## Facts

- The owners of a 15-acre tract executed an oil and gas lease reserving a 1/8 lessor’s royalty.
- Before any drilling or production, the lessor conveyed the north 5 acres to Keeble; Keeble conveyed an undivided 3-acre interest in that 5 acres to McRae.
- About 18 months later, the lessor conveyed the remaining south 10 acres to Keeble, and Keeble conveyed that 10 acres to Japhet.
- None of the deeds or the lease included an apportionment (entireties) clause addressing how the 1/8 royalty would be shared after subdivision.
- The lessee drilled and obtained production only from wells located on Japhet’s 10-acre tract; the 5-acre tract owned by Keeble and McRae was not drilled.
- Keeble and McRae sued Japhet seeking 5/15 of the 1/8 royalty from production, based on their ownership of 5 of the original 15 leased acres.
- The case was tried on an agreed statement of facts; the trial court denied recovery to Keeble and McRae, the court of civil appeals reversed, and further review was taken.

## Issues

1. When a leased tract is subdivided before production, and production later occurs only on one subdivided tract, must the reserved lessor’s royalty be apportioned among all subdivision owners absent an express apportionment agreement?
2. If not, does the royalty from production belong solely to the owner of the subdivision on which the producing well is located?

## Decision

- The reviewing court rejected apportionment by acreage and held that the royalty was not shared among the post-lease subdivision owners absent an express agreement.
- Royalty from production belonged exclusively to the owner of the particular subdivided tract on which the producing wells were located.
- Keeble and McRae, as owners of the undrilled 5-acre portion, took nothing from production on Japhet’s 10 acres.
- The result reinstated the trial court’s allocation of all royalty from the producing wells to Japhet.

## Legal Principles

- After a lessor executes an oil and gas lease and later conveys parts of the leased premises before production, the reserved royalty is not apportioned among the several grantees unless the instruments expressly provide otherwise.
- Royalties accruing from production under such a lease belong to the owner of the specific subdivision where the producing well is situated; owners of other subdivisions have no claim to those royalties.
- Courts will not imply an apportionment scheme from the mere fact that the entire original tract remains subject to a single lease; an express apportionment (entireties) clause is required to change the default rule.

## Conclusion

The court applied Texas’s nonapportionment doctrine to hold that, absent an express apportionment clause, owners of a subdivided portion of leased land are not entitled to share in royalties from wells drilled on another subdivided tract; the royalty follows the wellsite tract.


Japhet v. McRae, 276 S.W. 669 (Tex. Comm’n App. 1925)