Nature of the Case
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Facts
D through tax proceedings had acquired the real property described in the oil and gas leases to P. In 1933 D entered into a contract with Shields for the sale to Shields of the real property. The contract contained the following reservation: '… vendor [D] reserves to itself and its successors an undivided two and one-half percent of all oil, gas and other minerals lying in, under and beneath the premises hereinbefore described….' This language created a mineral reservation. Before full payment had been made and deed delivered under the 1933 contract for deed, Shields filed a quiet title action against D which resulted in a 1943 decree. The decree in part stated: '… A. D. Shields, is the owner, seized in fee and entitled to the possession of the following described real property… excepting and reserving to the said D, 2 1/2% of all oil, gas or other minerals lying in, under and beneath [the said land]…' In 1944, D executed and delivered to Shields a deed covering the property in question which contained the following reservation: '… and reserving unto… [D] its successors and assigns, an undivided two and one-half percent royalty of all oil, gas, and other minerals lying in, and that may be produced from the premises hereinbefore described, delivered free of cost…' This constitutes a royalty reservation as distinguished from the mineral reservation contained in the contract for deed. The lands described in the deed were transferred by Shields and his successors in interest to other parties. In 1974, 30 years after the deed, the successors in interest of Shields executed oil and gas leases to Exeter Company, which assigned its interest to Exeter Exploration Company, which in turn made partial assignments to True Oil Company. Oil wells were drilled on the lands in 1976 and four of the five wells drilled are presently producing oil. In 1976, one day before drilling started on the first well, P, obtained from D the first of his oil and gas leases covering the County's mineral interest in the lands. The second lease was obtained by P from D 19 days later. The McSweyn leases, which are valid only if the County owned and retained a mineral interest rather than a royalty interest, contained the following disclaimer: 'The execution of this instrument shall in no way prejudice the right of D to claim its interest is a royalty interest rather than a mineral interest.' P brought this action in 1977 asking the District Court to declare and determine his rights and interests under his oil and gas leases from D. D then entered into a written agreement with all of the real property owners, who are Shields' successors in interest, and other parties. The agreement covered the land involved in this action as well as other lands. The agreement points out that D executed contracts for deed containing mineral reservations, not only covering the Shields land but also other D lands. All of such contracts for deed were followed by deeds containing royalty reservations similar in form to the deed to Shields. The parties agreed that where the deeds from D to the various Purchasers show that there was a 2 1/2% royalty, that said royalty interest be considered to be a 2% interest, and wherever D reserved a 6 1/4% royalty in the above-described property, that said interest be considered to be a 4% royalty interest. D also warranted that it makes no claim to any mineral interest in the above-described property, and makes claim to only royalty interest as set forth above. The agreement further conveys to D the 2 percent royalty interest in the land described in this case. The Court held that the contract for deed contained a reservation of mineral interest and the issuance of the deed at a later date gave Shields more than he had bargained for. The court found that a mineral interest is more valuable than a royalty interest and that the deed by D to Shields was an unconstitutional donation or gift by D. It found that the 1943 judgment in the quiet title action cannot be attacked and that such decree commanded D to issue a mineral interest deed which D failed to do. The court further found that the 1943 decree is res judicata. The court found P's leases to be valid. D appealed.
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