LOOK OUT! A COLORADO COURT FINDS THAT A MINERAL RESERVATION IN THE HABENDUM CLAUSE OF A DEED, NOT THE GRANTING CLAUSE, IS A VALID RESERVATION

An old rule of thumb for title examiners was that a mineral reservation needs to be in the granting clause, not the warranty clause, of a deed to be valid. As the courts have moved to seeking to determine the parties’ intent in a deed, these old rules have been whittled away. A recent Colorado Court of Appeals case shows that a title examiner needs to read the entire deed and that a mineral reservation does not need to be in the granting clause to be valid.

In Owens v. Tergeson, 2015 COA 164, 2015 WL 6746535 (2015), the court of appeals interpreted two deeds from 1950 and found that all oil, gas and other mineral interests were reserved in the deeds.

The reservation was not in the granting clause of the deeds. The court found the reservation was in the habendum clause of the deeds (the clause that starts out “To Have and To Hold . . . ”). The part of the deeds where the reservation was inserted read:

. . . free and clear from all former and other grants, bargains, sales, liens, taxes, assessments and encumbrances of whatever kind or nature soever. except reserving all oil, gas and other minerals and the right to use so much of the surface as is necessary to develop, produce and care for the same; also 1950 taxes; and the above bargained premises in the quiet and peaceable possession of the said party of the second part, his heirs and assigns against all and every person or persons lawfully claiming or to claim the whole or any part thereof, the said parties of the first part shall and will WARRANT AND FOREVER DEFEND.

The court of appeals found it was important that the deeds appear to be a printed form of warranty deed with the reservation language added.

The court noted that in a 1952 case, the Colorado Supreme Court rejected the old common law rule requiring the reservation to be in the granting clause, in favor of the more modern view that the overall intent from the deed considered as a whole should control.

This decision is interesting to title attorneys because it confirms the trend of the court to interpret deeds as a whole to determine the parties’ intent.