Understanding The Duhig Rule

The “Duhig” rule was developed to deal with the frequent problem of people accidentally drafting deeds that attempted to convey more property than they actually owned. There was actually a case called Duhig v. Peavy-Moore Lumber Company in 1940 (Texas) which is the namesake of this rule.

That case summarized the rule as follows:

When full effect cannot be given to the granted interest because of a previous outstanding interest, priority will be given to the granted interest (rather than to the reserved interest) until full effect is given to the granted interest.

The Duhig rule is applied only to “warranty” and “special warranty” deeds in most of the states that have adopted this rule. A warranty deed “promises” or “warrants” certain interest, and must be taken as a “stand alone” document, without regard to other documents or previous deeds.

An example of the Duhig Rule in action follows:

Suppose Adam owns 100% of the “Happy Acres” farm (100% of land, and 100% of the mineral rights under the land) and later sells it to Betty using a warranty deed, reserving 1/3 of the minerals for himself.

Betty, who now owns the farm and 2/3 of the mineral rights under it, then sells Happy Acres to Charlie using a warranty deed, and she reserves an additional 1/3 of the minerals (leaving 1/3 for Charlie.) She forgets to mention in her deed to Charlie that Adam had kept 1/3 of the mineral rights when he sold the farm to her.

Betty’s intent was to sell Charlie all of the Happy Acres and 1/3 of the minerals under it…keeping 1/3 for herself. However, according to the Duhig rule “priority will be given to the granted interest” and so Betty is actually left with nothing because Charlie, reading the deed on a “stand-alone” basis (and having no knowledge of Adams’s reservation,) would reasonably conclude that 2/3 of the minerals under Happy Acres were being granted to him, since the deed Betty gave him only mentions that 1/3 of the minerals are being reserved.

The warranty deed must be taken on its own; without regard to the prior reservation from Adam (since it was not mentioned.) As far as Charlie knew, Betty owned ALL the minerals, not just 2/3 of the minerals.

One way to avoid this problem would have been for Betty to reference the prior reservation from Adam on her deed to Charlie, thus giving Charlie a “head’s up” that she only owned 2/3 of the minerals under Happy Acres. That way, Charlie, and anyone else looking at the deed, would know that Betty only owned 2/3 of the minerals at the time she sold Happy Acres. Charlie would know then he was only going to get 1/3 of the minerals under Happy Acres, not 2/3.

It’s because of “bad” deed drafting like Betty’s deed (i.e. not including prior reservations on future deeds) that the Duhig case came about. Keep in mind that the Duhig rule does not apply to quit-claim deeds, because they do not warrant anything. Most jurisdictions have adopted the Duhig Rule, but not all.

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