Hynson v. Jeffries
1997 WL 329158, 697 So.2d 792 (1997)
Rule of Law:
Unless a trust instrument explicitly provides a contrary definition for "income" from mineral royalties, the Mississippi Uniform Principal and Income Law dictates the allocation of such receipts between a life tenant and remaindermen, overriding common law doctrines like waste and the open mines doctrine.
Facts:
- Robert C. Hynson owned substantial oil and gas properties at the time of his death.
- Mr. Hynson created the Robert C. Hynson Marital Deduction Trust in his detailed last will and testament.
- The will bequeathed all Mr. Hynson's oil, gas, and other mineral interests to the named trustees of this trust.
- The trust instrument specified that, during his wife Carolyn Harris Hynson's lifetime, "all income" after payment of certain expenses would be disbursed to her.
- The will also included an intent provision stating that the controlling consideration was for the trust to qualify as a marital deduction trust, and any provision preventing this should be modified.
- Upon Mrs. Hynson's death, the entire remaining corpus of the trust would be divided into three equal parts and distributed per stirpes to specified descendants, some of whom are minors.
- The will did not explicitly define what constitutes "income" or "principal" in the context of receipts from oil and gas royalties.
Procedural Posture:
- Carolyn Harris Hynson (the widow and primary beneficiary) asserted in the chancery court that she was entitled to the entire royalty payments.
- One co-trustee of the Robert C. Hynson Marital Deduction Trust and the two guardians ad litem for the minor remaindermen took the position that Mrs. Hynson was only entitled to the interest earned on invested royalties, with the royalties themselves added to the trust corpus.
- The second co-trustee took no position in the dispute.
- Mrs. Hynson filed a motion for summary judgment.
- The co-trustees also filed a motion for summary judgment.
- The chancery court ruled that Mrs. Hynson was not entitled to the entirety of the royalty, but only the interest on invested royalty.
- Mrs. Hynson appealed the chancery court's decision.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the owner of a life estate in a trust containing producing oil and gas properties receive the entire mineral royalties, or must the royalties be apportioned according to the Mississippi Uniform Principal and Income Law, with a portion allocated to principal for depletion and the remainder to income?
Opinions:
Majority - Southwick, J.
No, the owner of a life estate in a trust containing producing oil and gas properties does not receive the entire mineral royalties if the trust instrument does not explicitly define "income" in a contrary way; instead, the royalties must be apportioned according to the Mississippi Uniform Principal and Income Law, with 27.5% of gross receipts (not to exceed 50% of net receipts) allocated to principal as an allowance for depletion, and the balance of net receipts to income. The court determined that the will's language granting Mrs. Hynson "all income" was ambiguous regarding mineral royalties because it did not define "income" in that specific context. Therefore, the court had to look to external legal definitions. While acknowledging common law doctrines such as the rule against waste (which generally holds that oil in place is part of the principal, and a life tenant only receives interest on royalties, as established in Martin v. Eslick) and the open mines doctrine (an exception allowing a life tenant to exploit existing mines), the court concluded that these common law principles are superseded by the Mississippi Uniform Principal and Income Law (§§ 91-17-1 et seq.). Section 91-17-5(b) of this statute explicitly states that its provisions apply "in the absence of any contrary terms of the trust instrument." Since the will did not provide a clear, contrary definition of income for mineral royalties, the statute controls. Specifically, § 91-17-19(c) mandates that 27.5% of the gross receipts (but not exceeding 50% of the net receipts after expenses, computed without allowance for depletion) from royalties shall be added to principal as an allowance for depletion, and the balance of the gross receipts, after payment of expenses, is income. The court reasoned that the legislature has the authority to amend or abolish common law doctrines, which it did through this statute, making the applicability of the open mines doctrine irrelevant in this context. The chancellor's reliance on common law definitions over the statute was an error.
Analysis:
This case is highly significant as it firmly establishes the preemptive authority of the Mississippi Uniform Principal and Income Law over common law doctrines when allocating mineral royalties in trusts, provided the trust instrument does not explicitly define 'income' in a conflicting manner. The ruling provides a clear statutory framework for trustees to follow regarding depletion allowances for natural resources. It underscores the critical importance for trust drafters to specifically define how mineral royalties should be treated if they intend to deviate from the statutory allocation, thus influencing future drafting practices in estate and trust law in Mississippi.
