Opinion
March 21, 1996
Appeal from the Surrogate's Court, New York County (Eve Preminger, S.).
As found by the Surrogate, the resolution of the issue as to whether the royalty interest in oil located in Texas should be considered real property, and thus governed by Texas law, or personalty, and thus governed by New York law, requires resort to the law of Texas, inasmuch as it is the local law of the jurisdiction in which the land is situated which determines whether the property may be considered real or personal (EPTL 3-5.1 [i]).
The Surrogate erred, however, when she found that the royalty interests herein constituted personalty rather than realty under Texas law. As stated by the Texas Civil Appeals Court in Sheppard v Stanolind Oil Gas Co. (125 S.W.2d 643, 647): "Oil in place is a part of the land. It constitutes real estate. When it is severed from the soil, the land itself is taken (wasted) to that extent, and the corpus of the estate in the land is to that extent depleted. Consequently anything which the lessor receives, in whatever form, in consideration for the oil taken or to be taken from the land, constitutes a part of the purchase price of the title to the oil, and therefore of the land." (Emphasis added; accord, N.M. Uranium v Moser, 587 S.W.2d 809; Matter of Jenney, 193 Misc. 162; Matter of Haldeman, 208 Misc. 419.)
Accordingly, the executor is entitled to file an amended account allowing for the application of Texas law, with the concomitant 27.5% allocation of royalties to principal during the term of the trust. Further, the executor's calculation of commissions may be adjusted to allow for the application of Texas law to the royalties received as payment for real property.
Concur — Sullivan, J.P., Wallach, Kupferman, Nardelli and Tom, JJ.