William S. Hausser, Albert F. Hausser, Robert Hausser, Jr. Eugene L. Amos, Jr., Lawrence J. Flume, Jr., Corwin D. Denney Foundation, and Des Cygne Denney Settlement Partners, Ltd. v. Fernando Cueller

DISSENTING OPINION
No. 04-09-00560-CV

William S. HAUSSER, Albert F. Hausser, Robert Hausser, Jr. Eugene L. Amos, Jr., Lawrence J.
Flume, Jr., Corwin D. Denney Foundation, and Des Cygne Denney Settlement Partners, Ltd.,
Appellants

v.

Fernando D. CUELLAR and Jacob F. Rathmell Jr., Successor Co-Trustees under the Wills of
Fernando Cuellar and Inocente T. De Cuellar, and Trustees under Trust Deeds executed by
Fernando Cuellar and Inocente T. De Cuellar,
Appellees

From the 49th Judicial District Court, Zapata County, Texas
Trial Court No. 6803
Honorable Jose A. Lopez, Judge Presiding

Opinion by: Marialyn Barnard, Justice
Dissenting opinion by: Sandee Bryan Marion, Justice, joined by Steven C. Hilbig, Justice

Sitting: Catherine Stone, Chief Justice
Karen Angelini, Justice
Sandee Bryan Marion, Justice
Phylis J. Speedlin, Justice
Rebecca Simmons, Justice
Steven C. Hilbig, Justice
Marialyn Barnard, Justice

Delivered and Filed: February 2, 2011

I respectfully dissent. In this appeal we are again faced with the issue of how to reconcile

an interest specified in the granting clause with a different interest specified in the future lease

clause. The Texas Supreme Court’s opinion in Luckel v. White, 819 S.W.2d 459 (Tex. 1991)

does not provide the necessary guidance on this important issue, and with this dissent, I urge the

Supreme Court to take up this specific issue and further elaborate on its opinion in Luckel.

In Luckel, the Court overruled its earlier opinion in Alford v. Krun, 671 S.W.2d 870 (Tex.

1984) on the grounds that the Alford majority “failed to harmonize the provisions under the four
Dissenting Opinion 04-09-00560-CV

corners rule and then erred in applying the ‘repugnant to the grant’ rule in disregard of the future

lease clause.” Luckel, 819 S.W.2d at 464. 1 The Luckel Court held that a court’s primary duty

“when construing such a deed is to ascertain the intent of the parties from all of the language in

the deed by a fundamental rule of construction known as the ‘four corners’ rule.” Id. at 461.

Under this rule a court “seeking to ascertain the intention of the parties, attempts to harmonize all

parts of the deed.” Id. “Even if different parts of the deed appear contradictory or inconsistent,

the court must strive to harmonize all of the parts, construing the instrument to give effect to all

of its provisions.” Id. A court should not strike down any part of the deed, “unless there is an

irreconcilable conflict wherein one part of the instrument destroys in effect another part thereof.”

Id.

In this case, the granting clause conveys an undivided one-half interest “in and to all of

the oil royalty, gas royalty, royalty in casinghead gas and gasoline, and royalty in other minerals

in and under, and that may be produced and mined from” certain land described in the deed. The

existing lease clause states that the described land is subject to an existing oil and gas lease that

“covers and includes one-half (1/2) of all the oil royalty, gas royalty, royalty in casinghead gas

and gasoline, and royalty from other minerals or products due and to be paid under the terms of

the lease.” Finally, the future lease clause provides that upon termination of the existing lease

and in the event of any future lease the grantees “shall receive under such future lease or leases

one-sixteenth (1/16) part of all oil, gas and other minerals taken and saved from the above

described property, under such lease or leases, and shall receive the same out of the royalty

therein provided for.” At the time the deed was executed it was subject to a lease that provided

for a one-eighth royalty interest, which resulted in the payment of a one-sixteenth (1/2 x 1/8)

1
In Alford, the Supreme Court gave “effect to the ‘controlling language’ . . . [of] the granting clause” because an
irreconcilable conflict existed between the granting clause and the future lease clause. 671 S.W.2d at 873-74.

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Dissenting Opinion 04-09-00560-CV

royalty to the grantees. When that lease terminated, a new lease was executed which provided

for a one-fourth royalty interest. The issue then became how much do the grantees receive under

the new lease: one-half of one-fourth or a fixed one-sixteenth? The majority determines the

Haussers are entitled to an undivided one-half interest of the one-fourth royalty specified in the

new lease. I dissent, in part, because I believe the majority does not properly apply Luckel. The

majority also disapproves of this court’s earlier opinion in Neel v. Killam Oil Co., Ltd., 88

S.W.3d 334 (Tex. App.—San Antonio 2002, pet. denied). Again, I disagree because I believe

the panel’s analysis in Neel was correct and gave effect to all parts of the deed in that case.

The majority here criticizes the Neel opinion for looking back to the prior deed; however,

the examination of the prior deed in Neel merely confirmed the conclusion that Neel and Mayo

were entitled to only a one-sixteenth interest in production. The “granting clause” in the Ortiz-

Neel deed conveyed a one-half interest in any royalties produced or mined from the land. Id. at

340. The deed did not contain a “minimum royalty” clause or “fee development” clause. Id. An

“existing lease” clause made the deed subject to a pre-existing 1940 lease. Id. Under the “lease

termination” clause, Neel would receive one-sixteenth of all production as a free royalty if the

present lease (which was the 1940 lease) terminated, lapsed or was forfeited. Id. Following the

“lease termination” clause, the Ortiz-Neel deed contained a “future lease” clause, which provided

that, if a future lease is executed, Neel will “receive the mineral interests described in the

preceding paragraph out of the royalty provided for in” the future lease. (Emphasis added.) Id.

at 340-41. When the 1940 lease expired, a new lease was executed in 1980, which “granted a

one-fourth royalty in the production of oil and gas.”

The Neel court concluded that, under the Ortiz-Neel deed, Neel received a present

interest of one-half of the one-eighth royalty reserved in the 1940 lease and, after expiration of

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the 1940 lease, the right to receive one-sixteenth of production from any future leases. Id. at

341. The 1980 lease triggered the future lease clause, under which Neel would receive the

interests described in the lease termination clause. Id. The lease termination clause specified a

one-sixteenth interest in production. Id. Therefore, harmonizing all parts of the Ortiz-Neel deed

together, the Neel court concluded the parties intended to convey a fixed one-sixteenth interest in

production. Id.

In this case, the Escamilla Deed conveyed a one-half interest in “royalties” reserved

under the existing 1936 lease. The 1936 lease provided for a one-eighth royalty, which

translated to one-sixteenth of gross production. Consistent with this conveyance of one-sixteenth

of gross production, the future lease clause conveyed one-sixteenth “of all oil, gas, and other

minerals taken and saved from” the property under the 2006 lease. Appling the same analysis

used in Neel to the Escamilla Deed, I would conclude the Escamilla Deed entitled the Haussers

to a fixed one-sixteenth fixed royalty interest in production.

Sandee Bryan Marion, Justice

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