Temple-Inland Forest Products Corp. v. Henderson Family Partnership, Ltd.

WALKER, Chief Justice,

dissenting.

I respectfully file this dissent.

The majority concludes that, “[i]f the parties had intended the feth retained interest to be a fixed royalty interest, there would have been no need to grant these attributes to the grantee. These attributes would have automatically passed without a grant of the mineral interest.”

I take the majority’s position to mean that the Grantors of the two subject mineral deeds simply said too much in their efforts to retain a royalty interest only. I submit that it would be difficult to locate a mineral deed more clearly defining the intent of the Grant- or than the two deeds under review by this Court. The majority has set forth portions of the subject deeds, however, I think it important to provide a more textual flow of these instruments, as follows:

... Together with the right of ingress and egress in, upon and over said land at all times for the purpose of mining, drilling and exploring said land for oil, gas and other minerals and removing the same therefrom; together with the use of such amount of the surface of said land as is necessary or useful to produce, save, store, refine, treat, transport and remove such oil, gas and other minerals, including water, and to conduct all operations and erect and use thereon all buildings, derricks, tanks, structures, machinery and equipment as may be necessary or proper for such purpose, together with the right to lay and operate thereon pipe lines, telephone and telegraph lines, and to repair and remove from said land any of Grantee’s property thereon at any time, including the right to pull and remove casing.
In respect to the undivided one-sixteenth (¾6⅛) part of and interest in the oil, gas and other minerals retained and reserved by the Grantor in said land, it is understood and agreed that said one-sixteenth (¾6⅛) interest is and shall always be a royalty interest, and shall not be charged with any of the costs which the Grantee may incur in exploring, drilling, mining, developing and operating wells or mines for the production of oil, gas and other minerals; and, if the Grantee, or his heirs, executors, assigns or any person or concern to whom the Grantee shall give an oil and gas mining lease thereon, shall, by his or their explorations and operations, discover and produce oil, gas and other min-*536erais, the Grantor’s one-sixteenth (⅜⅛) royalty interest above referred to shall be delivered free of cost to the Grantor at the wells or mines or to the credit of Grantor in pipe lines or storage provided by the Grantor. It is expressly understood that the Grantee shall never be required or under any covenant or obligation, whether express or implied, to drill or operate on said lands or any part thereof for the discovery of or production of oil, gas and other minerals, and that all drilling operations and development for oil, gas and other minerals, before and after discovery, shall be solely at the Grantee’s option and election, and that any wells or mines discovered or drilled by the Grantee may be abandoned or operated by him at any time at his election or discretion; provided that, before Grantor’s royalty shall be calculated and determined all oil, gas and other minerals used for light, heat and operations by the Grantee and any taxes against the production shall be first deducted.
Grantor further agrees that the Grantee shall have the right at any time to redeem for the Grantor or his heirs, executors and assigns, by payment, any note, deed of trust, taxes, judgments or other liens on the above described land in the event of default of payment by Grantor and be subrogated to the rights of the holder or holders thereof.
The rights and interests herein granted, created and reserved shall extend to the respective heirs, executors, administrators, successors and assigns of the parties hereto it being agreed that the Grantor shall not be required to join in or ratify any oil and gas mining lease which the Grantee may grant by virtue of his ownership hereunder and that Grantor shall be entitled to none of the bonus money therefor and to no part of the delay rentals paid thereunder; it being further understood that any change of ownership of the one-sixteenth (¾6⅛) royalty belonging to Grantor, whether effected by conveyance, will, partition or otherwise, shall entitle the respective owners only to their proportionate part of said royalty, and that the Grantee shall not be responsible for the payments or delivery of said royalty to any new owners unless and until he shall be furnished with the instrument of transfer or duly certified copy thereof....

I wholeheartedly agree with the majority, that, “The single issue before the trial court and now before this Court of Appeals is a pure question of law: What interests were reserved to Grantors in these mineral deeds?”

Regarding the two deeds under construction, it is clear and uncontested that Grantors intended and did convey a ⅜⅛ mineral interest to Grantees. Thus, we are not confronted with the interest granted, but rather the interest reserved unto Grantors, i.e., a mineral interest or a royalty interest. Through ease law analysis and interpretation, a mineral estate consists of five interests: 1) the right to develop; 2) the right to lease; 3) the right to receive bonus payments; 4) the right to receive delay rentals, and 5) the right to receive royalty payments. French v. Chevron U.S.A., Inc., 896 S.W.2d 795 (Tex.1995); citing Altman v. Blake, 712 S.W.2d 117,118 (Tex.1986). A conveyance of a mineral estate need not dispose of all interest; individual interests can be held back, or reserved, in the Grantor. French, 896 S.W.2d at 797. However, “ ‘[w]hen an undivided mineral interest is conveyed, reserved, or excepted, it is presumed that all attributes remain with the mineral interest unless a contrary intent is expressed.’ ” French, 896 S.W.2d at 797; citing Day & Co., Inc. v. Texland Petroleum, Inc., 786 S.W.2d 667, 669 n. 1 (Tex.1990). In French, the primary focus was upon the size and nature of the interest conveyed by Grantor to Grantee. Clearly, if the two deeds under consideration reserved a mineral interest, appellees as successors in interest to Grantees, win. Conversely, if the interest retained and reserved by Grantors in the subject deeds was a royalty interest, appellants, successors in interest to Grantors, win.

Having identified those legal attributes applicable to mineral interests, we must determine whether our Grantors retained a ⅜& mineral interest or a ⅛⅛ royalty interest. In reviewing the “four comers” of the mineral deeds, I believe it clear and obvious that *537the Grantors retained only one of the five attributes applicable to a severed mineral interest, that being, the right to receive royalty payments. I find it compelling that the Grantors in the subject deeds definitively conveyed away all of those rights attributable to a mineral interest. The only right retained was the right to receive royalty payments. In French, the Grantor reserved the right to receive delay or other rentals, or any revenues from leasing or from any renewal or extension of any lease. Unlike those facts in French where the Grantors intent was not clearly defined by deed, the facts in our appeal compel a determination that our Grantors intended to retain and reserve only a royalty interest.

Recitations in the mineral deeds contain no less than six (6) separate and specific references to the reserved interest as “royalty interest.” The Grantors of these two deeds very specifically provided that the one-sixteenth (feth) interest reserved in each of the mineral deeds “... is and shall always be a royalty interest.”

In 1945, our Texas Supreme Court was confronted with the identical issue presently before this Court. That court held that the reserved interest was a one-sixteenth (⅜6&) royalty interest, and, in so doing, focussed specifically on the language in the Deed, subsequent to the granting clause, which, in “plain and definite terms” identified the nature of the interest reserved as a “royalty interest.” Watkins v. Slaughter, 144 Tex. 179, 189 S.W.2d 699, 700 (1945).

Appellees proffered two principal arguments in the trial court, contending that the reserved interests were either one-sixteenth (¾6⅛) mineral interests or one-sixteenth (⅛ th) “of royalty” interests. Appellees’ first argument, that the one-sixteenth (feth) interest reserved is that of a mineral interest, does not rise above mere argument. Appel-lees contend that since the granting clause does not differentiate between the interest granted and the interest reserved, Grantors by choice retained a one-sixteenth Gieth) mineral interest. Appellees’ exact position is that, “[bjecause a ⅞⅛ mineral interest was granted, the Grantors have retained a jieth mineral interest.” (emphasis by appellees)

To accept appellees’ mineral interest position, we would be compelled to ignore the remaining language contained in these mineral deeds. Appellees contend that since the granting clause of the mineral deeds unambiguously grants an undivided %ths interest, the royalty interest language following the granting clause creates an inconsistent expression of intent by Grantors. Interestingly, appellees cite no authority for this position. Appellees simply assert that, “[tjhe granting clause, standing alone, clearly expresses an intent to retain a jieth mineral interest.”

Appellees argue, alternatively, that the interests retained by Grantors in the mineral deeds were one-sixteenth (⅜⅛) interests “of royalty.” Appellees argued to the trial court that: The granting clause in the mineral deeds, due to the language utilized, granted a ¾⅛ mineral interest and reserved a feth mineral interest; a ¾6th mineral interest is entitled only to a jieth percentage of the lease royalty; there are references in the mineral deeds to the jieth reserved interest as royalty interest; a jieth “of royalty” interest is, just as a ⅜⅛ mineral interest, entitled only to a foth percentage of the lease royalty; a jieth royalty interest, on the other hand, unlike a ¾⅛ mineral interest, is entitled to ⅜6th of all gross production; and, therefore, to avoid a conflict between the granting clauses and all the subsequent references to the reserved interest as royalty interest, the ⅜6⅛ reserved interest must be construed as “of royalty” interest.

The trial court properly rejected appellees’ “of royalty” argument. However, I would hold that the trial court erred in construing the mineral deeds as retaining and reserving a ¾6⅛ mineral interest “in accordance with the granting clause.” At one time, the granting clause in a Mineral Deed was given greater importance in the construction of mineral deeds. However, this rule of construction was specifically overruled and rejected by the Texas Supreme Court in Luckel v. White, 819 S.W.2d 459, 464 (Tex.1991).

To reach its conclusion, the trial court erroneously determined there existed a direct and irreconcilable conflict between the *538granting clauses of the mineral deeds and all subsequent references and descriptions of the nature of the retained interest as royalty interest. In effect, appellees were successful in urging the trial court to consider only the granting clause of these mineral deeds. I believe it was error for the trial court to do so.

We must look to the intent of the Grantors as to the nature of the interests reserved in the mineral deeds. The parties to the two mineral deeds, within the four corners of said deeds, plainly and definitively set forth their agreement that each of the reserved ¾⅛ interest is a “royalty interest.” The mineral deeds do not use the term “of royalty” interest or “mineral interest” where setting forth Grantors’ retained interest. Again, six (6) specific references are contained in the respective deeds defining royalty interests. Though each and every reference to Grantors’ royalty interest is significant in determining the intent of the parties, I believe that the Grantors’ most definitive intent is set forth in the previously referenced paragraph which reads:

The rights and interests herein granted, created and reserved shall extend to the respective heirs, executors, administrators, successors and assigns of the parties hereto it being agreed that the Grantor shall not be required to join in or ratify any oil and gas mining lease which the Grantee may grant by virtue of his ownership hereunder and that Grantor shall be entitled to none of the bonus money therefor and to nopart of the delay rentals paid thereunder; it being further understood that any change of ownership of the one-sixteenth (¡ifith) royalty belonging to Grantor, whether effected by conveyance, will, partition or otherwise, shall entitle the respective owners only to their proportionate part of said royalty, and that the Grantee shall not be responsible for the payments or delivery of said royalty to any new owners unless and until he shall be furnished with the instrument of transfer or duly certified copy thereof....

I would hold that the trial court erred in its application of the law in construing the two mineral interest deeds. I would reverse the summary judgment entered by the trial court and render judgment in favor of appellants.