Court of Appeals of Texas, Fourth District, San Antonio
Charles Edward REED Jr.; Amos E. Reed III, Individually and as Representative of the Estate of Delores Perrin, Deceased; Curtis Cullen Smith, as Trustee of the Laura Dossett Smith Family Trust; Reeder Walter Dossett and Mary Martha Dossett, as Trustees of the Mary Martha Dossett Second Trust; Alethea Brooks Bateman, as Trustee of the Alethea Brooks Bateman 1993 Trust; Jane Elizabeth Sheppard; Susannah Sheppard Benner; Thomas D. Swann; Andrew R. Swann; and Alethea Swann Bugg, Appellants
MALTSBERGER/Storey Ranch, LLC; Storey Minerals, Ltd.; Tom O. Hanks; Karen R. Hanks; and TK Hanks Royalties, LP, Appellees
the 81st Judicial District Court, La Salle County, Texas
Trial Court No. 13-03-00057-CVL Honorable Donna S. Rayes,
Bryan Marion, Chief Justice Karen Angelini, Justice Irene
AND RENDERED IN PART; REVERSED AND REMANDED IN PART
issue in this appeal is the interpretation of a 1942 Deed
that conveys to the grantees "an undivided one-fourth
(1/4) interest in and to all of the oil, gas and other
minerals in and under and that may be produced from the
following described lands" but then proceeds to strip
certain rights of mineral ownership from the grantees.
Appellants (collectively "the Reed Plaintiffs")
argue the trial court erred in determining that the 1942 Deed
conveys a fixed non-participating royalty interest to the
grantees. According to the Reed Plaintiffs, the 1942 Deed
conveys a 1/4 mineral interest and not a fixed royalty
interest. Alternatively, they argue the 1942 Deed conveys a
"floating" royalty interest. We agree with the Reed
Plaintiffs that the 1942 Deed conveys a 1/4 mineral interest
to the grantees.
1942, through an instrument titled "Royalty Deed, "
L.V. Chenoweth conveyed to W.B. Dossett and E.M. Benz
"an undivided one-fourth (1/4) interest in and to all of
the oil, gas and other minerals in and under and that may be
produced from" described lands in La Salle County,
Texas. The 1942 Deed acknowledges that, at the time the deed
was signed, the described lands were subject to an existing
oil and gas lease:
And said above described lands being now under an oil and gas
lease originally executed in favor of L.V. Chenoweth, Trustee
and now held by said L.V. Chenoweth, Trustee, it is
understood and agreed that this sale is made subject to said
lease, but covers and includes one-fourth (1/4) of all the
oil royalty and gas rental or royalty due and to be paid
under the terms of said lease, insofar as it covers the above
deed then strips Grantees W.B. Dossett and E.M. Benz of
certain rights normally given to mineral-interest owners:
In the event the above lease to L.V. Chenoweth, trustee,
shall for any reason become cancelled or forfeited, it is
agreed that the joinder or consent of grantee, his heirs or
assigns, shall not be required to another or new lease upon
said property by L.V. Chenoweth, his heirs or assigns, nor
shall grantee, his heirs or assigns, be entitled to share in
any bonus consideration therefor or delay rentals thereunder,
it being the purpose and intent hereof to grant and convey an
undivided one-fourth (1/4) of the one-eighth (1/8) royalty
(including any annual gas rentals) under said existing lease
and an equivalent royalty interest under any future mineral
leases thereon by the said L.V. Chenoweth, his heirs,
administrators or assigns.
underlying dispute arose out of the amount of royalty
payments owed to the Reed Plaintiffs, as successors in
interest to Grantees W.B. Dossett and E.M. Benz. At the time
the 1942 Deed was signed, the lease referred to in the deed
provided for a 1/8 royalty. The current lease, "the
Hanks Lease, " provides for a royalty of 22.5%.
Hanks and Linda R. Hanks are the current lessors of the
mineral estate. Their assignee is TK Hanks Royalties, L.P.
Rosetta Resources Operating, L.P. ("Rosetta") is
the current lessee and has been
conducting operations on the land described by the 1942 Deed.
Rosetta was thus responsible for distributing royalty
payments and had been paying a fixed 1/32 royalty to the Reed
Plaintiffs as W.B. Dossett's and E.M. Benz's
successors in interest.
Reed Plaintiffs, believing they owned a 1/4 mineral interest
and thus were owed 1/4 of the 22.5% royalty, sued Rosetta, TK
Hanks Royalties, L.P., Tom O. Hanks, and Linda R. Hanks for
declaratory judgment. The Reed Plaintiffs also brought a
declaratory judgment action against Maltsberger/Storey Ranch,
LLC and Storey Minerals, Ltd. (collectively,
"Storey"), the successors in interest to a claimed
royalty reservation burdening the leased property. The Reed
Plaintiffs alleged they were entitled to royalty payments
calculated based on their ownership of 1/4 of the minerals as
provided in the 1942 Deed. That is, the Reed Plaintiffs
alleged they were entitled to 1/4 of the 22.5% royalty.
Storey filed a counterclaim for declaratory relief, alleging
that Rosetta had correctly construed the 1942 Deed and was
properly paying the Reed Plaintiffs a 1/32 fixed royalty. Tom
O. Hanks, Linda R. Hanks and TK Hanks Royalties, L.P.
(collectively "the Hanks") filed a counterclaim for
declaratory relief, also alleging the Reed Plaintiffs were
entitled to only a 1/32 fixed royalty.
Reed Plaintiffs moved for summary judgment, arguing that as a
matter of law they were entitled to 1/4 of the 22.5% royalty
provided in the Hanks Lease. Storey and the Hanks then,
respectively, moved for their own summary judgment, arguing
that as a matter of law the 1942 Deed conveyed to the
grantees a 1/32 fixed royalty in all future leases. The Reed
Plaintiffs and Storey also requested attorney's fees in
their respective motions for summary judgment. The trial
court denied the motion for summary judgment filed by the
Reed Plaintiffs and granted the motions for summary judgment
filed by Storey and the Hanks. In its order, the trial court
declared that "the 1942 Royalty Deed . . . conveyed a
fixed non-participating royalty interest to W.B. Dossett and
E.M. Benz." The trial court ruled that the Reed
Plaintiffs were "collectively entitled to a fixed 1/32
nonparticipating royalty interest associated with production
from the property described in the Royalty Deed." It
then awarded attorney's fees to Storey.
Reed Plaintiffs bring two issues on appeal: (1) whether the
1942 Deed conveyed a mineral ownership interest or a royalty
interest; and (2) if the 1942 Deed conveyed a royalty
ownership interest, whether the deed conveyed a floating
royalty interest or a fixed royalty interest.
obtain a traditional summary judgment, a party moving for
summary judgment must show that no genuine issue of material
fact exists and that the party is entitled to judgment as a
matter of law. Tex.R.Civ.P. 166a(c); Randall's Food
Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995);
Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548
(Tex. 1985). In reviewing the grant of a summary judgment, we
must indulge every reasonable inference and resolve any
doubts in favor of the respondent. Johnson, 891
S.W.2d at 644; Nixon, 690 S.W.2d at 549. In
addition, we must assume all evidence favorable to the
respondent is true. Johnson, 891 S.W.2d at 644;
Nixon, 690 S.W.2d at 548-49.
court's grant of summary judgment is reviewed de novo.
Mid-Century Ins. Co. v. Ademaj, 243 S.W.3d 618, 621
(Tex. 2007). When both parties move for partial summary
judgment on the same issues and the trial court grants one
motion and denies the other, we consider the summary judgment
evidence presented by both sides, determine all questions
presented, and if we determine that the trial court erred,
render the judgment the trial court should have rendered.
Valence Operating Co. v. Dorsett, 164 S.W.3d 656,
661 (Tex. 2005).
primary objective in construing mineral grants is to
ascertain intent from the four corners of the instrument
based on the words used and not the subjective intent of the
parties. Hysaw v. Dawkins, 483 S.W.3d 1, 8 (Tex.
2016) (citing Luckel v. White, 819 S.W.2d 459,
461-62 (Tex. 1991)). A court determines intent "by
construing the instrument holistically and by harmonizing any
apparent conflicts or inconsistencies in the language."
Id. at 4. While the supreme court recently
acknowledged the "call for more certain and predictable
guidance, " it nevertheless rejected "bright-line
rules of interpretation that are arbitrary and, thus,
inimical to an intent-focused inquiry." Id. The
court mandated "a holistic and harmonizing approach and
rejected mechanical rules of construction, such as giving
priority to certain types of clauses over others or requiring
the use of magic words." Id. at 8. The court
emphasized that it could not "embrace a mechanical
approach, " id. at 4, and that to "discern
intent, words and phrases must be construed together and in
context, not in isolation." Id. at 13.
"Words and phrases generally bear their ordinary meaning
unless the context supports a technical meaning or a
different understanding." Id. "Similarly,
apparent inconsistencies or contradictions must be
harmonized, to the extent possible, by construing the
document as a whole." Id. "But considering
whether inconsistencies might exist and how they may be
harmonized is part of the process for determining intent; it
is not merely a cross-check method of validating an
interpretation derived by segregating key terms and
phrases." Id. "That is to say, meaning
derived without reference to context is not confirmed merely
because such a construction would not produce an
inconsistency with another provision." Id.
Mineral Interest vs. Royalty Interest
their first issue, the Reed Plaintiffs contend that as a
matter of law, the 1942 Deed conveyed a mineral interest and
not a royalty interest. "An instrument conveying land in
fee simple transfers both the surface estate and all minerals
and mineral rights, unless the instrument contains a
reservation or expresses a contrary intention."
Hysaw, 483 S.W.3d at 8. A mineral estate consists of
five essential interests: (1) the right to develop, (2) the
right to lease (the executive right), (3) the right to
receive bonus payments, (4) the right to receive delay
rentals, and (5) the right to receive royalty payments.
Altman v. Blake, 712 S.W.2d 117, 118 (Tex. 1986).
"The holder of the leasing privilege is the
executive-interest holder." Hysaw, 483 S.W.3d
at 9. "The executive enjoys the exclusive right to make
and amend mineral leases and, correspondingly, to negotiate
for the payment of bonuses, delay rentals, and royalties,
subject to a duty of utmost good faith and fair dealing to
non-executive interest holders." Id.
conveyance of a mineral estate need not dispose of all
interests; individual interests can be held back, or
reserved, in the grantor." French v. Chevron U.S.A.
Inc., 896 S.W.2d 795, 797 (Tex. 1995). "However,
when an undivided mineral interest is conveyed, reserved, or
excepted, it is presumed that all attributes remain with the