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WTX Fund, LLC v. Brown

Court of Appeals of Texas, Eighth District, El Paso

January 8, 2020

WTX FUND, LLC, Appellant,
v.
RAY HOLT BROWN, JAY F. HOLT, CHERYL JONES, JUDY BROWN WADSWORTH, JANIE H. GIDDIENS AS TRUSTEE OF THE JANIE H. GIDDIENS TRUST, DEBRA LYNN MORGAN AS TRUSTEE OF THE DEBRA LYNN MORGAN REVOCABLE TRUST, SUSAN G. WESSON AS TRUSTEE OF THE SUSAN G. WESSON REVOCABLE LIVING TRUST, PATTI HOLT ELKINS, BOBBY VAN HOLT AS TRUSTEE OF THE BOBBY VAN HOLT REVOCABLE LIVING TRUST, AND JOHN THOMAS HOLT, Appellees.

          Appeal from the 112th District Court of Reagan County, Texas (TC #1913)

          Before Rodriguez, J., Palafox, J., and McClure, C.J. (Senior Judge)

          OPINION

          GINA M. PALAFOX, JUSTICE

         In this appeal, we are asked to interpret a 1951 mineral deed to determine whether grantors conveyed their entire mineral interest without reservation, or instead, reserved from the conveyance at least one incident of mineral ownership-the royalty interest-either in whole or in fractional share. Appellant WTX Fund, LLC (WTX), the successor-in-interest to the grantors' heirs, appeals the trial court's rulings on cross motions for summary judgment. WTX asserts the trial court erred in granting judgment in favor of the heirs of grantee J.F. Holt-namely, Appellees Ray Holt Brown, Jay F. Holt, Cheryl Jones, Judy Brown Wadsworth, Janie H. Giddiens as Trustee of the Janie H. Giddiens Trust, Debra Lynn Morgan as Trustee of the Debra Lynn Morgan Revocable Trust, Susan G. Wesson as Trustee of the Susan G. Wesson Revocable Living Trust, Patti Holt Elkins, Bobby Van Holt as Trustee of the Bobby Van Holt Revocable Living Trust, and John Thomas Holt (collectively, the Holt heirs). Because we construe the 1951 deed as expressly excluding grantors' royalty right in its entirety from the conveyance, we reverse the trial court's judgment and render partial judgment in favor of WTX. Additionally, we remand the cause to the trial court for reconsideration of WTX's remedy and to consider an award of attorney's fees, if any.

         BACKGROUND

         On October 18, 1951, Hamilton S. Roach and his wife, Billie Roach (grantors), signed a deed titled, "MINERAL CONVEYANCE," (the deed or 1951 deed), which conveyed to J.F. Holt and his heirs and assigns, grantors' rights, title, interest and estate to certain rights to oil, gas, and other minerals in and under described land in Reagan County, Texas. The land was more particularly described in the instrument as "Survey 114, Block 2, T & P Ry Company, Certificate No. 1/226." By use of a multi-clause structure, the deed expressly lists the rights being conveyed, followed by expanded details, and then concludes with a final paragraph of further substance.

         Two years prior to signing the 1951 deed, grantors had granted two separate royalty deeds to O.L. Johnson, for a total undivided share of the size of 201.56/643.12, with each deed setting a primary term of twenty years and continuing thereafter for as long as oil, gas or other minerals were produced on the property.[1] With each of the Johnson royalty deeds, grantors expressly retained all other non-royalty rights to include their executive or leasing rights. Notably, the reservation of the executive right provided that any future leases must "provide for at least a royalty on oil of the usual one-eighth[.]"

         On the same day of the signing of the 1951 deed, Hamilton and Billie Roach joined with J.F. Holt and his wife, Ella Holt, and, together, the two couples signed an Oil, Gas and Mineral Lease with S.L. Parham (lessee) pertaining to "[t]he East Half of Section 114, Block 2, T. & P. Ry. Co. Survey." The Parham lease provided for a 1/8 royalty to be paid to lessors and oil payments up to the cumulative amount of $128, 664. Of note, the lease also stipulated that "[i]t is agreed and understood that the bonus for this lease, and all royalties, rentals and other payments provided for herein are to be paid to J.F. Holt, his heirs, successors and assigns." In addition to the 1/8 royalty, the lease provided for a production payment based on oil and gas production up to a cumulative cap.[2] The Parham lease provided for a primary term of ten years and continued thereafter as long as oil, gas or other minerals were produced from the land. At present date, the parties agree that the Parham lease has since terminated and is no longer in effect. Instead, the property is currently held by new leases which provide for different terms and royalty rates. One such lease is held by Laredo Petroleum[3] while the other is held by Pioneer Natural Resources, USA (Pioneer). The Pioneer lease provides for a 1/6 royalty, while the Laredo lease provides for a 1/4 royalty.

         Trial Court Proceedings

         In 2015, Pioneer filed an interpleader action in the 112th District Court of Reagan County, Texas, pursuant to Rule 43 of the Texas Rules of Civil Procedure. Pioneer owned and operated various oil and gas properties in Reagan County on which it explored for oil and gas deposits. As a well operator, Pioneer described that it ordinarily paid proceeds to royalty owners. Pioneer was then paying royalties to ten distinct payees pertaining to land situated at SE/4 of Sec 114, Block 2, T&P Ry Co Survey, Reagan County, Texas. Pioneer described that it had since received notice from WTX informing Pioneer that it was disputing its payment of royalties for proceeds derived from the described property. To avoid multiple liability on the same debt, Pioneer filed the interpleader action against all payees who were then asserting competing royalty interests. Pioneer named WTX and the Holt heirs among the parties whom it listed as contesting royalty payments owed by Pioneer. Pioneer also made an unqualified tender of disputed funds with its interpleader action.

         Responding, WTX filed not only a general denial of the action but also a crossclaim and counterclaim against all other parties. Against Pioneer, WTX asserted violations of the Texas Natural Resources Code based on nonpayment of oil and gas proceeds and other interests.[4]Against all parties, WTX asserted an action for a declaratory judgment seeking relief from the uncertainty and insecurity regarding the parties' respective rights, status, and other legal relationships. WTX requested a declaration that the 1951 deed neither conveyed the mineral estate in whole nor the royalty interest owned by the grantors. WTX asserted that only leasing rights, bonuses, and delay rentals were conveyed from grantors Hamilton and Billie Roach to grantee J.F. Holt. WTX described that it became a successor-in-interest in 2015 to the grantors' reserved interest by way of a conveyance and assignment of a mineral-and-royalty interest from Y-Royalty Partners, LLC (Y-Royalty).[5]

         Among its claims, WTX asserted it informed Pioneer by letter that it owned a royalty interest that it had acquired from Y-Royalty, who had obtained its interest through a series of conveyances from the heirs of Hamilton and Billie Roach, grantors of the 1951 deed. WTX further described that its interest was based on the royalty rate that was provided for in the existing oil and gas lease(s), as opposed to the fixed 1/8 interest stated in the 1951 deed. WTX further described that the lease providing a 1/8 royalty that was in effect at the time of the 1951 deed had since terminated, and a new lease with a 1/6 royalty was currently in effect. WTX claimed that Pioneer had incorrectly credited the Holt heirs with owning title to the royalty interest of the subject property. WTX sought a declaratory judgment to determine the respective rights as between WTX and the Holt heirs, and to recover monetary relief and other damages.

         Eventually, after arrangements were made for Pioneer to make regular deposits into the registry of the court, the parties dismissed Pioneer by agreement. With Pioneer dismissed, the controversy over royalty payments proceeded as between WTX, as successor-in-interest of grantors, and the Holt heirs, as successors-in-interest of grantee. Thereafter, WTX filed a motion for partial summary judgment. WTX characterized the claim as a dispute as to (1) whether the 1951 deed conveyed only leasing rights, bonuses and delay rentals, and accordingly, the grantors retained the full royalty interest; or (2) whether the deed conveyed the full mineral estate, including the royalty interest, such that grantors reserved no interest of the mineral estate. WTX asserted in its motion that its present interest was based on the royalty rate in the existing oil and gas lease(s), rather than a fixed 1/8. In support of its motion, WTX relied on the 1951 deed and other documents to show it had acquired its interest from a series of transactions tracing back to the grantors of the 1951 deed.[6]

         Like WTX, the Holt heirs also filed a motion for partial summary judgment. By their motion, the heirs asserted that WTX was attempting to divest them of the royalty interest conveyed in whole to their predecessors-in-interest by the 1951 deed. The Holt heirs asserted the deed conveyed all mineral rights in and under the land to J.F. Holt, and his heirs and assigns.

         The Trial Court's Decision

         The trial court agreed with the Holt heirs that the 1951 deed conveyed all of grantors' mineral interests-including the royalty interest-to grantee J.F. Holt. Accordingly, the trial court entered final judgment incorporating its earlier order granting a partial summary judgment in favor of the Holt heirs and contemporaneously denying WTX's cross motion for summary judgment. The trial court also ordered that WTX pay the Holt heirs damages for the recovery of improperly received royalties in the amount of $93, 309.22, attorney's fees and costs in the amount of $80, 000, and, further, the court made provision for additional attorney's fees in the event of later appeals. The trial court also entered further orders pertaining to the release of interpleaded funds and related fees charged for the interpleader suit. Lastly, the trial court ordered pre-and post-judgment interest in accordance with the law. Following entry of the judgment, WTX timely filed this appeal.

         DISCUSSION

         In a single issue, WTX broadly asserts that the trial court erred in denying its motion for partial summary judgment and in granting the cross motion of the Holt heirs. WTX asserts the trial court erred by declaring that the 1951 deed conveyed all of grantors' mineral interest including the royalty interest. WTX argues the deed reserved grantors' non-participating royalty interest while conveying all other attributes of their mineral estate. Correlated with its primary argument, WTX further argues that the trial court erred in awarding attorney's fees to the Holt heirs. Countering, the Holt heirs assert the trial court properly granted judgment in their favor by construing the deed as conveying grantors' entire undivided mineral interest (including royalty).

         We address the arguments in turn.

         Standard of Review

         We review a summary judgment de novo. Provident Life & Acc. Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). Traditional summary judgment is appropriate where there is no genuine issue of material fact and a party is entitled to judgment as a matter of law. See Tex. R. Civ. P. 166a(c). When both parties move for summary judgment on the same issue and the trial court grants one motion and denies the other, the reviewing court should review the evidence presented by both sides, determine all questions presented, and render the judgment the trial court should have rendered. Texas Workers' Compensation Com'n v. Patient Advocates of Texas, 136 S.W.3d 643, 648 (Tex. 2004).

         Principles of Deed Construction

         To determine whether the trial court erred in its interpretation of the 1951 deed, the first issue we address is whether the deed is ambiguous. Although neither party asserts the deed is ambiguous, both parties clearly diverge on its proper interpretation. Ambiguity is a question of law for the court. ConocoPhillips Co. v. Koopmann, 547 S.W.3d 858, 874 (Tex. 2018). Texas courts recognize that ambiguity does not arise merely because parties assert differing interpretations. N. Shore Energy, LLC v. Harkins, 501 S.W.3d 598, 602 (Tex. 2016). If a deed is worded in such a way that it can be given a certain or definite meaning, then the deed is not ambiguous. Endeavor Energy Res., L.P. v. Discovery Operating, Inc., 554 S.W.3d 586, 601 (Tex. 2018). Only when a deed remains susceptible to two or more reasonable interpretations, after application of rules of interpretation, does an ambiguity of interpretation arise. ConocoPhillips, 547 S.W.3d at 874.

         The construction of an unambiguous deed is reviewed as a question of law. Luckel v. White, 819 S.W.2d 459, 461 (Tex. 1991); Clayton Williams Energy, Inc. v. BMT O & G TX, LP, 473 S.W.3d 341, 348 (Tex. App.-El Paso 2015, pet. denied). When conducting our review, we apply our own judgment and accord no deference to the trial court's decision. Quick v. City of Austin, 7 S.W.3d 109, 116 (Tex. 1998). Our primary duty is to ascertain the intent of the parties from the four corners of the instrument. Wenske v. Ealy, 521 S.W.3d 791, 794 (Tex. 2017) (citing Luckel v. White, 819 S.W.2d 459, 461 (Tex. 1991)). We must examine the entire instrument seeking to harmonize and give effect to all its provisions such that no provision is rendered meaningless. Luckel, 819 S.W.2d at 462; Altman v. Blake, 712 S.W.2d 117, 118 (Tex. 1986). In so doing, we reject rules of construction which give priority to certain clauses over others or require the use of so-called "magic words." Wenske, 521 S.W.3d at 794. As a fundamental principle, "[t]he parties' intent, when ascertained, prevails over arbitrary rules." Id. (citing Luckel, 819 S.W.2d at 462).

         More recently, in a case of a will dispute that necessarily involved the construction of a mineral deed, the Texas Supreme Court reaffirmed that courts must employ a holistic approach aimed at ascertaining intent from all words and all parts of the conveying instrument. Hysaw v. Dawkins, 483 S.W.3d 1, 13 (Tex. 2016). Importantly, Hysaw eschewed reliance on mechanical or bright-line rules as a substitute for "an intent-focused inquiry rooted in the instrument's words." Id. When discerning intent, courts construe words and phrases together and in context, not in isolation. Id. "[A]pparent inconsistencies or contradictions must be harmonized, to the extent possible, by construing the document as a whole." Id. Words and phrases bear their ordinary meaning unless the context supports a technical meaning or a different understanding. Id. (citing In re Office of the Att'y Gen. of Tex., 456 S.W.3d 153, 155-56 (Tex. 2015) ("Given the enormous power of context to transform the meaning of language, … the import of language, plain or not, must be drawn from the surrounding context, particularly when construing everyday words and phrases that are inordinately context-sensitive.")). When applicable, Hysaw further confirmed that "the estate-misconception theory and the historical use of 1/8 as the standard royalty may inform the meaning of fractions stated in multiples of 1/8, but these considerations are not alone dispositive." Id.

         Mineral Interest Ownership, ...


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