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At a Glance:
Title:
Concord Oil Co. v. Pennzoil Exploration & Production Co.
Date:
February 26, 1998
Citation:
966 S.W.2d 451
Court:
Texas Supreme Court
Status:
Published Opinion

Concord Oil Co. v. Pennzoil Exploration & Production Co.

Supreme Court of Texas.

CONCORD OIL COMPANY and Crenshaw Royalty Corporation, Petitioners,

v.

PENNZOIL EXPLORATION AND PRODUCTION COMPANY, Pennzoil Producing Company, Sanchez–O’Brien Oil & Gas Corporation, and John M. Robinson, Respondents.

No. 94–0504.

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Argued Jan. 8, 1998.

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Decided Feb. 26, 1998.

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Concurring Opinion filed June 5, 1998.

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Rehearing Overruled June 5, 1998.

Attorneys & Firms

*452 Andy Carson, Corpus Christi, Ernest E. Smith, III, Austin, Laura H. Burney, San Antonio, Bruce M. Kramer, Lubbock, for Petitioners.

John Gaston, Houston, for Respondents.

Opinion

ABBOTT, Justices, join.

The motions for rehearing were granted, and the opinion of the Court dated October 18, 1996 is withdrawn.

This case presents an issue with which this Court, other courts, and practitioners have struggled for many years: What interest has been conveyed in an oil and gas property when two differing fractions appear within the conveying instrument? The granting clause of the mineral deed in controversy describes the interest conveyed as a 1/96 interest in minerals, but a subsequent clause *453 states that the conveyance covers and includes 1/12 of all rentals and royalty of every kind and character. We hold that the conveyance at issue, when considered in its entirety, constituted a grant of a 1/12 interest in any rights or benefits under the lease in existence at the time of the grant and the possibility of reverter of a 1/12 interest in the mineral estate. Accordingly, we reverse the judgment of the court of appeals and render judgment in favor of Concord and Crenshaw.

I

The mineral deed at issue, which we refer to as the Concord deed, was executed in 1937 by A.B. Crosby as the grantor. It covers Survey Sixty-four in Zapata County. The grantee was Southland Lease and Royalty Corporation, through whom petitioners Concord Oil Company and Crenshaw Royalty Corporation claim. Crenshaw acquired Southland’s interest and subsequently executed two oil and gas leases under which Concord is the lessee. (We use “Concord” to refer to both of the petitioners in the balance of this opinion.) The Concord deed provides in relevant part:

That I, A.B. Crosby ... Grant, Sell and Convey unto Southland ... an undivided one-ninety sixth (1/96) interest in and to all of the oil, gas and other minerals in and under, and that may be produced from Survey Sixty-four ... together with the right ... of ingress and egress at all times for the purpose of prospecting, drilling, mining and exploring said lands for oil, gas and other minerals ... together with all rights of every kind and character necessary and convenient to the full use and enjoyment of such estate herein conveyed....

While the estate hereby conveyed does not depend upon the validity thereof, neither shall it be affected by the termination thereof, this conveyance is made subject to the terms of any valid subsisting oil, gas and/or mineral lease or mineral lease or leases on above described land or any part thereof, but covers and includes one-twelfth (1/12) of all rentals and royalty of every kind and character that may be payable by the terms of such lease or leases insofar as the same pertain to the above described land, or any part thereof.

This deed was executed on August 5. The day before, the grantor Crosby had acquired an undivided 1/12 interest in the minerals under a deed identical to the Concord deed in all respects but one: the fraction in the granting clause. The granting clause in the deed to Crosby contained the fraction “one-twelfth (1/12)” rather than 1/96.

The parties have stipulated that at the time each of these deeds was executed, an oil and gas lease that provided for a 1/8 royalty was outstanding. That lease expired before any of the parties to this case entered into leases covering Survey Sixty-four.

In 1961, Crosby executed another mineral deed covering Survey Sixty-four in which he purported to convey to John M. Robinson an undivided 7/96 interest in the minerals. Robinson subsequently entered into an oil and gas lease with Pennzoil Producing Company. Through various transactions, Pennzoil Exploration and Production Company succeeded to interests under that lease, and Sanchez O’Brien Oil & Gas Corporation acquired a 25% interest in the lease. (Robinson and the other respondents are referred to in this opinion collectively as Pennzoil unless the context indicates otherwise.)

Pennzoil completed producing wells on the property, and this dispute ensued. Concord sought a determination of its interest and sued for damages equal to the value of past production by Pennzoil. Pennzoil counterclaimed seeking a determination of its rights. The case was tried to the court on stipulated facts. Concord’s primary contention was that the deed at issue unambiguously conveyed a 1/12 interest in the minerals. Concord asserted three other theories of recovery in the alternative. Concord’s first alternative claim was that the deed was ambiguous and that it conveyed 1/12 of all rentals and 1/12 of all royalty attributable to all production under any lease that included Survey Sixty-four, not just the proportionate amount of royalty that would be attributable to production from Survey Sixty-four. (Apparently, Concord contended that this deed should be construed in the same manner as that in *454 Hoffman v. Magnolia Petroleum Co., 273 S.W. 828 (Tex. Comm’n App.1925, holding approved).) The second alternative contention was that the deed conveyed 1/12 of rentals and royalty on production attributable to Survey Sixty-four. Concord’s final alternative claim was that it was entitled to a 1/96 royalty.

Pennzoil contended that the Concord deed conveyed only a 1/96 interest in the minerals. Pennzoil acknowledged that the deed had also conveyed 1/12 of rentals and royalty, but took the position that the 1/12 interest was limited to the lease that existed at the time the deed was executed. Under Pennzoil’s view of the case, the 1/12 interest terminated upon the expiration of that lease, which occurred well before the Crosby conveyance to Robinson, Pennzoil’s lessor.

The trial court found in favor of Pennzoil and entered a take-nothing judgment against Concord. The court of appeals affirmed. Id. at 196. For the reasons discussed below, we disagree with this construction of the deed.

II

This case is not the first one in which we have considered deeds or other conveyances of mineral interests that contain two or more differing fractions. The proper construction of such instruments has been a recurring issue. See, e.g., Jupiter Oil Co. v. Snow, 819 S.W.2d 466 (Tex.1991).

In Luckel, we held that the primary objective in construing mineral and other grants is to determine the intent of the parties from all the language in the instrument. Luckel, 819 S.W.2d at 464.

Commentators have written fairly extensively about our decisions in this area of oil and gas law, often debating what theories were or were not applied.1 However, with the exception of Alford, our decisions contain a unifying principle: the entire document must be examined to glean the parties’ intent. See Luckel, 819 S.W.2d at 462. Apparent inconsistencies in the conveying instrument must be harmonized, if possible, by *455 looking at the document as a whole. Id. In the cases that we have considered in the past, when conveyances contained apparent inconsistencies between the fraction in the granting clause and fractions in other provisions, it was evident from the instrument as a whole that the grantor had conveyed a larger interest than the granting clause otherwise indicated. In those cases, provisions other than the granting clause gave rights to the grantee that, when considered in the aggregate, amounted to a larger fraction of the mineral or royalty interest than specified in the granting clause.

A

One of the first decisions that confronted a conveyance with more than one fraction was Id. at 1079. The intent of the parties was evident from the four corners of the instrument.

The facts in Id. at 907. Once again, the instrument spelled out what the grantee was to receive, which amounted to 1/8 of all the attributes of mineral ownership.

The conflict in the royalty deed at issue in Luckel was not as readily apparent as those in Tipps and Garrett. In Luckel, as long as the royalty payable under any given lease was a 1/8 royalty, the granting clause seemed consistent with other parts of the deed. The granting and warranty clauses of the royalty deed at issue spoke of a 1/32 royalty. Id.

On the same day that we decided Luckel, we also decided Id. at 469. The result in Jupiter Oil was fully consistent with Luckel, Garrett, and Tipps.

B

One case that is sometimes cited among the decisions addressing conflicting fractions is Id. The dispute boiled down to how to construe the use of the word “of” in a royalty conveyance.

Our decision in Id. at 169. Thus, the grantor was left with a 1/8 interest in the minerals, but 3/8 of certain benefits payable under any lease.

Another decision of this Court that is often discussed in conjunction with conflicting fractions in mineral or royalty deeds is Id.)

C

In each of the cases in which the fraction in the granting clause was smaller than those in subsequent parts of the conveyance, the conveyance contained explicit, unambiguous provisions that directed what interest the grantee was to receive under various circumstances. In each of these cases, the fraction was consistent in all clauses except the granting clause. And, in each of these cases, when all the rights of the grantee under the specific provisions following the granting clause were considered and aggregated, the grantee had in fact received an estate larger than that otherwise indicated by the granting clause. The principal import of our decision in Luckel is that the document must be read as a whole to see what actually has been conveyed. While we have not always articulated this precept, the result in each case, other than Alford, has been consistent with the directives in Luckel that the conveyance must be considered as a whole to determine the intent of the parties and that seemingly conflicting provisions are to be harmonized if possible. Luckel, 819 S.W.2d at 462.

This does not mean that no deed or grant should be construed to convey mineral and royalty interests of different magnitudes. The owner of a mineral interest may convey one or more, or fractions of one or more, of any attribute of the mineral estate, including but certainly not limited to a fraction of the mineral interest, a fraction of royalties, the right to receive delay rentals, and the executive rights. But when differing fractions appear in a conveyance, we must discern the intent of the parties from the four corners of the document. In other words, as we held in Luckel, we will consider the entire instrument to determine what has been conveyed.

III

The Concord deed does not give as much guidance as the conveyances considered by this Court in other cases. One of the primary points of dispute is whether the provision that refers to “one-twelfth (1/12) of all rentals and royalty” applies only to leases in existence at the time the grant was made or whether it applies to all leases. The court of appeals framed the issue as whether the Concord deed contained a “future lease” clause and concluded that it did not. 878 S.W.2d at 194–95.

Whether a deed such as the one under consideration contains a “future lease” clause is not necessarily dispositive of what interest was conveyed. The substance of what has been conveyed must be determined taking into account all provisions of the conveyance. The parties’ intent must be determined from the document as a whole, not by the presence or absence of a certain provision.

A

One of the first questions that must be answered is whether it is evident within the four corners of the conveyance that two differing interests were to be conveyed. Although the Concord deed gives only sparse direction, we conclude that it does not evidence an intent to convey two separate interests. The opening paragraph of the deed describes a 1/96 interest in the “estate” conveyed. The second paragraph recites that “the estate hereby conveyed ... covers and includes one-twelfth (1/12) of all rentals and royalty of every kind and character.” This language indicates that only a single “estate” is being conveyed, not two separate interests. Moreover, if the estate were only a 1/96 interest in the minerals, it would cover and include only 1/96 of the rents and royalty. A 1/96 mineral interest could not “cover [ ] and include[ ] one-twelfth (1/12) of all rentals and royalties.”

Another indication that a single estate rather than two estates with differing durations was conveyed is the recitation in the deed that the estate being conveyed “does not depend upon the validity ... [nor] shall it be affected by the termination” of leases. If the estate conveyed was a 1/12 mineral interest *458 only for the life of the lease that was in effect at the time the deed was executed and became a 1/96 mineral interest upon expiration of that lease, “the estate hereby conveyed” is unquestionably “affected by the termination” of that lease. The construction placed on the deed by the court of appeals and by the dissent ignores the express direction of the deed. The dissent and the court of appeals concede, as they must, that the grantee was entitled to 1/12 of rents and royalties as long as the lease in existence at the time of the conveyance continued in effect. They cannot explain how, upon termination of that lease, “the estate hereby conveyed,” which included 1/12 of rents and royalties under the existing lease, became 1/96 of rents and royalties under all future leases and yet was not “depend[ent] upon” or “affected by” the termination of the existing lease.

The construction adopted by the court of appeals also does violence to the express provisions of the conveyance in concluding that two separate estates were conveyed, a 1/96 mineral interest and “in addition,” a “1/12 interest in the existing lease which expired when the lease terminated.” 878 S.W.2d at 196. No language in the conveyance indicates that the 1/12 interest in rents and royalties was meant to be in addition to or separate from the estate granted in the opening clause. Such a construction also raises a knotty problem. The court of appeals concluded that the grant of a 1/96 mineral interest and the grant of 1/12 interest in the existing lease took effect at the same time, specifically, that the grant of a 1/96 mineral interest “remained the same throughout.” Id. If that were the case, the deed would have granted 1/96 of the minerals pursuant to which the grantee would receive 1/96 of the rents and royalties under the then-existing lease plus a 1/12 interest pursuant to which the grantee would receive another 1/12 (8/96) of rents and royalties. The sum of these two grants would be 9/96 of rents and royalties under an existing lease, which is more than 1/12. See David E. Pierce, Developments in Nonregulatory Oil and Gas Law: The Continuing Search for Analytical Foundations, in 47 INSTITUTE ON OIL & GAS LAW & TAXATION § 1.05 (1996) (criticizing the decision of the court of appeals in this regard). Nothing in the conveyance indicates that the parties intended to convey a 9/96 interest under the then-existing lease. The dissent implicitly reasons that the grant of a 1/96 mineral interest was either deferred until the expiration of the existing lease or that the grant of a 1/96 interest expanded to a 1/12 interest during the life of the lease outstanding at the time of this conveyance. But here again, there is absolutely no language in the deed to support such a construction. The grant in the granting clause was a present conveyance. We should not and do not resort to a strained construction of this deed that ignores its express provisions. The intent of the parties can be determined from the four corners of the document which evidences the intent to convey a single estate. The only issue is the size and character of that single estate.

As discussed above, when an instrument effectively transfers the attributes of a 1/2 interest in the minerals, a 1/2 interest in the minerals has been conveyed even though the fraction in the granting clause is less than 1/2. See Pan American Petroleum Corp. v. Texas Pacific Coal & Oil Co., 340 S.W.2d 548, 557–58 (Tex.Civ.App.—El Paso 1960, writ ref’d n.r.e.), persuasive. We need not and do not decide today the proper construction of the deed in Pan American.

Our decision in this case does not depend on the presence or absence of a “future lease” clause, which the court of appeals *459 found dispositive. See 878 S.W.2d at 197. If the deed had simply said “any valid subsisting oil, gas and/or mineral lease,” we might be inclined to agree. But it says “any valid subsisting oil, gas and/or mineral lease or mineral lease or leases.” (emphasis added). The deed covers and includes 1/12 of the rentals and royalty on any “mineral lease or lease” as well as those leases subsisting at the time of the grant. Any other construction ignores the phrase “or mineral lease or leases.”

The final question to be resolved is whether the Concord deed conveyed an interest in minerals or only an interest in rents and royalty. Concord has argued in the alternative that the grant was 1/12 of royalty together with 1/12 of delay rentals. On the day Crosby executed the conveyance, the property was leased. He owned a 1/12 interest in all benefits under the lease and a 1/12 interest in the possibility of reverter of the mineral estate. The Concord deed left him with no interest in royalty and no right to receive delay rentals under any lease. If the Concord deed granted only Crosby’s rights to royalty and rental, Crosby would have retained a possibility of reverter in 1/12 of the interest in the minerals, less 1/12 of rents and royalty. Crosby would thus have retained a right to develop upon reverter of the minerals, executive rights, and the right to 1/12 of any bonuses upon execution of any future leases. The fact that the provision that “covers and includes” 1/12 of rents and royalty contains no reference to bonuses or executive rights could be considered an indication that the conveyance was more akin to a royalty interest than a grant of a 1/12 interest in the minerals.

But a royalty interest is a nonpossessory one, and it does not include the right to receive delay rentals. The right to delay rentals is another attribute of the “bundle of rights” associated with a severed mineral estate. See Altman v. Blake, 712 S.W.2d 117, 118 (Tex.1986). The Concord deed grants not only 1/12 of delay rentals, but also extensive, detailed rights of possession to drill for and produce oil and gas, including the right to lay pipeline and to build tanks, power stations, telephone lines, and storage and marketing facilities. The granting clause contains classic language used in granting an interest in minerals.

Bearing in mind that our objective is to determine the intent of the parties in light of all the provisions of the deed, we conclude that the Concord deed conveyed an interest in minerals. Because the deed evidences the intent to convey a single estate that covered and included 1/12 of rents and royalties under all leases, and because other provisions in the deed indicate that a possessory, mineral estate was conveyed, we hold that the Concord deed conveyed a 1/12 interest in the minerals.

B

The parties and amici address at some length the history of mineral deeds that contain multiple fractions. Concord offers this history as a reason to construe the deed in question as conveying an interest in minerals larger than the granting clause otherwise indicates. We note that the use of “1/12” and of “1/96” in the Concord deed was, in all probability, no accident. This Court has taken judicial notice of the fact that the prevailing royalty in private oil and gas leases was a 1/8 royalty during the era in which the Concord deed was executed. See, e.g., 878 S.W.2d at 193 & n. 2. We have seen that when mineral or royalty deeds contain differing fractions, the fractions almost invariably involve a multiple of eight.

Concord and some commentators suggest that conflicting fractions appear in so many deeds because of a common misconception of what an owner of a mineral interest retains after the execution of a lease. See, e.g., 2 HOWARD R. WILLIAMS & CHARLES J. MEYERS, OIL AND GAS LAW § 327.2, at 94.1 (1980); Frank W. Elliott, Jr., Luckel, 819 S.W.2d at 464. The lessor also receives, of course, all rights that are bargained for in connection with the lease, which usually include the payment of royalties, delay rentals, and bonuses.

The decision in Tipps, which helped to foster this so-called “estate misconception,” went so far as to say that the use of differing fractions was the proper method of conveyance when a mineral lease was outstanding at the time of the grant. 101 S.W.2d at 1079. In referring to the conflicting fractions, the court said, “No language has been suggested, and we know of none, that would more clearly and accurately express the intention of the parties or that would have the legal effect intended by them than that used.” Id. The Tipps court thus blessed the use of “1/16” in the granting clause and “1/2” in subsequent clauses when the grantor owned the possibility of reverter in the entire mineral estate and wished to convey 1/2 of that interest at a time when the property was subject to a mineral lease providing for a 1/8 royalty. Tipps was decided in 1936, and the Concord deed was executed in 1937. Under the rationale of Tipps, it would have been appropriate for Crosby to have inserted “1/96” in the granting clause and “1/12” in other provisions of the Concord deed if he intended to convey a 1/12 interest in the minerals.

We are thus mindful of extant circumstances at the time the Concord and other deeds were executed. But we do not base our decision in this case on the theory of an “estate misconception.” An understanding of the misconceptions under which some operated is helpful and instructive, but not dispositive. We cannot say categorically that no conveyance with differing fractions effectuated a grant of one fractional interest in the mineral estate and a different fractional interest in royalties under either existing or future leases.

Concord and amici urge this Court to adopt “firm” or “bright-line” rules for construing mineral and royalty conveyances that contain differing fractions. Bright-line tests that focus only on the predominance of one clause over another or that strictly construe each provision in a conveyance as a separate, independent grant, or that choose the larger of conflicting fractions are arbitrary. They will not always give effect to what the conveyance provides as a whole. The principles *461 set out in Luckel and the approach taken in Garrett are designed to give effect to the intent of the parties as actually expressed within the four corners of the conveyance and to harmonize provisions that appear to conflict.

IV

The remaining issue is the question of prejudgment interest. We note at the outset that this dispute does not involve a contract or account, and article 5069–1.03 does not apply. TEX.REV.CIV. STAT. art. 5069–1.03. No contract or other agreement exists between any of the petitioners and any of the respondents.

Pennzoil contends that 91.403(a). However, the statute permits a payor to withhold or suspend payment without interest when there is a dispute concerning title. The Code provides in pertinent part:

§ 91.402. Time for Payment of Proceeds

....

(b) Payments may be withheld without interest beyond the time limits set out in Subsection (a) of this section when there is:

(1) a dispute concerning title that would affect distribution of payments;

TEX. NAT. RES.CODE § 91.402(b).

§ 91.403. Payment of Interest on Late Payments

....

(b) Subsection (a) of this section does not apply where payments are withheld or suspended by a payor beyond the time limits specified in Section 91.402 of this code.

TEX. NAT. RES.CODE § 91.403(b).

There is no doubt that a dispute concerning title exists in this case. We do note that both Concord and Pennzoil are working interest owners and that there is some indication in the legislative history of the statute that it was designed to protect the interests of royalty owners. The House Bill Analysis stated:

Currently, there is no specific law to protect royalty owners in Texas from intentional practices to delay their royalty checks. While it is generally accepted that a great deal of these delays stem from legitimate title problems, it is also recognized that some of these delays are intentional and should be addressed by the Legislature.

HOUSE COMM. ON ENERGY, BILL ANALYSIS, Tex. H.B. 1775, 68 th Leg., R.S. (1983).

Nevertheless, the language of the statute is not limited to royalty interests. It is broad enough to encompass working interest owners and operators. Significantly, among the many briefs received in this case, no party or amicus contends that the statute reaches only royalty payments. Further, Hondo Oil & Gas Co. v. Texas Crude Operator, Inc., 970 F.2d 1433, 1439 (5th Cir.1992). Concord and Pennzoil fall within the definitions of “payee” and “payor,” respectively, under this statute:

§ 91.401. Definitions

In this subchapter:

(1) “Payee” means any person or persons legally entitled to payment from the proceeds derived from the sale of oil or gas from an oil or gas well located in this state.

(2) “Payor” means the party who undertakes to distribute oil and gas proceeds to the payee, whether as the purchaser of the *462 production of oil or gas generating such proceeds or as operator of the well from which such production was obtained or as lessee under the lease on which royalty is due. The payor is the first purchaser of such production of oil or gas from an oil or gas well, unless the owner of the right to produce under an oil or gas lease or pooling order and the first purchaser have entered into arrangements providing that the proceeds derived from the sale of oil or gas are to be paid by the first purchaser to the owner of the right to produce who is thereby deemed to be the payor having the responsibility of paying those proceeds received from the first purchaser to the payee.

(2).

As an owner of an interest in the minerals, Concord has a legal right to compensation for oil and gas that has been produced from Survey Sixty-four and is a “payee.” Pennzoil is the operator of the wells that have been drilled and is a lessee under a valid lease or leases covering all of the mineral interests other than the 1/12 interest at issue in this case.

Concord and amici contend that the exceptions under Hondo, 970 F.2d at 1439 (holding prejudgment interest was not recoverable even though payor claimed an interest in the disputed amounts).

Finally, Concord and amici contend that equitable prejudgment interest should be awarded under the common law, citing TEX. NAT. RES.CODE § 91.403(b)(2) did not require payment of interest). Accordingly, prejudgment interest is not recoverable in this case.

* * * * *

For the foregoing reasons, we reverse the judgment of the court of appeals and render judgment in favor of Concord.

ENOCH, Justice, concurring.

I withdraw my opinion of February 26, 1998, and substitute the following in its place.

I joined the Court’s original opinion in this case. On rehearing, it became evident to me that our original opinion, although scholarly,1 went wide of the mark. The rehearing has produced a more accurately focused argument by the parties and consequently a better opinion from this Court. But the plurality insists on writing beyond the problem on points that seriously undermine its own position. Consequently, I can only concur in the Court’s judgment, although I agree with the plurality on rehearing that we cannot reasonably interpret the deed in this case to convey two estates.

The original opinion from this Court was seriously flawed in two respects. First, the Court presupposed that the typical grantor does not intend to make two grants in one deed. 40 Tex. Sup.Ct. J. 33, 38. Pennzoil, on rehearing, could not have been clearer in its attack on these flaws. Surprisingly, Concord, in response, made no effort at all to support the underpinnings of the Court’s opinion. We granted the rehearing and further argument ensued.

Pennzoil rightly contends that whether “most grantors” intend to make two grants in one deed is an irrelevant inquiry unless the Court determines that the document, standing alone, contains internal inconsistencies. See, e.g., National Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 521 (Tex.1995). In short, we violated our own rules for construing writings. We read the “subject to” clause in a way that created a conflict within the document, rather than in a way that avoided the conflict.

Today, the plurality undermines its reasoning by continuing to rely on both the improper presupposition about a typical grantor’s intent and the improper reading of the Crosby deed’s “subject to” clause. Concord, by not arguing the point, implicitly concedes that both are flaws in the plurality’s position. Were these the only bases supporting the Court’s judgment, then the dissent’s view should prevail and a different judgment should be rendered. But, there is one other, dispositive reason that dictates the actual judgment in this case. A point that destroys the reading the dissent attempts to give the *464 Crosby deed. And a point the plurality merely adds to the Court’s original opinion.

Were the Crosby deed to contain two conveyances rather than one, there would be an unavoidable conflict—a conflict that was, until now, overlooked by us. Even the parties failed to focus on it until oral argument on rehearing. The conflict would arise because, were the granting clause and the “subject to” clause conveying separate estates, they would convey more than Crosby owned. We need only focus on this fact. It is this fact alone that keeps me from joining the dissent, which is otherwise correct. There is nothing inherently wrong with a deed expressing two grants, and where expressed, such grants should be honored. However, the potential for over-grant in the Crosby deed prevents me from concluding that this deed contains two grants.

A proper review of the Crosby deed begins with the four-corners rule, under which we attempt to ascertain the intent of the parties from the language of the deed. See National Union, 907 S.W.2d at 520. Importantly, we are not to give the deed a reading that is unreasonable. Id.

We cannot give the Crosby deed the reading that the dissent believes is correct—that the deed makes two conveyances—because that reading is unreasonable. Assuming that the deed makes two conveyances, we would have the granting clause conveying a 1/96 mineral interest. But we would also have the “subject to” clause simultaneously conveying an additional 1/12 (or 8/96) interest in rentals and royalties under the then-current lease. This reading produces an over-grant.

At the time of Crosby’s deed to his grantee, Southland, a mineral lease covered the property. The lessee held title to the mineral estate subject to the possibility that title would revert to Crosby and the other lessors in the future. Crosby, therefore, owned the possibility of a 1/12 mineral interest. Crosby’s reverter interest included the right to royalties under the then-current lease, as do all reverter interests in the absence of language to the contrary. See Luckel, 819 S.W.2d at 464. Therefore, the Crosby deed’s granting clause transferred to Southland 1/96 of Crosby’s reverter interest, carrying with it a corresponding 1/96 share of the royalties due under the then-current lease. See id. If the “subject to” clause were a separate conveyance, it would transfer to Southland an additional 8/96 interest in the royalties due under the then-current lease. Under the dissent’s construction, the granting clause and the “subject to” clause would convey 1/96 plus 8/96 for a total of 9/96 interest in the royalties, a larger interest than Crosby owned. This construction is not reasonable.

As Professor David Pierce has noted in looking at the court of appeals’ opinion in this case, the dissent’s two-grant conclusion makes sense only if one assumes that only one grant operates at a time. See David E. Pierce, Developments in Nonregulatory Oil and Gas Law: The Continuing Search for Analytical Foundations, in 47 OIL & GAS LAW & TAXATION § 1.05, at 1–24 (1996). That assumption, however, is contrary to the clear language of both the granting and “subject to” clauses.

Because reading the Crosby deed as making two conveyances creates an over-conveyance problem, we may not use that reading as a way of resolving the conflicting fractions in the Crosby deed. Therefore, we must see if there exists another reading that will resolve the conflict between the fractions.

As the plurality notes, the Crosby deed was written in the same year that this Court adopted the Texarkana court of appeals’ opinion in id. at 1079. Construing a deed with differing fractions used similarly to those in the Crosby deed, the Tipps court held that “we know of [no language] that would more clearly and accurately express the intention of the parties” to convey the single larger interest. Id. Simply, Tipps *465 supports construction of the Crosby deed to convey all of Crosby’s 8/96 mineral interest.

I do not disagree with the content of the plurality’s dissertation on policy and historical justifications, but the dissertation requires the practitioner to dig to find the nugget that resolves this case. Giving the Crosby deed a reasonable construction, I must conclude that the deed conveyed all of Crosby’s 1/12 mineral interest. Therefore, I concur.

HANKINSON, Justices, dissenting on motion for rehearing.

The dissenting opinion of October 18, 1996 is withdrawn and the following is substituted in its place.

We agree with both the trial court and the court of appeals that the deed in question unambiguously conveyed two estates of different sizes and duration: a 1/96 perpetual interest in the minerals, and a 1/12 interest in rentals and royalties which ended with the existing lease. Accordingly, we would affirm the judgment of the court of appeals.

I

The rules of construction that govern this type of dispute were most recently articulated in Luckel v. White:

The construction of an unambiguous deed is a question of law for the court. The primary duty of a court 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.” That intention, when ascertained, prevails over arbitrary rules. The court, when seeking to ascertain the intention of the parties, attempts to harmonize all parts of the deed. The parties to an instrument intend every clause to have some effect and in some measure to evidence their agreement. 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. The 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.

819 S.W.2d 459, 461–62 (Tex.1991) (citations and some punctuation omitted).

Luckel rejects mechanical rules of construction, such as giving priority to the granting clause over others, or requiring the use of magic words. Guided by Luckel, we conclude that the A.B. Crosby deed to Southland Leasing Co. (which the Court refers to as the “Concord deed”) unambiguously makes two grants: (1) the granting clause conveyed a 1/96 perpetual mineral interest and the corresponding royalty; and (2) the subject-to clause conveyed a separate and additional 1/12 royalty estate from subsisting leases. The Court errs because it begins with a presumption that different fractions in different provisions necessarily conflict. If we can give the differing fractions meaning according to the plain language of the deed, then we must do so.

Understanding the deed as two separate grants, we need not apply rules of construction to rewrite one of the fractions, as the Court has done. Under well-settled case law, a grantor may convey a different interest in the leased minerals and in the existing royalty income by the same instrument. See Richardson v. Hart, 143 Tex. 392, 185 S.W.2d 563, 564 (Tex.1945). Thus, the fact that the deed purports to grant two different fractional estates does not create a conflict.

Because we can give the deed’s language its plain and ordinary meaning, we have no reason to resort to rules of construction. Rules of construction come into play only to resolve irreconcilable conflicts in multi-fraction deeds. See Jupiter Oil Co. v. Snow, 819 S.W.2d 466, 469 (Tex.1991).

For this reason, the cases the Court cites involving conveyances with irreconcilable provisions do not apply here. See, e.g., Tipps v. Bodine, 101 S.W.2d 1076 (Tex.Civ.App.—Texarkana 1936, writ ref’d). These cases properly outline the rules for construing mineral deeds. These cases are distinguishable, however, because the deeds at issue in those cases each contained a future-lease clause.1 In each there were multiple provisions consistent with each other but inconsistent with the granting clause. Here, no irreconcilable conflict appears on the face of the deed, in part because only two fractions must be reconciled.

The deed at issue in this case is more like the one in Id.

II

The subject-to clause states that the conveyance was subject to “any valid subsisting oil, gas and/or mineral lease or mineral lease or leases.” The deed plainly limits the subject-to clause to existing leases, but the Court avoids this construction by interpreting the conclusion of the phrase “or mineral lease or leases” to mean future leases. It is unlikely that after carefully limiting the subject-to clause to existing leases, Crosby meant “or mineral lease or leases” to include an entirely different interest—future leases. “Valid subsisting” is a compound adjective that modifies everything afterward. What follows is a list of each type of lease that could have existed when Crosby made the grant. The list is connected by commas and conjunctions, consistent with other serial lists. Under this construction, the deed is subject to:

· An oil, gas, and mineral lease

· An oil and gas lease

· A mineral lease

· A mineral lease or leases

The phrase “or mineral lease or leases” is broad enough to cover any combination of these lease types or to serve as the plural form of any single type of lease. It is best understood as lawyerly writing bordering on the redundant, such as “grant, sell, and convey” or “right, title, and interest.”

Ignoring the subject-to clause’s serial nature, the Court takes the phrase “or mineral lease or leases” out of context and concludes that Crosby really intended to convey a 1/12 royalty interest under both the existing lease and all future leases. However, we may not isolate this phrase and read it as an independent clause. We have never before read a future-lease clause into a mineral deed when the parties did not clearly express their intent about future events. See, e.g., Tipps v. Bodine, 101 S.W.2d 1076, 1077 (Tex.Civ.App.—Texarkana 1936, writ ref’d) (providing that, “in the event that the above described lease for any reason becomes canceled or forfeited,” grantee would receive “One–Half of the lease interests and all future rentals on said land” (emphasis in original)). Unlike these deeds, the Crosby–Southland deed did not specify that Southland would hold an interest when the existing lease terminated. Thus, Crosby retained a possibility of reverter in future lease benefits that vested when the existing lease expired. The Court’s construction ignores the word “subsisting,” which unlike “or mineral lease or leases” has substantive meaning.

The Court and Justice Enoch contend that the lease may not be enforced as written because the granting clause includes within the “bundle of sticks” a royalty interest which must be added to the interest in existing leases conveyed in the subject-to clause. They assert that when the implied royalty interest of the granting clause is added to the express conveyance of the royalty interest in existing leases, it results in an interest larger than Crosby owned. The Court and Justice Enoch over-complicate the deed’s plain language to create a false conflict. The deed says “subject to,” not “added to.” A far simpler interpretation is that Crosby intended to convey to Southland a 1/96 interest in all of his rights, except for the rentals and royalties in subsisting leases, of which he conveyed a 1/12 interest. The net effect is that Crosby conveyed to Southland all of his royalty interest from existing leases, being 1/12, and a 1/96 interest in the possibility of reverter; Crosby retained the other 7/96 interest in the possibility of reverter. The right to royalty from subsisting leases and the possibility of reverter are two different interests which should not be added together. Under this interpretation, Crosby conveyed all of his right to royalty in subsisting leases and less than his interest in the possibility of reverter; it does not require us to assume that Crosby meant to convey 1/12 when he wrote 1/96.

In sum, the only way to justify the harmonizing approach is to create a conflict between the fractions where none exists. Even then, the Court assumes that the grantor intended to convey something other than what appears on the face of the deed, thereby violating the four-corners rule. This Court cannot substitute what it thinks the grantor really meant for the unambiguous grant of a 1/96 mineral interest and an additional 1/12 royalty from existing leases. See Luckel, 819 S.W.2d at 463. Nevertheless, the Court interpolates a future-lease clause into the deed and holds that 1/96 really means 1/12. The Court’s opinion promotes ad-hoc analysis of every mineral deed and wreaks havoc on title stability. For these reasons, we would affirm the court of appeals’ judgment.

Footnotes

1

A sampling of treatises and articles addressing so-called multiple-grant conveyances and decisions of this Court includes: RICHARD W. HEMINGWAY, THE LAW OF OIL AND GAS §§ 9.1–.2 (3d ed.1991); Laura H. Burney, Petroleum Land Titles: Title Examination & Title Opinions, 46 BAYLOR L.REV. 1007 (1994).

1

Patrick H. Martin, Recent Developments in Nonregulatory Oil & Gas Law, in OIL & GAS LAW & TAXATION § 1.02(2)(e), at 1–15 (1997).

1

As the Court acknowledges, “The Concord deed does not give as much guidance as the conveyances considered by this Court in other cases.” 966 S.W.2d at 457. The Court again observes that the Concord deed “is not as explicit as the deeds in Luckel, Jupiter Oil, Garrett, or Tipps.” 966 S.W.2d at 458.

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