#### WATKINS et ux. v. SLAUGHTER et al.

No. A-409.

Supreme Court of Texas.

July 18, 1945.

Rehearing Denied Oct. 17, 1945.

Durwood D. Mahon and Lawrence F. Green, both of Lubbock, for petitioners.

John E. Kilgore, of Dallas, for respondents.

Eastham & Simpson and Jas. L. Shepherd, Jr., both of Houston, amici curiae.

SHARP, Justice.

On May 9, 1945, this Court reversed the judgment of the Court of Civil Appeals (183 S.W.2d 474) and rendered judgment for petitioners. The case is now pending here on motion for rehearing, and this Court has decided to withdraw the original opinion rendered herein and substitute therefor the following:

This suit was 'brought to settle a controversy between petitioners and respondents as to the interpretation to be given a deed from Bob Slaughter conveying 80 acres of land to F. G. Watkins. The pertinent part of the language contained in the deed in controversy is as follows:

> “Together with a *15Ae*interest in and to all the oil, gas and other minerals in and under and that may be produced from said land and the grantor retains title to a 3⁄46 interest in and to all of the oil, gas and other minerals in and under and that may be produced from said land; but it is distinctly agreed and understood that the grantor, his heirs and assigns shall not receive any part of the money rental paid on any future lease; and the grantee, his heirs or assigns, shall have authority to lease said land and receive the cash bonus and rental; and the grantor, his heirs or assigns, shall receive the royalty retained herein only from actual production of oil, gas or other minerals on said land.”

Watkins later executed to third parties a mineral lease covering the 80 acres and vesting in the lessees the usual 7⁄8 leasehold estate; whereupon a dispute arose between respondents, successors in title to Bob Slaughter, and Watkins as to whether the quoted language reserved to the Slaughters 3⁄46 of the gross minerals as a royalty or only %e of the usual 1⁄8 royalty.

The trial court found that the Slaughters were entitled to “a non-participating perpetual royalty interest epuivalent to 3⁄46 of the gross minerals heretofore and hereafter to be produced from” the land. The Court of Civil Appeals affirmed the judgment of the trial court.

The controlling question for decision is: Did the conveyance of the land by Slaughter to Watkins, together with a *1BAe*interest in the oil, gas and other minerals, and the reservation to Slaughter of a %g interest in the oil, gas and other minerals, reserve to Slaughter a 3⁄46 royalty interest, or did it reserve to him merely a 3⁄46 mineral fee interest?'

*700The word “royalty” has a well understood meaning in the oil and gas industry. Schlittler v. Smith, 128 Tex. 628, 101 S.W.2d 543; State National Bank v. Morgan, 135 Tex. 509, 143 S.W.2d 757.

Article 5421c, Vernon’s Annotated Civil Statutes, in part reads as follows:

> “Sec. 4. All land shall be sold without condition of settlement and with a reservation of one-sixteenth (%e) of all minerals, as a free royalty to the State, * *

This statute was construed by this Court in the case of Wintermann v. McDonald, 129 Tex. 275, 102 S.W.2d 167; Id.,129 Tex. 275, 104 S.W.2d 4. A royalty or royalty interest may be created, prior to any lease for oil ond gas purposes, either by grant or by reservation. *See*Schlittler v. Smith, supra; State National Bank v. Morgan, supra; Brown v. Smith, 141 Tex. 425, 174 S.W.2d 43; and Summers’ Oil and Gas, Perm. Ed., Vol. 3, pp. 348, 349, § 572, pp. 473-483, § 599. In this State a royalty or royalty interest, whether created by grant or reservation, or by lease, is an interest in land. Sheffield v. Hogg, 124 Tex. 290, 77 S.W.2d 1021, 80 S.W.2d 741.

Of course, the whole of the material part of the deed must be considered in order to ascertain its meaning. This would be true even if the material part had consisted of different sentences and different paragraphs. But here the grantor was careful to express his intention and meaning in a single sentence, consisting of four parts, separated by semicolons. The first part is as follows:

> *“Together with*a *Wie*interest in and to all the oil, gas and other minerals in and under and that may be produced from said land and the grantor retains title to a %6 interest in and to all of the oil, gas and other minerals in and under and that may be produced from said land;”

Had the foregoing clause been the whole of what the deed contained as to the mineral interest conveyed and the mineral interest reserved, Slaughter would have reserved merely a 3⁄46 mineral fee interest. But the deed proceeds to describe the nature and quality of the two undivided mineral interests’ and to state what incidents and rights shall attach and belong to them. The second and third clauses of the sentence read as follows: “but it is distinctly agreed and understood that the grantor, his heirs and assigns, shall not receive any part of the money rental paid on any future lease; and the grantee, his heirs or assigns, shall have authority to lease said land and receive the cash bonus and rental;”. By these clauses the right to delay rentals under any future lease and the cash bonus which might be paid for the execution of any such lease passed to Watkins, the grantee, and was denied to Slaughter, the grantor.

The fourth and final clause of the sentence, following another semicolon, is: “and the grantor, his heirs or assigns shall receive the royalty retained herein only from actual production of oil, gas or other minerals on said land.”

Disregarding for the moment the use of the word “royalty” in this clause, it is apparent that the clause is intended to reiterate that the owner of the 3⁄46 is to be paid only from production, and that he shall receive no part of the payments of bonus or rentals, all of them belonging to the owner of the 1%c interest, the mineral fee estate. By the plain and definite terms of the deed it is announced unequivocally in the last clause that the grantor *“shall receive the royalty retamed herein only from actual production of*oil, *gas or other minerals cm said land.”*(Emphasis supplied.)

As aptly said by Associate Justice Stokes, who wrote the clear and able opinion of the Court of Civil Appeals herein:

> “The deed contained no reservation other than the %s of oil, gas, and other minerals, mentioned in the first clause of this one, and the quoted phrase could not, therefore, have had reference to any other item. It is obvious, therefore, that both the grantor and the grantee considered it to be royalty. In order to apply to the reservation the interpretation contended for by appellant, it would be necessary to disregard completely the last clause, which designates the reservation as royalty. Under all the rules of interpretation, that cannot be done, because it is not only not in conflict with the other provisions of the deed, but is in complete harmony with them.” 183 S.W.2d 474, 477.

Had the word “royalty” appeared in the first clause, above quoted, of the deed, by which the *Vie*was reserved — that is, had that clause read “the grantor retains title to a 1⁄46 royalty interest” — then there could be no contention that the interest reserved was only a mineral fee interest. Schlittler v. Smith, 128 Tex. 628, 101 S.W.2d 543; Brown v. Smith, 141 Tex. 425, 174 S.W.2d *70143. Certainly the reservation should not be given a different meaning merely because the description of the reserved interest as a royalty interest appears in the last clause of the sentence rather than in the first clause.

The motion for rehearing by respondents is granted and the former judgment of this Court is set aside. The judgments of the trial court and of the Court of Civil Appeals are affirmed.