N O . 04
- 14 -00711- CV

I N T HE C OURT O F A PPEALS F OURTH D ISTRICT O F T EXAS S AN A NTONIO D IVISION

___________________________________________________

P ETER J. D RAGON , Appellant,

V . C HARLES E. H ARRELL AND H OLLIS R. H ARRELL , Appellees

.

__________________________________________________

Cause No. 13 -1100232-CVK On Appeal from the 218 th Judicial District Court, Karnes County, Texas

Honorable Donna S. Rayes, Judge Presiding

___________________________________________________

B RIEF OF A PPELLEES

____________________________________________________

Jesse R. Castillo State Bar No. 03986600 jcastillo@casnlaw.com C ASTILLO S NYDER , P.C. Bank of America Plaza, Suite 1020 300 Convent Street San Antonio, Texas 78205 Telephone : (210) 630

- 4200 Facsimile: (210) 630

- 4210 Attorneys for Appellee s Charles E. Harrell and Hollis R. Harrell

ORAL ARGUMENT REQUESTED ACCEPTED 04-14-00711-CV FOURTH COURT OF APPEALS SAN ANTONIO, TEXAS 6/18/2015 5:16:29 PM KEITH HOTTLE CLERKii I DENTITY OF P ARTIES AND C OUNSEL Plaintiffs/Appellee s : Charles E. Harrell Hollis R. Harrell Trial and Appell ate Counsel: Jesse R. Castillo jcastillo@casnlaw.com Edward C. Snyder esnyder@casnlaw.com Melanie A. Castillo mcastillo@casnlaw.com C ASTILLO S NYDER , P.C. 300 Convent Street, Suite 1020 San Antonio, Texas 78205 (210) 630

- 4200 (210) 630

- 4210 (Facsimile) Defendant/Appellant: Peter J. Dragon Trial and Appellate Counsel : Clinton M. Butler cbutler@langleybanack.com Elizabeth R. Kopecki ekopecki@langleybanack.com L ANGLEY , B ANACK & B UTLER 114 N. Panna Maria Avenue Karnes City, Texas 78118 (830) 780

- 2700 (830) 780

- 2701 (Facsimile)iii T ABLE OF C ONTENTS I DENTITY OF P ARTIES AND C OUNSEL

................................ ................................ ......... ii T ABLE O F A UTHORITIES

................................ ................................ ........................... iv R EFERENCE C ITATION G UIDE
................................ ................................ ................... vii S TATEMENT OF THE C ASE

................................ ................................ ....................... viii S TATEMENT R EGARDING O RAL A RGUMENT

................................ ........................... viii S TATEMENT OF F ACTS

................................ ................................ ................................ . 1 S UMMARY OF A RGUMENT

................................ ................................ ........................... 3 A RGUMENT

................................ ................................ ................................ ................. 5 I. A fter considering the competing motions for summary judgment and responses thereto, the trial court properly granted the Harrells’ traditional motion for summary judgment.

................................ ................................ ....... 5 A. Standard of Review

................................ ................................ ............... 5 B. The trial court properly adopted the Harrell’s construction of the Reservation in the Harrell Deed

................................ ............................ 7 II. After considering the competing motions for summary judgment and responses thereto, the trial court properly denied Dragon’s traditional motion for summary judgment.

................................ ................................ .................. 13 A. Impairment Of Future Leasing Not A Factor

................................ ...... 18 B. Appellant Did Not Plead Ambiguity

................................ ................... 20 P RAYER FOR R ELIEF
................................ ................................ ................................ .. 22 C ERTIFICATE OF C OMPLIANCE

................................ ................................ .................. 23 C ERTIFICATE OF S ERVICE

................................ ................................ .......................... 24iv T ABLE O F A UTHORITIES Cases Altman v. Blake , 712 S.W.2d 117 (Tex. 1986)

................................ ................................ ....... 5, 9 Arnold v. Ashbel Smith Land Co ., 307 S.W. 2d 818 (Tex. Civ. App.

— Houston 1957, w rit ref’d n.r.e.)

....... 4, 18 Ayert v. Grande, Inc ., 717 S.W.2d 891 (Tex. 1986)

................................ ................................ ......... 21 Benge v. Scharbauer , 152 Tex. 447, 259 S.W.2d 166 (1953)

................................ .......................... 22 BP America Production Co. v. Zaffirini , 419 S.W.3d 485 (Tex. App.

— San Antonio 2013, pet. denied)

...................... 6 Brown v. Howard , 5 93 S.W.2d 939 (Tex. 1980)

................................ .............................. 4, 10, 12 Brown v. Smith , 141 Tex. 425, 174 S.W.2d 43 (1943)

................................ ........................ 4, 10 City of Galveston v. Tex. Gen. Land Office , 196 S.W.3d 218 (Tex. App.

— Houston [1st Dist.] 2006, pet. denied)

............ 6 City of Keller v. Wilson , 168 S.W.3d 802 (Tex. 20 05)

................................ ................................ ........... 6 Clifton v. Koontz , 325 S.W.2d 684 (Tex. 1959)

................................ ................................ .. 19, 20 Cockrell v. Gulf Sulphur Co ., 157 Tex. 10, 15, 299 S.W.2d 672 (1957)

................................ ...................... 21 Coghill vs. Griffith , 358 S.W.3d 834 (Tex. App.

— Tyler 2012, pet. denied)

............ 11, 12, 13, 15 Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd ., 940 S.W.2d 587 (Tex. 1996)

................................ ................................ ......... 20 Dawkins v. Hysaw , 450 S.W.3d 147 (Tex. App.

— San Antonio 2014, pet. filed)

........... 13, 17, 18 FM Props. Operating Co. v. City of Austin , 22 S.W.3d 868 (Tex. 2000)

................................ ................................ ............. 6v

Frost Nat'l Bank v. L & F Distribs., Ltd., 165 S. W.3d 310 (Tex.2005)

................................ ................................ ............ 8 Gavenda v. Strata Energy, Inc. , 705 S.W.2d 690 (Tex. 1986)

................................ ................................ ..... 4, 18 Harris v. Ritter , 279 S.W.2d 845 (Tex. 1955)

................................ ................................ .. 11, 12 HECI Exploration Co. v. Neel, 982 S.W.2d 881 (Tex. 1998)

................................ ................................ ........... 8 Helms v. Guthrie , 573 S.W.2d 855 (Tex. App.

— Fort Worth 1978, writ ref'd n.r.e. )

................ 11 Hicks v. Castille , 313 S.W.3d 874 (Tex. App. 2010)

................................ ................................ .. 6 J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex.2003)

................................ ................................ ............ 8 Luckel v. White , 819 S.W.2d 459 (Tex. 1991)

................................ ................................ ....... 5, 9 Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding , 289 S.W.3d 844 (Tex. 2009)

................................ ................................ ........... 6 Markert v. Williams, 874 S.W.2d 353 (Tex.App.

- Houston [1st Dist.] 1994, writ denied)

............... 9 Matagorda Hosp. Dist. v. Burwell, 189 S.W.3d 738 (Tex. 2006)

................................ ................................ ........... 8 Moore v. Noble Energy, Inc ., 374 S.W.3d 644 (Tex. App.

— Amarillo 2012, no pet.)

................................ . 19 Range Resources Corporation v. Bradshaw , 266 S.W.3d 490 (Tex. App.

— Fort Worth 2008, pet. denied)

................... 3, 13 Reeves v. Towery , 621 S.W.2 209 (Tex. App.

— Corpus Christi 1981, writ ref’d n.r.e. ( citations omitted )

................................ ................................ ................................ .......... 21 Schlitter v. Smith , 128 Tex. 628, 101 S.W.2d 543

................................ ............................... 11, 13 Stag Sales Co. v. Flores , 697 S.W.2d 493 (Tex. App.

— San Antonio 1985, writ ref’d n.r.e.)

....... 14, 16vi

State Nat. Bank of Corpus Christi v. Morgan , 143 S.W.2d 757 (Tex. 1940)

................................ ................................ .. 14, 17 Tenneco, Inc. v. Enterprise Products Co., 925 S.W.2d 640 (Te x. 1996)

................................ ................................ ........... 8 Tex. Mun. Power Agency v. Pub. Util. Comm'n of Tex., 253 S.W.3d 184 (Tex.2007)

................................ ................................ ............ 7 Tyler v. Bauguss , 148 S.W.2d 912 (Tex. Civ. App.

— Dallas 1941, writ dism’d judgm’t cor.) 14, 16 Valence Operating Co. v. Dorsett , 164 S.W.3d 656 (Tex. 2005)

................................ ................................ ........... 8 Whit e v. White , 830 S.W.2d 767 (Tex. App.

— Houston [1st Dist.] 1992, writ denied)

..... 4, 10 Wynne/Jackson Development, L.P. vs. PAC Capital Holdings, Ltd. No. 13

- 12

- 00449

- CV, (Tex.App.

— Corpus Christi 2013, pet. denied)

........ 11 Rules T EX
. R. C IV
. P. 166a(c)

................................ ................................ ............................... 6 Other Authorities 2 Patrick H. Martin & Bruce M. Kramer, Williams & Meyers Oil and Gas Law , § 327.2 (LexisNexis Matthew Bender 2009)

................................ ..................... 4vii R EFERENCE C ITATION G UID E
The Parties This Brief may refer to the parties as follows: Appellant Peter J. Dragon “Appellant” or “Dragon” Ap pellees Charles E. Harrell “Appellees” or “Harrells” The Record on Appeal
This Brief will refer to the record as follows: Appellant ’ s Brief “A’ants Br. At __” Clerk’s Record “CR __” Reporter’s Record “RR __”viii S TATEMENT OF THE C ASE Nature of the case This is a declaratory judgment action on the construction and

interpretation of a reservation clause in a Warranty Deed with Vendor’s Lien (the “Harrell Deed”) dated February 8, 1991, executed by Hollis R. Harrell and wife, Mary Harrell, conveying a 9.954 acre tract in Karnes County, Texas, to Peter J. Dragon and Sharon Dragon. 1 CR 8. Course of proceedings Appellees Charles E. Harrell and Hollis R. Harrell (the

“Harrells”) and Appellant Peter J. Dragon (“Dragon”) filed competing motions for summary judgment. After considering the motions and responses thereto, the Court granted Appellees’ Motion for Summary Judgment and denied Appellant’s Motion for Summary Judgment. 1 CR 141

- 43. Trial court’s disposition The trial court found that the reservation clause in the Warranty

Deed granted Appellees a fractional royalty interest. The trial court entered final judgment whereby it ordered and decreed that the Harrells own a one half (1/2) royalty interest in the 9.954 acre tract of land situated within the Ramon Musquiz Four League Grant, A

- 7 Karnes County, Texas, and being that certain Tract No. One (4.85 acres) and Tract No. Two (3.51 acres) (by re
- survey found to contain 9.954 acres) as described in the Warranty Deed. 1 CR 141

- 42. The trial court awarded attorneys’ fees and post judgment interest to the Harrells pursuant to Chapter 37 of the Texas Civil Practice and Remedies Code. 1 CR 142. Appellant is not appealing the attorney’s fees award. S TATEMENT R EGARDING O RAL A RGUMENT Appellees Charles E. Harrell and Hollis R. Harrell request oral argument in this proceeding. While the issue presented may be summarily dismissed based on this court’s review of the record below, oral argument will assist the court in analyzin g the legal issues herein presented.1 S TATEMENT OF F ACTS On or about March 17, 1978, General Portland, Inc., as Grantor, executed a Special Warranty Deed conveying three parcels of land in Karnes County, Texas to Hollis R. Harrell and his wife, Mary Harr ell, as Grantees (the “Special Warranty Deed”). CR 5 . On or about February 8, 1991, by Warranty Deed with Vendor’s Lien, Hollis R. Harrell and wife, Mary Harrell, conveyed 9.954 acres of land to Peter J. Dragon and wife, Sharon M. Dragon (the “Warranty D eed”). CR 6 . The Warranty Deed conveyed a 9.954 acre tract of land situated within the Ramon Musquiz Four League Grant, A

- 7 Karnes County, Texas, and being that certain Tract No. One (4.85 acres) and Tract No. Two (3.51 acres) (by this survey found to

co ntain 9.954 acres) as described in the Special Warranty Deed (“Subject Land”)

. Id. The Warranty Deed contained the following non

- participating royalty interest
reservation: “SAVE AND EXCEPT HOWEVER, and there is hereby reserved unto the Grantors, their h eirs and assigns, a free non

- participating interest in and to the royalty on oil, gas and other mineral in and under the hereinabove described property, consisting of ONE

- HALF (1/2) of the interest now owned by Grantors together with ONE

- HALF (1/2) of the reversionary rights in and to the presently outstanding royalty in on and under said property, perpetually from date hereof” (the “Reservation”). Id

. On or about February 17, 1993, as a result of the divorce between Sharon M. Dragon and Peter J. Drag on, Sharon M. Dragon executed a Special Warranty Deed2

conveying 6.44 acres (called 4.85 acres) of land, more or less out of the Roman Musquiz Four League Grant, to Peter J. Dr agon, a/k/a Peter Joseph Dragon , as Grantee, LESS AND EXCEPT, 3.51 acres of land, more or less, being described as Tract Two in that certain Special Warranty Deed effective March 17, 1978, from General Portland, Inc., as Grantor, to Hollis R. Harrell and wife, Mary Harrell, as Grantees, recorded in Volume 474, Page 514 of the Deed Reco rds of Karnes County, Texas. CR 6

- 7 . As a result of the Sharon M. Dragon Special Warranty Deed, Defendant Peter J. Dragon owns the mineral interest conveyed in the Warranty Deed subject to the Reservation. CR 7

. As of March 17, 1978, the Hollis R. Ha rrell and Mary Harrell ownership
interest was subject to a 1/32 nonparticipating royalty interest in Dorice Winerich
for her life. Id. Dorice Winerich died on October 6, 1994, and her 1/32 non

participating royalty interest terminated. Id

. By Special W arranty Deed dated July 10, 2006, Charles E. Harrell and Hollis R. Harrell, Jr., Trustees of the Mary Swain Harrell Living Trust, conveyed a fifty percent ( 50% ) interest in the undivided miner al interest in the Subject Land to Charles E. Harrell and a fift y percent ( 50% ) interest in the undivided mineral interest in the Subject Land to Hollis R. Harrell. Id

. The Harrells filed their Original Petition for Declaratory Judgment asking the court to interpret the Reservation as reserving a one half (1/2) royal ty interest3

in the Subject Land, entitling the Harrells to a stated fraction of total production of the oil and gas produced from the land. CR 4

- 15 . Dragon filed his Original Answer and Original Counterclaim asking the court to interpret the Reservation as reserving a one

- half fraction of royalty interest, conveying a fractional share of the royalty. CR 17

- 31

.
S UMMARY OF A RGUMENT This case hinges on the construction and interpretation of the reservation clause in the Warranty Deed. The critical questi on is whether the Reservation constitutes a “fractional royalty interest” or a “fraction of royalty.” The law makes a major distinction between a “fractional royalty interest” and a “fraction of royalty.” A “fraction of royalty” conveys a fractional shar e of the royalty that is contained in an oil and gas lease and is not fixed, but rather “floats” in accordance with the size of the landowner’s royalty in the lease. Range Resources Corporation v. Bradshaw , 266 S.W.3d 490, 493 (Tex. App.

— Fort Worth 2008, pet. denied) . The amount to be pai d to the owner is determinable upon the execution of some future lease and is calculated by multiplying the fraction in the royalty reservation by the royalty provided by the lease. There is no language in the Reservation that is typical of

— or indicates that the parties intended to

— create a “fraction of royalty” interest. Instead, the Harrell Deed, when read as a whole, shows an unambiguous intent by the Grantors to4

reserve a one
- half (1/2) fractional royalty interest. The owner of a fractional royalty is entitled to the stated fraction of gross production, unaffected by the royalty reserved in the lease. See Brown v. Smith , 141 Tex. 425, 174 S.W.2d 43 (1943) . “Thus the owner of a 1/16 royalty takes 1/16 of gross production whether the lease provides for a lessor’s royalty of 1/16, 1/8 or 1⁄4.” 2 Patrick H. Martin & Bruce M. Kramer, Williams & Meyers Oil and Gas Law , § 327.2 (Lexis Nexis Matthew Bender 2009) . Texas case law is clear that a reservation of an undivided fractional royalty interest is just that

— an undivided interest in production, not an interest reduced by a base royalty. See Brown v. Howard , 593 S.W.2d 939 (Tex. 1980) ; White v. White , 830 S.W.2d 767 (Tex. App.

— Houston [1st Dist.] 1992, writ
denie d)

. The size of the fractional interest reserved, or the possibility that the reservation would impair the future ability to lease, are not f actors to be considered in the construction of fractional royalty interest reservations. See Arnold v. Ashbel
Smith Land Co ., 307 S.W. 2d 818 (Tex. Civ. App.

— Houston 1957, writ ref’d n.r.e.) ; Gavenda v. Strata Energy, Inc. , 705 S.W.2d 690 (Tex. 1986) . The court does not determine the parties’ intent based on the quantum of production to which the holder of a particular interest may be entitled. The prima ry duty of a court in determining the construction of an unambiguous deed is to ascertain the intent of the parties by a fundamental rule of construction known as the “four corners” rule.5

Luckel v. White , 819 S.W.2d 459, 461 (Tex. 1991) . The interpretation of the contract is controlled by the parties’ intentions as expressed within the four corners
of the instrument. Altman v. Blake , 712 S.W .2d 117, 118 (Tex. 1986) . In seeking to ascertain the intention of the parties, the court must attempt to harmonize all parts of the deed. I

d . Qualifiers and parentheticals are critical in the final construction and interpretation. Brown , 593 S.W.2d at 942. No case has found that “in and to” means “of” without additional qualifiers in the instrument. In considering the competing motions f or summary judgment and responses thereto and the arguments of counsel, the trial court properly rendered final judgment in favor of appellees. The trial court prope rly determined that the
Harrell s are entitled to judgment as a matter of law construing th e Reservation as reserving a one

- half (1/2) royalty interest in the Subject Land.

A RGUMENT

I. After considering the competing motion s for summary judgment and responses thereto, the trial court properly granted the Harrells’ traditional motion for summary judgment.

A. Standard of Review To prevail on a traditional motion for summary judgment, the movant must show “there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.” BP America Production Co. v. Zaffi rini , 419 S.W.3d6

485, 495 (Tex. App.

— San Antonio 2013, pet. denied) ; T EX
. R. C IV
. P. 166a(c) . In reviewing the trial court’s judgment, the appellate court typically examines “the evidence presented in the motion and respon se in the light most favorable to the party against whom the party the summary judgment was rendered, crediting evidence favorable to that party if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. Mann Frankf ort Stein & Lipp Advisors, Inc. v. Fielding , 289 S.W.3d 844, 848 (Tex. 2009) ; see City of
Keller v. Wilson , 168 S.W.3d 802, 827 (Tex. 2005) . However, “[w]hen both sides move for summary judgment and the trial court grants one motion and denies the other, the reviewing court should review both sides’ summary judgment evidence [,]...determine all questions presented[,]...[and] render the judgment that the trial court should have rendered.” BP America Production Co, 419 S.W.3d. at 495 ( citing FM Props. Operating Co. v. City of Austin , 22 S.W.3d 868, 872 (Tex. 2000) (citations omitted)). When a trial court resolves a declaratory judgment action on competing
motions for sum mary judgment, the appellate court reviews the propriety of the declaratory judgment under the same standards applied in reviewing a summary judgment. Hicks v. Castille , 313 S.W.3d 874, 879

- 80 (Tex. App. 2010) ( citing City of Galveston v. Tex. Gen. Land Office , 196 S.W.3d 218, 221 (Tex. App.

— Houston [1st Dist.] 2006, pet. denied) ). The appellate court reviews a trial court's7

decision to grant or to deny a motion for summary judgment de novo. See Tex. Mun. Power Agency v. Pub. Util. Comm'n of Tex., 253 S.W.3d 184, 192 (Tex.2007) . Although the denial of summary judgment is ordinarily not appealable, an appellate court may review such a denial when both parties moved for summary judgment and the trial court gra nted one and denied the other. Id. Here, both parties moved for summary judgment on their respective claims involving the interpretation of the Reservation clause. The trial court, after reviewing the motions and responses thereto and hearing arguments of counsel, found that as a matter of law the Harrells’ interpretation of the Reservation clause entitled them to a fractional royalty interest and properly granted summary judgment in their favor. This court should affirm the trial court’s decision.
B. The trial court properly adopted the Harrell’s construction of the Reservation in the Harrell Deed
The trial court 's judgment adopted the Harrell s construction of the unambiguous warranty deed Reservation. The Harrell s read the Warranty Deed
Reservation as reserving a one

- half (1/2) royalty interest in the Subject Land. CR
7. In other words, the Reservation reserved a fixed fractional royalty interest entitling the Harrells to the one

- half (1/2) of total production of the oil and gas produced from the Subj ect Land. Dragon, on the other hand, reads the Reservation as unambiguously reserving a one

- half fraction of royalty interest that was owned by the Harrells at the time the Harrell Deed was executed. CR 19

.8 1. Legal Standard for Deed Construction
In constru ing a written contract, the court’s primary concerns are to ascertain and to give effect to the parties' intentions as expressed in the document. Frost Nat'l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 311

– 12 (Tex.2005)

. Ordinarily, the writing alone is sufficient to express the parties' intentions for it is the objective, not subjective, intent that controls. Matagorda Hosp. Dist. v. Burwell, 189 S.W.3d 738 , 740 (Tex. 2006) (per curiam). To give effect to the parties’ intentions , the court should consider the entire writing and attempt to harmonize and give effect to all of the provisions of the agreement by analyzin g the provisions with reference to the whole agreement. Id. at 312. The court should not give any single provision controlling effect. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex.2003)

. Contract terms are given their plain, ordinary, and generally accepted meanings unless the contract itself shows them to be used in a technical or
different sense. Va lence Operating Co. v. Dorsett , 164 S.W.3d 656, 661 (Tex. 2005)

. Courts are not authorized to rewrite agre ements to insert provisions parties could have included or to imply terms for which they have not bargained. Tenneco, Inc. v. Enterprise Products Co., 925 S.W.2d 640 , 646 (Tex. 19 96) . In other words, courts cannot make contracts for the parties. HECI Exploration Co. v. Neel, 982 S.W.2d 881 , 888 (Tex. 1998)

.9

A contract is not ambiguous simply because the parties disagree over its interpretation. Markert v. Williams, 874 S.W.2d 353, 355 (Tex.App.

- Houston [1st Dist.] 1994, writ denied)

. Nor does uncertainty or a lack of clarity in the language chosen by the parties suffice to render a contract ambiguous. Id. If, a fter applying the relevant rules of construction, the court can give the agreement a definite or certain legal meaning, the agreement is unambiguous, and is construed as a matter
of law Altman v. Blake , 712 S.W.2d 117, 118 (Tex. 1986)

. In interpreting a deed, the primary duty of a court is to ascertain the intent of the parties by a fundamental rule of construction known as the "four corners" rule.
Luckel v. White , 819 S.W.2d 459, 461 (Tex. 1991 )

. The interpretation of the contract is controlled by the parties' intentions as expressed within the four corners
of the instrument. Altman , 712 S.W.2d at 118 . In seeking to ascertain the intention of the parties, the court must attempt to harmonize all parts of a deed. Id. Even if different parts of the deed appear contradictory or inconsistent, the court must
strive to construe the i nstrument to give effect to all of its provisions. Luckel , 819
S.W.2d at 462

.

2. The Language of the Reservation Reserved a Fractional Royalty The dispute hinges on the construction and interpretat ion of the reservation clause in the Warranty Deed. The Harrells ’ interpretation of the Reservation is that
the Grantors reserved a one

- half (1⁄2) royalty interest in the Subject Land as a result10

of the Reservation. Appellant ’s interpretation of the Reserv ation is that Grantors
reserved a one

- half (1⁄2) of royalty in the Subject Land as a result of the
Reservation. The Harrells met their burden to establish they are entitled to judgment as matter of law, that the Reservation reserved a one

- half (1⁄2) royalty
i nterest, in the Subject Land. The language in question is a reservation of “a free non

- participating interest in and to the royalty on oil gas and other mineral in and under the above described property consisting of one

- half (1/2) of the interest now own ed by Grantors together with one

- half (1/2) of the reversionary rights in and to the presently outstanding royalty in, on and under said property, perpetually from date hereof” (the “Reservation”). Where a conveyance or reservation is phrased as a fracti onal royalty interest, the owner is entitled to the stated fraction of total production of the oil and gas produced from the land. Brown v. Smith , 141 Tex. 425, 174 S.W.2d 43 (1943 ).
This inter est in production is fixed and does not vary with the fractional royalty that may be payable under a particular lease. Texas case law is clear that a reservation of an undivided fractional royalty interest is just that

--- an undivided interest in producti on, not an interest reduced by a base royalty. See Brown v.
Howard , 593 S.W.2d 939 (Tex. 1980) and White v. White , 830 S.W.2d 767 (Tex.App.

- Houston [1 st Dist.] 1992, writ denie d)

.11

The Warranty Deed, when read as a whole, shows an unambiguous intent by
the Grantors to reserve a one

- half (1/2) fractional royalty interest. The first part of the Reservation, “a f

ree non
- participating interest in and to the royalty on oil gas
and other mineral in and unde r the above described property,” does not quantify the interest reserved, and necessarily relies on the language following to define and clarify the interest reser ved. In fact, without the additional language, the phrase would necessarily reserve a one hundred percent (100%) royalty interest then owned by the Harrells. There is no reference in the phrase to existing leases or existing or future production. All ca ses that have held similar language to be either a “fractional royalty interest” or a “fraction of royalty” have looked at the instrument as a whole, particular ly with respect to qualifiers, parentheticals, or other clarifications included in the instrumen t

. E g . Schlitter v. Smith , 128 Tex. 628,
101 S.W.2d 543 , 544 (Tex. Comm’n App. 1937); Coghill vs. Griffith , 358 S.W.3d 834, 838 (Tex. App

. — Tyler 2012, pet. denied) ; Harris v. Ritter , 279 S.W.2d 845 (Tex. 1955) ; Helms v. Guthrie , 573 S.W.2d 855, 857 (Tex. App.

— Fort Worth 1978, writ ref'd n.r.e. ) ; Wynne/Jackson Development, L.P. vs. PAC Capital Holdings, Ltd. No. 13

- 12

- 00449

- CV, (Tex.App.

— Corpus Christi 2013, pet. denied)

. As an example, Coghill involved a reservation of “an undivided one

- eighth (1/8 th ) interest in and to all of the oil and gas royalty”. Although the Court found12

this to be a “fraction of royalty”, the Court relied on “qualifiers” in making its ruling. The deed in Coghill included additional language that it wa s subject to an existing lease and reserved a 1/8 th royalty under that lease and the usual 1/8th of 1/8th royalties in any future leases. So Coghill is distinguisha ble based on the additional qualifying language.
In Harris v. Ritter , the Texas Supreme Court held that the phrase “grantors
herein reserve to themselves from this c onveyance one
- half (1/2) of one ei ghth (1/8) of the oil, gas and other minerals royalty [emphasis added] that may be produced from said land ...” reserved a fractional royalty interest, despite the use of the word “of” in the phrase based on the context of the deed. Harris v. Ritter , 279 S .W.2d at 847

- 8

. Qualifiers , and parentheticals and other clarifications are critical in the final construction and interpretation. Brown v. Howard , 593 S.W.2d at 942

. No case has found that “in and to” means “of” without additional qualifiers , parantheticals and
other clarifications in the instrument. The critical qualifier or clarification for the interest in the Reservation is “consisting of on e
- half of the royalty interest now owned by” the Harrells at the
time of the Warranty Deed. At the time of the Warranty Deed, the Harrells owned one hundred percent ( 100% ) of the minerals, and thus, a one hundred percent ( 100% ) royalty interest. There we re no outstanding leases covering the property at13

the time the Warranty Deed was executed. The r eservation was expressly for “royalty on oil, gas and other minerals in and under” the property, without any reference to future production. One

- half (1/2) of a one hundred percent ( 100% ) royalty in terest is logically and unambiguously a fifty percent (50%) fractional royalty interest.

II. After considering the competing motions for summary judgment and responses thereto, the trial court properly denied Dragon’s tr aditional motion for summary judgment. A “fraction of royalty” conveys a fractional share of the royalty that is contained in an oil and gas lease is not fixed, but rather “floats” in accordance with the size of the landowner’s royalty contained in the le ase. Range Resources Corporation v. Bradshaw , 266 S.W.3d 490, 493 (Tex. App.

— Fort Worth 2008, pet. denied) . The amount to be paid to the owne r is determinable upon the execution of some future lease and is calculated by multiplying the fraction in the royalty reservation by the royalty provided in a lease. Appellant argues that the language in the Reservation is consistent with what
Texas case s have found to be a fraction of royalty. Appellant cites six cases to support his co ntention that the Reservation is a fraction of royalty reservation and not a fractional royalty: Dawkins v. Hysaw , 450 S.W.3d 147 (Tex. App.

— San Antonio 2014, pet. filed ) ; Coghill v. Griffitti , 358 S.W.3d 834 (Tex. App.

– Tyler 2012, pet. denied) ; Schlitter v. Smith , 101 S.W.2d 543 (Tex. 1937) ; Stag Sales Co.14

v. Flores , 697 S.W.2d 493 (Tex

. App.

— San Antonio 1 985, writ ref’d n.r.e.) ; Tyler v. Bauguss , 148 S.W.2d 91 2 (Tex. Civ. App.

— Dallas 1941, writ dism’d judgm’t cor.) ; State Nat. Bank of Corpus Christi v. Morgan , 143 S.W.2d 757 (Tex. 1940)

. The language in the deeds in each of the six cases cited by Appellant is not the language in the Reservation. The language in the Warranty Deed shows that under the context of the Reservation, the grantors reserved a one

- half royalty in the Subject Lands.
The Court sh ould compare the language in the Reservation with the language in Coghill and the other cases cited by Defendant . The Reservation reads
as follows:
RESERVATION : SAVE AND EXCEPT HOWEVER, and

there is hereby reserved unto the Grantors, their heirs and assi gns, a free non

- participating interest in and to the royalty on oil, gas and other mineral in and under the hereinabove described property consisting of ONE
- HALF (1⁄2) of the interest now owned by Grantors together with ONE

- HALF (1⁄2) of the reversionary right s in and to the presently outstanding royalty in on and under said property, perpetually from date hereof.
CR 11

. The reservation in the Coghill deed provided as follows: [T]his Grantor excepts from this conveyance and reserves unto himself, his heirs and assigns an undivided one - eighth (1/8) interest in and to all of the oil royalty [and] gas royalty .... It is understood and agreed that this sale is made subject to the terms of said lease, but the Grantor reserves and excepts unto himself, his heirs a nd assigns an undivided one
- eighth (1/8) of15 all royalties payable under the terms of said lease, as well as an undivided one

- eighth (1/8) of the usual one

- eighth (1/8) royalties provided for in any future oil, gas and/or mineral lease covering said lands o r any part thereof.... Nevertheless, neither the Grantee herein, nor his heirs, executors, administrators, and assigns of the Grantee shall make or enter into any lease or contract for the development of said land or any other portion of the same for oil, gas or other minerals, unless each and every such lease, contract, leases or contracts, shall provide for at least a royalty on oil of the usual one

- eighth (1/8) to be delivered free of cost.... [A]nd in the event Grantee, nor [sic] the heirs, executors, a dministrators and assigns of the Grantee, or as in the status of the fee owners of the land and minerals, or as a fee owner of any portion of the same, shall operate or develop the minerals therein, Grantor shall own and be entitled to receive as a free ro yalty hereunder, (1) an undivided one

sixty fourth (1/64) .... (emphasis added). Coghill, 358 S.W.3d at 835

- 36

. The reservation in Schlitter provides as follows : Grantor H. F. Smith hereby reserves unto himself, his heirs and assigns for a period of ten years and as much longer thereafter as oil and gas or other minerals are being produced an undivided one

- half interest in and to the royalty rights on all of oil and gas and other minerals in, on and under or that may be produced from the land herein conveyed and described above. In the event oil or gas or other minerals are not being produced in paying quantities from said land at the expiration of said ten year p eriod then this reservation shall become null and void and of no further force and effect.
Schlitter , 101 S.W.2d at 544

. The reservation in Stag Sales Company provides: [Grantors convey to grantee] an undivided one - half (1/2) interest in and to all o f the oil royalty, gas royalty, royalty in casinghead gas and gasoline, and royalty in all other minerals in16 and under, and that may be produced and mined from [the 2291.2 acre tract]. Said land being now under an oil and gas lease...this sale is made subje ct to the terms of said lease, but covers and includes one
- half of all the oil royalty, gas royalty, casinghead gas and gasoline royalty, and royalty from other minerals or products to be paid under the terms of said lease...
In the event a future lease or leases are executed...then the Grantee shall receive under such future lease or leases an undivided one

- sixteen [sic] part of all the oil, gas and other minerals taken and saved under such lease or leases, and shall receive the same out of the royalty therei n provided for. Stag Sales Company v. Flores , 697 S.W.2d at 494

. The reservation in Tyler provided as follows:
For and in consideration of the sum of Te n Dollars cash in hand paid by Tyler & Smith, hereinafter called Grantee, the receipt of which is hereby acknowledged, have granted, sold, conveyed, assigned and delivered, and by these presents do grant, sell convey, assign and deliver, unto the said Gran tee, an undivided one
- tenth interest in and to all of the oil royalty, gas royalty, and royalty in casing head gas, gasoline, and royalty in other minerals in and under, and that may be produced and mined from the following described lands situated in the County of Henderson and State of Texas. Tyler , 148 S.W.2d at 916

. The deed in State Natl. Bank of Corpus Christi provided the following reservation langua ge:

It is expressly agreed and understood that there is reserved to granter , its successors and assigns forever , and excepted from this conveyance an undivided 1 /2 i nterest i n and to all of the royalty in o i l, gas, casinghead gas, gasol i ne, and i n17 all oth er minerals in and under and that may be produced and mined from the above described land; however, granter does not by this reservation and excep t i on reta i n any right of participat i ng in the making of future oil and gas lease nor of participating i n the b onus or bonuses which shall be received from any future l ease nor of partic i pat i ng i n any rental to be paid for the priv i lege of deferring the commencement of a well under any lease , now or hereafter; it being intended and agreed that in no event will any lease or contract be made for the development of said land or any portion of same for oi l , gas, or other minerals, provid i ng for a royalty of less than one
- eighth on oil and gas
. State Natl. Bank of Corpus Christi, 143 S.W.2d at 758

. The language in the deeds in each of the five cases above, cited by Appellant , is not the language in the Reservation. The language in the Warranty
Deed shows that under the context of the Rese rvation , the grantors reserved a one half royalty in the Subject Lands. As noted by Appellant, this Court recently provided five examples of language used to create a fraction of royalty. A’ants Br.

at 6. Appellant argues that the language in the Reserv ation is “almost identical” to the language cited in Dawkins as reserving a fraction of royalty: “(4) [a]n
undivided one
- half interest in and to all of the royalty

. ” 450 S.W.3d at 153. However, just because the Reservation has some of the same words does not make the language identical. It is the additional language in the Reservation that makes it clear that a fractional royalty was reserved, and that language cannot si mply be ignored so as to fit into Appellant’s argument.18

What Appellant failed to mention, is this Court also provided six examples of language used to convey a fractional royalty: “ (1) [a] one - fourth royalty in all oil, gas and other minerals in and und er and hereafter produced ; (2) [a] fee royalty of 1/32 of the oil and gas; (3) [a] n undivided one
- sixteenth royalty interest of any oil, gas or minerals that may hereafter be produced ; (4) [o] ne
- half of the

on e
- eighth royalty interest; (5) [a] n undivided 1 /24 of all the oil and other minerals produced, saved, and made available for market; (6) 1% royalty of all the oil and gas produced and saved .” Dawkins , 450 S.W.3d at 153 . The language cited by this Court as conveying a fractional royalty is consistent with the language found
in the Reservation.
A. Impairment Of Future Leasing Not A Factor The size of the fractional interest reserved, or the possibility that the
reservatio n would impair the future ability to lease, are not factors to be considered in the construction of fractional royalty interest reservations. White v.
White involved a 3/8ths fractional royalty interest. A 1/4 th fractional royalty
interest was reserved in Arnold v. Ashbel Smith Land Co. , 307 S.W.2d 818 (Tex. Civ. App.

— Houston 1957, writ ref'd n.r.e.) . The reservation of an undivided 1⁄2 nonparticip ating royalty entitling the grantor to 1⁄2 of all production was not even questioned by the Texas Supreme Court in Gavenda v. Strata Energy, Inc. , 705 S.W.2d 690 (Tex. 1986)

.19

Appellant su ggests that “Texas courts are charged with interpreting deed reservations in a manner that will not frustrate the ability of the mineral owners to enter into a lease at some point in the future ” and goes as far as asking this Court to take judicial notice “that Harrells’ interpretation of the Reservation would render the Property unleaseable and undevelopable ad infinitum .” A’ants Br. at 11

- 12. Appellant cites two cases in support of his argument that Harrells’ interpretation of
the Reservation hinders fut ure leasing 1 : Moore v. Noble Energy, Inc ., 374 S.W.3d 644 (Tex. App.

— Amarillo 2012, no pet.) and Clifton v. Koontz , 325 S.W.2d 684,
695

- 96 (Tex. 1959)

. In Moore v. Noble Energy , the question before the court was whether a reservation in a 1955 warranty deed was ambiguous. 374 S.W.3d 644 . The court considered each possible interpretation, and determined that the phrase “one

- half

non
- participating royalty interest,” standing along, would reserve to the grantor a fifty percent interest in the production, free of production costs.” Id. at 650 . The
court did note that a construction of the 1955 deed to reserve a one
- half royalty is “doubtful” but in no way charged courts with interpreting deed reservat ions in a manner that will not frustrate the ability of the mineral owners to enter into a lease at some point in the future. What the court was charged with was examining the deed as a whole, including the parenthetical phrase. Id

. ( citing Columbia Gas

1 It is important to note th at Appellant did not submit , and could not submit, any summary judgment evidence showing that any leasing of the minerals is impaired.20

Transmission Corp. v. New Ulm Gas, Ltd ., 940 S.W.2d 587, 589 (Tex. 1996) ([c] onstruction of the language to reserve a one

- half royalty would also require that the parenthetical phrase be ignored, contrary to the rule of construction mandating that we examine the deed as a whole) )

. In Clifton v. Koontz , the issue before the court was whether a lessee violated an implied covenant to reasonably develop the lease at issue by drilling additional
wells on a multi

- strata property. 325 S.W.2d at 695 . The court looked at both “reasonable diligence” and what a “reasonably prudent operator” might do and determined the lessee did not violate the implied covenant to reasonably develop
the lease. Id . It is not disputed that a reasonably prudent operator should proceed with due regard to his own interests as well as those of a lessor, however the “reasonably prudent operator” standard does not factor into the construction of the reservation language in thi s deed. Furthermore, the “reasonably prudent operator” or “reasonable diligence” in no way makes the Property unleaseable and undevelopable ad infinitum , and such a conclusion is certainly misplaced.
B. A ppellant Did Not Plead Ambiguity Appellant argues tha t “it is well

- established law that where an ambiguity exists in a contract, the contract language will be construed strictly against the party who drafted it since the drafter is responsible for the language used.” A’ants
Br. at 14. Appellant also argues that the Harrells offered no summary judgment21

evidence to establish that Harrells did not draft the W arranty Deed. Id. The Harrells did not offer summary judgment evidence because ambiguity was never an issue. Appellant did not plead ambiguity nor did he arg ue ambiguity in his Motion for Summary Judgment. In the absence of the allegations of ambiguity...parole evidence is not admissible to show the intentions of either the grantor or grantee in the deed, but such intention is to be determined by the trial

cour t as a matter of law from the language which appears in the deed itself, and the
deed will be enforced as written. Reeves v. Towery , 621 S.W.2 209, 212 (Tex. App.

— Corpus Christi 1981, writ ref’d n.r.e. ( citations omitted ) ; Ayert v. Grande,
Inc ., 717 S.W.2d 891, 893 (Tex. 1986) (“[n]either party contended the 1983 deed is ambiguous, so we construe the language of the deed to ascertain the intent of the part ies without considering parol e evidence, i.e. as a matter of law”). Appellant has never claimed, and cannot now claim, that the Warranty Deed is ambiguous

. Appellant also a rgues that it is well

- established in Texas that deeds are interpreted to convey the greatest estate possible to the grantee. See A’ants Br. at 15. Appellant ’ s argument is generally true in deed construction, but does not take into account the reservation language. “A general warranty deed conveys all of the grantor’s interest unle ss there is language in the instrument that clearly shows an intention to convey a lesser interest. ” Reeves , 621 S.W.2 at 212 ( citing Cock rell v. Gulf Sulphur Co ., 157 Tex. 10, 15, 299 S.W.2d 672, 675 (1957) ). The property22

inten ded to be reserved is never included in the grant. Benge v. Scharbauer , 152 Tex. 447, 259 S.W.2d 166 (1953) . As shown in the arguments above, the Reservation in the Warranty Deed clearly shows the intention to reserve a fractional royalty interest.

P RAYER FOR R ELIEF Appellees Charles E. Harrell and Hollis R. Harrell pray that this Court
affirm the traditional sum mary judgment granted by the trial court in favor of the Harrells and against Dragon, in its entirety. Appellees Charles E. Harrell and Hollis R. Harrell pray for whatever additional relief to which they may be entitled.
Respectfully submitted, 

## /s/ Jesse R. Castillo Jesse R. Castillo State Bar No. 03986600 jcastillo@casnlaw.com C ASTILLO S NYDER , P.C. Bank of America Plaza, Suite 1020 300 Convent Street San Antonio, Texas 78205 Telephone: (210) 630

- 4200 Facsimile: (210) 630

- 4210 Counsel for Appellees Charles E. Harrell and Hollis R. Harrell23 C ERTIFICATE OF C OMPLIANCE In Compliance with Texas Rule of Appellate Procedure 9.4(i)(3), Appellees Charles E. Harrell and Hollis R. Harrell certify that the number of w ords in Appellee’s Brief, including its headings, footnotes, and quotations, is 5 ,744

.24 C ERTIFICATE OF S ERVICE I certify that, on this 18 th day of June, 2015 , a true and correct copy of the foregoing Brief of Appellee has been served as follows: Clinton M. Butler CLINTON M. BUTLER State Bar No. 24045591 Email: cbutler@langleybanack.com ELIZABETH R. KOPECKI State Bar No. 24087859 Email: ekopecki@lan gleybanack.com LANGLEY, BANACK & BUTLER 114 N. Panna Maria Avenue Karnes City, Texas 78118 Telephone: 830.780.2700 Telecopier: 830.780.2701 ROBINSON C. RAMSEY State Bar No. 16523700 Email: rramsey@langleyb anack.com LANGLEY & BANACK, INC. Trinity Plaza II, Suite 900 745 E. Mulberry Avenue San Antonio, Texas 78212 Telephone: 210.736.6600 Telecopier: 210.735.6889
ATTORNEYS FOR APPELLANT PETER J. DRAGON



## /s/ Jesse R. Castillo Jesse R. Castillo