### DISSENTING OPINION N o. 04

- 09

- 00560

- CV William S. HAUSSER , Albert F. Hausser, Robert Hausser, Jr. Eugene L. Amos, Jr., Lawrence J.

Flume, Jr., Corwin D. Denney Foundation, and Des Cygne Denney Settlement Partners, Ltd., Appellants
v. Fernando D. CUELLAR and Jacob F. Rathmell Jr., Successor Co

- Trustees under the Wills of

Fernando Cuellar and Inocente T. De Cuellar, and Trustees under Trust Deeds executed by Fernando Cuellar and Inocente T. De Cuellar, Appellees From the 49th Judici al District Court , Zapata County, Texas Trial Court No. 6 803 Honorable Jose A. Lopez , Judge Presiding Opinion by: Marialyn Barnard, Justice Dissenting opinion by: Sandee Bryan Marion, Justice , joined by Steven C. Hilbig, Justice Sitting: Catherine Ston e, Chief Justice Karen Angelini, Justice Sandee Bryan Marion, Justice Phylis J. Speedlin, Justice Rebecca Simmons, Justice Steven C. Hilbig, Justice Marialyn Barnard, Justice Delivered and Filed: February 2 , 2011 I respectfully dissent. In this appeal we are again faced with the issue of how to reconcile an interest specified in the granting clause with a different interest specified in the future lease clause. The Texas Supreme Court’s opinion in Luckel v. White , 819 S.W.2d 459 (Tex. 1991) does not provide the necessary guidance on this important issue, and with this dissent, I urge the Supreme Court to take up this specific issue and further elaborate on its opinion in Luckel
. In Luckel , the Court overruled its earlier opinion in Alford v. Krun , 671 S.W.2d 870 (Tex. 1984) on the grounds that the Alford majority “ failed to harmonize the provisions under the fourDissenting Opinion 04

- 09

- 00560

- CV

- 2

- corners rule and then erred in applying the ‘ repugnant to the grant ’ rule in disregard of the future l ease clause. ” Luckel , 819 S.W.2d at 464. 1

In this case, the granting clause conveys an undivided one

- half interest “in and to all of the oil royalty, gas royalty, royalty in casinghead gas and gasoline, and royalty in other minerals in and under, and that may be pr oduced and mined from” certain land described in the deed. The existing lease clause states that the described land is subject to an existing oil and gas lease that “covers and includes one

- half (1/2) of all the oil royalty, gas royalty, royalty in casing head gas and gasoline, and royalty from other minerals or products due and to be paid under the terms of the lease.” Finally, the future lease clause provides that upon termination of the existing lease and in the event of any future lease the grantees “s hall receive under such future lease or leases
one - sixteenth (1/16) part of all oil, gas and other minerals taken and saved from the above described property, under such lease or leases, and shall receive the same out of the royalty therein provided for.” At the time the deed was executed it was subject to a lease that provided for a one

- eighth royalty interest, which resulted in the payment of a one

- sixteenth (1/2 x 1/8) The Luckel Court held that a court’s primary duty

“ when construing such a deed is to ascertain the intent of the parties from all of the language in the deed by a fundamental rul e of construction known as the ‘f o ur corners ’ rule. ” Id. at 461. Under this rule a court “ seeking to ascertain the intention of the parties, attempts to harmonize all parts of the deed. ” Id. “ Even if different parts of the deed appear contradictory or inconsistent, the court must striv e to harmonize all of the parts, construing the instrument to give effect to all of its provisions. ” Id. A court should not strike down any part of the deed, “ unless there is an irreconcilable conflict wherein one part of the instrument destroys in effec t another part thereof.” Id.

1 In Alford , the Supreme Court gave “effect to the ‘controlling language’ . . . [of] the granting clause” because an irreconcilable conflict existed between the granting clause and the future lease clause. 671 S.W.2d at 873

- 74.Dissenting Opinion 04

- 09

- 00560

- CV

- 3

- royalty to the grantees. When that lease terminated, a new lease was executed which provided for a one

- fourth royalty interest. The issue then became how much do the grantees receive under the new lease: one

- half of one

- fourth or a fixed one

- sixteenth? The majority determines the Haussers are entitled to an undivided one

- half interest o f the one

- fourth royalty specified in the new lease. I dissent, in part, because I believe the majority does not properly apply Luckel . The majority also disapproves of this court’s earlier opinion in Neel v. Killam Oil Co., Ltd. , 88 S.W.3d 334 (Tex. App.

— San Antonio 2002, pet. denied). Again, I disagree because I believe the panel’s analysis in Neel was correct and gave effect to all parts of the deed in that case. The majority here criticizes the Neel opinion for looking back to the prior deed; however, the examination of the prior deed in Neel merely confirmed the conclusion that Neel and Mayo were entitled to only a one - six teenth interest in production. The “granting clause” in the Ortiz

Neel deed conveyed a one

- half intere st in any royalties produced or mined from the land. Id. at 340. The deed did not contain a “minimum royalty” clause or “fee development” clause. Id. An “existing lease” clause made the deed subject to a pre

- existing 1940 lease. Id. Under the “lease t ermination” clause, Neel would receive one

- sixteenth of all production as a free royalty if the present lease (which was the 1940 lease) terminated, lapsed or was forfeited. Id. Following the “lease termination” clause, the Ortiz

- Neel deed contained a “f uture lease” clause, which provided that, if a future lease is executed, Neel will “receive the mineral interests described in the preceding paragraph out of the royalty provided for in” the future lease. (Emphasis added.) Id. at 340

- 41. When the 1940 le ase expired, a new lease was executed in 1980, which “granted a
one - fourth royalty in the production of oil and gas.” The Neel court concluded that, under the Ortiz

- Neel deed, Neel received a present interest of one

- half of the one

- eighth royalty reserve d in the 1940 lease and , after expiration ofDissenting Opinion 04

- 09

- 00560

- CV

- 4

- the 1940 lease , the right to receive one

- sixteenth of production from any future leases. Id. at 341. The 1980 lease triggered the future lease clause, under which Neel would receive the interests described in the lease termination clause. Id. T he lease termination clause specifie d a
one - sixteenth interest in production. Id. Therefore, harmonizing all parts of the Ortiz

- Neel deed together, the Neel court conclude d the parties intended to convey a fixed one

- s ixteenth interest in production. Id. In this case, the Escamilla Deed conveyed a one

- half interest in “royalties” reserved under the existing 1936 lease. The 1936 lease provided for a one

- eighth royalty, which translated to one

- sixteenth of gross product ion. Consistent with this conveyance of one

- sixteenth of gross production, the future lease clause conveyed one - sixteenth “of all oil, gas, and other minerals taken and saved from” the property under the 2006 lease . Appling the same analysis used in Neel to the Escamilla Deed, I would conclude the Escamilla Deed entitled the Haussers to a fixed one

- sixteenth fixed royalty interest in production.

Sandee Bryan Marion, Justice