Opinion ID: 1721674
Heading Depth: 1
Heading Rank: 1

Heading: construction of the browns' royalty reservation

Text: In 1963 Robert A. and Naomi Brown executed a deed to C. Arleigh and Mildred Nutt King. The deed contains the following reservation to the Browns: Grantors reserve unto themselves, their heirs and assigns in perpetuity an undivided one-half non-participating royalty (Being equal to, not less than an undivided 1/16th) of all the oil, gas and other minerals, in, to and under to that may be produced from said land; this reservation however, being expressly subject to that certain Assignment of a one-half non-participating royalty interest ... to John A. Wuensche, Sr., ... to which Assignment and the record thereof reference is here made for a further description of the interests to which this reservation is made expressly subject; it being provided ... that any reversion of the royalties set out in said Assignment to John A. Wuensche, Sr., shall to Grantors herein, and their heirs and assigns. Another clause makes the deed subject to a 1950, 1/8-royalty mineral lease which was kept in existence by the payment of shut-in royalties. In construing deeds, if the language used is unambiguous, resort to extrinsic evidence to explain its meaning is improper in the absence of fraud, accident, or mistake. Smith v. Liddell, 367 S.W.2d 662, 665-66 (Tex.1963); Woods v. Sims, 154 Tex. 59, 273 S.W.2d 617, 620 (1955). In this case, the trial court granted judgment non obstante veredicto, one ground being that the deed unambiguously reserved ½ of royalties to the Browns. Because the 1973 lease to M-Tex, a 3/8-royalty lease, was then outstanding on the property, the Browns were declared to be owners of ½ of that 3/8 royalty, or a 3/16 royalty. I agree with the trial court's judgment that the deed can be given a definite and certain legal meaning from the language used therein, and that the Browns are entitled to ½ of royalties from the 1973 lease. Havard, Benson, and Gill do not dispute that the Browns would be entitled to ½ of the 1/8 royalties that were payable under the 1950 lease. Their argument is that although the 1950 lease expired and a new lease to a different lessee with different royalty provisions was executed, the parenthetical language contained in the reservation clause limits the Browns' reservation to ½ of 1/8 under all leases. According to Havard, Benson, and Gill, the Browns are not entitled to ½ of royalties under the present 3/8-royalty lease, but instead are limited to a 1/16 royalty. The majority opinion states that an ambiguity arises from the discrepancy between the trial court's award of ½ of production from the owner-produced Gill No. 1 well and its award of ½ of royalties from the 1973 lease. To base the existence of an ambiguity upon the distinction between ½ of production and ½ of royalties is to assume that distinction was an issue in this case. Neither party, however, contended that the deed should be construed to reserve ½ of production. The award of ½ of production from the Gill No. 1 well was the result of a stipulation regarding proceeds from that well only, which was entered into by the parties at trial. The second reason given by the majority for holding the reservation ambiguous is the inclusion of the parenthetical expression, [b]eing equal to, not less than an undivided 1/16th. I do not find that this parenthetical language creates an ambiguity. When the entire reservation clause is read, with the explanatory parenthetical, it is clear that the deed reserves ½ of royalties, with a minimum royalty set at 1/16. The words, heirs and assigns in perpetuity, indicate that the parties intended to reserve a perpetual royalty, not a royalty coincident only with the duration of the 1950 lease outstanding at the time of the deed. The parenthetical language refers to the situation under the 1950 lease and also encompasses the possibility of future leases. At the time of the deed, which was expressly subject to the 1950 1/8-royalty lease, a reservation of ½ of royalties was the mathematical equivalent of a 1/16 royalty. The obvious problem with simply describing the ½ of royalties as being equal to 1/16, however, was that if the 1950 lease later expired, the grantees were entitled to release the property for a different royalty. If the new lease called for other than a 1/8 royalty, the grantors' ½ of royalties would no longer be equivalent to a 1/16 royalty. See 2 H. Williams & C. Meyers, Oil and Gas Law § 327.1, .2 (1977). A prudent grantor who reserves a fraction of royalties may wish to ensure that his interest will not fall below a certain minimum. Careful drafting of royalty reservations requires that he recognize that future leases may be executed by his grantee that call for a different royalty than a lease existing at the time of the deed. The inclusion of the additional words, not less than an undivided 1/16th, indicates that the Browns contemplated future leases on the property after the 1950 lease expired. In the event that a future lease called for less than a 1/8 royalty, the Browns thereby ensured that their interest would be not less than a 1/16 royalty. If a subsequent lease again called for a 1/8 royalty, the Browns' interest in ½ of royalties, or 1/16, would continue to be not less than 1/16. If a future lease called for more than 1/8 royalty, their interest in ½ of that royalty would continue to be consistent with the parenthetical language. There is no language anywhere in the reservation clause to indicate that the Browns' royalty was to be limited to a maximum of 1/16: there is no language to the effect that ½ of royalties is to be equal to not more than 1/16. The reservation does, however, unambiguously state that the Browns' royalty interest is to be not less than 1/16. Describing a variable amount as being equal to not less than 1/16 has the same result as describing it as equal to or greater than 1/16. The absence of a comma between the words equal to and not less than does not change this meaning. The deed reserves ½ of royalties, and the explanatory parenthetical sets a minimum of 1/16. The specific fractional equivalent to ½ of royalties may vary according to the lease so long as the Browns received their 1/16 minimum. There is an additional reason appearing from the deed that supports this construction of the reservation. The reservation in the Brown deed is expressly made subject to the one-half non-participating royalty interest assigned to John A. Wuensche and reference is made to the Wuensche deed for further description. In that deed, the language non-participating one-half royalty interest is used in the granting clause and subsequently described as being ½ of royalties payable under the existing lease or future leases. The Brown deed refers to and incorporates that definition. The Brown deed excepts the Wuensche assignment from the grant to the Kings and provides for its continuation as a reversion to the Browns. An interest of ½ of royalties, not a 1/16 royalty, was described in both deeds. When the parties have set out their own definitions of the terms they employ, other meanings should not be substituted. Williams v. J. & C. Royalty Co., 254 S.W.2d 178, 180 (Tex.Civ.App.San Antonio 1952, writ ref'd). Although the Wuensche assignment may have expired at the time of the deed, the legal effect of the exception to Wuensche was not affected. The giving of a false reason for an exception from a grant does not operate to alter or cut down the interest or estate excepted, nor dues it operate to pass the excepted interest or estate to the grantee. Pich v. Lankford, 157 Tex. 335, 302 S.W.2d 645 (1957). Moreover, even if Wuensche's assignment had expired, the same described interest reverted to the Browns by the terms of the deed. The royalty reserved to the Browns in their deed is a continuation of the interest assigned to Wuenschean interest in ½ of royalties. A profitable comparison may be made with a recently decided case that also concerns the construction of a royalty reservation clause. In Helms v. Guthrie, 573 S.W.2d 855 (Tex.Civ.App.Fort Worth 1978, writ ref'd n. r. e.), the court construed the following reservation: Also, the grantors herein retain and reserve under said First Tract ½ of the 1/8th royalty (same being a 1/16th of the total production) of oil, gas and minerals, same being a non-participating royalty interest here retained by grantors. Id. at 856. This reservation, expressly limited to ½ of the 1/8th royalty, and lacking the not less than language, was held to bind the grantor to a 1/16 royalty. Unlike the reservation in this case, there is no indication that future leases with royalties differing from 1/8 were anticipated.