Court Opinion

ID: 9673124
Source: CourtListenerOpinion
Date Created: 2023-08-24 04:06:39.400207+00
Date Added: 2024-06-11T18:16:20.311168
License: Public Domain

McGEE, Justice,
dissenting.
I respectfully dissent from the opinion of the majority and would affirm the judgment of the trial court. Accordingly, I would hold that the deed from the Browns to the Kings unambiguously reserves ⅛ of the ⅜ royalty from the M — Tex lease. I would also deny Havard, Benson, and Gill, the present owners of the property, the right to assert the Kings’ alleged claim to reformation of the deed on the ground that it is barred by limitations.
CONSTRUCTION OF THE BROWNS’ ROYALTY RESERVATION
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 undivid- . ed ½6⅛) of all the oil, gas and other minerals, in, to and under or 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, ⅛-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 ⅜-royalty lease, was then outstanding on the property, the Browns were declared to be owners of ½ of that ⅜ royalty, or a ¾6 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 V2 of royalties from the 1973 lease.
Havard, Benson, and Gill do not dispute that the Browns would be entitled to ½ of the ⅛ 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 ⅛ under all leases. According to Havard, Benson, and Gill, the Browns are not entitled to ½ of royalties under the present ⅜-royalty lease, but instead are limited to a ½6 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 ⅛ of production and ⅝ 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.
*946The 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 ½6⅛.” 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 ½6.
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 ⅛-royalty lease, a reservation of ⅝ of royalties was the mathematical equivalent of a Vie royalty. The obvious problem with simply describing the ½ of royalties as “being equal to Vie,” 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 ⅛ royalty, the grantors’ ½ of royalties would no longer be equivalent to a Vie 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 Vieth,” 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 ⅛ royalty, the Browns thereby ensured that their interest would be “not less than” a Vie royalty. If a subsequent lease again called for a ⅛ royalty, the Browns’ interest in ½ of royalties, or Vie, would continue to be “not less than” Vie. If a future lease called for more than ⅛ royalty, their interest in Vi 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 Vie: there is no language to the effect that ½ of royalties is to be equal to not more than Vie. The reservation does, however, unambiguously state that the Browns’ royalty interest is to be not less than Vie. Describing a variable amount as being equal to not less than Vie has the same result as describing it as equal to or greater than Vie. 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 Vie. The specific fractional equivalent to ½ of royalties may vary according to the lease so long as the Browns received their Vie 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 Vie 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, *947writ 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 ⅛⅛ royalty (same being a ½6⅛ 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 ⅛⅛ royalty,” and lacking the “not less than” language, was held to bind the grantor to a Vis royalty. Unlike the reservation in this case, there is no indication that future leases with royalties differing from ⅛ were anticipated.
REFORMATION OF THE BROWN DEED
Havard, Benson, and Gill also contend that if the deed is found to reserve an interest in ½ of royalties, this was not the intent of the parties and the deed was the result of an accident or mistake. They argue that as present owners of the property they are entitled to a claim for reformation that the Kings might have asserted.
Generally, the terms of an instrument may not be avoided merely by showing that it is contrary to a prior agreement and one party was mistaken about its contents. National Resort Communities v. Cain, 526 S.W.2d 510, 513-14 (Tex.1975). The terms may be avoided, however, upon proof that the writing fails to state the agreement of the parties because of a mutual mistake. A one-sided mistake may also give rise to a right of reformation if accompanied by fraud, misrepresentation, concealment, or misleading conduct on the part of the other party. See Stegall v. Fulwiler, 423 S.W.2d 182, 186 (Tex.Civ.App.—Amarillo 1967, no writ). See also Holchak v. Clark, 284 S.W.2d 399 (Tex.Civ.App.—San Antonio 1955, writ ref’d).
This suit was filed in 1976, thirteen years after the deed from the Browns to the Kings. A suit for reformation is governed by the four-year statute of limitations. McClung v. Lawrence, 430 S.W.2d 179, 181 (Tex.1968); Tex.Rev.Civ.Ann. art. 5529 (Vernon 1958). Several recent cases have rejected the rule that a grantor or grantee is to be charged with immediate knowledge of a mistake contained in a deed and that limitations on an action to reform it begins to run on that date. In Sullivan v. Barnett, 471 S.W.2d 39 (Tex.1971), this court held:
“[Ejquity and justice being the ultimate aims of all rules of law, this and other courts have not been so rigid in their application of this rule. Numerous exceptions are as well established as the rule itself. As shown by the cases hereinafter cited, this presumption that a grantor or grantee has immediate knowledge of a mutual mistake contained in a deed is rebuttable, and there are various circumstances, such as subsequent conduct of the parties as though the deed had not contained the error, which will excuse a delay in discovery of the mutual mistake. This Court has never permitted the rule to blindfold it to the true facts concerning actual discovery of the mutual mistake and subsequent conduct of the parties with respect thereto.
“The weight of authority is that once the presumption of immediate knowledge is *948rebutted, the statute of limitation will commence to run when the mutual mistake was, or in the exercise of reasonable diligence should have been, discovered.

Id. at 45; see McClung v. Lawrence, supra at 181-82; Miles v. Martin, 159 Tex. 336, 321 S.W.2d 62, 69 (1959). Thus, a determinative question in this case is when the alleged mistake was, or should have been, discovered.
A contract of sale signed by the Browns and King before the execution of their deed states that the deed was to contain an “exception of an undivided ½6⅛ now outstanding non-participating royalty interest.” An attorney selected by Brown assisted in the preparation of the deed. C. Arleigh King testified that he accepted the deed, but believed it had been prepared in accordance with the contract. King further testified that he had no actual knowledge of the Browns claim to ½ of royalties until 1976. The jury made several findings pertinent to the claim for reformation. They found that any language in the deed attempting to reserve more than a ½6 royalty would be the result of an accident or mistake. They also refused to find that King knew or should have known as of 1964, the year he sold the property, that the Browns had reserved a “one-half non-participating royalty interest.” The trial court, however, granted the Browns’ motion for judgment non obstante veredicto, concluding that the claim for reformation was barred by the four-year statute of limitations.
In deciding whether the motion was correctly sustained this court is governed by the determination whether there is any evidence to raise an issue of fact. King’s testimony is evidence of his lack of actual knowledge of a mistake, but there is no evidence to excuse his, or his successors’, thirteen-year delay in bringing suit to reform the deed. To the contrary, the evidence in this case establishes that within a year after King accepted the deed, it was apparent to him that the reservation in the deed differed from the contract of sale. King testified that he believed the deed complied with the contract of sale by conveying to him the entire property except a ½6 royalty. One year later, in 1964, King conveyed the same property to Kenneth Loyd. King’s deed to Loyd contains an exception, which King testified was intended to reflect the royalty interest previously created by the Wuensche assignment and carried forward as a reservation to the Browns in the Brown deed. King’s deed described this interest as follows:
“LESS, HOWEVER, THEREFROM an undivided one-half (½) non-participating interest in and to all of the royalties on oil, gas and other minerals, it being the intent of the Grantors herein to convey to Grantee all of the minerals and an undivided one-half (½) interest in and to all of the royalties on the minerals.”
This description of the Browns’ reservation contains no language indicating that it is to be limited to a ½6 royalty. King testified that his conveyance to Loyd was of all he understood he owned as a result of his deed from the Browns. This evidence, King’s own deed to Loyd, demonstrates that King believed he owned all the property except ½ of royalties.
Nor is there evidence that King was “lulled into a sense of security” by acts consistent with his belief that the Browns had reserved only a ½6 royalty. In this respect this suit is distinguishable from other reformation cases in which diligence in discovering a mistake has been discussed. See Sullivan v. Barnett, supra; Miles v. Martin, supra. In each of these cases the evidence suggests that conduct of the parties subsequent to the execution of the instrument was consistent with the reformation-seeking party’s mistaken belief as to its contents or effect.
In Sullivan v. Barnett, 471 S.W.2d 39 (Tex.1971), the parties did not dispute that approximately 240 acres were included in a conveyance by mutual mistake. The grantors sought reformation against the defense *949that the reformation claim was barred by the statute of limitations. This court recognized that the grantors’ delay in bringing suit could be excused when they had remained in possession as though the mistake had not been made. The court noted that upon discovery of the mistake the grantors were fraudulently told that a reconveyance would be executed. Meanwhile, they “continued to live on the land and exercise dominion over it with the knowledge of [defendants’ predecessor] . . ..” Id. at 46-47. In this case the alleged mistake concerns the amount of a royalty interest, as distinguished from the size of a tract in the possession of the grantor.
In Miles v. Martin, 159 Tex. 336, 321 S.W.2d 62 (1959), the plaintiff sought reformation because of mistake as to the legal effect of a royalty reservation in a deed. This court held that a fact issue was raised on the issue of plaintiff’s diligence in discovering the mistake because he had received delay rentals consistent with his claimed interest. He claimed a ¼ interest in minerals; the court noted that he had received ¾ of delay rentals from the land for five of the six years from the date of the conveyance to the date the suit was filed. Id. at 69-70. In this case, however, there is no evidence that the Kings received royalties in an amount consistent with their claim. The Browns continued to receive shut-in royalties from the 1950 lease until 1965. There is evidence that the Kings received a share of these shut-in payments, but no evidence that their share was calculated on the basis of ½6 of anything.
Havard, Benson, and Gill have failed to show that King would be entitled to reformation of the deed. The evidence establishes that King knew or should have known that the Browns had reserved ½ of royalties when he conveyed the property in 1964. In 1964, limitations began to run against the reformation claim and four years later the claim was barred. Havard, Benson, and Gill acquired the property in 1972 subject to a valid limitations defense. Therefore, they are now barred from asserting the Kings’ alleged right to reform the deed.
For the reasons stated, I would affirm the judgment of the trial court awarding ½ of the % royalty under the M-Tex lease to the Browns.
GREENHILL, C. J., and POPE, J., join in this dissent.