Court Opinion

ID: 3089886
Source: CourtListenerOpinion
Date Created: 2015-10-16 03:51:40.479624+00
Date Added: 2024-06-11T11:50:56.147187
License: Public Domain

IN THE
                        TENTH COURT OF APPEALS

                               No. 10-11-00014-CV

NATHAN P. PHILIPELLO
AND SHARI K. PHILIPELLO,
                                                         Appellants
v.

BRETT G. TAYLOR, THE BILL W. CLEMENTS
AND VELMA F. CLEMENTS REVOCABLE
LIVING TRUST, BILLY R. CLEMENTS,
AND LARRY B. CLEMENTS,
                                                         Appellees

                         From the 82nd District Court
                           Robertson County, Texas
                      Trial Court No. 08-01-18,007-CV-A

                         MEMORANDUM OPINION

      This dispute centers on the ownership of an undivided one-fourth mineral

interest associated with a tract of land located in Robertson County, Texas, which is

now included in a prolific gas unit. The trial court granted summary judgment in this

case in favor of appellees/cross-appellants, Brett G. Taylor, The Bill W. Clements and

Velma F. Clements Revocable Living Trust, Billy R. Clements, and Larry B. Clements
(collectively referred to as “Taylor”), and specifically concluded that: (1) the reservation

of the disputed one-fourth mineral interest by Bill and Velma in 1991 failed under the

Duhig doctrine because it did not explicitly except a prior conveyance of one-half of the

minerals to Billy and Larry, see generally Duhig v. Peavy-Moore Lumber Co., Inc., 135 Tex.
503, 144 S.W.2d 878 (1940); and (2) because the one-fourth and one-half mineral interests

were excepted from the deed of appellants/cross-appellees, Nathan P. Philipello and

Shari K. Philipello, the disputed one-fourth mineral interest did not pass to the

Philipellos.

        On appeal, the Philipellos complain that the trial court erred in granting

summary judgment in favor of Taylor because an exception contained in the Philipellos’

property deed did not act as a reservation of the disputed one-fourth mineral interest.1

In several issues on cross-appeal, Taylor argues that the trial court improperly applied

the doctrine articulated in Duhig to the facts in this case. See generally id. Although we

reverse the Duhig finding, this does not change the effect of the trial court’s judgment.

Accordingly, we affirm.

                                          I.      BACKGROUND

A. The Conveyances

        In 1950, Bill and Velma Clements, the parents of Billy and Larry, obtained a 501-

acre tract of land in Robertson County. For many years, Bill and Velma operated a farm

        1 Vernon E. and Dawna R. Hancock were parties to the summary judgment and this appeal;
however, while this appeal was pending, the Hancocks filed a motion to dismiss their appellate claims
because they had settled with Taylor.

Philipello v. Taylor                                                                          Page 2
on the property and owned both the surface and mineral rights associated with the

land.

        In 1982, Bill and Velma decided to convey an undivided one-half mineral interest

in the property to sons Billy and Larry, with each son receiving an undivided one-

fourth mineral interest in the entire property. This deed was properly recorded in the

property records and specifically noted that Billy and Larry’s interests were subject to

all prior recorded encumbrances affecting the property.

        Later, in 1991, Bill and Velma agreed to sell the surface rights and a portion of the

mineral rights associated with approximately 401 acres of the property to the Nelson

Family Farming Trust (“Nelson Trust”). Bill and Velma kept 100 acres of the surface

and reserved a one-fourth mineral interest pertaining to the 401 acres being sold. On

September 17, 1991, the parties entered into a standard “Farm and Ranch Earnest

Money Contract,” which provided, among other things, that: (1) one-half of the mineral

interest associated with the portion of the property being sold to the Nelson Trust was

outstanding in third parties; (2) Bill and Velma were retaining a one-fourth mineral

interest in the 401 acres; and (3) the Nelson Trust was to receive the remaining one-

fourth mineral interest associated with the 401 acres.

        However, the deed, which was apparently drafted by the title company without

either party having a lawyer review the document and was executed on September 26,

1991, did not specifically state that one-half of the mineral interests were outstanding in

third parties—a failure to specifically recognize the 1982 deed from Bill and Velma to

Billy and Larry.       Instead, the deed provided the following, which Taylor argues

Philipello v. Taylor                                                                   Page 3
implicitly references Billy and Larry’s interests:      “It is specifically agreed and

understood by and between the Grantors [Bill and Velma] and Grantee [Nelson Trust]

that this conveyance is subject to all leases, easements, restrictions, covenants,

encroachments[,] and ordinances of record and actually affecting the property on the

ground.” The 1991 deed was filed in the property records; however, the “Farm and

Ranch Earnest Money Contract” was not.

        Approximately two years later, in 1993, Bill and Velma decided to stop farming

the land and agreed to sell the remaining 100 acres they owned to the Nelson Trust.

Like the prior conveyance between the parties, Bill and Velma reserved a one-fourth

mineral interest in the 100-acre tract of land.     This deed, however, contained an

expressed exception of the one-half mineral interest outstanding with Billy and Larry.

And like the prior deeds, this deed was properly recorded.

        In 1995, as part of their estate plan, Bill and Velma conveyed all of their

remaining mineral interests in the subject property to The Bill W. Clements and Velma

F. Clements Revocable Living Trust.

        About six years later, in 2001, the Nelson Trust agreed to sell approximately 110

acres of the property to the Philipellos. In a standard “Farm and Ranch Contract,”

which was signed by the parties on May 25, 2001, the Nelson Trust indicated that it was

selling the 110 acres to the Philipellos.     However, the contract stated that:      (1)

approximately three-fourths of the mineral interest associated with the 110 acres was

outstanding in third parties, which corresponded with the one-half mineral interest

owned by Billy and Larry and the one-fourth mineral interest reserved by Bill and

Philipello v. Taylor                                                               Page 4
Velma; (2) the Nelson Trust retained one-eighth of the royalty interest associated with

the 110 acres for ten years, at which time it would revert to the Philipellos; and (3) the

Philipellos received “25% of the minerals” associated with the 110 acres.              The

corresponding “Warranty Deed with Vendor’s Lien” was signed by the parties in late

July 2001 and was subsequently recorded in the property records. The deed specifically

referenced the Nelson Trust’s reservation of the one-eighth royalty interest and

contained a section entitled, “Exceptions to Conveyance and Warranty.” In this section,

several easements were listed; additionally, Bill and Velma’s 1982 conveyance of one-

half of the mineral interest to Billy and Larry, Bill and Velma’s 1991 deed to the Nelson

Trust, wherein Bill and Velma retained a one-fourth mineral interest, and Bill and

Velma’s 1995 conveyance to their revocable living trust were specifically mentioned as

exceptions to the conveyance. This listing was not included in the section of the deed—

entitled “Reservations from Conveyance: SAVE AND EXCEPT”—where the Nelson

Trust’s one-eighth royalty interest was referenced.

        On July 30, 2007, the revocable living trust, Billy, and Larry entered into a “Term

Royalty Deed” with Taylor, which called for the conveyance of one-half of their royalty

interest in the entire 501 acres to Taylor.

        In late 2007, XTO Energy, the operator of an oil and gas lease granted by the

Clements on the 501-acre farm and other leases that XTO had combined to form the

“Hancock Gas Unit,” drilled a producing gas well and sent out a division order, which

credited Bill and Velma, whose interest was now with the revocable trust, with

ownership of the now-disputed one-fourth mineral interest in the 401-acre property.

Philipello v. Taylor                                                                 Page 5
Shortly thereafter, the Hancocks and the Philipellos notified XTO of their ownership

claim to the disputed one-fourth mineral interest.2

B. Procedural History

        On January 24, 2008, Taylor filed his original petition against the Philipellos, the

Hancocks, and the Nelson Trust, requesting from the trial court, among other things,

declarations that:

        [A]s a result of the Clements-Nelson Deed and the 100 Acre Tract Deed:
        (1) B.W. Clements and B.W. Clements and wife, Velma Clements, reserved
        an undivided one-fourth (1/4) of all the oil, gas[,] and other minerals in,
        on and under and that may be produced from the Property via the
        Clements-Nelson Deed and (2) as successor to The Bill W. Clements and
        Velma F. Clements Revocable Living Trust (as successor in interest to B.W.
        Clements and wife, Velma F. Clements), and via the Clements-Taylor
        Deed, Plaintiff Brett Taylor owns all right, title[,] and interest to an
        undivided one-half (1/2) of all of the royalty interest, of any type, as to all
        oil, gas[,] and other hydrocarbons, and any other substances produced
        therewith from the Property and owned by The Bill W. Clements and
        Velma F. Clements Revocable Living Trust, Bill W. Clements, Larry B.
        Clements[,] and Billy R. Clements.

         Philipello and the Nelson Trust filed original answers generally denying all of

the allegations contained in Taylor’s original petition. Thereafter, several motions for

summary judgment were filed by various parties, and the Philipellos and the Hancocks

filed a cross-claim against the Nelson Trust requesting a declaration from the trial court

that they own one-half of the mineral interest—the one-fourth interest specifically

conveyed in the 2001 deed and the disputed one-fourth interest reserved by Bill and

        2 In 2003, the Hancocks agreed to purchase 346 acres of the property from the Nelson Trust,

which consisted of 291 acres from the 401-acre property purchased from Bill and Velma in 1991 and 55
acres from the 100-acre tract purchased from Bill and Velma in 1993. The sales contract between the
Hancocks and the Nelson Trust indicated that three-fourths of the mineral interest was outstanding in
third parties and that the Hancocks received a one-fourth mineral interest in the 346 acres purchased.

Philipello v. Taylor                                                                           Page 6
Velma in 1991—associated with the 110 acres “as a result of the Nelson Trust-Philipello

deed with the exception of a 1/8 of royalty reservation for a period of 10 years as set

forth in the deed.”3 Taylor filed an answer to Philipello’s cross-claim denying all of the

allegations contained therein. Later, Taylor filed an amended petition, requesting the

same declarations as before and, in the alternative, asking that the 1991 deed from Bill

and Velma to the Nelson Trust be reformed due to a mutual mistake.

        On December 10, 2008, the trial court granted a summary-judgment motion filed

by Taylor, ordered reformation of the 1991 deed from Bill and Velma to the Nelson

Trust based upon mutual mistake, and severed Taylor’s claims from the underlying

lawsuit—thereby rendering its order final and appealable.

        The Nelson Trust, Hancocks, and Philipellos then moved for a new trial and for

reconsideration of Taylor’s summary-judgment motion, arguing, among other things,

that fact issues existed regarding a statute-of-limitations defense which was previously

pleaded. Subsequently, on February 11, 2009, the trial court entered an order granting

summary judgment in favor of the Nelson Trust, granting reformation in favor of

Taylor, and granting a new trial as to the statute-of-limitations issue.

        Taylor and the Nelson Trust eventually settled on June 11, 2009. Under the terms

of the settlement, the Nelson Trust assigned to Taylor all of its right, title, and interest in

the disputed one-fourth mineral interest. Specifically, the document provided that:

        It is the intent of the instrument to assign, transfer, and quitclaim
        Grantor’s [the Nelson Trust] interest in the Property to Billy R. Clements
        and Larry B. Clements, in equal undivided shares, subject to the Term

        3   The Philipellos’ and Hancocks’ cross-claim was later amended to include a reformation claim.

Philipello v. Taylor                                                                                Page 7
        Royalty Deed to Brett G. Taylor of record at Vol. 997, Page 330, of the
        Public Records of Robertson County, Texas.

        After settling with the Nelson Trust, Taylor once again moved for summary

judgment, arguing that if the Clements’ reservation in the 1991 deed failed under Duhig,

the disputed one-fourth interest remained with the Nelson Trust and did not pass to

either the Hancocks or the Philipellos under their deeds with the Nelson Trust.

        On August 31, 2009, the trial court granted Taylor’s motion for summary

judgment, holding that the disputed one-fourth interest remained with the Nelson Trust

under the Duhig doctrine, did not pass to the Hancocks or Philipellos, and was now

owned by Taylor because of the June 11, 2009 settlement assignment. In a subsequent

order signed on October 19, 2009, the trial court held that the Philipellos’ and Hancocks’

pleas for reformation were barred by limitations as a matter of law.

        Then, on the morning that trial was set to begin on the remaining issues, Taylor

reached an agreement with the Philipellos and the Hancocks, which called for the

parties to abandon their respective reformation claims and allow the trial court’s prior

orders construing the deed to be combined into a final judgment. As a result of the

agreement, the trial court entered its final judgment on December 13, 2010. In its final

judgment, the trial court held that: (1) Bill and Velma’s reservation of a one-fourth

mineral interest in the 1991 deed failed under Duhig because it did not explicitly except

from its grant and warranty the one-half mineral interest previously conveyed to Billy

and Larry; and (2) because the reserved one-fourth mineral interest and the previously

conveyed one-half mineral interest are both expressly excepted from the grants and

Philipello v. Taylor                                                                Page 8
warranties of the Hancock and Philipello deeds, the one-fourth mineral interest did not

pass to either the Hancocks or the Philipellos. Instead, the disputed one-fourth interest

remained with the Nelson Trust until it was conveyed to Taylor pursuant to the June 11,

2009 settlement assignment.

        Thereafter, the Philipellos filed their notice of appeal, and Taylor filed a notice of

cross-appeal.

                                   II.    STANDARD OF REVIEW

        We review the trial court’s grant of a traditional motion for summary judgment

de novo. See Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003).

When reviewing a traditional motion for summary judgment, we must determine

whether the movant met its burden to establish that no genuine issue of material fact

exists and that the movant is entitled to judgment as a matter of law. See TEX. R. CIV. P.

166a(c); Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002). The movant bears

the burden of proof in a traditional motion for summary judgment, and all doubts

about the existence of a genuine issue of material fact are resolved against the movant.

See Grant, 73 S.W.3d at 215. We take as true all evidence favorable to the non-movant,

and we indulge every reasonable inference and resolve any doubts in the non-movant’s

favor. Valence Operating Co. v Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). We will affirm a

traditional summary judgment only if the record establishes that the movant has

conclusively proved its defense as a matter of law or if the movant has negated at least

one essential element of the plaintiff’s cause of action. IHS Cedars Treatment Ctr. of

Philipello v. Taylor                                                                    Page 9
Desoto, Tex., Inc. v. Mason, 143 S.W.3d 794, 798 (Tex. 2004); Am. Tobacco Co. v. Grinnell,

951 S.W.2d 420, 425 (Tex. 1997).

                                   III.   THE DUHIG DOCTRINE

        In their first issue, the Philipellos argue that the trial court erred in concluding

that the exception to the warranty set forth in the 2001 deed between the Nelson Trust

and the Philipellos acted as a reservation of a one-fourth mineral interest instead of as a

protection of the Nelson Trust warranty. However, we need not address this issue

because the improper application of the Duhig doctrine—an issue raised in Taylor’s

cross-appeal—is dispositive in this case. See TEX. R. APP. P. 47.1 (“The court of appeals

must hand down a written opinion that is a brief as practicable but that addresses every

issue raised and necessary to final disposition of the appeal.”); see also Duhig, 144 S.W.2d

at 880-81.

        In his cross-appeal, Taylor contends that, for various reasons, the trial court

improperly applied the Duhig doctrine to the facts in this case. See 144 S.W.2d at 880-81.

The Philipellos counter that the Duhig doctrine applied because, on its face, the 1991

deed conveyed fee simple title to the Nelson Trust, though it did not explicitly reference

the 1982 deed to Billy and Larry. The Philipellos argue that because the 1991 deed

failed to explicitly reference the 1982 deed, the Duhig doctrine vested the Nelson Trust

with all of the mineral interest owned by Bill and Velma at the time of the 1991 deed,

which the Nelson Trust later conveyed to the Philipellos in 2001. Therefore, instead of

receiving a one-fourth mineral interest, as specified in the 2001 deed, the Philipellos

contend that they actually received a one-half mineral interest. The Philipellos also

Philipello v. Taylor                                                                 Page 10
argue that the language in the 2001 deed allegedly excepting Bill and Velma’s one-

fourth mineral interest is not a reservation and, thus, does not overcome the operation

of the Duhig doctrine.4

A. Duhig v. Peavy-Moore Lumber Company, Inc.

        In Duhig, W.J. Duhig purported to convey fee simple title to land by a general

warranty deed and to reserve an undivided one-half mineral interest in the land. Id. at

878. However, unbeknownst to the grantee, on the date of the deed, one half of the

minerals were outstanding in a third person—the estate of Alexander Gilmer. Id. The

court held, under that fact situation, that: (1) the covenant of warranty extended to the

surface of the land and one-half of the minerals; (2) there was a breach of the warranty;

and (3) that equity would estop Duhig and those claiming under him from asserting

title against the grantee and those claiming under it. Id. at 880-81 (“Thus[,] the deed is

so written that the general warranty extends to the full fee simple title to the land except

an undivided one-half interest in the minerals.”). The effect of the court’s holding was

to take the one-half mineral interest allegedly retained by Duhig and give it to the

grantee in order to fulfill the covenant of general warranty. Id. at 880-81. Essentially,

this allowed the grantee to get what it bargained and paid for, rather than having only a

breach of warranty claim for damages. See id. at 880-81.

        The general rule set forth in Duhig was:

         4 We agree with the Philipellos that the Nelson Trust did not intend to reserve a one-fourth

mineral interest in the 2001 deed. We disagree, however, with the notion that the Nelson Trust had a
one-half mineral interest to convey at the time of the 2001 deed. The Nelson Trust had a one-fourth
mineral interest and subsequently conveyed that to the Philipellos. As we explain later, the disputed one-
fourth interest that the Philipellos attempt to obtain was owned by Bill and Velma and their revocable
trust at all points in time.

Philipello v. Taylor                                                                              Page 11
        a deed purporting to convey a fee simple or a lesser definite estate in land
        and containing covenants of general warranty of title or of ownership will
        operate to estop the grantor from asserting an after-acquired title or
        interest in the land, or against the estate which the deed purports to
        convey, as against the grantee and those claiming under him.

Id. at 880; see Gutierrez v. Rodriguez, 30 S.W.3d 558, 561 (Tex. App.—Texarkana 2000, no

pet.); Seydler v. Herder, 361 S.W.2d 411, 414 (Tex. App.—El Paso 1962, writ ref’d n.r.e.)

(“The general warranty deed from George Seydler to George Herder warranted the full

fee simple title to George Herder. It conveyed all the title that Seydler had, and if he

did not then have the full fee simple title, but later acquired it, then such title would

pass eo instante to George Herder, and would relate back to the date of said warranty

deed.”). Or, in other words, a reservation in a deed is ineffective when, as a result of the

grantor’s title shortage, the conveyance and the reservation cannot both be given effect.

See Duhig, 144 S.W.2d at 880 (“The deed, of course, does not actually convey what the

grantor does not own.”).

B. Canons of Construction for Contracts and Deeds

        In analyzing the Duhig issue, we must ascertain the intent of the parties through

examining the contents of several contracts and deeds.           In construing a written

agreement, we must ascertain and give effect to the parties’ intentions as expressed in

the agreement. Frost Nat’l Bank v. L&F Distribs., Ltd., 165 S.W.3d 310, 311-12 (Tex. 2005)

(per curiam); Carbona v. CH Med., Inc., 266 S.W.3d 675, 680 (Tex. App.—Dallas 2008, no

pet.); see Terrill v. Tuckness, 985 S.W.2d 97, 101 (Tex. App.—San Antonio 1998, no pet.)

(noting that the rules of contract construction apply to the construction of deeds). We

discern intent from the agreement itself, and the agreement must be enforced as written.

Philipello v. Taylor                                                                   Page 12
Deep Nines, Inc. v. McAfee, Inc., 246 S.W.3d 842, 846 (Tex. App.—Dallas 2008, no pet.); see

French v. Chevron U.S.A., Inc., 896 S.W.2d 795, 797 (Tex. 1995) (“Because ‘once a dispute

arises over meaning, it can hardly be expected that the parties will agree on what

meaning was intended,’ courts use canons of construction to help ascertain the parties’

intent.” (quoting Southland Royalty Co. v. Pan Am. Petroleum Corp., 378 S.W.2d 50, 59

(Tex. 1964) (Calvert, C.J., concurring))). We consider the entire writing and attempt to

harmonize and give effect to all the provisions of the contract by analyzing the

provisions with reference to the whole agreement. Frost Nat’l Bank, 165 S.W.3d at 312.

This consideration comes “‘from a utilitarian standpoint bearing in mind the particular

business activity sought to be served,’” and we will “‘avoid when possible and proper a

construction which is unreasonable, inequitable, and oppressive.’” Id. (quoting Reilly v.

Rangers Mgmt., Inc., 727 S.W.2d 527, 530 (Tex. 1987)). And, “[i]t is a rule of construction

of deeds that they are to be most strongly construed against the grantor and in favor of

the grantee, and this rule applies to reservations and exceptions.” Commerce Trust Co. v.

Lyon, 284 S.W.2d 920, 921 (Tex. Civ. App.—Fort Worth 1955, no writ).

        Extrinsic evidence of intent is admissible only if the deed is ambiguous on its

face. See Friendswood Dev. Co. v. McDade & Co., 926 S.W.2d 280, 283 (Tex. 1996); see also

CenterPoint Energy Houston Elec., L.L.P. v. Old TJC Co., 177 S.W.3d 425, 431 (Tex. App.—

Houston [1st Dist.] 2005, pet. denied) (“A court may consider the parties’ interpretations

of the contract through extrinsic or parol evidence only after a contract is first

determined to be ambiguous.”). A mere disagreement about the proper interpretation

of a deed, however, does not make the deed ambiguous; the instrument is ambiguous

Philipello v. Taylor                                                                Page 13
only if, after application of the rules of construction, the deed is reasonably susceptible

to more than one meaning. Brown v. Havard, 593 S.W.2d 939, 942 (Tex. 1980); Universal

C.I.T. Credit Corp. v. Daniel, 150 Tex. 513, 243 S.W.2d 154, 157 (1951).

        In any event, the Texas Supreme Court has also held that “all writings that

pertain to the same transaction will be considered together, even if they were executed

at different times and do not expressly refer to one another.” DeWitt County Elec. Coop.,

Inc. v. Parks, 1 S.W.3d 96, 102 (Tex. 1999); see Miles v. Martin, 159 Tex. 336, 321 S.W.2d 62,

65 (1959) (“It is well settled that separate instruments executed at the same time,

between the same parties, and relating to the same subject matter may be considered

together and construed as one contract.”); GPA Holding, Inc. v. Baylor Health Care Sys.,

344 S.W.3d 467, 471 (Tex. App.—Dallas 2011, pet. filed); see also McDowell v. Bier, No. 2-

09-231-CV, 2010 Tex. App. LEXIS 2546, at **9-10 (Tex. App.—Fort Worth Apr. 8, 2010,

no pet.) (mem. op.). The supreme court cautioned, however, “that this rule is simply a

device for ascertaining and giving effect to the intention of the parties and cannot be

applied arbitrarily.” Parks, 1 S.W.3d at 102 (citing Miles, 321 S.W.2d at 65).

        In addition, “[a] written contract must be construed to give effect to the parties’

intent expressed in the text as understood in light of the facts and circumstances

surrounding the contract’s execution, subject to the parol evidence rule.”           Houston

Exploration Co. v. Wellington Underwriting Agencies, Ltd., 352 S.W.3d 462, 469 (Tex. 2011)

(citing Sun Oil Co. (Del.) v. Madeley, 626 S.W.2d 726, 731 (Tex. 1981); City of Pinehurst v.

Spooner Addition Water Co., 432 S.W.2d 515, 518-19 (Tex. 1968)). The parol evidence rule

applies when parties have a valid, integrated written agreement, and precludes

Philipello v. Taylor                                                                   Page 14
enforcement of prior or contemporaneous inconsistent agreements. Id. (citing Hubacek

v. Ennis State Bank, 159 Tex. 166, 317 S.W.2d 30, 32 (1958); RESTATEMENT (SECOND)          OF

CONTRACTS § 213 (1981)); see Gannon v. Baker, 818 S.W.2d 754, 755 (Tex. 1991) (per

curiam) (noting that the parol evidence rule does not apply to mere statements or

recitals of past facts).   “The rule does not prohibit consideration of surrounding

circumstances that inform, rather than vary from or contradict, the contract text.”

Houston Exploration Co., 352 S.W.3d at 469; see Bandera Drilling Co. v. Sledge Drilling Corp.,

293 S.W.3d 867, 871 (Tex. App.—Eastland 2009, no pet.) (“[C]ourts can properly

consider parol evidence of the surrounding circumstances when interpreting a

contract.”). “Those circumstances include, according to Professor Williston’s treatise,

‘the commercial or other setting in which the contract was negotiated and other

objectively determinable factors that give a context to the transaction between the

parties.” Id. (citing 11 RICHARD A. LORD, WILLISTON ON CONTRACTS § 32.7 (4th ed. 1999)).

Negotiations of the parties “may have some relevance in ascertaining the dominant

purpose and intent of the parties embodied in the contract interpreted as a whole.”

Houston Exploration Co., 352 S.W.3d at 469-70 (citing Tanner Dev. Co. v. Ferguson, 561
S.W.2d 777, 781 (Tex. 1977); RESTATEMENT (SECOND)                  OF   CONTRACTS § 214

(“[N]egotiations prior to or contemporaneous with the adoption of a writing are

admissible in evidence to establish . . . (c) the meaning of the writing, whether or not

integrated . . . .”)).

Philipello v. Taylor                                                                   Page 15
C. Discussion

        1. The 1991 Conveyance from Bill and Velma to the Nelson Trust

        For numerous reasons, which we detail below, we do not believe that the Duhig

doctrine applies to the facts in this case. First, we examine the contents of the 1991 deed

from Bill and Velma to the Nelson Trust. Neither party asserts that the governing

documents are ambiguous. In any event, the 1991 deed clearly indicates a reservation

of a one-fourth mineral interest by Bill and Velma.5               However, the deed does not

expressly reference the previous one-half mineral interest that Bill and Velma conveyed

to Billy and Larry in 1982. Instead, the 1991 deed provides the following: “It is

specifically agreed and understood by and between the Grantors [Bill and Velma] and

Grantee [the Nelson Trust] that this conveyance is subject to all leases, easements,

restrictions, covenants, encroachments[,] and ordinances of record and actually

affecting the property on the ground.” It is undisputed that the 1982 conveyance to

Billy and Larry was properly recorded in the property records and, thus, was

searchable via a title search. It is arguable that, even though the 1991 deed does not

explicitly reference the 1982 conveyance of one-half of the minerals to Billy and Larry,

the 1991 deed implicitly references the conveyance.

        5Specifically, the 1991 deed provides the following with regard to Bill and Velma’s one-fourth-
mineral-interest reservation:

        SAVE AND EXCEPT, and there is hereby reserved unto Grantors [Bill and Velma], their
        heirs and assigns, an undivided one-fourth (1/4) of all of the oil, gas[,] and other
        minerals in and under and that may be produced from the above described property,
        together with the right of ingress and egress at all times for the purposes of mining,
        drilling, exploring, operating[,] and developing said lands for oil, gas[,] and other
        minerals and removing the same therefrom.

(Emphasis in original).

Philipello v. Taylor                                                                             Page 16
        The “subject to” clause served two purposes: (1) it limited Bill and Velma’s

conveyance to the Nelson Trust; and (2) it put the Nelson Trust on notice that other

encumbrances to title may exist. See Averyt v. Grande, Inc., 717 S.W.2d 891, 894 (Tex.

1986) (“The ‘subject to’ clause does limit the estate granted and warranted.”); see also

Cockrell v. Tex. Gulf Sulphur Co., 299 S.W.2d 672, 676 (Tex. 1956) (noting that the term

“subject to” in a mineral deed is a limiting clause, and a qualifying term that “mean[s]

‘subordinate to,’ ‘[s]ubservient to’ or ‘limited by.’ There is nothing in the use of the

words ‘subject to,’ in their ordinary use, which would even hint at the creation of

affirmative rights”); Freeman v. Southland Paper Mills, Inc., 573 S.W.2d 822, 823-24 (Tex.

App.—Beaumont 1978, writ ref’d n.r.e.) (same). In addition, the inclusion of the terms

“restriction” and “covenant” in the deed arguably supports the contention that the 1991

deed implicitly referenced the 1982 conveyance to Billy and Larry and, thus, does not

support a Duhig finding that the Nelson Trust received more than the one-fourth

interest that was bargained for. “Restriction” is defined and commonly used to mean

“[a] limitation (esp. in a deed) placed on the use or enjoyment of property.” BLACK’S

LAW DICTIONARY 1054 (7th ed. 2000). On the other hand, “covenant” is defined as “[a]

formal agreement or promise, [usually] in a contract.” Id. at 298. Either of these terms

arguably supports Taylor’s assertion that the 1991 deed implicitly referenced the 1982

conveyance, especially considering the 1982 deed was properly recorded and, therefore,

put all parties on notice of the interest, and did not create a situation where Bill and

Velma were conveying to the Nelson Trust an interest that they did not have.

Philipello v. Taylor                                                               Page 17
        Nine days prior to the signing of the deed, the parties entered into a standard

“Farm and Ranch Earnest Money Contract,” which involved the same property, parties,

and interests and clearly stated that three-fourths of the mineral interest associated with

the portion of the property purchased by the Nelson Trust was outstanding in third

parties—one half corresponding with Billy and Larry’s interest and one-fourth retained

by Bill and Velma.6 See Parks, 1 S.W.3d at 102; Miles, 321 S.W.2d at 65; GPA Holding, Inc.,
344 S.W.3d at 471; see also McDowell, 2010 Tex. App. LEXIS 2546, at **9-10. The “Farm

and Ranch Earnest Money Contract” also stated that the Nelson Trust was to receive

only a one-fourth mineral interest, nothing greater. With regard to the surrounding

circumstances of the transaction between Bill and Velma and the Nelson Trust, Taylor

included excerpts from deposition testimony provided by Bill; Wesley Nelson, who

participated in the transactions; and Howard Wayne Hoegemeyer.                              Both Bill and

Wesley testified that all parties understood that three-fourths of the minerals were

outstanding in third parties and that the Nelson Trust was only to receive a one-fourth

mineral interest.7 Moreover, Hoegemeyer, who was the real estate agent representing

         6 To the extent that the Philipellos assert that the merger doctrine prevents us from considering

the sales contract to interpret either the 1991 or 2001 deeds, we note that the merger doctrine applies only
in the absence of fraud, accident, or mistake. See Gail v. Berry, 343 S.W.3d 520, 525 (Tex. App.—Eastland
2011, pet. denied) (citing Commerical Bank, Unincorporated, of Mason, Tex. v. Satterwhite, 413 S.W.2d 905, 909
(Tex. 1967)). Here, the record contains testimony indicating that the 1991 deed was drafted by the title
company and that neither the Clements nor the Nelson Trust was represented by lawyers. Mutual
mistake was raised in the trial court and the parties sought reformation of the deed. The trial court
entered an order calling for the reformation of the 1991 deed based upon mutual mistake. Moreover,
Wesley and Bill provided consistent deposition testimony regarding the parties’ intent. Because the 1991
deed was inartfully drafted and the record contains evidence indicating a consistent intent on the part of
the parties to the 1991 deed, it appears as if this case involves a mistake with respect to the 1991 deed,
which prevents the application of the merger doctrine. See id. (“[A] scrivener’s failure to embody an
agreement is sufficient to show mutual mistake.”); see also Satterwhite, 413 S.W.2d at 909.

        7   Specifically, Wesley stated that:

Philipello v. Taylor                                                                                  Page 18
both Bill and Velma and the Nelson Trust in this transaction, stated that it was clear to

everyone at the time of the transaction that three-fourths of the mineral interests were

outstanding in others and that the Nelson Trust was to receive only a one-fourth

interest in the minerals as a result of the 1991 deed. Further, Hoegemeyer stated the

following with regard to the transaction:

              It says one-quarter mineral interest.            Buyer will receive a one-
        quarter mineral interest and—go ahead.

                 ....

              I based that on a hundred percent. One-half plus one-quarter plus
        one-quarter equaled the total amount of minerals.

                 ....

               And I normally don’t put that in there in a contract that the buyer
        will receive a quarter, but that—we were at Mr. Clements’ [sic] house and
        [the] Nelsons and that’s what they wanted me to put in there, so that’s
        what I put in there.

        Based on the contract, which was executed nine days prior to the deed, the

deposition testimony regarding the surrounding circumstances of the transaction, and

the plain language of the deed, we conclude that the intent of the parties to the 1991

deed was that one-fourth of the minerals would be retained by Bill and Velma and one-

fourth of the minerals would be conveyed to the Nelson Trust with the remaining one-

half of the minerals owned by Billy and Larry in accordance with the 1982 deed. And, it

is worth mentioning that the usage of the documents and testimony of surrounding

        Well, the intent was with Mr. Clements and the trust at—or myself was that Mr.
        Clements did not have but one-half of the total minerals. So he was willing to transfer
        one-half of his one-half, which would’ve been one-fourth to the trust and he was to keep
        one-fourth of the minerals for himself and his wife.

Philipello v. Taylor                                                                               Page 19
circumstances to ascertain the intent of Bill and Velma and the Nelson Trust with

respect to the 1991 deed does not result in a variance or alteration of the terms of the

1991 deed, especially considering Billy and Larry’s interest arguably falls within the

language of the “subject to” clause of the deed. See Houston Exploration Co., 352 S.W.3d

at 469; see also Parks, 1 S.W.3d at 102.

        2. The 2001 Conveyance from the Nelson Trust to the Philipellos

        This alone would demonstrate that the Duhig doctrine does not apply in this

situation. See 144 S.W.2d at 880-81. However, our conclusion is further supported by

an examination of the deed and other documents pertaining to the 2001 transaction

between the Nelson Trust and the Philipellos. In the “Warranty Deed with Vendor’s

Lien,” which was signed in late July 2001, the parties included the following language,

in pertinent part:

        Exceptions to Conveyance and Warranty:

                 ....

               7.) Mineral and/or royalty interest, the royalties, bonuses, rentals[,]
        and all other rights in connection with said mineral and/or royalty rights,
        bonuses[,] rentals, described in instrument from B.W. Clements and wife,
        Velma Clements[,] to Larry B. Clements and Billy R. Clements, dated
        March 16, 1982, recorded in Volume 389, Page 308, Public Records of
        Robertson County, Texas, reference to which instrument is here made for
        all purposes.

               8.) Mineral and/or royalty interest, the royalties, bonuses, rentals[,]
        and all other rights in connection with said mineral and/or royalty rights,
        bonuses[,] rentals, described in instrument from B.W. Clements and wife,
        Velma Clements[,] to Nelson Family Farming Trust, dated September 26,
        1991, recorded in Volume 569, Page 183, Public Records of Robertson
        County, Texas, reference to which instrument is here made for all
        purposes.

Philipello v. Taylor                                                                     Page 20
(Emphasis added). Clearly, the Philipellos’ deed referenced and arguably excepted

from the conveyance both the one-half mineral interest reserved for Billy and Larry in

1982 and the one-fourth mineral interest reserved by Bill and Velma in 1991. See Pich v.

Langford, 157 Tex. 335, 302 S.W.2d 645, 648 (1957) (“It is also well established that an

interest or estate in land excepted from a grant is excluded from the grant and does not

pass to the grantee.”); see also Patrick v. Barrett, 734 S.W.2d 646, 647 (Tex. 1987) (“It is

manifest that an exception does not pass title itself; instead it operates to prevent the

excepted interest from passing at all.”). Based on the plain language of the deed, it

would appear that the disputed one-fourth interest was excepted from the Philipellos’

deed. And, at the very least, the Philipellos had actual notice of Bill and Velma’s one-

fourth and Billy and Larry’s one-half mineral interests that were outstanding based on

the language contained in the 2001 deed. As a result, we cannot say that the Philipellos

are entitled to an interest in the minerals greater than the one-fourth interest that was

specifically conveyed in the 2001 deed.

        In further support of our interpretation of the Philipello deed, we note that the

“Farm and Ranch Contract,” signed by the parties on May 25, 2001, indicates that three-

fourths of the mineral interests associated with the portion of the property purchased

by the Philipellos is outstanding in third parties and that the Philipellos were to receive

only one-fourth of the minerals and a one-eighth royalty interest from the Nelson Trust.

In addition, Wesley testified via deposition that, at the time of the transaction, everyone

was clear that only a one-fourth mineral interest was being conveyed from the Nelson

Philipello v. Taylor                                                                 Page 21
Trust to the Philipellos. Wesley also stated that he did not recall any questions from or

disputes raised by the Philipellos regarding the mineral interest being conveyed.

        It is clear to us that the surrounding circumstances and documents and the plain

language of the 2001 deed prevents the Philipellos from procuring a mineral interest in

excess of the one-fourth for which they bargained and paid. In fact, the thrust of our

holding is that: (1) Billy and Larry retain a one-half mineral interest associated with the

entire 501 acres; (2) the one-fourth mineral interest that Bill and Velma reserved in the

1991 deed never passed to the Nelson Trust and, instead, remained with Bill and Velma

and their revocable trust at all times; and (3) the Philipellos only own a one-fourth

mineral interest with respect to the 110 acres they purchased from the Nelson Trust.

The Philipellos could only receive the mineral interest that was owned and

subsequently conveyed by the Nelson Trust at the time—a one-fourth mineral interest.8

Thus, the settlement agreement between the Nelson Trust and Bill and Velma is

irrelevant with respect to the disputed one-fourth mineral interest because the interest

never passed to the Nelson Trust pursuant to the 1991 deed or an application of the

Duhig doctrine. In effect, we do not believe that the Duhig doctrine, being equitable in

nature, operates in this case to vest the Philipellos with a mineral interest that exceeds

that which they bargained and paid for.                 See 144 S.W.2d at 880-81. We therefore

         8 It is our belief that by adopting the Philipellos’ interpretation of the 1991 and 2001 deeds—that

Bill and Velma did not properly reserve the one-fourth mineral interest in 1991 which then resulted in the
Nelson Trust and, in turn, the Philipellos, obtaining all of Bill and Velma’s interest in the minerals—a
variance or alteration of the deeds would result, which violates the canon of contract construction
requiring us to harmonize and give effect to all the provisions of the contracts. See Frost Nat’l Bank v. L&F
Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005).

Philipello v. Taylor                                                                                 Page 22
conclude that the trial court erred in applying the Duhig doctrine to the facts in this

case. As such, Taylor’s cross-issues pertaining to the Duhig doctrine are sustained.

                                       IV.     CONCLUSION

        Having sustained Taylor’s cross-issues pertaining to the Duhig doctrine, which as

we noted earlier are dispositive in this appeal, we reverse the trial court’s Duhig finding.

And because we have concluded that Bill and Velma and their revocable living trust

owned the disputed one-fourth interest at all points in time as a matter of law and

because the reversal of the Duhig finding does not change the effect of the trial court’s

judgment, we affirm the trial court’s judgment.

                                                  AL SCOGGINS
                                                  Justice

Before Chief Justice Gray,
       Justice Davis, and
       Justice Scoggins
(Chief Justice Gray concurring with a note)*
Affirmed
Opinion delivered and filed April 25, 2012
[CV06]

*(Chief Justice Gray concurs in the judgment of the Court to the extent that it affirms the
trial court’s determination and judgment that the disputed ¼ mineral interest, based
upon the deeds at issue in this proceeding, is owned by Brett G. Taylor, The Bill W.
Clements and Velma F. Clements Revocable Living Trust, Billy R. Clements, and Larry
B. Clements (as their interest appear or record, under the settlement quitclaim deed and
assignment, recorded as document No. 20092869 in Volume 1076, page 772, Official
Public Records of Robertson County, Texas). A separate opinion will not issue. He
notes, however, that because of the settlement between the Nelson Trust and the
Plaintiffs (owners listed above) the issue of the application of the Duhig doctrine
appears moot and because it is unnecessary to the disposition of this appeal, since no

Philipello v. Taylor                                                                 Page 23
party has explained what impact, if any, the application of the doctrine would have on
the actual result of the judgment of the Court as opposed to the legal underpinnings
thereof after the settlement above referenced. Further, Chief Justice Gray notes that he
does not join the discussion of the interpretation of the Clements to Nelson deed, such
deed being unambiguous we need not resort to aids to construction and in particular
the use of the contract executed 9 days prior to the unambiguous deed is inappropriate.
Further, he does not join the discussion that the “subject to” language of either
“restrictions” or “covenants” could include a prior reservation of a mineral interest.
With these comments, he concurs in the result of the judgment of the Court.)

Philipello v. Taylor                                                             Page 24