Court Opinion

ID: 5583
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:07:25+00
Date Added: 2024-06-11T15:04:15.620653
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS

                      FOR THE FIFTH CIRCUIT

                            No. 92-4394

TEMPLE-INLAND FOREST PRODUCTS
CORPORATION,
                                          Plaintiff-Appellee,

                                versus

UNITED STATES OF AMERICA,
                                          Defendant-Appellant.

           Appeal from the United States District Court
                 for the Eastern District of Texas

                         (April 13, 1993)

Before Reynaldo G. GARZA, HIGGINBOTHAM, and Emilio M. GARZA,
Circuit Judges.

HIGGINBOTHAM, Circuit Judge:

     This case turns on the construction of a 58-year-old deed

under Texas law. In 1935, Temple-Inland's predecessor sold land in

East Texas to the United States, reserving the mineral rights.

This reservation was to expire in 1985, subject to extension on

limited areas around commercial production.      Temple's right to

retain tracts that have become inactive since 1985 is now disputed.

The district court granted summary judgment in favor of Temple.   We

disagree with the district court's interpretation of the deed, and

reverse.

     The facts are undisputed. By warranty deed dated December 27,

1935, Temple Lumber Co. conveyed to the United States 77,806 acres
in Sabine County, Texas.   It is unknown which party drafted the

deed.1   Under its terms, Temple reserved all of the oil, gas and

minerals on, in, or under roughly 59,983 acres.      The pertinent

paragraphs of the deed provide:

     [1] There is hereby excepted and reserved from the
     foregoing sale and conveyance all the oil, gas, and other
     valuable minerals deposited on, in or under said lands,
     in accordance with the following clauses, rules and
     regulations, to-wit:

     [2] Reserving to the vendor, its successors and assigns,
     for the period ending January 1, 1985, the right to
     prospect for, mine, and remove any and all gas, oil and
     mineral deposits on, in, or under said lands.         The
     vendor, its lessees, successors, and assigns, shall have
     at any and all times full right to enter upon said lands
     for the purposes of prospecting for, mining, and removing
     gas, oil, and minerals.

     [3] It is further provided that if on January 1, 1985,
     gas, oil and/or minerals are being produced on said land
     in commercial quantities, then and in that event the gas,
     oil and mineral reservations shall be extended on all
     areas within a one-half mile radius of each then existing
     gas or oil well or mineral operation. Such extension of
     gas, oil and mineral reservation shall run for a five
     year period from date of January 1, 1985.

     [4] Provided further that said gas oil, and mineral
     reservations shall be extended by five year periods so
     long as commercial operations are being carried on at the
     end of the then current extension period.

     [5] It is provided that at the end of the termination of
     the period ending January 1, 1985, if not as above
     provided extended, or at the termination of any extended
     period, if no commercial gas, oil or mineral operations
     are being carried on, then and in that event the right of
     the vendor, its lessees, successors and assigns to

     1
      Temple introduced evidence in the record from which, it
argues, it may be inferred that the United States chose the terms
of the reservation provisions. The identification of the drafter
is not material to our decision. We construe the deed as written
and do not rely upon the presumption that the grantor, here
Temple, drafted the deed.

                                  2
      prospect for, mine and remove gas oil, and minerals shall
      terminate.

      On January 1, 1985, there was production of oil or gas in

commercial quantities at only twenty-two sites in the conveyed

land.      Pursuant to paragraph three of the deed, Temple's mineral

interest terminated as to all areas except twenty-two circles, each

one mile in diameter and centered on a producing well.                        These

circles encompassed 7,930 of the 59,983 acres reserved in 1935.

      Five years later, on January 1, 1990, there were commercial

operations at only six of the twenty-two sites.                     The government

believed that Temple's mineral interest had terminated as to the

other sixteen circular tracts and so notified Temple on May 21,

1990.      The government then elicited public bids to lease these

tracts.

      Temple responded by filing this suit on October 16, 1990.

Temple     contended   that    so     long       as   commercial   operations     are

conducted on any of the twenty-two tracts as to which the mineral

rights reservation was extended in 1985, Temple owns the mineral

rights for all twenty-two. Both parties moved for summary judgment

on   the    single   legal    issue    in       dispute:    the    meaning   of   the

reservation paragraphs of the 1935 deed.                     The district court

granted Temple's motion.

      We review the question de novo. Under Texas law, interpreting

an unambiguous contract presents a question of law, including

determining whether the contract is ambiguous.                     REO Industries,

Inc. v. Natural Gas Pipeline Co., 932 F.2d 447, 453 (5th Cir.

                                            3
1991).2    A contract is not ambiguous because the parties disagree

about its meaning.         Id.     Under Texas law, "[a]n instrument is

ambiguous    only   when    the     application   of     pertinent   rules    of

construction    leaves     it    genuinely   uncertain    which   one   of   two

reasonable meanings is the proper one."           Prairie Producing Co. v.

Schlachter, 786 S.W.2d 409, 413 (Tex. App.--Texarkana 1990, writ

denied); see also Technical Consultant Services Inc. v. Lakewood

Pipe, 861 F.2d 1357, 1362 (5th Cir. 1988).             We conclude that this

deed is unambiguous, because the "language of the reservation . .

. can be accorded a certain legal meaning by applying appropriate

rules of construction."          Buffalo Ranch Co., Ltd. v. Thomason, 727
S.W.2d 331, 333 (Tex. App.--Houston [1st Dist.] 1987, writ ref'd

n.r.e.).

     Our duty when construing a deed is to ascertain the intent of

the parties from all of the language in the deed by a fundamental

rule of construction known as the "four corners" rule.               Luckel v.

White, 819 S.W.2d 459, 461 (Tex. 1991).           While Texas has relaxed

the strict operation of its tenets of construction, see Harris v.

Windsor, 294 S.W.2d 798, 800 (Tex. 1956), we refer to those rules

to guide us in determining the intent expressed in the instrument.

"The cannons of law for the construction of deeds are for the

purpose of discovering the intent of the makers."                 Humble Oil &

     2
      This general rule applies to deeds.          Altman v. Blake, 712
S.W.2d 117, 118 (Tex. 1986).

                                        4
Refining Co. v. Kirkindall, 119 S.W.2d 731, 733 (Tex. Civ. App.--

Beaumont 1938), aff'd, 145 S.W.2d 1074 (Tex. 1941).3

     When interpreting the terms of a reservation, courts construe

the language against the grantor.    State v. Dunn, 574 S.W.2d 821,

824 (Tex. Civ. App.--Amarillo 1978, writ ref'd n.r.e.); Cameron

Cty. Water Control & Improvement Dist. v. George, 349 S.W.2d 308,

310 (Tex. Civ. App.--Eastland 1961, writ ref'd n.r.e.); Commerce

Trust Co. v. Lyon, 284 S.W.2d 920, 921 (Tex. Civ. App.--Fort Worth

1955, no writ);   Hidalgo Cty. Water Control & Improvement Dist. v.

Hippchen, 233 F.2d 712, 715 (5th Cir. 1956).   Thus, when

     the intent of the parties is not as clear as it could be,
     the rules of construction demand that where there is any
     doubt as to proper construction of a deed, that doubt
     should be resolved against the grantor.        This rule
     applies with equal force to a grantor who attempts to
     reserve an interest under the deed.

Guaranty Nat'l Bank & Trust of Corpus Christi v. May, 513 S.W.2d
613, 617 (Tex. Civ. App.--Corpus Christi 1974, no writ).4

     3
      Harris noted the relaxation, not the abandonment, of rules
of construction. Subsequent decisions continue to look to the
tenets for guidance in determining expressed intent. See, e.g.,
Garrett v. Dils Co., 299 S.W.2d 904 (Tex. 1957)(noting relaxation
of tenets in Harris and stating rule construing doubts against
grantor).
     4
      The rule construing deeds against grantors is often
justified by attributing deeds' language to grantors. See, e.g.,
Garrett, 299 S.W.2d at 906. We do not regard this as the only
basis for the rule of construction. The need for specificity
when reserving any interest from a conveyance also justifies
construing reservations against the grantor. See Sharp v.
Fowler, 252 S.W.2d 153 (Tex. 1952)(holding reservations must be
stated by clear language); Monroe v. Scott, 707 S.W.2d 132 (Tex.
App.--Corpus Christi 1986, writ ref'd n.r.e.)(noting deed conveys
all interests not expressly reserved).

                                 5
      A reservation must be stated by clear language. Courts do not

favor reservations by implication.               Sharp v. Fowler, 252 S.W.2d
153, 154 (Tex. 1952); Chambers v. Huggins, 709 S.W.2d 219, 222

(Tex. App.--Houston [14th Dist.] 1986, no writ); Guaranty Nat'l

Bank v. May, 513 S.W.2d 613, 618 (Tex. Civ. App.--Corpus Christi

1974, no writ).      The need to clearly state a reservation arises

from the fact that a conveyance ordinarily passes to the grantee

all   of   the   grantor's   interest       in   a   property.    See   Phillips

Petroleum Co. v. Adams, 513 F.2d 355, 362 (5th Cir.), cert. denied,

423 U.S. 930, 96 S. Ct. 281 (1975).5             There is no question whether

a reservation was expressly created.             Rather, the dispute is over

the termination terms of the reservation, and so how long Temple

retained the interest.

      The deed conveyed a present, possessory interest in the

surface estate to the United States in 1935.               It reserved, for a

potentially unlimited time, all valuable minerals deposited on, in,

or under that land and the right to exploit them.                Thus, the deed

severed the surface and mineral estates.                 See Moser v. United

States Steel Corp., 676 S.W.2d 99, 101 (Tex. 1984); Humphreys-Mexia

Co. v. Gammon, 254 S.W. 296, 299 (Tex. 1923).               Temple retained a

present interest in the mineral estate.                 Because that reserved

interest was subject to termination, however, Temple conveyed a

future reversionary interest in the mineral estate to the United

      5
      A warranty deed will pass all of the estate owned by the
grantor at the time of the conveyance unless reservations reduce
the estate conveyed. Monroe v. Scott, 707 S.W.2d 132, 133 (Tex.
App.--Corpus Christi 1986, writ ref'd n.r.e.).

                                        6
States.   When a grantor reserves a determinable mineral interest,

to be followed by vesting of the mineral interest in the grantee,

the grantee receives at the time of the conveyance a reversionary

interest. See Chambers v. Huggins, 709 S.W.2d 219, 222 (Tex. App.-

-Houston [14th Dist.] 1986, no writ).

     We must construe the deed provisions that terminate Temple's

possessory interest and give the United States a present interest

in the minerals on the tracts.              The parties offer competing

interpretations of the deed. Temple contends that it expresses the

intent to reserve the mineral rights until no commercial operations

existed on any of the circular tracts created in 1985.                      The

government   maintains   that   the       deed   expresses   the   intent    to

terminate Temple's reservation as to each tract if no operations

existed on that tract at the end of a five year period.

     Despite able contrary arguments, we are persuaded that the

latter interpretation properly construes the parties' expressed

intent. The deed provides that Temple's original reservation would

terminate in 1985, except as to certain areas.           The parties agree

that the operation of paragraph three preserved Temple's ownership

of twenty-two tracts for another five years. The focus then shifts

to paragraph four, which provides for the further extension of

Temple's rights past January 1, 1990.

     Paragraph four, like paragraph three, uses the plural term

"reservations."   Paragraph two created a single reservation in

1935--Temple's possessory mineral interest.           The use of the plural

term in the following paragraphs indicates that the extension

                                      7
provision of paragraph three created discrete reservations in 1985.

Temple's ownership of a 59,983 acre mineral estate became the

ownership of the mineral interests on twenty-two tracts of roughly

five-hundred-two    acres     apiece.6   The    deed's   plural    language

indicates that each of those tracts was held by Temple by a

separate reservation.

      Temple maintains that paragraph three created a single, non-

contiguous reservation in 1985, subject to termination at one point

in time.   We disagree.     The use of the plural term indicates that

the   extension   provision    of   paragraph   three    created   multiple

reservations in 1985.         The subsequent extension provision in

paragraph four applies to these discrete reservations.         Reasonably

interpreted, the deed allows for these reservations to terminate at

different times.

      Temple's reading of the deed renders the five-year periods

mandated by paragraph four nigh pointless.          We must examine the

entire writing in an effort to harmonize and give effect to all its

provisions so that none will be rendered meaningless.          Chapman v.

Orange Rice Milling Co., 747 F.2d 981, 983 (5th Cir. 1984) (citing

Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983)); see also Altman

v. Blake, 712 S.W.2d 117, 118 (Tex. 1986) ("the parties to an

instrument intend every clause to have some effect").               If the

intended agreement were for Temple to retain ownership of all

      6
      The expected acreage of twenty-two circles one mile in
diameter is 11,055 acres. The fact that 7,983 acres remained in
Temple's hands in 1985 indicates that some circles must be
centered on production sites less than one mile apart and so
overlap.

                                     8
circular tracts until operations ceased upon all of them, the

purpose of re-examining their status every five years is doubtful.

Temple      suggests   that     such   periods   allow   it    time    to   restore

production somewhere if operations play out on all tracts.                     This

suggestion does little for Temple, because the same is true if

separate reservations are subject to separate termination.                    Then,

too, established termination dates give warning and a chance for

reworking. Giving paragraph four a more reasonable effect, we read

it to provide for the incremental termination of reservations on

circular tracts as operations cease on those tracts.

       If    a   single   reservation     existed     after    1985,   commercial

operations in 1990 on six tracts would support an extension of

Temple's rights as to the sixteen non-producing tracts.                     Temple

emphasizes the language of paragraph five:

       [A]t the end of the termination of the period ending
       January 1, 1985, if not as above provided extended, or at
       the termination of any extended period, if no commercial
       gas, oil or mineral operations are being carried on, then
       and in that event the right of the vendor . . . shall
       terminate. (Emphasis added.)

This paragraph, which Temples describes as "the only express

provision for termination" of Temple's mineral interests, when read

with   paragraph       three,    arguably    treats   the     twenty-two    tracts

reserved in 1985 as one collective interest.                Recognizing that the

plural term "reservations" indicates otherwise, Temple notes the

singular terms used in the last sentence of paragraph three:                  "Such

extension of gas, oil and mineral reservation shall run for a five

year period from the date of January 1, 1985."                (Emphasis added.)

                                         9
     Temple's     observation   is    well   taken.    We    must,   however,

harmonize each element of the deed rather than focusing on one

sentence    in   isolation.     The   deed   refers   more    than   once    to

"reservations" existing after 1985.          This language indicates that

discrete tracts are individually reserved.            We construe the last

sentence of paragraph three to refer to the five-year extension of

any one of those tracts, rather than collectively to all of them.

     There is no clear language reserving the mineral rights as to

the circular tracts that have ceased commercial operations.                 The

requirement of a clear statement for reservations applies not only

to whether a reservation was created, but to its endurance and

termination.     See Guaranty Nat'l Bank & Trust of Corpus Christi v.

May, 513 S.W.2d 613 (Tex. Civ. App.--Corpus Christi 1974, no writ).

In May, a 1944 deed reserved to the grantor of two tracts a royalty

interest.    The reservation was to expire in twenty years unless

oil, gas, or minerals were being produced from "said land."                 The

two tracts were adjacent to three others owned by the grantee, who

leased the unit of five tracts in 1958.               In 1964, there was

production on the unit, although not on either tract conveyed by

the grantor. The case required interpretation of the reservation's

provision for termination. The grantor's successor argued that the

reservation had become perpetual in 1964, because by its terms the

reservation could only terminate at the end of twenty years.                The

court "decline[d] to accept such a narrow interpretation of this

reservation."     Id. at 617.   There was no express statement that the

reservation would endure only so long as production did.             Yet that

                                      10
was the evident intent, in the absence of language indicating that

the reservation could last forever.        The construction asserted in

favor of the grantor required implication of such language, which

the court refused to supply for a reservation.         Id. at 617-18.

     Each party noted that the deed could clearly express an intent

either way if just a few words had been added to paragraph four.7

Where "the intent of the parties is not as clear as it could be,"

doubt regarding a reservation must be resolved against the grantor.

Id. at 617.    Temple's arguments, in effect, would have us imply the

meaning   by   mentally   supplying    words   favorable   to   it.   That

interpretation would increase the temporal extent of the grantor's

reservation and defer the grantee's right to possession.                We

construe the deed against the grantor and against broadening a

reservation by implication, limiting the temporal scope of the

discrete reservations created by the deed.

     Seeking support in analogous factual circumstances, Temple

refers to cases discussing the relinquishment of non-producing

lease acreage.     There, in the absence of language calling for a

continual relinquishment, the general rule provides that production

     7
      Temple would prevail if paragraph four stated:
     Provided further that all said gas, oil, and mineral
     reservations shall be extended by five year periods so
     long as commercial operations are being carried on upon
     any of them at the end of the then current extension
     period.
Likewise, the government's construction could be more clearly
stated:
     Provided further that each of said gas, oil, and
     mineral reservations shall be extended by five year
     periods so long as commercial operations are being
     carried on upon it at the end of the then current
     extension period.

                                      11
anywhere on the leased premises maintains the lease.     See, e.g.,

Humphrey v. Seale, 716 S.W.2d 620, 622 (Tex. App.--Corpus Christi,

1986, no writ).     Temple also contends that when an instrument

creates mineral interests in multiple tracts of land, subject to

termination in the absence of production, production from one of

the tracts will extend the interest in non-producing tracts as

well. See Mathews v. Sun Oil Co., 425 S.W.2d 330, 333 (Tex. 1968);

e.g., Williamson v. Federal Land Bank of Houston, 326 S.W.2d 560

(Tex. Civ. App.--Texarkana 1959, writ ref'd n.r.e.); Hillegust v.

Amerada Petroleum Corp., 282 S.W.2d 892 (Tex. Civ. App.--Beaumont

1955, writ ref'd n.r.e.).

     In Williamson, a grantor sold four non-contiguous tracts of

land.   The deed reserved a non-participating royalty interest in

"said land" that would permanently vest if mineral production

occurred within twenty years.   In dicta, the court stated that had

production occurred within the period on any one of the four

tracts, the interest would have vested as to all of them. 326
S.W.2d at 562.   There was a single reservation, created at the time

of the sale, governing all of the tracts.   There was no language in

the deed, as there is here, that separate tracts of land were

subject to separate reservations.

     Temple maintains that when a lease conveys an interest in non-

contiguous tracts subject to a habendum clause requiring production

on "said land" or "said premises," production on only one tract

will hold the lease as to all tracts conveyed by the lease.     See

Hillegust, 282 S.W.2d at 896.       In Hillegust, grantors conveyed

                                 12
fractional   interests    in   two    tracts   to   two    grantees.    These

interests    were   subject    to    termination    if    no   production   was

occurring at the end of fifteen and twenty years, respectively.

Grantors' successors argued that the tracts had been severed by

pre-existing leases and therefore production on one would not

prevent termination of the grantees' interests in the other.

Treating the conveyed interests like leases, the court held in

favor of the grantees.

     The interests subject to termination in Hillegust were held by

grantees, not reserved by grantors.            We do not accept Temple's

argument that the reservation provisions of the deed here should be

treated as a lease's habendum clause.          It is true that both a deed

conveying a determinable interest and a mineral lease create

estates subject to the same principles of Texas law.              Midwest Oil

Corp. v. Winsauer, 323 S.W.2d 944, 948 (Tex. 1959).                This deed,

however, did not convey a determinable interest; it reserved one.

     The district court noted that Texas law requires specific

language to impose a limitation on a grant.                    See Tomlin v.

Petroleum Corp. of Texas, 694 S.W.2d 441, 442 (Tex. App.--Eastland

1985, no writ).     We agree, but as we see it the only grant here was

to the United States.      Temple conveyed a present interest in the

surface and a future interest in the mineral estate.                It kept a

determinable interest in the mineral estate.              The reservation was

not a grant and Temple gains no comfort from the rule stated in

Tomlin.

                                       13
     The longer Temple's present interest in the circular tracts is

preserved, the less the United States has received as grantee of a

future interest.   Under Texas law, deeds are construed to vest an

interest as speedily as their terms will allow.    Victoria Bank &

Trust Co. v. Cooley, 417 S.W.2d 814, 817 (Tex. Civ. App.--Houston

[1st Dist.] 1967, writ ref'd n.r.e.); Hedick v. Lone Star Steel

Co., 277 S.W.2d 925, 929 (Tex. Civ. App.--Texarkana 1955, writ

ref'd n.r.e.); Soper v. Medford, 258 S.W.2d 118, 122 (Tex. Civ.

App.--Eastland 1953, no writ).    In the absence of clear language

preserving Temple's present interest in every tract pending the

cessation of commercial operations on all others, we adopt that

reading which gives the grantee an immediate possessory interest.

     We REVERSE the judgment of the district court.   We hold that

Temple-Inland Forest Products Corporations's mineral interest in

each of the twenty-two circular tracts reserved in 1985 terminated

or shall terminate when, at the end of a five-year period, there

are no commercial operations on that circular tract.     We RENDER

judgment accordingly.

                                 14