Wenske v. Ealy

• Citation: 521 S.W.3d 791
• Decision Date: 23 June 2017
• Docket Number: No. 16-0353,16-0353
• Parties: Benedict G. WENSKE and Elizabeth Wenske, Petitioners, v. Steve EALY and Deborah Ealy, Respondents
• Court: Supreme Court of Texas

521 S.W.3d 791

Benedict G. WENSKE and Elizabeth Wenske, Petitioners,

v.Steve EALY and Deborah Ealy, Respondents

No. 16-0353

Supreme Court of Texas.

Argued March 22, 2017

OPINION DELIVERED: June 23, 2017

William B. Burford, Kelly Hart & Hallman LLP, Midland, pro se.

Rollin L. Fischer, Streit, Peterson, Hall & Keeney, L.L.P., Houston, pro se.

Adam T. Uszynski, Shannon Taylor Moore, Meier, Bradicich & Moore, LLP, Victoria, for Petitioners.

Robert M. Maiden, Robert C. McKay, McKay & Coffey, L.L.P., Victoria, Respondents.

Justice Brown delivered the opinion of the Court, in which Chief Justice Hecht, Justice Green, Justice Johnson, and Justice Guzman joined.

In this case we construe a deed that conveyed a mineral estate and the surface above it. Doing so allows us to reinforce a trend in our mineral-deed jurisprudence. Over the past several decades, we have incrementally cast off rigid, mechanical rules of deed construction. We have warned against quick resort to these default or arbitrary rules. And we do so again today by reaffirming the paramount importance of ascertaining and effectuating the parties' intent. We determine that intent by conducting a careful and detailed examination of a deed in its entirety, rather than applying some default rule that appears nowhere in the deed's text.

The specific issue in this case is whether the language of the deed passed the entire burden of an outstanding non-participating royalty interest to the grantees or whether the NPRI proportionately burdened the grantor's reserved interest.¹ The trial court concluded that the deed burdened both parties with an outstanding NPRI. And it ruled that the parties must share the burden of the NPRI in proportion to their respective fractional mineral interests. The court of appeals affirmed, evaluating the case in light of our holding in Bass v. Harper , 441 S.W.2d 825 (Tex. 1969), and reasoning that Bass did not control. We affirm the court of appeals' judgment, though we clarify that the parties' intent, not Bass or default rules, decides the case.

I

In 1988, Benedict and Elizabeth Wenske purchased a 55-acre mineral estate from Marian Vyvjala, Margie Novak, and others. From that 55-acre conveyance, Vyvjala and Novak each reserved a 1/8th NPRI, resulting in a combined 1/4th NPRI over all of the oil, gas, and other minerals produced from the property for a period of 25 years (Vyvjala NPRI).

In 2003, the Wenskes sold the property to Steve and Deborah Ealy by warranty deed. The deed purported to grant all of the surface estate to the Ealys and, by operation of a reservation, effectively divided the mineral estate between the parties: 3/8ths reserved to the Wenskes and 5/8ths conveyed to the Ealys. The relevant parts of the deed are:

Reservations from Conveyance:

For Grantor and Grantor's heirs, successors, and assigns forever, a reservation of an undivided 3/8ths of all oil, gas, and other minerals in and under and that may be produced from the Property. If the mineral estate is subject to existing production or an existing lease, the production, the lease, and the benefits from it are allocated in proportion to ownership in the mineral estate.^[2]

Exceptions to Conveyance and Warranty:

...

Undivided one-fourth (1/4) interest in all of the oil, gas and other minerals in and under the herein described property, reserved by Marian Vyvjala, et al. for a term of twenty-five (25) years in instrument recorded in Volume 400, Page 590 of the Deed Records of Lavaca County, Texas, together with all rights, express or implied, in and to the property herein described arising out of or connected with said interest and reservation, reference to which instrument is here made for all purposes.

...

Grantor, for the Consideration and subject to the Reservations from Conveyance and the Exceptions to Conveyance and Warranty, grants, sells, and conveys to Grantee the Property, together with all and singular the rights and appurtenances thereto in any way belonging, to have and to hold it to Grantee and Grantee's heirs, successors, and assigns forever. Grantor binds Grantor and Grantor's heirs and successors to warrant and forever defend all and singular the Property to Grantee ... except as to the Reservations from Conveyance and the Exceptions to Conveyance and Warranty.

In 2011, the Wenskes and Ealys entered into oil-and-gas leases that provided for a royalty on production. In 2013, a dispute arose concerning from whose share of the royalties the 1/4th Vyvjala NPRI would come. The Wenskes sought a declaratory judgment that their 3/8ths interest was unburdened by the NPRI. The Ealys counter claimed and sought a declaratory judgment that the NPRI burdened both the Ealys' and the Wenskes' mineral estates in proportion to each party's fractional interest in the minerals.

The trial court granted summary judgment for the Ealys, concluding that they and the Wenskes must share the NPRI's burden in proportion to their interests. The court of appeals affirmed. 521 S.W.3d 369, 372, 2016 WL 363735 (Tex. App.—Corpus Christi–Edinburg 2016) (mem. op.). We granted the Wenskes' petition for review.

II

"The construction of an unambiguous deed is a question of law for the court." Luckel v. White , 819 S.W.2d 459, 461 (Tex. 1991). When construing an unambiguous deed, our primary duty is to ascertain the intent of the parties from all of the language within the four corners of the deed. Id. The parties' intent, "when ascertained, prevails over arbitrary rules." Id. at 462 (quoting Harris v. Windsor , 156 Tex. 324, 294 S.W.2d 798, 800 (1956) ). In Luckel , we rejected mechanical rules of construction, such as giving priority to certain clauses over others, or requiring the use of so-called "magic words." See Concord Oil Co. v. Pennzoil Expl. & Prod. Co. , 966 S.W.2d 451, 465 (Tex. 1998) (citing Luckel , 819 S.W.2d at 462 ).

Here, neither party contends the deed is ambiguous, and we agree. See Heritage Res., Inc. v. NationsBank , 939 S.W.2d 118, 121 (Tex. 1996) (explaining that ambiguity is a question of law for the court). So we begin by attempting to ascertain the parties' intent as expressed in the language of the deed. And generally, if we can ascertain their intent, that should also be the end of our analysis.

The Wenskes argue, however, that our treatment of a "subject-to" clause in Bass v. Harper should control this case. They contend we must give the same effect to the subject-to clause in the deed here as we gave the subject-to clause in Bass . So we take a brief detour to explain why Bass does not compel a specific outcome in this case.

A

In Bass v. Harper , Thomas Bass owned the surface of a tract of land, the executive rights, and 8/14ths of the 1/8th royalty under the existing lease. 441 S.W.2d at 825. The other 6/14ths of the 1/8th royalty had been reserved by third parties. Id. Bass executed a warranty deed granting an undivided 1/2 interest in the minerals to a grantee. Id. at 826. A subject-to clause in the deed excepted from the conveyance various mineral interests totaling the other 6/14ths of the royalty. Id.

A dispute arose over royalty payments and Bass argued that (1) the deed conveyed half of his entire estate and (2) that half (7/14ths) was made subject to the outstanding 6/14ths royalty. Id. at 825. In other words, the 7/14ths was burdened with, or subject to, all of the outstanding royalty interests. Id. This, in effect, left the grantee with just a 1/14th interest. Id. The grantee's successor argued that although the grant was for an undivided one-half interest in the mineral estate (7/14ths), Bass meant to convey a half of the interest he owned , that is, 1/2 of Bass's 8/14ths royalty (4/14ths). Id. He argued that the subject-to clause was included merely to protect Bass from a warranty claim based on the outstanding interests. Id.

We agreed with Bass, holding that the deed's granting clause conveyed 1/2 of the 1/8 royalty because it contained no language limiting the grant to 1/2 of the interest Bass owned. Id. at 827 ; see also Averyt v. Grande, Inc. , 717 S.W.2d 891, 894 (Tex. 1986) (interpreting Bass ). We further held that the grant of 7/14ths of the royalty was subject to the exception of 6/14ths, leaving the grantee with 1/14th of the royalty. Bass , 441 S.W.2d at 828. We reasoned that the exception of 6/14ths of the royalty in the subject-to clause was "tied specifically to the grant." Id. at 827. Therefore, it operated to limit the estate granted and not simply to protect Bass against warranty claims. Id. We rendered judgment for Bass "under the specific wording of the instrument" at issue. Id. at 828.

Our reasoning in Bass should remain limited to the specific wording of the instrument in that case. Our analysis relied, in large part, on the location of the subject-to clause in the deed. Id. at 827 ("The instrument in question does not relate the outstanding mineral royalty interests to the warranty. It could have done so, but it is tied specifically to the grant."). We have said for decades, even before Bass , that:

The strictness of ancient rules for construing deeds and like instruments has been relaxed, and it is now well settled that all parts of the instrument will be given effect when possible, and the intention of the parties will be gathered from the whole without reference to matters of mere form, relative position of descriptions, technicalities, or arbitrary rules.

Sun Oil Co. v. Burns , 125 Tex. 549, 84 S.W.2d 442, 444 (1935).

Since Bass , our rules for deed construction have moved even more decisively toward (1) a focus on the intent of the parties, expressed by the language within the four corners of the deed, and (2) harmonizing all parts of an instrument, even if particular parts appear contradictory or inconsistent. See Luckel , 819 S.W.2d at 462 ; see also Anadarko Petroleum Corp. v. Thompson , 94 S.W.3d 550, 554 (Tex. 2002). As we recently reaffirmed, "[i]ntent must be determined by a careful and detailed examination of the document in its...