Cherokee Water Co. v. Forderhause
| Decision Date | 21 July 1982 |
| Docket Number | No. C-854,C-854 |
| Citation | 641 S.W.2d 522,25 Tex.Sup.Ct.J. 470 |
| Parties | CHEROKEE WATER COMPANY, Petitioner, v. Martha Paul Rogers FORDERHAUSE, et al., Respondents. |
| Court | Texas Supreme Court |
McGinnis, Lochridge & Kilgore, Lloyd Lochridge and John W. Stayton, Austin, Gordon Wellborn, Henderson, Allison I. McLemore, Longview, for petitioner.
Ruff P. Wall, Carthage, T.A. Bath, Henderson, Bath, Turner, Barber & Shumate, for respondents.
This case involves the construction of a deed. The deed conveyed the surface of the subject property, but the grantors reserved the mineral estate. The deed gave the grantee, Cherokee, a preferential right to acquire the minerals if the grantor decided to sell the minerals. The grantor executed an oil and gas lease to a third party. The main question is whether the oil and gas lease constituted a sale so as to give Cherokee a preferential right to acquire the minerals.
Cherokee Water Company [Cherokee], as holders of the preferential right to purchase, brought suit against Martha Paul Rogers Forderhause and others [mineral owners] for declaratory judgment and specific performance of the preferential right to purchase. The mineral owners brought a counterclaim for reformation of the deed. Both Cherokee and the mineral owners moved for summary judgment.
The trial court granted Cherokee's motion for summary judgment. It severed the mineral owners' claim for reformation of the deed. The trial court found that Cherokee was the holder of a preferential right to purchase under the deed, that an oil and gas lease executed by the mineral owners constituted an attempted sale of the oil, gas and other minerals under the terms of the preferential right to purchase, and ordered specific performance.
The Court of Appeals reversed. 623 S.W.2d 435. It found that the challenged language in the deed was ambiguous. It remanded the cause to the trial court to determine the intention of the parties. The court reasoned that even though technically an oil and gas lease was a sale of the minerals under Texas law, it was not clear from the language in the instrument that the parties intended a "lease" to be a "sale." The court noted, without citing authority, that it was "common knowledge in the area of real estate transactions and in the oil and gas business in particular, that the terms sale of the minerals and lease of the minerals have vastly different and entirely distinct meanings ...." [emphasis in original] The term "sale" as used in the instrument was considered by the court to be subject to two reasonable interpretations. The Court of Appeals felt it was necessary for the trial court to resolve the ambiguity by determining the intention of the parties.
The Court of Appeals also held that the trial court committed error in severing the mineral owners' plea for reformation from the declaratory judgment action. The majority considered the claim for reformation to be a compulsory counterclaim that must be tried with the rest of the cause under Rule 97(a) of the Texas Rules of Civil Procedure.
One justice dissented. He noted that the law in Texas is that an oil, gas and mineral lease is a sale of an interest in land. The dissenting justice was also of the opinion that severing of the claim for reformation was within the discretionary power of the trial court, and that court did not abuse its discretion considering the facts and circumstances surrounding the severance.
We disagree with the holding of the Court of Appeals. The language in the deed is not ambiguous, and an oil and gas lease is within the scope of the transactions contemplated by the preferential right to purchase. In addition, the trial court did not abuse its discretion by severing the counterclaim for reformation from the declaratory judgment action. The Court of Appeals is therefore reversed, and the judgment of the trial court is affirmed.
Cherokee purchased the surface of a 59.71 acre tract of land in Rusk County, Texas, from the fee owners of the tract, our Respondents, in 1947. Cherokee intended to construct a lake which would cover the surface of the property. The grantors reserved all the oil, gas and other minerals under the surface, but gave Cherokee and its assigns a preferential right to purchase the mineral estate should the mineral owners ever desire and agree to sell it. The preferential right to purchase provided:
In reference to the reservation of oil, gas and other minerals, it is expressly understood and agreed that the above land is purchased by Grantee for the purpose of forming a Lake and that all or a part of said land will be covered with water that will vary from a few to many feet in depth. This right of Grantee to cover said land with water is superior to the rights of Grantor to use said land to remove said minerals as above set out and the mineral owners shall not, in any manner, subject the Grantee to damages, liabilities or obligations of any kind or character by reason of the construction of said dam and covering said land with water. The rights of Grantor to said minerals shall be the same as if such minerals were conveyed to Grantor after said Lake is created and established. If a well or wells are drilled to remove said minerals, such well or wells shall be so operated and maintained as to not to in any manner pollute the Lake water with salt water, hydrocarbons or other foreign matter. If a dike or road is built from the shoreline to such well or wells, the same shall be so located as not to interfere with the use of said Lake by Grantee, his successors or assigns, and such dike or road shall not be constructed across said Lake so as to obstruct free and continuous passage of boats going to and from one part of the Lake to another part of such Lake. No act shall be performed by the mineral owner or his successors and assigns that is not necessary in order to remove said minerals.
Grantee is hereby given the first option to purchase the oil, gas and other minerals herein reserved, at the same price and on the same terms as Grantor has agreed to sell to a third party; such option to be accepted or rejected within five (5) days after Grantee has been furnished with the bona fide offer made by such third party. Failure to exercise such...
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