Luckel v. White, D-0080

• Citation: 819 S.W.2d 459
• Decision Date: 23 October 1991
• Docket Number: No. D-0080,D-0080
• Parties: Eb F. LUCKEL, et al. v. Furl WHITE, et al.
• Court: Supreme Court of Texas

Page 459

819 S.W.2d 459

Eb F. LUCKEL, et al. v. Furl WHITE, et al.

No. D-0080.

Supreme Court of Texas.

Oct. 23, 1991.

Rehearing Overruled Jan. 8, 1992.

J.M. Slator, III, Houston, Robert C. Bledsoe, and Tevis Herd, Midland, for appellants.

Claude C. Roberts, William A. Teague, Robert I. Peeples, Houston, Rex G. Fortenberry, Beaumont, Chap B. Cain, III, Liberty, Susan M. Edmonson, Seabrook, Bradford Pickett, Liberty, Thomas A. Zabel, Stanley J. Krist, Houston, and E.R. Norwood, Liberty, for appellees.

OPINION

GAMMAGE, Justice.

This suit concerns the construction of a royalty deed in which the "granting," "habendum" and "warranty" clauses recite that a 1/32nd royalty interest is conveyed, but the "subject to" and "future lease" clauses state that the grantee shall be entitled to receive one-fourth of any and all royalties. The grantee's successors (Luckel, et al.) sought declaratory judgment that the deed conveyed an interest in one-fourth of the royalties reserved under all subsequent leases and an accounting for oil and gas production on the land. Both sides moved for summary judgment. The trial court construed the deed as conveying a fixed 1/32nd royalty interest, giving controlling effect to the "granting" clause and holding the "future lease" clause ineffective to convey one-fourth of future royalties on future leases. The trial court's holding follows Alford v. Krum, 671 S.W.2d 870 (Tex.1984). The trial court granted a partial summary judgment to the grantor's successors (White, et al.) and severed the cause to make the summary judgment final. The court of appeals affirmed. 792 S.W.2d 485. We reverse the court of appeals, overrule Alford v. Krum, and hold that the so-called "future lease" clause was effective to convey a one-fourth interest in all royalties as to future leases.

In 1935 Mary Etta Mayes executed the royalty deed in question to L.C. Luckel, Jr. The land was then subject to an oil and gas lease, the "Coe lease." Mayes had, contemporaneously with execution of the Coe lease, transferred one-half of her royalty interest to her children, and consequently owned only one-half the royalty payable under lease. The Coe lease provided for the usual one-eighth royalty. What Mayes conveyed to Luckel was one-half of the royalty she owned, which amounted to a 1/32nd royalty. The last clause of the deed explained that the Coe lease had reserved a one-eighth royalty and she was conveying one-half of the 1/16th royalty she owned, which conveyed royalty was one-fourth of the total royalty provided for in the Coe lease. The deed is set out in detail in the court of appeals opinion, 792 S.W.2d at 487-88, but we repeat the pertinent parts as follows (emphasis supplied):

["Granting" clause]

I, Mary Etta Mayes, ... [convey to] L.C. Luckel, Jr. an undivided one thirty-second ( 1/32nd) royalty interest in and to the following described property, ...

["Habendum" and "Warranty" clauses]

TO HAVE AND TO HOLD the above described 1/32nd royalty interest ... unto the said L.C. Luckel, Jr. his heirs and assigns forever ... to warrant and forever defend ... the said 1/32nd royalty interest ...

["Subject-to" clause]

It is understood that said premises are now under lease originally executed to one Coe and that the grantee herein shall receive no part of the rentals as provided for under said lease, but shall receive one-fourth of any and all royalties paid under the terms of said lease.

["Future lease" clause]

It is expressly understood and agreed that the grantor herein reserved [sic] the right upon expiration of the present term of the lease on said premises to make other and additional leases ... and the grantee shall be bound by the terms of any such leases ... [and] shall be entitled to one-fourth of any and all royalties reserved under said leases.

[Final clause]

It is understood and agreed that Mary Etta Mayes is the owner of one-half of the royalties to be paid under the terms of the present existing lease, the other one-half having been transferred by her to her children and by the execution of this instrument, Mary Etta Mayes conveyed one-half of the one-sixteenth ( 1/16th) royalty now reserved by her.

The Coe lease eventually expired. The land covered by the Mayes-Luckel deed is now the subject of five other mineral leases. Four of these leases provide for royalties of one-sixth ( 1/6th). The Luckel successors (Luckel) contend the future lease clause entitles them to one-fourth of all of the royalties under the current leases. As to those four leases the 1/24th royalty interest they claim would exceed the 1/32nd interest originally conveyed in the granting clause and warranted in the deed under the Coe lease. The White respondents argue the deed entitles Luckel only to a fixed 1/32nd royalty. In effect they contend that when the mineral estate reverted upon expiration of the Coe lease, they owned the rights to any increase in negotiated royalty in future leases because the "future lease" clause was ineffective to increase the Luckel share as to new leases with larger royalties. Thus White, et al. argue they are entitled to all of the increase in the royalty amount.

There is no contention that the deed is ambiguous. The construction of an unambiguous deed is a question of law for the court. Altman v. Blake, 712 S.W.2d 117, 118 (Tex.1986). The primary duty of a court when construing such 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. Garrett v. Dils Co., 157 Tex. 92, 94-95, 299 S.W.2d 904, 906 (1957); 1 E. KUNTZ, THE LAW OF OIL AND GAS, § 16.1 (1987); 6A R. POWELL, THE LAW OF REAL PROPERTY, p 899, at 81A-108 (P. Rohan ed. 1991). "That intention, when ascertained, prevails over arbitrary rules." Harris v. Windsor, 156 Tex. 324, 328, 294 S.W.2d 798, 800 (1956). The court, when seeking to ascertain the intention of the parties, attempts to harmonize all parts of the deed. Altman v. Blake, 712 S.W.2d at 118. "[T]he parties to an instrument intend every clause to have some effect and in some measure to evidence their agreement." Id. Even if different parts of the deed appear contradictory or inconsistent, the court must strive to harmonize all of the parts, construing the instrument to give effect to all of its provisions. Benge v. Scharbauer, 152 Tex. 447, 451, 259 S.W.2d 166, 167 (1953). The court should "not strike down any part of the deed, unless there is an irreconcilable conflict wherein one part of the instrument destroys in effect another part thereof." Id. The question is what effect the one-fourth language of the "future lease" clause should have, given these rules of construction.

Luckel argues that to give effect to all provisions of the deed, in particular the future lease clause, the deed must be interpreted to grant one-fourth of the royalties payable under the Coe lease (which was equal to 1/32nd of production) and, when that lease expired, one-fourth of the royalties paid under all subsequent leases. The court of appeals concluded that the granting, habendum, and warranty clauses of the deed conveyed a permanent 1/32nd royalty interest and that the future lease clause was ineffective to convey one-fourth of future reserved royalty, despite its express terms. The court of appeals offered two rationales--a "harmonizing" of the deed under the four corners rule and application of Alford v. Krum. We address the issues in that order.

The court of appeals reasoned that all parts of the deed could be harmonized, including the future leases clause, by assuming that the parties to the deed contemplated that all future leases would provide for one-eighth royalty. One-eighth was the "usual" royalty so standard in the 1920s and 1930s that all Texas courts took judicial notice of it. Garrett v. Dils Co., 157 Tex. at 96, 299 S.W.2d at 907. The court interpreted the future lease clause as merely extending the fixed 1/32nd royalty interest conveyed in the granting, habendum and warranty clauses to future leases, creating a permanent 1/32nd royalty. Thus, by this "harmonizing," the court of appeals concluded that the clear and unambiguous language "one-fourth of any and all royalties reserved under said leases" really meant a fixed 1/32nd.

The court's reasoning is not a proper "harmonizing" under the four corners rule, and conflicts with a number of this court's decisions. We do not quarrel with the assumption that the parties probably contemplated nothing other than the usual one-eighth royalty. But that assumption does not lead to the conclusion that the parties intended only a fixed 1/32nd interest. It is just as logical to conclude that the parties intended to convey one-fourth of all reserved royalty, and that the reference to 1/32nd in the first three clauses is "harmonized" because one-fourth of the usual one-eighth royalty is 1/32nd. One would therefore conclude the express 1/32nd granting clause only meant to convey a one-fourth of all future royalties, which "harmonizes" the clauses to the same extent as the court of appeals' analysis. Both this reasoning and the opposite reasoning employed by the court of appeals ignore the express language used, and produce different assumptions about what the parties' actual intent was.

The assumption that the parties contemplated only the usual one-eighth royalty is equally consistent with an actual intent to convey a fixed 1/32nd interest or a one-fourth of the reserved royalty interest. Even if the court could discern the actual intent, it is not the actual intent of the parties that governs, but the actual intent of the parties as expressed in the instrument as a whole, "without reference to matters of mere form, relative position of descriptions, technicalities, or arbitrary rules." Sun Oil Co. v. Burns, 125 Tex. 549, 552, 84 S.W.2d 442, 444 (1935); see also Woods v. Sims, 154 Tex. 59, 65-66 273 S.W.2d 617, 620 (1954). In particular, the...