Alamo Nat. Bank of San Antonio v. Hurd, 15078

• Decision Date: 13 September 1972
• Docket Number: No. 15078,15078
• Citation: 485 S.W.2d 335
• Parties: ALAMO NATIONAL BANK OF SAN ANTONIO, Texas, et al., Appellants, v. Harry H. HURD et al., Appellees.
• Court: Texas Court of Appeals

Page 335

485 S.W.2d 335

ALAMO NATIONAL BANK OF SAN ANTONIO, Texas, et al., Appellants, v. Harry H. HURD et al., Appellees.

No. 15078.

Court of Civil Appeals of Texas San Antonio.

Sept. 13, 1972.

Rehearing Denied Oct. 11, 1972.

P. H. Swearingen, Jr., W. F. Nowlin, Matthews, Nowlin, Macfarlane & Barrett, Morrison, Dittmar, Dahlgren & Kaine, George J. Carson, San Antonio, for appellants.

Anderson, Brown, Orn, Pressler & Jones, Houston, for appellees.

KLINGEMAN, Justice.

A will construction case. This is an appeal from a summary judgment construing a portion of the will of Rodney DeLange, wherein he devised, '. . . all producing and nonproducing oil, gas and mineral royalties, mineral interests, both participating and nonparticipating, perpetual and term, owned by me at the time of my death, as distinguished from oil, gas and mineral leases and interests in such oil, gas and mineral leases, . . .' to Jennie Stassinos, as not including overriding royalties and the production payments owned by the testator at the time of his death. The question on this appeal is the correctness of that construction.

The will includes various bequests and devises, but the only portions herein under construction are parts VI and VII of said will. Part VI provides in part as follows: 'I give and devise unto Jennie Stassinos of San Antonio, Texas all producing and nonproducing oil, gas and mineral royalties, mineral interests, both participating and nonparticipating, perpetual and term, owned by me at the time of my death, as distinguished from oil, gas and mineral leases and interests in such oil, gas and mineral leases, all of which are excepted from this special devise to Jennie Stassinos, . . ..' Here follows specific devises which are not here under construction. In part VII of such will, the testator devised and bequeathed all the rest, residue and remainder of his estate, after the payment of debts, taxes, special bequests, administrative expenses, and after special devises made by him in said will, to the Alamo National Bank of San Antonio, Texas, as trustee for the Franklin Hurd Trust, the Patricia Ramsey Cottrell Trust, the Harry Hurd Trust, and the Jennie Stassinos Trust, in four equal parts, with detailed and specific instructions and limitations as to the administration of said trusts, and the administration of said estate.

Appellants complain that the trial court erred in granting appellees' motion for summary judgment because: (a) the plain and unambiguous language of the will of Rodney DeLange evidences the clear intent of the testator that Jennie Stassinos shall receive under said will the overriding royalties and production payments; (b) as a matter of law the term 'royalty' includes overriding royalties and production payments; and (c) if the will of Rodney DeLange, deceased, is ambiguous, then there is a genuine issue as to material fact and therefore, the appellees are not entitled to summary judgment as a matter of law.

The sole issue here to be determined is whether the overriding royalties and production payments owned by the testator at the time of his death constitute a part of the oil, gas and mineral royalties and mineral interests specifically devised to Jennie Stassinos under part VI of the will of Rodney DeLange, or constitute a part of the rest, residue and remainder of said estate of Rodney DeLange, devised to the Alamo National Bank as trustee.

The cardinal rule to be followed in construing a will is to seek and enforce the intention of the testator; and if the intention of the testator be not clearly expressed by the particular language used, it may be found by looking to the provisions of the will as a whole, and to the circumstances surrounding its execution. Guilliams v. Koonsman, 154 Tex. 401, 279 S.W.2d 579 (1955). It is often said that the meaning of the will must be determined by the language used 'within the four corners of the instrument.' Republic National Bank of Dallas v. Fredericks, 155 Tex. 79, 283 S.W.2d 39 (1955). The Supreme Court in this case established and enumerated the well settled principles of law applicable to the construction of wills. The Court said that: (a) the dominant purpose in the construction of a will is to ascertain the intention of the testator in the disposition of his estate; (b) a will should be construed as to give effect to every part of it if the language is reasonably susceptible to that construction; (c) the testator will not be presumed to have done a useless thing; and (d) all words which the testator used in his will and which express his wish as to distribution of his estate upon his death should be interpreted in the sense in which they were used in order that the plan of distribution of his estate may be enforced.

The will must be considered as a whole. If possible, every provision of the will must be given effect and must be brought into harmony with the general purpose of the will. This rule is sometimes thought to lead to the corollary that, in the event of conflict, the general intent of the testator, shown by the will as a whole, shall prevail over a special intent shown by a particular clause. 10 Tex.Pract. (Bailey) Construction of Wills, § 562, p. 330 (1968).

In order to properly construe this will, a general discussion of some of the applicable terms are here set forth.

Webster's New International Dictionary defines 'royalty' as a share of the product or profit reserved by the owner for permitting another to use the property. In its broadest aspect royalty is a share of profit reserved by the owner for permitting another the use of the property. Griffith v. Taylor, 156 Tex. 1, 291 S.W.2d 673 (1956). Royalty in the oil and gas industry is commonly understood to be that part or share of production reserved or to be paid during the life of the lease; and generally speaking, the royalty created, excepted, or reserved under the terms of an oil or gas lease, is the right to receive, either in kind or its equivalent in money, a stipulated fraction of the oil or gas produced and saved from property covered by the lease, free of all costs of development and production. Hardwicke, Problems Arising Out of Royalty Clauses in Oil and Gas Leases in Texas, 29 Tex.L.Rev. 790, 791 (1951); 43 Tex.Jur.2d Oil and Gas § 379, p. 16 (1963); Badger v. King, 331 S.W.2d 955 (Tex.Civ.App.--El Paso 1960, writ ref'd n.r.e.).

'Overriding royalties', 'oil payments' and 'production payments' are terms usually referring to an interest carved out of the lessee's or operator's interest, in addition to the lessor's royalty. An overriding royalty is an interest running throughout the term of the lease, while an oil payment or production payment is an interest running only until it has yielded a specified sum of money. Such interests are generally free from the burden of any costs of development or operation. 43 Tex.Jur.2d, supra, § 383; Standard Oil Company of Texas v. Marshall, 265 F.2d 46 (5th Cir. 1959); MacDonald v. Follett, 142 Tex. 616, 180 S.W.2d 334 (1944).

The term 'overriding royalty' as used in an oil and gas lease means a given percentage of the production carved from the working interest, but by agreement, not chargeable with any of the expenses of operation. MacDonald v. Follett, supra. An overriding royalty is nevertheless a royalty and differs from ordinary royalties only in that it constitutes something in addition thereto; and though an overriding royalty is carved out of the working interest of the lease, the owner of such overriding royalty stands in the same relation to the operator as regards the right to receive some fractional part of the oil and gas produced and saved, as does the owner of the royalty interest. 43 Tex.Jur.2d, § 383, supra. An overriding royalty is first and foremost a royalty interest. In other words, it is an interest in oil and gas produced at the surface, free of the expenses of production. 2 Williams, Oil & Gas Law § 418.1 (1959).

There are numerous Texas cases, including Supreme Court decisions, holding that an overriding royalty is royalty. The Supreme Court in Delta Drilling Co. v. Simmons, 161 Tex. 122, 338 S.W.2d 143, 147 (1960), had under consideration an oil lease which contained the usual one-eighth royalty reservation, and contained this additional reservation: "Lessor reserves * * * a one-sixteenth of seven-eighths (1/16 of 7/8th) overriding royalty interest, free and clear of all cost of development, except taxes." The Court in discussing such interest, said:

'The interest thus reserved has the characteristics of a royalty interest: it is an expense-free obligation (except as to taxes), payable as a specified share of the gross production, and is to continue throughout the life of the lease. We believe, therefore, that under the facts and circumstances of this case, the interest reserved is an overriding royalty interest.

'Where it was determined that the instrument before the Court created an overriding royalty, this Court has held that the overriding royalty was a royalty interest. McMahon v. Christmann, 1957, 157 Tex. 403, 303 S.W.2d 341, 304 S.W.2d 267. Delta is therefore entitled to a 1/8th part of all the royalty provided in the instrument which leased its interest, that is 1/8 of the 1/8 royalty and 1/8 of the 1/16 of the 7/8 overriding royalty. Richardson v. Hart, 1945, 143 Tex. 392, 185 S.W.2d 563.' 338 S.W.2d at 147.

In McMahon v. Christmann, 157 Tex. 403, 303 S.W.2d 341, 344, 304 S.W.2d 267 (1957), the Court said: 'The overriding royalty is, withal, 'royalty', State National Bank of Corpus Christi v. Morgan, 135 Tex. 509, 143 S.W.2d 757, and Griffith v. Taylor, (156) Tex. (1), 291 S.W.2d 673, . . ..' In Griffith v. Taylor, supra, the Court had before it an oil lease in which a conventional one-eighth royalty was reserved, but which lease had an additional reservation which provided that the lessor reserved as additional consideration and bonus royalty an equal one-sixteenth part of all...