Farmers Canal Co. v. Potthast, 1387

• Decision Date: 21 September 1979
• Docket Number: No. 1387,1387
• Citation: 587 S.W.2d 805
• Parties: FARMERS CANAL COMPANY, Appellant, v. Otto J. POTTHAST et al., Appellees.
• Court: Texas Court of Appeals

Page 805

587 S.W.2d 805

FARMERS CANAL COMPANY, Appellant, v. Otto J. POTTHAST et al., Appellees.

No. 1387.

Court of Civil Appeals of Texas, Corpus Christi.

Sept. 21, 1979.

Thomas H. Lee, Dyess, Prewett, Rosenberg & Henderson, Houston, for appellant.

Dean W. Turner, Bath & Turner, Henderson, for appellees.

OPINION

BISSETT, Justice.

Involved in this appeal from a summary judgment is the construction of a royalty grant in a deed. The question to be determined is whether the deed conveyed to the grantee, his heirs and assigns, a royalty of 1/4Th of 1/8Th of the minerals produced from the subject land, or a royalty of 1/4Th of the fractional royalty reserved by the grantors, their heirs and assigns, in future mineral leases.

Otto J. Potthast and wife, Virginia Potthast, Mabel Potthast, Cynthia Potthast, Phyllis P. Alford, and Dorothy P. Massey, plaintiffs, filed this suit against Farmers Canal Company, defendant, on October 29, 1976. Plaintiffs sought a declaratory judgment to the effect that they are the owners, subject to an existing oil, gas and mineral lease, of all oil, gas and other minerals, save and except a 1/4Th of 1/8Th (or a 1/32Nd), royalty interest, in and to all of the oil, gas and other minerals produced, saved and sold from a certain 952.10 acre tract of land, in Matagorda County, Texas; plaintiffs further asked that the cloud cast on their title to their "royalty interest" be removed, and for damages for their royalty then being held in suspense. Defendant answered with a general denial and a cross action, wherein it contended (in the cross action) that it is the owner of 1/4Th of the royalties reserved in the existing oil, gas and mineral lease affecting the 952.10 acres, and 1/4Th of the royalties which may be reserved by plaintiffs in future mineral leases. Thereafter, both parties moved for summary judgment. Plaintiffs' motion was granted, and defendant's motion was denied. The judgment decreed:

"IT IS NOW, THEREFORE, ORDERED, ADJUDGED, DECREED, DETERMINED AND DECLARED that the Plaintiffs, individually or through their predecessors in title, reserved all of the oil, gas and other minerals except 1/32Nd nonparticipating royalty interest by that deed from Dr. A. H. Potthast, et al, to J. B. Bures, dated January 15, 1945, recorded in Volume 159, Page 4-6, Deed Records of Matagorda County, Texas, conveying the above described land; that the cloud of title on Plaintiffs' said minerals and royalties cast by Defendant herein be, and the same is hereby removed."

The dispute between the parties, which precipitated the filing of this suit, arose out of a difference in the parties' construction of two clauses contained in a deed, dated January 15, 1945, executed by Dr. A. H. Potthast, E. B. Potthast, and Dr. O. J. Potthast, joined by their respective wives, as grantors, to J. B. Bures, as grantee, whereby the surface of the said 952.10 acres and a royalty interest was conveyed to Bures.

The granting clause in the aforesaid deed reads, as follows:

"Have GRANTED, SOLD and CONVEYED, and by these presents do GRANT, SELL AND CONVEY unto the said J. B. Bures, of Matagorda County, Texas, the surface estate, together with all and singular the rights and appurtenances thereto in anywise belonging, and an undivided one-fourth (1/4Th) interest in and to all of the sulphur royalty, oil royalty, gas royalty, and royalty in all other minerals in that certain tract, parcel and body of land, lying and being situated in Matagorda County, State of Texas, described as follows:"

Following the land description, there is a clause which clearly reserves unto grantors the executive rights with respect to future leasing of the land for mineral exploration and development, and made the royalty conveyed by the deed a "nonparticipating" royalty. That clause, in relevant part, further provides:

"It is distinctly understood and herein stipulated and agreed . . . that Grantee shall only receive one-fourth (1/4Th) of the money royalty on sulphur on the basis of One ($1.00) Dollar per long ton and one-fourth (1/4Th) of the one-eighth (1/8Th) royalty on oil, gas and all other minerals provided for in such lease or leases; and in the event Grantors, their heirs, or assigns, in the status of the fee owners of the minerals shall operate and develop the minerals therein, Grantee, his heirs and assigns, shall own and be entitled to receive as a free royalty an undivided one-thirty-second (1/32Nd) of all of the sulphur, oil, gas and other minerals produced, saved and sold off the premises; all future ad valorem, production and other taxes assessable or chargeable against the property and rights herein conveyed are assumed by Grantee."

Dr. A. H. Potthast and E. B. Potthast, two of the grantors in the deed to Bures, died before this suit was filed. Plaintiffs, hereinbefore named, are the sole owners of the mineral interests reserved by the grantors in the deed to Bures.

Thereafter, on December 1, 1945, J. B. Bures conveyed to Farmers Canal Company, defendant, the land in question. The deed contained the following language which followed the land description:

"This deed is subject to Mineral Reservations set out in deed from Dr. A. H. Potthast et al to J. B. Bures, dated January 15th, 1945, and recorded in Volume 159, on pages 4 to 6, of the Deed Records of Matagorda County, Texas."

On May 12, 1972, plaintiffs executed an oil, gas and mineral lease covering said land. The lease reserved a 1/6Th royalty on oil and gas, 50cents per long ton on sulphur and 1/10Th on all other minerals. Production of oil and gas in commercial quantities was established under said lease. The lease was a valid and subsisting lease at all times pertinent to this appeal.

There is no evidence that the land conveyed to Bures in 1945 was leased for mineral development until May 12, 1972. Defendant interprets the deed as conveying to Bures, his heirs and assigns, 1/4Th of whatever royalty is reserved in subsequent leases covering the 952.10 acre tract. Plaintiffs interpret the deed as conveying 1/4Th of 1/8Th royalty to Bures, his heirs and assigns.

It is a well settled rule that in construing a deed, it is the duty of a court...