Hysaw v. Dawkins

• Decision Date: 29 January 2016
• Docket Number: NO. 14–0984,14–0984
• Parties: Madelon Hysaw, Kathryn Hysaw Weafer, Michael and Cindy Burris Family Partnership III, Ltd., Byron M. Burris and Judith Ann Burris Dziuk, Petitioners, v. Bretton Guy Dawkins, Bradley Ken Dawkins, Jerry Howard Oxford and Sharon Ann Oxford, Respondents
• Court: Texas Supreme Court

483 S.W.3d 1

Madelon Hysaw, Kathryn Hysaw Weafer, Michael and Cindy Burris Family Partnership III, Ltd., Byron M. Burris and Judith Ann Burris Dziuk, Petitioners,

v.Bretton Guy Dawkins, Bradley Ken Dawkins, Jerry Howard Oxford and Sharon Ann Oxford, Respondents

NO. 14–0984

Supreme Court of Texas.

Argued December 8, 2015

Opinion delivered: January 29, 2016

Thomas H. Crofts Jr., Crofts & Callaway, P.C., San Antonio, Robert C. McKay, McKay & Coffey, L.L.P., Victoria, Boyce C. Cabaniss, Mary A. Keeney, John B. McFarland, Graves, Dougherty, Hearon & Moody, P.C., Austin, Laura H. Burney, St. Mary's School of Law, San Antonio, for Petitioner.

Michael G. Maloney, Judith R. Blakeway, James Maverick McNeel, Strasburger & Price LLP, San Antonio, for Respondent.

J. Byron Burton III, Matthew Miles, Martin, Drought & Torres, P.C., San Antonio, Allen D. Cummings, Law Offices of Alan D. Cummings, San Antonio, Jeffrey R. Akins, Law Office of Jeffrey R. Atkins, San Antonio, for Amicus Curiae.

JUSTICE GUZMAN

delivered the opinion of the Court.

Mineral deeds employing double fractions give rise to disputes about whether the instrument creates a fixed ("fractional") royalty or a floating ("fraction of") royalty. The double-fraction problem emerges when an instrument expresses a royalty interest as the product of two fractions, such as "1/2 of the usual 1/8." When viewed against a historical backdrop in which the standard royalty was 1/8 and many landowners erroneously believed the landowner's royalty could be no greater than 1/8, the quantum of the interest conveyed or reserved by double-fraction language is subject to disagreement. Questions arise about whether double fractions must be multiplied and the royalty interest fixed without regard to the royalty negotiated in a future mineral lease (fractional royalty) or whether 1/8 was intended as a synonym for the landowner's royalty, meaning the interest conveyed varies depending on the royalty actually obtained in a future mineral lease (fraction of royalty). The proper construction of instruments containing double-fraction language is a dilemma of increasing concern in the oil and gas industry, as uncertainty abounds, disputes proliferate, and courts have seemingly varied in their approaches to this complicated issue.

The case before us today presents the double-fraction issue in the context of a will-construction dispute. More than a half century ago, various real-property interests were distributed to three children under their mother's will. The testatrix bequeathed different-sized land tracts to each of her children in fee simple but globally devised to each child a non-participating royalty interest of "an undivided one-third (1/3) of an undivided one-eighth (1/8) of all oil, gas or other minerals in or under or that may be produced from any of said lands." The will similarly specified that each child "shall receive one-third of one-eighth royalty," unless there has been an inter vivos sale or conveyance of royalty on land willed to that child, in which case the children "shall each receive one-third of the remainder of the unsold royalty." Heirs of the original devisees are at odds over the proper construction of these will provisions and the quantum of royalty bequeathed to each sibling because some of the lands are now subject to mineral leases providing for royalties in excess of 1/8. The issue is whether the double-fraction language fixed the siblings' devised royalty at 1/24–allowing the fee owner the exclusive benefit of any negotiated royalty exceeding 1/8–or whether the testatrix intended the devisees to share equally in all future royalties.

In resolving this dispute, we hew to the guiding principle that our objective is to discern and give effect to the testatrix's intent as expressed in the will's four corners. We determine intent by construing the instrument holistically and by harmonizing any apparent conflicts or inconsistencies in the language. Though we acknowledge the call for more certain and predictable guidance, we reject bright-line rules of interpretation that are arbitrary and, thus, inimical to an intent-focused inquiry. See Concord Oil Co. v. Pennzoil Expl. & Prod. Co., 966 S.W.2d 451, 460–61 (Tex.1998)

(plurality op.); see also Luckel v. White, 819 S.W.2d 459, 464 (Tex.1991). We therefore cannot embrace a mechanical approach requiring rote multiplication of double fractions whenever they exist. Rather, considering the testatrix's will in its entirety, we hold that she intended her children to share future royalties equally, bequeathing to each child a 1/3 floating royalty, not a 1/24 fixed royalty.

I. Factual and Procedural Background

Ethel Nichols Hysaw executed her will in 1947, at which time she owned three tracts of land in Karnes County, Texas—a 1065–acre tract, a 200–acre tract, and a 150–acre tract. Her will divided the property among her three children in fee-simple title, as follows: to Inez Hysaw Foote, 600 acres from the 1065–acre tract; to Dorothy Francis Hysaw Burris, the remaining 465 acres of the 1065–acre tract; and to Howard Caldwell Hysaw, Jr., the 200–acre tract, which had been a gift to Ethel from her father, and the 150–acre tract, which was her homestead. With respect to the related mineral estates, Ethel¹ employed a different distribution method, burdening each tract as follows:

I will and bequeath to each of the above named children fee simple title to the lands designated to go to them, subject, however, to the following:

That each of my children shall have and hold an undivided one-third (1/3) of an undivided one-eighth (1/8) of all oil, gas or other minerals in or under or that may be produced from any of said lands, the same being a non-participating royalty interest;.... (Emphases added.)²

Ethel further described the royalty interest devised to each child in nearly identical paragraphs:

[T]hat is to say, that ... [the named child] shall not participate in any of the bonus or rentals to keep any lease or leases in force; that it shall not be necessary for the said [named child] to execute any oil, gas or mineral lease over the lands of [the siblings], and that it shall not be necessary for [the named child] to obtain the consent either orally or written of the said [siblings], to lease any portion of said land so willed to [the named child] for oil, gas or other minerals, but that the said [named child] shall receive one-third of one-eighth royalty, provided there is no royalty sold or conveyed by me covering the lands so willed to [the child], .... (Emphases added.)

Each paragraph concludes with a residual royalty clause that takes into account the effect of an inter vivos royalty sale on lands bequeathed to a particular child, providing:

[A]nd should there be any royalty sold during my lifetime then [the three children], shall each receive one-third of the remainder of the unsold royalty. (Emphases added.)

Before and after executing the will, Ethel made several inter vivos conveyances to her children. In 1946, Ethel gifted equal royalty interests in the 200– and 150–acre tracts to each child.³ In 1948, she conveyed the surface estate of the 200–acre tract to Howard. The remainder of Ethel's real property interests passed under her will when she died in 1949. The Hysaw children have since passed away, and their property interests in the devised lands have passed to their descendants and other successors in interest.

The ties that bind surely wither through the ages, and even more so when market influences increase the economic stakes, as they have in the present case.⁴ These days, landowners fare better in royalty negotiations than in Ethel's day, frequently securing mineral leases offering royalties larger than 1/8. Compare Lee Jones, Jr., Non–Participating Royalty, 26 TEX. L. REV. 569, 575 (1948)

("The usual royalty is 1/8, and this fact is so generally known that judicial knowledge may be taken of it."), with Graham v. Prochaska, 429 S.W.3d 650, 657 (Tex.App.–San Antonio 2013, pet. denied) ("Leases containing royalties larger than one-eighth became increasingly common in the mid–1970's." (citing 1 SMITH & WEAVER, TEXAS LAW OF OIL & GAS § 2.4[B] [1], at 2–64)). Consistent with the market trend, Inez's successors⁵ executed a mineral lease in 2008 that provided for a 1/5 royalty on the 600 acres bequeathed to Inez in Ethel's will.

The underlying declaratory-judgment action, initiated by Howard's successors,⁶ ensued after Inez's successors advanced a construction of Ethel's will that produced unequal sharing of royalties among her heirs and benefitted Inez's successors. Inez's successors asserted that (1) Howard's 200–and 150–acre tracts were burdened by a floating (fraction of) royalty based on Ethel's inter vivos conveyance of royalty interests in those tracts, (2) for Inez's 600–acre tract and Dorothy's 465–acre tract, Ethel's will fixed each non-fee owner's royalty interest at 1/24 (a simple calculation of 1/3 times a fixed 1/8 royalty), and (3) excess royalties on the 600– and 465–acre tracts belonged to the fee owner.

Howard's successors and Dorothy's successors⁷ were aligned in opposition to this construction of the will. In their view, multiplying the double fractions in Ethel's will and fixing the devised royalty interest (1) is discordant with will language evincing an intent that the siblings share royalties equally; (2) adds language not found in the deed by inserting a fixed, single fraction of 1/24; and (3) creates disharmony among the provisions by mixing fractional royalty interests with fraction of royalty interests to produce unequal treatment of Ethel's children. Howard's and Dorothy's successors have taken the position that the will gave each child a "floating" 1/3 of any royalty obtained from all the land tracts, resulting in equal sharing of royalties under all future leases. They thus claim each sibling line is entitled to a 1/15 royalty under the mineral lease on the land devised to Inez (1/3 of the 1/5 royalty...