Miles v. Martin

• Decision Date: 18 February 1959
• Docket Number: No. A-6764,A-6764
• Parties: Carl MILES, Petitioner, v. J. O. MARTIN, Respondent.
• Court: Texas Supreme Court

Page 62

321 S.W.2d 62

159 Tex. 336

Carl MILES, Petitioner, v. J. O. MARTIN, Respondent.

No. A-6764.

Supreme Court of Texas.

Feb. 18, 1959.

Whitten, Harrell & Wilcox, Abilene, for petitioner.

Yates & Yates, Abilene, for respondent.

WALKER, Justice.

The principal question in this case is whether the rule laid down in Duhig v. Peavy-Moore Lumber Co., 135 Tex. 503, 144 S.W.2d 878, applies to a deed executed by respondent, J. O. Martin, in 1951. Respondent brought the suit against Carl Miles, a petitioner, and others to recover an undivided one-fourth interest in the minerals in and under approximately 417 acres of land in Taylor County which he claims was reserved to him by the terms of said deed. In the course of the trial it developed that the only real controversy is between petitioner and respondent, and the other defendants, except a stakeholder of the royalties allocable to such interest, were dismissed from the suit. The case was tried to the court without a jury, and judgment was entered awarding respondent the one-fourth mineral interest and accrued royalties, subject only to valid mineral leases covering the land and to the power of others to execute oil and gas leases thereon. This judgment was affirmed by the Court of Civil Appeals. 310 S.W.2d 635. We have concluded that the present record does not establish respondent's ownership of the mineral interest in question and that the cause should be remanded for a determination of his right to equitable relief.

By warranty deed dated December 22, 1950, L. A. Wall and wife, who are the common source of title, conveyed the land to respondent. There was 'excepted from this conveyance and reserved to the grantors, herein, their heirs and assigns,' one-fourth of the royalty that might be provided in, and one-fourth of all bonuses and delay rentals received from or payable under, any oil, gas or mineral lease or contract thereafter executed by the grantee, his heirs or assigns, for the exploration and development of the land or any part thereof. It further stipulated that the grantors, their heirs or assigns, need not be named as lessors or join in the execution of any such lease or contract. There are other provisions which are not mentioned here because the entire exception is quoted in the opinion of the Court of Civil Appeals.

The conveyance which gives rise to the present suit is a general warranty deed dated January 12, 1951, whereby respondent conveyed the land to Jabe M. Pratt and Carl P. Pratt. This instrument also reserves one-fourth of the royalty, bonus money and delay rentals, and authorizes the grantees, their heirs and assigns, to execute mineral leases and contracts for the development of the property. The reservation is identical in all respects with that set out in the Wall deed.

By deed dated January 8, 1955, the Pratts conveyed the land to petitioner and O. B. Haley. The terms and provisions of this instrument will be noticed later. O. B. Haley's interest was subsequently acquired by petitioner, who then conveyed a tract of 5.08 acres to R. L. Holloway. Petitioner thereafter conveyed the surface of the remainder of the land, together with all leasing rights and one-half of the bonuses, delay rentals and royalties, to J. Q. Carter.

It was held in the Duhig case that the grantor in a general warranty deed is estopped to claim title to an interest reserved therein when to permit him to do so would, in effect, breach his warranty with respect to the title and interest which the deed purports to convey. The parties recognize that the Walls own an undivided one-fourth interest in the minerals by virtue of the reservation in their deed to respondent, subject to the leasing rights granted thereby. Although this interest was outstanding, it is not mentioned in the conveyance executed by respondent to the Pratts. The latter instrument purports to convey all of the surface, three-fourths of the bonus money, delay rentals and royalties, and all leasing privileges. It also contains a covenant of general warranty, and there is no contractual provision limiting the title, rights and powers which the grantees were to acquire thereunder. The form of the conveyance thus brings the case squarely under the Duhig holding, and we shall consider the facts and circumstances found by the trial court which respondent says render such rule inapplicable.

The deed from respondent to the Pratts reserves an express vendor's lien to secure the payment of a note for $6,650 of even date with the deed, executed by the grantees and payable to respondent's order on or before thirty days after date. Respondent transferred this note and the lien securing same to Kansas City Life Insurance Company by assignment dated January 31, 1951. The Pratts executed a deed of trust on the land dated January 22, 1951, to secure the payment of a note for $6,650 given by them to Kansas City Life in renewal and extension of the vendor's lien note. It is recited therein that the deed of trust is 'subject to mineral interest reserved in deed from L. A. Wall and wife to J. O. Martin dated December 22, 1950, recorded in Volume 417, page 600, Deed Records of said County, and to mineral interest reserved in deed from J. O. Martin and wife to Jabe M. Pratt and Carl P. Pratt dated January 12, 1951.'

The evidence shows and the trial court found that the executed deed, vendor's lien note, assignment, deed of trust, and deed of trust note were placed by the parties in the hands of P. P. Bond, who had obtained the loan for the Pratts from Kansas City Life. All of the instruments were held by Bond in escrow pending receipt of a check for the proceeds of the loan. When the check was received, Bond delivered same to respondent, filed the three recordable instruments for record at the same time, and forwarded the two notes to the loan company. This was done in accordance with the previous agreement and understanding of the parties.

Respondent argues that under these circumstances the several instruments held in escrow by Bond are to be construed together as parts of the same transaction. He says that the deed of trust plainly recognizes the existence and validity of two mineral reservations, and that this must be read into and becomes part of the deed and thus takes the case out of the Duhig rule. We do not agree.

It is well settled that separate instruments executed at the same time, between the same parties, and relating to the same subject matter may be considered together and construed as one contract. Howards v. Davis, 6 Tex. 174; 26 C.J.S. Deeds § 91, p. 840; 16 Am.Jur. Deeds 537, § 175. This undoubtedly is sound in principle when the several instruments are truly parts of the same transaction and together form one entire agreement. It is, however, simply a device for ascertaining and giving effect to the intention of the parties and cannot be applied arbitrarily and without regard to the realities of the situation.

Decisions will be found in which instruments have been construed together or treated as one contract even though they were not between the same parties. See Guadalupe-Blanco River Authority v. City of San Antonio, 145 Tex. 611, 200 S.W.2d 989; Veal v. Thomason, 138 Tex. 341, 159 S.W. 472. In the Guadalupe-Blanco case, the city and the river authority made an agreement in settlement of pending litigation under the terms of which the city was permitted to acquire the assets of a certain utility company on condition that it would lease a part of the property to the authority. The conveyance to the city was accordingly treated as being subject to the lease for the purpose of determining the validity of the latter. It was also held that the lease and a trust indenture executed by the city to secure its bonds should be construed together as one instrument, but the evidence showed not only that the instruments were executed in consummation of one over-all transaction but also that all parties were present while they were being prepared. The Veal case involved separate identical oil and gas leases covering a group of contiguous tracts of land owned by the various lessors in severalty. Each instrument contained recitals showing that the execution of similar leases by other lessors was contemplated by the parties, and the several leases were held to constitute but one contract just as though all of the lessors had signed the same paper.

There was a reasonable basis for construing the instruments together or treating them as one contract in these cases, but that is not true of the deed and deed of trust now under consideration. The conveyance and mortgage were executed as parts of the same transaction in the sense that both were necessary to effectuate the sale, but not in the sense that they together form one entire agreement. A vendor who sells his land for cash and retains a vendor's lien for the convenience of the purchaser and to enable the latter to obtain a loan with which to pay part of the purchase price is not concerned with the terms of a security instrument executed by the purchaser in favor of the lender. In such a transaction the deed of trust is usually prepared by or under the direction of the lender and the seller has no interest in and does not attempt to acquaint himself with its provisions. There is nothing in the present record to suggest that respondent participated in the preparation of the deed of trust or knew any of its terms. Under these circumstances respondent could not be bound by recitals therein tending to enlarge his obligations under the deed or indicating that additional property or a greater estate was conveyed thereby. It would hardly be appropriate then to lay down a rule that the deed of trust might be read into the deed for the purpose of showing that the grantee acquired less property than the latter instrument purports to convey. Extrinsic declarations by one party to an unambiguous conveyance which are not binding upon the other party...