Perryman v. Spart an Tex. Six Capital Partners, Ltd., 16–0804

• Decision Date: 27 April 2018
• Docket Number: No. 16–0804,16–0804
• Citation: 546 S.W.3d 110
• Parties: Gary Don PERRYMAN, Nancy K. Perryman and Leasha Perryman Bowden; and EOG Resources Inc., Petitioners, v. SPART AN TEXAS SIX CAPITAL PARTNERS, LTD., Spart an Texas Six–Celina, Ltd. and Dion Menser, Respondents
• Court: Texas Supreme Court

546 S.W.3d 110

Gary Don PERRYMAN, Nancy K. Perryman and Leasha Perryman Bowden; and EOG Resources Inc., Petitioners,

v.SPART AN TEXAS SIX CAPITAL PARTNERS, LTD., Spart an Texas Six–Celina, Ltd. and Dion Menser, Respondents

No. 16–0804

Supreme Court of Texas.

Argued December 5, 2017

Opinion delivered: April 27, 2018

D. D'Lyn Davison, Wichita Falls, Cora L. Moore, Mineral Wells, Lawrence F. Labanowski, Houston, James W. McCartney, Doug J. Dashiell, Austin, Edward F. Mulholland, for Petitioners

C. Henry Kollenberg Jr., H. Miles Cohn, David A. Polsinelli, Houston, for Respondents

Justice Boyd delivered the opinion of the Court.

Buried in a mound of real-property deeds lies a single contract-interpretation question: What is the function of a clause that "saves and excepts" 1/2 of "all royalties from the production of oil, gas and/or other minerals that may be produced from the above described premises which are now owned by Grantor ," when the deed does not disclose that the grantor does not own all of the royalty interests and does not except any other royalty interests from the conveyance? The trial court construed the clause to reserve for the grantor 1/2 of all of the "royalties ... which [were then] owned by Grantor," and thus the deeds did not create a so-called Duhig problem, where the grantor owns less than he purports to convey. The court of appeals disagreed and held that the clause reserved for the grantor 1/2 of all royalties produced from the "above described premises which [were then] owned by Grantor," and thus created a Duhig problem.

We agree with the court of appeals that the phrase "which are now owned by Grantor" modifies "the above described premises" and does not put the grantee on notice that the grantor may not then own all of the royalties, and the deeds thus purported to exclude 1/2 of the entire royalty interest and convey the other 1/2. But we also conclude that, instead of reserving a 1/2 royalty interest for the grantors, the clause merely excepted that interest from the grant, so the deeds did not create a Duhig problem. We agree with the court of appeals' ultimate conclusions about the parties' respective ownership of the royalty interests as to the larger tract at issue here, but not as to the smaller tract. However, we base our conclusions on the deeds' language, rather than on the Duhig -estoppel theory. Applying our conclusions to the chain of deeds in this case, we hold that each party with an interest in the tracts owns a 1/4 interest in the royalties produced. We also hold that judicial estoppel does not bar Petitioners from claiming their royalty interests, and that the trial court did not err in denying Petitioners' motion to transfer venue. We modify the court of appeals' judgment in part and affirm the judgment as modified.

I.Background

This complicated dispute involves a chain of eight separate real-property deeds. The first was executed in 1977, when Ben Perryman conveyed property to his son and daughter-in-law, Gary and Nancy Perryman. The deed (Ben's Deed) conveyed a parcel of land referred to as the "First Tract"¹ to Gary and Nancy, "LESS, SAVE AND EXCEPT an undivided one-half (1/2) of all royalties from the production of oil, gas and/or other minerals that may be produced from the above described premises which are now owned by Grantor." Because Ben owned all of the royalties, minerals, and premises at the time of the conveyance, the parties all agree that, as a result of Ben's Deed, Gary and Nancy owned all of the surface and mineral interests and 1/2 of the royalty interests in the First Tract, and Ben retained the other 1/2 of the royalty interests.

After Ben died in 1980, his 1/2 royalty interest in the First Tract passed through intestacy in equal amounts to Gary and his brother, Wade. Wade's interest later passed upon his death to his daughter, Leasha Perryman Bowden.² All parties agree that, as a result of these events, Gary and Nancy owned all of the surface and minerals and 3/4 of the royalties, and Leasha owned the remaining 1/4 of the royalties.

The trouble began in 1983 with the second of the eight deeds, in which Gary and Nancy conveyed the First Tract to GNP Inc., a corporation they created and controlled. This deed (Gary and Nancy's Deed) included a "less, save and except" clause identical to the clause that Ben's Deed contained:

LESS, SAVE AND EXCEPT an undivided one-half (1/2) of all royalties from the production of oil, gas and/or other minerals that may be produced from the above described premises which are now owned by Grantor. It being understood that all of the rest of my ownership in and to the mineral estate in and under the above described lands is being conveyed hereby.

The deed also included a warranty clause in which Gary and Nancy agreed to "Warrant and Forever Defend, all and singular the said premises." The deed did not mention that Leasha already owned 1/4 of the royalty interest or expressly except that interest from the grant.

GNP then executed the third of the eight deeds, a deed of trust in favor of Gainesville National Bank, to secure a promissory note. GNP's Deed of Trust included the same "less, save and except" and warranty clauses as Gary and Nancy's Deed. This deed did not mention or expressly except Leasha's 1/4 royalty interest or any royalty interest Gary and Nancy may have retained in their deed to GNP.

GNP defaulted on the note. After the Bank purchased the property at a foreclosure sale, the trustee—acting under GNP's Deed of Trust—conveyed the First Tract to the Bank through the fourth of the eight deeds, the Trustee's Deed. The Trustee's Deed contained the same "less, save and except" clause as the three prior deeds, except that it referred to the premises "now owned by Gary Perryman," instead of the premises "now owned by Grantor." It also contained a similar warranty clause, covering "the property hereinbefore described." It did not mention Leisha's 1/4 royalty interest or any royalty interest Gary and Nancy or GNP may have retained in their prior deeds.

Although Ben's Deed had described the First Tract as containing 177 acres "more or less," a new "modern" survey conducted when the Bank acquired the First Tract concluded that the First Tract actually included about 206 acres. In the fifth of the eight deeds, the Bank conveyed the 206 acres to Dion Menser and her then-husband David Johnson.³ The Bank's Deed did not contain a "less, save and except" clause similar to the clauses in the prior deeds, but instead excluded from the conveyance and warranty "all presently recorded restrictions, reservations, covenants, conditions, oil and gas leases, mineral severances, and other instruments, other than liens and conveyances, that affect the property."

In the sixth deed, Menser—as part of a divorce settlement—conveyed her interest in the 206 acres to Johnson via a special warranty deed, but reserved to herself "an undivided one-half (1/2) of all the oil, gas and other minerals on, in and under" the property conveyed. Menser's Deed expressly made the conveyance "subject to the terms of any valid ... mineral severance."

In the seventh deed, Johnson conveyed 28 of the 206 acres to a third party. That interest is now owned by James and Mildred Wright, who are not parties to this appeal. In the eighth and final deed, Johnson conveyed the remaining 178 acres to Spartan Texas Six Capital Partners, Ltd., and Spartan Texas Six–Celina, Ltd. Similar to Menser's Deed, Johnson's Deed to Spartan excepted "all presently recorded restrictions, reservations, covenants, conditions, oil and gas leases, mineral severances, and other instruments, other than liens and conveyances, that affect the property."

Spartan and Menser, as lessors, entered into oil-and-gas leases that the lessee later assigned to EOG Resources, Inc. Spartan's lease covered the 178–Acre Tract, while Menser's lease covered both the 178–Acre Tract and the 28–Acre Tract, since she had reserved a mineral interest in all 206 acres. According to Spartan and Menser, EOG wrongfully pooled the First Tract with horizontal wells it had drilled on an adjacent tract, even though the leases do not allow for, and Spartan refused to consent to, pooling. Spartan and Menser sued EOG for breach of the lease and for an accounting. After Spartan disclosed that a dispute existed over who owned what portions of the royalty interests, EOG counterclaimed and filed third-party claims against Gary and Nancy and Leasha (collectively, the Perrymans), seeking a declaratory judgment resolving that dispute. The Perrymans cross- and counter-claimed for a declaration of their royalty interests and moved to transfer venue to Montague County, where the property is located. The trial court denied the motion to transfer venue. The Perrymans sought mandamus relief from that ruling, but the court of appeals denied the petition. See In re Perryman , No. 14-13-00131-CV, 2013 WL 1384914 (Tex. App.—Houston [14th Dist.] Apr. 4, 2013, no pet.) (mem. op.) (per curiam).

The trial court severed the parties' royalty-interest claims from Spartan's and Menser's wrongful-pooling claims against EOG. The parties then filed cross-motions for summary judgment, and the trial court granted a final summary judgment declaring, with respect to the 178–Acre Tract, that Menser and Spartan each own 3/32 of the royalty interest, Gary and Nancy own 9/16 of the royalty interest, and Leasha owns 1/4 of the royalty interest. The court also declared that the same parties own the same interests in the 28–Acre Tract, except that Spartan owns no interest in that tract. Spartan appealed, and Gary and Nancy raised conditional cross-issues in response.⁴

The court of appeals mostly disagreed with the trial court. It modified the trial court's judgment to declare that Menser, Spartan, Gary and Nancy, and Leasha each own 1/4 of the royalty interest in the 178–Acre Tract. Although its reasoning would appear to apply also to the 28–Acre Tract, the declaration language...