Temple-Inland Forest Products Corp. v. U.S.

• Decision Date: 13 April 1993
• Docket Number: TEMPLE-INLAND,No. 92-4394,92-4394
• Citation: 988 F.2d 1418
• Parties: FOREST PRODUCTS CORPORATION, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1418

988 F.2d 1418

TEMPLE-INLAND FOREST PRODUCTS CORPORATION, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.

No. 92-4394.

United States Court of Appeals, Fifth Circuit.

April 13, 1993.

Bob Wortham, U.S. Atty., O. Kenneth Dodd, Asst. U.S. Atty., Beaumont, TX, Jeffrey Krishkowy, Katherine W. Hazard, Robert L. Klarquist, Michael Reed, Appellate Section, Env. & Nat. Resources Div., Dept. of Justice, Washington, DC, for defendant-appellant.

Gilbert I. Low, Stanley Plettman, Orgain, Bell & Tucker, Beaumont, TX, for plaintiff-appellee.

Appeal from the United States District Court for the Eastern District of Texas.

Before REYNALDO G. GARZA, HIGGINBOTHAM, and EMILIO M. GARZA, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

This case turns on the construction of a 58-year-old deed under Texas law. In 1935, Temple-Inland's predecessor sold land in East Texas to the United States, reserving the mineral rights. This reservation was to expire in 1985, subject to extension on limited areas around commercial production. Temple's right to retain tracts that have become inactive since 1985 is now disputed. The district court granted summary judgment in favor of Temple. We disagree with the district court's interpretation of the deed, and reverse.

The facts are undisputed. By warranty deed dated December 27, 1935, Temple Lumber Co. conveyed to the United States 77,806 acres in Sabine County, Texas. It is unknown which party drafted the deed. ¹ Under its terms, Temple reserved all of the oil, gas and minerals on, in, or under roughly 59,983 acres. The pertinent paragraphs of the deed provide:

There is hereby excepted and reserved from the foregoing sale and conveyance all the oil, gas, and other valuable minerals deposited on, in or under said lands, in accordance with the following clauses, rules and regulations, to-wit:

Reserving to the vendor, its successors and assigns, for the period ending January 1, 1985, the right to prospect for, mine, and remove any and all gas, oil and mineral deposits on, in, or under said lands. The vendor, its lessees, successors, and assigns, shall have at any and all times full right to enter upon said lands for the purposes of prospecting for, mining, and removing gas, oil, and minerals.

It is further provided that if on January 1, 1985, gas, oil and/or minerals are being produced on said land in commercial quantities, then and in that event the gas, oil and mineral reservations shall be extended on all areas within a one-half mile radius of each then existing gas or oil well or mineral operation. Such extension of gas, oil and mineral reservation shall run for a five year period from date of January 1, 1985.

Provided further that said gas oil, and mineral reservations shall be extended by five year periods so long as commercial operations are being carried on at the end of the then current extension period.

It is provided that at the end of the termination of the period ending January 1, 1985, if not as above provided extended, or at the termination of any extended period, if no commercial gas, oil or mineral operations are being carried on, then and in that event the right of the vendor, its lessees, successors and assigns to prospect for, mine and remove gas oil, and minerals shall terminate.

On January 1, 1985, there was production of oil or gas in commercial quantities at only twenty-two sites in the conveyed land. Pursuant to paragraph three of the deed, Temple's mineral interest terminated as to all areas except twenty-two circles, each one mile in diameter and centered on a producing well. These circles encompassed 7,930 of the 59,983 acres reserved in 1935.

Five years later, on January 1, 1990, there were commercial operations at only six of the twenty-two sites. The government believed that Temple's mineral interest had terminated as to the other sixteen circular tracts and so notified Temple on May 21, 1990. The government then elicited public bids to lease these tracts.

Temple responded by filing this suit on October 16, 1990. Temple contended that so long as commercial operations are conducted on any of the twenty-two tracts as to which the mineral rights reservation was extended in 1985, Temple owns the mineral rights for all twenty-two. Both parties moved for summary judgment on the single legal issue in dispute: the meaning of the reservation paragraphs of the 1935 deed. The district court granted Temple's motion.

We review the question de novo. Under Texas law, interpreting an unambiguous contract presents a question of law, including determining whether the contract is ambiguous. REO Industries, Inc. v. Natural Gas Pipeline Co., 932 F.2d 447, 453 (5th Cir.1991). ² A contract is not ambiguous because the parties disagree about its meaning. Id. Under Texas law, "[a]n instrument is ambiguous only when the application of pertinent rules of construction leaves it genuinely uncertain which one of two reasonable meanings is the proper one." Prairie Producing Co. v. Schlachter, 786 S.W.2d 409, 413 (Tex.App.--Texarkana 1990, writ denied); see also Technical Consultant Services, Inc. v. Lakewood Pipe, 861 F.2d 1357, 1362 (5th Cir.1988). We conclude that this deed is unambiguous, because the "language of the reservation ... can be accorded a certain legal meaning by applying appropriate rules of construction." Buffalo Ranch Co., Ltd. v. Thomason, 727 S.W.2d 331, 333 (Tex.App.--Houston [1st Dist.] 1987, writ ref'd n.r.e.).

Our duty when construing a deed is to ascertain the intent of the parties from all of the language in the deed by a fundamental rule of construction known as the "four corners" rule. Luckel v. White, 819 S.W.2d 459, 461 (Tex.1991). While Texas has relaxed the strict operation of its tenets of construction, see Harris v. Windsor, 156 Tex. 324, 294 S.W.2d 798, 800 (1956), we refer to those rules to guide us in determining the intent expressed in the instrument. "The canons of law for the construction of deeds are for the purpose of discovering the intent of the makers." Humble Oil & Refining Co. v. Kirkindall, 119 S.W.2d 731, 733 (Tex.Civ.App.--Beaumont 1938), aff'd, 145 S.W.2d 1074 (Tex.1941). ³

When interpreting the terms of a reservation, courts construe the language against the grantor. State v. Dunn, 574 S.W.2d 821, 824 (Tex.Civ.App.--Amarillo 1978, writ ref'd n.r.e.); Cameron Cty. Water Control & Improvement Dist. v. George, 349 S.W.2d 308, 310 (Tex.Civ.App --Eastland 1961, writ ref'd n.r.e.); Commerce Trust Co. v. Lyon, 284 S.W.2d 920, 921 (Tex.Civ.App.--Fort Worth 1955, no writ); Hidalgo Cty. Water Control & Improvement Dist. v. Hippchen, 233 F.2d 712, 715 (5th Cir.1956). Thus, when

the intent of the parties is not as clear as it could be, the rules of construction demand that where there is any doubt as to proper construction of a deed, that doubt should be resolved against the grantor. This rule applies with equal force to a grantor who attempts to reserve an interest under the deed.

Guaranty Nat'l Bank & Trust of Corpus Christi v. May, 513 S.W.2d 613, 617 (Tex.Civ.App.--Corpus Christi 1974, no writ). ⁴

A reservation must be stated by clear language. Courts do not favor reservations by implication. Sharp v. Fowler, 151 Tex. 490, 252 S.W.2d 153, 154 (1952); Chambers v. Huggins, 709 S.W.2d 219, 222 (Tex.App.--Houston [14th Dist.] 1986, no writ); May, 513 S.W.2d at 618. The need to clearly state a reservation arises from the fact that a conveyance ordinarily passes to the grantee all of the grantor's interest in a property. See Phillips Petroleum Co. v. Adams, 513 F.2d 355, 362 (5th Cir.), cert. denied, 423 U.S. 930, 96 S.Ct. 281, 46 L.Ed.2d 259 (1975). ⁵ There is no question whether a reservation was expressly created. Rather, the dispute is over the termination terms of the reservation, and so how long Temple retained the interest.

The deed conveyed a present, possessory interest in the surface estate to the United States in 1935. It reserved, for a potentially unlimited time, all valuable minerals deposited on, in, or under that land and the right to exploit them. Thus, the deed severed the surface and mineral estates. See Moser v. United States Steel Corp., 676 S.W.2d 99, 101 (Tex.1984); Humphreys-Mexia Co. v. Gammon, 113 Tex. 247, 254 S.W. 296, 299 (1923). Temple retained a present interest in the mineral estate. Because that reserved interest was subject to termination, however, Temple conveyed a future reversionary interest in the mineral estate to the United States. When a grantor reserves a determinable mineral interest, to be followed by vesting of the mineral interest in the grantee, the grantee receives at the time of the conveyance a reversionary interest. See Chambers v. Huggins, 709 S.W.2d 219, 222 (Tex.App.--Houston [14th Dist.] 1986, no writ).

We must construe the deed provisions that terminate Temple's possessory interest and give the United States a present interest in the minerals on the tracts. The parties offer competing interpretations of the deed. Temple contends that it expresses the intent to reserve the mineral rights until no commercial operations existed on any of the circular tracts created in 1985. The government maintains that the deed expresses the intent to terminate Temple's reservation as to each tract if no operations existed on that tract at the end of a five year period.

Despite able contrary arguments, we are persuaded that the latter interpretation properly construes the parties' expressed intent. The deed provides that Temple's original reservation would terminate in 1985, except as to certain areas. The parties agree that the operation of paragraph three preserved Temple's ownership of twenty-two tracts for another five years. The focus then shifts to paragraph four, which provides for the further extension of Temple's rights past January 1, 1990.

Paragraph four, like paragraph three, uses the plural term "reservations." Paragraph two created a single...