Temple-Inland Forest Products Corp. v. U.S. ( 1993 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 92-4394
TEMPLE-INLAND FOREST PRODUCTS
CORPORATION,
Plaintiff-Appellee,
versus
UNITED STATES OF AMERICA,
Defendant-Appellant.
Appeal from the United States District Court
for the Eastern District of Texas
(April 13, 1993)
Before Reynaldo G. GARZA, HIGGINBOTHAM, and Emilio M. GARZA,
Circuit Judges.
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:
[1] 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:
[2] 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.
[3] 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.
[4] 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.
[5] 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
1
Temple introduced evidence in the record from which, it
argues, it may be inferred that the United States chose the terms
of the reservation provisions. The identification of the drafter
is not material to our decision. We construe the deed as written
and do not rely upon the presumption that the grantor, here
Temple, drafted the deed.
2
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.
3
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, 294 S.W.2d 798, 800 (Tex. 1956), we refer to those rules
to guide us in determining the intent expressed in the instrument.
"The cannons of law for the construction of deeds are for the
purpose of discovering the intent of the makers." Humble Oil &
2
This general rule applies to deeds. Altman v. Blake, 712
S.W.2d 117, 118 (Tex. 1986).
4
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
3
Harris noted the relaxation, not the abandonment, of rules
of construction. Subsequent decisions continue to look to the
tenets for guidance in determining expressed intent. See, e.g.,
Garrett v. Dils Co., 299 S.W.2d 904 (Tex. 1957)(noting relaxation
of tenets in Harris and stating rule construing doubts against
grantor).
4
The rule construing deeds against grantors is often
justified by attributing deeds' language to grantors. See, e.g.,
Garrett, 299 S.W.2d at 906. We do not regard this as the only
basis for the rule of construction. The need for specificity
when reserving any interest from a conveyance also justifies
construing reservations against the grantor. See Sharp v.
Fowler, 252 S.W.2d 153 (Tex. 1952)(holding reservations must be
stated by clear language); Monroe v. Scott, 707 S.W.2d 132 (Tex.
App.--Corpus Christi 1986, writ ref'd n.r.e.)(noting deed conveys
all interests not expressly reserved).
5
A reservation must be stated by clear language. Courts do not
favor reservations by implication. Sharp v. Fowler, 252 S.W.2d
153, 154 (Tex. 1952); Chambers v. Huggins, 709 S.W.2d 219, 222
(Tex. App.--Houston [14th Dist.] 1986, no writ); Guaranty Nat'l
Bank v. May, 513 S.W.2d 613, 618 (Tex. Civ. App.--Corpus Christi
1974, no writ). 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 (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, 254 S.W. 296, 299 (Tex. 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
5
A warranty deed will pass all of the estate owned by the
grantor at the time of the conveyance unless reservations reduce
the estate conveyed. Monroe v. Scott, 707 S.W.2d 132, 133 (Tex.
App.--Corpus Christi 1986, writ ref'd n.r.e.).
6
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 reservation in
1935--Temple's possessory mineral interest. The use of the plural
term in the following paragraphs indicates that the extension
7
provision of paragraph three created discrete reservations in 1985.
Temple's ownership of a 59,983 acre mineral estate became the
ownership of the mineral interests on twenty-two tracts of roughly
five-hundred-two acres apiece.6 The deed's plural language
indicates that each of those tracts was held by Temple by a
separate reservation.
Temple maintains that paragraph three created a single, non-
contiguous reservation in 1985, subject to termination at one point
in time. We disagree. The use of the plural term indicates that
the extension provision of paragraph three created multiple
reservations in 1985. The subsequent extension provision in
paragraph four applies to these discrete reservations. Reasonably
interpreted, the deed allows for these reservations to terminate at
different times.
Temple's reading of the deed renders the five-year periods
mandated by paragraph four nigh pointless. We must examine the
entire writing in an effort to harmonize and give effect to all its
provisions so that none will be rendered meaningless. Chapman v.
Orange Rice Milling Co., 747 F.2d 981, 983 (5th Cir. 1984) (citing
Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983)); see also Altman
v. Blake, 712 S.W.2d 117, 118 (Tex. 1986) ("the parties to an
instrument intend every clause to have some effect"). If the
intended agreement were for Temple to retain ownership of all
6
The expected acreage of twenty-two circles one mile in
diameter is 11,055 acres. The fact that 7,983 acres remained in
Temple's hands in 1985 indicates that some circles must be
centered on production sites less than one mile apart and so
overlap.
8
circular tracts until operations ceased upon all of them, the
purpose of re-examining their status every five years is doubtful.
Temple suggests that such periods allow it time to restore
production somewhere if operations play out on all tracts. This
suggestion does little for Temple, because the same is true if
separate reservations are subject to separate termination. Then,
too, established termination dates give warning and a chance for
reworking. Giving paragraph four a more reasonable effect, we read
it to provide for the incremental termination of reservations on
circular tracts as operations cease on those tracts.
If a single reservation existed after 1985, commercial
operations in 1990 on six tracts would support an extension of
Temple's rights as to the sixteen non-producing tracts. Temple
emphasizes the language of paragraph five:
[A]t 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 . . . shall
terminate. (Emphasis added.)
This paragraph, which Temples describes as "the only express
provision for termination" of Temple's mineral interests, when read
with paragraph three, arguably treats the twenty-two tracts
reserved in 1985 as one collective interest. Recognizing that the
plural term "reservations" indicates otherwise, Temple notes the
singular terms used in the last sentence of paragraph three: "Such
extension of gas, oil and mineral reservation shall run for a five
year period from the date of January 1, 1985." (Emphasis added.)
9
Temple's observation is well taken. We must, however,
harmonize each element of the deed rather than focusing on one
sentence in isolation. The deed refers more than once to
"reservations" existing after 1985. This language indicates that
discrete tracts are individually reserved. We construe the last
sentence of paragraph three to refer to the five-year extension of
any one of those tracts, rather than collectively to all of them.
There is no clear language reserving the mineral rights as to
the circular tracts that have ceased commercial operations. The
requirement of a clear statement for reservations applies not only
to whether a reservation was created, but to its endurance and
termination. See Guaranty Nat'l Bank & Trust of Corpus Christi v.
May, 513 S.W.2d 613 (Tex. Civ. App.--Corpus Christi 1974, no writ).
In May, a 1944 deed reserved to the grantor of two tracts a royalty
interest. The reservation was to expire in twenty years unless
oil, gas, or minerals were being produced from "said land." The
two tracts were adjacent to three others owned by the grantee, who
leased the unit of five tracts in 1958. In 1964, there was
production on the unit, although not on either tract conveyed by
the grantor. The case required interpretation of the reservation's
provision for termination. The grantor's successor argued that the
reservation had become perpetual in 1964, because by its terms the
reservation could only terminate at the end of twenty years. The
court "decline[d] to accept such a narrow interpretation of this
reservation." Id. at 617. There was no express statement that the
reservation would endure only so long as production did. Yet that
10
was the evident intent, in the absence of language indicating that
the reservation could last forever. The construction asserted in
favor of the grantor required implication of such language, which
the court refused to supply for a reservation. Id. at 617-18.
Each party noted that the deed could clearly express an intent
either way if just a few words had been added to paragraph four.7
Where "the intent of the parties is not as clear as it could be,"
doubt regarding a reservation must be resolved against the grantor.
Id. at 617. Temple's arguments, in effect, would have us imply the
meaning by mentally supplying words favorable to it. That
interpretation would increase the temporal extent of the grantor's
reservation and defer the grantee's right to possession. We
construe the deed against the grantor and against broadening a
reservation by implication, limiting the temporal scope of the
discrete reservations created by the deed.
Seeking support in analogous factual circumstances, Temple
refers to cases discussing the relinquishment of non-producing
lease acreage. There, in the absence of language calling for a
continual relinquishment, the general rule provides that production
7
Temple would prevail if paragraph four stated:
Provided further that all said gas, oil, and mineral
reservations shall be extended by five year periods so
long as commercial operations are being carried on upon
any of them at the end of the then current extension
period.
Likewise, the government's construction could be more clearly
stated:
Provided further that each of said gas, oil, and
mineral reservations shall be extended by five year
periods so long as commercial operations are being
carried on upon it at the end of the then current
extension period.
11
anywhere on the leased premises maintains the lease. See, e.g.,
Humphrey v. Seale, 716 S.W.2d 620, 622 (Tex. App.--Corpus Christi,
1986, no writ). Temple also contends that when an instrument
creates mineral interests in multiple tracts of land, subject to
termination in the absence of production, production from one of
the tracts will extend the interest in non-producing tracts as
well. See Mathews v. Sun Oil Co., 425 S.W.2d 330, 333 (Tex. 1968);
e.g., Williamson v. Federal Land Bank of Houston, 326 S.W.2d 560
(Tex. Civ. App.--Texarkana 1959, writ ref'd n.r.e.); Hillegust v.
Amerada Petroleum Corp., 282 S.W.2d 892 (Tex. Civ. App.--Beaumont
1955, writ ref'd n.r.e.).
In Williamson, a grantor sold four non-contiguous tracts of
land. The deed reserved a non-participating royalty interest in
"said land" that would permanently vest if mineral production
occurred within twenty years. In dicta, the court stated that had
production occurred within the period on any one of the four
tracts, the interest would have vested as to all of them. 326
S.W.2d at 562. There was a single reservation, created at the time
of the sale, governing all of the tracts. There was no language in
the deed, as there is here, that separate tracts of land were
subject to separate reservations.
Temple maintains that when a lease conveys an interest in non-
contiguous tracts subject to a habendum clause requiring production
on "said land" or "said premises," production on only one tract
will hold the lease as to all tracts conveyed by the lease. See
Hillegust, 282 S.W.2d at 896. In Hillegust, grantors conveyed
12
fractional interests in two tracts to two grantees. These
interests were subject to termination if no production was
occurring at the end of fifteen and twenty years, respectively.
Grantors' successors argued that the tracts had been severed by
pre-existing leases and therefore production on one would not
prevent termination of the grantees' interests in the other.
Treating the conveyed interests like leases, the court held in
favor of the grantees.
The interests subject to termination in Hillegust were held by
grantees, not reserved by grantors. We do not accept Temple's
argument that the reservation provisions of the deed here should be
treated as a lease's habendum clause. It is true that both a deed
conveying a determinable interest and a mineral lease create
estates subject to the same principles of Texas law. Midwest Oil
Corp. v. Winsauer, 323 S.W.2d 944, 948 (Tex. 1959). This deed,
however, did not convey a determinable interest; it reserved one.
The district court noted that Texas law requires specific
language to impose a limitation on a grant. See Tomlin v.
Petroleum Corp. of Texas, 694 S.W.2d 441, 442 (Tex. App.--Eastland
1985, no writ). We agree, but as we see it the only grant here was
to the United States. Temple conveyed a present interest in the
surface and a future interest in the mineral estate. It kept a
determinable interest in the mineral estate. The reservation was
not a grant and Temple gains no comfort from the rule stated in
Tomlin.
13
The longer Temple's present interest in the circular tracts is
preserved, the less the United States has received as grantee of a
future interest. Under Texas law, deeds are construed to vest an
interest as speedily as their terms will allow. Victoria Bank &
Trust Co. v. Cooley, 417 S.W.2d 814, 817 (Tex. Civ. App.--Houston
[1st Dist.] 1967, writ ref'd n.r.e.); Hedick v. Lone Star Steel
Co., 277 S.W.2d 925, 929 (Tex. Civ. App.--Texarkana 1955, writ
ref'd n.r.e.); Soper v. Medford, 258 S.W.2d 118, 122 (Tex. Civ.
App.--Eastland 1953, no writ). In the absence of clear language
preserving Temple's present interest in every tract pending the
cessation of commercial operations on all others, we adopt that
reading which gives the grantee an immediate possessory interest.
We REVERSE the judgment of the district court. We hold that
Temple-Inland Forest Products Corporations's mineral interest in
each of the twenty-two circular tracts reserved in 1985 terminated
or shall terminate when, at the end of a five-year period, there
are no commercial operations on that circular tract. We RENDER
judgment accordingly.
14