farm-ranch-investors-ltd-v-titan-operating-llc-bruce-d-pfaff ( 2012 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-11-00217-CV
FARM & RANCH INVESTORS, LTD. APPELLANT
V.
TITAN OPERATING, L.L.C.; BRUCE APPELLEES
D. PFAFF; TERESA M. WALTER;
DAVID NOVOTNY; DENNIS J.
FEGAN II; MICHAEL C. AND KRIS
ALJOE; JEFFREY J. AND DIANE S.
BRUNDAGE; JOHN T. EUBANKS
FAMILY LIVING TRUST;
CHRISTOPHER M. AND NANCY L.
HOLLOWAY; C.E. BYE AND
SANDRA J. BYE
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FROM THE 352ND DISTRICT COURT OF TARRANT COUNTY
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OPINION
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Appellant Farm & Ranch Investors, Ltd. appeals the trial court’s grant of
summary judgment in favor of appellees Titan Operating, L.L.C. and individual lot
owners Bruce D. Pfaff, Teresa M. Walter, David Novotny, Dennis J. Fegan II,
Michael C. and Kris Aljoe, Jeffrey J. and Diane S. Brundage, John T. Eubanks
Family Living Trust, Christopher M. and Nancy L. Holloway, and C.E. Bye and
Sandra J. Bye (collectively, the lot owners). We affirm.
Background Facts
Caldwell’s Creek, Ltd. was the owner of roughly sixty acres of land in
Colleyville known as the Caldwell’s Creek Addition. In 1994, Caldwell’s Creek,
Ltd. recorded a dedication and restrictions for the land in the deed records.1 One
of the restrictions stated, “No oil drilling, oil development operations, oil refining,
quarrying or mining operations of any kind shall be permitted upon or on any lot.
All mineral rights shall belong and shall continue to belong to the limited
partnership of Caldwell’s Creek, LTD.”
After the restrictive covenants were recorded, Caldwell’s Creek, Ltd.
divided the land into lots and sold the lots to individual owners. Caldwell’s Creek,
Ltd. executed the first of the nine deeds at issue in 1994 and the last in 1999.
The warranty deeds that conveyed the property to the individual owners stated,
“This conveyance is made subject to any and all easements, restrictions, and
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The dedication stated,
All utility, sanitary sewer service, and emergency access
easements are hereby dedicated to the Public unless specifically
stated otherwise in the granting instruments filed of record.
However, Common Areas, and Common Area Access Easements
shall be for the use of the Lot Owners encompassed herein and
shall not be construed as being for the use of the general public
unless expressly stated in the granting instrument.
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mineral reservations affecting said property that are filed for record in the office of
the County Clerk of Tarrant County, Texas.” The deeds did not contain a
separate reservation of the mineral interest. In October 2005, Caldwell’s Creek,
Ltd. purported to convey all of the oil, gas, and mineral rights to Farm & Ranch by
special mineral deed. Caldwell’s Creek, Ltd. believed it had retained the mineral
rights to the Caldwell’s Creek Addition based on the recorded restrictions and the
statement in the lot owners’ deeds that conveyed the property subject to any
recorded restrictions.
Farm & Ranch joined an organization of property owners in Colleyville
called the Colleyville Area Mineral Rights Association (CAMRA) to negotiate
mineral leases. In 2008, CAMRA negotiated on behalf of Farm & Ranch for a
mineral lease with Titan. Titan ultimately decided that Farm & Ranch did not hold
the mineral rights to the Caldwell’s Creek Addition and refused to sign the
CAMRA lease. Instead, Titan contracted with the nine lot owners individually.
Titan then filed suit against Farm & Ranch seeking a declaratory judgment
that it owns the mineral rights to the nine lots in the Caldwell’s Creek Addition.
Farm & Ranch counterclaimed for breach of contract. The nine lot owners were
later added to the case as third party defendants. They also filed a claim for
declaratory judgment. All parties then filed motions for summary judgment on
their respective claims. After a hearing, the trial court granted Titan’s motion and
denied Farm & Ranch’s motion, and it declared, “Titan owns fee simple
determinable title to the minerals under these nine subject lots in the Caldwell[’s]
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Creek subdivision pursuant to its oil and gas leases . . . .”2 Farm & Ranch
appealed.
Standard of Review
We review a summary judgment de novo. Travelers Ins. Co. v. Joachim,
315 S.W.3d 860, 862 (Tex. 2010). We consider the evidence presented in the
light most favorable to the nonmovant, crediting evidence favorable to the
nonmovant if reasonable jurors could and disregarding evidence contrary to the
nonmovant unless reasonable jurors could not. Mann Frankfort Stein & Lipp
Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). We indulge every
reasonable inference and resolve any doubts in the nonmovant’s favor. 20801,
Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008). When both parties move for
summary judgment and the trial court grants one motion and denies the other,
the reviewing court should review both parties’ summary judgment evidence and
determine all questions presented. Mann Frankfort, 289 S.W.3d at 848; see
Myrad Props., Inc. v. Lasalle Bank Nat’l Ass’n, 300 S.W.3d 746, 753 (Tex. 2009).
The reviewing court should render the judgment that the trial court should have
rendered. Mann Frankfort, 289 S.W.3d at 848.
2
The order did not grant the lot owners’ motion for summary judgment.
However, the lot owners sought essentially the same declaratory judgment as
Titan, and on appeal, they joined in and adopted Titan’s brief.
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Deed Construction
Deeds are construed to convey to the grantee the greatest estate possible.
Reeves v. Towery, 621 S.W.2d 209, 212 (Tex. App.—Corpus Christi 1981, writ
ref’d n.r.e.) (citing Waters v. Ellis, 158 Tex. 342, 347, 312 S.W.2d 231, 234
(1958)). A general warranty deed conveys all of the grantor’s interest unless
there is language in the instrument that clearly shows an intention to convey a
lesser interest. Id. (citing Cockrell v. Gulf Sulphur Co., 157 Tex. 10, 15, 299
S.W.2d 672, 675 (1957)). A reservation by implication in favor of the grantor is
not favored by courts. Sharp v. Fowler, 151 Tex. 490, 494, 252 S.W.2d 153, 154
(1952); Reeves, 621 S.W.2d at 212.
Discussion
In Farm & Ranch’s sole issue on appeal, it argues that the deed
restrictions reserved the mineral rights to Caldwell’s Creek, Ltd. and that the
statement in the lot owners’ deeds that conveyed the property subject to any
recorded restrictions means that Caldwell’s Creek, Ltd. conveyed only the
surface estate to the lot owners.
At the time that Caldwell’s Creek, Ltd. filed the restrictions, it owned both
the mineral and surface rights to the Caldwell’s Creek land. An owner cannot
reserve to himself an interest in property that he already owns, see Reeves, 621
S.W.2d at 213, and the restrictions did not convey any surface or mineral estates
to another party, see Moser v. U.S. Steel Corp., 676 S.W.2d 99, 101 (Tex. 1984)
(“In Texas, the mineral estate may be severed from the surface estate by a grant
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of the minerals in a deed or lease, or by reservation in a conveyance.”). Thus,
the restrictions were not a reservation of the mineral rights by Caldwell’s Creek,
Ltd.3 The trial court so found in its grant of declaratory relief.
Farm & Ranch does not directly challenge the trial court’s finding but
instead argues that the restrictions and the deeds “must be read as an integrated
instrument of conveyance . . . .” The deeds state, “This conveyance is made
subject to any and all easements, restrictions, and mineral reservations affecting
said property that are filed for record in the office of the County Clerk of Tarrant
County, Texas.” Farm & Ranch argues that this “subject to” language imports
the language of the restrictions into the deed and is constructive notice of the
restrictions. See Tex. Prop. Code Ann. § 13.002 (West 2004) (“An instrument
that is properly recorded in the proper county is . . . notice to all persons of the
existence of the instrument.”); Westland Oil Dev. Corp. v. Gulf Oil Corp., 637
S.W.2d 903, 908 (Tex. 1982) (“It is well settled that ‘a purchaser is bound by
every recital, reference and reservation contained in or fairly disclosed by any
instrument which forms an essential link in the chain of title under which he
claims.’”) (quoting Wessels v. Rio Bravo Oil Co., 250 S.W.2d 668 (Tex. Civ.
App.—Eastland 1952, writ ref’d)). But if the lot owners had looked back to the
restrictions, they would only have found an affirmative statement that Caldwell’s
3
We further note that the restrictions were subject to change by a vote of
70% of the lot owners. To construe the restriction as a reservation of the mineral
rights would mean that the lot owners could vote to divest Caldwell’s Creek, Ltd.
of its mineral rights simply by voting it to themselves.
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Creek, Ltd. did indeed own the mineral rights in fee simple and were thus able to
convey them to the lot owners.
Farm & Ranch argues that the phrase “shall continue to belong” “serves as
a clear reservation of mineral rights” in attempt to distinguish this case from
Reeves, in which the failed attempt at a reservation was a plat showing the
conveyed property with a portion marked “Reserved by Owner.” See Reeves,
621 S.W.2d at 210. It contends that the restrictions in this case are
distinguishable because “shall continue to belong” is a future-looking statement
that, once read into a deed at a later date, “can only mean that we’re reserving it
each and every time that we issue a deed in reference to or subject to those
restrictions.” This argument first neglects both that the restrictions are neither a
lease nor an instrument of conveyance, and thus, cannot reserve an interest, see
Moser, 676 S.W.2d at 101, and that an owner cannot reserve to himself an
interest that he already owns, Reeves, 621 S.W.2d at 213. Farm & Ranch cites
no case holding that a statement that does not rise to a reservation retroactively
transmutes into a reservation when referenced in a later deed, nor do we believe
it to be so. A reservation must be made at the time of the conveyance or lease.
See id. at 212 (“It is fundamental that a general warranty deed conveys all of the
interest that a grantor has in the land described therein unless there is language
in the instrument which clearly shows an intention to convey a lesser interest,
and there is not reserved to the grantor any interest in the land conveyed, absent
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a clear and unequivocal intent to do so which is expressed in the deed itself.”)
(emphasis added).
Second, we do not believe that the phrase “shall continue to belong” can
only be interpreted as a future reservation. The trial court correctly interpreted it
to mean that nothing in the restrictions and reservations deprived Caldwell’s
Creek, Ltd. of its ownership of the mineral rights in the property. Thus, Caldwell’s
Creek, Ltd. continued to possess the mineral rights and was therefore able to
convey them in future deeds.
Turning to the language of the deeds conveying the property to the lot
owners, Farm & Ranch does not argue that anything in the deeds’ language is a
separate reservation of mineral interests in the deeds, only that the provision that
made the conveyance “subject to any and all easements, restrictions, and
mineral reservations affecting said property that are filed for record in the office of
the County Clerk of Tarrant County, Texas” reads the language of the restrictions
into the deeds. As stated above, a general warranty deed conveys all of the
grantor’s interest unless there is language in the instrument that clearly shows an
intention to convey a lesser interest. Waters, 158 Tex. at 347, 312 S.W.2d at
234; Reeves, 621 S.W.2d at 212. The “subject to” language in the lot owners’
deeds is not a clear intention to reserve or except an interest from the
conveyance. See Wright v. E.P. Operating L.P., 978 S.W.2d 684, 688 (Tex.
App.—Eastland 1998, pet. denied) (construing similar language as a limitation of
warranty).
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In Wright, Wright, the owner of a tract of land, executed a deed of trust
pledging both his surface and mineral rights as collateral on a loan. Id. at 685.
Oliver later assumed Wright’s loan in an agreement that expressly reserved the
mineral rights to Wright. Id. The bank approved the assumption and reservation,
and it also agreed not to foreclose on the minerals should Oliver default on his
payments. Id. When Oliver defaulted on the loan, the bank erroneously
foreclosed on both the surface and the minerals. Id. at 686. The bank’s
successor in interest (Oregon) later conveyed its interest by special warranty
deed that included language stating the conveyance was “subject and
subordinate to . . . [a]ny and all valid and subsisting leases, reservations, [and]
severances of any and all oil, gas[,] and minerals . . . which are presently of
record . . . including, without limitation, that certain reservation of all oil, gas[,]
and minerals . . . reserved by [Wright].” Id. Our sister court held, as a matter of
law, that
[t]he language stating that the conveyances were made subject to
any and all reservations . . . does not reserve any mineral interest in
Oregon’s predecessors in title, but rather recognizes that
reservations have been made in the past and are in the chain of title.
This language is more in the form of limiting the warranty than
reserving an interest.
Id. at 688. The court recognized that all the parties agreed that Oregon intended
to reserve the mineral rights, but it noted that the court’s duty is to “ascertain
what the language of the instrument says, not what the parties meant for it to
say.” Id.; see also Reeves, 621 S.W.2d at 211 (“The question to be answered in
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this case is not what the grantors may have intended to say in the deed, but the
meaning of what they did, in fact, say.”).
Farm & Ranch argues that this construction renders the clause a nullity.
We do not believe the “subject to” language is null, but it is a limitation of the
warranty. See Wright, 978 S.W.2d at 688; see also Averyt v. Grande, Inc., 686
S.W.2d 632, 634 (Tex. App.—Texarkana 1984) (citing Kokernot v. Caldwell, 231
S.W.2d 528 (Tex. Civ. App.—Dallas 1950, writ ref’d)) (“As used in conveyances,
‘subject to’ is a term of qualification and not of contract.”), aff’d, 717 S.W.2d 891
(Tex. 1986). That is, the “subject to” language serves to protect Caldwell’s
Creek, Ltd.’s warranty. See Tex. Indep. Exploration, Ltd. v. Peoples Energy
Prod.-Tex., L.P., No. 04-07-00778-CV, 2009 WL 2767037, at *5 (Tex. App.—San
Antonio Aug. 31, 2009, no pet.) (mem. op.) (“The principal function of a ‘subject
to’ clause is to protect a grantor against a breach of warranty claim. Conveying
land ‘subject to’ defined interests is merely a means of providing notice of
outstanding interests that may affect a grantee’s title.”) (citations omitted); Averyt,
686 S.W.2d at 634 (“This clause [‘less, however, and subject to’] limits the
granting or conveyance of the mineral interest from Grande, Inc. to the
Fogelmans, thereby protecting the general warranty in the deed and avoiding an
estoppel situation . . . .”). As our sister court explained in Stewman Ranch, Inc.
v. Double M. Ranch, Ltd., 192 S.W.3d 808, 811 (Tex. App.—Eastland 2006, pet.
denied) (citations omitted),
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The warranty clause does not convey title nor does it determine the
character of the title conveyed. Rather, it warrants that the same
estate or any right, title, or interest therein has not been conveyed to
any person other than the grantee and that the property is free from
encumbrances.
See also Petro Pro, Ltd. v. Upland Res., Inc., 279 S.W.3d 743, 750 (Tex. App.—
Amarillo 2007, pet. denied) (noting that phrase “insofar and only insofar,” “[l]ike
the phrase ‘subject to,’” does not serve to limit the rights conveyed or to reserve
any rights).
Thus, while Caldwell’s Creek, Ltd. may have intended to reserve the
mineral rights, it did not effectively do so. See Johnson v. Conner, 260 S.W.3d
575, 578 (Tex. App.—Tyler 2008, no pet.) (holding that deed conveyed all
mineral interests, despite any intent not to do so, when it stated that “[n]one of
the [mineral, water, royalty, timber, or other interests] are available to
be conveyed” because that language was not an explicit reservation). When
Caldwell’s Creek, Ltd. conveyed its interests to the lot owners without
reservation, it conveyed its interests in both the mineral and surface. It conveyed
those interests subject to the previously recorded restrictions, but those
restrictions were insufficient to reserve the mineral interests. See Miller v. Melde,
730 S.W.2d 12, 13 (Tex. App.—Corpus Christi 1987, no writ) (holding that a deed
noting that prior conveyances reserved and excepted interests in the mineral
estate conveyed the entire interest when there were no prior conveyances). The
mineral interest thus passed to Titan, not to Farm & Ranch. The trial court did
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not err by granting Titan’s motion for summary judgment and denying Farm &
Ranch’s motion for summary judgment. We overrule Farm & Ranch’s sole issue.
Conclusion
Having overruled Farm & Ranch’s sole issue, we affirm the trial court’s
judgment.
LEE GABRIEL
JUSTICE
PANEL: LIVINGSTON, C.J.; GARDNER and GABRIEL, JJ.
DELIVERED: May 17, 2012
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