Benedict G. Wenske and Elizabeth Wenske v. Steve Ealy and Deborah Ealy ( 2015 )

ACCEPTED
13-15-00012-CV
THIRTEENTH COURT OF APPEALS
CORPUS CHRISTI, TEXAS
5/4/2015 3:41:45 PM
DORIAN RAMIREZ
CLERK
CAUSE NO. 13-15-00012-CV
FILED IN
13th COURT OF APPEALS
CORPUS CHRISTI/EDINBURG, TEXAS
IN THE THIRTEENTH COURT OF APPEALS
5/4/2015 3:41:45 PM
AT CORPUS CHRISTI, TEXAS DORIAN E. RAMIREZ
Clerk
BENEDICT G. WENSKE AND ELIZABETH WENSKE,
Appellants
v.
STEVE EALY AND DEBORAH EALY,
Appellees
ON APPEAL FROM THE 25TH JUDICIAL DISTRICT COURT
OF LAVACA COUNTY, TEXAS
THE HONORABLE WILLIAM D. OLD, III PRESIDING
APPELLEES' BRIEF
ROBERT C. MCKAY
McKAY & COFFEY, LLP
P.O. Box 2469
VICTORIA, TEXAS 77902
(361) 894-8975
(361) 894-8973(FAX)
rmckay@mckaycoffey .com
ATTORNEYS FOR APPELLEES
ORAL ARGUMENT REQUESTED
TABLE OF CONTENTS
TABLE 0 F CONTENTS ........................................................................... ii
INDEX OF AUTHORITIES .................................................................... iv
STATEMENT OF THE CASE ........................................................... vi
STATEMENT REGARDING ORAL ARGUMENT ............................... vii
ISSUES PRESENTED .................................................... 0 •••••••••••••••••••••• viii
STATEMENT 0 F FACTS ......................................................................... 1
SUMMARY 0 F THE ARGUMENT .......................................................... 3
ARGUMENT ............................................................................................. ~
1. Non-Participating Royalty Interests
Are Borne Proportionately by the
Owners of the Mineral Estate ........................................................ ~
2. Texas Rules of Deed Construction
Support the Trial Court's Ruling oo•••o••o··· .... •o•oooo······o ......... o. 15
3. An Exception Is Not a Reservation ........ 0 . 00 . . . . . . . . . . . . . . . . 00 00 . . 00 . . 18
4. Appellants' Contention Leads to
Absurd Results .................................................. 0. 0. 0. 0 ••••••••••• 19
5. Appellants' Case· Law Is
Distinguishable from the
Facts of This Case . 0 0 0 0 0 0 0 0 0 0 0 •• 0 0 0 0 0. 0 0 0 •••• 0 0. 0 0 ••• 0 •••••••••••••••••••••••••••• 21
CONCLUSION AND PRAYER ........ o.oo··················································· 26
CERTIFICATE OF COMPLIANCE ....................................................... 2~
ii
CERTIFICATE OF SERVICE ................................................................. 28
APPENDIX .............................................................................................. 29
iii
INDEX OF AUTHORITIES
Cases: Page(s):
A veryt v. Grande, Inc.,
717 S.W.2d 891
(Tex. 1986) .......................................................................... 22
Bagby v. BredthauerJ.
627 S.W.2d 190
(Tex. App.-Austin, 1981, no pet.) .......................................... 12, 13
Bass v. Harper,
441 S.W.2d 825
(Tex. 1969) ......................................................................... 22, 23, 24
Bright v. Johnson,
302 S.W.3d 483
(Tex. App.-Eastland, 2009, no pet.) .. o. o o. o o o o o o o o • • • o o. o o • • • o o. o o o o. o o •• 18
Day & Co. v. Texland Petroleum, Inc.,
786 S.W.2d 667
(Tex. 1990) 0 0 0 0 0. 0. 0 0 0 0 •• 0. 0 0 •• o o. o. o o. o o o o o. o o o o o o o. o o o. o o. o o •• o o o o o. o o o o • o o o o. o •• 17
Graham v. Prochaska,
429 S.W.3d 650
(Tex. App.-San Antonio, 2013, pet. filed) ..................................... 8
Harris v. Windsor,
294 S.W.2d 798
(Tex. 1956) ............................................................................... 24, 25
Lucke] v. White,
819 S.W.2d 459
(Tex. 1991) ...................................................................................... 12
iv
Pich v. Lankford,
157 Tex. 335 (1957) ................................................................... 8, 23
Plainsman Trading Co. v. Crews,
898 S.W.2d 786
(Tex. 1995) ....................................................................................... 8
Reagan v. Marathon Oil Co.,
50 S.W.3d 70
(Tex. App.-Waco, 2001, no pet.) .................................................. 16
Selman v. Bristow,
402 S.W.2d 520
(Tex. Civ. App-Tyler, 1966, writ refd n.r.e.) .................... 9, 10, 19
Sharp v. Fowler,
151 Tex. 490 (1952) ....................................................................... 15
Walker v. Foss,
930 S.W.2d 701
(Tex. 1996) ..................................................................................... 21
v
STATEMENT OF THE CASE
Nature of the Case: This is a suit regarding the proper construction of
a deed in which the grantor conveyed both the
surface and a portion of minerals under the
disputed property to the grantee while excepting
an extant non-participating royalty interest
owned by unrelated third parties. Appellees
contend that the non-participating royalty
must be borne proportionately by both
Appellants and Appellees. Appellants contend
that the non-participating royalty should be
borne entirely by Appellees. The parties filed
cross-motions for summary judgment. 1
Trial Court: The Honorable William D. Old, III, 25th Judicial
District Court of Lavaca County, Texas; Cause
No. 13-15-00012-CV.
Disposition: The trial court granted Appellees' motion and
denied Appellants' motion.2 All other issues were
disposed of by a trial before the court on the sole
issue of attorneys' fees. s
Court ofAppeals: The Appellants timely perfected this appeal.
1 C.R. pg. 4 7; C.R. pg. 80
2 C.R. pg. 199
a C.R. pg. 199
vi
STATEMENT REGARDING ORAL ARGUMENT
Appellees welcome the opportunity to present oral argument to
the Court, should the Court determine oral argument is appropriate.
The issues to be addressed at oral argument would likely focus on the
application of settled rules of deed construction to this case as well as
real-property law as it applies to a conveyance of real property.
vii
ISSUE PRESENTED
1. Did the district court properly determine that the non-
participating royalty should be borne, proportionate to the respective
interests in the mineral estate, by both Appellees and Appellants?
viii
STATEMENT OF FACTS
The issue in this case is the proper construction of a deed (the
"Deed") in which the Appellants-Grantors conveyed approximately 55.0
acres of land to the Appellees-Grantees on October 17, 2003. 4 Although
the surface was conveyed as well as a portion of the minerals under the
property, there is no dispute in this lawsuit related to the surface estate
or the mineral estate reserved and conveyed except as to the amount of
royalty reserved by Appellants. The dispute between the parties hinges
on the following two sections of the Deed that include the mineral
reservation ("Reservation") and the exceptions to conveyance and
warranty ("Exception"):
The Reservation from the 2003 Deed (The "Reservation")
"RESERVATIONS FROM CONVEYANCE:
For Grantor and Grantor's heirs, successors, and assigns forever,
a reservation of an undivided 3/Sths of all oil, gas and other
minerals in and under and that may be produced from the
Property. If the mineral estate is subject to existing production or
an existing lease, the production, the lease, and the benefits from
it are allocated in proportion to ownership in the mineral estate."
4 C.R. 34; Appendix 1
1
The Exception from the 2003 Deed 5 (The "Exception")
"Exceptions to Conveyance and Warranty:
Undivided one-fourth (1/4) interest in all of the oil, gas and other
minerals in and under the herein described property, reserved by
Marian Vyvjala, et al for a term of twenty-five (25) years in an
instrument recorded in Volume 400, Page 590 of the Deed Records
of Lavaca County, Texas, together with all rights, express or
implied, in and to the property described herein arising out of or
connected with said reserved interest and reservation, reference to
which instrument is here now made for all purposes."
The remaining factor relevant to this dispute is the non·
participating royalty referenced in the Deed and immediately above
created by an earlier 1988 deed in which the following reservation was
made:
Non-Participating Royalty Interest from 1988 Deed 6 ("The 1988 Deed")
"Anything in the foregoing conveyance to the contrary
notwithstanding, it is expressly agreed and stipulated that out of
the sale hereby made there is expressly excepted and reserved to
the grantors herein, MARIAN VYVJALA AND MARGIE NOVAK,
their heirs and assigns .... an undivided one-fourth (1/4th) interest
in and to all of the oil royalty, gas royalty, and royalty in
casinghead gas, gasoline and royalty in other minerals in and
under and that may be produced from the above described
tract ... for a period of twenty-five (25) years ... "
5 C.R. pg. 35; Appendix 1
s C.R. pg. 38; Appendix 2
2
Additionally, there is language in the 1988 Deed which is relevant to
this case:
Non-Participating Royalty Requirements 7
"in the event any existing or future oil, gas and/or minerals lease
provides for a royalty in excess of one-eighth (1/8) then grantors
herein, Marian Vyvjala and Margie Novack, shall share in said
royalty provided for in such lease or leases to the extent of an
undivided one-fourth (1/4) thereof."
Both Appellants and Appellees executed oil, gas and mineral
leases covering the disputed interest. 8 Both leases were executed in
exchange for a royalty that was in excess of one-eighth. 9
SUMMARYOFTHEARGUMENT
The Deed from Appellants-Grantors to Appellees-Grantees
conveyed everything owned by the Appellants-Grantors except that
which was reserved or excepted. In order to avoid a breach of warranty,
the interests contained in the "exceptions to conveyance and warranty"
section put the Appellees-Grantees on notice of interests outstanding in
7 C.R. pg. 41; Appendix 2
s C.R. pg. 9, 10, ~ C
9 C.R. pg. 9, 10 ~ C
3
third parties. The Reservation in the Deed makes it clear that the
Appellants-Grantors reserved to themselves 3/Sths of the minerals
under the property. By operation of Texas law, everything else not
reserved or properly excepted to passed to the Appellees-Grantees.
Because the Appellants-Grantors reserved 3/Sths of the minerals, 5/8ths
of the minerals were conveyed to Appellees-Grantees. The parties do
not dispute this calculation of the mineral estate; the parties do
however dispute how Appellants' 3/Sths mineral ownership and
Appellees' 5/8ths mineral ownership is affected by the outstanding
2/8ths non-participating royalty interest ("NPRI") owned by third
parties to this lawsuit. (Appellants' Brief Page 3)
The distinction between minerals and royalty has been a difficult
and longstanding source of problems for mineral owners, judges,
justices and attorneys alike. Although it would seem easy enough to
take the Appellants' 3/Sths reserved mineral reservation and add it to
the outstanding 2/8ths NPRI leaving a 3/Sths interest for the Appellees-
Grantees, this is not the way Texas oil, gas and mineral law works. The
mineral estate is not the royalty estate. The Deed reserved to the
Appellants-Grantors 3/Sths of the minerals and the Deed conveyed
4
everything not reserved or properly excepted to the Appellees-Grantees,
this being a 5/Sths mineral interest as well as the surface. Together,
the Appellants and Appellees own the entire mineral estate under the
55.0 acre tract of land conveyed by the Deed. However, it is undisputed
that the 8/Sth mineral estate is burdened by a NPRI of 2/8ths which is
owned by third parties to this lawsuit. There is no contradiction in this
because a NPRI is carved out of the mineral estate; it is derivative of
the mineral estate. Thus, Texas law holds that the Appellants own
3/Sths of the minerals, that the Appellees own 5/Sths of the minerals,
and that out of this complete 8/8ths mineral estate under the property,
there is carved from it a 2/8ths NPRI which Appellants and Appellees
must bear proportionately to their respective estate in the minerals.
Besides the plain language of the Deed and the operation of
settled oil, gas and mineral law, Texas adheres to the greatest estate
possible rule, the rule against implied reservations, and the rule of deed
construction which construes reservations and exceptions in favor of the
grantee. In order for this Court to accept Appellants' novel
interpretation which Appellants contend allows them to shrug off their
share of the NPRI burden, this Court would have to ignore rules of deed
5
construction that must favor the Appellees-Grantees and well settled oil
and gas jurisprudence in this state.
The trial court's decision correctly acknowledges the legal
distinction between a reservation and an exception in a deed. A
reservation is not an exception, despite unclear or ambiguous drafting
in the occasional deed. There is no assertion of ambiguity in the Deed
by any party to this proceeding. A reservation will always favor the
grantor; an exception never favors the grantor because an interest to be
excepted is necessarily owned by an individual who is not the grantor.
The benefit a grantor receives by making exception to an outstanding
interest is that he is protected from breaching his warranty to the
grantee. In this case, the Appellants-Grantors properly made exception
to the outstanding 2/Sths NPRI. 1o This exception put the Appellees·
Grantees on notice that there is an outstanding interest the grantors do
not own, will not be conveyed in the deed, and is not warranted. The
Deed was drafted properly and carefully if one wanted both Appellants'
and Appellees' mineral estates to equally bear the NPRI. Appellants
cannot assert under Texas law that merely making an exception to the
10
Appendix 1
6
2/Sths NPRI somehow increased the size of their mineral reservation or
operated as some kind of a "back-door" reservation.
Lastly, Appellees will explain how and why Appellants' argument
leads to absurd results as well as discussing the case-law cited in
Appellants' brief.
In summary, Appellants' argument confuses the distinction
between royalty and minerals, violates Texas' rules of deed
construction, fails to respect the substantive operation and plain
meaning of the reservation and exception sections in the deed and leads
to absurd and unjust results.
ARGUMENT
I. Standard of Review
Appellees agree with the Appellants' statement on page 8 of
Appellants' Brief regarding the de novo standard of review applicable to
appeals of cross-motions for summary judgment.
II. Non-Participating Royalty Interests. Absent Express Language to
the Contrary. Are Borne Proportionately by the Mineral Fee-Estate
Owners.
A royalty interest is not a mineral interest; an interest in minerals
in place and an interest in royalty are separate and distinct estates in
7
land. Pich v. Lankford, 157 Tex. 335, 339 (1957). The specific type of
royalty interest outstanding in third parties and present in this case is
a non-participating "floating'' royalty interest which entitles the NPRI
owner to a share of the mineral-fee owner's royalty under a lease. See
Graham v. Prochaska, 429 S.W.3d 650 (Tex. App.-San Antonio, 2013,
pet. filed.) Because of the language creating it, the NPRI in this case
"floats" due to the fact that its value can change based on the royalty
reserved by the mineral owners when oil, gas and mineral leases are
executed. Id. A typical NPRI owner cannot lease the mineral estate
himself, but relies on a mineral owner to lease the property and to
reserve a royalty interest in which the NPRI owner will share.
Plainsman Trading Co. v. Crews, 898 S.W.2d 786 (Tex. 1995). A NPRI
is carved out of the mineral-fee estate. Id. Logically then, because the
mineral-fee estate is owned by both Appellants and Appellees the NPRI
is thus carved from both Parties' interests and accordingly must be
borne proportionately. The Court in Pich clearly states that
"Ordinarilyll the royalty interest ... would be carved proportionately
from the two mineral ownerships ... " Pich v. Lankford, 157 Tex. at 343.
11
The Petitioner in Pich apparently stipulated to the NPRI burden.
8
Further support for Appellees' contention that the NPRI must be
borne proportionately by both Appellees and Appellants is Selman v.
Bristow, 402 S.W.2d 520, 521 (Tex. Civ. App. 1966, writ refd n.r.e.) In
Selman, the court was dealing with almost identical facts to this case. A
NPRI was first carved from the mineral estate by Mrs. Weeden. ld.
Next, the Plaintiffs in Selman divided the mineral fee by reserving a
1/4th mineral interest. Id. The Grantee-Defendants were conveyed the
remaining 3/4ths of the mineral estate. The issue in the case was who
bore the NPRI. However, in Selman the Plaintiff-Grantor did not make
exception to the NPRI in the deed. I d. The Selman Court held that the
NPRI would be borne entirely by the grantor because there was no
exception to the NPRI. In our case, Appellees properly made exception
to the NPRI, in contrast to Selman, and Appellees have never contended
that Appellants must bear the entire NPRI. However, properly making
exception to the NPRI does not result in the pendulum swinging the
entire way back; it results in the equitable and just result of
proportionate sharing of the NPRI burden. This case is the deed in
Selman, but drafted correctly. Because of the Exception notifying
Appellees-Grantees of the outstanding NPRI, the NPRI will not be
9
borne solely by Appellants-Grantors as Selman requires but would be
shared proportionately between the Grantors and Grantees. 12
If Appellees wished to create for themselves the result they now
seek, to have Appellees bear entirely the outstanding NPRI, by a
properly worded reservation, they could have done so. To do so
however, would have taken additional and unequivocal language which
would serve to negate longstanding rules of deed construction that
always operate in favor of the Appellees-Grantees. Such additional
language could have been something to the effect of "Grantor reserves
3/Sths of all minerals, and it is specifically understood that Grantors'
reserved interest will bear no part of any NPRI interest." This type of
language would clearly indicate what was intended by the grantor and
it would properly notice any grantee of the effect of the deed on their
conveyed interests. This would have been permissible under the law
because by the delivery and acceptance of the deed, grantees would
have consented to this allocation. However, this was not done.
Appellants reserved 3/8ths of the minerals, conveyed 5/Sths to
12
For the purpose of clarification and to avoid confusion, the Selman case supra
involved a Duhigproblem because an interest was not excepted to. Despite
Appellants' citation to Duhig v. Peavey Moore Lumber Co., this case does not
involve a Duhigproblem.
10
Appellees and made exception to the outstanding NPRI. The effect of
this was to essentially keep the status quo. The 8/8ths mineral interest
in the aggregate, now merely owned by two instead of one, continues to
share the entire NPRI as it did prior to the Deed.
The 1988 deed creating the NPRI also controls the question of how
the NRPI must be borne. The 1988 Deed specifically states that:
"in the event any existing or future oil, gas and/or minerals lease
provides for a royalty in excess of one-eighth (1/8) then grantors
herein, Marian Vyvjala and Margie Novack, shall share in said
royalty provided for in such lease or leases to the extent of an
undivided one-fourth (1/4) thereof." 13 (Bold added)
The language in the 1988 Deed makes it perfectly clear that the
drafters anticipated a severance or multiple owners of the minerals,
such as that which occurred after the Deed to Appellees. It was
understood that multiple leases executed by multiple mineral owners
would have to be accountable to the NPRI owners. Because the
Appellants-Grantors stand in the shoes of the grantee under the 1988
Deed, they are equally bound by this language and must account, just
as Appellees must account, to the current NPRI owners. When
construing deeds, "[t]he primary duty of a court when construing [an
13
Appendix 2
11
unambiguous] deed is to ascertain the intent of the parties from all of
the language of the deed by a fundamental rule of construction known
as the 'four corners' rule." Lucke] v. White, 819 S.W.2d 459, 461 (Tex.
1991). Courts are to attempt to "harmonize all parts of the deed" and
give effect to "every clause." I d. at 462. In this case, Appellants
essentially say to this Court " we intended to reserve 3/Sths of the
minerals and 3/8ths of the royalty free and clear of any burdens" but
that is not what the Deed says.
Lastly, the state of future interests under the facts of this case
also controls the correct result here. The NPRI created by the 1988
Deed is for a term of 25 years and "as long thereafter as oil and gas is
produced ...."14 Despite the fact that the NPRI has been kept alive by
production from the leased property, this interest will at some future
time terminate. What will occur when the NPRI terminates? The
answer is contained in the Deed; both Appellees and Appellants
currently own reversionary interests in the NPRI because they each
own portions of the mineral fee. See Bagby v. Bredthauer, 627 S.W.2d
190, 197 (Tex. App.-Austin, 1981, no pet.) These interests are in
14
Appendix 2
12
proportion to the minerals owned by each respective party. See I d. (i.e.
Appellees own 3/8ths of the reversionary interest in the NPRI and
Appellants own 5/8ths of the reversionary interest) The 1988 Deed says
that:
"this reservation (the NPRI) ... shall terminate ... and all
right, title and interest in and to said oil, gas and other
minerals herein excepted and reserved ... shall pass to and
vest in the grantees herein, their heirs and assigns forever".
(Imbedded parenthetical added for clarity)
When Appellants-Grantors divided the mineral interest in the
Deed, this reversionary interest was also divided. See I d. Everything
not reserved or excepted to in a deed is conveyed to the grantee. I d.
Because the reversionary interest of the NPRI was not expressly
reserved to Appellants-Grantors it was necessarily conveyed to
Appellees-Grantees in proportion to their share of the minerals, 5/8ths.
I d. When the NPRI terminates Appellants will own 3/Sths of the
minerals under the property and 3/8ths of the royalty and Appellees
will own 5/8ths of the minerals and 5/8ths of the royalty, but neither
Appellees nor Appellants will suffer any reduction in royalty due to a
13
burdening NPRI. As the NPRI terminates, 3/8ths of that interest will
revert to the Appellants and 5/Sths will revert to the Appellees.
Because both mineral owners, Appellants and Appellees, will be
benefited by the reversion of the outstanding NPRI, it can only follow
that both mineral owners bear their proportionate share of the NPRI
prior to its termination and nothing in the Deed indicates any intent to
the contrary The district court construed the Deed, correctly applied
the appropriate case law and found as follows:
By applying Texas law, the following displays the correct calculation of
the royalty interest held by each party:
Appellants- .25 (the amount reserved in the1988 Deed)
X 3/8 (the amount of mineral-fee reserved by Appellants)
= .09375 (the amount by which Appellants royalty interest is
reduced by the NPRI)
Then, 3/8 minus .09375 = .28125; the Appellants receive .28125 of
any royalty reserved in a lease by them.
Appellees- .25 (the amount reserved in the1988 Deed)
X 5/8 (the amount of mineral-fee conveyed to Appellees)
= .15625 (the amount by which Appellees' interest is reduced
by the NPRI)
14
Then, 5/8 minus .15625 = .46875; the Appellees receive .46875 of
any royalty reserved in a lease by them.
Thus, Appellants and Appellees' combined interest in the royalty is
.28125 + .46875 = .75
Appellants and Appellees' royalty interest combines to make a 3/4 or .75
interest leaving only the outstanding NPRI of .25 of royalty to complete
the royalty interest and equal1 or 100% of the royalty.
The Trial Court correctly construed the Deed to this effect and
should in all respects be affirmed.
III. Texas Rules of Deed Construction Support the Trial Court's
Interpretation and Determination.
Texas law does not favor implying reservations; they must be
made by clear language to be effective. Sharp v. Fowler, 151 Tex. 490
(1952). If Appellants' position were to be approved it would violate this
rule because Appellants never, under any construction of the Deed,
reserved anything more than a 3/8ths mineral interest and that interest
must bear its equal share of the outstanding NPRI. If Appellants
intended to make an additional reservation that would allow them to
discard the burden of the NPRI, they certainly could have. However,
15
Appellants did not and no reservation should now be implied which was
never expressed in the Deed. Appellants reserved for themselves a
3/Sths mineral interest under the property and that is precisely what
they have.15 Appellees were conveyed 5/Sths of the minerals under the
Deed and that is precisely what they have. 16 Neither changes the
correct application of law in this case, that both mineral interests must
bear the outstanding NPRI carved from the 8/8ths mineral-fee estate.
Reservations are strongly construed against the grantor and in
favor of the grantee. Reagan v. Marathon Oil Co., 50 S.W.3d 70 (Tex.
App.-Waco, 2001). Exceptions are also strictly construed against the
grantor. State v. Dunn, 574 S.W.2d. 821, 824 (Tex. Civ. App.-Amarillo
1978, writ refd n.r.e.) The Reservation and Exception in the Deed must
be construed in favor of the Grantee which was the decision of the trial
court to wit: that Appellees own 5/8ths of the minerals, that Appellants
own 3/8ths of the minerals and that the total aggregate 8/8ths mineral
estate bears the 2/Sths NPRI proportionately.
In order for Appellants' position to be correct, that the 3/Sths
mineral reservation included with it the additional benefit of it not
15
Appendix 1
16
Appendix 1
16
being burdened by the NPRI, there must be additional language in the
Deed effectuating that intent. Absent that, the Reservation as it exists
in the Deed must be construed in favor of the Appellees-Grantees and
that construction is for the NPRI created by the 1988 Deed to burden
both Appellants' and Appellees' mineral estate proportionately.
Texas also follows the rule commonly known as the "greatest
estate possible" - meaning that a deed will convey every interest held
by the grantor except that which he clearly reserves or excepts. Day &
Co. v. Texland Petroleum, Inc., 786 S.W.2d 667 (Tex. 1990). Applying
this rule, Appellants reserved to themselves 3/8ths of the minerals
under the property and notified the Appellees-Grantees of the existence
of the NPRI created by the 1988 Deed. Because we can determine
exactly what interest Appellants own then by deduction we can
determine what Appellees own, that being everything else or the
greatest estate possible. Appellees' greatest estate possible is a 5/8ths
mineral interest together with 5/8ths of the reversionary interest
burdened by 5/Sths of the NPRI for as long as the NPRI is in effect.
17
IV. Appellants Cannot Convert an Exception into a Reservation.
An exception is not a reservation. A reservation is always in favor
of the grantor; an exception is not. See Bright v. Johnson, 302 S.W.3d
483 (Tex. App.-Eastland, 2009). An exception is an exclusion from the
grant and is typically used when there is an outstanding interest in a
third party. The exception clause is used when the grantor, here
Appellants, excludes an interest from the granting clause because it is
already owned by another and thus cannot be conveyed without an
instantaneous breach of warranty. Appellants make much ado about
the presence of the NPRI in the exceptions section of the Deed.
However, the mere exception to an NPRI does not and can never result
in an increased reservation to Appellees. Since Appellants reserved
3/8ths of the minerals under the property, rules of deed construction
will give Appellees-Grantees the remainder being their greatest estate
possible. Approving Appellants' argument that the mere exception to
the NPRI in the exception section of the Deed inured to the benefit of
the Appellants-Grantor by way of increasing Appellants' reserved
interest adulterates the operation of an exception within a deed,
contradicts the rule against implied reservations and contradicts the
18
rule that reservations and exceptions be construed in favor of the
grantee.
Appellees do not dispute the fact that the exception put them on
notice to the existence of the NPRI, and as explained earlier in the
discussion of the Selman case, had the exception not been there it would
in fact be Appellants bearing the full burden of the NPRI. Appellees
understood their mineral interest was burdened by this NPRI in
proportion to their ownership of the minerals and that is what the
Exception and the Deed makes clear. However, there is absolutely
nothing in the Deed, nor are there any rules of construction or
presumptions regarding deeds in Texas that would allow us to leap to
an interpretation that the NPRI would only burden Appellees.
V. Absurdities Abound if Appellants' Contention Is Approved.
Appellants state their position clearly that "Appellants expressly
reserved 3/8ths of all of the [minerals] and conveyed the remainder,
subject to the burden of the [NPRI] ....As a result, Appellees' mineral
interest should be burdened by the [NPRI]." Appellants' BriefPg. 14.
While Appellees agree with the foregoing, Appellants' interest must be
19
treated in the same manner. Appellants may not inexplicably remove
the NPRI from burdening their interest. This is akin to conveying half
of your surface in a piece of property and arguing that the grantor no
longer has to pay property tax on any of the property because he has
disclosed the fact that grantee should pay property tax in the
transaction. If you own real property, you pay your tax absent an
agreement to the contrary; the "tax" in this case is the NPRI and
Appellees have never agreed to accept more than their share of it.
Appellees do at least agree they are accountable to the NPRI owners,
unlike Appellants who are before the Court attempting to avoid any
part of their fair share of the NPRI burden.
Appellants' argument adds complexity and confusion in an already
difficult area of the law. Had Appellants conveyed to Appellees all of
the mineral estate, there would be no question as to who would bear the
NPRI; the sole 100% mineral owner would bear it all. If Appellants had
reserved all of the minerals under the property, the result would be the
same- Appellants, being owners of 100% of the minerals in fee, would
bear the entire NPRI. Under Appellants' position and the facts of this
case however, when Appellants conveyed only part of the mineral
20
interest under the property we are presented with the nonsensical
result presented by Appellants that the NPRI will be only borne by the
grantee, who merely owns a portion of the mineral estate. The sensible
result and that which case-law in Texas mandates is Appellees', that
when the mineral estate is severed by a reservation, the burden of the
NPRI - being a separate and distinct estate in land, one that is carved
from the mineral estate - must be borne, absent express and clear
language to the contrary, by the mineral owners in proportion to their
mineral ownership.
VI. Appellants' Case-Law Is Inapposite or Distinguishable To the
Facts of this Case.
Appellants first cite Walker for the proposition that an exception
or a "subject to" clause protects the grantor against a breach of
warranty and limits the estate granted to another interest. Walker v.
Foss, 930 S.W.2d 701 (Tex. 1996). This case merely restates the law
regarding exceptions in a deed. As explained earlier, an exception does
serve to protect the grantor from a breach of warranty - Appellees
approve of this statement of the law. What Walker does not say
however, is that an exception to title operates to somehow increase the
21
magnitude of a grantor's reservation. An exception limits the estate
granted but the real substantive point here is that Appellants'
argument does not join the issue regarding whether or not Appellants'
mineral interest is likewise burdened by the NPRI. That is, the fact
that Appellees' interest is burdened by the NPRI, which Appellees do
not contest, determines not whether or not Appellants are also
burdened. The case does not speak to this and it has no relevance to
this lawsuit excluding a restatement of well know principles related to
the workings of an exception in a deed.
Appellants also discuss Bass v. Harper, 441 S.W.2d 825 (Tex.
1969.) but Bass does not support Appellants' contention. The Texas
Supreme Court has made clear their holding in Bass by stating that
"Bass only holds that the "subject to" clause limits the estate granted in
the land .... " Averyt v. Grande, Inc., 717 S.W.2d 891, 894 (Tex. 1986).
What was the conveyance in the Deed subject to? The NPRI. Thus,
under Bass the NPRI, if alive and outstanding, was not included in the
grant to the Appellee-Grantees. Appellees have never contended that it
was. What was granted, however, were the reversionary rights to 5/8th
of the excepted to NPRI. The NPRI is owned by third-parties to this
22
lawsuit and will continue for so long as there is production in
commercial quantities under the leased lands. Appellees 5/Sths mineral
interest is burdened by the NPRI, and so is Appellants' 3/Sths mineral
interest. The "subject to" clause relating to the outstanding NPRI does
not alter this analysis in any fashion.
The grantee in Bass was conveyed 7/14ths of the royalty and the
court subtracted an outstanding 6/14ths royalty from that grant
yielding 1/14ths of the royalty owned by the grantee. This analysis is
inapplicable to the facts of this case because Appellees were granted a
mineral interest and not the derivative and separate estate of royalty.
Pich v. Lankford, 157 Tex. 335, 339 (1957). Because the NPRI is carved
from the mineral estate that both Appellants and Appellees own, it
must be borne by both mineral owners and Bass has no application
here.
Furthermore, Bass is inapposite to the facts of this case because
the deed interpreted therein is nothing like the Deed in this case. First,
the deed referenced in Bass does not contain a reservation. This fact
alone should be sufficient to distinguish the case. The granting
language in Bass conveys "all that ... one-half interest in and to ...." Bass
23
v. Harper, 441 S.W.2d at 826. This is uncommon granting language
and unlike the instant Deed. The Deed in this case grants everything
in and under the property, and then out of the all-encompassing grant
reserves a small portion of the conveyance (3/Sths of the minerals) via
the reservation. The deed in Bass does not do so and it is not analogous
to the facts of this case. Next, the conveyance in Bass references a
specific fractional interest to be conveyed. The Deed in our case does
not do so; the granting clause conveys everything and then operates to
subtract the reserved interest in favor of the Appellants-Grantors.
Additionally, Bass dealt with the relationship of a warranty clause in a
deed with the granting clause; this is not the case under these facts and
Appellees have never urged a claim related to breach of warranty.
Appellants are incorrect in stating that the Appellees should bear the
burden of the NPRI under the Bass analysis because the analysis has
absolutely no bearing to the facts of this case.
Lastly, Harris is cited by Appellants for the proposition that
"when a deed reserves an interest in the grantor and contains a recital
referring "for all purposes" to an earlier deed describing the third
party's mineral interest, the grantor is not estopped to assert his
24
reservation." Harris v. Windsor, 294 S.W.2d 798, 800 (Tex. 1956).
Appellants' Brief Pg. 11. Appellants also cite Harris for the proposition
that the phrase "for all purposes" made the grantee's interest subject to
the reservation contained in an earlier deed. Appellants' Brief Pg. 12.
Appellees agree with these statements of the law and approve of their
application here. The grantor is not estopped to assert his reservation -
the Grantor-Appellants reserved for themselves a 3/Sths mineral
interest always burdened by the NPRI. Further, Appellee-Grantees'
interest certainly is "subject to the reservation" in the 1988 deed, the
NPRI, but so too is Appellants'.
As a whole, all of Appellants' cases simply are inapplicable or are
cited for an erroneous proposition that confuses minerals with royalty.
As much as Appellants may now wish they had reserved 3/Sths of the
royalty, despite the fact that had they done so they would have never
signed a lease nor would they have received any bonus payments, they
did not do so; Appellants reserved exactly what the Deed says, 3/Sths of
the minerals. Because the NPRI is carved from the mineral estate and
because the NPRI is a separate estate in land burdening the mineral
25
estate, both Appellants and Appellees, as mineral owners, must bear
the NPRI proportionately.
CONCLUSION AND PRAYER
For the reasons stated, Appellees request that the trial court's judgment
be in all respects affirmed and that the Appellees be granted such other
and further relief to which they may be justly entitled.
Respectfully,
Robert C. McKay
State Bar No. 136908
Bobby M. Maiden
State Bar No. 24088893
One O'Connor Plaza, Ste. 305
Victoria, Texas 77902-2469
Telephone: 361.894.8975
Facsimile: 361.894.8973
bmaiden@mckaycoffey .com
rmckay@mckaycoffey .com
ATTORNEYS FOR APPELLEES
26
CERFICIATE OF COMPLIANCE WITH TEXAS RULE OF
APPELLATE PROCEDURE 9.49(I)
The undersigned certifies that the foregoing document contains 5,088
words excluding the subject matter found in T.R.A.P. 9.4 (i)(l).
27
CERTIFICATE OF SERVICE
I certify that on r1f !/!;, <-(-fi_ ,2015, I electronically filed the
foregoing with the Clerk of e Court us1ng the state provided electronic
filing system which will send notification of such filing to the following:
Adam T. U szynski
MEIER, BRADICICH & MOORE, LLP
P.O. Box 550
Victoria, Texas 77902
adamu@victoriatxlawyers.com
COUNSEL FOR APPELLANTS
28
APPENDIX
1. The Deed
2. The 1988 Deed (Creating the Non-Participating Royalty
Interest/NPRI)
3. Final Judgment
29
APPENDIX-!
~14-2113 ts:aa Fram: Toa,1361573584B
.
:1'
..
. J Vbl. 299PAGE 769
warra.- Deed with Vendafa Uen
Date: October 17, 2003
Grantor: BENEDICT G. WENSKE and EUZABETH WENSKE. husband and wife
Grantor's Mailing Addres8:
BENEDICT G. WENSKE and EUZABETH WENSKE
2378FM532W
Shiner, Texas 77884
Lavaca County
Grantee: STEVE EALY and DEBORAH EALV, husband and Wife
Grantee's MaiDilg Acldnl&s:
STEVE EALY and DEBORAH EALV
28514 Autumn Glen Road
Boerne. Texas 78008
Consideration:
cash and two notes of even date executed byGJantee and referred to as thaflnlt.uen note
and the second-lien note. The first-lien note Is D8Yab1e to the order of AMERICAN NATIONAL
BANK In the_p_m_ctDal amount of FIVE HUNDRED SEVENTY..SEVEN THOUSAND AND N0/100
DOLLARS ($577.000.00) of which FIVE HUNDRED SIXTY.SEVSN THOUSAND AND N0/100
DOLLARS ($587,000.00) Is advanced aa ~ ~. The first-Den note Ia secured by the
ftJst and auiJerlor venclofellen aaatnst. anCiauperfor UUa to. the_PI0)2erty mtalned tn thla deed tn
favarofAMERICAN NAnONAL lANK and Is also secured b)! a fbst.llan ileed oftruatofeven date
from Grantee to w.v. HYMAN. trustee. Tile second-Usn note Ia payable to the order of Glantor
In the P.rfnclpal amauntofFlFlY•EIGHT~ISAND AND N0/100 DOLLARS ($68,000.00~The
saconCI-Den note Is secwad by a second ami nferlorvendofs Den agatnst. and autetlortltle the
Property retained In this deed and Is also eecured by a 88C011d-llen Cleed Of trust Of even date
Gr8nle8 to BENEDICT G. WENSKE, trustee.
Property (Including mw Improvements):
AD that certain tractor~l of land sttuated In Lavaca CoUJl!Y, Texas, a part of the
~=~?:,•,;=:t~r~o:~:.'lC:o~::;,w:::r:.,lt~
of the 107-416acre tract of land converad to John Brom bY ste~en ElsDC and wJfe &:ad
=!'l:e``~.``````t~r:e~attacJ~
hereto and blcotpO herein by reference.
Reservations from Conveyartca:
Par Grantor and Grantor's heirs, successors, and assigns forevel a relJervattan Of an
undMdec13/8thsofaU oft, gaa, and othermtnerass In and under and that ~be produced from the
PnmertY. Ifthe rntnera1 estate Is subject to exJstl~ production or an exls1lml lease. the production,
lhe leaie, and the benefits from It &18 aUocated In proportion to ownellh.lp In the m!naral estate.
NOU-14·2813 15129 From: To: .13615735848
VOL 299PAGE 770
Exceptions to conve,anae and Warrantr-
Rfght of Way Deed from John Bron], ~tux to the state of Texas. dated February 1. 1861,
I8CORied rn Vo!um8187, Page 83&, Deed tecords of Lavaca COunty. Texas.
Undivided cme-four.th (1/4) Interest In all of the OU, ~and other minerals In and under the
ha!eln desclibed ~. I'8I8IV8d r~ at ill roratenn oftwenfr-fiVe ``In
fnsfrumant reCOftled In Volume 400, e 690 of the Deed Records of Lavaeb CoUntY, Texas,
together with aU rigl\ts, express or rmpn t~and to lhe PrOPertY herein described arising out of or
connected with 88ld friterast and reservaUon. reference to whfch Instrument Is here made far aU
purposes.
Uena described as ~rt of the COnslderaUcn and lnlother liens deacrlbad In thfe deed as
bel!lg either assumed or subJect to Which ttUe Is ~i.valfaiY existing easementa, rlthts-okvay,
and ptescripttve rfahta, whether of record or not; •• presentlY recoRied and valfdly existing
lnsfnimenta, other than canveyancea oftha surface fee~ tnataffeatthe Pro~ and taxeS
for 2003, which Grantee assumes and agrees to pfW, and subsequent assessments for that and
prior years due to change rn land usage, owneialifp, or both, the payment of which Grantee
assumes.
Grantor, for the Consideration and subject to the Reservauona from Co~ce and the
=trona to CGft\!8r811ca and Warranty, grants, aeua. and convws to Grantee the ProRtrty.
erwlth au and s~ularthe rtghts and ..,purtenances thereto lri any~ befonatna. tO have
ariil to hold It to Grantee and Grantee's heirs. 8UCC8880ra, and a88i~ farever. Giaiitor binds
Grantor end Grantor's hells and aucceaaora to warrant and forever ifafend all and singular the
Property to Grantee and Grantee's hefra. 8UCC8880rs, and asstgns SB~nat ~ "180R
whOmsOeVer lawfullY claiming or to clafm the aame or any part lheraof. ~ as to the
Reservations from conveyance and lhe Excepllons to conveyance and Warranty.
11te vendol'a Den aptnst and aupelfor tftfe to the Pm"rty are mtafned until each note
described Is fully palcl accafdlng to Its terms, at which time thiS deed WID become ab&o!ute.
Amarlcan National Bank. at Grantee's ~t. has P!lfd In cash to Grantor that portfon of
the P-urchase pl'lce Of the PropertY that Is evidenCed by the ftl8t-lfen note. The fflat and superior
venCIOJ's Hen against and sUP-eriOr tiUe to the Propg are retatnecl for the benefit of Amirfcan
National Bank ilnd are tranSferred to American NatiOnal Bank without recoul8e on Grantor to
secure the fbat.Uen note. The seccmd and fnfedor vendofa lien aplnst and ~erior tile tD the
PropertyareretatnedforthelfenefttOfGrantortoaecuretheseconcRren note. Grantor.-.that
thtS seciond and lnferlorvendofa Ren agafnstand s~ titre to the Pro= are and Will remain
==~7re=-~:n:r:.::;..::,.R~J:;=!m:=-u':rn':::#:a'd:.:.C:::: fl
When the context requtrea, singular ftOURa and pronouns Include the plurel.
~G``
(Acknowledgment an following page)
NOU-14-2113 15129 F..om1 To: t1361573584a Paeel23'24
VOL 299PA&E 771
STATE OF TEXAS )
COUNTY OF GONZALES )
TtUs Instrument was aclcnoWfedGt!~ before ma on Oclobe
r I7 2003 b
BENEDICT G. WENSI41 ....
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Paga19
APPENDIX-3
Caase Np. 13-Jf;Hf"'C"
BBNIDIC'I G. WBNSKBAND I IN TBI DISTJUcr COURT
IIIZABBTJI WINSKI §
RalatU&, I
§
v. I 2PJIJDICW, DISTRICJ'OP
I
STEVE 'BALY, DIBORAB EA.LY1 §
AND I
PINN VIRGINIA OIL A GAS, L.P. §
Derazdats. I LA.VACA COUN'IY1 TEXAS
BEING IT REMEMB!RBD that Oil April17. 2014 amo on to be ccmsklellcl Steve IIIII
Dc1xna11 Ealy's ("Caunr..J~Jafnlifli" t.efn) Dcf'eadats" Moticm for Tnulldonal Summaly
Jucl&mcat as well as Beudlct 8Dd Ellmbeth Weasb's ("Caunter-JWeudants" !serela)
Pctitlcmar's Modem ror sau,_,
Judamcnt far Dcc1aradon cfRoyalty Jutaats ccmcendrJa ai~
ps mulalher mfaerals muler Use foJioWJDs tract of'lad:
AD d&al ccrt~ln 1aa:1 orpualol'r..t llfCDalat ln LavaaCaualy, Teas. 1partof'1he Wm. a..
IMauc. Alacl No. tad a pad oflk3GO-=zeiiiCC~ 1J7 M. DocJay rat w~tc.co
SCcpllcn Elslkaa Dcccdcr 12, IUD, IIIII also 1lclaa de IIOitfa poctfGca aflllo 107-4/S •ctrut
of lad~ lalo!aalftlmby StcPcal!lsilc IIIII .uge.y dccd4atatlllcJI• *'loFOcrcter,
•a.•=nk•Uza d=llc=dsofDeall att.wcae:.y, Tau. In VoL24. Ptpi&Jst,lhil
WllafaamcnlpCCiilcel1ycbcrlbalua 5Socn: trlcl,a~maor rca. ave)'ld In adeal fium
8eacdlct a. Wcnsi:D n Ellldela Wcalb • srcvc Edt ad Ddlorllt Ea17 cbd Ocrabcr 17,
.,..,.,
20DJ ad ncaatcd f11 lb Oll1etal Rccan!l at Llvll:l Coanl,r It Vo1. 29J, Plge '18. (lbc
Tile Court CODSIIcrcd all tho pleadJaas. SWJ``~WYiUd&meat proof ldxe it, aad lho upm=ts
of ccnmsel made mopea ~ tlla Court Jlllllld Ddladants' Modoo tor Tndftloaal
Summaly .Judameat ad dte Ccnut deltled Petilloafl Molfoa Cor SUmmar.v Judpeat ror
DeclardOD of'ltayalt)' IDiacsts. 11lenafter Gil tho 13• day of August. 2014, came OD to be
ccmskfered Ccnllter-Piainlifli' c1alms fbt attomeys fa. acl tbD Camt theo C0118&1era4 all
p!eadiqt. evfdeace 8Dd upmea111 of CGUDSel aepdias tile Counter-PJaladSi' claims fbr
Btlameyl rea.
ASAMATrii.OFLAWITJS,11JI!REFOU. ORDBRED,ADJUDOED AND
DECREED:
1. Thaltbe W&II'IIDl7 Deed with Vendor's Um tium Counla'·Dofendanls 10 Counlar·
Pillallmfamectt. Causa No.13-I0.22530CY- Pap J
~. . . .a..WJi!. . .ca5fal4a
A1VII*t4
Plaintill"s, found ofrccard in VoL 299. Pasc 769 of the OlrcclnJ Records of Lavaca COWll)',
Texas ("'Deed") and C:O\'Oring d1c Property conveyed to lite Counter•PIDintJITs, Steve and
Deborah Ealy, conveyed a 5/Bihs nainerallntcrcsl in fcc as well as alf of lhc surfac:c In the
Propcny.
2. That the l/Sths mineral interest rcscrYed by the Cauaucr·Dcfcndnnts and the 5/Blhs
minerul interest con\'cycd to lhc Cauntcr-Pioinliff's in the: Dc:cd will proportionately bear in
accordance wJlb the racl'\'l!d and conveyed mineral interests In dtc Deed, lhc royalty
rcsen'illion crcalcd in thul cenaha deed rrorn Georsla Rnab. Edgar Raab, J\iarian V)'\1alo.
Clarcnc:c Vyvjala. Margie No\·nk. Viccor No\'ak, Ensily Mfgl, Martita Mfgl. ond David Migl to
Counter-Defendants dntcd Janwuy 271l. 1988 and rceardcd Jn the Official Records of La\'8ca
Counay at Vol. 400. Pap 590.
3. That each party sball be r.:sponsiblc far their respective oUomcy•s faa.
4. Tit:tl costs ar courl incurred in Ibis case will be home hy lhc Party lballnc:uncd dlCIU.
S. That any amouniS deposited lnlo lhc rcslsay ofthe Court by Interpleader Penn Virsinfa
Oil &: Oas LP. related to dds action stall be paid GUllo Counler-PiaindR's.
6. Counacr·Piaintirrs may 111\'C execution, writs or possession or such alhcr \\'Ji&s or
process as lmlY be neccssauy for die caron:c:mcnt and collection oftmsjuclamcnt ancllhe ~
ofcourt.
The Coun has previously cnlcmllhc parties• Agreed CRier Disclmrsins lnlaplelder
and dcfcmflmt Penn Viruinia Oil & Gas, LP. This judgment finally disposes of all claims
prcscnlcd in lhls asc and all panhs All otbcr JC~licfnot expressly granted Is dcaicd.
SIGNEDihis1. dayo;u,h ~.2014.
tJ:cL~f)f&
Final Judgmcnc, Cause No. ll·IG-22530CV -Pap 3
\weava~Wcatlf.a.AIIIIia\F~·mliDdon
A1VII•l'olol
•l
i
..
AGBBED AS TO roR.MONLY:
&``
Shamaa T.Moore
Aaomo,yfor PJafa11&lr1Couatermeliudlllls
BeucllctaaclBUaabath Was!SD
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