COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 2-07-263-CV
RANGE RESOURCES CORPORATION APPELLANTS
AND RANGE PRODUCTION I, L.P. AND
STEADFAST FINANCIAL, LLC,
R.J. SIKES, KATHY SIKES,
CHRISTY ROME, GREG LOUVIER,
PAM LOUVIER, AND DACOTA
INVESTMENT HOLDINGS, LLP
AND R. CRIST VIAL
V.
BETTY LOU BRADSHAW APPELLEE
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FROM THE 355TH DISTRICT COURT OF HOOD COUNTY
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OPINION ON REHEARING
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We deny Appellants’ motion for rehearing, but we withdraw our opinion
and judgment of May 8, 2008 and substitute the following. We affirm.
I. Introduction
In three issues, Appellants Range Resources Corporation, Range
Production I, LP, Steadfast Financial, LLC, R.J. Sikes, Roger Sikes, Kathy Sikes,
Christy Rome, Greg Louvier, Pam Louvier, Dacota Investment Holdings, LLP,
and R. Crist Vial (collectively “Range”) appeal the trial court’s partial summary
judgment in favor of Appellee, Betty Lou Bradshaw. While the underlying suit
brought by Bradshaw involves claims for breach of fiduciary duty and
conspiracy, the overarching issue in this interlocutory appeal by agreed order
is whether the trial court correctly decided that the reservation in two 1960
deeds was a “fraction of royalty” interest rather than a “fractional royalty”
interest. We conclude that the trial court was correct and that the reservation
was a “fraction of royalty.”
II. Factual and Procedural History
Bradshaw is the holder of a non-participating royalty interest (“NPRI”)1 in
approximately 1,800 acres in Hood County that she inherited from her parents,
1
… A non-participating royalty is non-possessory in that it does not entitle
its owner to produce the minerals himself. It merely entitles its owner to a
share of the production proceeds, free of the expenses of exploration and
production. See Plainsman Trading Co. v. Crews, 898 S.W.2d 786, 789
(Tex. 1995); Luckel v. White, 819 S.W.2d 459, 463 (Tex. 1991); Hamilton v.
Morris Res., Ltd., 225 S.W.3d 336, 344 (Tex. App.—San Antonio 2007, pet.
denied).
2
J.A. and Lota Fay Driskill. The Driskills reserved the royalty interest in two
deeds that they executed in 1960 (the “1960 Deeds”). 2
By 2006, Appellant Steadfast owned the surface and mineral estates in
approximately 1,994 acres in Hood County, of which the Driskills’ reserved
royalty interests covered 1,800 acres. Steadfast conveyed the surface estate
to Appellant Range Resources Corporation but reserved to itself all of the oil,
gas, and other hydrocarbons in the 1,994 acres. At the same time, Steadfast
entered into an oil and gas lease covering the 1,994 acres with Appellant Range
Production I, L.P.; the lease provided for a 1/8 royalty. Steadfast assigned
portions of its royalty interest to the following additional Appellants: R.J. and
Kathy Sikes, R. Crist Vial, the Louviers, and Dacota Investment Holdings, LLP. 3
In January 2007, Bradshaw filed suit, alleging that Steadfast breached its
fiduciary duty to her by entering into the one-eighth royalty lease with Range
Production I, L.P., when Steadfast owed her a duty to secure a one-fourth
royalty in the lease. Bradshaw argued that she was entitled to a one-eighth
royalty (1/2 of 1/4 lease royalty), rather than a one-sixteenth royalty (1/2 of 1/8
2
… In one deed, the Driskills conveyed approximately 600 acres to
Mitchell & Son, a partnership. In the other deed, the Driskills conveyed
approximately 1,173 acres to The Wheatland Retreat, Inc.
3
… Steadfast also assigned portions of its royalty interest to Peter G.
Bennis and Roger Sikes.
3
lease royalty) because, at the time Steadfast executed the lease to Range, the
“going royalty rate in Hood County, Texas, was one-fourth.”
The parties filed competing motions for summary judgment on whether
the 1960 Deeds reserved a “fraction of royalty” or a “fractional royalty”
interest. Range argued that Bradshaw’s NPRI was a fixed one-sixteenth
“fractional royalty” (1/2 x 1/8) and, therefore, no fiduciary duty was owed or
breached. Bradshaw contended that the 1960 Deeds provided for a “fraction
of royalty,” such that her share of royalty could never drop below one-sixteenth
but could be greater than one-sixteenth. Thus, if a future lease provided for a
one-eighth royalty, she would get a one-sixteenth (1/2 x 1/8) share of
production; if it provided for a one-sixth royalty, she would be entitled to a one-
twelfth (1/2 x 1/6) share of production.
The trial court agreed with Bradshaw, holding that the royalty interest
reserved in the 1960 Deeds was a “fraction of royalty” interest. This
interlocutory appeal by agreed order followed. See T EX. C IV. P RAC. & R EM. C ODE
A NN. § 51.014(d) (Vernon 2008). The trial court stayed the proceedings below
pending our review.
III. Standard of Review
Neither Bradshaw nor Range contends that the 1960 Deeds are
ambiguous. The interpretation of an unambiguous deed is a question of law.
4
Altman v. Blake, 712 S.W.2d 117, 118 (Tex. 1986). Accordingly, we review
de novo the trial court’s construction. EOG Res., Inc. v. Hanson Prod. Co., 94
S.W.3d 697, 701 (Tex. App.—San Antonio 2002, no pet.). When conducting
a de novo review, the reviewing court exercises its own judgment and
redetermines each issue, according no deference to the trial court’s decision.
Quick v. City of Austin, 7 S.W.3d 109, 116 (Tex. 1998).
IV. “Fraction of Royalty” versus “Fractional Royalty”
The sole issue in this appeal is one of deed interpretation: whether the
royalty reservations in the 1960 Deeds constitute a “fractional royalty” or a
“fraction of royalty.”
A “fractional royalty” interest entitles the owner to the specified fractional
amount stated in the deed of oil, gas, or other minerals produced from the land
and remains constant regardless of the amount of royalty contained in a
subsequently-negotiated oil and gas lease. See Tiller v. Tiller, 685 S.W.2d 456,
458 (Tex. App.—Austin 1985, no writ); Phillip E. Norvell, Pitfalls in Developing
Lands Burdened by Non-Participating Royalty: Calculating the Royalty Share and
Coexisting with the Duty owed to the Non-Participating Royalty Owner by the
Executive Interest, 48 A RK. L. R EV. 933, 935 (1995).
A “fraction of royalty” conveys a fractional share of the royalty that is
contained in an oil and gas lease—it is not fixed, but rather “floats” in
5
accordance with the size of the landowner’s royalty contained in the lease and,
in addition to the landowner’s royalty, the fraction of non-participating royalty
also shares proportionally in any overriding royalty interest reserved in the oil
and gas lease, and the holder of the executive right owes a duty to the NPRI
owner in establishing the landowner’s royalty in an oil and gas lease. Norvell,
48 A RK. L. R EV . at 935–36. The amount to be paid to the owner is
determinable upon the execution of some future lease and is calculated by
multiplying the fraction in the royalty reservation by the royalty provided in a
lease. See Winslow v. Acker, 781 S.W.2d 322, 327 (Tex. App.—San Antonio
1989, writ denied); Tiller, 685 S.W.2d at 458.
A. Rules of Deed Interpretation
In construing a deed, our primary duty is to ascertain the intent of the
parties by a fundamental rule of construction known as the “four corners” rule.
Luckel, 819 S.W.2d at 461; Bennett v. Tarrant County Water Control & Imp.
Dist. No. One, 894 S.W.2d 441, 446–47 (Tex. App.—Fort Worth 1995, writ
denied). We do not look for the subjective intent of the parties, which may be
conflicting; instead, it is the objective intent, the intent expressed or apparent
in the writing, that is sought. Cherokee Water Co. v. Forderhause, 641 S.W.2d
522, 525 (Tex. 1982). In seeking to ascertain the intention of the parties, we
must attempt to harmonize all parts of the deed. Altman v. Blake, 712 S.W.2d
6
117, 118 (Tex. 1986). Even if different parts of the deed appear contradictory
or inconsistent, the court must strive to construe the instrument to give effect
to all of its provisions. Luckel, 819 S.W.2d at 462.
B. 1960 Deeds’ Royalty Reservations
The reservation at issue is contained within three unnumbered paragraphs
in each deed, with the controversial portions in italics:
[1] The Grantors herein reserve unto themselves, their heirs and
assigns, and except from this conveyance an undivided one-half
(1/2) Royalty (Being equal to not less than an undivided one-
sixteent[h] (1/16)[)] of all the oil, gas and/or other minerals in, to,
and under or that may be produced from said . . . land aforesaid,
to be paid or delivered to said Grantors, as their own property, free
of cost Forever; together with the right of ingress and egress at all
times for the purpose of storing, treating, marketing and removing
the same therefrom.
[2] Said interest hereby reserved is a Non-Participating Royalty and
shall not participate in the Bonuses paid for any oil, gas or other
mineral[s] lease covering said land, nor shall it participate in the
money rentals which may be paid to extend the time within which
a well may be begun under the terms of any lease covering said
land. It shall not be necessary for the Grantors, their heirs, and
assigns, to join in the execution of any lease covering said Royalty
interest herein reserved, and the Grantee herein, his heirs and
assigns, shall have the right to lease said land for oil, gas and other
minerals provided, however, that all such leases shall provide for
Royalty of not less than one-eighth (1/8):
(a) on oil, gas and other minerals, liquid or solid;
(b) Of the net proceeds from the sale of liquid
hydrocarbons such as gasoline, butane, protane or
from the sale of any other manufactured or processed
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by-products extracted or recovered from said natural
gas or casinghead gas;
(c) Of the net proceeds derived from the sale of all
residue gas or its by-products.
[3] In the event oil, gas or other minerals are produced from said
land, then said Grantors, their heirs and assigns, shall receive not
less than one-sixteenth (1/16) portion (being equal to one-half (1/2)
of the customary one-eighth (1/8) Royalty) of the entire gross
production and/or such net proceeds as hereinabove provided as
their own property to be paid or delivered to said Grantors free of
all cost from royalty oil, gas and/or other minerals, by-products
manufactured or processed therefrom. [Emphasis added.]
C. Analysis
The Texas Supreme Court interpreted a similar clause in Brown v. Havard.
593 S.W.2d 939 (Tex. 1980). In that case, a clause in a 1963 warranty deed
reserved “in perpetuity an undivided one-half non-participating royalty (Being
equal to, not less than an undivided 1/16th) of all the oil, gas and other
minerals.” Id. at 940. After a lease with a 3/8 royalty was executed, the
Browns claimed a 3/16 royalty interest. Id. at 941. The court concluded that
the clause was ambiguous and upheld the jury’s finding that the parties’ intent
was to reserve a royalty equal to 1/16 based on extrinsic evidence. See id. at
942; Havard v. Brown, 577 S.W.2d 757, 759–60 (Tex. Civ. App.—San
Antonio 1979), aff’d, 593 S.W.2d 939 (Tex. 1980).
8
The court reasoned that, “[w]ithout the parenthesis, the reservation is
either a 1/2 royalty or 1/2 of royalties,” that is, a fractional royalty or a fraction
of royalty, although it did conclude that the language without the parenthetical
would reserve 1/2 of all oil, gas, and other minerals produced, i.e., a fractional
interest, and not 1/2 of any outstanding or future royalty. Brown, 593 S.W.2d
at 942. The parenthetical presented further ambiguity: either (1) the parties
intended to reserve 1/2 of the conventional 1/8 royalty, “being equal to” a
1/16, with the “not less than” insuring that the reservation was 1/2 of the
conventional 1/8 and that, if the royalty were reduced, the Browns would still
receive their 1/16; or (2) the parties intended to reserve 1/2 of the royalties
contained in future leases, providing further that such share must not be less
than 1/16. Id. The majority discounted the second interpretation because it
“must ignore the presence of the ‘comma’ between the phrase ‘Being equal to’
and the phrase ‘not less than an undivided 1/16th.’” Id.
Justice McGee, dissenting, stated that the provision was not ambiguous
and interpreted the parenthetical as an indication that the Browns had
contemplated future leases and had attempted to make sure that their royalty
interest would never be less than the 1/16 interest under the current lease, an
unambiguous minimum. Id. at 946 (McGee, J., dissenting); see also Sharon
Callaway Dittfurth, Common Problems in Conveying Oil and Gas Interests, 13
9
S T. M ARY’S L.J. 825, 830 (1982) (describing the difficulty for the drafter
post-Havard). Justice McGee hinged this analysis on the words “heirs and
assigns in perpetuity” to indicate that the parties intended to reserve a
perpetual royalty and not one coincident only with the duration of the existing
lease on the property and “not less than an undivided 1/16th” to indicate that
the Browns contemplated future leases on the property after the expiration of
the current lease. Brown, 593 S.W.2d at 946 (McGee, J., dissenting).
Furthermore, Justice McGee observed the absence of any language to indicate
that the royalty was to be limited to a maximum of, or not more than, 1/16, but
also the presence of specific language that the royalty was to be not less than
1/16. Id. (McGee, J., dissenting). He noted, “Describing a variable amount as
being equal to not less than 1/16 has the same result as describing it as equal
to or greater than 1/16,” and the absence of a comma between “equal to” and
“not less than” did not change that meaning. Id. (McGee, J., dissenting).
There are some differences between the facts in Brown and the facts in
this case: (1) the property in Brown was under lease at the time that the
reservation was made, (2) there was a comma in the Brown reservation
between “Being equal to” and “not less than,” and (3) the grant included the
words “in perpetuity.” See id. at 940, 942. Here, the property had not been
leased at the time Bradshaw’s parents made the reservation, there is no
10
separating comma between the “being equal to” and “not less than” clauses,
and, instead of just the words “in perpetuity,” the 1960 Deeds contain two
additional paragraphs that explain what was granted and indicate what was
intended.
Paragraph One sets out that the grantors reserved an “undivided one-half
(1/2) Royalty . . . of all the oil, gas and/or other minerals in, to, and under or
that may be produced” from the land. Without the addition of the parenthetical
this first sentence probably reserved only a fractional royalty interest. 4 See id.
at 942. Paragraph Two clarifies that the interest reserved in Paragraph One is
a nonparticipating royalty interest.
Although no lease existed at the time the reservation was created, the
reservation clearly indicates that leasing was anticipated: in Paragraph Two, the
reservation states that it is unnecessary for the grantors, heirs, or assigns to
join in the execution of any leases and excludes them from participating in
bonuses or rentals “which may be paid to extend the time within which a well
may be begun under the terms of any lease covering said land.” Paragraph
Three also indicates that leasing was contemplated, stating, “[i]n the event oil,
4
… However, the Brown majority did recognize that this language could
create either a fractional royalty or a fraction-of-royalty. 593 S.W.2d at 942.
11
gas or other minerals are produced . . . then said Grantors . . . shall receive . . . .”
If the absence of the comma renders only one possible interpretation of
the parenthetical under Brown, i.e., to reserve 1/2 of the royalties contained in
future leases, providing further that such share must not be less than 1/16, the
floor being set by the parenthetical in Paragraph One, then the reservation is a
fraction of royalty. Brown, 593 S.W.2d at 942. This conclusion is supported
by the dissent’s reasoning in Brown as well, i.e., the language indicating the
anticipation of leasing in Paragraph Two and the inclusion of the parenthetical
itself in Paragraph One as contemplating future leases. Id. at 946 (McGee, J.,
dissenting). Paragraph Two also sets out that all leases shall provide for a
royalty of not less than 1/8—a floor that would guarantee that the royalty
provided (a fraction of royalty) would not be less than 1/16. Finally, the
language in Paragraph Three again includes a parenthetical to explain the
calculation of the not-less-than-1/16 portion of the royalty received by the
grantors, “(being equal to one-half (1/2) of the customary one-eighth (1/8)
Royalty) of the entire gross production and/or such net proceeds as hereinabove
provided . . . .” [Emphasis added.] This language establishes that what was
reserved was a floating fraction of royalty and not a fixed fractional royalty.
Construing the deeds as a whole, and harmonizing all parts to give effect
to the parties’ intent, we determine that a “fraction of royalty” was conveyed.
12
See Luckel, 819 S.W.2d at 462. Paragraph One reserves an undivided one-half
of royalty for Bradshaw, based on the language reserving “an undivided one-half
royalty,” interpreted with the parenthetical that immediately follows it, which
sets out that the undivided one-half royalty is “equal to not less than an
undivided one-sixteent[h] (1/16) of all the oil, gas and/or other minerals in, to
and under or that may be produced,” and the clarifying language in Paragraph
Three, which states that the grantor shall receive not less than one-sixteenth
portion “(being equal to one-half (1/2) of the customary one-eighth (1/8)
Royalty of the entire gross production and/or such net proceeds as hereinabove
provided . . . .” We read this language, en toto, as expressing the intent to
establish an interest of a minimum one-sixteenth royalty, rather than a fixed
one-sixteenth “fractional royalty.”
In its motion for rehearing, Range cites the following Texas statutes that
use “equal to not less than” to support its argument that the phrase can denote
a fixed amount: section 51.302(a)(4) of the government code and section
61.0591(a) of the education code. Range also refers the court to 42 U.S.C.A.
§ 608(a)(2)(A) (West 2003), and Neel v. Oliver’s Estate, 44 A.2d 561, 563 (Pa.
1945), to support its argument that the 1960 Deeds’ use of “not less than”
indicates a fixed amount.
13
However, each of these provisions establishes a baseline and a method
of calculation based on different variables, not a specific fixed amount. Section
51.302(a)(4) of the government code, which involves the bond a district clerk
is required to provide before beginning the duties of office, merely states that
the bond must
be in an amount equal to not less than 20 percent of the maximum
amount of fees collected in any year during the term of office
immediately preceding the term of office for which the bond is
given, except that the bond may not be in an amount less than
$5,000 nor more than $100,000.
T EX. G OV’T C ODE A NN. § 51.302(a)(4) (Vernon 2005) (emphasis added). The
statute itself expressly sets out the bond’s floor ($5,000) and the ceiling
($100,000), and provides for the calculation of a fixed amount based on the
amount collected by a particular district—this amount, needless to say, would
vary by county. Similarly, Paragraphs One, Two, and Three of the 1960 Deeds
establish a floor for the royalty (one-sixteenth) and provide for the calculation
of the royalty based on a potentially varying amount of production or lease-
royalty size.5 The other statutory provisions which Range cites operate in a
5
… That is, the Grantors reserved “an undivided one-half (1/2) royalty
(Being equal to not less than an undivided one-sixteent[h]” of
production—Paragraph One; all leases shall provide for royalty of not less than
one-eighth—Paragraph Two; and the Grantors shall receive not less than one-
sixteenth portion “(being equal to one-half (1/2) of the customary one-eighth
(1/8) Royalty) of the entire gross production and/or such net proceeds as
14
similar fashion.6 And the case to which Range cites is inapposite. 7 See Brown,
hereinabove provided”—Paragraph Three.
6
… Section 61.0591(a) of the education code is part of the chapter
addressing the powers and duties of the Texas Higher Education Coordinating
Board and states that “[t]he legislature shall appropriate to the board an amount
equal to not less than 10 percent of the total appropriations for base funding
of general academic teaching institutions for the purpose of providing incentive
and special initiative funding under this section.” T EX. E DUC. C ODE A NN.
§ 61.0591(a) (Vernon 2006) (emphasis added). 42 U.S.C.A. § 608(a)(2)(A)
states, with regard to reduction or elimination of Temporary Assistance to
Needy Families for noncooperation in establishing paternity or obtaining child
support, if the State makes the appropriate findings with regard to
noncooperation and the individual does not qualify for good cause or other
exceptions, then the State
(A) shall deduct from the assistance that would otherwise be
provided to the family of the individual under the State program
funded under this part an amount equal to not less than 25 percent
of the amount of such assistance; and
(B) may deny the family any assistance under the State program.
42 U.S.C.A. § 608(a)(2)(A) & (B) (emphasis added). Contrary to Range’s
argument that these provisions set out fixed amounts, they too merely establish
a floor and provide a method of calculating a fixed amount that is dependent on
the variables set out in the statutes.
7
… In Neel, the Pennsylvania court had to construe an insurance code
provision that contemplated an assessment liability of an insurance subscriber
as “equal to not less than one additional annual premium or deposit charged.”
44 A.2d at 563–64 (emphasis added). The court concluded that the provision
prescribed the ceiling of a subscriber’s liability for assessment, and not a floor,
based on its “very evident purpose” of making certain that subscribers could
not limit the extent of their respective liabilities to anything less than one
additional annual premium or deposit charged. Id. at 563. However, this
reasoning does not apply here because the issue is not the limitation of liability
(i.e., the amount a subscriber would have to pay), but rather the amount of
15
593 S.W.2d at 946 (McGee, J., dissenting) (“A prudent grantor who reserves
a fraction of royalties may wish to ensure that his interest will not fall below a
certain minimum. Careful drafting of royalty reservations requires that he
recognize that future leases may be executed by his grantee that call for a
different royalty than a lease existing at the time of the deed.”).
Based on the foregoing, we hold that the reservations in the 1960 Deeds
provided for a “fraction of royalty” rather than a “fractional royalty.” Therefore,
we agree with Bradshaw’s interpretation that the language of the 1960 Deeds
permits her to share in one-half of whatever royalties may be contracted for,
and that her resulting share of production must not be less than one-sixteenth.
This interpretation is consistent with the plain language of the 1960 Deeds and
gives effect to all of the operative language in the 1960 Deeds so that all of the
terms are in harmony. See Brown, 593 S.W.2d at 942; see also Luckel, 819
S.W.2d at 462; Altman, 712 S.W.2d at 118.
payment the grantors intended to receive from their reservation.
16
V. Conclusion
Having determined that the trial court properly found that the 1960 Deeds
provided for a “fraction of royalty,” we overrule Range’s three issues and affirm
the trial court’s partial summary judgment in favor of Bradshaw.
BOB MCCOY
JUSTICE
PANEL: CAYCE, C.J.; LIVINGSTON and MCCOY, JJ.
CAYCE, C.J. filed a dissenting opinion.
DELIVERED: August 14, 2008
17
COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 2-07-263-CV
RANGE RESOURCES CORPORATION APPELLANTS
AND RANGE PRODUCTION, I, L.P. AND
STEADFAST FINANCIAL, LLC,
R. J. SIKES, KATHY SIKES,
CHRISTY ROME, GREG LOUVIER,
PAM LOUVIER, AND DACOTA
INVESTMENT HOLDINGS, LLP
AND R. CRIST VIAL
V.
BETTY LOU BRADSHAW APPELLEE
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FROM THE 355TH DISTRICT COURT OF HOOD COUNTY
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DISSENTING OPINION
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I respectfully dissent. As a matter of law, the two 1960 deeds at issue
reserved a fixed fractional 1/16th non-participating royalty interest. The
appellee’s contention to the contrary requires us to ignore numerous rules of
contract construction, to give no effect to the “being equal to” language in the
deeds, and to imply from the “not less than” phrase in the deeds a reservation
of interest in favor of the grantor that is more than the plain language of the
deeds allows. I would, therefore, grant appellants’ motions for rehearing,
reverse the trial court’s partial summary judgment, and render judgment that
appellee take nothing on her claims against appellants.
JOHN CAYCE
CHIEF JUSTICE
DELIVERED: August 14, 2008
2