The Texas Supreme Court Continues the Trend for a Case-By-Case Analysis for Mineral Deeds

In Wenske v. Ealy, 521 S.W.3d 791 (Tex. 2017), the Texas Supreme Court followed its decision in Hysaw v. Dawkins, 483 S.W.3d 1 (Tex. 2016) and emphasized the importance of examining all of the language in a conveyance to attempt to ascertain the intent of the parties. In Wenske, the dispute focused on the proportions the current non-participating royalty owners bore a previously reserved non-participating royalty interest ("NPRI"). In 1988, Benedict and Elizabeth Wenske acquired the subject land from Marian Vyvjala, et al., in which a 1/4 NPRI was reserved ("Vyvjala NPRI"). Next, the Wenskes conveyed the subject land to Steve and Deborah Ealy, in which the Wenskes reserved 3/8ths of the mineral estate. The deed from the Wenskes to the Ealys, in relevant part,

"For Grantor and Grantor's heirs, successors, and assigns forever, a reservation of an undivided 3/8ths 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." (emphasis added)

The deed to the Ealys also included an exception that referenced the outstanding 1/4 NPRI and contained the following subject to clause:

"Grantor, for the Consideration and subject to the Reservations from Conveyance and the Exceptions to Conveyance and Warranty, grants, sells, and conveys to Grantee the Property, together with all and singular the rights and appurtenances thereto in any way belonging, to have and to hold it to Grantee and Grantee's heirs, successors, and assigns forever. Grantor binds Grantor and Grantor's heirs and successors to warrant and forever defend all and singular the Property to Grantee . . . except as to the Reservations from Conveyance and the Exceptions to Conveyance and Warranty."

In 2011, the Wenskes and Ealys entered an oil and gas lease and in 2013, and a dispute arose between the Wenskes and Ealys regarding who would bear the burden of the Vyvjala NPRI. The Wenskes claimed that their 3/8ths mineral interest was unburdened by the Vyvjala NPRI.

The Texas Supreme Court reiterated its rule that "[w]hen construing an unambiguous deed, our primary duty is to ascertain the intent of the parties from all of the language within the four corners of the deed[,]" which prevail over arbitrary or mechanical rules of construction. The Texas Supreme Court emphasized that "our rules for deed construction have moved even more decisively toward (1) a focus on the intent of the parties, expressed by the language within the four corners of the deed, and (2) harmonizing all parts of an instrument, even if particular parts appear contradictory or inconsistent." In Hysaw, the Texas Supreme Court explained that "[i]ntent must be determined by a careful and detailed examination of the document in its entirety, rather than by application of mechanical rules of construction that offer certainty at the expense of effectuating intent." 483 S.W.3d at, 16. Following those principles, the Texas Supreme Court concluded that the "proportion to ownership" language suggested that the parties intended to proportionally bear the Vyvjala NPRI.

The Texas Supreme Court's decision in Wenske is significant because it emphasizes that mineral deeds must be reviewed closely and an attempt must be made to ascertain the intent of the parties based on the language in the document. As the Texas Supreme Court noted, mechanical rules of construction, "which at one time offered certainty at the expense of effectuating intent, are relics of a bygone era." Thus, landmen do not have the benefit of mechanical rules to determine the nature of the interest granted or reserved in a mineral deed. Rather, landmen must attempt to try to determine the possible intent of the parties in each specific deed. To avoid potential disputes, a prudent approach is to obtain stipulations of interest or wait until the parties have litigated the issue and a court has determined the nature of the interest granted or reserved.