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Loose Canons (of Construction) – Barrow Shaver Res. Co. LLC v. NETX Acquisitions, LLC

January 7, 2022 Barrow Shaver Res. Co. LLC v. NETX Acquisitions, LLC is a trespass-to-try-title action brought by competing lessees based on the interpretation of a 1963 warranty deed recorded in Cass County, Texas (the “1963 Deed”).[1]  Prior to the execution of the 1963 Deed, the surface and mineral estate were owned in fee by the Dawson Parties.  In conveying an interest to the Stone Family (“Grantees”) in the 1963 Deed, the Dawson Parties (“Grantors”) conveyed “all that certain [tract of land in Cass County described by metes and bounds and] . . . [t]here is likewise conveyed to Grantees by this conveyance one-eighth (1/8) of all Oil, Gas and Other Minerals . . .” (emphasis added).[2]

At issue was whether the 1963 Deed conveyed to the Stone Family all of the oil, gas and other minerals under the entire tract of land, or only 1/8th of the oil, gas and other minerals (reserving 7/8ths to the Dawson Parties).[3] The dispute arose when the successors to the original Grantors and Grantees executed oil and gas leases, with the Stone Family successors claiming 100% of the minerals and the Dawson Parties’ successors claiming 7/8ths of the minerals.[4] The trial court held that the 1963 Deed had conveyed 100% of the minerals, however, the Texarkana Court of Appeals reversed and entered judgment in favor of the Dawson Parties.[5]

In reaching its decision, the Texarkana Court of Appeals turned to several decisions of the Supreme Court of Texas, including the oft-cited Luckel v. White, 819 S.W.2d 459 (Tex. 1991) and the more recent Wenske v. Ealy, 521 S.W.3d 791 (Tex. 2017).[6]  These cases stand for the proposition that when construing unambiguous deeds, Texas courts should strive to ascertain the intent of the parties from all of the language within the four corners of the instrument. This divining of intent should prevail over the “arbitrary” traditional rules of deed interpretation.  Thus, the courts will reject mechanical rules of construction, such as giving priority to certain clauses over others, or requiring the use of “magic words.” Courts will instead attempt to harmonize all the parts of a deed and give effect to each of its provisions, therefore resolving any conflicting terms and considering each part of the document.

Despite this recent trend in deed interpretation, NETX Acquisitions (the Stone Family Lessee) attempted to argue four traditional principles of real property law to interpret the 1963 Deed, as follows:

  1. A warranty deed will pass all of the estate owned by the grantor at the time of the conveyance unless there are reservations or exceptions which reduce the estate conveyed, Cockrell v. Texas Gulf Sulphur Co., 157 Tex. 10, 299 S.W.2d 672, 675 (Tex. 1956) (citing Harris v. Currie, 142 Tex. 93, 176 S.W.2d 302, 304 (Tex. 1943));[7]
  2. Reservations must be made by ‘clear language,’ and courts do not favor reservations by implication, Combest v. Mustang Minerals, LLC, 502 S.W.3d 173, 179-80 (Tex. App.—San Antonio 2016, pet. denied) (quoting Graham v. Prochaska, 429 S.W.3d 650, 655 (Tex. App.—San Antonio 2013, pet. denied) (citations omitted));[8]
  3. Words in a deed that are of a doubtful meaning are construed against the grantor, Reeves v. Towery, 621 S.W.2d 209, 212 (Tex. App.—Corpus Christi 1981, writ ref’d n.r.e.) (citing Jones v. Sun Oil Co., 110 S.W.2d 80 (Tex. App.—Texarkana 1937, writ ref’d));[9] and
  4. A deed is construed “to confer upon a grantee the greatest estate that the terms of the instrument will permit,” Johnson v. Conner, 260 S.W.3d 575, 579 (Tex. App.—Tyler 2008, no pet.) (citing Lott v. Lott, 370 S.W.2d 463, 465 (Tex. 1963)).[10]

Interestingly, the Court noted that although these customary “canons of construction” may remain persuasive in certain instances, they will not trump a modern holistic “four corners” analysis. In this case, however, the Court found that these canons of construction do not apply at all. This is because there was not an actual reservation in the 1967, but merely an interest that was held back and not purported to be conveyed.[11] The Court went on to note that Tex. Prop. Code Ann. § 5.001(a) states that “[a]n estate in land that is conveyed or devised is a fee simple unless the estate is limited by express words or unless a lesser estate is conveyed or devised by construction or operation of law.”[12]

Here, the Texarkana Court of Appeals focused on the fact that the 1967 Deed contained a metes and bounds description and “likewise” conveyed one-eighth of the oil, gas and minerals.[13] Per the Court, the Grantors’ clearly and unambiguously intended to convey something less than the fee simple estate.[14] Thus, under the “four corners” approach to deed interpretation and Section 5.001 of the Texas Property Code, only 1/8th of the minerals passed to the Dawson Parties under the 1967 Deed.[15]

This case underscores Texas courts’ commitment to applying a four corners approach to deed interpretation as opposed to applying canonical rules of construction. However, it is important to observe that these traditional interpretation tools are not entirely abandoned, but merely relegated to “persuasive” authority. A thorough analysis of each provision of a deed and how it comports with other provisions remains a crucial exercise in Texas mineral titles. A petition for review of the Texarkana Court of Appeals’ decision was filed on October 27, 2021 and is currently pending before the Supreme Court of Texas.

_______________________________________________________________________________________________

[1] No. 06-20-00081-CV, 2021 WL 3571394, at 1 (Tex. App. Aug. 13, 2021)

[2] Id.

[3] Id. at 2.

[4] Id.

[5] Id.

[6] Id. at 3.

[7] Id.

[8] Id.

[9] Id.

[10] Id.

[11] Id. at 4.

[12] Id. at 5.

[13] Id. at 1.

[14] Id. at 5.

[15] Id. at 6.


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