Texas Court Interprets Terms of 1963 Conveyance in Recent Oil and Gas Case
Mar 3, 2023
Austin, TX (Law Firm Newswire) October 6, 2021 – Texas oil and gas disputes can sometimes boil down to which party owns the mineral rights associated with a particular piece of property. While it may seem as though determining who the legal owner of a mineral estate should be easy, in reality, this can be a complex process that sometimes requires court intervention. This is because parties to real estate deals frequently rely on inarticulately drafted contracts that leave too much room for interpretation. And, given the high stakes involved, room for interpretation is an invitation for an oil and gas dispute.
In a recent case before the 5th District Court of Cass County, the court was tasked with clarifying the ownership of a 181-acre tract of land. To do so, the court had to look back to a 1963 warranty deed.
One of the few things the parties agreed on was that the source of their interests arose from a 1954 deed conveying the property to Hill and Dawson. Then, in 1963, Hill and Dawson executed a warranty deed with the Stones. The deed provided that Hill and Dawson were conveying the property to the Stones. The description included the metes and bounds of the property, followed by the language:
This conveyance is made subject to any and all easements and reservations of record. There is likewise conveyed to Grantees by this conveyance one-eighth (1/8) of all Oil, Gas, and Other Minerals. This conveyance is made subject to the terms of an outstanding Oil, Gas and Mineral Lease executed by [former] Grantors.
The Stones went on to sell whatever interests they had to Merritt. In turn, several years later, Merritt executed an oil and gas lease on the tract to NETX Acquisitions. There is no question that Merritt owns the surface estate; however, Hill and Dawson argue that Merritt does not own 100 percent of the mineral estate, citing the 1963 conveyance.
The question the court had to answer was whether Hill and Dawson conveyed a one-eighth interest of the mineral estates to the Stones, or whether they conveyed 100 percent of the mineral interest to the Stones, attempting to reserve a seven-eighths interest for themselves.
The trial court found that Hill and Dawson conveyed 100 percent of the mineral estate to Stone, which was, in turn, conveyed to Merritt. Thus, the court granted the joint motion for summary judgment of Merritt and NETX Acquisitions. Hill, Dawson, and several other related parties appealed.
The court began its analysis by noting that when parties bring an unambiguous deed to the court for its interpretation, the court’s “primary duty is to ascertain the intent of the parties from all of the language within the four corners of the deed.” To do this, a court will look at the entire text of a document, attempting to reconcile any inconsistencies. For example a warranty deed will convey the entire extent of the grantor’s interests unless there is clear language reserving some interest for the grantor.
Here, both parties agreed that the deed was not ambiguous. Thus, the court’s next step was to determine the parties’ intent at the time of the deed’s execution. The court explained that one of the primary rules of construction when reviewing a mineral estate deed is that courts will “construe a deed to convey not the greatest estate possible, but the greatest estate ‘permissible under its language.”
Here, the court noted that the language “there is likewise conveyed to Grantees by this conveyance one-eighth (1/8) of all Oil, Gas, and Other Minerals” illustrated the grantor’s intent to convey something less than a 100 percent interest in the mineral estate. The court took this to mean that the conveyance was for 100 percent of the surface estate and a one-eighth interest in the mineral estate, which was Hill and Dawson’s position. The court also noted that nothing else in the deed purported to convey anything more than the one-eighth interest of the mineral estate.
As a result of the court’s opinion, the trial court’s decision was reversed. Thus, Hill and Dawson own seven-eighths of the mineral estate.
Austin oil and gas attorney Gregory D. Jordan explains, “Even mineral estate deeds that seem clear may not be once the stakes get high enough. What often happens is that decades can go by with no issues, but once a mineral estate becomes valuable, parties start to look into the deed. If there is any room for ambiguity, a party may try to claim a greater interest than the terms of the deed seemingly convey. This highlights the importance of ensuring any warranty deed is crystal clear and outlines everyone’s expectations.”
At the Law Offices of Gregory D. Jordan, Attorney Jordan represents individuals and businesses in all types of Texas oil and gas cases and contractual disputes. Attorney Jordan has over 30 years of relevant experience helping clients confront the complex legal issues they face throughout Texas. Contact the Law Offices of Gregory D. Jordan at http://www.theaustintriallawyer.com/.