Face Challenges Confidently

706 Bupp v. Bishop, No. 04-16-00827-CV, 2018 WL 280408 (Tex. App.—San Antonio Jan. 3, 2018, pet. denied)

Friday, September 7th, 2018

Richard F. Brown

The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.

Bupp v. Bishop, No. 04-16-00827-CV, 2018 WL 280408 (Tex. App.—San Antonio Jan. 3, 2018, pet. denied) (mem. op.) held that a deed excepted all royalty interests. Mother devised specific tracts to each of her four children, reserving “all of the oil royalties, gas royalties, and royalties in other minerals,” which she then devised in another provision of her will in equal undivided shares to her four children. Mother died, and the successors to the interests of two of the children, as Grantor, executed a warranty deed in 2009 conveying one of the tracts to Grantee. The deed conveyed all of Grantor’s interest in the property “subject to the reservations from and exceptions to conveyance and warranty” set out in the deed. The deed had a section under the heading “Reservations from and Exceptions to conveyance and warranty:”. Under that heading, several items were listed, including: “Royalty interest, the royalties, and all other rights in connection with said royalty rights, described in the Will of [Mother].” The issue was whether the deed conveyed the royalty interest acquired by Grantor under Mother’s will.

Reservations and exceptions are not synonymous. The court recited that the distinction was critical to its construction of the 2009 deed. “A reservation is made in favor of the grantor and creates a new right issuing out of the conveyance.” It takes back a part of the interest being granted and must always be in favor of and for the benefit of the grantor. Similarly, an exception also operates to exclude some interest from the grant, but differs from a reservation by not passing title or creating a new interest. An exception vests the excepted interest in the grantor only if “the interest excepted is not outstanding in another.”

Although the royalty clause was put underneath a heading that grouped both reservations and exceptions, the court found that the clause did not create a new right which Grantor was reserving, but rather referred to a “right or interest already in existence which the deed excepts from the conveyance to [Grantee].” The deed was with warranty, but the court did not discuss any implications under the Duhig Rule, presumably because of its holding that there was no reservation to Grantor.

Having concluded the restrictive clause was an exception and not a reservation, the last question that remained for the court was to determine the extent and ownership of the royalty interest excepted in the deed. The court held that the exception in the deed prevented all of the royalty interests described in the Mother’s will from passing to Grantee under the deed. The two undivided one-fourth interests in the royalties owned by each of the two children who were not included as Grantor in the deed remained vested in them. The other two undivided one-fourth royalties owned by the successors of the other two children who were included as Grantor in the deed were “not outstanding in another,” and thus their undivided one-fourth royalty interests remained vested in them. Therefore, none of the royalty interest passed to Grantee.

The case highlights the distinction between a reservation and an exception and holds that this particular deed involved an exception. The deed form used was probably the State Bar form, which lumps reservations and exceptions under a single heading without distinction, increasing the risk of uncertainty in deed construction.