Face Challenges Confidently

342 Hausser v. Cuellar

Friday, November 6th, 2015

Richard F. Brown

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

Hausser v. Cuellar, 345 S.W.3d 462 (Tex. App.—San Antonio 2011, pet. denied), harmonizes seemingly conflicting granting and future lease clauses within a deed by determining the grantor’s intent within the four corners of the deed. The granting clause of the 1936 deed in question conveyed an undivided 1/2 interest “in and to all of the oil royalty, gas royalty, royalty in casinghead gas and gasoline, and royalty in other minerals in and under and that may be produced and mined from [the land].” There was an existing lease clause which provided that the deed conveyed “one-half (1/2) of all the oil royalty, gas royalty, royalty in casinghead gas and gasoline, and royalty from other minerals or products due and to be paid under the terms of said lease.” The existing lease provided for a 1/8th royalty, and it was undisputed that grantees had received 1/16th of production under the existing lease (1/2 of 1/8th = 1/16th) for years. In 2006, a new lease was executed with a 1/4th royalty. The pertinent part of the future lease clause of the 1936 deed read as follows:

In the event a future lease or leases are executed . . . then the Grantees shall receive under such future lease or leases . . . one-sixteenth (1/16) part of all oil, gas and other minerals taken and saved . . . under such lease or leases, and shall receive the same out of the royalty therein provided for.

Grantors’ successors asserted that, pursuant to the terms of the future lease clause contained in the 1936 deed, the grantees’ royalty should be limited to a fixed 1/16th royalty interest (1/16th of production). Grantees’ successors argued that pursuant to the granting clause contained in the 1936 deed, grantees were entitled to an undivided 1/2 of royalty received under the 2006 lease (1/2 of 1/4th, or 1/8th of production).

Although the deed in this case closely followed the deed previously considered by the same court in Neel v. Killam Oil Co., the San Antonio Court of Appeals expressly disapproved of its own reasoning in Neel v. Killam. In that case, the court went outside the four corners of the deed in question to rely upon an earlier deed to support its conclusion that the future lease clause was controlling.

The court stated that under a proper analysis, the 1936 deed in this case must be harmonized to give effect to all its provisions by ascertaining the parties’ intent from the four corners of the instrument and to determine whether the granting clause or future lease clause controlled the amount of royalty reservation. After harmonizing all the provisions of the deed, the court held that the deed conveyed an undivided 1/2 of the 1/4th royalty, or 1/8th of production. The court reasoned that the 1936 deed involved a single conveyance with fixed
rights, in that the deed did not contain any language suggesting two different estates were conveyed. The court’s construction was further supported by language in the deed restricting the grantor’s ability to enter into a future lease providing for a royalty of less than 1/8th. This is consistent with the current trend of divining the parties’ intent from the four corners of the deed, even though the provisions are inconsistent, and refusing to give some arbitrary priority to any one clause (i.e., the granting clause).

The significance of this case is that, in the absence of ambiguity and language suggesting that two differing estates were conveyed, a court will not look beyond the four corners of an instrument to harmonize and give effect to all its provisions, whatever that means. While it is to be hoped that our jurisprudence is moving toward some coherent theory in resolving these cases with conflicting fractions, confusion appears likely to continue. This was an en banc opinion by a divided court, but twice the majority referred to its holding by reciting that the deed conveyed “an undivided one-half royalty,” which would be 1/2 of production, and that was not the court’s holding.