410 Farm & Ranch Investors, Ltd. v. Titan Operating, LLC

CASE NOTE

Richard F. Brown

 
The following is not a legal opinion.  You should consult your attorney if the case may be of significance to you.
 
Farm & Ranch Investors, Ltd. v. Titan Operating, L.L.C., 369 S.W.3d 679 (Tex. App.—Fort Worth 2012, no pet.) held that a dedication and restrictions recorded in the deed records by the owner of the land were ineffective to reserve the mineral estate.  Caldwell’s Creek, Ltd. (“Caldwell”) owned approximately sixty acres in Colleyville, Texas.  In 1994, Caldwell recorded a dedication and restrictions for the land that stated in part: “‘All mineral rights shall belong and shall continue to belong to the limited partnership of Caldwell’s Creek, Ltd.’”  Later, from 1994-1999, Caldwell divided the land into lots and conveyed the lots to individual owners by a series of warranty deeds.  The warranty deeds did not contain an express reservation of the mineral estate, but stated that the conveyances were “‘made subject to any and all easements, restrictions, and mineral reservations affecting said property that are filed for record in the office of the County Clerk of Tarrant County, Texas.’”  Believing it still owned the mineral estate, Caldwell then purported to convey all the oil, gas, and mineral rights to Farm & Ranch Investors, Ltd. (“Farm & Ranch”).  When Titan Operating, L.L.C. (“Titan”) decided to lease the mineral interest, it acquired leases from the individual lot owners rather than from Farm & Ranch.  The issue in the case was whether the restrictions and the subsequent deeds to the lot owners were effective to reserve the mineral estate to Caldwell.  The court held that the deed restrictions and reference to the restrictions in the deeds to the lot owners were insufficient to reserve any mineral interest to Caldwell and that Titan owned fee simple determinable title to the minerals by virtue of its leases from the individual lot owners.
 
The court relied on several basic conveyancing principles in arriving at its conclusion.  “An owner cannot reserve to himself an interest in property that he already owns.”  A severance of the mineral estate can be by grant of the minerals in a deed or lease, or by a reservation of the minerals in a conveyance, but the restrictions were neither.  Therefore, the deed restrictions, when considered alone, merely state that Caldwell owned the minerals in fee simple and was thus able to convey them to the lot owners.  Caldwell also argued that the portion of the restrictions stating that the minerals “shall continue to belong” to Caldwell was a future-looking statement and reserved the minerals retroactively when referenced in the later deeds to the lot owners.  However, a “reservation must be made at the time of the conveyance or lease.”  Farm & Ranch did not contend that there was a separate reservation of the minerals in the deeds to the lot owners, but relied upon the “subject to” language to incorporate the restrictions.  The court held the warranty deeds, although expressly made “subject to” restrictions in the deed records, did not clearly show an “intention to reserve or except an interest from the conveyance.”  Rather, the “subject to” language operated as a limitation of the warranty, protecting against outstanding interests that may affect the grantee’s title.  “A reservation by implication in favor of the grantor is not favored by the courts”; accordingly, the instrument must express a clear intention to convey a lesser interest.
 
“When Caldwell’s Creek, Ltd. conveyed its interests to the lot owners without reservation, it conveyed its interests in both the mineral [sic] and surface.  It conveyed those interests subject to the previously recorded restrictions, but those restrictions were insufficient to reserve the mineral interests.”
 
This case is significant because it sticks to the established fundamentals of deed construction.  Despite what the parties may have intended, the reservation or grant of a mineral interest must be clearly demonstrated in the instrument creating the severance