Face Challenges Confidently

429 Dodd v. Wiatrek

Tuesday, September 1st, 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.
Dodd v. Wiatrek, No. 04-11-00829-CV, 2012 WL 5354730 (Tex. App.—San Antonio Oct. 31, 2012, pet. denied) (mem. op.), strictly construed a deed reservation to hold that a royalty reservation did not revert to Grantee.  In June 1983, Grantor conveyed real property to Grantee in a warranty deed that included two reservations:
SAVE AND EXCEPT there is reserved unto Grantor, her heirs and assigns, an undivided two-thirds (2/3) interest in all of the payments do [sic] to be paid Grantor under the existing Mineral Lease covering the subject property oil well presently located and producing on the property.  [“First Reservation”]
SAVE AND EXCEPT and in addition to the reservation found immediately above, but not in lieu thereof there is reserved unto Grantor, her heirs and assigns, and [sic] undivided one-half (1/2) interest in the existing royalty and all future royalty interests, in all of the oil, gas, coal, lignite, iron, uranium and other minerals [“Second Reservation”]. . . .  Provided further, that such royalty reservation shall terminate and revert to Grantees, fifteen (15) years from date of closing unless there has been production of any of the abovedescribed [sic] minerals.  [“Reversion Clause”]. . . .
The property produced oil from the existing oil well from June 1983 to March 1984, and there was no other production.  The issue was whether the Second Reservation had terminated and reverted to Grantee.
Grantee argued that the First and Second Reservations, when read together, amounted to over 100% of the royalty interest.  Thus, the only way the Second Reservation could be given effect is if it was a royalty interest in production from a subsequent lease and well, rather than production from the lease and well existing at the time of the conveyance.  The court held, however, that the First Reservation reserved an undivided two-thirds of the right to payments due (accrued royalties), not an interest in real property.  The court stated that “[t]he [F]irst [R]eservation refers retrospectively to payments accrued before the date of the deed, and the [S]econd [R]eservation refers prospectively to realty interests existing at the time of the deed or arising thereafter.  There is no overlap in the reservations as they do not reserve different percentages of the same thing – royalty interests.”
Grantee argued that the royalty interest reverted because there was never any production except from the existing well.  Both parties knew that the well on the property was producing at the time of the conveyance.  Thus, the words “unless there has been production” were totally meaningless unless applied to new production.  Otherwise, the production requirement would be satisfied the moment the conveyance took effect simply by virtue of the production from the existing well.  The court rejected this interpretation, relying instead on the fact that the Second Reservation provided that production of “any” minerals would prevent reversion.  There was no evidence as to whether there was any significance as to the date of the deed and the “date of closing,” but the plain meaning was that the production of “any” minerals would prevent the reversion.  Accordingly, the Grantor retained a 1/2 interest in the royalty.
The case strictly construes the language of reservation and applies the plain meaning rule.  There is no discussion of construing a reservation against the grantor and a very clear refusal to consider any argument not evidenced in the language of the deed itself.