April 1, 2022 — In the Texas case of Pauler v. M & L Minerals, LP, [1] the San Antonio Court of Appeals was tasked with interpreting a mineral deed to determine whether certain disputed royalty interests had been conveyed or excepted. Under particular scrutiny was the effect of the deed’s “subject to” language on these previously conveyed interests. In reversing the trial court’s judgment, the Court of Appeals held that the language in the deed conveyed all of the grantor’s interests in the property to the grantees. [2] This included all of the grantors’ royalties and reversionary rights (other than a specific reservation to one grantor). [3]
Susan and Edward Janysek acquired a 197-acre tract of land in 1925. In 1958, Susan and Edward conveyed a term 1/4 nonparticipating royalty interest to a third party for a ten-year period and as long as oil and gas is produced. The following year, in 1959, Susan and Edward conveyed a term 1/8 nonparticipating royalty interest to a different third party for ten years and as long as oil or gas is produced (collectively, the “Term Royalty Interests”). [4] Later that year, Susan and Edward executed nine royalty deeds to each of their nine children, with each deed conveying a 1/24 nonparticipating royalty interest (“1/24 Royalty Interests”).
In 1977, Susan Janysek (now a widow) and eight of her nine children executed the mineral deed at issue (the “1977 Deed”) in favor of the ninth child. The 1977 Deed stated that the grantors conveyed: “All that certain tract or parcel of land [legal description of the property].” Following the description of the property, the 1977 Deed states, “[t]his conveyance is subject, however, to all mineral conveyances, mineral reservations, oil, gas and other mineral leases, royalty conveyances or reservations, easements, ordinances and rights-of-way of record in the office of the County Clerk of Karnes County, Texas” (emphasis added). [5] Additional paragraphs provided that:
In addition to the above exceptions, there is reserved and excepted unto SUSAN JANYSEK, an undivided one-fourth (1/4) interest in and to all royalty paid on the production or mining of oil, gas and any and all other minerals, whether similar or dissimilar. The interest reserved unto the said SUSAN JANYSEK, shall be a non-participating royalty interest . . . . Such royalty interest is for the life of SUSAN JANYSEK, and after her death, such royalty interest shall revert to [Susan’s nine children, identified by name].
TO HAVE AND TO HOLD the above described premises, subject to the above mentioned exceptions and reservations, together with all and singular, the rights and appurtenances thereto in anywise belonging unto the said VINCENT J. JANYSEK and wife, LEONA B. JANYSEK, their heirs and assigns, forever; and we do hereby bind ourselves, our heirs, executors and administrators, to WARRANT and FOREVER DEFEND, all and singular, the said premises, subject to the above mentioned exceptions and reservations, unto the said VINCENT J. JANYSEK and wife, LEONA B. JANYSEK, their heirs and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof (emphasis added). [6]
The dispute arose in 2018, when a lessee interpreted the 1977 Deed to have conveyed the grantors’ reversionary rights in the disputed Term Royalty Interests and the 1/24 Royalty Interests to the grantees. Soon after, the successors of the grantors (the “Moczygembas”) filed suit requesting a declaratory judgment that the grantors did not convey the disputed royalties. The successors to the grantees (the “Janyseks”) took the opposite position, and both parties moved for summary judgment. The trial court determined that the based on the “subject-to” language of the 1977 Deed, it did not convey the Term Royalty Interests or the 1/24 Royalty Interests. [7] The Janyseks appealed.
The San Antonio Court of Appeals first noted the familiar rule that when construing an unambiguous deed, it must attempt to ascertain the intent of the parties within the four corners of the instrument. This should be done without relying on mechanical rules of construction or the use of “magic words.” [8] The Court then cited to its two recent holdings in Jarzombek v. Marathon Oil Company [9] and Gonzalez v. Janssen. [10] In each of these cases, the San Antonio Court had found that disputed deeds did not include a reservation or exception to conveyance. However, the Court carefully noted that in a four-corners analysis it was not bound by a “mechanical” application of these precedential holdings, which were merely “instructive.” [11]
The Court next opined that although clearly not dispositive in a four-corners inquiry, certain traditional canons of construction still provide a valuable framework for deed interpretation. First, the Court noted that deeds are construed to confer the greatest estate that the instrument will allow. Therefore, a deed will pass whatever estate a grantor owns, unless the deed contains language showing intent to grant a lesser estate. A reservation of minerals must be made by clear language and exceptions must identify the interest excepted with reasonable certainty (and are strictly construed against a grantor). [12]
The Moczygembas focused on the deed language providing that “[t]his conveyance is subject, however, to all mineral conveyances, mineral reservations, oil, gas and other mineral leases, royalty conveyances or reservations, easements, ordinances and rights-of-way of record in the office of the County Clerk of Karnes County, Texas.” They argued that the disputed royalties were excluded from the conveyance, pursuant to this language, because the interests had been established in other records that had been recorded with the county clerk. For further support, the Moczygembas cited the clause at the end of the 1977 Deed, which states that the warranty is “subject to the above-mentioned exceptions and reservation.”
In rejecting the Moczygembas arguments, the Court reasoned that the 1977 Deed did not state with any certainty that the disputed royalties were reserved. It did not mention the Term Royalty Interests, the 1/24 Royalty Interests, or the deeds that had conveyed those interests. Rather, the only interest that was specifically mentioned was the 1/4 royalty interest to Susan Janysek. The Court also noted that the “subject to the above-mentioned exceptions” language was insufficient as it did not express a clear intention to reserve the interest. [13] Finally, the Appellate Court reasoned that a plain reading of the “subject to” clause serves its principal function, which is to protect the grantor against a claim for breach of warranty when a mineral interest is outstanding. Therefore, the Appellate Court found that the 1977 Deed lacked a clear intent of the grantors to reserve or except the disputed royalties or reversionary interest. [14]
To convince the Court that surrounding circumstances should be considered, the Moczygembas also argued for the admission of extrinsic evidence. In particular, the Moczygembas pointed to evidence that Susan Janysek intended to treat all nine or her children equally (by vesting each child with a 1/24 royalty). The Court rejected this argument, reasoning that because the language in the 1977 Deed is clear and conveyed all of the grantor’s interest – other than the one specific interest reserved to Susan Janysek – extraneous evidence is inadmissible to contradict the deed’s plain language. [15] Therefore, the language in the 1977 Deed conveyed all of the grantors interest in the Term Royalty Interests and the 1/24 Royalty Interests.
According to the San Antonio Court of Appeals, reversionary rights to a prior-existing royalty and similar outstanding interests must be clearly and unequivocally reserved or excepted or they will likely pass under a deed. [16] A “subject to” clause generally will not be stretched to “imply” an exception. This case also serves as a reminder that although mechanical rules and magic words have given way to the modern four-corner analysis, the classic rules of deed construction remain a persuasive tool.
[1] Tex. App. LEXIS 5381 (Tex. App.—San Antonio, July 7, 2021, pet. filed). The San Antonio Court of Appeals originally handed down its opinion on May 12 at 2021 Tex. App. LEXIS 3655. After the appellees filed a motion for rehearing, the Court withdrew its May 12 opinion and substituted its July 7 opinion.
[4] At the time of the 1977 conveyance, both royalty interests were still outstanding.
[9] 2019 Tex. App. LEXIS 2871 (Tex. App.—San Antonio, Apr. 10, 2019, pet. denied) (holding that the court would not imply a reservation in favor of grantors because a general warranty deed conveys all a grantor’s interest unless a lesser conveyance is clearly shown by the language of the deed and because the grantors had not provided any authority to show that the language used in the deed expressly excepted or reserved the future interest created by the earlier deed).
[10] 553 S.W.3d 633 (Tex. App.—San Antonio 2018, pet. denied) (holding that the parties intended the words “subject to” only to serve the purpose of “informing the grantees that other interests were still outstanding”).
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