Laborde Props., L.P. v. U.S. Shale Energy II, LLC
Laborde Props., L.P. v. U.S. Shale Energy II, LLC
Opinion of the Court
This is an appeal from a trial court's order granting summary judgment in favor of appellees U.S. Shale Energy II, LLC ("U.S. Shale"), Raymond B. Roush, Ruthie Ann Roush Dodge, and David E. Roush (collectively "the Bryan Heirs") and awarding them attorney's fees. The underlying dispute involves the interpretation of a nonparticipating royalty interest reserved in a 1951 warranty deed. On appeal, appellants Laborde Properties, L.P. and Laborde Management, LLC (collectively "Laborde"), argue the trial court erred in: (1) granting summary judgment in favor of U.S. Shale and the Bryan Heirs, thereby declaring the 1951 warranty deed reserved a floating nonparticipating royalty interest ("NPRI") as opposed to a fixed NPRI; (2) denying its motion for summary judgment regarding its counterclaims to quiet title and recover overpayment of royalties to U.S. Shale and the Bryan Heirs; and (3) awarding attorney's fees to U.S. Shale and the Bryan Heirs. We reverse the trial court's summary judgment in favor of U.S. Shale and the Bryan Heirs and render judgment that the reserved NPRI is a fixed interest equal to one-sixteenth (1/16) of production. We also reverse the trial court's award of attorney's fees and remand the issue of attorney's fees to the trial court for reconsideration in light of this court's opinion relating to the nature of the reservation. As we discuss below, the issues relating to Laborde's claims to quiet title and recover alleged overpayments are not before this court, having been severed and abated in the trial court.
BACKGROUND
The crux of this dispute centers on the interpretation of a NPRI reserved in a 1951 warranty deed. Specifically, the parties agree a NPRI was reserved in the 1951 deed, but disagree whether the NPRI reserved therein is a fixed NPRI equal to one-sixteenth (1/16) of production or a floating NPRI equal to one-half (1/2) of royalty. Laborde asserts the NPRI is a fixed interest entitling U.S. Shale and the *743Bryan Heirs to one-sixteenth (1/16) of production; U.S. Shale and the Bryan Heirs contend it is a floating interest entitling them to one-half (1/2) of royalty or one-tenth (1/10) of production.
The underlying facts are not in dispute. On January 6, 1951, grantors J.E. Bryan and Minnie H. Bryan conveyed all right, title, and interest in a tract of Karnes County real property to grantee S.E. Crews. In that same deed, the grantors reserved a NPRI. The reservation provision states:
There is reserved and excepted from this conveyance unto the grantors herein, their heirs and assigns, an undivided one-half (1/2) interest in and to the Oil Royalty, Gas Royalty and Royalty in other Minerals in and under or that may be produced or mined from the above described premises, the same being equal to one-sixteenth (1/16) of the production. This reservation is what is generally termed a nonparticipating Royalty Reservation....
U.S. Shale and the Bryan Heirs are the successors-in-interest to the original grantors, i.e., they are current owners of the NPRI J.E. and Minnie reserved in the 1951 warranty deed. Laborde ultimately became the successor-in-interest to grantee S.E. Crews when, on July 9, 2010, it acquired a portion of the real property described in the 1951 deed. As successor-in-interest, Laborde acquired all right, title, and interest in the real property, subject to the NPRI owned by U.S. Shale and the Bryan Heirs. When Laborde acquired the property, the property was subject to an oil and gas lease, which provided for a twenty percent (20%) royalty. At the time the dispute arose between Laborde, U.S. Shale, and the Bryan Heirs, the oil and gas lease was held by EOG Resources, Inc. ("EOG Resources") and made up part of the Lake and Emerson Unit in Karnes County.
After receiving a division order from EOG Resources, Laborde disputed the amount of royalty payments it was receiving. According to Laborde, EOG Resources was improperly reducing the royalty payments due to Laborde under the lease because EOG Resources was erroneously categorizing U.S. Shale's and the Bryan Heirs' NPRI as a floating interest equal to one-half (1/2) of royalty rather than a fixed NPRI equal to one-sixteenth (1/16) of production. In other words, Laborde claimed that by categorizing the NPRI as a floating as opposed to a fixed interest, EOG Resources was over calculating the amount of royalty payments due to U.S Shale and the Bryan Heirs because it was calculating their payment as a floating one-half (1/2) of the lease's twenty percent (20%) royalty, i.e., one-tenth (1/10) of production, rather than a fixed one-sixteenth (1/16) of production. Thus, Laborde believed its royalty payments under the lease were being reduced by the improper overpayment of one-tenth (1/10) of production to U.S. Shale and the Bryan Heirs as opposed to one-sixteenth (1/16) of production to U.S. Shale and the Bryan Heirs.
By letter dated January 12, 2015, Laborde notified EOG Resources of its disagreement with the EOG Resources royalty payment. In response, EOG Resources suspended payments regarding the disputed interest pending proper construction of reservation language in the 1951 warranty deed. U.S Shale and the Bryan Heirs subsequently filed suit for declaratory judgment, asking the trial court to declare the 1951 warranty deed reserved a floating NPRI, and under the current oil and gas lease, their royalty is equal to one-half (1/2) of twenty percent (20%), i.e., one-tenth (1/10) of production. Laborde counterclaimed, asking the trial court to declare the 1951 warranty deed reserved a fixed NPRI equal to one-sixteenth (1/16) of *744production, or alternatively, to quiet title to its royalty interest. Laborde also sought recovery of the overpayment of royalty to U.S. Shale and the Bryan Heirs and attorney's fees. All parties filed motions for summary judgment requesting the trial court declare whether the NPRI reserved in the 1951 warranty deed was a fixed or floating interest. Laborde also sought summary judgment on its claim for recovery regarding the overpayment of royalties to U.S. Shale and the Bryan Heirs and its alternative claim to quiet title.
The trial court granted partial summary judgment in favor of U.S. Shale and the Bryan Heirs, declaring the 1951 deed reserved a floating NPRI equal to one-half (1/2) of royalty. According to the summary judgment, under the current lease, which provides for a one-fifth (1/5) or twenty percent (20%) royalty, U.S. Shale and the Bryan Heirs are entitled to a one-tenth (1/10) royalty, i.e., one-half (1/2) of twenty percent (20%). Subsequently, the trial court awarded U.S Shale and the Bryan Heirs attorney's fees, thereby rendering a final judgment. Laborde then perfected this appeal.
ANALYSIS
On appeal, Laborde first contends the trial court erred in granting summary judgment in favor of U.S. Shale and the Bryan Heirs on their declaratory judgment action, arguing the trial court misinterpreted the 1951 warranty deed by concluding the reserved NPRI was a floating as opposed to a fixed interest. According to Laborde, the 1951 deed-by its plain and unambiguous language and under the greatest possible estates rule-reserved a fixed NPRI equal to one-sixteenth (1/16) of production as opposed to a floating NPRI equal to one-half (1/2) of royalty, i.e., one-tenth (1/10) of production under the current lease. Laborde next contends the trial court erred in awarding attorney's fees to U.S. Shale and the Bryan Heirs under the Declaratory Judgment Act because the award was based on an erroneous grant of summary judgment.
I. Nonparticipating Royalty Interest-Fixed or Floating
A. Standard of Review
We review de novo a trial court's ruling on a summary judgment motion. Valence Operating Co. v. Dorsett ,
"Where, as here, both parties file motions for summary judgment, and the trial court grants one motion and denies the other, we review all issues presented and enter the judgment the trial court should have entered." Hausser v. Cuellar ,
B. Applicable Law-Deed Construction
In construing the meaning of a deed, our primary objective is to ascertain the parties' intent as provided in the four corners of the instrument. Medina Interests ,
Recently, in Hysaw v. Dawkins , the supreme court explained that in ascertaining the parties' intent, courts are to take a "holistic approach," considering all parts of the conveying instrument and construing words and phrases together, not in isolation.
Whether an instrument, such as a deed, is unambiguous or ambiguous is a question of law we review under a de novo standard. Graham ,
C. Application-Deed Construction
With these construction principles in mind, we must determine whether: (1) the 1951 warranty deed is ambiguous or unambiguous; and (2) the NPRI reserved in the 1951 warranty deed is a fixed or floating interest. As to the first question, neither party contends the 1951 warranty deed is ambiguous. Rather, both parties agree the deed is unambiguous; they simply advance conflicting interpretations with regard to the reservation language. See Columbia Gas Transmission Corp. ,
As to the second question-the main issue in this matter-as indicated above, Laborde contends the 1951 warranty deed should be construed as reserving a fixed royalty interest equal to one-sixteenth (1/16) of production. Laborde argues that by treating the reservation as a floating interest, the trial court failed to comply with the principles of deed construction and gave no effect to the phrase "same being equal to one-sixteenth (1/16) of production." According to Laborde, the reservation provision does not contain any language indicating an intent to create a floating royalty interest. Rather, the reservation begins with language "an undivided one-half (1/2) interest in and to the ... Royalty," which is indicative of reserving a fixed interest, and then ends with language clearly stating the amount and type of interest being reserved, "same being equal to one-sixteenth (1/16th) of production." To support its position, Laborde largely relies on two appellate decisions. First, Laborde relies on this court's opinion Graham v. Prochaska , wherein we acknowledged that the phrase "one-half of the one-eighth royalty," without more, is indicative of fixed royalty language. See
In response, U.S. Shale and the Bryan Heirs contend the 1951 warranty deed reserved a floating royalty interest equal to one-half (1/2) of royalty. They support their interpretation by pointing out the lease operator, EOG Resources, interpreted the language as reserving a floating royalty interest, explaining the additional phrase "same being equal to one-sixteenth (1/16th) of production" is reminiscent of oil and gas leases with a 1/8 royalty (in other words, 1/2 of 1/8 is equal to 1/16 of production). U.S. Shale and the Bryan Heirs also point to this court's opinion, Graham v. Prochaska , as well as our decision in Hausser v. Cuellar , for support. In those cases, this court ultimately held the disputed language was equal to a floating royalty interest. See Graham ,
*747In general, a mineral interest owner may create by conveyance or, as here, by reservation, a NPRI, out of either the total production achieved under a lease or from his royalty. See Medina Interests ,
Whether a deed reserves or conveys a fixed or floating NPRI becomes more complicated when courts consider the "near ubiquitous nature of the 1/8 royalty"-the royalty fraction so commonly found in oil and gas leases that courts took judicial notice of it as "the usual royalty provided in mineral leases." Hysaw ,
*748In our continuing effort to properly analyze deeds and reservations with regard to the fixed versus floating issue, we have noted numerous examples of both types of conveyances. See Medina Interests ,
Examples of a fractional royalty, i.e., a fixed royalty, include:
(1) A one-fourth royalty in all oil, gas and other minerals in and under and hereafter produced;
(2) A fee royalty of 1/32 of the oil and gas;
(3) An undivided one-sixteenth royalty interest of any oil, gas or minerals that may hereafter be produced;
(4) One-half of the one-eighth royalty interest;
(5) An undivided 1/24 of all the oil, gas and other minerals produced, saved, and made available for market;
(6) 1% royalty of all the oil and gas produced and saved[.]
(1) 1/16 of all oil royalty;
(2) The undivided 2/3 of all royalties;
(3) One-half interest in all royalties received from any oil and gas leases;
(4) An undivided one-half interest in and to all of the royalty;
(5) One-half of one-eighth of the oil, gas and other mineral royalty that may be produced;
(6) One-half of the usual one-eighth royalty.
As we explained above, per the court's recent decision in Hysaw , it is not enough, however, to compare the language in the reservation before us to the examples set out above to determine whether the NPRI at issue is fixed or floating. In Hysaw , the Texas Supreme Court specifically cautioned against merely comparing a deed's language to other phrases in other deeds that were divorced from context.
Looking at the 1951 warranty deed and heeding the supreme court's admonition to ascertain intent "from all words and parts of the conveying instrument," we begin by noting the deed is a concise, standard deed. See 2 SMITH & WEAVER , TEXAS LAW OF OIL & GAS § 3.2[A], at 3-6-3-6.1. Deeds like this normally begin with a granting clause, which identifies the grantor and the grantee, provides a recital of consideration, and a description of the property being transferred.
The 1951 deed follows this standard form. The deed begins with a granting clause, which identifies the grantors, the grantee, the amount of consideration, and includes general conveyance language and a detailed description of the property. See
This reservation is what is generally termed a nonparticipating Royalty Reservation and the grantors in this deed, their heirs and assigns shall have no interest in bonus payments under future oil, gas or mineral leases, nor shall it be necessary for such grantors to join in or ratify the execution of such lease or leases, the right being expressly granted and assigned to the grantee herein, his heirs and assigns to execute such lease or leases and to receive and retain all bonuses and delay rental from any lease now or hereafter.
This language describes the nature of the reserved interest as a royalty as opposed to a mineral interest. The parties do not dispute this, and case law supports this interpretation. A mineral interest owner, unlike a royalty interest owner, is generally entitled to a proportional amount of bonuses, rentals, and royalties due under a lease. Hysaw ,
As noted, after reservation clause is a habendum clause. A habendum clause describes the duration of the interest conveyed-for a term or in perpetuity. 2 SMITH & WEAVER , TEXAS LAW OF OIL & GAS § 3.2[A], at 3-6.1-3-7. The habendum clause in the 1951 deed starts with the traditional "to have and to hold" language and then states the property described in the granting clause, subject to the royalty reservation, belongs to the grantee, his heirs, and assigned "forever," and that the grantors will defend the grantee from all claims to the contrary. There is nothing in the habendum clause to assist the court in determining whether the royalty reserved was a fixed or floating interest. Thus, after looking to the other provisions in the deed pursuant to the mandate in Hysaw , thereby avoiding the application of a mechanical rule based merely on the disputed language in the reservation, we are left with nothing but the disputed language. See
As set out above, the disputed language in the deed states:
*750There is reserved and excepted from this conveyance unto the grantors herein, their heirs and assigns, an undivided one-half (1/2) interest in and to the Oil Royalty, Gas Royalty and Royalty in other Minerals in and under or that may be produced or mined from the above described premises, the same being equal to one-sixteenth (1/16) of the production. This reservation is what is generally termed a nonparticipating Royalty Reservation....
(emphasis added). U.S. Shale and the Bryan Heirs point to the first part of the paragraph above-specifically, the "undivided one-half (1/2) interest in and to" language, arguing the parties intended to create a floating interest. They argue, based on our prior decision in Graham , that the additional phrase "same being equal to one-sixteenth (1/16th) of production" does not change the interest to one that is fixed. In Graham , this court had to harmonize the following reservation to determine whether the interest reserved was fixed or floating:
One-half (1/2) of the one-eighth (1/8) royalty to be provided in any and all leases for oil, gas and other mineral now upon or hereafter given on said land, or any part thereof ... the same being equal to one-sixteenth (1/16th) of all oil, gas, and other minerals of any nature, free and clear of all costs of production, except taxes."
We first found we could harmonize the seemingly conflicting phrases because of the language in the provision specifically referencing "the" one-eighth (1/8) royalty provided for in the current and future leases.
*751We then looked at prior deeds, which we held were incorporated in the deed at issue, and found these prior deeds "clarified" that each royalty reservation created was a floating interest.
Thus, our decision in Graham -that the interest in question was a floating as opposed to a fixed interest-was based on: (1) language in the deed objectively demonstrating the parties' assumption of "the" one-eighth (1/8) royalty in the current and all future leases; and (2) language in prior deeds establishing the creation of a floating interest.
The 1951 deed does not contain any language from which we can objectively find the parties assumed a one-eighth (1/8) royalty in any current or future lease. Rather, the deed at issue merely reserves "an undivided one-half (1/2) interest" in any oil, gas, or minerals that may be produced. It follows that we cannot objectively find the parties assumed, with regard to the "one-sixteenth (1/16) of the production" language, that the reserved interest would always be one-sixteenth (1/16) of production, i.e., 1/2 of 1/8. Moreover, there are no other portions of the deed nor any reference to documents outside the lease to suggest the parties' assumed the use of a continued one-eighth (1/8) lease royalty or that they intended to create a floating interest. Thus, Graham does not compel this court to conclude the royalty reservation in this case is a floating interest.
U.S. Shale's and the Bryan Heirs' reliance on our decision in Hausser is likewise misplaced. As in Graham , in Hausser this court specifically looked to several provisions in the lease-the granting clause, the existing lease clause, and the future lease clause-all of which included royalty reservation language. Hausser ,
We agree with U.S. Shale and the Bryan Heirs that in both Graham and Hausser , this court ultimately concluded the disputed language at issue represented an intent to create a floating royalty interest. See Graham ,
In isolation, the phrase "an undivided one-half (1/2) interest in and to the Oil Royalty, Gas Royalty and Royalty in other Minerals in and under or that may be produced or mined from the above described premises, the same being equal to one-sixteenth (1/16) of the production" appears to be a mix of language used to describe both types of interests. See Medina Interests ,
To hold the disputed language reserves a floating or fraction of royalty, given the absence of language such as that found in Graham , would require this court to ignore "the same being equal to one-sixteenth (1/16) of the production" language. In Graham , we determined the phrase "same being equal to one-sixteenth (1/16th) of all oil, gas and other minerals," in the absence of other language, would express an intent to create a fixed interest. Graham ,
Here, the 1951 warranty deed does not include the critical language relied upon in Graham , i.e., the language from the deed and prior deeds showing an intent to create a floating royalty interest. Specifically, we have no reference in the deed to any current lease, lease royalty, much less a reference to a particular lease royalty, such as "the" one-eighth (1/8) royalty in the Graham deed, that might express an assumption of a particular lease royalty. And, there are no prior deeds or other documents from which we might derive an intent to create a floating interest. In sum, there is no additional language in the 1951 deed or other documents that would permit this court to objectively determine the parties assumed a perpetual lease royalty in any amount. Rather, the plain and ordinary language in the disputed provision describes the reservation as an "undivided one-half interest" in royalties and minerals that may be produced or made, "equal to one-sixteenth (1/16) of production." We hold "the same being equal to one-sixteenth of the production" language qualifies, modifies, or clarifies the preceding undivided one-half language, showing an intent to reserve a fixed one-sixteenth (1/16) interest.
The misconception theory arises out of the previously mentioned historical standardization of a landowner's lease royalty as one-eighth (1/8). See Hysaw ,
Accordingly, we hold the trial court erred in declaring the 1951 warranty deed reserved a floating NPRI equal to one-half (1/2) of royalty. Rather, under the proper construction, the deed reserves to the grantor a fixed NPRI equal to one-sixteenth (1/16) of production. We now turn to Laborde's counterclaims to quiet title and recover alleged overpayment of royalties, as well as the issue of attorney's fees.
II. Counterclaims to Quiet Title and Recover Overpayment of Royalties
In addition to seeking declaratory judgment with regard to the nature of the reserved interest, Laborde filed counterclaims to quiet title and to recover alleged NPRI overpayments to U.S. Shale and the Bryan Heirs. Laborde moved for summary judgment on these counterclaims. On appeal, Laborde contends the trial court erred in denying its motion for summary judgment as to these claims. However, U.S. Shale and the Bryan Heirs contend these claims are not before this court. We hold these claims are not before us.
The record reflects that in October 2015, the trial court signed an order granting partial summary judgment in favor of U.S. Shale and the Bryan Heirs and denying the partial summary judgment motion of Laborde. In its order, the trial court specifically rendered judgment that the 1951 *754warranty deed created a floating NPRI. The order did not reference Laborde's counterclaims to quiet title or recover alleged overpayments. Nor did the trial court rule upon U.S. Shale's and the Bryan Heirs' request for attorney's fees. In February 2016, however, the trial court rendered an order awarding attorney's fees to U.S. Shale and the Bryan Heirs.
The parties ultimately filed a "Joint Motion for Severance and Abatement." In that motion, the parties stated:
The only claims not disposed of by the Court's Summary Judgment rulings are those asserted by Defendants Laborde Property, L.P. and Laborde Management, LLC in their counterclaim against [U.S. Shale] and [the Bryan Heirs]. The parties agree that the Court's summary judgment rulings have adjudicated all of [U.S. Shale's] and [the Bryan Heirs'] claims and therefore file this Joint Motion for Severance and Abatement asking the Court to sever from the above-styled and numbered cause all of [U.S. Shale's] and [the Bryan Heirs'] claims against [Laborde] and to abate the claims of [Laborde] against [U.S. Shale] and [the Bryan Heirs'] in the lawsuit until all appeals, if any, have become final.
The parties alleged that in order for the judgment regarding the nature of the royalty reservation to be final, it would be necessary to sever that claim from Laborde's claims to quiet title and recover overpayments. The parties asked the court to abate Laborde's counterclaims until all appeals are exhausted and a judgment regarding the nature of the NPRI is final.
The trial court granted the joint motion, severing the declaratory judgment claims regarding the nature of the reservation, i.e., fixed or floating, and specifically stating:
[T]his is a final severance and makes the Judgment or Judgments entered against [Laborde] regarding [U.S. Shale's] and [the Bryan Heirs'] royalty and attorney's fee claims final and disposes of all parties and all issues in the severed action.
(emphasis added). The trial court further ordered Laborde's counterclaims-to quiet title and recover alleged overpayments-"STAYED AND ABATED" until all appeals are exhausted or the judgment in the severed action becomes final.
A severance divides a lawsuit into two or more separate and independent lawsuits. In re E.I. du Pont de Nemours & Co. ,
Here, the record establishes Laborde's counterclaims to quiet title and recover alleged overpayments were severed, stayed, and abated pending the outcome of the royalty dispute. Thus, those claims are now a distinct lawsuit, from which an appeal may be taken upon rendition of a final judgment. See
III. Attorney's Fees
Finally, Laborde contends the trial court erred in awarding attorney's fees to U.S.
*755Shale and the Bryan Heirs under the Declaratory Judgment Act because the award was based on the trial court's grant of summary judgment in their favor on the royalty issue. U.S. Shale and the Bryan Heirs argue that because the trial court properly granted summary judgment in their favor, there is no basis to disturb the award of attorney's fees.
As we recognized in Hausser , under the Declaratory Judgment Act ("the Act"), the trial court may exercise its discretion in awarding attorney's fees.
In Hausser , we reversed the trial court's summary judgment, holding the trial court improperly construed the deed at issue.
We hold, as we did in Hausser , given our decision to reverse the trial court's summary judgment and render judgment in favor of the opposing parties, we must remand the matter of attorney's fees to the trial court for reconsideration in light of our decision.
CONCLUSION
Based on the foregoing, we hold the royalty reservation in the 1951 warranty deed is a fixed NPRI equal to one-sixteenth (1/16) of production. We therefore reverse the trial court's summary judgment in favor of U.S. Shale and the Bryan Heirs and render judgment in favor of Laborde that the royalty interest reserved is a fixed NPRI equal to one-sixteenth (1/16) of production. Based on the reversal and rendition relating to the reservation, we remand the issue of attorney's fees to the trial court for reconsideration in light of our decision. As to the counterclaims alleged by Laborde regarding quiet title and overpayment, we hold those issues are not before this court based on the trial court's severance order.
As we recognized in Graham , leases with royalties larger than one-eighth (1/8) became much more common in the mid-1970's.
The phrase "the same being equal to" is simply another way of saying "in other words," "in short," or "that is."
There is nothing to suggest the theory applies only to show an intent to create a floating as opposed to a fixed interest.
Case-law data current through December 31, 2025. Source: CourtListener bulk data.