The Austin Court of Appeals recently addressed the issue of mineral reservation in a deed in Ross v. Flower, offering important reminders for Texas landowners and property purchasers.

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Background

This case revolves around the interpretation of a paragraph in a deed for 20-acres of land in Fayette County.

In 1999, the Rosses owned the surface and mineral interests for the 20-acre tract at issue.  In April 1999, the Rosses executed a General Warranty Deed conveying the property to Richard & Patricia Church.  Specifically, the Deed stated that the Rosses:

GRANT, SELL, and CONVEY unto RICHARD F. CHURCH and wife,
PATRICIA A. CHURCH, herein referred to as “Grantee”, whether one or more,
the real property described on attached Exhibit “A”.

This conveyance however, is made and accepted subject [to] any OIL, GAS
AND OTHER MINERALS, including, but not limited to BUILDING STONE,
LIMESTONE, CALICHE, SURFACE SHALE, WATER, SAND, GRAVEL
AND LIGNITE, IRON AND COAL and to any and all validly existing
encumbrances, conditions and restrictions, relating to the hereinabove described
property as now reflected by the records of the County Clerk of Fayette County,
Texas.

Subsequently, Mr. and Mrs. Church conveyed their interest to the Rankins, who then conveyed ownership of the property to the Flowers.

A dispute arose and Mr. and Mrs. Ross filed suit against Mr. and Mrs. Flowers for trespass to try title and conversion.  The lawsuit also sought a declaration regarding ownership of the mineral estate underlying the 20-acre tract.   The Rosses claimed that the “accepted subject to” language in the Deed reserved their mineral ownership.  The Flowers argued this language was not an express reservation of the mineral interests.

The trial court sided with the Flowers, rendering a take-nothing judgment against the Rosses.  The Rosses appealed.

Applicable Law 

When construing an unambiguous document, the court’s duty is to “ascertain the intent of the parties from all of the language within the four corners of the deed.”  When looking at a deed, a court will “confer upon the grantee the greatest estate that the terms of the instrument will allow.”  In other words, “a deed will pass whatever interest the grantor has in the land, unless it contains language showing the intention to grant a lesser estate.”  Reservations and exceptions must be made in clear language, and identify, with reasonable certainty, the property to be excepted from the larger conveyance.

Reservations and exceptions in deeds are not synonymous.  A reservation is made in favor of the grantor and creates a new right out of the conveyance.  It is essentially the taking back by the grantor of a part of the interest being granted.  Conversely, an exception operates to exclude some interest from the grant. An exception operates in favor of the grantor only to the extent that the interest as excepted may be vested in the grantor and not outstanding in another.

Opinion

The Austin Court of Appeals affirmed the trial court’s decision that the Rosses failed to expressly reserve the mineral interest.  [Read Opinion here.]

Both parties argued that the deed was unambiguous.  They, of course, disagreed on what the unambiguous language meant.  The Rosses claimed the provision quoted above operated to reserve or except the mineral estate from the conveyance.  The court disagreed.

First, the court looked at the meaning of the words “subject to.”  Used in their ordinary sense, the court reasoned, these words mean “subordinate to, or subservient to or limited by.”  Generally, a “subject to” clause in a deed seeks to protect the grantor against a claim for breach of warranty if some mineral interest is already outstanding.  Here, the “subject to” clause referenced not only oil, gas, and other minerals, but also “any and all validly existing encumbrances.”  The court held this indicated an intent to avoid a breach of warranty and an over-conveyance problem, rather than a clear attempt to reserve a mineral interest.

Second, construing this language as the Rosses request would result in the “subject to” clause functioning inconsistently: as a reservation with regard to the minerals, but as a limitation of warrant with regard to all existing encumbrances, conditions, and restrictions.  Instead, because the Rosses had executed two oil and gas leases prior to conveying the property in 1999, the deed can be construed consistently as protecting the Rosses against a breach of warranty arising from some already outstanding mineral or other interest.  Nothing in the four corners of the document showed that the parties intended the “subject to” clause to operate differently or to serve a purpose other than informing the grantees that other outstanding interests may burden the property conveyed.

Third, the “subject to” clause also referenced a number of substances that are part of the surface estate.  Yet, the Rosses did not dispute that the deed conveyed all of their rights in the surface estate.  Thus, reading the “subject to” clause as a reservation would result in the deed also reserving valuable portions of the surface estate.

Thus, the court held that the “subject to” clause did not exclude anything from the conveyance, but instead merely referred to encumbrances on the property to explain and clarify the nature of title being conveyed.   Because of this, the Rosses failed to expressly reserve the mineral rights to the 20-acres, and those rights passed with the sale of the property.

Key Takeaways

First, this case is a good reminder that for any ownership interest to be reserved when a person is selling property, such reservation must be expressly made.  This should be done in both the sales contract and the deed.  Without express language clearly indicating the reservation, no interest will be reserved.

Second, although it is unclear whether the Rosses used an attorney to draft the Deed language, I recommend doing so to avoid issues like this case.  Even single words or punctuation can make a world of difference when looking at deeds and contracts.  To ensure that property is properly deeded and any reservations are adequately written, having an attorney representing your interest draft and/or review is a good idea.