U.S. Shale Energy Ii, Llc. v. Laborde Properties, L.P.

551 S.W.3d 148 (2018)

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Nature of the Case

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Facts

On January 6, 1951, J.E. and Minnie Bryan conveyed by deed all rights, title, and interest in a tract of land where the Bryans reserved a nonparticipating royalty interest in the minerals. The reservation in the deed 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 non-participating Royalty Reservation . . . .” Eventually, P acquired a share of the Bryans' reserved interest and now the Bryans' heirs and P own the nonparticipating royalty interest reserved in the Bryan deed. In 2010, Laborde Properties, L.P. (D), acquired all rights, titles, and interests in portions of the property that are subject to the Bryan successors' nonparticipating royalty interest. When D acquired the property, EOG Resources held an oil and gas lease providing for a lessor's royalty of 20%, i.e., 1/5. D received a division order from EOG reflecting that the Bryan successors were being credited with 1/2 of that 1/5 royalty (for a total of 1/10 of production). D immediately stated that the Bryan successors should be credited with only 1/16 of total production by virtue of the fixed 1/16 royalty reserved in the Bryan deed. EOG suspended payments pending resolution of the dispute. P sued D seeking a declaratory judgment that the Bryan deed reserved a floating 1/2 royalty interest, resulting in a 1/10 royalty under the EOG lease (1/2 of the 1/5 royalty contained in the lease). D sought a declaration that the deed reserved a fixed 1/16 royalty. The trial court granted Ps' motions and denied D's, declaring that the Bryan deed reserved a floating 1/2 royalty interest and, in a separate order, awarding the Bryan successors their attorney's fees. The court of appeals reversed. determined that no provision other than the reservation itself had significance to the nature of the royalty reserved and held that the language ''the same being equal to one-sixteenth of the production' . . . qualifies, modifies, or clarifies the preceding undivided one-half language, showing an intent to reserve a fixed one-sixteenth (1/16) interest.' Ps appealed.