JUSTICE GUZMAN delivered the opinion of the Court.
Mineral deeds employing double fractions give rise to disputes about whether the instrument creates a fixed ("fractional") royalty or a floating ("fraction of") royalty. The double-fraction problem emerges when an instrument expresses a royalty interest as the product of two fractions, such as "1/2 of the usual 1/8." When viewed against a historical backdrop in which the standard royalty was 1/8 and many landowners erroneously believed the landowner's royalty could be no greater than 1/8, the quantum of the interest conveyed or reserved by double-fraction language is subject to disagreement. Questions arise about whether double fractions must be multiplied and the royalty interest fixed without regard to the royalty negotiated in a future mineral lease (fractional royalty) or whether 1/8 was intended as a synonym for the landowner's royalty, meaning the interest conveyed varies depending on the royalty actually obtained in a future mineral lease (fraction of royalty). The proper construction of instruments containing double-fraction language is a dilemma of increasing concern in the oil and gas industry, as uncertainty abounds, disputes proliferate, and courts have seemingly varied in their approaches to this complicated issue.
The case before us today presents the double-fraction issue in the context of a will-construction dispute. More than a half century ago, various real-property interests were distributed to three children under their mother's will. The testatrix bequeathed different-sized land tracts to each of her children in fee simple but globally devised to each child a non-participating royalty interest of "an undivided one-third (1/3) of an undivided one-eighth (1/8) of all oil, gas or other minerals in or under or that may be produced from any of said lands." The will similarly specified that each child "shall receive one-third of one-eighth royalty," unless there has been an inter vivos sale or conveyance of royalty on land willed to that child, in which case the children "shall each receive one-third of the remainder of the unsold royalty." Heirs of the original devisees are at odds over the proper construction of these will provisions and the quantum of royalty bequeathed to each sibling because some of the lands are now subject to mineral leases providing for royalties in excess of 1/8. The issue is whether the double-fraction language fixed the siblings' devised royalty at 1/24-allowing the fee owner the exclusive benefit of any negotiated royalty exceeding 1/8-or whether the testatrix intended the devisees to share equally in all future royalties.
In resolving this dispute, we hew to the guiding principle that our objective is to discern and give effect to the testatrix's intent as expressed in the will's four corners. We determine intent by construing the instrument holistically and by harmonizing any apparent conflicts or inconsistencies in the language. Though we acknowledge the call for more certain and predictable guidance, we reject bright-line rules of interpretation that are arbitrary and, thus, inimical to an intent-focused inquiry. See Concord Oil Co. v. Pennzoil Expl. & Prod. Co., 966 S.W.2d 451, 460-61 (Tex.1998) (plurality op.); see also Luckel v. White, 819 S.W.2d 459, 464 (Tex.1991). We therefore cannot embrace a mechanical approach requiring rote multiplication of double fractions whenever they exist. Rather, considering the testatrix's will in
I. Factual and Procedural Background
Ethel Nichols Hysaw executed her will in 1947, at which time she owned three tracts of land in Karnes County, Texas — a 1065-acre tract, a 200-acre tract, and a 150-acre tract. Her will divided the property among her three children in fee-simple title, as follows: to Inez Hysaw Foote, 600 acres from the 1065-acre tract; to Dorothy Francis Hysaw Burris, the remaining 465 acres of the 1065-acre tract; and to Howard Caldwell Hysaw, Jr., the 200-acre tract, which had been a gift to Ethel from her father, and the 150-acre tract, which was her homestead. With respect to the related mineral estates, Ethel
Ethel further described the royalty interest devised to each child in nearly identical paragraphs:
Each paragraph concludes with a residual royalty clause that takes into account the effect of an inter vivos royalty sale on lands bequeathed to a particular child, providing:
Before and after executing the will, Ethel made several inter vivos conveyances to her children. In 1946, Ethel gifted equal royalty interests in the 200- and 150-acre tracts to each child.
The ties that bind surely wither through the ages, and even more so when market influences increase the economic stakes, as they have in the present case.
The underlying declaratory-judgment action, initiated by Howard's successors,
Howard's successors and Dorothy's successors
After stipulating to the pertinent facts, the parties filed cross-motions for summary judgment. The trial court denied the motion filed by Inez's successors and granted the motion filed by Howard's and Dorothy's successors, rendering judgment that Ethel's will entitled each child to 1/3 of any and all royalty interest on all the devised land tracts.
The court of appeals reversed and rendered judgment in favor of Inez's successors,
In arriving at this construction of the will, the court of appeals first considered the meaning of each royalty provision in isolation, and then evaluated whether the provisions, as so construed, conflicted with one another. Id. at 155. The court interpreted the first royalty interest provision — which granted to "each of [Ethel's] children ... an undivided one-third (1/3) of an undivided one-eighth (1/8)" — as unambiguously conveying a fixed fractional royalty of 1/24 to each child. Id. at 154. The court afforded the same construction to the second royalty-interest provision — which reiterated that each child, by name, "shall receive one-third of one-eighth royalty" unless an inter vivos royalty conveyance had been effected on "the lands so willed to [that child]." Id. at 152-54. However, the court concluded the third royalty provision — applying only in the event of an inter vivos royalty sale and providing that "each [child] receive one-third of the remainder of the unsold royalty"-unambiguously devised a floating one-third of any and all royalty. Id. at 155. Despite the court's determination that the will described both fixed and floating royalty interests, the court found no inconsistency in this construction of the will, concluding (1) the second royalty provision did not fix the surface-owner's mineral interest but was merely a restatement of the first royalty provision, (2) any excess royalty to the surface owner occurred by operation of the fee-simple devise, and (3) the third royalty provision was restricted to a specific condition that operated independently from the other two royalty clauses. Id. at 155-56.
On appeal to this Court, the decisive issue remains the proper interpretation of the double-fraction language in Ethel's will in light of other testamentary language indicating Ethel intended to treat her children similarly with respect to their royalty interests.
Our objective in construing a will is to discern and effectuate the testatrix's intent as reflected in the instrument as a whole. See Shriner's Hosp. for Crippled Children of Tex. v. Stahl, 610 S.W.2d 147, 151 (Tex.1980); Bergin v. Bergin, 159 Tex. 83, 315 S.W.2d 943, 946 (Tex.1958). As we have explained, "[t]he intent must be drawn from the will, not the will from the intent." San Antonio Area Found. v. Lang, 35 S.W.3d 636, 640 (Tex.2000) (quoting Lehman v. Corpus Christi Nat'l Bank, 668 S.W.2d 687, 688 (Tex.1984)). Thus, we "focus not on `what the testatrix intended to write, but the meaning of the words she actually used.'" Id. at 639 (quoting Shriner's Hosp., 610 S.W.2d at 151). Ascertaining intent from the four corners of a will requires careful examination of the words the testatrix chose, id. and "[t]he sense in which the words were used by the testator is the ultimate criterion." Stewart v. Selder, 473 S.W.2d 3, 7 (Tex.1971).
Similar construction principles apply to non-testamentary instruments conveying mineral interests. Luckel, 819 S.W.2d at 461-62 (the primary objective in construing mineral grants is to ascertain intent from the four corners of the instrument based on the words used and not the subjective intent of the parties); Sun Oil Co. v. Madeley, 626 S.W.2d 726, 731 (Tex.1981) (surrounding circumstances may inform the meaning of text and render it capable of only one meaning). In such cases, we have favored a holistic and harmonizing approach and rejected mechanical rules of construction, such as giving priority to certain types of clauses over others or requiring the use of magic words. See Luckel, 819 S.W.2d at 463-64 (overruling Alford v. Krum, 671 S.W.2d 870 (Tex.1984), which had afforded controlling weight to the granting clause over another provision in the conveyance); see also Concord Oil Co., 966 S.W.2d at 460-61 (rejecting invitation "to adopt `firm' or `bright-line' rules for construing mineral and royalty conveyances that contain differing fractions," because such rules "are arbitrary" and "will not always give effect to what the conveyance provides as a whole"); id. at 465 (Gonzalez, J., dissenting) (acknowledging Luckel's salient holding as a rejection of "mechanical rules of construction"); accord Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006) (explaining no single provision in a contract "taken alone will be given controlling effect; rather, all the provisions must be considered with reference to the whole instrument" (quoting Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983)).
In this case, questions of testamentary intent arise due, in part, to the use of double fractions in two of the will's three royalty provisions, the absence of any expression of the royalty devise as a single or fixed fraction, the equal-sharing language in the residual royalty clause, the prevalence of 1/8 as the standard royalty at the time Ethel executed her will, and the fee simple devise of the surface estates. Because some contextual prologue is helpful to understand the nature of the dispute, our consideration of the language in Ethel's will is preceded by a brief discussion of mineral-interest conveyances, the legacy of the then-standard 1/8 royalty, and a related theory of "estate misconception."
A. Mineral-Interests Overview
An instrument conveying land in fee simple transfers both the surface estate and all minerals and mineral rights, unless the instrument contains a reservation or expresses a contrary intention. Schlittler v. Smith, 128 Tex. 628, 101 S.W.2d 543,
"A royalty interest derives from the grantor's mineral interest and is a nonpossessory interest in minerals that may be separately alienated." Id. at 463. "The same instrument may convey an undivided portion of the mineral estate and a separate royalty interest, and the royalty interest conveyed may be larger or smaller than the interest conveyed in the minerals in place." Id. A party possessing a royalty interest that does not include the right to lease the mineral estate, receive delay rentals, or bonus payments is referred to as a non-participating royalty-interest holder. KCM Fin., 457 S.W.3d at 75.
Royalty interests may be conveyed or reserved "as a fixed fraction of total production" (fractional royalty interest) or "as a fraction of the total royalty interest" (fraction of royalty interest). Luckel, 819 S.W.2d at 464. A fractional royalty interest conveys a fixed share of production and "remains constant regardless of the amount of royalty contained in a subsequently negotiated oil and gas lease." Coghill v. Griffith, 358 S.W.3d 834, 838 (Tex.App.-Tyler 2012, pet. denied). In comparison, a fraction of royalty interest (as a percentage of production) varies in accordance with the size of the landowner's royalty in a mineral lease and "is calculated by multiplying the fraction in the royalty reservation by the royalty provided in the lease." Id.; see Luckel, 819 S.W.2d at 464.
B. The Double-Fraction Dilemma
Discerning the nature of a particular royalty interest may be a simple matter when an instrument consistently uses single fractions to describe the interest. See Garrett v. Dils Co., 157 Tex. 92, 299 S.W.2d 904, 906 (Tex.1957) (because the granting clause contained a fixed, stated fraction "there would be no doubt as to the interest conveyed ... [h]ad other language in the deed not disclosed what the parties understood [the fixed fraction] to mean"). But conveyances containing double fractions or two or more differing fractions present recurring interpretative challenges. See id.; Concord Oil Co., 966 S.W.2d at 452, 454.
Instruments employing double fractions to convey or reserve mineral interests almost invariably involve multiples of 1/8, a royalty rate so pervasive that, for decades, courts took judicial notice of it as the standard and customary royalty.
A related issue that may be implicated in double-fraction cases is the theory of "estate misconception." This theory refers to a once-common misunderstanding (perpetuated by antiquated judicial authority) that a landowner retained only 1/8 of the minerals in place after executing a mineral lease instead of a fee simple determinable with the possibility of reverter in the entirety.
Though not inexorably so, the reality is that use of 1/8 (or a multiple of 1/8) in some instruments undoubtedly embodies the parties' expectation that a future lease will provide the typical 1/8th landowners' royalty with no intent to convey a fixed fraction of gross production.
A mechanically applied, mathematical approach is appealing because it provides a bright line for resolving the double-fraction problem and, thus, certainty. This approach also purports to afford weight to each of the expressed fractions under a plain-meaning analysis. See WILLIAMS & MEYERS, OIL & GAS LAW § 327.2, at 90-91 (approving of multiplying double fractions under a plain-meaning approach despite acknowledging existence of likely alternative meaning when multiple of 1/8 is used). However, the mechanical approach fails to accord any significance to the use of double fractions in lieu of a single fraction and, in doing so, may interpolate words not actually expressed in an instrument (i.e., a fixed single fraction). See Burney, 33 ST. MARY'S L.J. at 3-4.
Courts determining that double-fraction language created a floating royalty typically adhere to an analytical approach that emphasizes the four-corners rule and harmonization principles of our precedent in Garrett, Luckel, and Concord Oil. Similar to this trilogy of cases, the conveying instruments in fraction-of-royalty cases tend to be more complex than in the fractional
Variety of outcome should be expected because written instruments must be interpreted in light of the parties' intent as expressed in the entire document. See Graham, 429 S.W.3d at 661 (explaining "the deed before us contains additional language that provides the context necessary to objectively determine that the parties assumed the landowner's royalty would always be one-eighth of production"). But some discordance in the jurisprudence may result from a misapplication of the analytical approach we have long-endorsed.
Today, we reaffirm our commitment to a holistic approach aimed at ascertaining intent from all words and all parts of the conveying instrument. To discern intent, words and phrases must be construed together and in context, not in isolation. See Plainsman Trading Co., 898 S.W.2d at 789; cf. State Farm Life Ins. Co. v. Beaston, 907 S.W.2d 430, 433 (Tex. 1995) ("Indeed, courts must be particularly wary of isolating from its surroundings or considering apart from other provisions a single phrase, sentence, or section of a contract."). Words and phrases generally bear their ordinary meaning unless the context supports a technical meaning or a different understanding. See In re Office of the Att'y Gen. of Tex., 456 S.W.3d 153, 155-56 (Tex.2015) ("Given the enormous power of context to transform the meaning of language, ... [t]he import of language, plain or not, must be drawn from the surrounding context, particularly when construing everyday words and phrases that are inordinately context-sensitive."); see also Plains Expl. & Prod. Co. v. Torch Energy Advisors, Inc., 473 S.W.3d 296, 305 (Tex.2015). Similarly, apparent inconsistencies or contradictions must be harmonized, to the extent possible, by construing the document as a whole. Luckel, 819 S.W.2d at 462. But considering whether inconsistencies might exist and how they may be harmonized is part of the process for determining intent; it is not merely a cross-check method of validating an interpretation derived by segregating key terms and phrases. That is to say, meaning derived without reference to context is not confirmed merely because such a construction would not produce an inconsistency with another provision.
We further eschew reliance on mechanical or bright-line rules as a substitute for an intent-focused inquiry rooted in the instrument's words. To that end, the estate-misconception theory and the historical use of 1/8 as the standard royalty may inform the meaning of fractions stated in multiples of 1/8, but these considerations are not alone dispositive. Cf. Antonin Scalia & Bryan A. Garner, READING LAW: THE INTERPRETATION OF LEGAL TEXTS 78 (2012) ("Words must be given the meaning they had when the text was adopted.").
In this case, the court of appeals departed from the appropriate analytical approach by construing each royalty provision in isolation, deriving their meaning by comparing them to exemplar phrases that
C. Ethel's Will
We begin our analysis of Ethel's will with the language distributing her real property. Ethel devised different-sized land tracts to each child; specifically, more acreage to Inez and Dorothy than to Howard. However, nothing in the will suggests Ethel intended to favor her daughters over her son based solely on this size-disparity. To the contrary, the intrinsic value of the land bequeathed to Howard is expressly noted.
When land is devised in fee simple, as it was here, the devise includes the mineral estate except on terms so specified. Schlittler, 101 S.W.2d at 544. Ethel's devise did not transfer all the interests in the mineral estate. Rather, the will describes, as follows, the royalty interests bequeathed to each child that were severed from the fee-simple devise:
Using identical language addressed to each child, Ethel's will thus:
Absent other indicators of testamentary intent, it might be plausible to read the double-fraction royalty devise in the first two royalty provisions as a mathematical expression describing a fractional royalty; under such a reading, any excess royalty would default to the fee owner. However, other language in the will and the overall structure of the royalty devise confirms Ethel's intent to treat the children equally in the distribution of the devised royalty interests and, thus, to legate a floating 1/3 royalty to each.
Evidencing Ethel's intent to equally divide the royalties among the children is (1) the deliberate recitation of identical language to effect each child's royalty inheritance; (2) the use of double fractions in lieu of single fixed fractions, with one fraction connoting equality among the three children (1/3) and the other raising the specter of estate misconception or use of the then-standard 1/8 royalty as a synonym for the landowner's royalty; (3) the first royalty provision's global application to all the children and the second provision's language restating the royalty devise of each child individually; and (4) the equal-sharing language in the third and final royalty clause.
Most telling of testamentary intent is the third royalty clause, in which Ethel clearly provided for equal sharing of royalties among the children as to lands affected by an inter vivos royalty sale. In the event Ethel sold some of her royalty interest prior to her death, the third royalty provision specified that each child would "receive one-third of the remainder of the unsold royalty." The court of appeals correctly interpreted this provision as unambiguously conveying a floating fraction of royalty interest. However, due to the provision's conditional nature, the court failed to recognize its significance in ascertaining the testatrix's intent. 450 S.W.3d at 156. Even if no operational inconsistency ensues from reading the first two royalty provisions as describing a fractional royalty and the third as describing a fraction of royalty, such a reading produces an inconsistency with regard to testamentary intent.
The third royalty clause demonstrates that Ethel intended the royalty devise to be equal and that re-equalization would be required if an inter vivos event diminished the available royalty. If Ethel had truly intended the fee-owning child to benefit exclusively from any excess royalty, as Inez's successors argue, equalization following a royalty-diminishing transaction would produce a paradoxical result. The only plausible construction supported by a holistic reading of the will is that Ethel used "one-eighth royalty" as shorthand for the entire royalty interest a lessor could retain under a mineral lease,
When the terms of a mineral conveyance are in dispute, our objective is to effectuate the parties' intent as expressed within the four corners of the conveying instrument. Intent must be determined by a careful and detailed examination of the document in its entirety, rather than by application of mechanical rules of construction that offer certainty at the expense of effectuating intent. Ethel Hysaw's will, when so considered, demonstrates her intent to convey an equal royalty interest to each of her three children. We therefore reverse the court of appeals' judgment and render judgment that the Hysaw will devised a 1/3 fraction of royalty, not a 1/24 fractional royalty.
Charles Tanford, BEN FRANKLIN STILLED THE WAVES: AN INFORMAL HISTORY OF OIL ON WATER WITH REFLECTIONS ON THE UPS AND DOWNS OF SCIENTIFIC LIFE IN GENERAL 83 (Oxford University Press 2004).
The case of Harriss v. Ritter presents a combination scenario involving a three-fraction reservation: "one-half of one-eighth of the ... mineral royalty that may be produced from said land." 154 Tex. 474, 279 S.W.2d 845, 846 (1955) (emphases added). The issue was whether the royalty was fixed at 1/16, and we held that the phrase did not reserve "one-half of one-eighth royalty," but plainly reserved "1/16th of the royalty on all the oil, gas or other minerals that may be produced from said land." Id. at 847 (emphasis added). We therefore multiplied the first two fractions, but also gave effect to the fraction of royalty language that followed.