Benge v. Scharbauer

*456 Mr. Justice Garwood,

joined by Justice Culver, dissenting.

The argument for the respondent-grantors, Scharbauer, while obviously not unimpressive, is in my view, more legalistic than —to use a current term — realistic or equitable and is thus a departure from the fair and sensible principle lately exemplified in Duhig v. Peavy-Moore Lumber Co., 135 Texas 503 , 144 S.W. 2d. 878 . Since that decision can be called novel only in the sense of being recent, I find myself unable to think of its relation to the instant case in terms of an “extension” — as if the Duhig case were itself somewhat revolutionary. On the contrary, the proper approach to the instant case would seem to be, “What good reason do the respondent-grantors show to escape an otherwise ordinary equitable construction of their written instrument in a situation closely resembling that in the Duhig case”?

It is apparently admitted that by the terms of the deed here in question the grantors represented themselves to own the full 8/8 of the minerals, of which they were keeping 3/8 and conveying to the grantee the balance, or 5/8. We therefore correctly say that when the grantors turn out to have only 6/8 instead of the represented 8/8, their reservation of 3/8 should be cut down by 2/8 in order that the grantee shall still get his full 5/8. We thus say that because of their wrong representation in the deed, the grantors have actually reserved to themselves in the way of a so-called mineral interest only 1/8 and not the 3/8 specified in the deed. But we also say that, despite this wrong representation and its effects as regards the mineral interest' purportedly reserved, the grantors yet come out (at the grantee’s expense) with the practical equivalent of their erstwhile 3/8 mineral interest, to wit, a 3/8 portion of all royalties, because the grantee. agreed to stipulate in any lease he might make that the grantors should receive 3/8 of all royalties, rentals and bonuses to accrue thereunder. In other words, we say in effect that the grantors stipulated two reservations — one the mere mineral interest reservation of 3/8 and the other a royalty interest, being 3/8 of all royalties; that while the 3/8 mineral reservation fails to the extent of the 2/8 interest which was outstanding in a third party, the royalty interest somehow does not fail to any extent, and so, despite the representation abovementioned (that they owned 8/8) they come out in practical effect with a 3/8 interest after all, while the grantee thus comes out with his erstwhile 5/8 interest reduced to 3/8 because he has to yield 3/8 of all royalties to the grantors, while 2/8 thereof goes to the outstanding owner. The grantee really owns, we say, 5/8 of all the minerals, and has the exclusive power *457 to lease 6/8 (all the minerals less the 2/8 outstanding) but in every lease he makes he must provide for the grantors to get 3/8 of the royalty, so that, with 2/8 of the royalty going to the outstanding owner, his mineral ownership of 5/8 is somewhat illusory and will not be an easy problem for the tax assessor. Had we written at more length on this theory, we would necessarily have added that if the outstanding interest had been 5/8 instead of merely 2/8, the grantee would have to yield up 3/8 of the royalties to his grantors and the remaining 5/8 to the outstanding owner, and would thus enjoy only the dubious privilege of being a royaltyless lessor and an “owner” of 3/8 of the mineral estate with no practical benefits ever likely to accrue from his ownership. Such an arrangement may be one within the power of a grantee to contract for, but few sane people would so contract.

Now, it seems to me that since the grantors have in their deed represented themselves to own 8/8, they have done so for all purposes, and not just for the purpose of one paragraph or clause of the instrument. The instrument is a unit and should be taken as if the grantors had said, “We represent ourselves to own 8/8 of the minerals in this tract of land, and your commitments as well as our rights in this trade are upon the faith of the representation.” Whether the words about the contents of the leases are words of royalty or not, they are part and parcel of an entire arrangement, and this fact appears from the deed itself. It appears quite artificial to reason that the representation exists and has positive effect with regard to part of the deed but does not exist or have effect as to another part. Surely, in the case above put of an outstanding 5/8, it would be far fetched to believe that business men might agree for the grantee to have the exclusive power to lease and a substantial interest in the minerals and yet receive nothing by the deed of practical value. And yet we could not hold one way when the outstanding interest is 5/8 and another way when it is only 2/8. It is plain to me that in the instant case the same equity (“estoppel”) which arises from the grantor’s representation of 8/8 ownership and converts the stipulated 3/8 mineral reservation into 1/8, also justifies construing the instrument so as to reduce the so-called royalty reservation from 3/8 of the royalty to 1/8 thereof.

So to hold does not, I think, destroy the principle “that the fractional part of bonuses, rentals and royalties to be received” (by the grantors) need not “always be the same as the frac *458 tional mineral interest owned” (by the grantors). Usually, as is conceded, the two fractions are the same in actual practice, so that no great harm would be done, even if our holding had the consequence apprehended. But not every case will involve an outstanding title, as this one does. Where, for example, a grantor owning 8/8, executes a deed which by unmistakable language conveys 7/8 of the minerals, reserves the remaining 1/8 thereof and also reserves an interest of, let us say, 2/8 of whatever royalty may thereafter accrue under leases, I do not understand that a judgment for the petitioner in the instant case would compel a holding that only 1/8 of the royalty was in fact reserved. The grantor did not misrepresent his ownership, so no equitable considerations are involved. Moreover, in a given case, the deed might be such as to show from its four corners beyond any doubt that even if the grantor’s ownership were less than represented in the deed, he was yet to have his stipulated interest in the royalty unimpaired — an unlikely case, to be sure, but theoretically possible, just as it is theoretically possible for a grantor to contract (in the above example of a 5/8 outstanding interest) that he shall have a substantial mineral ownership and the exclusive right to lease, but without any tangible benefits to accrue to him from either.

And is it not within the pale of legal principle to hold in the instant case, that by reason of the representation of the grantors that they owned 8/8, the provision as to stipulations to be made in the leases ought to be construed as merely referring back to whatever mineral interest was actually reserved? The law gives the grantor the same fraction of the royalty that he reserved from the minerals, and lawyers often enough spell out legal consequences in contracts for purposes of easier comprehension on the part of their clients. My view of the matter could be but an unfortunate example of what one learned jurist calls “The Judgment Intuitive”, but I cannot escape thinking that most any sensible business man after reading the deed involved here, would be mystified to learn that a loss due to an outstanding interest would, by its terms, fall (for all practical purposes) on the grantee rather than the grantor. If we are to treat the matter on the basis of rigid adherence to the letter of a phrase, why do we not go a step further than we do and hold that the grantors here have, not 3/8, but 4/8 of the royalty? If the lease-stipulation provision is so wholly divorced from the rest of the deed, why not say that it refers only to that royalty which the grantee is required to stipulate in the lease, and does not supplant such royalty as the grantors are entitled to *459 by virtue of their “mineral ownership”, which is admittedly 1/8? The language in question is restricted to requiring the grantee to stipulate in his leases that 3/8 of the royalty shall be paid to the grantors. If, as we say, the requirement has no connection with the “mineral interest” reserved by the grantors, why are not the grantors additionally entitled to a corresponding 1/8 of the royalty, just as the owner of the outstanding mineral interest is as to his 2/8 of the royalty? The lessees, of course, will be indifferent, since they have to pay the full royalty in any event.

I think we should adjudge to the petitioner 5/8 of the royalties.

Justice Culver joins in this dissent.

Opinion delivered June 17, 1953.

Rehearing overruled July 15, 1953.