Geary v. Two Bow Ranch Ltd., P’ship, No. 04-18-00610-CV, 2020 Tex. App. LEXIS 552 (Tex. App.—San Antonio Jan. 22, 2020, pet. denied) held that a mineral owner was not required to share lease bonus because the mineral owner only leased his interest. In 1981, Geary executed a warranty deed conveying certain property to Meader. The 1981 deed provides the following:
[Grantors] by these presents do GRANT, SELL AND CONVEY unto MEADER CONSTRUCTION CO., INC. (herein referred to as “Grantee”) all that certain real property situated in Bandera County, Texas described within Exhibit “A” attached hereto, together with . . . one-half (1/2) of all oil, gas and other minerals and related executory rights and interests associated therewith currently held by Grantors (all of which is collectively referred to herein as “the Property”).
Grantors expressly reserve and retain unto themselves one-half (1/2) of all oil, gas and other minerals and related executory rights and interests associated therewith currently held by Grantors. Grantee may control the executory rights pertaining to the minerals provided the Grantors and Grantee share equally in any and all proceeds related thereto.
The court referred to the last quoted sentence above as the “Provisional Authority” clause. In 1991, Meader conveyed its interest to Bandera, and in 1999 Bandera conveyed its interest to Two Bow Ranch. In 2011, Two Bow Ranch executed an oil and gas lease which covered the Property. Geary sued Two Bow Ranch contending that the 2011 lease bonus should be shared pursuant to the 1981 deed’s Provisional Authority clause. Two Bow Ranch counterclaimed and moved for summary judgment, which the trial court granted. Geary appealed, raising seven issues which the court grouped as: (1) the Provisional Authority was assignable and was assigned; (2) Two Bow Ranch breached contractual and fiduciary duties to share the lease bonus; (3) Two Bow Ranch breached fiduciary duties to lease Geary’s interest on the same terms as its own, or to inform Geary of its lease; (4) reversal and remand are necessary if the deed or 2011 lease is ambiguous; and (5) Geary is entitled to attorney’s fees.
The court began its analysis by looking at the central question of the appeal—whether Two Bow Ranch had any authority to exercise Geary’s executive rights. Geary argued that the deed conveyed Meader ownership of the executive rights in all of the Property, subject to the condition that it must share any benefit it receives from exercising said rights with the Grantors. The court disagreed, stating that the plain meaning of “related” and “associated therewith” in the deed limits the “executory rights and interests” to those attached to the conveyed one-half mineral interest. Both parties additionally argued that the deed should be interpreted in light of certain cases involving executive rights. The court was not persuaded that the line of cases controlled here because they involved conveyances by the owner of previously severed executive rights.
The court next turned to the Provisional Authority clause, which it summarized as granting Meader conditional authority to exercise the Grantors’ executive rights in their one-half mineral interest. Geary argued that the Provisional Authority is transferable because the deed’s habendum clause states the conveyance is to “Grantee, its successors and assigns forever.” The Court noted the language Geary relied upon is in the deed’s habendum clause, which conveys “the Property, together with all and singular the rights and appurtenances thereto in any wise belonging unto the said Grantee, its successors and assigns forever . . . .” The court stated that the “Property,” as defined in the deed, does not include the reserved one-half mineral interest or the associated conditional authority, and thus the Provisional Authority is not assignable under the plain language of the deed. Geary next argued that the Provisional Authority is assignable as a contract right because contracts are generally assignable. The court held that even if the Provisional Authority was assignable as a contract right, summary judgment evidence conclusively established it was not assigned in the 1991 deed or in the 1999 deed to Two Bow Ranch, and as a result, Two Bow Ranch did not have conditional authority to exercise the executive rights as to Geary’s one-half mineral interest.
In the second issue, Geary argued that Two Bow Ranch effectively leased the entire mineral interest in the 2011 Lease by not including a limitation in the lease, and that Two Bow Ranch must therefore share the lease bonus it received from exercising Geary’s executive right. The court recited its earlier holding that Two Bow Ranch only had the authority to exercise its own executive rights and lease its own mineral interest. As a result, the 2011 Lease does not include Geary’s interest.
In the third issue, Geary argued that Two Bow Ranch breached a duty owed under the deed and breached a fiduciary duty as holder of Geary’s executive rights. The court held this claim was precluded because the deed did not impose any duties and Two Bow Ranch was not the holder of Geary’s executive rights. In the fourth issue, Geary argued that Two Bow Ranch owed a duty to inform Geary that it was leasing its interest. Since Geary did not raise this claim before the trial court, the court overruled this issue, but the court would not have ruled in Geary’s favor for the same reasons it denied Geary’s other claims. The court overruled the final issue for recovery of attorney’s fees because Geary was not the prevailing party.
The holding is significant because it provides an example of interests in a deed that are not assignable. The case largely turned on the plain meaning of the deed’s provisions and exemplifies how parties should carefully review assignability provisions when drafting a deed.