San Antonio Court of Appeals Applies Double Fraction Presumption to 1956 Deed, Finds Floating Royalty Interest Rather Than Fixed 3/32 Interest
In a declaratory judgment action originating in McMullen County, the Court of Appeals reversed the trial court's determination that a 1956 deed reserved a fixed 3/32 nonparticipating royalty interest, holding instead that the deed's double fraction language reserved a floating ¾ interest for the grantors. The court applied the presumption that references to ⅛ in deeds containing double fractions serve as shorthand for the lessor's entire mineral estate, rejecting arguments that this presumption was inapplicable to royalty interest reservations or to instruments executed after 1924.
Background and Procedural History
The Hoffman family, as grantors of property in McMullen County, sought a declaratory judgment to construe a deed's reservation of royalty interests. The 36th District Court granted partial summary judgment to the grantees (the Thomson parties and related entities), decreeing that the Hoffmans had reserved only a fixed 3/32 nonparticipating royalty interest. The Court of Appeals initially reversed and remanded at 630 S.W.3d 427, but the Texas Supreme Court vacated that decision and remanded for further consideration at 674 S.W.3d 927, setting the stage for this opinion resolving the dispute over whether the deed created a fixed or floating royalty interest.
The Core Dispute: Fixed Versus Floating Royalty
The central issue turned on interpreting a 1956 deed containing double fraction language in its royalty reservation clause. The trial court had concluded the deed reserved a fixed 3/32 interest—a mathematical calculation that would remain constant regardless of the actual royalty rate negotiated in future leases. The Hoffmans contended the deed instead reserved a floating royalty interest equal to ¾ of whatever royalty was actually negotiated, which would fluctuate with lease terms.
The Court's Analysis: Applying the Double Fraction Presumption
The Court of Appeals, in an opinion by Justice McCray, held that the presumption that any reference to ⅛ in a deed containing a double fraction serves as shorthand for the lessor's entire mineral estate applied to the deed's reservation of royalty interest for the grantor. The court found that this interpretive presumption applies equally to reservations of royalty interests as to mineral estates. The court rejected the grantees' argument that the presumption should be limited to older instruments, holding that it was not precluded from applying the presumption to a deed executed in 1956.
Rebuttal and Harmonization Principles
The court acknowledged that the presumption is rebuttable, but emphasized that rebuttal of the presumption must come from the document itself. Applying traditional deed construction principles, the court took a holistic approach aimed at ascertaining intent from all words and all parts of the deed, striving to harmonize all provisions of the instrument. The court examined the specific language of the 1956 deed and determined that nothing in the deed's text or structure rebutted the presumption that the double fraction language created a floating royalty interest.
Holding and Disposition
The Court of Appeals reversed the trial court's judgment and rendered judgment that the deed reserved a floating ¾ interest for the grantor, rather than a fixed 3/32 royalty interest. The case was remanded for further proceedings consistent with the court's interpretation of the deed. This decision reinforces the application of established interpretive presumptions regarding double fraction language in mineral and royalty conveyances, regardless of the date of execution.