Hamman v. Bright & Co.

924 S.W.2d 168, 1996 WL 85043
CourtCourt of Appeals of Texas
DecidedMay 15, 1996
Docket07-93-0245-CV
StatusPublished
Cited by7 cases

This text of 924 S.W.2d 168 (Hamman v. Bright & Co.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hamman v. Bright & Co., 924 S.W.2d 168, 1996 WL 85043 (Tex. Ct. App. 1996).

Opinions

DODSON, Justice.

This is an appeal from a summary judgment. Appellants, the Hammans,1 request [170]*170that we reverse the trial court’s determination that certain oil and gas top leases violate the Texas constitutional rule against perpetu-ities (the Rule). By cross-points, Bright,2 Shell Western E & P, Inc. (Shell) and Atlantic Oil Corporation (Atlantic), the appel-lees/cross-appellants, request that we reverse the trial court’s determination that the perpetual non-participating free royalty interest (NPRI) reserved in a certain deed, was not subject to the Rule. We decline in each instance, and affirm.

Issues

This appeal presents two similar issues for our resolution. First, we are requested to determine whether, in certain top leases executed by the Hammans to John Hamman, Jr., the Hammans as lessors made present conveyances of their possibilities of reverter, which existed by virtue of outstanding bottom leases, or made conveyances of executo-ry interests, which violated the Rule. Relying on Peveto v. Starkey, 645 S.W.2d 770 (Tex.1982), we conclude the top leases executed by the Hammans were future conveyances of springing executory interests which violated the Rule, and as such, were void ab initio.

We are further requested to determine whether the non-participating royalty interest reserved by the Hammans in a deed to Rio Grande Realty was a present reservation from a portion of the Hammans’ possibility of reverter, which existed by virtue of outstanding oil and gas leases on the properties, or whether the interest was an executory interest which violated the Rule. Relying on Jupiter Oil Co. v. Snow, 819 S.W.2d 466 (Tex.1991), and cases cited therein, we conclude the non-participating royalty interest was a valid reservation by the Hammans from a portion of their possibility of reverter on the outstanding oil and gas leases and that as such, the interest did not violate the Rule.

Background

The record shows in 1917, George and John Hamman acquired the Hamman ranch located in Hidalgo County. In April of 1951, the Hammans leased 20,715.83 acres to Shell Oil Company (the Shell lease). Shell later released a portion of this land, and on November 4, 1952, the Hammans leased 1,853.48 acres to Superior Oil Company (the Superior lease). The leases to Shell and Superior became “bottom leases” nine days later, when the Hammans executed two top leases3 and a third lease in favor of John Hamman, Jr. The top leases corresponded to the property descriptions in the bottom leases, and the third lease (the other lease) covered all acreage not subject to the bottom leases. Except for the property descriptions and references to the underlying bottom leases, the two top leases are identical.

On December 27, 1952, George and John executed a deed to Rio Grande (the Deed) conveying certain mineral interests in the property under lease. The Deed provided that such conveyance was subject to the bottom leases, the top leases, the other lease, a reservation of one-half of the royalties accruing under the existing leases, and a perpetual one-sixteenth royalty interest in the grantors. After several transactions spanning approximately ten years, Atlantic succeeded to the mineral interest originally conveyed by the Deed.

In December 1987, the Hammans sued Bright, a sublessee/assignee under the top leases, to recover on the top leases for underpaid royalties, excessive fees, fraud, and conversion. They later sued Bright for wrongful [171]*171pooling, and Atlantic was joined as a party. Bright denied liability and joined Shell as a third-party defendant. Atlantic responded by denying liability and further pleaded that the Rule voided both the top leases and the Deed ab initio. Bright, Shell and Atlantic then counterclaimed against the Hammans based upon the voidness of the instruments, and sought to recover previously paid royalties.

Bright, Shell and Atlantic moved for partial summary judgment on their counterclaims, and the Hammans responded with a cross-motion for partial summary judgment on the ground that the Rule did not affect either the top leases or the Deed. The trial court found that the top leases were void under the Rule, but that the conveyance in the Deed was valid. Bright then moved for, and received, a supplemental summary judgment that the Hammans had no standing to assert rights under the void top leases. The judgments were severed and consolidated, and the parties appeal.

Applicable Principles

The summary judgment is based upon undisputed facts, and thus presents only questions of law. Therefore, we must determine whether the trial court correctly construed the provisions of the disputed instruments. Hutchings v. Chevron U.S.A., Inc., 862 S.W.2d 752, 756 (Tex.App.—El Paso 1993, writ denied). Because the parties assert validity, or lack thereof, of the instruments based upon the rule against perpetuities, we will begin our inquiry by focusing on the Rule as it relates to the opposing interests allegedly created.

The Texas Constitution provides that “[p]erpetuities ... are contrary to the genius of free government, and shall never be allowed.” Tex. Const, art. I, § 26. Courts have enforced this provision by applying the rule against perpetuities. Trustees of Casa View Assem. of God Ch. v. Williams, 414 S.W.2d 697, 702 (Tex.Civ.App.—Austin 1967, no writ). Under the Rule, no interest is valid unless it must vest, if at all, within twenty-one years after the death of some life or lives in being at the time of the creation of the interest. Peveto v. Starkey, 645 S.W.2d at 772; Foshee v. Republic Nat’l Bank of Dallas, 617 S.W.2d 675, 677 (Tex.1981).

The Rule relates only to the vesting of estates or interests, not vesting of possession, and is not applicable to present interests, or future interests which vest at their creation. Kelly v. Womack, 153 Tex. 371, 268 S.W.2d 903 (1954). We must therefore, examine the challenged conveyances as of the date the instruments were executed, and the conveyances are void if, by any possible contingency, the interests could vest outside the perpetuities period. Peveto v. Starkey, 645 S.W.2d at 772; Brooker v. Brooker, 130 Tex. 27, 106 S.W.2d 247, 254 (1937).

Upon creation of an oil and gas lease, the grantee receives a fee simple determinable estate in the minerals, and the grantor is left with a possibility of reverter. Jupiter Oil Co. v. Snow, 819 S.W.2d at 468. This possibility of reverter is the right to the mineral estate upon termination of the lease, and is a freely assignable vested right. Id. In that regard, Texas courts have long recognized that the owner of a mineral estate can bargain, sell, convey, assign, retain, reserve, or except all or a portion of the possibility of reverter. Id.; Murphy v. Dilworth, 137 Tex.

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Hamman v. Bright & Co.
924 S.W.2d 168 (Court of Appeals of Texas, 1996)

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924 S.W.2d 168, 1996 WL 85043, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hamman-v-bright-co-texapp-1996.