## Facts

- In 1937, A.B. Crosby executed a deed to Southland Lease and Royalty Corp. conveying an interest in oil, gas, and other minerals in Survey 64 in Zapata County, Texas.
- The deed’s granting clause conveyed “an undivided one-ninety sixth (1/96) interest” in and to the minerals in and under, and that may be produced from, the described land, along with related development and access rights.
- The deed also provided that, although the estate conveyed did not depend on the validity of any lease and would not be affected by lease termination, the conveyance was “made subject to” any valid existing lease and “covers and includes one-twelfth (1/12) of all rentals and royalty of every kind and character” payable under such lease(s) as to the described land.
- When the deed was executed, the land was subject to an outstanding oil and gas lease; the lessee held a leasehold mineral interest, and Crosby retained a reversionary interest when the lease ended.
- After the original lease expired, Crenshaw acquired the interest conveyed under the 1937 deed and executed an oil and gas lease to Concord Oil Co.
- Also after the original lease expired, Crosby’s successor in interest executed an oil and gas lease to Pennzoil.
- Concord sued Pennzoil over the size of the interest created by the 1937 deed, claiming the deed conveyed a one-twelfth mineral interest (and related lease benefits).
- Pennzoil argued the deed conveyed only a one-ninety-sixth mineral interest, plus a separate one-twelfth royalty interest limited to the lease that existed in 1937 (which had since expired).
- The trial court ruled for Pennzoil based on the “two-grant theory,” and the court of appeals affirmed, treating the deed as conveying two separate estates: a 1/96 mineral interest and a 1/12 royalty interest tied to the original lease.
- Concord appealed to the Supreme Court of Texas.

## Issues

1. When a mineral deed contains two different fractions (1/96 in the granting clause and 1/12 in a lease/royalty clause), how should the instrument be construed as a whole?
2. Did the 1937 Crosby deed convey only a 1/96 mineral interest plus a 1/12 royalty interest limited to the then-existing lease, or did it convey a 1/12 interest in lease benefits and a 1/12 possibility of reverter in the mineral estate that continued after lease termination?

## Decision

- The Supreme Court of Texas reversed the court of appeals’ judgment and rendered judgment for Concord and Crenshaw.
- The Court held that, read in its entirety, the deed granted a 1/12 interest in any rights or benefits under the lease existing at the time of the grant and the possibility of reverter of a 1/12 interest in the mineral estate.
- The Court rejected the lower courts’ use of the two-grant theory to treat the 1/96 and 1/12 fractions as separate, stand-alone conveyances that produced only a lease-limited royalty.
- Because the deed stated the conveyed estate would not be affected by termination of the existing lease, the 1/12 interest did not end when that lease expired and applied going forward.

## Legal Principles

- A deed is construed by examining the entire instrument to determine the parties’ intent from the language used.
- Courts should attempt to give effect to all parts of the deed and reconcile provisions, rather than reading clauses in isolation.
- “Subject to” lease language may identify how the grantee shares in lease benefits (rentals and royalty) during the lease term, without limiting the estate to a lease-only interest.
- Language stating that the conveyed estate is not dependent on a lease’s validity and is not affected by lease termination supports a construction that includes a continuing interest in the reversionary mineral estate.
- The presence of differing fractions within a single deed does not require a separate-estates reading; the instrument’s full text controls whether it creates one combined interest or multiple distinct interests.

## Conclusion

Concord Oil Co. v. Pennzoil Exploration and Production Co. holds that the 1937 Crosby deed, despite listing a 1/96 fraction in the granting clause and a 1/12 fraction in a rentals-and-royalty clause, conveyed a 1/12 interest in the rights and benefits under the then-existing lease and a 1/12 possibility of reverter in the mineral estate, and that this interest continued after the original lease terminated.


Concord Oil Co. v. Pennzoil Exploration and Production Co., 966 S.W.2d 451 (1998)