`
`DAVID E. KELTNER
`david.keltner@kellyhart.com
`
`
`
`ACCEPTED
`11-21-00103-CV
`ELEVENTH COURT OF APPEALS
`EASTLAND, TEXAS
`3/17/2022 5:40 PM
`Marla Hanks
`CLERK
`
`
`
`TELEPHONE: 817.878.3560
`FAX: 817.878.9280
`
`
`March 17, 2022
`
`
`Via Electronic Filing:
`Ms. Marla Hanks
`Clerk, Eleventh Court of Appeals
`P.O. Box 271
`Eastland, Texas 76448-0271
`
`Re: No. 11-21-00103-CV; PetroLegacy Energy II, LLC, et al. v. Element
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`Petroleum Properties, LLC, et al.
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`Dear Ms. Hanks:
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`Please present this letter to Chief Justice Bailey, Justice Trotter, and former
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`Chief Justice Wright.
`
`Element presents this post-submission letter to address a question raised by
`the Court during oral argument, an argument PetroLegacy’s counsel made in
`rebuttal, and one point Element’s counsel was unable to present because the Jase
`Appellees’ presentation went longer than scheduled.
`1.
`In answering whether the 1962 Grantors had the authority to lease the
`mineral interest reserved to Childress and Chandler in the 1958 Deed,
`this Court can avoid either the “naked” executive right or the fixed-vs-
`floating royalty issue.
`If the Court agrees that the 1958 Deed reserved a fixed 1/32 royalty interest
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`as the trial court held, the Court need not consider whether an executive right severed
`from the remainder of the mineral interest can be exercised. Conversely, if the Court
`decides that a severed executive right can be held by itself, the Court need not
`consider whether the 1958 Deed reserved a fixed 1/32 royalty interest. In other
`words, the question in this case is not whether the royalty amount will increase or
`decrease (it will not)—but whether the 1962 Grantors had the authority to lease the
`mineral interest reserved by and for the 1958 Grantors.
`
`
`
`
`
`FORT WORTH OFFICE | 201 MAIN STREET, SUITE 2500 | FORT WORTH, TX 76102 | TELEPHONE: (817) 332-2500 | FAX: (817) 878-9280
`AUSTIN OFFICE | 303 COLORADO, SUITE 2000 | AUSTIN, TX 78701 | TELEPHONE: (512) 495-6400 | FAX: (512) 495-6401
`BATON ROUGE OFFICE | 301 MAIN STREET, SUITE 1600 | BATON ROUGE, LA 70801 | TELEPHONE: (225) 381-9643 | FAX: (225) 336-9763
`MIDLAND OFFICE | 508 W. WALL, SUITE 444 | MIDLAND, TX 79701 | TELEPHONE: (432) 683-4691 | FAX: (432) 683-6518
`NEW ORLEANS OFFICE | 400 POYDRAS STREET, SUITE 1812 | NEW ORLEANS, LA 70130 | TELEPHONE: (504) 522-1812 | FAX: (504) 522-1813
`Kelly Hart & Hallman, a Limited Liability Partnership | www.kellyhart.com
`
` FILED IN
`
`11th COURT OF APPEALS
`
` EASTLAND, TEXAS
`
`3/17/2022 5:40:50 PM
`
` Marla Hanks
`
` Clerk
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`

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`Page 2
`March __, 2022
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`2.
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`Appellants’ reliance on the estate misconception theory is flawed because
`Van Dyke’s reasoning also applies to deeds executed after 1924, and
`because the parties to the 1958 Deed did not labor under the estate
`misconception.
`Chief Justice Bailey asked whether the fact that this dispute concerns a 1958
`
`Deed—as opposed to a document from the 1920s, as in Van Dyke—is significant.
`The answer is, “Yes.”
`
`The result in Van Dyke applies even to documents executed in the years
`following 1924. Van Dyke teaches that “courts construe simple reservations, such
`as a fraction of one-eighth, or a variation thereof, as a fixed royalty interest, the
`extent of which is calculated simply by multiplying the fractions.” Van Dyke v.
`Navigator Grp., No. 11-18-00050-CV, 2020 WL 7863330, at *5 (Tex. App.—
`Eastland Dec. 31, 2020, pet. filed). On this lesson, the Van Dyke opinion did not
`break new ground—it followed the same approach it employed in Jones v. Bedford,
`56 S.W.2d 305 (Tex. Civ. App.—Eastland 1932, writ ref’d).
`
`The writ refused designation in Jones is important because, from 1892
`through 1997, such designation meant that the judgment was correct and that the
`case “ha[s] equal precedential value with the Texas Supreme Court’s own opinions.”
`The Greenbook: Texas Rules of Form, App’x. E (Texas Law Review Ass’n 12th ed.
`2010). The Jones v. Bedford opinion held that, absent confusion or ambiguity,
`double fractions should be taken at their face value:
`It is interesting to speculate why the party said “1/8th of 1/8th” rather
`than “1/64.” . . . in these provisions the expression “1/8th of 1/8th” can
`mean nothing else than the exact equivalent of 1/64, and at any rate,
`cannot have reference to the particular 1/8th royalty provided in the
`existing leases. . . . Therefore . . . it becomes unnecessary for us to
`determine just why the party said “1/8th of 1/8th” instead of “1/64,”
`since whatever the reason it is made certain from the reading of the
`entire instrument that the factors, “1/8th of 1/8th” were used as meaning
`the same things as “1/64.”
`
`
`
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`Kelly Hart & Hallman, a Limited Liability Partnership
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`

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`Page 3
`March __, 2022
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`Jones, 56 S.W.2d at 308 (op. on rehearing). Accordingly, the fractions mean exactly
`what they say. That was true for the 1924 deed in Van Dyke, for the Texas Supreme
`Court in 1932 when it refused the writ in Jones, and in 1958 when the parties
`executed the 1958 High Crest Deed.
`
`To be sure, there are times when mineral deeds inconsistently use both fixed
`and floating language, which was the case in Hysaw v. Dawkins, 483 S.W.3d 1, 5
`(Tex. 2016). When such internal inconsistencies reveal the parties were confused,
`courts may consider the legacy of the 1/8th and the estate misconception theory to
`reconcile conflicting provisions or ambiguities. Otherwise, even “the possibility that
`the parties were operating under the assumption that future royalties would remain
`1/8th will not alter clear and unambiguous language that can otherwise can be
`harmonized.” Hysaw, 483 S.W.3d at 10. Thus, a deed’s unambiguous plain
`language controls. That tenet is at the core of Jones, Van Dyke, and Hysaw.
`
`In oral argument, PetroLegacy and XTO invited the Court to follow Butler v.
`Horton, 447 S.W.3d 514 (Tex. App.—Eastland 2014, no pet.), rather than Van Dyke.
`None of the parties in Butler directed this Court to its prior decision in Jones, perhaps
`because Butler was a case transferred from the Waco Court of Appeals and Eastland
`precedent was less important to the result. See Tex. R. App. P. 41.3. Regardless, in
`his Butler opinion, former Chief Justice Wright correctly pointed out the internal
`conflict in the instrument that prevented the simple multiplication of the fractions.
`See 447 S.W.3d at 519 (“one-half of the usual 1/8th royalty” versus “one-half of the
`royalty”). But Butler did not question, let alone overrule, the Supreme Court’s
`decision in Jones v. Bedford, which explains how to understand double fractions in
`an instrument that has no internal inconsistencies.
`
`The 1958 Deed did not involve the inconsistencies that supported application
`of the estate misconception theory in Hysaw. Though the 1958 High Crest Deed
`includes the language “the usual 1/8th royalty,” it made clear that the “Grantors shall
`be entitled to 1/4th of the 1/8th royalty irrespective of the amount of royalty actually
`provided for in any lease executed by Grantee, its successors or assigns….” [CR
`2268 (emphasis added)]. Thus, the face of the 1958 High Crest Deed demonstrates
`that the parties knew that lease royalties could exceed 1/8th but nonetheless, limited
`the reservation to 1/32 royalty. The parties did not labor under the estate
`misconception.
`
`Nor was the estate misconception a widespread or uniform occurrence in
`Martin County in 1957 and 1958. The record reveals several Martin County oil and
`gas leases from 1957 and 1958 with royalties of 1/4, 3/16, and 5/32. [CR 2707-70].
`Like the parties to the 1958 High Crest Deed, the parties to those other oil and gas
`
`Kelly Hart & Hallman, a Limited Liability Partnership
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`Page 4
`March __, 2022
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`leases in the record did not labor under the estate misconception. There is simply
`no basis to apply the theory here.
`3.
`The 1958 High Crest Deed did not set a royalty “floor.”
`
`Finally, in rebuttal, PetroLegacy argued that the 1958 High Crest Deed’s
`royalty language actually reserved a floating royalty interest with a floor of 1/321—
`citing Luckel v. White, 819 S.W.2d 459 (Tex. 1991). But the language in Luckel was
`dramatically different. In Luckel, the Court was confronted with conflicting
`fractions and provisions—“an undivided one thirty-second (1/32nd) royalty” and
`“one-fourth of any and all royalties paid.” Id. at 461. The Court reconciled the
`conflicting provisions by holding that the royalty was “not less than 1/32nd of
`production.” Id. at 465.
`
`Here, in contrast, there is no conflict, and the parties to the 1958 High Crest
`Deed anticipated future leases that might involve a royalty more or less than 1/8th.
`Nonetheless, the parties agreed to limit the reserved royalty to 1/32 “irrespective of
`the amount of royalty actually provided for in any lease executed by Grantee….”
`[CR 2268]. As a result, the remaining royalty interest that might arise under a lease
`was conveyed to the 1958 Deed Grantee.
`
`
`
`Respectfully submitted,
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`/s/ David Keltner
`David E. Keltner
`State Bar No. 11249500
`david.keltner@kellyhart.com
`KELLY HART & HALLMAN LLP
`201 Main Street, Suite 2500
`Fort Worth, Texas 76102
`Tel. (817) 332-2500
`Fax (817) 878-9280
`
`
`1 In their opening brief, however, Appellants argued that the 1958 High Crest Deed provided that
`the grantors reserved the right to “royalty payments (subject to a floor of 1/8).” Brief of
`Appellants, pp. 26, 49. Such a construction, of course, renders meaningless the following bold
`language: “one-fourth (1/4th) of the usual one-eighth (1/8th) royalty” and “1/4th of the 1/8th
`royalty irrespective of the amount of royalty actually provided for in any lease executed by
`Grantee, its successors or assigns).” [CR 2268 (emphasis added)].
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`Kelly Hart & Hallman, a Limited Liability Partnership
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`March __, 2022
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`Harold L. Hensley, Jr.
`State Bar No. 24047503
`harold.hensley@kellyhart.com
`Derek L. Montgomery
`State Bar No. 24042264
`derek.montgomery@kellyhart.com
`Jeff Kuhnhenn
`State Bar No. 24078809
`jeff.kuhnhenn@kellyhart.com
` KELLY HART & HALLMAN LLP
`508 W. Wall, Suite 444
`Midland, Texas 79702
`Tel. (432) 683-4691
`Fax (432) 683-6518
`
`William M. Kerr
`State Bar No. 13347100
`william.kerr@kellyhart.com
` KELLY HART & HALLMAN LLP
`303 Colorado Street, Suite 2000
`Austin, Texas 78701
`Tel. (512) 495-6400
`Fax (512) 495-6401
`
`ATTORNEYS FOR ELEMENT
`PETROLEUM PROPERTIES, LLC
`
`
`
`Kelly Hart & Hallman, a Limited Liability Partnership
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`

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`Page 6
`March __, 2022
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`CERTIFICATE OF COMPLIANCE
`
`This letter complies with the type-volume limitations of Texas Rules of
`Appellate Procedure 9.4(i)(2)(B) because it contains 1,310 words, excluding
`the parts of the letter exempted by the Texas Rules of Appellate Procedure.
`This letter complies with the typeface requirements of Texas Rules of
`Appellate Procedure 9.4(e) because this letter has been prepared in a
`proportionally spaced typeface using “Microsoft Word 2010” in fourteen (14)
`point “Times New Roman” style font.
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`
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`/s/ David Keltner
`David E. Keltner
`
`
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`CERTIFICATE OF SERVICE
`
`
`This is to certify that on this 17th day of March, 2022, a true and correct copy
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`of the foregoing document was served upon all counsel of record via e-filing:
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`
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`1.
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`2.
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`John A. “Jad” Davis
`jadavis@dgclaw.com
`Julie Griffis
`jlgriffis@dgclaw.com
`Davis, Gerald & Cremer
`400 W. Illinois, Suite 1400
`Midland, Texas 79701
`Attorneys for Appellees
`Jase Family, Ltd. and
`Jase Minerals, LP
`
`Jesse R. Pierce
`jpierce@pierceoneill.com
`Brian K. Tully
`btully@pierceoneill.com
`Pierce & O’Neill, LLP
`4203 Montrose Blvd
`Houston, Texas 77006
`Attorneys for Appellees
`Earle H. Chandler, Jr.,
`Frederick H. Chandler,
`Tommy Sue Chandler Black,
`Mary Grace Chandler
`McFarland, John Franklin
`Childress, Frances Childress
`Ross, 5ross LP, Wayne A. Bissett,
`and James H. Chandler
`
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`Kelly Hart & Hallman, a Limited Liability Partnership
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`

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`Page 7
`March __, 2022
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`
`P. Jefferson Ballew
`Jeff.Ballew@hklaw.com
`Richard B. Phillips, Jr.
`Rich.Phillips@hklaw.com
`Anna Kalinina
`Anna.Kalinina@hklaw.com
`Aaron C. Powell
`Aaron.Powell@hklaw.com
`Holland & Knight LLP
`1722 Routh Street, Suite 1500
`Dallas, Texas 75201
`Attorneys for Appellant
`PetroLegacy Energy II, LLC
`
`
`
`Andrew D. Sims
`asims@hfblaw.com
`Russell R. Barton
`rbarton@hfblaw.com
`Michael V. Fitzpatrick
`mfitzpatrick@hfblaw.com
`J. Nathaniel James
`njames@hfblaw.com
`Harris, Finley & Bogle, P.C.
`777 Main Street, Suite 1800
`Fort Worth, Texas 76102
`Attorneys for Appellant
`XTO Holdings, LLC
`
`
`Kelly Hart & Hallman, a Limited Liability Partnership
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`