Opinion
NO. 12-14-00262-CV
03-31-2016
CHARLES ALFORD AND MARY LOU ALFORD, APPELLANTS v. ROBERT THOMAS MCKEITHEN, EOG RESOURCES, INC. AND CENTRAL TEXAS LAND SERVICES, APPELLEES
APPEAL FROM THE 1ST JUDICIAL DISTRICT COURT SAN AUGUSTINE COUNTY, TEXAS
MEMORANDUM OPINION
This is a deed construction case. Charles Alford and Mary Lou Alford appeal the trial court's judgment in favor of Robert Thomas McKeithen, EOG Resources, Inc., and Central Texas Land Services. In one issue, the Alfords claim the trial court erred in holding that an exhibit attached to the warranty deed in question was entirely incorporated by reference into the deed, and that the deed was ambiguous. We affirm.
BACKGROUND
Annie and Jack Jessup lived on the property they owned in San Augustine County. For many years, the Alfords rented the three tracts from the Jessups for pasture. In 2003, Annie Jessup told Mary Lou Alford that she and her husband would like to sell their land to them. However, the Jessups wanted to reserve a life estate in the two acre tract where they lived. A price was agreed upon. The San Augustine Title Company prepared the warranty deed with vendor's lien conveying the property from the Jessups to the Alfords, and a promissory note from the Alfords to the Jessups. The Alfords executed a deed of trust securing the Jessups' lien. The parties executed the documents necessary to close the transaction on April 25, 2003. The mineral estate was not discussed or even mentioned at closing or during the negotiations leading up to the sale.
The deed conveyed three tracts. Tract One (the tract at issue) is 117.50 acres "more particularly described by metes and bounds on Exhibit A attached hereto." The metes and bounds description includes a reservation of one-half of all the mineral rights. The deed contains a section titled "Reservations from Conveyance and Warranty" that describes a reservation of a life estate in Tract Two, the two acre tract where the Jessups' home was located. The deed also excepts from the conveyance all presently recorded oil and gas leases and mineral severances.
The Alfords conceded that the mineral estate was not discussed and that they would have bought the property with or without the minerals. They acknowledged that although the terms of the deed and deed of trust were probably explained to them, they did not read in their entirety the conveyance to them or the deed of trust they signed containing the same description.
Central Texas Land Services secured oil and gas leases of the same mineral interest from the Alfords and from Robert McKeithen, guardian of the estate of Jack Jessup. Both Jack and Annie Jessup died before trial. EOG acquired both leases, commenced production, and paid the royalties to McKeithen, the sole devisee of the Jessups' will.
In 2012, the Alfords filed suit seeking a judgment declaring their title to one-half of the mineral rights under Tract One, the 117.5 acre pasture. In the alternative, they sought a declaration that they owned one-half of the mineral interest the Jessups' owned in Tract One on the date of the conveyance or reformation of the deed to delete the mineral reservation based on mutual mistake. EOG was joined because EOG had paid McKeithen royalties that the Alfords claimed EOG should have paid them.
The Alfords moved for summary judgment contending Exhibit A was attached to the deed for the sole purpose of providing a metes and bounds description, and the mineral reservation following the metes and bounds description should be ignored. The Alfords asked the court to construe the deed to convey to them the one-half mineral interest under the 117.5 acre tract. The trial court denied their motion for summary judgment. The Alfords reurged the same arguments just before trial in a "Motion to Construe Document." The trial court ruled that the mineral reservation found in the description of the 117.5 acre tract in the attached Exhibit A was incorporated into the deed, and the deed was ambiguous.
The case proceeded to trial on the Alfords' trespass to try title action and their claim for reformation based on mutual mistake. The jury found against the Alfords on all their claims and further found that the Alfords did not exercise due diligence in reviewing the deed.
CONSTRUCTION OF THE DEED
In their sole issue, the Alfords argue that the trial court erred as a matter of law in holding that Exhibit "A" attached to the Jessups' deed to the Alfords was entirely incorporated by reference into the deed. The Alfords contend further that the trial court erred in holding that the deed was ambiguous. Standard of Review
Whether a written instrument is ambiguous or unambiguous is a question of law for the court. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003); Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983). Therefore, we review the trial court's decision de novo. See Kachina Pipeline Co. v. Lillis, 471 S.W.3d 445, 449 (Tex. 2015). Applicable Law
Deeds and other instruments of conveyance are construed in the same manner as contracts, and the same rules of construction apply. See Sonny Arnold, Inc. v. Sentry Sav. Ass'n, 633 S.W.2d 811, 815 (Tex. 1982); Brown v. Havard, 593 S.W.2d 939, 942 (Tex. 1980). The primary goal is to determine the actual or true intent of the parties as expressed in the instrument. Amedisys, Inc. v. Kingwood Home Health Care, LLC, 437 S.W.3d 507, 514 (Tex. 2014). In determining the parties' intent, "we must examine and consider the entire writing in an effort to harmonize and give effect to all [its] provisions . . . so that none will be rendered meaningless." J.M. Davidson, 128 S.W.3d at 229. No single provision taken alone should be given controlling effect. Id. All the provisions must be considered with reference to the whole instrument. Id. Words and phrases are to be given their ordinary and accepted meaning unless the instrument indicates the parties intended to use them in some technical or specific sense. See Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd's London, 327 S.W.3d 118, 126 (Tex. 2010).
An instrument is not ambiguous simply because the parties offer conflicting interpretations. Am Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003). Instead, an instrument is ambiguous only when, after applying the pertinent rules of construction, it remains "subject to two or more reasonable interpretations." Balandran v. Safeco Ins. Co. of Am., 972 S.W.2d 738, 741 (Tex. 1998). The court may look at the circumstances surrounding the document's creation in determining whether the document is ambiguous. Coker, 650 S.W.2d at 394. A court need not embrace strained rules of interpretation to avoid an ambiguity at all costs. Lenape Res. Corp. v. Tenn. Gas Pipeline Co., 925 S.W.2d 565, 574 (Tex. 1996).
Separate agreements may be incorporated by reference into a signed contract. See Trico Marine Servs., Inc. v. Stewart & Stevenson Tech. Servs., Inc., 73 S.W.3d 545, 549 (Tex. App.—Houston [1st Dist.] 2002, orig. proceeding [mandamus denied]). The language used to incorporate a document is not important provided the signed document plainly refers to the incorporated documents. Owen v. Hendricks, 433 S.W.2d 164, 166 (Tex. 1968). However, the doctrine of incorporation does not extend to documents that simply appear to relate to the same transaction. Id. at 166-67. "[A] reference by the contracting parties to an extraneous writing for a particular purpose makes it a part of their agreement only for the purpose specified." Guerini Stone Co. v. P. J. Carlin Constr. Co., 240 U.S. 264, 277, 36 S. Ct. 300, 306, 60 L. Ed. 636 (1916). Discussion
The Jessups' deed to the Alfords conveyed three tracts. The description of Tracts One and Two stated that they were "more particularly described by metes and bounds on Exhibit A attached hereto." The tract at issue is the 117.5 acre tract (Tract One). The description of Tract One in Exhibit A includes a mineral reservation in the same font and block of text as the metes and bounds description. The metes and bounds description of Tract Two in Exhibit A does not include a mineral reservation. But a life estate reservation in Tract Two is stated on the face of the deed and was initialed by the Jessups and the Alfords. The parties' initials do not appear beside the mineral reservation in Exhibit "A."
Appellees' interpretation of the deed is that the reference to Exhibit A does not state that Exhibit A is attached solely for a metes and bounds description. They argue that the deed "plainly refers" to Exhibit A and it is therefore part of the deed. See Owen, 433 S.W.2d at 166. They urge that, under established contract law, all parts of a document are to be given meaning, and none should be rendered meaningless. Appellees contend that all the parts of the deed should be considered and harmonized in order to give effect to all its provisions, including the mineral reservation in Exhibit "A." J. M. Davidson, 128 S.W.3d at 229.
The interpretation of the deed urged by the Alfords is that the descriptive phrase "more particularly described by metes and bounds on Exhibit A attached hereto" indicates the parties intended that the deed incorporate Exhibit A solely for the metes and bounds description. In support of their position that the deed incorporated Exhibit A only for its metes and bounds description of the surface, the Alfords rely on what they contend is a line of cases beginning with Guerini Stone Co. v. P. J. Carlin Construction Co.
In Guerini, the contractor and the subcontractor agreed that the subcontractor's work was to be done according to drawings and specifications, "copies of which have been delivered to the subcontractor." Id., 240 U.S. at 277, 36 S. Ct. at 306. The plans and specifications were assumed (but not shown) to be identical with those in the general contract between the owner (the U. S. Government) and the contractor. Id. The general contractor contended that this reference to drawings and specifications in the subcontract necessarily imported all the provisions of its general contract with the government into its agreement with the subcontractor. Id., 240 U.S. at 275, 36 S. Ct. at 305. However, the Court observed that the subcontract "contains no clause incorporating into itself the provisions of the principal contract, or even in terms referring to that instrument." Id., 240 U.S. at 277, 36 S. Ct. at 306. The Court held that the reference to drawings and specifications was merely to show what work was to be done and in what manner. Id. In rejecting the general contractor's theory of incorporation, the Court stated the rule relied on by the Alfords in this case: "[A] reference by the contracting parties to an extraneous writing for a particular purpose makes it a part of their agreement only for the purpose specified." Id. Texas law requires the signed document to "plainly refer" to the extraneous writing sought to be incorporated. Owen, 433 S.W.2d at 166.
In Hill & Combs v. First National Bank of San Angelo, Section 3 of the paving subcontract for Goodfellow Flying Field at San Angelo called for the paving subcontractor to pave the "streets" according to plans Nos. 10/2 and 10/1.3. 139 F.2d 740, 742 (5th Cir. 1944). These plans were attached "and made a part of" the subcontract. Id. On both sets of the attached plans, the paving work to be done was shown without any distinction between streets and so called drives, turn outs, and service entrances except that each street was marked "Street." Id. There was no marking on the other areas. Id. The contractor insisted that the contract included the paving of the streets and the other areas. Id. The paving contractor contended the contract required him to pave only the streets and that he was entitled to additional compensation for paving the turn outs, drives, and other areas. Id. The trial court determined the language in the contract was ambiguous, and submitted the question to the jury, which resolved all issues in favor of the paving subcontractor. Id. at 743.
Although the court cited Guerini, it did not rely on it in reaching its decision. Instead, the court agreed with the trial judge that the contract was ambiguous and affirmed the jury's verdict. Therefore, it is hardly supportive of the Alfords' position.
In Sullivan v. City of Galveston, the city recovered against the sureties on the bond of Ed. McCarthy & Co., a city depository that failed in 1926 owing the city approximately $250,000.00. 17 S.W.2d 478, 487 (Tex. Civ. App.—Galveston 1929), aff'd,34 S.W.2d 808 (Tex. Comm'n App. 1931, judgm't adopted). One of the several contentions raised by the sureties related to a provision of the bond which read "that the said Ed. McCarthy & Co. will pay interest on such monies as may be deposited with him at the rate stipulated in his written obligation of even date herewith. . . ." Id. at 480. Because no such written obligation ever existed, the sureties maintained that the bond remained incomplete and therefore never became effective. Id. at 484. The court of appeals stated that "[i]t is clear from all the facts and circumstances in evidence that all the parties to the transaction understood what paper was referred to, and that it was referred to only for the purpose of fixing the rate of interest. . . ." Id. at 490. Citing Guerini, the court noted that the extraneous (and nonexistent) document had no effect on the referring document other than to supply the interest rate. Id.
The court of appeals decision was based not on the particular words of incorporation, but on "all the facts and circumstances." Therefore, the Guerini reference is dictum. The Commission of Appeals opinion affirming Sullivan, as EOG points out, "relied not on Guerini, but on common sense: the interest rate, said the Commission of Appeals, 'can be . . . ascertained' without the referenced document because the rate was stated in the city board's resolution authorizing the bond. . . ." Sullivan v. City of Galveston, 34 S.W.2d 808, 811-12 (Tex. Comm'n App. 1931, judgm't adopted). "[T]he fact that the reference was made to a written instrument which did not exist becomes immaterial." Id. at 811.
Tribble & Stephens Co. v. RGM Constructors, L.P. involved a subcontract between T&S, the general contractor, and RGM, the subcontractor, in which RGM agreed to perform concrete formwork on the floors and ceilings of a new Embassy Suites hotel in Austin. 154 S.W.3d 639, 647 (Tex. App.—Houston [14th Dist.] 2004, pet. denied). T&S argued that the flow down provision of the subcontract incorporated a provision from the general contract requiring approval by the project architect as a condition precedent to arbitration or litigation of a claim. Id. at 662-63. Since RGM had not obtained the architect's approval before filing suit, T&S contended the trial erred in denying its motion for summary judgment. Id. at 661-62. RGM maintained that the flow down provision of the subcontract pertained only to the performance of its work and did not incorporate the condition precedent to litigation. Id. at 663. Finding ambiguity as to the applicability of the flow down provisions, the court of appeals held the trial court properly denied T&S's motions for summary judgment, "because fact issues exist as to the intent of the parties to bind RGM to the condition precedent provision in the General Conditions. . . ." Id. at 669.
In Bob Montgomery Chevrolet v. Dent Zone Cos., Montgomery, a Louisville, Kentucky auto dealership, signed an application which stated that Montgomery would "become a 'Certified Repair Center' as detailed in our PDR LINX Service Program. . . ." 409 S.W.3d 181, 184-85 (Tex. App.—Dallas 2013, no pet.). The application also stated, "Additional benefits, qualifications and details of the PDR LINX Service Program are available for your review at our website: http://www.linxmanager.com/pdf/CRCTermsConditions.pdf." Id. at 190. Dent Zone alleged Montgomery consented to Texas jurisdiction by agreeing in the internet document "to submit to the jurisdiction of the courts of the State of Texas which shall be the sole and exclusive jurisdiction for any legal dispute between us." Id. at 188. Montgomery contended that the internet document was not part of the contract. Id.
The court of appeals held that the internet document was not incorporated into the parties' contract for any purpose, but instead contained "informative material only, not binding terms and conditions." Id. at 193. Although the opinion contained a passing reference to Guerini, it was not the basis of the court's decision.
The Alfords argue that Guerini and the other decisions they cite as its progeny constitute a line of cases supporting a limited incorporation of the language in Exhibit A. But their kinship is tenuous. Although the opinions cited mention Guerini, they do not necessarily rely on it. Nor do the results in the cited cases support the Alfords' position. Two found no incorporation whatsoever. Two others found ambiguity in the incorporating language or the wording of the material incorporated. Given the Guerini facts, it is probable that Texas courts would reject a claim of inclusion of the extraneous writing, because, as the Guerini court noted, there was no language of incorporation plainly referring to the extraneous writing. See Owens, 433 S.W.2d at 166. There would be no need to rely on the Guerini rule.
Although the rule stated is valid and of long lineage, it is not so apposite to our facts as to compel, as a matter of law, a construction ignoring the mineral reservation in Exhibit A. Nevertheless, when the language of incorporation is considered with the other parts of the deed, especially the dissimilar and inconsistent treatment given the life estate reservation and the mineral reservation, we cannot say that the Alfords' construction is unreasonable.
The effect of the incorporation language, at best, is unclear. The trial court was confronted with two reasonable interpretations of the deed. Therefore, we conclude that the trial court did not err in finding the deed ambiguous and submitting mutual mistake to the jury. The Alfords' sole issue is overruled.
The Alfords do not challenge the jury's findings. --------
DISPOSITION
Having overruled the Alfords' sole issue, we affirm the judgment of the trial court.
BILL BASS
Justice Opinion delivered March 31, 2016.
Panel consisted of Worthen, C.J., Hoyle, J., and Bass, Retired J., Twelfth Court of Appeals, sitting by assignment.
(PUBLISH)
JUDGMENT
Appeal from the 1st District Court of San Augustine County, Texas (Tr.Ct.No. CV-12-9344)
THIS CAUSE came to be heard on the appellate record and briefs filed herein, and the same being considered, it is the opinion of this court that there was no error in the judgment.
It is therefore ORDERED, ADJUDGED and DECREED that the judgment of the court below be in all things affirmed, and that all costs of this appeal are hereby adjudged against the Appellants, CHARLES ALFORD AND MARY LOU ALFORD, for which execution may issue, and that this decision be certified to the court below for observance.
Bill Bass, Justice.
Panel consisted of Worthen, C.J., Hoyle, J., and Bass, Retired J., Twelfth Court of Appeals, sitting by assignment.