NOT DESIGNATED FOR PUBLICATION

DIVISION IV

ARKANSAS COURT OF APPEALS

KAREN R. BAKER, JUDGE

CA02-27

November 13, 2002

D.M. RICHE, INC. AN APPEAL FROM UNION COUNTY

APPELLANT CIRCUIT COURT

[CIV 1998 126-2]

V.

HONORABLE EDWARD P. JONES,

McGOWEN WORKING PARTNERS, CIRCUIT JUDGE

INC.

APPELLEE AFFIRMED

Appellant D.M. Riche, Inc., sought a declaratory judgment from the Union County Circuit Court construing a reservation contained in a 1938 deed from appellant's predecessor in title, P.W. and Myrtle Mayfield, to Lion Oil Refining Company, appellee's predecessor. The trial court found that the reservation did not include timber and that brine was not included within the term "minerals" as used in the 1938 deed reservation. The trial court also ruled that title to the property had not reverted to appellant. This appeal followed. Appellant raises three points on appeal: (1) that it has the right to the timber growing on the property; (2) that the 1938 deed's reservation of minerals and water included brine; and (3) that the fee title to the property reverted to appellant due to the failure of the conditions subsequent contained in the deed. We affirm.

In 1936, P.W. Mayfield and Myrtle Mayfield owned approximately 101 acres in Union County. On March 17, 1936, they executed an oil and gas lease for the property to Lion Oil Refining Company, appellee's predecessor in interest. On February 3, 1938, the Mayfields executed a quitclaim deed to the same property to Lion Oil. The deed contained exceptions, reservations, and conditions. The deed excepted all oil, gas, and minerals in, on, and under the property. The deed also reserved to the grantors the right to take "such surface and underground water as may be necessary or proper to explore for or produce, save and market the oil, gas and minerals thereunder ...." The conveyance was also subject to the following conditions subsequent:

[T]hat the grantee ... shall hold the property so long as grantee ... shall use the said property in connection with the business of producing, storing, saving, marketing or transporting oil or gas ... or so long as grantee ... shall maintain on said premises towers, tanks, structures, pipe lines, machinery or equipment suitable for use in the production ... oil or gas ... or so long as grantee ... shall maintain on said premises any house or structure used by any person employed by grantee ... in the business of producing, saving, marketing or transporting oil or gas .... If, however ... grantee ... shall cease to use said property in connection with the business of producing, storing, saving, marketing or transporting oil or gas ... and shall fail to maintain on said premises towers, tanks, structures, pipe lines, machinery or equipment suitable for use in the production ... of oil or gas ... and shall fail to maintain on said premises any house or building used for the storing of machinery, equipment or supplies, and shall fail to maintain on said premises any house or structure used by any person employed by grantee ... in the business of producing, saving, marketing or transporting oil or gas ... then upon the concurrence of all of said conditions, but only in such event, title to the property herein granted shall revert to grantors ....

[I]n case grantee ... shall permit said property to forfeit for general taxes, and shall fail to redeem the same within eighteen months from the date on which said property shall be sold for such taxes, then if thereafter, and within thirty days after having been notified in writing of such delinquency by grantors ... grantee ... shall fail to redeem said property, then in that event title in said premises shall revert to grantors ....

On March 29, 1938, the Mayfields and Lion Oil executed a supplemental agreement expressly declaring that the quitclaim deed did not affect the 1936 oil and gas lease to LionOil. Myrtle Mayfield conveyed her interest in the property to George and Bernadine Wilson by special warranty deed on January 20, 1972. George Wilson acquired all of Bernadine's interest by a commissioner's deed and a quitclaim deed from Bernadine in September 1980. George Wilson and Susan Wilson conveyed the property to appellant D.M. Riche, Inc., by special warranty deed on December 30, 1994. On September 23, 1999, appellee received its interest in the property by an "Assignment, Bill of Sale and Conveyance" from Ocean Energy Resources, Inc., a successor of Lion Oil.

Joe Nixon, owner of Union Abstract Company, qualified as an expert and testified that he was asked to prepare a title insurance commitment for a prospective timber buyer. Nixon stated that the title commitment listed appellant as the conditional owner of the timber because of the "subject to" language contained in the 1938 deed to Lion Oil.

Charles Beasley, employed by both Land Management Company and Ensco to buy or sell land and timber, was also a witness. He had visited the property four times over a two-year period and, during those visits, he saw oil wells, towers, tanks, and pipe lines used in the production of oil and gas, but did not know if the oil wells were producing. He did not see any buildings for the storage of machinery, equipment, or supplies, but he understood that there were storage facilities just south of this property. He further testified that there was marketable timber growing on the property.

Regan Campbell, employed by Land Management Company as a forester, testified that he had been to the property on six occasions and that he had observed the property's use in connection with the production, storing, transporting, and marketing of oil or gas. There were towers, tanks, and pipe lines on the property, but he did not see any buildings used forstorage of machinery or equipment, or houses used by employees. However, there were storage buildings and an office building located south of the property. There was marketable timber growing on the property and that timber could be considered a crop, but Campbell did not know whether timber was considered a crop in 1938.

Murrey Grider, the president of D.M. Richie, Inc., testified that the property was acquired in 1994 from George and Susan Wilson. No title work was done prior to appellant purchasing the property; however, Grider visited the property and saw five or six wells and transmission lines. He also testified that he was familiar with the 1938 deed from the Mayfields to Lion Oil and knew that there were reservations and conditions. He never assessed the property with the county tax assessor because the taxes were the responsibility of the assignees. When Grider checked on the taxes in 1995, he found them to be current. He did not check the taxes for the 1996, 1997, or 1998 tax years. Although familiar with the 1938 deed's provision concerning reversion for nonpayment of taxes, Grider admitted he sent no written notice to appellee even though he would have been the person responsible for sending that notice. He was not aware that appellee was claiming to own the surface interest until the redemption of the property following the nonpayment of taxes. He did not dispute that there was production coming from the property. In his opinion, the Mayfields reserved the right to exploit the land for their own purposes and that Lion Oil only received the additional right to build structures on the property. In his opinion, the conditions in the deed had not been met and the title reverted back. He acknowledged that the 1938 deed did not use the term "brine," just "oil, gas, and minerals." He also admitted that he did not know whether brine was considered a mineral in 1938.

Donald Thomas, an employee of appellee, testified that he was familiar with the property and that there were two producing wells, as well as transmission lines on the property. He had worked on the property since 1980 and there had been continuous production during that time. During his employment, no house or building existed that was used for the storage of machinery or equipment.

David Russell is appellee's operations manager in charge of the day-to-day regulatory contractual business, buying and selling oil properties, and is a registered petroleum geologist in Mississippi. He testified that transmission lines for wells not on the property cross the property. One well had been producing since 1938, but was presently shut down for re-working and putting a new motor on the pump. In his opinion, the 1938 deed gave Lion Oil the right to enjoy the property as long as it was used in connection with the business of producing, storing, saving, marketing, and transporting oil and gas, or as long as it maintained on the premises towers, tanks, structures, pipe lines, machinery, and equipment suitable for use in the production of oil, or for so long as it maintained on the premises any house or structure used by any person employed by them in the production of oil or gas. It was also his opinion that the property would revert back to the grantors if Lion Oil or its successors ceased to use the property in connection with the business of producing, storing, saving, marketing, and transporting oil and gas; failed to maintain on the premises towers, tanks, structures, pipe lines, machinery, and equipment suitable for use in the production of oil; failed to maintain on the premises any house or structure used for storage of machinery, equipment or supplies; and failed to maintain on the premises any house or structure used by any person employed by appellee in the production of oil or gas. It was Russell's opinionthat, in order for a reversion to take place, all four conditions must stop. Russell also testified that the 1938 deed did state that the grantor reserved the right to exploit the land but that he interpreted that provision as providing that the grantor could exploit the land by prospecting for oil and gas. Russell understood appellant's interpretation was that it could exploit the land, and this was an independent clause. Russell further testified that there were no buildings or houses on the property for the storing of machinery, equipment, or supplies. Neither was there a house or structure on the property used by any person employed by appellee in the production of oil or gas.

This court reviews equity cases de novo but does not reverse the trial judge's findings unless they are clearly erroneous. Oliver v. Oliver, 70 Ark. App. 403, 19 S.W.3d 630 (2000). A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. Hedger Bros. Cement & Materials, Inc. v. Stump, 69 Ark. App. 219, 10 S.W.3d 926 (2000); Summers v. Dietsch, 41 Ark. App. 52, 849 S.W.2d 3 (1993). This court will give due regard to the opportunity of the trial judge to judge the credibility of the witnesses and the weight to be given their testimony. Jennings v. Burford, 60 Ark. App. 27, 958 S.W.2d 12 (1997).

A reservation is a clause in a deed whereby the grantor reserves some new thing to himself, issuing out of the thing granted which was not in esse before. Cottrell v. Beard, 69 Ark. App. 87, 9 S.W.3d 568 (2000); Wallner v. Johnson, 21 Ark. App. 124, 730 S.W.2d 253 (1987). It is well settled in Arkansas with respect to the scope of a mineral reservation in a deed that it is a fact question as to whether a certain substance is generally characterized orconsidered as a mineral. ··²7040-7²····²7040-7²··Southern Title Ins. Co. v. Oller, 268 Ark. 300, 595 S.W.2d 681 (1980); Carson v. Missouri Pac. R.R. Co., 212 Ark. 963, 209 S.W.2d 97 (1948); Missouri Pac. R.R. Co. v. Strohacker, 202 Ark. 645, 152 S.W.2d 557 (1941). The intent of the parties will be determined so as to be consistent with and limited to those minerals commonly known and recognized by legal or commercial usage at the time and in the area where the instrument was executed. Strohacker, supra.

When the court is called upon to construe a deed, we will examine it from its four corners for the purpose of ascertaining the parties' intent from the language employed and will not resort to rules of construction ··²SDU_15²····²SDU_15²··when the deed is clear and contains no ambiguities. See Gibson v. Pickett, 256 Ark. 1035, 512 S.W.2d 532 (1974); Winningham v. Harris, 64 Ark. App. 239, 981 S.W.2d 540 (1998). A reservation will be given effect according to the plain meaning and intent of the language used and cannot be extended beyond its terms. Cottrell, supra.

For its first point, appellant argues that it is entitled to the timber on the property because, according to appellant, the 1938 deed reserved the right to exploit the land to the grantor. We believe that this is an unreasonable construction of the language used in the deed. The deed conveys the property to Lion Oil, appellee's predecessor, and then excepts the following:

[A]ll of the oil, gas and minerals in, on and under said lands, full and complete title to said oil, gas and minerals being retained by grantors and not conveyed hereby; and further reserving unto said grantors, their heirs and assigns in perpetuity the right to exploit said lands, and prospect thereon for oil, gas and other minerals, with the full right at all times to enter upon said lands and use such part of the surface thereof as shall be necessary or proper for the purpose of mining for said oil, gas and/orminerals, or for the drilling of wells in search of oil or gas thereon, and the operation of mines, oil wells and gas wells, and the production of oil, gas and other minerals from said lands....

(Emphasis added.) The language used in the exception makes it clear that the reservation of the right to exploit the land is in connection with the reservation of the oil, gas, and mineral rights and not a general right to exploit the land. If this were a general right to exploit the land, the conveyance to Lion Oil would be meaningless because Lion Oil would not have gained any rights under the deed. A reservation as broad as the grant is ordinarily void. Carson v. Missouri Pac. R.R., supra.

Appellant argues that the provision in the 1936 oil and gas lease that Lion Oil would pay for damages to the surface crops indicates that the Mayfields intended to reserve the timber rights in the 1938 deed. However, when the 1936 lease was executed, the Mayfields still owned the surface interest. The 1938 deed conveyed that interest to Lion Oil; therefore, there would be no need for Lion Oil to pay for damages to surface crops because it owned the surface interest and would be damaging only itself.

A timber deed is more akin to the sale of a crop, while a mineral rights deed is a separate estate in the minerals beneath the surface. Bonds v. Carter, 348 Ark. 591, 75 S.W.3d 192 (2002) (Hannah, J., concurring). It is well settled that growing crops form part of the real estate and pass by a conveyance thereof unless a constructive severance of the crops has been made by way of reservation in the deed of conveyance. Arnold v. Grigsby, 158 Ark. 232, 249 S.W. 584 (1923). We find no error on this point.

For its second point, appellant argues that it is entitled to the brine rights in the property under the mineral reservation contained in the 1938 deed. In addition to the oil, gas,and mineral reservation, the 1938 deed also reserved to the grantors the right to take such surface or underground water as may be necessary or proper to explore for or produce the oil, gas, and minerals beneath the surface of the property. UMC Petroleum Corporation, another of appellee's predecessor in interest, executed a brine lease in favor of Great Lakes Chemical Corporation in April 1995. The trial court, citing Strohacker, supra, found that brine was not considered a mineral in 1938 and, therefore, was not reserved by the 1938 deed.

The question becomes whether brine is a mineral or is otherwise included in the reservation of the right to take water (both surface and underground). "Brine" is defined as "water saturated or strongly impregnated with common salt." Webster's Third New International Dictionary 278 (1993). Arkansas Code Annotated section 15-56-301(b) (1994) provides:

(b) The word "mineral" as used herein shall include oil, gas, asphalt, coal, iron, zinc, lead, cinnabar, bauxite, and salt water whose naturally dissolved components or solutes are used as a source of raw materials for bromine and other products derived therefrom in bromine production.

(Emphasis added). Section 15-56-301(b) was enacted as section 12 of Act 220 of 1937. At that time, section 15-56-301(b) did not include "salt water" within the definition of "mineral." Act 126 of 1975 amended section 15-56-301(b) to include "salt water" within the definition of "minerals." Although brine would be considered a "mineral" today under section 15-56-301(b), the record does not contain any evidence on whether brine was considered a "mineral" when the 1938 deed to appellee's predecessor in title was made. Murrey Grider, president of appellant, testified that he did not know whether brine was considered a mineral in 1938. The construction of a deed will be made with reference to thecircumstances and usages at the time of the conveyance. See Strohacker, supra. The cases cited by appellant on this point recognize the rule that the construction of a deed is governed by the circumstances and usages that existed at the time of the conveyance as in Strohacker. Any other construction of the specific reservation of water would not include brine because the reservation is limited by the words "as necessary or proper to explore for or produce, save and market the oil, gas and minerals thereunder ...." We cannot say that the trial court's finding was clearly erroneous.

For its third point, appellant argues that the property reverted to it because the conditions contained in the deed have not been met and also because appellee allowed the property to be forfeited for delinquent taxes. Appellant argues that the property reverted to it upon the appellee's failure to meet any one of the conditions. However, the deed clearly states that, "upon the concurrence of all of said conditions, but only in such event, title to the property ... shall revert to the grantors...." This clearly and unambiguously means that there will be a reversion only upon the occurrence of all four conditions (the failure to use the property for production of oil or gas, the failure to maintain towers, tanks, structures or pipe lines on the property, the failure to maintain buildings used for the storing of equipment, machinery or supplies, or the failure to maintain a house or building used by an employee in the production, etc.). Appellant stipulated that two of the conditions were being met. Other witnesses testified that the property was being used for oil and gas production and that there were transmission lines and pipe lines on the property. This testimony was sufficient to show that all of the conditions necessary for title to revert to appellant had not been met.

The deed provision concerning the reversion for taxes contains two conditions which must occur before title will revert to appellant - the failure of the grantee to redeem the property within eighteen months from the sale of the property and the failure to redeem the property within thirty days following written notice. Neither condition has occurred, and title has not reverted. First, Carol Lincoln, an attorney with the State Land Commissioner's office, testified that, although the taxes were delinquent for the tax years 1994 through 1998, the property was never sold for delinquent taxes by either Union County or the State because appellee redeemed the property prior to the scheduled sale date. Second, Murrey Grider testified that appellant never sent appellee written notice of the tax delinquency. Because neither condition was met, the title did not revert to appellant. The trial judge based his decision on the lack of notice from appellant to appellee, and we cannot say that his decision is clearly erroneous.

Affirmed.

Robbins and Vaught, JJ., agree.