Co-author Chance Decker
BNSF v. Chevron Midcontinent LP et al. asked whether a 1903 deed granted BNSF’s predecessor a strip of land in fee simple absolute or only an easement. The result: BNSF holds only an easement. There’s more to the case than an analysis of particular language in one sui generis contract. What else did we learn?
The big picture
- Is your assignment to determine the intent of the parties in a document? Consider it as a whole; don’t cherry pick phrases and read them in isolation. I doesn’t matter whether you are issuing checks based on ownership or convincing the court of your righteousness.
- Beware of ancient title documents, in particular a “Right of Way Deed”. Railroads in the early part of the last century had a propensity to present documents that looked like easements but were really deeds in fee simple. Here, 115 years later, if that was the intent it didn’t work.
- “Beware” translates to “read the document carefully and thoroughly”. Don’t skim the granting clause and call it a day.
- In a face-off between the granting and habendum clauses, the granting clause prevails. But, as you will see, it’s not that simple.
Dueling deed language
The consideration: “… benefits which will accrue… by reason of the construction of a line of railroad over the land…”
The granting language: “… a right of way, that certain strip of land hereinafter described, …”. The deed then described a line traced by surveyors.
The habendum clause: “To have and to hold the said premises, together with all appurtenances thereto belonging, in fee simple, unto the said … its successors and assigns forever.”
BNSF’s losing arguments (contending the deed conveyed fee simple absolute)
- “Right-of-way” is not a legal term of art with a set definitive meaning, but rather may be used in two senses: a right of passage, and also a strip of land which railroad take up one upon which to construct a roadbed. The court agreed, but that didn’t carry the day.
- “For a right-of-way” is a precatory nonrestrictive clause that states a purpose but does not limit the nature of the estate being conveyed. (Don’t even try to say you already know what “precatory” is.)
- The habendum clause refers to “fee simple”. That alone should answer the question. But the granting clause controls, and the court wasn’t ready to recognize a Texas doctrine of “an easement in fee simple” as do some other states.
The court – it’s an easement
The granting clause straddled the line between two different types of deeds, making it ambiguous. The court then had to examine the entire deed and harmonize its conflicting provisions. The court followed the basic rule: Assume the parties intended every clause to have effect so that no clause is rendered meaningless. But the focus remained on the granting clause, which controls the disposition.
Chevron offered the only reasonable reading of the deed. The deed as a whole evinces a clear intent to convey only a surface easement. The court noted these factors:
- The opening recitals show that the grantor would receive benefits if a railroad passed over the land.
- “Right-of-way” appears in the granting clause directly in front of “that strip of land”. The placement of the statement of purpose means something.
- The line shaped by the surveyors went “over to and across” various sections.
- There was a separate grant of the right to use wood, stone and other resources. If the deed conveyed the land in fee simple the right to take and use the natural resources would have passed automatically.
- The granting clause defines which bundle of rights was transferred; the habendum clause tells the recipients how long and under what conditions they can have and hold those rights.
- The habendum clause allows the grantee to have and hold the “premises”, which suggests only an easement.
What is the effect of the reference to “fee simple” in the habendum clause? Fee simple is a “durational or conditional qualifier, rather than the expression of an estate’s size”. The operative question of what BNSF actually owns is answered by the granting clause and the “gloss put on that clause by the rest of the deed.”