Drach v. Ely

694 P.2d 1310, 10 Kan. App. 2d 149, 84 Oil & Gas Rep. 257, 1985 Kan. App. LEXIS 588

• Court: Court of Appeals of Kansas
• Decided: February 7, 1985
• Docket: 56,223
• Status: Published

Opinions

Meyer, J.:

This is an action by appellee Leonard Drach (Drach) to quiet title to the “NW 1/4 ofSection 13, Township 22, Range 13, in Stafford County, Kansas” (hereinafter NW 1/4-13). Defendants Alice Hartnett, Gerald Hartnett, and Nadine Berube (appellants) claim an interest in and to the oil, gas and minerals under this tract. Drach’s Motion for Summary Judgment was granted, hence this appeal.

Martha Siefkes (Siefkes), who had inherited the NW 1/4-13 from her father, Fritz Mettscher, conveyed it to Drach by warranty deed. This deed, however, contained the following language below the legal description of the property:

“This being subject to Mineral Royalty deeds now of record and subject also to the terms of the Last Will and Testament of Fritz Mettscher, deceased.

“. . . subject only to Mineral Royalty deeds of record and Will stipulations as stated above

At issue herein is what interest in NW 1/4-13 was conveyed by Siefkes to Drach; specifically, whether or not Drach obtained the mineral interests by this conveyance.

Fritz Mettscher died September 20, 1938. His last will and testament was probated, and the order of final settlement was entered on November 13, 1939. Although the Kansas probate code of 1939 applies to this estate, and therefore the order of final settlement controls the flow of title from decedent (K.S.A. 59-2602; and Bindley v. Mitchell, 170 Kan. 653, 657, 228 P.2d 689 [1951]), that order merely decrees that decedent’s real property will pass to those persons and in such proportions as designated in paragraph 3 of the will. Paragraph 3, in turn, decrees that the devises therein are “subject to the reservation made in paragraph two.” We thus must interpret decedent’s will to determine what interest in the property Siefkes took and in what manner she took it. Thereafter we will consider what interest was conveyed by her deed to Drach.

Paragraph 2 of the Mettscher will provides as follows:

“I give, devise and bequeath die oil, gas and other minerals in and under and that may be produced from the hereinafter described farm lands which I now own, to my six children, in the proportions as hereinafter set forth, to-wit:

To my son, F. H. Mettscher, a one-sixth interest;

To my daughter, Marie Strobel, a one-sixth interest;

To my son, Henry Mettscher, a one-sixth interest;

To my daughter, Wilhelmina Kues, a one-sixth interest;

To my daughter, Martha Siefkes, a one-sixth interest;

To my daughter, Ida Cadman, a one-sixth interest;

“It is my will and intention that the mineral rights herein devised shall be and include only the oil, gas or other minerals which may be produced from said premises, and shall not, in any manner, be interpreted or construed as including any of the oil, gas or mineral lease rentals, delay rentals or bonuses which may be payable under any leases upon said real estate; it being my will and desire that all of the rentals, delay rentals and bonuses payable under any leases upon said real estate shall be payable to the person to whom the specific real estate upon which such rentals are paid is hereinafter given and devised.” (Emphasis added.)

Paragraph 3 of the will states in pertinent part;

“3. ... I give, devise and bequeath, subject to the reservation made in paragraph two of this my Last Will and Testament, my farm lands to my children, as here immediately set forth, to-wit:

“To my daughter, Martha Siefkes, I give the NW 1/4 of Section 13, Township 22, Range 13, in Stafford County, Kansas, and if my- said daughter pre-decease me, then I give the said quarter section of land to her children;”

As paragraph 3 of .the will is subject to paragraph 2, it is paragraph 2 which controls whether royalty or mineral interest was obtained by Siefkes under the will.

The trial court determined that Siefkes, in the italicized part of paragraph 2 of the will, obtained only a royalty interest and that this interest violated the rule against perpetuities. The trial court further determined that the subsequent conveyance to Drach gave him a fee simple title to the NW 1/4-13, including the mineral interest in, on, and under the same. We agree.

We italicized part of paragraph 2 of decedent’s will in order to clearly set it apart from the final part of that paragraph. The first part, we conclude, refers to a royalty interest, while that part of the paragraph which follows the italicized part refers to a mineral interest. We will expound on the reasons for this conclusion.

Language associated with the granting of a mineral interest includes reference to oil, gas and other minerals “in and under” the land, to the rights of ingress and egress over the land, to enter the surface land to operate or develop, to lease production rights, and to participate in bonuses and delay rentals. See Cosgrove v. Young, 230 Kan. 705, 712-13, 642 P.2d 75 (1982), and numerous cases detailed therein. See also Palmer v. Brandenburg, 8 Kan. , 651 P.2d 961 (1982), rev. denied 233 Kan. 1092 (1983).

The true distinction between a royalty and a mineral interest is that the owner of a royalty interest owns only those minerals which are brought to the surface of the land, that is, “what is produced,” while the mineral interest owner possesses the minerals in place. This is why the mineral interest owner has the right of ingress and egress; that is, the right to explore for minerals, and, when found, to develop and remove them. The mineral interest owner also has the leasing power by the use of which he can negotiate for a bonus, and he can grant delays in drilling requirements in exchange for the receipt of delay rentals. All three of these indicia — ingress and egress, delay rentals, and bonuses — are thus clearly compatible with mineral interest ownership, but have nothing to do with the ownership of royalty. In the final analysis, once oil and gas reach the surface, they become subject to royalty ownership. On the other hand, just as clearly, the owner of the mineral interest in and to the oil and gas owns the same wherever located. The owner of the mineral interest also may own the royalty interest, and in fact does own it unless it has been sold to someone else, and can receive title thereto by use of the term “mineral interest.” The converse is not true; that is, the owner of a royalty interest — expressed only as such without qualifying expletives — does not by use of that term acquire any interest whatever in and to minerals “in place.”

The foregoing distinction between royalty and mineral interests requires that each case be determined on a case by case method. As was said in Cosgrove, 230 Kan. at 706:

“In determining the type of interest conveyed, we are not governed by the title affixed to the conveying document, but will look instead to the language of the contract contained in its four corners and from there find the intention of the parties. [Citation omitted.]”

The devise in the instant case makes reference to mineral rights “in and under” the land, but otherwise is devoid of references to other of the above-mentioned language generally associated with the transfer of a mineral interest. The testator, in fact, by expressly naming them, states that the indicia of mineral interests does not go with the interest he thereby grants.

It seems clear to us that the testator intended that Siefkes and her five siblings should each receive an undivided l/6th royalty interest only in all of the real property of which he died seized. It is equally clear he intended that the mineral interest under each tract would go to the respective devisee thereof. One must ask what possible reason he would otherwise have had to use the starkly different language in the italicized part of the last paragraph of paragraph 2 of his will, than he used in the remainder of that paragraph.

While the phrase “in and under” is indicative of a mineral interest, the phrase “may be produced from” is more compatible with a royalty interest. Magnusson v. Colorado Oil & Gas Corp., 183 Kan. 568, 575, 331 P.2d 577 (1958); Shaffer v. Kansas Farmers Union Royalty Co., 146 Kan. 84, 91-92, 69 P.2d4 (1937). When both such terms are used in the same grant, however, resort must be had to other language in the grant to determine what was, in fact, transferred.

The Kansas Supreme Court has, on numerous occasions, reiterated the distinction between minerals in place and a royalty interest. For instance, in Lathrop v. Eyestone, 170 Kan. 419, Syl. ¶¶ 1 and 2, 227 P.2d 136 (1951), it was held:

“A mineral deed is one which makes a severance, from the fee, of a present title to minerals in place. It is actually a realty conveyance.”

“ ‘Royalty’ in its ordinary meaning is that part of oil and gas payable to the lessor by the lessee out of oil and gas actually produced and saved. It is the compensation to the lessor provided in the lease for the lessee’s privilege of drilling and producing oil or gas and does not include a perpetual interest in and to oil and gas in place. It is not uncommon to find ‘royalty’ shortly defined as ‘a share’ in production ‘paid.’ ”

In the instant case, the testator stated that what he was granting (in the italicized part of paragraph 2) would “include only the oil, gas or other minerals which may be produced from said premises.” By such language he clearly limits the interest transferred to a royalty. Moreover, the testator then, specifically, states that lease rentals, delay rentals, and bonuses — those things normally associated with mineral interests — were not transferred. By specific omission of these mineral interest indicia, he most certainly intended, up to that point in his will, to grant a royalty interest only. Furthermore, the testator thereupon (in the last — the unitalicized — part of paragraph 2) grants to each of his children what we conclude he intended was a mineral interest in and to each of the various tracts. This is particularly apparent when read in conjunction with his devise of the specific tracts of land in paragraph 3 of his will. Clearly he intended that each of his children receive a royalty interest in and to all of the land of which he died seized, but wanted each to own the mineral interest in and to the land he specifically deviséd to each. Any other interpretation defies reason.

In sum, the testator (in the italicized part of the last paragraph of paragraph 2 of his will) made no provision for ingress or egress; removed any claim the devisees may have had to delay rentals, lease rentals, and bonuses; and stated the devisees were to receive only the minerals “produced from” the premises. The result is that all elements normally serving as indicia of mineral interests are gone, with the exception of the phrase “in and under” used in the first paragraph of paragraph 2 of the will. Thus, in the concluding part of paragraph 2, together with paragraph 3, he devised the fee simple title to Siefkes. So far as the attempted grant of a royalty interest to Siefkes is concerned, it is for all practical purposes, mere surplusage.

Thus, when Siefkes conveyed the NW 1/4-13 to Drach by warranty deed, she conveyed to him all her rights to the property except what she deemed she had been separately given under her father’s will, namely a royalty interest. But what royalty interest did Siefkes have? We submit that she had no such separate interest (apart from her full fee simple ownership), since the italicized part of paragraph 2 of decedent’s will violates the rule against perpetuities. This violation of the rule occurs because it cannot be said that the royalty interest will vest within a life or lives in being plus 21 years. As was explained in Cosgrove, 230 Kan. at 714-15:

“One of the essential elements of the rule against perpetuities is that at the time the future interest is created, it must appear that the condition precedent to vesting must necessarily happen, if it happens at all, within the period prescribed by the rule. ... A possibility, or even a probability, that the interest or estate may vest within that time is not enough, for, it is said, the question of probabilities does not enter into the equation. If by any conceivable combination of circumstances it is possible that the event upon which the estate or interest is limited may not occur within the period of the rule, or if there is left any room for uncertainty or doubt on the point, the limitation is void.” ’

“. . . Naturally, if no future oil and gas leases are made and executed, there would never be a vesting of title to any royalty interest. If it is not certain the vesting will occur within the time stated in the rule, then the rule has been violated and the conveyance is void.”

And even though we do not deal With an oil and gas lease per se in the instant case, the strength with which the rule is applied is demonstrated by the language of the Cosgrove court which immediately follows the above quote from that court:

“Even if an oil and gas lease were required to be executed within the time prescribed by law, there would still be no vesting of title until royalty becomes due and payable to the grantor or his successor. The execution and delivery of an oil and gas lease does not insure that there will ever be any production attributable to the lease.” Cosgrove, 230 Kan. at 715.

If Siefkes did not possess any separate royalty interest, there was nothing to be excepted from the granting clause of the deed.

Moreover, although the deed to Drach uses the words “subject to Mineral Royalty deeds now of record,” this does not reserve anything to Siefkes or her heirs since it has not been alleged there are any such deeds of record.

In the final analysis, however, it matters not what Siefkes intended to convey to Drach; what she did was to convey fee simple title to him. This is so because of the foregoing analysis coupled with the fact that the warranty deed to Drach, though less than artfully drawn, is not ambiguous.

It follows, therefore, that Siefkes reserved nothing in her deed to Drach, and that the trial court was correct in its judgment that Drach took fee simple title to the NW 1/4-13 by his deed from Siefkes, and in quieting title thereto in Drach.

Affirmed.