Great Western Land Management, Inc. v. Slusher

939 S.W.2d 865, 1996 WL 492713
CourtKentucky Supreme Court
DecidedMarch 27, 1997
Docket94-SC-516-DG, 94-SC-522-DG and 95-SC-431-DG
StatusPublished
Cited by6 cases

This text of 939 S.W.2d 865 (Great Western Land Management, Inc. v. Slusher) is published on Counsel Stack Legal Research, covering Kentucky Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Great Western Land Management, Inc. v. Slusher, 939 S.W.2d 865, 1996 WL 492713 (Ky. 1997).

Opinion

STEPHENS, Chief Justice.

This appeal concerns ownership of the mineral rights on a tract of land located in Knox County. The Slushers are the undisputed owners of the surface of the tract. The Stewart heirs hold the record title to the mineral estate on the property. Great Western Land Management Incorporated (Great Western) holds the mining leases, one from the Slushers and one from the Stewarts, on the property. The Slushers filed an action to quiet title of the mineral estate and for money damages from Great Western for failure to pay royalties. The Stewart heirs were also named as defendants. The trial court found that the Stewart heirs were the record *867 title holders of the mineral estate but the Slushers had gained legal title through adverse possession of the minerals for the required statutory period. Additionally, the trial court awarded $187,924.96 in damages to the Slushers. This amount equaled royalties Great Western would have owed to the Slushers for mining on the Knox County property. The trial court judgment was appealed by all parties. The Court of Appeals affirmed the award of money damages to the Slushers and remanded for further findings on the question of adverse possession. Great Western and the Stewart heirs moved this Court for discretionary review which we granted. The Slushers then made a cross-motion for review of the Court of Appeals decision regarding application of the cham-perty statute, which we granted.

The issues to be discussed in this opinion include application of the principles of adverse possession to a severed mineral estate; the applicability of the attornment statute; and, the applicability of the champerty statute. We find that as a matter of law the Slushers could not have gained legal title to the mineral estate through adverse possession and that neither the attornment statute or the champerty statute is applicable.

The Slushers and the Stewarts both trace their interest in the Knox County property to a common grantor, Isaac Mills. On August 4,1899, Isaac and Margaret Mills deeded the Knox County property to Grant Taylor. Taylor did not record his deed until July 8, 1909. The Mills deeded the mineral underlying the same property to Dr. Samuel Bennett and Flem D. Sampson in 1908. This deed was recorded on December 24, 1904. The Slushers claim the property through the Taylor deed and the Stewarts claim through the mineral rights deed. The Slushers ownership of the surface rights to the Knox County property are not in dispute. The trial court found, and the issue was not appealed, that the Stewarts are the record title owners of the mineral estate underlying the Knox County property.

I. Adverse Possession

In this state it has long been the law that the surface owner holds a severed mineral estate, acquired from a common grantor, in trust for the benefit of the mineral estate owner. KRS 381.430; Foxwell v. Justice, 191 Ky. 749, 231 S.W. 509 (1921). Because the surface owner is in the position of a trustee, “he cannot acquire title by adverse possession to the mineral estate except in the way and manner which a trustee of other real property may acquire title against the cestui que trust.” McPherson v. Thompson, 203 Ky. 35, 261 S.W. 853, 854 (1924). A trustee can acquire title to the trust property; by adverse possession, against a cestui que trust, by repudiating the trust. A repudiation is required in order to convert the surface owner’s permissive possession, as a trustee, of the mineral estate into possession that is hostile to the interest of the owner of the mineral estate. See Ward v. Woods, Ky., 310 S.W.2d 63 (1958).

In general terms, a “repudiation must be unequivocal and in violation of the duties of the trust.” First Kentucky Trust Co. v. Christian, Ky., 849 S.W.2d 534, 537 (1993). This Court requires a separate formal repudiation of the trust relationship mandated by KRS 381.430.

Under this statute [KRS 381.430], the Kentucky authorities are unanimous in holding that after severance of the mineral title one who acquires possession of the surface from the same grantor is deemed to hold possession of the minerals as trustee for the holder of the mineral title and, in the absence of an explicit disclaimer and clear repudiation of this subsisting relationship in a manner sufficiently open and notorious to bring home to the mineral owner knowledge or notice of the hostility of the surface holder’s possession, the surface holder, being a trustee in possession, can never acquire title of his cestui que trust by any length of possession for his possession never becomes adverse. The possession of the mineral owner thus being preserved and protected by the statute is not lost nor its continuity interrupted by any length of non-user.

Ward v. Woods, supra at 65, citing Kentucky River Coal Corp. v. Singleton, 36 F.Supp. 123, 125 (E.D.Ky.1941). The surface owner “may repudiate the trust by acts or words *868 which clearly bring home to the mineral holder the knowledge that the surface owner is claiming the minerals adversely.” Diederich v. Ware, Ky., 288 S.W.2d 643, 646 (1956). This Court, in Diederkh, found that the mineral estate owners had “formal” notice that their interest was being invaded due to testimony in the record of a previous action concerning the same mineral deed. The notice given by the testimony alone was not sufficient. The Court found a repudiation of the trust only after taking into consideration the formal notice “together with the open and notorious operation of these two wells since that time, was sufficient to cause the limitation to run against the mineral owners.” Id. at 647.

In the ease at bar, the Slushers are required by KRS 381.430 to hold the mineral estate for the benefit of the Stewarts until there is a formal repudiation of that trust relationship. There is evidence in the record of contact between the lessees of the two families in 1982. It was in 1982 that Plastics Universal, lessee of the Stewarts, discovered the Stewarts ownership of the minerals underlying the Knox County tract. The Stew-arts inherited this interest from their father’s estate which included large mineral holdings. Plastics Universal leased all the mineral interests owned by the Stewarts and discovered the Knox County interest during a subsequent title search. The record shows that Plasties Universal contacted Monarch, holder of the Slusher lease on the Knox County property at the time, and informed them of the Stewarts’ ownership. Monarch did not cease mining or give possession of the mineral estate to Plastics Universal.

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Bluebook (online)
939 S.W.2d 865, 1996 WL 492713, Counsel Stack Legal Research, https://law.counselstack.com/opinion/great-western-land-management-inc-v-slusher-ky-1997.