Court Opinion

ID: 9626226
Source: CourtListenerOpinion
Date Created: 2023-08-22 08:05:57.807364+00
Date Added: 2024-06-11T18:06:23.914858
License: Public Domain

Rees, J.:
I dissent.
This quiet title action concerns the Northwest Quarter of Section Thirteen, Township Twenty-two, Range Thirteen (NW/4 13-22-13) in Stafford County, Kansas (Northwest Quarter), land owned by Fritz Mettscher prior to his death on September 20, 1938.
Testamentary transfer of all interests in the Northwest Quarter occurred according to the following will language:
“2.1 give, devise and bequeath the oil, gas and other minerals in and under and that may be produced from the hereinafter described [six quarter sections] . . . which I now own, to my six children [in equal shares] ....
“[T]he mineral rights herein devised shall be and include only the oil, gas or other minerals which may be produced from said [six quarter sections] and shall not . . . [include] any of the oil, gas or mineral lease rentals, delay rentals or bonuses . . . payable under any leases . . .; all of the rentals, delay rentals and bonuses payable under any leases . . . shall be payable to the person to whom the specific real estate upon which such rentals are paid is . . . given and devised.
“3. I give, devise and bequeath, subject to the [foregoing] reservation . . .
To my daughter, Martha Siefkes the [Northwest Quarter] . . . .”
The will made like provision for each of Martha Siefkes’ (Martha’s) five brothers and sisters, two of whom were Marie Strobel (Marie) and Ida Cadman (Ida). A specific quarter section was designated for each brother and sister under Paragraph 3 of the will.
*157The appellants are successors to Marie and Ida’s interests. Plaintiff is Martha’s successor in interest by assignment. The scope of the reservation or exclusion from Martha’s assignment to plaintiff is not at the foundation of this case. Plaintiff is treated as having succeeded to all of Martha’s right, title and interest in and to the Northwest Quarter.
The dispositive issue is whether Marie and Ida became owners of fractional mineral interests in and to the Northwest Quarter by operation of Fritz Mettscher’s will. Under the majority opinion, they did not. I disagree.
The majority says that any interpretation of the will language other than that made by them defies reason. I have considered that assertion. I still disagree.
The will reflects it was Fritz Mettscher’s intent that his estate be transferred to his six children, his only heirs, in substantially equal shares. Subject to disposition of mineral estate interests in and to the entire six quarter sections, he devised a quarter, section of land to each child. The will language disposing of mineral estate and surface interests in the six quarter sections is the only language of specific devise or bequest found in the will. Pursuant to the will’s residuary clause, all other property of Fritz Mettscher’s, after payment of debts and estate administration expenses, passed in equal shares to his children.
It is reasonable and likely that Fritz Mettscher held the view that the principal tangible benefit of mineral ownership ordinarily is realized only when there is production. That understandable view affords logical and sound explanation of his patently expressed intent that each of his children share equally in the oil, gas and minerals produced anywhere upon the six quarter sections. The sole deviation from the reflected intent and plan of equal distribution of the testamentary estate to the six children is the direction that future oil, gas and mineral bonus and rentals are to belong to the child to whom the leased acreage is devised. Is the testamentary intent to distribute the fruits of Fritz Mettscher’s estate in six substantially equal shares frustrated with respect to oil, gas and mineral production? I believe not.
The record on appeal discloses no oil and gas lease or any other interest affecting Fritz Mettscher’s ownership of the six *158quarter sections as of the date he executed his will or as of the date of his death. We assume, as the parties have, fee title to the six quarter sections was in Fritz Mettscher, unencumbered by any outstanding oil, gas, mineral or other interest.
No party has proffered parol evidence or suggested it appropriate to consider any such evidence.
The matter before the trial judge and now before us is construction and interpretation of the order of final settlement entered upon probate of Fritz Mettscher’s estate. That order incorporated the will language verbatim. We are afforded the same opportunity as the trial judge to construe and interpret the transfer intended by the will language. Cf. Palmer v. Brandenburg, 8 Kan. App. 2d 154, 155, 651 P.2d 961 (1982), rev. denied 233 Kan. 1092 (1983).
Whether fractional mineral interests — six undivided one-sixth interests — in and to the Northwest Quarter passed to Fritz Mettscher’s children must be gleaned from the will language. There is nothing else to guide us.
As I read the majority opinion, its foundation is that the will language states in essence:
To my six children, I give the oil, gas and other minerals that may be produced from the Northwest Quarter;
To Martha, I give all bonus and rentals payable under future leases of the Northwest Quarter.
The majority concludes that because the will language recites the transfer to the six Mettscher children of only and nothing other than the oil, gas and minerals that may be produced from the Northwest Quarter and the transfer to Martha of the bonus and rentals payable under leases covering the Northwest Quarter, the interest transferred to Marie and Ida was royalty. I do not agree.
What is the grant to the six children recited by the will language? It is not a grant of royalty — a share of production — to be delivered or paid for as provided under leases of the Northwest Quarter. It is not a grant of a share of royalty. It is a grant of the production, the total production. If treated as royalty, an interest held free of production costs, there would be no production or proceeds of production available for payment of production costs except as might be assented to by one or more of the children. Where would the rights to lease, develop and *159produce lie? Those rights spring from or are ancillary to mineral interest ownership. They neither spring from nor are they ancillary to the “right” to bonus and rentals. They must lie with whomever holds the right to the oil, gas and other minerals produced. That has to be true particularly where, as here, there is the grant of all production.
Oil, gas and other minerals “in and under,” standing alone, creates a mineral interest. 1 Williams and Meyers, Oil and Gas Law § 304.4, p. 473 (1983); Rutland Savings Bank v. Steele, 155 Kan. 667, 670, 671, 672, 127 P.2d 471 (1942). Cf. Shepard, Executrix v. John Hancock Mutual Life Ins. Co., 189 Kan. 125, 132, 368 P.2d 19 (1962). The will language says that.
Oil, gas and other minerals “in and under and that may be produced from,” standing alone, creates a mineral interest. 1 Williams and Meyers, Oil and Gas Law § 304.5, p. 477 (1983); Serena v. Rubin, 146 Kan. 603, 606, 608, 72 P.2d 995 (1937); Shaffer v. Kansas Farmers Union Royalty Co., 146 Kan. 84, 91-92, 69 P.2d 4 (1937). The will language says that.
Oil, gas and other minerals “that may be produced,” standing alone, creates a mineral interest under our law. 1 Williams and Meyers, Oil and Gas Law § 304.6, p. 481 (1983); Brooks v. Mull, 147 Kan. 740, 741, 78 P.2d 879 (1938); Palmer v. Brandenburg, 8 Kan. App. 2d at 159-61. The will language says that.
A devise is a testamentary gift of real property. A bequest is a testamentary gift of personal property. In re Estate of Williams, 158 Kan. 734, 738, 150 P.2d 336 (1944). Thus “devise” connotes transfer of a real property interest. A mineral interest is a real property interest. A royalty interest is a personal property interest. Palmer v. Brandenburg, 8 Kan. App. 2d at 158-59. The will language says “devise.”
Application of the foregoing construction and interpretation principles to the will language convinces me that an undivided one-sixth mineral interest in and to the entire six quarter sections was created in favor of each of Fritz Mettscher’s six children by the will language reading:
“I give, devise and bequeath the oil, gas and other minerals in and under and that may be produced from the hereinafter described [six quarter sections] . . . which I now own to my six children [in equal shares] ....
“[T]he mineral rights herein devised shall be and include only the oil, gas or other minerals which may be produced from said [six quarter sections] . . . .” (Emphasis added.)
*160Use of the word “only” does not detract from or vary the meaning and effect of the other wording of the last quoted sentence. The word is surplusage. The meaning of the sentence is unaffected by its inclusion or omission.
What is the effect of the remaining pertinent will language, that is,
“[T]he mineral rights herein devised . . . shall not [include] any of the oil, gas or mineral lease rentals, delay rentals or bonuses . . . payable under any leases; . . . all of the rentals, delay rentals and bonuses payable under any leases . . . shall be payable to the person to whom the specific real estate upon which such rentals are paid is . . . given and devised”?
In my view, that language simply severs the “right” to bonus and rentals from the full mineral interest and sets over that “right” to the surface owner or owners of the leased acreage. It renders the mineral interest held by the children as tenants in common nonparticipating as to bonus and rentals.
By the will language, there was a grant to the six children that was a devise of the oil, gas and other minerals both in and under the lands and in and under and that may he produced from the lands. That is the grant of a full mineral interest. Again, as I see it, the other pertinent will language did nothing more than carve out and except from the granted mineral interest the “right” to bonus and rentals and separately grant it to particular children. The fact that the will language says “the mineral rights herein devised shall be and include only the oil, gas or other minerals which may be produced” is of no present material consequence. Under Brooks and Palmer, and with no Kansas authority to the contrary, of which I am aware, it is established that the grant or reservation of a fractional part or the entirety of “all the oil, gas and minerals that may be produced” creates a mineral interest.
Although Shepard, Executrix v. John Hancock Mutual Life Ins. Co., 189 Kan. at 126-36, is not on all fours in that it involved other language in the instrument and is otherwise factually distinguishable, I find the following from that case apropos to the case before us and supportive of the result I believe we should reach:
“[T]he defendant executed and delivered its special warranty deed to plaintiffs conveying the real estate in fee simple subject to . . . [a] reservation, in the granting clause, which reads:
*161“ \ . . reserving ... an undivided [fractional] interest in and to all oil, gas or other minerals ... in or under the said land .... The said . . . reservation shall not be participating in bonuses or rentals ... .’
“. . . What was the nature of the interest reserved? The answer turns largely upon the construction to be given the reservation. The fundamental rule in construing the effect of written instruments is that the intent and purpose of the parties be determined from an examination of the entire instrument, or as is sometimes stated, from its four comers, that is, all the language used anywhere in the instrument should be taken into consideration and construed in harmony with other provisions. [Citations omitted.]
“The defendant contends the deed reserved an . . . interest in the minerals in place ....
“Plaintiffs [contend] . . . that the reservation created a true royalty interest ... .
“. . . For purposes here concerned, it may be said that the term ‘royalty’ has reference to a right to share in production of oil and gas at severance; it is personal property, and does not include a perpetual interest in the oil, gas and other minerals in and under the land. The term ‘mineral interest’ means an interest in and to oil and gas in and under the land and constitutes present ownership of an interest in real property.
“. . . The language, ‘in and to all oil, gas and other minerals ... in and under the said land’ is diametrically opposed to the definition of royalty, and to deny its apparent meaning as an estate in land and interpret it to mean ‘share of production’ only . . . would be irregular and clearly unwarranted. The language is very similar to deeds of conveyance previously reviewed by this court and held to convey present title to minerals in place [citation omitted], and it is persuasive evidence that minerals in place were reserved. . . .
“The second part of the reservation . . . makes it clear the defendant was not to participate in bonuses or delayed [sic] rentals accruing under any lease .... The fact that the reservation expressly stipulated the defendant was not to participate in such payments lends support to the defendant’s contention that minerals in place were intended to be reserved.
“. . . [A royalty] interest does not carry the right to lease the property for oil and gas development or to join in the execution of such leases [citation omitted], or to participate in bonuses or delayed [sic] rentals [citations omitted]. Hence, had the parties intended the defendant reserve only a royalty interest there would have been no necessity to make the reservation nonparticipating as to bonuses and delayed [sic rentals] . ... On the other hand, had the parties intended the defendant reserve a fractional interest in minerals in place, the defendant’s right to participate in such payments would naturally follow and to entitle the plaintiffs to receive them, it [was] necessary to expressly exclude them from the reservation. . . .
*162“The district court erred in not finding that the defendant reserved an undivided [fractional] nonparticipating interest in the minerals in place (Emphasis added.)
Marie and Ida were each granted a fractional — an undivided one-sixth — mineral interest in and to the Northwest Quarter subject only to Martha’s “right” to receive bonus and rental payments, bargained for payments arising out of and only by reason of future leases. Marie and Ida each received a fractional mineral interest nonparticipating as to bonus and rentals. Each received a fractional interest in and to the right and power to lease, develop and produce, which carries with it the rights incidental thereto including, among others, the rights to reasonable ingress and egress, to explore, to drill and to receive royalty according to the terms of any future leases.
With respect to mineral interest rights, rights arising from an oil and gas lease and the interplay of these rights, it is of value to bear in mind that an oil and gas lease is a hybrid instrument. Ingram v. Ingram, 214 Kan. 415, 521 P.2d 254 (1974); In re Estate of Sellens, 7 Kan. App. 2d 48, 50, 51, 637 P.2d 483 (1981), rev. denied 230 Kan. 818 (1982). It is a license to enter and explore for oil and gas. Shaffer v. Kansas Farmers Union Royalty Co., 146 Kan. at 89; Burden v. Gypsy Oil Co., 141 Kan. 147, 150, 40 P.2d 463 (1935); Gas Co. v. Neosho County, 75 Kan. 335, 89 Pac. 750 (1907); In re Estate of Sellens, 7 Kan. App. 2d at 51. It is a grant with conditions. One of the conditions is a reservation to the lessor of a share in the production — royalty. The right to royalty is reserved out of the lessor’s grant. The lessor’s right to royalty arises from his mineral interest ownership rather than arising from or originating with the lease. Cf. In re Estate of Sellens, 7 Kan. App. 2d at 51.
I infer from the majority opinion that they are significantly impressed by the omission of explicit expression of a grant to the six children of a right of ingress and egress. I am not similarly impressed. I believe the right of ingress and-egress is necessarily incidental and ancillary to the rights to explore, develop and produce, rights that I conclude passed to the six children. In Cosgrove v. Young, 230 Kan. 705, 642 P.2d 75 (1982), there was no recited grant of right of ingress and egress and it was held a royalty interest was conveyed. In contrast to the will language before us, the instrument involved in Cosgrove was entitled *163“Contract on Oil and Gas Royalty,” its granting clause stated “sell, assign and agree to deliver . . . one-half (Yz) of the royalty in Oil and Gas produced upon the . . . land . . and no reference was made to oil, gas and other minerals in and under the land. (Emphasis added.) 230 Kan. at 707, 712-713.
Despite the risk of a responsive assertion of immateriality, I proffer to plaintiff s counsel and the majority a line of inquiry. Bonus and rental payments occur only if and when an oil and gas lease is executed. Citing Kansas case authority, you say the grant of a perpetual bare royalty interest fails because of violation of the rule against perpetuities. If that be so, would not Fritz Mettscher’s testamentary grant to Martha of bonus and rentals fail for that same reason? As I read the majority opinion, its principal reasoning is that Marie and Ida’s purported interest in the Northwest Quarter is a bare royalty interest because bonus and rentals are set apart to Martha. If the rule against perpetuities defeats the grant to Martha of bonus and rentals, as your case authority and reasoning logically must require, do you not lose the primary basis for your conclusion that Marie and Ida received only a bare royalty interest? If the interest Marie and Ida received was not simply a bare royalty interest, is it not correct that the principle that the rule against perpetuities invalidates a grant of a bare royalty interest is not controlling in this case?
Since the opinions in this appeal are to be published, I wish to add some observations.
In cases such as this, it is appropriate to bear in mind three rather basic matters. Ordinarily it is a lessee who engages in exploration, development and production, although the mineral interest owner may personally undertake exploration, development and production at his own cost. In general, bonus is the consideration paid by a lessee for the lessor’s execution of an oil and gas lease, a license to explore, develop and produce, and pursuant to which production, if achieved, is shared on an agreed basis with the lessor’s share free of production costs. Such lessor’s share is usually referred to as royalty. 8 Williams and Meyers, Oil and Gas Law, pp. 65, 656 (1982); In re Estate of Sellens, 7 Kan. App. 2d at 51. In general, delay rental is a sum of money payable to the lessor by a lessee for the privilege of deferring the commencement of drilling operations or the com*164mencement of production during the primary term of the lease. 8 Williams and Meyers, Oil and Gas Law, p. 175 (1982).
Because I question the usage in the majority opinion of Magnusson v. Colorado Oil & Gas Corp., 183 Kan. 568, 575, 331 P.2d 577 (1958), and Shaffer v. Kansas Farmers Union Royalty Co., 146 Kan. 84, 91-92, 69 P.2d 4 (1937), as authority for the proposition for which they are cited, I leave it to the reader to evaluate the precedential accuracy and value of the citations appearing in the opinions being filed in this case.
Left for consideration on another day in some similar case is the proposition found in Singer Company v. Makad, Inc., 213 Kan. 725, 729, 518 P.2d 493 (1974), where it is said:
“[T]he recent trend among legal authorities is to relax the harsh and inflexible application of the [rule against perpetuities] and . . . courts are now disposed to follow one of several tenable theories which will avoid remoreless application of the rule and give effect to the intention of the parties. . . .
“[0]ur own cases reflect the modern tendency to temper the rule where its rigid application would do violence to the disposition of property.”
See also Cosgrove v. Young, 230 Kan. at 721-725 (dissent).
In his briefs and arguments presented to the trial court and on appeal, plaintiff has cited an unpublished opinion of this court as precedent. This is plain violation of Supreme Court Rule 7.04, 232 Kan. cxvi, that cannot be condoned. Is published rebuke the only available penalty? Perhaps so.
I would reverse.