Brubaker v. Branine, s. 56958

• Decision Date: 21 June 1985
• Docket Number: Nos. 56958,57308,s. 56958
• Citation: 701 P.2d 929,237 Kan. 488
• Parties: Leo D. BRUBAKER and Ruth J. Brubaker, his wife, Appellees, v. Ivan G. BRANINE and Etta G. Branine, his wife, and Larry Branine, Appellants.
• Court: Kansas Supreme Court

Page 929

701 P.2d 929

237 Kan. 488

Leo D. BRUBAKER and Ruth J. Brubaker, his wife, Appellees, v. Ivan G. BRANINE and Etta G. Branine, his wife, and Larry Branine, Appellants.

Nos. 56958, 57308.

Supreme Court of Kansas.

June 21, 1985.

Syllabus by the Court

1. In the absence of an "entirety clause" in an oil and gas lease, the general rule of nonapportionment is applied in this state.

2. When an "entirety clause" is contained in the lease, the lessor's power to alienate any part of his estate in the land covered by the lease, except in accordance with the provisions of the lease, is restricted. Thus, when the lessor sells a portion of the land subject to an oil and gas lease containing an entirety clause, the purchaser of that tract is entitled to participate in royalties derived from oil produced on any part of the land subject to the lease in proportion to his share of ownership.

3. In fixing the contractual rights between the purchaser of a portion of the leased premises and the lessor-seller who owns the remainder of the leased premises, the record title of the property involved showing the oil and gas lease must be construed together with the deed conveying the property which was subject to the lease. A five-year statute of limitations applies.

4. When an oil and gas lease contains a "change of ownership" clause, the lessee must receive notice of any change of ownership before he will be contractually bound to pay royalties to the new owner. Both the lessor-seller and the purchaser bear an equal responsibility to notify the lessee in writing of the change in ownership.

Martin W. Bauer of Martin, Pringle, Oliver, Triplett & Wallace, of Wichita, argued the cause, and Eric S. Strickler, of the same firm, was with him on the briefs for appellants.

David J. Bideau, of Bideau Law Offices, Chanute, argued the cause and was on the brief for appellees.

SCHROEDER, Chief Justice:

The issues presented in this case stem from consolidated appeals taken by Ivan, Etta and Larry Branine (defendants-appellants) from a decision of the trial court determining liability on a motion for summary judgment and a subsequent judgment granting Leo D. and Ruth J. Brubaker (plaintiffs-appellees) a proportionate share of the landowners' royalties under an oil and gas lease containing an "entirety clause." The facts are not in dispute.

On September 20, 1976, the defendants, Ivan and Etta Branine, granted an oil and gas lease to Wayne D. Cox which covered the west one-half ( 1/2) and the southeast quarter ( 1/4) of Section 5, Township 25, Range 11, in Greenwood County, Kansas. (At that time, Ivan and Etta Branine owned 100% of the mineral rights under the above-described land.) Then, in September 1977, they sold an undivided one-half ( 1/2) interest in their mineral rights to their son, Larry Branine. Under the terms of the lease, the lessors reserved a one-eighth ( 1/8th) landowners' royalty which was to be paid by the lessee. The lease also contained an "entirety clause" providing:

"If the leased premises are now or hereafter owned in severalty or in separate tracts, the premises, nevertheless, may be developed and operated as an entirety, and the royalties shall be paid to each separate owner in the proportion that the acreage owned by him bears to the entire leased area."

The lease further provided that:

"[N]o change in the ownership of the land or assignment of rentals or royalties shall be binding on the lessee until after the lessee has been furnished with a written transfer or assignment or a true copy thereof...."

On October 27, 1976, the defendants conveyed a portion of the land covered by the September 20 lease to the plaintiffs, Leo and Ruth Brubaker. The parties stipulated that the plaintiffs acquired 65% of the total surface acreage subject to the lease. Neither the contract for sale nor the deed contained a reservation of mineral rights or an express modification of the "entirety clause" in the oil and gas lease. The conveyance to the Brubakers, however, was subject to the oil and gas lease, duly recorded, covering the premises here in question.

The lessee was never notified of the change of ownership. The defendants alleged that the plaintiffs failed to give notice to the lessee because of an oral agreement made at the time of sale that the entirety clause would be inapplicable and that the parties would receive nonapportioned royalties from wells physically located on their land. Because the contract and deed were unambiguous, the trial court refused to consider evidence of the alleged oral agreement. The propriety of the court's action on this point was not raised as an issue on appeal. While it is incidentally mentioned in the defendants' brief on appeal, it is not argued and this court will consider this issue to have been abandoned. Puritan-Bennett Corp. v. Richter, 235 Kan. 251, 255, 679 P.2d 206 (1984).

The oil and gas lease herein involved was valid for a primary term of three years and so long thereafter as oil and gas was produced. Production was begun in March 1978 through a well drilled on the portion of the property owned by the Branines. The lessee paid the Branines 100% of the one-eighth ( 1/8th) landowners' royalty from 1978 until this lawsuit was filed in 1983. The defendants accepted all such payments.

On February 22, 1983, plaintiffs filed this lawsuit against Ivan and Etta Branine to recover a proportionate share of all landowners' royalties paid to the defendants from and after 1978. Larry Branine was not joined until May 16, 1983. Plaintiffs also requested an accounting of all oil and gas produced from the entire leasehold estate. Plaintiffs sued the lessee, all working interest owners, and all overriding royalty owners. All claims have been resolved except those against the defendants and the lessee. By the nature of its summary judgment ruling, the trial court did not have to reach the claims against the lessee.

The procedural aspects of this case in the trial court are cumbersome, and need not be stated. They are sufficient to present the issues herein determined.

On March 12, 1984, the trial court heard plaintiffs' motion for summary judgment on the issue of liability, which it granted. The journal entry dated April 25, 1984, reads in part:

"That by virtue of the real estate contract, joint tenancy warranty deed and provisions of the oil and gas lease covering said premises, Plaintiffs are entitled to receive a proportionate share of the oil and gas royalties produced and saved from the entire leased area since February, 1978 as a matter of law.

"[T]he applicable statute of limitations for this cause of action is five (5) years pursuant to K.S.A. 60-511."

At an April 18, 1984, hearing upon defendants' motion to alter or amend the prior judgment, the trial court, after admitting confusion in how to properly characterize the cause of action, ruled that liability was based upon equitable principles for an accounting and that liability was not limited by the doctrines of statute of limitations or laches. The foundation for the court's analysis was that "[t]here are no legal obligations or agreements between the Branines and the Brubakers with respect to the royalty payments."

Defendants appealed from the trial court's summary judgment on the issue of liability and the statute of limitations, and from the trial court's order denying the motion to alter or amend that judgment.

Plaintiffs then filed a second motion for summary judgment for the dollar amount due under the trial court's initial judgment. The accounting was presented on June 18, 1984. The defendants and the plaintiffs agreed that a total of $115,365.52 had been paid to the defendants as landowners' royalties from February 1978 through February 1984. Plaintiffs and defendants also agreed that plaintiffs owned 65% of the total acreage covered by the oil and gas lease. Accordingly, the trial court granted summary judgment and awarded damages totalling $74,987.58. Defendants admitted that these amounts were mathematically correct...