Carlock v. Krug

• Decision Date: 09 March 1940
• Docket Number: 34587.
• Citation: 151 Kan. 407,99 P.2d 858
• Parties: CARLOCK v. KRUG et al.
• Court: Kansas Supreme Court

99 P.2d 858

151 Kan. 407

CARLOCK v. KRUG et al.

No. 34587.

Supreme Court of Kansas

March 9, 1940

Rehearing Denied April 12, 1940.

Syllabus by the Court.

When a tract of land upon which an oil and gas lease has been given is subsequently divided into different ownerships, the owners of separate parcels or mineral interests are only entitled to the royalties accruing from production on particular tract to which their ownership attaches, in absence of specific provisions or agreements to the contrary, since term "royalty" refers, not to oil in place, but to the share in the oil and gas produced and paid as compensation for right to drill and produce.

A provision in an oil and gas lease that, if lessor owns a less interest in land than entire and undivided fee simple estate therein, then royalties and rentals shall be paid lessor only in proportion which his interest bears to the whole undivided fee, does not constitute an "entirety clause" requiring leased land to be developed and operated as a unit and all royalty accruing from production anywhere thereon to be treated as an entirety and apportioned among owners of separate parcels or mineral interests, if original tract is subsequently divided in ownership.

An owner of undivided interest in oil and gas under west half of described quarter section was not entitled to interest in oil being produced from a well located on the east half under a lease which covered the entire quarter section.

1. When a tract of land upon which an oil and gas lease has been given is subsequently divided into different ownerships, the owners of the separate parcels or mineral interests are only entitled--in the absence of specific provisions or agreements to the contrary--to the royalties accruing from production on the particular tract to which their ownership attaches.

2. A provision in an oil and gas lease that "if the lessor owns a less interest in the above described land than the entire and undivided fee simple estate therein, then the royalties and rentals herein provided shall be paid the lessor only in the proportion which his interest bears to the whole and undivided fee" does not constitute an "entirety clause" requiring the leased land to be developed and operated as a unit and all royalty accruing from production anywhere thereon to be treated as an entirety and apportioned among owners of separate parcels or mineral interests, in the event the original tract is subsequently divided in ownership.

3. The record is examined in an action by the owner of an undivided mineral interest in the west half of a quarter section of land who seeks to share in the royalty accruing from oil production on the east half of the quarter section under a lease covering the entire quarter, and it is held that demurrers to the petition were properly sustained.

Appeal from District Court, Russell County; C. A. Spencer, Judge.

Action by C. L. Carlock against Fred D. Krug and others to recover an interest in production from an oil well and for an accounting wherein defendants filed demurrers. From a judgment for defendants sustaining their demurrers, plaintiff appeals.

Joe T Rogers, of Wichita, for appellant.

A. M Ebright, Hayes McCoy, and R. O. Mason, all of Bartlesville Okl., for appellees.

Chas G. Yankey, Harvey C. Osborne, John G. Sears, Jr., Verne M. Laing, and G. K. Purves, Jr., all of Wichita, for appellee Charles G. Yankey.

HOCH Justice.

The plaintiff asserts ownership of an interest in production from an oil well and asks an accounting. Defendants are the landowners, the lessee who brought in the well and the company which has been buying the oil. All defendants filed demurrers to the petition. From the order sustaining all demurrers the plaintiff appeals.

The principal question presented is whether the plaintiff, who claims under a mineral deed conveying an undivided interest in the oil and gas under the west half of the described quarter section, is entitled to an interest in the oil being produced from a well located on the east half under a lease which covers the entire quarter section.

The petition alleged that the defendants, Fred D. Krug and Amelia Krug, owners of the described quarter section of land in Russell county, executed an oil and gas lease covering the entire quarter on February 12, 1929, which was duly recorded on March 13, 1929; that through mesne assignments, duly recorded, the defendant Charles D. Yankey became the holder of the lease on December 1, 1938; that on July 31, 1929 (more than four months after the recording of the lease), the Krugs, owners of the land, executed and delivered to C. A. Johnson a mineral deed, conveying for a term of ten years, and so long thereafter as oil or gas might be produced from said land, an undivided 1/32 interest in all of the oil and gas "In and under the west half" of the described quarter section and that in the deed the Krugs "reserved all rentals or bonus money that might be paid on any present or future lease on said lands;" that the mineral deed provided that "It is understood and agreed that there is no oil or gas lease covering said land at the present time" and that the grantees and their successors in interest should have an undivided one-fourth interest in the one-eighth royalty of oil and gas under any future lease and that the grantors "reserve the sole and absolute right to execute oil and gas leases covering the lands without the necessity or right of the grantee joining in such lease," the intent being simply to convey to the grantee a 1/32 interest "carved out of the royalty interest reserved by the grantors under any future lease"; and that this mineral deed was recorded on August 1, 1929; that by mesne assignments the plaintiff became the holder of the mineral deed on October 28, 1936. Copies of the lease and mineral deed were attached and made a part of the petition.

The petition further alleged that the defendant Yankey drilled a well on the east half of the quarter section--"located at approximately the center of the northwest quarter of the southeast quarter" of the quarter section--about January 4, 1939, secured a commercial producer and that the defendant, the Cities Service Oil Corporation, has purchased the oil produced therefrom. The petition further alleged that the covenants of the lease are indivisible and that: "The lessors (meaning lessees) or those claiming under them have complied with the conditions and covenants in said lease with reference to exploration and development and cannot be compelled to further develop said premises for the benefit of the plaintiff herein" and that the Krugs "are now asserting that the interest of the plaintiff will expire on the 31st of July, 1939, and the other defendants have refused to recognize the rights of plaintiff and refused to pay him his part of the royalty."

As heretofore noted, the lease covering the quarter section was recorded several months prior to the mineral deed which conveyed an undivided 1/32 interest in the oil and gas under the west half of the quarter. Appellant does not contend that the mineral deed under which he claims conveyed any interest in the land on which the well is located, but contends that the well, located on the east half, has produced oil and gas "from the west half" of the quarter in which he has "a one-sixty fourth undivided interest." His argument is that since the lease covers the entire quarter the owners of the well and of the land on which the well is located are required to account to him for his interest in the oil under the west half. He claims not only under a general theory of law but under a specific provision of the lease to which reference will later be made.

Some preliminary matters must first be noted. The petition, the mineral deed and the assignments present some inconsistencies, difficult, if not impossible, to harmonize but which require little attention in view of the conclusions hereinafter stated on the main issues. For instance, the mineral deed from the Krugs to Johnson, given July 31, 1929, first conveyed "an undivided one-thirty-second interest in and to all of the oil and gas in and under" the west half of the quarter, while a later recital of the instrument was: "It is understood" that "by this instrument" the grantee "shall have an undivided one-fourth interest in the one-eighth royalty of oil and gas under any future lease" on "said land." Ownership of a 1/32 interest in the oil in place is not equivalent to a 1/32 interest in the oil produced under a lease. 3 Summers on Oil and Gas, Per.Ed. § 606. Owners of minerals in place are only entitled to their proportionate share of the royalties due from any lessee. However, construing the instrument most favorably to appellant, it conveyed to Johnson, the original grantee, a 1/32 interest in the oil produced from the land under any subsequent lease. It must be noted, however, that "the land" referred to in the deed cannot refer to any land except the west half, since no reference is made to any interest in the east half. We...