Cosgrove v. Young

• Citation: 230 Kan. 705,642 P.2d 75
• Decision Date: 27 February 1982
• Docket Number: No. 53311,53311
• Parties: Thomas F. COSGROVE and Mary C. Van Slyck, Appellees and Cross Appellants, v. Louise B. YOUNG, Donald P. Young, Jr., and Frederic R. Young, Appellants.
• Court: Kansas Supreme Court

Page 75

642 P.2d 75

230 Kan. 705

Thomas F. COSGROVE and Mary C. Van Slyck, Appellees and Cross Appellants, v. Louise B. YOUNG, Donald P. Young, Jr., and Frederic R Young, Appellants.

No. 53311.

Supreme Court of Kansas.

Feb. 27, 1982.

Syllabus by the Court

1. 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.

2. "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. It does not include a perpetual interest in and to the oil and gas in place. It is not uncommon to find "royalty" shortly defined as "a share" in production "paid." It is personal property.

3. In determining the type of interest conveyed, the court is 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.

4. An instrument of conveyance is examined and held to: (1) Convey only a royalty interest; and (2) be in violation of the rule against perpetuities.

5. Adverse possession applies only to real property. One cannot obtain a royalty interest by adverse possession.

6. Equitable estoppel is the effect of the voluntary conduct of a person whereby he is precluded, both at law and in equity, from asserting rights against another person relying on such conduct. A party asserting equitable estoppel must show that another party, by its acts, representations, admissions, or silence when it had a duty to speak, induced it to believe certain facts existed. It must also show it rightfully relied and acted upon such belief and would now be prejudiced if the other party were permitted to deny the existence of such facts.

7. The doctrine of laches is an equitable device designed to bar stale claims, and courts of equity will regard long passage of time in asserting claims with disfavor, apart from any particular statute of limitations.

B. G. Larson, of Williams, Larson, Voss, Strobel & Estes, Dodge City, argued the cause, and George Voss, Dodge City, was on the brief for appellants.

Gene H. Sharp, of Vance, Hobble, Neubauer, Nordling, Sharp & McQueen, P. A., Liberal, argued the cause and was on the brief for appellees and cross appellants.

McFARLAND, Justice:

Plaintiffs Thomas F. Cosgrove and Mary C. Van Slyck brought this action against defendants Louise B. Young, Donald P. Young, Jr., and Frederic R. Young: (1) To declare that a certain instrument conveying a royalty interest in gas and oil production was void for violation of the rule against perpetuities; and (2) to quiet plaintiffs' title to said property. On stipulated facts, the trial court held the instrument was a nullity but permitted defendants to continue to receive royalties from one 1950 unitized off-premises gas well. There were three wells on the subject tract in which defendants were barred from participation. The parties appeal and cross appeal from those portions of the judgment adverse to their respective interests.

It is appropriate at this point to summarize the issues and place them in a logical sequence. The first question is whether the instrument before us conveyed a royalty interest or a mineral interest. If it is determined that a royalty interest was conveyed, then we are asked to determine whether a subsequent unitization agreement modified the original instrument into a conveyance of a mineral interest. If we conclude no such modification occurred, then we are asked to determine whether the conveyance violates the rule against perpetuities. If the conveyance is void, we must then consider the propriety of the trial court's judgment permitting defendants to continue to receive royalties from the one well by application of equitable principles and through adverse possession.

We turn now to the first issue which is whether the instrument conveyed a royalty interest or a mineral interest.

Plaintiffs argue that the instrument merely conveyed a royalty interest.

Defendants contend that the instrument created a right to minerals in place rather than a royalty interest.

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. Froelich v. United Royalty Co., 178 Kan. 503, 290 P.2d 93 (1955).

It should be borne in mind that plaintiffs are the successors in interest to Mr. and Mrs. Akers, grantors under the instrument, while defendants are the successors in interest to Stewart, the grantee.

The instrument involved herein provides as follows:

"CONTRACT ON GAS AND OIL ROYALTY

"THIS CONTRACT made and entered into this 11th day of January, 1918, by and between U. S. Akers and Nellie G. Akers, his wife, of Prowers County, in the State of Colorado, parties of the first part and A. G. Stewart, of Seward County, in the State of Kansas, as party of the second part,

"WITNESSETH: That said parties of the first part, in consideration of the sum of $50.00, the receipt of which is hereby acknowledged, do by these presents sell, assign and agree to deliver unto said party of the second part, his heirs and assigns, one-half (1/2) the royalty in Oil and Gas produced upon the following described land to-wit: The East Half of Section twenty-two (22), in Township thirty-three (33), Range thirty-four (34), in Seward County, Kansas, containing 320 acres, more or less, according to the Government survey thereof; and that this contract conveys to the second party, said royalty, whether paid in cash by the company now holding the oil and gas lease on said premises, as provided in such lease, or of any royalties to become due and owing by reason of any future oil or gas leases executed and delivered by the said first parties or their assigns; and that this contract further binds said first parties, their heirs or assigns, to deliver to the second party one-half of all royalties to become due and owing to said first parties, their heirs or assigns by reason of any production of oil or gas produced upon said premises.

"The said first parties hereby bind themselves, their heirs and assigns, unto said second party, to promptly deliver to said second party his one-half of said royalties immediately upon receipt of said royalty by the said first parties, in the event said royalties are paid to said first parties, and the present lessee, and the lessees of any future leases upon said premises are hereby authorized and directed to pay direct to said second party, his one-half of any and all royalties becoming due first parties by virtue of any oil or gas lease.

"Said first parties hereby waive any and all right to the said one-half of said royalty herein conveyed, and hereby firmly bind themselves, their heirs, executors, trustees and assigns, by these presents.

"IN WITNESS WHEREOF the said parties of the first part have hereunto set their hands this 16th day of January, 1918.

/s/ U. S. Akers

/s/ Nellie G. Akers" In holding that the instrument herein is a conveyance of royalty interests only and not a conveyance of minerals in place, the trial court cited as controlling the case of Lathrop v. Eyestone, 170 Kan. 419, 227 P.2d 136 (1951).

Lathrop was a quiet title action in which the court was required to interpret three instruments. In so doing, the court set out several well-established principles:

"As we have frequently stated the term 'royalty' is often rather loosely and inaccurately used by men in the petroleum industry, those dealing in oil and gas holdings and at times by attorneys. Some persons refer to oil and gas in place as royalty. Others refer to royalty as the landowner's share in production. We have, therefore, repeatedly held the true nature and character of the instrument is not to be determined by the name or label attached thereto but by its intent as reflected by the terms, the contents thereof. A few of such cases are Serena v. Rubin, 146 Kan. 603, 72 P.2d 995; Fry v. Dewees, 151 Kan. 488, 99 P.2d 844; Rutland Savings Bank v. Steele, 155 Kan. 667, 127 P.2d 471; Dennett v. Meredith, 168 Kan. 58, 64, 211 P.2d 117. See, also, annotation in 4 A.L.R.2d 492, 496.

"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. (Richards v. Shearer, 145 Kan. 88, 64 P.2d 56; Rathbun v. Williams, 154 Kan. 601, 121 P.2d 243; Hickey v. Dirks, 156 Kan. 326, 327, 133 P.2d 107.) On the other hand '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. It does not include a perpetual interest in and to the oil and gas in place. (Bellport v. Harrison, 123 Kan. 310, 255 Pac. 52; Burden v. Gypsy Oil Co., 141 Kan. 147, 40 P.2d 463; Rutland Savings Bank v. Steele, supra; Rathbun v. Williams, supra.) It is not uncommon to find 'royalty' shortly defined as 'a share' in production 'paid.' (Anno. 4 A.L.R.2d 492, 497.) It is personal property. (Hickey v. Dirks, supra, and cases therein cited.) The lessee's interest in the oil produced, commonly seven-eighths or whatever the lease provides, is called the working interest. (Robinson v. Jones, 119 Kan. 609, 240 Pac. 957; Davis v. Hurst, 150 Kan. 130, 90 Pac.2d 1100.)

In the Bellport case, supra, it was held:

'The ordinary meaning of the word 'royalty' in an existing oil and gas lease cannot be enlarged by proof of usage and custom so as to include a conveyance of oil and gas in place in the land and the perpetual right to go upon the...