Froelich v. United Royalty Co.

• Decision Date: 12 November 1955
• Docket Number: 39841,Nos. 39840,s. 39840
• Citation: 178 Kan. 503,290 P.2d 93
• Parties: Christina FROELICH, Appellee, v. UNITED ROYALTY COMPANY, an express trust, and M. H. Watts, S. M. Brown and Ruth Stewart, as trustees thereof, Appellants. Frank FROELICH, Appellee, v. UNITED ROYALTY COMPANY, an express trust, and M. H. Watts, S. M. Brown and Ruth Stewart, as trustees thereof, Appellants.
• Court: Kansas Supreme Court

Page 93

290 P.2d 93

178 Kan. 503

Christina FROELICH, Appellee, v. UNITED ROYALTY COMPANY, an express trust, and M. H. Watts,

S. M. Brown and Ruth Stewart, as trustees thereof,

Appellants.

Frank FROELICH, Appellee, v. UNITED ROYALTY COMPANY, an express trust, and M. H. Watts,

S. M. Brown and Ruth Stewart, as trustees thereof,

Appellants.

Nos. 39840, 39841.

Supreme Court of Kansas.

Nov. 12, 1955.

Rehearing Granted Feb. 2, 1956.

Syllabus by the Court.

1. Under the stipulated facts and the record in this case, it is held: The trial court erred in determining (1) the meaning and result of affixing a federal internal revenue stamp to a recorded instrument; (2) that the recorded instrument by its terms did not impart notice to plaintiffs; and (3) that a mere royalty was created and not an interest in minerals in place and, as a result, it further erred in quieting title in plaintiffs and in failing to quiet title in defendants.

2. The rule against perpetuities does not apply in a case such as that set out in the preceding paragraph because such an interest in the minerals in place vests immediately.

Kirke W. Dale, Arkansas City, Donald Hickman, Arkansas City, and Marvin E. Thompson, George W. Holland, and Alan Kent Shearer, Russell, and G. C. Spillers, and G. C. Spillers, Jr., Tulsa, Oklahoma, on the brief, for appellants.

F. F. Wasinger, Hays, Delmas L. Haney, Hays, on the brief, for appellees.

ROBB, Justice.

Each of these appeals is from a decree of the trial court quieting title of appellee in and to certain land in Ellis county. The cases were consolidated for review in this court and they will be treated throughout this opinion as one case.

Christina Froelich's land is the north half of the northwest quarter, and Frank Froelich's land is the north half of the northeast quarter, all located in section 34, range 16 west, in Ellis county, and will hereinafter be referred to as 'the land.'

In order to present the situation clearly, we will turn immediately to the stipulated facts, which were substantially as follows:

The United Royalty Company, an Oklahoma express trust, has M. H. Watts, S. M. Brown and Ruth Stewart as presently qualified and acting trustees. The United Royalty Company will be referred to as 'United' in this opinion.

On August 11, 1922, pursuant to Oklahoma statutes, J. F. Pochel, Olen Burnham, and H. L. Landon, both as subscribers and trustees, executed the declaration of trust which established United for the purpose of uniting or pooling the undivided one half of the oil and gas and mineral rights of the fee owners of 50,000 acres of several oil bearing states in exchange for 2,000,000 units in the pool. The original term of the trust was twenty-one years and was later extended for an additional twenty-one year period from August 11, 1943. The pool of acreage was fully obtained by United in accordance with the agreement.

George H. Butler, on October 10, 1924, was the owner of the land and he and his wife and United executed a contract and royalty pooling agreement, hereinafter called 'agreement' and on the same date the Butlers executed and delivered a royalty conveyance to United. The royalty conveyance was recorded in Ellis county on October 11, 1924, but the agreement was not recorded in Ellis county until March 15, 1952.

In return for the above documents, George H. Butler and his wife received a certificate for 4,480 units in United's mineral right pooling organization. These units were later transferred by the Butlers on July 30, 1925; 1,494 units went to C. C. Stanley, 1,493 to Victor H. Martin, and 1,493 to G. O. Kimmel. The Butlers received $67.57 and Butlers' assignees received $772.23 from United on these units. United's block of acreage had five producing wells in Arkansas, thirty-three producing wells in other parts of Kansas than Ellis county, sixteen producing wells in Oklahoma, and one producing well in Texas.

At the time of the agreement there was an oil lease on the land dated December 20, 1923, to Mississippi Valley Oil Company, which was released on December 5, 1927. There were other leases between May 26, 1931, and June 15, 1943.

George H. Butler died May 26, 1931, and Frank Froelich, Sr., acquired the north half of the northwest quarter from Butler's heirs by a special warranty deed dated June 16, 1934. Frank Froelich, Sr., died testate leaving the north half of the northwest quarter to Christina Froelich, who leased it to O. E. Bradley on June 15, 1943. There is and has been production on this land since July 9, 1950.

On March 31, 1948, Frank Froelich obtained title by warranty deed from George H. Butler, Jr., and his wife, lone, to the north half of the northeast quarter. This land was leased for oil and gas several times between 1927 and 1948. On September 17, 1948, a lease was made to Verner R. Schoup and production started November 12, 1949.

At the time title was vested in them neither of the appellees had any notice of United's interest except as disclosed by records in Ellis county. Appellees filed actions in the district court, issues were finally joined, stipulation of facts was made, the cases were submitted to the court and the court in its judgments of December 15, 1954, quieted appellees' title as against any interest of United. Motions for new trials were filed and overruled. These appeals, which, as previously stated, have been consolidated for review, followed.

There were nine specifications of error, the substance of which was as follows:

The court erred (1) in quieting title in appellees and in not quieting title in appellants; (2) in rendering the judgments which were not warranted by the agreed stipulation of facts; (3) in determining that the intention of the Butlers and United was to create a mere royalty as distinguished from a mineral interest in or to minerals in place; (4) in determining the affixing of an internal revenue documentary stamp failed to show the parties intended to transfer real property and not personal property; (5) in determining that the specific provision that the grantors were to retain the exclusive leasing privilege for oil and gas, and receive the bonuses and rentals evidenced an intent to create a royalty interest only, as distinguished from minerals in place; (6) in determining that the recorded royalty conveyance did not impart notice to all of United's interest in minerals in place and in overruling United's motion for a new trial.

All matters pertinent to this appeal were set out and covered in appellants' motions for new trials in the district court.

The three questions presented here are:

1. Was the interest acquired by United to the minerals in place or to a share of oil and gas produced?

2. Did the transaction between Butlers and United violate the rule against perpetuities?

3. Did the recording of the royalty conveyance impart notice to appellees?

The royalty conveyance, which was properly acknowledged and recorded in Ellis county, contained the following in its text:

'* * * party of the first part [consideration] does hereby bargain, sell * * * to second party * * * an undivided one half * * * interest in and to the oil and gas royalty, which is or may hereafter be reserved by said party of the first part * * * exclusive of the oil and gas bonus and oil and gas rental money in and under the following described property [description].

'To have and to hold, all the afore-granted estate, property, and easements together with all and singular the rights, privileges and heriditaments thereunder belonging or appertaining unto the said United Royalty Company, an express trust of Newkirk, Oklahoma, its heirs, successors, for a term of twenty-one years and as long thereafter as oil and gas or either of them is produced in paying quantities on any of the acreages in the block belonging to the United Royalty Company.

'It is understood and agreed that said first party shall be entitled to have and receive all oil and gas bonuses and rentals from said land other than royalty herein above described. That in the leasing of said land for oil and gas that the said second party shall not be a necessary party to the leasing of said land and the said second party hereby authorizes the said party of the first part * * * to lease said land for oil and gas purposes.

* * *

* * *

'It is understood and agreed that this royalty is not transferable but shall be held in trust by the United Royalty Company, an express trust of Newkirk, Oklahoma. * * *' (Our emphasis.)

Attached to the above was a fifty cent internal revenue documentary stamp.

The trial court found this was merely a transfer of one half of the landowner's interest in and to oil and gas that might be produced from the land, which had become denominated as an oil and gas royalty. It is true that the instrument is headed 'Royalty Conveyance' but we are not governed by the name or title affixed to a document. This court has many times said that we will look to the language of a contract contained in its four corners and from there find the intention of the parties as to what kind of a contract they intended to make. Rutland Savings Bank of Rutland, Vt. v. Steele, 155 Kan. 667, 127 P.2d 471; Heckard v. Park, 164 Kan. 216, 188 P.2d 926, 175 A.L.R. 605; Dennett v....