In re Barker

• Decision Date: 06 June 2014
• Docket Number: No. 110,309.,110,309.
• Citation: 50 Kan.App.2d 375,327 P.3d 1036
• Parties: In the Matter of the Protest of BARKER, Robert E. and R. Gay for the Year 2011 in Neosho County, Kansas.
• Court: Kansas Court of Appeals

50 Kan.App.2d 375

327 P.3d 1036

In the Matter of the Protest of BARKER, Robert E. and R. Gay for the Year 2011 in Neosho County, Kansas.

No. 110,309.

Court of Appeals of Kansas.

June 6, 2014.

Syllabus by the Court

1. Under the Kansas Judicial Review Act, K.S.A. 77–601 et seq., the burden of proving the invalidity of a decision by the Court of Tax Appeals rests on the party asserting invalidity.

2. In Kansas, an oil and gas lease conveys a license to explore or a profit a prendre. Like other easements, a profit a prendre (or profit) is an incorporeal hereditament or an intangible right in the land. Unlike an ordinary easement, a profit grants not only the right to go onto the land of another but also to take some product from the land.

3. An oil and gas lease conveys a license to enter upon the land owned by another to explore for such minerals and to produce and sever them if discovered. In Kansas, oil and gas leasehold interests constitute personal property except in specific instances covered by statute. For the purposes of valuation and taxation in Kansas, all oil and gas leases are personal property.

4. Easements and profits are both servitudes. In fact, a profit is simply an easement that grants a person the additional right to take from the land. Likewise, the rules governing creation, interpretation, transfer, and termination of easements and profits are generally the same in American law.

5. Although a servitude may be terminated by agreement of the parties, it also may be terminated by operation of law. Under the legal doctrine of merger, when the burdens and benefits of an easement or a profit are united through common ownership in either a single person or a group of persons, an easement or profit ceases to have any function. This is because, as a general rule, a landowner does not need a license or permission to use his or her own property, and the easement or profit terminates by operation of law. This doctrine of merger is applicable to oil and gas leases just as it is to other servitudes.

6. Joint tenancy requires four unities—interest, title, time, and possession.

7. Under the facts of this case, the taxpayers are joint tenants and constitute one person. Because the husband owns the whole and every part of the land, he does not need a license to enter his own property to explore, discover, or remove oil and gas. Thus, the oil and gas lease no longer served a purpose and was terminated by operation of law.Robert E. Barker and R. Gay Barker, appellants pro se.

Eric W. Barth, of Hinkle Law Firm LLC, of Wichita, for appellee.

Before BRUNS, P.J., PIERRON and STANDRIDGE, JJ.

BRUNS, P.J.

Robert E. and R. Gay Barker (Barkers) appeal from the decision of the Court of Tax Appeals (COTA) entering summary judgment against them and in favor of Neosho County (County) on the Barkers' 2011 tax protest appeal. Robert Barker leased an oil and gas interest on land owned by his parents in 1983, and his parents retained a 3/16th royalty interest from the oil and gas that Robert produced. When Robert's mother died in 2009, the land passed to the Barkers as joint tenants by a transfer on death deed. However, the County continued to impose separate taxes on the royalty interest and working interest. The Barkers protested the County's tax valuation for 2011, and COTA affirmed the County's decision, finding that the lease and royalty interests remained in existence because the lease was Robert Barker's individually while the royalty was the Barkers' as joint tenants.

The Barkers argue that COTA erred in holding that the doctrine of merger did not work to combine their interests in the property after Estelle Barker's death. We hold that the oil and gas lease executed in 1983 no longer served a purpose and was terminated by operation of law upon the death of Robert's mother in 2009. Because of this finding, we do not need to reach the merits of the Barkers' second issue. We, therefore, reverse COTA's decision and remand for entry of summary judgment in favor of the Barkers.

Facts

The relevant facts are undisputed. In 1983, Gordon and Estelle Barker granted an oil and gas lease to their son, Robert Barker, on a piece of land they owned in Neosho County. Gordon and Estelle Barker reserved a 3/16th royalty interest in the gross proceeds from the lease. Gordon Barker predeceased Estelle Barker, who passed away on January 6, 2009. At that time, the Barkers, as joint tenants, received Estelle Barker's ownership in the property at issue through a transfer on death deed.

In December 2011, Robert Barker paid the 2011 taxes on both the working interest and royalty interest under protest, raising two arguments: (1) that the value should have followed a decline rate established in a prior year, and (2) that there was, in fact, no royalty interest. As part of the documents in support of protest, the Barkers attached a 2010 royalty interest tax statement, which the County had mailed to Estelle Barker. The County Appraiser (Appraiser) held a hearing on April 4, 2012. According to the Appraiser's notes, the Appraiser and Robert Barker settled on the decline issue after their discussions. The Appraiser, however, did not “feel qualified to make the decision to remove the ‘royalty’ portion of [Robert Barker's] tax bill and felt that this needed to be a COTA decision since [the Appraiser] couldn't find any precedents allowing the valuation of a lease with only a ‘working’ interest value.”

The Barkers filed a protest appeal with COTA. Eventually, the Barkers filed a motion for summary judgment and a memorandum in support of their motion in which the Barkers argued that the interest Robert owned prior to Estelle's death merged with the interest the Barkers obtained upon her death and should be taxed as such. After the County filed its response and the Barkers filed a reply, the parties entered into a stipulation of facts in which they agreed on tax values if the property was classified as a 3/16th royalty interest and 13/16th working interest or a 100% working interest.

On June 17, 2013, COTA entered its order denying the Barkers' motion for summary judgment and entering judgment in favor of the County. Subsequently, the Barkers filed a petition for reconsideration, which COTA denied. Thereafter, the Barkers timely filed a petition for judicial review with this court.

Analysis

Issue Presented

On appeal, the Barkers contend that COTA erred by failing to apply the doctrine of merger in this action. Specifically, the Barkers contend that an oil and gas lease executed by Robert and his parents in 1983 was terminated in 2009 when the Barkers became the owners—as joint tenants—of the land that was burdened by the leasehold. We also note that COTA entered judgment as a matter of law on behalf of the County even though only the Barkers moved for summary judgment. Although we question this procedure, the Barkers have not raised the issue on appeal. Hence, we will not address it in this opinion.

Standard of Review

The Kansas Judicial Review Act (KJRA), K.S.A. 77–601 et seq., controls our review of COTA's decision. Under the KJRA, the burden of proving the invalidity of COTA's action rests on the party asserting invalidity. K.S.A.2013 Supp. 77–621(a)(1). Although judicial review is limited by the KJRA, COTA determined that the facts were undisputed and that the issue presented only a matter of law. Accordingly, our review of COTA's decision is unlimited. See K.S.A.2013 Supp. 77–621(c)(4); In re Tax Appeal of LaFarge Midwest, 293 Kan. 1039, 1043, 271 P.3d 732 (2012); In re Equalization Appeals of EOG Resources, Inc., 46 Kan.App.2d 821, 825, 265 P.3d 1207 (2011), rev. denied 296 Kan. 1130 (2013).

Nature of Oil and Gas Lease

In Kansas, “an oil and gas lease conveys a license to explore, or a “ ‘profit á prendre.’ ” ” Farrar v. Mobil Oil Corp., 43 Kan.App.2d 871, 883, 234 P.3d 19 (citing State, ex rel. Fatzer v. Board of Regents, 176 Kan. 179, 190, 269 P.2d 425 [1954] ), rev. denied 291 Kan. 910 (2010); see also Restatement (Third) of Property: Servitudes § 1.2 (1998). Like other easements, a profit a prendre—often simply referred to as a “profit”—is an incorporeal hereditament or an intangible right in the land. See Utica Nat'l Bank & Trust Co. v. Marney, 233 Kan. 432, 433–34, 661 P.2d 1246 (1983). While easements generally allow one to go onto land owned by another person, a profit allows one not only to go onto the land of another but also to take some product from the land. See Burden v. Gypsy Oil Co., 141 Kan. 147, 150, 40 P.2d 463 (1935) (“A profit a prendre is the right to take soil, gravel, minerals and the like from the lands of another....”).

Specifically, an oil and gas lease “conveys a license to enter upon the land [owned by another] and explore for such minerals and if they are discovered to produce and sever them.” Ingram v. Ingram, 214 Kan. 415, 418, 521 P.2d 254 (1974). In Kansas, oil and gas leasehold “interests constitute personal property except in those specific instances when that classification is changed by statute for a specific purpose.” Utica Nat'l Bank & Trust Co., 233 Kan. at 435, 661 P.2d 1246. “For the purposes of valuation and taxation in Kansas, all oil and gas leases and wells are considered personal property. K.S.A. 79–329.” Helmerich & Payne, Inc. v. Board of Seward County Comm'rs, 34 Kan.App.2d 53, 55, 115 P.3d 149, rev. denied 280 Kan. 982 (2005); see In re Equalization Appeals of EOG Resources, Inc., 46 Kan.App.2d at 825, 265 P.3d 1207.

The Doctrine of Merger

The Kansas cases cited by COTA and the parties regarding merger are not particularly helpful. While they stand for the general proposition that where a greater and lesser estate coincide, the lesser estate merges into the greater estate, the cases deal with real estate rather than easements or profits. Under the facts of this case, we find the Restatement of Property—which both the Kansas Supreme Court and this court have turned to for guidance on...