Ingram v. Ingram
| Decision Date | 06 April 1974 |
| Docket Number | No. 47220,47220 |
| Citation | 214 Kan. 415,521 P.2d 254 |
| Parties | , 14 UCC Rep.Serv. 1033 Nathalie INGRAN, Plaintiff-Appellee, v. Billy L. INGRAM, Defendant, and The Home State Bank, Russell, Kansas, Intervenor-Appellant. |
| Court | Kansas Supreme Court |
Syllabus by the Court
1. An oil and gas lease is a hybrid property interest. For some purposes an oil and gas leasehold interest in considered to be personal property and for other purposes it is treated as real property.
2. A mortgage or assignment of an oil and gas leasehold interest for security purposes which is recorded in the real estate mortgage records of the county wherein the property is situated fixes a lien upon the oil and gas leasehold effective from the filing of the same and imparts notice to all persons of the contents thereof of under the provisions of K.S.A. 58-2222.
3. A mortgage or assignment of an oil and gas leasehold interest for security purposes is to be treated as a real estate mortgage and such instruments are not subject to the provisions of the Uniform Commercial Code.
4. An assignment of an oil and gas leasehold interest given for security purposes but absolute on its face should be treated as an equitable mortgage and enforced as such in accordance with the actual agreement of the parties.
5. An unrecorded assignment of an oil and gas leasehold interest given for security purposes may be enforced against the debtor as well as his attaching creditor.
Michael S. Holland, of Holland ,& Holland, Russell, argued the case, and Herbert N. Holland, Russell, was with him on the brief for intervenor-appellant.
Mark Arthur, Jr., of Thompson, Holland & Arthur, Russell, argued the cause, and Marvin E. Thompson and Clifford R. Holland, Jr., Russell, were with him on the brief for appellee.
This case involves a dispute as to the priority of two liens asserted against an oil and gas leasehold interest. The essential facts in the case are not in dispute and are as follows: The plaintiff-appellee, Nathalie Ingram, is the former wife of the defendant, Billy L. Ingram. On October 8, 1968, plaintiff, Nathalie Ingram was granted a divorce. As a part of the decree Billy L. Ingram was ordered to pay alimony in the amount of $500 per month and child support in the amount of $100 per month. The property settlement agreement and the decree approving the same awarded to Billy L. Ingram an oil and gas lease free and clear of the claims of Nathalie Ingram. This lease covered a tract of land in Russell county and will be referred to in this opinion as the Solbach lease. On August 18, 1969, Billy L. Ingram, obtained a loan and executed a promissory note in the amount of $12,500 to the Home State Bank of Russell, the intervenor-appellant. In order to secure the loan Billy L. Ingram assigned to the Home State Bank his undivided 3/4ths working interest in the Solbach lease. At that time Billy L. Ingram and the Home State Bank orally agreed that the Solbach lease was assigned to secure and mortgage all indebtedness incurred or to be incurred by Billy L. Ingram by future advances made to him by the bank and that the bank had no obligation to reassign the Solbach lease back to Mr. Ingram until all of his indebtdness to the bank was paid in full. This assignment was filed as an instrument affecting real estate for record in the office of the register of deeds of Russell county on August 29, 1969. The assignment of the oil and gas lease, although absolute in form, was stamped by the register of deeds to reflect the amount of the indebtedness which the assignment secured, $12,500. A mortgage registration fee calculated on the basis of a $12,500 loan was paid. On October 11, 1969, the Home State Bank loaned Billy L. Ingram additional moneys and the $12,500 note was renewed and incorporated in a new note in the amount of $36,400. It was orally agreed that the $36,400 indebtedness was to be secured by the Solbach lease and by other oil and gas leases assigned to the bank. Nathalie Ingram had no actual knowledge of these financial transactions between Mr. Ingram and the bank.
The controversy arose in this case when Billy L. Ingram defaulted on his alimony and child support payments. On January 23, 1973, Nathalie Ingram levied execution on the Solbach lease in order to collect delinquent alimony and child support payments in the amount of $6,529.50 with interest. It is undisputed that all of the delinquencies in alimony and child support payments arose subsequent to the execution of the second promissory note of Billy L. Ingram on October 11, 1969. The attempt of Nathalie Ingram to levy execution and sell the interest of Billy L. Ingram in the Solbach lease prompted the Home State Bank to take action to protect its security interest in the Solbach lease. On March 14, 1973, the Home State Bank filed motions in the divorce case to intervene and to enjoin the sale of the Solbach lease. The bank sought to have its mortgage lien declared superior and prior to any lien the plaintiff, Nathalie Ingram, might have on the Solbach lease as a judgment creditor. It was Nathalie Ingram's position that assignments of oil and gas leasehold interests for security purposes are within the compass of the Uniform Commercial Code (K.S.A. 84-1-101 through 84-10-102); that the assignment of the Solbach lease made no express provision to secure future advances after the original loan of August 18, 1969, in the amount of $12,500 was made; hence the oral agreement that the lease assignment was to secure future advances was null and void. It was the position of the Home State Bank, as intervenor, that the assignment of the Solbach oil and gas lease for security purposes is excluded from the application of the Uniform Commercial Code by the provisions of K.S.A. 84-9-104(j); and that its assignment of the Solbach lease constitutes a first and prior mortgage or security interest entitling the bank to all proceeds derived from the sale of the Solbach lease necessary to pay the entire indebtedness of Billy L. Ingram to the bank.
The district court held that the Uniform Commercial Code applies to the assignment of an oil and gas leasehold interest given as security for future advances. The trial court reasoned that although K.S.A. 84-9-104(j) excludes from the application of the code instruments creating or transferring an interest in or lien on real estate, such provision does not exclude oil and gas leasehold interests. The trial court further held that because of the provisions of the Uniform Commercial Code, the assignment of the Solbach lease secured only the original indebtedness of $12,500 and therefore the Home State Bank has priority only as to the unpaid balance of the indebtedness in the amount of $5,585.12. The trial court then found the bank had a prior lien on the Solbach lease only to the extent of $5,585.12, holding that the judgment execution lien of Nathalie Ingram was superior as to any amount in excess of that figure. The Home State Bank has appealed to this court from that judgment.
The primary issue to be determined in this case is whether or not the assignment of an oil and gas lease for security purposes is subject to the provisions of the Uniform Commercial Code. If the provisions of the code are applicable then it would follow that under the provisions of 84-9-204(5) the bank's security interest for future advances was not perfected since the assignment of the Solbach lease did not specifically provide for securing future advances as well as present advances. Furthermore under 84-9-301 a 'lien creditor' is fully protected from unperfected liens. On the other hand if the provisions of the Uniform Commercial Code are not applicable to the assignment of an oil and gas leasehold interest for security purposes then traditional principles of law pertaining to real estate mortgages should be applied.
The issue presented is one of first impression in this state since the Uniform Commercial Code became effective in Kansas on January 1, 1966. In order to determine the issue presented it is necessary for us to construe K.S.A. 84-9-104(j) which provides as follows:
'(j) except to the extent that provision is made for fixtures in section 84-9-313, to the creation or transfer of an interest in or lien on real estate, including a lease or rents thereunder; . . .'
Does the assignment of an oil and gas leasehold interest for security purposes fall within this exclusion? Is an oil and gas lease an interest in or lien on real estate within the meaning of the section? The determination of these issues is not without difficulty. We have stated in many cases that an oil and gas lease does not create any present vested estate in the nature of title to the land which it covers or to the oil and gas in place. It merely conveys a license to enter upon the land and explore for such minerals and if they are discovered to produce and sever them. We have further declared that an oil and gas leasehold interest is personal property-an incorporeal hereditament-a profit a prendre. (Connell v. Kanwa Oil, Inc., 161 Kan. 649, 170 P.2d 631, citing many Kansas cases to that effect.) The Kansas courts, like those of other jurisdictions, have found some difficulty in fitting the interest of an oil and gas lessee into the traditional common-law classifications relating to ordinary surface interests in land. It seems to be agreed that an oil and gas leasehold interest is a property right, but there still remains wide disagreement among the various jurisdictions of this country as to whether it is real property or personal property. A number of our opinions state categorically in general language that an oil and gas lease is personal property. (Burden v. Gypsy Oil Co., 141 Kan. 147, 40 P.2d 463; Connell v. Kanwa Oil, Inc., supra; Wilson v. Holm, 164 Kan. 229, 188 P.2d 899.) In Western Natural Gas Co. v. McDonald, 202...
To continue reading
Request your trial
-
Farrar v. Mobil Oil Corp.
...property under the statutes pertaining to recordation of instruments conveying real estate. See K.S.A. 58-2221(b); Ingram v. Ingram, 214 Kan. 415, 420-21, 521 P.2d 254 (1974). In any event, an oil and gas lease conveys a license to explore, or a “profit a State, ex rel. Fatzer v. Board of R......
-
N. Natural Gas Co. v. L.D. Drilling, Inc.
...counter that a production lease is a hybrid interest under Kansas law, justifying an action for nuisance. See Ingram v. Ingram , 214 Kan. 415, 420, 521 P.2d 254 (1974) (an oil and gas lease is a hybrid property interest which, depending on the context, may be treated as personal or as real ......
-
Resolution Trust Corp. v. Binford
...Transactions Under the Uniform Commercial Code Sec. 16C.03 at p. 16C-15 (Benders U.C.C. Serv. (1992)) (explaining Ingram v. Ingram, 214 Kan. 415, 521 P.2d 254 (1974) (holding leaseholds not encompassed by Kansas version of Article 9)). The hybrid nature of leaseholds necessitates that they ......
-
Wallace B. Roderick Irrevocable Living Trust v. Xto Energy, Inc.
...Stat. Ann. § 60-511(1) (setting a five year statute of limitations for a breach of written contract action). 101. Ingram v. Ingram, 214 Kan. 415, 422, 521 P.2d 254, 258 (1974) ("[A]n oil and gas lease is a hybrid property interest."); In re Estate of Sellers, 7 Kan. App. 2d 48, 51, 637 P.2d......
-
CHAPTER 5 CONSTRUCTIVE NOTICE--A MULTI-STATE PERSPECTIVE
...the same as a purchaser under the statute. Paris Grocer Co. v. Burks, 101 Tex. 106, 105 S.W. 174 (1907); contra, see Ingram v. Ingram, 214 Kan. 415, 521 P.2d 254 (1974) (judgment creditors and execution purchasers are not covered by the statute). The treatment of creditors by the different ......
-
CHAPTER 2 CONSTRUCTIVE NOTICE: A MULTI-STATE PERSPECTIVE
...the same as a purchaser under the statute. Paris Grocer Co. v. Burks, 101 Tex. 106, 105 S.W. 174 (1907); contra, see Ingram v. Ingram, 214 Kan. 415, 521 P.2d 254 (1974) (judgment creditors and execution purchasers are not covered by the statute). The treatment of creditors by the different ......
-
Mortgage Registration Taxes a Practitioner's Guide to the Mortgage Registration Fee Statutes
...Kan. 334, 92 P.2d 63 (1939). See also Berger v. Bierschbach, 201 Kan. 740, 743-744, 443 P.2d 186 (1968). [FN21]. E.g., Ingram v. Ingram, 214 Kan. 415, 422, 521 P.2d 254 (1974); National Bank of Tulsa v. Warren, 177 Kan. 281, 279 P.2d 262 (1955); 20 Op. Att'y Gen. 53, No. 86-131 (1986); 16 O......
-
CHAPTER 8 KEEPING OIL AND GAS LEASES ALIVE A REVIEW OF BOTH THE MINERAL LESSEE'S OBLIGATIONS AND POSSIBLE WAYS TO KEEP LEASES IN EFFECT
...land therein described but merely a license to explore, and is personal property — an incorporeal hereditament — a profit a prendre." [34] 521 P.2d 254, 48 O.&G.R. 168 (Kan. 1974). [35] 521 P.2d at 258. [36] Shaffer v. Kansas Farmers Union Royalty Co., 69 P.2d 4 (1937). [37] "The lessor's r......