Jason Oil Co. v. Littler

• Decision Date: 16 August 2019
• Docket Number: No. 118,387,118,387
• Citation: 446 P.3d 1058
• Parties: JASON OIL COMPANY, LLC, Appellee, v. Frank E. LITTLER, et al., Defendants, (Debra Baldwin Burkhart, Susan Baldwin Manes, and James Baldwin), Appellants, and (F&E Littler, LLC, Janice Stull, Craig Stull, Jerilyn Ann Stull, and Michael Stull), Appellees.
• Court: Kansas Supreme Court

446 P.3d 1058

JASON OIL COMPANY, LLC, Appellee,

v.Frank E. LITTLER, et al., Defendants,(Debra Baldwin Burkhart, Susan Baldwin Manes, and James Baldwin), Appellants,and(F&E Littler, LLC, Janice Stull, Craig Stull, Jerilyn Ann Stull, and Michael Stull), Appellees.

No. 118,387

Supreme Court of Kansas.

Opinion filed August 16, 2019.

John L. Richeson, of Anderson & Byrd, LLP, of Ottawa, argued the cause, and Jeffrey A. Wilson, of the same firm, was with him on the briefs for appellants.

Kenneth L. Cole, of Woelk & Cole, of Russell, argued the cause and was on the brief for appellee Jason Oil Company, LLC.

Robert E. Bauer, of Bauer, Pike, Bauer & Wary, LLC, of Great Bend, argued the cause, and Kate M. Wary and Greg L. Bauer, of the same firm, were with him on the brief for appellees F&E Littler, LLC, Janice Stull, Craig Stull, Jerilyn Ann Stull, and Michael Stull.

David E. Pierce, of Topeka, was on the brief for amicus curiae Eastern Kansas Oil & Gas Association.

Joseph A. Schremmer and Charles C. Steincamp, of Depew Gillen Rathbun & McInteer, LC, of Wichita, Tyson Eisenhauer, of Johnston Eisenhauer Eisenhauer & Lynch, LLC, of Pratt, and Tyler K. Turner, of Jeter Law Firm, LLP, of Hays, were on the brief for amicus curiae Kansas Independent Oil & Gas Association.

Will B. Wohlford, Roger L. Theis, and Jonathan A. Schlatter, of Morris, Laing, Evans, Brock & Kennedy, Chartered, of Wichita, were on the brief for amicus curiae Wichita Association of Petroleum Landmen.

The opinion of the court was delivered by Johnson, J.:

This is a quiet title action involving the mineral interests in two tracts of real estate that were conveyed by deeds in which the grantor excepted the mineral interests for a "period of 20 years or as long thereafter" as minerals may be produced. The grantor's successors in interest (Grantor's heirs) claim that the future interests in the minerals that the deeds purported to convey to the grantees—that is, ownership of the minerals when grantor's excepted term interest ended—violated the common-law rule against perpetuities (the Rule), thereby voiding those conveyances ab initio and preventing them from subsequently devolving to the grantees' successors in interest (Grantees' heirs). Consequently, Grantor's heirs now claim full ownership of the mineral interest in both tracts.

The district court relied on the intent of the parties to the original deeds to find that the Grantees' heirs obtained ownership of the minerals when 20 years expired without production on the property. We affirm the district court's result, but on different grounds. We determine that the common-law rule against perpetuities, being a rule founded upon public policy, should not be applicable to the circumstances presented here.

FACTUAL AND PROCEDURAL OVERVIEW

The parties do not dispute the facts. On December 30, 1967, Frank E. Littler (Grantor) executed two deeds conveying tracts of real estate situated in the same section, to-wit: Section 20, Township 16 South, Range 19, West of the 6th P.M., Rush County, Kansas. He conveyed the East Half of the section (East Tract) to Franklin G. Littler and Elaine Littler (Littler Grantee). He conveyed the Northwest Quarter of the section (Northwest Tract) to Ruby I. Myers and George E. Myers (Myers Grantee). The Littler Grantee and the Myers Grantee will be collectively referred to as Grantees. Both the deed transferring the East Tract and the deed transferring the Northwest Tract contained the following language:

"EXCEPT AND SUBJECT TO: Grantor saves and excepts all oil, gas and other minerals in and under or that may be produced from said land for a period of 20 years or as long thereafter as oil and/or gas and/or other minerals may be produced therefrom and thereunder." (the reservation).

On December 28, 1973, in Rush County Probate Case No. 3802, a Journal Entry of Final Settlement distributed specified percentages of the residue of Grantor's estate, which would encompass any excepted interest in the above-described real estate, to children and grandchildren. Some of the Grantor's grandchildren and great-grandchildren who succeeded to the residuary interests under Grantor's will are the Grantor's heirs claiming the invalidity of Grantor's conveyance of the future interest in minerals to the Littler Grantee and the Myers Grantee.

From the expiration of the 20-year term of years, December 30, 1987, to the date the district court filed its memorandum decision granting summary judgment to the Grantees' heirs, May 31, 2017, there was no drilling operation conducted on either the East Tract or the Northwest Tract, and no oil or gas or other minerals was ever produced from either tract.

In 2016, Jason Oil Company, LLC (Jason Oil) filed its amended petition to quiet title to both tracts, claiming to hold valid and subsisting oil and gas leases. With respect to the Northwest Tract, the petition alleged that Michael L. Stull, Jerilyn Ann Stull, and Craig A. Stull—successors to the interests of the Myers Grantee—own all of the oil, gas, and other minerals in and under the property. With respect to the East Tract, the petition alleged that F&E Littler, LLC—presumably the successor to the interests of the Littler Grantee—owns all of the oil, gas, and other minerals in and under the property.

Debra Baldwin Burkhart, Susan Baldwin Manes, and James Baldwin and others (Grantor's heirs) answered, claiming an interest in the mineral rights through Frank E. Littler's will, as his grandchildren and great-grandchildren. In a motion for judgment on the pleadings, the Grantor's heirs argued that after the deeds were executed and delivered, Grantor was vested with a fee simple determinable in the mineral rights and the Littler Grantee and Myers Grantee held springing executory interests in the minerals which were subject to and invalidated by the Rule.

Michael Stull, Jerilyn Ann Stull, Craig Stull, Janice Stull, and F&E Littler, LLC, as Grantees' heirs, also answered. They admitted all of the allegations in Jason Oil's amended petition and cross-claimed against all other defendants, alleging that Michael Stull, Jerilyn Ann Stull, and Craig Stull owned the Northwest Tract minerals as successors to the Myers Grantee and that F&E Littler, LLC owned the East Tract minerals as successors to the Littler Grantee. Alternatively, Grantees' heirs asserted that if the court determined the future interest in minerals conveyed by Grantor violated the Rule, the interests should be reformed under the Uniform Statutory Rule Against Perpetuities (USRAP) specifically under K.S.A. 59-3405(b) to conform with the intent of the parties and avoid violating the Rule.

The Grantor's heirs filed a motion for summary judgment seeking a ruling that the future interests in minerals created in the deeds are springing executory interests that are void under the Rule; that USRAP, including K.S.A. 59-3405(b), is void for violating Article II, § 16 of the Kansas Constitution because it was passed in a bill containing more than one subject; and that ownership of the minerals lying in and under both Tracts passed with the residue of Frank E. Littler's estate as stated in the Journal Entry of Final Settlement of the probate case.

The district court granted the Grantees' heirs' contested motion for bifurcation, ruling that the court would not determine whether USRAP violated Article II, § 16 of the Kansas Constitution until it determined the threshold issue of whether the mineral interests violated the Rule.

The Grantees' heirs and Jason Oil responded in opposition to the Grantor's heirs' motion for summary judgment. The Grantees' heirs filed their own summary judgment motion.

On May 31, 2017, the district court denied the Grantor's heirs' motion and granted summary judgment to the Grantees' heirs. The district court noted that "[t]here is no serious dispute that Frank E. Littler [Grantor] conveyed all of his interest in the subject properties to the respective grantees, subject only to the grantor's express reservation, excepting and saving a term mineral interest." The court found that when construing deeds, all other rules are subordinate to the intention of the grantor and Frank E. Littler's intention "could not be clearer than stated." With respect to classifying the mineral interests, the court found:

"Frank E. Littler granted less than the entire interest in the subject real estate and created a defeasible estate by reservation. The defeasible term mineral interest in each deed is a future estate reserved to the grantor and a reversion. A reversion remaining in the grantor is not subject to the [Rule]."

The district court also considered the public policy underlying the Rule and found that Grantor's reservation had not restricted alienation of the surface and mineral estates of the real property in question.

The Grantors' heirs filed a motion to alter or amend the judgment requesting that the district court change its analysis to focus on the future interest created in the grantees and hold the Rule applied to the grantees' interests. If the court continued to rule for the Grantees' heirs, the Grantor's heirs requested an order quieting title in the Grantees' heirs to ensure the judgment was a final appealable order. The district court granted the request to quiet title but denied the remainder of the motion to alter or amend. After the Journal Entry of Judgment Quieting Title was filed, the Grantor's heirs timely appealed to the Court of Appeals.

This court granted the Grantor's heirs' motion to transfer the appeal from the Court of Appeals and granted motions to file amicus curiae briefs on behalf of the Kansas Independent Oil & Gas Association (KIOGA), the Eastern Kansas Oil & Gas Association (EKOGA), and the Wichita Association of Petroleum Landmen (WAPL).

THE APPLICABILITY OF THE COMMON-LAW RULE AGAINST PERPETUITIES

We are asked to decide a question of first impression in this state that carries the potential of voiding innumerable transfers of mineral...