Kumberg v. Kumberg

• Decision Date: 23 January 1980
• Docket Number: No. 51227,51227
• Citation: 623 P.2d 510,5 Kan.App.2d 640
• Parties: Harold KUMBERG, Bob Kumberg, and Frank Kumberg, Appellees, v. Carl KUMBERG, Appellant.
• Court: Kansas Court of Appeals

Page 510

623 P.2d 510

5 Kan.App.2d 640

Harold KUMBERG, Bob Kumberg, and Frank Kumberg, Appellees, v. Carl KUMBERG, Appellant.

No. 51227.

Court of Appeals of Kansas.

Jan. 23, 1980.

Syllabus by the Court

1. An oil and gas royalty is the right to share in the production of oil and gas at severance; it is personal property, and does not include an interest in the oil and gas still in the ground.

2. Where provisions of the Uniform Principal and Income Act govern, they modify the common law rules and previous case law inconsistent therewith. In the absence of specific directions from a testator, the act controls the distribution of royalties among those entitled to income from land and to those who own the fee or a remainder interest.

3. In a proceeding to construe a will, it is held : the trial court did not err in holding (a) oil and gas royalties were included in the term "net profits" as used in the will, and (b) distribution of the royalties should be under the applicable provisions of the Uniform Principal and Income Act, K.S.A. 58-901 et seq.

Christopher Randall of Turner & Boisseau, Chartered, Wichita, for appellant.

W. Luke Chapin of Chapin, Penny & Goering, Medicine Lodge, for appellees.

Before FOTH, C. J., MEYER, J., and MILLER, District Judge Retired, sitting by designation.

MILLER, District Judge Retired:

The defendant has appealed from a judgment in favor of plaintiffs requiring defendant to share with plaintiffs oil and gas royalties realized on land the defendant inherited from his brother Herman.

The facts are not disputed. Herman died testate on August 16, 1970, leaving four brothers and a sister. By the terms of his will he left the lands involved herein to his brother Carl, the defendant, subject to the following provision:

"I direct my brother, CARL, to divide the net profits from my share of such land among the survivors of my brothers and sisters, including my brother CARL."

The order of final settlement of Herman's estate, dated August 11, 1972, decreed Carl to be the owner in fee simple of the land and directed that Carl, his heirs and assigns, divide the net profits derived from the real estate among the survivors of the four brothers and sister until the death of all of them.

In 1974 a dispute arose among the brothers. Carl had possession of the land and was paying the other brothers such amount as he deemed proper. An action was filed by plaintiffs against Carl and the sister, Beatrice, seeking an accounting and the appointment of a trustee. A journal entry of judgment was entered on July 1, 1974, in which the district court made the following finding:

"That One-third crop rent is the customary rental arrangement in the area in question; that the term 'net profits' as used in the Will of Herman Kumberg, deceased, must have referred to 'net rentals' .... that a one-third crop rental arrangement is interpreted by the Court to include receipts for wheat pasture, Government payments, feed ground, and any other income from the premises, including oil and gas lease bonuses and rentals...."

The court retained jurisdiction for such further orders as might be necessary or desirable. This judgment was not appealed.

The action giving rise to this appeal was filed by the plaintiffs on March 15, 1979. Although originally broader in scope, the case was finally submitted to the trial court on the single issue of whether or not oil and gas royalties and landowners' overriding royalties are "net profits" within the meaning of the term as used in Herman's will. The trial court ruled on June 19, 1979, that oil and gas royalties were included within the "net profits" provision of Herman's will and were to be distributed under the applicable provisions of the Uniform Principal and Income Act, K.S.A. 58-901 et seq. There is now a gas-producing well on the land.

Defendant, in reliance upon State, ex rel., v. Board of Regents, 176 Kan. 179, 269 P.2d 425 (1954), contends that royalties paid pursuant to an oil and gas lease constitute money derived from the sale of lands and is not income.

In Board of Regents the court was faced with the problem of ascertaining what the intent of Congress was in 1862 when it made a grant of "agricultural" lands to support an agricultural college in this state, and provided that the entire proceeds of the sale of such lands should be held in a "perpetual fund" to be forever "undiminished," and the interest applied to the support and maintenance of the college. Congress specifically provided that no part of the money in the perpetual fund could be used to erect or repair buildings. The court reasoned that cash bonuses and delay rentals, since they took nothing from the land, could be used to erect dormitories, but that since oil and gas severed from the land represents something of value taken from the land, which diminishes its value, Congress must have intended that royalty money was money received from the sale of land and could not be used to erect a student dormitory.

The decision did not purport by its terms to overrule existing case law (Burden v. Gypsy Oil Co., 141 Kan. 147, 40 P.2d 463 (1935); Bellport v. Harrison, 123 Kan. 310, 255 P. 52 (1927)), defining the nature of a royalty interest. Nor did it mention the Uniform Principal and Income Act then in effect in this state. Significantly, also, the case...