Rucker v. Delay

• Decision Date: 19 October 2012
• Docket Number: No. 101,766.,101,766.
• Citation: 295 Kan. 826,289 P.3d 1166
• Parties: Donald R. RUCKER and Barbara L. Rucker, Appellees, v. Earl R. DELAY and Leah Griffith DeLay, Henry Choquette and Ruth Mary Choquette, Leigh G. DeLay, Edith L. DeLay, John E. DeLay, Elizabeth Bennett, Harriet DeLay, Marian Allender, Eloise Hayes, and Wendy Anderson, Appellants.
• Court: Kansas Supreme Court

295 Kan. 826

289 P.3d 1166

Donald R. RUCKER and Barbara L. Rucker, Appellees,

v.Earl R. DELAY and Leah Griffith DeLay, Henry Choquette and Ruth Mary Choquette, Leigh G. DeLay, Edith L. DeLay, John E. DeLay, Elizabeth Bennett, Harriet DeLay, Marian Allender, Eloise Hayes, and Wendy Anderson, Appellants.

No. 101,766.

Supreme Court of Kansas.

Oct. 19, 2012.

Richard N. Raleigh, of Medicine Lodge, argued the cause and was on the brief for appellants.

Alan C. Goering, of Goering and Slinkard, of Medicine Lodge, argued the cause and was on the brief for appellees.

David E. Pierce, of Topeka, was on the brief for amicus curiae David E. Pierce.

The opinion of the court was delivered by BILES

, J.:

This is a quiet title action challenging a claimed interest to oil and gas rights reserved in 1924 when the landowners sold the surface and mineral estate, but kept for themselves and their heirs what was described as a portion of the landowners' one-eighth interest in the oil, gas, or other minerals that might later be developed. The district court and Court of Appeals held that this reservation was a royalty interest and invalidated it under the rule against perpetuities. We hold that the royalty interest is not void under the rule against perpetuities because it was reserved in the grantors and reverse.

Factual and Procedural Background

The parties stipulated to the following facts. In 1924, Earl R. DeLay and his wife Leah Griffith DeLay executed a general warranty deed transferring title to certain lands in Barber County, Kansas, to Lurena Keener. The warranty deed contained the following reservation:

“The grantor herein reserves 60% of the land owner's one-eighth interest to the oil, gas or other minerals that may hereafter be developed under any oil and gas lease made by the grantee or by his subsequent grantees.”

Earl ratified an oil and gas lease in 1946, and two of his successors ratified an oil and gas lease in 1966. No other leases have been executed or ratified, and no oil or gas has ever been produced on the land. Earl and Leah's successors in interest have paid taxes on 6 mineral acres, as their interest is expressed in the Barber County Clerk's Severed Mineral Interest Book.

In 2008, the current property owners, Donald R. Rucker and Barbara L. Rucker, filed a quiet title action against Earl and other heirs of Earl and Leah DeLay (the DeLays). The Ruckers alleged the reservation in the deed was a royalty interest that violated the rule against perpetuities. The DeLays alleged the reservation created a mineral interest and the rule against perpetuities did not apply. In other words, the case presented two issues: (1) What interest was created by the language of the deed; and (2) Is that interest valid?

Based on the stipulated facts, the district court found:

“The language here attempts to create an interest which has no leasing rights (nonparticipating) with no reservation of a right to enter and produce. The one-eighth is a traditional leasehold royalty a portion of which is attempted to be reserved forever but which may not ever come to fruition (if land is never leased or developed).”

The district court held that the deed created a perpetual, nonparticipating, royalty interest that was subject to termination under Kansas caselaw. It held further that this royalty interest was void because it violated the rule against perpetuities. In so ruling, the district court added that the result was required by what it considered to be settled Kansas precedent, but it expressed concern that the result was inequitable and not what the parties to the 1924 transaction intended. It commented that “[o]ccasionally, the application of the law is not fair in a traditional sense.”

Based on its decision, the district court declined to rule on a pending issue regarding delay in recording the deed, but the appellate briefs explain that this issue is premised on the reserved interest being a mineral interest, rather than a royalty interest as the court found. See G.S.1935, 79–420 (“[W]hen such reserves or leases are not recorded within ninety [90] days after execution, they shall become void if not listed for taxation.”). The DeLays filed a timely notice of appeal to the Court of Appeals.

Like the district court, the Court of Appeals held that the deed created a royalty interest. It also reluctantly applied the rule against perpetuities to void the interest, citing its obligation to follow Kansas Supreme Court caselaw. But the panel observed: “Were we to write on a clean slate, our reasoning and result would be different.”

Rucker v. DeLay, 44 Kan.App.2d 268, 282, 235 P.3d 566 (2010)

. The DeLays petitioned for this court's review, which we granted. Jurisdiction arises under K.S.A. 20–3018(b) (review of Court of Appeals decision).

Analysis

The DeLays' threshold argument to the Court of Appeals was that the deed created a mineral interest, not a royalty interest, but the court disagreed. In their petition for review to this court, the DeLays specified that they sought review of: (1) “[T]he Court of Appeals determination that the reservation by the Appellant's predecessors in interest is violative of the rule against perpetuities and as a result the interest is quieted”; and (2) “whether production should continue to be the vesting event if the rule against perpetuities is to continue to be applied to such situations.” These issues relate only to the panel's holding that the rule against perpetuities voided the royalty interest. They do not challenge the holding that the reserved interest in this case was a royalty interest.

[1]

[2]

At oral argument, the DeLays stated that they had intended to continue arguing that the deed created a mineral interest and claimed the lower courts erred in finding a royalty interest. But that issue is beyond our reach at this stage. Under Kansas Supreme Court Rule 8.03(a)(5)(c) (2011 Kan. Ct. R. Annot. 70), this court will not consider any issues not presented in the petition for review or fairly included therein, absent application of a permissive exception for plain error. Moreover, under Supreme Court Rule 8.03(g)(1), a party must allege that an issue was decided erroneously by the Court of Appeals in order for the issue to be properly before the Supreme Court on petition for review. State v. Allen, 293 Kan. 793, Syl. ¶ 2, 268 P.3d 1198 (2012).

[3]

For these reasons, we hold that any argument regarding whether a royalty or mineral interest was created by the deed was not preserved for appeal. Therefore, in deciding the issue that was preserved, we will presume the Court of Appeals and district court correctly held that the deed created a royalty interest. Rucker, 44 Kan.App.2d at 278–79, 235 P.3d 566 (“the reserved interest is that of a royalty interest”).

[4]

Appellate courts “have de novo review of cases decided on the basis of documents and stipulated facts.” In re Trust D of Darby, 290 Kan. 785, 790, 234 P.3d 793 (2010)

. In this case, whether the DeLays' royalty interest is void under the rule against perpetuities is a question subject to de novo review.

[5]

[6]

At the outset, it is helpful to define the parameters for some relevant terms. A royalty interest refers to the right to share in the production of oil and gas at severance. In Kansas, a royalty interest is considered personal property. Royalty interests are often contrasted with mineral interests, which refer to oil and gas in place. In Kansas, mineral interests are real property. Kumberg v. Kumberg, 232 Kan. 692, Syl. ¶ 2, 659 P.2d 823 (1983).

[7]

[8]

Both mineral and royalty owners share in royalties derived from an oil and gas lease. The mineral-royalty distinction determines whether the interest owner has additional rights and benefits that this court calls the “ ‘indicia of mineral interests.’ ” See Drach v. Ely, 237 Kan. 654, 658, 703 P.2d 746 (1985). Kansas has long recognized that property interests are subject to the rule against perpetuities. Gore v. Beren, 254 Kan. 418, 429, 867 P.2d 330 (1994). In Gore, this court said:

“The rule against perpetuities springs from considerations of public policy. The underlying reason for and purpose of the rule is to avoid fettering real property with future interests dependent upon contingencies unduly remote which isolate the property and exclude it from commerce and development for long periods of time, thus working an indirect restraint upon alienation, which is regarding at common law as a public evil.” 254 Kan. 418, Syl. ¶ 9, 867 P.2d 330

.

The rule against perpetuities began as a creation of common law, but the 1992 legislature codified and somewhat modified it by adopting the Uniform Statutory Rule Against Perpetuities. K.S.A. 59–3401 et seq.

The statutory scheme supersedes the common-law rule. K.S.A. 59–3408. But the statutory rule only applies to nonvested property interests created on or after July 1992. See K.S.A. 59–3405(a); L. 1992, ch. 302, sec. 20. Therefore, the uniform rule from the statute is not applicable in this case because the DeLays' royalty interest was created by the 1924 deed. See Gore, 254 Kan. at 429, 867 P.2d 330 (holding uniform act did not apply to property interest created in 1962). Accordingly, we revert to the common law to decide this case.

[9]

[10]

[11]

[12]

The common-law rule against perpetuities “precludes the creation of any future interest in property which does not necessarily vest within twenty-one [21] years after a life or lives presently in being, plus the period of gestation, where gestation is, in fact, taking place.” Singer Company v. Makad, Inc., 213 Kan. 725, 728–29, 518 P.2d 493 (1973). A future interest is an ownership interest that does not currently entitle the owner to possession or enjoyment of the property because the right to possess is delayed until some future time. 3 Restatement (Third) of Property, Future Interests § 25.1 (2011). The rule against perpetuities applies if it is possible that the interest will not vest during the permitted time...