Shaffer v. Kansas Farmers Union Royalty Co.

• Decision Date: 12 June 1937
• Docket Number: 33326.
• Citation: 146 Kan. 84,69 P.2d 4
• Parties: SHAFFER v. KANSAS FARMERS UNION ROYALTY CO. et al. [*]
• Court: Kansas Supreme Court

69 P.2d 4

146 Kan. 84

SHAFFER v. KANSAS FARMERS UNION ROYALTY CO. et al. ^[*]

No. 33326.

Supreme Court of Kansas

June 12, 1937

Syllabus by the Court.

A mineral deed could not be set aside on ground that company which issued stock in consideration of deed had not complied with Securities Act at time of transaction, where action to set deed aside was not brought within three years and hence was barred by statute (Laws 1929, c. 140; Gen. St.1935 17-1240).

Statute avoiding mining instruments not recorded within 90 days after execution, if not listed for taxation, applies whenever mineral in land is owned separately from other portion of land (Gen.St.1935, 79-420).

A mineral deed whereby landowner conveyed an undivided one-half interest to oil, gas, and other minerals in land, with right of egress and ingress, subject to existing oil and gas lease and which deed contained covenants of seisin and warranty and which specifically referred to instrument as a "grant of mineral and royalty rights," was a conveyance of part of oil and gas and other minerals in land within statute avoiding instruments not recorded within 90 days after execution if not listed for taxation (Gen St.1935, 79-420).

Petroleum and natural gas are "minerals" and, as long as they remain in the ground, are a part of the realty and belong to the owner of the land. An "oil and gas lease" basically authorizes the lessee or grantee named therein to go on land and explore and produce oil or gas, and under such instrument lessee has exclusive right to produce oil and gas from the premises for time named in the lease, and to that extent may be said to have an interest in the oil or gas in or under the ground, but the actual title thereto does not pass from the landowner to the lessee until it is brought to the surface and separated from the land. Generally the purpose of a "mineral deed" is to convey to the grantee the oil or gas in or under the land or some fraction thereof without regard to when or by whom it may be produced and brought to the surface.

That a mineral deed conveyed a fractional portion of minerals in land rather than all of them did not prevent the deed from being an instrument within statute avoiding instruments not recorded within 90 days after execution if not listed for taxation (Gen.St.1935, 79-420).

Statute avoiding instruments conveying mineral rights which instruments are not recorded within 90 days after execution, if not listed for taxation, is valid (Gen.St. 1935, 79-420).

The word "void" in statute providing that, when instruments conveying mineral rights are not recorded within 90 days after execution, they shall become void if not listed for taxation, is used in its primary sense of "nullity" (Gen.St.1935, 79-420).

1. A "mineral deed" is examined and held to be a conveyance of minerals in place and to be the character of an instrument which should be recorded within ninety days after its execution and listed for taxation, as required by G.S.1935, 79-420.

2. The fact that the mineral deed conveyed a fractional portion of the minerals in the land rather than all of them does not prevent it from being such an instrument as comes within the purview of the statute.

3. The statute is not invalid for any of the reasons urged against it. The word "void" in the proviso of the statute is used in its primary sense of nullity.

Appeal from District Court, Russell County; Herman Long, Judge.

Action by John W. Shaffer against the Kansas Farmers Union Royalty Company and another. From a judgment for defendant, plaintiff appeals.

Reversed, with directions.

ALLEN, J., dissenting.

Oscar Ostrum and Frances K. Seeley, both of Russell (J. E. Driscoll, of Russell, of counsel), for appellant John W. Shaffer.

C. W. Burch, B. I. Litowich, LaRue Royce, L. E. Clevenger, E. S. Hampton, R. E. Haggart, all of Salina, and S. H. King, of Blackwell, Okl., for appellees.

HARVEY Justice.

This was an action to quiet title. Defendants prevailed, and plaintiff has appealed.

More specifically plaintiff sought to set aside a "mineral deed" executed by plaintiff to defendants on land owned by him, on the grounds: (1) That the conveyance was not recorded within ninety days, or listed for taxation as required by G.S.1935, 79-420; (2) that it was without any legal or valid consideration; (3) that the purported consideration consisted of a share of stock which defendants were not at the time authorized to issue; and (4) that plaintiff was induced to execute the instrument by certain alleged false and fraudulent representations. Plaintiff tendered into court the stock issued to him in exchange for the mineral deed and offered to reassign the same. The mineral deed in question, which was signed by plaintiff and duly acknowledged, reads as follows:

"Know All Men by These Presents, That John W. Shaffer, and Martha Catharine Shaffer his wife of Bunker Hill, Russell County, State of Kans., for and in consideration of the sum of One Dollar, cash in hand paid by The Kansas Farmers Union Royalty Company and Flag Oil Company, hereinafter called Grantees and other good and valuable considerations the receipt of which is hereby acknowledged, have granted, sold, conveyed, assigned and delivered, and by these presents do grant, sell, convey, assign and deliver unto said Grantees an undivided one half interest, in the proportion of three fourths (3/4) and one fourth (1/4) interest therein respectively to the said Grantees, in and to the oil, gas and other minerals in and under, and that may be produced from" (certain described land), "together with the right of ingress and egress at all times for the purpose of mining, drilling and exploring said lands for oil, gas and other minerals and removing the same therefrom.

"Said land being now under an oil and gas lease executed in favor of H. C. Schumacher, Bunker Hill, Kansas, it is understood and agreed that this sale is made subject to the terms of said lease, and covers and includes one half of all of the oil royalty, and gas rental or royalty due and to be paid under the terms of said lease insofar as it covers the lands above described.

"It is understood and agreed that 1/2 of the money, or other bonus, which is paid for any future oil and gas lease or leases, which may be placed upon the above described land and 1/2 of the money rentals which may be paid to extend the terms within which a well may be commenced under the terms of said lease, or leases, shall be paid to and be the property of the grantees.

"To have and to hold the above described property, together with all and singular the rights and appurtenances thereto in anywise belonging unto the said Grantees herein, their respective successors and assigns, for a period of fifty years and as long thereafter as oil and gas may be produced therefrom; and we do hereby bind ourselves and our heirs, executors and administrators to warrant and forever defend all and singular the said property unto the said Grantees herein, their respective successors and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof.

"It is hereby further expressly agreed that the Grantees accept this conveyance subject to any mortgage loan now existing against the above described land or any renewal thereof on the same, or on new, modified or qualified terms and conditions; and that this grant of mineral and royalty rights shall at all times be subject to, inferior and subordinate to any future mortgage loan which may be applied for and placed on the land by the grantor herein, and the same shall have the same force, effect, validity and priority as if executed, delivered and recorded prior to the date of execution, delivery and recording of this mineral grant."

It is not necessary to detail the pleadings, since the case was tried on an agreed statement of facts, which we summarize as follows: The Kansas Farmers Union Royalty Company hereinafter called the Royalty Company, is a corporation duly organized October 16, 1929, under the laws of the state of Kansas. It is a landowners' co-operative mineral resources pooling organization. Its original stockholders were landowners who transferred to it undivided interests or what is sometimes referred to as "head rights" in mineral resources in consideration for the issuance of one share of stock in the company for each undivided interest in mineral resources in, under, and produced from each unit of land consisting of 160 acres. Stock cannot be acquired from the company in any manner other than by the transfer of such undivided interest or head rights in mineral resources in consideration for the issuance of the stock. The company obtained from the bank commissioner a permit under the Kansas Speculative Securities Act (Laws 1929, c. 140) to sell its stock in the manner above outlined, November 13, 1929, which permit is still in good standing. The company was organized through the activities of one Aldrich Blake and his associates. The sale of its shares in exchange for mineral rights was presented to landowners in various counties of the state by paid agents. Such agents were authorized and directed to state and represent to landowners and farmers that 75 percent. of the mineral interests conveyed to the Royalty Company would be held by it exclusively for profits and dividends to stockholders, and that the other 25 percent. would be conveyed to Aldrich Blake, or his nominee, to defray the expense of organization of the pool. The stipulation details how Blake obtained the money to finance the organization of the company by transactions at Oklahoma City with the Flag Oil Company, a corporation organized under the laws of Oklahoma and authorized to transact business in Kansas...