In re Tax Protest of Barker

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No. 110,309

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

In the Matter of the Protest of BARKER, ROBERT E. and R. GAY
for the Year 2011 in Neosho County, Kansas.


SYLLABUS BY THE COURT

1.

Under the Kansas Judicial Review Act, K.S.A. 77-601 et seq., the burden of
proving the invalidity of a decision by the Court of Tax Appeals rests on the party
asserting invalidity.

2.

In Kansas, an oil and gas lease conveys a license to explore or a profit a prendre.
Like other easements, a profit a prendre (or profit) is an incorporeal hereditament or an
intangible right in the land. Unlike an ordinary easement, a profit grants not only the right
to go onto the land of another but also to take some product from the land.

3.

An oil and gas lease conveys a license to enter upon the land owned by another to
explore for such minerals and to produce and sever them if discovered. In Kansas, oil and
gas leasehold interests constitute personal property except in specific instances covered
by statute. For the purposes of valuation and taxation in Kansas, all oil and gas leases are
personal property.


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4.

Easements and profits are both servitudes. In fact, a profit is simply an easement
that grants a person the additional right to take from the land. Likewise, the rules
governing creation, interpretation, transfer, and termination of easements and profits are
generally the same in American law.

5.

Although a servitude may be terminated by agreement of the parties, it also may
be terminated by operation of law. Under the legal doctrine of merger, when the burdens
and benefits of an easement or a profit are united through common ownership in either a
single person or a group of persons, an easement or profit ceases to have any function.
This is because, as a general rule, a landowner does not need a license or permission to
use his or her own property, and the easement or profit terminates by operation of law.
This doctrine of merger is applicable to oil and gas leases just as it is to other servitudes.

6.

Joint tenancy requires four unities—interest, title, time, and possession.

7.

Under the facts of this case, the taxpayers are joint tenants and constitute one
person. Because the husband owns the whole and every part of the land, he does not need
a license to enter his own property to explore, discover, or remove oil and gas. Thus, the
oil and gas lease no longer served a purpose and was terminated by operation of law.

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Appeal from the Court of Tax Appeals. Opinion filed June 6, 2014. Reversed and remanded with
directions.

Robert E. Barker and R. Gay Barker, appellants pro se.

Eric W. Barth, of Hinkle Law Firm LLC, of Wichita, for appellee.

Before BRUNS, P.J., PIERRON and STANDRIDGE, JJ.

BRUNS, P.J.: Robert E. and R. Gay Barker (Barkers) appeal from the decision of
the Court of Tax Appeals (COTA) entering summary judgment against them and in favor
of Neosho County (County) on the Barkers' 2011 tax protest appeal. Robert Barker leased
an oil and gas interest on land owned by his parents in 1983, and his parents retained a
3/16th royalty interest from the oil and gas that Robert produced. When Robert's mother
died in 2009, the land passed to the Barkers as joint tenants by a transfer on death deed.
However, the County continued to impose separate taxes on the royalty interest and
working interest. The Barkers protested the County's tax valuation for 2011, and COTA
affirmed the County's decision, finding that the lease and royalty interests remained in
existence because the lease was Robert Barker's individually while the royalty was the
Barkers' as joint tenants.

The Barkers argue that COTA erred in holding that the doctrine of merger did not
work to combine their interests in the property after Estelle Barker's death. We hold that
the oil and gas lease executed in 1983 no longer served a purpose and was terminated by
operation of law upon the death of Robert's mother in 2009. Because of this finding, we
do not need to reach the merits of the Barkers' second issue. We, therefore, reverse
COTA's decision and remand for entry of summary judgment in favor of the Barkers.



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FACTS

The relevant facts are undisputed. In 1983, Gordon and Estelle Barker granted an
oil and gas lease to their son, Robert Barker, on a piece of land they owned in Neosho
County. Gordon and Estelle Barker reserved a 3/16th royalty interest in the gross
proceeds from the lease. Gordon Barker predeceased Estelle Barker, who passed away on
January 6, 2009. At that time, the Barkers, as joint tenants, received Estelle Barker's
ownership in the property at issue through a transfer on death deed.

In December 2011, Robert Barker paid the 2011 taxes on both the working interest
and royalty interest under protest, raising two arguments: (1) that the value should have
followed a decline rate established in a prior year, and (2) that there was, in fact, no
royalty interest. As part of the documents in support of protest, the Barkers attached a
2010 royalty interest tax statement, which the County had mailed to Estelle Barker. The
County Appraiser (Appraiser) held a hearing on April 4, 2012. According to the
Appraiser's notes, the Appraiser and Robert Barker settled on the decline issue after their
discussions. The Appraiser, however, did not "feel qualified to make the decision to
remove the 'royalty' portion of [Robert Barker's] tax bill and felt that this needed to be a
COTA decision since [the Appraiser] couldn't find any precedents allowing the valuation
of a lease with only a 'working' interest value."

The Barkers filed a protest appeal with COTA. Eventually, the Barkers filed a
motion for summary judgment and a memorandum in support of their motion in which
the Barkers argued that the interest Robert owned prior to Estelle's death merged with the
interest the Barkers obtained upon her death and should be taxed as such. After the
County filed its response and the Barkers filed a reply, the parties entered into a
stipulation of facts in which they agreed on tax values if the property was classified as a
3/16th royalty interest and 13/16th working interest or a 100% working interest.

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On June 17, 2013, COTA entered its order denying the Barkers' motion for
summary judgment and entering judgment in favor of the County. Subsequently, the
Barkers filed a petition for reconsideration, which COTA denied. Thereafter, the Barkers
timely filed a petition for judicial review with this court.

ANALYSIS

Issue Presented

On appeal, the Barkers contend that COTA erred by failing to apply the doctrine
of merger in this action. Specifically, the Barkers contend that an oil and gas lease
executed by Robert and his parents in 1983 was terminated in 2009 when the Barkers
became the owners—as joint tenants—of the land that was burdened by the leasehold.
We also note that COTA entered judgment as a matter of law on behalf of the County
even though only the Barkers moved for summary judgment. Although we question this
procedure, the Barkers have not raised the issue on appeal. Hence, we will not address it
in this opinion.

Standard of Review

The Kansas Judicial Review Act (KJRA), K.S.A. 77-601 et seq., controls our
review of COTA's decision. Under the KJRA, the burden of proving the invalidity of
COTA's action rests on the party asserting invalidity. K.S.A. 2013 Supp. 77-621(a)(1).
Although judicial review is limited by the KJRA, COTA determined that the facts were
undisputed and that the issue presented only a matter of law. Accordingly, our review of
COTA's decision is unlimited. See K.S.A. 2013 Supp. 77-621(c)(4); In re Tax Appeal of
LaFarge Midwest, 293 Kan. 1039, 1043, 271 P.3d 732 (2012); In re Tax Appeals of EOG
Resources, Inc., 46 Kan. App. 2d 821, 825, 265 P.3d 1207 (2011), rev. denied 296 Kan.
1130 (2013).
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Nature of Oil and Gas Lease

In Kansas, "an oil and gas lease conveys a license to explore, or a '"profit á
prendre."'" Farrar v. Mobil Oil Corp., 43 Kan. App. 2d 871, 883, 234 P.3d 19 (citing
State, ex rel., v. Board of Regents, 176 Kan. 179, 190, 269 P.2d 425 [1954]), rev. denied
291 Kan. 910 (2010); see also Restatement (Third) of Property: Servitudes § 1.2 (1998).
Like other easements, a profit a prendre—often simply referred to as a "profit"—is an
incorporeal hereditament or an intangible right in the land. See Utica Nat'l Bank & Trust
Co. v. Marney, 233 Kan. 432, 433-34, 661 P.2d 1246 (1983). While easements generally
allow one to go onto land owned by another person, a profit allows one not only to go
onto the land of another but also to take some product from the land. See Burden v.
Gypsy Oil Co., 141 Kan. 147, 150, 40 P.2d 463 (1935) ("A profit a prendre is the right to
take soil, gravel, minerals and the like from the lands of another . . . .").

Specifically, an oil and gas lease "conveys a license to enter upon the land [owned
by another] and explore for such minerals and if they are discovered to produce and sever
them." Ingram v. Ingram, 214 Kan. 415, 418, 521 P.2d 254 (1974). In Kansas, oil and gas
leasehold "interests constitute personal property except in those specific instances when
that classification is changed by statute for a specific purpose." Utica Nat'l Bank & Trust
Co., 233 Kan. at 435. "For the purposes of valuation and taxation in Kansas, all oil and
gas leases and wells are considered personal property. K.S.A. 79-329." Helmerich &
Payne, Inc. v. Board of Seward County Comm'rs, 34 Kan. App. 2d 53, 55, 115 P.3d 149,
rev. denied 280 Kan. 982 (2005); see In re Tax Appeals of EOG Resources, Inc., 46 Kan.
App. 2d at 825.

The Doctrine of Merger

The Kansas cases cited by COTA and the parties regarding merger are not
particularly helpful. While they stand for the general proposition that where a greater and
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lesser estate coincide, the lesser estate merges into the greater estate, the cases deal with
real estate rather than easements or profits. Under the facts of this case, we find the
Restatement of Property—which both the Kansas Supreme Court and this court have
turned to for guidance on multiple occasions—to be more instructive. See Hamel v.
Hamel, 296 Kan. 1060, 1068, 1075, 299 P.3d 278 (2013) (citing both the Second and
Third Restatements of Property); Rucker v. DeLay, 295 Kan. 826, 831, 289 P.3d 1166
(2012) (citing Restatement [Third] of Property); U.S. Bank NA v. McConnell, 48 Kan.
App. 2d 892, 901, 305 P.3d 1 (citing Restatement [Third] of Property), rev. denied 298
Kan. __ (October 28, 2013). Likewise, in City of Arkansas City v. Bruton, 284 Kan. 815,
831, 166 P.3d 992 (2007), our Supreme Court expressly recognized that the Restatement
(Third) of Property addresses the law of servitudes.

A servitude includes both an easement and a profit. Restatement (Third) of
Property: Servitudes § 1.1. Actually, a profit is simply an easement that grants a person
additional rights—the right "to take" from the land. As the official comment to the
Restatement (Third) of Property explains: "Profits are easements (rights to enter and use
land in the possession of another) plus the right to remove something from the land. . . .
Generally, the rules governing creation, interpretation, transfer, and termination of
easements and profits are the same in American law." Restatement (Third) of Property:
Servitudes § 1.2, comment e.

Although a servitude may be terminated by agreement of the parties, it also may
be terminated by operation of law. Restatement (Third) of Property: Servitudes § 7.1
(1998). Restatement (Third) of Property: Servitudes § 7.5 specifically provides that "[a]
servitude is terminated when all the benefits and burdens come into a single ownership."
(Emphasis added.) As the reporter's note to Restatement (Third) of Property: Servitudes
§ 7.5 states: "The rule stated in this section is generally accepted and is similar to that
stated in the Restatement [(First)] of Property §§ 497-499 and § 555." See Restatement
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(First) of Property § 497 (1944) ("An easement appurtenant is extinguished by unity of
ownership of estates in the dominant and servient tenements . . . .").

The official comment to the Restatement (Third) of Property explains:

"A servitude benefit is the right to use the land of another or the right to receive the
performance of an obligation on the part of another. A servitude burden is an obligation
not to interfere with another's use of the burdened party's land . . . . When the burdens and
benefits are united in a single person, or group of persons, the servitude ceases to serve
any function. Because no one else has an interest in enforcing the servitude, the servitude
terminates. The previously burdened property is freed of the servitude." (Emphasis
added.) Restatement (Third) of Property: Servitudes § 7.5, comment a.

In other words, when the burdens and benefits are united through common
ownership in either a single person or a group of persons, an easement or profit ceases to
have any function. This is because as a general rule a landowner does not need a license
or permission to use his or her own property. See Van Sandt v. Royster, 148 Kan. 495,
499, 83 P.2d 698 (1938) (stating that a landowner cannot have an easement in his own
land). Accordingly, in such instances, an easement or profit terminates by operation of
law.

We find the legal principle set forth in Restatement (Third) of Property:
Servitudes § 7.5 to be consistent with Kansas law. In Johnston v. City of Kingman, 141
Kan. 131, Syl., 39 P.2d 924 (1935), our Supreme Court held that "no man can acquire an
easement in his own lands." See also Ferguson v. Ferguson, 106 Kan. 823, 825, 189 P.
925 (1920) ("[A]ll the uses which an easement might supply were then embraced in [a]
general proprietorship."). A few years later, in Van Sandt, 148 Kan. at 499, it was held
that "[a]s an easement is an interest which a person has in land in the possession of
another, it necessarily follows that an owner cannot have an easement in his own land."
(Emphasis added.) See Chinn v. Strait, 173 Kan. 625, 631, 250 P.2d 806 (1952).
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More recently, in Dameron v. Kelsay, No. 96,462, 2007 WL 2580598, at *7-8
(Kan. App. 2007) (unpublished opinion), this court held that a person who jointly owned
land could not acquire an easement in her own property. Likewise, in Stroda v. Joice
Holdings, 288 Kan. 718, 719, 207 P.3d 223 (2009), our Supreme Court noted a district
court's ruling that an easement was extinguished by the doctrine of merger. Thus, we
conclude that the doctrine of merger is applicable to oil and gas leases just as it is to other
servitudes, including easements or profits.

Application of the Doctrine of Merger

We now turn to the question of whether the doctrine of merger should have been
applied in the present case. COTA found that there was no evidence that a properly
recorded instrument terminated either interest. Certainly, the Barkers—as joint tenants—
could have simply executed and filed a document terminating the oil and gas lease by
agreement after Robert's mother died. See Restatement (Third) of Property: Servitudes §
7.1. Perhaps they have now done so, which would eliminate the potential of this issue
being raised again in the future. But at the time this action was pending before COTA, it
appears that no such instrument had been recorded. Accordingly, we must determine
whether the oil and gas lease terminated by operation of law.

It is important to recognize that joint tenancy requires four unities—interest, title,
time, and possession. Simonich, Executrix v. Wilt, 197 Kan. 417, 421, 417 P.2d 139
(1966). Here, the County agrees that Robert and Gay are the joint tenants of the subject
property. As such, it is undisputed that all four unities are present—Robert and Gay each
share the same ownership interest in the property, they each took title to the property
under the "Transfer on Death Deed" executed by Robert's mother in 2002, their interest
commenced upon the death of Robert's mother in 2009, and they both are in possession
of the whole estate. Thus, by definition there is a joint tenancy with a unity in the
ownership of the entire property.
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It is undisputed that Robert and Gay Barker jointly became the owners of the
property that is the subject of the oil and gas lease upon the death of Robert's mother in
2009. As joint tenants, Robert and Gay do not have divided or fractional interests in the
property. Rather, it is well settled that each of the joint tenants owns "'the whole and
every part, with the benefit of survivorship, unless the tenancy be severed.'" (Emphasis
added.) Simons v. McLain, 51 Kan. 153, 159, 32 P. 919 (1893); see also Restatement
(Second) of Property: Donative Transfers § 30.1, comment q (1987) ("each joint tenant
. . . was seised of the whole"); Restatement (First) of Property § 29, comment e (1936)
("each joint tenant was historically regarded as having an estate in fee simple absolute in
all the land in which the joint tenancy exists"). In the present case, there is no allegation
that the joint tenancy has been severed.

In Dameron, 2007 WL 2580598, at *7, this court recognized the continued
viability of the rule set forth in Simons. Specifically, our court found that "every joint
tenant owns an undivided whole of the jointly owned property and the joint tenant does
not own a share or a fractional part of jointly owned property. Joint means oneness and
[the joint tenants] constitute one person . . . ." (Emphasis added.) As joint tenants, Robert
and Gay constitute one person. Because Robert owns the whole and every part of the
land, he does not need a license to enter his own property to explore, discover, or remove
oil and gas. Thus, we conclude that the oil and gas lease executed in 1983 no longer
served a purpose and was terminated by operation of law.

Cases from Other Jurisdictions

We do not believe it is necessary to turn to cases from other jurisdictions, but we
will briefly discuss the Alabama Court of Appeal's opinion in Clayton v. Clayton, 75 So.
3d 649 (Ala. Civ. App. 2011), cert. denied No. 1100716 (Ala. August 5, 2011). While the
Barkers argue that the majority opinion in Clayton is instructive to the application of the
doctrine of merger to joint tenancy, COTA found that the dissent in that case "is most
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consistent with Kansas law." Although we find the facts of the Clayton case to be
distinguishable from the present case, we find the legal principles set forth in the majority
opinion to be more consistent with both Kansas law and the Restatement (Third) of
Property than those stated in the dissent.

The facts in the Clayton case are substantially different from those in our case, and
we will not set them forth in detail. Briefly, the Clayton case involved a son who
inherited—as a joint tenant with his son—real property from his mother that had
previously been leased to him. Prior to his mother's death, the son had subleased the
mining rights to a third party. Following the mother's death, the grandson successfully
petitioned to receive half of the royalties under the sublease with the mining company. In
ruling in favor of the grandson, the majority concluded that the previous lease between
the mother and son had merged into the son's ownership of the property as a joint tenant
upon her death. 75 So. 3d at 653-54.

In reaching this conclusion, the majority in Clayton found as a matter of law that
"'[in] a joint tenancy each tenant . . . owns the whole.'" 75 So. 3d at 653. Certainly, this
statement is consistent with Kansas law and the Restatement (Third) of Property.
Likewise, the majority noted "'the general rule of law . . . that when a greater and less, or
a legal and equitable estate, meet and coincide in the same person, they are merged, the
one drowned in the other.'" 75 So. 3d at 653. This statement is also consistent with
Kansas law and the Restatement (Third) of Property. The majority then quoted an
Alabama Supreme Court opinion for the proposition that "'[t]here can be no greater
absurdity, than to place [a person] in the relation of being his own landlord, and his own
tenant, at one and the same time; bound himself to pay, and to receive rent.'" 75 So. 3d at
653 (quoting Otis v. McMillan & Sons, 70 Ala. 46, 59 [1881]). Even though we can
imagine greater absurdities, the proposition is also illogical under Kansas law and the
Restatement (Third) of Property.

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On the other hand, as the majority correctly pointed out, the dissent in Clayton
appears to discount—if not ignore—the well-settled rule that a joint tenant owns an
undivided interest in the whole property. See 75 So. 3d at 654. Moreover, the dissent
takes the position that even if joint tenancy amounted to a unification of the freehold and
leasehold estates, the doctrine of merger should not apply if it works as a disadvantage to
the prior owner of one of the estates. 75 So. 3d at 659 (Moore, J., dissenting). This is
probably true in Kansas as well. See Aguilera v. Corkill, 201 Kan. 33, 38, 439 P.2d 93
(1968) ("The doctrine of merger has its foundation in the convenience of the parties and
should be determined from their intention."). But in the present case, there is no
suggestion that application of the doctrine of merger would defeat the intent of Robert's
mother or inconvenience Robert and Gay.

In passing, we also note the opinion in Zanelli v. McGrath, 166 Cal. App. 4th 615,
82 Cal. Rptr. 3d 835 (2008). Similar to the present case and the majority opinion in
Clayton, the California Court of Appeal concluded that the doctrine of merger can apply
to cases involving joint tenancy. In reaching this conclusion, the California court
correctly noted that Restatement (Third) of Property: Servitudes § 7.5, comment a,
"expressly includes 'a group of persons' in its statement of the principle and rationale for
extinguishment by merger." 166 Cal. App. 4th at 625. Thus, the California court held that
joint tenancy—where more than one person owns the whole estate in fee simple, not
merely a fractional share—"is exactly the 'unity of title,' or as we prefer, the 'unity of
ownership," required for finding an easement extinguished by merger." 166 Cal. App. 4th
at 632.

Conclusion

In summary, we conclude that the oil and gas lease executed in 1983 no longer
served a purpose and was terminated by operation of law upon the death of Robert's
mother in 2009. Although we recognize that applying the doctrine of merger often
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involves a question of fact, judgment as a matter of law is appropriate in this case
because the parties do not dispute the facts. In light of our holding regarding the doctrine
of merger, it is not necessary to reach the merits of the Barkers second issue of whether
COTA deviated from a prescribed procedure set forth in the Oil and Gas Appraisal
Guide.

Reversed and remanded with directions to enter summary judgment as a matter of
law for the Barkers.