Face Challenges Confidently

492 Kimble v. Gostecnik

Friday, September 4th, 2015

Richard F. Brown

 
The following is not a legal opinion.  You should consult your attorney if the case may be of significance to you.
 
Kimble v. Gostecnik  held that a deed may by reference to a term interest reserve the same interest upon the expiration of the term for an unlimited term.  The parties aligned as successors-in-interest to Grantor and Grantee under a 1953 deed which contained the following language:
 

And provided, it is especially stipulated that each of the term royalty interests shall at the termination of their respective periods revert to and become the property of grantors, said deferred interests being now reserved, saved and excepted from the force and effect of these presents, and reference is here made to each of the above instruments and their respective records for a further description of said term royalty interests.

 
At the time of the 1953 deed, there were two term nonparticipating royalty deeds and one term mineral deed in the chain of title, each with a term which expired in 1964, if there was no production.  There was no timely production and all of the term interests terminated in accordance with their terms.   Grantee contended that Grantor reserved a term interest, now terminated, and thus nothing.  Grantor contended that Grantor reserved a nonparticipating royalty equal to the term nonparticipating royalty from and after the term nonparticipating royalty terminated in 1964.
 
“[Grantor] reserved unto [Grantor] the interest that [the term nonparticipating royalty owners] had reserved only for a term or years. . . .  As the owner of the entire property and mineral estate subject only to the term royalty previously reserved, [Grantor] could reserve for [Grantor] any portion of the mineral estate.  And that is precisely what the subject clause did. . . .  [T]he reference to the term royalty was in reference to the size and type of the interest reserved, not the length or duration of the interest.”   The court held that a reversionary interest is a future interest in real property that remains with the grantor, it is freely assignable, and in this case, Grantor assigned (reserved) it to Grantor.
 
This is a memorandum opinion, which does not quote the language of the term assignments, does not distinguish between the term royalty and term mineral interests, and does not seem to add up as to the quantum of interest reserved by Grantor as expressed in the opinion.  The significance is limited to the concept that the owner of the fee can reserve an outstanding reversionary interest which will vest in the owner upon the termination of the term, and unless otherwise limited, it will not be a term interest.