## Facts

- In 1924, the surface owner conveyed an undivided one-fourth mineral interest in the west half of a quarter section to a predecessor of Ruthven; the interest was later ratified and ultimately owned by Ruthven.
- In 1956, the surface owner executed an oil-and-gas lease to Dreiling covering the entire quarter section; Ruthven did not sign or join the lease.
- The lease included an entirety clause providing that if the leased premises were owned in separate tracts, development would be treated as an entirety and royalties would be distributed among owners in proportion to acreage.
- The lease also included a lesser-interest clause reducing the lessor’s royalty proportionately if the lessor owned less than the full estate.
- Wells were drilled only on the east half of the quarter section, and all lessor royalties for that production were paid to the lessor under division orders.
- Ruthven demanded a proportionate share of east-half royalties based on the lease’s entirety clause and sued the oil purchaser for an accounting.

## Issues

1. Whether an entirety clause in a lease executed by a record owner can extend to a prior, outstanding mineral interest not owned by the lessor and not leased by the mineral owner.
2. Whether the unleased mineral owner is entitled to share in royalties from production on a different tract (east half) where it holds no mineral title, solely by virtue of the lease’s entirety clause.
3. Whether the purchaser of production owes an accounting or payment duty to the unleased mineral owner when the purchaser paid royalties according to division orders and the lease as executed.

## Decision

- The Kansas Supreme Court affirmed.
- The outstanding one-fourth mineral interest under the west half was not part of the “leased premises” because the lessor lacked power to lease what had previously been conveyed away.
- The lease’s entirety clause did not apply to, and did not burden, the prior unleased mineral interest.
- The lesser-interest clause functioned to adjust the lessor–lessee royalty obligation and did not grant rights to third-party mineral owners.
- Ruthven was not entitled to royalties from production on the east half, where it had no mineral ownership.
- The purchaser was not liable to Ruthven for an accounting for proceeds from the east-half wells.

## Legal Principles

- An entirety clause applies only to interests actually subject to the lease—those the lessor owns and can validly lease.
- A prior outstanding mineral interest not joined in the lease is excluded from the “leased premises” and is not brought under the lease by an entirety clause.
- Entirety and lesser-interest clauses are contractual provisions allocating royalty burdens and payments among the parties to the lease; they do not, without consent, create royalty rights in nonparty mineral owners.
- A purchaser who pays according to division orders and the lease is not required to divert royalties to an unleased mineral owner absent a legal basis extending the lease to that owner’s interest.

## Conclusion

The court held that an entirety clause in a lease covering a full quarter section did not entitle a prior, unleased mineral owner under one half to share in royalties from wells on the other half, because the lessor could not lease the outstanding interest and it was not part of the leased premises.


Ruthven & Co. v. Pan Am. Petroleum Corp., 206 Kan. 639, 482 P.2d 28 (Kan. 1971)