I’ll finish up this series here at my office in Findlay. In the previous parts of this series (Read part 1, part 2, part 3 and part 4) are at Porter Wright’s web site. The earlier blogs discussed the history of DMA and summarized how it provides for the abandonment of severed mineral interests. Now we will look at court opinions that have interpreted the law.
Constitutionality of DMA’89
In Tribett v. Shepherd, Belmont C.P. No. 12-CV-180 (July 22, 2013) stated:
“The Ohio Dormant Mineral Act was enacted in its original form on March 22, 1989. The act has been characterized as a “use it or lose it” statute. The Ohio Legislature attempted to balance the interests of property owners and the compelling public interest in drilling, producing and marketing the mineral interests of this state. Dormant and abandoned mineral interests were viewed as of no beneﬁt to the state, while making use of the state’s mineral resources was for the public good.”
“In order to negate the retroactive effect of the Act, [the three-year grace period was included].”
“The oil and gas owners thereby were given three years to meet one of the “Savings Events” provisions. A similar statute was enacted in Indiana and provided for a two-year grace period. This act was upheld by the United States Supreme Court in Texaco Inc. v. Short. 454 US 516 (1982). In Texaco, it was held that, “There was no constitutional right for a mineral interest owner to receive individual notice that his right will expire.”
“Based upon Texaco, this court ﬁnds the 1989 Ohio Dormant Mineral Act to be constitutional.”
The same result in Taylor v Crosby, Belmont C.P. No. 11-CV-422 (Sept. 16, 2013) and Tribett v Shepherd, Belmont C.P. No. 12-CV-180 (July 22, 2013). With its notice provision, DMA’06 would seem to be constitutional as well.
DMA’89 is — and, after DMA’06, remains — self-executing
If the facts are such that the requirements of DMA’89 are met, i.e., no savings event between 1989 and 1969, the surface owner can go to court on that basis as the statute is self-executing. This is what the surface owner did in Wiseman v Potts, Morgan C.P., No. 08 CV 0145 (June 29, 2010), where a 1/3 mineral interest severed in 1947 was found to have been abandoned under DMA’89.
Similarly, in Wendt v. Dickerson, Tuscarawas C.P. No. 2012 CV 020135 (Feb. 21, 2013), the court found that because there had been no title transaction determinative, the mineral interest, severed in 1952, became vested in the surface owners on March 22, 1992 — the effective date of DMA’89 plus the three-year grace period.
A court reach the same result in Marty v Dennis (Winkler), Monroe C.P., 2012-203 (April 11, 2013) and Shannon v. Householder, Jefferson C.P. No. 12CV266 (July 17, 2013)
Moreover, DMA’06 is not retroactive such that it would change the applicability or effectiveness of DMA’89. Shannon v. Householder, supra, (“DMA of 2006 is not retroactive but applies only prospectively in accordance with ORC§1.48 as the same was not ‘expressly made retroactive’ as is required under said statute.”). The same result a week later in Tribett v. Shepherd, Belmont C.P. No. 12-CV-180 (July 22, 2013), citing Revised Code 1.58 (A)(1) and (2).
In Walker v Noon, 7th Dist. No. 13 NO 402 (April 3, 2014), the court said, “There is no language in the 2006 version of R.C. 5301.56 to suggest that it is to be applied retroactively.” So, the court found a severed interest with no savings event automatically abandoned on March 22, 1992. Furthermore, with DMA’06 was enacted, the interest had already been abandoned and thus vested with the surface owner.
Contra — it is not self-executing
But court opinions have not been consistent. In Dahlgren v Brown Farm Properties, Carroll C.P., 13CVH27445, (Nov. 5, 2013), the court said it is implied that DMA’89 requires DMA’06 to establish the constitutionally-required notice. Also, even if DMA’89 applies to extinguish a dormant interest for nonuse during the 20-year look-back period, “[A]t most, the absence of those conditions created an inchoate right; it could not and did not transfer ownership without judicial confirmation or at least an opportunity for the disowned party to contest their absence or the effect of their absence.”
In M&H Partnership v Walter Vance Hines, et al., Harrison C.P. No. CVH-2012-0059 (Jan. 14, 2014), the court ruled that DMA’89 does not provide for “automatic” vesting. In its view, that attribute would be contrary to the purpose of the Marketable Title Act (MTA), which allows persons to rely on a record chain of title.
The DMA’89 look-back period
In M&H Partnership v Walter Vance Hines, et al., Harrison C.P. No. CVH-2012-0059 (Jan. 14, 2014), the court held that a lease granted by the mineral interest owners on July 15, 1969, was a savings event under both DMA’89 and DMA’06 because it had occurred during the fixed 20-year period preceding the DMA ’89 effective date of March 22, 1989. Citing Riddell v. Layman: “Riddell v. Layman, 5th Dist. No. 94 CA 114 (July 10, 1995) is the only appellate decision which touches upon the appropriate 20-year look-back period for DMA’89. The Riddell court decided that ‘the title transaction must have occurred within the proceeding 20 years from the enactment of the statue, which occurred on March 22,1989.’ ”
Also citing Riddel, the court in Wiseman v. Potts, Morgan C.P. 08-CV 0145 (Dec. 10, 2009) said: “Under R.C. 5301.56, the time period for examination was 20 years before the effective date of the statute, in other words from March 1969 through March 1989.” Accord, Wendt v. Dickerson, Tuscarawas C.P. No. 2012 CV 020135 (Feb. 21, 2013).
More recently, in Taylor v Crosby, Belmont C.P. No. 11-CV-422 (Sept. 16, 2013), the court quoted R.C. 5301.56 (D)(1), which provides for “successive filings of claims to preserve,” and concluded, “A static 20 year look back period would have no need for a provision providing for indefinite preservation of mineral interests through successive filing of preservation claims. Based upon the same, the Court finds the [DMA’89] to provided for a ‘rolling look back period.'”
DMA’89 vis a vis DMA’06
In M&H Partnership v Walter Vance Hines, et al., supra, the court ruled that for DMA’89 to apply, the plaintiff would have needed to bring its action before the effective date of DMA’06.
In Gentile v. Ackerman, Monroe C.P. No. 2012-110 (Jan. 13, 2014), the trial court followed Dodd v. Croskey, 2013-Ohio-4257, (Seventh Dist., Sept. 23, 2013), which we discuss further below, applying DMA’06 to a post-2006 claim.
DMA is part of MTA but DMA is controlling
In Tribett v. Shepherd, Belmont C.P. No. 12-CV-180 (July 22, 2013), plaintiff surface owners claimed ownership of the oil and gas. The defendants claimed ownership based on a 1962 reservation.
The defendants argued that DMA, because it is part of the MTA, would include a restriction specified in the MTA that says marketable title is subject to “all interest and defects which are inherent in the muniments of which such chain of record title is formed.” R.C. 5301.49(A). The defendants further noted that two coal deeds specifically identified the severed oil and gas interest. The court responded:
The Ohio Dormant Mineral Act is a part of the Ohio Marketable Title Act. The speciﬁc language required by the Dormant Mineral Act controls over the general language of the Marketable Title Act. The Dormant Mineral Act requires a higher test for a “Savings Event” than does the language of the Marketable Title Act. This court does not ﬁnd the mere ﬁling, of the [coal deeds] within the muniments of title, to be controlling.
In Dahlgren v Brown Farm Properties, Carroll C.P., 13CVH27445, (Nov. 5, 2013), the court analyzed the relationship between the MTA and DMA saying: “In their context, it is clear that the legislature has always intended that the [MTA] and [DMA] are integrated title laws which should be read together whenever they were in effect.” They also said: “Nothing in either [DMA’89] or [DMA’06] denies that the [MTA] remains applicable to mineral rights, at least to the extent that the [DMA] does not expressly provide differently.”
Yet the Dahlgren court concluded that DMA’89 “impliedly required implementation [by DMA’06] before it finally settled the parties’ rights, at least by a recorded abandonment claim that permitted the adverse party to challenge its validity…” even though it has been held that:
- DMA’06 is not retroactive; and
- The MTA, like a statute of limitation, automatically terminates old interests.
In Gentile v. Ackerman, Monroe C.P. No. 2012-110 (Jan. 13, 2014), the plaintiff argued that the MTA operated to extinguish a 1/2 severed interest. The facts of the case did not allow the MTA to extinguish the severed interest, but, given the court’s analysis of the MTA, the MTA might have been effective had the facts been different.
Subject to a title transaction
Cases interpreting the DMA often turn on whether the mineral interest has been “the subject of a title transaction,” which is a savings event. For example, in Riddell v. Layman, 5th Dist. No. 94 CA 114 (July 10, 1995), the court held that minerals were “the subject of a title transaction” in the deed that created the severance, which had occurred within the preceding 20 years. The defendant mineral owner prevailed.
Other cases have determined that a deed that references or notes a prior mineral reservation did not make the minerals the subject of a title transaction so the surface owner prevailed on that issue. See Walker v. Noon, Noble C.P., No. 212-0098 (March 20, 2013) (the transaction would need to affect the mineral interest); Wendt v. Dickerson, Tuscarawas C.P. No. 2012 CV 020135 (Feb. 21, 2013); Wiseman v. Potts, Morgan C.P., No. 08 CV 0145 (June 29, 2010); Eisenbarth v. Reusser, Monroe C.P. No. 2012-292 (June 6, 2013) (summarizing the previous cases, “a recitation of the original oil and gas reservation in subsequent transfers of the surface do not affect the severed mineral interest and, therefore, do not constitute ‘title transactions’ under [the DMA]”); and Dodd v. Croskey, 2013-Ohio-4257, 2013 Ohio App. LEXIS 4475 (Seventh Dist., Sept. 23, 2013) (“In order for the mineral interest to be the ‘subject of’ the title transaction the grantor must be conveying that interest or retaining that interest.”); Tribett v. Shepherd, Belmont C.P. No. 12-CV-180 (July 22, 2013).
A lease as a “title transaction”
Bender v. Morgan, Columbiana C.P., 2012-CV-378 (March 20, 2013) considered the following facts. Harry Dorr reserved the oil and gas interest in 1947. The surface owner filed suit, claiming that she owned the minerals under the DMA. The Dorr heirs argued that an oil and gas lease within the 20-year period predating March 22, 1989, was a “title transaction” and, thus, a “savings event.” The court agreed.
A title transaction does not have to be a conveyance. It must merely “affect” the interest. The court said:
Clearly, an oil and gas lease is an instrument which affects an interest in such minerals.” It conveys a determinable fee interest in the oil and gas. “If one focuses attention on the 1988 oil and gas lease alone …, there can be no determination of abandonment under [DMA’89].
There is a similar result in Eisenbarth v. Reusser, Monroe C.P. No. 2012-292 (June 6, 2013), where a number of leases made the minerals the subject of a title transaction. So, too, in Dahlgren v Brown Farm Properties, Carroll C.P., 13CVH27445, (Nov. 5, 2013), “Those recorded leases are ‘title transactions’ that preclude any deemed abandonment for the plaintiffs’ mineral interests pursuant to [DMA’06].”
More recently, the U.S. District Court for the Northern District of Ohio, Eastern Division, held that an oil and gas lease, specifically a partial release of the lease, was a title transaction that precluded abandonment. McLaughlin v CNX Gas Company, Case No. 5:13CV1502, Dec. 13, 2013.
In McLaughlin, the plaintiff filed an action to quiet title, alleging that the mineral rights merged with the surface rights no later than Jan. 3, 2005 because following the 1985 severance, 20 years passed without a title transaction. In the plaintiff’s view, an oil and gas lease was “nothing more than a license and therefore cannot act in any manner preserve rights under the DMA.” The court did not agree. After reciting the MTA’s definition of “title transaction,” it said:
As the above definition makes clear, title transaction means any transaction affecting title to any interest in land. It is difficult for the Court to conceive of a broader definition than the one chosen by Ohio law. By its plain language, the statute does not require a conveyance or transfer of real property in order to constitute a title transaction. Rather, the statute simply requires a transaction that affects title to any interest in the land.
The nature of the interest conveyed under Ohio law in an oil and gas lease notwithstanding, “[T]hose interests quite clearly still affect title to the mineral rights in the property. As the lease itself was a title transaction, there can be no dispute that the release of rights under that lease qualifies as a title transaction as well. Accordingly, Plaintiff’s claims must fail as a matter of law.”
Contra for an inactive lease
However, in Shannon v. Householder, Jefferson C.P. No. 12CV266 (July 17, 2013), the court said that a mineral lease was not an activity “which under the statute prevents the abandonment of said minerals.” The court pointed out: “No activities were ever commenced under said oil and gas lease.”
Apparently, because the inchoate fee simple determinable never vested in the lessee, the lease was not a title transaction. The rights to look for the minerals and to drill on the property granted in the lease were not enough to make the minerals the subject of a title transaction. However, in Marty v. Dennis (Winkler), discussed below, the court said that the right to receive a royalty payment should production be achieved is an interest in real estate subject to DMA abandonment.
The DMA’06 procedure
In Dodd v Croskey Harrison C.P. No CVH-2011-0019 (Oct. 29, 2012), the point of contention was a 1/3 mineral interest that had been excepted from a 1947 deed. The surface owners attempted to have it deemed abandoned using DMA’06. The lower court found that there had been a title transaction within the DMA’06 look back period so the interest remained with the holders. The court also said that not all of the holders had been provided the requisite notice.
The appellate court affirmed the lower court result but not for all the same reasons. It found that Croskey, an heir of the grantor in the 1947 deed, had filed an affidavit to preserve within 60 days of the owners’ published notice. Dodd v. Croskey, 2013-Ohio-4257, (Seventh Dist., Sept. 23, 2013). Croskey had filed a document titled “Affidavit Preserving Minerals.” It did not identify a savings event so it could not be a “Savings Event Affidavit” under (H)(1)(b), which was added by the 2006 amendment. But was it a “Claim” under (H)(1)(a) and, like other savings events listed in DMA’89, did it have to occur during the 20-year look back period that ends on the notice date?
Does the notice preclude a later claim?
In short, was the Croskey claim a “savings event” under (B)(3)(e) and division (C)?
The surface owner argued that the claim filed by Croskey could not be a savings event because it was not filed within the 20-year look back period preceding the notice. This assertion is based on (H)(1)(a)’s statement that the claim to preserve the mineral interest is to be in accordance with division (C), which mandates the 20-year period.
Despite the statute’s intertwined references, the court did not agree. As the court opined: “The clear language of … (H)(1)(a) does not require the claim to preserve the mineral interest to have been filed within the 20 years immediately preceding the notice. Rather, it requires the claim to be filed within 60 days after the notice.”
Though its MTA progeny would lend credence to the 20-year requirement for a claim, the 2006 amendments, in light of Texaco v Short, clearly intended to ameliorate the harshness of the MTA by providing notice and a chance to respond.
Finally, citing the common law maxim — the law abhors a forfeiture — the court found the filing, albeit outside the 20-year period, a savings event.
In Marty v Dennis (Winkler), discussed below, the court summarized the DMA’06 procedure consistent with the Dodd v. Croskey decision.
In Tribett v. Shepherd, Belmont C.P. No. 12-CV-180 (July 22, 2013), the surface owner’s failure to attempt service precluded its reliance on DMA’06 for its abandonment claim.
Deadlines are deadlines
Bender v. Morgan, Columbiana C.P., 2012-CV-378 (March 20, 2013) provides a lesson, too. As the court recounts, DMA’06 requires the surface owner to provide notice to the holder under division (E)(1). Next, for the mineral right to vest with the surface owner, (E)(2) requires that an affidavit of abandonment must be filed at least 30 days, but no later than 60 days, after notice. Here, the affidavit was filed 61 days after notice so the court found it “late and ineffective as a matter of law.” Moreover, the holders filed a Claim (this time there was no argument as to its being filed after the notice as in the Dodd v Croskey case) and a separate tax parcel for the mineral interest has been created, both of which the court found effective as savings events.
Royalty interest subject to abandonment
In 1949 John Winkler conveyed property with a reservation:
Also excepting and reserving unto the grantors herein, their heirs and assigns, the one-half (1/2) of the oil and gas royalty, same being one- sixteenth (1/16) of all the oil and one-half (1/2) of all monies received from the sale of gas from the east half of the south east quarter of Section 24, Township 3 of Range 4, containing sixty-eight (68) acres.
Marty, the surface owner, recorded an affidavit under DMA’89 declaring that the severed interest was abandoned. Six days later, notice was published in the paper declaring the interest was abandoned and vested in them. A month later, Marty filed another Affidavit of Abandonment, this time pursuant to DMA’06. Three weeks after that, the Winkler heirs filed their Notice to Preserve Mineral Interests.
In the ensuing litigation, Marty v Dennis (Winkler), Monroe C.P., 2012-203 (April 11, 2013), Winkler’s defense was that their interest is only the right to receive a royalty payment and is not a mineral interest that can be forfeited under DMA, and even it is subject to forfeiture, it had been preserved by the Notice to Preserve Mineral Interests.
The court recounted the self-executing nature of DMA’89. Then it pointed out that in a previous case, Cyril T. Burkhart v. George A. Burkhart, Monroe C.P. CVH 92-278, it had held a royalty interest to be subject to DMA’89. The Winkler heirs tried to distinguish the earlier decision saying that a right to receive a royalty payment is different from an actual mineral interest in the property. Marty responded by arguing there is a difference, but a royalty interest is still an interest in realty until the minerals are produced.
The court agreed with Marty, holding that the interest was subject to abandonment under DMA’89 and DMA’06. Furthermore, because there were no savings events within the DMA’89 look back period, the interest was deemed abandoned as of March 13, 1992, allowing for the DMA ’89’s three-year grace period.
As for the DMA’06 procedure, the court said:
“[T]his Court ﬁnds the if a severed interest holder ﬁles a notice under paragraph [division (H)], the landowner’s statutory remedy to abandon a Severed Mineral Interest has been exhausted, requiring the ﬁling of a lawsuit. At that point, the severed interest holder must be required to show why the severed interest has not been abandoned. A preservation notice itself cannot be the basis for establishing that the mineral interest has not been abandoned. The holder must show the existence of one of the savings conditions under ORC §5301.56(B).”
Here, the court ruled, there was no savings event and the severed interest was deemed abandoned.
Any time the legislature tries to declare, generically, the winner and loser of competing claims to property rights — especially where the claims are typically fact intensive and the property is increasingly valuable — controversy is inevitable. We will keep you posted as the law develops.