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Swartz v. Householder & Shannon v. Householder - Seventh District Court of Appeals Once Again Upholds 1989 Dormant Minerals Act as Self-Executing

Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A.

In Swartz and Shannon, companion cases which involve two reservations of mineral rights, the Seventh District Court of Appeals, was once again faced with interpreting the former version of Ohio R.C. § 5301.56 (1989 DMA).  The Court of Appeals, in an opinion authored by the Honorable Joseph J. Vukovich, held the trial court had correctly determined the mineral interests were not the subject of a preserving event within the meaning of the 1989 DMA, which was self-executing, meaning severed mineral interests were deemed abandoned automatically and title to the same vested with the surface owners.  Additionally, the Court of Appeals discussed the portion of the Texaco v. Short decision addressing the constitutionality of Indiana’s self-executing dormant mineral statute, and noted that Ohio’s DMA provided notice of three years within which mineral owners could save their interest before any abandonment would vest, but declined to analyze the constitutionality of the 1989 DMA further because the appellant failed to properly raise the issue with the trial court.

Which Version of the Statute Should Apply: Is the Former Version of R.C. § 5301.56 Self-Executing?
The appellant argued the former version of R.C. § 5301.56 (“1989 DMA”), which was in effect between 1989 and 2006, should not have been applied by the trial court because (1) Dodd v. Croskey did not discuss the 1989 DMA before applying the 2006 DMA; (2) the 1989 DMA conflicts with Ohio’s Marketable Title Act (and its 40 year period); (3) the 1989 DMA did not provide a specific implementation procedure; and (4) the surface owner needed to take action prior to the effective date of the 2006 DMA on June 30, 2006.

First, the Court of Appeals stated that in Dodd v. Croskey, the parties did not present arguments to the court under the 1989 DMA, but rather only presented arguments under the 2006 DMA.  The Court of Appeals clarified if the parties do not invoke a statute, the court proceeds under the impression that the parties agreed that it was not dispositive, i.e., if the parties agree there was no abandonment under the 1989 DMA, then they proceed under only the 2006 DMA.  Thus, the lack of reference to the 1989 DMA in Dodd was not dispositive as to whether the 1989 DMA can still be used to assert vested rights.

Second, when discussing the 1989 DMA’s interplay with the Marketable Title Act (MTA), the Court of Appeals held that the more specific provisions of the 1989 DMA would control over the more general language of the MTA, and that the legislative intent under the 1989 DMA is clearly to reattach mineral interest back to the surface under a twenty-year look back.  The Court also noted that as the 1989 DMA is part of the MTA, it should be liberally applied, as provided for in R.C. § 5301.49(A).

Third, under the terms of the 1989 DMA, the Court of Appeals held the trial court’s determination that the mineral interests were “deemed abandoned and vested” in the surface owner was correct.  The Court of Appeals held that the 1989 DMA need not provide a specific statutory remedy in order to cause abandonment, citing to the fact that an action for declaratory judgment or quiet title already existed and that “the statute need not explain to the reader how they can file a court action to have their rights declared.”  The Court of Appeals noted the 1989 DMA placed no obligations upon the surface owner prior to the statutory abandonment and vesting.

Fourth, the Court of Appeals held the 2006 version of the statute contains no language “to suggest that it is to be applied retroactively.”  Thus, the 2006 version of the statute would only apply prospectively.  The Court of Appeals stated that “when the 2006 version was enacted, any mineral interest that was abandoned under the 1989 version stayed abandoned and continued to be vested in the surface owner, and once the mineral interest vested in the surface owner, it reunited with the surface estate pursuant to statute regardless of whether the event has yet to be formalized.”

The Court of Appeals took the opportunity to further address Dahlgren v. Brown decision. The Court of Appeals found that the holding in Dahlgren ignored the legitimate state interest of unifying dormant mineral interests with surface estates, an interest which legislatures throughout the country have furthered through the use of statutes like the 1989 DMA.  Furthermore, the Court of Appeals noted that the Dahlgren court’s concern about the opportunity of the mineral owner to contest abandonment failed to recognize that the “very suit before it was the opportunity to so contest (that there were savings events in the pertinent time period).”

Therefore, the Court of Appeals held the additional notice provisions in the 2006 DMA eliminated automatic vesting after June 30, 2006, but did not erase previously vested interests merely because a suit had yet been filed to formalize the reverter. 

Whether the Former Version of R.C. § 5301.56 is constitutional?
The Court of Appeals analyzed the United States Supreme Court’s holding in Texaco v. Short, placing particular emphasis on the fact that the dormant mineral statute in that case contained a two-year grace period, which foreclosed any argument that the statute was invalid because persons owning property within a state are charged with knowledge of the relevant statutory provisions affecting the control or disposition of such property.  The Court of Appeals noted that Ohio’s DMA provided notice of three years within which the mineral owners could save their interest before any abandonment would vest, but declined to analyze the constitutionality of the 1989 DMA further finding the appellant had waived this issue by failing to properly raise it before the trial court.  

NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.

If you have any questions concerning this client alert, please contact Attorney Gregory W. Watts or Attorney Matthew Onest at 330-497-0700.

 
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