In Senterra v. Winland, 2019-Ohio-4387 (decided October 11, 2019), the Seventh District Court of Appeals held that (1) a surface owner was not precluded from using the Marketable Title Act (“MTA”) to extinguish a mineral interest after the surface owner attempted an abandonment under the Dormant Mineral Act (“DMA”), and (2) actions by the surface owner or mineral interest holder under the DMA would not revive an interest already extinguished by the MTA.
The Case raised three issues important for landowners to be aware of. First, whether the MTA applies to minerals. The Court of Appeals held that it did.
Second, whether a land owner is permitted to use the MTA to extinguish mineral interests when they have already attempted to use the DMA to abandon the same interests. The Court of Appeals allowed this as permissible, noting that a plaintiff can raise alternative theories of recovery in a case. Further, under Ohio Revised Code 5301.51, if a mineral interest has already been extinguished under the MTA, it cannot be revived. Therefore, it is unclear how an action by the surface owner (whether under the DMA or not) could somehow revive an already extinguished interest.
Third, how do you determine the forty-year look back period under the MTA. O.R.C. §5301.48 indicates a person has record marketable title if they have an unbroken chain of title for 40 years or more with nothing appearing of record purporting to divest the person of the interest. Record marketable title extinguished interests and claims existing prior to the effective date of the root of title. O.R.C. §5301.47(A). “Root of title” is defined as “[t]hat conveyance or other title transaction in the chain of title of a person, purporting to create the interest claimed by the person, upon which he relies as a basis for the marketability of his title, and which was the most recent to be recorded as of a date forty years prior to the time when marketability is being determined. O.R.C. §5301.47(E).
The Court found that a “root of title” has two elements, one is temporal and one is substantive. The root of title cannot be the initial severance deed of the interest the person is seeking to extinguish, but can contain a repetition of a reservation. The Court stated to determine the root of title, you find a deed at least forty years prior to the time marketability is being determined and then examine the recordings in the forty years succeeding that title transaction to see if there is anything in the record purporting to divest the person of the claimed interest. If there is, then that deed does not qualify as the root of title, and the next preceding deed must be examined. A title examiner would continue moving back in time until he or she found a conveyance followed by forty years of clean title. That document would be the root, and the examiner could safely conclude that the act extinguished all competing interests recorded prior to that date.
Once a forty-year period is found where there is no preserving act, it is important to understand that no act occurring after the forty-year period can revive the extinguished interest. Therefore, while there were leases entered into by the mineral holders in 2016 and 2017, those leases would not revive the interest if it was already extinguished. The Court found that there were no preservation acts within the applicable forty year periods (1954 – 1994 for one reservation, and 1971 – 2011 as to other reservations) and therefore, they were extinguished.
Lastly, the Court looked at a separate reservation of one-fourth that was ruled ineffective by the trial court under the Duhig Rule. The Duhig Rule applies when a grantor breaches his warranty of title such that a grant and a reservation both cannot be given effect, because there is not enough interest to go around. In that case, the reservation will fail. For example, if there was a prior reservation of ½ the minerals, and subsequently, a grantor conveyed the land and purported to reserve ½ and convey ½ to the grantee, this would result in too many halves – the ½ previously reserved, the ½ purported to be reserved by the grantor, and the ½ purported to be conveyed to the grantee. In that case, the Duhig Rule would, in equity, give the ½ to the grantee and the reservation by the grantor would fail.
However, the Court noted it had to consider the interplay between the Duhig Rule (rule of equity or fairness) with the MTA, which is not a rule of equity, but a rule of law. In this case, the rule of law (MTA) could resolve the issue and validate the 1954 reservation of ¼ that would have been originally ineffective at the time in 1954. This is because the challenge to the 1954 reservation did not come until 2018 when the complaint was filed, and by that time, the MTA had extinguished the prior reservations. Therefore, equity (Duhig Rule) was not needed to favor the grantee over the grantor with respect to the 1954 reservation of ¼, because the MTA had given the surface owner the ¾ interest he was purported to own under the 1954 deed.
When considering the DMA, MTA, and principals of contract construction (like the Duhig Rule), examining mineral titles can be complex. If you have a mineral reservation in your chain of title, you should contact an experienced oil and gas attorney to determine what course of action may be available to you.
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.