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SUPREME COURT SUPPORTS MINERAL INTEREST HOLDER

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SUPREME COURT SUPPORTS MINERAL INTEREST HOLDER

In an earlier blog, on February 6, 2015, we noted the Ohio Supreme Court had accepted for review five Dormant Mineral Act cases to determine whether a severed mineral interest can be reattached and become part of the surface owner’s property rights.

Since February, the Supreme Court accepted three more cases (two were noted in our March 17, 2015 blog) and on June 18, 2015, the Supreme Court set the tone for how it will rule in the numerous cases pending in the Supreme Court regarding the interpretation of R.C. § 5301.56, the Dormant Mineral Act (“DMA”).

In Dodd v. Croskey, Slip Opinion No. 2015-Ohio-2362, the Chief Justice wrote the unanimous decision for the Court.  The Court noted the history of oil and gas exploration in Ohio and the common practice of severing mineral rights from surface rights in certain parts of the state.  Often, over the years, the severed mineral rights were abandoned, and the DMA was enacted to allow reunification of those abandoned mineral rights with the surface rights.

In Dodd, the mineral interests had been severed from the surface rights in 1947, when the owners conveyed the property but excepted and reserved the oil and gas rights.  The plaintiffs acquired the property in 2009.  Their deed included the original exception of mineral rights, so they did not claim that they acquired the mineral rights as part of the conveyance.  The plaintiffs initiated the process under the DMA to have the mineral interests deemed abandoned by publishing a notice of abandonment in the local newspaper.  Several weeks later, one of the defendants recorded an “Affidavit Preserving Minerals”, stating that he and the other owners of the mineral rights intended to preserve those rights.

The plaintiffs filed an action to quiet title, but the trial court found in favor of the defendants.  The court relied on the savings statute of the DMA, which provides that a mineral interest cannot be deemed abandoned if any one of six “saving events” occurs during the 20-year period prior to service of the notice of abandonment.  The court held that because the 2009 deed to the plaintiffs included the exception for the mineral rights, this constituted a saving event under the DMA, thus precluding forfeiture of the mineral rights.

The appellate court agreed with the trial court’s result, but for a different reason.  The DMA permits the holder of a mineral interest to preserve his rights, even after a notice of abandonment has been served, by recording within 60 days after notice either a “claim to preserve” or an affidavit describing a saving event that occurred during the preceding 20-year period.  The appellate court held that the affidavit filed by the defendant was sufficient to constitute a “claim to preserve” under the DMA.

The Supreme Court initially accepted the case on the proposition of law involving the “claim to preserve” under the DMA.  It later accepted the proposition of law regarding whether the exception of mineral rights in the 2009 deed constituted a saving event, but the Court never had to reach that issue.

The Supreme Court found that under the plain language of the DMA, a claim to preserve, such as the affidavit filed by the defendant, can serve two separate but similar functions depending on when it is filed for record.  It can be used as a saving event under the DMA when filed during the 20 years prior to the service of a notice of abandonment.  It can also preclude the mineral interest from being forfeited when filed within 60 days after service of the notice of abandonment.  The Court found that a claim to preserve need only state that the mineral interest owner intends to preserve that interest.  It does not need to also reference a saving event that occurred within the 20 years prior to the attempted forfeiture.  Therefore, that proposition, which had been considered by other courts in the Seventh District, is no longer a viable argument for surface owners.

The Court also held that the claim to preserve does not have to be filed within the 20-year period preceding the surface owner’s notice of abandonment.  Instead, it is sufficient if it is filed within 60 days after the notice of abandonment.  Thus, the severed mineral interest can be preserved after service of the notice of abandonment either by filing an affidavit identifying a saving event that occurred within the 20 years prior to service of the notice, or by filing a claim to preserve the mineral interest after the notice of abandonment has been served, regardless of whether any saving event occurred prior to the notice of abandonment.

The Supreme Court held for later decision whether mineral rights automatically vest after 20 years without action by the surface owner under the original 1989 version of the DMA, assuming no saving event occurred.  That will be decided in Walker v. Shondrick-Now, Corban v. Chesapeake Exploration, Schwartz v. Householder and Shannon v. Householder.  In the Dodd case, the parties did not dispute whether the 1989 or 2006 version of the DMA applied, and the parties framed their legal arguments based on the 2006 amendments to the DMA.

The Court found that the provisions of the DMA were unambiguous.  The Court also noted that its application of the DMA was consistent with the Marketable Title Act, R.C.

  • 5301.47, et seq., which the DMA supplements. The Marketable Title Act mandates liberal construction of its provisions to accomplish the legislative purpose of the Act, which is to simplify land title transactions by allowing persons to rely on a record chain of title. The Court reasoned that the DMA, by allowing a record owner of mineral rights to file a claim to preserve his interest after the surface owner serves a notice of forfeiture, is consistent with this legislative purpose.  This viewpoint will have an impact on decisions to be made later this year by the Court.

The Supreme Court recognized that there will be fact based inquiries as to whether a mineral interest holder’s claim to preserve is appropriate, and that declaratory judgment actions may be necessary to resolve these title issues.  Nevertheless, this case does not bode well for surface owners, and one must presume the Supreme Court will not use the Marketable Title Act’s liberal interpretation requirement to support the arguments of surface rights owners regarding application of the 1989 DMA versus the 2006 DMA, or on such matters as a rolling look back after 1992, which have been discussed in prior blog articles by this author.

To read the opinion, click here: Dodd v Croskey Slip Opinion No. 2015-Ohio-2362

If you are a landowner, or a holder of severed mineral interests, please contact us if you have questions or legal issues regarding oil and gas rights, leasing enforceability, pipelines and eminent domain, all of which are subject to more intense judicial review than at any time in the last century.  You may e-mail Dale Markowitz at dmarkowitz@tddlaw.com or call (440) 285-2242.