This is the first in a series of articles delving into the history and influence of the Ohio Dormant Minerals Act since it was enacted in 1989.
The oil boom at the turn of the last century led property owners selling their land to reserve from the sale, for themselves, “the oil and gas and other minerals” — thus creating severed mineral interests. During the next 40 to 50 years there were two world wars, divorces, deaths and myriad other family-changing events. In many cases, the ownership of severed mineral interests became clouded. Through the years, legislatures in the Midwest have worked to address the situation through mineral lapse acts or dormant minerals acts, whereby the severed interest is reunited with the surface.
With the advent of horizontal wells, consternation around determining who owns the minerals has become exacerbated. Horizontal wells and fracking have made severed interests, even small ones, a matter of animated debate. Furthermore, any time the legislature tries to decide who wins, the loser is bound to argue that the Constitution requires restitution. As Justice Oliver Wendell Holmes Jr. said in one of his famous dissents, “Great cases, like hard cases, make bad law.” Northern Securities Co. v. United States, 193 U.S. 197 (1904). The severed mineral interest issue pits two fundamental principles against each other: the certainty title to land vs. the need to extinguish dormant claims so that development can proceed.
The objective of this series of articles is to trace the history and evolution of Ohio’s Dormant Minerals Act (DMA), and to examine current issues related to its implementation.
The DMA was enacted in 1989 as part of the Ohio Marketable Title Act (MTA), which itself became law in 1961. The MTA is best understood not in the abstract, but (at least for this writer) in the context of actual facts. A recent case from Licking County is illustrative.
Ohio’s Marketable Title Act
A portion of land in Licking County was once owned by the Ohio Midland Railroad. Though not clear in the court’s opinion, presumably the original deeds to the railroad in the mid-1800s were effective “for so long as the property is used as a railroad.” The interest granted by the grantors is a “fee simple determinable,” and the interest retained by the grantors is a “possibility of reverter.” Ohio Midland conveyed its fee simple determinable to the B&O Railroad with a deed recorded on Nov. 5, 1915.
In 1984, the Thomas J. Evans Foundation purchased the property from the railroad. The foundation took steps to develop the property into a public bicycle path. Because the property was no longer to be a railroad, the Licking County Prosecutor filed a complaint seeking a declaration regarding ownership of the land. J. Terry Evans, the Licking County Treasurer, was the plaintiff. The foundation and adjoining property owners where named as defendants. The foundation claimed full ownership. The adjoining property owners claimed that the property reverted to them once it had ceased to be used as a railroad. The trial court issued granted summary judgment in favor of the foundation holding that any interests arising before Nov. 5, 1915, were extinguished by the operation of Ohio’s Marketable Title Act, R.C. 5301.47 to R.C. 5301.56 (MTA). The adjoining property owners appealed. Evans v. Thomas J. Evans Found., 2010 Ohio 541, 2010 Ohio App. LEXIS 427, 2010 WL 560668 (Ohio Ct. App., Licking County Jan. 5, 2010. Discretionary appeal not allowed by the Ohio Supreme Court.) Evans v. Thomas J. Evans Found., 125 Ohio St. 3d 1416, 2010 Ohio 1893, 925 N.E.2d 1003, 2010 Ohio LEXIS 1305 (2010).
The court explained that the MTA, which became law nearly 50 years ago as a means of simplifying land title transactions, allows persons to rely on a record chain of title as set forth in the pertinent statutes by eliminating “ancient interests,” which operate to cloud otherwise clear titles (citations removed). Citing Collins v. Moran, Mahoning App.No. 02 CA 218, 2004 Ohio 1381, P 20, the court said:
“The MTA functions as a 40-year statute of limitations for bringing claims against a title of record.”
Furthermore, the statute itself, at R.C. 5301.55, states that the MTA “shall be liberally construed to effect the legislative purpose of simplifying and facilitating land title transactions ***.”
Note that there is no notice requirement to or for the benefit of possible adverse claimants. It’s automatic.
Let’s digress by looking at the MTA in more detail starting with R.C. 5301.48:
“Any person having the legal capacity to own land in this state, who has an unbroken chain of title of record to any interest in land for 40 years or more, has a marketable record title to such interest as defined in section 5301.47 … , subject to [R.C. 5301.49].” (emphasis added)
“A person has such an unbroken chain of title when the official public records disclose a conveyance or other title transaction, of record not less than 40 years at the time the marketability is to be determined, which said conveyance or other title transaction purports to create such interest, either in:
(A) The person claiming such interest; or
(B) Some other person from whom, by one or more conveyances or other title transactions of record, such purported interest has become vested in the person claiming such interest;
with nothing appearing of record, in either case, purporting to divest such claimant of such purported interest.” R.C. 5301.48. (emphasis added)
R.C. 5301.47(A) provides that “marketable record title” operates to extinguish such interests and claims, existing prior to the effective date of the root of title, as are stated in section 5301.50 of the Revised Code. (emphasis added)
Similarly, R.C. 5301.50 provides record marketable title:
“shall be held by its owner and shall be taken by any person dealing with the land free and clear of all interests, claims, or charges whatsoever, the existence of which depends upon any act, transaction, event, or omission that occurred prior to the effective date of the root of title. All such interests, claims, or charges, however denominated, whether legal or equitable, present or future, whether such interests, claims, or charges are asserted by a person sui juris or under a disability, whether such person is within or without the state, whether such person is natural or corporate, or is private or governmental, are hereby declared to be null and void.” (emphasis added)
There are some limits. Marketable record title is subject to matters specified at R.C. 5301.49:
(A) “Possibilities of reverter which have existed for forty years or more if preserved as provided for in R.C. 5301.51;
(B) All interests preserved by filing proper notice in accordance with R.C. 5301.51;
(C) Adverse possession;
(D) Any interest arising out of a title transaction created subsequent to the effective date of the root of title (provide that an interest that has expired cannot thus be “recreated”); and
(E) Certain rights specified at R.C. 5301.53.” (emphasis added)
Note, again, that the interest is extinguished automatically except in the case where a claimant preserves the interest by recording a detailed affidavit during the 40-year period. See R.C. 5301.51 and 5301.52.
“Root of title” is defined at 5301.47 (E) as “conveyance or other title transaction in the chain of title of a person, purporting to create the interest claimed by such 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 40 years prior to the time when marketability is being determined. The effective date of the ‘root of title’ is the date on which it is recorded.”
A “title transaction” means any transaction affecting title to any interest in land, including title by will or descent, title by tax deed, or by trustee’s, assignee’s, guardian’s, executor’s, administrator’s, or sheriff’s deed, or decree of any court, as well as warranty deed, quit claim deed or mortgage.” R.C. 5301.47 (F).
With that background, let’s get back to the Evans case. The trial court found that the foundation’s 1984 deed from the Baltimore and Ohio Railroad Company was a “title transaction.” The trial court also found that the foundation’s “root of title” was the previous deed in the chain of title — the deed to B&O on Nov. 5, 1915. The trial court recognized this as the first deed to be found in the foundation’s chain of title, which was recorded more than 40 years before marketability was determined. Accordingly, the trial concluded that the foundation has “marketable record title” to the former railroad strip.
As the holder of marketable record title, the foundation was not bound by interests existing before the root of title. The foundation, thus, was not required to check the title for any transaction occurring before Nov. 5, 1915.
Addressing the adjoining property owners’ possibility of reverter (based on the theory that the property is no longer being used for a railroad), the court said:
“We agree with the foundation that such an assertion can only be maintained under the facts of this case if a preservation notice under R.C. 5301.51 is filed. The record in this case indicates there were no preservation notices filed in either the chains of title of appellants or the foundation, at any time, much less during the critical 40 years following Nov. 5, 1915, the foundation’s root of title. *** Under the statutory scheme, other persons (here, appellants) have the opportunity to utilize recordation in the chain of title to preserve their rights, and if they fail to do so, undesired outcomes for some landowners may result, as is evident in the case sub judice. The Ohio Supreme Court has recognized: ‘The Marketable Record Title Act is also a recording act in that it provides for a simple and easy method by which the owner of an existing old interest may preserve it. If he fails to take the step of filing the notice as provided, he has only himself to blame if his interest is extinguished.’ Heifner v. Bradford (1983), 4 Ohio St. 3d 49, f.n. 4, 4 Ohio B. 140, 446 N.E.2d 440, quoting Miami v. St. Joe Paper Co. (Fla. 1978), 364 So.2d 439, 442.”
Payment of real estate taxes
In some states, payment of real estate taxes can impact record title. Here, the adjoining property owners claimed they had paid real estate taxes at certain times for their entire parcels, including the former railroad right-of-way. The court responded, “Nonetheless, the payment or non-payment of real estate taxes has no bearing on the question of ownership under the circumstances of this case. There is no provision in the Act that indicates that the determination of marketable record title is materially affected by the payment or non-payment of real estate taxes.”
Thus, the court held:
- That appellants failed to preserve their alleged rights in the property, and the trial court properly found that “any interests arising prior to Nov. 5, 1915, are null and void under the Act; and
- That the foundation holds marketable record title and was entitled to rely upon the provisions of the MTA when it purchased the railroad property in 1984.
The operation and effect of the MTA, while perhaps controversial, is nevertheless clear.
In the next installment of this series, we will examine other DMA infrastructure, including a case applying the MTA to a severed mineral interest.