Ohio Supreme Court Reconciles Application of the 1989 and 2006 Versions of Dormant Mineral Act
On September 15, 2016, the Supreme Court of Ohio issued its much-anticipated decisions in multiple appeals dealing with the Ohio Dormant Mineral Act, Ohio Revised Code § 5301.56 (DMA). Using Corban v. Chesapeake Exploration, L.L.C. (Slip Op. No. 2016-Ohio-5796), as the lead case to determine the pivotal legal issues, the Supreme Court held:
The 1989 version of the DMA is not self-executing, and, therefore, did not cause ownership of mineral rights to automatically transfer to the owner of the surface rights;
Because the 1989 DMA is not self-executing, a surface owner must bring a quiet title action to obtain a judicial decree that a mineral interest has been abandoned and is merged with the surface estate pursuant to the 1989 DMA; and
The 2006 DMA, and not the 1989 DMA, applies to all claims asserted after June 30, 2006, the effective date of the 2006 amendments to the statute.
The Court applied its holding in Corban to all of the pending DMA appeals, but provided specific commentary only in its decisions in Walker v. Shondrick-Nau (Slip Op. No. 2016-Ohio-5793), and Albanese v. Batman and Lipperman v. Batman (combined) (Slip Op. No. 2016-Ohio-5814). The remaining decisions merely reference the result (affirmance or reversal of the appellate court decision), with a cursory reference to Corban, Walker, or the Court’s previous decision in Dodd v. Croskey (143 Ohio St.3d 293).
Corban v. Chesapeake: The 1989 DMA Is Not Self-Executing, and the 2006 DMA Applies to All Claims Brought to Court After June 30, 2006
In Corban, the Supreme Court was tasked with answering the following certified question of state law from the United States District Court for the Southern District of Ohio: “Does the 2006 version or the 1989 version of the [Dormant Mineral Act] apply to claims asserted after 2006 alleging that the rights to oil, gas, and other minerals automatically vested in the surface land holder prior to the 2006 amendments as a result of abandonment?”
The Court answered the certified question and concluded that the 2006 DMA applies to all claims asserted after June 30, 2006. In comparing the 1989 DMA to the Ohio Marketable Title Act, the Supreme Court did not equate the former’s use of the word “deemed” with the latter’s use of “extinguish” and “null and void.” Rather, the Court determined that the 1989 DMA creates a conclusive presumption (i.e., an evidentiary device) as to the abandonment of severed mineral interests. Therefore, the surface owner must bring a quiet title action in order to terminate abandoned mineral rights pursuant to the 1989 DMA. The Court believed that the Ohio General Assembly did not intend that mineral rights would automatically transfer to surface owners outside of the record chain of title.
The 2006 DMA contains a specific procedure for serving notice upon mineral interest holders, who must either file a claim to preserve or an affidavit in order to protect their interest from abandonment. These requirements help to establish the surface owner’s marketable title. After the 2006 DMA became effective on June 30, 2006, surface owners were required to comply with its notice and recording procedures before the mineral rights could be deemed abandoned and vested to the surface owner. Importantly, the Court indicated that these procedures apply equally to claims that mineral interests were abandoned prior to, or after, the amendments became effective. The 2006 DMA further avoids the constitutional perils of retroactivity because it applies prospectively as to all claims asserted after its effective date. The amended statute implements a procedure for dealing with claims to mineral rights, and does not adversely affect any substantive rights that may have accrued prior to its enactment.
Walker v. Shondrick-Nau: A Mineral Interest Is Preserved Where Its Holder Follows the 2006 DMA Recording Requirements.
In Walker v. Shondrick-Nau, the Seventh District Court of Appeals held that because the 1989 DMA was self-executing, the mineral interest had been abandoned as of March 22, 1992, due to the lack of savings events prior to that date. Applying Corban, the Supreme Court reversed the Seventh District and held that the 2006 DMA applied to the case, which had been commenced in 2012. The surface holder took no court action prior to the 2006 DMA amendments to determine the mineral interest to be abandoned. When the surface owner served a notice of intent to abandon under the 2006 DMA, the mineral interest holder responded by timely filing an affidavit and claim to preserve. Therefore, the mineral interest was preserved pursuant to the 2006 DMA. The Court also noted that if the 1989 DMA had applied to the Walker appeal, the Court would have had to determine whether a savings event occurred within the statutory period.
Albanese v. Batman and Lipperman v. Batman:Mineral Interest Is Not Abandoned Where Surface Owner Asserted 1989 DMA Claim After June 30, 2006, But Did Not Comply with 2006 DMA’s Notice and Recording Requirements.
In the related cases Albanese v. Batman and Lipperman v. Batman, the Seventh District Court of Appeals held that a 1981 recorded affidavit was a savings event that preserved Batman’s interest pursuant to the 1989 DMA. The Supreme Court reversed, and held that the 2006 DMA applied because both Albanese and Lipperman filed their respective Complaints after the 2006 DMA became effective even though both Complaints only asserted claims pursuant to the 1989 DMA. However, as the Court noted in Corban, the 1989 DMA created a presumption as to abandonment, and a quiet title action was required before the mineral interest could be abandoned. The Court held that the surface owners must comply with the 2006 DMA’s notice and recording (affidavit) requirements as prerequisites to the abandonment of the mineral interest. Neither Albanese nor Lipperman complied with the 2006 DMA requirements, and because the 2006 DMA applied because their cases were filed after its effective date, the mineral interest remained with the mineral owner (Batman).