The Marketable Title Act
In 2016 the Ohio Supreme Court held in Corban v. Chesapeake Exploration, LLC (2016-Ohio-5796) that the 1989 Dormant Mineral Act (“DMA”) (O.R.C. § 5301.56) was not a self-executing statue. Since then surface owners have been turning to the Ohio Marketable Title Act (“MTA”) (O.R.C. § 5301.47-5301.56) as an alternative option to extinguish severed mineral interests. However, uncertainty exists as to whether the MTA can still be used to extinguish mineral interests after enactment of the DMA in 1989.
The MTA was enacted to simplify and facilitate land title transactions. The MTA provides that a person with an unbroken chain of title to an interest for forty years has marketable record title to such interest (O.R.C. § 5301.48). “Record Marketable Title” is defined as a title of record “which operates to extinguish such interests and claims, existing prior to the effective date of the root of title” (O.R.C. § 5301.47(A)). A root of title is a “conveyance or other transaction in the chain of title of a person, purporting to create the interest claimed by such person” that has been of record for at least forty years prior to the time when marketability is being determined (O.R.C. § 5301.47(A)).
The Blackstone Decision
In December 2018, the Ohio Supreme Court issued the opinion in Blackstone v. Moore (2018-Ohio-4959), holding that reference to the type of interest created and to whom the interest was granted in a “root of title” deed was a sufficiently specific reference under Ohio Revised Code Section 5301.49(A). The court created a three-step inquiry to determine whether reference to an interest was sufficiently specific: (1) Is there an interest described within the chain of title? (2) If so, is the reference to that interest a “general reference”? (3) If the answers to the first two questions are yes, does the general reference contain a specific identification of a recorded title transaction (Blackstone at ¶ 12). The interest at issue in Blackstone was a reserved royalty interest, indicating that the MTA is applicable to minerals. However, the court was only presented with the question of whether the particular reference at issue in the case was sufficiently specific under the MTA. Since the appellants conceded that the DMA could not be applied, the court did not address the interplay between the MTA and the DMA.
Blackstone contains a concurrence from J. DeGanaro emphasizing the narrow scope of the opinion and questioning whether the MTA continues to apply to minerals after enactment of the more specific DMA. She notes that the result reached in the opinion did not hinge on the nature of the interest and it should not be read to imply that the MTA still applies to minerals.
Appellate Decisions Post-Blackstone
The Seventh District Court of Appeals has issued a number of decisions since Blackstone holding: (i) oil and gas interests are subject to both the MTA and DMA; (ii) a general exception to the interest claimed in a deed does not prevent that deed from being a root of title deed; and (iii) the MTA can validate a reserved interest that would otherwise be void under the Duhig Rule.
- Oil and gas interests are subject to both the MTA and DMA:
In February 2019, the Seventh District Court of Appeals issued decisions in Hickman v. Consolidation Coal Company (2019-Ohio-492) and Miller v. Mellott (2019-Ohio-504) citing Blackstone for the proposition that mineral interests are subject to both the MTA and DMA. The court did not address the issue of whether the 40-year examination period under the MTA could extend beyond the enactment of the DMA. However, the root of title deeds from both cases resulted in the establishment of record marketable title after 1989, implying that parties seeking to extinguish mineral interests could use the MTA even if record marketable title to the mineral interest could not be established until after 1989. However, in both cases the 40-year examination period did not extend beyond the enactment of the 2006 DMA.
The Seventh District explicitly held that the parties could avail themselves of either the MTA or DMA in Stalder v. Bucher (2019-Ohio-936). The court recited that the MTA does not differentiate between interests, but applies to all interests, and noted the Ohio Supreme Court applied the MTA to a mineral interest in Blackstone (See Stalder at ¶ 15 and 16). Later decisions expanded their reasoning, citing dicta in Corban and providing specific examples of how the MTA and DMA do not conflict (See Senterra Ltd. v. Winland, 2019-Ohio-4387).
On January 21, 2020, the Ohio Supreme Court accepted an appeal in West v. Bode (2019-Ohio-4092) from the Seventh District Court of Appeals under the proposition of law that the DMA is the specific statue that supersedes and controls over the MTA. The decision in this case should provide clarity regarding the interplay between the MTA and DMA.
- General reference to an interest in a “root of title” deed:
In Hickman and Miller, the Seventh District cited precedent from the 1980s and held that a root of title deed cannot include an exception and reservation of the interest claimed as extinguished (Hickman at ¶ 26; Miller at ¶ 27). These holdings seem to be in conflict with Blackstone, where the Ohio Supreme Court applied the MTA in a scenario where the root of title deed contained an exception of the interest claimed by the landowners. Recently, the Seventh District clarified their holdings in Hickman and Miller in Applications for Reconsideration (See Hickman v. Consolidation Coal Company, (2019-Ohio-4077), and Miller v. Mellott, (2019-Ohio-4084)), describing that they could not treat reservation language in the root of title deeds as repetitions due to a gap in title in the court record between the severance deeds and root of title deeds. As a result, the court did not presume evidence outside of the record and treated the reservation language in the root of title deeds as new reservations.
In Senterra Ltd. the Seventh District applied the three-part test from Blackstone to two severed mineral interests. The conveyances after the two severances contain language which except and reserve oil and gas rights without a prior deed reference to the specific severance documents or the persons who reserved the interests. Under the second part of the Blackstone test the court determined that the references were general rather than specific, noting that there is no indication of who reserved the interest and it is unclear what interest is being referenced in the repeated reservation language (See Senterra Ltd. at ¶ 83). The court then moved on to the third part of the test in Blackstone and found that there is no specific identification of a recorded title transaction in the root of title and subsequent deeds (Id. at ¶ 84).
- Implication of Senterra on Duhig Rule and fractional mineral interests:
The third assignment of error in Senterra involved the interplay of the Marketable Title Act and the Duhig Rule, which was applied in Ohio by the Seventh District in Talbot v. Ward (2017-Ohio-9213). The Duhig Rule provides that a reservation of minerals will fail if a grantor breaches a warranty of title when a grant and reservation in a deed cannot be given full effect. Under the facts, in 1954, George Russell conveyed an 86 acre tract, “EXCEPTING and reserving to George W. Russell, his heirs and assigns, one-fourth (1/4) of the oil and gas in and under lying the above described property.” Therefore, under the language in the deed, George Russell conveyed a 3/4 oil and gas interest. However, absent any application of the MTA, at the time of the conveyance he was only vested with a 3/8 oil and gas interest. Therefore, he was in violation of the warranty of title and his 1/4 oil and gas reservation would be void under Duhig. However, the court distinguished the facts of the case from the earlier decision applying Duhig, noting that the MTA validated George Russell’s 1954 reservation because it extinguished the earlier mineral reservations. These reservations were not preserved and no one attempted to correct the record that George Russell’s 1954 reservation was incorrect. Therefore, the MTA validated the reservation that would have otherwise failed under Duhig.
This holding creates various complications in determining mineral ownership in situations where the chain of title contains multiple reservations of fractional interests with repeating reservation language, as an MTA analysis would need to be conducted for each deed.
The Seventh District has applied a broad interpretation of the holding in Blackstone, which only held that “a reference that includes the type of interest created and to whom the interest was granted is sufficiently specific to preserve the interest in the record title” (See Blackstone at ¶ 18). Though the Ohio Supreme Court did apply the MTA to a mineral interest, the court did not address whether the appropriate 40-year examination period could extend beyond the enactment of either the 1989 or 2006 DMA. The forthcoming Ohio Supreme Court decision in West v. Bode should determine whether the MTA can be used to extinguish severed mineral interests after the 1989 DMA and/or 2006 DMA, which will provide some needed clarity for surface owners, mineral owners, and oil and gas operators.