accompanying Comment states: Marketable title is a title free of adverse claims, liens and defects that are apparent from the record. Any objections should be reasonable and not based on speculation. 10 The title standard assures a title free from reasonable doubt, but not from every doubt . 11 Speculative or overly cautious concerns without solid factual basis do not impair marketability, thereby supporting the reliable transfer of real property titles in Oklahoma. 12 However, as will be demonstrated, the Oklahoma Title Examination Standards do not 5 Cline , 479 F. Supp. 3d 1148 at 1157 citing Krug v. Helmerich & Payne, Inc. , 2015 OK 74, 362 P.3d 205. In Oklahoma, the oil industry has engaged in abusive practices where producers or first purchasers often withheld royalty payments from owners for extended periods. For decades, these entities would delay or decline distributing proceeds from oil and gas sales, citing reasons like title defects or the inability to locate owners, but often without making reasonable efforts to resolve these issues. This practice allowed them to benefit from the interest earned on these funds during the delay, particularly lucrative during times of high interest rates in the late 1970s and early 1980s, leading to significant litigation as owners fought to receive their rightful payments in a timely manner. See , 2015 OK AG 6, ¶1-¶4. 6 The Cline court explained: When Sunoco pays owners late, it does not automatically pay statutory interest. . . . Sunoco only pays statutory interest when specifically requested by an owner. . . . Although Sunoco knows that it owes interest on late payments under the PRSA, it takes the position that the statute does not set forth a due date; in other words, the debt never becomes due. Sunoco takes this position based on industry practice and the advice of counsel. Cline., 479 F. Supp. 3d at 1160. 7 Sunoco argued that it had a good faith belief that it did not have to pay interest automatically based in large part on industry practice. Cline, 479 F. Supp. 3d at 1178. However, the court in a scathing rebuke to industry practice and bad lawyer advice stated: As thousands of mothers have told their children, the fact that everyone does something does not make it right. Here, an industry (apparently supported by its lawyers) decided that it owes interest that it never has to pay. This myopic group-think does not excuse keeping millions of dollars of other people’s money. Id. at 1179. 8 52 O.S. § 570.10. 9 Oklahoma Title Examination Standards §1.1. 10 Id. 11 See generally, Paul E. Basye, Clearing Land Titles § 4 (2nd ed 1970) (Marketability and Its Appraisal) 12 Id. fn. 12, citing, In Delnay v. Woodruff, 221, N.W. 614 at 1928, (the court said: The objection that a title is defective should have some reasonable foundation of fact. A mere aversion to taking property as security, the title to which is subject to some captious doubt or the remote and improbable possibility of litigation, is not enough. Even the opinion of counsel that a title is bad is not sufficient, if in fact erroneous, to raise such a doubt as will render a title unmarketable.)
As explained in Cline, [t]he Oklahoma Legislature adopted the prompt payment rule [under the PRSA] because of abusive practices by the oil industry, which frequently withheld payments from owners for a long time. 5 However, it appeared little had changed since the enactment of the PRSA. Before Cline , it was still the industry-wide practice to withhold interest on late royalty payments until such interest was specifically requested by an owner. 6 After Cline , Oklahoma law requires automatic interest for late payment of proceeds. 7 Here, we focus on one uniquely Oklahoma method of using an affidavit of heirship, recorded ten (10) or more years, to acquire marketable title to a severed mineral interest—without the need for a formal probate of the decedent’s estate. Additionally, we will examine the effect on marketable title of using same affidavit but recorded for less than ten (10) years, for purposes of paying royalties and avoiding automatic interest penalties under the PRSA. Marketable Title Defined Crucially, the PRSA provides that marketability of title shall be determined in accordance with the then current title examination standards of the Oklahoma Bar Association. 8 These standards—regularly updated by the Oklahoma Bar Association’s Title Examination Standards Committee—serve as the authoritative benchmark for title examiners, operators, and courts when assessing whether title defects justify suspending payments. In the wake of Cline –and resulting scrutiny of royalty payment practice—Oklahoma oil and gas title examiners face heightened pressure to apply consistent, defensible standards when evaluating the marketability of title. Inconsistent or overly cautious determinations can expose operators to significant interest liability for suspending otherwise presumptively marketable royalty proceeds. The Oklahoma Title Standards define a marketable title as . . . one free from apparent defects, grave doubts and litigious uncertainty, and consists of both legal and equitable title fairly deducible of record. 9 Furthermore, the
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N at i onal A ssociation of D i v i s i on O rder A nalys t s
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