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Volume MMXXII • No 2
www.NADOA.org
Contents Feature
Articles
Legal Updates 1776 Energy Partners v Freeport-McMoran Oil & Gas............7 Ammonite Oil & Gas v RR Comm’n of Texas............................9 Ohio Clarity on Distinction between Reservation & Exception.......................................................11 Ohio Dormant Mineral Act ‘Reasonable Diligence’ Standard. ..............................................................12 Texas 10 Year Adverse Possession Statute................................13 Legislative Updates West Virginia...........................................................................22 Unclaimed Property Texas Voluntary Disclosure Program.......................................23 Unclaimed Property Reporting................................................24 Ohio Unclaimed Reporting and Webinar...............................27 National Niche...........................................................................28 Institute Update.........................................................................35
NADOA 2022 Officers President Michele Lawton 1st Vice President Norma Dooley 2nd Vice Presiden t Vicki Danielson, CDOA Treasurer Valerie Wible, CDOA Corresponding Secretary Jason Alexander Recording Secretary Kimberly Bowman
The NADOA News Magazine is a quarterly publication of the National Association of Division
In This
Order Analysts P O Box 1656 Palm Harbor, FL 34682
Issue
President’s Corner..............................................................1 Decimal Points...................................................................2 Membership Recognition Nominations...............................3 Certification....................................................................... 5 Cob Webs............................................................................6 Follow NADOA..................................................................7 New Members...................................................................29 Counterpart Connection...................................................30 In Memory........................................................................33 Ellis Rudy Memorial Scholarship......................................46 2022 NADOA Board & Committee Chairs.......................48 Calendar of Events...........................................................49
Subscription: By membership to NADOA, at $75.00 per year. News Magazine Editor Rona L. Erickson, CDOA Kaiser-Francis Oil Company Ronae@KFOC.net 918.491.4319
Graphic Design, Paul Beach
On the Cover: San Antonio Sunset, Courtesy of the City of San Antonio.
All rights reserved. No part of this publication may be reproduced/copied without written permission. Editorial disclaimer: The contents of this newsletter are intended for member use only and any other use without permission from the NADOA Board of Directors is strictly prohibited. Articles published herein represent the view of the authors; publication neither implies approval of the opinions expressed nor accuracy of the facts stated and NADOA accepts no liability for misprints.
President’s
Corner
Michele Lawton, CDOA 2022 NADOA President
Happy Spring NADOA! Time is flying by this year. The NADOA Board and Institute Committee are really working hard to plan a great Institute in San Antonio. Now that we are seeing travel open up for everyone we are hoping to have an awesome in person showing this year for the 49th Annual Institute. Our hotel is the Marriott Rivercenter right on the Riverwalk. There are so many great restaurants and things to see in downtown San Antonio. This year we are having Institute in October so the weather in Texas should be perfect for strolls along the Riverwalk and visiting the Alamo. Plan to come in early and stay through the weekend to enjoy everything the city has to offer. Although we have a great city location this year, NADOA is all about education for our members. Stephanie Moore and Armando Lopez, our Institute co-chairs, have enlisted some great committee chairs who are bringing us exceptional speakers. There will be Wednesday classes again this year featuring Unclaimed Property and CDOA Review. I always learn something new no matter what the topic is. Don’t miss out on this educational opportunity! I am really looking forward to our Wednesday reception and Thursday night event to get some quality networking time while having fun. I enjoy getting to put faces with the names of members at different companies that I e-mail with for work but have never met in person. We are a small niche in the oil and gas industry making networking important to keep up with all the challenges our careers bring.
Hurry and get registered for our early bird pricing of $625.00 through June 30!
I am looking forward to seeing everyone In San Antonio for some fun and education! Let’s Float Down the River of Education together!
See you all soon!
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NADOA
Decimal Points
Regional Reporters ABADOA Steptoe & Johnson PLLC Ryan.daniels@steptoe-johnson.com CAPDOA OPEN DADOA OPEN DALWORTH Lewis Box, CDOA lewis.box@gmail.com HADOA Emily Sheffield esheffield@kolawllp.com PBADOA Rosanne Kidder Rosanne.kidder@pxd.com SADOA Joe Anderson Janderson96@cox.net Arkansas Jackie Clotfelter, CDOA jclotfelter@hannaoilandgas.com Kansas Amy Flaming Amy.flaming@chsinc.com North Dakota Kimberly A. Backman kbackman@crowleyfleck.com New Mexico Zachary P. Oliva zoliva@kolawllp.com Louisiana Margaret Patton mpatton@pattonfirm.com
Remember to keep your NADOA directory information updated. Due to all the changes taking place in our industry and the world, it is more important than ever to maintain professional contacts and receive the educational benefits of membership in NADOA. NADOA online Job Bank has new postings. Visit http://www.nadoa.wildapricot.org/page-662233
2022 NADOA Article Deadlines
July 8...........................Special Institute Edition
August 12...................................Third Quarter
November 11............................ Fourth Quarter
If you have a suggestion for someone to act as a Regional Reporter to help NADOA keep abreast of current legislation and legal issues for your region, please submit the name or the name of the firm.
2022 News Magazine Team
Kim Bowman Associate Editor, Photography
Rona Erickson CDOA, Editor
Susan Bradley CDOA Associate Editor
Michelle Davila Associate Editor
Cheryl Hampton Associate Editor
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2022 Nominations for NADOA Membership Recognition
I would like to nominate ___________________________________________________ for the Ellis Rudy Memorial Lifetime Achievement Award. This award is presented to the NADOA member who has exemplified the Division Order profession through demonstrated leadership contributions to the industry and the profession during his/her career. Do you have a great mentor that you’d like to thank? Do you know an organization that is promoting the advancement of the Division Order profession? Consider nominating someone or an organization for an NADOA Membership Recognition Award. A nomination form is included in this issue of the NADOA News Magazine or is available on the NADOA website: http://www.nadoa.wildapricot.org/page-1709232
I would like to nominate ___________________________________________________ for the NADOA Membership Recognition Corporate Award. Presented to the group or company that has contributed to NADOA’s growth and development, the Division Order profession, and/or the industry during the past year.
I would like to nominate ___________________________________________________ for the NADOA Membership Recognition Award for Education. This award is presented to the NADOA member who has dedicated their time and service to the betterment of Division Order Professionals through influence and mentorship.
I would like to nominate ___________________________________________________ for the NADOA Membership Recognition Award for Interaction. This award is presented to the NADOA member or affiliated organization who has had a positive community impact and extraordinary service and dedication in leading and promoting the Division Order profession.
I would like to nominate ___________________________________________________ for the Russell Schetroma Memorial Speaker’s Award. This award is presented to the individual who has made a difference in the lives of our members by contributing to the growth, development and education of our association or industry during the past year.
Send nominations to: Member Recognition Awards Committee, c/o Sonya Turner (sturner@farmersnational.com) Nominations will be accepted through July 1, 2022
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2022 Nomination Form for NADOA Membership Recognition
2021 Nomination Form for NADOA Membership Recognition
I would like to nominate ___________________________________________ for the NADOA Membership Recognition Award for Interaction . This award is presented to the NADOA member or affiliated organization who has had a positive community impact and extraordinary service and dedication in leading and promoting the Division Order profession. Please detail the nominee’s involvement in NADOA, the services they have performed and/or contributions they have made (You may attach a separate sheet if necessary). Please detail the nominee’s involvement in NADOA, the services they have performed and/or contributions they have made (You may attach a separate sheet if necessary).
___________________________________________________ Signature ____________________________________________________ Please Print Name ____________________________________________________ Email Address
Send nominations to: Member Recognition Awards Committee, c/o Sonya Turner (sturner@farmersnational.com) Nominations will be accepted through July 1, 2022
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CANDIDATES FOR CERTIFICATION Publication of the following “Certified Division Order Analyst” applicant(s) fulfills the requirement as stated in the Voluntary Certification Policy, III C.2 which states: “…applicant’s name will be published in the NADOA Newsletter or other official publication of NADOA.” This allows the NADOA membership an opportunity to present objections to the certification of the applicant. Any objection to the certification of the applicant must be in writing and signed by a NADOA member or non-member who qualifies his knowledge and objection of the applicant. All such letters will be considered confidential and must be received by the NADOA Certification Committee at the following address within thirty (30) days following the last day of the month in which the Newsletter or other official publication of NADOA was published: NADOA Certification Committee P O Box 1656 Palm Harbor, FL 34682 If the objection warrants denial of the certification or temporary withholding of certification, the applicant will be notified by Certified Mail.
CANDIDATES FOR RECERTIFICATION
Kaitlin LaFlamme – Littleton, CO Lauretta Randle – Shreveport, LA
Tanya Ward – Plano, TX
2022 CERTIFICATION COMMITTEE
Chairman
Lewis Box, CDOA
Lewis.box@gmail.com
Riverbend Energy Group
Recertification Credits Sherry Werth, CDOA
Srw6886@gmail.com
Independent
Recertification Applications
Darryn McGee, CDOA
Darryn.Mcgee@coterra.com
Coterra Energy Inc.
Applications & Candidate Publications Stephanie Moore, CDOA
smoore@callon.com
Callon Petroleum Company
Review Manual/Forms
Lewis Box, CDOA
Lewis.box@gmail.com
Riverbend Energy Group
Testing
Bonnie Didrickson, CDOA
bonniedidrickson@gmail.com
Independent
Policies
Megan McKee, CDOA
mmckee@rangeresources.com
Range Resources
CDOAs with July renewal dates be sure to submit your 2021 employment credits using the Certification Self-Service portal on the NADOA website. This is a pre-approved drop down item. TIME TO RECERTIFY? If you are a CDOA whose certification expires July 1, 2022, you should receive your Re-Certification Application electronically by the end of June. If you do not receive your application, please contact Darryn McGee, CDOA at darryn.mcgee@coterra.com.
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webcasts and Kiefaber & Oliva LLP webinars are pre-approved. Please check the certification page to determine if other webinars are pre- approved or need to be submitted for approval to the NADOA Certification Committee. Contact Sherry Werth for approvals ( srw6886@ gmail.com ). Certification points should only be applied for after completing the event. If you are unable to attend an event due to unforeseen circumstances, it is an ethics violation to apply for the credit. NADOA – Webinar information and registration links will be posted on the website ( www.nadoa.org ). Webinars are free for NADOA members and $15.00 for non- members. Links to recorded webinars are available to NADOA members by
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Legal
Updates Articles are not intended to be and should not be relied upon as legal advice or to establish any kind of an attorney-client relationship with the author. How Safe is Your Harbor?: Suspense of Production Payments in the Wake of 1776 Energy Partners, LLC v. Freeport-McMoran Oil & Gas LLC
Texas
decision reversed the trial court’s grant of summary judgement and remanded the case back to the trial court for further proceedings regarding fact issues. Between the years of November 2011 through March 2012, Appellant 1776 Energy Partners, LLC (“1776”) and Appellees Freeport- McMoran Oil & Gas, LLC and Encana Oil & Gas (USA), Inc. (“Freeport” and “Encana”) entered into five joint operating agreements for the development of their oil and gas leases. Freeport and Encana were designated as operators of the contract areas. 1776 participated as a non-operator and was entitled to its proportionate share of the net proceeds from the production of oil and gas. 2 1 1776 Energy Partners, LLC v. Freeport-McMoran Oil & Gas LLC , No. 04-20-00468-CV, 2021 Tex. App. LEXIS 10157 (Tex. App. Dec. 29, 2021) 2 Id. at 2.
In 1776 Energy Partners, LLC v. Freeport-McMoran Oil & Gas LLC , the Court of Appeals of San Antonio examined whether production payments under various joint operating agreements were properly held in suspense without interest under the “safe harbor” provisions of Texas Natural Resources Code Section 91.402(b) (a/k/a the “Texas Suspense Statute”). 1 Specifically, it examined whether creation of a constructive trust pursuant to a judgment amounted to “a dispute concerning title that would affect distribution of payments” pursuant to Section 91.402(b)(1)(A). For the reasons discussed below, the Court found that as a matter of law, creating a constructive trust pursuant to a judgment did not create a suspense-worthy title dispute affecting distribution of payments under the joint operating agreements. Consequently, the operators were not entitled to withhold payments on production without accruing interest. This
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that would affect distribution of payments.” 9 Ultimately, the Court determined that the judgement did not create a dispute concerning title that would affect the distribution of payments as set forth under the joint operating agreement. The Court reasoned that with or without the judgement, payments would still be owed to 1776, either in their own right as the owner of “legal title,” or as constructive trustee for Longview’s “use and benefit” until title was assigned to them under the judgement. 10 Because the assignment never occurred, legal title always remained in 1776 11 . The Court also applied Section 91.402(b)(1)(B) (ii) of the Suspense Statute which states that payments may be withheld without interest beyond the time limits set out in Section 91.402(a) if there is “a reasonable doubt that the payee has clear title to the interest in the proceeds of production.” 12 On this issue, the Court determined that there was a genuine issue of material fact as to whether Freeport and Encana’s doubts about 1776’s title being clear were reasonable, and remanded the case to the trial court for further findings. 13 This case reminds us that the courts rely on a strict interpretation of statutory language, and that specifically, not every title “dispute” is enough to invoke the “safe harbor” provision of the Texas Suspense Statute. For safe harbor protection, the title dispute must rise to the level that it affects the distribution of payments, and that in this case, a constructive trust created pursuant to a judgment does not meet the standard.
In 2011, 1776 was sued by Longview Energy Company (“Longview”) for breach of fiduciary duty. Longview prevailed at the trial court level, and was granted a constructive trust over their “equitable interest” in 1776’s rights to receive payments on production under the joint operating agreements. 3 1776 was ordered to assign the interests to Longview within thirty days of the judgement, but until said assignment was executed, 1776 was to retain the legal title to the assets as constructive trustee for Longview’s use and benefit, retaining no equitable interest. 4 1776 appealed the judgement, and posted bond to delay the enforcement of the order until the case had gone through appeal. As a result, no assignment from 1776 into Longview was ever executed. The case ultimately made its way to the Texas Supreme Court, where judgment was rendered in favor of 1776 in December of 2017. 5 While the case was on appeal, Freeport and Encana placed 1776’s production payments in suspense. 6 1776 filed suit claiming that Freeport and Encana wrongly withheld the payments on production, and that 1776 was entitled to statutory interest on the withheld payments. 7 Freeport and Encana moved for summary judgement arguing that they were, as a matter of law, entitled to place the payments in suspense without accruing interest pursuant to the safe harbor provisions of the Texas Natural Resources Code Section 91.402(b) because the judgement against 1776 created a title dispute. 8 The trial court agreed, granting their motion for summary judgement and dismissing 1776’s claims with prejudice. 1776 appealed, and the case was heard in the 4th District Court of Appeals, San Antonio. For the Appellate Court, the issue hinged on the specific language of the safe harbor provision and whether the facts of this case amounted to “a dispute concerning title that would affect distribution of payments.” Specifically, Section 91.402(b)(1)(A) states that payments may be withheld without interest beyond the time limits set out in subsection 91.402(a) if there is “a dispute concerning title
3 Id. at 2-3. 4 Id. at 3. 5 Id. at 4.
6 Id. 7 Id. 8 Id. 9 Id. at 5-6 10 Id. . 11 Id. at 8-9. 12 Id. at 6. 13 Id. at 10-11.
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_____________________________________________ www.kolawllp.com The content of this publication and any attachments are not intended to be and should not be relied upon as legal advice or to create a lawyer-client relationship. © 2022 Kiefaber & Oliva LLP. All rights reserved. This publication may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Houston (principal office): 815 Walker St., Suite 1140, Houston, Texas 77002, 713-229-0360 | Columbus: One East Livingston Avenue, Suite B, Columbus, Ohio 43215, 614-349-4525 | Oklahoma City: 9520 N. May Avenue, Suite 219 Oklahoma City, OK 73120, 405-757-8797
CONTACT If you have any questions regarding this case law update or suggestions for topics to be covered in future issues, please call our office at 713-229-0360 or contact:
Brad Gibbs Partner, Houston bgibbs@kolawllp.com
Emily Sheffield Senior Attorney, Houston esheffield@kolawllp.com
Ammonite Oil & Gas Corp. v. R.R. Comm’n of Tex.
Texas
The facts here are simple: Ammonite offered to pool 16 units, subject to a mutually agreeable JOA where EOG Resources would act as operator. Ammonite proposed a 10% charge for risk attached to the working interest, a payment to EOG that would compensate them for the risk of drilling additional wells in the forcibly pooled unit. EOG’s expert testified that Ammonite’s offer did not adequately compensate EOG for the risk and that a 100% charge for risk was the proper amount due to the limited permeability of the rocks within the Eagle Ford shale. The expert further noted that unconventional drilling and completion techniques often result in wells that are not commercially successful. Since the Eagle Ford shale requires substantial investment in acreage, the number of wells EOG would have to drill to potentially recoup costs, the expert argued, would be excessive.
In Ammonite Oil & Gas Corp. v. R.R. Comm’n of Tex , the San Antonio Court of Appeals heard an appeal regarding the Mineral Interest Pooling Act (MIPA). Under MIPA, the owner of a mineral estate may ask the Texas Railroad Commission (TRC) to force other tracts owners within both the same proration unit and within a common reservoir to pool their interest with that of the applicant. To invoke MIPA, an applicant must 1) “make a fair and reasonable offer to the owner/operator(s) of the other well(s) to voluntarily create a pooled unit prior to filing an application under MIPA;” 2) file a MIPA application to force pooling; 3) make a showing that the forced pooling would prevent the drilling of unnecessary wells, protect correlative rights, or prevent waste. The Act does not define what constitutes a fair and reasonable offer, meaning that the TRC is charged with determining the nature of a fair offer. In other words, the TRC decides on a case-by-case basis whether an offer meets the definition of fair and reasonable. If the offer is not fair, then the TRC is said to lack jurisdiction over the issue and must dismiss the case.
Further findings that the TRC took into account included:
1) A showing that none of EOG’s well drained Ammonite’s tracts. 2) Ammonite actually agreed in its voluntary
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pooling offers that a greater than 10% charge for risk was reasonable. 3) Ammonite failed to provide survey data or a metes and bounds description of their tract. 4) Forced pooling here would not prevent waste. 5) Ammonite offered no expert witnesses. Accordingly, the TRC found that the first requirement of MIPA, a fair and reasonable offer, was not met. When the Court of Appeals conducts a judicial review of the TRC’s decision in a case, it will apply the substantial evidence standard. This means that a court may only reverse and remand if it finds the TRC’s proceedings were “in violation of constitutional or statutory provision,” “in excess of the agency’s statutory authority,” “made through unlawful procedure,” “affected by other error of law,” “not reasonably supported by substantial evidence,” or it the decision was “arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.” This standard of review does not entail the court weighing the evidence provided during the administrative hearing and coming to a decision regarding its fairness. Rather, the court’s role here is to determine whether some reasonable basis existed to justify the TRC’s decision. This is a low bar. This case is fundamentally an administrative law case and demonstrates the deference Texas courts give to agency decision making processes. In applying the substantial evidence standard of review here, the court determined that the TRC’s dismissal of Ammonite’s MIPA application was proper based on some of the reasons noted above. These factors were more than enough to show the TRC had “some reasonable basis” for their decision, which is all the deferential standard employed by the court requires. As a matter of policy, the TRC does not want to force landowners to pool their lands. It would prefer that lessors and lessees come to a mutually agreeable contractual agreement without involving the courts. Accordingly, the purpose of MIPA is to encourage voluntary pooling, not to be the proverbial stick in a mineral
owner’s toolbox when a carrot cannot convince an adjoining owner to voluntarily pool. CONTACT If you have any questions regarding this case law update or suggestions for topics to be covered in future issues, please call our office at 713-229-0360 or contact:
Brad Gibbs Partner, Houston bgibbs@kolawllp.com
Eli Kiefaber Partner, Houston rkiefaber@kolawllp.com
Zachary Oliva Partner, Houston zoliva@kolawllp.com
_____________________________________________ www.kolawllp.com The content of this publication and any attachments are not intended to be and should not be relied upon as legal advice or to create a lawyer-client relationship. © 2022 Kiefaber & Oliva LLP. All rights reserved. This publication may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Houston (principal office): 815 Walker St., Suite 1140, Houston, Texas 77002, 713-229-0360 | Columbus: One East Livingston Avenue, Suite B, Columbus, Ohio 43215, 614- 349-4525 | Oklahoma City: 9520 N. May Avenue, Suite 219 Oklahoma City, OK 73120, 405-757-8797
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Ohio Supreme Court Decision Provides Further Clarity on the Common Law Distinction Between a Reservation and an Exception
Ohio
Royalty and one half of the gas is hereby reserved and is not made a part of this transfer” (hereafter referred to as the “Mary Fleahman Interest”). Mary Fleahman then conveyed three-fourths of her rights to the oil and gas to W. T. Fleahman. The Stark County Court of Common Pleas held that the language contained in both deeds constituted reservations rather than exceptions, and therefore words of inheritance were required to create a fee- simple interest. The Fifth District Court of Appeals affirmed, stating that “[b]oth reservations explicitly indicate the grantors were reserving interests unto themselves, not merely excepting them from the grant. The Mary Fleahman Interest and the W. T. Fleahman Interest created new, severed oil and gas interests.” On appeal, the Supreme Court of Ohio disagreed with the lower courts and held that the language contained in both deeds constituted an exception rather than a reservation. The Court stated that because the oil and gas was already in existence at the time of the conveyance, a fee simple property interest existed in the unaccrued oil and gas royalties that the grantors could except from the transfer of the real estate. The conveyances did not create the oil and gas royalty interest, but rather excluded or withheld said interest from the operation of the conveyance, thereby constituting an exception. The grantors owned a fee-simple interest that was inheritable and, therefore, words of inheritance were not required to retain more than a life estate in the excepted interest in the oil and gas royalties. Furthermore, in response to Peppertree’s assertion that W. T. Fleahman and Mary Fleahman retained an interest only in oil and gas royalties which are personal property interests and therefore the reservation of the same created new property rights, the Court again disagreed and held that, at the times that W. T. Fleahman and Mary Fleahman
On February 15, 2022, the Supreme Court of Ohio issued its decision in Peppertree Farms, L.L.C., et al. v. Thonen, et al., providing further clarity on the common law distinction between a “reservation” of a property interest and an “exception” to a conveyance. The Court concluded that the deeds creating the severed oil and gas rights contained an exception of said rights from the transfer of the property, instead of a reservation of said rights that would have required words of inheritance prior to March 25, 1925. On March 25, 1925, the General Assembly abrogated the common law distinction between a reservation and an exception whereby words of inheritance were no longer required to retain, or pass on, a fee-simple absolute interest in land. However, prior to March 25, 1925, words of inheritance were required to create a fee-simple interest in a reservation or conveyance of an estate. Otherwise, the interest reserved or conveyed was limited to that of a life estate and the interest expired upon the death of the interest holder. If the interest created was an exception, rather than a reservation, then no words of inheritance were required to create a fee-simple estate. In Peppertree, the severance language at issue was contained in two deeds made prior to 1925 and, as such, the courts were called to determine whether the interest created was a reservation or an exception, resulting in either a life estate or a fee-simple interest, respectively. In 1916, W. T. and Katherine Fleahman conveyed two tracts of land in Monroe County, Ohio, to W. A. Gillespie, using the following severance language: “Grantor W. T. Fleahman excepts and reserves from this deed the one half of the royalty of the oil and gas under the above described real estate” (hereafter referred to as the “W. T. Fleahman Interest”). Mary Fleahman then acquired W. A. Gillespie’s interest and executed a deed in 1920, stating, “the 3/4 of oil
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each conveyed the property, they owned an existing real-property interest in unaccrued royalties from the production of oil and gas. This interest could properly be severed from both the surface and the mineral estate and, therefore, their property
rights in the partial interest to the oil and gas were absolute. As such, the Court held that the W. T. Fleahman Interest and the Mary Fleahman Interests were not life estates and did not terminate on their respective deaths.
Authors:
William J. O’Brien Jr. MEMBER
Andreah S. Riedel ASSOCIATE Andreah Riedel’s practice includes abstracting for oil and gas title opinions, preparing easements for oil and gas clients, and drafting title opinions for drilling operations to commence.
Bill O’Brien focuses his practice in the areas of energy and mineral law. Mr. O’Brien is a trusted advisor to the land departments of oil and gas exploration and production companies and serves as one of the leaders of the firm’s Division Order Title Opinion team. Phone: (412) 504-8026 Email: bill.obrien@steptoe-johnson.com
Phone: (304) 230-2351 Email: andreah.riedel@steptoe-johnson.com
Ohio Supreme Court Further Clarifies ‘Reasonable Diligence’ Standard under the Ohio Dormant Mineral Act
Ohio
On March 24, 2022, the Supreme Court of Ohio issued its decision in Fonzi v. Brown and Fonzi v. Miller , Slip Opinion No. 2022-Ohio-901, discussing the level of due diligence required of a surface owner to provide notice to a severed mineral interest owner in order to abandon said mineral interest under the Ohio Dormant Mineral Act (DMA). The court held that surface owners did not exercise reasonable due diligence when they failed to conduct a public record search in the county where the last known mineral interest holder resided, despite having knowledge of the same. These cases concern two adjoining parcels of land located in Monroe County, Ohio. For both parcels, prior deeds within the chain of title identified that the severed mineral interest holder, being Elizabeth Henthorn Fonzi (Fonzi), resided in Finleyville, Washington County, Pennsylvania. The surface owners, being appellants Gary D. Brown, Allen B. Miller, M. Craig Miller, and Brenda Thomas, subsequently began the process to have the Fonzi mineral interests declared abandoned. In doing so, their attorney searched the Monroe County
public records and conducted “limited Internet searches,” but failed to uncover any information about Fonzi or any potential heirs to send notice by certified mail. Therefore, the surface owners published notices of intent to declare the Fonzi mineral interests abandoned in a Monroe County newspaper, and subsequently filed affidavits of abandonment. The Fonzi heirs then filed complaints in the Monroe County trial court for declaratory judgment, seeking to quiet title, alleging that the surface owners had failed to exercise reasonable due diligence in attempting to locate the holders of the Fonzi mineral interest. The trial court granted summary judgment in favor of the surface owners in both cases, holding that the surface owners had made reasonable efforts to locate the potential Fonzi heirs. The Seventh District Court of Appeals reversed the trial court’s decision in both cases, instead finding that the surface owners failed to conduct any search outside Monroe County when the surface owners knew that Fonzi lived in Washington County, Pennsylvania, at the time the reservations were made. On September
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1, 2020, the Supreme Court of Ohio accepted this appeal. In its discussion, the court relied upon its prior decision in Gerrity v. Chervenak , 162 Ohio St.3d 694 (2020), wherein it refused to adopt a bright- line rule and instead stated that the analysis of reasonable diligence should be conducted on a case-by-case basis. Here, the court stated, “[s]urface owners are not required to do the impossible… the issue is not whether the surface owner could have located all mineral-rights holders by exercising reasonable diligence. Instead, the question is whether the surface owner did exercise reasonable diligence.” The court placed the burden of proof on the surface owners to show that they were reasonably diligent in attempting to identify and locate the holders of the severed mineral interests. In placing the burden of proof on the surface owners, the court stated that O.R.C. 5301.56(E)(1)
provides that the surface owner “shall” comply with the statutory notice requirements outlined therein, and therefore, “the reasonable-diligence standard is entirely within the hands of the surface owner.” The court found that the surface owners did not exercise reasonable due diligence because they failed to search the public records of Washington County, Pennsylvania, and as a result, the surface owners’ attempts fell short compared to those attempts made in Gerrity . The Supreme Court of Ohio affirmed the appellate court’s decision. If you have questions about this ruling or how it might affect your business, please contact the authors of this alert.
Contributors Andreah S Riedel, Associate William J. O’Brien Jr., Member
DON’T FENCE ME IN OR NO FENCE, NO LIMITATION TITLE Part One – The Ten Year Statute
Texas
The stated purpose of this paper is to investigate the pertinent statutes/case law regarding the necessity of the prior proper fencing of lands by the adverse claimant when those lands are claimed under the ten (10) year limitation statute. Nature of Adverse Possession “Limitation represents the statutory acquisition of title to land by means of adverse possession. As shown by Article 5515 of the statutes, and the decisions interpreting such statutes, this means that there has been an actual, notorious, distinct and visible appropriation of land commenced and continued uninterrupted for the statutory period under a claim of right hostile to the claim of another, and of such character as to indicate unmistakably an assertion of a claim of exclusive ownership in the occupant.” Lange on Land Titles §861 (Texas Practice, West Publishing). “Adverse possession isn’t about who uses the property more or for better purposes; it’s about
whether one party ousts another from his legally held land. In other words, exclusive possession is required. Kleckner v. McClure , 524 S.W.2d 608, 613 (Tex. Civ. App.—Ft. Worth 1975, no writ) (emphasis added). The owner must be wholly excluded by the adverse claimant.….” Terrill v. Tuckness, 985 S.W.2d 97, 110 (Tex. App.—San Antonio 1998, no pet.). Limitation Title Generally A limitation title is not a marketable title until it is memorialized in a Trespass to Try Title case when it becomes absolute legal title. “ Marketable title has been a defined legal term in Texas jurisprudence since the 1920’s. ( Lund v. Emerson , 204 S.W.2d. 639 (Tex. Civ. App. — Amarillo 1947, no writ.); Owens v. Jackson , 35 S.W.2d. 186 (Tex. Civ. App. — Austin 1931, writ dism’d w.o.j.); Texas Auto Co. v. Arbetter , 1 S.W.2d. 334 (Tex. Civ. App. — San Antonio 1927, writ dism’d w.o.j.); Austin v. Carter , 296 S. W. 649 (Tex. Civ. App. — Eastland
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t
Co. v. Arbetter , 1 S.W.2d. 334 (Tex. Civ. App. — San Antonio 1927, writ dism’d w.o.j.); Austin v. Carter , 296 S. W. 649 (Tex. Civ. App.-Eastland 1927, writ dism’d) and Alling v. Vander Stucken , 194 S.W. 443 (Tex. Civ. App. — San Antonio 1917, writ ref’d)).” ( A Realistic Approach to Identifying and Curing Ancient Title Problems , Terry E. Hogwood – 18th Advanced Oil, Gas and Mineral Law Course).
1927, writ dism’d) and Alling v. Vander Stucken , 194 S.W. 443 (Tex. Civ. App. — San Antonio 1917, writ ref’d)). A “marketable title” is a title based solely on instruments of conveyance properly filed of record and is defined as that title which is reasonably free from such doubt that a prudent man, with knowledge of all of the salient facts and circumstances surrounding the title and their legal significance, would be willing to accept. An objection (read title requirement) to a marketable title is based on serious and reasonable doubts by the title examiner concerning the title that would induce a prudent man to hesitate in accepting a title affected by it/them. ( Lund v. Emerson , 204 S.W.2d. 639 (Tex. Civ. App. — Amarillo 1947, no writ); Owens v. Jackson , 35 S.W.2d. 186 (Tex. Civ. App. — Austin 1931, writ dism’d w.o.j.); Texas Auto Co. v. Arbetter , 1 S.W.2d. 334 (Tex. Civ. App. — San Antonio 1927, writ dism’d w.o.j.); Austin v. Carter , 296 S. W. 649 (Tex. Civ. App. — Eastland 1927, writ dism’d) and Alling v. Vander Stucken , 194 S.W. 443 (Tex. Civ. App. — San Antonio 1917, writ ref’d)).
The 10 Year Adverse Possession Statute
This paper will deal primarily with § 16.026, Tex. Civ. Prac. & Rem. Code; the 10-Year Adverse Possession Limitations Period, and the cases interpreting § 16.026. In particular this paper will address the cases where the issue is generally whether the adverse claimant can make a successful claim for a limitation title under § 16.026 where it DID NOT adequately fence the lands claimed. This paper will not explore what is or is not a “title instrument,” “duly registered deed” or “other memorandum of title” under sub-parts (b) and (c) below. The statute provides the following, quoted in pertinent part: § 16.026. Adverse Possession: 10-Year Limitations Period (a) A person must bring suit not later than 10 years after the day the cause of action accrues to recover real property held in peaceable and adverse possession by another who cultivates, uses, or enjoys the property. (b) Without a title instrument, peaceable and adverse possession is limited in this section to 160 acres, including improvements, unless the number of acres actually enclosed exceeds 160. If the number of enclosed acres exceeds 160 acres, peaceable and adverse possession extends to the real property actually enclosed . (c) Peaceable possession of real property held under a duly registered deed or other memorandum of title that fixes the boundaries of the possessor’s claim extends to the boundaries specified in the instrument. (emphasis added).
A title is NOT marketable if:
1. there is a reasonable chance that a third party could raise an issue concerning the validity of the title to the estate against the apparent owner ( for instance, a claim of adverse possession ) or 2. parol evidence is necessary to remove any doubt as to the validity and/or sufficiency of the owner’s title (for instance, an affidavit of heirship to reflect a deceased owners heirs-at-law) or 3. title rests upon a presumption of fact which, in the event of a suit contesting title, would probably become an issue of fact to be decided by a jury (for instance, whether additions to a tract of land occurred by accretion or avulsion) or 4. the record discloses outstanding interests in other parties that could reasonably subject the owner to litigation or compel such owner to resort to parol evidence to defend the title against the outstanding claims (for instance, a fee simple title with an outstanding, unreleased oil and gas lease is not a marketable title). ( Lund v. Emerson , 204 S.W.2d. 639 (Tex. Civ. App. — Amarillo 1947, no writ.); Owens v. Jackson , 35 S.W.2d. 186 (Tex. Civ. App. — Austin 1931, writ dism’d w.o.j.); Texas Auto
This statute actually sets forth the general outline of this paper:
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3. Hostile intent does require the adverse possessor to claim the lands at issue to the exclusion of all other claimants or owners. The claim of the adverse possessor must be inconsistent with the claims of all other rivals to the fee simple title to the lands at issue. The belief that one is the rightful owner and has no competition for the ownership of the land is sufficient intention of a claim of right.” Estrada v. Cheshire , 470 S.W.3d 109 (Tex. App.— Houston [1st Dist.] 2015, pet. denied); Kazmir v. Benavides , 288 S.W.3d 557 (Tex. App.—Houston [14th Dist.] 2009, no pet.). 4. Hostile possession must be continuous and consistent and must last for the duration of the statutory period. Balli v. McManus , 311 S.W.2d 933 (Tex. Civ. App. —San Antonio 1958, writ ref’d n.r.e.). 5. “The test for hostility is whether the acts performed by the claimant on the land and the use made of the land were of such a nature and character as to reasonably notify the true owner of the land that a hostile claim was being asserted to the property. Winchester v. Porretto , 432 S.W.2d 170, 174-75 (Tex. Civ. App.—Houston [1st Dist.] 1968, writ ref’d n.r.e.). Whether possession is hostile and continuous are questions of fact …” Terrill v. Tuckness , 985 S.W.2d 97, 109 (Tex. App.— San Antonio 1998, no pet.) (emphasis added). 6. The acts of the adverse possessor must reflect an open, obvious assertion of exclusive ownership of the lands at issue. Villarreal v. Guerra, 446 S.W.3d 404 (Tex. App.—San Antonio 2014, pet. denied). 7. Where only grazing of cattle on the disputed lands has occurred, the construction of a fence is required to reflect evidence of a hostile claim by the adverse claimant. Orsborn v. Deep Rock Oil Corp. , 267 S.W.2d 781, 785 (Tex. 1954) (emphasis added). Thus, if the adverse use is a claim by the adverse possessor of having grazed the land for ten years, the claim will fail without proof of a designed enclosure. Burden of Proof 1. Where two or more claimants to the ownership of a tract are involved in litigation, each claimant
• First, what is adverse possession? Coupled with that question, how long must an adverse possessor cultivate or use the land? How long must the cultivation or use continue i.e. for some or all of the ten years? Second, if there is no fence or title instrument containing a property description conveying the lands at issue to the adverse possession claimant, what actions on the part of the adverse possessor are required to claim a) 160 acres or less and b) more than 160 acres? • Last, what is required to claim a property by adverse possession where there is a fence surrounding all or part of the claimed premises? Ultimately, in the absence of a title instrument containing a legally sufficient description , the question becomes whether adverse possession under the statute can be perfected in the absence of an adequate fence circumscribing the lands claimed/at issue? Hostile Intent Initially, the adverse possessor must have the requisite “intent” to claim and ultimately own the lands at issue. The rules regarding the knowledge and intent of the adverse possessor have been developed over time: 1. The first element of hostile intent is whether the acts performed by the adverse possessor were of such a character as to reasonably notify the then legal owner that a hostile claim was being made by the adverse possessor to specific lands. Such notification to the true legal owner is based on the acts of the adverse possessor visibly appropriating the lands at issue such that the true owner has or would have notice of such appropriation. Estrada v. Cheshire , 470 S.W.3d 109 (Tex. App.—Houston [1st Dist.] 2015, pet. denied). 2. Hostile intent does not require that the adverse possessor intend to dispossess the rightful owner or that there is a rightful owner. Tran v. Macha , 213 S.W.3d 913, 914 (Tex. 2006); Kazmir v. Benavides , 288 S.W.3d 557 (Tex. App.—Dallas 2009, no pet.); Estrada v. Cheshire , 470 S.W.3d 109 (Tex. App.— Houston [1st Dist.] 2015, pet. denied).
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seeking to establish its title has the burden of proving each and every fact essential to its claim of title by a preponderance of the evidence. Wells v. Johnson , 443 S.W.3d 479, 489 (Tex. App.—Amarillo 2014, pet. denied). That is, a title claimant seeking to prove its title by adverse possession must prove every fact by “clear and satisfactory” evidence. Orsborn v. Deep Rock Oil Corp ., 267 S.W.2d 781, 786 (Tex. 1954). 2. “To prevail on a claim of adverse possession under section 16.026(a), the elements to prove by a preponderance of the evidence are: (1) actual and visible possession of the disputed property; (2) that is adverse and hostile to the claim of the owner of record title; (3) that is open and notorious; (4) that is peaceable; (5) that is exclusive; and (6) involves continuous cultivation, use, or enjoyment for ten years. Glover v. Union Pac. R.R. Co. , 187 S.W.3d 201, 213 (Tex. App.—Texarkana 2006, pet. denied) citing Natural Gas Pipeline Co. v. Pool , 124 S.W.3d 188, 193-94 (Tex. 2003).” Kazmir v. Benavides , 288 S.W.3d 557, 561 (Tex. App.—Dallas 2009, no pet.) (emphasis added). 3. The ten-year limitations period begins to run on the date the adverse possessor actually goes onto the disputed lands and visibly appropriates the claimed lands. The true issue, which must be proved by a preponderance of evidence by the adverse claimant, is what acts are claimed to constitute a “visible appropriation of the claimed lands.” Waddy v. City of Houston , 834 S.W.2d 97, 103 (Tex. App.—Houston [1st Dist.] 1992, writ denied).” Kazmir v. Benavides , 288 S.W.3d 557, 561 (Tex. App.—Dallas 2009, no pet.). 4. “ One seeking to establish title to land by virtue of the statute of limitations has the burden of proving every fact essential to that claim by a preponderance of the evidence . Rhodes v. Cahill , 802 S.W.2d 643, 645 (Tex. 1990); Orsborn v. Deep Rock Oil Corp. , 153 Tex. 281, 286, 267 S.W.2d 781, 787 (1954) (holding that adverse claimant has the burden to prove every fact necessary to that claim by “clear and satisfactory” evidence which is not a standard of proof included in the Texas pattern jury charge issues except in the instance of the award of exemplary or
punitive damages where the evidence must be clear and convincing and must be supported by an unanimous verdict). Thus, the burden of proving each essential element is on the party claiming title by adverse possession. Fuentes v. Garcia , 696 S.W.2d 482, 484 (Tex. App.—San Antonio 1985, no writ) (citing Davis v. Carriker , 536 S.W.2d 246, 251 (Tex. Civ. App.—Amarillo 1976, writ ref’d n.r.e.)). See Moore v. Stone , 255 S.W.3d 284, 288 (Tex. App.—Waco 2008, pet. denied).” Wells v. Johnson, 443 S.W.3d 479, 488 (Tex. App.—Amarillo 2014, pet. denied) (emphasis added). 5. The burden of proof on the adverse claimant is to show when the acts of adverse possession commenced (the exact date), how long those acts lasted (10 years) and if same were unbroken and prosecuted continuously. Texas law presumes that the true owner is in possession until the adverse possession claimant demonstrates, from an evidentiary standpoint, when adverse possession commenced. Carroll v. Brown, 472 S.W.2d 825 (Tex. Civ. App.—Tyler 1971, n.w.h.) . It is from that point in time that the record title owners obligation to bring suit begins to run. The statute provides that the only way to break the running of limitations is for the record title owner to bring suit within the statutory period. Elements of Adverse Possession The reader is referred to § 16.026. Adverse Possession: 10-Year Limitations Period set out above. The following are the general rules further explaining, via court decisions, how this statute is to be interpreted. 1. “Adverse possession is statutorily defined as an actual and visible appropriation of real property, commenced and continued under a claim of right that is inconsistent with and is hostile to the claim of another person.” Rhodes v. Cahill , 802 S.W.2d 643, 645 (Tex. 1990) 2. Since a completed and perfected act of adverse possession disenfranchises the record title owner, compliance with the statutory requirements is strictly construed. Thomas v. Southwestern Settlement & Development Co. , 131 S.W.2d 31, 34 (Tex. Civ. App.—Beaumont 1939, writ dism’d
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