PA Supreme Court - Title Washing - Herder Spring Hunting Club v. Harry and Anna Keller

Rather than further hijacking Ron Hale's thread elsewhere, I decided t'would be a better idea to give this topic it's own well-deserved thread.

A year or two ago I had cast aside any interest in title washing, believing the topic legally dead, or at least moot.  IOW, back then I thought it represented no possible threat to my mineral ownership here in PA.

It would seem the PA Superior Court had a different view, with their ruling having subsequently been appealed to the PA Supreme Court.  As best I'm able to determine, Herder Spring Hunting Club v. Harry and Anna Keller remains in the hands of our Supreme Court and no ruling has yet been handed down.

Rather than slough through title washing again, I'll just post this link:

Title washing reference

I cannot believe the Supreme Court will do other than overrule the Superior Court.  But at the same time, I'd not have guessed in advance the Superior Court would have ruled as it did.

If by chance the PA Supreme Court upholds the Superior Court ruling, there could be a legal earthquake here in Pennsylvania shale country regarding mineral ownership.  I think drilling could be set back if that happens, and so could payment of my royalties should any uncertainty or doubt be created as to my ownership of my minerals.  Royalties placed into escrow cannot be spent.

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Permalink Reply by Frank Walker on November 20, 2014 at 2:03am

Thanks, Samuel, for that contribution.  I believe you might be onto something with your statute of limitations thinking.

I naively believed, not all that long ago, that our Pennsylvania courts would surely uphold title washing because to do otherwise could lead to widespread chaos and even restrain commerce.

But as Jesse pointed out, above, our Supreme Court has chosen so far not to intervene.  In light of events, perhaps a less naive view is that courts in general support their own.  In this case that means the "legal community".

This is not to assert the Superior Court ruled in error.  And they certainly were apologetic in their ruling.  But the potential of this to make miserable the lives of countless unsuspecting PA landowners remains remarkably large.  Even if clawback somehow could be circumvented, leased landowners would lose all royalties going forward.  And PA landowners currently unleased would lose everything.       

 

Permalink Reply by Jim Litwinowicz on November 20, 2014 at 2:10am

Frank; read your lease. Look for clause that covers warranty of title.  If it says you warrant the title, you may have issues if someone else claims the mineral rights in the future. If you had a good attorney draft it, it should say that you do not warrant the title and you would not be liable for back pay of any royalties or bonus....but could lose future payments.  If you signed a standard lease from a landman, it will usually state that you warrant the title which is one of many reasons why one should always use an attorney.

As others have stated, gas cos usually go back to 1850 when doing title so you should be safe.  Even if someone eventually claims title, you may have the possibility of suing the title company that did the work and/or the gas co that contracted them.

I am not an attorney so talk to a good O & G attorney for proper advice.

Permalink Reply by Frank Walker on November 20, 2014 at 10:04am

Thanks, Jim.  That's a really sweet post, at least for me.  And I'm sure other landowners will be reading their leases exactly as you suggest.

I most certainly did not warrant my title.  But without your post I would not have thought of that aspect on my own!  My heart goes out to landowners who signed "boiler plate" leases.  They have been harmed thereby in so many ways.  And this is just another thing that could reach out and bite them.  I hope somehow everyone comes out of this OK.

Jim, I don't know across Pennsylvania the percentage of boiler plate leases vs. leases which might be more protective for the landowner against clawback, along the lines you mentioned.  But if the percentage of boiler plate leases is too low, I would have to think the industry will become involved here at some point, if the Supreme Court stays out.  Otherwise gas companies might be facing a wave of double payments for bonus and royalty.  It seems to me they would have to fight that somehow.

Permalink Reply by David Mason on November 20, 2014 at 9:33am

This concept which you refer to as "title wash" is not new.  It was standard knowledge for lawyers and land men in the 19th century.  Far from creating havoc and unrest, affirmance by the Pennsylvania Supreme Court would settle the issue for many owners, including the Commonwealth of Pennsylvania, DCNR Bureau of Forestry, and the Pa Game Commission.  There has been speculation on the number of acres or percentage of state owned and controlled acreage which is dependent upon the concept but I do not have that information right now.

An attorney practicing real estate title law with respect to subsurface rights in Pennsylvania would likely be aware of this concept and has advised his/her clients about it already.  I doubt if it comes as a surprise to very many experienced practitioners.  I don't believe it would be a catastrophe if HERDER SPRING is upheld, as it should be.

The decision in HERDER SPRING is regarding "Unseated lands" - or that land which was unoccupied and uncultivated.  Many times the unseated lands consisted of the large and vast wilderness tracts owned by distant landowners. The real estate taxes on unseated lands were different than for seated lands. Unseated land was itself liable for payment of the real estate taxes and the owners of such tracts  were not.  There was no personal liability on owners for the debt of these taxes.  Consequently, if and when owners allowed their lands to be sold for non-payment of real estate taxes they avoided personal debt for the real estate taxes.  Because the LAND owed the taxes, when the land was sold for non-payment of taxes, all of the estates which were assessed and taxed when the land was sold were conveyed to the Buyer at a tax sale.  Each property owner was responsible for reporting to the Commissioners his acquisition of or ownership in any of these remote, mountain, unoccupied tracts whether he acquired (or retained) surface acreage or subsurface interests.  The owner had to report it so he could get taxed separately.  Until he reported, his interest was taxed along with the rest of the unseated land.  if the unseated land was sold, and the taxes were and had been assessed against the whole, the Buyer at a tax sale acquired the whole.  Pretty simple, actually, and widely recognized and acknowledged in the 1800's and early 1900's.

Let's say Jones owned a tract of unseated land of 500 acres, and sold 100 acres to Smith.  It was Smith's duty to tell the County he owned 100 acres.  If he didn't report this deed to the County, the tract would still be assessed and sold as 500 acres.  The County did not do title searches.  Even though Smith had a deed for 100 acres, if he didn't report this transfer, he wasn't taxed and didn't pay his taxes on the 100 acres of land.  The land gets sold as a 500 acre tract. 

"Title Wash" was the intentional perversion of this concept principally by the Pennsylvania tanning industry.  O sold 1,000 acres to A, reserving the minerals, oil & gas.  A sold to B, who failed to pay the real estate taxes.  X bought the land at a tax sale, waited 2 years to see if O or B redeemed it.  When neither O nor B did so, X owned the land, along with the minerals, oil & gas, because O never reported his severance to the County to be taxed separately. If it was not taxed separately, then it was included in the sale of the land.

Permalink Reply by Frank Walker on November 20, 2014 at 10:15am

David good and helpful post.  For the record, my OP was never intended to advocate on one side of this issue or the other.  I was merely trying to raise awareness.  I also acknowledged in the OP that this thing is far from being "new".  As I said earlier, I had (wrongly) stopped following title washing a couple years ago because I thought it had "gone away" as an issue for PA landowners.

Your post is valuable because it highlights for all PA landowners the magnitude and seriousness of this controversy.  Opinions on both sides are strongly and tightly held.  The amount of money on the line is potentially very, very large.  And for landowners without a good lease, the specter of clawback looms.

Permalink Reply by David Mason on November 20, 2014 at 10:33am

Thanks for the very well-written and expressed reply, Frank.  I was not intending to disparage your OP, and agree it was written with respect for both sides of this issue.  My post was a simple attempt to explain the how and why to those who viewed the HERDER SPRING decision as unfair.

Permalink Reply by Harrison Run on November 20, 2014 at 11:06am

Interesting.  Thanks for the post.  But you say the LAND owed the taxes.  If the mineral right were never taxed and the LAND was responsible for the tax, as you said, (given that the definition of land is "surface" http://dictionary.reference.com/browse/land), then is it fair, or more to the point, legal, to take someone's mineral rights if the surface owner doesn't pay?  It seems like they are actually different properties to me.  .   

Permalink Reply by Bonefish on March 26, 2015 at 8:23pm

Hi Everyone.  I just found that Frank created a desperate thread.  Thanks Frank.

Check Hoyt Royalty's page.  It has been updated with briefs.  Pretty technical, but it is all laid out.

HERE

I am going to keep all my future responses here.
Enjoy.
Permalink Reply by Frank Walker on March 27, 2015 at 1:37am

Bonefish

I do not know why you posted a blank entry here, but I'm glad you did.  Once again I had forgotten about this important issue winding its way through our PA courts at an absolutely glacial pace.  Forgetting was easy.  Metal rusts faster than resolution of this important matter is making progress.

Anyway, I have searched for updates and found little new.  But I did find this:

March 13, 2015, 3:36 PM ET -- Several trusts and corporations with nearly 200,000 acres of collective subsurface gas and oil rights in north-central Pennsylvania asked the state Supreme Court on Monday to overturn a ruling that a tax sale of surface rights also conveyed previously separate subsurface rights.

The amici filed a brief supporting the heirs of the Keller family, who lost the gas rights on a 406-acre property in Centre County, Pennsylvania.

That's all I have because that information appears on a pay website . . and I did not pay.  Still, it does tell us the matter remains active and large interests remain very much involved.

Permalink Reply by Frank Walker on March 27, 2015 at 2:02am

Thanks to Bonefish I now can post this link to the brief itself:

Herder-Spring-amicus-brief

It's only my opinion, but I think any PA in-the-shale landowner should read that brief.

Note the brief is dated March 9, 2015.  I totally missed it so again special thanks to Bonefish for bringing this to our attention.

Bonefish also has brought to our attention this more comprehensive website:

Website for Herder-Spring news

Permalink Reply by Bonefish on March 27, 2015 at 9:21am

Hi Frank,

I didn't mean to make a blank post.  It was really late and the one-year old was title-washing my sleep.

The post I meant to put up was to thank you for starting a Keller thread, and to post the link that you posted.  So, thanks.

I have read and studied both briefs (Amicus and Appellant).  Pretty dense, but there you have it.  We'll see what the Attorney for Herder says in their brief.  I wonder if Herder's attorney is the same David Mason that opined above in this thread, seems likely. 

Gonna vent a little….While I think everyone knows where I stand on this issue, and it is anyone's guess how the SCOPA will decide, I find my sanity reinforced by the fact that the highest court in PA is paying attention to this Russian/Venezuelan style taking.  As I mentioned in another post, my family's mineral rights were given by my late-grandfather to my dad and uncle as a college graduation present.  And then they gave it to me shortly after the end of my enlistment.  It wasn't worth anything at the time.  But it meant something to each of us.  It tied us to our heritage in PA and to our family history from a very different time.  And then the lawsuit came, and the O&G Companies stopped returning calls.  What we didn’t know, was that people were ignoring our reservation, pencil whipping adverse possession quiet-title actions, misinterpreting laws and cases, just so they could make $5/acre leasing amongst their friends, and then selling the idea to the operators (who now stand to lose, a lot.)  And nobody, including posters to this forum, could explain how or why this was possible.  When they have tried to explain how this taking worked, their explanation just caused my sense of reason, logic and justice to spin-out. 

Rumor, wink, nod, "trust me", "you just don't understand", "that's the way we have always done it", "100 years of jurisprudence", Pennsylvania is just weird, In Rem, “Proctor Rule”, you abandoned it, or you failed to report the unreportable.  These were the vaporous, moving arguments being made.  And if this really was happening, why was there such a vacuum of law, cases, policies, regulations, notices, recordings, commissioner’s records, etc validating the process?  This is a taking without documentation.  It’s a black hole that can’t be defended against (Tioga doesn’t have a single example of a duly recorded severance being reported for assessment, neither does Centre).  There is what the statute says and a handful of cases that tackle the issue stating that is illegal; for obvious reasons.

If I were conspiratorial (I am not, but tempting), I would say Dr. Evil himself couldn’t have come up with a better caper than title wash.  Was this Birrell’s plan?  I don’t really think so.  I think it evolved out of necessity, economics, bad luck, a room full of lawyers in Williamsport and absent subsurface owners.  And some folks are believing it.  Maybe I am nuts.

So now the Kellers are representing my thoughts, in front of the Supreme Court.  And if they lose here, I  expect an application for Writ of Certiori from the SCOTUSA.  And as mentioned in the brief, years and years of costly “house to house” litigation over property specific chain of title. 

Or they can settle it now by enforcing what the law says.

Bonefish

Permalink Reply by Frank Walker on March 27, 2015 at 10:50am

Understood, Bonefish.  Those one-year-olds will get you every time!  :-)

As I wrote earlier my involvement with respect to this issue, unlike your own, is not personal at this time.  I'll use that as my excuse for having fallen asleep at the switch.  I'm merely here, at least for now, to raise awareness.  So I'm very grateful to you for having posted regarding this latest development, which I find significant.

I am respectful that opinions on this matter, in the overall, run hot and heavy on both sides.  I do not take sides today, though if my own mineral rights ever should become threatened I certainly would take sides.

What I found most interesting in your post is your reference to the possibility of a SCOTUS appeal.  Of course I realize the amount of money on the line here is nearly beyond imagination.  But I had hope, and to be honest I had assumed, that the PA Supreme Court would be the end of the road for this litigation.  If the SCOTUS becomes involved many of us, myself certainly included, might be dead before this is finally decided once and for all!

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