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 16, 2014 at 4:47am

ETA

OK, a couple more references for anyone who wants to delve into this more deeply:

Reference #1

Reference #2

Prob'ly should have posted those earlier in the OP.

Permalink Reply by Frank Walker on November 16, 2014 at 11:38am

Jesse

What you seem to be saying is, given good chance the PA Supreme Court refuses to review this going forward, that the PA Superior Court ruling will stand?!

Permalink Reply by Frank Walker on November 18, 2014 at 10:34am

OK, several things first:

1.  Thanks and props to Jesse.  I'm about to run with what he wrote.

2.  Sorry this impacts solely Pennsylvania.  Not even worth a read by others.

3.  I'm no expert on Title Washing.  I knew more about this a couple years ago than I do now, back when I was taking the threat seriously.  So I'm sort of working from memory.  I'm writing this in hope a more knowledgeable participant here will correct me if what I write is in error.

A lot of land was unseated (unimproved) back in the 1800's.  At least that's true where I live.  But these lands had owners even way back then, and not the King since this thing is limited to post (Revolutionary) war, which the King thank goodness lost.

So if an owner back then sold off his mineral rights to another party, and if that same land years later (but prior to 1961) was sold for taxes, then that other party at that point surrendered their mineral rights because the tax sale "washed" the title.

Until, it seems, now.  Until the Superior Court ruling which, if it stands as Jessie believes is likely, effectively reinstates the mineral rights of that other party from long ago.

I'm as worried about the cloud this could put over my land as I am about any actual loss of rights.  Searching back into the 1800's would be a nightmare.  Have you ever tried to read a deed, or for that matter a lease, written in cursive?  It's very, very slow work to ferret out the detail hidden within such documents.  So asserting proof of ownership of our minerals, for some of us at least, could be tedious and time consuming.

And of course if another party comes forward to assert their rights, you're looking at a possible court fight, with instantaneous escrowing of your royalties.

I'm more than four years in on my lease.  If another party comes forward and can prove their ownership of (what I always honestly believed are) my minerals, do I have to return all those royalty payments?  Do I have to return my original bonus payment?  I dunno, but I surely wish I did know.

I hope the Pennsylvania Supreme Court reviews this entire matter.  But I have to agree with Jesse it's been a while and things are not looking all that great.

 

Permalink Reply by DONNA M SELLERS on November 18, 2014 at 11:33am

Frank may I ask if you know what in a DIVISION ORDER it states that you have so many net acres lets just say 4.654557 but under pay status it has ST (I was told suspended title) does that mean royalties are held up in Escrow?  I just cant seem to find out about this ST thing I have called CHK and been given 3 or 4 different stories now Rice owns it and they cant tell anything till they do their own title searchs. Ever heard of anyone else with this problem? thanks

Permalink Reply by Philip Thackray on November 19, 2014 at 1:28pm

Frank,

I had an Abstractor do an Abstract of Title on a farm I bought here in Butler County, PA last year.  I wanted to be sure that I was getting the mineral rights.  I went through the same process that the Gas & Oil companies go through.  These title searches go back to the time of first discovery of gas and oil in the Americas circa 1859.

If you signed a lease and the O&G did a title search it is very likely that it went back to the 1850's.

You can have such a search done.  Mine cost about $2000.00 dollars.  The Attorney who requests such a search then issues an Attorney Certification of Title which also carries an insurance policy.  I got a title search back to the 1800's and title insurance for LESS than a separate title insurance policy would have cost!  Oh - and normal title insurance does not cover mineral rights issues only surface.

Regards,

Phil

Permalink Reply by Frank Walker on November 20, 2014 at 2:33am

That's good stuff, Phillip.  Thanks!

Please allow me to share my own experience:

When I bought my property, following a thorough search,  there were no deed reservations for any leases.  There was no mention of past leases on my deed.  The title insurance company accordingly issued me a policy.

Much later I learned there was a lease on my property which had not been found by the searchers.  Further, and more importantly, I learned the title policy insured only the value of my property at time of purchase.  Setting aside completely considerations of oil and gas, just the increase in property value due to inflation alone, over many years, makes (almost) worthless the title policy for which I had paid good money.  And for certain, that same policy would offer no help whatsoever in addressing losses which might involve the value of my oil and gas.

This is only MHO:

I don't have a high regard for the ability of title policies to cure problems which arise long after the policy is issued.  If a title challenge comes up soon after purchase, of course, the title policy will bail you out.  But title policies are a vanishing asset, at least in my view.  Without wanting to go off topic or sound overly controversial, I view title policies as something of a scam.  I say this because they impart to the buyer a false sense of security.

Permalink Reply by Philip Thackray on November 20, 2014 at 2:58am

Frank,

Conventional title insurance is just like fire insurance for your house or accident insurance for your car.  Actuarials calculate the probability of a negative event and insurance companies price policies accordingly.  There may be no title search at all.  Furthermore, as you have mentioned, conventional title insurance only covers surface events not issues below the ground.

When I had the Abstract of Title done, my attorney informed that he would issue the Attorney Certificate of Title and that the Certificate would cover the surface and minerals and that the Certificate was backed by a 2 million dollar insurance policy against future claims.  When he told me all of this I thought for a moment and said "so I don't need to buy separate title insurance policy?".  He paused for a moment and said "No, you don't need separate title insurance".  The conventional title insurance company wanted $6000.00 for insurance that only covered the surface.  For 1/3 of that price I got the surface and the minerals covered.

So if someone is buying a piece of property and the mineral rights are important, have an Abstract of Title done along with an Attorney Certificate of Title.  Every attorney will have the back-up insurance policy but most will not be willing to share that fact with the client.

Phil

Permalink Reply by Frank Walker on November 20, 2014 at 3:16am

Very interesting and pertinent "inside" stuff there, Phil.  Thanks!!

Permalink Reply by Jack Young on March 27, 2015 at 3:24am

Actually, title washing does apply to other states. New York had essentially the same rule, and it's never been challenged.

Permalink Reply by Harrison Run on November 19, 2014 at 9:58am

Frank, which side of this are you on?  Can you tell us what Herder says that could take away your rights?  If you are a surface owner or the mineral rights owner, I think you had better go to the local courthouse and check the deeds to your property going back as far as you can, even if you have to read some script.  If at any point, there is a reservation mentioned in one of the deeds, then it means that someone else may own the mineral rights on your property (if you are the surface owner.)  If the surface was severed from the sub-surface (usually happened in the end of the 19th century), then the person who purchased the land from the previous owner did not purchase the subsurface, only the surface.  So whoever sold the deed to you should have shown that in your deed.   But if your property was sold in a tax sale at some point, then the person who sold you the property may have claimed that the property had been title washed - that when it was sold in a tax sale the subsurface and the surface were reunited.  As I look at Herder, it seems to be about whether it is legal for one group to take another groups property in that manner.  There seems to be a group who say that title washing was always the law of the land and there is another group saying that title washing strips owners of their property (the mineral rights) without due process. The latter group says they should not be penalized if the surface owner failed to pay their taxes.  

On the other hand, you are already drilling on your property and so if someone does come claiming it, you can declare adverse possession.  However you will need to show that you have been drilling for, I think, 20 consecutive years to be able to do so.  

Permalink Reply by Frank Walker on November 19, 2014 at 10:46am

Harrison

Thanks for a really good and thoughtful post.  I'm honestly not advocating for one side or the other . . . not yet anyway.  I own, or at least I hope I own, both the surface and subsurface of my land en toto.  But I live in a region of PA which, even today, is quite rural.  It's easy to envision that back in the 1800's my land, and most of the land hereabouts, was unseated.  And I only have searches back about one hundred years, plus or minus.  I never asked, but I doubt my gasco ever searched back into the title washing era.

The real purpose of this thread was just to raise awareness of this issue, which apparently has not gone away as I earlier had believed.  Title washing has the possibility of making some currently unsuspecting persons quite wealthy, while at the same time making other PA landowning persons really unhappy.

I don't know how long the Supreme Court has before they must tell us what they're going to do . . . if anything!

I suppose, if the Superior Court decision stands, lawyers and searchers might descend on our Halls of Records all across Pennsylvania in effort to turn up new found wealth.  Then they locate the lucky, but unsuspecting, winners and offer to explain to them their windfall provided the beneficiary agrees to cut the lawyer in.  Title washing is too legally complex for the average person to comprehend, so I have to concede lawyers doing discovery will earn their money.

For me, as I wrote above, a real concern is possible gasco clawback of money paid to me over the years, as it might turn out, in error.  Clawback, in any situation, is always extremely threatening and problematic.  But if I don't really own my minerals, and if another party takes my gasco to court to recover bonus and royalty rightfully theirs, I cannot believe my gasco would do other than come after me for money they paid me in error.

Permalink Reply by Samuel J. Orr on November 19, 2014 at 1:01pm

I think a far as any clawback  that you might possibly be saved from that by some applicable statute of limitations which of course would depend on how much time had elapsed from the time you received the royalties until some Gasco tried to invoke clawback. I could envision a hypothetical case where perhaps a landowner had erroneously been paid royalties for 15 years after which it was discovered the payments had been made in error, and Gasco tried to invoke clawback. I can envision that there might be some statute of  limitations that might at the least limit the number of years of royalties to which any clawback might be invoked. I have no idea if this might really be true, but am posting so that perhaps some Pa lawyers with real knowledge can weigh in. 

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