CHAPTER 11 UNQUIET TITLES: Practical Solutions to Common Oil, Gas and Coal Title Problems
| Jurisdiction | United States |
(Apr 1982)
UNQUIET TITLES: Practical Solutions to Common Oil, Gas and Coal Title Problems
Holland & Hart
Billings, Montana
INTRODUCTION
At first glance, the subject of this paper would appear to be easily definable and consequently simple to articulate. But, like icebergs, initial impressions are often deceiving. Indeed, the title of this paper is somewhat of a misnomer. All that can be said about common oil/gas and coal title problems is that each is uncommon. Unfortunately, it is very seldom that a title examiner encounters a problem which is identical to a previous one. It seems each problem has its own special twist or insidious variation. A "common" title problem can be something as relatively simple as ensuring that two names found in a chain of title with different spellings relate in fact to the same person, at one end of the spectrum, to unravelling the complexities of the Duhig rule1 at the other. Consequently, it is important to stress at the outset that each title problem, common or otherwise, must be analyzed and viewed on its own legal and factual bases. It is not an area which lends itself to universal solutions or talismatic remedies.
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Given these general caveats, it should also be noted that the devising or divining of practical solutions to oil/gas and coal title problems is one of the most challenging aspects of mineral title examination. As we all know, clients do not pay title examiners merely to tell them they have problems; instead, they expect answers to those problems. Without intending to sound overly dramatic, finding such answers requires not only perspiration but frequently imagination.
Against this background, consideration was given, in the preparation of this paper, as to what type of guidance would be of the most benefit to the title examiner in finding these solutions. Because of the variance in problems, as discussed above, the approach of discussing isolated problems and their particular solutions was certainly a viable option. Yet, it was felt that an approach in which general "laundry list" types of solution avenues were presented with specific examples being utilized for explanation purposes would be more useful. In this way, the title examiner would hopefully have at least a starting point and some form of checklist from which to approach such problems. Accordingly, this paper discusses the various solution avenues afforded by statutes, specialized affadavits, adverse possession, stipulations, and interpleader actions and concludes with a review of the efficacy of quiet title actions and assumption of risk as being the ultimate title defect remedies.
STATUTORY REMEDIES
As law professors are wont to impress upon students, the place to start in solving a legal problem is with the law and as teachers of legislation courses are equally quick to advise: "Don't forget to look at the statutes." Such admonitions are valuable here. The legislatures of several states, most likely in response to the cajoling of the title examination Bar, have enacted from time to time legislation centered on curing title defects. Two states which have adopted this approach in varying degrees and whose statutes serve to illustrate this point are North Dakota and Montana. In North Dakota, for example, the legislature has periodically enacted statutes which cure defects in foreclosure proceedings. More specifically, Section 1-50-05 (N.D. Cent. Code) provides that:
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"From and after January 1, 1944, no action shall be commenced or maintained, no defense or counterclaim in any action shall be recognized, in the courts of this state, upon the ground that any real estate mortgage foreclosure, sale in connection with which was had prior to January 1, 1943, is defective, legally insufficient or void...." See also generally, Section 1-05-02 , et. seq. (N.D. Cent. Code).
Similarly, in Montana, the legislature, perhaps in a more subtle manner, enacted legislation which deals with the unreleased mortgage problem. Section 71-1-210 MCA provides:
"every mortgage of real property, made, acknowledged, and recorded as provided by the laws of the state shall be good as against all from the time it is so recorded until eight years after the maturity of the entire debt or obligation secured thereby and no longer, unless the mortgagee, his heirs, executors, administrators, representatives or assigns shall, within sixty days after the expiration of said eight years, file in the office of the county clerk where said mortgage is recorded an affidavit setting forth the date of said mortgage, when and where recorded, the amount of debt secured thereby and the amount remaining unpaid, and that the mortgage is not renewed for the purpose of hindering, delaying, or defrauding creditors of the mortgagor or owner of the land, and upon the filing of said affidavit, the mortgage shall be valid against all persons for a further period of eight years."
These are two isolated examples of the way statutes may cure a particular defect. Many others could be cited. Obviously, it must be cautioned that such statutes may not be found merely by looking under the "Title" or "Property" portions of the index to the particular state's statutes. Such statutes are usually hidden in the labyrinth of the specific topic involved, i.e., "Mortgages," "Banking," "Taxes," and thus the review of the state statutes should be extensive and not merely perfunctory.
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On the other hand, state legislatures, in addition to the "subtle" approach discussed above, have also entered the title curative area in more dramatic and substantive fashions. The one such statute which immediately leaps to mind is the "marketable title acts" enacted by several states. See, for example, Section 47-19A-101, et. seq. (N.D. Cent. Code). This whole area of the efficacy of such acts is the subject of an excellent paper presented by Mr. Bate at this Institute and nothing would be gained by repeating that analysis. Suffice it is to say, these broad, general focus type of curative statutes should never be overlooked.
Another type of such broad legislation can be found in the recently enacted Montana "Unlocatable Mineral Owner Act."2 Every title examiner has faced the problem of uncovering a mineral owner or royalty interest owner whose interest vested years ago and who has not been heard from since. Without curative legislation, it was the custom to require that such persons be treated as unleased or unlocatable owners and all production proceeds attritutable to such interest be placed in a suspense account. This led to accounting nightmares. Under the Montana statute, a procedure has been established whereby the clerk of court of the county in which the property is situated can be appointed a trustee for an unlocatable owner, and, as trustee, is given the authority to lease and collect payments on behalf of such owner. This system eliminates the risk to the developer of the "carried" unleased interest.
Before leaving the curative statute area, a brief mention must be made of the relationship of state title standards to curing title defects. Again, this is the subject of a paper presented earlier at this Institute by Mr. Kirven. His well-documented analysis speaks for itself. The purpose for mentioning it here is to alert the title examiner not to ignore this valuable source of finding solutions. These standards usually represent a consensus of expert thinking on common problems and provide extremely useful references. However, in contrast to statutes, such standards should be utilized as guidelines only and not relied upon as providing the ultimate answer. In short, these standards are not law but merely directions and if recognized as such are most useful.
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Putting these factors in perspective, it is clear that both title standards and various state curative statutes, be they direct or indirect, provide one of the best starting places to solve a title defect. It may be argued that such devices are really not a "practical" solution, but if it is agreed that practical means workable, it is submitted that such devices are, in reality, the most practical and certainly should never be dismissed out of hand.
USE OF AFFIDAVITS
The use of specialized affidavits to solve title problems is perhaps the...
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