CHAPTER 12 EXOTIC EASEMENT PROBLEMS TO INTRIGUE THE TITLE EXAMINER

• Jurisdiction: United States

Rights-of-Way How Right is Your Right-of-Way?
(May 1998)
CHAPTER 12
EXOTIC EASEMENT PROBLEMS TO INTRIGUE THE TITLE EXAMINER
Richard H. Bate
Attorney-at-Law
Denver, Colorado

TABLE OF CONTENTS

SYNOPSIS
Page

I. INTRODUCTION

II. THE EFFECT OF TAX SALES, FORECLOSURES AND BANKRUPTCY SALES OF THE UNDERLYING FEE SIMPLE ESTATE ON RECORDED EASEMENTS

A. TAX SALES

B. FORECLOSURES

C. BANKRUPTCY SALES

III. DO RIGHT OF WAY GRANTS AFFECT MINERAL RIGHTS?

IV. ARE UNRECORDED EASEMENTS VALID UNDER RECORDING ACTS AS AGAINST SUBSEQUENT PURCHASERS OF THE UNDERLYING FEE?

V. ARE GRANTS OF EASEMENTS OR RIGHTS OF WAY SPECIFYING A GENERAL, BUT NOT A SPECIFIC, LOCATION VALID? ARE THEY DEFINED WHEN CONSTRUCTED OR DO THEY CONTINUE TO FLOAT?

VI. WHEN DOES AN EASEMENT TERMINATE OR WHEN IS IT DEEMED ABANDONED?

VII. IF AN EASEMENT IS ABANDONED, DOES IT TERMINATE OR MERELY PASS ON INTO OTHER OWNERSHIP?

VIII. WHAT EFFECT DO CONSERVATION, RECREATIONAL (HUNTING AND FISHING) AND HISTORICAL EASEMENTS HAVE ON OIL AND GAS AND MINING OPERATIONS?

IX. DO DEEDS CONVEYING NARROW STRIPS OF LAND CONVEY MINERAL RIGHTS? WHEN THE PURPOSE OF THE GRANT IS STATED TO BE FOR A ROAD, PIPELINE, ETC.?

X. CONCLUSION

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600 Seventeenth Street

Suite 1735 North

Denver, Colorado 80202

So far, in this institute, we have focused on acquiring easements and rights of way. Sometimes, however, particularly when planning a surface mining project, the problem is to get rid of rights of way. Commonly it is thought that if a miner acquires the freehold to the surface and all severed minerals he has no further title problems. In fact. however, many interests of others, less than a freehold but still entitled to enforcement, may persist. These might include various tenancies and contractual rights such as restrictive covenants, as well as equitable servitudes, but, at this institute we are concerned with easements and rights of way, of which there are many types. A broad classification would include easements arising from express grants (or condemnation), implied easements, also known as ways of necessity, and easements acquired by prescription.¹ Only the first of these types of easements can ordinarily be detected by examining the county records. Nevertheless, the nonrecord types can usually be enforced against a bona fide purchaser for value of the freehold in spite of the recording acts because the existence of such nonrecord easements can usually be detected by inspecting the land.² Most recording acts will not protect against nonrecord interests of which a purchaser knew or should have known at the time of purchase, and "should have known" encompasses interest which are discoverable by inspection of the land.³

Easements are also broadly classified as either appurtenant or in gross.⁴ Appurtenant easements are for the benefit of another tract known as the dominant tenement. The property burdened with the easement is the servient tenement. Easements in gross are for the benefit of the grantee of the easement and are not appurtenant to any dominant tenement. At common law, easements in gross were personal and nonassignable, except if granted for commercial

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purposes,⁵ but, increasingly, easements in gross are being authorized by statutes for such purposes as conservation.⁶ These are negative easements which restrict the use of the property burdened by the easement, ostensibly for the benefit of the grantee or the public.

Once the existence of an easement is discovered, a question sometimes arises as to whether it continues to be enforceable. Unlike freehold interests, easements are nonpossessory interests and can be lost by abandonment even if granted in perpetuity.⁷ Easements may be terminated in other ways as we shall see.

The following analyses are not exhaustive. The scope of this paper is too broad to permit coverage of multiple jurisdictions. I have concentrated on Wyoming and Utah law with occasional references to Colorado and other states for purposes of comparison or where there is no Wyoming or Utah law on a subject. Perhaps more importantly, I have tried to suggest methods of analysis that will help to characterize a problem so that, in the absence of authority in a particular jurisdiction, outcomes can be predicted with some degree of confidence (or not). I noticed in my research that in the absence of a controlling statute, courts have relied on standard treatises and the Restatement of Property to define the characteristics of easements. Legal conclusions drawn by such authorities tend to have theoretical underpinnings which are predictive in novel cases. An important example is the conceptual model of an appurtenant easement being a part of the dominant tenement, and not a part of the servient tenement.⁸ One consequence of this model is that termination of an appurtenant easement without affording just compensation or at least procedural due process to the owner of the dominant estate encounters constitutional objections.⁹ Because easements, although incorporeal, are still property, the same protection may be afforded to easements in gross, the owner thereof being deemed to have a property interest separate from the servient tenement.

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THE EFFECT OF TAX SALES, FORECLOSURES AND BANKRUPTCY SALES OF THE UNDERLYING FEE SIMPLE ESTATE ON RECORDED EASEMENTS

TAX SALES. At one time, in some jurisdictions, the principle that tax title is original title, creating a newly minted and unencumbered fee in the grantee of the tax deed, was thought to extinguish easements burdening lands sold for taxes.¹⁰ In practice, it can be seen, however, that such an application of the principle violates the theoretical model mentioned above and introduces notice and valuation problems. In general, the lien of property taxes attaches on January 1 of the year for which taxes are being assessed.¹¹ Notice of that assessment must be given to the owner.¹² If John Farmer owns Blackacre on that day, subject to an easement for the benefit of Whiteacre owned by Frank Rancher, there are two possibilities as to how the assessor could assess the value of Blackacre. It could be assessed at its full value as if not burdened by the easement or at its value so burdened. If the first alternative is chosen, both John's and Frank's property is being assessed and notice should be given to both. The cases are clear that what passes at a tax sale is what is assessed but that the owner is entitled to procedural due process.¹³ Therefore, if the easement is assessed but Frank is not given notice either of the assessment or the subsequent sale and his opportunity to redeem, the sale is void as to the easement.¹⁴ It makes a great deal more sense, as well as being theoretically defensible, to assess the value to Frank as a part of the value of Whiteacre, with the result that Whiteacre, if sold for taxes, carries the appurtenant easement with it, thereby preserving the value of Whiteacre for the purchaser at the tax sale and, presumably, enhancing revenue to the county. It should be noted, however, that if the easement was not created until after the lien of taxes attached on January 1, the tax sale may extinguish the easement but Frank may have a right to redeem and a right to notice thereof.¹⁵

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Whether the assessor, in fact, assesses the value of easements to anyone is a matter of local practice, particularly in the case of easements in gross, but, in any event, Utah, by case law,¹⁶ and Colorado, by statute,¹⁷ provide that a tax sale does not affect easements burdening the property sold for taxes. There appears to be no authority in Wyoming.

FORECLOSURES. The effect on an easement of a foreclosure sale pursuant to a mortgage, power of sale in a deed of trust, or lien encumbering the servient tenement, is also predicted by the theoretical model. While a mortgage or deed of trust is a deed in form, the law of all of the states with which we are concerned is that any instrument, whatever its form, which is intended to subject land to the satisfaction of a debt is a mortgage, and mortgages do not pass title, either before or after default, but create only a lien on the property.¹⁸ This lien can be enforced only by a public sale of the land and the owner has a redemption right.¹⁹ For this reason, the mortgagee has no interest in the land other than its right to have the land sold to satisfy the debt.²⁰ This interest takes priority according to the usual rules. Thus, if the owner of Blackacre grants an easement to the owner of Whiteacre, the easement becomes an appurtenance to Whiteacre. If the owner of Blackacre then mortgages it, the mortgage does not affect the easement which remains valid even if the mortgage is foreclosed.²¹ On the other hand, if the order is reversed and the mortgage is senior to the easement, a foreclosure of the mortgage will extinguish the easement but the owner of the easement may have a statutory right to redeem from the foreclosure sale.²² Such a redemption will preserve the easement and will have such other effects as may be prescribed by the redemption statute.²³

BANKRUPTCY SALES. if the owner of the dominant tenement is the subject of a bankruptcy petition, both the dominant tenement and

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the appurtenant easement become assets of the bankruptcy estate.²⁴ Likewise, if the owner of a valid easement in gross is bankrupt, the easement is a part of the bankruptcy estate.²⁵ As to bankruptcy of the owner of the servient tenement, the theoretical model predicts that the easement does not become a part of the bankruptcy estate and is unaffected by the bankruptcy. This is the case, but the theoretical model suffered some abuse by Congress which gave the Bankruptcy Courts an extraordinary power, in some circumstances, to order sale of property of the estate free of liens and encumbrances.²⁶ The restraints on this power in cases administered under Chapters 7, 11 and 13 are such that it cannot be...