CHAPTER 15 MASTERING THE ART OF MASSIVE TITLE EXAMINATIONS OR THE JOY OF LOOKING OR LARGE-SCALE MINERAL TITLE EXAMINATION PROGRAMS—A RECIPE FOR SURVIVAL
| Jurisdiction | United States |
(Nov 1977)
MASTERING THE ART OF MASSIVE TITLE EXAMINATIONS OR THE JOY OF LOOKING OR LARGE-SCALE MINERAL TITLE EXAMINATION PROGRAMS—A RECIPE FOR SURVIVAL
Dawson, Nagel, Sherman & Howard
Denver, Colorado
It is probably akin to carrying coals to Newcastle to state that natural resource lawyers are becoming involved, with increasing frequency, in massive title examination projects. The technology of modern exploration permits, and the economics of modern mining seemingly demand, ever larger-scaled mineral operations. Gone are the days when a mine could be created from a few lode claims and a mill site or two. High volume, low grade mines require extensive areas for open pits, ore storage, overburden storage or disposal, waste and tailings disposal, mill sites and a host of other uses. This in turn generates the need for title examinations of similarly Brobdingnagian dimensions.
There is an abundance of material which describes the procedures which should be followed in conducting a title examination of mineral lands, whether the property involved is patented or unpatented mining claims, mineral leaseholds or fee lands.1 In many respects, a large-scale title examination project is merely a collection of smaller projects and can be adequately handled by the techniques normally used by mineral title examiners. However, there are a number of problems which arise in large-scale title examination projects simply because of the size of the undertaking. These problems relate not to questions of substantive law, but rather to the management of personnel and resources, an area many lawyers are unprepared to deal with by either training or experience. Although it involves bread and butter work, a lawyer may justifiably react with alarm and dismay when asked to examine title to hundreds or thousands of acres of land held by various patented and unpatented mining claims, by leases, by options, by exploration permits and under various other contractual
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arrangements. It is the type of project which can easily swallow up the unwary or inefficient. On the other hand, it is the kind of project that is so pregnant with challenge that it offers the possibility of tremendous reward and a great opportunity to be creative. This type of mineral title examination bears the same resemblance to conducting an office examination of an abstract covering nonmineral lands or a small mineral property as does a lion to a house cat. There is much superficial resemblance between the projects; but there are also tremendous differences, some of which result from the different sizes of the critters involved, but others of which are inherent in the nature of the beast. The literature contains little of help to the lawyer confronted with the need to plan and execute a large-scale title examination. What follows is an attempt to start to fill that gap. This paper contains a series of suggestions for the management and coordination of a large-scale title examination. Its essence is management, not law. Although many of its suggestions are applicable to projects involving fee lands or leaseholds, much of what follows assumes that the mineral deposit in question is held, at least in part, by unpatented mining claims. Obviously, the bulk of this paper will deal with planning, systems, the use of standardized forms, and the like. However, before those issues can be considered, there are several quasi-substantive matters which must be dealt with first.
Understand the Objectives of the Title Examination Program
It is crucial that before undertaking a large-scale mineral title examination project (or for that matter any title examination) both the lawyer and the client clearly understand the objectives of the program. Obviously, the client will wish to obtain some measure of title security. But the matter is not that simple. There is a broad spectrum of degrees of title assurance from which the client must choose, and the choice is often difficult. Characteristically, adequate title insurance is simply not available. Ultimately, therefore, the mineral developer must depend upon the opinion of an expert for security of title to its project. Selecting the expert and specifying the nature and scope of the examination to be performed, in effect, determines the degree of title assurance which the program will provide.
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In each case, the mineral developer must determine how much title assurance is appropriate under the particular circumstances involved. This in turn generally depends on the phase of the project, the activity or absence of activity by competitors and the quality of the mineralization. Typically, a mining company about to explore a raw prospect needs some degree of confidence that its exploration activities will not be conducted in trespass and that it owns or can acquire any minerals which are discovered. On the other hand, a mining company with a proven ore body needs a degree of title assurance sufficient to give it the confidence to invest substantial sums in future development and to enable it to induce others to do so as well. Providing title assurance for a mineral exploration and development project is a dynamic, rather than a static, undertaking. As exploration activities establish that a prospect holds significant promise of economic potential, there is a need for correspondingly increasing assurance that the party conducting the exploration activity owns or controls the prospect. The manager of a mineral exploration and development project constantly faces the difficult question of how much title assurance is enough. Characteristically, the manager would rather put dollars in the ground than into title examination. However, if adequate title examination is too long delayed, there will come a point in the development of the prospect where the quality of title, rather than the quality of the mineralization, represents the highest risk element in the project.
Some of the objectives of the lawyer confronted with a large-scale mineral title examination project may be at variance with those of his client. For example, although the exploration manager may want to keep title examination costs to a bare minimum, the lawyer, on the other hand, will need to conduct a sufficiently thorough investigation and analysis to give his client a meaningful opinion regarding the status of title. By limiting the scope of the title examiner's inquiry to only certain records, the project manager may be able to obtain a relatively quick and inexpensive title report. This type of analysis may be all that is needed under the circumstances. But lawyers who render such opinions justifiably worry that their product will be used for purposes for which it was not intended. And any "down and dirty" analysis of
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title is fraught with the possibility that it is worth nothing at all because of facts which the title examiner was not permitted to consider.
Another factor which the lawyer must consider is the possibility that successful exploration activity will necessitate a subsequent "upgrading" of the preliminary title examination. Because of this possibility, the title examiner will desire to conduct even his initial review so as to avoid unnecessary subsequent duplication of effort by creating a paper record or trail which will be of value later on. Again, this may entail more effort than the client is willing to commit to the prospect at an early stage.
Reconciliation of the somewhat inconsistent goals of the project manager and the title examiner is not always possible. But prudence dictates that these concerns, as well as the probable cost of the program, be discussed candidly by attorney and client at the outset of any large-scale title examination.
Define the Nature of Title Examined and the Limitations of the Opinion
Before commencing any title examination project, the lawyer should review with the client the general form of title opinion or report which the lawyer will prepare. This may appear to be putting the cart before the horse, but is an extremely effective way to assure that both parties understand the purpose and scope of the title examination project. Such an exercise will force the parties to focus on two key matters. First, the attorney and the client will have to discuss the quality or character of the title upon which the examiner will opine, and the records to be examined. Second, the parties will have an opportunity to consider at the start of the project the general or "standard" exceptions which will be contained in the title opinion. This, in turn, will enable the parties to plan for any extra-record investigations which should be performed as part of the overall project, but which are outside of the attorney's charter. It also will alert the client of those matters against which the attorney's title opinion or report will afford no protection.
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The majority of real estate title examinations are made to determine whether the vendor can deliver "marketable" or "merchantable" title. On the other hand, most mineral title examinations are made to satisfy the mineral developer's own need for title security and not to satisfy a contractual standard. Thus, the question need not be whether the client has "marketable title" to the property. It may be far more appropriate to ask who has "record title" or "possessory title," or "good title" to the property; or for the attorney to opine on a limited or particular estate in the property.2
At English common law, titles were either "good" or "bad." There appears to have been no middle ground. In an action at law, a purchaser could be forced to take a defective title unless it was "absolutely bad."3 Predictably, courts of chancery took a different view of matters, and it was these courts which developed the concept of "marketable title." Thus, the essence of the concept of marketable...
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