CHAPTER 15 OVERVIEW OF COMPLICATING FACTORS AFFECTING TITLE

• Jurisdiction: United States

Nuts & Bolts of Mineral Title Examination
(Apr 2015)
CHAPTER 15
OVERVIEW OF COMPLICATING FACTORS AFFECTING TITLE
Laura Lindley
Shareholder
Sarah Sorum
Associate
Heather Buller
Associate
Allison Preiss
Associate
Bjork Lindley Little PC
Denver, Colorado

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LAURA LINDLEY: After earning her B.S. degree from Louisiana State University and working as an abstractor for a couple of years in south Louisiana, Laura Lindley came West to earn her law degree from the University of Denver (1980, Order of St. Ives). She was affiliated with the Denver firm of Poulson, Odell & Peterson until 1992, and since then has been a shareholder in Bjork Lindley Little PC, emphasizing oil and gas law and public land issues. Laura is a past president of the Rocky Mountain Mineral Law Foundation and continues to participate in a number of Foundation efforts, including serving as a Trustee, writing papers for annual and special institutes, and teaching at the Federal Oil and Gas Leasing Short Course. She has also written an article on the history of the Mineral Leasing Act for the ABA's Natural Resources & Environment, and co-authored a chapter in The NEPA Litigation Guide published by the ABA.

SARAH SORUM is an associate with Bjork Lindley Little PC in Denver, Colorado, where she has practiced since 2008. Her practice focuses mainly on mineral title examination. She is a graduate of the University of Washington, and the University of Colorado School of Law. During law school, Sarah interned for Judge Walker Miller of the United States District Court for the District of Colorado. Upon graduating, Sarah served as a law clerk to the Honorable John W. Madden, IV of the Denver District Court. Sarah is licensed to practice law in both Colorado and North Dakota.

HEATHER BULLER is an associate at Bjork Lindley Little PC, where she has practiced since 2011. Her practice focuses primarily on mineral title examination. Heather is a graduate of the Metropolitan State College of Denver and the University of Denver Sturm College of Law (2011, Order of St. Ives). While in law school, Heather was a general editor for the Denver University Law Review and interned for Judge John L. Wheeler of the 18th Judicial District. She is licensed to practice law in Colorado and North Dakota.

ALLISON PREISS is an associate at the law firm of Bjork Lindley Little PC in Denver, CO, where her practice focuses on title examination and other oil and gas matters. She earned her B.A. in 2007 from the University of Wisconsin, and her J.D. from the University of Colorado School of Law in 2011. Allison is a member of the Colorado Bar Association, Denver Association of Oil and Gas Title Lawyers, and Women in Energy, and is licensed to practice law in Colorado.

TABLE OF CONTENTS

I. Effects of Bankruptcy, Foreclosure, Tax Sales and Liens

A. Introduction

B. Bankruptcy

C. Tax Sales

D. Foreclosure

E. Liens

II. Adverse Possession

III. Horizontal Drilling Complexities

A. Introduction

B. Using Neighboring Lands to Access the Subject Minerals: Surface and Subsurface Agreements.

1. How Will the Title Examiner Know?

(a) Information Provided by the Client

(b) Information Found on the Internet

(c) Instruments of Record

2. So, You Think the Client Needs Access to Off-Tract Lands to Reach the Subject Minerals: What Kinds of Agreements are Necessary?

(a) General Principles of Surface Use

(b) Whose Consent do you Need?

(c) An Alternative to Consent: What about Pooling?

C. Other Surface and Subsurface Agreements Affecting Title

D. Conclusion

IV. Pooled Units and Working Interest Units

A. Introduction

B. Pooled Units

1. What is a Pooled Unit and How is it Formed?

2. Pooled Units and Title Examination

(a) Production from the Pooled Unit is Production from All Unit Lands

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(b) Spacing is Not Pooling

(c) All Pooled Unit Lands Should be Examined

(d) Production from the Pooled Unit is Allocated on an Acreage Basis

(e) Commitment of All Interest Owners to the Pooled Unit is Required

C. Working Interest Units

1. What is a Working Interest Unit and How is it Formed?

2. Working Interest Units and Title Examination

(a) The Entire Contract Area Should be Examined

(b) Who is Bound by the JOA?

(c) The Creation of a Working Interest Unit Does Not Relieve the Working Interest Owners of Underlying Obligations

V. Differences for Indian Lands

A. Introduction

B. Trust Property

C. Tribes' Sovereign Status and the Federal Government's Fiduciary Relationship to Tribes

D. Know the Laws Affecting the Applicable Reservation

E. Federal Supervision of Transactions Affecting Indian Lands

F. General Allotment Act

G. Statutory Authority for Indian Leasing and Similar Agreements

1. Allotted Lands Mineral Leasing Act

2. Indian Mineral Leasing Act of 1938

3. Indian Mineral Development Act of 1982 ("IMDA")

4. Indian Tribal Energy Development and Self-Determination Act of 2005

H. Records to Be Examined

1. Bureau of Land Management

2. BIA Land Titles and Records Offices

3. BIA Regional Offices

4. BIA Agency Offices

5. Tribal Realty or Energy Offices

6. County Records

I. Access to BIA and Tribal Records

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INTRODUCTION

Every title opinion has a life of its own and will present the title examiner with a variety of complications. This paper provides a broad overview of just some of the potpourri of issues that a title examiner will face. Every title examiner should be aware of the effects that bankruptcy, foreclosures, tax sales, liens and adverse possession may have on title. Additionally, as horizontal drilling has become a common method of drilling for oil and gas, title examiners must be mindful of the implications of using other lands to reach the minerals underlying another tract of land, as is common for many horizontal wells. Similarly, understanding pooled units and working interest units is critical to providing the most accurate title opinion possible. Finally, a title examiner whose opinion will cover Indian lands must become familiar with the applicable treaties, statutes, executive orders, and secretarial orders that may apply to the particular reservation located on the lands covered by the opinion. We have attempted to present an overview of the complicating issues a title examiner may encounter under these diverse topics and to provide advice to the title examiner on how to assist their client in addressing those issues.

I. Effects of Bankruptcy, Foreclosure. Tax Sales and Liens

A. Introduction

The effects of bankruptcy, tax sales, foreclosure, liens and adverse possession on title were discussed in detail in a paper written last year for the "Advanced Mineral Title Examination: Oil, Gas, and Mining" Special Institute.¹ Below we have excerpted portions of that paper (and updated where applicable) to summarize these issues.

B. Bankruptcy

The following discussion is a brief overview of the primary issues for a title examiner that typically arise in the event that evidence of a bankruptcy filing by a record owner appears in the materials he or she is provided. There are often exceptions to the general rules discussed below which could be applicable under the specific facts of a given situation. If a transfer by a debtor or a trustee in bankruptcy appears in the chain, the examiner will have to determine the date of the filing of the petition and investigate the details of the Bankruptcy Code in effect on that date and their application to the facts apparent from the record materials.

The Bankruptcy Code² does not place persons dealing with the debtor or its property on

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constructive notice of the filing of a petition in bankruptcy. Therefore, the title examiner is under no duty to examine the docket of the bankruptcy court in which the property is located or in which the property owner resides.³ Of course, if a copy of the petition in bankruptcy or other evidence of the pendency of a bankruptcy proceeding is recorded in accordance with the real property laws of the applicable state,⁴ then the public is on notice of the bankruptcy and its potential effects on title to the debtor's property as provided under the recording statute of the state.

The filing of a petition in bankruptcy creates an estate comprised of the pre-bankruptcy property of the debtor.⁵ The estate is a separate legal entity from the debtor, and is administered by the bankruptcy trustee or, in a Chapter 11 or 13 proceeding, by the debtor-in-possession.⁶ A debtor-in-possession has the same powers as a trustee for the bankruptcy estate⁷ but holds title to the property of the bankrupt estate for the benefit of the estate; it may not deal with the property except as authorized under the Bankruptcy Code.

The filing of a petition in bankruptcy imposes an automatic stay of any action or proceeding to recover a pre-petition debt from the debtor or to enforce a pre-petition lien or judgment.⁸ Any action commenced or continued in violation of the automatic stay is void, even where the creditor had no notice of the existence of the stay.⁹ A creditor can, however, seek relief from the automatic stay from the bankruptcy court.

The trustee or debtor-in-possession has the power to set aside transfers to or for the benefit of a creditor relating to a prior debt owed to the creditor if the transfer was made within ninety days before the filing of the petition in bankruptcy and if the debtor was insolvent at the time of the transfer.¹⁰ The purpose for allowing the trustee or debtor-in-possession to set aside

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such "voidable preferences" is to prevent the debtor from diminishing the property of the bankrupt estate in favor of one creditor over another. For example, a deed in lieu of foreclosure could be a voidable preference if it was made within the ninety-day period.

Once the petition in bankruptcy is filed, the trustee...