CHAPTER 2 ADVANCED MINERAL CONVEYANCING AND TITLE ISSUES - PART 2
| Jurisdiction | United States |
(Jan 2014)
ADVANCED MINERAL CONVEYANCING AND TITLE ISSUES - PART 2
Sarah Sorum
Bjork, Lindley, Little PC
Denver, CO
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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 contributed a chapter to The NEPA Litigation Guide published by the ABA.
SARAH SORUM 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 has been with Bjork Lindley Little PC since 2008. Her practice focuses mainly on title examination and she is licensed to practice law in both Colorado and North Dakota.
Table of Contents
I. Tax Sales and Titles Derived through Tax Deeds 1
A. Introduction 1
B. General Overview of Tax Sale Proceedings 2
C. Due Process Requirements for Notice 3
D. Colorado 4
1. Colorado Tax Sale Proceedings 4
2. Taxation of Severed Minerals in Colorado 6
3. Colorado Statutes of Limitations 7
4. Application of Statutes of Limitation to Severed Minerals in Colorado 10
E. North Dakota 10
1. North Dakota Tax Sale Procedures 10
2. Taxation of Severed Minerals in North Dakota 11
3. North Dakota Curative Acts and Statutes of Limitations 11
F. Wyoming 12
1. Wyoming Tax Sale Procedures 12
2. Taxation of Severed Minerals in Wyoming 16
3. Wyoming Statutes of Limitations 16
G. Mineral Reservations to Counties 17
H. Summary for Tax Titles 18
II. Mortgage and Other Foreclosures 18
A. Introduction 18
B. Colorado 19
C. Foreclosure Sales in Other States 22
III. Adverse Possession 24
IV. Marketable Record Title Acts 25
V. Effects of Bankruptcy 28
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VI. Unprobated Estates 31
A. Introduction 31
B. Descent of Real Property at Death 31
C. North Dakota 33
1. Proceedings Required to Pass Legal Title 33
2. Three Year Limitation 33
3. Intestacy Scheme 34
4. Ancillary Probate 35
D. Wyoming 35
1. Proceedings Required to Pass Legal Title 35
2. No Time Limit 36
3. Intestacy Scheme 36
4. Ancillary Probate 36
E. Affidavits of Heirship 37
F. Conclusion 37
VII. Escheat 38
A. Introduction 38
B. When Escheat is a Title Concern 39
C. Escheat Procedure 41
1. Due Process 41
2. Whether Judicial Proceedings are Necessary 41
3. Asserting Escheat 41
4. Ownership of Escheated Land 42
D. Summary 42
VIII. Dormant Mineral Acts 42
A. Introduction 42
B. Constitutionality 44
C. Definition of "Use" 45
D. Notice and Reasonable Inquiry 45
E. Whether a Quiet Title Action is Necessary 47
F. Note of Caution for Landmen 48
G. Conclusion 49
IX. Effect of Mechanics', Materialmen's, and Miners' Liens 49
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A. Introduction 49
B. Liens as a "Secret" Encumbrance 49
1. Colorado 50
2. North Dakota 51
C. Expiration 52
1. Colorado 52
2. North Dakota 52
D. Conclusion 52
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INTRODUCTION
The topics which we have been assigned to address are primarily creatures of statute, so there are significant variations among the states as to the details of, for example, how tax sales are conducted and tax deeds issued or whether and how dormant minerals acts are applied. Given limited space and time, our approach, therefore, is to use the laws from a few mineral producing states as examples for each topic. The title examiner will have to review the applicable statutes on each of these topics for the state in which he or she is examining title and for the time period applicable to the deed or other instrument at issue.
I. Tax Sales and Titles Derived through Tax Deeds
A. Introduction
The title examiner will frequently encounter a tax sale followed by issuance of a tax deed to a new owner by the authorized county official, particularly during the dust bowl and Depression years.1 Many commentators have noted the inherent uncertainty of title derived through a tax deed.2 Courts historically have viewed any kind of forfeiture with disfavor. The fact that a tax sale proceeding is, in most states, an in rem proceeding and the taxpayer may receive notice only through publication, seems to have contributed to a tendency by courts to find reasons to protect the dispossessed taxpayer. The North Dakota title standard on tax titles provides an excellent summary of the lack of title security associated with title derived through a tax deed:
There is no way of knowing what the courts will consider to be a jurisdictional defect [in the tax sale proceeding], but historically they have been exceedingly stringent in requiring exact and precise compliance with all of the statutory steps in the tax sales (now tax lien foreclosure) proceedings. Moreover, NDCC 57-45-11--which has generated a great deal of case law--specifically authorizes a quiet title action by an interested party against the tax deed grantee of the county, which seemingly indicates a legislative lack of confidence in the regularity of tax sales or tax lien foreclosure proceedings. . . . For these reasons tax titles are considered inherently suspect in the absence of an appropriate curative action or occurrence as specified in the standard.3
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As a result, most title examiners are unwilling to pass title that is derived through a tax deed, unless there has been (a) a conveyance to the tax sale purchaser or its successors from the taxpayer or its successors, (b) a quiet title decree quieting title in the purchaser at tax sale or its successors, or (c) a curative statute clearly applies. Unfortunately, most curative statutes (such as adverse possession statutes) require actual possession as one of their elements, so that they are generally unavailable to cure a tax title where the minerals have been severed from the surface and there has been no actual possession of the minerals. Landmen are frequently frustrated by the title examiner's requirement to cure what appears to be an ancient tax deed but, in many cases, the examining lawyer would risk liability for malpractice if the requirement to cure the tax title is not included in the opinion.
B. General Overview of Tax Sale Proceedings
Each state has its own statutory procedures for assessing, levying, and collecting real property taxes and for foreclosing on unpaid tax liens. Unfortunately, these procedures vary significantly from state to state, so the applicable statute must be reviewed in each instance. Moreover, these statutes can vary significantly over time, so it is not enough for the examiner to be familiar with just the current statute. The statutes in effect at the time the tax lien attached, the tax sale was held, and the tax deed was issued must be examined with respect to the applicable tax sale proceeding (which usually means a trip to the state's dusty archives will be required to dig out copies of the old statutes, as they are often not available on computerized legal search services).
Although each state's laws set forth different procedures for taxing real property, collecting the tax, and foreclosing on unpaid tax liens, they all share certain similar basics.4 All real property (subject to exemptions provided for in a state's constitution or statutes) is taxed. The tax is assessed against the owner of record as of the assessment or valuation date, and different interests in the property (e.g., surface estate and severed minerals, in some states) are separately assessed. The property is valued, usually by the county assessor, and, almost universally, the tax lien attaches as of the assessment or valuation date. The amount of the tax is established by statute and the taxing authority (usually the county treasurer).
Tax notices of the amount due are sent to the record owner or owners, with the tax payable by the date set by statute (in many states, the tax may be paid in two installments, with a discount offered if the entire tax is paid by the first installment date). If payment is not made by the statutory deadline, then penalties and interest are added to the tax bill. The statutes then provide for a public sale of the unpaid tax liens, with a tax sale certificate being issued to the purchaser at the sale or, if the lien is not sold, the lien is "struck off to the county. A period is provided for the taxpayer to redeem the tax lien by paying the past due amounts (including penalties, interest, and costs). If redemption does not occur within the time prescribed, then the treasurer will issue a tax deed to the holder of the tax sale certificate.
As the saying goes, the devil is in the details, and failure of the assessor or treasurer to comply with any statutory detail frequently gives rise to defects which make the tax title less than defensible. We will use the statutes of Colorado, North Dakota, and Wyoming as examples.
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C. Due Process Requirements for Notice
The statutes discussed below generally require personal service or service by registered or certified mail on the owner of the property before the lands are sold at tax sale and before...
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