Ohio Supreme Court holds that both the MTA and DMA apply to mineral interests in West v. Bode

Ohio oil and gas stakeholders received another landmark decision from the Ohio Supreme Court in West v. Bode, 2020 — N.E.3d — 2020 WL 7049820 2020-Ohio-5473. Specifically, the Court held that both the Marketable Title Act (MTA) and the Dormant Mineral Act (DMA) apply to severed mineral interests. Thus, surface owners may utilize either the MTA or DMA to extinguish or abandon previously severed mineral interests, depending on the circumstances.

Background

On discretionary appeal from the Seventh District, the single issue before the Court was whether the MTA and the DMA were in irreconcilable conflict with respect to quieting title to severed mineral interests. In short, the MTA extinguishes stale property interests after a 40-year absence of any preserving events while the DMA, enacted as part of the MTA, concerns the abandonment of oil and gas interests. Appellants, heirs of the severed mineral interest holders and the surface owners disputed whether the MTA or the more specific provisions of the DMA should govern their competing claims to the mineral interests.

Under longstanding Ohio law, two statutes that conflict must be interpreted so that they can both apply simultaneously. However, when the conflict is irreconcilable, the more specific statute controls over the general statute. See R.C. 1.51. Thus, the Court’s ruling would determine whether the provisions of the DMA controls over the MTA.

Overturning the trial court’s order, the Seventh District held that the MTA and DMA “are co-extensive alternatives whose applicability in a particular case depends on the time passed and the nature of the items existing in the pertinent records.”

Supreme Court says no irreconcilable conflict

In a split decision, the Ohio Supreme Court affirmed the Seventh District and held that no irreconcilable conflict exists between the two statutes. Writing for the majority, Justice French reasoned that nothing in the statutory language of either the MTA or the DMA precluded a mineral interest holder from ensuring compliance with both. West at ¶ 30. Additionally, she opined that the differences between the acts do not create any obstacle to giving effect to both pursuant R.C. 1.51.

In concluding that both the DMA and MTA apply to claims concerning severed mineral interests, the Court went on to enumerate differences between the two acts. The fact that the two acts operate differently, toward different ends, does not mean that they are irreconcilably in conflict. Id. ¶ 29. The MTA extinguishes property interests after 40 years without a saving event, measured from the effective date of the surface owner’s root of title. Id. at ¶ 28. On the other hand, the DMA provides a mechanism that a surface owner may use to have a severed mineral interest deemed abandoned and vested in the surface owner after a shorter, 20-year period. Id. Further, the acts contemplate different “savings events” and applicable lookback periods.

The Court explained that “[b]ecause the acts affect mineral interests differently, it is only reasonable that they contain different saving events, and we may not disregard the General Assembly’s policy determinations in support of the statutory differences in the guise of construction.” Id. at ¶ 30. Although both the DMA and MTA ultimately affects the viability of severed mineral interests, they were created for different purposes and function differently. Notably, the Court further specified that mineral interests extinguished by operation of law pursuant to the MTA no longer exist to be preserved under the DMA. Simply stated, a mineral interest extinguished under the MTA cannot be revived.

In her dissent, Justice Kennedy finds that the MTA and DMA do not “create independent, alternative statutory mechanisms to deprive a mineral interest holder of private property.” Id. at ¶ 45. She notes that the majority’s holding will frustrate the legislature’s purpose in enacting the DMA.

Implications for future MTA and DMA litigation

Ohio law with respect to the extinguishment or abandonment of mineral interests remains complex. In fact, Justice French highlighted that “joint application of the acts to severed oil and gas interests brings about the unintended consequence of complicating determinations of ownership of those interests.” Id. at ¶ 2. Unanswered issues still remain within the MTA: (1) what is the date of marketability?; (2) can a root of title deed contain a general reference to a reservation?; (3) is a will filed in probate court sufficient to preserve title? While surface owners will have more than one avenue to terminate previously severed interests, title determinations will remain uncertain. Nonetheless, Bode v. West is another important decision as the Ohio Supreme Court continues to further define the rights and obligations of surface owners and heirs of severed mineral interests.

A full copy of the opinion can be found here.