CASE LAW UPDATE - Dormant Mineral Act
The Plaintiffs/Appellees in Fonzi (the “Fonzi Heirs”) are the holders of an oil and gas royalty interest that was severed from the surface estate of two separate properties located in Monroe County, Ohio, in 1952. The severance occurred through reservations in two separate deeds by the Fonzi Heirs’ parents, Henry A. Fonzi, Jr. and Elizabeth H. Fonzi (the “Fonzi Royalty Interest”). In each case, the Defendants/Appellants, as surface owners of the respective tracts, attempted to have the Fonzi Royalty Interest deemed abandoned pursuant to the 2006 Ohio Dormant Mineral Act (the “DMA”). Although, the two Fonzi cases involve different surface owners and properties, Plaintiffs/Appellees are the same in each case, the timelines are primarily the same, and the legal arguments are identical. Therefore, the oral arguments for both cases were consolidated before the Ohio Supreme Court.
FACTUAL SUMMARY
The record reflects that the surface owners conducted a search of the public records of Monroe County, Ohio, as well as an internet search, and were unsuccessful in locating any heirs of Henry A. Fonzi, Jr. and Elizabeth H. Fonzi. Thereafter, the surface owners published notice of their intent to declare the Fonzi Royalty Interest abandoned pursuant to Division E(1) of the DMA and timely recorded Affidavits of Abandonment pursuant to Division E(2). No response to this notice was filed by the Fonzi Heirs and pursuant to Division H(2) of the DMA (as required prior to 2014), the surface owners caused the Monroe County Recorder to have each respective 1952 reservation deed memorialized to reflect that the Fonzi Royalty Interest was deemed abandoned. The Fonzi Heirs eventually discovered the actions taken by the surface owners and recorded a Claim to Preserve their interest in Monroe County, Ohio and filed a Complaint for Declaratory Judgment and to Quiet Title against each surface owner. Counterclaims seeking the same relief were subsequently filed by the surface owners in each case.
PROCEDURAL HISTORY
The Trial Court entered summary judgment in favor of the surface owners on all claims. The 7th Appellate District reversed the decisions of the Trial Court and granted summary judgment in favor of the Fonzi Heirs, holding the surface owners’ search for the Fonzi Heirs prior to notice by publication was unreasonable, since the surface owners failed to conduct a search in Washington County, Pennsylvania, where the surface owners had actual knowledge that Elizabeth H. Fonzi and her ex-husband, Henry Fonzi, Jr., had moved prior to their deaths.
APPELLANTS/SURFACE OWNERS’ ARGUMENTS
The primary focus of Appellants’ brief and oral argument is based on their Propositions of Law Nos. 4 and 5 and this post will be limited to outlining those two propositions. Proposition of Law No. 4 provides as follows:
“If a Landowner files an action to quiet title to a mineral interest under the DMA, such mineral interest is abandoned and vested in the Landowner if the requirements of R.C. 5301.56(E) are satisfied and none of R.C. 5301.56(B) (1) through (3) apply.”
This proposes alternate methods a surface owner can utilize to have a mineral interest deemed abandoned under the DMA: (1) by quiet title action after the requirements of R.C. 5301.56(E) are satisfied by the surface owner and none of the savings events set forth in R.C. 5301.56(B) (1) through (3) apply; or (2) by the “extrajudicial” process provided in Division (E) through (I). Appellants rely heavily on the Court’s interpretation of the 1989 DMA in Corban V. Chesapeake Exploration, LLC, 149 Ohio St.3d 512, 2016-Ohio-5796. The language “deemed abandoned” is utilized in both the 1989 DMA and the 2006 DMA, and Corban required a quiet title action to invoke the statutory right to have an interest deemed abandoned under the 1989 version of the Act. Appellants argue this right was not removed by the 2006 DMA, rather the 2006 DMA added the “extrajudicial” process as an independent method of abandonment and added the requirements of Division (E) before a quiet tile action can be filed.
An example of when the Appellants’ proposed quiet title method would be utilized is when a surface owner satisfies the notice requirement of Division (E)(1), timely files an Affidavit of Abandonment under Division (E)(2) stating that no savings events have occurred as set forth in Division (B)(1) through (3) in the twenty years prior to filing notice, and the mineral holder then timely files a Claim to Preserve, thus preventing abandonment under the “extrajudicial” process. Appellants argue, however, that since the surface owner met the requirements of Division (E) and no savings event occurred in the twenty years prior to filing notice, this establishes a “conclusive presumption” of abandonment and the surface owner can still prevail in a quiet title action to have the mineral interest deemed abandoned, even though the mineral holder thwarted the “extrajudicial” process by timely filing a claim to preserve.
Appellants’ Proposition of Law No. 5 provides as follows:
“If a mineral holder is not prevented under R.C. 5301.56 (H)(2) from presenting the record of a mineral interest in court as evidence against the owner of the surface of the lands formerly subject to the interest, insufficient service of the R.C. 5301.56(E)(1) notice on the mineral holder is harmless and irrelevant to whether a mineral interest has been abandoned under R.C. 5301.56(B) or (H)(2).”
This is an important argument for Appellants because the Court may follow the 7th Appellate District and decide the surface owners did not perform a reasonably diligent search to identify and locate the Fonzi Heirs, and as such, notice by publication was not proper. Appellants argue that for a quiet title action, notice under Division (E)(1) does not have to be proper, since the Fonzi Heirs have an opportunity to present evidence of the occurrence of a savings event in the quiet title action. The nature and diligence of a search are only an issue if improper notice prevents a holder from presenting evidence of a savings event or filing a claim to preserve under Division (H)(1). The attemptat proper notice, followed by an Affidavit of Abandonment and the lack of any saving events in the 20 years prior to the attempted notice are the conditions precedent for the surface owner to bring a quiet title action and establish a “conclusive presumption” that the mineral interest was abandoned. Through the quiet title action, the mineral interest holder will be properly served pursuant to rules of civil procedure and entitled to due process via the civil case.
APPELLEES/ROYALTY HOLDERS’ ARGUMENTS
Arguments against Propositions of Law Nos. 4 and 5:
Appellees arguments against Propositions of Law Nos. 4 and 5 are simple and direct. Appellees believe the 2006 DMA made significant and obvious changes to the 1989 DMA, by adding procedural requirements that must be satisfied prior to an interest being deemed abandoned, thus eliminating the need for a quiet title action. The plain language of the 2006 DMA does not allow a surface owner to seek abandonment of a mineral interest through a quiet title action and the only means for a surface owner to have an interest deemed abandoned is the process set forth in the statute, i.e., proper service of notice and timely recording an Affidavit of Abandonment. To hold otherwise, Appellees argue, is in direct conflict with the Court’s previous decisions in Dodd, Corban and Gerrity[1].
Appellees obviously agree with the decision of the 7th Appellate District and request the Ohio Supreme Court to uphold this decision. Appellees rely on the decision of the Ohio Supreme Court in Gerrity where the Court refused to establish a bright line rule for a reasonable search under Division (E)(1) of the DMA, but provided that notice by publication would be improper where the surface owner’s independent knowledge and/or a review of the property records in the county where the mineral interest is located, along with a search of the county court records, reveals additional information to aid in continuation of the reasonable search for holders. In the present case, Appellees argue that notice by publication was improper, and the surface owners’ attempt to have the Fonzi Royalty Interest deemed abandoned failed, since the surface owners’ failure to conduct a search for the Fonzi Heirs in Washington County, Pennsylvania, was unreasonable.
Martin Legal Group will continue to track both of the Fonzi cases and will follow-up with a post when the Ohio Supreme Court issues its decision.
[1] Dodd v. Croskey, 143 Ohio St.3d 293, 2015-Ohio-2362; Corban v. Chesapeake Exploration, LLC , 149 Ohio St.3d 512, 2016-Ohio-5796; Gerrity v. Chervenak, 162 Ohio St.3d 694, 2020-Ohio-6705.