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Ohio Supreme Court holds that a filed will that does not devise a severed mineral through either a specific provision or through a residue clause is not preserving event under Section 5301.49(D) of the Ohio Marketable Title Act (“MTA”).
By Matthew W. Onest, Esq.
On February 15, 2022, the Ohio Supreme Court issued another opinion relating to the Ohio MTA and its application to old property interests. In Peppertree Farms, L.L.C. v. Thonen, Slip Opinion No. 2022-Ohio-396, the Court held “that a recorded will that does not distribute the decedent’s oil and gas rights does not affect title and is not a recorded title transaction that prevents those rights from being extinguished by the Marketable Title Act.”
Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A. represented the surface owners in Peppertree. There were three issues in this case. This legal alert deals with the third issue. The mineral owners’ third proposition (which are statements of law that the party wants the Ohio Supreme Court to accept a general statement about Ohio law) stated:
The filing of a severed mineral interest owner’s will in the probate court where the property is situated constitutes a title transaction under the Marketable Title Act even if the will does not specifically devise the interest or contain a residuary clause because the plain language of R.C. 5301.47(F), broadly defines title transaction as “any transaction affecting title to any interest in land, including title by will or descent.”
The Court rejected this proposition of law and adopted the opposite position.
The MTA, as codified in R.C. 5301.47, et seq., provides a statutory mechanism through which interests affecting real estate are extinguished by automatic operation of law if certain factors are met. Should the MTA not automatically extinguish an interest, then the DMA provides an alternate mechanism by which a landowner can attempt to statutorily abandon a mineral interest, should certain factors be met.
The MTA extinguishes real property interests which predate a landowner’s “root of title.” A landowner’s “root of title” is the
[C]onveyance or other title transaction in the chain of title of a person, purporting to create the interest claimed by such person, upon which he relies as a basis for the marketability of his title, and which was the most recent to be recorded as of a date forty years prior to the time when marketability is being determined.
R.C. 5307.47(E).
The MTA is designed to make transactions simpler by extinguishing interests unless specific elements are present. The MTA extinguishes any interest which exists prior to the “root of title,” provided that the interest is not: (1) Specifically stated or identified in the “root of title”; (2) Specifically stated or identified in one of the muniments of the chain of record title within forty years after the root of title; (3) Subject to a notice of preservation which complies with and is recorded in accordance with R.C. 5301.51 and R.C. 5301.52; (4) One of the other exceptions provided for in R.C. 5301.49; or (5) One of the rights that are statutorily excepted from operation under R.C. 5301.53.
Importantly, once an interest is extinguished, it cannot be revived.
Furthermore, the MTA does not require the party seeking extinguishment to take any action. The MTA does not require advance notice to the interest holder before extinguishment occurs. In essence, the MTA operates like a statute of limitations against property owners who let their interests sit dormant and silent for more than 40 straight years.
Peppertree involved a reservation of oil and gas rights from 1921. A will of one of the subsequent owners of the 1921 interest was recorded in the early 1970s. However, the will did not specifically devise that person’s interest in the mineral interest to anyone. The will also did not contain a residue clause, meaning it did not contain the typical catch-all provision which says that any property owned by the testator of the will which is not specifically addressed within the will goes to a designated person or persons.
The question was whether that will preserved the severed mineral interest under the following section of the MTA:
Such record marketable title shall be subject to:
***
Any interest arising out of a title transaction which has been recorded subsequent to the effective date of the root of title from which the unbroken chain of title or record is started; provided that such recording shall not revive or give validity to any interest which has been extinguished prior to the time of the recording by the operation of section 5301.50 of the Revised Code…
R.C. 5301.49(D).
The Ohio Supreme Court held that this type of will does not meet R.C. 5301.49(D)’s preserving criteria. The Court summed up its reasoning at paragraph 26 of its opinion:
The will at issue in this case is not a recorded title transaction under R.C. 5301.49(D). The will did not contain a specific devise of the Jones Interest, nor did it include a residuary clause distributing the remainder of Ward’s property to a beneficiary. Therefore, although it was recorded after the effective date of the root of title, it did not transfer, encumber, or in any way affect title to the Jones Interest. In contrast, the transfer of the Jones Interest to Ward’s heirs through intestate succession did affect title to an interest in land and was a title transaction. But this title transaction was not recorded within 40 years of the effective date of title.
As a result of this decision real estate practitioners will need to analyze filed wills for owners of pre-root interests to determine whether the wills devised the pre-root interests, either by a specific devise or by a residue clause. If the will does not do either, then it cannot preserve the pre-root interest under R.C. 5301.49(D).
A copy of the Peppertree decision may be found at:
https://www.supremecourt.ohio.gov/rod/docs/pdf/0/2022/2022-Ohio-396.pdf