Self-Executing Operation of 1989 DMA Affirmed

The Court of Appeals of Ohio, Seventh Appellate District, Jefferson County, Ohio, in the companion cases of Swartz v. Householder and Shannon v. Householder, 2014-Ohio-2359; 2014 Ohio App. LEXIS 2302 held that the Dormant Mineral Act, Ohio Rev. Code § 5301.56, effective March 22, 1989 (“1989 DMA”) is self-executing and the lapsed right automatically vests in the surface owner.  Id. at ¶28.

The operative facts in both cases were identical and stem from the same underlying transaction.  Over fifty years ago, the property at issue was owned by Elva Lawrence, Alma Lawrence, Chelissa Swickard, and Jetta Householder.  Chelissa and Jetta sold their interests to Elva and Alma (the “Lawrence sisters”), but reserved their mineral rights (the “Householder Interest”).  In 2011, Jay Householder, Sr. recorded a claim to preserve the mineral rights reserved by Chelissa and Jetta.  The surface estate of the property was subsequently conveyed to the Shannons.  The Shannons filed a complaint for a declaratory judgment and a quiet title action against Householder, seeking a judgment that the Householder Interest had been abandoned under the 1989 and 2006 Dormant Mineral Acts.  The trial court granted summary judgment in favor of the Shannons and stated that the 1989 DMA was self-executing.  The trial court explained that the Dormant Mineral Act, Ohio Rev. Code § 5301.56, effective June 30, 2006 (“2006 DMA”) was not expressly made retroactive as required by Ohio Rev. Code § 1.48 and was only to be applied prospectively.  Id. at 5. 

Householder appealed both cases.  The sole assignment of error alleged that the trial court erroneously granted summary judgment “because [the trial court] incorrectly applied the 1989 [DMA] instead of the 2006 [DMA] in holding that the Defendants[’] mineral interest was automatically abandoned.” Id. at ¶10.  Householder argued that the Householder Interest was not abandoned because the 1989 DMA conflicts with the Marketable Title Act, Ohio Rev. Code § 5301.47, et seq.  Householder asserted that allowing a mineral interest to be lost without a savings event during the applicable 20-year period under the 1989 DMA is contrary to the purpose of the Marketable Title Act, which is “…to effect the legislative purpose of simplifying and facilitating land title transactions by allowing persons to rely on a record chain of title.” Ohio Rev. Code § 5301.49(A).  The Seventh Appellate District rejected that argument because the 1989 DMA outlines a specific legislative intent to reattach mineral interests back to the surface under a twenty-year look back period. Householder, at ¶20.

Householder also argued that 1989 DMA was inapplicable unless the surface owners took an affirmative action under the 1989 DMA prior to the effective date of the 2006 DMA, such as by recording an affidavit of abandonment or filing a court proceeding for quiet title.  However, the Court concluded that 1989 DMA was self-executing and “emphasize[d] that the obligation to act was on the mineral interest holder in order to avoid automatic abandonment and vesting and there was no obligation imposed upon the surface owner under the 1989 DMA.”  Id. at ¶24.  The Court further explained that the 1989 DMA can still be used after the 2006 DMA amendments because the 1989 DMA is self-executing and the lapsed right automatically vested in the surface owner (which was first discussed in the Walker case).  Id. at ¶28 (citing Walker v. Shondrick-Nau, Executrix of the Estate of Noon, 7th Dist. No. 13NO402, 2014-Ohio-1499).

Under Ohio law, the statute to be applied is “…the one existing at the time the cause of action accrued unless the new statute existing at the time the suit was filed enunciates that it applied to causes of action that accrued prior to the effective date.”  Id. at ¶32 (citing Groch v. Gen. Motors Corp., 117 Ohio St.3d 192, 2008-Ohio-546, 883 N.E.2d 377, ¶179,183) (emphasis added).  The reenactment, amendment, or repeal of a statute does not affect (i) the prior operation of the statute or any prior action taken thereunder; (ii) any validation, cure, right, privilege, obligation, or liability previously acquired, accrued, accorded, or incurred thereunder; or (iii) any proceeding or remedy in respect of any privilege, obligation, or liability and the proceeding or remedy may be instituted, continued, or enforced as if the statute had not been repealed or amended.  Id. at ¶30 (citing Ohio Rev. Code § 1.58(A)(1), (2) and (4)).  The Court explained that its application of the 1989 DMA was consistent with basic property rights – “[a] vested interest…so completely and definitely belongs to a person that it cannot be impaired or taken away without the person’s consent.”  Id. at ¶29 (citing Walker, 2014-Ohio-1499 at ¶40).

Thus, when the 2006 DMA was enacted, any mineral interest that was abandoned under the 1989 DMA stayed abandoned and continued to be vested with the surface owner – once the mineral interest vested in the surface owner, it reunited with the surface estate pursuant to the statute, regardless of whether the event has yet to be formalized.  Id. at ¶34.  Additionally, the 2006 DMA does not contain language that expressly eliminates property rights that were previously vested pursuant to the 1989 DMA.  Without express language eliminating the prior automatic abandonment and vesting of rights under the old act, the amendments do not affect causes already existing.  Id.  Accordingly, the 2006 DMA “eliminated the automatic vesting after June 30, 2006, but did not erase previously vested interests (merely because a suit had not yet been filed to formalize the reverter).” Id. at ¶35.

In conclusion, the 2006 DMA is not retroactive because it does not expressly state as much in accordance with Ohio Rev. Code § 1.48.  Further, the Court in Householder reiterated its decision in Walker: that the 1989 DMA is self-executing, and mineral interests are to be analyzed under the statute in existence at the time when the mineral estate may have lapsed and reunited with the surface estate.  Thus, under Ohio law, title to the mineral estate may have lapsed and vested with the surface owner without any transaction filed of record to document the lapse of the mineral interest.  Accordingly, when title to the mineral estate and the surface estate has been severed, you must conduct an analysis to determine if the mineral estate lapsed under the 1989 DMA or if the 2006 DMA is applicable.