Vexatious Title Issues Student Symposium
Title examiners, in Kansas and elsewhere, deal with a number of recurring issues that often defy resolution. This symposium provides an in-depth study of many of the commonly encountered issues along with a preview of several new emerging issues.
Each of the presentations at this Symposium will be made by a Washburn Law student who has worked with a professor, and two practitioners, to prepare his or her topic. The students will lead the Symposium by making presentations and engaging a panel of title examiners, and the audience, in a discussion of the issues.
The Symposium will be held Friday, March 28, 2014, at in Room 102 at Washburn University School of Law (directions) from 9:15 a.m.-5:00 p.m. Free parking is available north, south and east of the law school.
9:15 a.m. – "All Mineral" and "Oil, Gas, and Other Minerals"
Courtney L. Kelley
A foundational inquiry in every "mineral" or "oil, gas, and other minerals" conveyance is the scope of the term "mineral." Related interpretive issues concern the scope of terms such as "gas" and "coal" as they relate to coal bed methane ownership. Existing law is examined with the goal of distilling interpretive guides that can be used to try and define the scope of mineral conveyances. Guidance is also provided on drafting to avoid the problem.
9:30 a.m. – "Mineral" and "Royalty" Interests
Every conveyance of an interest in oil and gas must be analyzed to determine whether it creates a "mineral" interest or a "royalty" interest. Although the attributes of each can be easily identified, the industry is plagued with poorly drafted documents that are often the product of forms that perpetuate and magnify drafting errors. Although an extensive body of case law exists on the topic, it is inconsistent and often the product of the court seeking a desired outcome to achieve an equitable result. Early case law reflects the inability to recognize the nonparticipating mineral interest. After accounting for these jurisprudential tendencies, the case law nevertheless provides useful guidance to distinguish "mineral" from "royalty" with clear guides on how to draft to avoid the issue in future conveyances.
9:45 a.m. – Nonparticipating Mineral Interests
The ability to create a "mineral" interest that participates only in "royalty," but as a "mineral" interest owner, has challenged judges and practitioners. Particularly in a state like Kansas where distinguishing a mineral interest from a royalty interest will often determine whether the conveyance is void or valid. Although the nonparticipating mineral interest is clearly recognized by Kansas courts, the law defining the contours of the interest, including potential relational obligations, is largely nonexistent. Therefore, existing law must be identified along with the many unresolved issues. Experiences in other states provide guidance on how Kansas may, or may not, want to address the open issues. Guidance is also provided on drafting nonparticipating mineral interests to resolve and avoid the open issues.
10:00 a.m. – Defeasible Term Interests
Michael J. Duenes
The major issue is determining whether the interest has been extended, and maintained, during the indefinite "so long as oil or gas is produced" secondary term. Most deeds do not contain the detailed provisions found in oil and gas leases that provide for constructive production, such as commencement, completion, dry hole, cessation, shut-in, pooling, and force majeure clauses. Instead, a unique body of law has developed to address when the interest will be extended into the secondary term. The stakes are high. The validity of the interest will turn on the interpretation and application of a body of case law that has not been consistent, and that is continuing to develop in significant ways. The case law, however, provides a useful guide for drafting defeasible term mineral interests.
10:15 a.m. – Break
10:30 a.m. – Rivers and Lakes
Coleman J. Younger
Ownership of land beneath rivers and lakes depends upon whether they were navigable-in-fact at the time of statehood. The determination of navigability is a federal law issue and the U.S. Supreme Court recently reaffirmed that navigability is not a river-by-river determination but rather a segment-by-segment determination for each river. This presentation examines federal navigability law and state law defining ownership boundaries for navigable and non-navigable rivers and lakes. The legal effect of erosion, accretion, and avulsion are also examined.
10:45 a.m. – City Streets, County Roads, State & Federal Highways
Jeffrey A. "Jeff" Wilson
When land is acquired for a street, road, or highway, whether by grant, dedication, or condemnation, the issue is whether a fee interest was conveyed, including the mineral interest, or an easement. The goal is to identify the applicable statutory law and case law that define the nature of ownership beneath a particular road, maintained by a particular entity, and created pursuant to a particular statutory or common law process.
11:00 a.m. – Railroad Land Grants
Anthony J. "Tony" Ford
Railroad land grants cover 1/6th of the land area of Kansas. Lands were granted pursuant to a number of legislative acts and for various railroad purposes. Commonly-encounter legislative and grant language states: "Excluding and excepting all mineral lands should any such be found in the tracts aforesaid…" Language similar to this has been interpreted by state and federal courts with some inconsistent results. The goal is to identify and analyze the relevant law that must be considered to determine the disposition of the mineral estate at the time of the original grant. Another issue is determining whether an otherwise unlimited grant will create a fee simple, a fee simple determinable, or merely an easement.
11:15 a.m. – Spousal Rights
Christopher A. "Chris" Rohr
Constitutional homestead rights, and a statutory substitute for dower and curtesy, make it essential that a married person be joined by their spouse in any conveyance of real property. The failure to recite marital status in a conveyance is perhaps the most common title defect. The law governing spousal joinder is examined along with other laws addressing spousal rights when a divorce petition is filed. The effect of a false recital of marital status is also examined.
11:30 a.m. – Break
11:45 a.m. – Mortgages and Other Creditor Burdens
Nathan A. "Nate" Jiwanlal
When a landowner grants an oil and gas lease the land will often be subject to pre-existing creditor claims, typically secured by a recorded mortgage. Perfected creditor claims prior in time to the oil and gas lease create problems because they enable the creditor to foreclose on the property and sell it unburdened by junior claims, including a subsequently-granted oil and gas lease. This has given rise to the "subordination" agreement and other arrangements to protect the oil and gas lessee in the event the landowner defaults on pre-existing obligations to creditors. Basic creditor rights in the oil and gas law context are explored along with common practices and problems associated with pre-existing creditor rights.
Noon – Farm Tenancies and Other Landlord/Tenant Relationships
Tucker A. Stewart
Land in Kansas is often burdened by a farm tenancy. The lease may be oral or written, and in many cases will be supported by the farm tenant's long-term physical possession of the land. Issues arise concerning the scope of the tenancy and whether it limits the landowner's ability to grant an oil and gas lease, and associated development rights, to the burdened land. The farm tenant's status as a third party beneficiary of the oil and gas lease and other development contracts is also explored.
12:15 p.m. – LUNCH
1:45 p.m. – Operating Agreement Burdens
Robert J. Moody
When evaluating the validity and effect of lease transfers a major focus will be the terms of any operating agreement that may burden an interest in the lease. Restrictions on partition, required consents, preferential rights to purchase, areas of mutual interest, liens, and unfunded obligations may all burden the transferred interest. The focus is on operating agreement burdens that title examiners often encounter and what to do with them in the title opinion.
2:00 p.m. – Fractional Conveyances and the Duhig Response
Jessica A. Brunken
Interpretive issues can arise whenever a grantor seeks to except from a conveyance a fractional interest in minerals at a time when the grantor owns less than all the minerals. Unless the conveyance addresses the issue, examiners are left with the task of trying to determine the intent of the parties to the conveyance. Many courts have adopted the Duhig analysis to arrive at a generic, matter-of-law approach to the issue. The adoption of a Duhig analysis remains open in Kansas. Available statutory and case law will be examined to determine how Kansas addresses these issues.
2:15 p.m. – Proportionate Reduction
Bret M. Robinson
Proportionate reduction is an issue at the pre- and post-lease stages. It impacts the expectations of the parties; expectations that often differ. Proportionate reduction issues arise any time a party entitled to lease benefits owns less than all the underlying mineral interest. It arises between lessors and lessees, and between assignors and assignees. The goal is to evaluate existing law to identify potential traps, interpretive issues, and to define the effect of language commonly found in oil and gas leases and assignments.
2:30 p.m. – Notice: Constructive, Actual, Inquiry
David W. Exstrum
Third parties are deemed to have notice of title documents and circumstances through statutory and common law rules that impute notice regardless of the party's actual knowledge. Constructive notice, and actual notice, have been explained and developed by case law. Inquiry notice impacts the potential scope of both categories of notice. The goal is to explore the law of notice and define the necessary scope of an examiner's efforts to ascertain the facts.
2:45 p.m. – Break
3:00 p.m. – Recorded Memoranda of Unrecorded Documents
Nathaniel A. "Nathan" Unruh
It is now common to see recorded memoranda intended to put the public on notice that the property is burdened by a wind lease, oil and gas lease, operating agreement, or other important document affecting title. The referenced documents are not recorded, but instead are identified with varying degrees of detail in the memoranda. The goal is to evaluate the efficacy of the recorded memoranda, the required content of the memoranda, and how administering requests for a complete copy of the instrument can impact the notice analysis.
3:15 p.m. – Tax Liens and Tax Sales
Stephen P. Tyler
Failure to pay taxes can result in a statutory lien against property. One of the most common judicial transfers of title arises from a sale for non-payment of taxes. It is also the judicial proceeding that is most prone to procedural defects. This presentation examines tax liens and the procedural requirements for a valid tax sale, what the examiner should look for, and common defects.
3:30 p.m. – Fractionalized Interests
Matthew A. "Matt" Tate
Mineral and royalty interests are frequently overlooked until they become the focus of development. Often they will pass through several generations and, through intestacy, further fractionalized among statutory heirs. Interests in oil and gas leases become fractionalized to accommodate investment and to leverage risk. For producing properties the fractionalization may be simultaneously taking place at the mineral owner, royalty owner, and working interest owner levels. Ownership can also become further complicated with the creation of future interests, such as remainders, reversions, and possibilities of reverter. The menu of statutory and common law procedures to address fractionalized interests is limited. The opportunities and limitations created by existing law are explored.
3:45 p.m. – Break
4:00 p.m. – Royalty Pools
Aaron K. Friess
Beginning in the 1920s it was fashionable to create "royalty pools" where landowners were enticed to transfer a fractional interest in their minerals to a promoter. The concept was to leverage the possibility of production from a single tract of land by placing it in a "pool" that included thousands of acres of land. After deducting administrative fees and the promoter's share of production, the balance would be distributed among all pool owners based upon their proportional acreage contribution to the pool. Disappointment with the arrangement usually occurred when a tract that had been contributed to the pool became very productive but the owner of the land only received a very small proportion of the production revenue. Fortunately, most of these arrangements relied upon defeasible term interests and required the perpetuating production to come from the granted tract of land. Royalty pools, however, are still encountered with the contributed interests having been perpetuated by production.
4:15 p.m. – Rule Against Perpetuities
Kathleen M. "Kate" Wary
The rule against perpetuities is a frequent issue when dealing with routine oil and gas interests, particularly in Kansas. The unique application of the rule to nonparticipating royalty interests continues to generate trips to the Kansas Supreme Court; most recently in Rucker v. DeLay. The courts have also applied the rule to preferential rights to purchase. The potential impact of the Kansas Uniform Statutory Rule Against Perpetuities remains to be determined by the courts. This presentation examines the current state of the rule and the role the statutory rule is likely to play in future perpetuities disputes.
4:30 p.m. – Minimum Notice Requirements for Title Litigation
An issue that impacts all legal proceedings is the effort that must be made, in the Internet Age, to diligently identify the present address or whereabouts of parties to a lawsuit so it is likely they will receive notice of a pending action. The goal is to define current federal constitutional notice requirements and address compliance with statutes that require some level of Internet inquiry.
4:45 p.m. – Environmental Land Use Limitations
Benjamin E. "Ben" Busboom
Land use limitations come in many varieties. The more apparent limitations are those created by contract and conveyance. These typically appear of record in the chain of title. Less apparent are those created by law, such as zoning restrictions. These will rarely appear of record. The more obscure limitations arise from state and federal environmental laws. For example, a potential land use limitation may arise from the existence of unplugged wells on land or the classification of the land as a "wetland." This topic explores the potential expansion of the title examiner's role in identifying and searching public records that can alert the client to significant land use problems associated with a proposed lease acquisition or drill site.
5:00 p.m. – Reception
Date and Location
Friday, March 28, 2014
9:15 a.m.-5:00 p.m.
Washburn University School of Law
No CLE credit is available in conjunction with this program.