curative

Utah Oil & Gas Update

Oil and Gas Regulations, Royalty Issues, Title Issues/Curative, , , , , , , , , , , , , ,

UTAH COURT OF APPEALS APPLIES THE OPEN MINES DOCTRINE, REJECTS PETITION TO CONSTRUE WILL IN FAVOR OF LIFE TENANTS

In re Estate of Womack, 2016 UT App 83, 2016 WL 1729528, involved a decedent whose formally probated Will devised a 160-acre parcel to his three children, in equal shares. See id. ¶ 2. In his Will, the decedent specified that “the oil, gas and mineral rights under the said property . . . are devised to each of my children, share and share alike, for life,” remainder to the decedent’s grandchildren. Id. In 1990, the district court entered an estate closing order that named the decedent’s three children as the owners of the 160-acre parcel outright. Id. ¶ 3. In 1992, the district court amended the estate closing order “to conform to the Will” and provide for the grandchildren’s remainder in the minerals, which had been incorrectly omitted in the prior order. Id. ¶ 4. In 2008, an oil and gas company leased the minerals underlying the 160-acre parcel, but a question arose as to who was entitled to the proceeds of production. Id. ¶ 5.

In an effort to clarify who was entitled to the proceeds of production, one of the life tenants petitioned the district court to reopen the decedent’s estate and construe the Will in favor of the life tenants. According to the life tenant, the prior order’s lack of specificity resulted in an ambiguity that should be resolved in favor of the life tenants, based on an affidavit from the drafting attorney regarding the decedent’s intent. Id. ¶¶ 5 and 6. Two of the remaindermen challenged the petition, asserting that the requested relief would require the court to re-construe a provision of the Will that had already been construed, and that the court would be required to vacate or modify its prior order. This, the remaindermen contended, was barred by a six-month statute of limitations. Id. ¶ 14 (citing Utah Code Ann. § 75-3-412). The district court agreed with the remaindermen and denied the life tenant’s petition to construe the Will.

The life tenant appealed, claiming that the district court had misinterpreted the nature of the petition, and that the petition only sought clarification of the prior estate closing order, which was not subject to the six-month limitations period. The Court of Appeals affirmed the district court’s decision. The Court cited the open mines doctrine and concluded that the remaindermen were entitled to the proceeds of production because the Will did not specify otherwise. The Court found that the prior estate closing order had already construed the Will as creating life estates in mineral rights, and “[l]ife estates in mineral rights, by default, do not encompass a right to any proceeds from new mineral extraction.” Id. ¶ 17 (citing Hynson v. Jeffries, 697 So.2d 792, 797 (Miss. Ct. App. 1997). In the Court’s view, the Will was not ambiguous, and clarification was not necessary. Id. The Court found that the prior estate closing order “implicitly granted extraction proceeds to the [remaindermen] (albeit by default).” Id. ¶ 19. Because the petition sought to prove the decedent’s intent for the life tenants to receive income from the minerals, “rather than letting such proceeds default to the holders of the remainder” under common law, the Court found that the six-month time limit for vacations and modifications of prior orders applied, and the petition was time-barred. Id.

UTAH LEGISLATURE CONFIRMS THAT FEDERAL, STATE, AND TRIBAL INTERESTS MUST BE EXCLUDED WHEN CALCULATING SEVERANCE TAX ON OIL AND GAS

In the May 2015 edition of the Rocky Mountain Mineral Law Foundation Mineral Law Newsletter, we reported on the Utah Supreme Court’s decision in Anadarko Petroleum Corporation v. Utah State Tax Comm’n, 2015 UT 25, 345 P.3d 648 (Utah 2015). In Anadarko, the Court held that an oil and gas operator may exclude federal, state, and tribal interests when calculating its severance tax rate.

The Utah legislature recently codified the rule established by Anadarko. See S.B. 17, ch. 324, 2016 Utah Laws (amending Utah Code Ann. §§ 59-5-102 and 59-5-103.1). S.B. 17 confirms that the severance tax on oil and gas does not apply to federal, state, or tribal interests in oil and gas. As such, for purposes of determining the amount of severance tax, these exempt interests should be excluded when calculating the value of oil and gas and the tax rate. S.B. 17 applies to a taxable year beginning on or after January 1, 2015, as well as to severance taxes “for any taxable year, including a taxable year beginning before January 1, 2015, that is the subject of an appeal that was filed or pending on or after January 1, 2016.” Id.

(Re-printed from Andrew J. LeMieux, Utah Oil & Gas, Rocky Mountain Mineral Law Foundation Mineral Law Newsletter, May 2016)

Utilizing Online Resources to Save Time: A Primer for Landmen and Title Examiners

Due Diligence, Title Issues/Curative, , , , , , , ,

Advances in technology save everyone time. We all look to technology to organize and inform our daily lives in both professional and personal settings. How can technology be used to save time when dealing with common title issues? Something as simple as knowing where to obtain a patent or how to determine potential heirs can save a landman time and avoid unnecessary questions and research.

There is a vast amount of title information available online, but knowing where to find it is half the battle. This article provides a brief summary of some of the best online resources available to landmen. These websites1 provide materials ranging from oil and gas plats to well production records, which can be used to form a more complete and accurate picture of the land and title issues being examined.

Because most land ownership in the Western United States originated with the federal government, a good place to start is with the Bureau of Land Management (“BLM”) website2, regardless of the current ownership of the land. The BLM website provides land patents, surveys, master title and oil and gas plats, and historical indices for a select group of states:

  • Official BLM Patents are particularly useful to confirm federal reservations.
  • Survey plats can be used to track changes in legal descriptions.
  • Plats provide a visual representation and depict the current uses on those lands in a given township and range.
  • Historical indices provide a ledger-like record of all uses that have occurred in a given township and range.

However, land status records for a few of the Western states are maintained separately on the respective BLM state office’s website.3 See the BLM website for more information regarding the availability of these records.

In addition, geographic reports with accompanying serial register pages are available through the Bureau of Land Management Land & Mineral Legacy Rehost 2000 System (“LR-2000”) website4. These reports can be obtained by searching lands by township, range, and section. Geographic reports provide a list of all uses, including mining claims, federal leases, right-of-ways, and communitization agreements for a designated geographic area and will provide the BLM internal serial number for each use. Once you have the serial number, an accompanying serial register page which is available for both inactive and active uses provides more detailed information pertaining to each use.

The next source of valuable information is the state entity tasked with regulating oil and gas. Various oil and gas records can be found on state oil and gas commission websites:

Unfortunately, most states have unique websites that require a little patience to navigate. Also, some states do not provide older production records online. Although it is easier to search in some states than others, most states also provide spacing and pooling orders. These records are helpful to find detailed information on a well or to determine whether a lease has been properly held by production.

Individual county resources available online can vary greatly. Fortunately, more and more counties are providing online parcel viewers, often with aerial maps, which can be used to give a visual representation of the land, surface parcel boundaries, parcel acreage, roads, railroads, utilities, and bodies of water. Most county websites at least provide the status of property taxes which can help confirm surface ownership, while other counties provide additional resources through a paid subscription service.

You may also need to research corporate status or history of an entity. Every state has an entity that regulates the corporations registered in the state5 with a range of information that can be obtained regarding a business entity including (but not limited to) officers, addresses, and formation dates. One type of data that is typically available from these Secretary of State sites, but often requires a fee, is the corporate succession. However, there are other online resources that are free and easier to use. For example, the BLM Wyoming website offers the Corporate Name Change & Mergers Index6 and the National Association of Division Order Analysts maintains a mergers and acquisitions database as well.7 In the event a landman is faced with a gap in title between two entities, these resources particularly helpful to confirm whether an entity has merged or changed its name.

In addition to government sponsored websites, there are also some private sites that can be useful, especially in the area of genealogy. Genealogical research may be required for various title curative issues that may arise, including determining potential heirs, or confirming the death of a join tenant. There are many helpful resources online to troubleshoot these issues, including GenealogyBank.com8, a subscription-based service with a database of 6,500 newspapers which can aide in the search for an obituary or death notice. In addition, Ancestry.com9 can be used for a more intense, subscription-based genealogical search for census records, birth and death certificates, and other historical documents like military and marriage records.

These easy to access records can save time and money when dealing with basic title issues that arise at the outset of many, often time-sensitive, title projects.

1Many of these online resources limit their liability regarding the accuracy of the information provided.
2https://www.glorecords.blm.gov/default.aspx.
3For example, Nevada and Wyoming.
4http://www.blm.gov/lr2000.
5Colorado, Delaware, Montana, New Mexico, North Dakota, Utah, Wyoming.
6 http://www.blm.gov/wy/st/en/resources/public_room/corporate_list.html.
7http://www.nadoa.org/forms/ma/From_To_Updated_2014.pdf.
8http://www.genealogybank.com/.
9http://www.ancestry.com/.

But My Husband (or Wife) Doesn’t Need to Sign: Spousal Joinder Issues

Royalty Issues, , , , , ,

When obtaining an oil and gas lease from an individual mineral owner, it is a common practice for landmen to obtain a signature on the lease not only from the record title owner but also from that person’s spouse. That is done for good reason. Given the various legal principles that may require spousal joinder – such as community property rights and homestead laws as discussed in this article – obtaining spousal joinder on a lease often is required, and is a very good precaution even in situations where it may not be required.1

Obviously, a lease isn’t the only place where spousal joinder issues crop up. The chain of title to mineral property may include a number of deeds that were executed by individuals who held record title at the time and that were not executed by the spouses, if any, of such persons. Often there is nothing in the abstract confirming whether or not the grantor was married at the time a deed was executed. When it comes to conveyances that were executed in the past, a landman doesn’t readily have the ability to cause the grantor’s spouse to execute the deed and thereby eliminate the risk that a required spousal joinder was not obtained. So when is joinder in a conveyance by the non-record title owning spouse required?

For land in a community property state, any conveyance by a married individual without joinder of that person’s spouse raises the issue of whether any potential community property interest of a non-record title owner spouse was conveyed, or even whether the conveyance by the spouse owning record title was valid. Of the western states, Arizona, California, Idaho, Nevada, New Mexico, Oregon and Washington are community property states. Statutes in several of those states specifically require joinder of a husband and wife in execution of a conveyance of community property.2 Generally speaking, when a married individual living in a community property state acquires mineral rights or other real property interests in that state using funds generated by the joint effort of both spouses, the property is community property. Both spouses have an equal, presently vested interest in such real property. On the other hand, real property interests acquired by either spouse before marriage or after entry of decree of dissolution of marriage, and real property acquired by either spouse by gift, bequest, devise or descent, is separate property. The issue of what constitutes community property or quasi-community property is state specific and fact specific and is beyond the scope of this article.

Community property issues can’t be ignored entirely with respect to real property in common law jurisdictions either. A number of western states, including Colorado,3 Montana,4 Utah5 and Wyoming,6 have adopted the Uniform Disposition of Community Property Rights at Death Act. Under these statutes, the community property rights of a surviving spouse that resided in a community property state are recognized as to real property located in the applicable common law state. If both spouses are living, these statutes are not a concern. However, execution by a non-record title owing spouse is needed when conveying real property in the common law state that was owned by a deceased resident of a community property state, except as to real property that is separate property under the laws of the community property state.7 The statutes do protect purchasers for value from a personal representative, heir or devisee of the record title holder that has apparent title to the property against claims of the surviving spouse.

Other spousal joinder requirements arise out of state laws requiring that both spouses must join in instruments affecting real property when the land is a homestead. In Montana,8 Nevada,9 South Dakota10 and Utah,11 homesteads are created by a filing or a declaration in accordance with the applicable state statute, and spousal joinder is required to convey or encumber homesteads of married persons so created.12 In other states such as Nebraska,13 New Mexico,14 North Dakota,15 and Wyoming,16 a homestead right can arise without the filing of a homestead certificate. In Colorado, homesteads created automatically under the statutory provisions can be conveyed or encumbered free and clear of homestead rights by the record owner alone, but if the owner and spouse file a homestead declaration, the signature of both spouses is required to convey or encumber the property.17

In states where a homestead filing is required, if the title data is sufficient to determine that there was no homestead filing, a landman or title examiner can conclude that no spousal joinder was required in a conveyance. In jurisdictions where a homestead can be created without filing, spousal joinder generally should be obtained due to the difficulty of determining whether the land falls within the statutory definition of a homestead such that spousal joinder is required.18 However, given the provisions of the various homestead statutes, an out of state owner or the owner of a severed mineral interest would not be in a position to assert a homestead claim. As a result, the lack of joinder by the spouse of the record owner on a deed conveying such an interest would not be a title defect unless spousal joinder was needed for reasons other than the homestead statute.

In addition to the statutes discussed above, most states have adopted probate laws which guarantee that a surviving spouse will receive a fraction of the total value of the spouse’s estate. These statutes also permit the surviving spouse to attack certain conveyances made prior to death if the reduced estate and other assets are not there to satisfy the survivor’s share. The most common form of forced share provision is the augmented estate provision of the Uniform Probate Code (UPC). In order to protect the surviving spouse against transfers made before death, the effect of which is to reduce the estate and therefore the statutory guaranteed share, the UPC allows augmenting the estate to include certain property dispositions made by the decedent alone during a specified period (usually two years) before death. The augmented estate provisions of the UPC have been adopted in various forms in Colorado,19 Montana,20 Nebraska,21 North Dakota22 and Utah.23 These statutes are relevant only as to conveyances that were made by a married record owner without spousal joinder during the specified period before his or her death, when the issue has not been rendered moot by subsequent probate or intestacy proceedings which clarify that the surviving spouse did not elect to take under the augmented estate provisions.

As the discussion above indicates, there is no simple, across-the-board answer to the question of when spousal joinder is required in a conveyance. Whether the lack of spousal joinder in a deed in the chain of title resulted in an outstanding interest that was not conveyed may depend on facts not available in an abstract examined. Clearly one needs to understand the statutes and case law of the applicable state as the starting point in making that determination.

1If an individual executes a lease alone, the lessee frequently includes a recital stating the reason given by the lessor as to why joinder by a spouse was not needed. For example, the lease may recite that the lessor is a single person, or is a widow or widower. When the spouse of a record owner who is married does not sign a lease, the lease may recite that the lessor is dealing with his or her separate property. Inclusion of self-serving recitals such as these may make a company more comfortable in accepting a lease that has not been executed by the record owner’s spouse, but there is a risk in relying on such recitals without further confirmation since they are not proof of the facts stated. The “facts” recited may be incorrect. At most, they qualify the recited facts as prima facie evidence or create a rebuttable presumption that they are true. See, e.g., Colo. Rev. Stat. § 38-35-107 (recitals instruments recorded for 20 years are prima facie evidence of facts recited therein); S.D. Codified Laws § 43-28-19 (recitals are prima facia evidence on questions of marital status, homestead and identity when recorded); N.D. Title Standards 2-03 (permits reliance upon a recitation of single status, including widow or widower, if no evidence of marriage appears in the record).
2Ariz. Rev. Stat. Ann. § 33-452; Ida. Code § 32-912; N.M. Stat. Ann. § 40-3-13 (also applies to leases if the initial term, together with any option or extension, exceeds 5 years, or if the term is indefinite); and Rev. Code Wash. Ann. § 26.16.030(3). Under New Mexico law, for example, if a spouse fails to join in the conveyance, mortgage, assignment, or lease of community property, the instrument is void and of no effect, unless ratified by the spouse in writing. N.M. Stat. Ann. § 40-3-13; Hannah v. Tennant, 589 P.2d 1035 (N.M. 1979). In fact, an instrument purporting to convey a community property interest that is signed by only one of the spouses may not even be effective as to the spouse who signed the instrument. Either the joining or non-joining spouse can subsequently assert a claim that the conveyance was void. See Marquez v. Marquez, 513 P.2d 713 (N.M. 1973); McGrail v. Fields, 203 P.2d 1000 (N.M. 1949).
3Colo. Rev. Stat. § 15-20-101 et seq.
4Mont. Code Ann. § 72-9-101 et seq.
5Utah Code Ann. § 75-2b-101 et seq.
6Wyo. Stat. Ann. § 2-7-720 et seq.
7The statutes list rebuttable presumptions relating to community property and separate property.
8Mont. Code Ann. § 70-32-105.
9Nev. Rev. Stat. § 115.020.
10S.D. Codified Laws § 43-31-8.
11Utah Code Ann. § 78B-5-504.
12See Mont. Code Ann. § 70-32-301; Nev. Rev. Stat. § 115.040; S.D. Codified Laws § 43-31-17; Utah Code Ann. § 78B-5-504(4).
13Neb. Rev. Stat. § 40-104.
14N.M. Stat. Ann. § 42-10-9.
15While N.D. Cent. Code §§ 47-18-19 through 20 provide for execution and recording of a homestead declaration, N.D. Cent. Code § 47-18-17 provides that failure to make such a declaration shall not impair the homestead right.
16Wyo. Stat. Ann. § 34-2-121 (in addition to spousal joinder, requires language stating: “Hereby releasing and waiving all rights under and by virtue of the homestead exemption laws of this state” to convey or encumber homestead). Under Wyo. Stat. Ann. § 34-8-101 et seq., a defective deed is cured by operation of law after it has been of record for 10 years, however. 17Colo. Rev. Stat. § 38-41-202.
18As noted above, homesteads created automatically in Colorado are the exception since the record owner alone can convey or encumber the property.
19Colo. Rev. Stat. § 15-11-201 et seq.
20Mont. Code Ann. § 72-2-222.
21Neb. Rev. Stat. §§ 30-2313 – 2314 (period extended to 3 years).
22N.D. Cent. Code § 30.1-05-01.
23Utah Code Ann. § 75-1-201 et seq.

Beyond Six Feet Under: Mineral Ownership and Development Issues Involving Cemeteries

Title Issues/Curative, ,

Recent news coverage has spurred discussion on the rights that burial plot owners have in cemeteries and whether or not drilling for oil and gas should be prohibited on or under lands reserved for the dead.1 As horizontal drilling brings oil and gas development closer to population centers, the oil and gas industry will need to address some of the unique title and public policy issues surrounding mineral development under cemeteries.

Often, individual burial plot deeds read like warranty deeds and do not contain mineral reservations. However, burial plot deeds may contain a qualifier that the deed is granted for the sole purpose of the burial of human remains. If a burial plot deed grants fee title and contains no mineral reservations, it is conceivable that the burial plot owner (or his or her estate) could attempt to make a claim to the minerals underneath. Under general rules of deed interpretation in most states, a deed with no mineral reservations is deemed to convey fee title, including mineral rights.

On the other hand, burial plot transactions are not typical real property transactions. It is arguable that burial plot deeds are not intended to grant fee simple title to the land. The general rule is that “one who owns or has an interest in a cemetery for burial purposes does not acquire any title to the soil, but only an easement or license for the use intended.”2 Case law suggests that a burial plot deed should be interpreted as conveying only such interests in the burial plot that are necessary for the purpose of burying human remains (in other words not mineral rights). However, it is not clear that this rule applies in each state.3 From a public policy standpoint, it could be very difficult to track down the heirs or devisees of burial plot owners who died centuries ago.

If burial plot owners do not have a valid mineral claim, then who does? Public entities, common-law dedicators, and cemetery operators are likely candidates. For example, if a parcel of land is owned in fee simple by a public entity and dedicated for a cemetery, then the public entity (such as the city) would own the fee title, including mineral rights. If a parcel of land is privately owned in fee simple and dedicated on a subdivision plat or conveyed as a common-law dedication for use as a cemetery, then arguably the mineral title remains with the dedicator.4 If a cemetery operator acquired fee simple title, including minerals, by conveyance, then the operator may be deemed to own the minerals after deeding out the burial plots under the general rule discussed above.

Although the value of mineral rights under individual burial plots are likely to be economically miniscule, particularly if a cemetery is contained within a large drilling and spacing unit, there are risks involved if the proper mineral owners are not identified. Unfortunately, because of the small amount of oil and gas development near cemeteries to date, there are very few states that have addressed issues of mineral title in cemeteries. Therefore, title examiners and land departments should carefully examine burial plot deeds and thoroughly analyze the applicable state’s law in order to determine the correct mineral ownership under cemeteries.

Knowing who owns the minerals is only part of the issue if an operator intends to drill within the boundaries of a cemetery. Conducting drilling operations on actual cemetery land will likely be against public policy in many states. For example, inChas. E. Knox Oil Co. v. McKee, a church signed a lease with the operator for the purpose of drilling for oil and gas.5 Some of the church congregation members had family members buried in the cemetery and filed an injunction against the operator. The court held that it was against public policy to permit an operator to drill for oil and gas in a cemetery.6

Today with technological advancements in horizontal drilling, operators now have the ability to drill for minerals underneath cemeteries without having to conduct surface activities on the surface of the cemeteries. Arguably, the public policy rule established in cases like McKee would not apply to horizontal drilling. However, there have been recent oil and gas opposition groups claiming that underground fracking would disturb gravesites and not allow the dead to effectively “rest in peace.”7 Although mineral extraction occurs at depths that would likely never have any impact on gravesites, operators should be prepared to discuss and address these concerns when electing to drill for minerals on or beneath cemeteries.

*The author would like to acknowledge Scott T. Swallow for his contribution to this article.
1Manny Fernandez, Drilling for Gas Under Cemeteries Raises Concerns, N.Y. TIMES, July 8, 2012, available athttp://www.nytimes.com/2012/07/09/us/drilling-for-natural-gas-under-cemeteries-raises-concerns.html; see also Julie Carr Smyth, PRESSCONNECTS, Gas Drilling under Cemeteries Raises Money, Moral Questions, July 3, 2012, http://archive.pressconnects.com/article/20120704/NEWS01/207040337/Gas-drilling-under-cemeteries-raises-money-moral-questions.
2Walker v. Georgia Power Co., 177 Ga. App. 493, 496 (1986); see also Heiligman v. Chambers, 338 P.2d 144, 148 (Okla. 1959); Evergreen-Washelli Memorial Park Co. v. Dep’t of Revenue, 574 P.2d 735 (Wash. 1978); Petition of First Trinity Evangelical Lutheran Church in City of Pittsburg, 251 A.2d 685 (Pa. 1969).
3See, e.g., Wyo. Stat. Ann. §§ 35-8-102; Colo. Rev. Stat. Ann. § 12-12-116 (2006).
4See Taylor v. Con’t S. Corp., 280 P.2d 514 (Cal. App. 2d 1955).
5Chas. E. Knox Oil Co. v. McKee, 223 P. 880 (Okla. 1924).
6Id. at 882.
7See infra note 1.

How Online Genealogical Tools Can Make a Landman’s Life Easier

Title Issues/Curative, , ,

The drilling rig is en route to your location and your land manager is breathing down your neck to lease the last remaining fee owners. The only problem: the owners cannot be found because they are likely deceased. Now what do you do? Carry the interests? Force pool? Drilling delays can be costly and carrying interests can be risky, so time is of the essence. Fortunately, there are a number of online genealogical tools available that might help you track down the heirs or devisees of the deceased owners.

Surprisingly, Google searches are a great starting point. In particular, rare names or unique spellings are helpful to locate information and, oftentimes, an obituary can be located by searching a decedent’s name and last known city or state of residence. Obituaries are generally accurate and provide a list of possible heirs or devisees. If an obituary is not located by a Google search, it might be found using another search engine, such as Yahoo or Bing.

If you know the decedent’s place of death and approximate date of death, you can search probate records. Some states, such as Colorado1, Montana2, New Mexico3, North Dakota4, Texas5, and Utah6, have websites which provide probate or other genealogical resources online. Individual counties typically maintain their own probate files. Where resources are not available online, you may ask the county court if there is a probate file for the decedent and, if so, request a copy of the file.

What about the more difficult searches? GenealogyBank.com, a subscription-based site, has a database of 6,500 newspapers with some newspapers going as far back as 1690. Generally, the earlier the date of death, the more difficult it is to find an obituary for the decedent. However, GenealogyBank.com may provide a death notice (indicating when and where the decedent died), a social security number, newsworthy stories, or birth or marriage announcements. If a social security number is located, it can be used to search the Social Security Death Index (free on several online genealogical websites, see below) to identify the date of the decedent’s birth and death, the town in which the decedent’s social security card was issued, and the decedent’s last place of residence. Any information gathered about the decedent, including relatives, dates of life events, places of life events, etc., can be used on other genealogical websites to locate potential heirs or devisees.

Obituaries and genealogical information may also be available on FindAGrave.com. However, this website is best known for its vast library of headstone images. These images generally include the name of the decedent’s spouse and the decedent’s and his or her spouse’s birth and death dates (as well as the location where the decedent was buried).

The largest of all the genealogical websites is Ancestry.com, which claims to have over 6 billion records available online. Another genealogical website, FamilySearch.org, is particularly helpful for decedents who resided in Utah, Idaho, and Wyoming. There are countless other genealogical blogs and websites to search, many of which focus on a particularly feature such as religion, national origin, ethnic background, etc. The larger genealogical websites, including Ancestry.com and FamilySearch.org, have census records available up until 1940.7 These websites also include marriage records, birth records, military records, and family trees. Family trees are created by individuals, which means they are not always accurate or complete. However, they are a great source for locating possible heirs or devisees because they may include names of descendants, biographies, and family histories. As an added feature, some websites allow communication with the person who provided the genealogical information to the website.

The more information that you can use in a search, the better the chance that: (i) you will find the decedent’s heirs or devisees and (ii) they will be the right persons. With any luck, you will gather enough information to track down possible heirs or devisees to obtain leases or send participation letters prior to drilling. Although these online genealogical resources may not finish the job, since title curative will likely be required, they can start you down the right path.

1https://www.colorado.gov/pacific/archives/archives-search.
2http://www.montana-genealogy.com/Montana-Probate-Records.htm. No subscription required, but the website links to third-party subscription websites.
3http://caselookup.nmcourts.gov/.
4http://publicsearch.ndcourts.gov/.
5http://www.texas.gov/en/discover/Pages/topic.aspx?topicid=/records. Records available for select counties only.
6http://www.utcourts.gov/xchange. Subscription required.
7Census records are sealed for 72 years after the census is taken, which means they are currently available for the 1940s and back.

If It’s Wrong, You Got Nothin’ – Execution of Instruments

Title Issues/Curative, , ,

To state the obvious, one of the most important aspects of any lease, deed, assignment or any other contract is making sure the appropriate party executes it. If the wrong person signs it, it will be either invalid or voidable at best. This is exactly what happened when only one manager of a limited liability company signed a 99 year lease. Unfortunately, the articles of organization on file with the secretary of state required both of the managers identified therein to sign such a lease. The lessee did not know there were two managers or that the articles of incorporation contained such requirement. The court found that the manager who signed the lease lacked actual and apparent authority to execute the lease and the lease was declared invalid.1 To assist in determining the appropriate party to execute a lease, deed, assignment or other contract, set forth below is a list of the common entities and scenarios that may be encountered in any title examination or transaction. 2

Attorneys-in-Fact. An attorney-in-fact is one who is authorized by a power of attorney to act on behalf of the actual owner of the property. Such authority will be defined in the power of attorney and will be strictly construed. Several states require recordation of the power of attorney in the county where the property is located.3

Associations: Religious, Cooperatives, Lodges, Educational, Non-Profits. These associations may encumber or convey real property held in the association’s name through its officers as authorized by its bylaws and resolutions. Such association’s governing documents and the laws of the state in which it is organized must be reviewed to determine authority.

Contracts for Deed. Generally, the holder of a contract may convey or encumber the applicable interest, unless the contract specifically provides otherwise. The holder of a contract for deed should join in the execution of the instrument in the same way as a life tenant joins (see below).

Corporations. The laws of the state of incorporation4 and the corporation’s governing documents (articles of incorporation, bylaws or resolutions) define the appropriate officer(s) or agent to execute a contract on behalf of a corporation. Typically, the president or vice president are authorized to execute a contract. If required, the officer’s signature should be attested and a corporate seal affixed.

Estates (Personal Representatives, Executors, Administrators). Generally, the authority of the personal representative, executor, or administrator to execute a contract is granted by a court having jurisdiction over the real property. Accordingly, applicable probate proceedings must be initiated in the state in which the property is located, not the resident state of the deceased. The resulting letters testamentary evidencing the party’s authority to act must be reviewed to confirm any limitations that may be imposed on the party’s authority, including the time period for which the party’s was granted authority to represent the estate of the decedent.

General Partnerships. Typically, an instrument can be executed by any partner, if acting within the scope of his or her authority, unless otherwise restricted in the partnership agreement or the laws of the state in which the partnership is organized.

Individuals. Any competent person may execute a contract. However, a contract executed by a minor is voidable at the minor’s election either before the age of majority or within either a statutorily defined time or a reasonable time thereafter. The typical age of majority is 18 years unless otherwise emancipated. If an interest is owned by a minor or incompetent, a guardian or conservator should be appointed by a court, who then may execute on behalf of the minor or incompetent. If a person cannot sign his or her own name, he or she may execute a contract by a mark. The signature of one or more credible witnesses or the acknowledgment by a notary public is typically required. As to competency, absence actual or constructive knowledge, a person of the age of majority is presumed to be competent. A person is not considered mentally incompetent until declared as such by a court. However, there appears to be a general standard that if the person is entirely without understanding, generally such person has no power to execute a contract. Any contract executed by a mentally incompetent person is voidable at the person’s election for a reasonable time after the person is judicially declared competent and most likely void if the person is under a guardianship.

If an individual is married, a variety of laws and circumstances exist which must be considered before it can be determined if a married person can legally convey such property without a joinder by his or her spouse. Under certain circumstances, the contract may be void even as to the party who signed.5 Therefore, it is generally recommended that a contract be signed by both spouses. However, in order to prevent any unintended consequences or benefits to the non-record title owner spouse, the proposed contract should be carefully drafted to avoid any unintended consequences. The types of ownership by married individuals are as follows:

Community Property. In a community property state, the property is owned by the community or, in other words, each spouse may claim an undivided one-half interest. This type of ownership applies to most property acquired during marriage by the husband or the wife. It generally does not apply to property acquired prior to the marriage or by gift or inheritance during the marriage. After a divorce, community property is either divided equally or according to the discretion of the court. Some of the applicable community property states include Alaska6, California, Louisiana, Nevada, New Mexico, and Texas7. Unless it can be determined that the property is owned separately, both spouses must execute or be a joining party to the instrument. Generally, upon the death of one spouse, the spouse’s interest passes to his or her devisees if the decedent spouse died testate or to his or her surviving spouse if the decedent spouse died intestate. Therefore, it is recommended to have the contract executed by the heirs or devisees of the deceased spouse and by the surviving spouse until the estate of the decedent spouse has been formally probated. Most importantly, even if the real property is not located in a community property state, if the husband and wife are domiciled in a community property state, the community property laws will apply.

Tenancy by the Entirety. Tenancy by the entirety is recognized in Alaska, Michigan, Ohio, Oklahoma, and Wyoming. This type of ownership is similar to joint tenancy, except that the parties must be husband and wife and the property cannot be conveyed by only one spouse. In the event the parties divorce, the property will transform into a tenancy in common.

Joint Tenants. For a joint tenancy to be created, it must be expressly declared in the contract conveying the real property by use of such language as “joint tenants” or “with rights of survivorship.”8 In the event of the death of one of the joint tenants, the surviving joint tenants continue to own the property (as joint tenants), regardless of the will of the deceased or any intestate laws. All joint tenants will need to execute the instrument (preferably the same one) in order to convey the full interest. Execution of an instrument by less than all joint tenants will validly convey the interests of the individual interests who sign and likely sever his or her joint tenancy.

Tenants in Common. An interest in real property created in two or more owners is presumed to be a tenancy in common unless specific language or circumstances indicate otherwise. Although listed under the header “Individuals,” a business entity can also be a tenant in common. Each cotenant is generally free to convey and encumber his or her own interest without the consent of the other cotenants. Upon the death of a cotenant, title passes to the cotenant’s heirs or devisees as previously designated by will or through intestacy.

Life Tenant and Remainderman. A life estate is an estate in which the duration of interest is measured by the life of one or more persons. The measuring life is usually that of the life tenant, but can also be the life of another (pur autre vie). Although the life tenant has the right of possession, he or she cannot execute a lease or otherwise dispose of the property without being liable to the remainderman for waste. Therefore, unless otherwise provided in the instrument creating the life estate, both the life tenant and the remainderman must execute any instrument affecting the real property .

Limited Liability Companies. Typically, a manager(s) or, if there is not a manager, then any member, is the appropriate party to execute a contract.9 The state of organization’s laws may also determine who has the authority to execute a contract on behalf of the company.

Limited Partnerships. The general partner of the limited partnership is the appropriate party to execute a contract unless the authority is otherwise provided in the partnership agreement or state laws in which the partnership is organized.10

Mortgages and Deeds of Trust. Generally, a mortgagee is not required to join in the execution of a lease. However, it is recommended that the mortgage subordinate its interest to an oil and gas lease in order to protect the rights of the lessee in the event the mortgagor defaults on the mortgage. In the unusual case a mortgage or deed of trust specifically prohibits the mortgagor from performing certain acts (e.g., leasing for oil and gas), the mortgagee should remove the prohibition contemporaneously with the execution of the lease.

Perpetual or Term Royalty Interest. A royalty interest may be reserved or conveyed out of the mineral interest for a fixed or perpetual term. Typically, the mineral interest owner retains the executive rights, subject to the right of the royalty owner to participate in production. Generally, a royalty interest is owned separately from the mineral interest and the royalty owner signs only instruments relating to his or her royalty. However, the instrument creating the royalty interest should be carefully reviewed.

Proprietorships or DBA’s. A person may adopt a name in which the person acquires property and transacts business in his or her individual capacity. The sole proprietor has the sole authority to execute in behalf of such an entity. Any contract executed by a sole proprietor should recite the person’s name and also that the person is doing business as the adopted name.

Term Mineral Interest. A mineral interest may be reserved or conveyed for either a fixed term only or a fixed term and so long thereafter as minerals are produced in paying quantities. Similar to a life estate interest, a conveyance should be obtained from both the term interest owner and the reversionary interest owner. If a lease is granted by only the term interest owner, a ratification of the lease should also be obtained from the reversionary interest owner.

Trusts. An individual or entity (the trustee) may own legal title to a property for the benefit of another. Each state’s laws and the terms of the trust agreement will govern the trustee’s authority to execute any contract and any limitations on the trustee’s powers. At a minimum, the contract should describe the grantor or grantee trust by including the name of the trust, the date of the trust, and the name(s) of the trustee(s).

As stressed above, the governing state laws and the governing entity documents are critical in determining whether the appropriate party is executing the contract. Many unintended consequences may exist by failing to consult such laws and documents.

1Zions Gate R.V. Resort, LLC v. Oliphant, 362 P.3d 118 (Utah Ct. App. 2014).
2See also Landman’s Legal Handbook , Rocky Mt. Min. L. Found., 5th ed. 2013; Oil & Gas Law: Nationwide Comparison of Laws on Leasing, Exploration and Production, Am. Ass’n Prof. Landmen, 2011.
3See, e.g., Colo. Rev. Stat. § 38-30-123; Nev. Rev. Stat. § 111.450; N.D. Title Standard 2-11; N.M. Stat. Ann. § 47-1-7.
4See, e.g., Colo. Rev. Stat. § 38-30-144 (allowing the president, vice-president, or other head office of the corporation); Mont. Code Ann. § 70-21-203(1)(b) (allowing president, vice-president, secretary or assistant secretary or by any other person duly authorized by resolution).
5If the property is qualified as a homestead, both husband’s and wife’s signature is required. See N.D. Cent. Code § 47-18-05; Mont. Code Ann. § 70-32-301; Wyo. Stat. § 34-2-121. In New Mexico, if a spouse fails to join in the instrument, it is void and of no effect, unless ratified by the spouse in writing. Marquez v. Marquez, 513 P.2d 713 (N.M. 1973); Hannah v. Tennant, 589 P.2d 1035 (N.M. 1979).
6Alaska is an opt-in community property state; therefore, property is separate property unless both parties agree to make it community property through a community property agreement or a community property trust.
7Colorado, Montana, North Dakota, Oklahoma, South Dakota, Utah, and Wyoming are not community property states.
8See Cal. Civ. Code § 683; Utah Code Ann. § 57-1-5(3). Additionally, Utah statutes create a presumption in favor of a joint tenancy being created when the granting clause refers to a husband’s and wife’s marital status without further joint tenancy language. Utah Code Ann. § 57-1-5(1).
9See, e.g., Mont. Code Ann. § 35-8-301; N.M. Stat. Ann. § 53-19-30; Wyo. Stat. Ann § 17-29-407 (consent of all members required).
10See Mont. Code Ann. § 35-12-803, 806; N.M. Stat. Ann. § 54-2A-110; Nev. Rev. Stat. § 88.445; Wyo. Stat. Ann. § 17-14-503.

The Attorney-Client Privilege: A Primer for Landmen

Title Issues/Curative, , , ,

Your attorney has finally sent you a title opinion advising you that some of your leases may be dead. Management decides to drill anyway. It’s a gusher and the lessors sue. Can you prevent the title opinion from being given to the lessors’ attorneys? What if you previously gave a copy of the opinion to an independent contractor landman to work on curative for you? What if you gave it to other working interest owners in the drillsite? The attorney-client privilege may protect confidential information from disclosure in a lawsuit, but the privilege does not apply in all instances.1

The attorney-client privilege applies to confidential communications between attorneys and their clients, or their respective representatives, for the purpose of obtaining legal advice. If the privilege applies, it can protect such communications from mandatory disclosure in a lawsuit or other legal proceeding. The privilege may apply to oral or written communications. There is no “blanket” privilege for title opinions or any other type of attorney-client communication. Rather, whether the privilege applies to a communication is determined on a case-by-case basis.

The confidentiality of the communication is key. A confidential communication is one that the client reasonably expects will be kept confidential and that is not disclosed, or intended to be disclosed, to persons other than the attorney and client or their respective representatives. If a client discloses, or consents to the disclosure of, the communication to a third party, then the privilege may be lost. So, is the privilege lost when an operator gives a copy of a title opinion received from an attorney to participating working interest owners? There does not appear to be any case law addressing this situation, but it is possible that the operator’s disclosure of the title opinion to those third parties might be viewed as a waiver of the privilege, and the title opinion might be admitted as evidence in a lawsuit or other legal proceeding against the operator, such as in a lawsuit alleging a title defect that invalidates the operator’s oil and gas lease(s) and that was discussed in the title opinion.

Generally, if disclosure to a third party serves the interests of the client, or if the third party’s presence is necessary to accomplish the purposes of consulting the attorney, then disclosure to the third party might not waive the privilege. For example, if an operator’s independent contractor, such as an independent landman who is working for the operator, learns of or participates in a confidential communication between an attorney and the operator, the privileged status of the communication might not be in jeopardy if the independent contractor is the “functional equivalent” of an employee of the operator.

What happens when only part of a privileged communication (for example, a single comment and requirement of a title opinion) is disclosed to a third party? Is the privilege lost for the entire communication? Some courts view disclosure of a single communication as waiving the privilege for all communications regarding the “same subject matter.” In theory, a court could view the entire title opinion as one communication about a single subject matter—title to the subject lands—and require disclosure of the entire opinion. Other courts, however, take a more narrow approach and attempt to distinguish between what is privileged and what is not, finding that the privilege is lost only as to those portions of a communication that were disclosed to third parties. In short, if the privilege is lost for one comment and requirement, the privilege may still be intact as to a comment and requirement regarding a completely different subject matter, depending on the facts of the case and the court’s approach to the scope of the waiver.2

Not all types of communications are privileged. To be privileged, the communication must relate to legal advice. For example, if an attorney-client communication relates to business advice, as opposed to advice regarding an operator’s legal rights and obligations, then the privilege may not apply. In instances where the communication contains both legal and non-legal advice, then to the extent the non-legal advice can be separated from the legal advice, the privilege may not apply. Further, if an attorney has been hired to merely draft a document, such as a deed, as opposed to providing advice regarding a document’s legal effect, then the privilege may not apply and the attorney may be required to testify in a legal proceeding as to communications regarding the drafting of the document.

In sum, if you disclose a confidential communication or legal advice that is covered by the attorney-client privilege to a third party, then you may be required to disclose it again, but this time in a lawsuit or other legal proceeding. If you must share the confidential communication or legal advice to a third party, then you should only disclose those portions of the communication that absolutely must be disclosed in an effort to preserve the privilege for as much of the communication as possible.

1This article discusses certain aspects of the attorney-client privilege in general terms and is not intended to be a comprehensive analysis of the law of attorney-client privilege or the law of any particular jurisdiction. The reader should consult with competent legal counsel regarding the law that applies to any particular situation and jurisdiction.
2There are relatively few court cases that deal directly with title opinions and the attorney-client privilege. However, the Supreme Court of Colorado recently discussed the privilege in the context of title opinions and noted that if the parties cannot agree as to what title opinions, or portions of title opinions, are privileged, then the court can be requested to review the title opinions to determine what is privileged and what is not. See DCP Midstream, LP v. Anadarko Petroleum Corporation, 303 P.3d 1187, 1200 (Colo. 2013). Therefore, it appears that at least one court has recognized the possibility of having portions of a title opinion covered by the privilege, even if other portions are not