Ohio Supreme Court Set to Tackle Dormant Minerals Act, Legacy Trust Act in New Year

In 2015, the legal community is anticipating, among others, decisions on the Ohio Dormant Minerals Act, the Ohio Legacy Trust Act and whether mortgages with incorrect legal descriptions are invalid.

The Legacy Trust Act, R.C. § 1301.401, became law on March 27, 2013. The statute provides that the recording of documents with a county recorder creates constructive notice “of the existence and contents” of that document. R.C. § 1301.401(B). The law also provides that “[A]ny person contesting the validity . . . of any transaction referred to in a public record is considered to have discovered that public record. .” R.C. § 1301.401(C). 

The Ohio Supreme Court has been asked to consider two questions regarding this statute. First, does the law apply to all recorded mortgages in Ohio? And, second, does the law act to provide constructive notice to the world of a recorded mortgage that was defectively executed under R.C. § 5301.01?  Whether the Ohio Supreme Court will accept these questions for review is yet to be determined. We expect to hear from the court on certification in the spring or summer of this year. The case is In re Daren A. Messer and Angela Messer v. JP Morgan Chase Bank NA, Case No. 2014-2036.

Legal description issues have been front and center in Ohio bankruptcy litigation for a number of years. In 2009 the Sixth Circuit Court of Appeals held in Drown v. Argent Mortgage Corporation (In re Bunn), 578 F. 3d 487, that a residential mortgage that lacked a formal legal description but contained the correct street address for property was “sufficient to give constructive notice of the mortgage to third parties.” While many practitioners thought this case would put an end to these types of challenges, new cases were filed challenging mortgages that had incorrect legal descriptions but the street address or tax identifier was correct in the mortgage.

A split arose amongst bankruptcy courts in these cases over whether the result in Bunn should control. There is now pending before the Bankruptcy Appellate Panel of the Sixth Circuit a case where the questioned mortgage had a legal description for property not owned by the borrower and the street address for the property that the borrower did own as well as for the property that he did not own. The mortgage also showed tax parcel numbers for both properties. We expect that case to be argued and decided in 2015. The case is In re Paul A. Geraci, Case No. 14-8019, United States Court of Appeals for the Sixth Circuit.

Last year the Ohio Supreme Court agreed to hear four cases involving the Dormant Minerals Act, R.C. § 5301.56. The questions before the court include:

(1) Whether the owner of mineral rights may be deemed to have abandoned those rights if some type of notice of preservation is not filed in the chain of title for the mineral rights (not in the chain of title of the surface owner);

(2) What is the nature of the interest under and oil and gas lease? Some argue that it is a fee simple determinable interest while others argue that it is a merely a leasehold;

(3) What is the scope of notice required to be given to the owners of sub-surface rights before those rights can be deemed to be abandoned; and

(4) Does the 2006 DOMA apply to claims asserted after 2006 when the rights were vested prior to 2006? Those cases are Dodd v. Croskey, 2013-1730; Chesapeake v. Buell, 2014-0067 and Corban v. Chesapeake, LLC, 2014-0804.

Please keep reading for further updates about these issues and many others coming in the year ahead.

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