The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)


 

STATE OF MICHIGAN

MIKE COX, ATTORNEY GENERAL

MINERAL RIGHTS:

MARKETABLE RECORD TITLE ACT:

RECORDS AND RECORDATION:

Application of the three-year grace period under Marketable Record Title Act

The three-year grace period for preserving certain property interests, claims, or charges provided in section 3 of the Marketable Record Title Act, MCL 565.103, applies only to the recording of notices necessary to preserve interests in minerals as defined by the Act that had not been previously barred or extinguished utilizing a 40-year look-back period.

Opinion No. 7148

January 26, 2004

Honorable Michael A. Prusi
State Senator
The Capitol
Lansing, Michigan 48913

You have requested my opinion regarding 1997 PA 154, which originated as HB 4273 and amended certain provisions of the Marketable Record Title Act, MCL 565.101 et seq (the Act), as well as my opinion regarding the rights of landowners and occupants to notice from parties exploiting certain mineral resources.

Your letter states:

House Bill 4273, as introduced, attempted to shorten the period required for filing claims of title from forty (40) years to twenty (20) years for those mineral interests other than sand, gravel, limestone, clay or marl. The change was intended to make the Marketable Title Act consistent with the Dormant Minerals Act of 1963, which already utilizes a twenty (20) year claim period for oil and gas minerals. The bill was also intended to clear defunct companies or deceased landowners from county records relative to mineral right ownership. The unintended consequence of the legislation may have allowed for the sale of the mineral rights to a third party during the three-year window.

As enacted, PA 154 of 1997 provides those individuals who fall within the twenty- and forty-year time frame, a three-year grace period to reassert their intent to continue a mineral rights claim. If no assertion to maintain mineral rights is submitted within the allotted grace period, the mineral rights would then revert to the surface owner.

You ask:

First, by law, if those [mineral interest holders] that fell between the twenty- and forty-year timeframe did not reassert their intent to continue mineral interests within the three-year grace period, who then would have legal claim to these mineral rights? Second, if the owner of the mineral rights did not reassert within the 3-year grace period, could a third party claim those interests and circumvent them from reverting to the surface owner? Lastly, would the mineral rights owner have the authority to perform mineral explorations without first notifying the owner of the surface rights?

Before answering your questions, an overview of some general principles of property law may be helpful. Coal, oil, gas, and other minerals may be owned in fee simple. Thus, the ownership of minerals may be held in fee separate from fee simple ownership of other rights in the land. Rathbun v Michigan, 284 Mich 521; 280 NW 35 (1938); Pellow v Arctic Mining Co, 164 Mich 87; 128 NW 918 (1910). See also, Van Slooten v Larsen, 410 Mich 21; 299 NW2d 704 (1980).

As our Supreme Court explained in Rathbun v Michigan, 284 Mich at 534:

In Walters v. Sheffield, 75 Fla. 505, 511 (78 South. 539), it is said:

"By the common law also several sorts of estates or interests, joint or several, may exist in the same fee; as that one person may own ground or soil, another the structures thereon, another the minerals beneath the surface, and still another the trees and wood growing thereon."

Minerals in place may be severed from the remainder of the land by proper conveyances. Severance of all the minerals from the remainder of the lands may be effected by a reservation in the deed. Upon severance of the title of minerals from that of the remainder of the land, each estate may be a free-hold of an estate in fee simple. Humphreys-Mexia Co. v. Gammon, 113 Tex. 247 (254 S. W. 296, 29 A. L. R. 607).

"The State, having title in fee, could, like any other owner in fee, deed with reservation of the oil, coal, gas and minerals. * * *

"The State as owner of the land, could sever the estate in fee to the surface from that of fee in the oil and gas underlying the surface." Krench v. State of Michigan, 277 Mich. 168, 179, 180.

Mineral resources, therefore, may be exploited by the fee owner of the resources or by those parties to whom these rights have been leased.

The determination of who owns or holds an interest in lands subject to mineral exploitation requires the examination of all deeds, leases, or other instruments conveying or affecting that property recorded in the Office of the Register of Deeds for the county in which the property is located. Erickson v Michigan Land & Iron Co, 50 Mich 604; 16 NW 161 (1883); Harlow v Lake Superior Iron Co, 36 Mich 105 (1877); Pellow, supra. Prior to adoption of the Marketable Record Title Act, this could have involved examination of recorded instruments filed over a period of almost 200 years from the issuance and recordation of a United States land patent or confirmation of a British or French grant.

The Marketable Record Title Act was adopted to shorten the period that must be reviewed. However, it should be emphasized that it only "remedies title defects within its scope." Michigan Land Title Standards, 5th Edition,1 STANDARD 1.1 (capital and bold lettering omitted). As Title STANDARD 1.1 explains:

The stated legislative purpose of the Marketable Record Title Act is to simplify and facilitate land title transactions by providing a statutory basis for establishing record title with reference to a period of at least 40 years (at least 20 years for certain mineral interests). The effect of the Act is to extinguish by operation of law certain interests and claims which arise out of any act, transaction, event or omission preceding the 40-year period (or the 20-year period for certain mineral interest), subject to specified exceptions and limitations. The 20-year period applies only to a mineral interest other than an interest in oil, gas, sand, gravel, limestone, clay or marl, owned by a person other than the surface owner.

An interest in land is preserved under the Act by the recording during the 40-year period (or during 20-year period for certain mineral interests) of a notice, verified by oath, setting forth the nature of the interest claimed. A mineral interest other than an interest in oil, gas, sand, gravel, limestone, clay or marl, owned by a person other than the surface owner, is also preserved by the recording within three years after December 22, 1997, of a notice setting forth the nature of the interest claimed. See also Standard 15.4 with respect to certain severed oil and gas interests.

The title resulting from application of the Actís remedial provisions is a marketable record title. MCLA 565.103 . . . . Marketable record title under the Act may not be equivalent, however, to a marketable title at common law or to a commercially marketable or merchantable title, as those terms are generally used. One may have a marketable record title under the Act which is still properly subject to objection.

Interests held by the State of Michigan or the federal government are not subject to defeasance or loss under the Act. Section 4 identifies those interests that are not barred or extinguished by the Act:

This act shall not be applied to bar any lessor or his successor as reversioner of his right to possession on the expiration of any lease or any lessee or his successor of his rights in and to any lease; or to bar any interest of a mortgagor or a mortgagee or interest in the nature of that of a mortgagor or mortgagee until after such instrument under which such interests are claimed shall have become due and payable, except where such instrument has no due date expressed, where such instrument has been executed by a railroad, railroad bridge, tunnel or union depot company, or any public utility or public service company; or to bar or extinguish any easement or interest in the nature of an easement, the existence of which is clearly observable by physical evidences of its use; or to bar or extinguish any easement or interest in the nature of an easement, or any rights appurtenant thereto granted, excepted or reserved by a recorded instrument creating such easement or interest, including any rights for future use, if the existence of such easement or interest is evidenced by the location beneath, upon or above any part of the land described in such instrument of any pipe, valve, road, wire, cable, conduit, duct, sewer, track, pole, tower, or other physical facility and whether or not the existence of such facility is observable, by reason of failure to file the notice herein required. Nor shall this act be deemed to affect any right, title or interest in land owned by the United States, nor any right, title or interest in any land owned by the state of Michigan, or by any department, commission or political subdivision thereof. [MCL 565.104; emphasis added.]

See also Michigan Land Title STANDARD 1.6, Comment C.

Prior to the adoption and effective date of 1997 PA 154, interests in minerals other than oil, gas, and other hydrocarbons were subject to being extinguished where they arose out of any act, transaction, event, or omission that preceded the 40-year period. With respect to certain minerals, this time frame, sometimes referred to as a "look-back period," was shortened by 1997 PA 154 to 20 years. To afford due process of law to those whose interests would be extinguished because of the shortened period, the Act provided a three-year window within which they could assert their continuing interest in the affected minerals. The law now provides in section 1:

Any person, having the legal capacity to own land in this state, who has an unbroken chain of title of record to any interest in land for 20 years for mineral interests and 40 years for other interests, shall at the end of the applicable period be considered to have a marketable record title to that interest, subject only to claims to that interest and defects of title as are not extinguished or barred by application of this act and subject also to any interests and defects as are inherent in the provisions and limitations contained in the muniments [documents evidencing title] of which the chain of record title is formed and which have been recorded within 3 years after the effective date of the amendatory act that added section 1a or during the 20-year period for mineral interests and the 40-year period for other interests. However, a person shall not be considered to have a marketable record title by reason of this act, if the land in which the interest exists is in the hostile possession of another. [MCL 565.101.]

The interests in real property subject to extinguishment by virtue of the 20-year period are defined by section 101a:

As used in this act, "mineral interest" means an interest in minerals in any land if the interest in minerals is owned by a person other than the owner of the surface of the land. Mineral interest does not include an interest in oil or gas or an interest in sand, gravel, limestone, clay, or marl. [MCL 565.101a.]

Section 2 of the Act prescribes what constitutes an unbroken chain of title:

A person is considered to have an unbroken chain of title to an interest in land as provided in section 1 when the official public records disclose either of the following:

(a) A conveyance or other title transaction not less than 20 years in the past for mineral interests and 40 years for other interests, which conveyance or other title transaction purports to create the interest in that person, with nothing appearing of record purporting to divest that person of the purported interest.

(b) A conveyance or other title transaction not less than 20 years in the past for mineral interests and 40 years for other interests, which conveyance or other title transaction purports to create the interest in some other person and other conveyances or title transactions of record by which the purported interest has become vested in the person first referred to in this section, with nothing appearing of record purporting to divest the person first referred to in this section of the purported interest. [MCL 565.102.]

Section 3 of the Act, in which the three-year grace period is described, provides:

Marketable title shall be held by a person and shall be taken by his or her successors in interest free and clear of any and all interests, claims, and charges whatsoever the existence of which depends in whole or in part upon any act, transaction, event, or omission that occurred prior to the 20-year period for mineral interests, and the 40-year period for other interests, and all interests, claims, and charges are hereby declared to be null and void and of no effect at law or in equity. However, an interest, claim, or charge may be preserved and kept effective by filing for record within 3 years after the effective date of the amendatory act that added section 1a or during the 20-year period for mineral interests and the 40-year period for other interests, a notice in writing, verified by oath, setting forth the nature of the claim. A disability or lack of knowledge of any kind on the part of anyone does not suspend the running of the 20-year period for mineral interests or the 40-year period for other interests. For the purpose of recording notices of claim for homestead interests the date from which the 20-year period for mineral interests and the 40-year period for other interests shall run shall be the date of recording of the instrument, nonjoinder, in which is the basis for the claim. A notice may be filed for record by the claimant or by any other person acting on behalf of any claimant if 1 or more of the following conditions exist:

(a) The claimant is under a disability.

(b) The claimant is unable to assert a claim on his or her own behalf.

(c) The claimant is 1 of a class but whose identity cannot be established or is uncertain at the time of filing the notice of claim for record. [MCL 565.103; emphasis added.]

The Marketable Record Title Act should be distinguished from the Dormant Minerals Act of 1963, MCL 554.291 et seq, to which you refer. The Dormant Minerals Act covers oil and gas. Where the requisite dormancy period has expired, dormant oil and gas interests are extinguished or forfeited to the surface owner. The Marketable Record Title Act does not "forfeit" any interest; rather it extinguishes the interest or claim of intent. An owner of interests in land holds them free and clear of any interest in minerals that cannot be discovered by examining records filed with a register of deeds office within the 20-year "look-back period." This means that the surface owners, as well as holders of other interests in land (including mineral interests not extinguished), hold fee title or those other interests free from the extinguished claims. Surface interests, as well as those other interests, may, however, be subject to claims of other persons whose interests do appear on examining title within the 20-year period. The owners of mineral interests that are properly recorded within the 20-year period may, like surface owners, assert that they hold their interests free and clear of any potentially competing claims that are beyond the 20-year period.

The Marketable Record Title Act does not allow a person with no previously recorded interest and who has no predecessors in title or interest, commonly known as a "stranger to title," to establish valid entitlement to mineral interests simply by recording an instrument asserting those interests with a register of deeds office. Should a person file a claim or an instrument purporting to vest the person with a mineral interest, its validity is determined by other rules of property law pursuant to which a valid chain of title to the interest claimed is established.

Michigan Land Title Standards 1.2, 1.3, and 1.6 summarize those rules as follows:

STANDARD 1.2 ELEMENTS OF MARKETABLE RECORD TITLE

A PERSON HAS MARKETABLE RECORD TITLE IF: (1) THERE IS AN UNBROKEN CHAIN OF RECORD TITLE FOR AT LEAST 40 YEARS (AT LEAST 20 YEARS FOR CERTAIN MINERAL INTERESTS); AND (2) THERE IS NO ONE IN HOSTILE POSSESSION OF THE LAND.

STANDARD 1.3 UNBROKEN CHAIN OF RECORD TITLE

A PERSON HAS AN UNBROKEN CHAIN OF RECORD TITLE IF (1) THERE IS EITHER (A) A CONVEYANCE OR OTHER TITLE TRANSACTION WHICH PURPORTS TO CREATE AN INTEREST AND HAS BEEN A MATTER OF RECORD FOR AT LEAST 40 YEARS (AT LEAST 20 YEARS FOR CERTAIN MINERAL INTERESTS) OR (B) A SERIES OF CONVEYANCES OR OTHER TITLE TRANSACTIONS OF RECORD IN WHICH THE FIRST CONVEYANCE OR TITLE TRANSACTION HAS BEEN A MATTER OF RECORD FOR AT LEAST 40 YEARS (AT LEAST 20 YEARS FOR CERTAIN MINERAL INTERESTS), AND (2) THERE IS NOTHING OF RECORD PURPORTING TO DIVEST SUCH PERSON OF TITLE.

STANDARD 1.6 EFFECT OF THE MARKETABLE RECORD TITLE ACT ON PRIOR INTERESTS

A PERSON WHO HAS MARKETABLE RECORD TITLE HOLDS TITLE FREE FROM:

ANY INTEREST, CLAIM OR CHARGE, THE EXISTENCE OF WHICH DEPENDS IN WHOLE OR IN PART UPON ANY ACT, TRANSACTION, EVENT OR OMISSION WHICH PRECEDES AT LEAST A 40-YEAR CHAIN OF RECORD TITLE (AT LEAST A 20-YEAR CHAIN OF RECORD TITLE FOR CERTAIN MINERAL INTERESTS); PROVIDED THAT (1) THE MINIMUM 40-YEAR CHAIN (MINIMUM 20-YEAR CHAIN FOR CERTAIN MINERAL INTERESTS) INCLUDES NO REFERENCE TO SUCH INTEREST, CLAIM OR CHARGE, AND NO NOTICE OF CLAIM BASED THEREON HAS BEEN FILED PURSUANT TO SECTIONS 3 AND 5 OF THE ACT AND (2) THE INTEREST IS NOT EXCEPTED FROM THE APPLICATION OF THE ACT BY SECTION 4 THEREOF;

BUT THE TITLE IS SUBJECT TO:

ANY INTEREST, CLAIM OR CHARGE WHICH ARISES FROM, OR IS REFERRED TO IN, ANY INSTRUMENT WITHIN THE MINIMUM 40-YEAR CHAIN OF RECORD TITLE (MINIMUM 20-YEAR CHAIN FOR CERTAIN MINERAL INTERESTS).

The three-year window for filing notices of intention to retain interests in land after the effective date of 1997 PA 154 amending section 3 (December 22, 1997) should not be read as relating to interests, mineral or otherwise, already barred under the 40-year standard. It relates to those existing interests that would first be extinguished on December 22, 1997, by a 20-year "look back."

The three-year window periods avoid any argument that owners were deprived of real property interests without due process of law in 1945 when the Marketable Record Title Act was first adopted and again in 1997 when the "look-back" period was shortened from 40 to 20 years for certain mineral interests. As the United States Supreme Court noted in Texaco Inc v Short, 454 US 516, 532-533; 102 S Ct 781; 70 L Ed 2d 738 (1982), in sustaining the Indiana Dormant Mineral Interests Act:

In short, both the Indiana Legislature and the Indiana Supreme Court have concluded that a 2-year period was sufficient to allow property owners in the State to familiarize themselves with the terms of the statute and to take any action deemed appropriate to protect existing interests. On the basis of the records in these two proceedings, we cannot conclude that the statute was so unprecedented and so unlikely to come to the attention of citizens reasonably attentive to the enactment of laws affecting their rights that this 2-year period was constitutionally inadequate. We refuse to displace hastily the judgment of the legislature and to conclude that a legitimate exercise of state legislative power is invalid because citizens might not have been aware of the requirements of the law.

With the Act's initial adoption in 1945, the Michigan Legislature similarly provided property owners a three-year period within which to familiarize themselves with the law and take whatever action was necessary to preserve their interests. When the Legislature amended the Act again in 1997 to shorten the period of examination required to ascertain the continuing valid interests in minerals, it again provided a three-year period within which citizens were able to familiarize themselves with the effect of the law upon mineral interests and protect those interests. The 1997 amendments should not be read as permitting or facilitating the resuscitation of interests already barred, because such a construction would operate to unconstitutionally impair the obligations of contracts entered into with respect to rights or interests in land previously barred under the 40-year standard. Const 1963, art 1, ß 10.

Moreover, in the time between 1945 and 1997, property and interests in property, including mineral interests, have been bought, sold, and otherwise acquired based upon a reliance on the extinguishment of competing or opposing interests not discernible by examining documents recorded during the 40-year look-back period. Generally, to retroactively permit resuscitation of interests already extinguished under the applicable law would unconstitutionally deprive owners of property or vested rights to property. A vested right has been defined as an interest that the government is compelled to recognize and protect of which the holder could not be deprived without injustice. Detroit v Walker, 445 Mich 682, 699; 520 NW2d 135 (1994). See also Van Slooten v Larsen, 410 Mich 21, supra; Schoolcraft Community School Dist No 50 v Burson, 357 Mich 682; 99 NW2d 353 (1959); and Dodge v Detroit Trust Co, 300 Mich 575; 2 NW2d 509 (1942).

Finally, to the extent 1997 PA 154 is subject to differing interpretations, it should be read in a way that renders it constitutional, not unconstitutional:

The general principle has repeatedly been invoked that if a legislative enactment is of such a character that it is subject to differing interpretations, one of which would result in the act being held unconstitutional and the other permitting its being upheld as valid, the latter alternative will be accepted. In other words, the presumption is that the legislature would not intend to pass an act in contravention of a constitutional restriction or otherwise invalid. [State Bar of Michigan v Lansing, 361 Mich 185, 195; 105 NW2d 131 (1960).]

It is my opinion, therefore, that the three-year grace period for preserving certain property interests, claims, or charges provided in section 3 of the Marketable Record Title Act, MCL 565.103, applies only to the recording of notices necessary to preserve interests in minerals as defined by the Act that had not been previously barred or extinguished utilizing a 40-year look-back period.

In specific response to your questions as quoted on page two:

(1) Identification of the party or parties holding interests in land including mineral interests and the nature of such interests is determined by the content of all instruments properly recorded within the "20-year" look-back period specified by the Marketable Record Title Act.

(2) Where a party's interest in minerals has been extinguished by failure to preserve that interest consistent within the three-year grace period provided by the Marketable Record Title Act, the identification of the owners and holders of mineral interests and the nature of their interests is again determined by the content of all instruments properly recorded within the "20-year" look-back period specified by the Marketable Record Title Act.

(3) In addition to any obligations that may be imposed on mining operations by regulatory statutes, which this opinion does not address, whether a mineral rights owner is required to notify a surface owner or occupant of proposed mining operations is determined by the content of the deed or other instruments of conveyance pursuant to which the mineral rights were acquired.


MIKE COX
Attorney General

1The Michigan Land Title Standards (5th Edition) published by the Land Title Standards Committee of the Real Property Law Section of the State Bar of Michigan is an authoritative source that has been relied upon by property law practitioners in Michigan for nearly 50 years.