Paper 3 – 1

Ohio’s Marketable Title Act and the ODMA: Siblings or Distant Cousins?

By: James A. (“Jay”) Carr II Vorys, Sater, Seymour and Pease

Craig E. Sweeney

Bricker & Eckler, LLP

I. History and Purpose of the Ohio Marketable Title Act

A. History of the Act

1. The Ohio Marketable Title Act, R.C. 5301.47, et seq. (“OMTA”) became effective on June 29, 1961.1 However, to avoid due process concerns, etc., the original version of R.C. 5301.56 provided for a three year extension period (“If the forty-year period specified in section 5301.47 to 5301.56, inclusive of the Revised Code, has expired prior to three years after the effective date of such sections, such period shall be extended three years after the effective date of such sections.”).

2. The OMTA is land reform legislation that is based on the Model Marketable Title Act (“Model Act”), which was drafted by Lewis M. Simes and Clarence B. Baylor.2 A comparison of the OMTA and the Model Act reveals that the two pieces of legislation are largely identical to one another. However, under the OMTA, “marketable record title” is taken subject to two exceptions that are not found in the Model Act. The first exception is for coal and any rights exercisable in connection with coal. The OMTA provides that “[a]ny right, title, estate, or interest in coal, and any mining or other rights pertinent to or exercisable in connection with any right, title, estate, or interest in coal” cannot be extinguished.3 The second exception is for future interests. Under the OMTA, “marketable record title” is taken subject to “interests . . . inherent in the muniments of which such chain of record title is formed . . . provided that possibilities of reverter, and rights of entry or powers of termination for breach of condition subsequent, which interests are inherent in the muniments of which such chain of record title is formed and which have existed for forty years or more, shall be preserved and kept effective only in the manner provided in section 5301.51 of the Revised Code.”4

1 Am.H.B. No. 81 (1961), 129 Ohio Laws, 1040. 2 Lewis M. Sims and Clarence B. Taylor, The Improvement of Conveyancing by Legislation (1961). 3 R.C. 5301.53(E). 4 R.C. 5301.49(A).

Paper 3 – 2

3. Ohio does not have an extensive body of case law interpreting the OMTA. If you are confronted with an issue of first impression, you may want to consider how Simes and Taylor intended for the Model Act to apply given the similarities between the Model Act and the OMTA.

B. Purpose of the Act

1. The OMTA was enacted as a means “to simplify and facilitate land title transactions by allowing persons to rely on a record chain of title as described in R.C. 5301.48 and subject to limitations of R.C. 5301.49.”5 Put another way, the OMTA improves the marketability of title by extinguishing certain outstanding claims and defects due to a lapse of time.6

2. This legislative purpose is reflected in the definition of “marketable record title,” which is a title that “operates to extinguish such interests and claims, existing prior to the effective date of the root of title . . .”7

a. Under the OMTA, “such record marketable title shall be held by its owner and shall be taken by any person dealing with the land free and clear of all interests, claims, or charges whatsoever, the existence of which depends upon any act, transaction, event, or omission that occurred prior to the effective date of the root of title. All such interests, claims, or charges, however denominated, whether legal or equitable, present or future, whether such interests, claims, or charges are asserted by a person sui juris or under a disability, whether such person is within or without the state, whether such person is a natural or corporate, or is private or governmental, are hereby declared to be null and void.”8

3. Note the difference between “marketable record title” and “marketable title.” While the two terms share similar names, they are different. “Marketable record title” is a title that extinguishes certain ancient interests and defects that create a cloud on title. “Marketable title,” on the other hand, is a title that “imports such ownership as insures the owner the peaceable enjoyment and control of the land, as against all others.”9

5 Pinkney v. Southwick Invs., L.L.C., 8th Dist. Cuyahoga Nos. 85074 and 85075, 2005-Ohio-4167, ¶31, citing Semachko v. Hopko, 35 Ohio App.2d 205, 209, 301 N.E.2d 560 (8th Dist. 1973). See R.C. 5301.55. 6 Minnich v. Guernsey Sav. & Loan Assn., 36 Ohio App.3d 54, 55, 521 N.E.2d 489 (5th Dist. 1987), citing Hausser & Van Aken, Ohio Real Estate Law and Practice (1985), T 7.02. 7 R.C. 5301.47(A). 8 R.C. 5301.50. 9 McCarty v. Lingham, 111 Ohio St. 551, 558, 146 N.E. 64 (1924).

Paper 3 – 3

II. Application of the Ohio Marketable Title Act

A. There are seven steps to apply the OMTA:

1. The first step is to ensure that you have accurate title work.

a. Whereas the Ohio Dormant Mineral Act (“ODMA”) is restricted to instruments filed in the county recorder’s office, the OMTA applies to all documents and instruments filed in the county, including the county recorder’s office, clerk of court’s office, etc.

i. Under the OMTA, the term “‘records’ includes probate and other official public records, as well as records in the office of the recorder of the county in which all or part of the land is situate.”10

b. There are several exceptions to “marketable record title” under the OMTA. As such, it is imperative that you confirm all relevant documents and instruments have been provided for your review and that those documents and instruments have been properly interpreted.

2. The second step is to verify that the claimant (i.e., the person claiming “marketable record title” under the OMTA) has the legal capacity to own land in Ohio.

3. The third step is to determine what interest in land is being claimed (e.g., surface estate vs. mineral estate; fee simple absolute vs. determinable fee vs. term of years; etc.)

a. Like most jurisdictions, Ohio subscribes to the “bundle of sticks” theory where the various interests in land can be separately conveyed. For example, one person can own the surface estate, another person can own the oil and gas estate, and yet another person can own the remaining mineral estate.

4. The fourth step is to select the date when marketability is being determined.

a. Selecting the “date marketability is being determined” is important because it ultimately affects which instruments can qualify as the claimant’s “root of title.” The OMTA defines “root of title” as that “conveyance or other title transaction . . . which was the most

10 R.C. 5301.47(B).

Paper 3 – 4

recent to be recorded as of a date forty years prior to the time when marketability is being determined.”11

b. The “date marketability is being determined” is one of the open issues under the OMTA that will be discussed later in this paper. As such, for practical reasons, we suggest that marketability be determined present day.

5. The fifth step is to identify the claimant’s “root of title.”

a. The “root of title” is “that conveyance or other title transaction in the chain of title of a person, purporting to create the interest claimed by such person, upon which he relies as a basis for the marketability of his title, and which was the most recent to be recorded as of a date forty years prior to the time when marketability is being determined.”12

i. The OMTA defines “title transaction” as “any transaction affecting title to any interest in land, including title by will or descent, title by tax deed, or by trustee’s, assignee’s, guardian’s, executor’s, administrator’s, or sheriff’s deed, or decree of any court, as well as warranty deed, quit claim deed, or mortgage.”13

(a) The foregoing is a non-exhaustive list of instruments that qualify as “title transactions.” Ohio courts have held, or implicitly found, that the following instruments, if recorded, also qualify as title transactions:

(1) a certificate of transfer;14

(2) interests passing under the terms of a will admitted to probate or filed of record;15

(3) an oil and gas lease;16

(4) a court decree which affects title to an interest in land;17

11 R.C. 5301.47(E) (emphasis added). 12 Id. 13 R.C. 5301.47(f). 14 Blakely v. Capitan, 34 Ohio App.3d 46, 49, 516 N.E.2d 248 (11th Dist. 1986). 15 Pollock v. Mooney, 7th Dist. Monroe No. 13 MO 9, 2014-Ohio-4435, ¶ 26. 16 Chesapeake Exploration, L.L.C. v. Buell, 144 Ohio St.3d 490, 2015-Ohio-4551, 45 N.E.3d 185, paragraph one of the syllabus. 17 Blakely v. Capitan, 34 Ohio App.3d, paragraph one of the syllabus, 516 N.E.2d 248 (11th Dist. 1986).

Paper 3 – 5

(5) an agreement of sale;18

(6) the annexation of parcels of real estate;19 and

(7) the filing of a probate court judgment.20

b. Example 1: In 1965, A conveys Blackacre to B. In 1968, B conveys Blackacre to C. In 1970, C grants an easement over Blackacre to X. In 1980, C conveys Blackacre to X.

i. Question: Marketability is being determined on January 1, 2016. What is X’s root of title?

ii. Answer: X’s root of title is the conveyance from B to C in 1968. This conveyance is the most recent conveyance to be recorded as of a date forty years prior to the time marketability is being determined that purports to create (i.e., convey) the interest being claimed (i.e., Blackacre in fee simple absolute).

c. Example 2: In 1968, A conveys Blackacre to B. In 1970, B grants an easement over Blackacre to X. In 1974, C conveys Blackacre to X.

i. Question: Marketability is being determined on January 1, 2016. What is X’s root of title?

ii. Answer: X’s root of title is the conveyance from C to X in 1974. This conveyance is the most recent conveyance to be recorded as of a date forty years prior to the time marketability is being determined that purports to create (i.e., convey) the interest being claimed (i.e., Blackacre in fee simple absolute).

iii. Note that even a “wild deed,” such as the conveyance from C to X in 1974, can qualify as a claimant’s “root of title.”21

18 Edward H. Everett Co. v. Jadoil, Inc., 5th Dist. Licking No. CA-3211, 1987 Ohio App. LEXIS 5684, *9 (Jan. 26, 1987). 19 Carlson v. Koch, 8th Dist. Cuyahoga Nos. 36497 and 36498, 1978 Ohio App. LEXIS 9501, *12-13 (Jan. 19, 1978). 20 Pollock v. Mooney, 7th Dist. Monroe No. 13 MO 9, 2014-Ohio-4435, ¶ 26. 21 Heifner v. Bradford, 5th Dist. Muskingum No. CA-81-10, 1982 Ohio App. LEXIS 14859, *16, rev’d on other grounds, Heifner v. Bradford, 4 Ohio St.3d 49, 446 N.E.2d 440 (1983).

Paper 3 – 6

6. The sixth step is to determine whether the claimant has an unbroken chain of title of record to his root of title.

a. Under R.C. 5301.48(B), “[a] person has such an unbroken chain of title when the official public records disclose a conveyance or other title transaction, of record not less than forty years at the time the marketability is to be determined, which said conveyance or other title transaction purports to create such interest, either in: (A) The person claiming such interest; or (B) Some other person from whom, by one or more conveyances or other title transactions of record, such purported interest has become vested in the person claiming such interest; with nothing appearing of record, in either case, purporting to divest such claimant of such purported interest.”

i. This definition requires that each instrument purport to create (i.e., convey) the interest being claimed and be sequentially connected with one another.

b. Example 3: In 1960, A conveys Blackacre to B. In 1972, B conveys Blackacre to C. In 1980, D conveys Blackacre to E. In 1985, E conveys Blackacre to X.

i. Questions: Marketability is being determined on January 1, 2016. What is X’s root of title? Does X have an unbroken chain of record title to his root of title?

ii. Answers:

(a) X’s root of title is the conveyance from B to C in 1972. This conveyance is the most recent conveyance to be recorded as of a date forty years prior to the time marketability is being determined that purports to create (i.e., convey) the interest being claimed (i.e., Blackacre in fee simple absolute).

(b) X does not have an unbroken chain of title of record to his root of title. There is a break in the chain of title from C to D. D’s conveyance to E in 1980 purports to divest C of his interest in Blackacre.

c. Example 4: In 1960, A conveys Blackacre to B. In 1965, B conveys Blackacre to C. In 1968, D conveys Blackacre to E. In 1972, E conveys Blackacre to X.

Paper 3 – 7

i. Questions: Marketability is being determined on January 1, 2016. What is X’s root of title? Does X have an unbroken chain of record title to his root of title?

ii. Answers:

(a) X’s root of title is the conveyance from E to X in 1972. This conveyance is the most recent conveyance to be recorded as of a date forty years prior to the time marketability is being determined that purports to create (i.e., convey) the interest being claimed (i.e., Blackacre in fee simple absolute).

(b) X has an unbroken chain of title of record to his root of title. There is no conveyance or title transaction in X’s chain of title purporting to divest him of his interest in Blackacre. Although there is a break in the chain of title from C to D, this break predates X’s root of title should not be considered when determining whether X has an unbroken chain of title of record to his root of title.

d. Example 5: A conveys Blackacre to ABC Corporation in 1970. ABC Corporation merges with XYZ Corporation in 1980. The surviving corporation is XYZ Corporation. No evidence of the merger is of record in the county. XYZ Corporation conveys Blackacre to X in 1990.

i. Questions: Marketability is being determined on January 1, 2016. What is X’s root of title? Does X have an unbroken chain of record title to his root of title?

ii. Answers:

(a) X’s root of title is the conveyance from A to ABC Corporation in 1970. This conveyance is the most recent conveyance to be recorded as of a date forty years prior to the time marketability is being determined that purports to create (i.e., convey) the interest being claimed (i.e., Blackacre in fee simple absolute).

(b) X does not have an unbroken chain of title of record to his root of title. There is a break in the chain of title from ABC Corporation to XYZ Corporation. Although we know that ABC Corporation merged with and into XYZ Corporation, such evidence was

Paper 3 – 8

not filed of record in the county. Thus, the conveyance from XYZ Corporation to X in 1980 purports to divest ABC Corporation of its interest in Blackacre. Note that this issue can be corrected by recording an affidavit relating to title, together with a copy of the pertinent merger document(s), in the applicable county recorder’s office.

e. Once the sixth step is completed and confirmed, the claimant has “marketable record title” to the interest being claimed. “[S]uch record marketable title shall be held by its owner and shall be taken by any person dealing with the land free and clear of all interests, claims, or charges whatsoever, the existence of which depends upon any act, transaction, event, or omission that occurred prior to the effective date of the root of title. All such interests, claims, or charges, however denominated, whether legal or equitable, present or future, whether such interests, claims, or charges are asserted by a person sui juris or under a disability, whether such person is within or without the state, whether such person is a natural or corporate, or is private or governmental, are hereby declared to be null and void.”22 However, because of statutory exceptions, marketable record title will be taken subject to certain interests and defects discussed below.

7. The seventh step is to confirm that none of the statutory exceptions apply.

a. Exception 1: “All interests and defects which are inherent in the muniments of which such chain of record title is formed; provided that a general reference in such muniments, or any of them, to easements, use restrictions, or other interests created prior to the root of title shall not be sufficient to preserve them, unless specific identification be made therein of a recorded title transaction which creates such easement, use restriction, or other interest . . .”23

i. Example 6: In 1950, A conveys Blackacre (132 acres of land) to B excepting and reserving one-half of the oil and gas. In 1955, B conveys 49 acres of Blackacre to X “subject to all coal, and oil and gas reservations heretofore made.” In 1960, B conveys the remaining 83 acres of Blackacre to Y “[e]xcepting the coal and oil and gas rights as reserved in A in a deed to B dated January 1, 1950 in Book 81, Page 2.”

22 R.C. 5301.50. 23 R.C. 5301.49(A).

Paper 3 – 9

(a) Question: Marketability is being determined on January 1, 2016. Does X and Y take subject to A’s oil and gas interest?

(b) Answers:

(1) X does not take subject to A’s oil and gas interest. The reference to A’s oil and gas reservation in the 1955 conveyance from B to X is general (e.g., A’s reservation is not referenced by book and page number, etc.). As such, A’s oil and gas interest is extinguished under the OMTA.

(2) Y takes subject to A’s oil and gas interest. The reference to A’s oil and gas reservation in the 1960 conveyance from B to Y is specific (e.g., A’s reservation is referenced by both book and page number and date). As such, A’s oil and gas interest is not extinguished under the OMTA.

(c) This example is taken from Landefeld v. Keyes, 7th Dist. Monroe No. 548, 1982 Ohio App. LEXIS 13378 (June 17, 1982). In that case, the Seventh District Court of Appeals for Ohio found that the references to A’s reservation in Y’s chain of title were specific because the references cited to the volume and page of the original reservation and the party who made the reservation. However, the references to A’s reservation in X’s chain of title were not specific because the references included only the word “heretofore.”

ii. Example 7: In 1960, A conveys Blackacre to B excepting and reserving one-half of the oil and gas under the premises and one-half of the royalty in the oil already in tanks of the premises. In 1970, B conveys Blackacre to X subject to A’s interest in the premises.

(a) Question: Marketability is being determined on January 1, 2016. Does X take subject to A’s oil and gas interest?

(b) Answer: X does not take subject to A’s oil and gas interest. The reference to A’s oil and gas reservation in the 1970 conveyance from B to X is general (e.g.,

Paper 3 – 10

not referenced by book and page number, etc.). As such, A’s oil and gas interest is extinguished under the OMTA.

(c) This example is taken from Duvall v. Hibbs, 5th Dist. Guernsey No. CA-709, 1983 Ohio App. LEXIS 13042 (July 8, 1983). The Fifth District Court of Appeals for Ohio concluded that the “specific identification” contemplated by R.C. 5301.49 requires “sufficient reference so that a title examiner may locate the prior conveyance by going directly to the identified conveyance record in the recorder’s office without checking conveyance indexes.”

b. Exception 2: Possibilities of reverter, and rights of entry or powers of termination for breach of condition subsequent, which interests are inherent in the muniments of which such chain of record title is formed and which have existed for forty years or more, shall be preserved and kept effective only in the manner provided in section 5301.51 of the Revised Code.24

i. Example 8: In 1900, A conveys Blackacre to the trustees of the local protestant church so long as Blackacre is used as a place of divine worship and for church purposes. In 1970, the limitation is broken. No other title transactions appear of record and now the heirs of A seek to retake Blackacre.

(a) Question: Does X take subject to A’s possibility of reverter?

(b) Answer: No. A and A’s heirs failed to record a notice of preservation in accordance with R.C. 5301.51. As such, A’s possibility of reverter was extinguished and X’s fee simple determinable became a fee simple absolute.

(c) This example is taken from Verona U.M.C. v. Shock, 2nd Dist. Preble No. CA 252, 1978 Ohio App. LEXIS 10863 (Oct. 13, 1978).

24 R.C. 5301.49(A).

Paper 3 – 11

c. Exception 3: “All interests preserved by the filing of proper notice . . . in accordance with section 5301.51 of the Revised Code.”25

i. In order for a document to qualify as a notice of preservation, the document must be and contain the following:26

(a) The document must be in the form of an affidavit. This requirement means that the document be sworn to and subscribed by the affiant (and not acknowledged by the affiant) in front of a notary public.

(b) The document must state nature of the claim to be preserved and names and addresses of the persons for whose benefit the document is being filed.

(c) The document must contain an accurate and full description of the land affected by the document.

(d) The document must state the name of each record owner of the land affected by the notice, at the time of its recording, together with the recording information of the instrument by which each record owner acquired title to the land.

(e) The document must be made by a person who has knowledge of the facts or is competent to testify concerning them in court.

d. Exception 4: “All interests preserved . . . by possession by the same owner continuously for a period of forty years or more, in accordance with section 5301.51 of the Revised Code.”27

Note that R.C. 5301.51(B) provides, in pertinent part, that “[i]f the same record owner of any possessory interest in land has been in possession of the land continuously for a period of forty years or more, during which period no title transaction with respect to such interest appears of record in his chain of title . . . and such possession continues to the time marketability is being determined, the period of possession is equivalent to the filling of the notice [of preservation].”

25 R.C. 5301.49(B). 26 R.C. 5301.52. 27 R.C. 5301.49(B).

Paper 3 – 12

i. Example 9: In 1965, A conveys Blackacre to B. B has been in continuous possession to present day. In 1970, A conveys Blackacre to X.

(a) Question: Marketability is being determined on January 1, 2016. Does X take subject to B’s interest?

(b) Answer: X’s root of title is the conveyance from A to X in 1970. This conveyance is the most recent conveyance to be recorded as of a date forty years prior to the time marketability is being determined that purports to create (i.e., convey) the interest being claimed (i.e., Blackacre in fee simple absolute). X has an unbroken chain of title of record to his root of title. There is no instrument appearing of record purporting to divest X of his interest in Blackacre. As such, X has marketable record title to Blackacre. However, X takes subject to B’s interest in Blackacre because B has been in continuous possession of Blackacre for forty years or more.

ii. This statutory exception likely does not apply to severed mineral interests because one cannot constructively possess such mineral interests.

e. Exception 5: “The rights of any person arising from a period of adverse possession or user, which was [acquired] in whole or in part subsequent to the effective date of the root of title.”28

i. Example 10: In 1955, A conveys Blackacre to B. In 1960, M begins to adversely possess Blackacre. M’s adverse possession continues uninterrupted for 21 years. In 1975, A conveys Blackacre to X.

(a) Question: Marketability is being determined on January 1, 2016. Does X take subject to M’s interest?

(b) Answer: X’s root of title is the conveyance from A to X in 1975. This conveyance is the most recent conveyance to be recorded as of a date forty years prior to the time marketability is being determined that purports to create (i.e., convey) the interest being claimed (i.e., Blackacre in fee simple absolute). X has an unbroken chain of title of record

28 R.C. 5301.49(C).

Paper 3 – 13

to his root of title. There is no instrument appearing of record purporting to divest X of his interest in Blackacre. As such, X has marketable record title to Blackacre. However, X takes subject to M’s adverse possession (assuming M proves each element of adverse possession by clear and convincing evidence).

(c) This example highlights one of the distinctions between “marketable record title” and “marketable title.” Under this example, X has marketable record title to Blackacre. However, X does not have marketable title to Blackacre. One Ohio court has defined “marketable title” as title that “imports such ownership as insures the owner the peaceable enjoyment and control of the land, as against all others.”29 X’s title to Blackacre does not meet this standard because, once M’s adverse possession is litigated, M (and not X) will be declared the lawful owner of Blackacre.

f. Exception 6: “Any interest arising out of a title transaction which has been recorded subsequent to the effective date of the root of title from which the unbroken chain of title or record is started; provided that such recording shall not revive or give validity to any interest which has been extinguished prior to the time of the recording by operation of section 5301.50 of the Revised Code.”30

i. Example 11: In 1916, A conveys Blackacre, which is located in Muskingum County, to B reserving the oil and gas estate. In 1931, A dies testate. His will is probated in Tuscarawas County. A’s will devises the reserved oil and gas estate to A-1 and A-2. In 1936, B conveys Blackacre to C (no mention of the reservation). In 1957, A’s will and affidavits executed in accordance with R.C. 317.22(B) (“317.22 Affidavits”) are recorded in Muskingum County. In 1980, C conveys Blackacre to X.

(a) Questions: Marketability is being determined in 1980. Does D take subject to A-1’s and A-2’s interest? Who is the lawful owner of the oil and gas estate?

29 McCarty v. Lingham, 111 Ohio St. 551, 558, 146 N.E. 64 (1924). 30 R.C. 5301.49(D).

Paper 3 – 14

(b) Answers:

(1) D’s root of title is the conveyance from B to C in 1936. This conveyance is the most recent conveyance to be recorded as of a date forty years prior to the time marketability is being determined that purports to create (i.e., convey) the interest being claimed (i.e., the oil and gas estate to Blackacre in fee simple absolute). D has an unbroken chain of title of record to his root of title. There is no instrument appearing of record purporting to divest D of his interest in the oil and gas estate to Blackacre.

(2) A-1’s and A-2’s root of title is the conveyance from A to B in 1916. This conveyance is the most recent conveyance to be recorded as of a date forty years prior to the time marketability is being determined and purports to create (i.e., convey) the interest being claimed (i.e., the oil and gas estate to Blackacre in fee simple absolute). A-1 and A-2 have an unbroken chain of title of record to their root of title. There is no instrument appearing of record purporting to divest A-1 and A-2 of their interest in the oil and gas estate to Blackacre.

(3) Typically, because A-1’s and A-2’s interest in the oil and gas estate to Blackacre was created before D’s root of title, their interest would be extinguished. However, because of a subsequent title transaction, D’s marketable record title is taken subject to A-1’s and A-2’s interest. The 1957 recording of A’s will (and, presumably, the 317.22 Affidavits) qualifies as a “title transaction.” Because A’s will was recorded within the forty years immediately following D’s root of title, A-1’s and A-2’s interest is not extinguished under the OMTA.

(4) Because D cannot extinguish A-1’s and A-2’s interest under the OMTA, and because A-1 and A-2 likewise cannot extinguish D’s interest under the OMTA,

Paper 3 – 15

ownership will turn on application of Ohio’s recording acts. With respect to deeds conveying real estate, Ohio is a race-notice jurisdiction.31 As such, A-1 and A-2 are the lawful owners of the oil and gas estate.

(5) This example is taken from Heifner v. Bradford, 4 Ohio St.3d 49, 446 N.E.2d 440 (1983).

g. Exception 7: Miscellaneous exceptions. The following interests can never be extinguished under the OMTA:32

i. The right of any lessor to possession on the expiration of any lease or the right of any lessee in and to any lease, except as may be terminated by the ODMA;

ii. Any easement held for any railroad or public utility purpose;

iii. Any easement that is clearly observable by physical evidence of its use;

iv. Any easement the existence of which is evidenced by 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;

v. Any right, title, estate, or interest in coal, and any other rights pertinent to or exercisable in connection with coal;

vi. Any mortgage recorded in conformity with section 1701.66 of the Revised Code; and

vii. Any right, title, or interest of the United States, the State of Ohio, or of any political subdivision, body politic, or agency of the United States or the State of Ohio.

31 R.C. 5301.25(A). 32 R.C. 5301.53.

Paper 3 – 16

III. Open Issues concerning Ohio Marketable Title Act

A. Issue No. One: Is the OMTA self-executing (i.e., does the OMTA automatically extinguish ancient interests and defects by operation of law)?

1. Arguments in support of a self-executing OMTA

a. Dicta in Corban v. Chesapeake Exploration, L.L.C., et al., 2016-Ohio-5796, suggests that the OMTA is self-executing. In that decision, the Supreme Court of Ohio held, inter alia, that the 1989 version of the ODMA was not self-executing (the “1989 ODMA”). In support of that holding, the Court contrasted language found in the larger OMTA against language found in the 1989 ODMA. The Court noted that the OMTA uses the word “extinguished” and the phrase “null and void” to describe what happens to ancient interests and defects under the OMTA. The 1989 ODMA, on the other hand, uses the phrase “shall be deemed abandoned” to describe what happens to severed mineral interests. This difference in language factored into the Court’s holding that the 1989 ODMA was not self-executing. By using the word “deemed” in the 1989 DMA, the Court found that the Ohio General Assembly created only a “conclusive presumption” that a holder of dormant, severed mineral interests had abandoned those interests.33

b. Despite several Ohio courts and attorneys characterizing the OMTA as a statute of limitations, the OMTA is not drafted as such. There is no language in the OMTA requiring a claimant to bring a lawsuit with a stated time period in order to extinguish another person’s rights in land.

c. In their book, The Improvement of Conveyancing By Legislation, Simes and Taylor explicitly state that they attempt to avoid legislation that would require landowners to bring a quiet title action to effectuate the purpose of their model legislation, including the Model Act (which the OMTA is based on).

d. Many attorneys apply the OMTA as if it is self-executing. This statement is especially true in the area of title insurance. This practice may be further evidence of the OMTA’s self-executing nature.

33 Corban v. Chesapeake Exploration, L.L.C., et al., 2016-Ohio-5796, ¶ 25.

Paper 3 – 17

2. Arguments against a self-executing OMTA

a. The Court in Corban appears to be concerned with interests passing outside the chain of record title. If the OMTA is self-executing, there would be no document appearing of record indicating that certain interests and defects were extinguished.

b. There may be constitutional concerns (e.g., due process issues) if the OMTA is applied as a self-executing statute.

B. Issue No. Two: What is the date “marketability is being determined”?

1. The OMTA does not state when marketability is to be determined. As such, Ohio case law has been inconsistent in this regard. For example, certain Ohio courts have found the date “marketability is being determined” to be the date the plaintiff’s complaint was filed, the date process was served upon the defendant, the date of trial, etc.

2. As shown in the example below, the date “marketability is being determined” can have material consequences to the person claiming marketable record title.

a. Example 12: In 1910, A conveys an easement over Blackacre to B. In 1930, A conveys Blackacre to C with no reference to B’s easement. In 1975, C conveys Blackacre to D with no reference to B’s easement. In 2014, D conveys Blackacre to X with specific reference to B’s easement.

i. Questions: Marketability is being determined on January 1, 2016. Does X take subject to B’s easement? What if marketability is being determined in 1975?

(a) Answers:

(1) If marketability is being determined on January 1, 2016, X’s root of title is the conveyance from C to D in 1975. This conveyance is the most recent conveyance to be recorded as of a date forty years prior to the time marketability is being determined that purports to create (i.e., convey) the interest being claimed (i.e., Blackacre in fee simple absolute). X has an unbroken chain of title of record to his root of title. There is no instrument appearing of record purporting to divest X of his interest in Blackacre. As such, X has marketable record title to Blackacre. However, X takes subject

Paper 3 – 18

to B’s easement because the conveyance from D to X in 2014 specifically references B’s easement.

(2) If marketability is being determined in 1975, X’s root of title is the conveyance from A to C in 1930. This conveyance is the most recent conveyance to be recorded as of a date forty years prior to the time marketability is being determined that purports to create (i.e., convey) the interest being claimed (i.e., Blackacre in fee simple absolute). X has an unbroken chain of title of record to his root of title. There is no instrument appearing of record purporting to divest X of his interest in Blackacre. As such, X has marketable record title to Blackacre. X takes free and clear of B’s easement because there is no conveyance or other title transaction in the chain of record title immediately following X’s root of title that specifically references B’s easement.

C. Issue No. Three: Does the OMTA apply to severed mineral interests?

1. Legislative History of the OMTA

a. As originally enacted, all mineral interests were excluded from operation of the OMTA. However, after amendments in 1973 and 1974, the OMTA applied to all mineral interests except coal.

i. “It logically follow[ed] that in enacting R.C. 5301.53(E), if the legislature had intended to treat oil and gas interests in the same manner as coal interests, [the statute] would have so provided. By not specifically including oil and gas [in the exclusion from its operation], the General Assembly decided as a matter of public policy that such interests are not within the exceptions enumerated in R.C. 5301.53 and that the OMTA does apply to extinguish oil and gas interests.”34

34 Morgenstern v. National City Bank of Cleveland, 4th Dist. Washington No. 85 CA 33, 1987 Ohio App. LEXIS 5677 (Jan. 27, 1987).

Paper 3 – 19

ii. Given these amendments to the OMTA, holders of severed mineral interests had until December 31, 1976, to preserve their mineral interests by filing a notice of preservation.35

b. In 1989, the OMTA was amended again to incorporate the ODMA.

2. Arguments for the OMTA applying to severed mineral interests

a. The OMTA, as amended in 1973 and 1974, was not successful in extinguishing all mineral interests (except coal) because one of the exceptions to marketable record title is “interests and defects which are inherent in the muniments of which such chain of record title is formed; provided that a general reference in such muniments, or any of them, to easements, use restrictions, or other interests created prior to the root of title shall not be sufficient to preserve them, unless specific identification be made therein of a recorded title transaction which creates such easement, use restriction, or other interest . . .”36 As such, a supplemental statute (i.e., ODMA) was necessary to abandon those ancient mineral interests that could be extinguished under the OMTA.

i. The legislative history surrounding the adoption of the ODMA suggests that this recognition was the impetus for enacting the ODMA.

ii. Certain Ohio courts have held that there is no irreconcilable conflict between the OMTA and ODMA because the two statutes offer alternative remedies to cure mineral defects. See Pletcher v. Brown, Monroe C.P. No. 2012-069 (Feb. 7, 2013).

3. Arguments against the OMTA applying to severed mineral interests

a. The OMTA and ODMA conflict with one another and, as such, the ODMA should exclusively apply to severed mineral interests because it is the more specific statute.

i. R.C. 1.51 provides that “[i]f a general provision conflicts with a special or local provision, they shall be construed, if possible, so that effect is given to both. If a conflict between provisions is irreconcilable, the special or local provision controls as an exception to the general provision, unless the general provision is the later adoption and the manifest intent is that the general provision prevail.”

35 Am.S.B. 267 (1973), 135 Ohio Laws 942; Am.H.B. 1231 (1974), 135 Ohio Laws 1210. 36 R.C. 5301.49(A).

Paper 3 – 20

ii. There is an irreconcilable conflict between the ODMA and OMTA because, in certain circumstances, the holder of a severed mineral interest can have marketable record title to his mineral interest, but such interest can also be abandoned under the ODMA. As such, and pursuant to R.C. 1.51, the ODMA applies exclusively to severed mineral interests because the ODMA was enacted after the OMTA and is the more specific statute. See Swartz v. Householder, 7th Dist. Jefferson Nos. 13 JE 24 and 13 JE 25, 2014-Ohio-2359.

D. Issue No. Four: Does the OMTA apply to severed royalty interests?

1. Arguments for the OMTA applying to severed royalty interests

a. The OMTA states that marketable record title “shall be held by its owner and shall be taken by any person dealing with the land free and clear of all interests, claims, or charges whatsoever, the existence of which depends upon any act, transaction, event, or omission that occurred prior to the effective date of the root of title. All such interests, claims, or charges, however denominated . . . are hereby declared to be null and void.”37

i. Certain Ohio courts have relied on this statutory language to find that the OMTA applies to severed royalty interests. See Pollock v. Mooney, 7th Dist. Monroe No. 13 MO 9, 2014-Ohio-4435, ¶ 21. (“The MTA does not differentiate between different types of interests. It applies to all interests.”).

2. Arguments against the OMTA applying to severed royalty interests

a. Oil and gas royalties are considered to be “personal property” interests under Ohio law. Because the OMTA is concerned with the extinguishment of interests and defects in real estate, the OMTA does not apply to severed royalty interests.

E. Issue No. Five: Can a conveyance or title transaction that repeats to a prior mineral / royalty reservation serve as a claimant’s root of title if the claimant is claiming marketable record title to that severed interest?

1. Arguments for such a conveyance or title transaction qualifying as a “root of title”

a. Such a conveyance or title transaction can qualify as a “root of title” because the mineral or royalty reservation was created earlier in the chain of title and the repetition of the original reservation

37 R.C. 5301.50 (emphasis added).

Paper 3 – 21

was intended to limit the warranty of title made by the grantor to the grantee. The focus should not be on whether such conveyance or title transaction qualifies as a title transaction, but whether the reference to the mineral / royalty reservation is specific or general in nature (i.e., is marketable record title taken subject to the mineral / royalty reservation).

2. Arguments against such a conveyance or title transaction qualifying as a “root of title”

a. Such a conveyance or title transaction cannot serve as the claimant’s root of title because the conveyance or title transaction does not purport to create the interest claimed by such person. Because the root of title is that conveyance “purporting to create the interest claimed by such person, upon which he relies as a basis for the marketability of his title,” the root of title must be “free of the reservation sought to be extinguished.” See Christman v. Wells, 7th Dist. Monroe No. 539, 1981 Ohio App. LEXIS 12702 (Aug. 28, 1981); Holdren v. Mann, 7th Dist. Monroe No. 592, 1985 LEXIS 6052 (Feb. 13, 1985)

F. Issue No. Six: Does a will qualify as a “title transaction” if the will does not specifically devise the subject land and the estate’s inventory does not identify the subject land?

1. Arguments for such a will qualifying as a “title transaction”

a. In their Model Title Standards, Simes and Taylor state that such a will qualifies as a “title transaction.”38 This is persuasive evidence that such a will may qualify as a “title transaction” under Ohio law.

b. Although the attorney examining title will need to search additional documents and instruments to determine what land the decedent was seized of at the time of his death, the decedent’s will is nonetheless a “title transaction” because the will, once admitted to probate, transfers title to the real estate to the decedent’s beneficiaries with vesting relating back to time of the decedent’s death.39 In this regard, the will is a “title transaction” because it affects title to an interest in land.

c. The fact that the estate’s inventory does not identify the subject land does not undermine the fact that title to the real estate transfers to the decedent’s beneficiaries once the decedent’s will is admitted to probate.

38 Lewis M. Simes and Clarence B. Taylor, Model Title Standards, Standard 4.11 (1960). 39 Long v. Long, 11th Dist. Trumbull No. 2007-T-0047, 2007-Ohio-5909, ¶ 32 (Nov. 2, 2007).

Paper 3 – 22

2. Arguments against such a will qualifying as a “title transaction”

a. Additional title searching will be necessary to determine what interest in land the decedent had title to at the time of his death. This additional searching undermines the legislative purpose of the OMTA, which is to simplify and facilitate land title transactions by allowing person to rely on a chain of record title.40

40 R.C. 5301.55; see Corban, 2016-Ohio-5796, ¶¶ 17, 27, 70.

11/22/2016 25976674 V.3