Surface, mineral rights issuesin Oklahoma murky territory

Journal Record, The (Oklahoma City), Jul 27, 2007 by Janice Francis-Smith

Extracting oil and natural gas out of the ground is one thing. Extracting information from land records to determine the proper owner of mineral rights is another. The Oklahoma Court of Civil Appeals recently dealt with two oil and gas lawsuits that hinged on construing a deed.

Oil and gas companies have to do their homework when it comes to acquiring surface and mineral rights, said S. Kim Hatfield, president of Crawley Petroleum. Hatfield said he's seen files a foot thick on one title.

"When we go out to lease something, you can't just walk up and knock on somebody's door and ask if you have the mineral rights and can I lease them," said Hatfield. "Whether they intend to mislead you or not, they can, especially when the rights are subdivided in a group."

Sometimes, a tract of land will be divided among several children or grandchildren, with just one family member given authority to bind the others in a lease, said Hatfield. In other instances, gifts of land or of mineral rights may have not been properly documented. Family feuds, marriages, divorces, migration, disagreements and a list of other factors can complicate the records when it comes to determining who has the rights to what.

The Court of Civil Appeals tackled one case last week that was resolved by invoking the statute of limitations. Tom Horn and a group of 17 others filed a lawsuit in 2006 against Larry Jake Horn and trustees of the Fred Horn Loving Trust, along with oil and gas companies Chesapeake, Gothic Production Corp. and Key Operating Co.

The plaintiffs sought to reform two deeds filed in 1971 and 1974, asserting that their predecessors had "on the basis of mutual mistake, fraud or inequitable conduct on the part of the grantee," conveyed both surface rights and mineral interests to the grantee. The landowners had only intended to convey surface rights, claimed the plaintiffs.

The Court of Civil Appeals upheld the District Court of Canadian County's decision to grant summary judgment to the defendants. The language of the two quitclaim deeds "unambiguously" conveyed all rights to the grantee, leaving no issues of material fact for the court to review. Instead, the court had to abide by the two-year statute of limitations on claims of mistake, fraud or inequitable conduct. The plaintiffs would have had to challenge the deed in the 1970s for the claim to be timely.

In Rox Petroleum LLC vs. New Dominion LLC, Gingerlynn, Inc., Oklahoma Title Clearing Corporation, Norma L. Doerfler and Hoster Brothers Inc., and Markeeta A. Hopwood, on the other hand, the Court of Civil Appeals expressed its own frustration with conflicting rules that govern such cases.

"The cardinal rule in construing a deed is to ascertain the true intent of the parties," reads the ruling. But 1987's Ford v. Raab ruling of the Oklahoma Supreme Court changed everything, the court asserted.

"In each of the pre-Ford v. Raab cases, the court looked to whether the grantor intended to reserve an interest," the ruling reads. "The Ford v. Raab Court went beyond the previous case law to declare a new rule requiring express reservation of the right to reversion in mineral interests. This rule may conflict with ascertaining the true intent of the parties."

Back in 1927, property owner Jennie Clauer executed deeds conveying one-quarter undivided interest in the minerals to each of two oil companies for however long oil and gas were produced from the property. In 1955, the surviving members of the Clauer family conveyed the property to the Oklahoma City Chamber of Commerce, which conveyed the property to a trust company, which conveyed the property to Southwest Improvement Co., through which the defendant oil and gas companies claim title as the surface owners.

The Clauer family's mineral interest passed to Carleton College in Minnesota, through which Rox claims title. Rox brought an action to quiet title to mineral interests for the property, claiming a reversionary interest in the minerals. The group of surface owners also claimed the reversionary interest.

Though the deed contained a reservation of the mineral interest of the grantors, the deed did not expressly reserve the reversionary interest.

"In our view, this language clearly expressed the grantors' intent to reserve all of their mineral interest of whatever nature," the ruling reads. "However, we are constrained to apply the rule of Ford v. Raab. The Court of Civil Appeals may not overrule an opinion of the Oklahoma Supreme Court."

The reluctant court affirmed the ruling of the trial court, which found the surface owners held the reversionary interest to the mineral rights for the property.