Subsurface Rights; Title Wash
Commonwealth v. Proctor, 455 F.Supp.3d 127 (M.D. Pa. 2020), appeal pending, No. 22-1587 (3d. Cir), Certification of Question of State Law granted Nov. 7, 2023, docket 31 EAP 2023
The Pennsylvania Supreme Court granted a Petition for Certification of Question of State Law filed by the United States Court of Appeals for the Third Circuit to consider the following issue:
Whether, on the record provided here, a 1908 tax sale of an unseated parcel of land, induced by the surface owner’s failure to pay taxes on the estate, and made to an agent of the defaulting surface owner, constitutes a title wash, thereby divesting the subsurface owner of his interest in the estate?
Docket sheet at 8. This question arises from a dispute between the Pennsylvania Game Commission (Game Commission) and the Thomas E. Proctor Heirs Trust and Margaret Proctor Trust (Trust). As Chief Judge Christopher C. Conner for the U.S. District Court for the Middle District of Pennsylvania (District Court) summarized:
Millions of acres of Pennsylvania land are situated above the Marcellus Shale, an underground sedimentary rock formation spanning multiple states and containing massive reserves of natural gas. Experts conservatively value that gas in the hundreds of billions of dollars. Relatively new methods of drilling—most notably hydraulic fracturing or “fracking”—have unlocked the potential to tap these subsurface gas reserves. To no one’s surprise, the ability to reach this lucrative natural resource has engendered sophisticated ownership disputes like the one before this court.
Plaintiff, Commonwealth of Pennsylvania, Pennsylvania Game Commission (“Game Commission”), claims that it owns both the surface and subsurface rights for numerous tracts of land in Sullivan and Bradford Counties in northeastern Pennsylvania. Defendants, Thomas E. Proctor Heirs Trust and Margaret O.F. Proctor Trust (collectively, “Proctor Trusts”) disagree, contending that they hold superior title to the subsurface estates underlying these tracts. A lengthy and complex legal battle has ensued, culminating in cross-motions for partial summary judgment regarding a bellwether tract of land in Bradford County. (Docs. 94, 123). Chief Magistrate Judge Susan E. Schwab issued an extensive report, (Doc. 155), recommending that the cross-motions for summary judgment be denied. Both parties have filed objections to Judge Schwab’s report.
Pennsylvania Game Comm’n v. Thomas E. Proctor Heirs Tr., 455 F. Supp. 3d 127, 130 (M.D. Pa. 2020). The relevant factual background, as summarized by the District Court, is that:
In 1893, Schrader Mining & Manufacturing Company conveyed the Josiah Haines warrant—located in LeRoy Township, Bradford County—to Thomas E. Proctor (“Proctor”) and Jonathan A. Hill (“Hill”). (Doc. 95 ¶ 5). The following year, Proctor and Hill and their wives deeded the property to Union Tanning Company (“Union Tanning”), “reserving” the subsurface rights to minerals, oil, gas, coal, and petroleum (hereinafter “mineral rights” or “subsurface estate”). (Id. ¶¶ 8-9). This conveyance effectively severed the surface and subsurface estates of the Josiah Haines warrant, vesting those rights in separate owners. In 1903, Union Tanning conveyed its surface ownership interest in the Josiah Haines warrant to Central Pennsylvania Lumber Company (“CPLC”), excepting the rights to certain tree bark and conveying the property “subject to” all prior exceptions and reservations. (Id. ¶¶ 13-15). In June 1908, Calvin H. McCauley, Jr. (“McCauley”), purchased the Josiah Haines warrant at the Bradford County treasurer’s sale (hereinafter “tax sale” or “treasurer’s sale”) when the property was sold to recover unpaid taxes for 1907. (Id. ¶¶ 23, 25). Exactly what interest—whether only surface rights or both the surface and subsurface estates—this 1908 tax sale conveyed is the gravamen of the instant dispute.
In December 1910, McCauley and his wife—in consideration of a recited payment of $1.00—quitclaimed all interest in numerous properties, including the Josiah Haines warrant, to CPLC. (Id. ¶ 31). Finally, in 1920, CPLC conveyed its interest in the warrant to the Game Commission, “subject to” the prior 1894 Proctor and Hill mineral rights exception and any exceptions or reservations in the 1903 deed from Union Tanning to CPLC. (Id. ¶¶ 37-38).
Since 1980, Proctor’s heirs, who comprise the Proctor Trusts, have been leasing the Josiah Haines warrant for oil and gas development. (Id. ¶¶ 46-47). The Proctor Trusts and the Game Commission now seek to quiet title to the subsurface estate of the warrant, asking the court to enter judgment as a matter of law as to ownership thereof.
Id. at 131. The District Court explained:
The Game Commission’s claim to the subsurface estate underlying the Josiah Haines warrant relies entirely on the premise that the 1908 tax sale “washed” the title and rejoined the previously severed surface and subsurface estates, thereby giving good title to the entire warrant to McCauley, the tax-sale purchaser. According to the Game Commission, Herder Spring’s endorsement of the title-wash phenomenon squarely answers the ownership claims in this case. The Game Commission contends that because the warrant was unseated and assessed as such, and because there is no evidence that Proctor and Hill reported their subsurface interest for separate assessment to the Bradford County commissioner, the warrant was properly assessed as a whole in 1907 and sold as a whole at the 1908 treasurer’s sale.
Id. at 133. The District Court held that Even if the county tax assessor misclassified subject property as unseated, as opposed to seated, such mistake was not grounds under Pennsylvania law to invalidate the treasurer’s deed that “washed” title and rejoined the previously severed surface and subsurface estates. The District Court denied the parties’ cross motions for summary judgment, having found genuine disputes of material fact regarding “what interest was assessed in 1907 and sold at the 1908 tax sale, as well as whether McCauley was acting as CPLC’s agent at that sale.” Id. at 154. The District Court concluded “that unseated landowners had a legal duty to pay taxes on their land,” reasoning that:
Because CPLC was the undisputed surface owner of the Josiah Haines warrant prior to the 1908 tax sale and had an affirmative duty to pay taxes on its interest, the rule set forth in Powell potentially applies. Hence, the question of McCauley’s agency (or lack thereof) is highly relevant and material. If McCauley were acting as CPLC’s agent at the 1908 tax sale, which was induced by CPLC’s failure to pay 1907 taxes, CPLC’s purchase through McCauley effectuated nothing more than a redemption of its surface interest. See Powell, 34 A. at 451. However, whether McCauley was acting as CPLC’s agent is a question of fact, not a question of law, and must be resolved by a jury. See Ellison v. Hosie, 147 Pa. 336, 23 A. 455, 455 (1892) (per curiam); Walton v. Johnson, 66 A.3d 782, 787 (Pa. Super. Ct. 2013) (citing Volunteer Fire Co. of New Buffalo v. Hilltop Oil Co., 412 Pa.Super. 140, 602 A.2d 1348, 1351 (1992)).
455 F.Supp. 3d at 151-52.
The Game Commission appealed to the Third Circuit, which certified the question of law stated above for the Pennsylvania Supreme Court’s consideration.
For more information, contact Kevin McKeon or Dennis Whitaker.