Ohio Supreme Court issues another major decision for surface and mineral owners in Ohio
On December 17, 2020, just days after its decision in West v. Bode (previously summarized by Bricker attorneys), the Ohio Supreme Court issued another major decision for surface and mineral owners in Ohio. In Gerrity v. Chervenak, Slip Opinion No. 2020-Ohio-6705, the Court formally weighed in, for the first time, on the level of diligence required by a surface owner who is researching severed mineral interest holders in order to serve a notice of abandonment pursuant to the Ohio Dormant Mineral Act (DMA). R.C. 5301.56 et seq. Appealing a Fifth District decision that upheld the purported abandonment of oil and gas mineral interests created by a 1961 reservation, and attacking the due diligence performed by the surface owners, the mineral owner presented two propositions of law for acceptance by the Court. (1) That the Court hold that the DMA requires strict compliance, such that a surface owner must identify and attempt service by certified mail on every holder of a mineral interest; and (2) that the Court hold that a surface owner must use certain specified search methods designed to locate all holders of the severed mineral interest to satisfy due process and the reasonable-diligence requirement underlying R.C. 5301.56(E).
In 1961, Gerrity, the predecessor of the mineral owner, reserved “all minerals (coal, oil and gas) underlying” the surface of the property in Guernsey County. Thereafter, in 1965, a certificate of transfer (CT) evidenced a transfer of ownership of the severed mineral interests to Jane F. Richards (Gerrity’s mother). The CT filed in Guernsey County included an address in Cuyahoga County. However, the public records search in Guernsey and Cuyahoga counties did not reveal further information on the whereabouts of Ms. Richards after 1965. Unbeknownst to the Chervenaks, the surface owners, Ms. Richards passed away in 1997 in Florida, and her probate proceedings entitled her sole heir, Gerrity, to the mineral interests underlying the property. No records, however, were filed in Guernsey County to evidence a transfer to Gerrity. Seeking to reunite the severed mineral interests with the surface, the Chervenaks commenced abandonment efforts pursuant to the procedures outlined in the DMA. Ultimately, no heirs or addresses other than Ms. Richards’ Cuyahoga County address were revealed, and the Chervenaks attempted certified mail service on Ms. Richards at the Cleveland address, which failed. Failing to complete service on the Cleveland address and to locate any other holders, the Chervenaks completed the DMA abandonment procedures by publishing their notice of their intent to declare the mineral interest deemed abandoned in a county newspaper, and filed a corresponding affidavit of abandonment.
On the first issue, the Court quickly disposed of the proposition, holding that “application of the [DMA] is not limited to circumstances in which every holder of a severed mineral interest has been identified.” Though the Court recognized that R.C. 5301.56(F)(1) provides that the notice of intent to declare the mineral interest abandoned “shall contain” the name of holders, the Court noted that other provisions permit publication of a notice where holders could not be identified. In its reasoning, the Court ruled that “[i]t would strain credulity to read R.C. 5301.56(E)(1) to allow notice by publication when a holder cannot be identified, but at the same time to require identification of the holder in the notice itself.” Ultimately, the Court affirmed that R.C. 5301.56(E)(1) permits notice of publication when a holder could not be identified or located for service by certified mail.
Turning to the second issue, the Court addressed—for the first time in its jurisprudence—what is required of surface owners in order to effectuate an abandonment of mineral interests (i.e., what constitutes “reasonable search methods” to identify and locate heirs). The Court first explained that the diligence efforts to locate mineral heirs are not as stringent as the rules governing service of process contained in the Ohio Rules of Civil Procedure (Civ. R. 4.4) and other provisions of the Ohio Revised Code (R.C. 2703.24). Next, the Court affirmed the Seventh and Fifth Districts’ “reasonable diligence” standard precedent, refusing to adopt a bright-line rule approach as to what search efforts need to be completed by a surface owner in order to satisfy the requirements of the DMA and permit publication of a notice of intent. Instead, the Court held that “whether a party has exercised reasonable diligence will depend of the facts and circumstances of each case.” In so holding, the Court refused to hold that an Internet search and/or a subscription to a paid ancestral service are required as a matter of law when attempting to locate mineral owners prior to service by publication. Finally, the Court (citing the U.S. Supreme Court’s decision in Texaco v. Short) rejected Gerrity’s argument that his due process rights were violated by the Chervenaks’ utilization of the DMA to abandon severed mineral interests, reasoning that the DMA’s existence since 2006 should have alerted and prompted Gerrity to undertake actions to preserve his interest and stave off abandonment.
Moving forward, while this case has resolved certain issues involving the diligence requirements of the DMA, it still leaves open the question as to what constitutes “reasonable diligence” under the facts of a future case. Simply put, the Court noted that, while a search of county property and court records may be sufficient for purposes of the standard in certain circumstances, “there may … be circumstances in which the surface owner’s independent knowledge or information revealed by the surface owner’s review of the public-property and court records would require the surface owner, in the exercise of reasonable diligence, to continue looking elsewhere to identify or locate a holder.” In other words, the question of whether a surface owner’s actions satisfy “reasonable diligence” will likely be a question in countless cases for years to come all across eastern and southeastern Ohio.
A full copy of the decision can be found here.