On May 9, 2014, in a decision it acknowledged “may be seen as unduly harsh,” the Pennsylvania Superior Court upheld the practice of title-washing, which can be used to erase early oil and gas reservations underlying formerly undeveloped lands. In Herder Spring Hunting Club v. Harry and Anna Keller, 2014 Pa. Super. 100 (May 9, 2014), the Pennsylvania Superior Court vacated a trial court decision, finding in favor of Herder Spring Hunting Club in a quiet title action wherein Herder Spring contended a tax sale of the subject property extinguished a prior reservation of all subsurface minerals, including oil and gas.
At issue were the following transactions: (i) an 1899 conveyance by Harry and Anna Keller, wherein they conveyed the subject property, but reserved all subsurface minerals, including oil and gas (horizontal severance deed); (ii) the 1935 acquisition of the property by the county commissioners for failure to pay property taxes; (iii) a 1941 tax sale from the commissioners, conveying the property (without any subsurface reservation) to Herder Spring’s predecessor in title; and (iv) a 1959 conveyance to Herder Spring by a deed providing the conveyance was “subject to all exceptions and reservations as are contained in the chain of title,” but containing no specific reservations.
Under Pennsylvania law in effect at the time of the horizontal severance deed, persons who acquired unseated land (unimproved land) were required to furnish a description describing the land to the county commissioners, or the board for the assessment and revision of taxes, so that a proper tax assessment could be levied. Although the law did not specifically address the situation where the subsurface rights to a parcel of land were horizontally severed from the surface rights, thereby creating two estates in the same parcel of land, the Court reviewed relevant case law and concluded the statute applied, such that upon the horizontal severance in 1899, the Kellers had a duty to notify the county commissioners of their retention of subsurface rights in the unseated lands, so that their reserved interest could be properly assessed. The Kellers did not provide the required notice, and the property continued to be taxed as a whole. Thereafter, in 1935, the treasurer obtained the rights to the property pursuant to a treasurer’s sale. Because the horizontal severance had never been reported to the commissioners, the treasurer obtained the property as a whole and transferred it to the commissioners as a whole. In 1941 the property was sold at a tax sale to a predecessor in title to Herder Spring. The Court noted that under Pennsylvania law, the Keller heirs had two years following the 1941 tax deed to challenge it, and that after the two year period passed without challenge, any subsequent transfer of the title to the property was entitled to rely on the deed containing no reservation of subsurface rights. The 1959 deed to Herder Spring provided the conveyance was subject to all exceptions and reservations as contained in the chain of title, but the Court stated there were no active exceptions or reservations, as the horizontal severance had been extinguished upon the expiration of the two year period after the 1941 tax deed.
This article was authored by Elizabeth B. Elmore, Jackson Kelly PLLC. For more information on the author, see here.