Lessons from the Courtroom: Leasing and Title Litigation in WV

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1 Lessons from the Courtroom: Leasing and Title Litigation in WV Follow Steptoe & Johnson on Twitter: ALSO FIND US ON Steptoe & Johnson PLLC. All Rights Reserved.

2 Today s Presenter Allison J. Farrell Bridgeport, WV

3 Lessons From The Courtroom: Leasing and Title Litigation in WV 3

4 Partition in WV 4

5 Goals Understand: Relevancy of co-tenancy laws Requirements for filing partition action Legal issues surrounding actions 5

6 WHAT is Partition? Division of property among co-owners Key: Must be a co-owner What does this mean to the judges? 6

7 WHY Do We Need It? No forced pooling for Marcellus Shale Need 100% leased And... solution for stubborn mule Holdout Lessors 7

8 May Avoid The Dreaded Willful Trespass Claim! Consent of all co-tenants needed Mineral extraction without consent constitutes irreparable injury to real estate Subject to injunctive relief, intentional trespass, and treble damages 8

9 Governing Law W. Va. Code , et seq. 9

10 Three Types of Partition 1. In-Kind (physical division) 2. Allotment (forced sale to one or more co-tenants) 3. Public Sale Or, court may order allotment of part & sale of part 10

11 Partition In-Kind Carving of property into smaller parcels based on respective ownership interests Physical division 11

12 Example of Partition In-Kind 3 owners of 100 acre tract with undivided interests of 70%, 20%, and 10% respectively Court divides land into 3 parcels where each owner owns 100% Generally for surface Fugitive Minerals

13 Partition by Allotment If partition in kind is not convenient, court may partition by allotment Forced sale Must show that interests of owners will be promoted by the sale and interest of the others will not be prejudiced Special Commissioner appointed to execute deed 13

14 Appraisers If parties cannot agree on value, court appoints three appraisers: Appraisers have 30 days to appraise & file report Parties have 30 days to object Some judges now requiring them 14

15 Partition by Judicial Sale Usually, option of last resort Sold at public auction courthouse steps Risky! Beware of Buyer 15

16 WHO Can Partition? Mineral owners Lessees of mineral rights other than lessees of oil & gas This issue has been litigated 16

17 Infant, Insane Person, or Convict If value of interest exceeds $300, court requires security for faithful application of proceeds Bond, with approved security, payable to State in penalty prescribed by court (WV Code ) 17

18 If State Owns Interest Before filing Complaint, party seeking partition must notify State official who has supervision of State land State shall be named a plaintiff Costs of suit shall come from proceeds of sale 18

19 Unknown Owner Can partition against an unknown owner if you state as much in the Complaint Except in counties where the judges refuse to allow it 19

20 WHERE Can You File? In the county where the land sits If it s in multiple counties, you can file in any county where it sits 20

21 Necessary Parties All parties with an interest in the real property (PITA) Creditor (secured or unsecured) is not a necessary party 21

22 Those Pesky Details Describe subject property Include chain of title Set forth undivided interests And explain why you need a partition 22

23 Relief Requested State your priority: In Kind Allotment Sale Request specific type of partition head off CONFUSION! All questions of title are resolved in a partition action 23

24 Hearing on Damages Parties must set forth evidence of fair market value If can t agree, appraisers appointed to determine value Parties can object 24

25 Risks If can t partition in kind or by allotment, the tract will be auctioned on the courthouse steps. Entire tract, or small portion? High bid wins - those courthouse steps can be dangerous! 25

26 Deed If defendant refuses or is unable to execute deed, court appoints Special Commissioner to make, execute & deliver deed and distribute sales proceeds 26

27 Can t We All Just Get Along? ALL co-tenants must unite to seek termination or forfeiture of a lease If no agreement, then partition Cawthon et al. v. CNX Gas Company et al., memorandum opinion issued November 16,

28 Partition v. Petition PARTITION Used to acquire property from Holdouts Missing Heirs PETITION used to acquire leases from Houdinis 28

29 Just Who Are Missing Heirs? 29

30 Unknown or Missing Owner Person vested with title whose present identity or location cannot be determined from records of: Clerk of the County Commission Clerk of Circuit Court where property is located Diligent inquiry in vicinity of owner s last known place of residence Sheriff Assessor 30

31 Due Diligence to Find Missing Heirs Due diligence includes but is NOT limited to: All county records where property located All county records in missing person s last known county of residence Online resources Newspapers, especially obituaries Interviews with relatives DOCUMENT all efforts in sworn affidavit If you don t make a diligent effort, the judge may send you back for a re-do

32 Parties To Be Named in Petition All unknown or missing owners or abandoning owners having record title Unknown heirs, successors, and assigns of all such owners not known to be alive 32

33 The Petition Itself Petition MUST contain, among other things: Standing of petitioner to file Identity of defendants and ownership interest of each Legal description of land at issue Nature of proposed development Efforts to locate unknown or missing owners, usually by affidavit Petitioner must sign and verify accuracy of petition The devil is in the details! 33

34 Service of Petition Personal service, if possible But if this was possible, they wouldn t be missing! How Petitions Are Actually Served Via publication in newspaper File Notice of Lis Pendens in County Clerk s office 34

35 Guardian Ad Litem Once the action is filed, the Court appoints a guardian ad litem to represent the missing heirs GAL must confirm they are missing AND being treated fairly by lessee GAL paid by Petitioner 35

36 Waiting is the Hardest Part After filing and serving, petitioner must wait SIX MONTHS before the Court can appoint a Special Commissioner to execute the lease on behalf of the missing heirs.

37 Special Commissioner s Duties Once appointed, he or she: Signs lease on behalf of missing heirs Files report with Court recommending Court approval Usually, we all then go BACK to Court for the final hearing 37

38 Final Hearing Court will accept reports of GAL and Special Commissioner Order payments to GAL and Special Commissioner Approve lease Special Commissioner signs lease Record lease Pay money for lease into court receiver 38

39 Declaratory Judgment W.Va. Code et seq. 39

40 Declaratory Judgment Actions Court declares relationships, rights, responsibilities Clears up uncertainties Must be actual controversy further relief 40

41 Declaratory Judgment Actions Broader implications than quiet title actions Not need to be in possession of the real property in dispute Validity of leases, assignments Competing claims by mineral owners; interpleader 41

42 Quiet Title W.Va. Code (d) 42

43 Quiet Title Actions Must have claim to the real property in dispute Actual competing claims of title Gaps in record title Achieve marketable title

44 Points to Takeaway Use partition for Holdouts Use missing heirs actions for Houdinis Use quiet title actions for title disputes Summary proceedings needed for minors and incompetent persons.

45 Questions? Allison J. Farrell

46 Material Disclaimer These materials are public information and have been prepared solely for educational purposes to contribute to the understanding of energy and oil and gas law. These materials reflect only the personal views of the authors and are not individualized legal advice. It is understood that each case is factspecific, and that the appropriate solution in any case will vary. Therefore, these materials may or may not be relevant to any particular situation. Thus, the authors and Steptoe & Johnson PLLC cannot be bound either philosophically or as representatives of their various present and future clients to the comments expressed in these materials. The presentation of these materials does not establish any form of attorney-client relationship with the authors or Steptoe & Johnson PLLC. While every attempt was made to insure that these materials are accurate, errors or omissions may be contained therein, for which any liability is disclaimed.