In a pair of decisions, the Ohio Supreme Court in Peppertree Farms, L.L.C. v. Thonen, Slip Opinion No. 2022-Ohio-395, and Peppertree Farms, L.L.C. v. Thonen, Slip Opinion No. 2022-Ohio-396, decided on issues related to a) the relationship between Ohio’s Dormant Minerals Act (the “DMA”) and Ohio’s Marketable Title Act (the “MTA”), b) the necessity of words of inheritance in mineral reservation, and 3) when a decedents recorded will constitutes a title transaction under the MTA.
First, the Court affirmed its decision in West v. Bode, 162 Ohio St.3d 293, holding that the DMA and MTA provide alternative, independent mechanisms to reunite it’s a severed mineral interest with the surface estate.
Second, the Court ruled on the necessity of words of inheritance in in mineral reservations. Prior to the its abrogation in 1925, a common law rule distinguished between the reservation of a real property interest and the exception of a real property interest in conveyances. If the real property interest being retained was classified as a reservation, then the grantor had to use words of inheritance if the grantor wanted to own the interest in fee simple. The law at that time required the grantor to use words of inheritance in such instances because a reservation creates a new property right in the grantor. However, if the real property interest being retained was classified as an exception, no words of inheritance were required, as exceptions carve out an existing fee-simple property right from the conveyance.
In one case, the grantor executed a deed that provided “3/4 of oil Royalty and one half of the gas is hereby reserved and not made a part of this transfer.” In holding that the quoted language was an exception, the Court recognized that “the present right to a future royalty is real property” and was owned by the grantor at the time of the conveyance.
In the other case, the deed provided “[a]ll the oil and gas underlying the above described premises is hereby reserved and is not made a part of this transfer.” The Court held that this language also created an exception rather than a reservation, finding that the grantor’s oil and gas interest existed at the time of the transaction, and he owned the interest in fee simple with rights of inheritance.
In both cases, the Court found that the retained interests were in existence and owned in fee simple by the grantors at the time of the conveyance. Therefore, words of inheritance were not necessary to create more than a life estate in such interests. The Court also held that “the word ‘reserve’ or the word ‘except’ or the use of both words in the same deed provision is not determinative of whether a reservation was created or an exception was made to the conveyance.”
Third, the Court held that a particular recorded Last Will and Testament did not constitute a “title transaction” under the MTA, because the Will did not devise the mineral interest and did not include a residuary clause disposing of the mineral interest. The Court affirmed the lower Court’s decision that (1) a recorded Last Will and Testament that devises a decedent’s oil and gas rights and (2) the passage of oil and gas rights through intestacy are both “title transactions” under the MTA. However, in this case, the Will did not devise the decedent’s oil and gas rights either explicitly or through a residuary clause, and the passage of the mineral rights through intestacy was not recorded. Therefore, the decedent’s Will was not a recorded “title transaction” in this particular case.