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Casenotes

Indiana

Mineral Rights; Tax Deeds

Groome v Donlin Corp, 908 NE2d 330 (Ind Ct App, 2009).

Facts:In 1951, husband and wife Frank and Florence Varner, and husband and wife Bennie and Odas Varner signed an oil and gas lease with the Sun Oil Company. This lease allowed the Sun Oil Company to take possession of the oil present beneath the two properties owned by the Varners — each couple owned one lot that was subject to the lease&€”in exchange for royalties.

The first lot eventually came under the ownership of Molly Baumgartner. After her death, her property interests were divided between Ruth and Ralph Werner and Don and Beverly Masterson. No specific mention was made of the mineral rights. These property rights were then transferred to the children of the Werners and trusts established by Don and Beverly Masterson.

The second lot came into the possession of Donlin Corp. A portion of the real estate was then sold to Kevin Masterson. The mineral rights were never severed from the surface rights.

In 2006, the Groomes purchased certificates of sale for the royalty interests in the property due to unpaid oil property taxes from the year 2005. In 2007, the Groomes filed for the issuance of the two tax deeds. Upon conducting a title search, Groome found that the royalty interests under the lease appeared to belong to Baumgarter and Odas Varner. Groome provided notice to both these individuals, despite their death some years prior. No notice was made to any of the individuals who then owned the surface properties on which the oil and gas leases were based.

This suit ensued when Donlin Corp. and Kevin Masterson filed to have the tax deed set aside due to Groome's failure to provide notice. The trial court found that the mineral interests were never separated from the surface land and, as such, Groome had been obligated to provide notice to the parties who now possessed the surface land. The Groomes appealed this decision.

Holding:Affirmed. The court explained that mineral rights such as royalties under an oil and gas lease are transferred with all other interests without a provision to the contrary. As such, when a landowner conveys his land to another in fee simple, these rights are now vested with the new owner. By default, the mineral rights follow the surface rights. The court ruled that barring any evidence in the chain of title that these rights had been severed, the Groomes should have provided notice to the surface owners.

As such, the court rejected the Groomes' argument that it should up to the owners of the surface rights to prove that the mineral rights were never severed in cases where the chain of title is unclear. The court refused to put the burden of proving a negative on the owners and instead put the burden of proving that the rights had been severed upon the Groomes. The court reasoned that proving that the rights had been severed would be a much more reasonable burden of proof than requiring proof of a negative.

Ultimately, the court found that it was the tax deed purchaser's burden to prove that the mineral rights had been severed from the surface rights. In the event that the purchaser were unable to prove this, as they were in this case, notice should be provided to the surface owners.

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[Last update: 4-26-10]