Westervelt v. Woodcock

BAILEY, Judge,

concurring in result.

The majority in this case concludes that Stinson paid ad valorem taxes on royalties she received from her mineral interest in land, and the payment of these taxes had the effect of tolling the Dormant Mineral Act’s (“the Act”) twenty-year period requiring reversion of an unused mineral interest. The majority accordingly reverses the trial court’s decision finding that Stinson’s interest had reverted to Woodcock. While I agree with the majority’s result, I disagree with the majority’s construction and application of the Act. I *81write separately to explain my disagreement with the majority’s rationale.

The majority observes that the Dormant Mineral Act extinguishes “[a]n interest in coal, oil and gas, and other minerals, if unused for a period of twenty (20) years,” with the effect that the interest “reverts to the owner of the interest out of which the interest in coal, oil and gas, and other minerals was carved.” Ind.Code § 32-23-10-2 (emphasis added). The reversion does not occur if a statement of claim, the requirements for which are set forth in the Act, is filed. Id.

Further, the twenty-year period set forth in the Act may be tolled through use.

A mineral interest is considered to be used when:

(1) minerals are produced under the mineral interest;
(2) operations are conducted on the mineral interest for injection, withdrawal, storage, or disposal of water, gas, or other fluid substances;
(3) rentals or royalties are paid by the owner of the mineral interest for the purpose of delaying or enjoying the use or exercise of the rights;
(4) a use described in subdivisions 1 through 3 is carried out on a tract with which the mineral interest may be unitized or pooled for production purposes;
(5) in the case of coal or other solid minerals, there is production from a common vein or seam by the owners of the mineral interest; or
(6) taxes are paid on the mineral interest by the owner of the mineral interest.

I.C. § 32-23-10-3(a); Miller v. Weber, 839 N.E.2d 204, 208 (Ind.Ct.App.2005) (characterizing the six circumstances of use as tolling the twenty-year period of I.C. § 32-23-10-2), trans. denied.

Here, the majority concludes that Subsection 32-23-10-3(a)(6)-payment of taxes upon the mineral interest by the interest’s owner — operated to put Stinson’s mineral interest in use as that term is understood within the Act. In doing so, the majority relies heavily upon distinguishing its reasoning from that of this Court’s prior decision in Miller, supra. Most notably, the majority observes that in Miller the capital gains taxes paid on royalties were not a matter of public record sufficient “to remedy uncertainties in titles to mineral interests,” Op. at 79 (citing Miller, 839 N.E.2d at 211), whereas Stinson’s payment of ad valorem taxes in this case “were, or should have been, recorded in public documents.” Id.

As the Miller Court observed, the payment of public-record taxes can be sufficient to resolve uncertainties in a mineral interest. But, in my opinion, we need not reach the issue in this case of whether payment of the ad valorem tax satisfies that requirement, because a more important distinction exists between this case and the facts of Miller. In Miller, the mineral rights went unused for any active exploration or recovery of minerals, oil and gas, or other sub-surface resources covered by the mineral interest at issue. Id. at 206. In the present matter, however, oil continued to be produced from the land associated with Stinson’s mineral interest. That is, the mineral interest was in use in the plainest manner possible: minerals were produced from sub-surface deposits that were the subject of Stinson’s mineral interest. I.C. § 32-23-10-3(a)(l).

By its plain language, Subsection 3(a)(1) requires only that a mineral interest be productive. This is unlike Subsection (a)(3), which tolls the twenty year statutory period only when royalties are paid directly by the mineral interest holder to the grantor of that interest. See Miller, 839 N.E.2d at 208-09 (rejecting a claim under I.C. § 32-23-10-3(a)(3) that the *82statutory period was tolled by payment of royalties to a mineral interest holder by a third-party grantee of the holder). In this case, then, I would construe Subsection 3(a)(1) such that it was satisfied by the continued production of minerals — whether or not Stinson personally conducted that activity.

This construction is clearly within the plain language of the Act, which distinguishes between the requirements for tolling in cases of actual production or extraction of resources (in which case the legislature’s concern for productivity is satisfied), see I.C. § 32-23-10-3(a)(l), and cases in which there has been no production and no payment of royalties to toll the twenty-year period as to the unproductive interest. See I.C. § 32-23-10-3(a)(3). It serves our legislature’s purpose in derogating from the common law by limiting the duration of economically unproductive mineral interests to a twenty-year reversion period, which helps to ensure the marketability and productivity of land with sub-surface coal, oil and gas, and other mineral deposits. Short v. Texaco, Inc., 273 Ind. 518, 526, 527-28, 406 N.E.2d 625, 629, 630 (1980), aff'd, Texaco, Inc. v. Short, 454 U.S. 516, 102 S.Ct. 781, 70 L.Ed.2d 738 (1982). This construction also recognizes the separability and transferability of portions of a mineral interest. See id. at 528, 406 N.E.2d 625 (observing that various interests may need to be “assemble[d]” to “actually produce minerals”); Miller, 839 N.E.2d at 207-209 (addressing the dependence of a third party’s interest upon that of an original grantee).

Finally, applying the plain language of Subsection (a)(1) obviates the kind of inquiry otherwise required by the majority’s opinion. The focus of that inquiry is whether and how taxes were paid and recorded with a county office — a subject that may not be appropriate for summary judgment here, given the apparent factual dispute over the recording of Stinson’s ad valorem tax payments. If the mineral interest is productive during the tolling period, Subsection (a)(1) is met, the reversion period is tolled, and there is no need for further inquiry because both the plain language and the legislative purposes of the Act have been met. I think that is the case here.

I therefore respectfully concur in the result.