Van Slooten v. Larsen, Docket Nos. 62256
| Decision Date | 23 December 1980 |
| Docket Number | Docket Nos. 62256,61917,8,Nos. 7,s. 7 |
| Citation | 16 A.L.R.4th 1005,410 Mich. 21,299 N.W.2d 704 |
| Parties | H. John VAN SLOOTEN, Plaintiff-Appellee, v. Myrtle LARSEN, Ruth Armstrong, Mary Kinnison, Elsie M. Dick, Alice C. Pearson, Helen Wagner, Mary Hyatt, Eleanor Hall, Faye Petrak, Jean Tenore, Earl Osborn, Jack Osborn, Bill Osborn, Marva Engle, Kent Osborn, James Osborn, Susan Decent, Gwendolyn Gill, Joyce A. Hall, Lois J. Beatty, James G. Dick, Terrel B. Dick, Gerald A. Dick, Virginia A. Cummings, Ronald G. Dick, Gloria Henderson, Lester Teater: unknown claimants, unknown owners; and any and all unknown heirs, devisees, legatees, and assignees of Nellie F. Gill, Deceased, Defendants- Appellants. John E. BICKEL, Etta Mae Bickel, Getty Oil Company, a Delaware Corporation, Skelly Oil Company, a Delaware Corporation, Total Leonard, Inc., a Michigan Corporation, The Dow Chemical Company, a Delaware Corporation, Saxon Oil Company, a Texas Corporation, Plaintiffs and Appellants, v. James I. FAIRCHILD, Winifred E. Fairchild, Carl M. Worth, Doris W. Worth, Shell Oil Company, a Delaware Corporation, Delores M. Cook, d/b/a Southwestern Oil Company, Defendants and Appellees. Calendar410 Mich. 21, 299 N.W.2d 704, 16 A.L.R.4th 1005 |
| Court | Michigan Supreme Court |
Thompson, Zirnhelt & Bowron, Traverse City, for plaintiff-appellee, by Peter J. Zirnhelt, John Michael Senger, Traverse City.
James D. Dreyer, Michael K. Cooper, Dreyer & DuBois, Gaylord, for defendants-appellants.
Denfield, Timmer & Taylor, Lansing, for plaintiffs and appellants, by Clifford W. Taylor, Lansing.
John H. Norris, Monaghan, Campbell, Lo Prete, McDonald & Norris, Detroit, for defendants and appellees Worth and Shell Oil Co.
The issue in these cases is the constitutionality of the dormant mineral act, M.C.L. § 554.291 et seq.; M.S.A. § 26.1163(1) et seq., 1 as applied to these oil and gas interests created prior to the passage of the act in 1963. In Bickel v. Fairchild, 83 Mich.App. 467, 268 N.W.2d 881 (1978), the Court of Appeals held that the act unconstitutionally impaired the obligation of contract. In Van Slooten v. Larsen, 86 Mich.App. 437, 272 N.W.2d 675 (1978), another panel of the Court of Appeals upheld the constitutionality of the act. We hold that the act does not unconstitutionally impair the obligations of contracts as applied in these cases.
In Michigan, the ownership of a mineral interest can be severed from the ownership of the surface estate, see Rathbun v. Michigan, 284 Mich. 521, 534, 280 N.W. 35 (1938). At common law, these severances create fee estates, corporeal hereditaments, for the owners of the severed mineral interests, 2 which could not be abandoned. 3
The dormant mineral act provides that if the owner of a severed oil and gas interest fails to take actual possession of the interest as specified in the act, 4 transfer the interest by recorded instrument, or record a notice of claim of interest for a period of 20 years, the interest is deemed abandoned and title to it vests in the owner or owners of the surface estate. The act, passed in 1963, also provided a three-year grace period in which owners of interests created before the act was passed could record a claim of interest and preserve their interests.
Although we recognize the fact that the Legislature could have adopted other, if more tortuous, means of addressing this foreseeably increasing problem of mineral shortages, it did not. Therefore, we must commence with the concept that the statute must be presumed to be constitutional.
The relevant facts in these cases are very similar. 5 In both cases, the owner of the land sold it by a deed recorded prior to 1946, excepting from the conveyance the title to the oil and mineral estates. In 1963, the dormant mineral act was passed. Because the owners of the severed oil and gas interests had not performed any of the acts specified in the act or recorded a claim of interest for a period of over 20 years by 1966, their interests, pursuant to statute, were deemed abandoned and vested in the owners of the surface estates. In Van Slooten, the defendants, claiming through the reservation of title to the mineral interests in the deed severing the interests, executed oil and gas leases covering their interests in 1970. In Bickel, the owners of the mineral interests, the owners of the surface estate in 1966 and the present owners of the surface estate, all executed separate oil and gas leases covering the land in 1973 and 1974. The owners of the surface estates then filed suit to quiet title to the oil and gas interests.
Defendants contend that the act unconstitutionally impairs the obligation of contracts, U.S.Const. art. I, § 10, Const.1963, art. 1, § 10. They argue that the act severely impairs and destroys reliance interests, favors narrow private groups, was not prompted by any emergency or tailored to meet one and was not temporary or experimental, and thus that the statute unconstitutionally impairs the obligation of contracts. Compare Home Building & Loan Ass'n. v. Blaisdell, 290 U.S. 398, 54 S.Ct. 231, 78 L.Ed. 413 (1934).
When adjudicating impairment claims, the first inquiry should be whether the act has, in fact, operated as a substantial impairment of the contract relationship. The severity of the impairment determines the height of the hurdle the act must clear, Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244-245, 98 S.Ct. 2716, 2722, 57 L.Ed.2d 727 (1978).
El Paso v. Simmons, 379 U.S. 497, 85 S.Ct. 577, 13 L.Ed.2d 446 (1965), is instructive in reaching the conclusion that, although the consequences of failing to undertake one of the specified acts or to record a claim of interest every 20 years may be severe, the obligation to record is so minimal that the presumption of constitutionality is not overcome.
El Paso involved a Texas statute that cut off a purchaser's right to re-claim land forfeited to the state for non-payment of the purchase price after five years from the original default. Prior to the enactment of the statute, a purchaser's right to have claims reinstated by paying the full amount due up to the date of reinstatement was unlimited. The Court upheld the statute although failure to meet the additional requirement (payment within five years) resulted in a complete forfeiture of any remaining rights in the property.
In the instant cases, the impairment or additional obligation imposed by the act cannot seriously be contended to have comprised a "high" hurdle. Neither can it be seriously contended that the defendants were substantially induced to enter the initial contractual relationships in reliance on the fact that their interests need not be recorded, or recorded more than once, or that such a requirement significantly changed their bargaining position.
In Short v. Texaco, Inc., Ind., 406 N.E.2d 625 (1980), the Court upheld Indiana's mineral lapse act, Ind.Code §§ 32-5-11-1 et seq., a statute similar to Michigan's dormant mineral act, holding that it did not violate the constitutional prohibition against impairment of obligations of contract. The Court found the act, for the purpose of constitutional analysis, analogous to acts of limitation. The Court concluded that the Legislature adopted means which were rationally related to its valid objectives and held that the act did not unconstitutionally impair the obligation of contract.
Recording statutes long have been upheld in the face of constitutional challenges on impairment grounds, see Jackson v. Lamphire, 28 U.S. 280, 7 L.Ed. 679 (1830). The requirement of periodic recording furthers valid state interests. "The measure taken * * * was a mild one indeed, hardly burdensome to the purchaser * * * but nonetheless an important one to the State's interest", El Paso, supra, 379 U.S. 516-517, 85 S.Ct. 587-88.
We hold that M.C.L. § 554.291 et seq.; M.S.A. § 26.1163(1) et seq. does not unconstitutionally impair the obligation of contract.
Defendants claim the act violates the constitutional protection against deprivation of property without due process of law, U.S.Const. Am. XIV, Const.1963, art. 1, § 17. Defendants argue that by making a corporeal hereditament subject to abandonment the act has unconstitutionally changed the nature of defendants' interests and by requiring a record owner in constructive possession to take specific actions to preserve the interest, the act has unconstitutionally changed a property right into a mere cause of action, see Groesbeck v. Seeley, 13 Mich. 329 (1865). 6 Statutes which require property owners in possession to institute a proceeding within a specified time or lose their property have been held unconstitutional because a state cannot require one in possession of all that he demands to prosecute a suit to preserve his interest when no adverse interest is asserted by suit or possession, see Groesbeck, supra, 343.
Significant differences exist, however, between the dormant mineral act and the statutes which have been held unconstitutional for converting a property right into a mere cause of action. This act specifically exempts from its abandonment provisions those interests which have been occupied as specified in the act at any time within the last 20 years. More importantly, the act does not require the owner to institute a suit (at a time when conceivably there is no one to sue) to preserve title to the interest. The act only requires the owner to record a notice of his claim every 20 years. Although the validity of such recording requirements will be discussed more thoroughly infra, 7 it is sufficient to recognize at this point that statutes imposing recording requirements have been upheld when a reasonable time is provided for recording existing interests, see Wichelman v. Messner, 250 Minn. 88, 83 N.W.2d 800 (1957). We therefore hold that the act does not unconstitutionally change defendants' property rights into mere causes of...
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