Senterra v. Winland – Ohio Supreme Court Limits Duhig Application and Applies Marketable Title Act
The Ohio Supreme Court considered the application of the Duhig rule and the Marketable Title Act in the case of Senterra, Ltd. v. Winland, Slip Opinion No. 2022-Ohio-252, in its opinion dated July 26, 2022. In a 4-3 decision, the Court found that the Duhig rule was inapplicable to the specific facts of the case, which involved multiple deeds with oil and gas severance language throughout the historical chain of title, and that the Marketable Title Act acted to extinguish oil and gas interests that had been previously severed from the surface estate.
The surface owner of the property at issue, Senterra, Ltd., acquired the property in 2012 and in 2018 filed suit to quiet title to the oil and gas interests. The issues arose due to the oil and gas severance language in the chain of title: (i) in 1925, the property was conveyed to Joseph Russell and George Russell, with an exception and reservation of a 1/4 interest in the oil and gas; (ii) in 1941, Joseph Russell and George Russell conveyed the property to George Russell, excepting and reserving all of the oil and gas; (iii) in 1954, George Russell conveyed the property, excepting and reserving a 1/4 interest in the oil and gas although, at the time, he was vested with a 3/8 interest in the oil and gas. In the subsequent deeds in the chain of title, dated in 1971 and 1987, the interest reserved by George Russell in 1954 is referenced but the prior reservations are not. The deeds in the chain of title after the 1987 deed, including the 2012 deed into Senterra, Ltd. do not specifically reference any prior severances of oil and gas interests.
The Court first held that the Duhig rule does not apply to the facts in this case, but applies only in narrow circumstances. The Court stated that the Duhig rule only applies when the grantor of the deed at issue is vested with the exact interest necessary to remedy a breach at the time of execution of the deed. Applying this rationale to the facts of this case, when George Russell reserved a 1/4 interest in the oil and gas estate in 1954, purporting to convey 3/4 interest, he did not own enough of an interest to remedy the breach. George Russell could have only conveyed a 3/8 interest, as that is what he owned. Therefore, forfeiting a 1/4 interest in favor of the grantees in the 1954 deed would not remedy the alleged breach.
The Court concluded that the Duhig rule was not applicable to these facts, and that the 1/4 interest stated as being reserved in the 1954 deed was not void upon execution of the deed.
The Court then applied the Marketable Title Act to the facts in the case. Importantly, the Court noted that the interests reserved by the 1925 and 1941 deeds had been extinguished, but not until the lawsuit filed in 2018 because Senterra, Ltd. is the only party to challenge the validity of those interests. The Court held that only the 1/4 interest of George Russell was preserved as it was specifically referenced in the 1971 root of title deed and subsequent deeds. Accordingly, such 1/4 interest was preserved under the Marketable Title Act, but the remaining interests, as reserved in the 1925 and 1941 deeds, were extinguished and vested in Senterra, Ltd.
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