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Use It or Lose It: Court of Special Appeals Upholds Constitutionality of Maryland Dormant Mineral Interests Act

In Harvey v. Sines, 228 Md. App. 283, 137 A.3d 1045 (2016), the Court of Special Appeals held that the Maryland Dormant Minerals Act (the “Act”) is constitutional, finding that it does not impair vested rights or improperly take property without compensation.

The Maryland General Assembly passed the Act in 2010 to allow the owners of the surface estate to terminate severed mineral interests that have not been used for 20 years or more.  The Act is codified at §15-1201 et seq. of the Environmental Article (“Env.”) of the Maryland Code.  The Maryland law was based on the Uniform Dormant Mineral Interests Act, which was designed “to enable and encourage marketability of real property and to mitigate the adverse effect of dormant mineral interests on the full use and development of both surface estate and mineral interests in real property.” 

Under the Act there is “use” of the mineral interest by an owner if any of the following occur: (i) active mineral exploration or exploitation; (ii) payment of taxes on a separate assessment of the mineral interest; (iii) recordation of an instrument that evidences the continued existence of the mineral interest; or (iv) recordation of a judgment or decree that makes a specific reference to the mineral interest.  Env. § 15-1203(c)(1).  An owner of a mineral interest may record a notice of intent to preserve the mineral interest, or a portion of it.  Furthermore, an owner of a mineral interest may record a “late notice of intent” to preserve the mineral interest after a case has been filed to terminate it unless the mineral interest has been unused for 40 years or more.

In the subject case, in 2014 Joseph L. Sines and Sandra S. Sines (“the Sineses”), who are the surface owners of approximately 20 acres in Garrett County and own an undivided one-half interest in the minerals beneath the property, brought an action in the Circuit Court for Garrett County to terminate an undivided half-mineral interest owned by the descendants of Henry B. Harvey.  Harvey had purchased a one-half interest in the minerals on the property, evidenced by a deed dated March 26, 1912 and recorded among the Land Records of Garrett County.  Harvey’s descendants (the “Harveys”) did not assert any rights to the property for over 100 years, and they never paid any taxes on their property interests.

Each of the parties filed cross-motions for summary judgment.  The circuit court found that there were no material facts in dispute, and it entered an order terminating the Harveys’ mineral interest.  The Harveys appealed to the Court of Special Appeals.  

On appeal the Harveys raised two points.  First, they argued that the Act retroactively impaired vested property rights.  The Court of Special Appeals stated, “In evaluating retrospectivity, we consider three factors, ‘fair notice, reasonable reliance, and settled expectations,’ to determine ‘the nature and extent of the change in law and the degree of connection between the operation of the new rule and a relevant past event.’” John Deere Const. & Forestry Co. v. Reliable Tractor, Inc., 406 Md. 139, 147 (2008) (quoting Landgraf v. USI Film Products, 511 U.S. 244, 270 (1994)).

The court distinguished Muskin v. State Dept. of Assessments & Taxation, 422 Md. 544, 554 (2011).  In Muskin the Court of Appeals held unconstitutional the law that extinguished ground rents that were not timely registered with the State Department of Assessments and Taxation on the basis that that it “impermissibly impacted the reasonable reliance and settled expectations of ground rent owners.”  In contrast, the Court of Special Appeals found that the Harveys, who had received no benefit from their mineral rights for over 40 years (probably over 100 years), had no expectations with respect to them.  Therefore, the Court of Special Appeals held that the Act does not operate retrospectively to impair vested rights.

The court next determined that the Act did not impermissibly impair vested rights.  The court recognized that a severed mineral interest is a vested property right; however, it pointed out that the Harveys had a long time to assert their rights, but they took no action for more than 40 years.  The Act was written to encourage mineral rights to be put to productive use, and the Harveys did nothing for an extended period of time about the interests that they had.  The court held that the notice provisions of the Act satisfied the due process requirements of Article 24 of the Maryland Declaration of Rights.

The Harveys contended that they suffered a taking without compensation, and that was prohibited by the Maryland Constitution.  However, the court pointed out that doctrines such as adverse possession, abandonment, and escheat permit vested property rights to be lost under certain circumstances.  In enacting the Act, the court said, “the General Assembly created yet another vehicle to ensure the productive use of property in Maryland.”  

The Court of Special Appeals upheld the constitutionality of the Act, and so it wrote, “[W]e conclude that the [Act] does not operate retrospectively to impair vested rights and does not take property without just compensation.”

For questions, please contact Ed Levin (410) 576-1900. 

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Date

09.14.16

Type

Publications

Authors

Levin, Edward J.

Teams

Real Estate