The Superior Court of Pennsylvania recently held that a 1902 tax sale extinguished a party’s subsurface gas, oil, and mineral rights.  See Woodhouse Hunting Club, Inc., v. William Hoyt, et. al., J-A26044-17 (Sup. Ct. Pa. Feb. 2, 2018).  This case involved an action to quiet title of the subsurface oil and gas rights to a tract of land (the “Property”).  In 1891, the Hoyt family acquired title to the Property and subsequently conveyed it to Union Tanning Company, but reserved ownership of the gas, oil, and mineral rights and created a subsurface estate in favor of the Hoyts, their heirs, and assigns.  The Hoyts did not notify the Tioga County commissioner of the severance or their ownership in the subsurface estate.  On August 30, 1902, the Property was sold at a tax sale to Morris Manufacturing Company due to the nonpayment of taxes on both the surface and subsurface estates.  This sale was recorded in the Treasurer’s Sale Book of Unseated Lands.  The tax sale deed was not recorded until January 1903.  On November 17, 1902, after the tax sale but prior to the recording of the tax sale deed, Union Tanning Company executed a second deed to the surface rights of the Property in favor of Morris Manufacturing Company and purportedly reserved mineral and oil rights in favor of the Hoyts and their heirs and assigns.  In 1932, the Property was again sold at tax sale.  C.C. Slaght Lumber Company (“C.C. Slaght”), the record owner at the time, was allowed to redeem the Property in 1935 despite the expiration of the two-year redemption period.  In May 1952, Woodhouse Hunting Club (“Woodhouse”) received title from C.C. Slaght.

In 2011, Woodhouse commenced this action to quiet title against Hoyt Royalty (“Hoyt”), a Colorado LLC formed to manage all rights in the subsurface mineral rights originally owned by the Hoyt brothers and that claimed an interest in the subsurface rights.  In June 2013, Hoyt filed a motion for summary judgment against Woodhouse, arguing that the 1893 deed to Union Tanning Company severed the natural gas, oil, and mineral rights from the disputed land.  The trial court denied the motion, quieted title in favor of Woodhouse as to the entire Property and enjoined Hoyt and its successors from asserting a contrary record title.

On appeal, the Court affirmed.  Firstly, the Court held that a prior Pennsylvania case, Herder Spring Hunting Club v. Keller, 143 A.3d 358 (Pa. 2016), stood for the proposition that, where the owner did not challenge the assessment and the tax sale within the initial two-year redemption period, a challenge to the propriety of the tax sale may not be heard, and if the land is not redeemed within that period, then both surface and subsurface rights are extinguished. Thus, the Court held the trial court did not err in quieting title in favor of Woodhouse. There was no legislation at the time of the 1902 tax sale requiring the purchaser to record the deed or make an official record of his purchase and, importantly, the record contains reliable indicia that the sale properly occurred, including the minutes of the Tioga County Court recorded in the Prothonotary’s Office that show the acknowledgement in open court of the treasurer’s deed conveying the property to Morris Manufacturing Company, along with further records from the Treasurer’s Register Book.  Thus, the sale divested any subsurface interests that may have remained following the 1902 tax sale since the statutory time limit for redemption passed—a process known as “title washing.”  Moreover, the Court held that where the assessment of unseated—or “wild”—property does not specify whether it involves surface or subsurface rights, the tax sale conveys the property in its entirety, which occurred here as well.  The Court further held that collateral attacks on a tax sale may not be raised after the redemption period has passed.  Finally, the Court held petitioners may not raise tax sale defects as a defense to a quiet title action outside of the redemption period.  Accordingly, the trial court’s grant of summary judgment quieting title for Woodhouse was affirmed.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Dylan Goetsch at dgoetsch@riker.com.