Pennsylvania Title Wash – Part Two

In Part Two of our examination of Pennsylvania title wash issues, we consider several recent cases which particularly apply to the lands formerly owned by Thomas Proctor, but set precedent for understanding the issues of title washing across the state. 

Recall from Part One of this series that Central Pennsylvania Lumber Company (“CPLC”) and its successors claimed title to minerals in Proctor lands pursuant to multiple tax sales.  In Keta Gas & Oil Co. v. Proctor, No. 1975 MDA 2018, 2019 WL 6652174 (Pa.  Super.  Dec.  6, 2019), the Superior Court of Pennsylvania refused to open a 1951 default judgment in favor of one of CPLC’s successors in Lycoming County. The Proctors claimed genuine issues of fact existed as to whether Lycoming County had notice of Thomas Proctor’s original mineral reservation (the “Proctor Reservation”), affecting prong (ii) of the Herder Spring test discussed in our previous post. They further argued that Calvin H. McCauley Jr. was an agent of CPLC at the time he made the purchase of land at tax sale and was merely redeeming CPLC’s delinquent taxes.  The court disagreed and found there was insufficient evidence to establish that the Proctor Reservation was reported to Lycoming County, meaning the reserved mineral estate was classified as unassessed. The court also found insufficient evidence supporting the position that McCauley was acting on behalf of CPLC and that concluding as much would require improper speculation as to the historic motives of McCauley.   

Part One of this series also mentioned the Powell decision, which held that a purchaser at a tax sale caused by their own failure to pay taxes cannot acquire a better title than originally owned. The Proctors argued that because the tax sale to McCauley was the result of CPLC’s failure to pay taxes, McCauley, as an agent of CPLC, and CPLC itself could not obtain more than was previously owned – i.e., CPLC only owned the surface, and could not enhance that by adding the minerals. The Keta court agreed that the Powell holding applies only to tax sales caused by the purchaser’s own failure to pay taxes; but, even if they were to agree that McCauley was an agent of CPLC, neither McCauley nor CPLC ever had a duty to pay the mineral taxes. CPLC’s delinquent taxes were for the surface only; CPLC was not at fault for the delinquent mineral taxes, so Powell would not prevent it from obtaining the additional mineral estate. 

However, in similar cases involving Proctor land in Lycoming and Bradford Counties, (1) both the Commonwealth Court of Pennsylvania and the United States District Court for the Middle District of Pennsylvania held opposite to Keta on certain issues involving the Proctor Reservation.   For instance, the courts found there may in fact be sufficient evidence the counties knew of the Proctor Reservation or, alternatively, the counties had actual knowledge that CPLC only owned a surface interest in the lands. Although the courts were unable to determine if Calvin H. McCauley, Jr. and A. F. Jones were acting as agents of CPLC, these courts agreed CPLC could not improve its own title by having agents purchase the land at a tax sale caused by its own delinquency.  Specifically, the Commonwealth Court held that a purchase by CPLC’s agents would constitute a redemption of CPLC’s delinquent taxes and not a new, valid purchase, (2) while the Middle District Court held that a party (either on its own or through its agents) cannot acquire a better title by purchasing the property at a tax sale for delinquent taxes, but instead is limited to only redeeming its own delinquent taxes under Powell. (3) Therefore, these cases appear to complicate Powell’s application (see footnote 3) and add a fourth question to the Herder Spring analysis by asking if the tax sale purchaser was an agent of the delinquent surface owner.   

Although the Pennsylvania Supreme Court has attempted to guide discussions of title wash with decisions like Powell and Herder Springs, the conflicting Proctor cases briefed above illustrate the difficulty of understanding how title wash will apply to your land. The Proctor lands alone comprise nearly 60,000 acres in northern Pennsylvania; further conflicting decisions from other jurisdictions concerning title wash claims have the potential to influence treatment of hundreds of thousands of additional acres.  Until the Supreme Court of Pennsylvania issues firmer guidance, it bears monitoring how Pennsylvania courts continue to analyze title wash.  

Kuiper Law Firm, PLLC specializes in oil and gas issues; if you have any questions about how the information in this article may apply to you or your operations, do not hesitate to contact us.    

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1. Commonwealth v. Thomas E. Proctor Heirs Tr., No. 493 M.D. 2017 (Pa. Cmmw. Ct. Jan. 16, 2020) and Comm’n v. Thomas E. Proctor Heirs Trust, 455 F. Supp. 3d 127 (M.D. Pa. 2020). 
2. A redemption operates to “set aside or annul” the tax sale, leaving the title “precisely as though the sale had not been made.” Yocum v. Zahner, 162 Pa. 468, 29 A. 778, 779 (1894). 
3. The Powell court stated, “one cannot profit by his own wrong, and build up or acquire a title founded upon his own neglect of duty” but limited application of this rule to cases where the purchaser had some duty to pay the tax. 34 A. 450, 451 (Pa. 1896). According to the Middle District Court, the Herder Spring court “use[d] language—albeit in dicta —which could be read to infer that there was no duty to pay taxes on unseated land. Nevertheless, when put in proper context, we do not believe that such remarks were meant to contradict longstanding legislation or state court precedent.”  The Middle District Court held CPLC had a duty to pay its taxes, even if CPLC did not have a duty to pay taxes on the oil and gas under the surface.  It further distinguished Powell and Herder Spring where “the buyer was a bona fide third party [and] none of the prior surface or subsurface owners had reported their separate interest to county commissioners or paid the taxes owed, thus causing a tax sale of the entire property.” Because CPLC was the undisputed surface owner of the land at issue in the Middle District Court’s Proctor case “prior to the 1908 tax sale and had an affirmative duty to pay taxes on its interest, the rule set forth in Powell potentially applies. Hence, the question of McCauley’s agency (or lack thereof) is highly relevant and material.”