LAWRENCE D. BRUDY & ASSOCIATES, INC. 1st Quarter 2013 Attorneys at Law “Your Energy Firm in the Natural Gas Age ” Appalachian Basin Law Firm LAWRENCE D. BRUDY & ASSOCIATES, INC. is a regionally positioned Appalachian Basin law firm with lawyers licensed in Pennsylvania, New York, Ohio, Virginia and West Virginia. The Firm is comprised of Attorneys, Certified Public Accountants, Paralegals, Legal Assistants, Title Examiners, Licensed Title Insurance Agents, Real Estate Brokers, Marketing and Public Relations Personnel, with a collective 125 years of Energy, Real Property, Litigation, Business and Tax Experience.
Oil and Gas Issues Increase as Exploration Continues conveyed in addition to verifying ownership. The firm’s attorneys recommend, as part of the sale, that a Certified Title Opinion be prepared identifying ownership of the subsurface interests, even when those interests are currently under lease. Also, the conveying deed should clearly and conspicuously provide for transfer or exception and reservation of the surface and subsurface estates. If there is an existing lease on the property and that needs to be researched. it is to be assigned to the new buyers, that Before a severance of subsurface interests, assignment should be memorialized in the the oil and gas interests convey with the deed and by separate agreement. An oil and surface estate in a deed even when the deed gas lease is not conclusive evidence of subdoes not mention those interests. After the surface ownership and the inclusion of the subsurface interests are severed, those oil and Pennsylvania Association of Realtors Oil, gas interests become a separate estate which Gas and Mineral Rights can be conveyed by deed akin to Pennsylvania AssociaDisclosure Addendum the surface estate? Severances have does not guarantee conoccurred in the 18th century, so, tion of Realtors Oil, Gas veyance of subsurface looking at a current deed today you and Mineral Rights Disinterests, which can only cannot determine who owns the closure Addendum does be accomplished by a subsurface interests. Subsurface not guarantee conveyCertified Title Opinion interests can also be severed via a testamentary document, (i.e. Last ance of subsurface inter- and Deed. Most title inests, which can only be surance policies ―except‖ Will and Testament). When negotiating for the purchase of a tract or accomplished by a Certi- ownership of subsurface interests. piece of land, buyers and sellers fied Title Opinion and need to discuss and contract for the Deed. subsurface interests that are to be
Prior to the exploration and development of is to be conveyed. Subsurface interests can unconventional [shale] oil and gas resources, be divided horizontally (i.e.) layers of depth a title search for a residential real estate with all or certain layers being excepted and transaction generally conreserved or conveyed. The sisted of a review of the pubseparating of subsurface interLooking at a current lic records back sixty (60) ests from the surface is known deed today you cannot years examining the subject as a ―severance.‖ In addition, determine who owns the parcel, seller and buyer. each subsurface severance subsurface interests. However, today, questions creates its own chain of title abound as to who owns the subsurface (oil, gas, coal, mineral) interests. Most title insurance agents do not have the time or resources needed to do a search of the subsurface interests which is substantially more expensive than the sixty (60) year search. Purchasing a property in an area where there is no subsurface development does not necessarily mean there will never be subsurface development. Buyers relocating from areas where development is prevalent will be aware of the effects of subsurface development. When purchasing a tract or piece of property, all parties to a transaction need to expand traditional two dimensional (length x width) analysis to three dimensional (length x width x depth) contracting for what
Energy (PA • NY • OH • VA • WV)
Family
Litigation
• Certified Title Opinions • Oil • Gas • Coal • Mineral • Valuations / Sales / Purchases • Title Abstracting and Curatives • Lease Negotiation
• Divorce • Alimony • Custody & Support • Adoption • Familial Rights • Prenuptial / Postnuptial Agreements • Property Settlement Agreements
• Oil & Gas / Curative • Personal Injury • Products Liability • Insurance Disputes • Real Estate • Breach of Contract • Business
Estates
Business / Tax / Accounting
• Administration - Probate • Planning - Wills, POAs, Trusts
• Entity Formation • Individual / Business Tax Return Preparation • Quickbooks Controller Services
Real Estate • Commercial / Residential • Purchase / Sales • Relocation • Title Insurance
Page 2
Sean H. Bello, Esquire (OH) sbello@ldbassoc.com Lawrence D. Brudy, Esquire (PA) lbrudy@ldbassoc.com Matthew L. Brudy, Marketing Asst. mbrudy@ldbassoc.com Darcy M. Dayton, Esquire (PA) ddayton@ldbassoc.com Linda M. Eaves, Title Examiner leaves@ldbassoc.com
LAWRENCE D. BRUDY & ASSOCIATES, INC. is pleased to announce the firm has expanded its Practice Areas to include: Litigation—Oil & Gas • Title Curative • Personal Injury • Products Liability • Insurance Disputes • Real Estate • Landlord / Tenant • Motor Vehicle • Driving Under the Influence • Business • Breach of Contract Please contact Attorney, David A. Neely at dneely@ldbassoc.com Family—Divorce • Custody • Support • Adoption • Alimony • Familial Rights • Protection from Abuse • Prenuptial Agreements • Postnuptial Agreements • Property Settlement Agreements Please contact Attorneys, Darcy M. Dayton Jennifer L. Enciso at jenciso@ldbassoc.com
at
ddayton@ldbassoc.com
or
Jennifer L. Enciso, Esquire (PA) jenciso@ldbassoc.com G. John ―Jay‖ Flemma, Esquire (NY) jflemma@ldbassoc.com Thomas J. Kearn, CPA tkearn@ldbassoc.com Stefanie L. Kelly, Legal Asst. skelly@ldbassoc.com Paula J. Klein, Paralegal pklein@ldbassoc.com David A. Neely, Esquire (PA, WV) dneely@ldbassoc.com Tenille R. Pack, Title Examiner Asst. tpack@ldbassoc.com Amy E. Peck, Esquire (VA) apeck@ldbassoc.com Linda C. Polley, Marketing lpolley@ldbassoc.com Julie L. Schneck, Paralegal jschneck@ldbassoc.com
When Has a Lease Expired Due to Lack of Production in Pennsylvania, Ohio and West Virginia? The vast majority of oil and gas leases include a primary term, generally for a period of one to ten years, as well as a secondary term so long thereafter as oil and gas are produced. Once the primary term has expired, the lease remains active until production of oil and gas has ceased. Accordingly, the question as to when production has legally ―stopped‖ has become an important issue in Pennsylvania, Ohio and West Virginia. For example, is one day of no production enough to terminate a lease? Is one year? The West Virginia courts have taken a flexible approach to this issue, applying a widely used doctrine that allows for a reasonable period of time for a lessee to resume production, if the cessation is deemed to be ―temporary.‖ The courts have looked to several factors in determining whether a cessation in production is ―temporary,‖ including the length of time without production, the cause of the delay and whether the lessee exercised reasonable diligence to resume production. The Ohio courts have also elected to take a flexible approach in evaluating cessation of production, stating that mere ―temporary‖ ces-
sation in production will not be enough to forfeit a lease. Instead, the courts look to the length of time of which there was no production, the cause of the stoppage, and the diligence of the lessee in restoring production. The courts of Pennsylvania, however, have yet to adopt the relatively flexible ―temporary cessation of production‖ doctrine. Instead, Pennsylvania has historically applied the harsh and rigid ―automatic termination rule‖, where the secondary term of an oil and gas lease automatically terminates unless there is a producing well, without consideration as to whether the cessation is temporary. Developments in the treatment of this issue will be important to monitor from the perspective of both landowners and operating companies, as the courts of Pennsylvania will, in all likelihood, be forced to take on more issues of lease termination due to the lack of production in the near future. Citations: McCullough Oil, Inc. v. Rezek, 346 S.E.2d 788 (W. Va. 1986). Wagner v. Smith, 456 N.E.2d 523, 525–26 (Ohio Ct. App. 1982) See, e.g., Brown v. Haight, 435 Pa. 12 (Pa. 1969)
Page 3 Is Coal a ―Mineral‖ Per Se? A look at the Pennsylvania, West Virginia, and Ohio Courts. The term ―mineral‖ is often used in the language of deeds conveying or reserving certain surface and subterranean rights in real estate transactions. Though ―minerals‖ may seem to be an easily defined term outside of the legal context, when used without specificity or limitation, it has the potential to bring ambiguity to deeds purporting to convey certain severable interests. In Pennsylvania, courts seem hesitant to provide an inclusive definition of the term ―mineral‖, and instead have elected to view the term through the intent of the parties in the conveyance. The Pennsylvania Superior Court recently addressed this question in Butler v. Charles Powers Estate. According to the court, the cardinal test of the meaning of any word in any particular case is the intent of the parties using it. The court explained that ―mineral‖ is not a per se term of art, and may in any particular case have a different meaning, more extensive or more restricted, but such different meaning should clearly appear as intended by the parties. The court stated further that it may include any inorganic substance found in nature having sufficient value when separated from its situs, but though it may include all such substances, it does not necessarily do so. The West Virginia Supreme Court addressed the meaning of ―minerals‖ in the 1976 case Dep’t of Highways v. Farmer. In addressing whether sand and gravel are included in the term ―other minerals‖, the court stated that the word mineral is a comprehensive term including every description of stone and rock deposit, whether containing metallic or non-metallic substances. The court went on to explain that where language in a deed is unambiguous it is the duty of the court to give every word its usual meanings, but where an ambiguity is introduced, making the intent of the parties unclear, construction of the language in the deed is in order. In other words, unless an ambiguity arises from the language of the deed,
the term mineral is viewed in its usual, consequently comprehensive, sense. The Courts of Ohio have also had occasion to address the subject of what is included in the term ―minerals‖ in the 1928 case Hardesty v. Harrison. In addressing the question of whether the term ―mineral rights‖ included oil and gas rights, the court held that oil and gas was included in a conveyance of ―minerals‖ unless there was language in the deed that showed the parties’ intent not to include it. The court went on to state that it is a well settled law that ―petroleum oil is a mineral and is part of the realty, like coal, iron and copper‖, further evidencing the notion that absent a showing of intent otherwise, coal should be construed to be included in a conveyance of ―minerals‖.
Pennsylvania Land Title Association (PLTA) American Association of Professional Landmen (AAPL) Energy & Mineral Law Foundation (EMLF) National Association of Royalty Owners (NARO) Northern Appalachian Landman’s Association (NALA) Realtors Association of Metropolitan Pittsburgh (RAMP) Pennsylvania Institute of Certified Public Accountants (PICPA) All Pennsylvania, New York, Ohio, Virginia, and West Virginia State Courts Allegheny County Bar Association
If one were to pick a theme that runs central to these examples, it would be the court’s focus on the intent of the parties to the deed. It seems as though, absent ambiguity in language as to the parties’ intent, and without a showing of intent to not include coal under the umbrella of ―minerals‖, the courts of Pennsylvania, West Virginia, and Ohio will likely find that coal falls under the umbrella of the term ―minerals‖.
United States District Court for the Western District of Pennsylvania
Citations: Butler v. Charles Powers Estate, 29 A.3d 35 (Pa. Super. 2011) cert. granted. Id, at 41, (emphasis added) (Quoting Silver v. Bush, 213 Pa. 195 (1906)). Id Dep’t of Highways v. Farmer, 226 S.E.2d 717 (W. Va. 1976). Id. Id. Hardesty v. Harrison, 6 Ohio Law Abs. 445 (Ohio App. 1928). Id.
United States Supreme Court
CHECK OUT OUR UPDATED WEBSITE!
www.ldbassoc.com
United States Court of Appeals for the Third Circuit United States Court of Appeals for the Fourth Circuit United States Court of Appeals for the Sixth Circuit
United States Tax Court Beaver County Chamber of Commerce Southpointe Chamber of Commerce Wexford / Cranberry Chamber of Commerce Pennsylvania Association of Notaries (PAN) National Association of Realtors (NAR) Beaver County Association of Realtors
Page 4 The Taxman Cometh: Consequences of Owning Mineral Rights and/or Natural Gas Interests You, or a client, may be one of the fortunate
§8102-C. Real estate includes surface estates
real estate taxes are not deductible expenses
ones who have discovered that they are the
such as lands and permanent improvements
because they are personal expenses that are
owners of gas rich acreage lying within the
thereon and mineral rights estates in oil, gas
not directly related to the production of the
Appalachian Basin shale formations, including
and quarries. 72 P.S. §8101-C (definition of
rental or royalty payments. Accordingly, there
but not limited to the prized Marcellus and
―real estate‖). A document can be any writing
are no real estate taxes that can be associated
Utica fields. [While first thoughts turn to the
that effectuates or evidences the transfer of
with oil and gas interests that could be used to
bonus and royalties that may be obtained pres-
title to real estate, and can include a formal
reduce rental or royalty income for Pennsyl-
ently from leasing the acreage to an oil and gas
deed, lease, assignment agreement or a memo-
vania Personal Property Income Tax purposes.
company for drilling, there is also less thought
randum.
Regarding this subject, it is advised that the reader consult with a qualified tax profes-
about consequence: the tax liability to me should I seek to transfer these interests, or to
Taxable documents are those that transfer
sional to discuss in further detail the require-
my estate should they be passed on to my
interests in a mineral rights estate itself or
ments and consequences of filing the proper
heirs?]
interest in real estate; whereas documents that
tax amounts in such matters.
transfer personal property rights associated The Pennsylvania Department of Revenue has
with the mineral rights estate are not taxable.
Regarding the sale of subsurface interests, net
addressed these questions last year in two
(ex: assigning the right to receive income from
income from the disposition of property is
bulletins: Inheritance Tax Bulletin 2012-01
an oil and gas lease, such as a royalty payment
subject to Pennsylvania Personal Income Tax.
issued July 10, 2012 (Taxation and Valuation
would not be taxed as real estate, as opposed
72 P.S. §7303(a)(3). If a mineral rights estate
of Mineral Rights and Natural Gas Interests
to assigning the royalty interest itself, which
owner sells the mineral rights, the considera-
for Pennsylvania Inheritance Tax) and Infor-
would be subject to tax). The reservation of a
tion less the owner’s basis in the mineral
mational Notice Realty Transfer Tax and Per-
royalty creates an interest in real estate, where
rights and other costs associated with the sale
sonal Income Tax 2012-004 issued October
as the assigned cash proceeds flowing from
is taxable. The gain is reported on Schedule D
10, 2012 (Division and Transfer of Interests
the royalty right would be personal property.
of the PA-40. Conversely, if a mineral rights estate owner makes a gift of the mineral rights
Related to Oil and Natural Gas). This article touches upon the main points addressed in
Generally, oil and gas leases have an initial
(e.g., to family members), the conveyance is
those bulletins, and the reader may consult
fixed term, with language therein providing
not subject to tax, as the Commonwealth does
them for further detail and explanation.
for extension of the lease after oil and gas is
not impose a tax on gifts.
found and for as long as the oil and gas is
receives the owner’s basis in the mineral
Generally, real estate can be divided into three
produced in paying quantities. Therefore, the
rights estate as a carryover basis. 61 Pa. Code
separate estates: the surface estate, the mineral
term of an oil or gas lease is generally indefi-
§103.13(c). Similarly, if the owner conveys to
rights estate and the support estate. All three
nite, and would be taxable pursuant to the tax
a private trust for no or nominal consideration,
can be owned jointly by one owner, or sepa-
code. However, there is a statutory exemption
the same rule applies.
rately by several individuals. Oil and gas in-
for leases for the production of minerals such
terests are derived from ownership or rights to
as coal, oil or natural gas, 72 P.S. §8102-C.3
As to inheritance tax consequences in relation
the subsurface interests.
(22) and 61 Pa. Code §91-193(b)(22); such
to
leases are not subject to tax.
Inheritance Tax Bulletin 2012-01 clarified the
Oil and gas in place are themselves considered
While the ownership of the subsurface inter-
Department of Revenue’s policy regarding the
real estate, but once severed, become personal
ests, and upon leasing, the royalties derived by
taxation of mineral rights and natural gas
property.
The transferee
the transfer of subsurface interests,
When the subsurface interests are
the lessor therefrom, are to be considered real
interests for Pennsylvania Inheritance tax
leased, the lessor’s reservation of a royalty
property interests, the net gains from the rental
purposes. All mineral and natural gas inter-
under the said lease creates an estate in land
and royalty payments tendered to the interests’
ests shall be reported in Inheritance Tax
and not a personal property interest.
In re-
owner(s) are taxable for Pennsylvania Per-
Schedule E (REV-1508) as Cash, Bank Depos-
gards to transfer tax consequences, Pennsyl-
sonal Income Tax purposes and should be
its & Misc. Personal Property.
vania Realty Transfer Tax is imposed upon
reported on Schedule E of the PA-40. 72 P.S.
The taxable value of mineral rights shall be
any ―document‖ that effectuates or evidences
§7303(a)(4). The reader should be aware that
determined using the same methodology used
the transfer of ―title to real estate.‖ 72 P.S.
to value any real property or tangible personal
Page 5 The Taxman Cometh... (continued) [Taxable value is estab-
contrary, value shall be determined as follows:
Note: This article is general in nature and
lished by determining the actual monetary
(1) for leased and producing properties, an
should not be relied upon for specific legal or
worth of the interest determined by either a
estate shall value natural gas rights at an
tax issues, as there may be unique facts in the
bona fide sale, or, if the transfer is for no or
amount equal to any amounts received that
reader’s situation, or variations that may
nominal consideration, the computed value.]
were attributable to actual production of the
result in differing legal advice. In instances
In the event there is no sale and no computed
natural gas interests at issue during the twelve
where an owner of subsurface interests has
value, then the taxable value is the interest’s
months prior to the decedent’s date of death,
questions regarding the tax consequences
actual monetary worth, based upon the best
multiplied
leased,
regarding transfer of inheritance of said inter-
available evidence.
non-producing properties, interests shall be
ests, legal counsel and/or a tax professional
property interest.
by
two;
(2)
for
reported at a value of zero unless, at the time
knowledgeable in these matters should be
The taxable value of natural gas rights shall
of death, the properties were part of a
consulted.
be determined using the same methodology
contractual
used to value any real property or tangible
properties generated fixed future payments, in
Citations:
personal property interest. Taxable value is
which case the natural gas rights shall be
In re Consolidation Coal Sales Co., 932 A.2d 341
most clearly established by determining the
calculated by reducing the fixed future pay-
(Pa. Commw. Ct. 2007), citing Captline v. County
actual
interest
ments to present value as of the decedent’s
determined by a bona fide sale. If there is no
date of death using established Internal
bona fide sale, natural gas rights can be deter-
Revenue Service actuarial tables as found in
mined from an appraisal or other credible evi-
IRS Publication 1457 Actuarial Values Table
dence.
monetary
worth
of
the
arrangement
whereby
the
of Allegheny, 662 A.2d 691 (Pa. Commw. Ct. 1995). White v. New York State Natural Gas Corp., 190 F. Supp. 342, 346-347 (W.D. Pa. 1960).
A computed value using assessed
B, Section 3 Annuity, Income, Remainder
Jacobs v. CNG Transmission Corp., F. Supp. 2d
value cannot be accomplished because natural
Interests For a Term Certain; (3) for
759, 772-773 (W.D. Pa. 2004).
gas rights do not have assessed values.
non-leased, non-producing properties, inter-
Therefore, absent a bona fide sale, an
ests shall be reported at a value of zero.
appraisal or other credible evidence to the
Enhancing Title Opinions: The Use of Comprehensive Well Data Tools Often in title opinions the Firm’s attorneys
One of the ways to confront this potential
By cross referencing the information available
find older Oil and Gas Leases that have ex-
problem is the use of a resource providing a
from the Department of Environmental Pro-
pired by primary term, but have no Surrender
comprehensive and integrated database of
tection with our chain of title, we have been
or Release of record. This is particularly evi-
land, well mapping and production informa-
able to enhance the quality of our title opin-
dent in the leases from the late 1800’s and
tion. With the use of a comprehensive well
ions. With this resource, and the depth of in-
early 1900’s. There are several reasons why a
mapping tool, such as drillinginfo, our attor-
formation it provides, we are able to better
Release or Surrender may never have been
neys are able to locate the site of any recorded
determine the current leasehold status of a
recorded with the Recorder of Deeds in the
well location in relation to any parcel of land.
parcel of land and also provide a more con-
county where the land is located; perhaps the
We are then able to view the information on
crete determination as to the unreleased Oil
Lessee is deceased, or the operating company
record for a well that may affect a particular
and Gas Leases in a title opinion.
went out of business. Whatever the reason, an
parcel of land, including the lessor name, well
unreleased Oil and Gas Lease represents the
operator, well American Petroleum Institute
looming possibility of an unknown well hold-
number and name, permits, unitization decla-
ing an older Oil and Gas Lease by production.
rations, depth of the well, and production figures for oil and gas.
Page 6 A Case in Point – Products Liability On November 26th, 2012, the Pennsylvania Supreme Court issued a decision in a product liability case, Reott v. Remington Arms Co., et al. I am intimately familiar with this case because I have been handling it on behalf of Duane and Patty Reott since 2005. In September of 2005, Duane Reott, an avid deer hunter for many years, was setting up several treestands in various locations in Butler County in preparation for the upcoming archery season. A few years earlier, Duane had obtained two identical Remington treestands from the Sportsman’s Guide. While he had used one of the stands on many occasions prior to September of 2005, he had never even taken the other one out of its box until September 25th, 2005. On that date, Duane traveled to his brother’s farm to put the never used treestand up in a tree in the woods around the farm. In his brother’s kitchen he assembled the stand according to the instructions. Then he and his brother got into his brother’s golf cart and headed out to find a tree to put the stand in. After finding a suitable tree Duane proceeded to install the stand in the tree about 25 feet off the ground. When the stand was in place Duane stepped onto the platform and hugged the tree while he raised up on his toes and came down gently on his heels. Duane performed this maneuver to take any excess slack out of the treestand’s locking strap. Duane had used this same maneuver with other treestands on hundreds of occasions without
incident. However, on this day when Duane came down on his heels the stand collapsed, and Duane plummeted to the ground. The fall caused one of Duane’s vertebra to burst, and he also broke his wrist. His back had to be surgically repaired with the use of rods and screws. Almost seven and a half years after the accident, Duane still receives treatment for the constant pain by receiving epidural injections at the Pain Clinic. Shortly after the accident Duane wanted to know what had caused the treestand to collapse. Upon inspection he noticed that the locking belt, the strap on the treestand that is wrapped around the tree trunk and cinched tightly, had come loose from the treestand. It is supposed to be permanently attached. It is made out of the same material as a car seatbelt. One end of it is looped through the treestand, and then it is supposed to be stitched together just like the seatbelt in a car. However, it was obvious that this locking belt had never been stitched. There was evidence of a spot of dried glue on it but no stitching. During the manufacturing process the locking belt is looped through a slot on the treestand and held in place with a dab of glue until the next person stitches it. Unfortunately, this belt never got stitched. This case went to trial in the Court of Common Pleas of Butler County in August of 2009. The defendants were Remington Arms Company, Inc., as the manufacturer of the treestand; The Sportsman’s Guide, as the
seller, and Asia Trend, Inc., the company that arranged for the importation of the treestands. At the conclusion of the Reott’s case, the defendants did not call any of their own witnesses to testify. Counsel for Reotts asked the trial court for a directed verdict based on the fact that the treestand was defectively manufactured and the defect caused Duane Reott’s injuries. The trial court granted a directed verdict as to the defect but not as to causation. The case went to the jury which decided that the defendants were not liable. The defendants had argued that Duane had used the treestand in an improper manner, but they never introduced any evidence to support this argument. Counsel for Reott appealed the verdict to the Pennsylvania Superior Court. The Superior Court reversed the decision of the trial court and sent the case back for a new trial on damages alone, stating that Reotts had already proved liability at the first trial. The Superior Court reasoned that if the defendants wanted to argue that Duane had improperly used the treestand, they had to prove it. The defendants then filed an appeal with the Pennsylvania Supreme Court. On November 26th, 2012, the Supreme Court issued an opinion upholding the decision of the Superior Court. As stated, this case will be going back for a trial on damages alone. No trial date has been set yet. For more information, contact David A. Neely at dneely@ldbassoc.com
Divorce in Pennsylvania—An Overview To file for divorce in Pennsylvania, either spouse must have lived in the Commonwealth for at least six months. The Court will grant a no-fault divorce when both spouses consent and file an affidavit claiming that the marriage is ―irretrievably broken‖. After 90 days, the Court may then grant the divorce. A couple can come to their own agreement about property settlement, which the court will generally accept. However, if spouses cannot agree and fairly divide the marital property, the court
will decide such. Accordingly, Pennsylvania distributes marital property on an "equitable" basis, which means that the Court has discretion to award property in a manner it believes is fair and which may not necessarily be on a 50-50 basis. Considerations by the Court regarding such a division include property acquired during the marriage (which is in fact jointly owned regardless of title), the duration of the marriage, the individual assets and the potential earning capacity of each spouse, how
much each spouse has contributed to the marital property (including homemaking) and who will have physical custody of any children involved. Further, the Court will decide if either spouse is entitled to alimony, based upon considerations of age, physical and mental condition, earning potential, duration of the marriage and standard of living. Although, the Court will dictate the duration of alimony, such support will end automatically if the one receiving it remarries or cohabitates.
Page 7 Equitable Distribution of Property Pennsylvania is an equitable distribution state,
relating to all assets and liabilities. Once the
time (frequently one (1) year for every
meaning that at the time of divorce, property
schedule has been established, modification
three (3) years of marriage) depending on
will be distributed between the parties as fairly
and/or updates to such enable an ongoing
the length of the marriage and the age of
as possible.
As most couples do not have
appraisal of the various potential equitable
the children involved. However, devia-
prenuptial agreements, asset and debt division
distribution scenarios and provide the ability
tions from this standard may occur and
can be the most tedious and time consuming
to ascertain various tax consequences that may
may be based on health, earning capacity
component of a divorce. Many couples have
result from the transfer of marital assets.
and possible inheritance, among other possible factors.
accumulated both significant marital property and debt during the course of the marriage. As
Below is a basic framework of standards fol-
a result, simply identifying and valuing assets
lowed by the Courts within Pennsylvania.
Later in life marriages - In late in life
and organizing debt can be overwhelming.
Although there may be minor variations from
marriages, the Court tends to revert to a
Even if both parties are in agreement pertain-
county to county, the following principles are
50/50 split of assets and provide alimony,
ing to the division of assets, it can become
typically applicable:
if appropriate, until the parties retirement age (in some circumstances after retire-
complicated very quickly. Accordingly, it is imperative to protect your assets and invest-
Short term marriages - In this situation
ment). These cases generally involve
ments as well as any other property interests.
and when there are no children, the Court
division of pension interests which can
Determining what assets are marital, how
usually seeks to restore the parties to
be time consuming and extremely com-
much assets are worth and how to determine
where they were before the marriage. In a
plex. Additionally, health insurance is
alimony and child support requires a profes-
typical circumstance, the property ac-
usually an important consideration in
sional assessment. Working with lawyers and
quired during the marriage is split 50/50
these cases.
financial professionals will ensure that nothing
and alimony, if even appropriate, is or-
is missed and all property and debts are con-
dered for only a short period of time.
Litigation within a divorce proceeding should always be a last resort. Frequently, litigation
sidered so that the most advantageous settlement and tax consequences can be realized.
Mid-length marriages with children - The
occurs when there is total lack of communica-
Court, in this type of marriage, primarily
tion and distrust between the parties involved.
In the majority of divorce proceedings, precise
will seek to protect the children. The
While it is both wise and cost effective to
location, identification, and valuation of assets
Court may order more than 50% of the
work on resolving cases through negotiation
are essential in order to effectuate fair and
assets to the less wealthy custodial
and settlement, our firm is be prepared to take
legally binding marital property settlements.
spouse. Child support, medical coverage,
any case to trial in order to protect a client’s
Accordingly, at the onset, a schedule of the
and alimony all may be appropriately
rights.
marital assets and liabilities is made followed
ordered in these cases. Alimony is gener-
by a review of the primary documentation
ally awarded only for a finite period of
The Firm’s Professionals‌ Prepared over 1,000 Oil, Gas, Coal, and Mineral Certified Title Opinions;
Litigated over the limit weight claims for national midstream companies;
Are licensed Title Insurance Agents in 26 states;
Represented Landowners with over 30,000 acres available for Oil and Gas Leasing;
Represented clients in over 50 jury trials in State and Federal Courts;
Represented Buyers, Sellers & Third Party Vendors in over 10,000 Pennsylvania Real Estate transactions;
Provide Business and Personal Tax Return preparation, QuickBooks reconciliation and traditional controller services;
Prepared hundreds of Estate Plans including Wills, Power of Attorneys, Trusts, Living Wills, State and Federal Inheritance Tax Returns;
Have provided Accredited Continuing Education for Pennsylvania Realtors on behalf of Regional and National Real Estate Companies.
Page 8 A Primer in Dower Interests: What Are They, and Do They Apply to Me?
There was a time in our country where the rights of women, as related to property interests and ownership, were limited by societal practice. Accordingly, various states acted to codify assurances that women would receive certain rights when it came to the inheritance of property owned solely by their respective spouses upon their death. This
concept, known as dower, originated as a common law practice where, in instances where a husband died intestate, his surviving spouse would be entitled to a specified portion or share of the deceased’s real estate, for her support and the nurture of her children, during her life. This portion, usually a one-third interest, could vary by state. Conversely, this practice in the case of men was known as curtesy. The shares retained under dower and curtesy differed in a number of states, with a widower possibly receiving a greater portion than a widow in a similar instance. In creating these codified rights, the necessity arose for the non-titled spouse to join in the execution of the conveyance or financing documents, so as to account for these interests.
Such sex-based discrimination as identified above was subsequently determined to be illegal, with a majority of the states later abolishing both practices. In their stead, most states today generally provide the same benefits regardless of sex, known in such instances as the statutory share. That being said, and as mentioned in the preceding sentence, a minority of states (six) still recognize the concept of dower. So, when engaging in real estate transactions and title review in the tri-state area, it is important to recognize your state’s attitude toward this practice.
Pennsylvania
West Virginia
Ohio
While Pennsylvania used to recognize the common law practice of dower, it was abolished by the state’s legislature in 1978. Now, in instances where one spouse dies, the share of the deceased spouse’s estate which is allotted to the surviving spouse is controlled by the state’s intestate succession laws, or by election against the decedent’s will, in lieu and full satisfaction of dower or curtesy at common law thus eliminating the need for joinder by one spouse in a conveyance of real estate by the other spouse. 20 Pa.C.S. §2015. Further, in Bialczak v. Moniak, 373 Pa. Super. 251 (Pa. Super. Ct. 1988), the Pennsylvania Superior Court held that the common law dower rights are supplanted by the Probate, Estates, And Fiduciary Code.
Prior to 1992, West Virginia continued to recognize the practice of dower, providing that a spouse was entitled to a one-third interest in the other spouse’s real property. Additionally, during that time it was also recognized that should one spouse die intestate, the surviving spouse would take as to one-third of the decedent’s personal property in instances where there were surviving children, and as to all of the personal property if no children survived.
Ohio remains one of only six states that continue to recognize dower rights; in this instance, a one-third life estate interest that one spouse has in the real property of the other. It cannot be deeded away, or waived, as it is an inchoate right (a right contingent on an event). The only two ways in which dower can be extinguished is by death or divorce. Therefore, this becomes a key factor to keep in mind when undertaking a real estate conveyance or financial undertaking (refinance, home equity line, etc.) in that state. As the interest cannot be waived, a spouse must join in the execution of the deed or mortgage involving property owned by the other spouse, even if that property is owned solely in the name of the other spouse alone. Only with the non-titled spouse’s co-signature could the dower right be deemed ―released‖.
A wizened sage once expounded, ―The only thing constant is change.‖ This thought, applicable to numerous business practices, definitely is relevant in the fields of real property and title law. Changes in societal mores and understandings dictate that what may have been the rule a generation or two ago, is no longer the case today.
So, while in a specific instance a lender may require the joinder of the non-titled spouse in the execution of the deed or mortgage, or their having to sign a waiver of spousal’s rights, such a requirement is pursuant to that lender’s underwriting requirements, and not by state law.
Pennsylvania—abolished 1978 West Virginia—abolished 1992 Ohio—1/3 life estate interest
The practice of dower was subsequently abolished in 1992, so instances and requirements similar to those found in the following Ohio section above, would not be of relevance presently. In its place is the controlling statutory language found today in West Virginia Code Chapter 43 (Dower and Valuation of Life Estates). While the state legislature came to realize that the practice of dower could create complexities in real estate transactions by not allowing dower rights to be waived, it also sought to limit one spouse’s ability to hide solely owned property from the other souse. So, while abolishing dower, the legislature also implemented in Chapter 43 the legal requirement that a married individual notify their respective spouse of their intention to buy, sell or transfer any real property that would have been subject to dower rights prior to the 1992 law (WRC §43 -1-2).
As an intriguing aside, while it is ordinarily held that death and divorce are the two means by which dower can be extinguished, Ohio Revised Code §2103.5 indicates that ―a husband or wife who leaves the other and dwells in adultery will be barred from dower in the real property of the other, unless the offense is condoned by the injured consort.‖ This may be something to remember in instances where a borrower’s circumstances may fall under this scenario.
Citation: Ladner’s Pennsylvania Real Estate law, 5th Ed., Ronald M. Friedman, §10.05.
Page 9 Update on Butler v. Powers Estate This past October the Pennsylvania Supreme Court heard arguments in perhaps the most important oil and gas case to come through the Commonwealth in the past 130 years. In Butler v. Charles Powers Estate the state’s highest court has been asked, as they’ve done twice before, to decide the meaning of the term ―mineral‖ in a subsurface reservation. The court’s decision has the potential to disturb thousands of oil and gas leases throughout the Commonwealth. The question before the court stems from an 1881 deed conveying 244 acres of land situated in Susquehanna County, in which half of the oil and mineral rights underlying the surface were reserved for the heirs of Charles Powers. Today those 244 acres are owned by John and Josephine Butler. Who owns the gas under that land is for the court to decide. In 2010, the Butlers commenced an Action to Quiet Title claiming ownership of the gas underlying their land; a trial court agreed. The trial court relied on the ―Dunham Rule‖, a rule created by the Pennsylvania Supreme Court in 1882, stating that a reservation of ―minerals‖ without explicitly mentioning oil and gas creates a rebuttable presumption that the Grantor did not intend for the term to include oil and gas. On appeal to the Superior Court, the heirs of the Powers Estate argued that no Pennsylvanian court has decided that mineral rights exclude Marcellus shale and that Marcellus gas, an unconventional gas, is distinguishable from natural gas, a conventional gas, thus making the Dunham Rule immaterial. Further the Appellants asked the court to consider the
U.S. Steel Corp. v. Hoge ruling, holding that whatever gas is present in coal belongs to the coal owner, to be used as controlling precedence. Based on appellants’ arguments the Superior Court reversed the lower court’s decision, finding that the Dunham Rule need not necessary apply. The Superior Court agreed with Appellants that the law in this area was not clear and stated that the Dunham decision ―[does] not end the analysis‖. The court could not determine the Grantor’s intent to include the Marcellus Shale formation in the use of the term ―mineral‖, and therefore remanded the case to find answers. The parties were asked to present expert witnesses and testimony to establish whether Marcellus Shale constitutes a mineral, whether Marcellus shale gas constitutes a conventional natural gas or an unconventional gas, and whether Marcellus Shale is similar to coal to the extent that whoever owns the shale owns the shale gas. However, before the lower court was able to hear such arguments, following the Butlers’ petition for allowance of appeal, the Pennsylvania Supreme Court agreed to hear the case. The court’s ruling, whatever the outcome, is sure to have a considerable impact on the exploration and production of all shale formations throughout the Commonwealth. No timeline has been established by the court as to when a decision may be expected.
Pittsburgh Business Times – Dallas Business Journal – Houston Business Journal names Lawrence D. Brudy, Esquire, as one of three hundred industry leaders in the ―Who’s Who in Energy.‖ Lawrence D. Brudy, Esquire, provided accredited continuing education on Oil and Gas issues for the Butler County Association of Realtors and for the Educational Development School of Real Estate in 2011 and 2012.
Citations: See Dunham & Shortt v. Kirkpatrick, 101 Pa. 36 (1882) and Highland v. Commonwealth, 161 A.2d 390 (1960); See Butler v. Charles Powers Estate, 27 MAP 2012, Supreme Court of Pennsylvania (313688L), Middle District (Harrisburg); See U.S. Steel v. Hoge, 468 A.2d 1380 (1983); and See Dunham.
LAWRENCE D. BRUDY & ASSOCIATES, INC. is pleased to announce its sponsor-
ship of the Butler Blue Sox, a Prospect League member with the team playing home games at Pullman Park. The firm’s employees, many of them Butler County residents, are proud to support the home team.
The firms’ professionals provide Notary Services for Estate, Real Estate, Business and Energy transactions .
FIRM NOTARIES: Sean H. Bello, Esq., OH Lawrence D. Brudy, Esq., PA Darcy M. Dayton, Esq., PA Jennifer Enciso, Esq., PA Julie L. Schneck (Morris), PA
Gas Business Briefing (qualitynewsfirst@gasbb.com) Pittsburgh Magazine Pittsburgh Quarterly Landman Magazine Butler County Business Matters Mylan Classic Spectator Guide Butler Blue Sox
LAWRENCE D. BRUDY & ASSOCIATES, INC. 2500 BROOKTREE ROAD, SUITE 301 WEXFORD, PA 15090
Our office is located at:
www.ldbassoc.com
2500 Brooktree Road Suite 301 Wexford, PA 15090 (724) 935-1400 (724) 935-1415 fax (855) 935-1400 toll free
Our website offers easy access to all the areas of our practice and to information for contacting our staff. Our Newsletters are uploaded to the website for easy reading.
Safe Deposit Boxes The Firm’s Attorneys and Certified Public Accountants involved in providing tax planning and the preparation of estate plans for clients are often asked what items and/or documents should be stored in a Safe Deposit Box. Last Will and Testaments, Powers of Attorney and Living Wills are not filed or recorded in Pennsylvania, [generally] with the exception of a real property conveyance or death [probate]. Our Attorneys prepare estate planning documents, in triplicate originals (Last Will and Testaments, Powers of Attorney and Living Wills). We suggest a set remains with the client, a set with the Executor/Executrix and the last kept in the file or place where all of the ―important papers‖ are kept. In the event changes need to be made to the document, we recommend those changes be through our office as the documents are retained on our computer systems. These are items or documents we do not recommend you keep in a Safe Deposit Box:
These are items or documents we do recommend you keep in a Safe Deposit Box:
Last Will and Testament; Durable General and Health Care Powers of Attorney; Intervivos and Testamentary Trusts; Living Wills; Funeral / Burial Arrangements; Financial documents including computer logins, passwords and usernames; and Cash.
Sentimental or heirloom items; Impossible to replace photographs; Rare coins and stamps; Military medals; and Inventory of all home items (lists, video, DVD) including the combination of home safe.
Most important is to provide your person of trust with the information, direction and location of where the ―important papers‖ can be found.
LAWRENCE D. BRUDY & ASSOCIATES, INC. is pleased to announce that the following professionals have been accepted as members of the American Association of Professional Landmen. Sean H. Bello Lawrence D. Brudy Linda M. Eaves G. John ―Jay‖ Flemma Stefanie L. Kelly Paula J. Klein David A. Neely Tenille R. Pack Amy E. Peck Julie L. Schneck