Pennsylvania Superior Court Emphasizes Significance Of Title Searches In Trespass Action
The Pennsylvania Superior Court recently ruled that constructive notice of a title defect may toll the running of the statute of limitations and affect damages for an action in trespass and conversion to oil and gas rights in Sabella v. Appalachian Development Corp., et al., Case No. 722 WDA 2013. Sabella purchased the oil and gas underlying 66 acres of land in 1997. The owner of the surface executed a lease purporting to cover Sabella’s oil and gas interest in favor of Appalachian Development Corporation, who subsequently assigned its interest in the lease to Brian and Lisa Haner, d/b/a Pine Ridge Energy. The Haners opted not to conduct a full title search upon its acquisition, but instead conducted a bring-down title search. The Haners drilled several wells pursuant to the lease prior to receiving actual notice that their lease was producing interests actually owned by Sabella.
The Court held that the two year statute of limitations did not preclude the trespass and conversion claims, because the statute had been tolled by the discovery rule. The trespass and conversion began in 2003, approximately 7 years before Sabella filed the suit. However, Sabella met his burden of establishing that he was unaware of the trespass and that a reasonable person would not have discovered the trespass. Sabella drove down the public road along the property to look for oil and gas activity, but did not enter upon the surface of the property to determine whether activities were taking place. Despite the open oil and gas development that had occurred on the property for years, the activity was not clearly visible from any public areas or other areas in which Sabella may have been. The Court held that, in properly recording his mineral deed, Sabella could reasonably expect that anyone seeking to drill on the property would discover his interest through a title search. The Court stated that the mere recording of a deed in all instances does not relieve a party of an obligation of affirmative observation in protecting his interests. However, the specific factors showed that a reasonable person would not have discovered the trespass in this case.
The Court also ruled that because the Defendants had constructive notice of Sabella’s interest under Pennsylvania’s Constructive Notice Statute, they were precluded from asserting a good faith defense to trespass damages. The Haners were ignorant of Sabella’s interest not because of a recording error or latency, but because they willfully chose not to conduct a title search. Therefore, the Haners were found by the Court to have acted in bad faith.