QUIET TITLE ACTIONS: THE “SWISS ARMY KNIFE” OF LITIGATION By Richard W. Harris, Esq. Harris & Thompson Reno, Nevada _____________ Synopsis A. Introduction B. What is a Quiet Title Action? 1. Definition 2. Legal requirements 3. Problems with severed mineral interests C. The Quiet Title Complaint D. Service of Process E. Posting and Other Procedures F. Default and Judgment G. Conclusions A. INTRODUCTION You have been retained by Ajax Mining Company to conduct a mineral title examination of a historic mining district in Elko County, Nevada. Using the county master claim maps, BLM geographic indexes, district maps and other resources, you have determined that the land package consists of various fee parcels, patented mining claims and un-patented mining claims. You have reviewed and copied documents from the Nevada Bureau of Land Management and the Elko County Recorder’s Office, and you are confident that you have now gathered all public records pertaining to the chain of title. Back in the office, you are mulling over the following problems presented by the records: •Problem One. The assessor’s records show that Henry Jamieson has paid taxes for the Golden Dream patented mining claim for the last ten years. The patent was issued to A.T. Jamieson in 1934. There are no deeds or probate records showing transfer of the claim to Henry Jamieson. The recorder believes that Henry Jamieson is the great-grandson of A.T. Jamieson. The present Mr. Jamieson is willing to sell the claim to Ajax Mining for $10,000. •Problem Two. An agricultural patent was issued under the Homestead Act of 1862 to Jason Smith. Mr. Smith died in 1924, leaving his estate to two sons and a daughter. There is a continuous chain of title running from the sons to the current owner, but there is no record of any conveyance from the daughter. You conclude that there is a “dangling” one-third interest in the chain of title. •Problem Three. George Demetras located 15 unpatented claims in 1984. Three years later he conveyed the claims to his brother-in-law. Marriage records indicate that Mr. Demetras was married at the time of the conveyance, but his wife was not joined as a grantor. George Demetras and his wife are now dead, and there is no way to obtain a conveyance of her one-half community property interest in the claims. •Problem Four. A 1935 patent conveyed three claims to the Imperial Mining Company. The company became defunct in 1942 and its former officers and directors, as determined from records of the Nevada Secretary of State, have died or disappeared. In 1953 William Hogeson, purporting to be a former director of the company, conveyed the claims by quitclaim deed to the present owner. There is no indication that Mr. Hogeson was ever an officer, director, or trustee of the defunct corporation. •Problem Five. The mineral patent and survey plat for the Arch Angel claim describe it as being located in Section 24, T. 31 N., R. 63 E., MDM. The claim was forfeited to the county for failure to pay property taxes in 1948. Thereafter, the county treasurer issued a deed conveying the Orange Angel claim located in Section 24, T. 33 N., R. 61 E. The current treasurer has stated that she will not issue a correction deed for a transaction that is 53 years old. •Problem Six. Eileen Killebrew conveyed five patented claims in 1975 to the Ajax Mining Partnership, the predecessor of your client, Ajax Mining Company. The deed reserved an undivided 25 percent in all minerals to Ms. Killebrew. The Ajax Partnership mined the property from 1990 to 2000 but did not pay any royalties to Ms. Killebrew’s heirs following her death in 1991. •Problem Seven. Finally, your examination discloses a mining lease granted in 1983 by the owners of six patented mining claims to the Golden Dream Mining Company. A memorandum of lease recorded in the county states that the lease shall have an initial term of five years and “shall continue thereafter for so long as minerals are produced from the property.” There is no quitclaim deed or other record of termination. Golden Dream is a defunct corporation, and its former directors and officers cannot be located. The non-terminated lease therefore represents a cloud on title. These are fairly typical problems in a mineral chain of title. However, most of them cannot be easily remedied because of dead or missing persons. As part of your report, you suggest to Ajax Mining Company that it consider a quiet title action to eliminate these “dangling” interests and perfect the chain of title. B. WHAT IS A QUIET TITLE ACTION? 1. Definition. A quiet title action is a civil lawsuit brought for the purpose of determining conflicting claims to real property. “An action may be brought by any person against another who claims an estate or interest in real property, adverse to him, for the purpose of determining such adverse claim,” (Nevada Revised Statute 40.010). The action affects only those properties identified in the complaint. The action can target specific individuals who have or may claim an interest in the property (sometimes referred to as a “quasi in rem” proceeding); and it can sometimes be expanded to include all persons, known and unknown, who might have some interest in the property (an “in rem” action). A quiet title action, when properly conducted in accordance with statutory and constitutional requirements, can resolve all claims and conflicts regarding the property in a single proceeding. The quiet title action can also serve as a substitute for other legal proceedings. To take one example, consider the Golden Dream patent held by the Jamieson family for 67 years. In typical fashion, the property has been handed down over four generations without any probate proceedings. To confirm title in the present owner, we could initiate probates for the great- grandfather, grandfather, and father of Henry Jamieson. Each probate would be a separate legal action requiring appointment of an administrator, publication of notice to creditors, and compliance with various legal procedures. In contrast, a quiet title action naming the deceased parties and their estates as defendants can perfect title in a single legal proceeding. Another advantage of the quiet title action is that several different claims for relief can be asserted in one proceeding. The erroneous description of the Arch Angel claim, for example, could be corrected by a lawsuit seeking reformation of a legal instrument. However, this action can be joined with the Jamieson “probate” — as well as the problems of the “missing” wife, the defunct corporation, the dangling one-third interest, the non-terminated lease, and even the reserved mineral interest — in a single complaint with separate claims for relief. If the action is not contested, all of the title issues can be resolved in a period of 90 days or fewer. 2. Legal Requirements. Most quiet title actions are based on adverse possession, in which the plaintiff alleges that he and his predecessors-in-interest have openly and notoriously claimed the property over a period of years and have paid the property taxes. NRS 40.090(1) states: 1. An action may be brought to determine the adverse claims to and clouds upon title to real property by a person who, by himself, or by himself and his predecessors in interest, has been in the actual, exclusive and adverse possession of such property continuously for more than 15 years prior to the filing of the complaint, claiming to own the same in fee, or by any other freehold estate, against the whole world, and who has by himself or his predecessors in interest, paid all taxes of every kind levied or assessed and due against the property during the period of 5 years next preceding the filing of the complaint, except that where clouds upon title to real property have been created by such person, and the action is brought to remove such clouds, or any of them, such period of actual, exclusive and adverse possession of such property shall be for more than 10 years. The action shall be commenced by the filing of a verified complaint averring the matters above enumerated. Similar laws will be found in most states, although the periods for adverse possession and payment of taxes will vary from one jurisdiction to another. Nevada is cited here as an example, but you must carefully examine the laws of each state to determine (1) whether a quiet title action is available and (2) the requirements for such an action. Quiet title actions can be commenced in federal courts as well as state courts. However, in the absence of a federal question, the plaintiff must satisfy jurisdictional requirements such as diversity of citizenship between the parties and an amount in controversy greater than $75,000. The choice between state or federal venues can give rise to “forum shopping,” in which the plaintiff will select one or another court based on speed of resolution, concerns over local prejudice, and other factors. A quiet title action can also be used to perfect title to unpatented claims. NRS 40.090(1) does not apply to unpatented claims because it requires five years of property tax payments. (In Nevada, unpatented mining claims are not assessed and taxed.) However, Nevada has a unique “short fuse” statute of limitations, NRS 11.060, which allows an action for recovery of mining claims to be commenced within two years of taking possession of the property: 1. No action for the recovery of mining claims, or for the recovery of the possession thereof, shall be maintained, unless it appears that the plaintiff, or those through or from whom he claims, were seized or possessed of such mining claim, or were the owners thereof, according to the laws and customs of the district embracing the same, within 2 years before the commencement of such action. 2. Occupation and adverse possession of a mining claim shall consist in holding and working the same, in the usual and customary mode of holding and working similar claims in the vicinity thereof. 3. All of the provisions of this chapter which apply to other real estate, so far as applicable, shall be deemed to include and apply to mining claims; provided, (a) That in such application “2 years” shall be held to be the period intended whenever the term “5 years” is used; and (b) That when the terms “legal title” or “title” are used, they shall be held to include title acquired by location or occupation, according to the usages, laws and customs of the district embracing the claim. Note that there is no requirement under NRS 11.060 for payment of property taxes on unpatented claims. Similarly, in NRS 11.070, a party can commence a legal action to confirm ownership and possession of other forms of real property (e.g., fee parcels) after five years of adverse possession. These statutes of limitations can be viewed from another perspective — as a bar to defense of a quiet title action. A mining claimant who allows another party to come upon his property and work it openly and notoriously for two years is barred from asserting title, since he was not “seized or possessed” of the property for two years prior to commencement of the action. Another distinction between the statutes of limitations (NRS 11.060 and 11.070) and true quiet title actions (NRS 40.090) is their scope. The “short-term” statutes allow the plaintiff to proceed against specific, named defendants. However, only the “long-term” statute requiring 15 years of possession and 5 years of tax payments allows the plaintiff to eliminate unknown interests against the property (i.e., the interests of “all the world”). It is recommended that the plaintiff assert all available claims for relief (short-term and long-term) in a quiet title action. Following initiation of the complaint, one might determine that an outstanding interest had been created by the property owner within 10 years of filing the complaint. This interest could not be expunged under NRS 40.090, but it could be eliminated by means of the short-term statutes of limitations (NRS 11.060 and 11.070). 3. Problems with Severed Mineral Interests. Another significant issue involves adverse possession of a severed mineral interest. In the deed from Eileen Killebrew to Ajax Mining Partnership, Ms. Killebrew retained an undivided 25 percent mineral interest. Can this interest be eliminated by means of a quiet title action? An excellent discussion of this issue is given by Pat Garver in his 1983 article on mineral titles: In most instances, the doctrine of adverse possession will not operate to divest severed mineral interests. This is true, not because special rules apply to the adverse possession of severed minerals, but rather because the courts apply the usual rules. Those rules — open, notorious, exclusive, continuous and hostile possession under claim of right for the statutory time period — were developed in the context of surface possession. When applied to a severed mineral interest, the rules will usually result in a conclusion that no adverse possession has occurred. The first, and usually dispositive, barrier to establishing that a severed interest has been adversely possessed is the requirement that the adverse possessor must have been in actual possession of the interest for the requisite time period. Where ownership of the surface and minerals has been severed, the mineral estate cannot be acquired by any amount or degree of surface possession. A mineral estate can be possessed only by working the minerals. Actual production clearly suffices, but it is less clear whether exploratory activity constitutes possession of the estate. *** An additional problem is posed where mineral development is conducted by operations that are not readily apparent from a surface inspection, e.g., slant drilling or tunneling from adjacent property. Such operations will usually not be sufficiently open and notorious to give the true owner notice of an adverse claim, and the statute of limitations will not begin running until notice is given by other means. Where, as is often the case, severed mineral interests are held in co- tenancy, another and often insuperable barrier exists. Because each co-tenant has a right to the use and enjoyment of the entire estate, mere possession is never hostile between cotenants. Before such possession will be considered hostile, there must be an ouster. A cotenant is ousted where he is given actual notice that the cotenant in possession claims the entire property for himself or where the cotenant in possession demonstrates, by acts of the most open and notorious character, that his possession excludes and is intended to exclude the rights of his cotenants. *** Even where all the requisites of adverse possession have been established, another practical difficulty exists in determining what portion of the mineral estate has been adversely possessed. The difficulty arises from the general rule that, absent color of title, an intruder can gain title only to property he actually possessed. In applying this rule, the courts have reached different conclusions. Some courts have held that a miner possesses only the minerals he removes, while others have held that his possession extends to the entire tract from which the minerals were removed. *** Patrick J. Garver and Patricia J. Winmill, “Medicine for Ailing Mineral Titles: An Assessment of the Impact of Adverse Possession, Statutes of Limitation, and Dormant Mineral Acts,” 20 Rocky Mountain Mineral Law Institute (1983). In our hypothetical Problem Six, the withholding of royalties probably does not constitute a sufficient act of adverse possession to extinguish Ms. Killebrew’s reserved mineral interest. However, if Ajax Mining Partnership had written Ms. Killebrew or her heirs in 1991 or thereabouts stating that (1) the Killebrew family had no interest in the property and (2) the Ajax Mining Partnership would continue mining without payment of royalties, and thereafter the Partnership actually mined the patented claims for a period of five or more years, there may have been a sufficient ouster to allow the successor-in-interest, Ajax Mining Company, to assert title to the undivided 25 percent mineral interest. C. THE QUIET TITLE COMPLAINT An action to quiet title to mining claims and other real property is initiated by the filing of a complaint in the appropriate jurisdiction. A state court action will always be filed in the county in which the real property is situated. In the event that the property lies in two or more counties, the plaintiff can generally file the action in one county, provided that he gives notice of the action in the other county by means of a recorded notice of pending litigation. (Again, it is imperative that you check the statutes and rules of civil procedure in each state.) In Nevada, NRS 40.090(2) requires the plaintiff to name known claimants and claimants who could be discovered by the exercise of reasonable diligence. The statute also allows the plaintiff to name unknown claimants: 2. The complaint must include as defendants in such action, in addition to such persons as appear of record to have some claim, all other persons who are known, or by the exercise of reasonable diligence could be known, to plaintiff to have some claim to an estate, interest, right, title, lien or cloud in or on the land described in the complaint adverse to plaintiff’s ownership; and the complaint may also include as defendants any and all other persons, unknown, claiming any estate, right, title, interest or lien in such lands, or cloud upon the title of plaintiff thereto; and the plaintiff may describe such unknown defendants in the complaint as follows: “Also all other persons unknown claiming any right, title, estate, lien or interest in the real property described in the complaint adverse to plaintiff’s ownership, or any cloud upon plaintiff’s title thereto.” Note in particular the phrase — “all other persons unknown” — that extends the scope of the complaint to the entire world. An important prerequisite to filing the complaint is a diligent search for all parties claiming an interest in the real property. A thorough examination of county and federal records will disclose various “dangling” interests in the chain of title, such as the “missing wife” or unconveyed one-third interest from our examples. The BLM geographic index and county records may disclose conflicting claim owners, both senior and junior to the claims under investigation. A ground examination may reveal non-recorded conflicts, such as easements, structures, or adverse uses by other parties. The failure to exercise due diligence in identifying adverse claimants can result in the judgment being set aside at a later time (see Section G). The plaintiff must also undertake reasonable inquiry regarding the whereabouts of the defendant(s) identified in the title search. At a minimum, this will require a search of the local phone book and records of property ownership within the county. (I am not aware of any case that has required the hiring of “skip tracers” or detectives to locate a missing person.) The current status of corporations and the names and addresses of the last board of directors can generally be obtained from the secretary of state in which the corporation was incorporated. (In most jurisdictions, the last directors of a defunct corporation become trustees who are able to convey real property.) D. SERVICE OF PROCESS In addition to identifying adverse claimants, the plaintiff must undertake a diligent effort to give them notice of the action so that they can defend themselves. Since courts do not favor forfeitures of property interests, the plaintiff must satisfy both statutory and constitutional requirements for notice and due process. The best form of notice is personal service on the defendant(s). If a person is known to be living at a certain address, the plaintiff should have a copy of the complaint and summons served on the defendant by a sheriff or other process server. Corporations or limited liability companies are served by delivering the complaint and summons to the resident agent, whose name and address can be found in the secretary of state’s office. A limited partnership is served by delivery of the complaint and summons to the general partner, who can be identified from records of the secretary of state. If a defendant cannot be served personally, the states have enacted laws outlining the minimum procedures to be followed for constructive service of process on unknown or unlocatable claimants. These minimum procedures may require mailing notice by certified mail, return receipt requested, to the last known address of a claimant; giving notice to the secretary of state for a defunct corporation; posting notice on the land; and publishing notice of the complaint in a local newspaper. If all attempts at personal service and notice by mail are unsuccessful, the plaintiff can serve the complaint by publication. Typically, the plaintiff’s attorney will file an affidavit with the court identifying the named defendants and describing his or her efforts to find and serve them. The court will then issue an order allowing publication of summons in a local newspaper. In Nevada, publication must be made four times over four consecutive weeks. At the end of the publication, the newspaper publisher will issue an affidavit of publication to be filed with the court. If a judgment is later challenged on the ground that a claimant was served by publication and had no actual notice, many state statutes will permit reopening of the quiet title decree for as little as three months and as long as six years. The time for reopening the judgment may appear in the quiet title legislation, or it may be borrowed from general procedural rules such as statutes of limitations (Garver 1983, Page 304). In addition to personal or published service, quiet title statutes will generally require the plaintiff to create a record of the litigation. NRS 40.090(3) states, “Within 10 days after the filing of the complaint, plaintiff shall file or cause to be filed in the office of the county recorder of the county where the property is situated, a notice of the pendency of the action....” The notice must contain the names of the parties, the object of the action, and a description of the real property. The description of a patented mining claim should include the name of the claim, the mineral survey number, the patent number, and the section, township, and range in which the claim is located. The description of an unpatented claim should include the claim name, county book and page in which the location certificate is recorded, the BLM serial number, and the section, township, and range. Fee parcels should be described in accordance with the patent or a deed conveying the property. It is also useful to include assessor’s parcel numbers, where available. E. POSTING AND OTHER PROCEDURES Many state statutes will go on to require posting of the summons or complaint on each parcel of the property. NRS 40.100(2) states: Within 30 days after the issuance of the summons, the plaintiff shall post or cause to be posted a copy thereof in a conspicuous place, on each separate parcel of the property described in the complaint, and each parcel of the land upon which a copy of the summons is posted shall be deemed to be in the possession of the court for all the purposes of and pending the determination of the action. *** The plaintiff can post a single summons on claims or properties that are contiguous. Where the properties are noncontiguous, the plaintiff must post the summons on each separate piece of property. An “affidavit of posting” or similar document is then filed with the court. To demonstrate payment of property taxes for the statutory period, the plaintiff should obtain an affidavit from the county treasurer identifying the name of the assessed owner, the name(s) of the claims or other properties, and a statement that the assessed owner or his predecessors-in-interest have paid taxes for the five years preceding the action. This affidavit should be filed with the court prior to the final hearing. Some courts will require evidence that patents were issued by the United States to private persons or companies. This requirement can be satisfied by presenting certified copies of the patents at the hearing. It is highly recommended that the plaintiff or his attorney contact the court prior to the hearing to determine the court’s documentary and procedural requirements. They will vary considerably between jurisdictions. F. DEFAULT AND JUDGMENT The summonses published in the newspaper and posted on the ground are intended to inform the defendant(s) that he or she must file an answer or other responsive pleading within a specific period of time or suffer a judgment against him or her. In Nevada, the period to answer the complaint and summons is 20 days after actual service or from the last date of publication. Other states will have different time periods for a reply (e.g., California affords 30 days to respond). If no one answers the complaint within the specified time frame, the plaintiff may proceed to take a judgment against the non-answering defendant(s). Typically, the plaintiff will request the court clerk to issue a notice of default. The matter can then be set for a non-contested hearing, usually on the court’s law and motion day. If one or more defendants answer the complaint, then a contested legal action results. If the parties cannot resolve their differences by way of settlement, the case will proceed in the manner of any other civil trial. The parties will engage in a pretrial conference; conduct discovery by way of interrogatories, request for admissions, and depositions; and ultimately try the case before a judge or jury. A contested quiet title action can take months or years to resolve, particularly if one party appeals the trial judgment to a higher court. In Nevada, the trial court is required to hold a hearing and may not enter a judgment by default. NRS 40.110(1) states: 1. When the summons has been served... and the time for answering has expired, the court shall proceed to hear the case as in other cases and shall have jurisdiction to examine into and determine the legality of plaintiff’s title and of the title and claim of all the defendants and of all unknown persons, and to that end must not enter any judgment by default, but must in all cases require evidence of plaintiff’s title and possession and receive such legal evidence as may be offered respecting the claims and title of any of the defendants and must thereafter direct judgment to be entered in accordance with the evidence and the law. The court, before proceeding to hear the case, must require proof to be made that the summons has been served and posted as hereinbefore directed and that the required notice of pendency of action has been filed. An “in rem” judgment, whether issued in connection with a contested or uncontested action to quiet title, is a “conclusive determination” of ownership and possession with respect to all persons known and unknown. As noted in NRS 40.120(2): 2. The judgment after it has become final shall be conclusive against all the persons named in the summons and complaint who have been served personally, or by publication, and against all unknown persons as stated in the complaint and summons who have been served by publication, but shall not be conclusive against the State of Nevada or the United States. The judgment shall have the effect of a judgment in rem except as against the State of Nevada and the United States; and the judgment shall not bind or be conclusive against any person claiming any recorded estate, title, right, possession or lien in or to the property under the plaintiff or his predecessors in interest, which claim, lien, estate, title, right or possession has arisen or been created by the plaintiff or his predecessor in interest within 10 years prior to the filing of the complaint. There are two important caveats regarding the finality and conclusiveness of a quiet title action. First, the action is not conclusive against the United States nor, under Nevada law, against the State of Nevada. Furthermore, Nevada law states that any right or title created by the plaintiff or its predecessors within 10 years of filing the complaint is not expunged by the judgment; however, such interests can often be eliminated through a separate claim for relief based on adverse possession of mining claims (see NRS 11.060). Another limitation of quiet title judgments is their vulnerability to attack. As noted by Pat Garver in his 1983 article on mineral titles: If a court properly assumes jurisdiction in a quiet title action, and enters a judgment, the judgment may be set aside for a variety of reasons including: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence; (3) fraud, misrepresentation, or misconduct of an adverse party; (4) lack of personal service upon a non-appearing claimant who was without actual notice; and (5) “any other reason justifying relief from the operation of the judgment.” The grounds for reopening judgments are typically specified by statute or court rules that are not limited to quiet title actions. However, certain of these grounds are more frequently asserted against quiet title decrees than against other categories of judgments. For example, fraud is often claimed in connection with a plaintiff’s failure to personally serve process upon known but allegedly unlocatable claimants. The period for reopening a judgment depends upon the alleged grounds for relief. For example, if a judgment is challenged on the ground that a claimant was served by publication and had no actual notice, statutes permit reopening of the quiet title decree for as little as three months and as much as five years. *** As a result of these statutes related to the reopening of judgments, all quiet title decrees are, in effect, voidable for at least the period specified. In many jurisdictions, the statutory periods for reopening of judgments are further extended to accommodate the interests of infants or incompetents. In the context of dormant mineral interests, which are often held by elderly claimants or their minor heirs, these extensions pose even greater uncertainty. By way of example, a party can challenge a quiet title judgment in Nevada for a period of six years following entry of the final judgment (NRS 11.190(1)(a)). G. CONCLUSIONS A quiet title action is a convenient and often quick means of resolving various deficiencies in the chain of title. Different claims for relief, such as missing probates, “dangling” interests, defective property descriptions, and even possession of severed mineral interests, can be combined in a single action. The complaint can be expanded from specific defendants to name unknown parties claiming any right, title, or interest with respect to the property — in effect, a “complaint against the world.” Uncontested quiet title actions can generally be concluded within a period of 90 days following the filing of the complaint. On the downside, the plaintiff must be very careful to identify claimants of record and serve them with notice of the proceeding. In particular, the plaintiff must undertake all reasonable efforts to give personal or actual notice to the defendants in order to satisfy the due process requirements of the United States Constitution. Failure to give such notice will render the final judgment vulnerable to challenge.