How Do We Fix This? Bankruptcy, Tax Sales, Foreclosures, and ...

How Do We Fix This? Bankruptcy, Tax Sales, Foreclosures, and ...

How Do We Fix This? Bankruptcy, Tax Sales, Foreclosures, and Liens SARAH SORUM B J O R K L I N D L E Y L I TT L E P C DENVER, CO Who can be more nearly a fiend than he who

habitually overhauls the register of deeds in search of defects in titles, whereon to stir up strife and put money in his pocket? A moral tone ought to be infused into the profession which should drive such men out of it. - Abraham Lincoln CONFLICTING THEMES

Certainty, Security and Simplicity of Title vs. Due Process DUE PROCESS CLAUSE

5th and 14th Amendments to the U.S. Constitution: Neither the U.S. nor any State shall deprive any person of life, liberty or property without due process of law. Protected property interests include

surface, minerals, mortgages or other liens, easements, etc. WHAT DOES DUE PROCESS REQUIRE? Before property can be taken by the state (for example, by tax sale), the owner of any interest in that property must receive notice reasonably calculated to apprise him of the

pending tax sale or other proceeding. THE PROBLEM FOR THE TITLE EXAMINER How can we determine from the records in the abstract or courthouse whether constitutionally sufficient notice was given of a tax sale, mortgage foreclosure or similar proceeding? Frequently, we just cant!

As a result, title opinions contain requirements for quitclaims or quiet title actions to extinguish potential claims of owners who may have received insufficient notice. BANKRUPTCY PRIMARY ISSUES FOR TITLE EXAMINER

No constructive notice is given by filing of the petition; therefore, examiner has no duty to examine the bankruptcy court docket. If the petition or other evidence is properly recorded, then the public is on notice. HOW TO CURE

Bankruptcy Petition REQUIREMENT: Investigate what became of the bankruptcy estate Sale by Trustee or Debtor-in-Possession REQUIREMENT: Determine whether sale was authorized by bankruptcy court after

notice and hearing Closing Schedule with Property not described REQUIREMENT: Review the reorganization plan to determine what became of residuary assets TAX SALES

TAX TITLES INHERENTLY SUSPECT Courts have required strict compliance with detailed statutory procedures for tax sales More recent cases suggest a growing reluctance by the courts to set aside tax deeds for alleged deficiencies

TAXATION OF SEVERED MINERALS Authorized in Colorado, though not all assessors make it a priority Tax rolls for severed minerals are rarely accurate HOW TO CURE

Options: 1) Quitclaim Deed from taxpayer (or successors) to tax sale purchaser (or successors) 2) Quiet Title 3) Assume the risk

MORTGAGE AND OTHER FORECLOSURES FORECLOSURE GENERALLY Mortgages v. deeds of trust Power of sale provisions (no state action) v. Judicial foreclosures (state action)

Colorados unique system Debtor protections Notice Right to cure before sale Right to redeem after sale

PRIMARY ISSUES FOR TITLE EXAMINER Colorado 1) Statutes provide that sheriffs deed constitutes prima facie evidence of notice, but that is a rebuttable presumption that can be overcome by

evidence to the contrary. 2) Statute protects rights of omitted parties, e.g.: junior lienor MECHANICS, MATERIALMANS, AND MINERS LIENS

Generally, these types of liens are provided by state statute to ensure payment to the supplier of goods or services. Some states also provide for liens specific to oil and gas operations. SECRET LIENS Because lien statutes typically provide that the lien attaches when the labor or materials are first

provided, your lands may be subject to a valid lien that has not yet been recorded. North Dakota General Construction Lien 90 days after completion of work (as to BFPs) or up to 3 years (as to other parties) North Dakota Oil and Gas Lien 6 months after completion of work JUDGMENT LIENS

Judgment liens are created by a court (or by statute, in some states) after a creditor wins a lawsuit against a debtor. The lien allows the creditor to take possession of the property if the debtor fails to pay the obligation. E.g.: Medical debt

CHILD SUPPORT LIENS Many states allow a party that is owed child support payments (typically the custodial parent) to file the lien directly without the necessity of court involvement. That party can then force the sale of the property (after some period of time) to recover the money owed.

HOW TO CURE Lien statutes provide a timeframe after which the lien expires. If a lien has been recorded and has not expired, it must be released or satisfied of record. OTHER CURATIVE OPTIONS?

Adverse Possession? Marketable Record Title Acts? Dormant Mineral Laws? ADVERSE POSSESSION? Adverse possession is a legal doctrine by which a party in possession of land for the statutorily-prescribed period of time can

obtain title as against the legal record owner REQUIREMENTS Possession must be: Actual Open & Notorious Exclusive Continuous

Hostile to the true owner Under color of title in some states For period of possession prescribed by statute Objective Evidence . . . Can you tell? All elements are fact-specific, and

certainly wont be available from the records Further, adverse possession generally does not apply to severed minerals because they have not been possessed So rarely helpful for our purposes

MARKETABLE RECORD TITLE ACTS? MARKETABLE RECORD TITLE BASICS If person has unbroken record chain of title for a specified number of years (e.g. 40 years) back to root of title, then all conflicting claims and

interests based on title transactions prior to root of title are extinguished. Enacting states include Nebraska, North Dakota, Oklahoma, South Dakota, Utah and Wyoming. States vary in their requirements under the Act. But most states except mineral assets from the statutes application

DORMANT MINERAL ACTS? Statutory attempt to address the problem of mineral owners that cant be located. Allow another party (e.g. surface owner) to claim the abandoned minerals. Passed by some (but importantly not all)

states The mechanics and result of each states statutes vary widely, though many are based on the Model Dormant Mineral Interests Act. These statutes typically focus on whether or not the minerals have been used for some prescribed period of time (ND: 20 years)

Use can often take the form of a REASONABLE INQUIRY AND NOTICE [N]ot a model in drafting clarity. Sorenson v. Felton, 793 N.W.2d 799, 802 (N.D. 2011) QUIET TITLE PROVISION

Designed to be self-executing; i.e.: should not require quiet title action 2009 addition of N.D. CENT. CODE 38-18.106.1, which provides that the surface owner may institute a quiet title action Prudent examiners still require a judicial determination PAYMENT OF ROYALTIES

North Dakota: 150 days Does NOT apply in the event of a dispute of title existing that would affect distribution of royalty payments Colorado: 6 months

Suspended in the event of reasonable doubt by payer as to the payees identity, whereabouts, or clear title to an interest in the proceeds QUESTIONS? Sarah Sorum [email protected]

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