Pennsylvania Superior Court Affirms Striking Of 24-Year-Old Default Judgment, And Holds That Leasing Is Not Enough To Claim Subsurface Rights By Adverse Possession

The development of the Marcellus Shale in Pennsylvania has led to a number of disputes about historical judgments that purportedly divested reserved oil and gas rights from their owners. During the 20th century, surface owners used a variety of mechanisms in an attempt to regain subsurface rights that their predecessors in title had severed. Although the full extent of these shenanigans is still emerging, a recent Pennsylvania Superior Court case casts a jaundiced eye on one such effort, and reminds litigants that these efforts can only be upheld if there has been scrupulous compliance with applicable procedural rules, and will succeed only when they are grounded in fact and law.

On November 6, 2015, the Pennsylvania Superior Court affirmed the trial court's decision in Northern Forests II, Inc. v. Keta Realty Company, et al ., which struck a 1989 default judgment entered in favor of the surface owner. That default judgment, entered in favor of Northern Forests II, Inc., purported to award previously-reserved oil and gas rights based upon Northern Forests' alleged adverse possession of those subsurface interests. The Court's ruling striking the default judgment was based on two fatal defects appearing on the face of the record - Northern Forests' failure to name indispensable parties, which deprived the court of subject matter jurisdiction, and Northern Forests' failure to make proper service on any defendant it had named in the action.

The Superior Court observed that at the time of the filing of the complaint, "none of the named defendants had any ownership interest in the subsurface rights, a fact that was evident from instruments of record in the Lycoming County Recorder of Deeds." Instead, "[i]nstruments of record as of December 1988 showed that the record title owners of subsurface rights included Clarence Moore..., Kenneth Yates..., and the heirs of Thomas Proctor...." Northern Forests sought in its quiet title action to divest Moore, Yates and the Proctor Heirs of their ownership rights, but failed to name them in their complaint or join them as defendants. The Court held that Northern Forests' "failure to join them as defendants mandated that [the] judgment be stricken." Northern Forests had claimed that its failure to name Moore, Yates and Proctor resulted from conveyancing errors by its predecessors in title. The Court rejected any argument that such errors could preserve a judgment explaining that "[n]o matter how exhaustive or...