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Mansfield v. Federal Land Bank of Omaha

United States District Court, D. Nebraska

January 25, 2016

CALVIN M. MANSFIELD et al., Plaintiffs,
v.
FEDERAL LAND BANK OF OMAHA, et al., Defendants. CALVIN M. MANSFIELD et al., Plaintiffs,
v.
FEDERAL LAND BANK OF OMAHA, et al., Defendants. LARRY RICE, Plaintiff,
v.
FEDERAL LAND BANK OF OMAHA, et al., Defendants.

MEMORANDUM AND ORDER

RICHARD G. KOPF, Senior District Judge.

These consolidated cases, which were removed from state court based on federal officer jurisdiction under 28 U.S.C. § 1442(a)(1), involve the interpretation of Nebraska's dormant mineral statutes, Neb. Rev. Stat. §§ 57-228 to 57-231.[1] The plaintiffs allegedly own certain tracts of land located in northwest Nebraska. The Federal Land Bank of Omaha ("FLB") transferred these properties in 1941 (Case Nos. 4:14CV3232 and 4:14CV3233) and 1986 (Case No. 8:15CV26), while retaining an undivided one-half interest in the mineral rights. As the result of a series of mergers between 1988 and 2003, these severed mineral interests are currently owned by AgriBank, FCB ("AgriBank"). FLB and AgriBank are both named as defendants, as is FLB's immediate successor-in-interest, Federal Credit Bank of Omaha ("FCB").[2]

The plaintiffs contend the mineral interests are abandoned under Nebraska law because, although verified claims have been recorded by FLB, FCB, and AgriBank, no documents proving AgriBank's successor-in-interest status are on record at the register of deeds. The defendants dispute that Nebraska law imposes such a recording requirement, and argue it is sufficient that AgriBank's successor-in-interest status is a matter of public record under federal law. They also argue federal preemption. By way of a counterclaim, the defendants seek a declaratory judgment quieting title in favor of AgriBank.

Both sides have moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). For the reasons discussed below, the defendants' motions seeking dismissal of the plaintiffs' claims will be granted, and the plaintiffs' crossmotions will be denied. The defendants' counterclaims for declaratory relief will be dismissed without prejudice, as moot.

I. Procedural History

A. Case No. 4:14CV3232

Case No. 4:14CV3232 was commenced in the District Court of Sioux County, Nebraska, on October 23, 2014, by Calvin M. Mansfield and Sandra K. Mansfield. On November 25, 2014, the defendants removed the action to this court and filed an answer. On December 15, 2014, the defendants filed a Rule 12(c) motion (Filing No. 11). On August 21, 2015, the plaintiffs filed a Rule 12(c) motion (Filing No. 36).[3]

The defendants filed a counterclaim with prior leave of court on August 28, 2015. The plaintiffs answered the counterclaim on September 11, 2015. On October 6, 2015, the defendants filed a Rule 12(c) motion with respect to their counterclaim (Filing No. 45). The plaintiffs have not filed a cross-motion on the counterclaim.

B. Case No. 4:14CV3233

Case No. 4:14CV3233 was commenced in the District Court of Dawes County, Nebraska, on October 28, 2014, by Calvin M. Mansfield and Sandra K. Mansfield, who are also the plaintiffs in Case No. 4:14CV3232. On November 25, 2014, the defendants removed the action to this court and filed an answer. On December 15, 2014, the defendants filed a Rule 12(c) motion (Filing No. 8). On August 21, 2015, the plaintiffs filed a Rule 12(c) motion (Filing No. 40).[4]

The defendants filed a counterclaim with prior leave of court on August 28, 2015. The plaintiffs answered the counterclaim on September 11, 2015. On October 6, 2015, the defendants filed a Rule 12(c) motion with respect to their counterclaim (Filing No. 49). The plaintiffs have not filed a cross-motion on the counterclaim.

C. Case No. 8:15CV26

Case No. 8:15CV26 was commenced in the District Court of Sioux County, Nebraska, on December 9, 2014, by Larry L. Rice, who is represented by one of the same law firms as the Mansfields. On January 16, 2015, the defendants removed the action to this court, answered, and filed an unopposed motion to consolidate the three cases. On August 21, 2015, the plaintiff filed a Rule 12(c) motion (Filing No. 26).[5] On August 31, 2015, the defendants filed a Rule 12(c) motion (Filing No. 29).

The defendants filed a counterclaim with prior leave of court on August 28, 2015. The plaintiff answered the counterclaim on September 11, 2015. On October 6, 2015, the defendants filed a Rule 12(c) motion with respect to their counterclaim (Filing No. 38). The plaintiff has not filed a cross-motion on the counterclaim.

II. Applicable Nebraska Statutes

"Generally, dormant mineral statutes were enacted to address title problems that developed after mineral estates were fractured. At common law, mineral interests could not be abandoned. But permanent or long-term mineral interests could be created during a period of activity in a particular industry, and those interests did not terminate when the activity ceased. So, the mineral estate could be held by owners who had long disappeared from the area, leaving no trace. When the record owner of severed mineral interests could not be contacted, the dormant interests could cloud the titles of surface owners, and further development of the mineral estates became nearly impossible. Legislatures sought to remedy some of those problems by enacting statutes to reunite dormant mineral estates with surface estates." Ricks v. Vap, 784 N.W.2d 432, 434 (Neb. 2010) (footnotes omitted). "Nebraska's dormant mineral statutes are representative of those concerns." Id.

These statutes, which have not been amended since their passage in 1967, see Nebraska Laws 1967, ch. 348, §§ 1-4, provide as follows:

Any owner or owners of the surface of real estate from which a mineral interest has been severed, on behalf of himself and any other owners of such interest in the surface, may sue in equity in the county where such real estate, or some part thereof, is located, praying for the termination and extinguishment of such severed mineral interest and cancellation of the same of record, naming as parties defendant therein all persons having or appearing to have any interest in such severed mineral interest, and if such parties defendant are not known and cannot be ascertained, they may be proceeded against as unknown defendants under the provisions of Chapter 25, article 3.

Neb. Rev. Stat. § 57-228.

A severed mineral interest shall be abandoned unless the record owner of such mineral interest has within the twenty-three years immediately prior to the filing of the action provided for in sections 57-228 to 57-231, exercised publicly the right of ownership by (1) acquiring, selling, leasing, pooling, utilizing, mortgaging, encumbering, or transferring such interest or any part thereof by an instrument which is properly recorded in the county where the land from which such interest was severed is located; or (2) drilling or mining for, removing, producing, or withdrawing minerals from under the lands or using the geological formations, or spaces or cavities below the surface of the lands for any purpose consistent with the rights conveyed or reserved in the deed or other instrument which creates the severed mineral interest; or (3) recording a verified claim of interest in the county where the lands from which such interest is severed are located. Such a claim of interest shall describe the land and the nature of the interest claimed, shall properly identify the deed or other instrument under which the interest is claimed, shall give name and address of the person or persons claiming the interest, and shall state that person or persons claim the interest and do not intend to abandon the same.

Neb. Rev. Stat. § 57-229.

If the court shall find that the severed mineral interest has been abandoned, it shall enter judgment terminating and extinguishing it, canceling it of record, and vesting the title thereto in the owner or owners of the interest in the surface from which it was originally severed in the proportions in which they own such interest in the surface.

Neb. Rev. Stat. § 57-230.

In any action filed within two years after October 23, 1967, the owner of a severed mineral interest may enter his appearance and assert his interest therein, and he shall be deemed thereby to have timely and publicly exercised his right of ownership.

Neb. Rev. Stat. § 57-231.

"It is consistent with the statutory purpose of preventing abandonment of mineral estates to require an absent owner of dormant mineral interests to actively exercise those interests. And the plain language of § 57-229 provides that a severed mineral interest is abandoned unless the record owner of the interest is the one who publicly exercises it." Ricks, 784 N.W.2d at 436.

"As to record owner, ' [the Nebraska Supreme Court has] declined to adopt a rule of liberal or strict interpretation of the dormant mineral interest statutes. But [the Court has] noted that an action to terminate severed mineral interests sounds in equity and that equity abhors forfeitures. Thus, ... if doubt remain[s] about the meaning of record owner, ' it should be construed against forfeiture." Fisher v. Heirs & Devisees of T.D. Lovercheck, 864 N.W.2d 212, 217 (Neb. 2015).

III. Undisputed Facts

A. Case No. 4:14CV3232

In a "Deed of Land" dated March 26, 1941, and recorded in the office of the Register of Deeds of Sioux County, Nebraska, in April 1941, [6] FLB conveyed to Lawrence M. Hewett a tract of land in Sioux County described as the "Southeast Quarter of Section 1, in Township 29 North, Range 53, West of the 6th Principal Meridian, ... excepting therefrom one-half of all oil, gas and other mineral rights" (Complaint [Filing No. 1-1 at CM/ECF pp. 11-13]; Answer [Filing No. 3] ¶ 2 & Ex. A [Filing No. 3-1]; Counterclaim [Filing No. 38], ¶23 & Ex. A [Filing No. 38-1]).

The plaintiffs in Case No. 14CV3232, Calvin M. Mansfield and Sandra K. Mansfield, claim to be the record owners of such real estate (Complaint, ¶ 1; Answer to Counterclaim, ¶ 4). The defendants do not admit this claim of ownership.[7]

The plaintiffs allege that FLB is the record owner of the severed mineral interest (Complaint, ¶ 2). The defendants admit that FLB was the record owner until FLB was merged into FCB in 1988 (Answer, ¶ 2).

FLB's "Verified Claim of Severed Mineral Interest, " dated July 2, 1969, was recorded in the office of the Register of Deeds of Sioux County, Nebraska, on August 5, 1969, at Misc. Book A-30, Page 420 (Complaint, ¶2; Answer, ¶ 2; Counterclaim, ¶ 25; Answer to Counterclaim, ¶ 25). The verified claim states:

The Federal Land Bank of Omaha, 206 South 19 Street, Omaha, Nebraska, claims an undivided one-half interest in and to the oil, gas, and minerals in the following-described premises in Sioux County, Nebraska:
SE¼ Sec. 1-29N-53, West of the 6th P.M. which said interest was reserved by claimant in a deed dated March 26, 1941 conveying the described premises to Lawrence M. Hewitt [ sic ] and recorded in Book X, Page 19 & 20, of the deed records of said County.
This claim is made under the provisions of Chapter 348 of the Laws of 1967 for the purposes of preserving such severed interest and to verify that claimant has no intention to abandon the same.

( Id.; Answer Ex. A [Filing No. 3-3]; Counterclaim Ex. C [Filing No. 38-3]).

Effective July 6, 1988, FLB was merged into Federal Credit Bank of Omaha ("FCB"). The charter issued by the Farm Credit Administration ("FCA") states:

The Farm Credit Administration, in accordance with section 1.3 of the Farm Credit Act of 1971, as amended (the Act), [8] hereby charters a bank established pursuant to the merger of the Federal Land Bank of Omaha and the Federal Intermediate Credit Bank of Omaha, as provided by section 410 of the Agricultural Credit Act of 1987, [9] to be known as the FARM CREDIT BANK OF OMAHA (the Bank). The principal office location of the Bank shall be in the City of Omaha, County of Douglas, State of Nebraska. The Bank is an institution of the Farm Credit System and a federally charted instrumentality. The territory to be served by the Bank shall be all of the States of Iowa, Nebraska, South Dakota, and Wyoming.
By this Federal charter, the Farm Credit Administration hereby authorizes the Bank to exercise all powers conferred on the Bank under the Act and the regulations of the Farm Credit Administration.

(Answer, ¶ 2 & Ex. B [Filing No. 3-2]; Counterclaim, ¶ 26 & Ex. D [Filing No. 38-4]; Answer to Counterclaim, ¶ 26).[10]

FCB's "Verified Claim of Severed Mineral Interest, " dated February 19, 1992, was recorded in the office of the Register of Deeds of Sioux County, Nebraska on March 4, 1992, at Misc. Book A-55, Page 504, and states:

The Farm Credit Bank of Omaha, successor in interest to the Federal Land Bank of Omaha, 206 South 19th Street, Omaha, Nebraska 68102, claims a 50.00% interest in and to the oil, gas, and minerals in the following described premises in Sioux County, NEBRASKA, Township 029 North, Range 063 West of the 6th Principal Meridian Section 01: SE4
This interest was reserved by the claimant in a deed which conveyed the described premises. The particulars of the conveyance are as follows:
This claim is made under the provisions of NEBRASKA Statute, Neb. Rev Stat 57-229 for the purpose of preserving such severed interest and to verify that the claimant has no intention to abandon the same.

(Complaint, ¶ 3; Answer, ¶ 3 & Ex. C [Filing No. 3-3]; Counterclaim, ¶ 30 & Ex. H [Filing No. 38-8]; Answer to Counterclaim, ¶ 30).

On April 1, 1994, FCB merged into AgAmerica, FCB ("AgAmerica"), a federally chartered instrumentality, at which time AgAmerica became the successorin-interest to FCB (Answer, ¶ 3; Counterclaim, ¶¶ 32, 33; Answer to Counterclaim, ¶¶ 32, 33). AgAmerica's charter from the FCA states:

The Farm Credit Administration, in accordance with section 1.3 of the Farm Credit Act of 1971, as amended (the Act), hereby charters a Farm Credit Bank to be known as AgAmerica, FCB (the Bank), established pursuant to the consolidation of the Farm Credit Bank of Omaha and the Farm Credit Bank of Spokane, in accordance with section 7.12 of the Act.[11] The principal office location of the Bank shall be in the City of Spokane, County of Spokane, ...

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