Appellants Brief — EDEN H. POND v. ULYSSES G. WALDENEN JR. (Nos. 80-1018, 80-965)

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Otlice- Supreme Court, U.S.

FILED

No. 80-1018 MAY 11 1981

—KGERANDER T STEVAS,

CLERK

IN THE *

SUPREME COURT OF THE UNITED STATES

October Term, 1980

EDEN H. POND,

EDNA H. BOBE,

CONSOLIDATION COAL COMPANY, - Appellants,

versus

ULYSSES d. WALDEN, IR.,

CAROLYN SALLEE WALDEN, - - Appellees,

LOUISE r. SHORT, - - - - «= Intervenor.

On Appeal from the Supreme Court of Indiana

BRIEF OF APPELLANTS

JAMES M. BUTHOD and

MARK W. RIETMAN

BUTHOD, LONGEST, BUTHOD & RIETMAN

Citizens Bldg., Suite 409

115 Southeast Third Street

Evansville, Indiana 47708

Telephone (812) 423-5261

Attorneys for Appellants

—

CO., 619 W. KENTUCKY-?.0. BOX 3281, LOVISVILLE, Kv.

— — —

—

WESTERFIELD-BONTE

THE QUESTIONS PRESENTED FOR REVIEW

This Appeal raises the issue of the constitutionality of

an Indiana Statute, Indiana Code 1971, 32-5-11-1 through

$2-5-11-8, commonly known as the Indiana Mineral Lapse

Act, which statute retroactively provides that a mineral

interest severed from the surface is deemed to have lapsed

if a use of the mineral interest is not made within twenty

years of the severance or if a statement of claim setting

forth the ownership of the severed mineral interest is not

filed within the statutory period with the recorder in the

county in which the property is located. There are four

constitutional questions presented for review:

a) Whether the Indiana Mineral Lapse Act constitutes

a taking of private property without compensation

in violation of the due process clause since no compen-

sation is given to the owner of the severed mineral

interest upon the lapse of this interest pursuant to

the statute.

b) Whether the Indiana Mineral Lapse Act violates pro-

cedural due process protections by failing to provide

for any notice or hearing prior to the termination of

the mineral interest, or at some meaningful time

after the termination of the mineral interest.

c) Whether the Indiana Mineral Lapse Act constitutes

an impairment of contract by voiding contractual con-

veyances of mineral interests, where no overriding

public interest justifies the methods used in trans-

ferring ownership of the mineral interest.

d) Whether the provision in the Indiana Mineral Lapse

Act — which provides that owners of more than ten

mineral interests in a county who inadvertently fail

to file a statement of claim must be given written

notice prior to the lapse of their interest, when similar

protection is not provided for owners of less than ten

mineral interests in a county — violates the equal pro-

tection clause.

THE PARTIES TO THE PROCEEDING

All of the parties to the proceeding are shown in the

caption with the exception that the Attorney General for

the State of Indiana is also a party to this Appeal.

The present case has also been consolidated by this

Court with the case, Texaco, Inc., et al. v. Louise F. Short,

et al., No. 80-965, which also challenges the constitutionality

of the Indiana Mineral Lapse Act.

THE QUESTIONS PRESENTED FOR REVIEW

This Appeal raises the issue of the constitutionality of

an Indiana Statute, Indiana Code 1971, 32-5-11-1 through

32-5-11-8, commonly known as the Indiana Mineral Lapse

Act, which statute retroactively provides that a mineral

interest severed from the surface is deemed to have lapsed

if a use of the mineral interest is not made within twenty

years of the severance or if a statement of claim setting

forth the ownership of the severed mineral interest is not

filed within the statutory period with the recorder in the

county in which the property is located. There are four

constitutional questions presented for review:

a) Whether the Indiana Mineral Lapse Act constitutes

a taking of private property without compensation

in violation of the due process clause since no compen-

sation is given to the owner of the severed mineral

interest upon the lapse of this interest pursuant to

the statute.

b) Whether the Indiana Mineral Lapse Act violates pro-

cedural due process protections by failing to provide

for any notice or hearing prior to the termination of

the mineral interest, or at some meaningful time

after the termination of the mineral interest.

c) Whether the Indiana Mineral Lapse Act constitutes

an impairment of contract by voiding contractual con-

veyances of mineral interests, where no overriding

public interest justifies the methods used in trans-

ferring ownership of the mineral interest.

d) Whether the provision in the Indiana Mineral Lapse

Act — which provides that owners of more than ten

mineral interests in a county who inadvertently fail

to file a statement of claim must be given written

notice prior to the lapse of their interest, when similar

protection is not provided for owners of less than ten

mineral interests in a county — violates the equal pro-

tection clause,

TABLE OF CONTENTS

The Questions Presented for Review ............... yo

The Parties to the Proceedingg ii

BED GE GUT occ cvccvcccccvcccdcvcccocccccsee iii-iv

SD GE IEEE psc eee eee eee v-ix

Reference to the Opinion Belo 1

Statement of the Grounds on Which the Jurisdiction

of This Court Is Invoked ...............ceceeess 1- 2

Constitutional Provisions and Statutes Involved .... 2- 3

Statement of the Oase 3 6

Summary of the Argument 6- 8

eee ee eee eee eee eee 9-46

E nne eee eee ee ee eee eee 9—11

II. Legislative History of Indiana Act .......... 12-13

III. Relevant Principles of Indiana Mineral Law. .13-15

. The Indiana Mineral Lapse Act Unconstitu-

tionally Takes Property Without Due Process

Procedures Being Satisfle lll... 16-38

A. The Act Takes Property Without Provid-

ing an Adequate Opportunity to Protect

the Property Interest and Without Provid-

ing for Compensation 17-23

B. Alternative Constitutionally Approved

Methods Exist to Achieve the Goals of the

„eee teste eee e tee ee eee eee 24-25

C. The Act Does Not Provide for Notice and

Hearing to Contest the Legitimacy of the

ne Ü b eonesen's 26-34

D. The Act Is Not Analogous to Remedial

Types of Legislation 34-38

V. The Indiana Mineral Lapse Act Impairs the

Obligations of Contracts by Destroying a

PAGE

Vested Contractual Righhe 38-48

VI. The Indiana Mineral Lapse Act Makes a Clas-

sification Which Deprives One Class of Basic

Constitutional Rights and Which Is Also Ar-

bitrary and Capricious .........eeeeeeeeees 43-46

TABLE OF AUTHORITIES

Cases: pace

Allied Structural Steel v. Spannaus, (1978) 438

U. S. 234, 98 S. Ct. 217, 57 L. Ed. 2d 727. .39, 40, 41, 42

Anderson National Bank v. Luckett, (1944) 321

Se Ee Ear ee EE e 24

Andrus v. Allard, (1979) 444 U. S. 51, 100 S. Ct. 318,

, eee 18

Armstrong v. United States, (1960) 364 U. S. 40, 80

8. Ot. 1563, 4 L. Ed. 2d 155/%// 19

Berman v. Parker, (1954) 348 U. S. 26, 75 S. Ct. 98,

F .. 7 .. 23

Board of Commissioners of County of Sullivan v.

Heap, (1973) 115 Ind. App. 633, 294 N. E. 2d

Chase Securities Corporation v. Donaldson, (1945)

325 U. S. 304, 65 S. Ct. 1137, 89 L. Ed. 1628. 34

Chicago B. & Q. R. Co. v. Chicago, (1897) 166 U. S.

226, 17 S. Ct. 581, 41 L. Ed. 979 .............. 18

Chicago d N. W. Transp. Co. v. Pedersen, (1977)

80 Wis. 2d 566, 259 N. W. 2d 318. (Footnote 13)

City of Elkhart v. Christiana Hydraulics, (1945)

223 Ind. 242, 59 N. EL 2d 35888 „

Contos v. Herbst, (Minn. 1979) 278 N.W. 2d

“VT (Footnotes 11 & 30)

Fuentes v. Shevin, (1972) 407 U. S. 67, 92 S. Ot.

eee ove 29, 32

Goldberg v. Kelly, (1970) 397 U. S. 254, 90 S. Ot.

ee “v-c'0 6 8'0.cig, obo 016% 0 6'9.0 S006 He 17

Halbert v. Hendricks, (1950) 121 Ind. App. 43, 95

een 14

r ee (1902) 28 Ind. App. 555, 63 N. E.

„ (Pootnote 24), 13, 14

Pes A v. Le (1967) 141 Ind. App. 622, 231

ane 14

Home Building and Loan Association v. Blaisdell,

(1984) 290 U. S. 398, 54 8. OL 231, 78. Bd.

AEE eee 1

PAGE

Ingle v. Bottoms, (1902) 160 Ind. 73, 66 N. E. 160. 39

Kaiser Aetna v. United States, (1979) 444 U. S. 164,

100 S. Ot. 383, 62 L. Ed. 2d 332 ..... (Footnote 27), 18

Levy v. Stewart, (1870) 79 U. S. 244 (11 Wall 244) 35

McBeth v. Wetnight, (1914) 57 Ind. App. 47, 106

„%%% V ds hobo „„ 14

Mackey v. Montrym, (1979) 443 U. S. 1, 99 S. Ot.

r cb Sccandbdacentciesccecs 30

Matthews v. Eldridge, (1976) 424 U. S. 319, 96 S. Ot.

e ee 17, 30, 31

Memphis Light, Gas d Water Division v. Craft,

(1978) 436 U. S. 1, 98 S. Ct. 1554, 56 L. Ed. 2d

Missouri Pacific R. C. v. Nebraska ex rel. Board

of Transportation, (1896) 164 U. S. 403, 17 S. Ot.

r os tis curies one 23

Monon Coal Company v. Riggs, (1944) 115 Ind.

App. 236, 56 N. E. 2d 672, 57 N. E. 2d 598...... 14

Mullane v. Central Hanover Bank and Trust Com-

pany, (1950) 339 U. S. 306, 70 S. Ot. 652, 94

L. Ed. 865

New Orleans v. Dukes, (1975) 427 U.S. 297, 96

S. Ot. 2513, 49 L. Ed. 2d 5lII .li... 45

North Dakota State Board of Pharmacy v. Snyder’s

Drug Store, Inc., (1973) 414 U. S. 156, 94 S. Ot.

Ger SEE Ss PE bd deccdceccdanotacceccsce 17

North Georgia Finishing, Inc. v. Di-Chem, Inc.,

(1975) 419 U. S. 601, 95 S. Ct. 719, 42 L. Ed. 2d

TP ͤ‚ AAA 29

Northern Cheyenne Tribe v. Hollowbreast, (1976)

425 U. S. 649, 96 S. Ct. 1793, 48 L. Ed. 2d 274. 23

Ochoa v. Hernandez y Morales, (1913) 230 U. S. 139,

33 S. Ct. 1033, 57 L. Ed. 142227 29-30

Penn Central Transportation Co. v. City of New

York, (1978) 488 U.S. 104, 98 S. Ot. 2646, 57

L. Ed. 2d 631 ........ (Footnote 28), 19, 20, 21, 22, 37

Pennsylvania Coal Co. v. Mahon, (1922) 260 U.S.

393, 43 S. Ot. 158, 67 L. Ed. 332 ......... 19, 21, 22, 38

vii

| PAGE

Regional Rail Reorganization Act Cases, (1974) 419

U.S. 102, 95 S. Ot. 335, 42 L. Ed. 2d 3200 23

San Diego Gas d Electric Co. v. San Diego, No. 79.

Who (Footnote 28, 29), 18, 21, 22

Schaffner v. Benson, (1929) 90 Ind. App. 420, 166

eee 14

Security Savings Bank v. State of California, (1923)

263 U. S. 282, 44 S. Ct. 108, 68 L. Ed. 301 ...... 24

Short v. Texaco, (1980) —— Ind. , 406 N. E.

e (Footnote 14), 1, 5, 6

Simpkin v. New York Central Railroad Company,

(1966) 138 Ind. App. 668, 214 N. E. 2d 661.... 14

Standard Oil Co. v. New Jersey, (1951) 341 U.S.

428, 71 S. Ct. 822, 95 L. Ed. 1078 .............. 24

Stanley v. Illinois, (1972) 405 U.S. 645, 92 S. Ct.

, ̃ ůe—— K 32, 44

Terrace v. Thompson, (1923) 263 U. S. 197, 445

n PD cd bok bs cavedivondbevece 29

Tremble v. Gordon, (1977) 430 U. S. 762, 97 S. Ct.

Fm be ee re ee 44

United States v. Kubrick, (1979) 444 U. S. 111. 35

United States Trust Company v. New Jersey, (1977)

432 U. S. 1, 97 S. Ct. 1505, 52 L. Ed. 2d 92 38, 40

U. S. Railroad Retirement Board v. Fritz, (1980)

— U. 8. 101 S. Ot. 458, 66 L. Ed. 2d 368 45

Van Slouten v. Larsen, (1980) —— Mich. , 299

... (Footnote 15)

Webb’s Fabulous Pharmacies, Inc. v. Beckwith,

(1980) ___ U. S., 101 S. Ot. 446, 66 L. Ed.

. eee eee eee 18

Wheelock v. Heath, (1978) 201 Neb. 835, 272 N. W.

Moo „ „ „ „ „ 00 (Footnote 12), 39

Wilson v. Bishop, (1980) 82 Ill. 2d 364, 412 N. E.

o . (Footnotes 10 & 30)

viii

Treatises:

Anno, 71 A. L. R. 2d 846, (1960) “Marketable Title

DE ln e. 36

P. Bayse, Clearing Land Titles, (1953). . . (Footnote 31)

Hardy, Ancient Mineral Claims—An Obstacle to De-

velopment, (1977) 28 Ann. Inst. on Oil & Gas L.

SIE ˙ ˙ (, ene (Footnote 2)

Kurtz, Old and New Solutions to the Problems of

the Outstanding Undeveloped Mineral Interest,

(1971) 22 Ann Inst. on Oil & Gas L. & Tax

ccc (Footnote 2)

Outerbridge, Missing and Unknown Mineral Own-

ers, (1979) 25 Rocky Mtn. Min. L. Inst., 20-1, 20-

FT (Footnote 2), 12

Polston, Legislation, Existing and Proposed, Con-

cerning Marketability of Mineral Titles, (1972)

PAGE

7 Land and Water L. Rev., 78 (Footnotes 1, 16,

17, 18, 19, 20, 25), 45

Spies, Annual Survey of Virginia Law, Property,

eee

Constitutional Provisions:

Constitution of the United States, Article I, Section

PT. . ͤ . 2, 38

Constitution of the United States, 5th Amend-

e . 17-18, 20

Constitution of the United States, 14th Amendment,

. 2, 6, 18, 20, 43, 44

Statutes:

IIl. Ann. Stat. ch. 30, § 197, 198 (Smith-Hurd Supp.

r ⸗ se (Footnotes 6 & 26)

Indiana Code 1971, § 32-5-7-3..... (Footnotes, 21, 22, 23)

Indiana Code 1971, § 32-5-11-1 et seq. ...... 1-2, 3, 10, 12

Indiana Code 1971, § 32-5-11-1 ...(Footnote 7), 26, 28, 47

Indiana Code 1971, § 3 2-5-1122 (Footnote 7), 47

Indiana Code 1971, § 32-5-11-Zgꝛ (Footnote 7), 47

PAGE

Indiana Code 1971, § 32-5-11-4...... (Footnote 7), 30, 48

Indiana Code 1971, § 32-5-11-5 ...... (Footnote 7), 43, 48

Indiana Code 1971, § 32-5-11-6 ..... PERG PE 26-27, 49

Indiana Code 1971, § 32-5-11-7 ......... cece scene 49

Indiana Code 1971, § 32-5-11-8 ...........00eeeeee 50

Indiana Code 1971, § 32-1-5-1 et seq. 9 36

Indiana Code 1971, § 34-1-%9-1 et seg... 3

Mich. Comp. Law Awn. §§ 554.291 to 554.294

. ᷣ L w- (Footnotes 8 & 26)

Minn. Stat. Ann. §§ 93.52 to 93.58, West, 177, Supp.

/ ² ²˙ —T—T—— 5 (Footnote 3)

Neb. Rev. Stat. 55 57-228 to 57-231 (1978) . . (Foot-

notes 9 & 26)

S. D. Codified Laws Ann. 5 43-30-8.1 (Supp.

—T:! , ² ˙ -- (Footnote 5)

Wis. Stat. Ann § 700.30 (West Supp. 1979). . (Foot-

note 4)

Title 28, United States Code, Section 1257, Sub-

DOVOGTADN SD „„ „e eee 2

No. 80-1018

SUPREME COURT OF THE UNITED STATES

October Term, 1980

Even H. Poxp,

Epna H. Bonn,

CONSOLIDATION COAL CoMPANY, - - Appellants,

ULISSIS G. WALDEN, In.,

CAROLYN SALLZEE WALDEN, - - Appellees,

Louise F. SHort, - - - - Intervenor.

ON APPEAL FROM THE SUPREME COURT OF INDIANA

BRIEF OF APPELLANTS

REFERENCE TO THE OPINION BELOW

The Supreme Court of Indiana combined the present

case with the aforementioned case of Short v. Texaco, et al.,

for purposes of its opinion. This opinion is reported as

Short v. Texaco, (1980), — Ind. , 406 N. E. 2d 625.

It is reprinted in the Joint Appendix, pages 37 to 49.

The unreported “Memorandum Opinion and Judgment

on Agreed Case” entered by Judge Walter Palmer, Judge

of the Gibson County Circuit Court, dated July 24, 1978,

is reprinted in the Joint Appendix, pages 33 to 36.

STATEMENT OF THE GROUNDS ON WHICH THE

JURISDICTION OF THIS COURT IS INVOKED

The judgment of the Supreme Court of Indiana, declar-

ing constitutional the Indiana Statute, Indiana Code 32-5-

11-1 through 32-5-11-8, commonly known at the Indiana

Mineral Lapse Act, was entered on June 23, 1980.

A petition for rehearing, timely filed, was denied by

the Supreme Court of Indiana on September 24, 1980.

A Notice of Appeal to this court was duly filed in the

Supreme Court of Indiana on December 5, 1980.

This Appeal was docketed in this court on December

19, 1980, which was within ninety (90) days from the denial

of rehearing below. The jurisdiction of this court is in-

voked under Title 28, United States Code, Section 1257,

Subparagraph 2

CONSTITUTIONAL PROVISIONS AND

STATUTES INVOLVED

14th Amendment, Section 1, United States Constitution:

“All persons born or naturalized in the United States,

and subject to the jurisdiction thereof, are citizens of the

United States and of the state wherein they reside. No

state shall make or enforce any law which shall abridge

the privileges and immunities of citizens of the United

States; nor shall any state deprive any person of life, liberty

or property, without due process of law; nor deny to any

person within its jurisdiction the equal protection of the

laws.”

Article 1, Section 10, United States Constitution:

“No state shall enter into any treaty, alliance or a con-

federation; grant letters of marque and reprisal; coin

money; emit bills of credit; make anything but gold and

silver coin as tender in payment of debts; pass any bill of

attainder, ex post facto law, or law impairing the obliga-

tions of contracts, or grant any title of nobility.”

The Indiana Code 32-5-11-1 through 32-5-11-8: (Printed in

Appendix “ A”)

STATEMENT OF THE CASE

The action at bar was filed in the Circuit Court of Gibson

County, Indiana, as an Agreed Case, with an Agreed State-

ment of Facts, pursuant to an Indiana Statute, Indiana

Code 1971, Section 34-1-29-1 and following. The parties

stipulated that the sole issue for determination by the trial

court was whether the Indiana Minéral Lapse Act, Indiana

Code 1971, Sections 32-5-11-1 through 32-5-11-8, was con-

stitutional under the Constitution of the United States and

the Constitution of the State of Indiana. All of the ques-

tions set forth in the section of the Jurisdictional State-

ment entitled “The Questions Presented for Review” were

first raised and presented to the trial court. The Agreed

Statement of Facts, as found on pages 4 to 29 of the Joint

Appendix, may be summarized as follows:

On March 1, 1954, Clara M. Haper, Eden H. Pond and

Edna H. Bobe were the owners as tenants in common of an

eighty acre tract of land in Gibson County, Indiana. On

that date, they conveyed by Warranty Deed this eighty

acre tract to Ulysses Walden and Mildred Walden, his wife.

This Warranty Deed contained a reservation of the total

mineral estate by the grantors, Clara M. Haper, Eden H.

Pond and Edna H. Bobe.

On August 13, 1959, Ulysses G. Walden and Mildred

Walden conveyed by Warranty Deed to Ulysses G. Walden,

Jr. and Carolyn Sallee Walden, his wife, a seventy-nine acre

tract of land which was part of the aforementioned eighty

acre tract.

About the year 1958, Clara M. Haper died intestate leav-

ing as her sole and only heirs her daughters, Eden H. Pond

and Edna H. Bobe, who succeeded to the interest of Clara

M. Haper in the severed minerals under the eighty acre

tract.

On June 17, 1976, Eden H. Pond, Edna H. Bobe and

Raymond W. Bobe, her husband, as lessors, made, executed

and delivered to Consolidatio Coal Company, as lessee, a

coal mining lease covering forty acres of the aforemen-

tioned seventy-nine acre tract. On March 4, 1977, Ulysses

Grant Walden, Jr., and Carolyn Sallee Walden gave writ-

ten notice to Edna H. Bobe and Eden H. Pond of the lapse

of the mineral interest pursuant to the Indiana Mineral

Lapse Act. On the same date, March 4, 1977, there was

published in the Princeton Daily Clarion, a daily newspaper

in Gibson County, Indiana, a notice of the lapse of the

mineral interest pursuant to the Indiana Mineral Lapse

Aét. On May 27, 1977, Charles R. Nixon, as Attorney for

Ulysses Grant Walden, Jr., sent a notice to Consolidation

Coal Company of the claim of his client, Ulysses Grant

Walden, Jr.

On January 12, 1978, the Agreed Statement of Facts

[Complaint] was filed in the Circuit Court of Gibson

County, Indiana. It was stipulated by Eden H. Pond and

Edna H. Bobe that they had made no use of the mineral

interest as defined by the Mineral Lapse Act, and had not

filed a Statement of Claim with the Recorder of Gibson

County, Indiana, setting forth their ownership of the min-

eral interest. It was further stipulated by the parties that

the sole question for determination by the trial court was

whether the Indiana Mineral Lapse Act is constitutional

under the Constitution of the United States and the Con-

stitution of the State of Indiana. If the statute is uncon-

stitutional, Eden H. Pond and Edna H. Bobe are the owners

of the mineral interest in and under the subject property.

If the Mineral Lapse Act is constitutional, the owners of

the mineral interest pursuant to the statute are Ulysses

G. Walden, Jr. and Carolyn Sallee Walden, his wife.

Pursuant to an Indiana statute, the Attorney General

of the State of Indiana was notified during the lawsuit that

the constitutionality of a state statute was being questioned.

The Attorney General entered his appearance in the action

and submitted trial briefs on the question of the constitu-

tionality of the act. In addition, Louise F. Short filed a

Petition to Intervene in the action and such petition was

granted by the court. After the questions regarding the

constitutionality of the Indiana Mineral Lapse Act were

fully briefed and oral argument was heard, the Trial Court

rendered its “Memorandum Opinion and Judgment on the

Agreed Case” on July 24, 1978, holding that the Indiana

Mineral Lapse Act was unconstitutional. (Joint Appendix,

pages 33 to 36).

Several weeks after the trial court’s opinion and judg-

ment in the present case, the trial court issued its judgment

in another case that was pending in the Gibson Circuit

Court involving the constitutionality of the Indiana Mineral

Lapse Act, which case was styled Louise F. Short v. Texaco,

Inc., et al., and which has been consolidated with the present

case by this Court. The Short case involved oil and gas

mineral interests only. The trial court held that the In-

diana Mineral Lapse Act was also unconstitutional as it

applied to oil and gas mineral interests.

Constitutional questions being involved, pursuant to

the Indiana Rules of Appellate Procedure, a direct appeal

was taken from the trial court judgment to the Supreme

Court of Indiana. Again, all the questions presented in this

appeal were raised, briefed and argued before the Supreme

Court of Indiana. The Attorney General of the State of

Indiana was a party to the appeal and represented the

State of Indiana on the question of the constitutionality of

the Act. Short v. Texaco was also appealed directly to the

Supreme Court of Indiana. The Supreme Court of Indiana

combined the present case with Short v. Texaco for pur-

poses of oral argument and opinion.

On June 23, 1980, the Supreme Court of Indiana issued

a joint opinion in the two cases—the present case and

Short v. Texaco — reversing the Trial Court and declaring

that the Indiana Mineral Lapse Act was constitutional.

(Joint Appendix, pages 37 to 49). Petition for Rehearing

was timely filed with the Supreme Court of Indiana, which

petition was denied on September 24, 1980.

SUMMARY OF THE ARGUMENT

The Indiana Mineral Lapse Act is unconstituional and

void for the tollowing reasons:

1. The Indiana Mineral Lapse Act violates the Four-

teenth Amendment of the United States Constitution by

taking a very valuable property interest without providing

due process protections to the owner of the severed mineral

interest. Without question, a mineral interest is a property

right protected by the due process clause of the Fourteenth

Amendment. Dy providing for the transfer of the severed

mineral interest from the record owner to another entity

(usually the surface owner), a taking of property by the

state is effected. Yet the Indiana Mineral Lapse Act makes

no provision for notifying the owner of the severed mineral

interest that his valuable property right is being taken.

There is not even a requirement that the owner of the

severed mineral interest be notified after the severed min-

eral interest has been taken. No provision is made in the

Mineral Lapse Act for a hearing in which the owner of the

severed mineral interest might contest the taking of his

mineral interest. This is not a situation in which the Court

need determine whether a pretermination hearing is neces-

sary or whether a prompt post-termination hearing is ade-

quate, because the Mineral Lapse Act has no provision for

a hearing at any time. Finally, the Mineral Lapse Act

makes no provision for compensating the owner of the

severed mineral interest for the taking of his valuable

property rights which is clearly required under the Fifth

and Fourteenth Amendment due process clauses.

The Indiana Mineral Lapse Act is not analogous to

statutes of limitations, marketable title acts or recording

legislation. Statutes of limitations, recording acts and

marketable title acts are remedial, protecting the owner of

record of an estate in land against stale, spurious or doubt-

ful claims arising prior to the commencement of the statu-

tory period or against unknown or hidden claims. Statutes

of limitations and marketable title acts are in aid of the

record title owner, whether of the surface or mineral estate

or the entire fee. Dormant mineral legislation is in deroga-

tion of the rights of the record owner. Dormant mineral

legislation is intended and in fact does take substantive

property rights, being the total ownership of the mineral

estate. Statute of limitations and marketable title acts

merely limit the procedural remedies available to one chal-

lenging record ownership. Furthermore, remedial acts are

meant to aid the record title owner and assist in removing

clouds upon that title whereas dormant mineral legislation

is meant to take the valid unchallenged ownership of a real

property interest from a rightful owner.

2. The Indiana Mineral Lapse act also places a severe

impairment on contractural rights without using the means

and methods appropriate to the nature and purpose of the

legislation. In the present case, the reservation of the

mineral estate in the Warranty Deed of March 1, 1954,

constituted a contract between the parties to the convey-

ance and created on-going rights and duties with respect

to the reservation of the mineral estate. The Indiana Min-

eral Lapse Act severely, in an unanticipated and retroactive

fashion, changes the obligations of the parties to the con-

tract by requiring certain uses of the property be made

or a statement of claim filed, which if not done, leads to

complete destruction of the contract. There has been no

showing of any emergency need to justify this severe im-

pairment of contractural rights. Furthermore, the legis-

lation was not appropriately tailored to the purpose for

which it was designed to met.

3. The Indiana Mineral Lapse Act violates the equal

protection clause of the Fourteenth Amendment by creating

a classification which makes it mandatory that notice be

given to a small special interest group, before the lapse

of the mineral interest occurred, while not requiring that

notice be given to all other severed mineral interest

owners affected by the Act, who are in similar need of

such protection. The Mineral Lapse Act creates a classi-

fication which provides due process notice to a small special

interest group, while depriving all other owners of severed

mineral interest this basic constitutional right. Even if

this Court would view this classification as being of a social

or economic nature, thus utilizing a low level scrutiny test,

the classification must be considered arbitrary and ca-

pricious.

ARGUMENT

I. INTRODUCTION

Under Indiana law, as in all common law jurisdictions,'

it is possible to separate or sever the mineral ownership

in real estate from the ownership of the surface. With

the passage of time, it is possible for the severed mineral

estates to become fractionalized, making it potentially diffi-

cult to identify and locate the owners. This can impede

the development of the mineral estate.“ In response to

this perceived problem, a number of state legislatures have

enacted what are commonly called dormant mineral stat-

utes. These statutes are of two general types: (1) recor-

dation statutes which require specified severed mineral

owners to register their interests, with the failure to regis-

ter resulting in the merger of the mineral estate with the

surface or forfeiture to the state; and (2) statutes imposing

specific requirements — such as specified uses of the min-

crals, actual production, taxation or registration — which

if not satisfied within a set period of time, will cause the

severed mineral estate to merge with the surface estate.

See Polston, Legislation, Existing and Proposed, Concerning

Marketability of Mineral Titles, 7 Land and Water L. Rev. 73,

73-74 (1972).

2For commentaries on this problem see, Hardy, Ancient Mineral

Claims — An Obstacle to Development, 28 Ann. Inst. on Oil & Gas

L & Tax 137 (1977) ; Kurtz, Old and New Solutions to the Problem

of the Outstanding Undeveloped Mineral Interest, 22 Ann. Inst.

on Oil & Gas L. & Tax 81 (1971); Outerbridge, Missing and Un-

known Mineral Owners, 25 Rocky Mtn. Min. L. Inst. 20-1, 20-57

(1979).

The states of Minnesota, Wisconsin‘ and South Dakota“

have enacted the first type of dormant mineral legislation.

Illinois,“ Indiana,“ Michigan“ and Nebraska“ have enacted

the second type of dormant mineral legislation.

Minn. Stat. Ann. §§ 93.52 to 93.58 (West 1977, Supp. 1979).

This statute required the owner of the severed mineral interest

to file a verified statement of ownership with the register of deeds,

and pay a yearly tax. Failure to substantially conform to the

statute caused the severed mineral interest to forfeit to the state.

Act amended in 1979, Minn. State. Ann. § 93.55(1) to require no-

tice and a hearing prior to forfeiture.

Wis. Stat. Ann. § 700.30 (West Supp. 1979). Under the

Wisconsin statute the owners of severed mineral rights were re-

quired to record the severance instrument with the register of deeds

of the county within three years from the date of the act or the

date of the instrument, whichever was later. Failure to record

within this time period caused the mineral interests to revert to

the surface fee owner. In addition, the statute required payment

of an initial, and thereafter an annual, registration fee to preserve

the mineral rights. Failure to pay such registration fees within

three years from the due date also resulted in the reversion of the

mineral interests to the surface fee owner.

5§.D. Codified Laws Ann. § 43-30-8.1 (Supp. 1979). This

statute requires that one claiming a severed mineral interest

record an instrument describing that interest with the register of

deeds at least once every ten years, or it will merge with the surface

estate.

Il. Ann. Stat. ch. 30, §§ 197, 198 (Smith-Hurd Supp. 1980).

The Illinois statute required production of the severed oil and gas

mineral interests or written notice recorded with the county

recorder’s office within 25 years after its creation, or the mineral

interest would be deemed abandoned. Ownership would then vest

in the surface owner. There was a three year grace period after

the effective date of the Act to produce oil and gas or file the writ-

ten notice.

Ind. Code Ann. §§ 32-5-11-1 to 32-5-11-5 (Burns 1973).

(Footnotes continued on next page)

Six of the above dormant mineral acts have been con-

stitutionally challenged in each state’s highest court. The

Illinois, e Minnesota, 1 Nebraska! and Wisconsin" statutes

were found to be unconstitutional in some way, while the

Indiana!“ — in the present case — and Michigan“ statutes

were upheld.

(Footnotes continued from preceding page)

Mich. Comp. Laws Ann. §§ 554.291 to 554.294 (1967). The

Michigan statute requires the owner of an oil and gas mineral in-

terest to make certain statutorily defined uses of the property or

record a notice of interest with the register of deeds, within 20

years of the creation of the severed interest, or else the mineral

interest is deemed abandoned, with, a reversion to the surface owner.

There is a three year grace period immediately following the effec-

tive date of the Act given to the mineral interest owners allowing

them to record notices preserving their interests.

*Neb. Rev. Stat. §§ 57-228 to 57-231 (1978). The Nebraska

statute applied to all severed mineral interests and provided that

the owners of the surface could bring an action seeking a termina-

tion and extinguishment of the severed mineral inteersts, naming

as party defendants all persons having or appearing to have an

interest in the severed mineral interests. The severed mineral

interests would be deemed abandoned if for a period of 23 years

prior to the filing of the lawsuit, certain statutorily defined uses of

the property had not been made or a verified claim of interest re-

corded. There was also a two year grace period after the effective

date of the statute in which the severed mineral interest owner could

assert his claim.

10Wilson v. Bishop, (1980) —— III. 24 , 412 N. E. 2d 522.

11 ontos v. Herbst, (Minn. 1979) 278 N. W. 2d 732, 740, appeal

dismissed sub. nom. Prest v. Herbst, 444 U. S. 804.

12Wheelock v. Heath, (1978) 201 Neb. 835, 272 N. W. 2d 768.

Chicago & . W. Transp. Co. v. Pedersen, (1977) 80 Wis. 2d

566, 259 N. W. 2d 316.

4Short v. Texaco, (1980) Ind. , 406 N. E. 2d 625.

15Van Slouten v. Larsen, (1980) Mich. , 299 N. W. 2d

704.

II. LEGISLATIVE HISTORY OF INDIANA ACT

The Indiana Dormant Mineral Act, or Mineral Lapse

Act, Indiana Code Section 32-5-11-1 through 32-5-11-8, was

enacted by the Indiana Legislature in 1971. (Pub. L. No.

423 [1971] Ind. Laws 1970). The principal draftsman of

the Act was Ronald W. Polston, a professor of law at

Indiana University-Indianapolis Law School.’* While there

is little legislative history regarding the Act, Professor

Polston did author a law journal article in 1972 in which

he proposed the Indiana Act, with modifications, as a model

for dormant mineral legislation.“ Professor Polston dis-

cussed the legislative background to the passage of the

Indiana Act in this article.“

Professor Polston argued that severed mineral interests

whose present owners cannot be ascertained create a title

problem which hinder mineral development.“ The Indiana

Mineral Lapse Act was proposed and drafted with the

intent of changing the common law in Indiana as it applied

to severed mineral interests in an attempt to place the

severed mineral interests back into the stream of com-

merce,*°

For purposes of this argument, a challenge is not made

to this asserted public purpose behind the Act, although

a strong difference of opinion exists as to the need for

such legislation. See Outerbridge, Missing and Unknown

Mineral Owners, (1979) 25 Rocky Mtn. Min. L. Inst., 20-1,

16Polston, Legislation, Existing and Proposed, Concerning

Marketability of Mineral Titles, 7 Land and Water L. Rev. 73

(1972), see footnote 59, page 90.

177d.

10 d.

197d, at 74.

207d, at 74.

20-57. However, this case does challenge the means and

methods used to accomplish this purpose as not complying

with the constitutional dictates of due process, the contract

clause and equal protection.

III. RELEVANT PRINCIPLES OF INDIANA

MINERAL LAW

As previously stated, it has long been held at common

law in Indiana, as in all common law jurisdictions, that a

separate legal mineral estate or a separate interest in

minerals may be created independent of the ownership of

the land itself. Heller v. Dailey, (1902) 28 Ind. App. 555,

63 N. E. 490. This principle as it applied to oil and gas

interests in land was also codified by the Indiana legisla-

ture in Indiana Code 32-5-7-3.2"_ The severance of the min-

erals from the surface creates two estates, 2 of equal dig-

nity, each a freehold estate of inheritance that may be

Indiana Code 32-5-7-3. Nature of Estates. — Interests in the

oil and gas in or on or under or that may be taken from beneath the

surface of lands lying within the state may be created for life,

for a term of years, or in fee, in such manner and to such extent

as are all other interests in real estate; and title to such estate

may be vested in one or more persons, by sole ownership, tenancy

in common, joint tenancy, tenancy by the entireties, or in such

other manner as may be now or hereinafter recognized in the law

of this state. Such interests or estate shall be freely alienable, in

whole or in part, and in like manner as are other interests in real

estate.

a Indiana Code 32-5-7-3. Also, the Supreme Court of Indiana

in its opinion, Joint Appendix pages 38 to 39, stated:

Interests or estates in oil, gas, coal and other minerals ly-

ing beneath the surface of the land are interests in real estate

for our purposes here, and as such are entitled beyond question

to the firmest protection of the Constitution from irrational

state action. They are vested property interests separate and

distinct from the surface ownership.“

conveyed separately thereafter.2* The severed mineral

_ estates are considered to be interests in real property.“

Not only is it true that separate legal mineral estates

may be created in all the minerals on, in or under par-

ticular parcels of land, Indiana has further held that coal

and other solid minerals are corporeal hereditaments.

Heller v. Dailey, supra, 63 N. E. at 492-493; Monon Coal

Company v. Riggs, (1944) 115 Ind. App. 236, 56 N. E. 2d

672, 57 N. E. 2d 598; Halbert v. Hendricks, (1950) 121 Ind.

App. 43, 95 N. E. 2d 221; Board of Commissioners of

County of Sullivan v. Heap, (1973) 115 Ind. App. 633, 294

N. E. 2d 182. At common law, corporeal hereditaments

cannot be abandoned.“ Even if this was a property inter-

est which could be abandoned, e.g. an incorporeal heredi-

tament, there must be a concurrence of the intention to

abandon the property and actual relinquishment of the

property before an abandonment would occur. Schaffner

v. Benson, (1929) 90 Ind. App. 420, 166 N. E. 881; Hoepp-

ner v. Slagle, (1967) 141 Ind. App. 622, 231 N. E. 2d 51.

It has further been held under Indiana law that mere non-

usage does not show an intention to abandon. Simpkin v.

New York Central Railroad Company, (1966) 138 Ind. App.

668, 214 N. E. 2d 661.

In addition, it has been held that a severed mineral

estate cannot be obtained by adverse possession of the sur-

face alone, and that mere nonusage of the minerals does

not terminate the severed mineral estate. McBeth v. Wet-

night, (1914) 57 Ind. App. 47, 106 N. E. 407, 410.

28Indiana Code 32-5-7-3.

%47d.; see also Heller v. Dailey, supra.

*5Polston, Legislation, Existing and Proposed, Concerning

Marketability of Mineral Titles, 7 Land and Water L. Rev. 73

(1972).

Therefore, prior to the effective date of the Indiana

Mineral Lapse Act, being September 2, 1972, the severed

mineral interest would not have been lost by the owners of

the severed minerals, Eden H. Pond and Edna H. Bobe, on

the theory of adverse possession or abandonment, Further-

more, at the time the mineral interest was reserved, being

March 1, 1954, (Joint Appendix, pages 10 and 11) there

was no common law or statutory requirement that use be

made of the mineral interest in order to preserve the

interest.

While the Indiana Mineral Lapse Act does not use lan-

guage of abandonment as is the case in some dormant min-

eral acts of other jurisdictions,” it creates in effect a new

criterion for abandonment, with retroactive application, re-

quiring the owner of the vested mineral interest to make

use of the mineral interest or file a statement of claim in

order to avoid the presumption that the severed mineral

interest was abandoned. Therefore, in the present case, the

owners of the severed mineral interest, Eden H. Pond and

Edna H. Bobe, who had no contractural, statutory, or com-

mon law obligation to use their mineral interest when that

interest was created, find themselves in peril of losing this

valuable, vested mineral interest in real property, by a

statute which retroactively places an obligation on them to

make a statutorily defined use of the property or file a

statement of claim, without any notice or hearing being

provided them to challenge the legitimacy of the lapse.

20 III. Ann. Stat., ch. 30, § 197 (Smith-Hurd Supp. 1980); Mich.

Comp. Laws Ann., § 554.291 (1967); Neb, Rev, Stat. § 57-229

(1978).

IV. THE INDIANA MINERAL LAPSE ACT UNCON-

STITUTIONALLY TAKES PROPERTY WITHOUT

DUE PROCESS PROCEDURES BEING SATISFIED

Under the Indiana Mineral Lapse Act, persons who ac-

quired mineral interests long before its passage, as did

appellants herein, were automatically deprived of those in-

terests if they had not performed certain specified acts dur-

ing the 20 year period prior to the statute’s passage and if

they thereafter failed to register their interest in the prop-

erty in the ensuing two years. Thus, the Indiana statute

applies retroactively to property interests created prior to

its passage. The difficulty or ease of performing those acts

is of no significance here, because the statute provides no

notice to mineral interest holders as to what is expected of

them. It similarly provides no opportunity for them to

appear in any forum, administrative or judicial, to declare

their interest in their property or to show that they would

have met the statute’s requirements had they known of

them. It does not even give them an opportunity to show

that they did in fact meet the requirements of the Act.

As they did in the court below and as they reiterated in

their opposition to appellants’ jurisdictional statement, ap-

pellees will doubtless argue in this Court that the Indiana

Mineral Lapse Act, as well as other similar statutes re-

cently passed by other states, are necessary measures in an

age of energy scarcity. Appellees will contend, as they

have before, that the existence of severed mineral interests

impairs the development of oil, gas, coal, and other re-

sources, which could be more expeditiously extracted if

clear title to such resources were conveyed to surface

owners.

Again, we do not challenge these arguments, because we

recognize that this Court is not the proper place to debate

the wisdom of a state statute. See e. g., North Dakota State

Board of Pharmacy v. Snyder's Drug Store, Inc., (1973)

414 U. S. 156, 164-167, 94 8. Ct. 407, 38 L. Ed. 2d 379. Our

quarrel here is with the procedural aspects of the statute—

i. e., the absence of any notice or hearing associated with its

operation. At a time when this Court has required the

States to provide notice and an opportunity to be heard

even with respect to such matters as the temporary inter-

ruption of service provided by a public utility, Memphis

Light, Gas d Water Division v. Craft, (1978) 436 U. S. 1,

98 S. Ct. 1554, 56 L. Ed. 2d 30, it seems inconceivable that

a state can deprive a person of a fee interest in real estate—

the very core of the property rights protected by the due

process clause—and yet fail to afford any notice or oppor-

tunity to be heard. See also Matthews v. Eldridge, (1976)

424 U. S. 319, 325 n.4, 96 S. Ct. 893, 47 L. Ed. 2d 18; Gold-

berg v. Kelly, (1970) 397 U. S. 254, 90 S. Ct. 1101, 25 L. Ed.

2d 287. Indeed, as we show in the following section, the In-

diana statute’s impact upon a mineral interest is so perva-

sive as to constitute a taking, which a state can achieve only

if it observes the procedures required by the Fifth and

Fourteenth Amendments.

A. The Act Takes Property Without Providing an Ade-

quate Opportunity to Protect the Property Interest and

Without Providing for Compensation.

The taking clause of the Fifth Amendment has long been

recognized by this court as a limitation upon the power of

the States:

The pertinent words of the Fifth Amendment of the

Constitution of the United States are the familiar “nor

shall private property be taken for public use, with-

out just compensation.” That prohibition, of course,

applies against the States through the Fourteenth

Amendment.

Webb’s Fabulous Pharmacies, Inc. v. Beckwith, (1980)

—— U. S. 101 S. Ct. 446, 450, 66 L. Ed. 2d 358. See

Chicago, B. d O. R. Co. v. Chicago, (1897) 166 U. S. 226,

239, 241, 17 S. Ct. 581, 41 L. Ed. 979.

The Indiana Mineral Lapse Act unquestionably affects

a taking of private property. It takes the title to the prop-

erty of one person and gives it to another because the State

believes this transfer of ownership will more nearly con-

form with the State’s policies.

There is no issue here of a “regulatory taking” where

courts are asked to perform the often difficult task of estab-

lishing the line between regulation of the use of property

and taking. See, e.g., San Diego Gas & Electric Co. v. San

Diego, No. 79-678, slip op. at 14, n.15, (Brennan, Stewart,

Marshall & Powell, JJ., dissenting). Here, the statute

takes, in the words of Andrus v. Allard, (1979) 444 U. S. 51,

66, 100 S. Ct. 318, 62 L. Ed. 2d 210, the “full ‘bundle’ of

property rights” possessed by a mineral estate owner, not

merely “one ‘strand’ of the bundle.” In prohibiting the

subsurface owner’s “right to exclude” the surface owner

from access to any oil, gas, coal, or other minerals under-

lying the real estate, it takes what is “universally held to

be a fundamental element of the property right [that] falls

within this category of interests that the Government can-

not take without compensation.” Kaiser Aetna v. United

States, (1979) 444 U. S. 164, 179-10, 100 S. Ct. 383, 62 L. Ed.

2d 332 (footnote omitted).

27Indeed, the Indiana statute goes beyond the taking condemned

in Kaiser Aetna, since it gives the surface owner the right to ex-

clude the mineral estate holder from the use of his own property.

Because the taking here is so clear-cut, relatively few

modern cases are on point, there being only a limited num-

ber of cases that involve the taking of every vestige of

ownership. But see Armstrong v. United States, (1960)

364 U. S. 40, 80 S. Ct. 1563, 4 L. Ed. 2d 1554. However, a

number of cases that involve lesser invasions of property

rights caused by the regulation of property demonstate

a fortiori the unconstitutionality of the Mineral Lapse Act.

Pennsylvania Coal Co. v. Mahon, (1922) 260 U. S. 393,

43 S. Ct. 158, 67 L. Ed. 332, recently described by this Court

as the “leading case” in this area,** is instructive. Mahon

also dealt with severed mineral interests and the conflicting

claims of surface owners. There, a Pennsylvania statute

prohibited the mining of coal by a mineral estate owner, if

such activities threatened to cause subsidence that might

endanger the surface owner. Although recognizing that the

State could be concerned with public safety under such cir-

cumstances, the Court struck down the Pennsylvania stat-

ute, because “[t]o make it commercially impracticable to

mine certain coal has very nearly the same effect for con-

stitutional purposes as appropriating or destroying it.”

Id. at 414. Here, of course, the coal, oil or gas of the

mineral estate owner has been appropriated and given to

the surface owner.

Although rejecting taking claims advanced by the prop-

erty owner, Penn Central Transportation Co. v. City of

New York, (1978) 438 U. S. 104, 98 S. Ot. 2646, 57 L. Ed.

631, also supports the position of appellants here. In

that case, the Court idenified “several factors that have

28Penn. Central Trans. Co. v. New York City, (1978) 438 U. 8.

104, 127, reh. denied, 439 U. S. 883. See also San Diego Gas d

Electric Co. v. San Diego, No. 79-678 (March 24, 1981), slip. op.

at 13-14 (Brennan, Stewart, Marshall & Powell, JJ., dissenting).

particular significance” in determining whether Government

activity constitutes a taking. Id. 438 U. S. at 124. As the

first such factor, the Court referred to “the economic im-

pact of the regulation on the claimant, and, particularly,

the extent to which the regulation has interferred with dis-

tinct investment-backed expectations. .” Id. In the

instant case, the Indiana statute destroys a property inter-

est that is created solely for the pursuit of “investment-

backed expectations.”

The second factor referred to by the Court in Penn

Central was drawn from

.. « Decisions in which this Court has dismissed tak-

ing challenges on the ground that, while the challenged

government action caused economic harm, it did not

interfere with interests that were sufficiently bound up

with the reasonable expectations of the Claimant to

constitute property for Fifth Amendment purposes.

Id. at 124-25,

Once again, this factor highlights the nature of the taking

in this case. The lower court did not dispute that the

mineral interest destroyed by the Indiana statute consti-

tutes “property” as that term is used in both the Fifth and

Fourteenth Amendments. To the contrary, the Indiana

Supreme Court declared that the mineral interests affected

by the challenged legislation are

. interests in real estate for our purposes here,

and as such are entitled beyond question to the firmest

protection of the Constitution from irrational state

action. They are vested property interests separate

and distinct from the surface ownership. The State

has no power to deprive an owner of such an interest

without due process of law. They are entitled to the

same protection as are fee simple titles. They are

themselves of great utility and benefit to the society as

a means of facilitating the development of natural re-

sources. (Joint Appendix, page 39)

As an illustration of the final factor, the Court in Penn

Central referred to “instances in which a state court rea-

sonably concluded that health, safety, morals or our general

welfare would be promoted by prohibiting particular con-

templated uses of land,” citing “zoning laws” as the “classic

example” of the type of state regulation that usually pass

constitutional muster. Id. 438 U. S. at 125. The Indiana

statute cannot be so justified. Rather than prohibiting

“particular contemplated uses of land,” it completely de-

stroys all of the mineral estate holder’s interests. More-

over, it conveys these interests to the surface owner so

that he or she may engage in precisely the same activity as

the mineral estate owner—extraction of oil, gas, coal, or

other minerals.

The principles of Mahon and Penn Central have been

recently embraced by four or perhaps five members of this

Court in San Diego Gas d Electric Co. v. City of San

Diego, supra, No. 79-678 (March 24, 1981). In the dis-

senting opinion authored by Justice Brennan, joined by

Justices Stewart, Marshall, and Powell, and described by

Justice Rehnquist as stating principles with which he

“would have little difficulty in agreeing” had he accepted

the dissenting view that the opinion below was a final

judgment ripe for Supreme Court review, these members

of the Court agreed that a “ ‘taking’ may also occur with-

out a formal condemnation proceeding or transfer of fee

simple.” Slip op. at 15-16 (Brennan, Stewart, Marshall &

Powell, JJ., dissenting). The dissent continues:

In service of this principal, the Court frequently has

found “takings” outside the context of similar con-

demnation proceedings or transfer of fee simple, in

eases where Government action benefiting the public

resulted in destruction of the use and enjoyment of

private property. Id. at 16.

On this basis, these Justices determined that a zoning

ordinance of the City of San Diego that restricted the

property owner’s rights to construct a nuclear power plant

on its property constituted a taking for which the govern-

ment owed the utility just compensation.*®

The principles fairly extracted from Mahon, Penn

Central, and San Diego Gas d Electric, as well as other

cases that condemn regulation that rises to the level of a,

taking, apply a fortiori here. In such cases nominal title

is left in the property owner, but the owner is prevented

from productively using its property. Here, in order to

effect what Indiana considers to be a valid public policy,

title is actually removed from the mineral estate owner and

is transferred to the surface owner.

2°This recognition by the dissenters in San Diego Gas & Electric

that a taking can occur through the exercise of a Government’s

regulatory authority, rather than through the explicit invocation of

eminent domain powers, highlights a further error of the Indiana

court. In reversing the trial court’s judgment that the Indiana

statute constitutes a taking of property without just compensation,

the court stressed that ‘‘the state through this statute is not

actually taking the mineral interest for its own use and benefit.“

406 N. E. 2d at 631. The Court went on to observe that ‘‘the

Mineral Lapse Act does not involve the injury to private property

through conduct or activity of Government agents or others hav-

ing or exercising the power of eminent domain.“ Id. The dis-

senters in San Diego Gas & Electric clearly rejected this view of

the law of just compensation and eminent domain. While the

Indiana Supreme Court’s error in this regard was limited to its

discussion of the Indiana Constitution, there can be no question

but that it also permeated its view of the federal taking issues

raised below.

That the direct beneficiaries of the Indiana statute are

private parties, rather than the state itself, does not make

it any less a taking. The same was true in Mahon. More-

over, the Court’s recent opinion in Northern Cheyenne

Tribe v. Hollowbreast, (1976) 425 U. S. 649, 96 S. Ct. 1793,

48 L. Ed. 2d 274, was premised upon the assumption that

the transfer of title to severed mineral interests from one

group of private parties to an Indian tribe pursuant to

federal legislation would constitute a taking by the United

States, if the person from whom these rights were taken

had a vested interest in them. See Id. at 651-52. And in

Regional Rail Reorganization Act Cases, (1974) 419 U. 8.

102, 148-155, 95 S. Ct. 335, 42 L. Ed. 2d 320, this Court

recognized that the statutorily directed transfer of rail-

road properties to Conrail—“basically a private, not a

governmental, enterprise,” Id. at 152—could “indeed be a

taking of private property for public use.” Id. at 155. See

also Berman v. Parker, (1954) 348 U. S. 26, 33-34, 75 S. Ct.

98, 99 L. Ed. 27.

Finally, it is clear that the Indiana Mineral Lapse Act

could not be justified as constituting a taking of property

for private use only, since this type of taking is strictly

prohibited by the due process clause. Missouri Pacific R.

Co. v. Nebraska ex rel. Board of Transportation, (1896)

164 U. S. 403, 417, 17 S. Ct. 130, 41 L. Ed. 489, 495. The

due process clause requires a public purpose in the state

legislation before there can be a taking permissible under

the due process clause. However, as discussed above, it

clearly appears from prior decisions of this Court that the

taking of private property caused by the Indiana Mineral

Lapse Act would be considered a public use requiring just

compensation, as well as other due process protections of

notice and hearing.

B. Alternative Constitutionally Approved Methods

Exist to Achieve the Goals of the Act.

It is clear that the Indiana Mineral Lapse Act attempts

to satisfy public policy needs in an unconstitutional fashion

by taking property without providing notice, or an ap-

portunity for the severed mineral interest owner to be

heard regarding the lapse, or providing just compensation

for the taking. The case law which this Court has de-

veloped in reviewing state escheat statutes reveals a con-

stitutional path to achieve the policies underlying the

Mineral Lapse Act and other similar legislation.

This Court has reviewed a number of cases involving

state escheat statutes. See Standard Oil Co. v. New

Jersey, (1951) 341 U. S. 428, 71 S. Ct. 822, 95 L. Ed. 2d

1078; Anderson National Bank v. Luckett, (1944) 321 U. 8.

233, 88 L. Ed. 692; Security Savings Bank v. State of

California, (1923) 263 U. S. 282, 44 S. Ot. 108, 68 L. Ed.

301. In these cases, various statutes provided that certain

“dormant” property—inactive bank accounts, unclaimed

dividends, or the like—would escheat to the state after the

passage of a fixed number of years of “dormancy.” In

each case, however, this Court has made it clear that

escheat statutes must provide notice and an opportunity

for the absent owner to appear and declare his or her

interest in the property at issue. Thus, in Anderson Na-

tional Bank, supra, the Court stated, “[O]ur inquiry must

be directed to the question whether the procedure by which

the state undertakes to acquire the depositors’ right to

demand payment of the deposits was upon adequate notice

to them and opportunity for them to be neard.“ 321 U. 8.

at 243. See also Security Savings Bank v. State of Cali-

fornia, supra, 263 U. S. at 287.

The notice and hearing requirement associated with

escheat both protects the interests of private parties and

promotes the States’ interest in unfettering forgotten or

abandoned property simply and imexpensively. If the

owner of a dormant bank deposit, for instance, responds to

the notice by appearing at the hearing to claim his in-

terest, title to the account is not transferred. If, however,

after provision of the best possible notice under the cir-

cumstances, see Mullane v. Central Hanover Bank d Trust

Co., 339 U. S. 306 (1950), no one appears to assert his or

her ownership or other claim to the funds, the State can

validly conclude that the property has been abandoned and,

can therefore order the transfer of the account without

the payment of compensation to the absent or defaulting

party. The transfer of the absent or defaulting parties’

property to the state under these circumstances does not

represent an unconstitutional taking of property without

just compensation any more than a default judgment

entered in an ordinary civil action involving title to real

estate. 8

The objective sought to be promoted by the Mineral

Lapse Act could similarly be achieved in a simple admin-

istrative or judicial proceeding, at the option of the State,

notice of which is provided by, as in Mullane, personal

notice to reasonably identifiable individuals and by pub-

lication to all others. If the owner of the mineral interest

appears and asserts a claim to the interest, the proceeding

could be terminated. If no one appears in response to the

notice, the interest could be transferred to an identifiable

owner on the ground that it has been abandoned. At the

same time, the default by the record owner of the mineral

interest means that no one will have appeared to whom

compensation must be paid. So not only would the objec-

tive of the Act be achieved, but the constitutional flaw

identified in the prior section would be rectified.

O. The Act Does Not Provide for Notice and Hearing

to Contest the Legitimacy of the Taking.

Even if this Court held that due process did not require

giving the severed mineral interest owner prior notice and

an opportunity to come forward and preserve his interest,

or be compensated for the loss of that interest, the Indiana

Mineral Lapse Act would still violate due process by its

failure to provide for notice and a hearing to the owner of

the severed mineral interest regarding the legitimacy of

the taking of the mineral interest. It was primarily be-

cause of this failure to provide notice and a hearing to the

owners of the mineral interests that the trial court found

the Act unconstitutional (Joint Appendix, page 35).

The Indiana Mineral Lapse Act makes no mandatory

provision for giving notice, or providing a hearing, at any

time, either before or after the taking of the severed

mineral interest. Rather, the Act provides for a pre-

emptory, automatic, self-executing and irremediable tak-

ing. Indiana Code 32-5-11-1 (Appendix A, page A-1),

states :

Any interest in coal, oil and gas, and other minerals,

shall, if unused for a period of twenty years be ex-

tinguished, unless a statement of claim is filed in ac-

cordance with section 5 hereof, and the ownership

shall revert to the then owner of the interest out of

which it was carved. (Emphasis added.)

Indiana Code 32-5-11-6 (Appendix A, page A-4), states:

Any person who will succeed to the ownership of any

mineral interest, upon the lapse thereof, may give

notice of the lapse of such mineral interest by pub-

lishing the same in a newspaper of general circula-

tion in the county in which such mineral interest is

located and, if the address of such mineral interest

owner is shown of record or can be determined upon

reasonable inquiry, by mailing within ten days after

such publication a copy of such notice to the owner of

such mineral interest. (Emphasis added.)

As can be seen, there is no requirement whatsoever

that notice be given to the owner of the mineral interest

prior to the lapse of the mineral interest. After the lapse

of the mineral interest, the successor in interest may give

notice to the mineral interest owner of the fact that the

mineral interest has already lapsed. However, even if

such notice is given after the lapse of the mineral interest,

there is nothing which the mineral interest owner can do

to preserve the interest. Therefore, the taking of the

mineral interest becomes final before any notice provision

of the Indiana Mineral Lapse Act applies, and then the

successor in interest has the option of giving notice of the

lapse or remaining silent.

The Supreme Court of Indiana, in reversing the trial

court’s decision that the Act violated procedural due

process protection, held that no hearing was necessary in

that the Act merely set forth the conditions which, when

existing, mandated the extinguishment of the mineral in-

terest. If there was a dispute as to whether those condi-

tions did in fact exist, then a court could be called upon to

determine these facts. (Joint Appendix, page 41). The

view expressed by the Supreme Court of Indiana indicates

a fundamental misconception as to how the Act, in fact,

operates. Typically what occurs is that the successor in

interest—who is usually the surface owner—is aware of

the date the mineral severance was created. If more than

twenty years have passed since the severance, the successor

in interest will examine the County Recorder’s records or

have an abstract of title updated, in order to ascertain

whether any use of the minerals appears of record or

whether a statement of claim, pursuant to Indiana Code

32-5-11-4, has been filed. If no document appears of record

which indicates that use was miade of the mineral interest

within the last twenty years or if no statement of claim

was filed, then the successor in interest must make a deter-

mination as to whether use has been made of the mineral

interest as provided for in the Act, Indiana Oode 32-5-11-1,

which might not appear of record. Such unrecorded uses

might include an unrecorded lease, a lease over 20 years

old but kept valid by production, or production of coal by

the owner of the severed mineral interest from a common

vein or seam. After making these factual determinations,

the successor in interest then asserts ownership of the

mineral interest based upon the severed mineral interest

owner’s failure to use the mineral interest or file a state-

ment of claim. Since the successor in interest does not

have to give notice of the extinguishment to the severed

mineral interest owner, he can immediately begin to use

the mineral interest by leasing or producing the minerals,

without the severed mineral interest owner ever being

made aware that someone is asserting ownership to the

mineral interest. In fact, some types of mineral produc-

tion, e.g. underground coal mining, may not even be ap-

parent to the owner of the severed mineral interest upon

inspection of the property.

Therefore, what the Act in, fact does, is make the suc-

cessor in interest—the individual who will directly benefit

by the lapse of the severed mimeral interest—the entity

responsible for determining whether or not a statutory use

has been made or a statement of claim filed pursuant to

the Act,

It is beyond question that the ownership of real estate

is a property interest protected by procedural due process.

Terrace v. Thompson, (1923) 263 U. S. 197, 44 S. Ct. 15,

68 L. Ed. 255. As discussed in a prior section in this brief,

the Indiana Mineral Lapse Act causes a taking of private

property. It has been held by this Court that even a

temporary deprivation of a property interest constitutes

a taking requiring procedural due process protection.

Fuentes v. Shevin, (1972) 407 U. S. 67, 92 S. Ct. 1983, 32

L. Ed. 556; North Georgia Finishing, Inc. v. Di- Chem, Inc.,

(1975) 419 U. S. 601, 95 S. Ot. 719, 42 L. Ed. 2d 751. While

the Indiana Mineral Lapse Act calls the transfer of prop-

erty a “lapse”, it certainly constitutes a significant taking

of property within the purview of the due process clause of

the Fourteenth Amendment. See North Georgia Finishing

v. Di-Chem, supra, 419 U. S. at 606.

It is one of the most fundamental rights in our system

of jurisprudence that before there can be a taking of

private property by the state it is necessary that notice

and a hearing be given. As was stated by this Court in

the case of Ochoa v. Hernandez y Morales, (1913) 230

U. S. 139, 33 S. Ot. 1033, 57 L. Ed. 1427, on 57 L. Ed. 1427,

1437:

Without the guarantee of “due process” the right of

private property cannot be said to exist, in the sense

in which it is known to our laws. The principle, known

to the common law before the Magna Charta was em-

bodied in that charter [2 Coke, Inst. 45, 50], and has

been recognized since the revolution as among the

safest foundations of our institutions. Whatever else

may be uncertain about the definition of the term “due

process of law” all authorities agree that it inhibits

the taking of one mam’s property and giving it to

another, contrary to settled usages and modes of pro-

cedure, and without notice or an opportunity for a

hearing.

More recently, beginning with Mullane v. Central Han-

over Bank and Trust Company, (1950) 339 U. S. 306, 70

S. Ct. 652, 94 L. Ed. 865, this Court has again stated the

minimum requirements of procedural due process:

Many controversies have been raised about the cryptic

and abstract words of the due process clause but there

can be no doubt that at a minimum they require that

deprivation of life, liberty or property by adjudica-

tion be preceded by notice and opportunity for a

hearing appropriate to the nature of the case. 339

U. S. at 313,

While this court has held that it may not be necessary to

have a predeprivation hearing, there must at least be a

prompt postdeprivation hearing to correct any adminis-

trative error. See Mackey v. Montrym, (1979) 443 U. S. 1,

13, 99 S. Ct. 2612, 61 L. Ed. 2d 321, Matthews . Eldridge,

(1976) 424 U. S. 319, 334, 96 S. Ct. 893, 47 L. Ed. 2d 18.

Once it is determined that there has been a taking of

the property interest, and that due process protections

apply, the inquiry becomes what process is due to proteet

the erroneous deprivation of that interest. Mackey v.

Montrym, supra, 443 U. S. at 10. There are several factors

which have been used by this court to resolve this inquiry:

First, the private interest that will be affected by the

official action; second, the risk of an erroneous depri-

vation of such interest through the procedures used,

and the probable value, if any, of additional or sub-

stitute procedural safeguards; and finally, the govern-

ment’s interest, including the function involved and the

fiscal and administrative burdens that the additional

or substitute procedural requirement would entail.

Matthews v. Eldridge, (1976) 424 U. S. 319, 335, 96 S. Ct.

893, 47 L. Ed. 2d 18.

In the present case, the private interest affected by the

state legislation is the ownership in fee simple of a mineral

estate, the value of which could be quite substantial. The

risk of erroneous deprivation of the severed mineral in-

terest under the present statutory scheme is great inasmuch

as the entity making the factual determinations is the suc-

cessor in interest, the very individual who will most directly

benefit by the lapse of the mineral interest. Furthermore,

it would be of substantial value in preventing an erroneous

deprivation of the mineral interest if the person making

the determination as to whether a use had been made or a

statement of claim filed was a disinterested party. Finally,

the fiscal and administrative burden on the government in

providing notice and a hearing regarding the lapse of the

mineral interest, would be inconsequential in that the pres-

ent state judicial system and judges could be employed to

conduct the hearing. While there are no statistics on the

number of severed mineral interests which would be sub-

ject to review, it would seem very unlikely that this would

place any serious burden on the existing court dockets.

The test set forth in Matthews v. Eldridge, supra, con-

cerned itself with whether a predeprivation hearing was

required by due process, or whether a prompt postdepriva-

tion hearing would suffice. The Mineral Lapse Act provides

for no hearing whatsoever, and is therefore far more

defective.

The Supreme Court of Indiana in its opinion in this

case held that if there was a dispute regarding the facts

as to whether a lapse had occurred, notice and a hearing

would be provided by resorting to a court for a determina-

tion of the controversy. (Joint Appendix, pages 41 and 42).

This court has repeatedly rejected the argument that com-

mon law remediys of pretermination injunction or a post-

termination suit for damages is adequate for due process

purposes. Memphis Light, Gas and Water Division v.

Craft, supra, 98 S. Ct. at 1565-1566, n. 26; Fuentes v. Shevin,

(1972) 407 U. S. 67, 85, 92 S. Ct. 1983, 32 L. Ed. 2d 556.

Furthermore, speed and efficiency does not justify abroga-

tion of due process rights. As the Court stated in Stanley

v. Illinois, (1972) 405 U. S. 645, 92 S. Ct. 1209, 31 L. Ed. 551:

The establishment of prompt efficacious procedures to

achieve legitimate state ends is a proper state interest

worthy of cognizance in constitutional adjudication.

But the Constitution recognizes higher values than

speed and efficiency. Indeed, one might fairly say of

the Bill of Rights in general, and the Due Process

Clause in particular, that they were designed to protect

the fragile values of a vulnerable citizenry from the

overbearing concern for efficiency and efficacy that may

characterize praiseworthy government officials no less,

and perhaps more, than mediocre ones. 405 U. S. at

656.

Providing notice and a hearing to the owner of the

severed mineral interest prior to the lapse of the interest

would not impair the effectiveness of dormant mineral

legislation. As previously discussed, the main purpose of

the Indiana Mineral Lapse Act is to transfer ownership of

severed mineral interest from persons who have left the

area and cannot be located to the owner of the interest out

of which it was carved, who presumably can be more readily

located. However, as the present case indicates, the In-

diana Mineral Lapse Act not only transfers the severed

mineral interest from owners who have left the area and

cannot be located, but also transfers severed mineral in-

terests from owners who are still living in the area and

whose whereabout are known. Edna H. Bobe and Eden

H. Pond, the owners of the severed mineral interest in the

present case, were both living in an area near the subject

property and their addresses were known to the successor

in interest, Ulysses G. Walden, Jr., and Carolyn Sallee

Walden (Joint Appendix, page 7). Furthermore, Con-

solidation Coal Company was able to ascertain and locate

the owners of the severed mineral interest and obtain a

coal lease from them. (Joint Appendix, pages 6 and 7).

Therefore, in the present case, the Indiana Mineral Lapse

Act — by not providing notice and a hearing to the severed

mineral interest owners giving them an opportunity to file

a statement of claim or prove that a use had been made

within the statutory framework — actually impedes mineral

development by creating confusion as to the ownership of

the mineral interest.

Irrespective of other constitutional deficiencies, the In-

diana Mineral Lapse Act could quite simply be modified

to satisfy procedural due process notice and hearing re-

quirements. Essentially, all that need be done is make

the notice requirement of section 6 of the Act (Appendix

A, page 49) applicable to all severed mineral interest

owners. The statute would then provide that every severed

mineral interest owner, not just those with ten or more in-

terests, must be given notice — either actual notice, or if

their whereabout are unknown, by publication — and they

would have sixty days to record a statement of claim after

such notice is given. Furthermore, a hearing could be set

with the county court sometime after the expiration of the

sixty day period in which a determination would be made

as to whether a statement of claim was filed or a statutory

use made of the severed mineral interest. This simple

statutory change would still accomplish the principal pur-

pose of the statute by transferring severed mineral inter-

ests from owners who cannot be located and who have left

the area, but at the same time allow a severed mineral

interest owner who cun be found an opportunity to preserve

his interest and/or challenge the lapse of the interest.

D. The Act Is Not Analogous to Remedial Types

of Legislation.

In the courts below, the Appellees have argued that the

Mineral Lapse Act is analogous to remedial legislation such

as statutes of limitation, recording acts and marketable

title acts. The Supreme Court of Indiana relied heavily

on the analogy of the Mineral Lapse Act with statutes of

limitations in support of its finding that the Mineral Lapse

Act was constitutional. (Joint Appendix, pages 42 to 45).

An examination of other remedial types of legislation re-

veals the substantial differences which exist between them

and dormant mineral statutes.

With regard to statutes of limitation, this Court has

noted:

Statutes of limitation find their justification in neces-

sity and convenience rather than in logic. They repre-

sent expedience rather than principles. They are

practical and pragmatic devices.

Chase Securities Corporation v. Donaldson, (1945) 325 U. S.

304, 314, 65 S. Ct. 1137, 89 L. Ed. 1628. Statutes of limi-

tations are devices to protect the integrity of the judicial

process by excising stale claims and thereby preventing

citizens from confronting the unfairness of defending

claims long after evidence has disappeared and memories

faded. Id.; see also Levy v. Stewart, (1870) 78 U. S. 244,

11 Wall 244; United States v. Kubrick, (1979) 444 U. 8.

111.“ A mineral lapse statute cannot be so justified. To

the contrary, by making title to a mineral interest depend

upon evidence of the level of activity and development of a

mineral estate that may be 15-20 years old, and often not

of public record, the Indiana Court encourages litigation

of factual issues that may be presently diffeult to prove.

Furthermore, the import of the Mineral Lapse Act is sub-

stantive — the transfer of a mineral estate to persons whom

the state believes are more likely to develop those resources

— rather than procedural. As the Indiana Court admitted,

“the Act seeks to remedy a situation thought to retard

economic activity vital to the welfare of local communities

and the general public as well.” (Joint Appendix, page 48).

The Michigan Supreme Court made a similar statement

in its recent case upholding that State’s dormant mineral

act :

None of the provisions of the Act purport to be con-

cerned with the owner’s intent to abandon * * *

rather, the Act is designed to increase the market-

ability and development of severed mineral interests

“The Indiana Supreme Court passed over another important

distinction between the Mineral Lapse Act and statutes of limita-

tions. The Mineral Lapse Act operates upon a property interest,

not a mere cause of action. Under Indiana law, the mineral estate

owner has no cause of action that he can pursue against the surface

owner. Thus, his failure to file a claim cannot be taken as a waiver

of whatever rights he might have against the surface owner. This

distinction, which was found to be persuasive by other courts re-

viewing similar dormant mineral legislation, see Wilson v. Bishop,

(1980) 82 III. 2d 364, 412 N. E. 2d 522; Contos v. Herbst, (Minn.

1979) 278 N. W. 2d 732, 745, was rejected out of hand by the

Indiana Supreme Court.

by creating a rule of substantive law. . Bickle v.

Fairchild, (1980) 410 Mich, 21, 299 N. W. 2d 704, 713.

“nus, the Indiana statute and other similar mineral lapse

acts cannot be saved by analogy to statutes of limitation.

Similarly, Indiana’s Mineral Lapse Act is not like

marketable title acts or other title recordation statutes.

This type of legislation, as with statutes of limitation,

serves a narrower purpose and operates on different in-

terest than does the Mineral Lapse Act. Mineral title

acts “essentially provide that ‘when one person has a clear

record title to land for a designated period (which varies

from 20-50 years), inconsistent claims or interests which

arose before that period are extinguished unless the ad-

verse claimant seasonably records a notice of this claim

or interest'.“ Spies, Annual Survey of Virginia Law, Prop-

erty, 51 Va. Rev. 1621, 1660, n. 61 (1965). See also Anno.,

71 A. L. R. 2d 846, “Marketable Title Statutes” (1960).

Faced with competing or potentially competing claims to

the same property, marketable title legislation removes

ancient or technical impediments to title in favor of the

owner of clear record title to the same property. Market-

able title acts recognize that an ancient adverse claim to

property (the Indiana Marketable Title Act, I.C, 32-1-5-1

through 32-1-5-10, designates a period of 50 years) has

probably been satisfied or a decision was made not to exer-

cise the contingent adverse claims through litigation. A

marketable title act sorts out and decides the claims on an

effective basis.“!

*10Qne of the leading authorities on marketable title legislation

has warned against the overly broad application of marketable

title principles to inapposite land use problems, See P. Bayse,

Clearing Land Titles, § 216, at 317 (1953).

The Mineral Lapse Act does not purport to decide be-

tween competing claims to the same property. The Mineral

Lapse Act by interposing requirements for certain forms

of mineral extraction activities, registration, and the like,

actually creates conflicting claims between surface owners

and the severed mineral interest owners which would not

otherwise arise. Finally, it is clear that the Indiana Act

cannot be upheld by reference to simple recording acts.

They are justified under essentially the same rationale as

marketable title acts. Under a recording act, a subsequent

bona fide purchaser’s title to property is deemed superior

to that of a prior purchaser who failed to record the deed

or other instrument evidencing the transaction upon which

he bases his claim of ownership. They are intended to pro-

tect innocent parties who purchase property. The person

purchasing property without actual or constructive notice

or knowledge of an adverse claim to the property should

not have to take subject to that adverse claim. Moreover,

the recording act does not take the entire “bundle of rights”

from the prior purchaser; he is left with a cause of action

against the seller. Compare Penn Central Transportation

Company v. New York City, supra, 488 U. S. at 137. The

Mineral Lapse Act, by contrast, deprives owners of mineral

interests of every vestige of ownership.

In sum, Indiana has purported to encourage the develop-

ment of oil, gas and coal through the taking of private

property without observing the procedural and substantive

safeguards required by the Constitution. By upholding the

legislature’s choice of means in this case, the Indiana Su-

preme Court has “forgotten that a strong public policy to

improve the public condition is not enough to warrant

achieving the desire by a shorter cut than the constitutional

way of paying for the change.” Pennsylvania Coal Com-

pany v. Mahon, supra, 260 U. S. at 416.

V. THE INDIANA MINERAL LAPSE ACT IMPAIRS

THE OBLIGATIONS OF CONTRACTS BY DE-

STROYING A VESTED CONTRACTUAL RIGHT.

The Constitution of the United States, Article I, Sec-

tion 10, states in paragraph 1:

No state shall . pass any bills of attainder,

ex post facto law, a law impairing the obligations of

contracts, or grant any title of nobility.

The Indiana Mineral Lapse Act provides for the trans-

fer of a severed mineral interest from the owner of that

interest to the person, or his successors or assigns, who

contractually agreed to the original severance of the min-

eral interest. In the present case, the appellants, Eden H.

Pond and Edna H. Bode, in the Warranty Deed dated

March 1, 1954, created a severed mineral estate by reserva-

tion (Joint Appendix, pages 10 and 11). The Indiana Min-

eral Lapse Act destroys this contractual reservation by

transfering the mineral interest to the very person, or his

successors or assigns, who had originally agreed to the

severance (Joint Appendix, pages 5 to 7).

In two recent cases this court has reasserted that the

contract clause is not without meaning in modern constitu-

tional jurisprudence. In the case of United States Trust

Company v. New Jersey, (1977) 432 U. S. 1, 97 S. Ct. 1505,

52 L. Ed. 2d 92, this court held unconstitutional a 1974

New Jersey statute which retroactively repealed a 1962

covenant limiting the ability of the Port Authority of New

York and New Jersey to subsidize rail transportation with

revenue pledged as security for bonds, because it consti-

tuted an impairment of the state’s obligation of contract

with the bond holders. Allied Structural Steel Company v.

Spannaus, (1978) 438 U. S. 234, 98 S. Ct. 217, 57 L. Ed. 2d

727, rehearing denied 99 S. Ct. 233, involved a Minnesota

statute which subjected private employers of 100 or more

employees, who provided pension benefits under qualified

plans, to a “pension funding charge” upon termination of

the plan if the pension funds were not sufficient to cover

full pensions for all employees who had worked at least ten

years. This court struck down the statute on the basis that

it impaired the company’s contractual obligation to its em-

ployees under the pension agreement with them. Further-

more, the Supreme Court of the State of Nebraska in the

case of Wheelock v. Heath, (1978) 201 Neb. 835, 272 N. W.

2d 768, held that the Nebraska dormant mineral legislation

was unconstitutional in part because it violated the contract

clause of the United States Constitution.

Under Indiana law, a grant of the right to the coal estate

conveys with it as a necessary incident to the right of

ownership, the right to use such means and processes for

mining and removing the coal from the premises as may be

reasonably necessary. Ingle v. Bottoms, (1902), 66 N. E.

160, 160 Ind. 73. It has also been held under Indiana law

that the execution, delivery and acceptance of a deed con-

taining a reservation, constituted a contract between the

parties thereto. City of Elkhart v. Christiana Hydraulics,

(1945) 223 Ind. 242, 59 N. E. 2d 353. A reservation in a

conveyance, whereby a right is reserved in the grantor,

carries with it all the usual and necessary incidents and

appurtenances of such right. It carries with it all that is

necessary for the beneficial use and full enjoyment of such

reserved right. City of Elkhart v. Christiana Hydraulics,

supra, 59 N. E. 2d at 357. Applying these principles to the

present case, when Eden Pond and Edna Bobe reserved the

minerals under the subject property in the deed of March 1,

1954, they also reserved implied rights that were necessary

for the beneficial use and enjoyment of the mineral reserva-

tion. The deed with the reservation constituted a con-

tract between Edna Bobe and Eden Pond, Grantors, and

Ulysses Grant, and the successors and assigns of Ulysses

Grant, as Grantees, with certain on-going and continuing

obligations. The Indiana Mineral Lapse Act by causing the

severed mineral interest to revert to the owner of the in-

terest out of which it was carved totally destroys the

reservation and the rights appurtenant thereto.

While this Court has held that it is customary in review-

ing economic and social regulations for courts to defer to

the judgment of the legislature as to the reasonableness

and necessity of the legislation, private contracts are not

subject to unlimited modification under the police power.

United States Trust Company v. New Jersey, (1977) 431

U. 8. 1, 97 S. Ct. 1505, 52 L. Ed. 2d 92, at 109. While this

Court recognized in Allied Structural Steel Company v.

Spannaus, (1978) 438 U. S. 234, 98 S. Ct. 2716, 57 L. Ed.

727, that a state’s exercise of its police power is paramount

to any rights in the contracts between individuals, it noted:

If the contract clause is to retain any meaning at all

8 it must be understood to impose some limits

upon the power of a state to abridge existing contrac-

tual relations, even in the exercise of this otherwise

legitimate police power. 438 U. S. at 242.

Before examining the extent of the limits placed upon

the state’s power to abridge existing contractual relation-

ships, a preliminary determination that a contract has been

technically impaired is necessary. Home Building and

Loan Association v. Blaisdell, (1934) 290 U. S. 398, 54 S. Ct.

231, 78 L. Ed. 413. This seems to be easily satisfied in the

present case in that the mineral reservation, and its appur-

tenant rights, are not only impaired, but destroyed. The

next step in the inquiry was set out in Spannaus, supra,

438 U. S. at 244-245:

In applying these principles to the present case, the

first inquiry must be whether the state law has, in fact,

operated as a substantial impairment of a contractual

relationship. The severity of the impairment measures

the height of the hurdle the state legislation must clear.

Minimal alteration of contractual obligations may end

the inquiry at its first stage. Severe impairment, on

the other hand, will push the inquiry to a careful ex-

amination of the nature and purpose of the state legis-

lation.

After a severe impairment of the contract is found, a

careful examination of the nature and purpose of the state

legislation is necessary. Spannaus, supra, 438 U. S. at 245.

Five significant factors were set forth in the case of Home

Building and Loan Association v. Blaisdell, supra, 290 U. S.

at 245-247, regarding whether the legislation constitution-

ally impairs contracts. These factors were also utilized by

this Court in Spannaus, supra, 438 U. S. 242. These factors

are: (1) whether there was an emergency need for the

state legislation; (2) whether the legislation was enacted

to protect a basic societal interest and not merely a favored

group; (3) whether the relief was appropriately tailored to

the emergency that it was designed to meet; (4) whether

the conditions imposed were reasonable; and (5) whether

the legislation was limited to the duration of the emergency.

Applying the above factors, this Court in Spannaus,

supra, 438 U. S. at 248-249, found that the state law in

question was not enacted to protect a broad societal inter-

est but rather a narrow class. It also found that the legis-

lation imposed “a sudden, totally unanticipated, and sub-

stantial retroactive obligation upon the company to its

employees” without the desperate emergency economic con-

ditions of the 1930's.

Application of the court’s reasoning in Spannaus to the

Indiana Mineral Lapse Act in the present case leads to the

conclusion that the Act cannot withstand scrutiny under a

contract clause analysis. As in Spannaus, the Mineral

Lapse Act substantially alters the contractual relationship

between the record owner of the mineral interest and the

owner of the surface estate, by superimposing obligations

upon the mineral interest owner beyond those he had volun-

tarily agreed to undertake. Since the Indiana Mineral

Lapse Act effectively extinguishes traditional contractual

rights upon which individuals have placed great reliance in

the ordering of their business and personal affairs, the

“height of the hurdle” which this legislation must clear is

quite substantial. As in Spannaus, the impairment imposes

heavily on legitimate contractual expectations, which ex-

pectations did not include the substantial changes which

the Indiana Mineral Lapse Act caused.

In line with this court's mphasis in the Spannaus case

on the owner’s reasonable reliance on legitimate contrac-

tual expectations, Id. 438 U. S. at 246, the Indiana Mineral

Lapse Act destroys the reasonable expectations of the par-

ties to the original conveyance by retroactively imposing

obligations which neither party intended to be a part of the

contractual arrangement. There is nothing in the legisla-

tive history which indicates that the Act was meant to serve

an emergency need. It should be pointed out that the Act

was passed in 1971, which was prior to the energy crisis

created by the oil shortage in 1973. Furthermore, the

nature and the purpose of the Indiana Mineral Lapse Act

does not justify the severe impairment of contractual rights

which the Act causes. As can be seen by the present case,

the Indiana Mineral Lapse Act does not only serve to trans-

fer severed mineral interests from owners of the severed

minerals who cannot be located, but also serves to transfer

mineral interests from persons whose whereabouts are

known and can easily be located. The Indiana Mineral

Lapse Act destroys private property rights, which consti-

tute a basic societal interest, in favor of a limited class of

surface owners who otherwise possess no claim or right to

the mineral estate. Certainly, the nature and purpose of

this legislation cannot justfy this severe impairment of

contract.

VI. THE INDIANA MINERAL LAPSE ACT MAKES

A CLASSIFICATION WHICH DEPRIVES ONE

CLASS OF BASIC CONSTITUTIONAL RIGHTS

WHICH IS ALSO ARBITRARY AND CAPRICIOUS

The Fourteenth Amendment to the United States Con-

stitution states in Section 1:

No state shall . . . deny to any person within its

jurisdiction equal protection of the law.

As previously discussed in this brief, the Indiana Min-

eral Lapse Act makes no mandatory provision that notice

be given to the owner of the severed mineral interest re-

garding the lapse of the mineral interest. However, Indiana

Code 32-5-11-5, (Appendix A, page 48) being Section 5

of the Indiana Mineral Lapse Act, makes an exception to

the general absence of any notice requirement by requiring

that notice of the lapse of the mineral interest be given to

a special class of mineral interest owners to foreclose the

availability of a special remedy available only to that class.

Essentially, this exception provides that any owner of ten

or more mineral interests in a given county, who has filed a

statement of claim with respect to one or more of such

interests but who inadvertently fails to preserve one or

more of its interests, has sixty days after the giving of the

statutory notice of the lapse of the mineral interest in

which to file a claim to preserve the interests. Therefore,

the Indiana Mineral Lapse Act creates a classification which

favors a special interest group by requiring that, in certain

situations, they be given notice and an opportunity to file

a statement of claim prior to the lapse of their interests.

This small group, singled out by the legislature, is pro-

vided due process protection which enables them to protect

their property and contractual interests, while denying

similar protection to all the other severed mineral interest

owners who are in equal need of such protection.

This court has stated that when a state statutory classi-

fication approaches sensitive and fundamental rights, strict

scrutiny will be used to examine such legislation. Tremble

v. Gordon, (1977) 430 U. S. 762, 97 S. Ct. 1459, 62 L. Ed.

2d 31. In Stanley v. Illinois, (1972) 405 U. S. 645, 92 S. Ct.

1209, 31 L. Ed. 2d 551, this court held that a statute which

deprived an unwed father of a hearing on his fitness as a

parent while extending this protection to all other parents

whose custody of their children is challenged, violated the

equal protection clause of the Fourteenth Amendment. Id.

405 U. S. at 649. The Indiana Mineral Lapse Act by de-

priving a large class of severed mineral interest owners of

a basic right to be notified of the taking of their property,

and by depriving them of an opportunity to challenge that

taking or take affirmative action to prevent it—while offer-

ing such procedural due process protection to a select

group—violates the equal protection clause of the Four-

teenth Amendment.

Even if this court would view the classification in the

Mineral Lapse Act as being in the category of social and

economic legislation, thereby only requiring that the legis-

lation not be arbitrary and capricious, U. S. Railroad Re-

tirement Board v. Fritz, (1980) —— U. S., 101 S. Ct.

453, 66, L. Ed. 2d 368; New Orleans v. Dukes, (1975) 427

U. S. 297, 96 S. Ct. 2513, 49 L. Ed. 2d 511, the Indiana

Mineral Lapse Act would still fail to meet this low level

of scrutiny.

The reason this exception was placed in the Indiana

statute was because representatives of coal companies who

were asked to participate in the drafting of the statute ob-

jected to any provisions which would automatically ter-

minate their interests due to inadvertent failure to file a

statement of claim. It was contended that their interests

were often very complex and based upon documents

of great antiquity. The major mineral owners were

afraid that they might inadvertently fail to file a state-

ment of claim even though they had made a diligent effort

to do so. See Polston, Legislation, Existing and Proposed,

Concerning Marketability of Titles, 7 Land and Water Law

Review 73, at pp. 100-101. Therefore, this exception which

appears in the Indiana Mineral Lapse Act was in response

to the efforts of a particular group, who were in no greater

need of protection than the other members of the class.

In fact, large mineral interest owners who have substantial

capital and personnel to keep abreast of legislation affecting

their mineral interests are in far greater position to protect

their interests than individual mineral interest owners, who

often may not even be aware of the existence of the Mineral

Lapse Act. Furthermore, the purpose of the Indiana Min-

eral Lapse Act, being the promotion of the development of

the mineral interest by identifying and locating the owners

of the mineral interest, would best be served by giving

prior notice to all mineral interest owners along with an

opportunity for them to protect their rights by filing a

statement of claim before the lapse becomes final. It would

seem that the administrative inconvenience involved would

be minimal. It is evident that this classification in the

Mineral Lapse Act is arbitrary and capricious in that it

gives special treatment to members of a favored class who

are in no greater need of such protection than other mem-

bers of the class.

CONCLUSION

For the reasons set forth in this brief, it is respectfully

requested that the Indiana Mineral Lapse Act be declared

unconstitutional and null and void insofar as it pertains

to the Appellants, and that the decision of the Indiana

Supreme Court be reversed.

Respectfully submitted,

JAurs M. BurnHop and

Mark W. RierMan

Buruop, Loncest, BurHop & RrmerMan

Citizens Bldg., Suite 409

115 Southeast Third Street

Evansville, Indiana 47708

Telephone (812) 423-5261

Attorneys for Appellants

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APPENDIX “A”

(Compiler’s additions shown in bold face type)

32-5-11-1 [46-1808]. Lapse of mineral interest — Pre-

vention. — Any interest in coal, oil and gas, and other min-

erals, shall, if unused for a period of 20 years, be extin-

guished, unless a statement of claim is filed in accordance

with section five [32-5-11-5] hereof, and the ownership shall

revert to the then owner of the interest out of which it

was carved. [IC 32-5-11-1, as added by Acts 1971, P. L.

423, § 1.)

$2-5-11-2 [46-1809]. Mineral interest — Definition. — A

mineral interest shall be taken to mean the interest which

is created by an instrument transferring, either by grant,

assignment, or reservation, or otherwise an interest, of any

kind, in coal, oil and gas, and other minerals. [IC 32-5-11-2,

as added by Acts 1971, P.L. 423, § 1.]

$2-5-11-3 [46-1810]. Use of mineral interests — Defi-

nition.— A mineral interest shall be deemed to be used

when there are any minerals produced thereunder or when

operations are being conducted thereon for injection, with-

drawal, storage or disposal of water, gas or other fluid

substances, or when rentals or royalties are being paid by

the owner thereof for the purpose of delaying or enjoying

the use or exercise of such rights or when any such use is

being carried out on any tract with which such mineral

interest may be unitized or pooled for production purposes,

or when, in the case of coal or other solid minerals, there

is production from a common vein or seam by the owners

of such mineral interests, or when taxes are paid on such

mineral interest by the owner thereof. Any use pursuant

to or authorized by the instrument creating such mineral

interest shall be effective to continue in force all rights

granted by such instrument. [IO 32-5-11-3, as added by

Acts 1971, P.L. 423, § 1.]

$2-5-11-4 [46-1811]. Statement of claim — Filing — Re-

quirements. — The statement of claim provided in section

one [82-5-11-1] above shall be filed by the owner of the

mineral interest prior to the end of the twenty-year period

set forth in section two [one] [32-5-11-1] or within two [2]

years after the effective date [September 2, 1971] of this

act, whichever is later, and shall contain the name and

address of the owner of such interest, and description of

the land, on or under which such mineral interest is located.

Such statement of claim shall be filed in the office of the re-

corder of deeds in the county in which such land is located.

Upon the filing of the statement of claim within the time

provided, it shall be deemed that such mineral interest was

being used on the date the statement of claim was filed.

[IC 32-5-11-4, as added by Acts 1971, P.L. 423, § 1; 1972,

P. L. 11, § 15.)

$2-5-11-5 [46-1812]. Extinguishment of mineral interest

— Exceptions. — Failure to file a statement of claim within

the time provided in section 4 [32-5-11-4] shall not cause a

mineral interest to be extinguished if the owner of such

mineral interest:

(1) Was at the time of the expiration of the period

provided in section four [32-5-11-4], the owner of ten

[10] or more mineral interests, as above defined, in the

county in which such mineral interest is located, and;

(2) Made diligent effort to preserve all of such in-

terests as were not being used, and did within a period

of ten [10] years prior to the expiration of the period

provided in section four [32-5-11-4] preserve other

mineral interests, in said county, by the filing of state-

ments of claim as herein required, and;

(3) Failed to preserve such interest through inad-

vertence, and;

(4) Filed the statement of claim herein required,

within sixty [60] days after publication of notice as

provided in section seven [32-5-11-7] herein, if such

notice is published, and if no such notice is published,

within sixty [60] days after receiving actual knowledge

that such mineral interest had lapsed. [IC 32-5-11-5,

as added by Acts 1971, P.L. 423, § 1.]

$2-5-11-6 [46-1813]. Successor in interest — Notice re-

quirements — Prima facie evidence. — Any person who will

succeed to the ownership of any mineral interest, upon the

lapse thereof, may give notice of the lapse of such mineral

interest by publishing the same in a newspaper of general

circulation in the county in which such mineral interest is

located, and, if the address of such mineral interest owner

is shown of record or can be determined upon reasonable

inquiry, by mailing within ten [10] days after such publica-

tion a copy of such notice to the owner of such mineral

interest. The notice shall state the name of the owner of

such mineral interest, as shown of record, a description of

the land, and the name of the person giving such notice.

If a copy of such notice, together with an affidavit of service

thereof, shall be promptly filed in the office of the recorder

of deeds in the county wherein such land is located, the

record thereof shall be prima facie evidence, in any legal

proceedings, tht such notice was given. [IC 32-5-11-6, as

added by Acts 1971, P.L. 423, § 1.]

$2-5-11-7 [46-1814]. Statement of claim — Filing — Re-

corder’s duty. — Upon the filing of the statement of claim,

provided for in section 4 [32-5-11-4] of this chapter or the

proof of service of notice as provided in section seven [six]

[32-5-11-6] of this chapter in the recorder’s office for the

county where such interest is located, the recorder shall

record the same in a book to be kept for that purpose,

which shall be known as the “Dormant Mineral Interest

Record” and shall indicate by marginal notation on the in-

strument creating the original mineral interest the filing

of the statement of claim or affidavit of publication and

service of notice, [IC 32-5-11-7, as added by Acts 1971,

P. L. 423, § 1.]

$2-5-11-8 [46-1815]. Waiver of chapter's provisions —

Time Limit.— The provisions of this chapter may not be

waived at any time prior to the expiration of the twenty

[20] year period provided in section 1 [32-5-11-1]. II

$2-5-11-8, as added by Acts 1971, P.L. 423, § 1.]

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.