A Lycoming County trial judge has ruled that the only way a party can acquire a property’s oil and gas rights by adverse possession is by showing it has engaged in actual drilling and production on the land.

The judge said this was true even where a party had obtained a default judgment in an action to quiet title to a property’s oil and gas and mineral rights that stood unopposed for more than 21 years—the statutorily required amount of time that must pass in order for land rights to be acquired by adverse possession—before being struck last year.

In Northern Forests II v. Keta Realty, Lycoming County Court of Common Pleas Judge Dudley N. Andersondismissed plaintiff Northern Forests II’s suit seeking to acquire a Lycoming County property’s subsurface rights by adverse possession.

Anderson granted five separate preliminary objections filed by defendants Mountain Development Group Inc., and Cynthia Stanton McKenney; the trustees of the Margaret O.F. Proctor Trust; the Trustees of the Thomas E. Proctor Heirs Trust; Lancaster Exploration and Development Co.; and International Development Corp.

All of the preliminary objections, according to Anderson, alleged Northern Forests had failed to state a claim upon which relief could be granted.

Anderson said Northern Forests’ attempt to rely on a 1989 default judgment—which was eventually stricken from the record as void—as proof that it had acquired the subsurface rights to the property by adverse possession failed because it could not show any actual oil and gas drilling took place on the property.

“Plaintiff argues that while production may be one way to assert actual possession, it is not the only way. This court does not agree,” Anderson said. “Appellate authority makes it clear that actual possession means actual, and not constructive, possession.”

Anderson pointed to several Pennsylvania appellate court rulings, dating back to 1855, which held that adverse possession requires the physical manifestation of a party’s use of a property.

Anderson also heavily cited the U.S. District Court for the Western District of Pennsylvania’s 2011 ruling in Hoffman v. Arcelormittal Pristine Resources, in which the court rejected a plaintiff’s argument that she had obtained a property’s oil and gas rights by adverse possession because she had leased the oil and gas estate on three separate occasions, despite the subsurface rights having been reserved by previous landowners.

The Hoffman court found that adverse possession had not occurred because no actual oil and gas extraction had ever occurred on the property, according to Anderson.

In a footnote, Anderson said the default judgment Northern Forests relied on to show adverse possession was “even less effective than the leases in Hoffman.”

“Here, the judgment upon which plaintiff bases its claim was eventually stricken from the record as void,” Anderson said in the footnote, pointing to the Pennsylvania Superior Court’s 1994 ruling in Rieser v. Glukowsky that a voided judgment “‘must be treated as having never existed.’”

The dispute in Northern Forests dates back to December 1988, according to Anderson, when Northern Forests instituted an action to quiet title with regard to all natural gas, coal, coal oil, petroleum, marble and other minerals on a property in Lycoming County.

Northern Forests alleged in the 1988 complaint that it had acquired the surface estate of the property by deed in June 1987 and sought to acquire the subsurface rights by adverse possession, Anderson said.

The complaint was served by publication and no response was filed, resulting in the 1989 default judgment, according to Anderson.

But after petitions were filed in late 2012 and early 2013, a Lycoming County trial judge struck the 1989 judgment as void, finding that the affidavit required by Pa.R.C.P. 430(a) was defective because it failed to show the nature and extent to which the plaintiff attempted to locate the defendant and why service could not be made, Anderson said.

Northern Forests subsequently filed an amended complaint, seeking a declaratory judgment that it owns the subsurface rights, Anderson said.

In the amended complaint, according to Anderson, Northern Forests alleged it had acquired the subsurface rights by adverse possession because “‘for a period in excess of 21 years before 1988′” it “‘continuously, adversely, openly and notoriously used, mined, timbered, compiled and sold such gas, coal, coal oil, petroleum, marble and other minerals as have been found and located on the subject premises.’”

Anderson said, however, that even though Northern Forests alleged it has used and sold “‘such gas, coal, coal oil, petroleum, marble and other minerals as have been found and located on the subject premises,’” it did not allege any has actually been found on the property.

“The allegation is therefore too vague to support the claim,” Anderson said. “While ordinarily the court would allow for amendment, at argument counsel admitted that no such allegation could be made as no production has occurred, either before 1988 or after.”

Counsel for Northern Forests, Daniel F. Glassmire of Glassmire & Shaffer Law Offices in Coudersport, Pa., said he believed the default judgment being part of the record for more than 21 years constituted a “sufficient flying of one’s flag” that transferred the subsurface rights of the property to his client by adverse possession.

But counsel for International Development Corporation, which filed the most recent set of preliminary objections on March 14, Marc S. Drier of Drier & Dieter Law Offices, said a party who wishes to acquire subsurface rights by adverse possession must “actually go under the surface and plant a flag there.”

Zack Needles can be contacted at 215-557-2493 or zneedles@alm.com. Follow him on Twitter @ZNeedlesTLI. •

(Copies of the eight-page opinion in Northern Forests II v. Keta Realty, PICS No. 14-0836, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •