Bulletin: ID000004

Dear Associates:

Frequently in mountainous or other areas that contain mineralization, there have been and continue to be active mining operations. Historically, these mineral operations were afforded special rights under United States Mining Laws to claim and later patent the areas surrounding their mineral discovery. As these claims were developed, rights were also afforded for lands to be claimed and later patented for millsites used for the reduction of their ores.

These lands have become important since many are now being developed for other residential, recreational or commercial uses.

Nature of Title to Patented Lode and Millsite Claims

Lode and Millsite claims need to be characterized initially as patented or unpatented. The rights are established of record when a locator identifies an area where certain types of mineralization are present. From this discovery, the locator lays out on the ground the surface areas where he is staking his claim. The locator then places markings at each corner of the claim and prepares a notice of his claim or Location Certificate. This claim is laid out under certain provisions of United States Code. It must conform in size, markings and other criteria as established under the section where the claim is being made. Over the years the size and shapes of lode mining claims have changed. You will find, generally, that the older claims were long and narrow with some having angle points that generally conformed with the location of the vein or lode containing about 5 acres. Later, the claims are found to generally be 300 feet on each side of the centerline of the claim and 1500 feet along the claim, generally running in a straight line. The size of these later claims was generally about 20 acres. More recent claims generally follow subdivisions of sections.

The claim for a millsite was based upon the presence of lode claims and the need for an area to reduce ores removed from the areas where active mining was being conducted. These areas are generally irregular in shape and size.

Eventually, the locator, based upon production of ores and other criteria, could apply for a patent to his claim. This process culminates with the issuance of a patent that in some respects resembles a homestead or cash entry patent, but is very different in other respects.

It is key to your understanding of lode and millsite claims to know that these claims may convey some or all of the portions of the surface contained within the area of the mining claim, as well as the subsurface rights encompassed within the bounds of the claim. The lode mining claim also provides for what are known as Extralateral Rights. These extralateral rights allow the locator of the claim to follow the vein or lode in its downward course for the length of the claim for great distances from the tunnel or discovery point.

There has been extensive litigation determining the nature of the rights of the mineral locators vis-à-vis other persons. The Company considers the issuance of commitments and policies on patented lode and millsite claims to be deserving of extra special attention.

Unpatented Lode and Millsite Claims

The Company does not authorize, without specific approval of the National Legal Department, the insuring of any possessory interest or title to any unpatented lode claim or millsite claim. The holder of such a claim holds a possessory right that has certain protections under Federal law, but such interests are also subject to extensive challenges, not only by other claimants, but also by the Federal Government itself. To keep such a claim active, the claimant has to perform routinely a number of acts. Any present or past failure to comply could be cause for termination of the possessory rights.

The known failure of the holder of an unpatented claim to perform a required action should not be used to remove such a claimed interest in the land.

Beginning the Search

The search of the public records related to patented lode or millsite claims always begins with the records of the United States Bureau of Land Management. Persons who frequently deal with these records routinely obtain copies of aperture cards and microfiche of those records related to mining claims and index those records in their title plant. The records that must be reviewed and searched are:

1.Mining District Maps

2.Mineral Survey Plats

3.Master Title Plat

4. Tract Indices

Mineral District Maps are those maps compiled from the various claims filed with the mining district recorder. The mining district recorder was in some areas an employee of the county recorder if the area was organized into counties of a territory or state.

The early versions of these maps assigned lot numbers to the various claims that were later utilized when the land was patented. Before many areas were surveyed under the rectangular survey, the location certificates did not generally tie to section corners or similar monuments, but instead tied to United States Mining Monuments. The Mineral District Maps were extremely helpful in showing the location of each of the various claims as they were made. In later years these mineral districts were dissolved and their records merged with the county recorder's records. In that fashion many mineral district maps have found their way into the title plant. It is also just as common for the county recorder or assessor to either not have these maps or find that they have become lost over the years.

The government found it necessary to survey the mining claims as part of the patenting process. The surveyors made use of the mineral district maps as well as locating the monuments for each claim on the ground. The result of this effort is the Mineral Survey Plat. Later Mineral Survey Plats utilized a Mineral Survey Number that was used in the patent, along with a metes and bounds description to define the land being conveyed. These plats show the relationships between the mining claim and surrounding claims and the tie to United States Mining Monuments, rectangular survey corners and other claims. Later mineral survey plats frequently show ties to governmental rectangular surveys.

It is common to find generally that numerous mining claims and millsite claims overlap each other. This fact makes the search and examination of mining claims very difficult. The searcher and examiner must search each and every claim that overlaps the claim being searched.

The Master Title Plat is used to ascertain how the U.S. Bureau of Land Management now views the location of the mining claims and other non-mineral lands. It is used as a convenient check to look for obvious problems. For example, it is not uncommon to find that the government has patented a certain quarter section of land and also patented a lode mining claim. Examination of each reveals that neither patent takes exception to the other. Since we do not know which claimant has the better claim to the land, we must take exception to the matters presented and require correction documents to clarify the title. It is also not uncommon to find that the U.S. Bureau of Land Management records are deficient as to certain matters found in the county records or vice-versa.

The Tract Indices reveal the indexing of the patents issued on land. These records are very useful when the county recorder's records fails to reveal a chain of title to a claim that the U.S. Bureau of Land Management shows as patented. The patents are indexed to the township and range by Lot number in the Mineral District or Mineral Survey Number. It is important to be able to generally locate all mining claims in the proximity of the land under examination.

The County Records Search

Much of the process of searching and examining the title to mining claims follows procedures common to other chains of title. Mining claims are unique in a number of very significant ways, however. It is not uncommon to find aerial or underground easements through the land. There may be a common underground system of tunnels that are used by numerous claimants. Other unpatented claims held by parties outside of our chain of title may continue to affect land previously patented by our mineral locator. Portions of the surface may be in conflict with other claims or other patented land.

It is imperative that a complete search of the county records be conducted back to the original location certificate for our claim as well as each other claim that touches or surrounds our land. It is not uncommon in mining areas to have easements granted that run from Claim A to Claim Z without mention of the claims which are crossed. For that reason, a search should also be made of the grantor-grantee records of the county.

As with any easement, and especially when dealing with mining claims, extreme caution should be utilized when removing easements, even with documents that appear to be properly executed and acknowledged. The patents to the mining claims were generally made subject to the local mining district laws and regulations. Those regulations may not conform to our current understanding of how and to whom rights may vest under common development schemes.

Finding other unpatented mining claims can be difficult. It is common for the Company to leave an exception in Schedule B for

Unpatented mining claims

The U.S. Bureau of Land Management does maintain an index of mining claims arranged by section, township and range indexed by unpatented claim. Examiners should, however, exercise extreme care in relying upon theses indices.

Dealing with Extralateral Rights

Owing to the nature of patented lode mining claims conveying portions of the surface as well as specifically conveying the subsurface and the extralateral rights to follow a vein or lode in its downward course, the Company has determined that care must be taken to add an exception in Schedule B as follows:

"Any right, title, or interest to any land or rights therein lying beyond the side lines extended downward vertically."

By their very nature extralateral rights are the subject of extensive litigation. When numerous mining claimants follow their rights downward from varying directions, it should be easily seen that eventually those rights may intersect with another claimant's rights to follow the same vein or lode. The risks incident to such rights are then by their nature hazardous.

Townsite Patents

Townsite Patents did not convey title to mineral lands. In many areas, the lode claims were already filed and being worked prior to the filing of the application for the townsite patent. It is common to find a patented lode claim not taking exception for the portions of the surface contained within the townsite and to also not find any reference on that patent to the exclusion of mineral lands.

Even more disturbing, you may find two complete chains of title, one for the patented lode claim and one for the townsite lots. Title should not be insured until the conflict is resolved of record.

Legal Descriptions

When describing a patented mining claim, the preferable way to describe the claim is to take the description exactly from the patent. Most patents follow the format of first identifying the claim by name, followed by Lot Number in the District or Mineral Survey Number, and thereafter a metes and bounds description of the perimeter of the claim. Excepted areas follow thereafter.

If the use of that type of description is not possible, the next best description would be to describe the claim by name, followed by Lot Number in the District or Mineral Survey Number, with a recital similar to ". . . as the same is defined and delineated in that certain Patent, recorded ________ as Instrument No. ________, indexed in Book ________, at Page ________," and being followed by the exceptions contained in the patent.

Considering the number of transactions insuring patented mining claims, a very common type of policy loss arises when a title examiner identifies the land by name of claim followed by Lot Number in the District or Mineral Survey Number, but fails to set out precisely the exceptions to that description contained in the patent. The resulting ambiguity is then the cause of the loss when the insured believes that they also own the excepted parcels. The Mineral Survey Plat does not identify which claim has priority of title and which will be excepted.

Tax Titles

There are two primary theories of the effect of a tax title on interests in the land. The first holds that a de novo title is started that cuts off or terminates all interests in the land other than those of the holder of the tax title. The other theory holds that only the fee interest under assessment is cut off by the tax sale, leaving all other interests, such as easements, reservations, restrictions, and excepted interests, in the land intact. Needless to say, the more conservative approach should be utilized. The Company considers tax titles to be high risks. Insuring a tax title as to a mining claim is doubly hazardous, especially if conflicts are present.

Marketable Record Title Acts

Some states have what are known as Marketable Record Title Acts that supposedly are designed to cure or outlaw old defects in chains of title. Many title examiners have erroneously determined to not search title back more than 40 years based upon these statutes on the idea that no one could challenge their title and/or that the Act cuts off any other interests in the land. The problem with this thinking is that each holder of another interest in the land may also claim their title to be marketable based under this same Act.

Additionally, many patented lode mining claims are fraught with breaks in the chain of title and similar problems. The person shown of record holding the interest prior to the break may also claim marketable title under the same Act.

The result of this discussion is that only very limited use can be made of this Act when examining title to mining claims.

Environmental Concerns

You would be well to take note that many patented lode mining claims or patented millsite claims are the sites of hazardous wastes concerns. Care should be taken to insure that no notice has been filed related to a cleanup of such a site.

Extended Coverage

It is inherent in how mining claims were originally laid out and surveyed, that survey problems are present. It is not uncommon to have discrepancies of as much as 500 - 1,000 feet. Even more difficult is the fact that over the years the monuments that originally established the location of the corners have rotted or been disturbed by natural processes. Generally, survey control should generally be considered to be poor at best.

It is also common for owners of mining claims to disregard the exceptions in the patent and place improvements in the excepted areas. You could then find that your improvements are not located on the land

Access

If a dedicated public road does not touch the patented mining claim, access should be excepted in Schedule B. Great care needs to be utilized in this respect. It is not uncommon for governmental entitles to later challenge the right of a county or city to use a right of way that was presumably a public road. A heightened awareness needs to be maintained when the patented claim is surrounded by U.S. Bureau of Land Management, Forest Service or National Park Service administered federal lands.

In many cases the sole means of access to the patented lode mining claim is over U.S. Forest Service roads or similar rights of way. Many, if not most of these roads, are not to be considered dedicated roads. If the records of the U.S. Bureau of Land Management do not show a right of way on file in favor of the County or some other governmental entity that provides highway access to lands in the County, exception for access should be taken. The rights held by the public may be nothing more than a license to use the road on some very limited basis. The Company has determined when access is limited, proper exceptions should be taken.

An additional problem occurs when an overlapping mining claim cuts off a portion of the land from the remainder. Even though no fences or other obstructions may be present, the Company does not generally authorize insuring access to the cutoff lands without specific approval of the National Legal Department, or without a specific easement granted by the proper persons to the cutoff lands.

Before Turning an Examiner Loose . . .

You should consider the level of training of the title examiner personnel assigned to the task. Great care should be exercised by supervisory personnel to insure that the search and examination was proper in light of the significant risks associated with patented lode or millsite claims.

If you have further questions, please call me.