Edwin Smith Llc v. Clark
| Decision Date | 20 December 2010 |
| Docket Number | Nos. 28,248; 28,263.,s. 28,248; 28,263. |
| Citation | 149 N.M. 249,247 P.3d 1134,2011 -NMCA- 003 |
| Parties | EDWIN SMITH, LLC, a New Mexico limited liability company, and Jerry T. Walmsley, trustee of the June Walmsley Bypass Trust under the Will of June H. Walmsley dated April 7, 1992, Plaintiffs–Appellees,v.Kristi CLARK, F. Kevin Kurtz, and F. Norman Kurtz, Defendants–Appellants,andEdwin Smith, LLC, a New Mexico limited liability company, and Jerry T. Walmsley, trustee of the June Walmsley Bypass Trust under the Will of June H. Walmsley dated April 7, 1992, Plaintiffs–Appellees,v.Synergy Operating, LLC, a New Mexico limited liability company, Annemarie Keller, Charla Varner; Jodie Yates–Simon; Kimberly Brautigam; Robert E. Kouns; and Therolyn K. Williams, Defendants–Appellants. |
| Court | Court of Appeals of New Mexico |
OPINION TEXT STARTS HERE
Sutin, Thayer & Browne, P.C., C. Shannon Bacon, Kerry Kiernan, Derek V. Larson, Albuquerque, NM, Montgomery & Andrews, PA, J. Scott Hall, Santa Fe, NM, for Appellees.Finch & Olson PA, Kyle M. Finch, Farmington, NM, Holland & Hart, LLP, Larry J. Montaño, Santa Fe, NM, for Appellant Synergy Operating, LLC.Dixon, Scholl & Bailey, P.A., Gerald G. Dixon, Albuquerque, NM, for Appellants Kristi Clark, F. Kevin Kurtz, & F. Norman Kurtz.
{1} In this consolidated case, we review the law of joint tenancies in New Mexico as it applies to property in a quiet title action. We also evaluate whether the district court had authority to order proceeds suspended from two wells situated on the property. We affirm the district court's determination as to the quiet title issue, dismiss the proceedings regarding suspension of proceeds for lack of subject matter jurisdiction, and remand this matter for further proceedings consistent with this opinion.
{2} The subject property is a 160–acre tract of land located in San Juan County, New Mexico (the Property). We begin with a summary of the title history of the Property and basic information related to the development of two gas wells on the Property. Additional facts will be developed in the context of the issues discussed.
{3} The pertinent history of title to the Property stretches over a period of more than a half century. The first material event occurred in 1951 when Margaret, Julia, May, and Jennie Hasselman (collectively, the Hasselman Women) acquired by intestate succession an undivided one-half interest in the surface and mineral rights of the Property. On April 26, 1951, the Hasselman Women conveyed their entire interest in the Property to May's husband. Immediately thereafter, May's husband conveyed the Property back to the Hasselman Women as joint tenants. The language of the deed from May's husband to the Hasselman Women explicitly stated: “Not in tenancy in common but in joint tenancy[.]”
{4} In June 1958, the Hasselman Women filed a quiet title action in the San Juan County District Court. The judgment, entered in August 1958, quieted title to the Property as follows: the Hasselman Women were decreed the owners of an undivided one-half interest in the surface and mineral rights; Claude Smith was decreed the owner of the other one-half interest in the surface rights as well as a 75/160 mineral interest; George B. Robbins was decreed the owner of a 4/160 mineral interest; and J.R. Robbins was decreed the owner of a 1/160 mineral interest. Appellee Edwin Smith, LLC (Smith) is the successor in interest to the ownership interest of Claude Smith.
{5} May died in November 1962. Julia died in November 1973. Margaret died in May 1974. In September 1981, Jennie executed a warranty deed conveying an undivided one-half interest in the property to herself and her daughter June as joint tenants. In this deed, Jennie is described as the last “surviving joint tenant of” the Hasselman Women. Appellee Jerry Walmsley (Walmsley) is the surviving spouse of June.
{6} Jennie died in July 1988. June died in October 1995. In her will, June established the June H. Walmsley Bypass Trust (the Trust) under which Walmsley was named administrator and sole trustee. June devised her interest in the Property to the Trust. We recognize that Walmsley is acting in his capacity as trustee in this appeal, but will continue to refer to him as Walmsley.
{7} During and after October 2004, various heirs of May, Julia, and Margaret assigned mineral rights on the Property to Appellant Synergy. Synergy also signed a farm-out agreement with Joseph C. Robbins, an heir of J.R. Robbins, and a joint operating agreement (JOA) with Walmsley authorizing Synergy to operate wells on the Property.
{8} On May 24, 2005, Synergy filed an application with the Oil and Conservation Division (the Division) of the New Mexico Energy, Minerals, and Natural Resources Department to pool mineral interests on the Property to form a 320–acre compulsory-pooled gas spacing unit and to drill a well, well 104. Walmsley and Smith opposed this application, claiming that Synergy did not possess an interest in the Property.
{9} Despite Walmsley and Smith's opposition, the Division granted Synergy's application. Walmsley and Smith appealed that decision to the New Mexico Oil Conservation Commission (the Commission), the supervising agency for the Division, challenging Synergy's right to drill on the basis that Synergy did not possess any interest in the Property. Walmsley and Smith also filed a complaint to quiet title to the property in the Eleventh Judicial District Court (the 2006 quiet title action).
{10} At the Commission hearing on well 104, Synergy claimed its right to drill well 104 derived from three sources: a twenty-five percent mineral interest it obtained from the heirs of Julia and May; the farm-out agreement it held with Joseph C. Robbins, an undisputed owner of a 3.125 percent mineral interest on the Property; and the JOA with Walmsley. Walmsley and Smith refuted these contentions. They claimed that the heirs of Julia and May owned no interest in the Property and that Walmsley was the owner of the entire interest of the Hasselman Women. Therefore, according to Walmsley, Synergy could not derive an interest in the Property from the heirs of Julia and May. Walmsley and Smith also submitted an affidavit and unsworn statement from Joseph C. Robbins that they claimed showed that he had rescinded his farm-out agreement. It is unclear whether Walmsley and Smith challenged Synergy's claim under the JOA. In addition to asking the Commission to find that Synergy possessed no interest in the Property, Walmsley and Smith also asked the Commission to suspend all proceeds from well 104.
{11} After the Commission hearing, but before the Commission rendered a decision on Synergy's right to drill well 104, Synergy filed another application with the Division to pool mineral interests on the Property and drill a second well, well 105. Synergy again based its right to drill on the twenty-five percent mineral interest it allegedly obtained from the heirs of Julia and May, the farm-out agreement, and the JOA. Smith and Walmsley again objected to the application on the ground that Synergy did not possess any interest in the Property.
{12} In March 2006, the Commission entered an order regarding well 104. The Commission first observed that it lacked jurisdiction to make any determination regarding title to the Property. The Commission then found that there was no admissible evidence submitted to support Walmsley and Smith's claim that Joseph C. Robbins rescinded the farm-out agreement. Accordingly, the Commission concluded that Synergy was entitled to drill well 104 pursuant to the farm-out agreement and pursuant to the JOA. Because Synergy possessed the right to drill well 104, the Commission concluded that pooling all uncommitted interests on the Property was appropriate to avoid the drilling of unnecessary wells, to protect correlative rights, to prevent waste, and to achieve an efficient distribution of the natural resources underlying the Property. The Commission also authorized Synergy to recoup costs associated with the drilling, operating, and supervising of well 104 from the proceeds of that well. The Commission did not grant Walmsley and Smith's request to suspend proceeds.
{13} Following the entry of the March 2006 order, Walmsley filed a motion to suspend proceeds from well 104 in district court under the docket number that was generated from Walmsley and Smith's complaint to quiet title. Smith did not join the motion to suspend proceeds filed in district court. In his motion, Walmsley requested that the district court place 100 percent of the proceeds attributable to the disputed interest in well 104 into a suspense account pending the resolution of the 2006 quiet title action.
{14} In September 2006, the Division granted Synergy's request to pool mineral interests and drill well 105. The Division based its decision on the fact that Synergy had a farm-out agreement with Joseph C. Robbins, an undisputed owner of mineral rights on the Property. By virtue of that interest, the Division concluded that Synergy had the right to drill. Accordingly, the Division authorized Synergy to pool mineral interests. The Division further authorized Synergy to recoup costs associated with drilling, operating, and supervising well 105 from proceeds derived from the well. The Division rejected the requests of Walmsley and Smith to suspend proceeds from well 105 until the quiet title action was resolved. According to the Division, suspending proceeds from well 105 would preclude Synergy from recouping its expenses. After this order was entered, Walmsley amended the motion to suspend proceeds filed in district court to include 100 percent of the proceeds attributable to the disputed interest in well 105.
{15} In February 2007, the district court granted the amended motion to suspend proceeds from wells 104...
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