King v. Estate of Gilbreath

• Decision Date: 30 March 2016
• Docket Number: Civ. No. 13–862 JCH/LAM
• Parties: Frank A. KING and Paula S. Elmore f/k/a Paula S. King, Plaintiffs, v. ESTATE OF Norman L. GILBREATH, Deceased, Loretta E. Gilbreath, Gilbreath Energy, LLC, Energen Resources Corporation, Robert L. Bayless, Producer LLC, Animas Energy Group, LLC, James M. Martin, San Juan Basin Properties, LLC a/k/a San Juan Basin Operating a/k/a San Juan Basin Resources, TOP Operating Company, Maralex Resources, Inc., John Does I–X, and All Unknown Persons Who May Claim a Lien, Interest or Title Adverse to Plaintiffs, Defendants.
• Court: U.S. District Court — District of New Mexico

215 F.Supp.3d 1149

Frank A. KING and Paula S. Elmore f/k/a Paula S. King, Plaintiffs,

v.ESTATE OF Norman L. GILBREATH, Deceased, Loretta E. Gilbreath, Gilbreath Energy, LLC, Energen Resources Corporation, Robert L. Bayless, Producer LLC, Animas Energy Group, LLC, James M. Martin, San Juan Basin Properties, LLC a/k/a San Juan Basin Operating a/k/a San Juan Basin Resources, TOP Operating Company, Maralex Resources, Inc., John Does I–X, and All Unknown Persons Who May Claim a Lien, Interest or Title Adverse to Plaintiffs, Defendants.

Civ. No. 13–862 JCH/LAM

United States District Court, D. New Mexico.

Filed March 30, 2016

Stephen D. Ingram, Cavin & Ingram, Albuquerque, NM, for Plaintiffs.

J. Edward Hollington, J. Edward Hollington & Associates, Albuquerque, NM, J. Scott Hall, Sharon Theresa Shaheen, Montgomery & Andrews, PA, Santa Fe, NM, Andrew J. Cloutier, Hinkle, Hensley, Shanor & Martin LLP, Roswell, NM, for Defendants.

MEMORANDUM OPINION AND ORDER

JUDITH C. HERRERA, UNITED STATES DISTRICT JUDGE

This matter is before the Court on the following motions: Plaintiffs' Motion for Partial Summary Judgment—Adverse Possession [Doc. 183]; and Plaintiffs' Motion for Partial Summary Judgment—Mineral Ownership and Lease Termination [Doc. 180].

In this Memorandum Opinion and Order, the "Gilbreath Defendants" refers to: Loretta E. Gilbreath, Personal Representative of the Estate of Norman L. Gilbreath, Deceased; Loretta E. Gilbreath; and Gilbreath Energy, LLC.¹ The "Energen Defendants" refers to: Energen Resources Corporation ("ERC"); James M. Martin; San Juan Basin Properties, LLC a/k/a San Juan Basin Operating a/k/a San Juan Basin Resources; TOP Operating Company; and Maralex Resources, Inc. "Bayless and Animas" refers to: Robert L. Bayless, Producer LLC, and Animas Energy Group LLC.

FACTUAL BACKGROUND²

Plaintiffs filed suit seeking a determination that the Oil and Gas Lease ("Lease") they executed to Rodney P. Calvin, which was later assigned to Defendants Loretta and Norman Gilbreath, terminated. Plaintiffs seek damages for revenues owed from wells attributable to Plaintiffs' mineral interest.

Pursuant to a March 2, 1973 "Mineral Deed" from A.L. and Reba Duff, Plaintiff Frank King acquired the minerals underlying the following lands in San Juan County, New Mexico:

Township 30 North, Range 11 West, NMPM

Section 19: W/2NW/4SE/4, except 1.63 acres, more or less

Containing 18.37 acres, more or less

[Doc. 184–2] Before this deed was executed, Plaintiffs³ had entered into the Oil and Gas Lease dated August 4, 1972 ("Lease"), conveying an interest in part of these minerals to Rodney P. Calvin. [Doc. 184–1] The Lease conveyed an interest in the minerals "from the surface of the earth to the base of the Pictured Cliffs Formation only"—referred to herein as the "Subject Minerals." [Doc. 182–1, p. 1, ¶ 21] The lessee agreed to pay a royalty of 1/8.

The primary term of the Lease was three years; the Lease would continue "as long thereafter as oil or gas or casinghead gas or either or any of them, is produced therefrom; or as much longer thereafter as the lessee in good faith shall conduct drilling operations thereon and should production result from such operations, this lease shall remain in full force and effect as long as oil or gas or casinghead gas, shall be produced therefrom." The Lease further provides:

16. If within the primary term of this lease production on the leased premises shall cease from any cause, this lease shall not terminate provided operations for the drilling of a well shall be commenced before or on the next ensuing rental paying date; or, provided lessee begins or resumes the payment of rentals in the manner and amount hereinbefore provided. If, after the expiration of the primary term of this lease, production on the leased premises shall cease from any cause, this lease shall not terminate provided lessee resumes operations for drilling a well within sixty (60) days from such cessation, and this lease shall remain in force during the prosecution of such operations and, if production results therefrom, then as long as production continues.

17. It is agreed that this lease shall never be forfeited or cancelled for failure to perform in whole or in part any of its implied covenants, conditions, or stipulations until it shall have first been finally judicially determined that such failure exists, and after such final determination, lessee is given a reasonable time therefrom to comply with any such covenants, conditions, or stipulations.

Under this Lease, Calvin drilled the Wright #1 Well in the Pictured Cliffs Formation. The lessee's interests were assigned to Norman and Loretta Gilbreath on March 1, 1985. Norman and Loretta Gilbreath, and later their assignee Gilbreath Energy, LLC, were operator of the Wright #1 Well.

In July 1994, the New Mexico Oil Conservation Division issued an order stating that it pooled all mineral interests in the Basin–Fruitland Coal Gas Pool, including the Subject Minerals, for the drilling of the Flora Vista #2 Well. [Doc. 189–3] Plaintiffs were not given notice of this proceeding. The Flora Vista #2 Well was drilled in 1994. The Flora Vista #3 Well was drilled in 2004.

PROCEDURAL BACKGROUND

Plaintiffs filed a complaint on September 10, 2013. [Doc. 1] Pursuant to the Court's order [Doc. 72], Plaintiffs filed the First Amended Complaint ("FAC") on May 27, 2014. [Doc. 75] The FAC asserts ten counts: Count One—Declaratory Relief; Count Two—Quiet Title; Count Three—Accounting; Count Four—Breach of NMSA 1978, § 70–2–18(B) ; Count Five—Trespass; Count Six—Conversion; Count Seven—Breach of Fiduciary Duty; Count Eight—Unjust Enrichment; Count Nine—Oil and Gas Proceeds Payment Act; Count Ten—Negligence. [Doc 75]

On October 15, 2014, Plaintiffs moved to file a Second Amended Complaint ("SAC"). [Doc. 153] The Court granted the motion. [Doc. 278] The SAC was filed on May 22, 2015. [Doc. 279] The SAC added two additional counts: Count Eleven—Fraud, against the Gilbreaths; and Count Twelve—Uniform Fraudulent Transfer Act Violation, against the Gilbreath Defendants. [Doc. 279, pp. 13–16] Because two new claims were added, the Court granted the Gilbreath Defendants' request for further discovery and extension of deadlines, for the two new claims only; the Amended Scheduling Order set the deadline for discovery as September 1, 2015; the deadline for discovery motions as September 15, 2015; and the deadline for other pretrial motions as November 15, 2015. [Doc. 286] The Court also vacated the July 20, 2015 trial date.

Then on September 25, 2015, the parties filed a stipulation dismissing the two new claims, Counts Eleven and Twelve. [Doc. 308] On October 1, 2015, the Court dismissed Count Eleven and Count Twelve in accordance with this stipulation. [Doc. 311] This Order also dismissed Defendant Loretta E. Gilbreath and Successor Trustees, Trustee of the Norman L. Gilbreath and Loretta E. Gilbreath Trust dtd 2/2/06 and Trusts A, B and C Thereof, with prejudice, and stated that each party was to bear its own costs and attorneys' fees, except for the award pursuant to the Court's September 1, 2015 Order [Doc. 301].

On May 9, 2014, the Gilbreath Defendants filed crossclaims. [Doc. 67] Count III, concerning only the Flora Vista Wells, asserts a crossclaim for Breach of Fiduciary Duty against the Energen Defendants. [Doc. 67, pp. 11–12, ¶¶ 41–45] On September 29, 2015, the Court granted the Energen Defendants' Motion for Partial Summary Judgment No. 3: Gilbreath Defendants' Crossclaim for Breach of Fiduciary Duty.⁴ [Doc. 197; Doc. 310]

The Court concludes that it has diversity jurisdiction under 28 U.S.C. § 1332. Plaintiffs are citizens of Texas and all Defendants are citizens of different states. [Doc. 279, pp. 1–3] The SAC alleges that the amount in controversy exceeds $75,000, and Defendants, though answering with conclusory denials, make no argument that the damages claim was asserted in bad faith or was otherwise insufficient. [Doc. 282, p. 2, ¶ 4] See Marchese v. Mt. San Rafael Hosp. , 24 Fed.Appx. 963, 964 (10th Cir. 2001) (unpublished)⁵ (stating that general allegation of damages exceeding $75,000 is sufficient absent showing claim was asserted in bad faith); see also McPhail v. Deere & Co. , 529 F.3d 947, 954–55 (10th Cir. 2008) (stating general rule that allegation that amount exceeds $75,000 is sufficient, unless there is "a legal certainty" that claim cannot amount to $75,000). In addition, the pretrial order submitted by the parties on the FAC does not state that the amount in controversy is contested for subject matter jurisdiction. [Doc. 273, p. 3] See Adams v. Reliance Standard Life Ins. Co. , 225 F.3d 1179, 1182–83 (10th Cir. 2000) (stating that pretrial order's finding jurisdiction was appropriate supersedes pleadings and constitutes proper allegation of jurisdiction even if complaint were inadequate). The Court further concludes that it has jurisdiction over the crossclaims under Federal Rule of Civil Procedure 13(g).

LEGAL STANDARDS

Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A fact is material if it could have an effect on the outcome of the suit. Smothers v. Solvay Chems., Inc. , 740 F.3d 530, 538 (10th Cir. 2014). A dispute over a material fact is genuine if the evidence presented could allow a rational jury to find in favor of the non-moving party. EEOC v. Horizon/CMS Healthcare Corp. , 220 F.3d 1184, 1190 (10th Cir. 2000). The court views the facts in the light most favorable to the non-moving party and draws all reasonable inferences in favor of that party. Shero v. City of Grove , 510 F.3d 1196, 1200 (10th Cir. 2007). The court cannot weigh the evidence and determine the truth of the matter, but instead determines whether there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 243, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

A...