Prather v. Lyons

Decision Date25 October 2011
Docket NumberNo. 29,812.,29,812.
Citation2011 -NMCA- 108,267 P.3d 78
PartiesDelma E. PRATHER, as Trustee of the Delma E. Prather Revocable Trust, Plaintiff–Appellant, v. Patrick H. LYONS, Commissioner of Public Lands of the State of New Mexico, Defendant–Appellee,andMainline Rock & Ballast, Inc., Defendant.
CourtCourt of Appeals of New Mexico

OPINION TEXT STARTS HERE

Comeau, Maldegen, Templeman & Indall, LLP, Michael R. Comeau, Stephen J. Lauer, Sharon W. Horndeski, Santa Fe, NM, for Appellant.

New Mexico State Land Office, John L. Sullivan, Associate Counsel, Santa Fe, NM, for Appellee.

Brennan & Sullivan PA, Michael W. Brennan, Santa Fe, NM, for Amicus Curiae N.M. Farm & Livestock Bureau.

OPINION

SUTIN, Judge.

{1} State trust land was originally sold in 1930 to a purchaser who bought the land for grazing purposes. This original purchaser received a patent in 1947 and sold the land in 1982. The land contained surface and subsurface metamorphic rock, and the character of the surface and its use for grazing did not change from 1930 to 1982. After the 1982 sale, the successor landowner's lessee mined, crushed, and sold the rock for use primarily as ballast for railroad beds and paid the landowner-lessor royalties. In this action, Plaintiff Delma E. Prather, as trustee of the Delma E. Prather Revocable Trust, is the successor to the original purchaser of the state trust land. She sued Patrick H. Lyons, Commissioner of Public Lands of the State of New Mexico, to quiet title to the rock when the Commissioner asserted ownership of the rock and a right to royalties based on a general mineral reservation in the 1947 patent, which we refer to in this opinion as “the mineral reservation.” After a bench trial, the district court held for the Commissioner. Our issue is whether the rock in the state trust land acquired by the original and successor purchasers constituted a mineral reserved to the State under the mineral reservation.

{2} On appeal, Plaintiff requests that we adopt and apply the “surface destruction doctrine” in arriving at a decision that the parties to the original 1930 purchase transaction did not intend the rock to be considered a mineral within the mineral reservation. Relying in part on Bogle Farms, Inc. v. Baca, 1996–NMSC–051, 122 N.M. 422, 925 P.2d 1184, which states that title to state trust land should be determined on a case-by-case basis considering the intent of the original parties and not by a rule of property nor by conveyance by implication, the Commissioner argues against adoption of the surface destruction doctrine and further argues that the evidence of intent, considering the totality of circumstances, supported the district court's decision. In regard to the evidence, Plaintiff contends that the district court misread critical transactional documents and that its decision was based on irrelevant and insubstantial evidence. We hold that substantial evidence supported the district court's findings of fact under Bogle Farms' required analysis of the intent of the parties to the original sale transaction that the intent of the conveyance transaction was that the rock was included in the reservation of “all minerals of whatsoever kind” in the patent.

BACKGROUND

{3} The background recited here is largely taken from undisputed findings of fact of the district court. There exist two purchase transactions. J.C. Shelton acquired a fee simple interest in Section 16, Township 5 North, Range 12 East, Torrance County, New Mexico (Section 16), pursuant to a 1930 purchase contract with the then Commissioner of Public Lands of the State of New Mexico. Ms. Prather and her husband purchased Section 16 in 1982 from Shelton's successor in interest and, after her husband's death, Ms. Prather created her trust and transferred Section 16 into her name as trustee. Ms. Prather, as trustee of the Delma E. Prather Revocable Trust, is Plaintiff in the present action. For convenience, in this opinion we refer to Ms. Prather, individually and as trustee, and also to Mr. and Mrs. Prather, as Plaintiff.” We refer to Defendant Commissioner Lyons and past Commissioners of Public Lands as “the Commissioner.” Pertinent documentary history relating to Shelton's and Plaintiff's acquisitions of Section 16 is as follows.

{4} The State acquired title to Section 16 pursuant to an Act of Congress approved June 21, 1898, called the Ferguson Act, confirmed in an Act of Congress approved June 20, 1910, effective as of November 16, 1915, called the New Mexico Enabling Act. See Bogle Farms, 1996–NMSC–051, ¶ 9, 122 N.M. 422, 925 P.2d 1184 (reciting the history of the transfer of land by the federal government to New Mexico when New Mexico attained statehood to be held in trust for schools, citing the Enabling Act). Under the Ferguson Act, the United States granted Section 16, among other lands, to the Territory of New Mexico for the support of common schools, but excluded lands that were mineral in character. In confirming the grant, the Enabling Act also excluded mineral lands. The district court found that “mineral lands” is a term of art that means “lands known (at the time) to be more valuable for minerals and must contain minerals in sufficient quantity to justify expenditure for their extraction[,] and [t]he land must also be more valuable for mineral extraction than other uses.” Title was confirmed in Patent No. 1205336 issued by the United States on February 23, 1960.

{5} The district court found that in 1919 when there was a rush to obtain leases from the State for oil and gas exploration, the State Legislature authorized the Commissioner to classify the lands owned by the State as mineral or non-mineral. The State Land Office (SLO) Administrative Rule No. 1, 1919, dated April 4, 1919, designated and classified all lands of the State as mineral lands. See State ex rel. Otto v. Field, 31 N.M. 120, 128–31, 241 P. 1027, 1030–32 (1925) (recounting the history of Administrative Rule No. 1); see also 1912 N.M. Laws, ch. 82, § 1 (creating the SLO). Administrative Rule No. 1 was issued to afford the State “maximum protection from the purchase of lands as non-mineral, which may in fact be mineral lands or subject to classification as such[.] The district court also found that in 1925 the SLO issued regulations requiring the State to reserve all minerals when selling state trust lands. The district court further found that, prior to 1930, Section 16 was owned in fee by the State, was uncultivated and was useful for pasture or grazing purposes, and was largely composed of Pre–Cambian metamorphic rock.

{6} In August 1930, Shelton applied to purchase Section 16 from the Commissioner. In the form application, Shelton stated that Section 16 was grazing in character; that there was no growing timber, coal, minerals or oil and gas known to be on the land; that Shelton intended to use the land to “graze sheep or raise cattle”; and Shelton signed under a paragraph which read, “the land applied for herein is essentially non-mineral land, and that this application is not made for the purpose of obtaining title to mineral, coal, oil or gas lands fraudulently, but with the sole object of obtaining title to the land applied for for grazing and agricultural purposes.” According to the district court's findings, the law required that state trust lands such as Section 16 be sold at their “appraised true value,” and Shelton provided an appraisal for Section 16 on a form provided by the SLO entitled “Appraisement of Grazing and Agricultural Lands” which was sworn to and addressed to the Commissioner. See NMSA 1978, § 19–7–9 (1981) (amended 1989 and 2009); 1910 N.M. Laws, ch. 310, § 10 (Enabling Act). In this appraisal, the appraiser answered “no” to the question: “Is there mineral or coal on the land?” He stated that the land was “all grazing land” and swore in a non-mineral affidavit that he was well acquainted with the land and that:

there is not, to my knowledge, within the limits thereof, any vein or lode of quartz or other rock in places bearing gold, silver, cinnabar, lead, tin, or copper, or any deposit of coal; that there is not, within the limits of said land, to my knowledge, any placer, cement, gravel, salt or other valuable mineral deposits; that no portion of said land is worked for mineral during any part of the year by any person or persons; and said land is essentially non-mineral in character.

{7} In the contract for the purchase of land between Shelton and the Commissioner that followed, dated in November 1930, Shelton agreed that the land was being purchased “for the purpose of grazing and agriculture only.” He also agreed that:

while the land herein contracted for is believed to be essentially non-mineral, should mineral be discovered therein it is expressly understood and agreed that this contract is based upon the express condition that the minerals therein shall be and are reserved in the fund or institution to which the land belongs, together with right of way to the Commissioner, or anyone acting under his authority, at any and all times to enter upon said land and mine and remove the minerals therefrom without let or hindrance.

{8} In 1947 the Commissioner issued Patent for State Land No. 1906, pursuant to which he conveyed to Shelton's widow the State's interest in Section 16, but reserved to the State, by way of the mineral reservation, “all minerals of whatsoever kind, including oil and gas, in the lands so granted,” and also reserved the “right to prospect for, mine, produce and remove the same, and perform any and all acts necessary in connection therewith[.] Plaintiff purchased Section 16 in 1982 for the purpose of using it to graze cattle. The mineral reservation was noted in the chain of title. The character of Section 16 remained unchanged from the time of Shelton's purchase to the time of Plaintiff's 1982 acquisition.

{9} In 1998 Plaintiff entered into a license agreement with Ralph J. Conway to...

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