T.H. McElvain Oil & Gas Ltd. P'ship v. Benson-Montin-Greer Drilling Corp.

Decision Date24 October 2014
Docket NumberNo. 34,993.,32,666.,34,993.
PartiesT.H. McELVAIN OIL & GAS LIMITED PARTNERSHIP, a new mexico limited partnership; Karen Ann Handley Anderson, an individual; Susan R. Handley McGrew, an individual; Billie L. Phillips, an individual; Billie L. Phillips Recoverable Trust dated April 23, 1996, Billie L. Phillips Trustee, Judy Lynn Quint, an individual; Ronald Charles Weeber, an individual; Lucile Alice Northcote Trust dated May 29, 1996, Billie L. Phillips, successor trustee, Plaintiffs–Appellants, v. Group I: BENSON–MONTIN–GREER DRILLING CORP., INC., a Delaware corporation; Elizabeth Jeanne Turner Calloway, an individual; Kelly R. Kinney, an individual; Katherine P. Miller, an individual; Ronald Michael Miller, an individual; Vickie Roann Miller, an individual; Thomas R. Miller, an individual; Fred E. Turner, LLC, a Delaware Limited Liability Company; John Lee Turner, an individual; Linda Voitl a/k/a Linda Davis, an individual; Estate of Williame G. Webb, Deceased, John G. Taylor, Independent Executor, Group II: Cheryl U. Adams, an individual; E'Twila J. Axtell, an individual; BP America Production Company, a Delaware Corporation; Coastal Waters Petroleum Company, Inc., a Louisiana Corporation; Energen Resources Corporation, an Alabama Corporation; the Estate of Anne B. Little, First Security Bank of New Mexico, as Personal Representative; Lana Gay Phillips, an Individual; Henrietta Schultz, an Individual; the Frank and Henrietta Schultz Revocable Trust Dated January 2, 1990, Henrietta Schultz Trustee; Schultz Management Ltd., a Texas Limited Partnership; J. Glenn Turner, Jr. LLC, a Delaware Limited Liability Company; Mary Frances Turner Jr. Trust, JP Morgan Chase Bank, NA Trustee, Group III: all Unknown Claimants of interest in the Premises adverse to the Plaintiffs, Defendants–Appellees.
CourtCourt of Appeals of New Mexico

Dufford & Brown, P.C., Herbert A. Delap, Denver, CO, Cuddy & McCarthy, LLP, John F. McCarthy Jr., Arturo L. Jaramillo, Santa Fe, NM, for Appellants.

Gallegos Law Firm, P.C., J.E. Gallegos, Michael J. Condon, Santa Fe, NM, Briones Law Firm, P.A., Felix Briones Jr., Farmington, NM, for Appellees Henrietta Schultz, The Frank and Henrietta Schultz Revocable Trust, Henrietta Schultz Trustee, Schultz Management Ltd., Elizabeth Jeanne Turner Calloway, Fred E. Turner, LLC, John Lee Turner, J. Glenn Turner, Jr. LLC, Mary Frances Turner Jr. Trust, JP Morgan Chase Bank, N.A. Trustee, and Benson–Montin–Greer Drilling Corp., Inc.

Miller Stratvert P.A., Dylan O'Reilly, William T. Denning, Farmington, NM, for Appellees

E'Twila J. Axtell, Lana Gay Phillips, and Cheryl U. Adams.

OPINION

SUTIN, Judge.

{1} The Opinion filed in this case on October 16, 2014, is withdrawn and the following Opinion is substituted in its place.

{2} This case presents a difficult issue of whether constructive notice of an action to quiet title to property, including underlying oil and gas interests located in San Juan County, New Mexico, was effective. Title was quieted in 1948 to property in which the oil and gas interests had been reserved by the grantors of the property in a 1928 warranty deed. Presumably unbeknownst to the grantors who had reserved their oil and gas interests, the decree quieted title to those oil and gas interests in favor of the quiet title plaintiff whose title clearly stemmed from a warranty deed that contained the reservation.

{3} Evidence indicated that the quiet title plaintiff knew or should have known in 1948 that the grantors who reserved the oil and gas interests resided in San Diego, California at the time of the 1928 deed. Evidence also indicated that upon inquiry in San Diego, the quiet title plaintiff may have been able to locate the grantors. Yet, service of process was obtained solely through constructive notice published in a local San Juan County newspaper with no attempt shown in the record to discover the location of those grantors for personal service or to otherwise give notice of the action to those grantors.

{4} In 2002 a group searching for locations to pursue oil and gas exploration discovered, by examining the chain of title to the property, that the oil and gas interests had been reserved by the 1928 warranty deed before the 1948 quiet title action. Based on that discovery, the group was able to locate heirs (the Wilson heirs) to the reserved interests with the result that Plaintiffs sued the heirs of the quiet title plaintiff's purchasers to establish the Wilson heirs' ownership rights in the reserved oil and gas interests. From an unfavorable district court summary judgment, Plaintiffs appeal, contending that the constructive notice was not effective to permit adjudication of their reserved interests and thus violated due process. We conclude that the Millers failed to undertake a good faith effort to provide the Wilson heirs adequate notice of their 1948 quiet title suit. We, therefore, reverse the district court's grant of summary judgment to Defendants and remand for further proceedings.

BACKGROUND

{5} Plaintiff T.H. McElvain Oil & Gas Limited Partnership (McElvain) entered into a mineral lease agreement in 2002 with the Wilson heirs, specifically, Judy Lynn Quint and Ronald Charles Weeber, pertaining to the mineral interests associated with 160 acres of property in San Juan County (the property). Ms. Quint, Mr. Weeber, and a number of other individuals, are heirs of one of the original grantors, Mabel G. Wilson (later known by her married name, Weeber). Mabel Weeber, who, along with her mother and father, Eva C. Wilson and Judson Wilson (the Wilsons), sold the property to David Miller in 1928, reserving in their warranty deed to David Miller the “oil and gas existing or found” on the property. McElvain and the Wilson heirs are Plaintiffs in the present case.

{6} The property consists of 160 acres lying beneath the surface of Navajo Lake in San Juan County. In 1927 the Wilsons, as joint tenants, acquired a general warranty deed to the property from W.W. McEwen. The 1927 deed from McEwen to the Wilsons listed Judson Wilson and Eva C. Wilson and Mabel G. Wilson of San Diego, California” as purchasers of the property. When the Wilsons conveyed the property to David Miller in 1928, the warranty deed contained the following express exception and reservation:

excepting and reserving to the grantors herein the oil and gas existing or found therein, with the right to enter on for prospecting or developing same, provided they must pay all damage to land or crops in prospecting or development.

The deed from the Wilsons to David Miller was recorded in San Juan County in 1928.

{7} By a 1931 quitclaim deed, David Miller conveyed his interest in the property to his brother, Thomas Miller, who had paid one-half of the purchase price for the property at the time that David Miller purchased it from the Wilsons. The quit claim deed executed by David Miller, in which he conveyed his interest in the property to Thomas Miller was recorded in 1937, four days after David Miller's death. By a 1948 quiet title action in the San Juan County district court, Thomas Miller was adjudged to be the fee simple owner of the property.

{8} The numerous named Defendants in the present case were the various lessees and lessors of the mineral interests in the property whose interests stemmed from Thomas Miller's fee simple ownership in the property. The district court appointed a special master “to assist ... in determining the ownership of the mineral rights[.] The following background is based on the special master's statement of undisputed facts.

{9} Judson Wilson died in 1929, and Eva Wilson died in 1944. By the time that Eva Wilson died, Mabel Wilson had married and changed her name to Mabel Weeber. Mabel Weeber, the remaining joint tenant in the 1927 warranty deed to the property, died in 1970.

{10} In October 1948, Miller filed a quiet title action in the district court for San Juan County alleging, in relevant part, that he was the fee simple owner of the property. In his complaint to quiet title in the property, Miller named Judson Wilson, Eva Wilson, and Mabel Wilson, along with other individuals who are not relevant to this appeal, as defendants “if living, or if deceased, by their unknown heirs.” Miller's complaint included a sworn statement by Miller's attorney that, in relevant part, the Wilsons' heirs were “unknown to ... Plaintiff, and Plaintiff [had] been unable to learn or determine the names, places of residence, [p]ost [o]ffice addresses[,] and whereabouts of the ... unknown heirs[ ] after diligent search and inquiry[.] Additionally, the San Juan County Sheriff submitted a sheriff's return stating that he had “diligently searched and inquired for the [Wilsons],” but “after such search and inquiry, [was] unable to find [them] in San Juan County ... and [was] unable to find [their p]ost [o]ffice addresses, places of residence, or whereabouts[.]

{11} Miller served the Wilsons and their heirs (hereinafter, the Wilsons) with notice of his quiet title action by publication in a Farmington, New Mexico newspaper for four successive weeks. The Wilsons did not respond to the notice. On December 20, 1948, the district court entered judgment quieting title to the property in favor of Miller. In its judgment, the court determined “that after [a] diligent search and inquiry[,] the post office addresses, places of residences, and whereabouts of ... the [d]efendants” were “unknown”; and, therefore, the defendants could not “be personally served with process in this cause.” The judgment concluded that Miller was the owner of the property in fee simple title.

{12} In 1950 Miller conveyed the property to V.H. McRee, but reserved three-fourths of the mineral rights therein. In 1953 Miller and McRee entered into oil, gas, and mineral leases; as of September 24, 2012, those leases remained in effect. The heirs of McRee's purchasers, who are Defendants in this case, claim royalty interests...

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