Issues

February 27, 2016

This article was initially published by the Rocky Mountain Mineral Law Foundation in the February 2017 Mineral Law Newsletter. 

CERTAINTY IN QUIET TITLE JUDGMENTS UPHELD BY NEW MEXICO SUPREME COURT

By Elizabeth A. Ryan and Christopher A. Lauderman [1]

On October 20, 2016, the New Mexico Supreme Court in T.H. McElvain Oil & Gas L.P. v. Benson-Montin-Greer Drilling Corp. Inc., No. S-1-SC-34993, clarified that constructive service of process by publication satisfies due process if and only if the names and addresses of the defendants to be served are not “reasonably ascertainable.”  Id. at ¶ 31.  In this case, the Plaintiffs sought to declare a 1948 quiet title judgment void for failure to properly serve their predecessor-in-interest.  Id. at ¶ 1.

This saga began in 1927 when a landowner conveyed 160 acres of land in San Juan County, New Mexico to Mabel Wilson and her parents, as joint tenants with the right of survivorship.  Id. at ¶ 3.  The following year, the Wilsons deeded the property to David Miller, reserving the oil, gas and mineral interests.  Id.  In 1931, David Miller subsequently conveyed by quitclaim deed his mineral interests in the 160 acres to his brother, Thomas Miller.  Id. at ¶ 4.  In 1948, Thomas Miller filed a quiet title action in San Juan County, alleging that he was the fee simple owner of 931 acres, which encompassed the 160-acre mineral tract at issue.  Id. at ¶ 7.  Miller alleged in his Complaint that after diligent search and inquiry, he was unable to learn or determine the names, places of residence, Post Office addresses, and whereabouts of the unknown heirs of any deceased defendants.  Id.  Moreover, he alleged if any defendants were still living and resided in New Mexico, the defendants had “secreted” themselves so that service of process could not be had except by publication.  Id.  Miller then served by publication in a weekly newspaper published in San Juan County.  Id.  The Sheriff of San Juan County also attempted to serve notice on all parties, but was unable to locate any defendants.  Id. at ¶ 8.  The Court entered its judgment on December 20, 1948, quieting title in favor of Thomas Miller.  Id.

Mabel Wilson, the last surviving joint tenant, died in 1970.  Id. at ¶ 6.  At all times, Wilson resided in San Diego, California.  Id.  Prior to 1948, Wilson married and changed her name to Mabel W. Weeber.  Id.  Her estate made no claim to real property in New Mexico.  Id.  The 1948 San Diego City Directory contains a listing for “Weeber Chas E (Mabel W).”  Id. at ¶ 11.  This was the same address as Mabel Wilson’s parents.  Id.

In 2002, a landman informed Mabel Wilson’s successors-in-interest that they were the current owners of the mineral interests appurtenant to the property.  Id.  Wilson’s successors filed a civil action, challenging the constitutional effectiveness of the service of process made by publication on their predecessors-in-interest.  Id. at ¶ 14.  The New Mexico Rules of Civil Procedure, “both as they exist today and as they existed in 1948, effectuate the requirements of due process.”  Id. at ¶ 32; see, e.g., Rule 1-004(E) NMRA, comm. cmt. (“Rule 1-004(E)(1) makes explicit in the rule the general test for constitutionally-adequate service of process . . . .”)  In 1948, Rule 4(g) required a party seeking to serve notice by publication to “‘file a sworn pleading or affidavit, stating that any defendant’ had either gone out of state, concealed himself or herself within the state, otherwise avoided service, or that his or her name or place of residence are unknown.”  Id. (quoting NMSA 1941, § 19-101(4)(g) (Vol. 2)).  “Such a showing required the clerk of the court to issue notice of the action in a publication in the county in which the action was pending.”  Id.  The special master concluded that any investigation by Thomas Miller in 1948 would not have been likely to locate Mabel Wilson because her parents had died and she did not appear by that name in the telephone directory.  Id. at ¶ 16.  The special master also determined that the plaintiffs’ claim to title was barred by laches, waiver, and estoppel for failure to claim ownership from 1928 until 2002.  Id. at ¶ 17.  The New Mexico Court of Appeals reversed, concluding that Miller did not exercise diligence and good faith in notifying the Wilsons of the quiet title action.  Id. at ¶ 18. 

The New Mexico Supreme Court reversed the Court of Appeals, holding that notice by publication is proper in circumstances, such as the one here, as a last resort if and only if the names and addresses of the defendants are not reasonably ascertainable.    Id. at ¶ 31.  The Court reiterated that the exercise of diligence and good faith to locate a defendant are implicit prerequisites to effect service of process by publication.  Id. at ¶ 32.

In this case, the Supreme Court agreed with the district court that nothing indicated that Thomas Miller had information regarding Mabel Wilson’s whereabouts or that her whereabouts could be identified through reasonable diligence.  Id. at ¶ 37.  The Court noted that the world was a different place in 1948 and that Miller would have to have (1) assumed Mabel still lived in San Diego based on a twenty-year-old sale; (2) acquired and searched the San Diego City Directory from 1926 or 1930 to find the Wilson’s San Diego address; (3) searched San Diego’s public records for Eva Wilson’s death certificate which named her daughter Mabel Weeber as her informant or sift through twenty years of obituaries; and (4) inferred an exact familial relationship between Mabel and her parents.  Id. at ¶¶ 36–37.  The Court said Miller was not required to comb San Diego records to identify individuals who might appear to have an interest in the Property and who were not reasonably ascertainable.  Id. at ¶ 42.  Mabel Wilson’s address was not in any of the original deeds, she changed her name by the 1948 action, and she did not exercise ownership in the Property between 1928 and 1948.  Id. at ¶ 43.

Finally, the Court stressed the importance it must accord to finality in the context of court judgments.  Id. at ¶ 44.  Quiet title judgments provide the certainty needed to ensure that one is the record owner of property in New Mexico to the exclusion of others.  Id.  

1] The author thanks Christopher A. Lauderman, associate attorney with Carson Ryan LLC, Roswell, New Mexico, for his assistance in writing this quarter’s report for New Mexico.

 

June 2, 2016 

This article was initially published by the Rocky Mountain Mineral Law Foundation in the May 2016 Mineral Law Newsletter.

TIMES CHANGE. RULES CHANGE: NMOCC RULEMAKING AUTHORITY AFFIRMED

Earthworks’ Oil & Gas Accountability Project v. NM Oil Conservation Comm’n

No. 33,451, 2016 WL 756447 (N.M. Ct. App. Feb. 4, 2016)

By Elizabeth A. Ryan[1]

The New Mexico Court of Appeals recently upheld the New Mexico Oil Conservation Commission’s (“OCC”) 2013 version of the Pit Rule in Earthworks' Oil & Gas Accountability Project v. New Mexico Oil Conservation Comm'n, No. 33,451, 2016 WL 756447 (N.M. Ct. App. Feb. 24, 2016). Petitioners, Earthworks’ Oil & Gas Accountability Project and New Mexico Wilderness Alliance, appealed the OCC’s order promulgating the 2013 version of 19.15.17 NMAC that regulates pits, closed-loop systems, and below-grade tanks and sumps used in connection with oil and gas operations for the protection of fresh water, public health and the environment (“Pit Rule”). Id. at *1. The New Mexico Oil & Gas Association intervened. Petitioners made three arguments. Id. First, that OCC lacked of jurisdiction to create the 2013 version of the Pit Rule because there existed a pending appeal on a previous version of the Rule. Id. Second, the OCC’s decision to issue the 2013 version of the Pit Rule was arbitrary and capricious because Petitioners submitted contrary evidence to the OCC and the OCC did not adequately set forth reasons for changing the Pit Rule. Id. Third, the OCC provided inadequate notice of the proposed rulemaking of the 2013 version of the Pit Rule. Id.

The previous version of the Pit Rule was adopted by the OCC in 2008 and amended in 2009 (collectively, “2008 Rule”). Id. at *3. This version of the Pit Rule was appealed by the oil and gas industry to the First Judicial District Court. Id. While the appeal was on going, the same oil and gas industry petitioned the OCC to propose a new version of the Pit Rule. Id. Petitioners opposed to any such rulemaking secured a writ of prohibition from the First Judicial District Court to block the OCC from making changes to the Pit Rule. Id. The writ was quashed one month later, and the OCC proceeded in promulgating the 2013 version of the Pit Rule (“2013 Rule”). Id. The appeal of the previous version of the Pit Rule was stayed. Id.

Following adoption of the 2013 Rule, Earthworks’ requested a rehearing of the Pit Rule by the OCC. Id. The request was denied and having no appellate procedures within the OCC rulemaking process, Petitioners sought a writ of certiorari under Rule 1-075 NMRA in district court. Id. The district court granted the writ and subsequently certified the case to the New Mexico Court of Appeals. Id.

Petitioners’ claim arguing that the OCC lacked jurisdiction to promulgate the 2013 Rule was based on the appeal of the 2008 version and the 2009 amendment of the Pit Rule because the Court had not issued a final order in that appeal. Id. at *1, 4. Petitioners argued the on-going appeal divested the OCC of jurisdiction to adopt a new Pit Rule because it was acting in an adjudicatory capacity. Id. at *4. Petitioners, however, did not rely on any authority for this position. Id. at *4.  The Court pointed out that Petitioners confused the OCC’s rulemaking authority with its adjudicatory authority. Id. at *5. The Court held that the OCC was acting under its rulemaking authority when promulgating the 2013 Rule. Id. at *4, 6. The difference between an agency’s rulemaking authority and adjudicatory authority is that adjudications involve disputes among specific individuals in specific cases, whereas rulemaking affects the rights of a broad class of the public and not specific individuals. Id. at *5 FN 1.  Relaying on the New Mexico Supreme Court’s decision in New Energy Econ., Inc. v. Shoobridge, 2010-NMSC-049, 243 P.3d 746, the Court further held that an attempt by a court to suspend the rulemaking process of an agency because of a pending appeal is prohibited by the doctrine of separation of powers, which “forbids a court from prematurely interfering with the administrative process created by the Legislature”. Id. at *7, 8-9 (quoting Shoobridge, 2010-NMSC-049 at ¶1).

Next, Petitioners argued the OCC’s decision to issue the 2013 Rule was arbitrary and capricious for several reasons, and the Court addressed each reason applying a deferential standard of review. Id. at *11, 13. A deferential standard of review presumes a rule enacted by an agency is valid and will be upheld if it is reasonably consistent with the statutory mandates the agency is charged with implementing. Id. at *11. The OCC’s statutory mandates are found in the New Mexico Oil and Gas Act (the “Act”). Id.

Many of Petitioners’ arguments centered on the OCC hearing the same evidence in the hearings for the 2013 Rule as it did during the hearings on the 2008 Rule, yet the Rules are “radically different”. Id. at *13-14. The Petitioners requested the Court to take judicial notice of the record for the 2008 rulemaking proceedings in addition to reviewing the record of the 2013 rulemaking proceedings in order to show the similarity of evidence. Id. at *14-15. However, the Court declined to take notice, stating that it is not the function of the Court acting in its appellate capacity to admit new evidence or substitute its judgment for that of the OCC. Id. at *16. The Court limited its review to whether the OCC’s order adopting the 2013 Rule was arbitrary or capricious based only on the evidence presented during the 2013 rulemaking hearing. Id.

The Court found that the reasoning behind the OCC’s 2013 Rule was adequate because it gave detailed findings for the standards it applied and the requirements it created in the 2013 Rule. Id. at *17-19, 33. The OCC explained the negative impact the 2008 Rule had on the growth in the oil and gas industry, the difficulty in understanding the Rule, the creation of unnecessary paperwork, and the cumbersome process that did not promote a predictable system. Id. at *17, 29-30, 32. The OCC further stated in its findings that the changes to the 2013 Rule encouraged reuse and recycling of oilfield fluids, reduced surface impacts, and corrected misconceptions relied on during the development of the previous rule. Id.

Petitioners also argued the OCC did not adequately explain its changing the Rule from a prescriptive rule to a performance-based rule. Id. at *13, 20. The Court responded that the OCC was under no obligation to explain its use of one type of rule over another, and it is only required to satisfy the purposes set forth in the Act. Id. at *21. Petitioners simply did not meet their burden of establishing that the 2013 Rule was not related to the OCC’s legislative purpose. Id. at *22.

The Petitioners argued the OCC was arbitrary and capricious because the 2013 Rule lowered groundwater contamination standards. Id. at *13, 24. The Court, however, rejected this argument, stating the OCC is not required to justify a departure from a previous rule only to fulfil the statutory mandate of protecting fresh water, public health, and the environment. Id. at *24-25. The Court referenced the OCC’s reliance on testing using EPA methodology and detailed evidence on factors affecting groundwater contamination levels. Id. at *24. Ultimately, the Court found the OCC provided an adequate explanation for the standards set forth in the 2013 Rule, which continued to fulfill the statutory mandate. Id. at *24-25.

The last arbitrary and capricious argument set forth by Petitioners was that the OCC gave no explanation as to how the 2013 Rule provided for more cost savings and economic development. Id. at *13, 31. The Petitioners argued that the OCC took all possible measure related to cost savings when the previous rule was developed. Id. at *32. But the Court found Petitioners had no factual basis for this argument. Id. at *31. Petitioners argued the OCC acted arbitrary and capricious because it has no duty to further economic development. Id. at *26. The Court disagreed with Petitioners and found that the OCC must do whatever is reasonably necessary to carry out its statutory mandate, even if it is not expressly defined in any section of the Act. Id. at *27. Economic considerations cannot be the sole purpose behind the OCC adopting a rule, but the OCC may give consideration to economic factors when developing a rule. Id. at *27-28. Here, only one of the justifications for the 2013 Rule was strained economic development shown through various public comment given at the rulemaking proceeding; therefore, the OCC did not act arbitrary or capricious. Id. at *29, 33.

The third argument Petitioners made in appealing the OCC’s promulgation of the 2013 Rule was whether the OCC gave adequate notice of the proposed rulemaking. Id. at *1, 34. The Court found the OCC complied with the notice requirements in the Act by publishing notice (which specified where to obtain a copy of the proposed Pit Rule) in the Albuquerque Journal, the New Mexico Register, the appropriate division website, and e-mailed a copy to those who made a request. Id. at *36, 37 & 39. Petitioners argued that the Court should instead apply the notice requirements set forth in New Mexico Administrative Procedures Act (the “NMAPA”). Id. at *38. The Court stated Petitioners provided no authority to support this argument and the NMAPA does not apply to the OCC’s actions. Id. at *38.

In summary, the Court concluded that all of Petitioners’ claims failed. Id. at *40. The OCC is not deprived of the power to adopt new rules due to pending appeals. Id. at *2, 8-9. The Court will apply a deferential standard to agency decisions and the OCC provided adequate reasoning for adopting the 2013 Rule. Id. at *11, 24. The OCC did not act arbitrary or capricious in developing the 2013 Rule because the Rule satisfies the OCC’s statutory mandate. Id. at *33. Furthermore, the OCC acted within its authority under the Act in promulgating the 2013 Rule. Id. at *40. This case is significant because it is yet another decision, like the Shoobridge decision, where the Court confirms an administrative agency’s authority to promulgate rules if and when it desires. Agencies can even alter and amend old rules to comport with more current policy agendas. Times change and rules change.

 

[1] The author acknowledges the assistance of Elizabeth A. Shields, Associate at Carson Ryan LLC, in the preparation of this article.

 

January 22, 2015

Local Government/Pre-emption -- by Joel M. Carson III

The ability of local and county governments to ban oil and gas activity previously approved by the state and federal governments has been a hot topic in recent months.  On January 20, 2015, Judge James O. Browning of the United States District Court for the District of New Mexico ruled that such a ban in Mora County, New Mexico violated the United States and New Mexico Constitutions.  The ruling is important to property owners throughout the Western United States who have, in recent times, seen their valuable mineral rights essentially condemned by activist local and county governments.  Recently, Carson Ryan LLC partner Joel M. Carson III joined with Denver attorneys Robert Comer and Meredith Kapushion as counsel for the Western Energy Alliance in filing a brief in support of the Independent Petroleum Association of New Mexico in Mary Vermillion v. Mora County, New Mexico, No. 13-CV-01095 CEG/GBW.  The Vermillion case also seeks to overturn the Mora County ban and vindicate the right of property owners to extract their valuable minerals.  Please follow this link for more information -- http://www.westernenergyalliance.org/press-room/mora-county-fracking-ban-tramples-personal-property-rights .    

 

January 13, 2014

Public Lands / Wildlife -- By Joel M. Carson III

Sometimes it seems the issues never change.  In 1995, the U.S. Fish and Wildlife Service issued an Environmental Impact Statement with respect to its plans to reintroduce the Mexican Wolf to its historic range. In response to fears for public safety and the continued economic viability of Western New Mexico ranches, the FWS assured citizens that any restrictions and impacts on business and industry would be minimal. By most accounts, those assurances have not proven to be true.  Now, just as New Mexico residents believed the issue was settled, the FWS is proposing to dramatically expand the wolf reintroduction range from far Western New Mexico to the entire Southern two-thirds of the State. http://www.paysonroundup.com/news/2013/nov/21/feds-still-gathering-comments-wolf-reintroduction-/.

In 1998, I published an article discussing the reintroduction and suggesting that ranchers be paid when the reintroduced wolves dined on their cattle.  Joel M. Carson, Note, Reintroducing the Mexican Wolf, Will the Public Share the Costs or Will the Burden be Borne by a Few? 38 N.R.J. 297 (1998) (available at: http://lawlibrary.unm.edu/nrj/38/2/03_carson_wolf.pdf). At the time of publication, I believed the reintroduction area was established and that the issues associated the reintroduction were essentially settled. Apparently, some issues will never die.  If you earn your living from the land, through ranching or mineral development, this issue should be on your radar.  Expansion of the reintroduction area will be accompanied by increased regulation and increased federal land-use restrictions.  Find a way to participate in the process and to ensure your voice is heard. Can you afford not to?  

 

 

 

CERTAINTY IN QUIET TITLE JUDGMENTS UPHELD BY NEW MEXICO SUPREME COURT



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