Oil company's mineral rights in Eddy County upheld by New Mexico Supreme Court

New Mexico Supreme Court justices sided with an oil company in a dispute with a private landowner over rights to underground minerals in Eddy County, paving the way for the company to drill on the land in question.

The unanimous verdict came July 13 amid a legal challenge by potential heirs of the mineral rights’ previous owners before the rights were bought by Premier Oil and Gas of Artesia.

The court ruled Premier was the “bon fide purchaser” of the rights as there was no notice of claims against the purchase at the time of the acquisition.

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According to the decision, those claiming heir status argued a district court in 2007 wrongfully granted heirship to another person alone who sold the rights to Premier.

They argued the sale was invalid as not all heirs to the rights were accounted for, records show, when Premier acquired the leasehold in 2010.

In 2020, a New Mexico Court of Appeals verdict invalidated the district court ruling, as not all potential heirs were notified of the sale, but upheld Premiers claims to the mineral rights as a “good faith” purchaser as the company.

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That decision found the company relied on apparently valid judgement at the time in determining the leasehold was “free of claims that could jeopardize its ownership.”

Eddy County mineral rights disputed for decades

The rights were owned by Herbert and Marie Welch in the 1970s, who executed a joint will in 1974, listing each other and their family members as heirs to the mineral estate.

Herbert Welch died in 1975, and mineral rights were transferred to Marie who executed a will in 1980 and gave it to her cousin Samuel Alderman.

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Marie Welch died in 1988, but Alderman did not come forward with the will, the verdict read, despite attempts to contact him by Marie’s nephew Ralph Griffin.

The estate remained unprobated for about 20 years, the verdict read, until Griffin filed a petition in 2007 to determine its heirship, claiming he was Marie Welch’s sole heir.

Records show he publicized the proceeding in a local newspaper, addressing the notice to “the unknown heirs of Marie Welch” without naming anyone specifically.

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The district court sided with Griffin, finding him the sole heir Marie Welch and awarding him alone title to the minerals.

Griffin transferred the mineral rights to Griffin Minerals LLC, which leased the rights to Sam Shackelford in 2010, records show.

That year, Premier became interested in the leasehold, records show, and hired an attorney to inquire about the title, finding the 1974 will and 2007 judgement and concluding the purchase would be valid.

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Premier bought the mineral rights in March 2010, records show.

Alderman resurfaced in 2012 petitioning the court for a formal probate of the 1980 will and appointment of himself as its representative.

Griffin opposed the proceeding, but the court appointed Alderman as representative of Marie Welch’s estate.

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That was followed by “lengthy litigation,” the verdict read, and when Premier intervened to attempt to resolve its title to the rights, several family members claiming to be Herbert Welch’s heirs filed a counterclaim, arguing they had interest in the rights through his estate.

A district court ruled in favor of Griffin and Premier but was reverse by the Court of Appeals which ruled Griffin did not take adequate efforts to find the identities of the Welch’s other heirs and notify them of the sale.

But the Court of Appeals also found Premier to be the “bona fide” purchaser of the rights as it did not have any notice of potential adverse claims when buying the rights, relying on past court decisions that Griffin was Welch’s sole heir.

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In its verdict, the Supreme Court upheld this finding.

New Mexico Supreme Court finds oil company purchased rights ‘in good faith’

The court concluded that Premier and claimants like it should be able to rely on previously believed valid court judgements as accurate when making decisions about acquiring properties.

“To rule otherwise would mean that purchasers would have to delve into the merits of the judgment to ponder its legitimacy and even speculate as to whether the judgment would be upheld in the face of a collateral attack,” read the verdict.

“It would not only be unfair to purchasers but would invalidate the legitimacy of our judgments and diminish public trust in our judicial system.”

In his supporting opinion, Justice David Thomson wrote that although a court may have previously erred in 2007 in finding Premiers claims to the rights were without defect, that ruling could not come at the expense of the company as an “innocent third party.”

“We conclude that Premier did not have actual notice of title defects for two independent reasons,” read Thomson’s opinion. “First, as bona fide purchasers, Premier may rely on the 2007 Judgment as a facially regular judgment.

“Second, a judgment that is the result of a court improvidently exercising its jurisdiction is not to be corrected at the expense of an innocent third party who relied on that judgment.”

Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on Twitter.

This article originally appeared on Carlsbad Current-Argus: Oil company's mineral rights upheld by New Mexico Supreme Court