Bulletin: NM2014006

Dear Associates:

On October 16, 2014, the New Mexico Court of Appeals issued its decision in Case No. 32,666 styled T.H. McElvain Oil & Gas Limited Partnership, et al., v. Benson-Montin-Greer Drilling Corp. et al. As of the date of this bulletin, the appellees have not filed a motion for reconsideration with the Court of Appeals or filed a petition for cert. with the New Mexico Supreme Court.

While the facts of the case are complex and deal with mineral interests, the ultimate decision of the court is simple; the court allowed certain parties to attack the validity of a quiet title judgment rendered in 1948. The primary basis for the court’s reasoning was that certain of the 1948 quiet title defendants were denied due process, because the quiet title plaintiffs did not exercise sufficient due diligence in trying to serve those defendants with process. The court found that the quiet title plaintiffs had relied on service by publication in New Mexico of certain California defendants, even though it appeared to the court that the quiet title plaintiffs could have located the California defendants and served them personally had they exercised greater diligence. The lack of proper service of process on these defendants deprived the 1948 trial court of jurisdiction over those defendants and allowed the current plaintiffs (including the descendants of those defendants) to collaterally attack the 1948 judgment some 66 years later. In this case, it was not until the mineral interests to which title had been quieted became valuable that a challenge to quiet title action was raised.

Although it may be that the case can be limited to its facts, nonetheless the case raises substantial implications for those situations where we are asked to insure based on a chain of title that derives in whole or in part from a prior quiet title judgment. As a general matter, please follow the Stewart Underwriting Manual Guidelines 16.00 on quiet title actions, as supplemented by these guidelines.

Guidelines

1. You may continue to rely on starters except as described herein. We believe that it would be unreasonable to ask our agents to search back to patent on every transaction. If, however, your transaction involves rural property and if there has been recent mineral exploration activity in or around the rural property or the general environs, please examine the title back to patent to identify any quiet title actions. We believe that this case may present an issue only in those cases where quieted rights for some reason now become valuable.

2. If based on your title search you find a quiet title judgment, please review the court docket to ascertain whether the defendants were personally served or if there was service by publication. If there was personal service on all of the defendants, and if you are otherwise satisfied with the validity and sufficiency of the quiet title action, you may rely on the quiet title judgment.

3. If you find service by publication on one or more of the defendants in the quiet title action, please add the following specific exception to the commitment and policy(ies):

 "A collateral attack on the judgment in the case of ________________________  [case name and number] based on the lack of due process or lack of jurisdiction in the court that issued the quiet title judgment in favor of plaintiffs in that court proceeding, and which collateral attack results in a final, non-appealable order voiding or otherwise vacating the judgment of the trial court in that court proceeding."

If the customer objects to that exception, please contact your underwriter. Removing the exception may require additional due diligence by the title agent and underwriter to evaluate further the underlying quiet title action.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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