McNeill v. Rice Engineering & Operating Inc.

2006 NMCA 015, 128 P.3d 476, 139 N.M. 48
CourtNew Mexico Court of Appeals
DecidedNovember 22, 2005
Docket25,213
StatusPublished
Cited by13 cases

This text of 2006 NMCA 015 (McNeill v. Rice Engineering & Operating Inc.) is published on Counsel Stack Legal Research, covering New Mexico Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
McNeill v. Rice Engineering & Operating Inc., 2006 NMCA 015, 128 P.3d 476, 139 N.M. 48 (N.M. Ct. App. 2005).

Opinion

OPINION

SUTIN, J.

{1} Appellees’ motion for rehearing filed November 1, 2005, is denied. The formal opinion filed in this appeal on October 21, 2005, is withdrawn and this opinion is filed in its stead.

{2} This is the second appeal arising from a dispute over the disposal of salt water generated from oil and gas drilling. See McNeill v. Rice Eng’g & Operating, Inc., 2003-NMCA-078, 133 N.M. 804, 70 P.3d 794. Salt water is a waste product from oil and gas drilling operations. It is disposed of in wells used to reinject the water into geological formations comparable to those from which the product originated. Plaintiffs, the appellants in this appeal, are owners of, and heirs and successors-in-interest to, lands called the McNeill Ranch (the Ranch). Defendants, the appellees in this appeal, are operators of a salt water disposal system called the Hobbs Salt Water Disposal System (the Disposal System). As part of the Disposal System, salt water was injected into a disposal well called Well E-15 (E-15) situated on the Ranch. The salt water was transported by pipeline from oil and gas drilling operations participating in the Disposal System. This appeal primarily involves a statute of limitations bar of Plaintiffs’ trespass and conversion claims relating to the disposal of salt water transported to E-15 by pipeline from off-site oil and gas drilling operations over a span of thirty-six years. We conclude that material issues of fact exist that mandate trial on the trespass claim and thus reverse the district court’s grant of summary judgment in favor of Defendants as to that claim. We affirm the grant of summary judgment on Plaintiffs’ other claims.

BACKGROUND

{3} E-15 was drilled in 1957 by Defendants’ predeeessor-in-interest Pan American Petroleum Corporation (Pan American). The Ranch was owned by Will Terry. Commensurate with drilling E-15, Pan American negotiated a Property Damage Release (the Release) with Terry. The parties dispute whether the Release related only to damages from the initial construction of the well and pipelines or whether the Release also covered the disposal of the salt water on the Ranch. In 1958 Defendant Rice Engineering and Operating, Inc. took over the operation of the Disposal System and negotiated a right-of-way with Terry for pipelines that would run over and through the Ranch. Id. ¶3.

{4} When Terry died in 1968, title to the Ranch passed into a testamentary trust in which Terry’s daughters, including Muriel Terry McNeill, had interests. After the daughters’ deaths years later, the Ranch passed to Plaintiffs, descendants of Terry, namely, William F. McNeill and Marilyn Cates, and to the Black Trust, a trust in which certain other descendants of Terry hold an interest. Plaintiff William F. McNeill occupied the Ranch under a lease from 1993 to 1995. Plaintiffs acquired title in 1995. Plaintiffs leased the Ranch to Paige McNeill, William F. McNeill’s son, in November 1997. We refer to Plaintiffs’ predecessors in interest as “Predecessors” in this opinion.

{5} Plaintiffs sued Defendants on October 27, 1998. In their complaint, Plaintiffs sued Defendants for subsurface trespass caused by the disposal of the salt water into E-15 and also for injury caused by leakage from the salt water pipeline on Plaintiffs’ land. In November 2000, the district court granted partial summary judgment against Plaintiffs on the disposal claim on the limited ground that “the Release unambiguously granted [Defendants] the right to dispose of off-site salt water produced into Well E-15.” Id. ¶ 9. Trial on the leakage claim resulted in a verdict in January 2001 in favor of Plaintiffs for $70,000. Plaintiffs appealed from the partial summary judgment. This Court in April 2003 reversed on the ground that genuine issues of material fact existed in regard to the effect of the Release. Id. ¶ 42. The Release, which we concluded was ambiguous, is fully set out in McNeill. See id. ¶ 15.

{6} On remand from the McNeill reversal, Plaintiffs continued their trespass and conversion claims, arguing the doctrine of fraudulent concealment and the discovery rule in order to avoid the bar of the four-year statute of limitation, NMSA 1978, § 37-1-^i (1880). The district court, in November 2003, again entered a partial summary judgment. The court determined that any trespass claim for damages occurring outside the four years preceding the filing of the complaint on October 27, 1998, was barred. The court also determined that there was no evidence of fraudulent concealment or any concealment of Defendants’ activities in the operation of E-15. In addition, presumably based on Defendants’ defense that Plaintiffs had to be in possession of the Ranch to assert their claims, the court held that “Plaintiffs’ trespass claim ends when the ranch was leased to Paige McNeill on or about November 1, 1997.” The court also entered summary judgment against Plaintiffs on their conversion claim.

{7} In the partial summary judgment, the court also stated:

The Court finds an issue of material fact exists as to what was open and obvious to the previous owner(s) of the ranch and what he (they) knew, should have known or had constructive notice of regarding the operation of the E15 SWD Well. Summary Judgment is denied as to the claim of trespass.

Both parties appear to agree that the partial summary judgment disposed of the pre-October 27, 1994, claims.

{8} Following entry of this partial summary judgment, in a stipulated dismissal order, Plaintiffs released all claims and causes of action “in any way related, whether directly or indirectly, to the disposal and/or injection of produced waters in the E-15 Well-from October 27, 1994 through the infinity of time.” However, Plaintiffs expressly reserved their right to appeal from the court’s unfavorable partial summary judgment, leaving open the possibility of pursuing claims dismissed in the partial summary judgment. Thus, the trespass claims in this case have been split into two groups based upon the date of the trespass: (1) Plaintiffs have settled with Defendants as to trespass claims arising on or after October 27, 1994 (four years prior to the filing of this suit); and (2) Plaintiffs reserved the right to appeal the district court’s dismissal of any trespass claims arising prior to October 27, 1994. This is that appeal.

{9} There is no dispute that from 1958 through 2003 Defendants pumped into E-15 large amounts of salt water from oil and gas drilling operations outside the Ranch. Plaintiffs contend on appeal that this constituted a continuing trespass and continuing wrong, and through application of the doctrine of fraudulent concealment or the discovery rule that they can prove facts that would allow recovery of damages for that disposal. Plaintiffs further contend that summary judgment was improper because material facts are in dispute.

{10} In arguing that their conversion claim is viable, Plaintiffs assert Defendants intentionally failed to enter into a salt water disposal agreement with Predecessors for the disposal of the salt water. They further assert that Plaintiffs intentionally deprived Predecessors and Plaintiffs of compensation due them by exercising dominion over and converting to Defendants’ own use money that was to be used to compensate Predecessors.

DISCUSSION

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Cite This Page — Counsel Stack

Bluebook (online)
2006 NMCA 015, 128 P.3d 476, 139 N.M. 48, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mcneill-v-rice-engineering-operating-inc-nmctapp-2005.