I attest to the accuracy and
integrity of this document
New Mexico Compilation
Commission, Santa Fe, NM
'00'05- 11:16:36 2011.11.11
Certiorari Granted, October 25, 2011, No. 33,147
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: 2011-NMCA-108
Filing Date: July 19, 2011
Docket No. 29,812
DELMA E. PRATHER, as Trustee of the
DELMA E. PRATHER REVOCABLE TRUST,
Plaintiff-Appellant,
v.
PATRICK H. LYONS, Commissioner of
Public Lands of the State of New Mexico,
Defendant-Appellee,
and
MAINLINE ROCK & BALLAST, INC.,
Defendant.
APPEAL FROM THE DISTRICT COURT OF TORRANCE COUNTY
Matthew G. Reynolds, District Judge
Comeau, Maldegen, Templeman & Indall, LLP
Michael R. Comeau
Stephen J. Lauer
Sharon W. Horndeski
Santa Fe, NM
for Appellant
New Mexico State Land Office
John L. Sullivan, Associate Counsel
Santa Fe, NM
for Appellee
1
Brennan & Sullivan PA
Michael W. Brennan
Santa Fe, NM
for Amicus Curiae N.M. Farm & Livestock Bureau
OPINION
SUTIN, Judge.
{1} State trust land was originally sold in 1930 to a purchaser who bought the land for
grazing purposes. This original purchaser received a patent in 1947 and sold the land in
1982. The land contained surface and subsurface metamorphic rock, and the character of
the surface and its use for grazing did not change from 1930 to 1982. After the 1982 sale,
the successor landowner’s lessee mined, crushed, and sold the rock for use primarily as
ballast for railroad beds and paid the landowner-lessor royalties. In this action, Plaintiff
Delma E. Prather, as trustee of the Delma E. Prather Revocable Trust, is the successor to the
original purchaser of the state trust land. She sued Patrick H. Lyons, Commissioner of
Public Lands of the State of New Mexico, to quiet title to the rock when the Commissioner
asserted ownership of the rock and a right to royalties based on a general mineral reservation
in the 1947 patent, which we refer to in this opinion as “the mineral reservation.” After a
bench trial, the district court held for the Commissioner. Our issue is whether the rock in
the state trust land acquired by the original and successor purchasers constituted a mineral
reserved to the State under the mineral reservation.
{2} On appeal, Plaintiff requests that we adopt and apply the “surface destruction
doctrine” in arriving at a decision that the parties to the original 1930 purchase transaction
did not intend the rock to be considered a mineral within the mineral reservation. Relying
in part on Bogle Farms, Inc. v. Baca, 1996-NMSC-051, 122 N.M. 422, 925 P.2d 1184,
which states that title to state trust land should be determined on a case-by-case basis
considering the intent of the original parties and not by a rule of property nor by conveyance
by implication, the Commissioner argues against adoption of the surface destruction doctrine
and further argues that the evidence of intent, considering the totality of circumstances,
supported the district court’s decision. In regard to the evidence, Plaintiff contends that the
district court misread critical transactional documents and that its decision was based on
irrelevant and insubstantial evidence. We hold that substantial evidence supported the
district court’s findings of fact under Bogle Farms’ required analysis of the intent of the
parties to the original sale transaction that the intent of the conveyance transaction was that
the rock was included in the reservation of “all minerals of whatsoever kind” in the patent.
BACKGROUND
2
{3} The background recited here is largely taken from undisputed findings of fact of the
district court. There exist two purchase transactions. J.C. Shelton acquired a fee simple
interest in Section 16, Township 5 North, Range 12 East, Torrance County, New Mexico
(Section 16), pursuant to a 1930 purchase contract with the then Commissioner of Public
Lands of the State of New Mexico. Ms. Prather and her husband purchased Section 16 in
1982 from Shelton’s successor in interest and, after her husband’s death, Ms. Prather created
her trust and transferred Section 16 into her name as trustee. Ms. Prather, as trustee of the
Delma E. Prather Revocable Trust, is Plaintiff in the present action. For convenience, in this
opinion we refer to Ms. Prather, individually and as trustee, and also to Mr. and Mrs. Prather,
as “Plaintiff.” We refer to Defendant Commissioner Lyons and past Commissioners of
Public Lands as “the Commissioner.” Pertinent documentary history relating to Shelton’s
and Plaintiff’s acquisitions of Section 16 is as follows.
{4} The State acquired title to Section 16 pursuant to an Act of Congress approved June
21, 1898, called the Ferguson Act, confirmed in an Act of Congress approved June 20, 1910,
effective as of November 16, 1915, called the New Mexico Enabling Act. See Bogle Farms,
1996-NMSC-051, ¶ 9 (reciting the history of the transfer of land by the federal government
to New Mexico when New Mexico attained statehood to be held in trust for schools, citing
the Enabling Act). Under the Ferguson Act, the United States granted Section 16, among
other lands, to the Territory of New Mexico for the support of common schools, but
excluded lands that were mineral in character. In confirming the grant, the Enabling Act also
excluded mineral lands. The district court found that “mineral lands” is a term of art that
means “lands known (at the time) to be more valuable for minerals and must contain
minerals in sufficient quantity to justify expenditure for their extraction[,]” and “[t]he land
must also be more valuable for mineral extraction than other uses.” Title was confirmed in
Patent No. 1205336 issued by the United States on February 23, 1960.
{5} The district court found that in 1919 when there was a rush to obtain leases from the
State for oil and gas exploration, the State Legislature authorized the Commissioner to
classify the lands owned by the State as mineral or non-mineral. The State Land Office
(SLO) Administrative Rule No. 1, 1919, dated April 4, 1919, designated and classified all
lands of the State as mineral lands. See State ex rel. Otto v. Field, 31 N.M. 120, 128-31, 241
P. 1027, 1030-32 (1925) (recounting the history of Administrative Rule No. 1); see also
1912 N.M. Laws, ch. 82, § 1 (creating the SLO). Administrative Rule No. 1 was issued to
afford the State “maximum protection from the purchase of lands as non-mineral, which may
in fact be mineral lands or subject to classification as such[.]” The district court also found
that in 1925 the SLO issued regulations requiring the State to reserve all minerals when
selling state trust lands. The district court further found that, prior to 1930, Section 16 was
owned in fee by the State, was uncultivated and was useful for pasture or grazing purposes,
and was largely composed of Pre-Cambian metamorphic rock.
{6} In August 1930, Shelton applied to purchase Section 16 from the Commissioner. In
the form application, Shelton stated that Section 16 was grazing in character; that there was
no growing timber, coal, minerals or oil and gas known to be on the land; that Shelton
3
intended to use the land to “graze sheep or raise cattle”; and Shelton signed under a
paragraph which read, “the land applied for herein is essentially non-mineral land, and that
this application is not made for the purpose of obtaining title to mineral, coal, oil or gas lands
fraudulently, but with the sole object of obtaining title to the land applied for for grazing and
agricultural purposes.” According to the district court’s findings, the law required that state
trust lands such as Section 16 be sold at their “appraised true value,” and Shelton provided
an appraisal for Section 16 on a form provided by the SLO entitled “Appraisement of
Grazing and Agricultural Lands” which was sworn to and addressed to the Commissioner.
See NMSA 1978, § 19-7-9 (1981) (amended 1989 and 2009); 1910 N.M. Laws, ch. 310, §
10 (Enabling Act). In this appraisal, the appraiser answered “no” to the question: “Is there
mineral or coal on the land?” He stated that the land was “all grazing land” and swore in a
non-mineral affidavit that he was well acquainted with the land and that:
there is not, to my knowledge, within the limits thereof, any vein or lode of
quartz or other rock in places bearing gold, silver, cinnabar, lead, tin, or
copper, or any deposit of coal; that there is not, within the limits of said land,
to my knowledge, any placer, cement, gravel, salt or other valuable mineral
deposits; that no portion of said land is worked for mineral during any part
of the year by any person or persons; and said land is essentially non-mineral
in character.
{7} In the contract for the purchase of land between Shelton and the Commissioner that
followed, dated in November 1930, Shelton agreed that the land was being purchased “for
the purpose of grazing and agriculture only.” He also agreed that:
while the land herein contracted for is believed to be essentially non-mineral,
should mineral be discovered therein it is expressly understood and agreed
that this contract is based upon the express condition that the minerals therein
shall be and are reserved in the fund or institution to which the land belongs,
together with right of way to the Commissioner, or anyone acting under his
authority, at any and all times to enter upon said land and mine and remove
the minerals therefrom without let or hindrance.
{8} In 1947 the Commissioner issued Patent for State Land No. 1906, pursuant to which
he conveyed to Shelton’s widow the State’s interest in Section 16, but reserved to the State,
by way of the mineral reservation, “all minerals of whatsoever kind, including oil and gas,
in the lands so granted,” and also reserved the “right to prospect for, mine, produce and
remove the same, and perform any and all acts necessary in connection therewith[.]”
Plaintiff purchased Section 16 in 1982 for the purpose of using it to graze cattle. The
mineral reservation was noted in the chain of title. The character of Section 16 remained
unchanged from the time of Shelton’s purchase to the time of Plaintiff’s 1982 acquisition.
{9} In 1998 Plaintiff entered into a license agreement with Ralph J. Conway to explore
for quarry rock that might be suitable for railroad ballast and other construction aggregates.
4
Mainline Rock and Ballast, Inc. (Mainline) entered the picture in 2003 and collected surface
rocks, had this rock tested to determine if Section 16 would be suitable for extracting rock
and creating railroad ballast, sought to secure an exclusive contract with Burlington Northern
Santa Fe Railroad (BNSF) to supply railroad ballast, had the mineral content of the rock
analyzed and tested to determine if it met BNSF’s specifications, and drilled test holes and
had subsurface samples tested. Further, after obtaining an option of Conway’s right, title,
and interest in his lease, and after exercising that option with Plaintiff’s consent, Mainline
sought and obtained a zoning change of 120 acres of Section 16 from agriculture to a special
use district to construct its quarry.
{10} In 2004 Plaintiff and Conway entered into a twenty-five-year lease agreement, which
stated that Plaintiff owned the subsurface mineral estate of Section 16 and referred to mining
and characterized the rock as minerals. Mainline constructed a quarry and began removing
rock and crushing it primarily for railroad ballast and also for other aggregates, including
mainline ballast, yard ballast, modified ballast, chips, fines, rip-rap, surge, and roadbase.
The district court’s findings contain a detailed discussion and history relating to rock, natural
aggregates, industrial minerals, crushed stone, railroad ballast, and sales of crushed stone and
railroad ballast. Mainline removed thousands of cubic yards of overburden and used
explosives to blast the rock out of the deposit. It employed ongoing testing of samples to
assure that it met BNSF’s ballast specifications. As of April 2009, when the court’s findings
were entered, Mainline had sold over 2.5 million tons of ballast to BNSF and over 300,000
tons of byproduct. Mainline paid full royalties to Plaintiff until representatives of the
Commissioner asserted the State’s mineral interest; following a settlement agreement with
Mainline and a Rule 5 Mining Lease issued by the Commissioner obligating Mainline to
make royalty payments to the Commissioner, Mainline reduced its royalty payments to
Plaintiff.
{11} Plaintiff filed a complaint against the Commissioner for declaratory judgment and
other relief and later filed an amended complaint joining Mainline as a party defendant.
Plaintiff sought to quiet title in Section 16 including the rock and to recover damages as well
as remission of the royalties paid to the Commissioner. The Commissioner counterclaimed
seeking to quiet title in the mineral interest in Section 16 and for other relief. The district
court entered a partial final judgment in which the court determined that the Commissioner
was “the owner of all crushed stone mined, produced[,] and sold from Section 16 . . .
including, but not limited to, all crushed stone mined, produced[,] and sold pursuant to leases
issued by Plaintiff and by the Commissioner.” Plaintiff appeals.
{12} Plaintiff contends on appeal that we should adopt the surface destruction doctrine and
apply it in determining that the intent of the original parties was to exclude the rock from the
mineral reservation. She further contends that the transactional documents reflecting
Shelton’s purchase are at variance with the district court’s ruling, that the court’s decision
was based on irrelevant and insubstantial evidence, and that statutes in effect at material
times all buttress the conclusion that the rock in Section 16 was not a mineral or was not
intended to fall within the mineral reservation. The rock with which we are dealing is
5
described by Plaintiff as “common rock,” which Plaintiff claims means rock with no
particular or valuable mineral content and rock that is just “hard and heavy.”
DISCUSSION
{13} All arguments attempt to provide a route for the elusive quests for (1) the
understanding of what “minerals” is intended to mean and include within the mineral
reservation, and (2) the intent of the parties to the 1930 original purchase contract as to
whether the rock was to be considered a mineral within the mineral reservation. We preface
our discussion of the parties’ arguments with a discussion of Bogle Farms’ mandated intent-
of-the-original-parties test and rejection of case law establishing a rule of property governing
reservation of mineral rights in state trust land sales. We also set out the district court’s
findings of fact and conclusions of law in regard to intent.
The Intent Issue: Bogle Farms and the District
Court’s Findings and Conclusions in the Present Case
{14} In Bogle Farms, our Supreme Court reviewed an appeal by the Commissioner from
a district court’s partial summary judgment entered in favor of twenty-six plaintiffs who
sought a declaratory judgment holding that their contracts for the purchase of state trust
lands did not reserve sand and gravel to the State. 1996-NMSC-051, ¶ 1. The district court
had ruled based on collateral estoppel that the Commissioner was precluded from arguing
that the general mineral reservations in the contracts effectively reserved the State’s interest
in sand and gravel. Id. The estoppel issue arose based on our Supreme Court’s decision in
Roe v. State ex rel. State Highway Department, 103 N.M. 517, 710 P.2d 84 (1985), overruled
by Bogle Farms, 1996-NMSC-051. Bogle Farms, 1996-NMSC-051, ¶ 1. In Roe, the Court
ruled that title to sand and gravel passed to the purchaser along with the surface estate where
the purchase contracts and patents did not specifically reserve sand and gravel to the State.
Bogle Farms, 1996-NMSC-051, ¶ 1; Roe, 103 N.M. at 521, 710 P.2d at 88. Before we
discuss Bogle Farms further, we must discuss Roe in more detail, along with Burris v. State
ex rel. State Highway Commission, 88 N.M. 146, 538 P.2d 418 (1975), which preceded and
was overruled by Roe.
{15} In Burris, state land was sold to the plaintiffs by contract and a patent followed. Id.
at 146, 538 P.2d at 418. The purchase contract stated that the land was being purchased for
the purpose of grazing and agriculture only, and the patent reserved “to the [S]tate . . . all
minerals of whatsoever kind, including oil and gas, in the lands so granted[.]” Id. at 147,
538 P.2d at 419 (internal quotation marks omitted). The application to purchase stated that
“the land . . . is essentially non-mineral land, and that this application is not made for the
purpose of obtaining title to mineral, including but not limited to caliche, sand and gravel,
coal, oil or gas lands fraudulently but with the sole object of obtaining title to the surface of
the land applied for.” Id. (internal quotation marks omitted). In approaching a decision, the
Court in Burris stated that “apart from any governing statute, the issue is whether the parties
intended that sand and gravel are, or are not, to be . . . classified [as a mineral,]” a question
6
that “is normally resolved by the pertinent documents and the actions of the parties[.]” Id.
The Burris Court distinguished and did not follow State ex rel. State Highway Commission
v. Trujillo, 82 N.M. 694, 487 P.2d 122 (1971), overruled by Champlin Petroleum Co. v.
Lyman, 103 N.M. 407, 708 P.2d 319 (1985), which was decided on a factual underpinning
consisting solely of a patent that reserved to the United States “all the coal and other
minerals in the lands” and which held that sand and gravel were not minerals. Burris, 88
N.M. at 147, 538 P.2d at 419 (internal quotation marks omitted). Burris rejected Trujillo as
applicable authority because in Burris there was “a great deal more documentation casting
light on the intention of the parties,” namely, the application and the contracts. Id. Relying
on those documents, the Court in Burris held “the parties intended to reserve sand and
gravel,” because under the terms of the documents, the State “expressly reserv[ed] all
minerals in very clear, unambiguous and all-inclusive language, without qualification,
restriction[,] or limitations of any kind.” Id. at 147-48, 538 P.2d at 419-20.
{16} Roe, an inverse condemnation action, overruled Burris. Roe, 103 N.M. at 517, 521,
710 P.2d at 84, 88. The Roe Court noted that, in Burris, the application, but not the purchase
contract, contained the words “sand and gravel.” Roe, 103 N.M. at 521, 710 P.2d at 88.
Focusing on the application, Roe stated that “[a]n application is merely a request to purchase,
and its provisions do not affect the title to the property[,]” and Roe concluded that whether
title passed was not determined by what was stated in the application, but was determined
“by the conveyances themselves, the purchase contract[,] and the patent.” Id. Therefore, the
Court required that “[f]or the State to reserve sand and gravel, a provision so specifying must
be included in these conveyances.” Id. The Roe Court “determine[d] that although the
original applicant for the [plaintiffs’] property did not apply for title to sand and gravel, such
title nevertheless passed with the surface estate since sand and gravel were not specifically
reserved by the purchase contract and patent.” Id.
{17} In Bogle Farms, the Court discussed Roe along with other pertinent New Mexico
cases.1 Bogle Farms, 1996-NMSC-051, ¶¶ 8-22, 33. Overruling Roe, Bogle Farms rejected
Roe’s strict definition of minerals in the general reservation clause of the conveyance
documents to exclude sand and gravel. Bogle Farms, 1996-NMSC-051, ¶¶ 34-35. Bogle
Farms also rejected the purchasers’ collateral estoppel, stare decisis, and rule of property
arguments favoring Roe’s ruling. Bogle Farms, 1996-NMSC-051, ¶¶ 22, 27-33, 36.
{18} The Court in Bogle Farms read Roe as erroneously deciding the mineral reservation
issue based on a rule that affected title to property, thereby adopting a “rule of property,”
instead of deciding the issue based on the intention of the parties, and the Court read Roe as
erroneously permitting conveyance of title by implication. Bogle Farms, 1996-NMSC-051,
¶¶ 30, 34-35. Bogle Farms remanded for evidentiary proceedings given the lack of a specific
1
Bogle Farms discusses seven cases, the earliest dating back to 1940. See Bd. of
Cnty. Comm’rs v. Good, 44 N.M. 495, 498, 105 P.2d 470, 472 (1940) (stating that sand,
gravel, ordinary clay, and caliche fall within the term “mineral”).
7
mineral reservation and the need for the district court to consider evidence outside the face
of the contract to determine the meaning intended for the term “mineral” when the term was
shown under the circumstances to be ambiguous. Id. ¶ 35. Bogle Farms returned to Burris’
case-by-case approach “based on the principle that in contract cases the role of the court is
to give effect to the intention of the contracting parties.” Bogle Farms, 1996-NMSC-051,
¶ 22. The Court in Bogle Farms noted that “prior to Roe this Court had held in Burris that
a general mineral reservation included sand and gravel”; however, the Court left it open for
the district court on remand to determine whether the parties intended to include sand and
gravel within the term “mineral.” Bogle Farms, 1996-NMSC-051, ¶¶ 33-35.
{19} Among Bogle Farms’ several statements applicable to the present case are the
following. In cases involving state trust land, the determination whether a material or
substance is included within a general mineral reservation must be done on a case-by-case
basis. Id. ¶ 22. The issue is whether the parties to the original sale transaction intended that
the State reserve the material or substance at issue. Id. ¶ 35. There exists “a strong public
interest in the protection of state land and its products, as reflected in the Enabling Act’s
requirement that no sale or other disposal [of state land or its natural productions] shall be
made for a consideration less than the [appraised true] value.” Id. ¶ 26 (alterations in
original) (internal quotation marks and citation omitted). And “title to state trust lands
should not be conveyed by implication.” Id. ¶ 34.
{20} What material or substance comes within the word “minerals” in the mineral
reservation is not altogether clear. The district court in the present case determined that the
mineral reservation was ambiguous. Our Supreme Court has referred to this ambiguity. See
id. ¶¶ 20, 35 (stating that “the Roe Court may have been attempting to resolve the ambiguity
once and for all and to put to rest an issue that had given rise to a great deal of litigation”
and, further, that “[i]f there is not a specific reservation, the trial court must look to evidence
outside the face of the contract to determine the meaning intended for the term ‘mineral’
when that term has been shown under the circumstances to be ambiguous”); Rickelton v.
Universal Constructors, Inc., 91 N.M. 479, 480, 576 P.2d 285, 286 (1978) (stating that
“[w]hat the Legislature meant to be included as a ‘mineral’ is not well defined in New
Mexico” and that the Court had “recognized that the category of ‘minerals’ is a flexible
one”). Courts outside New Mexico have referred to the ambiguity of the words “minerals”
and “mineral reservation.” See United States ex rel. S. Ute Indian Tribe v. Hess, 348 F.3d
1237, 1241 (10th Cir. 2003); Kinney v. Keith, 128 P.3d 297, 303 (Colo. App. 2005); Resler
v. Rogers, 139 N.W.2d 379, 382 (Minn. 1965). In the present case, rock that might fit the
description of the rock in question was not specifically mentioned in any of the 1930
transaction-related documents or in the 1947 patent. Further, there exists no testimony of
the original contracting parties.
{21} The district court entered several findings of fact that appear to relate to the issue of
intent. A number of findings relate to the character of the rock. The court noted that “[t]he
rock[] or crushed stone” used for railroad ballast has certain characteristics and value, that
a railroad’s easy access to a rock quarry is important, and that as of 1915, railroad tracks,
8
which still exist, run near Section 16, about two miles from the quarry site ultimately
constructed by Mainline. The court further noted that “[r]ailroad ballast is the final product
of certain mineral aggregates (rock) that meet railroad specifications for density, hardness[,]
and durability . . .[,] is a construction use of the industrial material called ‘crushed stone[,]’”
and that “[a]n industrial mineral is a valuable, usually nonmetallic rock or related material
that is natural or man-made, excluding fuels, metals, and gems.”
{22} In further findings, the court discussed the United States Bureau of Mines’ 1932-33
Minerals Yearbook that characterized crushed stone as an industrial mineral used for railroad
ballast, and the court pointed to the chapter entitled “Crushed and Broken Stone” that stated,
“[s]ince the advent of concrete[,] the crushed-stone industry has far surpassed the dimension-
stone industry in tonnage and value.” The court found that, in 1932, there was no report of
railroad ballast sales in New Mexico and several other states, including Texas, and that
“[t]he lack of reporting probably was the result of the lack of demand for new construction
caused by the Great Depression.” However, the court also found that, as reflected in the
1947 Minerals Yearbook, “[b]y 1947, the crushed[-]stone industry . . . had turned around . . .,
[and s]ales of crushed stone were at an all-time high,” and “[i]n New Mexico, the sale or use
by railroads of railroad ballast exceeded 300,000 short tons[.]”
{23} In regard to crushed-stone production after 1947, the court found that in 1980
railroad ballast and other construction aggregates and roadstone accounted for twenty-seven
percent of the total crushed stone used in construction in the United States. The court
referred to a United States Geological Survey Bulletin 1594 (1993) entitled Natural
Aggregates of the Conterminous United States stating that crushed stone and sand and gravel
are the two main sources of natural aggregates and amount to about one-half of the mining
volume in the United States. In addition, referring to what was reported in a publication of
the New Mexico Geological Society and the New Mexico Bureau of Geology and Mineral
Resources, the court noted that crushed stone was included as a common industrial mineral,
along with sand and gravel and caliche, and that “[i]n 2003 the top nonfuel minerals in New
Mexico were, by value, potash and copper, followed by construction sand and gravel,
crushed stone, and cement[.]”
{24} The court entered the following further findings that relate more particularly to
intent.
62. The Sheltons acquired Section 16 to be used for grazing.
63. The Sheltons did not intend to exploit the rock deposit in
Section 16 by mining and selling the rock or leasing Section 16 for the
purpose of having the rock mined and sold.
64. Inclusion of the rock within the scope of the mineral
reservation in the 1930 contract and the 1947 patent, particularly where the
rock is being mined and sold commercially, serves the purposes that the
9
parties had in agreeing that the State would sell the land and that [the]
Sheltons would purchase it.
65. Mrs. Shelton’s subjective intention as to the mineral
reservation in Patent No. 1906 is unknown, but her objective intention as
evidenced by the surrounding circumstances, including her husband’s earlier
contract with the Commissioner for the acquisition of Section 16 and her
subsequent use of Section 16 for grazing, was in accordance with the State’s
intention to maximize its monetary opportunities for mineral extraction if
minerals were ever to be discovered on the property.
66. The State’s intention in reserving all minerals of whatsoever
kind when it issued Patent No. 1906 for land that was apparently not mineral-
bearing was to maximize the State’s opportunities for royalties to be derived
from any and all minerals that might later be discovered on Section 16.
67. The Commissioner . . . considered industrial minerals as
“minerals of whatsoever kind” in Patent No. 1906 given the widespread
understanding of industrial minerals as some of the most valuable minerals
in the United States for highest monetary sales from earlier in the 20th
century through the year 1947.
68. In 1947, the Commissioner . . . considered crushed stone as
an industrial mineral, as it was customarily considered in the mineral trade
markets.
69. Based on the parties’ language in their dealings with one
another, their conduct, the objectives they sought to accomplish, and the
surrounding circumstance, the parties intended that crushed stone, an
industrial mineral, was to be considered a mineral in the 1930 Shelton
contract to purchase and one of those “minerals of whatsoever kind” included
in the State’s mineral reservation in Patent No. 1906.
70. The fact that surface rock was visible on Section 16 was not
the same as a determination that such rock was or was not a mineral under
the 1930 Shelton contract to purchase or under Patent No. 1906’s mineral
reservation.
71. The crushed stone discovered on Section 16 in 2003 as a result
of extensive on-site and laboratory testing is a mineral under the 1930
Shelton contract to purchase and one of those “minerals of whatsoever kind”
reserved by the State in Patent No. 1906.
10
72. Even if the parties disagreed as to the meaning of the term
“mineral” in the 1930 Shelton contract to purchase or the phrase “minerals
of whatsoever kind” in the 1947 patent, or if the parties’ intentions could not
be determined, it is most reasonable that the term and phrase include the
industrial mineral known as crushed stone, based on all surrounding
circumstances.
After setting out the parties’ proof burdens, the district court entered the following
conclusions of law that appear to relate to intent.
5. Title to state trust land cannot be conveyed by implication.
....
7. The parties need not be aware that the property has minerals
in order to create a mineral estate.
8. Authority and responsibility for managing and conveying
Section 16 was vested in the Commissioner . . . pursuant to N.M. Const., art.
XIII, § 2 and N.M. Laws 1912, ch. 82, §§ 1-2 (currently codified at NMSA
1978, §§ 19-2-1 [(1913)] and 19-2-2[ (1963)]).
9. Pursuant to Section 1 of the Ferguson Act and Sections 6 and
10 of the Enabling Act, the State held title to Section 16 in trust for the
purpose of supporting common schools. The trust terms required that “the
natural products and money proceeds” of Section 16 “shall be subject to the
same trust[]” and that “[a]ll lands, leaseholds, timber[,] and other products
of land before being offered [for sale or lease] shall be appraised at their true
value, and no sale or other disposal thereof shall be made for a
consideration.” [(Alterations in original.)]
10. Because Section 16 was classified by the Commissioner as
mineral land, the Commissioner was required as a matter of state law to issue
a limited patent containing a reservation to the [S]tate of New Mexico of all
the minerals in Section 16, together with the right to the [S]tate or its
grantees, to prospect for, mine[,] and remove the same. NMSA 1978, § 19-
10-27 [(1925)].
11. The question of whether a state trust land patent reservation
of “all minerals of whatsoever kind, including oil and gas” may be resolved
by examining the intent of the parties to the transaction. The intent of the
parties may be determined by examining the parties’ language and conduct,
the objectives they sought to accomplish, and the surrounding circumstances.
11
12. A purchaser of [s]tate lands from the Commissioner owns the
surface and subsurface of the purchased property, save for such minerals as
are reserved, under statutory authority by the Commissioner.
13. Patent No. 1906’s mineral reservation was ambiguous.
Accordingly, it was incumbent upon the [c]ourt as fact-finder to resolve the
ambiguity.
14. If the parties, at the time Patent No. 1906 was issued, had the
same understanding of the mineral reservation, then that shared meaning
controls.
15. If the parties had a different understanding of the mineral
reservation in Patent No. 1906 at the time the patent was issued, then the
[c]ourt as fact-finder is required to give the meaning that it finds to be most
reasonable, taking into consideration all the circumstances, including the
intentions of the parties, the words that the parties used, the purposes the
parties sought to achieve, custom in the trade, the parties’ course of dealing,
the parties’ course of performance, whether a party, at the time the contract
was entered into, knew or should have known that the other party interpreted
the term[s] differently. [(Second alteration in original.)]
16. Plaintiff has not met her burden of proving her claims that the
rock at issue was not included in the reservation of “all minerals of
whatsoever kind” in Patent No. 1906.
17. The Commissioner has met his burden of proving his
counterclaims that the rock at issue was included in the reservation of “all
minerals of whatsoever kind” in Patent No. 1906.
Plaintiff’s Surface Destruction Doctrine and Other Arguments
{25} Plaintiff states that “[t]he crux of this appeal is whether New Mexico should adopt
the surface destruction doctrine.” That question is one of law, which we review de novo.
Romero v. Bd. of Cnty. Comm’rs, 2007-NMCA-004, ¶ 21, 140 N.M. 848, 149 P.3d 945;
Poncho v. Bowdoin, 2006-NMCA-013, ¶ 32, 138 N.M. 857, 126 P.3d 1221. Plaintiff’s in-a-
nutshell request of this Court is
to follow the lead of most other states in adopting the “surface destruction”
doctrine, which holds that, in the absence of clear contrary intent, where
materials alleged to be “minerals” are plainly visible on the surface, and
where the surface would have to be destroyed in order to “mine” them, the
parties could not have intended those materials to be “minerals” because, if
12
they were, the mineral reservation would swallow up the grant and render it
worthless.
Plaintiff cites to courts and commentators that recognize the “complex and hopeless search
for the ‘true intentions’ of the original parties” and that are critical of the attempt “to [divine]
the subjective intent of the parties” after decades have passed. Plaintiff contends that only
the objective intent of the parties to the original transaction can be ascertained and that
objective intent is to be derived from only three relevant factors, namely: (1) the surface
destruction doctrine; (2) statutes in effect at the time of the original transaction; and (3) the
circumstances at the time, including records, documents, and actions of the parties. See
Downstate Stone Co. v. United States, 712 F.2d 1215, 1217-20 (7th Cir. 1983) (relying on
a surface destruction rationale and statutes and on the circumstances in considering whether
a mining company had title to quarry limestone under a mineral reservation contained in
conveyances to the United States). Plaintiff challenges as irrelevant and insubstantial
findings of fact of the district court that recite post-1947 facts, circumstances, and
publications, insofar as the court intended the findings to relate to the intent of the original
parties. Plaintiff also challenges those findings which indicate that the rock was a mineral.
{26} Plaintiff describes the surface destruction doctrine as a common sense concept. She
asserts that it is not reasonable to assume or believe that a surface owner of land who
acquired the surface for grazing or agriculture would consent to a reservation of a material
or substance that obviously exists on and beneath the surface knowing that the surface could
be destroyed if the mineral owner mined the material or substance. Plaintiff further asserts
and points to photographs that she argues support the fact that the rock covered thirty to forty
percent of the surface of Section 16. Mineable rock also existed below the surface. Thus,
Plaintiff argues, if a reasonably objective rancher such as Shelton, who intended to use the
land for grazing, were to understand that all of the rock, including the subsurface rock,
constituted “minerals” that could be removed by the State in a manner that would destroy
the entire surface, that rancher would not have purchased the land in the first place, since it
“would nullify the grant by destroying the agricultural usefulness of the land.”
{27} This surface destruction doctrine appears in one form or another in several cases cited
by Plaintiff.2 See Waring v. Foden, [1932] 1 Ch. 276, 86 A.L.R. 969, 979 (Eng.) (stating that
“the word ‘minerals’ when found in a reservation out of a grant of land means substances
exceptional in use, in value[,] and in character . . . and does not mean the ordinary soil . . .
which if reserved would practically swallow up the grant”); see also Downstate Stone, 712
F.2d at 1218 (stating that “it [is] unreasonable to assume that a party intended to reserve the
surface, and at the same time convey to the mineral owner the limestone on the surface with
the right to remove it, thereby destroying all that he had reserved”); Florman v. MEBCO Ltd.
P’ship, 207 S.W.3d 593, 600, 601 (Ky. Ct. App. 2006) (holding that limestone was not a
mineral at the time of the original transaction in 1873 as well as at the time of the decision,
2
See cases cited infra note 3.
13
states that “[i]n this country it is a part of the soil, and a conveyance that reserves the
limestone with the right to remove it would reserve practically everything and grant
nothing” (internal quotation marks and citation omitted)).
{28} Plaintiff does not suggest that the surface destruction doctrine be applied without
regard to intent; instead, according to Plaintiff, it can be viewed as a doctrine “designed to
facilitate the [intent] inquiry mandated in Bogle Farms” and as a “proxy for determining
what the parties must have reasonably intended.” Plaintiff argues based on her cited case
law that application of the doctrine is triggered because (1) the entire surface area conveyed
need not be covered with the material in question before the doctrine applies; (2) the doctrine
may apply in circumstances where the reservation is included within a patent or other
instrument of conveyance issued by a state governmental entity; and (3) widespread
outcropping of the material covering thirty to forty percent of the land together with the same
rock found below the surface made it apparent that mining the rock would destroy the
surface and make the surface unsuitable for grazing. Plaintiff shows that the rock is part of
a fifteen- to twenty-mile-wide geologic formation with rock outcrops that stretches from the
Sangre de Cristo Mountains on the north into Texas and Mexico on the south and that “if the
rock being removed is ‘mineral,’ the entire formation would have to be considered ‘mineral’
since the rock being removed has the same characteristics as the other rock in the
formation[.]”
{29} Plaintiff also urges adoption and application of the surface destruction doctrine
because, had the appraiser believed the rock was a mineral, he would have reflected that in
his appraisal and would have accounted for reduced value because of the risk of surface
destruction. Thus, Plaintiff argues, viewing intent objectively, based on the undisputed
circumstances, a reasonable person in Shelton’s position would not have intended to
purchase Section 16 without ownership of the rock, adding that “a reasonable person in . . .
Shelton’s position would not have paid valuable consideration for Section 16 during the
Great Depression had he known that [the] SLO could destroy the surface.”
{30} Plaintiff points out that Bogle Farms never considered the application of the surface
destruction doctrine and because most of the parties to the original contract were before the
court and subject to cross-examination, it was not necessary for the court to consider the
doctrine. Plaintiff also argues that, in Bogle Farms, the patentee’s application specifically
referred to sand and gravel as being included as a mineral, thus showing the purchaser’s
intent that sand and gravel could be a mineral and making the result in that case
foreordained. See Bogle Farms, 1996-NMSC-051, ¶ 3. Plaintiff further distinguishes Bogle
Farms because “live persons who participated in the transactions in question were available
to testify concerning their intent[.]” Plaintiff complains that the district court in the present
case erroneously went beyond what Bogle Farms would allow by considering and relying
on information developed long after the original transaction—information deemed by courts
in similar cases not to be material. In addition, Plaintiff contends the Ferguson Act did not
intend to convey minerals, in that the Act provided that only non-mineral lands were to be
conveyed, and that the only possible conclusion that can be drawn is the lands conveyed
14
were not deemed to contain minerals, “a critical conclusion” according to Plaintiff “since the
materials now claimed to be minerals were plainly visible.”
{31} Relating specifically to the transactional documents, which are (1) the application
(Pl. Ex. 1), (2) the appraisal (Pl. Ex. 2), (3) the purchase contract (Pl. Ex. 3), and (4) the
patent (Pl. Ex. 4), Plaintiff not only contends that these documents provide “further support
for application of the surface destruction doctrine[,]” Plaintiff also argues that the documents
are at variance with the district court’s ruling, in that “the fact that there is no evidence the
parties considered whether the rock visible on Section 16 was a mineral disclosed a binding
intention not to reserve it.” Plaintiff states that the appraisal is the more important of the
four transactional documents, in that, although the rock was visible, “the state-approved
appraiser did not classify that rock as a mineral.” Because the SLO’s appraisal form used
by the appraiser called for the appraiser to list all minerals, Plaintiff argues, the rock would
have been listed had it been regarded as a mineral. Further, Plaintiff argues that because no
value was independently assigned to the rock, and because the Enabling Act requires all
sales of state lands to be appraised at their “true value,” if the rock had been regarded as a
mineral, there would have been a deduction from the “true value” of the rock given that the
removal of the rock would have rendered the land useless for the contemplated purpose of
grazing. As for Shelton’s application, Plaintiff points out that Shelton “recited that there was
nothing he regarded as a mineral on the land.” Plaintiff further shows that the patent stated
that Shelton was “to have and to hold the said premises . . . forever[,]” a concept inconsistent
with any notion that material was a mineral under the mineral reservation clause where the
mineral could be removed only by destroying the surface.
{32} Further, Plaintiff argues that Rickelton governs the present case. Plaintiff contends
that Rickelton addressed the precise question of “whether sand and gravel was a reserved
‘mineral’ within [the] SLO’s patent reservation” and, according to Plaintiff, “reached the
opposite conclusion because, unlike [in] Burris, there was nothing in the transactional
documents in the record in that case where the patentee acknowledged that sand and gravel
was a mineral.” Plaintiff concludes that because the transactional documents in the present
case contained no acknowledgment by Shelton that either rock, ballast, crushed stone, or
industrial materials was a mineral, under Rickelton, rock was not a mineral within the
common and ordinary meaning of that term in a mineral reservation and that “the undefined
term ‘minerals’ does not include rock.”
{33} Because Plaintiff strongly relies on Rickelton, we pause here to discuss Rickelton’s
status in New Mexico law. Plaintiff footnotes that although Bogle Farms, 1996-NMSC-051,
¶¶ 15-16, “took the opportunity to overrule, or recognize overruling, . . . several New
Mexico decisions, it left Rickelton [intact] despite discussing it extensively.” We doubt that
Rickelton is viable. The Court relied on and felt controlled by Trujillo, a case that, Rickelton
explained, held that sand and gravel was not intended to come within the general reservation
clause because it was a material that “had no rare or exceptional character and possessed
peculiar property giving it special value.” Rickelton, 91 N.M. at 480-81, 576 P.2d at 286-87.
Plaintiff fails to mention that Trujillo was overruled by Champlin Petroleum, 103 N.M. at
15
410, 708 P.2d at 322, a point expressly made in Bogle Farms. See Bogle Farms, 1996-
NMSC-051, ¶ 12. Both Trujillo and Champlin Petroleum involved conveyances pursuant
to the Federal Stock-Raising Homestead Act. Champlin Petroleum, 103 N.M. at 408-10,
708 P.2d at 320-22; Trujillo, 82 N.M. at 695-97, 487 P.2d at 123-25. Bogle Farms stated:
This Court specifically addressed whether the term “mineral” as used
in a reservation included sand and gravel for the first time in [Trujillo,
overruled by Champlin Petroleum]. Basing our holding on a review of the
Federal Stock-Raising Homestead Act, 43 U.S.C. §§ 291-302 (1982)
(repealed in part in 1976), we concluded that the federal government did not
intend to include sand and gravel within the term “mineral” as it was used in
a federal patent. Trujillo, 82 N.M. at 696-97, 487 P.2d at 124-25. The
United States Supreme Court indirectly overruled this conclusion in Watt v.
Western Nuclear, Inc., 462 U.S. 36, 55, 103 S. Ct. 2218, 2229, 76 L.Ed.2d
400 (1983) (determining that gravel was included within the scope of the
mineral reservation contained in a federal patent issued under the Stock-
Raising Homestead Act). Relying on Watt, this Court expressly overruled
Trujillo in Champlin Petroleum Co., wherein we determined that caliche was
“a mineral similar to sand, gravel, clay, and limestone,” Champlin Petroleum
Co., 103 N.M. at 409, 708 P.2d at 321, and was therefore included within the
general mineral reservation of a federal patent, id. at 410, 708 P.2d at 322.
Bogle Farms, 1996-NMSC-051, ¶ 12. Bogle Farms’ discussion of Rickelton and Rickelton’s
reliance on Trujillo leave Rickelton’s value as controlling or even reliable authority in
considerable doubt. Furthermore, Rickelton is not helpful to Plaintiff because the district
court’s determinations made in that case, which were affirmed, were fact-specific and not
necessarily ones that would make Rickelton controlling precedent. See 91 N.M. at 481, 576
P.2d at 287.
{34} Insofar as Plaintiff attacks evidence and certain of the district court’s findings as
irrelevant or insubstantial, thereby casting doubt on the validity of the district court’s
determination relating to intent, we hold that the attacks, even assuming some are
meritorious, have no effect on our decision in this case. We do not base our determinations
on the findings Plaintiff challenges as irrelevant or insubstantial based on information that
came into existence after the 1947 patent. We ignore Plaintiff’s quarrel with findings as to
which Plaintiff merely sets out evidence as to the original parties’ intent arguably favorable
to Plaintiff’s position.
The Dispositive Issues of Intent and the Surface Destruction Doctrine
{35} Bogle Farms requires us to determine the intent of the parties to the original sale
transaction between the Commissioner and the purchaser of state trust land. 1996-NMSC-
051, ¶ 14. The parties’ intent in the present case can be determined only objectively from
the original sale-related documents and surrounding circumstances. Plaintiff does not
16
contend that findings of fact are not supported by substantial evidence. Plaintiff’s primary
complaint is that the district court erred in not applying the surface destruction doctrine and
determining, based on the doctrine, that the parties did not intend the mineral reservation to
include the rock.
{36} Plaintiff also asserts that certain of the findings of fact on which the district court
relied were not sufficient to support a determination favoring the Commissioner on the
question “whether the parties to the original contract intended that the State reserve sand and
gravel[,]” quoting from Bogle Farms, 1996-NMSC-051, ¶ 35 (emphasis added by Plaintiff).
Plaintiff’s limited attack on certain conclusions of law as “based upon insubstantial
evidence” is phrased as follows: “[T]he trial court relied upon information developed long
after the original parties entered into the contracts at issue,” and also “relied upon other
information generally deemed by the courts in similar cases to be immaterial[.]” We dispose
of this limited point easily. None of the findings of fact to which Plaintiff refers relating to
circumstances after issuance of the patent are findings on which we rely to affirm the district
court’s conclusions of law and ultimate decision. The circumstances set out in the court’s
findings of fact that occurred after the patent was issued, although noteworthy, were not
necessary for a determination as to the intent of the parties. See Tome Land & Improvement
Co. v. Silva, 86 N.M. 87, 90, 519 P.2d 1024, 1027 (1973) (holding that a finding, even if
erroneous, was clearly immaterial and irrelevant and could be ignored as surplusage with the
remaining findings and conclusions supporting the judgment); see also Quarles v. Arcega,
114 N.M. 502, 509, 841 P.2d 550, 557 (Ct. App. 1992) (“Even if a finding of fact or
conclusion is erroneous, if it is unnecessary to the court’s decision, the mistake is not a basis
for reversal.” (internal quotation marks and citation omitted)); United Veterans Org. v. N.M.
Prop. Appraisal Dep’t, 84 N.M. 114, 118, 500 P.2d 199, 203 (Ct. App. 1972) (“The making
of unnecessary and superfluous findings of fact or the presence of error in findings of fact
on immaterial, irrelevant, or purely collateral issues is harmless and non-reversible error if
the judgment is otherwise sufficiently supported.”). The circumstances set out in the court’s
findings of fact relating to circumstances that pre-date the issuance of the patent are material.
{37} The court’s several ultimate findings of fact that support a determination as to intent
and its conclusions of law regarding intent are based on reasonable inferences from
evidence, including findings regarding the sale-related documents and the surrounding
circumstances, from which the court could determine, objectively, that the parties intended
that the mineral reservation included the rock. The court’s numerous findings of fact and
conclusions of law reflect a rational and reasonable process of distilling of the court’s
findings of fact into the court’s conclusions of law to arrive at Bogle Farms’ required-intent
element. We note, in particular, the court’s conclusions of law stating:
14. If the parties, at the time Patent No. 1906 was issued, had the
same understanding of the mineral reservation, then that shared meaning
controls.
17
15. If the parties had a different understanding of the mineral
reservation in Patent No. 1906 at the time the patent was issued, then the
[c]ourt as fact-finder is required to give the meaning that it finds to be most
reasonable, taking into consideration all the circumstances, including the
intentions of the parties, the words that the parties used, the purposes the
parties sought to achieve, custom in the trade, the parties’ course of dealing,
the parties’ course of performance, whether a party, at the time the contract
was entered into, knew or should have known that the other party interpreted
the term[s] differently.
These conclusions of law were derived in part from findings (1) that, based on several
factors, “the parties intended that crushed stone, an industrial mineral, was to be considered
a mineral in the 1930 Shelton contract to purchase and one of those ‘minerals of whatsoever
kind’ included in the State’s mineral reservation in Patent No. 1906[,]” and (2) that
[e]ven if the parties disagreed as to the meaning of the term ‘mineral’ in the
1930 Shelton contract to purchase or the phrase ‘minerals of whatsoever
kind’ in the 1947 patent, or if the parties’ intentions could not be determined,
it is most reasonable that the term and phrase include the industrial mineral
known as crushed stone, based on all surrounding circumstances.
{38} The foregoing findings of fact and conclusions of law as to intent followed the
district court’s ruling that the mineral reservation was ambiguous. The parties do not
disagree with that ruling, and we agree with the district court that the mineral reservation
was ambiguous. Except for minerals expressly mentioned, the mineral reservation did not
indicate what material or substance was intended to constitute a mineral within the meaning
of the mineral reservation. Although, over the years in New Mexico, what constitutes a
mineral under a mineral reservation in patents, deeds, custom, and case law has become clear
as to many, if not most, materials and substances, some materials and substances appear to
have escaped a settled identification. Common or metamorphic rock presently rests among
the unsettled. On appeal, Plaintiff resolves the ambiguity in meaning by application of the
surface destruction doctrine as the overriding evidence of intent. The Commissioner rejects
any application of the surface destruction doctrine and resolves the ambiguity in meaning
based on the district court’s findings of fact and conclusions of law.
{39} The district court, of course, was required under Bogle Farms to resolve factually the
ambiguity as to whether the rock came within the mineral reservation by ascertaining the
intent of the parties. UJI 13-804 NMRA requires the district court to determine the
intentions of parties to a contract “by examining their language and conduct, the objectives
they sought to accomplish, and the surrounding circumstances.” UJI 13-825 NMRA,
relating to ambiguity in a contract term, tells us that “[w]here . . . the parties at the time the
contract was made had different meanings in mind[,]” the fact-finder is to “give that meaning
which [it] find[s] to be most reasonable, taking into consideration all the circumstances[.]”
The district court was obviously guided by UJI 13-825.
18
{40} As we have indicated earlier in this opinion, the district court determined that the
parties intended the rock to be included in the mineral reservation, but also that if there was
disagreement in the meaning, the most reasonable meaning was that the rock was intended
to be included in the mineral reservation based on all surrounding circumstances. These
determinations were made based, among other findings of fact, on the findings set out earlier
in this opinion relating to the language in the contract and the patent; the Sheltons’ intent and
what they sought to achieve; what the status of commercial development of rock as crushed
stone and as a mineral was in the United States; what the State intended in reserving
minerals; and what the Commissioner, in regard to crushed stone, considered as an industrial
mineral based on the custom in the mineral trade markets. Evidence in the record supports
these findings.
{41} Also significant to the district court, as indicated in the court’s findings, was the
involvement of state trust lands and what follows from that. New Mexico state trust lands
have purposefully been classified as mineral lands since 1919. SLO regulations in effect at
the time of the original sale transaction purposefully required that minerals be reserved in
the sale of state trust lands. The 1947 patent reserved to the State “all minerals of
whatsoever kind[.]” At all material times, the rock had significant commercial value if it
were mined, crushed, and marketed for use as railroad ballast and other uses, which could
produce revenue to the State as intended by the mineral reservation. “The State’s intention
in reserving all minerals of whatsoever kind when it issued Patent No. 1906 for land that was
apparently not mineral-bearing was to maximize the State’s opportunities for royalties to be
derived from any and all minerals that might later be discovered on Section 16.”
{42} Discussions in two New Mexico Supreme Court decisions in print between 1930 and
1947 are pertinent in looking at surrounding circumstances. The 1925 decision in Otto
related to the Enabling Act, to the 1919 SLO regulation, and to a sale of state trust lands.
Otto, 31 N.M. at 122-25, 130-31, 241 P. at 1028-29, 1031-32. In Otto, the Court stated:
[I]t cannot be supposed that the Legislature of New Mexico, after taking the
precaution to provide in leases for reservations of minerals, oil, gas, stone,
shale, salt, timber, and all other natural products of the land to be dealt with
separately by the commissioner, intended that, when he went to sell grazing
land or agricultural land, he would be powerless to reserve to the [S]tate and
its institutions the great wealth which might flow from a future discovery of
minerals in the land, merely because the circumstances had not permitted of
his having made an adequate exploration in order to enable him to fully
determine the exact character of the land.
Id. at 140, 241 P.2d at 1035. In relation to the disposition of lands owned by the State, the
Court in Otto agreed with “the proposition that, until patent issues, legal title remains in the
government and subject to investigation and determination.” Id. at 136, 241 P. at 1034.
Although the context in which the foregoing statements were made is not that in the present
case, the Otto case and the statements in it were available for the parties’ consumption up
19
to the date of the issuance of the patent. Also in existence during the critical period was the
1940 decision in Board of County Commissioners v. Good, 44 N.M. 495, 498, 105 P.2d 470,
472 (1940), involving a suit filed by a board of county commissioners to condemn lands to
secure rock, sand, gravel, and caliche for public highway construction, addressing the actual
value of the materials taken and stating that caliche rock was, “in the ordinary acceptation,
a mineral simply, as is also sand [and] gravel[.]” The Court in Good stated: “‘Mineral,’ in
ordinary and common meaning, is a comprehensive term, including every description of
stone and rock deposit, whether containing metallic or non-metallic substances.” Id. The
Court in Good permitted a valuation of the rock separate from the land itself. Id. at 499, 105
P.2d at 472.
{43} Particular discussions in Bogle Farms are helpful in reaching a result in the present
case. Although set in the context of our Supreme Court’s discussion in Bogle Farms of
whether the doctrine of collateral estoppel applied, we read Bogle Farms to establish a
general principle that New Mexico’s state trust lands have a status of “great public
importance” and that there exists “a strong public interest in the protection of state land and
its products,” a status and interest that we cannot ignore. Bogle Farms, 1996-NMSC-051,
¶¶ 23, 26; cf. Otto, 31 N.M. at 126, 241 P. at 1030 (indicating that the case was “of great
importance, not only to the litigant who seeks protection of the right he claims, but also it
is of great public interest, because there is involved the policy and interest of the [S]tate as
a trustee with respect to its school fund”). Further, also in the collateral estoppel context,
Bogle Farms states that title to state trust lands is not to be conveyed by implication, a
holding made by the Court in response to Roe’s rule of property that, if sand and gravel were
not specifically reserved, title to those minerals passed to the purchaser. Bogle Farms, 1996-
NMSC-051, ¶ 34; Roe, 103 N.M. at 521, 710 P.2d at 88. We view the foregoing statements
in Bogle Farms as intended by our Supreme Court to apply beyond the confines of its
collateral estoppel analyses.
{44} Turning to Plaintiff’s main argument, which is that the surface destruction doctrine
necessarily reflects the intent of the parties, in our view the doctrine essentially espouses an
intent to convey minerals by presumption. In our view, the doctrine presumes that the
parties cannot have intended and did not, therefore, intend a conveyance of surface rights
without rights to the rock. And it mirrors the Roe property rule, which Bogle Farms rejected
as essentially establishing a presumption of a conveyance of minerals where the intent of the
parties was not manifest. Bogle Farms, 1996-NMSC-051, ¶ 34. We will not import the
doctrine into the intent analysis. Moreover, we cannot accept the view, if intended by
Plaintiff, that the doctrine itself is simply evidence to be weighed against all of the
surrounding circumstances in the process of inferring intent. Over the years, there may in
fact have been innumerable now-deceased purchasers of state trust lands who could well
have subjectively intended to purchase land for grazing purposes understanding that the
surface and sub-surface might be subject to mineral exploitation by the State. We are not
convinced that even a preponderance of such purchasers would not have purchased their
lands for grazing had they been specifically aware that some surface material was included
in a mineral reservation. Further, and significantly, none of the surface destruction doctrine
20
cases on which Plaintiff relies involves New Mexico state trust lands or lands similar to our
trust lands—instead, they involve purely private land transactions or conveyances by the
United States of lands dissimilar to New Mexico’s state trust lands.3
{45} We are aware of Plaintiff’s and Amicus Curiae New Mexico Farm and Livestock
Bureau’s arguments that substantial farm and ranch land will be at risk if the district court
is affirmed. Plaintiff states that, although this case involves only a single section of land, “its
implications are far more significant” and “could have grave consequences[,]” in that “the
practical effect of the decision below would be that the [Commissioner and the SLO] will
have the right to destroy and render useless for agricultural and grazing purposes any portion
of the millions of acres it has sold to farmers and ranchers on the mere showing that the hard
rock on their lands, which is pervasive throughout the State, has some current economic
value.” We are not insensitive to these concerns. However, we do not feel a freedom to
stray from the required Bogle Farms’ intent-of-the-parties method of ascertaining the
meaning of the mineral reservation. And we cannot ignore the over-arching principles and
policies Bogle Farms enunciates in regard to conveyance of state trust lands. Nor do we feel
free to ignore Bogle Farms’ apparent rejection of a rule or doctrine that creates a
presumption or necessary implication of intent to convey minerals that in effect overrides
or diminishes the significance of surrounding circumstances that indicate an intent to include
rock within the mineral reservation. We leave it up to our Supreme Court to consider
whether Bogle Farms’ clear rule requiring a determination of the intent of the parties to the
original sale transaction can permit application of the surface destruction doctrine.
{46} Further, Plaintiff’s and Amicus Curiae’s concerns are subject to some degree of
dilution in that Plaintiff has not pointed to any specific evidence showing a likely and
substantial risk of future harm to purchasers of state trust lands based on surface destruction.
Nor did Plaintiff show that she would be harmed based on destruction of the surface. We
think it noteworthy that state law requires the Commissioner to obtain from lessees, such as
Mainline, a bond to secure payment to the surface owner for damage to livestock range,
water, crops, or tangible improvements that may occur as a result of the mineral lessee’s
activities. NMSA 1978, §§ 19-10-26 (1979), 19-10-27 (1925); see Tidewater Associated Oil
Co. v. Shipp, 59 N.M. 37, 41, 278 P.2d 571, 574 (1954) (discussing the surface owner
protection provisions of 1919 and 1925 laws and holding that a mineral lessee is similarly
obligated to the surface lessee for damages to grass, livestock, or crops). It is also
noteworthy that, in obtaining a zoning change for construction of its quarry, Mainline
3
Private Grantor: Downstate Stone, 712 F.2d 1215; W.S. Newell, Inc. v. Randall,
373 So. 2d 1068 (Ala. 1979); Harper v. Talladega Cnty., 185 So. 2d 388 (Ala. 1966);
Bambauer v. Menjoulet, 29 Cal. Rptr. 874 (Ct. App. 1963); Farrell v. Sayre, 270 P.2d 190
(Colo. 1954) (en banc); Kinney, 128 P.3d 297; Florman, 207 S.W.3d 593; Resler, 139
N.W.2d 379; Farm Credit Bank of Tex. v. Colley, 849 S.W.2d 825 (Tex. App. 1993); Atwood
v. Rodman, 355 S.W.2d 206 (Tex. Civ. App. 1962). United States as Grantor: Hess, 348
F.3d 1237; Poverty Flats Land & Cattle Co. v. United States, 788 F.2d 676 (10th Cir. 1986).
21
provided a reclamation plan in which it represented that, “[w]hen the quarry is completed[,]
the land will be suitable for grazing and will form a basin for collecting storm water for
livestock watering[.]” The Rule 5 Mining Lease issued to Mainline states, “[l]essee has
separately contracted with the owner of the surface estate of the lands described herein,
which contractual arrangement . . . includes certain responsibilities relating to operations,
reclamation, surface protection[,] and damages[.]” And the district court made an
unchallenged finding that “[a]fter removal of the rock that can be removed in a commercially
viable manner, the site can be reclaimed in such a manner as to allow the pre-existing
grazing use without substantial impairment.”
{47} We hold that the district court did not err in determining, under Bogle Farms’
required analysis of the intent of the parties of the original sale transaction, that based on the
sale transaction documentation, including the patent, and also based on all of the surrounding
circumstances, the intent of the conveyance transaction was that the rock was included in the
reservation of “all minerals of whatsoever kind” in the patent.
CONCLUSION
{48} We affirm the district court’s determination that the rock in question was a mineral
within the mineral reservation in the 1947 patent relating to Section 16.
{49} IT IS SO ORDERED.
______________________________________
JONATHAN B. SUTIN, Judge
I CONCUR:
______________________________________
CYNTHIA A. FRY, Judge
MICHAEL E. VIGIL, Judge (dissenting).
VIGIL, Judge (dissenting).
{50} The extent of the mineral reservation set forth in the transaction documents is
ambiguous.4 Thus, the question before the district court was whether the original parties to
4
The transaction documents consist of: (1) Mr. Shelton’s August 5, 1930 application
to purchase Section 16 from the State; (2) the August 5, 1930 appraisal of Section 16; (3) the
contract dated November 21, 1930, (which was signed on January 22, 1931) between Mr.
Shelton and Land Commissioner James F. Hinkle setting forth the terms of the sale of
Section 16 from the State to Mr. Shelton; and (4) the August 4, 1947 patent, signed by Land
22
the sale intended the surface and subsurface metamorphic rock in Section 16 to be included
in the mineral reservation. The district court ruled, and the majority agrees, that the mineral
reservation includes the rock. In my view, the district court erred in two respects: (1) it
failed to take into consideration the surface destruction doctrine as bearing on the parties’
intent at the time the contract for the purchase of Section 16 was made; and (2) it considered
irrelevant evidence and without this evidence, its conclusion that the parties intended to
include the rock in the mineral reservation is not supported by substantial evidence. Since
the majority disagrees, I dissent.
THE HOLDING OF BOGLE FARMS
{51} Bogle Farms overruled the holding in Roe5 that because a purchase contract and
patent did not specifically reserve sand and gravel in a mineral reservation, title to the sand
and gravel passed to the purchaser along with the surface estate. Bogle Farms, 1996-NMSC-
051, ¶ 34. Bogle Farms reiterated the principle laid down in Burris,6 restated in Rickelton,7
that in determining whether the general term “mineral” includes a specific substance is
resolved on a case-by-case basis. Bogle Farms, 1996-NMSC-051, ¶ 21. “The case-by-case
rule adopted in Burris is based on the principle that in contract cases the role of the court is
to give effect to the intention of the contracting parties. The role of the court is to determine
whether the parties intended to include [the substance] within the term ‘mineral.’” Bogle
Farms, 1996-NMSC-051, ¶ 22. A case-by-case analysis is required “because the intent of
parties to one contract may not be the same as the intent of parties to another contract.” Id.
Given that “[t]he polestar of deed construction is the parties’ intent,” id. ¶ 34, Bogle Farms
unambiguously mandates:
[1.] [A]nyone purchasing land under a purchase contract or a
patent with a specific reservation would be bound by the terms of that
reservation.
[2.] If there is not a specific reservation, the trial court must look
to evidence outside the face of the contract to determine the meaning
intended for the term “mineral” when that term has been shown under the
circumstances to be ambiguous.
[3.] In those cases involving successors in interest to original
purchasers, [where the purchase was not made in reliance on Roe], . . . the
Commissioner John E. Miles, conveying Section 16 to Mrs. Shelton.
5
Roe, 103 N.M. at 521, 710 P.2d at 88.
6
Burris, 88 N.M. at 147, 538 P.2d at 419.
7
Rickelton, 91 N.M. at 481, 576 P.2d at 287.
23
issue is whether the parties to the original contract intended that the State
reserve [the substance in question].
Id. ¶ 35.
{52} In this case, none of the transaction documents contain a specific reservation of the
surface and subsurface metamorphic rock in Section 16. Further, there is no dispute that the
mineral reservation in the transaction documents is ambiguous. Thus, Bogle Farms required
the district court to determine whether Mr. Shelton and Commissioner Hinkle, as the parties
to the original contract, intended the State to reserve the surface and subsurface metamorphic
rock in Section 16. With the foregoing principles and requirements in mind, I now turn to
each specific disagreement I have with the majority.
REJECTION OF THE SURFACE DESTRUCTION DOCTRINE
{53} Mr. Shelton and Commissioner Hinkle, the parties to the original sale of Section 16,
are deceased. Thus, the majority concludes, their intent “can be determined only objectively
from the original sale-related documents and surrounding circumstances.” Majority Opinion
¶ 35. The “surrounding circumstances” clearly include the condition of the land at the time
of the sale. Since the original parties to the contract are deceased, and the transaction
documents are ambiguous, the evidence most probative of their intent is the condition of the
land at the time of the sale.
{54} The surface destruction doctrine requires the fact finder to engage in a critical
analysis of the land at the time of the sale. I refer to the surface destruction doctrine to mean,
as quoted by the majority in Paragraph 25, a doctrine “which holds that, in the absence of
clear contrary intent, where materials alleged to be ‘minerals’ are plainly visible on the
surface, and where the surface would have to be destroyed in order to ‘mine’ them, the
parties could not have intended those materials to be ‘minerals’ because, if they were, the
mineral reservation would swallow up the grant and render it worthless.” Plaintiff asked the
district court to use the doctrine in assessing the intent of the parties, but the district court
refused. The majority concludes this was not error, Majority Opinion ¶ 44, and I disagree.
{55} This area of New Mexico is part of what is called the Rocky Mountains for very good
obvious reason. The district court briefly noted the land’s physical condition in its findings,
noting that prior to 1930, Section 16 was owned in fee by the State, and that “Section 16 is
located in that part of Torrance County known as ‘Perdenal Hills’ and is largely composed
of Pre-Cambrian metamorphic rock.” (Emphasis added.) This finding is supported by
photographs showing rocks on the surface all over Section 16. To illustrate, two
photographs introduced into evidence are attached to this dissent. The majority also notes
that Plaintiff showed that the rock is part of a fifteen- to twenty-mile-wide geologic
formation with rock outcrops that stretches from the Sangre de Cristo Mountains on the
north into Texas and Mexico on the south. Majority Opinion ¶ 28. The district court
findings and Plaintiff’s evidence establish that the rocks in Section 16 were ubiquitous and
24
obvious in 1930. Nevertheless, the district court made a finding that “[t]he fact that surface
rock was visible on Section 16 was not the same as a determination that such rock was or
was not a mineral under the 1930 Shelton contract to purchase or under Patent No. 1906’s
mineral reservation.”
{56} The majority has discussed the appraisal as if the appraiser was representing Mr.
Shelton. Majority Opinion ¶ 6. The evidence suggests otherwise. In the application to
purchase Section 16, Mr. Shelton recites the amount he offers to pay for the land and he also
agrees to pay an additional amount of money “to defray the expense of appraisement and
advertising as per the rules of the State Land Office, such amount to be returned to me in the
event I am not the successful bidder.” The appraisal is based on the personal knowledge of
the appraiser and he does not classify the rock as a mineral, notwithstanding its obvious and
abundant presence on Section 16. In the 1930 contract to buy Section 16, Mr. Shelton
agreed to pay the agreed upon price for the land and he also paid an additional amount, “the
same being the payments required for the advertisement and appraisement of said land[.]”
Thus, these documents suggest on their face that the State hired the appraiser, and Mr.
Shelton simply reimbursed the State for the expense of the appraisal. It is therefore a fair
inference that the appraiser represented to his principal, the State, that notwithstanding the
presence and abundance of the rocks, there were no minerals on Section 16.
{57} The majority’s reasons for refusing to adopt the surface destruction doctrine to
facilitate the intent inquiry mandated by Bogle Farms are unconvincing. Majority Opinion
¶¶ 44-46. The majority states that Plaintiff urges its adoption as a means of conveying
minerals by implication or by presumption in violation of Bogle Farms. Majority Opinion
¶¶ 19, 44. I disagree. Bogle Farms did not consider the surface destruction doctrine, and
the statement in Bogle Farms, 1996-NMSC-051, ¶ 34, that state trust lands should not be
conveyed by implication is not a rejection of the surface destruction doctrine. Rather, the
statement sets forth an additional reason for overruling Roe’s conclusion that if a substance
is not specifically included in a mineral reservation, it is excluded from the mineral
reservation. Instead, the actual intent of the parties governs, and the Bogle Farms statement
does not preclude utilizing an evidentiary aid such as the surface destruction doctrine to
construe the intent of the original parties to the transaction. In addition, the majority in
wholesale fashion rejects the significant and substantial body of cases which recognize and
apply the surface destruction doctrine on the basis that “they involve purely private land
transactions or conveyances by the United States of lands dissimilar to New Mexico’s trust
lands.” Majority Opinion ¶ 44. Noticeably absent in the wholesale rejection of these cases
is any indication that the doctrine is not a valuable and valid aid in construing intent.
{58} I would adopt the surface destruction doctrine as an evidentiary tool to facilitate the
intent inquiry required by Bogle Farms. The intent of the original parties is to be construed
from the perspective of the interest the buyer desires to purchase, and the interest the seller
desires to sell. Mr. Shelton’s application to purchase Section 16 states he intends to use
Section 16 to “graze sheep or raise cattle”; the appraisal states that Section 16 is best adapted
for “grazing”; and the contract, which is the only document signed by both Mr. Shelton and
25
Commissioner Hinkle, states that Section 16 “is being purchased for the purpose of grazing
and agriculture only[.]” Thus, I would remand this case to the district court to utilize the
surface destruction doctrine to determine whether removal of the surface and subsurface
metamorphic rock unreasonably interferes with what use the original parties intended for
Section 16, namely for grazing and agricultural purposes. If such a burden results, this is
persuasive evidence that Mr. Shelton and Commissioner Hinkle did not intend the State to
reserve the rock in the general mineral reservation.
CONSIDERATION OF IRRELEVANT EVIDENCE
{59} The district court findings of fact relating to whether Mr. Shelton and Commissioner
Hinkle intended to include the rock in the general mineral reservation are, for the most part,
all facts which occurred after 1930. Many of them are set forth verbatim in the majority
opinion in Paragraphs 22-24. Without these facts, there is no basis for concluding that Mr.
Shelton and Commissioner Hinkle intended to include the rock in the general mineral
reservation. For the following reasons, I submit that the district court erred in considering
these facts. Furthermore, they do not support the district court’s findings of intent, because
they are irrelevant.
{60} Commissioner Hinkle agreed to sell Section 16 to Mr. Shelton, and they entered into
a contract, dated November 21, 1930. Under the contract, Commissioner Hinkle agreed to
convey a fee simple interest in Section 16 to Mr. Shelton upon payment of the purchase price
in full subject to the following reservations and conditions:
[T]hat this land is being purchased for the purpose of grazing and agriculture
only; that while the land herein contracted for is believed to be essentially
non-mineral land, should mineral be discovered therein it is expressly
understood and agreed that this contract is based upon the express condition
that the minerals therein shall be and are reserved to the fund or institution
to which the land belongs, together with right of way to the Commissioner,
or any one acting under his authority, at any and all times to enter upon said
land and mine and remove the minerals therefrom without let or hindrance.
The land was paid for, and on behalf of the State, Commissioner Miles issued a patent to Mr.
Shelton’s widow on August 19, 1947. The patent conveys a fee simple estate to Section 16,
but reserves to the State:
all minerals of whatsoever kind, including oil and gas, in the lands so
granted, and to it, or persons authorized by it, the right to prospect for, mine,
produce and remove the same, and perform any and all acts necessary in
connection therewith, upon compliance with the conditions and subject to the
limitations of the laws of the State of New Mexico[.]
26
{61} As set forth in this dissent, there are two general mineral reservations in this case:
the mineral reservation in the 1930 contract between Commissioner Hinkle and Mr. Shelton,
and the mineral reservation in the 1947 patent issued to Mr. Shelton’s widow by
Commissioner Miles. As quoted above, the 1930 contract first states that the land contracted
for “is believed to be essentially non-mineral.” With this preface, the contract then provides,
“should mineral be discovered” on Section 16, such minerals “are reserved.” On the other
hand, the 1947 patent in the broadest language states that “all minerals of whatsoever kind”
are reserved. The documents are not only separated by almost seventeen years, they are
signed by different commissioners. The differences between the two reservation clauses are
material, and the majority does not determine which mineral reservation applies. I conclude,
however, that the 1930 general mineral reservation is the one which is applicable.
{62} The contract between the parties defines what the purchaser (Mr. Shelton) agreed to
buy and what the seller (the State) agreed to sell. The function of the patent is to convey the
legal title which the parties agreed upon, not to change the contract made by the parties. See
Bogle Farms, 1996-NMSC-051, ¶ 4 (noting that purchasers buying land from the
Commissioner of Public Lands under installment contracts received patents from the
Commissioner transferring legal title after fulfilling their contractual payment obligations);
Jensen v. State Highway Comm’n, 97 N.M. 630, 631, 642 P.2d 1089, 1090 (1982) (stating
that the provisions of the purchase contract determine whether a substance is reserved to the
State, and if the State desires to reserve a substance, “it may do so by specific reservations
in the purchase contract”); cf. Deaton v. Gutierrez, 2004-NMCA-043, ¶ 14, 135 N.M. 423,
89 P.3d 672 (stating that until the Bureau of Land Management issued a patent to the land,
title remained in the United States). Bogle Farms itself was a declaratory judgment brought
by original purchasers and successors in interest to land sold by the Commissioner of Public
Lands under installment contracts. 1996-NMSC-051, ¶ 3. The plaintiffs alleged that the
general mineral reservation of their purchase contracts did not include sand and gravel, and
they sought a declaratory judgment that their patents could not include a specific reservation
of sand and gravel. Id. ¶ 5.
{63} I therefore conclude that the applicable mineral reservation at issue in this case is the
one contained in the 1930 contract between Commissioner Hinkle and Mr. Shelton. The
district court failed to relate the post-1930 findings of fact back to the intent Mr. Shelton and
Commissioner Hinkle had when they signed the 1930 contract. Thus, Finding of Fact No.
69 is not supported by substantial evidence. This finding, which the majority refers to in
Paragraph 37, and relies on in Paragraphs 38-39 in affirming the judgment states:
Based on the parties’ language in their dealings with one another, their
conduct, the objectives they sought to accomplish, and the surrounding
circumstance the parties intended that the crushed stone, an industrial
mineral, was to be considered a mineral in the 1930 Shelton contract to
purchase and one of those “minerals of whatsoever kind” included in the
State’s mineral reservation in Patent No. 1906.
27
Further, assuming the district court could, consistent with Bogle Farms, determine the most
reasonable meaning of the general mineral reservation if Mr. Shelton and Commissioner
Hinkle had different meanings in mind, Finding of Fact No. 72 fails for the same reason.
Finding of Fact No. 72 states:
Even if the parties disagreed as to the meaning of the term “mineral” in the
1930 Shelton contract to purchase or the phrase “minerals of whatsoever
kind’ in the 1947 patent, or if the parties” intentions could not be determined,
it is most reasonable that the term and phrase include the industrial mineral
known as crushed stone, based on all surrounding circumstances.
{64} The majority asserts that it does not rely on any findings made by the district court
after the patent was issued in 1947, and then it fails to specifically identify what those
findings are. Majority Opinion ¶¶ 36-37. I submit that the applicable date for determining
intent is as of the 1930 contract and not the 1947 patent.
{65} When one considers only those findings which are contemporary with, or precede
1930, they do not support a finding that Mr. Shelton and Commissioner Hinkle intended to
include the rock in the general mineral reservation. For this additional reason, I dissent.
CONCLUSION
{66} I would reverse and remand to the district court to consider the surface destruction
doctrine as evidence of the parties’ intent, and not to consider the post-1930 evidence unless
it is shown to be indicative of the parties’ intent in signing the purchase contract in 1930.
Since the majority disagrees, I dissent.
______________________________________
MICHAEL E. VIGIL, Judge
Topic Index for Prather v. Lyons, No. 29,812
AL ADMINISTRATIVE LAW AND PROCEDURE
AL-SE Sufficiency of Evidence
AE APPEAL AND ERROR
AE-AJ Appellate Jurisdiction
AE-HE Harmless Error
AE-PA Preservation of Issues for Appeal
AE-SR Standard of Review
AE-SB Substantial or Sufficient Evidence
CN CONTRACTS
CN-AM Ambiguous Contracts
28
CN-IT Intent
CN-RE Real Estate Contract
EV EVIDENCE
EV-RC Relevancy, Materiality, and Competency
GV GOVERNMENT
GV-EN Environmental Law
GV-LU Land Use
GV-PL Public Lands
NR NATURAL RESOURCES
NR-MM Mines and Minerals
NR-RO Royalties
PR PROPERTY
PR-AP Appraisal
PR-MD Mineral Deed
PR-MR Mineral Resources
PR-PU Public Lands
PR-QT Quiet Title
PR-RE Real Estate Contract
PR-SD Surface Destruction Doctrine
29
30
31