Godfrey | Johnson Wins Oil & Gas Royalties Appeal

In a case of first impression, the Wyoming Supreme Court affirmed that Godfrey’s client owned royalty interests as a matter of law but contrary to the terms of a probated will.

October 10, 2017

In a suit filed in Carbon County, Wyoming, a charitable trust established by the owner of over-riding royalty interests in oil and gas revenues generated by a number of producing oil wells located in Wyoming sought to recoup more than $1M in past royalties and statutory attorneys fees from a personal trust that was represented by Godfrey | Johnson, P.C. as well as from Devon Energy Corporation and Devon Energy Production Co., who had paid the royalties to Godfrey’s client for several years.

The plaintiff asserted that, pursuant to the last will and testament of the original mineral interest owner, who was also the settlor of the charitable trust, Godfrey’s client had only a life interest in the oil and gas royalties, and sought repayment of the royalties paid to it after the death of the life interest holder, asserting claims of unjust enrichment and constructive trust. In addition, the Devon companies cross-claimed against Godfrey’s client, seeking similar relief on the basis that it had paid the post-death proceeds to Godfrey’s client erroneously.

On summary judgment following a number of depositions and extensive briefing, the Wyoming District Court held that, despite the clearly expressed intent of the testator who had created both the life estate and the constructive trust, probate orders in California and Wyoming superseded the testator’s will and his clearly expressed testamentary intent. The charitable trust appealed that ruling.

The case called upon the Wyoming Supreme Court to interpret a 94-page California probate order and an ancillary Wyoming probate order. In a lengthy written opinion, the Supreme Court found that, notwithstanding the testamentary intent expressed in the will, neither of the probate orders transferred ownership of the residual interest to the Plaintiff, and that under a residuary clause in the California decree of distribution, title passed to Godfrey’s client “in fee simple,” meaning that it passed completely and without being limited to the lifetime of the beneficiary who held the life estate under the will.

“We will not “reach back in time” over thirty years to collaterally attack the probate order and evaluate errors that may have been made in the ancillary administration of Mr. Smith’s estate,” held the Supreme Court. “The district court properly concluded that the California probate order adopted by the Wyoming court controls the distribution of [the testator’s] Wyoming property.”