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Judge: Texan must repay $281,000 to oil and gas speculators

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A Washington County judge ordered a Texan to pay back more than $281,000 to speculators who purchased oil and gas under some land in Donegal Township but later discovered they couldn’t make any money because of a “most unusual reservation” in a roughly 70-year-old deed, according to a court ruling.

Senior Judge William Nalitz ruled Friday Joe Ann Padgett of Goldthwaite, Texas, must pay $281,328.50, plus costs, to Black Mountain Royalty LP and its subsidiary, Black Mountain Royalty I 2009 LP; Diamond Energy Inc.; Basin Oil and Gas LLC and its president and CEO, Mason Manulik; and Acoma Energy LLC – collectively described in Nalitz’s order as “members of group which attempts to acquire oil and gas interests which might be expected to generate an income stream.”

Those entities previously paid that amount to Padgett and her husband, Donald, in February 2014. In exchange, she signed a deed conveying to those entities her and her husband’s “undivided one-half interest in the oil, gas and other minerals underlying” roughly 113 acres of land in Donegal Township, according to the 2015 lawsuit the entities brought in Washington County Court. Padgett’s husband is now deceased.

Joe Ann Padgett inherited the one-half interest in oil and gas under the property. Nalitz noted, however, an “unusual, but not unique,” clause in a 1946 deed for the oil and gas under the land which “reserved the oil and gas” under the property to one set of owners while making the “rents and royalties” on those resources’ extraction payable to another set of owners, Nalitz found. While Padgett inherited a one-half interest in oil and gas under the property in 2001, ownership of rents and royalties followed a separate chain of successors, Nalitz ruled. They eventually wound up in the hands of West Penn Power Co., a subsidiary of First Energy Corp.

A default judgment filed in Washington County court two months before the Padgetts purportedly sold their oil and gas right held that any of the oil and gas rents and royalties belonged to West Penn, according to court records.

The new owners of those interests filed suit against Padgett and her husband in 2015, after realizing “they had a deed for the oil and gas which could not and would not generate an income stream because any rents and royalties from their oil and gas estate would be payable to West Penn Power Company,” according to Nalitz’s ruling.

Nalitz found in those entities’ favor and against Padgett on a count of negligent mirepresentation. He made a similar decision in June following a nonjury trial. Both sides filed motions for “post-trial relief,” prompting the more recent ruling.

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