A recent decision from the Arkansas Court of Appeals in Ellingsen v. King, 2009 Ark. 655 (October 7, 2009) illustrates how some long-forgotten but newly-discovered property can often send family members and creditors scrambling for their piece of the pie. This interesting case involved Mr. McAlexander, who died in 1988 a resident of Shelby County, Tennessee. An domiciliary probate estate was opened in Tennessee, and an ancillary probate estate was opened in Arkansas. Mr. McAlexander's creditors did not file a claim against the ancillary estate in Arkansas, and its known assets (a fractional mineral interest to 85 acres of land in Conway County, Arkansas) were transferred to the Tennessee estate, such that the Arkansas estate closed in 1990. In 1991, a Tennessee probate court concluded that the estate was insolvent and approved a plan of distribution to the estate's three creditors (the United States of America [60%], a bank [20%], and Mr. McAlexander's widow [20%]), before the estate was closed in 1996.
A decade went by and in 1996 it was discovered that Mr. McAlexander had actually also held an interest in the mineral rights to approximately 4800 additional acres of land in Conway County, Arkansas, which everyone in Arkansas now knows is in the heart of the booming Fayetteville Shale natural gas play. The ancillary estate in Arkansas was reopened but none of the creditors filed a claim. In 2007 the Arkansas trial court authorized the executor of the estate to execute an oil and gas lease that included a cash bonus in excess of $1,000,000.00.
At that point, of course, it appears that people came out of the woodwork to claim the money. Specifically, the executor asked the trial court to determine the rights and interests of the creditors who had filed claims agains the Tennessee estate. The trial court granted summary judgment in favor of the creditors, with the end result being that Mr. McAlexander's five daughters receiving nothing under the trial court's order. On appeal, the Arkansas Court of Appeals noted that while there was no evidence to indicate that the creditors properly presented their claims pursuant to Arkansas law, under Arkansas law when an estate is deemed insolvent it is still possible in some circumstances for such creditors to be paid a portion of their claim. While the Tennessee court had long ago held that the estate was insolvent, that finding was made before the assets at issue were discovered such that the Arkansas Court of Appeals reversed the trial court's summary judgment for factual findings as to the solvency of the estate in light of the newly-discovered assets.
I cannot help but think that in the coming years we will see many more stories like this, as people dust off old deeds and other documents only to discover that they possess mineral rights in North-Central Arkansas land that they never dreamed would become a profit-producing property.