Do you forfeit suspended funds if you sell mineral rights?

My father owns mineral rights in N.M. with a current lease and producing well. He died a year ag,o leaving us ( his kids) inheritance rights to sell, but life estate to his wife (our step-mother). She has an offer to sell outright the mineral rights from the new production company (taken over from the previous bankrupt operator).

She hasn't received royalties for months and the new operating company has approached her with a very attractive offer, and she's anxious to take it. I suspect there may be suspended royalties as the lease is still in my father's name and all the confusion of the bankruptcy. If she accepts the offer, does she lose the rights to claim any suspended funds from before the sale?

She's worried that they'll pull the contract offer if she makes waves. What should we do?

Thanks

Hi Jean, Depends on the language of the Deed. I have seen them conveying title to all suspended funds and I have seen them conveying title to only funds after the effective date. Also, remember that the buyer can only by what your step-mother has to sell - a life estate. So even if she sells, the minerals will pass to you all (the kids) upon her death. Best, Eric

Hi Eric - thanks for your quick reply.

Yes, I wonder if the company is aware of the life estate. I wasn't party to the discussions with the broker before the deed was drafted, and the actual deed only refers to the 3 of us as 'Grantors' - no mention of us as inheritors, or of her life estate.. If so this will all come out with a title search, correct? I assume the contract would have to be re-written.

Regarding possible suspended funds (I'm trying to research that now) - I found this phrase, buried in the legalese:

'..Grantor also grants sell and conveys to Grantee, its successor and assigns, by this deed ......(iii)all proceeds without limitation, all royalties, oil payments, gas payments,production payments, pooling payments, escheated funds, revenues payments, accounts,suspended funds, refunds, interest and overdue payments and others of value .... attributable to the Land before the date of this conveyance '

Am I right in assuming that the buyer will just pocket any payments which are in limbo (due to the confusion of the bankruptcy and our father's death) including those that weren't distributed and we never knew about?

Thanks, Jean

I haven't seen the complete language but if you are all listed as grantors, all grantors may be giving up their rights permanently.

If it only listed your mother, she would be selling her rights and there is no need to mention you. The fact that you are mentioned as grantor leads me to believe that you need to get this in front of a lawyer, pronto.

"'..Grantor also grants sell and conveys to Grantee, its successor and assigns, by this deed ......(iii)all proceeds without limitation, all royalties, oil payments, gas payments,production payments, pooling payments, escheated funds, revenues payments, accounts,suspended funds, refunds, interest and overdue payments and others of value .... attributable to the Land before the date of this conveyance '"

The above, to me at least and with no knowledge but what you have given it could be construed that you are selling ALL royalty your father ever received. That essentially they hand your mom a check for the mineral rights but now they can demand all the money ever received from production from the land.

Read it this way....'..Grantor also grants sell and conveys to Grantee, its successor and assigns, by this deed ......(iii)all proceeds without limitation,.... attributable to the Land BEFORE the date of this conveyance '

To me, the above means you are not only selling the minerals, but also all the money that has ever been received from the minerals...for the purchase price. It sounds to me like they are trying to buy your minerals forever...with your own money. Or possibly you could wind up granting them your minerals and still OWE them money because the purchase check didn't cover it.

Once again, get this offer in front of a lawyer, PRONTO!

{.... attributable to the Land before the date of this conveyance '} Means all the money ever received. If it said AFTER the date of the conveyance, they would probably still be entitled to whatever was in suspense.

I think it possible they are really trying to stick it to you.

I liked this hoping it would get The OP's attention. The OP's second post disturbs me.

Jean,

I've dealt with this problem before. Your step-mother may not have the right to sell only to accept income, if any.

The heirs may not yet have the right to sell until the will has gone through probate in NM

Mr. Toole's maps indicate you would be crazy to sell with out a proper independent evaluation.

I agree with Kennedy's instincts. The family is being set up. His instincts have proven to be right on.

Lea County is no place to trifle with long term royalty potential.

You owe it to your father to get some help, clean up the title, and understand what is going on. In this case, Haste will make a lot of Waste.

Hi, Jean -

I just noticed your posting.

It is my understanding that the holder of a Life Estate cannot burden the interests or "reduce the corpus" (sell any of the interests).

An Attorney more familiar with New Mexico law than I am would be able to explain it better, but I do not think she can sell.

Charles

Mr. Tooke, what if all the future heirs also sign as grantors?

["Yes, I wonder if the company is aware of the life estate. I wasn't party to the discussions with the broker before the deed was drafted, and the actual deed only refers to the 3 of us as 'Grantors' - no mention of us as inheritors, or of her life estate.. If so this will all come out with a title search, correct? I assume the contract would have to be re-written."]

I wish Jean would post so I would know she had seen my post.

Hi, RW!

Always good to hear from you.

If you mean what if all the Remaindermen sign, in this case that would be Jean and her sister and would be quite natural. We have Remaindermen ratify Leases all the time. As far as any future generational heirs, heirs of the Remaindermen for example, I have never seen that required.

Google "rights of life estate holders in new mexico" and you will get over 1.5 million hits in under a second.

Here are a few of the less complicated articles:

http://trusts-estates.lawyers.com/estate-planning/life-estates.html

http://theonlinelawyer.blogspot.com/2011/10/new-mexico-life-estate-deed.html

I have also attached a PDF of a presentation from a National Association of Division Order Analysts (NADOA) Conference. It is all interesting reading, but for this particular subject, see Page 32.

Charles

703-Chapter13OverviewofNewMexicoOilandGasLawsSeePg32.pdf (4.62 MB)

Hi RW - sorry I didn't post again but I did see your comments, and they're appreciated. I find it hard to believe that the buyer could claim prior receipts after the sale, but it seems obvious none of us will see another dime afterward if we did sign that deed.

All of this has convinced me I need to get professional advice, and I'm in the process of doing so. The hardest part may be finding a good NM lawyer that can sort things out. I know my father had a will and a trust but I haven't seen either of them.

Thanks to all-

Jean, you can find a lawyer in whatever state you are in as long as he is familiar with the laws of NM. I would try to find one local first as it's tough to work with one by mail or on the phone.

I'm glad you saw my post.

I live in Texas and we have had cases here, and here on the forum where people who sold their mineral rights didn't understand an sold everything from date of first production for less than the purchase price. Be wary. Please let us know what a lawyer says.