I had a question about the indemnity clause that is always included on my division orders (in the state of Colorado). I understand that the the indemnity clause to protect the company from overpayment in the case of getting the percentage wrong or in case there was not true title in the first place. But does this clause allow them to demand repayment when they erroneously sent payment a second time for royalties already paid out? Most businesses carry insurance policies for this kind of accounting error. This kind of error is not related to what my percentage is nor is it related to my ownership of the mineral rights, it is simply that they made an accounting goof and sent payment a second time.
I'm not a lawyer but, I think they would simply withhold payments until the books balanced.
The indemnity clause probably doesn't apply, but that doesn't matter. They have the right to recover an erroneous overpayment regardless. There's a legal principle called "unjust enrichment" and a person in a situation like yours would be hard pressed to convince a court they should be allowed to keep the overpayment and, given the amount that seems to be at issue, hard pressed to convince a court they shouldn't have suspected it was a mistake when they received it. Under principles of "equity" a person in this situation might be allowed to pay it back over time if it's truly a financial hardship, but they'd probably have to pay interest, as well. A person might be able to negotiate an interest-free repayment schedule (possibly just offsetting their future royalty payments as they accrue). Look at it this way: If you accidentally paid a doctor bill twice, should the doctor have to pay you back the overpayment? If so, how much time should he get to do so? The only "safe" thing to do when one is the beneficiary of such a mistake, other than promptly inquiring about it, might be to deposit the money in an interest bearing account (if such a thing exists any more). When the payer realizes the mistake and demands repayment, one could probably keep the interest that accrued on the account, if one repaid the "principal" promptly.
[The foregoing remarks are strictly gratuitous for purposes of discussion only and are not to be construed as legal advice nor relied upon for making any decision. You should seek guidance from a qualified personal adviser who is familiar with all the relevant facts of your situation and the law of your jurisdiction.]
That would be a good question to ask your own attorney.
Likely not worth pursuing as the money paid the second time is not legally yours, therefore it would be conversion to keep the money and not re-pay it, regardless of whether or not it was a mistake on the companies part or not. That does happen all the time, and since it was only recently paid that also does not help out much. If years had passed, then you would likely have some legitimate arguments/claims. I suggest working out a repayment arrangement with the company which they are likely to do. I can provide you more details if necessary on that. Hope that helps.
You're still entitled to your monthly statement, showing quantity of oil/gas purchased, price, your amount; and, of course, an accounting with respect to the overpayment being paid down. If you don't receive your statements, contact the regulatory agency of the state where the lease is, such as Texas RR Commission, where they are presumably licensed as an oil/gas purchaser.
You might also need to visit your accountant. If it was a large sum and you received it last year and if it was included on your 1099 for 2011 from this company, you may have claimed it as income last year, maybe even took depletion against it. Whatever your current monthly amount is that they hold back to apply on repayment, it's likely to be reported as income for this year, even though you're not receiving it. You don't want to be taxed twice! They should provide a corrected 1099 (if the overpayment was last year and was included on the 1099) and you may need to do an amended tax return. If the overpayment was this year, there shouldn't be a tax accounting problem, unless their goofy accounting system includes the overpayment on your 1099 for 2012, in addition to the payments for this year's production that you don't receive because it's being applied to repayment.