Question for TX Mineral Rights Issues

Oil and Gas Leasing Help
1

Ok, first, I am SO green to all this so please forgive me if the terminology isn’t quite right. Also, I know this may be a question for an atty, but I am looking for guidance and opinions.

DH’s dad has been deceased for years. We recently learned that he owned mineral rights in TX to an area that is booming. Because he died (what we thought) was intestate, the firm assigned his widow 50% and the remaining 50% split evenly between his children. Widow sold out her share quickly, pretty much took the initial offer from what we understand. Best we can tell, the other siblings also eventually took the offer and sold their rights. His last sibling just did so a couple of months ago, got tired of waiting on division order and payments.

The lease that was executed on this property was supposedly looked over by a TX atty hired by one of the siblings. It is a 3 year lease, but it’s up in a few months. A well went in and has been producing since Dec 2018, but we still don’t have division orders. Hubby keeps writing to inquire and was told today that all orders went out already except for those with “curative issues”, his being one of these. I am trying to understand how it’s taken to this point to realize there were curative issues.This feels like more stall tactics. We’ve been told for more than a year now that we’d have division orders “soon”.

On top of all of this, hubby more recently discovered an old copy of Dad’s will in a box that was long forgotten about in storage. Dad didn’t own anything and was penniless at death (ok, in debt), the will was never executed because it wasn’t even known about. The will states only his children split everything equally. I am not clear on the date, though, but it may also have predated his marriage to the last wife. Also, his siblings have bad blood with the widow.

No one else knows about the will. All things being equal, hubby has been ok with his stepmother having been “assigned” 50% and like I said, she sold hers anyway (very low, I believe). Now that the will was discovered, I believe she sold something that may not have been hers to sell, but I may be wrong. All other relatives have signed off on their shares to the company so it seems like a wash… or is it?

Can a late discovered will matter here or is it best to let it be? The will might predate the last marriage, but so did the mineral rights, of that there is little doubt. Widow was the 3rd legal marriage (that we know of) and there were no children between them.

What kind of things generally cause a curative issue? Could there be a debt that needs to be paid or is there someone now contesting something? We are still awaiting a return call, we still don’t even know the issue. If he is the only family left who hasn’t sold his share, are we obligated to pay any debts from the proceeds? Why were the others allowed to sell their shares to the company with these issues outstanding? Can curative issues void their sales, too?

Thanks for your help, this is all so confusing!

2

Apparently they are wanting the info on DH’s parents marriage… we now believe that the issue actually lies with the fact that the purchase of these rights occurred during HIS parents’ marriage and whether or not it was addressed in their divorce (I don’t believe it was, as I don’t think it was disclosed). If this purchase was indeed made then (they all lived in TX then and Dad was in real estate) then does this mean they prematurely paid out to the widow and other siblings? Still so confused.

DH is the only child of Dad’s marriage to that mother and it was a long term (20 year) marriage.

3

Your dad’s widow had to be married to him when the mineral rights were acquired, or she has no right to them. Texas is not California. In Texas the “Community one half interest law” has a provision stating that the property is community interest only if it was acquired during the marriage. If your dad inherited those mineral rights, or was married to someone else when those mineral rights were acquired then his widow had no rights at all to them. To find this out, go to the County Clerk’s office in the County the mineral rights were in. Ask to look at the Index Books for mineral deeds in the years you suspect that the mineral rights were acquired. Look for your dad’s name or maybe his dad’s name in the Grantee columns. When you find this it will tell you what Volume and Page to go to and locate the deed. Make a copy of that deed.Compare the date on the deed to the date of your dad’s marriage to his widow. This will clear up that answer. Then acquire your birth certificate showing who your dad was, or your dad’s birth certificate showing who his dad was. This establishes your trail of ownership. Be sure to write down the Volume and page where the deed can be found. Notify the oil company producing oil from the block and section, and present to them your trail of ownership. If the deed is a mineral deed, they should then offer you a lease to sign. After you sign a lease, then they will send the division orders which you sign and send back. Then expect to be paid. Insist on being paid for past royalties. If the royalties go past four years back and they say that under Texas Law that they only have to pay you for four years back, you tell them that Texas Law is dominated by Federal law, and under U.S. Constitution Article One, Section 10, that Texas cannot pass laws impairing the obligation of Contracts. Tell them that you demand to know how the Texas Law does not impair the obligation of contracts, or how a lease is not a contract, or since when does a State Law dominate a Federal Law.

4

And we are 1000 miles away or I would be happy to go search the records myself.

5

Lease was signed in 2017. Well has been producing since 12/18. Still don’t have division orders.

6

That is the thing… his widow was not married to him when they were purchased, my DH’s mother was. They were purchased, not inherited. There was an old well on it WAY back in the 70s, but it dried up and the property was deemed “worthless”, basically. Now with new drilling capabilities, this is no longer the case. I do not believe the property was discussed or disclosed during the divorce in 1989, but again, it was believed “worthless” so it makes sense that they did not pay lawyers to haggle over it.

So if the widow signed over her half interest in the property to the oil company, I am right in believing she sold something that was not hers to sell? Does that mean that goes back into the “pool”? I am sure they will not want to do this since they technically own it, now. Does this not also mean that 50% belongs to the spouse from the time it was purchased?

So mom owned half, dad owned half (assuming the 50-50 split in a community property state, which we are) and right now “they” oil company believe they own 87.5% of the property because all other family members signed over their portions, but I believe they sold more than they were legally supposed to have inherited. DH maintains his ownership, but he’s being told that is just 12.5% of the acreage that dad owned. Mom has 2 other children who I assume should have been included in this equation and that also means DH’s inheritance through both parents puts his share more like 29% (assuming 12.5 from dad and his 16.6 from mom) if I am understanding this correctly.

7

Anyone else care to weigh into this? Is it correct that the wife at the time of the purchase is legal half owner assuming (actually I know, I’ve seen the divorce decree) that said wife never signed away her rights? That ex-wife was actually alive when this started, but is now also deceased, which I assume means her legal heirs (again, 3) should been offered half of the rights in question.

I went through some old deeds and found the purchase… it was very much during marriage #2 to my husband’s mother, 1981.

Now what?

8

According to the facts presented by you heretofore, you are correct in that the widow did not inherit 1/2 of the mineral rights. According to Texas Law of Descent and Distribution, as follows: "Sec. 201.002. SEPARATE ESTATE OF AN INTESTATE. ( a) If a person who dies intestate leaves a surviving spouse, the estate, other than a community estate, to which the person had title descends and passes as provided by this section.

(b) If the person has one or more children or a descendant of a child:

(1) the surviving spouse takes one-third of the personal estate;

(2) two-thirds of the personal estate descends to the person’s child or children, and the descendants of a child or children; and

(3) the surviving spouse is entitled to a life estate in one-third of the person’s land, with the remainder descending to the person’s child or children and the descendants of a child or children."

In short, the widow only received a 1/3 “life estate” and that was all she could convey.

Since the previous posts do not definitively state all the pertinent facts, such as how many years since the deceased Dad passed away and how many total siblings and half-siblings are involved, it is indeed difficult to ascertain what DH share should be.

William T. LaRue

9

Let me clear some things up now that I have literally just found the divorce decree:

Dad died in 2011, we thought intestate, but there was literally nothing believed left to distribute so nothing was done. He was married to widow from roughly 1990 to his death, his 3rd wife, no children.

Mom and Dad were married from 1965 to 1989 and lived together in TX when property was purchased (1981). Terms of the divorce (in SC, also a community property state) clearly state that there is not a complete list of assets, but all assets to be split on a 50-50 basis. My believe based on dates and the fact that they were living in TX, legally married for all intents and purposes at the time of the property purchase, that this is marital property.

Dad has 4 children. 3 from first marriage, one from the middle marriage described above (my husband). The 3 are full siblings and then my husband, who is their half but biological of dad.

Mom mentioned above had 2 other children, both born before the 1965 marriage. Dad was step father to these 2, though I am not sure it matters except for whatever portion Mom may or may not have been entitled to inherit. Mom was alive in 2017 when the first lease was signed, but has since passed. She had a Trust and a Will, if it helps.

Oil company has since purchased the widow’s share (they said 50%), and the 3 other siblings’ shares amounting to another 37.5%. Hubby is the only one who has not wanted to sell his share, despite increasing offers from the company. They obviously think they now own 87.5% of the rights and hubby has his 12.5% left. To date, we still have no division orders and have been paid nothing. There IS a well and it is producing. Only when we were finally being told to expect division orders did they come back and say they needed the dates of his parents’ marriage. If there were already clouds, how were they able to purchase the rest of the shares?

10

Ok, based on the above information, there are some things that it appears can be calculated…

First, in Texas, by statute, a Last Will and Testament cannot be presented for probate if more than four (4) years have elapsed since the death of the Testator (Decedent). Since Dad died in 2011, the found Will would, in reality, have no effect on the distribution of the Estate and all assets would be distributed through the Descent and Distribution Laws of Texas, since the minerals are located in Texas.

Next, the minerals were acquired during the marriage of Dad and Mom, so, unless they were purchased with Dad’s separate funds, then more than likely, you are correct, they are community property. The terms of the divorce decree state all assets are to be split 50-50 so it would appear Dad owns 1/2 and Mom owns 1/2 of whatever mineral interest was acquired, so the death of Dad pertains only to his half of the mineral interest.

Upon Dad’s death, his surviving spouse, “the Widow” would have received an undivided one-third (1/3) “Life Estate” in the mineral interest owned by Dad at the time of his death, since it was Dad’s separate property and not part of community property estate belonging to Dad and the Widow.

It would appear that Dad’s children would equally share the remaining 2/3 of Dad’s mineral interest, plus the remainderman interest under the Life Estate belonging to the Widow. What that means is when the Widow dies, her one-third (1/3) would automatically vest in Dad’s children equally. All she could sell is the rights to the Life Estate. I’ll have to presume the Widow is still alive so this transfer has not taken place. When Dad’s children sold their interest to the Oil Company, if it was, in fact, an outright sale of all their mineral interest, they also conveyed their rights to the remainderman interest under the Widow’s 1/3 interest. Since your husband has not sold, it would appear that he retains not only his share from Dad’s interest but also his rights to his remainderman interest.

Since Dad had four (4) children total, each child would be entitled to 1/4 of the 2/3 mineral interest and 1/4 of the 1/3 remainderman interest, which would calculate to 1/4 of 2/3 or 1/6 (2/12) interest for each child in Dad’s mineral interest and 1/12 each of the remainderman interest. So that takes care of Dad’s half…

Now let’s look at Mom’s half…

Mom’s Last Will and Testament (LW&T) would govern what happen to her share and your husband’s share of her half (1/2) of the mineral interest would depend on how the assets are distributed in the LW&T. So, without knowing the terms of the LW&T, one can’t calculate what share your husband received.

As far as the Oil Company is concerned, if they acquired all the rights, title and interests of your husband’s half siblings and the Widow’s interest, it would appear they acquired all except your husband’s interest in Dad’s half, but unless they have dealt with Mom’s heirs, all of that one-half (1/2) except for your husband’s interest is “blowing in the wind”, so to speak. That may explain why they have not been forthcoming with very little information. They do not want to admit they may have made an error and a large portion of that mineral interest is not under their control.

Do you know if any of Mom’s heirs, other than your husband, have been approached about their interest?

Often times, Oil Companies will acquire interests and realize they have made an error in title or have received bad information, leading to clouds on the title, which they will work to clear up. Until the title is cleared, they are reluctant to pay anyone because they are not sure who owns what.

William T LaRue

11

**correcting 1/4th of the 2/3rds of Dad’s half which equals 8.3%

12

Ok, so for simplicity’s sake, let me rehash the way I understand… even though widow was told she owned 50% of the shares and sold her half back in 2017, she technically only owned 1/3 of 50% … so 16.67% and even though she SOLD her shares labeled 50% to the company, upon her death it reverts back to Dad’s pool? Really? She is still alive, but is elderly and ill, so I would imagine it may be something that comes into play soon. How does one even broach that if the company assumes they own it free and clear forever? Or they know they don’t but are hoping WE don’t know it?

Also, mom’s will basically puts everything in a trust to protect it (she once actually had assets, but 6 years in a nursing home ate those up) and is then split between her three children, my husband and his 2 siblings. No, none of her children were approached because we literally just told the oil company last week that we believe Mom owned half and that they’ve got it all wrong. No one has contacted us since that last email that included a copy of the divorce decree from 1989 that says Mom got half of all assets. They now know they messed up, just not sure how they will handle it, but my patience is so thin. This lease is 2.5 years in, the well has been producing for 9 months and we haven’t seen a penny.

What I assume they did based on my very limited understanding, it seems they asked Dad’s brother to fill in an affidavit that I assume was to delineate the heirs. It covered that he was married to widow when he died and that he was married twice before. Brother knew about when the first marriage ended (thought he was off by 5 years) and that was clearly before the rights were purchased, brother gave no dates for the other 2 marriages. He said that Dad had 4 children and listed those just as we discussed above.

When we sent this information to the oil company, we did not name the other siblings yet… and dad’s brother did not know the terms of that divorce, so he assumed that it was all Dad’s property, too and he certainly did not name the other siblings. We did not want to open that can of worms until the oil company agreed that 50% was Mom’s, too. So no, the other siblings have not been contacted and know nothing of any of this… yet.

So to recap, husband should be entitled to his 1/3rd of the 2/3rds of Dad’s half which should be about 8.3% and then also 1/3 of Mom’s half which is about 16.7% so about 25% total of the rights, I think. Does that sound right? Then, when stepmom dies, he should get another 4.1%? (her 1/3rd of 50% split 4 ways).

Mom had 3 kids and basically her part would be split 3 ways. Her will was never actually executed, either, as mom died without a penny to her name. $10k/ month in a nursing home is just awful, but that is a conversation for a whole other platform. Because there has been plenty of tension between the other 2 siblings (with each other, not husband), I think he’d be wanting to just go with the normal order of things where Mom is intestate and the state of TX says Mom’s share goes 3 ways to 3 siblings.

Also, just to clarify, regardless if the figures were wrong, all the previous sales to date are still binding? The fact that the numbers were wrong from the beginning do not negate the sales that the other siblings and stepmom made to the company? If/ when stepmom dies, how does husband try to claim his extra 4% from the Life Estate? Why does her contract not mention a life estate whatsoever?

Finally, if the oil company does not come forward with the right numbers soon, will we have to get an attorney? Being that the lease we have with them is up for renewal in less than 6 months, wouldn’t you think they’d be motivated to get this fixed already? If there is a well on or through the actual property right now that belongs to that group, we couldn’t just start over with another oil company, right? Based on the GPS coordinates I’ve found, the well is very, very close to our little parcel (if not actually on it). I’d love to say we find a new company when the lease is up, but I don’t see how that works if it is actually producing and belongs to this company. I say this, too, knowing that Dad owned a well in the 1980s that was producing on said property but it “dried up”. Now, with the new drilling procedures, it seems like they are right back on it, again.

I just want it all straight already. It seems very unfair that everyone else is getting paid royalties now and we are still waiting on division orders. Thanks for your patience with my questions.

13

Correct, under the facts outlined above, Husband appears to own an undivided 1/4 of whatever mineral interest was purchased by Dad. And he will be entitled to another 1/24 interest of the mineral interest purchased when Widow passes away…the Life Estate is set by statute, it does not have to be mentioned in the contract signed by the Widow. If Widow sold more than she owned, even though she was told by the Oil Company she owned 50%, she can only sell what she owns, but the contract is not voided because she did not own all she was told or thought she owned. Most times the contact says, at some point, that she was conveying “all right, title and interest owned”…the Oil Company might try to recoup some of the funds paid to the Widow under the warranty, if one was given, but usually they just write it off and go try to obtain the rest of the interest…the only thing your Husband should/will have to do to “claim” his part of the Widow’s share after her death, would be to provide proof of her death to the Royalty Payor.

Let’s clear up another issue…if the lease has been producing for nine (9) months and is still currently producing and continues to produce, there will be no renewal of the lease at the end of the primary term (3 years). An oil and gas lease is Held By Production as long as the land covered by the well is included in the producing unit. Therefor the oil company is under no “time limit” and in Texas, unless specifically stated in the lease form, non-payment of royalty is not a cause for termination of the lease. They may be liable for interest on royalties owed but non-payment does not automatically terminate the lease under normal circumstances.

I would venture an educated guess that the reason you have not received a Division Order is because the Oil Company is aware they have title problems and they need the problems cured before they can CORRECTLY pay the royalties owed. In cases like these, such royalties are “held in suspense” until the title problems are addressed and cured. Don’t expect that the Oil Company will be in a big hurry to distribute your money until they are sure they are paying the correct parties in the correct percentages, because it is often very difficult for them to get any refund of payments if royalties are paid to the wrong people, so they end up paying twice…

Also, if the Oil Company has shown an interest in buying your Husband’s interest, you can be sure they are probably interested in obtaining the rest of Mom’s 1/2 interest from the other heirs if they can figure out how to locate them.

I know it is hard to watch other royalty owners getting their moneys, while yours remains tied up because of problems, but the Oil Company is not necessarily just trying to delay payment, as I said before, they must ascertain who are the rightful owners and what are the correct percentages owned before they can release the funds…

Please be aware, I am not an attorney, all this conjecture is based on the facts given and forty years of experience in the oil business, but is not to be considered “legal advice”…I just hope all this helps you understand what is going on a little better…

William T. LaRue

14

Thank you, that cleared up a lot. So the lease has no bearing at all? Our contract lined through the “right to extend 3 years” but I guess it doesn’t matter if precedence says they don’t have to renegotiate an active well.

The way we see it, whether or not the other siblings sell is on them. It does not change what husband owns and they are all grown adults who make their own decisions. The widow took the first offer, which I am sure the company still got a pretty sweet deal whether her share was 50% or just 16.7%. I believe her premium was just $4k at that time. In the more than 2 years since, the offer for our (what we are told was a much smaller share) has gone much higher. I doubt they’d even think they needed to recoup what was paid to her.

Now that we’ve laid out all the known information, is the onus not on the oil company to recalculate the percentages, notify the other siblings and come out with new division orders?

Basically they were asking husband to help cure the clouds and produce another affidavit which I believe we’ve done as far as explanation, but it actually probably made more work for them. They gave him a copy of uncle’s affidavit and their instructions were “please find a copy of the affidavit of heirship that we reviewed in the past. Please have a disinterested party complete this form with all appropriate dates”. But it’s not blank at all… it seems weird to us that they want him to complete a full form, but I will try to help him do this.

Lastly, am I “disinterested” enough to do this for him? There is literally no one else that I can think of that knew Dad well enough to have this information besides his one living brother (uncle) who is in another state and already did his part. Dad hadn’t lived here in 30 years, so that is no help. I will be happy to do this, but I don’t want it to be kicked back if I have too much interest. Could we ask one of our own friends to do this, even if they’ve never met Dad? What about one of our adult children that were “only” step-grandchildren to Dad but at least knew him for years before his death? Trying to understand where that line lives.

Thanks again… this has been SO frustrating. It just seems like they could have asked us the right questions years ago when we first started and it would have been addressed long ago. We had never even seen Uncle’s affidavit until last week and then realized that there were unnecessary blanks. On that same note, Uncle never contacted us to ask dates, either. I truly believe they thought widow was married to Dad when the property was purchased, because she was also associated with him in TX during some of that time (short version, she was a longterm affair). I can think of no other reason why they’d offer her half and not 1/3 life estate as mentioned above. Her mineral deed on file says her name and “widow”. It seems the only thing that makes sense.

15

Also, and anyone may be able to answer this… I drew up another affidavit with much more complete dates and information and I think we have a family friend who can attest to this.

Should we include the statement about these rights being purchased during #2 marriage and stating they were community property of the marriage? We know the purchase date was during the marriage. OR is that not appropriate for an Heirship Affidavit? I think it needs to be included somehow but not sure if it is a normal statement that would be made in such an affidavit. Basically saying “this property was purchased from joint marital assets” or even “purchase during the course of this marriage” and then quoting the divorce decree where she gets half and then explaining Mom’s information ( her kids, date of death, intestate, no outstanding taxes, etc.)

Is this ok? Or does that need to be omitted completely and let the oil company discern for themselves?

16

Just list the dates (marriages and deaths) and the facts (no probates, the existence of the divorce decree, etc) and let the oil company attorneys determine the title. They are not going to accept your interpretation or conclusions. If you present all the correct facts and dates, they will verify and, in almost all cases, come up with the right ownership percentages.

17

Perfect, thanks! This is what I needed to know. Now, wonder how much longer this will take… LOL

18

The widow who sold what she did not own burned the purchaser and the oil company for any amounts paid out in royalties. Both should have done a complete investigation, that is what land men are for. the portion she sold actually belonged to your D.H.s mother. You need to get a hold of the marriage license and compare it to the deed and it’s date of purchase. Make copies of these and send them to the oil company who plans any future drilling. The “pool” only exists if there was oil production during the years since any well has produced. The mineral rights belonging to your mom are passed along to her heirs if there was no Will, or to whomever she names in her Will. It does not matter what the oil company claims is their ownership percentage. What does count is the amount of ownership stated on the deed. It will be something in a fraction like 1/4 or 1/32 or something like that unless the farm was owned outright by your family. The amount, whatever it is, is then divided by the heirs equally if there is no Will, or however it is stated in a Will. Don’t concern yourself with how much the oil company or anyone else owns. It is what you own according to the deed and the trail of ownership to the various heirs. Gather up the documents you need from the County Clerk’s office. These include the deed, and any Wills. It is important to know if the deed is a Mineral Deed or a Royalty Deed. If it is a Mineral deed then check the index files to see if any Royalty deeds were issued to anyone, that will reduce the amount of Royalty payments you may have coming, If there were no Royalty deeds to anyone then it is a matter of the ownership stated in the deed divided by the various heirs. If the deed is mineral deed then the oil company must offer you a lease. If the deed is a Mineral or Royalty deed then the oil company must have put the royalty payments into suspension, or “the pool”, and must pay those funds out to you when you can show them a deed and a documented trail of ownership.