My siblings and I separately own 5 mineral rights we leased earlier this year (in Oklahoma). The contracted bonuses were never paid. Now 9-10 months later this company has returned the notarized leases – which they apparently never filed. When I called I was told they “decided not to pursue it”. The paperwork is all correct and in place. Do you know what recourse we have to get paid – or can we at least report the company to someone for breach of contract?
Cinda, probably not a thing you can do. It was just a deal that fell through. Be grateful that the leases were never recorded. If there was a timeframe in which you were to be paid, that probably wouldn't be enough to pursue legal action if you did not also send demands to be paid by certified letter. If you didn't demand to be paid they could just say they thought you were ok with it. The courts lean heavily to the lessees side. Be glad you aren't going to be $20,000 down in legal fees. Do not send anymore leases until you are paid for them with cash you can spend, not bank/sight drafts, bills of exchange, order for payment, you get cash and they get the lease, then you won't be in these kinds of situations again. Better luck in the future.
Cinda, probably not a thing you can do. It was just a deal that fell through. Be grateful that the leases were never recorded. If there was a timeframe in which you were to be paid, that probably wouldn't be enough to pursue legal action if you did not also send demands to be paid by certified letter. If you didn't demand to be paid they could just say they thought you were ok with it. The courts lean heavily to the lessees side. Be glad you aren't going to be $20,000 down in legal fees. Do not send anymore leases until you are paid for them with cash you can spend, not bank/sight drafts, bills of exchange, order for payment, you get cash and they get the lease, then you won't be in these kinds of situations again. Better luck in the future.
Good point Steve, but if they returned the original leases they should have the recorders seal on them if they were recorded. I don't think recorders are supposed to record copies of original documents but I have heard of it happening. I often sign things in blue ink so I can tell whether I'm holding the copy or the original at a glance. Steve said:
Apparently never recorded? Make sure of that. If they were recorded, demand Release of Oil and Gas Lease.
Cold drafting has become fairly common even though un-ethical. I would contact OCC to alert them to this company.
Cinda, I have a little more time and thought I would elaborate. To have a breach of contract, you must first have a contract. Meeting of the minds, offer and acceptance [ I think in this case acceptance was conditional and would be difficult to prove ] and consideration on each side. You would have to prove there was acceptance or you have no case, in my opinion. Consideration on both sides ? Did they give you anything at all? If not you would have a hard time proving you had a valid contract. Cinda, lets say you get past all that and have $20,000 to $40,000 in lawyers fees invested from your own pocket, was the lease bonus worth more than that? I would accept Ms. Macias generous offer to discuss this with you but I wouldn't get my hopes up and I wouldn't invest great sums of money without alot of research. I think you would have a hard time proving you had a contract or that you were harmed. If they never recorded the lease there was no slander of title that you could easily prove and they voluntarily returned the lease to you. I'm not a lawyer but I think there may be holes in any kind of case you would have that I could drive a truck through, much less the lawyer your opposition would hire. I hate the no money down oil people but all you can really do is avoid them. I hope you can do so next time.
I was going to give them some benefit of the doubt and be discreet but Okay............... it was Hal C. Smith & Associates in Oklahoma. I signed a previous lease with them and they paid it; but that was a small one and this alas was 5 different properties in Seminole Co., OK. At first I got a letter (with the returned lease(s) saying the paperwork was not in order, but when I verified that it was, they said they just decided not to proceed.
There has been some large scale instances of this in other states. Primarily Chsapeake wa the one behind the shell companies that was doing the leasing. Michigan, and Texas were the one that made the most news. Colorado may have been another. You might google it and do some reading on it. It sounds very similar. When they decided they did not want it they used all types of excuses to rule the lease invalid. Typo, mortage, etc. in many cases the same issues were there when the leased in previous years. They used shell LLCs to hide who was behind the leasing.
The interesting part about yours is the party involved. Calvin energy was started in the last year. They have been leasing quite a bit in Grady and Caddo counties. One member reported thier check was from a Hal Smith in Norman.
Great article. Unfortunately other companies have followed Chesapeake's pattern, especially in the land/acreage plays. Try to lease for low dollars with a long term draft and then sell for profit before paying off the draft.
I don’t have a problem with them speculating on the lease or creating shell companies to conceal who is funding the operation. There are legitimate reasons to do some of those things and if the owners choose to lease not knowing who the operator is that is funding it, I feel that is ethical. If the owners choose to take $50 per acre with 1/8 RI for 20 years, that is ok with me as well. I chose to be be as informed as possible and I’m willing to negotiate accordingly. Who the operator is plays a very small part in my decision to lease. There are only a couple of instances we would have the acreage to make a difference on which company becomes the operator anyhow.
I do however have a very big problem with cold drafting the owners. Maybe the media has blown it out of proportion like other things (Well Fracturing is a good example). If the many reports I have read are accurate, some of the issues they cite for turning down the lease may be valid. However many of these issues were caused by them. (Intent can be argued as well) Some of these same issues are present in the leases that were paid and recorded. Some of the same issues with the same people were present on previous leases previously accepted.
In this instance there may have been a valid reason to not finish the lease. However, tying it up for 9-10 months and then saying they are not interest is far beyond a lack of ethics. That is significant time for plays to change and Cinda might have lost the opportunity to lease with another company. On the other hand she may come out to the better if she did not negotiate a “royalty owner favorable” lease anyhow.
Because of this, the industry is losing its credibility by the lack of integrity.
I told my Texas lawyer friend about this unfortunate situation, and he believes that, since the entire membership of the Mineral Rights Forum can read this discussion, he felt that lessors of their minerals should be aware of some of the problems and a few of their possible rights and risks. He pointed out out that he is not an expert in oil, gas and mineral leasing, that he is semi-retired and will not handle any such cases. He offered the following as a public service, with the understanding that he might be mistaken:--- "Several factors determine whether a suit for breach of contract (or for collection of money due) might or might not be proved and practical. 1) Do you happen to have a signed letter or other papers sent to you saying something like, "Please sign the enclosed lease and return it to me/us, and we will send you a bonus check for X dollars". 2) Is the person signing such correspondence known to be an executive officer of a financially substantial company or any paper proving that the person who signed the correspondence was authorized by such a company to make such an offer. Either is possible but not likely. If not, only the signer may possibly be liable, but that is not likely, and probably the signer is an individual landman who may have had good intentions but assets insufficient to pay a proper judgment. 3) If a financially substantial company made or authorized the offer, it can afford lawyers to defend and delay a lawsuit, so that your lawyer's time and cost to you might be too much for the amount involved. There are some lease "bonuses" (amount for a "paid-up" lease) in certain areas of the US that run into tens of thousands of dollars. 4) If the indicated factors seem favorable, you could probably get a lawyer to review your papers and provide you an opinion as to the ability and practicality of suing, at a cost of $200 to $500 for the review. A lawyer often requires a payment in advance, a "retainer" (deposit) he/she can draw against for whatever time the lawyer spends in reviewing the papers and conferring with you. If you then decide to pursue in law, it could be costly. A lawyer should provide you with an "engagement letter" stating his estimated charges, usually per hour. Before filing a suit, the lawyer will ordinarily first send the defendant a "demand letter", politely threatening suit unless payment is made. Use care in selecting a lawyer. Talk with your CPA, banker and other business operators you know well. It is better (I believe necessary or critical, even though I'm a lawyer) to hire an oil and gas lawyer BEFORE signing a lease. Because of the volume of leasing in some areas today, some general lawyers have learned enough to do adequate work in oil and gas. Your personal or family lawyer may be able to do a good job. Depending on locality, a competent oil and gas lawyer (in these times sometimes called an energy lawyer) will charge about $1,000 to $1,500 and up to review a lease and negotiate terms that protect and enhance the interests of the lessor and protect the land surface, crops, cattle, wells, marketability, etc. The higher fees are those involving a lot of negotiating of clauses. My own preference is a lawyer who represents mostly lessors and fewer lessees. Lessors should know that if a lease is called "standard", there are no standard leases, a few standard clauses. Also, The term "Producers 88 form" is meaningless. That has appeared on all kinds of forms for at least a century."
Thank you for your insightful paragraph. "Integrity" is a very important word though not used nearly enough. Integrity, if all people had it, would almost do away with the need for lawsuits. Wouldn't it be nice to approach a deal with someone who has integrity, knowing that what they told you is what will be in the lease. I'm afraid the days of integrity are behind us. Too many young ppl going into something they know little about and having nothing but greed as a guiding light. It's sad but that's the way it is these days. Have a great day. Yours,