An Operator has put me in suspense claiming a title issue. However…, as one might suspect, the county tax collector still wants payment for their (significant) tax bill.
A couple of questions come to mind:
a. Isn’t the Operator the root source of data (the royalty pay deck) that is passed along to County (often via the 3rd party valuation entity like Pritchard-Abbott, Capital Appraisal etc.)? In other words, isn’t the Operator in effect providing the data as to who to send tax bills to?
b. If a. is correct, then is the Operator obliged to tell the County that Royalty Owner “Doe” is in suspense and in fact NOT receiving revenue? (and thus should not be sent a tax bill)
c. I can’t imagine that this is the first time this has happened. Is there any case history?
The county needs to be paid 100% of the taxes for the appraisal value of the producing minerals each year. The taxes are allocated among the operator and the mineral owners based on their percentage ownership interests. The royalty deck is the list of owners, regardless of whether any are in suspense. Think of this as similar to owning a vacation home and you have to pay property taxes whether or not you use the house. You can assess your title issue. If it is because there is a gap in title history, e.g. no deed between your grandparent and parent, then you will be paid the accrued royalties when you get this fixed and should pay the tax. If there is dispute as to whether you or someone else owns the minerals or what percentage each of you owns, then you will need to assess your likelihood in prevailing before deciding whether to pay the taxes - or get the other party to agree to pay part. Keep in mind that if the county is not paid, then interest and penalties will accrue and at some point the county may decide to foreclose the debt and sell the minerals. Hopefully the oil company has sent you an explanation of the title issue and you can get it resolved soon.
@TennisDaze thanks much for your reply. I understand your points.
Of course since this is MY situation, it seems to me that it can be argued that it’s possible under the law for an owner to have the weight of the state on his back, while the Operator just sits back and claims it does not “have to” pay the owner for reason x, y, or z (certainly there are various degrees of title curative problems). So, owner pays and pays and pays taxes on minerals so that they don’t get foreclosed upon. All this on minerals that certainly are not “producing” for him.
Could you take the oil company to small claims court and sue for up to $20,000 owed to you?
Maybe one of the attorneys in the forum will comment on this.
I will throw in my $0.02 which is certainly not a legal opinion. Small claims court does not preclude the oil company (or any party) from appearing with legal counsel. It is just not mandatory to have an attorney represent you. In order to prevail in a claim for unpaid royalties, the mineral owner will have to prove his title. And that seems to be the very issue as to why the royalties are in suspense - there is a title problem.
We had a similar problem with suspended funds . We were able to take the lead is resolving it by having all the cousins sign a stipulation of interest. The title opinion usually identifies the curative in my experience. Perhaps ask for that by certified mail , and then work with your o&g attorney. We split the bill with the cousins.
What is a title problem to an oil company might not be a title problem to a Peace Justice. It seems like the oil company’s communication with the tax assessor’s office as to ownership could–prima facie–answer the question. Again, I hope a licensed attorney will comment.
Texas statutes regarding small claims courts and district courts provide that a trial of title to land is exclusive to district court and not allowed in small claims court.
You can make a request of the Operator to provide the requirement from the title opinion in order to perfect the title for payment. Most companies will readily supply this information. Once you have the requirement, then you can begin to investigate various methods of perfecting the title into your name. Suspense funds will be released once you have completed the required title actions. If this is your mineral interest by some means of unrecorded title transfer or some other title issue, then it is your duty to pay the taxes in order to protect your eventual interest.
