Energy Industry (Oil & Gas)/division orders incorrect/statute of limitaions?
My question is regarding Division Orders in the State of Texas. My deceased former husband had some interest in an oil and gas pool that I learned of after his passing. I was receiving 2/3 and his children were splitting the remaining 1/3. We recently found out that this Division Order was incorrect. Since he had purchased it before our marriage, I should have only received 1/3 and his children 2/3. The children are now suing me for $36,000. I have been to an attorney who was supposed to have some oil and gas knowledge, but he admitted that he only had limited knowledge. He did tell us that there is a Statute of Limitations and that he believes they (children) can only go back and ask for 2 years of royalties that were paid to me incorrectly. The children were all over 30 years of age when the division order was signed initially, which was in the early 1990's. I feel that they should not be suing me, but the owner/operator who wrote up the division orders. So my question is this:
Can they sue me and if so, would they have a case since they agreed to the Division Orders?
Is there a Statute of Limitations in the state of Texas for repayment of royalties for incorrect Division Orders?
Thanks in advance.
As you're probably aware, anyone can sue anyone for practically anything. It's whether they "have a case" or not that counts of course though. Even if they don't have a case, you want to avoid being sued if possible because even if you win it can cost you money to defend yourself in court absent a judge who is willing to charge the legal costs of both parties to the losing party.
As for whether they should be suing the operator instead of you I really don't think that would work for you because it's likely the division order indemnifies (holds blameless) the operator/purchaser from liability due to someone else claiming they are paying you wrong.
I think a better solution for you all than going to court would be for all of you to execute and sign a "stipulation of interest" stating that by mutual agreement from this point forward the interests would be owned 2/3 by the kids and 1/3 by you. They may still want their "back royalties" but if not this would certainly be a decent solution assuming you agree that you should only be getting 1/3. Once the stipulation was filed of record and a copy of the filed stipulation was given to the operator, they would sent all of you new division orders with the agreed-upon interest for each of you and then would begin paying you all based on the stipulation from that point forward.
If you don't do a stipulation, it sounds like the kids might (in addition to or instead of suing you) alert the company they've been overpaying you and if the company agrees with them the company could potentially "stop" paying you until the over payments they made to you are "made up" to the kids, and then begin paying you your 1/3 assuming there is still production. If either you or the kids contact the company and say there's a problem, the company might also elect to put ALL the money "in suspense" and stop paying EVERYONE until it's all figured out, either between you all via a stipulation, or in court. I would check that $36,000 figure to make sure it's accurate before agreeing to pay it though. You could probably get a check stub history and do the math to determine exactly how much was overpaid.
The attorney is correct on that there is a statute of limitations, but I think it may be 4 years, not 2. You can easily "Google" that though I'm pretty sure. You might check out the following link for more info on the Texas statute-of-limitations: http://www.oilandgaslawyerblog.com/lessors-remedies/
It's an article posted last year by Texas attorney John McFarland, who appears to me to be very knowledgeable about these types of things. I've read many of his blog posts and found them to be helpful concerning Texas. You may find that he's written other posts that better relate to your specific situation. I really don't have time to look through them all myself unfortunately, but his blog posts would be a good read I think.
Hope this helps you out!
Frederick M. Scott CMM, RPL
The Mineral Hub