Opinion ID: 2534600
Heading Depth: 2
Heading Rank: 1

Heading: The Operation of Mineral Code arts. 212.21-212.23

Text: The majority opinion defines the primary issue as whether Cimarex had a reasonable basis to invoke a concursus proceeding. (Op. at 933). However, there is no provision in the Mineral Code imposing penalties for unreasonably filing a concursus proceeding. The proper question before this Court is whether Cimarex, as a mineral royalties obligor, stated a reasonable cause for nonpayment for its failure to pay royalties to Orange River within 30 days of receipt of written notice of default. The relevant articles are as follows: § 212.21. Nonpayment of production payment or royalties; notice prerequisite to judicial demand If the owner of a mineral production payment or a royalty owner other than a mineral lessor seeks relief for the failure of a mineral lessee to make timely or proper payment of royalties or the production payment, he must give his obligor written notice of such failure as a prerequisite to a judicial demand for damages. § 212.22. Required response of obligor to notice The obligor shall have thirty days after receipt of the required notice within which to pay the royalties or production payments due or to respond by stating in writing a reasonable cause for nonpayment. The payment or nonpayment of the sums due or stating or failing to state a reasonable cause for nonpayment within this period has the following effect. § 212.23. Effects of payment or nonpayment with or without stating reasonable cause therefor; division order A. If the obligor pays the royalties or production payments due plus the legal interest applicable from the date payment was due, the owner shall have no further claim with respect to those payments. B. If the obligor fails to pay within the thirty days from notice but states a reasonable cause for nonpayment, then damages shall be limited to legal interest on the amounts due from the date due. C. If the obligor fails to pay and fails to state a reasonable cause for failure to pay in response to the notice, the court may award as damages double the amount due, legal interest on that sum from the date due, and a reasonable attorney's fee regardless of the cause for the original failure to pay. The procedure set forth in these articles is relatively simple. Once Orange River gives Cimarex written notice and demand for its nonpayment of royalties, Cimarex has 30 days from receipt of notice to either pay the royalties or explain in writing why it will not pay. If Cimarex does not pay within 30 days, and fails to explain why its nonpayment was reasonable, the court may award double damages, legal interest, and attorneys' fees. We are left with two questions: 1) Did Cimarex's deposit of funds into the court registry act as the legal equivalent of paying royalties, thereby satisfying article 212.22? 2) If not, did Cimarex state a reasonable cause for its nonpayment? The answer to both of these questions is no.