Dore Law - March 2020

THE D or É R eport

D ore L aw . com

MARCH 2020

LET ME TELL YOU A STORY … THE MYSTERY OF THE MISSING LIEN

Once upon a time, a company filed bankruptcy in San Antonio. The major lender was a bank from California — let’s call it “The Bank.” The Bank claimed it had secured everything under its senior position lien, and all the vendors who’d worked to establish production and benefit the value of the properties were going to have to wait at the end of the line as unsecured creditors. Basically, it told those hardworking men and women to go pound sand. From the vendors’ perspective, things looked bleak indeed until some smart oil and gas lawyers decided to do a little checking around. We looked into the real property records in all the counties where the bankrupt company had assets. Lo and behold, we found that The Bank and its fancy lawyers had forgotten to file their lien in Webb County. That meant that all the trade creditors who had taken steps to file mineral liens against the properties in that county suddenly became the senior lien claimants to those assets, ahead of The Bank. “So, here’s the moral of the story: Don’t always believe The Bank that claims to have all the debtor’s assets locked up with their lien because sometimes they miss something.”

properties, and then move the title into that new LLC where those producing properties could be sold with profits to the former trade creditors. The Bank responded with a lot of lawsuit threats, nasty emails, and other tricks lawyers love to try when they’re losing. The Bank even engaged an engineer to write a report and claim the major asset value of the company was in all the other counties, not Webb County. We’ll call this what it is: a manipulation of the values. After all the skirmishes were done, the trade creditors received full payment of their invoices, plus interest, and recovery of their attorneys’ fees. It was a well-deserved happy ending!

I wish more bankruptcies worked out this way, but alas, it’s not so. Too often, no law team is there to save the day. So, here’s the moral of the story: Don’t always believe The Bank that claims to have all the debtor’s assets locked up with their lien because sometimes they miss something. Instead, engage an experienced oil and gas lawyer who can do the digging for you.

-Carl Doré

After this discovery, all of the lien claimants threatened to form a new LLC, credit-bid in the bankruptcy for all of the Webb County

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