London v. Merriman

756 S.W.2d 736, 111 Oil & Gas Rep. 591, 1988 Tex. App. LEXIS 1222, 1988 WL 53031
CourtCourt of Appeals of Texas
DecidedMay 26, 1988
Docket13-87-127-CV
StatusPublished
Cited by18 cases

This text of 756 S.W.2d 736 (London v. Merriman) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
London v. Merriman, 756 S.W.2d 736, 111 Oil & Gas Rep. 591, 1988 Tex. App. LEXIS 1222, 1988 WL 53031 (Tex. Ct. App. 1988).

Opinions

OPINION

NYE, Chief Justice.

Appellant, Dorothy London, asks this Court to determine her rights as lessor under an oil and gas lease, as well as the rights of the non-participatory royalty interest owners (the Merrimans). London appeals from a judgment awarding the Merri-mans gas royalties. We affirm.

London owns two adjoining tracts of land and holds the executive right (the right to lease) to all the minerals. She owns a ¾6 royalty interest in the eastern tract and a ⅛ royalty interest in the western tract. The Merrimans own a ½6 non-participating (no right to lease) royalty interest in the western tract, created by reservation when Mr. Merriman conveyed the land to London.

In 1980, London executed a single oil and gas lease which included both tracts. The lessee later assigned its interest to the McCord Exploration Company. In 1982, McCord brought in successful gas wells on the eastern tract, in which London owns all the royalty interest. No wells have been drilled on the western tract.

In 1983, the Merrimans sued McCord and London, claiming that McCord breached a duty to protect the tract in which they owned a royalty interest against drainage by the other tract. In 1984, they successfully sought statutory forced pooling of their royalty interest with London’s by the Railroad Commission, enabling them to share in the royalties paid on the wells since the effective date of the Commission’s order, March 7, 1984. The Merri-mans pursued their suit for a common law recovery of royalties allegedly lost by drainage until the effective date of the order. In 1986, they filed a supplemental petition, alleging an alternative theory— [739]*739that they had ratified the lease between McCord and London and so had accepted London’s alleged offer in the lease to pool their royalty interest with hers.

The case proceeded to trial on both pled theories. The ratification theory was tried to the court, while the breach of duty theory was tried to the jury. The Merrimans were successful on both. They elected to have judgment on the ratification theory, and the trial court awarded them $390,-051.35 for royalty payments due them from the time the wells began to produce until the Railroad Commission ordered pooling.

London’s first two points of error involve the issue of ratification, tried to the court. In its judgment, the court found that the Merrimans ratified the lease by filing suit on July 14, 1983, entitling them to their share of royalties from that date until the effective date of the Railroad Commission’s forced pooling order, March 7, 1984. London asserts that the oil and gas lease by its terms precluded ratification and the consequent pooling of the royalty interests.

The oil and gas lease executed by London is a standard “Producer’s 88” lease. It contains a provision which authorizes the lessee, at its option, “to pool or combine the acreage covered by this lease, or any portion thereof, as to oil and gas, or either of them, with any other land ...” if certain conditions exist.1 If pooling occurs, the lease provides that the royalties shall be paid on a pro-rata, acreage basis; payments are to be made depending on the number of acres each royalty interest owner owns in the pooled unit.

Absent consent, the executive does not have the legal right to authorize the lessee to pool the royalty rights of the non-participating royalty interest owner with other royalty interest owners. Montgomery v. Rittersbacher, 424 S.W.2d 210, 215 (Tex.1968); Brown v. Getty Reserve Oil, Inc., 626 S.W.2d 810, 814 (Tex.App.—Amarillo 1981, writ dism’d.). A lease which purports to do so is essentially an offer by the lessor to the other royalty interest owners to create a community lease by ratifying the lease; if they do ratify it, the lease effects a cross-conveyance of interests and a pooling or combining of royalty interests. See Ruiz v. Martin, 559 S.W.2d 839, 842-44 (Tex.Civ.App.—San Antonio 1977, writ ref’d n.r.e.) and cases cited therein.

This result follows from the well-established line of cases which holds that when an ordinary oil and gas lease is executed by all the owners of different mineral interests in two or more tracts, the royalties payable under the lease will be pooled. In other words, all royalty interest owners in the land subject to the lease share in production no matter where the well is drilled on the leasehold. By an effective ratification of the lease after its creation, the non-executive accomplishes this result just as if he had been a party to the lease. Id. at 844; Standard Oil Co. v. Donald, 321 S.W.2d 602, 605-606 (Tex.Civ.App.Fort Worth 1959, writ ref’d n.r.e.).

By its judgment, the trial court held that this rule applied and that the Merri-mans’ ratification was legally effective to entitle them to share in production from the eastern tract.2

The instant case is nearly indistinguishable from Ruiz, where the court there also interpreted a Producer’s 88 lease. The lease included several royalty interest owners and covered separate tracts, and a gas well was brought in on one of the tracts. [740]*740The owner of a non-producing tract claimed a part of the royalties from the well under the pooling clause. The court, interpreting Montgomery, held that the non-participating royalty owner was able to ratify the lease and so claim a percentage of the royalty. See also Standard Oil Co. v. Donald, 321 S.W.2d at 606. We have carefully analyzed Ruiz and agree that it was correctly decided.

London argues, however, that a clause in the lease here distinguishes Ruiz. At the end of the same paragraph which grants the power to pool to the lessee, the lease contains a clause which London characterizes as a “non-unitization” or “anti-commu-nitization” clause:

If this lease now or hereafter covers separate tracts, no pooling or unitization of royalty interest as between any such separate tracts is intended or shall be implied or result merely from the inclusion of such separate tracts within this lease but Lessee shall nevertheless have the right to pool as provided above with consequent allocation of production as above provided. As used in this paragraph 4, the words “separate tract” mean any tract with royalty ownership differing, now or hereafter, either as to parties or amounts, from that as to any other part of the leased premises.

No such clause appears in the Ruiz opinion.

London contends that this clause negated any intent to pool or unitize the royalties and keeps the royalties separate, so that the Merrimans are entitled to recover only for production from the western tract. The Merrimans counter that the clause is ineffective and they are entitled to a proportionate share of royalty from production anywhere on the leasehold, under Ruiz and Montgomery.

We agree with the Merrimans. The purported non-unitization clause simply provides that no pooling or unitization of royalties is intended “merely from” the inclusion of the two tracts in one lease. We agree that no such pooling results merely

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London v. Merriman
756 S.W.2d 736 (Court of Appeals of Texas, 1988)

Cite This Page — Counsel Stack

Bluebook (online)
756 S.W.2d 736, 111 Oil & Gas Rep. 591, 1988 Tex. App. LEXIS 1222, 1988 WL 53031, Counsel Stack Legal Research, https://law.counselstack.com/opinion/london-v-merriman-texapp-1988.