## Facts

- Dorothy London owned two adjoining tracts and held the executive right to lease the minerals on both.
- London owned a 3/16 royalty interest in the eastern tract and a 1/8 royalty interest in the western tract.
- Dr. George Merriman, Jr., Cornelia Matthews, and Beatrice Harris owned a 1/16 nonparticipating royalty interest in the western tract, reserved when Merriman conveyed the land to London.
- In 1980, London executed a single oil and gas lease covering both tracts; the lease was later assigned to McCord Exploration Company.
- The lease contained a pooling clause affecting allocation of royalties across pooled acreage.
- In 1982, McCord drilled successful gas wells on the eastern tract; no wells were drilled on the western tract.
- The nonparticipating royalty owners alleged eastern-tract production drained gas from the western tract and sued for relief.
- In 1984, they obtained a Texas Railroad Commission forced-pooling order effective March 7, 1984, allowing royalty sharing prospectively.
- They continued the lawsuit seeking royalties for production before March 7, 1984, and later asserted an alternative theory that they had ratified the lease (including its pooling clause).
- The trial court found for the nonparticipating royalty owners on both a drainage theory (jury) and a ratification theory (bench), and they elected judgment on ratification.
- The trial court awarded $390,051.35 in gas royalties for the period from first production until the effective date of the Commission’s pooling order.

## Issues

1. Whether nonparticipating royalty owners, by their conduct, ratified an oil and gas lease executed by the executive-rights holder and thereby accepted the lease’s pooling arrangement as to their royalty interest.
2. If ratification occurred, whether it entitled the nonparticipating royalty owners to royalties for production before the effective date of a later forced-pooling order.
3. Whether electing recovery on ratification (rather than drainage) supported the royalty award and defeated the executive-rights holder’s appellate objections.

## Decision

- The court of appeals affirmed the judgment awarding royalties to the nonparticipating royalty owners.
- It held the nonparticipating royalty owners ratified the lease and, by doing so, accepted the lease’s pooling provision as applied to their interest.
- The court upheld recovery of royalties for production from the start of eastern-tract production through March 7, 1984, notwithstanding the later forced-pooling order.
- The court accepted the election of remedies on the ratification theory as a sufficient and independent basis for the award.

## Legal Principles

- A nonparticipating royalty owner, though lacking leasing power, may ratify a lease executed by the executive-rights holder that purports to affect the royalty interest.
- Ratification may be inferred from conduct inconsistent with repudiation, including asserting claims or seeking benefits that depend on the lease’s validity and terms.
- When a lease contains a pooling provision that would affect a nonparticipating royalty interest, the nonparticipating royalty owner’s ratification can operate as acceptance of the pooling arrangement.
- Upon ratification, the royalty owner is treated as bound by and entitled to the lease benefits as if the owner had joined originally, permitting recovery measured under the pooled allocation for production during the relevant pre-order period.
- A plaintiff may elect judgment on a supported ratification theory even if an alternative drainage theory was also submitted and found.

## Conclusion

The court affirmed an award of pre-order gas royalties, holding that nonparticipating royalty owners ratified the executive-rights holder’s lease and thereby accepted the lease’s pooling terms, entitling them to share in pooled production revenues from the time production began until the effective date of the regulatory pooling order.


London v. Merriman, 756 S.W.2d 736 (Tex. App.—Corpus Christi 1988)