Legal Effect of Voluntary Pooling and Unitization: Theories and Party Practice

The pooling or combining of smaller tracts is a recognized and expanding practice in the oil and gas industry. Consequently, it is important to understand the precise legal effect of pooling and unitization. In a typical situation, if A owns tract 1 and B owns tract 2, and A and B lease their tracts to X and Y respectively, it is clear that B would not share in the production from a well located on A\u27s tract. However, if tract 2 is pooled or unitized with tract 1, B would be permitted to share in the royalties from a well located on A\u27s tract. In Parker v. Parker the owners of contiguous tracts leased them as though they were a single tract owned by the lessors in common. In response to special issues the jury found that the parties had orally agreed that the lease should be considered a unitized one. The court of civil appeals disregarded the jury\u27s finding and held that, as a matter of law, the lessors had pooled their interests so that they will share pro rata in the royalty no matter from which land oil is produced. There are many other forms of pooling, as, for example, the true community lease, which generally describes the area that may be pooled and gives the other owners of a mineral interest in the described area an option to join as lessors. When the names of the other owners are subsequently inserted in the agreement and the lease has been executed by them, it has the same effect as a lease executed by one and all at the same time. The entire acreage of the joining lessors is developed and operate as one lease, and all royalties and rentals are treated as an entirety to be divided among the separate owners in the proportion that the acreage in each tract bears to the entire acreage. A third form of pooling is created by lessors who, subsequent to the leasing of their respective tracts, enter into a separate pooling agreement among themselves and their lessee(s). In Duff v. Du Bose, the pooling agreement signed by the various lessors provided that all of the leases were combined, merged, pooled, and shall hereafter be considered one lease for the purpose and operation of the Texas Company. The courts have upheld this type of pooling as a valid and binding contract. The most common means of pooling in recent years is that which results from the lessee\u27s exercise of authority to pool conferred by a pooling clause in the lease, or from an amendment that inserts a pooling clause in the lease. Typically, these clauses are drafted in broad, all inclusive fashion and the lessee is granted the right to pool the lease, or any portion thereof, with any other land, lease, or mineral estate, to create a unit of specified size for the purpose of oil and gas development and production. The lease pooling clause has also been upheld by the courts

Notes - Banks and Banking—Bills and Notes—Rights of Depositary Bank Against Drawer of Check.—City State Bank v. Lummus

Because of failure of consideration the defendant stopped payment of a check deposited with the plaintiff bank, which before receiving notice of the stop order had permitted the payee-depositor to withdraw the amount represented by the check. The trial court entered judgment for the defendant. Reversed and rendered. The court stated, inter alia, that the defendant had the burden of establishing that the bank had not become a party thereto for value

Notes - Jury—Trial—Appointment and Hearing by Master Does Not Affect Right to Jury Trial.—Creglar v. Hyde

The plaintiff sued to set aside a trustee\u27s deed in favor of the defendant. After the case was set for trial on the jury docket, the court appointed a master in chancery. The plaintiff\u27s objections to the appointment and to the master\u27s report were overruled and he was not allowed to submit any evidence to the court, which adopted the master\u27s findings. Held, reversed and remanded; the court is authorized to appoint a master only in exceptional cases and for good cause, and if the plaintiff objects to the report, he is entitled to a jury trial on the disputed issues

Notes - Libel and Slander—Lis Pendens—Filing of Lis Pendens Notice Not Privileged.—Albertson v. Raboff, 287 P.2d 145 (Cal. 1955)

In a prior action Raboff had sued Albertson, seeking a money judgment and either a lien on Albertson\u27s real property or a judgment declaring that her title was obtained, in fraud of creditors. Raboff recorded a notice of pendency of this action and subsequently obtained a money judgment, but Albertson prevailed on the counts concerning the real property. In the present action, Albertson alleged that Raboff had known when he had filed his prior complaint that he had no right to an interest in her property, that he had nevertheless knowingly and maliciously asserted false claims thereto, and that by recording a lis pendens notice he had disparaged her title. The trial court dismissed the action on the ground that the complaint did not state a cause of action. Reversed

Notes - Conflict of Laws-Workmen\u27s Compensation-Constitutional Law-Receipt of Workmen\u27s Comensation Benefits in Domiciliary State Does Not Bar a Tor Action in State Where Injury Occurred.-Carrol v. Lanza, 75 Sup. Ct. 804 (1955)

The plaintiff sued to set aside a trustee\u27s deed in favor of the defendant. After the case was set for trial on the jury docket, the court appointed a master in chancery. The plaintiff\u27s objections to the appointment and to the master\u27s report were overruled and he was not allowed to submit any evidence to the court, which adopted the master\u27s findings. Held, reversed and remanded; the court is authorized to appoint a master only in exceptional cases and for good cause, and if the plaintiff objects to the report, he is entitled to a jury trial on the disputed issues

Notes - Admiralty-Claims Agent\u27s Misreporentation of Law Held Not To Vitiate Seaman\u27s Agreement Releasing Shipowner-Thompson v. Coastal Oil Co., 218 F.2d 664 (3d Cir. 1955)

Because of failure of consideration the defendant stopped payment of a check deposited with the plaintiff bank, which before receiving notice of the stop order had permitted the payee-depositor to withdraw the amount represented by the check. The trial court entered judgment for the defendant. Reversed and rendered. The court stated, inter alia, that the defendant had the burden of establishing that the bank had not become a party thereto for value