1H.” During this same time period, Armstrong rejected BPX’s “offer to settle the wrongful pooling of the Strickhausen Lease,” and made a counter- offer. The counter-offer was never accepted, and Strickhausen deposited the initial check on March 11, 2013, and continued to deposit the monthly royalty checks until filing suit over a year later. 1 In 2014, Strickhausen filed suit against BPX for breach of contract, in addition to other claims. Both parties filed motions for summary judgment. Strickhausen argued that BPX owned her royalties on all production from the WK4-1H Well, despite the well extending horizontally under other pooled tracts. Strickhausen reasoned that her lease required BPX to pay royalties on all production from any well on her tract. BPX argued that Strickhausen impliedly ratified the pooling because she accepted royalty payments calculated on a pooled basis. The trial court granted BPX’s motion and the court of appeals reversed. The court of appeals reasoned that because of Strickhausen’s challenges to the pooled unit, the evidence cannot conclusively establish as a matter of law Strickhausen’s implied ratification. BPX petitioned for review. The Court began its analysis with stating the well-established principle that contract formation is a question of the parties’ intent to be bound. Similarly, one party ratifying changes to a contract is also a matter of intent. The Court noted that when the facts are not disputed, a court may decide a question of ratification as a matter of law. The Court noted that implied ratification is complex and that a party’s subjective state of mind is immaterial. Instead, courts look to the objective intent, such as words or actions. In addition, the Court noted that many Texas courts have held that implied ratification should be found only if the party’s actions clearly evidence an intent to ratify, in an effort to not interfere with a party’s rights to contract and reject unfavorable terms. 2 The Court agreed and reasoned that BPX was required to show that Strickhausen’s behavior clearly evidenced an intent to ratify the unauthorized pooling. When determining whether Strickhausen’s
actions clearly evidence an intent to ratify BPX’s unauthorized pooling, the Court first looked to the lease itself. The Court reasoned that Strickhausen specifically bargained for the prohibition on pooling without her express consent, which was unlike her neighboring lessors. The Court also looked to the history of the dispute, acknowledging that when Strickhausen learned of the unauthorized pooling, she notified her attorney, asserted her anti-pooling rights, and requested an explanation. In addition, not only did BPX acknowledged the unauthorized pooling, but they had also threatened to put Strickhausen’s royalties “in suspense” until she ratified. However, rather than putting the royalties in suspense, BPX began sending unsolicited royalty checks based on the unauthorized pooling. The Court also considered Strickhausen’s rejection of BPX’s offer to settle the wrongful pooling, the continued assertion of her anti-pooling rights, and the proposing of a counteroffer to settle the dispute. When considering all of these facts together, the Court determined that the facts did not amount to clear evidence of an attempt to ratify that would sufficiently support a judgment of ratification as a matter of law. The Court did recognize that depending on the circumstances, there are times that acceptance of the benefits of pooling can amount to ratification. The Court cited Yelderman v. McCarthy , 474 S.W.2d 781 (Tex. Civ. App. 1971), which held that a lessor who was not entitled to royalties in the absence of pooling had ratified unitization by accepting royalty checks based on production from the pool. However, when the facts relating to objective intent point in different directions, the Court reasoned that there is no Texas authority that requires evidence of implied intent to trump express intent, with express intent being all of Strickhausen’s other actions. The Court also recognized that, in some cases, depositing pooled royalty checks despite objections _____________________________________ 1 At the time of the Court’s review, Strickhausen received over $700,000.00 in monthly royalty checks. 2 The Court cited Chrisman v. Electrastart of Hous., Inc., No. 14-02-00516-CV, 2003 Tex. App. LEXIS 10725, 2003 WL 22996909, at *5 (Tex. App.—Houston [14th Dist.] Dec. 23, 2003, no pet.) for support.
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