543 Aycock v. Vantage Fort Worth Energy, LLC

Tuesday, February 2nd, 2016

Richard F. Brown

The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.

Aycock v. Vantage Fort Worth Energy, LLC held that a recovery by unleased cotenants for payment of bonus after ratification of the lease must come from the lessor, not the lessee. Vantage leased some of the cotenants in a 1,409acre tract and paid its lessors $750 per net mineral acre for their undivided 526acre interest. Vantage never drilled and the lease expired. The unleased cotenants claimed that they had ratified the lease and sued Vantage for their share of the bonus.

“Owners of undivided mineral interests are tenants in common. A cotenant may lease its undivided interest without joinder of another cotenant. The lease does not bind a nonconsenting cotenant. The lessor cotenant, however, must account to its nonconsenting cotenant for any minerals produced where the lessor cotenant has leased both its and the nonconsenting cotenant’s interest or has received production payments on the nonconsenting cotenants interest.”

The unpaid cotenants argued that Vantage leased the entire 1,409 acres and that they ratified the lease by a subsequent letter to Vantage. Vantage claimed that the proportionate reduction clause in the lease, along with other documents, shows that Vantage only intended to lease the 526acre undivided interest. The court noted that “[a] proportionate reduction clause acts to protect the lessee from paying the lessor more than the lessor is due, but it does not act to reduce what the lessor conveys to the lessee.”

However, the court assumed, without deciding, that Vantage leased the entire interest and that the unleased cotenants ratified the lease. Vantage was not the lessor cotenant and received no money accruing under the lease. Therefore, the unpaid mineral cotenants cannot recover bonus money from Vantage. The court concluded that Vantage established that the unpaid cotenants could only recover from bonus money paid to the lessors, if any, for the unleased cotenants’ interest. The unleased cotenants also could not recover against Vantage on an unjust enrichment claim, because Vantage did not profit at their expense.

This significance of the case is the holding that a recovery by unleased cotenants for payment of bonus after ratification of the lease must come from the lessor, not the lessee.