Untitled Texas Attorney General Opinion

JIM MA.rroX                     November 13, 1989


         Honorable Bobby Joe Mann      Opinion   No. JM-1115
         Palo Pinto County Attorney
         Courthouse                    Re: Whether the Water Commis-
         Palo Pinto, Texas 76072       sion has the authority to
                                       create a district whose boun-
                                       daries    exclude     mineral
                                       estates located more than 300
                                       feet below the surface of the
                                       land and whether such mineral
                                       estates must be taxed
                                       (RQ-1457)
         Dear Mr. Mann:

              .. inform us that _in 1980 the Texas Water Commission
              You
         by written order granreo a petition authorizing the creation
         of a municipal utility district within Palo Pinto County
         designated %portsman‘s World Municipal Utility District.”
         The petition approved by the commission set forth the
         boundaries of the district, specifically excluding from the
         boundary description the mineral estates located below a
         depth of 300 feet under the surface area of the land
         comprising the district.     Consequently, as a practical
         matter, all mineral interests within the surface boundaries
         of the district below a depth of 300 feet from the surface
         have been exempted from ad valorem taxation imposed by the
         district since the district's creation.
              Because of the requirement of article VIII of the Texas
         Constitution that all property, except that specifically
         exempted by the constitution, be taxed in any equal and
         uniform manner, you ask the following question:

                 [A]re the mineral interests located under the
                 boundaries of the Sportsman's World Municipal
                 Utility District taxable for ad valorem taxa-
                 tion purposes by the Sportsman's World Munic-
                 ipal Utility District?
         YOU also ask:




                                      P. 5847
Honorable Bobby Joe Mann - Page 2   (JM-1115)




       Does the Water Commission have the authority
       to create a district whose boundaries exclude
       a category of taxable property?
     We will address initially your second question.     We
answer it in the negative: the Texas Water Commission is
without authority to approve a petition authorizing the
creation of a municipal utility district that excludes from
its boundaries a particular class of taxable property,
specifically the mineral estates located below a depth of
300 feet from the surface area of the land comprising the
district.
     There can be no question that, absent the Water
Commission order purporting to exclude from the boundaries
of the district the mineral estates below a depth of 300
feet under the surface of the land comprising the district,
such mineral estates would be taxable by the district. See.
u,    Note, Ad Valom     Tax&ion   of Mineral Prooerty   21
Baylor L. Rev. 46 (1969). The issue then is whether' the
Water Commission has the authority to approve the creation
of a district that excludes such a category of taxable
property from the boundaries of the district.
      The Sportsman's World Municipal Utility District was
created pursuant to section 59 of article XVI of the Texas
Constitution and chapter 54 of the Water Code.      Section
54.013 of the code governs the composition of the district
and provides:
           (a) A district may include the m        in
        all or part of any county or         counties
        including all or part of any cities and other
        public agencies.
          (b) The m      composing a district need
       not be in one body, but may consist of
       senarate bodie   of land separated by land
       which is not' included in the      district.
       (Emphasis added.)
     Section 54.014 of the code provides that, in order to
create a chapter 54 municipal utility district, a petition
requesting creation must be filed with the Texas Water
Commission [hereinafter the commission]. Section 54.015 of
the code sets forth the contents of the petition and
provides in pertinent part:
           The petition shall:




                             p. 5848
Honorable Bobby Joe Mann - Page 3   (JM-1115)




          (1) describe the              of the pro-
       posed district bv metes and bounQs or bv lot
                         if there is a recorded map
       itiyefFt       survey of the     area . . . .
       (Emphasis added.)
     Section 54.020 of the code requires that, after proper
notice, the commission shall hold a hearing and Qhall
examine the    petition to    ascertain its    sufficiency.18
Subsection (b) of section 54.020 provides that "[t]he com-
mission shall have jurisdiction to determine all issues on
the sufficiency of the petition and creation of          the
district."
     Section 54.021 of the code governs the granting      or
denial of the petition and provides in relevant part:
            (a) After the hearing of the petition if
       it is found that the petition conforms to the
       requirements of Section 54.015 of this code
       and that     the project    is feasible    and
       practicable and is necessary and would be a
       benefit to the m       to be included in the
       district,  the commission shall so find by its
       order and grant the petition.
           (b) In determining if the project is
        feasible and practicable     and if it    *
        necessary and would be a benefit to the G
        included in the district, the commission
        shall consider:
           . . . .

                (3) whether or not the district and
           its system and subsequent      development
           within   the   district   will   have   an
           unreasonable effect on the following:
                     (A) land elevation:

                     (W   subsidence;
                     (C) groundwater    level   within
                the region:
                     (D) recharge capability     of   a
                groundwater source:




                             P. 5849
Honorable Bobby Joe Mann - Page 4   (JM-1115)




                    (El  natural run-off   rates   and
               drainage;

                     (P) water quality: and
                    ((3 total tax assessments on
               all land located within the district.
          (c) If the commission finds that not all
       of the u      proposed to be included in the
       district will be benefited by the creation of
       the district, the commission shall so find
       and exclude all m      which is not benefited
       from the proposed district and
       She Drooosed district s bodies        accord-
       -.       (Emphasis adde:.)
     Neither section 54.013 nor any other section of the
code expressly authorizes the commission to approve a
petition authorizing the creation of a district        that
excludes from its boundaries the mineral estate located
below the surface of the land comprising the district.
However, a brief submitted to us in connection with this
request concludes that the code impliedly authorizes the
creation of such a district.  We summarize the argument as
follows:
          Minerals in place are realty and, as such,
       are subject to ownership, severance, and
       ;;d;; maer   v. Stakeg, 294 S.W. 835 (Tex.
              Dx s Co. v. Daua&&y      176 S.W. 717
       (Tex.' 191:).   A grant   or  keservation  of
       mineral interests by the fee owner effects a
       horizontal severance and creation of two
       separate and distinct estates: an estate in
       surface and an estate in mineral.
       m,     464 S.W.Zd 348 (Tex. 1971);
       Ref. Co. v. Noa, 443 S.W.2d 35 (Tex. 1968).
       Real estate ordinarily is taxed as a unit;
       yet, where there has been a severance by
       conveyance, exception, or reservation, so
       that one portion of the realty belongs to one
       person and other portions to others, each
       owner should pay taxes under proper assess-
       ment against him of the portion owned by him.
       The fact that a portion may consist of
       minerals or of a fractional interest therein
       makes no difference. -v.               NJxa:
       State v. Downmgn, 134 S.W. 707 (Tex. Civ.




                             p. 5850
Honorable Bobby Joe Mann - Page 5 (JM-1115)




       APP. 191>1), u,       231 U.S. 353 (19i3).
       Because a grant or reservation of mineral
       estates effects a horizontal severance and
       creation of two separate estates, each of
       which is taxable separately, the petition
       seeking the    creation of    a chapter  54
       municipal utility district may be drawn in
       such a way as to exclude the mineral estate
       and reflect that horizontal severance.
We disagree with this construction of the Water Code for two
reasons.
      First, the severance of mineral interests by the 'fee
owner creates two separate mtateg     in land.    When     the
severance is accomplished, each gstatg, that in the minerals
in place,  and that in the remainder of the land, may be a
freehold, or an estate in fee simp1e.w aevs      -Mexia
                                                     *     co.
v. Gammon, 254 S.W. 296, 299 (Tex. 1923) (emphasis added).
The estate   of a person is not the land itself, but the
status or relation that the law permits that person to bear
toward the land.     &&&&   v. Milti,    28 S.W. 940 (Tex.
1894). The term "estate" in law means the degree, quantity,
nature, and extent of one88 interest or ownership in land or
other tenements.
S.W.Zd 506 (Tex. 1962):
                    E                                  ' (T:::
Comm'n App. 1931, judgm*t adopted). It may designate the
quantum, extent, or duration of one's ownership of a
particular item of property.      Gibbs,              i%zwr.a.
Different persons may, at the same time, bear different
relations, each constituting an estate in the land. Bouldin
Y. Mi.ue?cI-.
     Sections 54.013 and 54.015 of the Water Code do not
provide that a municipal utility district comprise westates"
in land: rather they provide that a district comprise "area"
or "land" whose nboundariesVO are described by "metes and
bounds or by lot and block number."        The word "land"
ordinarily includes a mineral estate, even when the minerals
are severed constructively from the surface.      no110 v
    own Heirs v. What&y       131 S.W.Zd 89 (Tex. 1::9;7
          Tennantv.           110 S.W.Zd 53 (Tex. 1937);
      eld v. Hoaq, 77 S.W.Zd 1021 (Tex. 1934).
     Second, the petition to establish a district must
describe the wboundariesw by "metes and bounds or by lot and
block number." Water Code f 54.015.     Boundaries mark out
the limits of the territory over which the district has
jurisdiction. m     2E.   McQuillan, The Law of Municipal




                            p. 5851
Honorable Bobby Joe Mann - Page 6 (JM-1115)




Corporations f 7.02, at 359 (3d ad. rev. 1988).   Boundaries
ordinarily are limits established laterally on the surface
of the land, and do not extend vertically to mark a
district's limits underground or in the airspace. $@= Doria
y. Suchowolsu, 531 S.W.Zd 360 (Tex. Civ. App. - San Antonio
1975, writ ref'd n.r.e.) ("boundary by aquiescence"       is
generally a line    established by a fence): 11       C.J.S.
Boundariee 9 1, at 538:   &   &I.G. Invesats     v. E.P A,
;;:,",,f:."d1 (Ill. 1988) (boundaries generally involv;
         not vertical measurement, but exception is made for
solid haste fill, which      has boundaries expressed     in
altitude).
      %etes and bounds" refers to a method of measurement by
distances and angles from designated landmarks in relation
to adjoining properties.    B. Garner, Dictionary of Modern
Legal Usage 359 (1987); set 11 C.J.S. Boundaries 5 4, at 542
 (*metes" includes the exact quantity of land in square feet,
rods,  or acres). Metes and bounds provide a two dimensional
measurement of land.    A description of land by metes    and
bounds indicates that its boundaries are on the surface, and
that the land is not limited by boundaries at a certain
subsurface depth or distance above the ground.
     Thus, any district whose creation is approved by the
Water Commission consists of land marked out by boundaries
on the surface of the earth.        The commission is not
authorized by the code to approve boundaries that limit the
district's jurisdiction vertically. Accordingly, we answer
your second question in the negative: The Water   Commission
may not grant a petition seeking the creation of a chapter
54 municipal utility district whoae boundaries exclude the
mineral estate or a portion thereof below the surface of the
land comprising the district.
     We note, however, that after the commission approves
the petition seeking creation of the district, but before
the district's governing board issues the district's first
series of bonds, the code requires the governing body of the
district to exclude "land     or other property" from the
boundaries of the district under certain circumstances.
Section 54.701 provides in pertinent part:
           (a) Before the board issues the first
        series of district bonds payable in whole or
        in part from taxes, the board may on its own
        motion call a hearing on the question of the
        exclusion of J&3.@from the district under the
        provisions of Sections 54.702-54.707 of this




                             p. 5852
Honorable Bobby Joe Mann - Page 7 (JM-1115)




        code,  if the exclusions are    practicable,
        just, or desirable.
           (b) The board must call a hearing on   the
        exclusion of w   or otue*v         from   thg
                                 er in the district
       filed with the secretary of the board before
       the district issues its first series of bonds
       payable in whole or in part from taxes.
       (Emphasis added.)
     Section 54.704 of the code governs the petition      for
exclusion from the district of "land or other property"   and
provides in relevant part:
          (a) A petition for exclusion of land must
       accurately describe by metes and bounds or
       lot and block number the land to be excluded.
       A petition for exclusion of other property
       must describe the property to be excluded.
     Thus, it appears that the class of property that may be
excluded from the boundaries of the       district  by   its
governing body m      the initial petition to create the
district has been approved by the Water Commission is
greater than that which the commission may consider when
deciding whether to approve the initial petition. No case
decided under chapter 54 of the Water Code, which governs
municipal utility districts, has construed the phrase "land
or other propertyH that is set forth in section 54.701.
However, a case decided under chapter 51 of the code, which
governs water control and improvement districts and contains
a section virtually identical to section 54.701, has done
so.1


      1. The 1925 codification of what later would become
chapter 51 of the Water Code provided that the district
comprise "land' and provided that "land" may be excluded
from the boundaries after its creation under        certain
circumstances. No mention was made of "other property" or
"interests in land." Acts 1925, 39th Leg., ch. 25, 5 76, at
106. Two years later, section 76 of chapter 25 was amended
to provide that notice for exclusion of "land" from the
district must be afforded "to the owner or owners of the
                                       (Footnote Continued)




                            p. 5853
Honorable Bobby Joe Mann - Page B (JM-1115)




       W-s     Countv Water Control   6 UggrovemeUst.    No
           , 304 S.W.Zd 281 (Tex. Civ. App - El Paso    1957,'
writ ref'd n.r.e.), the court of appeals upheld a       trial

(Footnote Continued)
land and all others in anywise interested." Acts 1927, 40th
Leg., 1st C.S., ch. 107, 5 9, at 501.        The "or other
property" language was included for the first time in a 1929
amendment to section 76:
           After a district has been       organized,
        preliminary surveys have been completed, the
        district   does   adopt    plans   for    the
        construction of a plant and improvements, and
        before the district calls an election for the
        authorization of construction bonds, there
       rt   be
            anyexc::e-  ::c"""""t"""""i
                                     are
       practicable, just or desirable, from the
       district by means and upon conditions as
       follows . . . .
Acts 1929, 41st Leg., ch. 280, 8 8, at 585. Such language
was retained in the 1957 amendment to then article 7680-76,
V.T.C.S. Acts 1957, 55th Leg., ch. 324, g 1, at 787.     No
legislative history exists indicating what the legislature
meant by the phrase.
     The Water Code was enacted in 1971, codifying the
general and permanent statutes relating   to water rights,
water development, water quality control, river    compacts,
and general law districts. Acts 1971, 62d Leg., ch. 58, at
110.   The code was extensively amended by other 1971
amendments, including the addition of chapter 54, which
authorizes the creation of municipal utility districts. Id.
ch. 84, at 774. Title 4 of the code sets forth those code
provisions governing the creation and operation of 14
general law districts.   Chapters 50 (containing provisions
generally applicable    to   general law    districts),   .52
(governing underground water conservation districts), 58
(governing irrigation districts), and 65 (governing special
utility districts), in addition to chapters 51 and 54, each
contain sections regarding the exclusion of "land or other
property" from the boundaries of the districts after the
petition seeking the creation of the district has been
granted. No case has construed the phrase under any of
                                        (Footnote Continued)




                             p. 5854
Honorable Bobby Joe Mann - Page 9 (JM-1115)




court judgment excluding certain lands owned by one party
(who presumably owned both the surface and the subsurface
estates) and certain oil and gas leases owned by oil and gas
companies from the boundaries of a water control and
improvement district.   The district comprised 140 square
miles of territory, SO percent of which was submerged by the
waters of two bays.   The land that one party sought to be
excluded comprised 8,400 acres of Uustang Island. The oil
leases of the oil and gas companies were located under lands
that were submerged by the bays. The plans of the proposed
district did not call for, nor was any expenditure of
district funds shown for, providing service to any other
area other than the town of Port Aransas and the area
immediately adjacent thereto.   Specifically, the plans did
not contain any provision for service either to the lands
sought to be excluded or to the submerged oil and gas
leases.
     In affirming the trial court judgment excluding both
the land and the oil and gas leases, the court of appeals
stated:
           The only two issues submitted to the jury
        by the court were whether. the lands of
        appellee Sam    E. Wilson,    Jr. would    be
        benefited by .the proposed improvements, and
        as to whether the oil and gas leases of the
        appellee oil companies would be benefited by
        the proposed improvements. The jury answered
        both questions in the negative.     Appellant
        objected to said issues because they were
        immaterial, and    because   there   was
        evidence, and    insufficient evidence,    ::
        support the jury's findings to said issues.
           We overrule these points. There was ample
        evidence to support the findings of the jury.
        The question of benefit to the lands involved
        is material,  as is provided in the above
        quoted statute.



(Footnote Continued)
these chapters, except for   pueces County Water Control &
             ist. No. 4 v. Wilsqn, 304 S.W.Zd 281 (Tex. Civ.
APP. - El Paso 1957, writ ref'd n.r.e.).




                             p. 5855
Honorable Bobby Joe Mann - Page 10   (JM-1115)




Ig, at 287: ~98 Attorney General Opinion H-881 (1976) (sets
forth background of law enacted by legislature granting
Corpus Christi certain submerged lands in Corpus Christi Bay
to use as public beach).
     Thus, under chapter 51 of the Water Code, mineral
estates apparently can be excluded under subchapter 0 of
chapter 51 of the code. There is no authority, however, for
excluding such estates from the boundaries set forth in the
initial petition seeking the creation of the district   that
must be passed on by the Water Commission. Analogously, we
assume that a court, if presented with a question of
exclusion of mineral estates under chapter 54 of the code,
would conclude that section 54.701 likewise authorized such
an exclusion under the phrase "land or other property."
See. e.a,, 59 Tex. Jur. 3d m        SS l-4 (V1prope*yt'is a
broad term, referring not to a particular material object
but to the right and interest or domination rightfully.
obtained over such object, with the unrestricted right to
its use, enjoyment, and disposition, and includes not only
that which is perceptible to the senses but also that which
is intangible). We turn now to your first question.
     You ask:
       Are the mineral estates located under the
       boundaries of the Sportsman's World Municipal
       Utility District taxable for ad valorem tax
       purposes by the Sportsman's World Municipal
       Utility District?
     Section 21.01 of the Tax Code provides that "[r]eal
property is taxable by a taxing unit u located in the unit
wJanuarv       (emphasis added).2 Thus real property that is
not located within a taxing unit is not taxable by that
taxing unit. Mineral interests are interests in land and


      2. Section    11,   article   VIII,   of   the   Texas
Constitution sets forth the general rule governing situs of
property for purposes of taxation and provides in relevant
pa*:
           All property, whether owned by persons or
        corporations shall be assessed for taxation,
        and the taxes paid in the county where
        situated . . . .




                              p. 5856
Honorable Bobby Joe Mann - Page 11 (JM-1115)




are taxable in the   taxing unit where   the land islocated.
                                                      , 165
S.W.Zd 645 (Tex. 1943); m        Countv v. Mid-w      Oil &
Gas Co<, 254 S.W. 290 (Tex. 1923).    Real property that is
omitted from the appraisal roll of a district is required to
be added to the roll and back appraised pursuant to section
25.21 of the Tax Code. In this instance, however, we are
unable to answer whether such excluded mineral interests
should be back appraised.
     We do not have sufficient facts before us to determine
whether the initial petition proposing the creation of the
district is fatally flawed because of the failure to include
owners of the mineral estates. Section 54.014 of the Water
Code sets forth the requirements for the petition and
provides:
          When it is proposed to create a district,
       a petition requesting creation shall be filed
       with the commission.   The petition shall be
       signed by a majority in value of the holders
       of title of the land within the proposed
       district, as indicated by the county tax
       rolls. If there are more than 50 persons
       holding title to the land in the proposed
       district, as indicated by the county tax
       rolls, the petition is sufficient if it is
       signed by 50 holders of title to the land.
     We do not have sufficient facts before us to determine
either whether the petition was signed by a majority in
value of the holders of title to the land when the value of
the mineral estates is added to the value of the surface
estates or whether there are more than 50 persons holding
title to the land in the district when the owners of mineral
estates are added.    Nor are we empowered to make such
findings of fact.
     In the matter of the creation and organization of
public and    quasi-public corporations,    there must    be
substantial compliance    with the    conditions   precedent
required by statut;;xa~l;;gCrutc~,           578 S.W.Zd 438
                                I writ ref‘d n.r.e.); State
                                         eside vim       329
S.W.Zd 245 (Tex. Civ. App. - Fort Worth 1959, writ r;fld).
An irregularity, if harmless, in the creation of a municipal
corporation will not work an ouster under quo warranto.
We-s Countv ater Control & Imvrovement Dist. No. 4
                      270 S.W.Zd 672 (Tex. Civ. App. - Sk




                             p. 5857
Honorable Bobby Joe Mann - Page 12 (JM-1115)




Antonio 1954, writ ref'd n.r.e.); State ex rel. Miller vr
Troell, 207 S.W. 610 (Tex. Civ. App. - San Antonio 1918,
writ ref'd). In an instance in which the irregularity is
deemed sufficiently serious, a proposed district has been
declared to be without legal existence. fitv of Cornu
                       288 S.W.Zd 836 (Tex. Civ. App. - Sa:
                writ ref'd)    (court invalidated proposed
district when' relevant statute required petition to be
signed by "majority in number of the holders of title to t&
J&p& [within the proposed district] and the owners of a
majority in value of the lands ther& II and the owners of
the mineral estates were not considered in determining the
sufficiency of the petition: under the facts presented,
court found that less than a majority of landowners signed


No. 3 v. State, 73 S.W.Zd 1101 (Tex. Civ. App. - Texarkana
1934, writ dism'd) (irregularities in creation of levee
district would make district bonds voidable, not void).
     Moreover, subsection (b) of section 54.701 of the   code
provides:
           The [governing] board [of the district]
        must call a hearing on the exclusion of land
        or other property from the district on the
        wrA::enirtition of any landowner or property
                    the district    filed with    the
        secretary of the board before the time the
        first election on     the question of     the
        issuance of bonds payable in whole or in part
        from taxes is called.
     The failure to provide for such a hearing amounts to a
denial of due process.
(Tex. 1927); State ex rel. Ma        v. BaU
(Tex. 1927). We do not have sufficient facis before us to
determine, nor are we empowered to so determine, whether
such notice was, in fact, afforded.
      We cannot answer your first question or other questions
about the possible consequences of our answer to your second
question. The ultimate resolution of such questions would
require us to make findings of fact, which we are not
empowered to make, and to evaluate the interests of various
parties who have relied on the boundaries of the district
established by the commission. &= Wallin-
Texas                  , 348 S.W.Zd 532 (Tex. 1961); b Sal18




                             p.   5858
Honorable Bobby Joe Mann - Page 13 (JM-1115)




                  OVement Dist. NO. 1 v. Gw     40 s.w.zd 892
(Tex. Civ. App. - San Antonio 1931, writ ref8& (when it is
claimed that a statute was not followed in establishing the
territorial limits      of  a special    district   as   then
constituted, matter can be raised only by the state in a guo
warrant0 proceeding).

                       SUMMARX
           Chapter 54 of the Water Code does not
        authorize the Texas Water Commission       to
        permit the creation of a municipal utility
        district that exc,ludesfrom its boundaries
        the mineral estates located below a depth of
        300 feet under the surface of the land
        comprising the district.     The code    does
        authorize the board of the district        to
        exclude such    property after    the   Water
        Commission has approved the petition seeking
        the creation of the district. We are unable
        to answer whether such mineral interests,
        which were heretofore improperly excluded
        from the district, should be added to the
        district*s appraisal roll and back appraised
        pursuant to section 35.21 of the Tax Code,
        because we are given insufficient facts to
        determine the validity of the creation of the
        district, and we     are not empowered     to
        determine such facts.     The filing of an
        information in the nature of guo warrant0 is
        the proper method for resolving such        a
        matter, rather than the opinion process.




                                         JIM     MATTOX
                                         Attorney General of Texas
WARYKELLER
First Assistant Attorney General
LOUMCCREARY
Executive Assistant Attorney General
JUDGE ZOLLIE STBARIBY
Special Assistant Attorney General




                             p.   5859
Honorable Bobby Joe Mann - Page 14 (JM-1115)




RICK GILPIN
Chairman, Opinion Committee
Prepared by Jim Moellinger
Assistant Attorney General




                              P. 5860