The Attorney General of Texas
March 23, 1983
JIM MATTOX
Attorney General
Honorable Joe C. Hanna Opinion No. JM-18
Supreme Court Building
P. 0. BOX 12546
Chairman
Austin. TX. 78711.2548 Energy Resources Committee Re: Whether House Bill No. 226
5121475.2501 Texas House of Representatives relating to reporting ownership
~46.~ 910/874.1367 P. 0. Box 2910, Capitol Station of mineral interests severed
Telecopier 512/475-0266 Austin, Texas 70769 from surface estate and to
proceedings for abandonment of
1607 Main St., Suite 1400 unreported mineral interests
Dallas. TX. 75201.4709 violates article I, section 19
2141742.8944 of the Texas Constitution
4824 Alberta Ave., Suite 160
Dear Representative Hanna:
El Paso. TX. 79905-2793
9151533.3484 You have requested our opinion regarding the constitutionality of
T-
House Bill No. 226, presently pending before the Sixty-eighth
Legislature. The bill provides:
,c20 Dallas Ave., suite 202
Houston, TX. 77002.6986
7131650-0666 Section 1. Policy. The purpose of this Act is
to assure that productive use of mineral reserves
and natural resources will not be prevented by the
806 Broadway, Suite 312
existence of abandoned mineral interests.
Lubbock, TX. 79401.3479
8061747.5238
Section 2. Definitions. In this Act:
4309 N. Tenth, Suite 6 (1) 'Abandonment' means actual and
MCAII~~, TX. 78501.1685 voluntary relinquishment of an interest in
5121682.4547
minerals that is intended to be permanent, by
the owner of the interest.
200 Main Plaza. Suite 400
~3x7 Antonio. TX. 78205.2797 (2) 'Mineral interest' means an interest in
5121225.4191 minerals in place that is severed from the
ownership of an interest in the surface, and
An Equal Opportunltyl includes a fee interest. whether conditional or
Affirmative Action Employer not, executive right, royalty interest, life
estate, estate for years, remainder, reverter,
possibility of reverter, leasehold, or any
other present possessory interest, future
interest, equitable interest, or concurrent
ownership interest.
p. 76
Honorable Joe C. Hanna - Page 2 (JM-18)
(3) 'Interest in the surface' means a fee
interest, whether conditional or not, from
which a mineral interest has been severed.
(4) 'Person' means a natural person,
corporation, business trust, estate, trust,
partnership, or association.
(5) 'Surface owner' means a person who has
concurrent or sole legal right or title, except
the holder of a leasehold or an estate for
years, to a present interest in real property
from which a mineral interest has been severed.
Section 3. Report of Ownership of Mineral
Interest. (a) A person who owns a mineral
interest on September 1, 1983. must file a report
with the county clerk of each county in which part
of the interest is located before September 1,
1984. A person who acquires or creates a mineral
interest after September 1, 1983, must file a
report with the county clerk of each county in
which part of the interest is located before the
first anniversary of the date the person acquires
or creates the interest.
(b) The report must be subscribed and
acknowledged in the same manner as is required for
a deed and must contain:
(1) the name and address of the person
claiming the interest;
(2) the date the person acquired or created
the interest;
(3) a legal description of the interest; and
(4) a general description of the nature of the
interest.
Section 4. Recording of Reports. (a) A
county clerk may charge the same filing fee for
recording a report under this Act as is authorized
for recording a deed.
(b) Each county clerk shall maintain a public
record of reports filed under this Act separately
from other records in the clerk's office. The
p. 77
Honorable Joe C. Hanna - Page 3 (JM-18)
clerk shall keep the record in the same manner as
is required for deeds.
Section 5. Effect of Failure to Report. An
owner of a mineral interest who does not file the
report required by this Act is presumed to have
abandoned the interest, and title to the interest
is presumed to belong to the surface owner.
Section 6. Judicial Proceeding. A surface
owner may file a petition for declaratory judgment
in the district court of the county in which the
real property is located, requesting the court to
declare a mineral interest abandoned.
Section 7. Notice of Proceeding. In an action
for declaratory judgment under this Act, citation
shall be issued to the last known owner or owners
of the abandoned mineral interest as shown by the
official records of the county clerk of the county
where the property is located and shall be served
in accordance with the Texas Rules of Civil
Procedure.
Section 8. Evidence of Nonabandonment. A
mineral interest is not abandoned if the owner of
the interest appears at the abandonment proceeding
or if the owner files the report required by this
Act before the court renders a judgment declaring
the interest abandoned.
Section 9. Vesting of Title. (a) If a court
declares that a mineral interest is abandoned,
title to the interest vests in the current owner
or owners of the surface interest from which it
was severed, with each owner taking the same share
and the same type of ownership in the mineral
interest as the person has in the surface.
(b) A person who acquires title to a mineral
interest in an abandonment proceeding under this
Act may record in the same manner as a deed a
certified copy of the judgment as evidence of
title.
Section 10. Applicability. This Act does not
apply to a mineral interest owned by a
governmental body or agency.
p. 78
Honorable Joe C. Hanna - Page 4 (JM-18)
For the following reasons. we conclude that House Bill No. 226 is
unconstitutional under the due process clauses of the United States
and Texas Constitutions. We do not reach the question of whether the
bill is unconstitutional in other respects.
The fourteenth amendment to the United States Constitution
provides that no state may "deprive any person of life, liberty, or
property without due process of law." Article I, section 19 of the
Texas Constitution provides that no citizen of Texas shall be deprived
of life. libertv. or orooertv "exceut bv due course of the law of the
land*” . . - - . . - .
These guarantees are essentially synonymous. Mellinger v.
City of Houston, 3 S.W. 249, 252 (Tex. 1887).
Courts utilize a two-step analysis to determine whether a person
has been deprived of life, liberty, or property without due process of
law. First, the court decides whether a constitutionally cognizable
life, liberty, or property interest exists. If it finds that such an
interest does exist, it then decides what procedures constitute "due
process of law" under the circumstances and whether those procedures
have been followed. Ingraham v. Wright, 430 U.S. 651, 675 (1977);
Sullivan v. University Interscholastic League, 599 S.W.2d 860, 863
(Tex. Civ. App. - Austin 1980). aff'd in part, rev'd in part, 616
S.W.2d 170 (Tex. 1981).
In Texas, due process attaches to vested property rights in
mineral estates. Brown v. Humble Oil and Refining Company, 83 S.W.2d
935 (Tex. 1935). Therefore, our due process analysis of House Bill
No. 226 must focus on the second step in the two-step process. The
requirements of both procedural and substantive due process must be
satisfied. Eggemeyer v. Eggemeyer, 554 S.W.2d 137, 140 (Tex. 1977).
At a minimum, procedural due process requires that a deprivation
of life, liberty, or property by adjudication be preceded by notice
and opportunity for a hearing appropriate to the nature of the case.
Mullane v. Central Hanover Bank & Trust Company, 339 U.S. 306, 314
(1950). "Due course of the law of the land" requires a law that hears
before it condemns, oroceeds uuon inauirv. and renders iudement onlv
. I -
after trial. Union Central Life Insurance Company v. -Ch&nin&, 2k
S.W. 982, 984 (Tex. 1894). The right to notice and sn opportunity to
be heard must be granted at a meaningful time and in a meaningful
manner. Fuentes v. Shevin, 407 U.S. 67, 80 (1972). The notice must
be reasonably calculated to apprise interested parties of the pendency
of the action and afford them an opportunity to present their
objections. The notice must also afford a reasonable time for
preparation. Constitutional requirements, however, are satisfied if,
with due regard for the practicalities and peculiarities of the case,
these conditions sre reasonably met. Mullane, supra, at 313-18.
p. 79
Honorable Joe C. Hanna - Page 5 (JM-18)
Section 7 of House Bill No. 226 provides for notice to certain
mineral interest owners that a declaratory judgment proceeding has
been instituted by the owner of the surface estate to have the court
declare the mineral interest abandoned. The notice is to be issued to
the last known owner or owners of the mineral interest as shown by the
official records of the county clerk where the property is located and
is to be served in accordance with the Texas Rules of Civil Procedure.
On the other hand, the notice procedure fails to provide for service
of citation to known owners not of record and to unknown owners.
In Texaco, Inc. v. Short, 454 U.S. 516 (1982), the United States
Supreme Court dealt with an Indiana statute which was somewhat similar
to House Bill No. 226. This statute, the Indiana Dormant Mineral
Interests Act, provided that a severed mineral interest not used for a
period of twenty years automatically lapsed and reverted to the owners
of the surface estate unless the mineral interest owner had filed a
statement of claim in the local county recorder's office. The statute
contained a two-year grace period in which owners of mineral interests
subject to lapse might preserve those interests by filing the
statement of claim. The purpose of the statute, as articulated by the
Indiana Supreme Court, was to remove impediments to the development of
mineral interests that arose because of the existence of unused,
- stale, and abandoned mineral interests.
One of the arguments made in Short was that the statute's notice
provisions were constitutionally infirm because they did not require
that any specific notice be given to a mineral owner prior to a
statutory lapse of a mineral estate. Relying on Mullane v. Central
Hanover Bank and Trust Company, surpa, the appellants contended that
the lack of adequate notice deprived them of due process of law. The
Supreme Court disagreed, however, stating:
The reasoning in Mullane is applicable to a
judicial proceeding brought to determine whether a
lapse of a mineral estate did or did not occur,
but not to the self-executing feature of the
MineralLapse Act. The due process standards of
Mullane apply to an 'adjudication' that is 'to be
accorded finality.' (Emphasis added).
454 U.S. at 535. The Court concluded that because the lapse of a
mineral estate resulted, not from a judicial proceeding, but from the
application of a self-executing statute, the existence of which
everyone was presumed to be aware, the notice provisions of the
statute were not constitutionally deficient.
The feature that distinguishes House Bill No. 226 from the
Indiana statute is that, under the former, a mineral interest is lost
,p & after a judicial proceeding. Even if one concedes that everyone
p. 80
Honorable Joe C. Hanna - Page 6 (JM-18)
would, after House Bill No. 226 becomes effective, be presumed to be
aware of its existence, one cannot conclude that everyone is presumed
to be aware of the pendency of a judicial proceeding initiated under
it. On the contrary, Mullane establishes that those who may be
affected by the outcome of such a proceeding must be given such notice
as is reasonably calculated to inform them of its pendency.
We do not believe that the notice provisions of House Bill No.
226 are reasonably calculated to apprise everyone who might be
affected by a suit instituted thereunder of the pendency of that suit.
As noted, these provisions fail to provide for any kind of notice,
even notice by publication, to known owners not of record and to
unknown owners. To take away the mineral interests of owners who are
not served with any citation whatsoever would, in our opinion, clearly
deprive those owners of due process of law.
Although the lack of adequate notice provisions is sufficient to
invalidate House Bill No. 226 on procedural grounds, we believe that
the bill also violates substantive due process. In determining
whether substantive due process requirements are met, courts balance
the gain to the public welfare resulting from the legislation against
the severity of its effect on personal and property rights. A law
violates substantive due process when it is arbitrary or unreasonable,
i.e., if the social necessity of the law is not a sufficient
justification for restricting the rights involved. In the Interest of
B-M-N, 570 S.W.2d 493, 503 (Tex. Civ. App. - Texarkana 1978, no writ).
In Texaco, Inc. v. Short, supra, the United States Supreme Court
held that the Indiana act met the constitutional requirements of due
process. In reaching its conclusion, the Supreme Court stated:
[J]ust as a State may create a property interest
that is entitled to constitutional protection, the
State has the power to condition the permanent
retention of that property right on the
performance of reasonable conditions that indicate
a present intention to retain the interest.
Id., at 526. The Court concluded that Indiana had not exercised this
power in an arbitrary manner because each of the actions that the
state required the mineral interest owner to take in order to avoid
abandonment of his interest furthered a legitimate state goal. If the
owner engaged in production, or collected rents or royalties from
another person engaged in production. his interest was protected; this
furthered the state's goal of developing mineral interests. If the
mineral interest owner paid taxes, his interest was protected; this
furthered the fiscal interests of the state. If the mineral interest
owner filed a statement of claim, his interest was protected; this
furthered the state's goal of developing mineral interests by
p. 81
Honorable Joe C. Hanna - Page 7 (~~-18)
identifying and locating the owners of the mineral interests. "The
State surely has the power to condition the ownership of property on
compliance with conditions that impose such a slight burden on the
owner while providing such clear benefits to the State." Id., at
529-30.
In our opinion, House Bill No. 226 is clearly distinguishable
from the Indiana act. Under the latter, non-use for twenty years
raises an irrebuttable presumption of abandonment, while House Bill
No. 226 allows only a one-year period in which the mineral interest
owner must file a statement of claim or suffer the institution of a
judicial proceeding on the issue of abandonment can be instituted. It
is conceivable that a court, when faced with a substantive due process
challenge to House Bill No. 226, could rely on this time period
difference to distinguish the holding in Short. More importantly,
however, the two acts are distinguishable in terms of the conclusions
that they permit. Under the Indiana act, it was the lack of 9 use
of a mineral interest for a period of 20 years that resulted in the
irrebuttable presumption of abandonment of the interest. Even if
there were such lack of use, the owner of the interest could still
retain it by filing a statement of claim. Under House Bill No. 226,
on the other hand, it is only the failure to file a required report
that creates the presumption that the interest has been abandoned.
Whereas the Court in Short found, in effect, that it was not
unreasonable to conclude that an owner of a mineral interest had
abandoned that interest where he did nothing for a twenty-year period
to indicate his intent to retain it, we believe that our courts would
be loathe to find intent to abandon where the only evidence of such
intent is the failure to file a particular report.
The legislature may provide, as a rule of evidence for a judicial
proceeding, that certain facts will raise a presumption of other
facts, and such presumptions do not deny due process if there is a
rational evidentiary relationship between the proven facts and those
presumed. See Mobile, Jackson & Kansas City Railroad Company v.
Turnipseed, 219 U.S. 35 (1910) (injury to persons by operation of
railroad is prima facie evidence of negligence). Clem v. Evans, 291
S.W. 871, 872 (Tex. Comm'n App. 1927, holding adopted) (presumption
that promises to do future acts, made as inducement to enter into
contract and not performed within reasonable time, were fraudulently
made). In our opinion, a presumption of abandonment cannot rationally
arise from the fact that a property owner fails to file a report
within a one year period. Such a presumption disregards other
evidence relevant to abandonment, such as payment of taxes or efforts
to produce minerals occurring shortly before the one year period.
Compare Attorney General Opinion M-821 (1971) (presumption of
abandonment of mineral estate arises from failure for twenty years to
pay taxes, transfer estate, or explore for or produce minerals).
p. 82
. .
Honorable Joe C. Hanna - Page 8 (JM-18)
In Lobley v. Gilbert, 236 S.W.2d 121 (Tex. 1951). the Texas
Supreme Court stated:
A presumption is a rule which 'draws a
particular inference as to the existence of one
fact, not actually known, arising from its usual
connection with other particular facts which are
known or proved.'. . . It is founded upon and
must conform to the commonly accepted experiences
of mankind. . . . It must be based upon an
established fact and cannot rest upon a presumed
fact. (Emphasis added). (Citations omitted).
236 S.W.2d at 123, quoted in Beck v. Sheppard, 566 S.W.2d 569, 571
(Tex. 1978). We do not believe that a valid presumption of intent to
abandon a mineral interest may arise under this test where the only
fact giving rise to the presumption is the failure to file a
particular document.
We therefore conclude that House Bill No. 226 is unconstitutional
on substantive due process grounds. We believe, however, that there
are methods of dealing with the problem of abandoned mineral interests
which comport with the requirements of the constitution. See
generally Texaco, Inc. v. Short, 454 U.S. 516 (1982). V.T.C.S. arz
3272-3289 (escheat statutes).
In closing, we note that either of these problems is sufficient
to invalidate House Bill No. 226. Their impact in combination is even
more offensive to the due process clause. To couple defective notice
provisions with a defective presumption is. in our opinion, to produce
too much weight for the scales of justice to withstand.
SUMMARY
House Bill No. 226 relating to proceedings for
abandonment of unreported mineral interests is
unconstitutional under the due process clauses of
the United States and Texas Const tutions.
dzh
JIM MATTOX
Attorney General of Texas
TOM GREEN
First Assistant Attorney General
p. 83
.
Honorable Joe C. Hanna - Page 9 (JM-18)
DAVID R. RICHARDS
Executive Assistant Attorney General
Prepared by Jon Bible
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Susan L. Garrison, Chairman
Jon Bible
Carl Glaze
Jim Moellinger
Bruce Youngblood
p. 84