AUSTEN in. ll%xAES
December 3.0, 1952
Hon. Murray L. .Harrfs Opinfon No. V-1568
County Attorney-
“wood county Re: Tax.exemption status of a
Quitman, Texas royalty interest belonging to
United Christian Missionary
Society, arising from the leas-
ing of lands of Jarvis Christian
-Dear Mr. Harris: College.
You pre~sent for the opinion of this office the question
contained in your letter of December 2, 1952 which is copied below
for a statement of the’facts upon whfch our opfnfon will be based,
with such additional facts.as we may add disclosed from the file
and our investiga.tfon of the records of the Secretary of State.
.Your letter follows:
.*Jarvis College received its name from Major
and Mrs. J. J. Jarvis of Ft. Worth, Texas, who, in
1911, made a gift of 456 acres of land in Wood County,
.Texas. about one hundred miles east of Dallas, Texas.
The Grant was made to the Christian Women’s Board
of Missions whose work is now incorporated fn the
continufng program of the United Christian Missionary
Society ‘on condftion that said corporation keep up and
maintain a school for the elevation and education of the.
Negro race on the land, or elsewhere in eastern Texas,
in which school there shall be efficient and religious
training.’
%n January 13, 1912. school began at Jarvfs with
thirteen elementary students. The surroundings were
primitive, but the program went forward with courage
and determination. Gradually. the transition was made
from elementary to secondary level, then to junior
college and, finally, to senior college work, with recog-
nftion by the Texas Department of Education in Septem-
ber, 1951. Enrollment in the Fall of 1948 was two hundred
twenty-two pupils, using twenty-one buildings. The esti-
mated valuation of the buildings and ground improvements,
as of January, 1952, is approximately $534,000.00. and
the equipment estimated value, $90,000.00.
Hon. Murray L. Harris, page 2 (V- 1568)
‘The acreage, in the orfgfnal Grant having been
considered inadequate. so, in 1913 and 1924 the Chris-
tian Women’s Board of Missions purchased adjoining
land, making a total of 8744 acres available for the
campus and farm.
*Jarvis Christian College is fully approved by
the Southern Association of Colleges and. Secondary
schools.
‘Said school is owned and operated through a
Board of Trustees by the United Christian Missionary
Society, which is the organizatfon which handles miii-
sionary .and benevolent work for the Christian Church,
or Deciples of Christ, from whom they receive a yearly
contribution. which is used )n the education and mainte-
nance of said school, and, in addition thereto, money
is ~received from the sale of oil and/or gas from royalties
on oil produced from said properties.
‘This institution (Jarvis College) iq-a non-profit
i educational institution, supported by the United Christian
Misstonary Society for the benefit of such members of
‘the Negro rac~e as wish to avail themselves of the edu-
rational facilities offered at. this Institution.
“For many years prior to the discovery of oil upon
said lands in 1940, all of t&s lands herein involved have
been dedicated and actually used for educational purposes;
some of the lands ,b.efng used as campus; othsr lands be-
ing used as demonstration tracts in agricu&ral pursuits,
and other lands used in reforestation courses conducted
by the School for students enrolled therein, and a major
portion of it used for buildings and campus.
“All of ‘the land is under an Oil and Gas Lease and
some of it is producing oil and gas. and the revenue
therefrom is being used for said work hereinabove enu-
merated.
‘%t the year 1940 the Women’s Christian Missionary
,Society executed oil and gas leases on the lands involved,
.reservfng.the usual and customary one-eighth royalty
interesf, and~various leasehold operators are claiming
under such leases and are now producfng oil and gas from
parts of these lands, and are paying to the United Christian
Missionary Society the proceeds from the sale of such oil
.
Hon. Murray L. Harrfs, page 3 ,(V-1568)
and gas accrafng’ to the one-eighth royalty interest
reserved in the leases.
%A11 ftinds..redeived by the Women’s Christian
Missionary Society as royalties are expended for
educational purposes in maintaining the College and
carrying out its co-educational program.
“In view of the above, are these royalties sub-
ject to the payment of ad valorem tax, or, are they
exempts from such ‘taxation under Article 7150. Re-
‘vised Civil Statute; 19253 *
The records of-the Secretary of State disclose that Jars-
vis Chrfstian College, Hawkins,.Texas, was incorporated February
11, 1939 with the followjng purpose clause:
.*The purpose for’which this corporation is
created is to support and :maintain an esllcational
institution that will give to the colored youth .of
Texas practical domestic, manual and agricultural.
training, as w.ell a’s high grade instruction in the
arts and sciences; the support and maintenance to i
be under the general control of the Home Depart-
.ment, United Christian Mjssionary Society, Deciples
of Christ.”
-The charter provides for.directors and trustees not to
exceed in number twenty-five. There is no questfon as to the ex-
emption from ad valorem taxes of the buildings and the campus
upon which they are located, consisting of 874i acres, of which
456 acres were donated or given fn 1911 to the college by Major
and Mrs. J. J. Jarvis. This was inadequate for the purpose and
plans for the college and adjoining additional land was purchased
by the Christian Women’s Board of Missions of the Deciples of
Christ which has the ,duty under its charter powers to support,
maintain and control the college in cooperation wfth the local Board
of Directors and Trustees. The corporation has no capital stock.
The questfon presented is the status of the one-eighth
royalty received by the college from leases made upon the land
constitutfng the campus for ad valorem state and county taxes: that
is, whether taxable or exempt.
Certain types of property are exempt from tsxatlon by
the exoressed terms of the Constitution, and this the Legislature
has no power to tax. LowerColorado River Authority v; Chemical
Bank and Trust Company, 144 Tex. 326, 190 S .’W .2 d 48 . 0th er kinds
Hon. Murray L. Harris, page 4 (V-1568)
of property, and the property here in question is of that charac-
ter, may be exempt from taxation by the Legislature only by the
authority conferred upon it under the Constitution of this State.
This power is derived from Section 2 of ‘Article VIII of the
Constitution which reads in part as follows:
*
. . . the legislature may; by general laws,
exempt from taxation . . . all buildings used ex-
clusively and owned by persons or associations
of persons for school purposes and the .necessary
furniture of all schools and property us.ed ex-
elusively and reasonably necessary in c~onducting
any association engaged in promoting the religious,
ed.ucational and physical development of boys, girls,
young men or young women operating under a State
or National organization of lilce character; . . .”
Pursuantto the authority thus conferred upon the Legis-
lature by Section.2 of Article VIII of. the Constitution quoted above,
the Legislature enacted Article 7150, V;C.S.i in language in part
as follows:
>
!‘A11 .public colleges, public academies, and
all endowment funds of institutions of: learning
and religion not used with a view to profit, and
when the same are invested in bonds or mortgages,
and all such buildings .used exclusively and owned
.by. persons .or.,associations of .persons for school
purposes; . l,:.
If the ones-eighth oil royalty interest here in question is
exempt from ad valorem taxes, it must be by virtueof the terms of
Article 7150, V.C.S., quoted above. The exemptionfrom~taxation
of the buildings and campus grounds co~istiing of.the entire acreage
owned-and inalntained by the colleges is not questioned, but does the
same r~ule apply to the one-eighth oil royalty ,,intere.st ,here in ques-
tion owned by thencollege or by ~the Women’s’. Christian Missionary
Society of the Deciples of Christ, a religiout; organization? We
thi!nhit makes no difference whether owe consider the corporation
& owner’ of the property or the Missionary Society. In either
event, it is owned by persons or an association of, persona and to
that extent clearly falls within the ~purview of, Article 7.150, V~C.S..
but our difficulty arises in determinkg whether or not the one-
eighth oil royal% interest here involved ‘%s mused exclusively for
school purposes. . A careful search of the opfnions of this Depart-
ment and the decisions of our ‘Appellate Courts fail, to reveal that
this identical ques,tion has heretofore been passed upon by @is
Department or the Courts of this State. In the recent case of Harris
Hon. Murray L. Harris, page 5 (V-1568)
v. City of Fort Worth; 142 Tex. 600,~18O’S.W.2d~l31, Justice
Sharp of the Supr eme ~Court, in approving what Mr; Justice
Robertson said-in the early case of Cassiano v. Ursdie :
Academy, 64 Tex. 673. said:
% has’been the policy of the state since~ 1849
to encourage educational enterprises by exempt-~
ing them froth any shaie of the burdens of govern-
ment. Pasrh. Dig., arts. 5147. 5148, 7485, 7688.
. . .
“The education of the masses is now recog-
niied as a function of ,state government. Those who,
fr~om charitable considerations, to forward sectarian
views, or for private profit, have organised or con- .
ducted schools, have assisted the state in the per-
formance of a duty it owes to its citizens which can-
not be too thoroughly performed, and which thestate
has never assumed that it had eitherthe means or
the machinery of doing sufficiently well without pri-
vate assistance. The .Ursuline Academy is perform-
ing itspar.t-in this branch of the public service, and
it should rather be encouraged by aids, than impaired
in its usefulness by a tax upon its revenues.”
From this case, we think it may be said that the same
stric.tness of construction, will not be indulged where the exemption
is to religious and educational institutions that otherwise would be
applied in considering exemptions to corporations created and
operated for private gain or profit.
*We think Texas will compare favorably with any State in
the Union in the number, efficiency, and value of educational insti-
tuttons owned and mafntained by religious organizations. Such
schools and colleges have been fostered and built up, and it has been
the policy of our State to encourage~them.
It is conceded in your statement of facts that~ Jarvis
Christian College is a non-profit educational institution supported
by the United Christian h&ssiionary Society for the benefit of such
members of the negro race as wish to avail themselves of the
educational facilities offered by the college.’ It is likewise con-
ceded that all of the land involved has for many years and is now
dedicated and actually used for educational purposes as part of
the campus, demonstration tracts .in agricultural’pursuits,. and
training in reforestation courses conducted by the collegki In
brief, all of the land is devoted to the educational. activities of the
college.
Hon. Murray L. Harris, page 6 (V-1568)
The Supreme Court, in construing the language “used
with a view to profit” in the case of Harris v. City of Fort Worth,
supra, said:
“Whatever may be the ordinary signification
of the words ‘used with a view to profit,’ we think
that in these tax exemption provisions of the stat-
utes they mean only that the fund be not used with
a view to private gain or profit.”
It is admitted that the one-eighth oil royalty here in-
volved is expended in the furtherance of the educational activities
of the college and, we thinlc. meets the constitutional and statutory
requirement that it is used for educational purposes and not for
profit.
Neither Jarvis Christian College nor the Missionary
Society pQSSeSS the facilities to develop and produce oil from the
land here in question even if they possessed the authority, which
we doubt, It is, therefore, apparent that the only feasible and
practical method of producing revenue from oil under the land was
to execute an oil and gas lease such as was done here and leave the
development to the lessees from which the one-eighth oil royalty is
received by the college. We think the net result of what was ac-
complished by the execution of the oil and gas lease was to convey
a determinable fee to the lessees of seven-eighths of the oil in
place and retain the one-eighth royalty in the college or Missionary
Society. The lessor, therefore, continued its ownership of-the sur-
face and one-eighth of the oil under the terms of the lease. In other
words, there remains vested in the lessor the surface and one-
eighth of the oil after the execution of the oil leases.
An oil and gas lease does not create the relationship of
landlord and tennant. The lessor may sell such oil royalty in the
same manner as applicable to the sale of other real estate under
the laws of this State. Gulf Production Go. vI Warren, 99 S.W.td
616 (Tex.Civ.App. 1936. error ref.).
We do not deem a discussion of the doctrine of severance.
which prevails in this State asp to oil and gas in place and the surfare
upon the execution of an oil and gas lease essential to the determina-
tion of the question here involved.
It is sufficient to say that Jarvis Christian College or the
Missionary Society is the owner of the surface and everything under
it or over’ it, in the absence of a severance of the oil and gas. under
the surface. Therefore, upon the sale of the seven-eighths minerals
and the retention by the lessor in the execution of an oil and gas
.
Hon. Murray L. Harris; page 7 (V-1568)
lease, seven-eighths of the minerals became vested in the les-
see and the college remained the’owner of the surface and one-
eighth of the minerals. The ownership-and possession of the
surface would also extend to the possession and ownership of
one-eighth of the minerals represented by the one-eighth royalty,
and this remains true until such minerals and the surface are
severed one from the other. An oil and gas lease is in effect
a sale and conveyance of the oil and gas in place under the land
described in the conveyance and is not in fa~ct a lease in the- brdi-
nary acception of that term. Gulf Production Company v. Warren,
supra. But, we do not construe the cases to hold that the one-
eighth royalty retained by the lessor in the usual oil and gas lease
operates as a severance of the one-eighth mineral interest from
the surface. The one-eighth royalty owned and retained by the
lessor is not severed from the surface estate. It continues to
be the property of the lessor so long as it is in place as a part of
the realty. Wagnor v. Wichita County, 298 Fed., pp. 818, 821.
We are, therefore, of the opinion that the exemption
which prevails under the constitution and statutes of this state
to the whole of the surface owned by the college or Missionary
Society likewise extends to the one-eighth oil royalty constituting
a part of the whole of the real estate owned by the college, and is,
therefore, exempt from ad valorem taxes, and you ark accordingly
so advised.
SUMMARY
Oil royalty produced from land owned by a non-
profit educational college, operated by a religious
organization, is exempt from ad valorem taxes if
produced from land comprising the campus of the
college, all of which is used and dedicated to the edu-
cational activities of the college to the same extent
as the surface of the land. The oil royalty retained
by the lessor, the owner of the sur.face. constitutes
a part of the entire ownership of the land in that there
has not been a severance of such estate. Hence, both
the surface and the oil royalty are exempt from ad
valorem taxation under the constitution and statutes
Hon. Murray L. Harris, page 8 (V-1568)
of this State if the royalty is likewise ex-
clusively used in promoting the educational
activities of the college.
APPROVED: Yours very truly,
W. V. Geppert PRICE DANIEL
Taxation Division Attorney General
E. ~Jacobson
Executive Assistant
By , ’
e@Lk
Charles D. Mathews L. P. Lollar
First Assistant Assistant
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