:i- f
..,
July 12.1951
Hon. Bascom Gilbs Opinion No. V-1204 ..
Commissioner
General Land’Office Re: Legality of refunding lease
Austin, Texas rental payments made dur-
ing pendency of-litigation
relating to the validity of
such lease or the’authority
of the Land Commis,sioner
to lease the-land covered
Dear Sir: thereby. .’ <,
‘.
Your letter requesting an opinion is as follows:
4
“I desire your official opinion on the question’of
Y’
refnnding~payments now held in suspense -wh!ch were
tendered to this~-office by various oil companies for
rentals on oil and gas leases~ covering lands’in the
Gulf of Mexico;which have been in litigation in t&r
Supreme Court of the United States, and return of k&t-
als paid by Sun Oil Company and held in suspense, cov-
ering oil and gas leases onla$ds”in Lag&ia’M&lre in-,
volved in litigation in Civil Action No. 61~4,‘X@ted :
States District Court, %orpus Cliristi Division: Some
of the rentals paid to this office for the Gulf of~ivfexi-
co lands were p&id &de; protest and held in suspense
by this department, and some were paid without pr.o-’
test and held in suspense for a, judicial determination
as to ðer or not Article 54211 of Vernon’s Anno-
tated Civil Statutes. relieved the lessees from payment
of rentals during the pendtncy of’the litigation above
named.
“There follows a list of rental payments made on
oil and gas leases in the Gulf.of ‘Mexico, showing wheth-
er or not such payments were.made under protest:
.I
. *
. :_
-.
Hon. Bascom Giles, Page 2, V-1204
Name Date Amount
Humble Oil & Re-
fining Co. 11-5-49 $49,371.00 Protested
Stanolind Oil h
Gas Co. 11-7-49 56,OOO.OOProtested
Superior Oil Co. &
Tidelands GilCorp. 10-19-49 35,040.OO Protested
Phillips ~Petroleum
co. c 10-a-49 2,686.OO Not Protested
Sun Oi; Company 10-15-49 1,494.OO Not Protested
The Texas Company 11-5-49 17,020.00, Protested
Sun Gil Company 11-28-49 2,880.OO Not Protested
Oil Drilling Co.,
Inc. 11-29-49 480.00 Not Protested
Sun Oil Company 6-2-50 320.00 Not Protested
Brasos Oil & Gas Co. 10-7-50 1,664.OO Not Protested
Sun.Oil Company 10-16-50 1,494.OO Not Protested
Phillips Petroleum
co. 1 l-6-50 2.686.00 Not Protested
Oil Drilling Co.,
IUC. 1 Z-4-50 480.00 Not Protested 4
Superior Gil Company
& Tidelands Oil. i. .
Corp. 12-5-50 35.040.00 Protested,
Sun Oil Company l-4-51 2;880.00 Not Protested
“The above enumerated rental payments total
$209.535.00. which amount has been and is now held
in suspense, and requests for refunds have been made
in writing by two of the companies and inquiries have
been made by other parties regarding the refunds of
these rentals.
“On January 28, 1950, Sun Gil Company tendered
under protest *a sum of $16.458.00 and on January
26, 1951 tendered under protest the sum of $16.458.00
for rentals on oil and gas leasss covering lands in
Laguna Madre in litigation on appeal under Civil Action
No. 614. This total of $32,916.00 has been and is now
held in suspense, and I have been requested by letter
dated March 21, 1951. to refund these rentals to Sun
Oil Company in light of the case styled, The Ohio Com-
pany, et al vs. Bascom Giles. et al, 235 SW~2d 630. V
.
Hon. Bascom Giles, Page 3; V-1204 -’
Motion for Rehea,ring on which was denied February
5, 1951.
“It is necessary that I have your official legal
opinion as to whether or not these payments. should
be refunded, as1 have requests for refunds pend-
ing in this office.”
The above rental payments were placed in a. suspense
fund by your department under Article 4388, V.C.S., which pro-
vides:
“The State Treasurer shall receive daily from
the head of each Department, each of whom is specif-..
ically charged with the duty of making same daily, a
.; detailed list of’all persons remitting money .the ‘status
of which. is .und.etermined or which is awaiting thentime
when it can ,fiqally be taken ,into, the Tre,as.ury..:togeth-:
er with the actual remittances which the, Tieasurer. X
shall cash and place in his vaults or in legally author-
ized depository banks, if the necessity arisesi .The .‘~:.
report f,r,om the General Land Office shall include all
money for interest, principal and.,leases of school,--
university, asylum and other lands. A deposit receipt
shall Abeissued- by, the Comptroller for the daily total
of such r,emitt.anc.es from each Department; and .tlie . .. ‘.
cashier of the Treasurer*s Department shall keep a
cash book, .m be called, ‘suspense .cash book,..! in which
to enter these deposit receipts,, .and any~others: is~sued :
for ashreceived for w&h no deposit warrants can
be issued, or when their. issuance is del,ayed, *As soon
as the status of money $0 placed with the Treasurer. ‘..
on a deposit receipt iS determined, it shall be trans-... .
ferred from the suspense account by placing the por-
tion of Xbelonging to the State in the Treasury.by the
issuance of a deposit warrant, and the part found, not..
tobelong to the State shall ,be,refunded. When deposit’.
warrants are issued,, they.shall be entered in this cash.
book, as well as any refunds,. and the balance shall se-,
present the aggregate :of the items still in suspense.
Refunds shall be. made in a manner similar to that in
present use, except that.separate series, of warrants,.
shall be used for~m.aking~such refunds, to.bp.called
‘refund warrants,’ and such warrants shall be written
.
Hon. Bascom Giles. Page 4, V-1204
and signed by the Comptroller and countersigned
by the Treasurer and charged against the suspense
funds to which they apply. Such warrants shall then
be returned to the Comptroller and delivered by him
to the person entitled to receive them.”
The question of whether money held in suspension under
Article 4388 can be recovered where the payment was not under
protest, even though unlawfully exacted, does not appear to have
been passed upon by the Texas courts. See Daniel v. Richcreek,
118 S.W.2d 935, 937 (Tex. Civ. App. 1938). an appeal from an
interlocutory order appointing a receiver of a fund deposited by
the Texas Racing Commission in the suspense account of the State
Treasury under Article 4388. It was stated in the argument in
that case before the Court of Civil Appeals “that the Treasurer
and Cqmptroller would contend, upon the merits of the case, that
the fees Eollected by the Commission from jockeyg were volun-
tarily paid, or in any event without protest, and therefore could
not be recovered by those paying them, however illegal might
have been their exaction.” Although the Court was not required
to pass upon this question on the appeal on the merits,,having de-
cided that the fund was not public in character and that the State
had no interest therein, the Court indicated that a voluntary pay-
ment of money held in suspension under Article 4388 might bar
recovery. Daniel v. Richcreek. 146 S.W.Zd 206 (Tex. Civ. App.
1940, error dism.. judgm. car.). The Court said:
“If the Commission, acting under a presumed
authority, had attempted to levy an excise tax or privi-
lege fee for some public purpose connected with the
act or otherwise, the question then would arise whether
such taxes or fees might thereafter be recovered by
those voluntarily paying them. It is at least plausible
that recovery would be denied under the provisions
of Art. 4388, since the payments were not (by those
making them) deposited in the treasury suspense ac-
count under protest as provided in that article. See
Rainey v. Malone, Tex. Civ. App.. 141 ~‘S.W.Zd 713.
. . .” (146 S.W.2d at 208.)
However, we do not find it necessary to pass upon that
question in this opinion, since we think it is clear that the rent-
al payments in question were made involuntarily.
. .
ohm. Bascom Giles, Page 5, V-1204
Article 5372, V.C.S., provides that
“If any person, firm or corporation. . . shall
fail or refuse to make the payment of any sum with-
in thirty days after it becomes due, . . . the rights
acquired under the . . . lease shall be subject to
forfeiture by the Commissioner, and he shall forfeit
same when sufficiently informed of the facts which
authorize a forfeiture, and the oil and gas shall be
subject to-sale . . .”
As stated in the brief for the State in Ohio Oil Co. v.
Giles. 235 S.W.Zd 630 (Tex. Sup. 1950). “it is and has been the
uniform interpretation and practice of the Commissioner of the
General Land Office and his predecessors in office that the stat-
utory order of forfeiture is required to be entered upon the
failure of a lessee to pay the stipu‘lated rentals within 30 days
of the date provided in the lease. . . . This interpretation and
practice is generally known among les~sees of the State, and was
generally knawn at the time the instant leases were offered and
awarded.“1 Thus, “the lessees had to pay the rentals in order
to keep the leases in force.” Ohio Oil Co. v. Giles. supra, ,at
636.
The rentals having been paid under an express or im-
plied threat of forfeiture of the leases, we think the rule most
recently discussed by the Supreme Court of Texas in Crow v.
City of Corpus Christi, 146 Tex. 558, 209 S.W.Zd 922 (1948),is
applicable. In permitting a cab company to recover certain
fees paid under an invalid ordinance, which fees, although paid
to the city without protest, would, not~have been paid exsept for
clauses in the franchise ordinance providing for cancellation of
the franchise for nonpayment, the Court said:
“The early common-law doctrine of duress has
been expanded (17 Am. Jur., p.875) and many courts
have adopted the modern doctrine of ‘business com-
pulsion,’ under which ‘it is established that where by
reason of the peculiar facts a reasonably prudent man
finds that in order to preserve his property or pro-
tect his business interest it is necessary to make a
lf Reply to Relators’ Brief in Support of Motion for Leave
to File Petition for Writ of Mandamus, p. 17.
. .
Hon. Bascom Giles, Page 6, V-1204
payment of money which he does not owe and which
in equity and good conscience the receiver should
not retain, the payment may be recovered.’ 40 Am.
hr., p. 831. A view similar to that of ‘business
compulsion’ has been taken by our courts in cases
involving the recovery of illegal taxes or fees; and
‘it is immaterial to the right of repayment,’ in the
absence of statutory provision to that effect, ‘wheth-
er or not an illegal tax is paid under protest.’ Na-
tional Biscuit Co. v. State, supra; Austin Nat. Bank
v. Sheppard, 123 Tex. 272,, 71 S.W.Zd 242; Cooley on
Taxation, Vol. 3 (4th Ed.), p. 2566.” (209 S.W.2d at
924.)
In Texas Power & Light Co. v. Doering Hotel Co..147
S.W.Zd 897, 905 (Tex. Civ. App. 1941). aff. 139 Tex. 351,. 162
S.W.Zd 938, this rule is stated as follows:
Y
. . . But where the payee has the power to en-
force such payment, or on failure to pay, to work
great financial loss, business disadvantage, or ir-
reparable injury to the payor, duress occurs. even
though it be not actually attempted to be exercised.
Appellant had the power, under its contract with
Doering. to cut off his service for nonpayment of its
~demand, and thus paralyze his business. Nonpay-
ment by him necessarily invoked that potential ha-
zard. In such case, the Supreme Court has held in
Austin National Bank v. Sheppard, 123 Tex. 272, 71 :
S.W.Zd 242, and in National Biscuit Co. v. State,
134 Tex. 293, 135 S.W.2d 687, ,692, that in the face
of such existing power, payments so made are made
under implied duress even though the payor did not
make them under protest. See, also, Edwards v. Wil-
liams, Tex. Civ. App., 93 S;W.Zd 452; Ward v. Scar-
brough, Tex. Corn. App., 236S.W. 434. . . .*
See, also, Dale v. Simon, 267 S.W. 467 (Tex. Comrn.
APP. 1924). and Kenyon v. United Salt Corp., 129 S.W.Zd 402 (Tex.
Civ. App. 1937). in which it was held that money unlawfully obtain-
ed could be rec:overed as having been paid under duress where the
payment was made under a threat to declare a forfeiture of the
lease, which could have been done without resort to the courts.
Hon. Bascom Giles, Page 7, V-1204
In the light of the above cases, it is our opinion that
all of the rental payments listed in your letter are subject to re-
fund under Article 4388 if they were unlawfully collected from
the State’s lessees.
The determination of the status of moneys held in sus-
pense undoerArticle 4388 is primarily a matter for the courts,
unless the Treasurer and Comptroller voluntarily assume the
responsibility of making such determination. In Daniel v. Rich-
creek, 118 S.W:2d 935, 937, the following was said with refer-
ence to refunds under this article:
“The fund was placed in the ‘suspension ac-
count’ of the Treasury by state officials acting under
Art. 4388, and can only be drawn out of said .account
when and in the manner prescribed by said Article,
-- that is: ‘as soon as the status of money so placed
*** is determined,’ when it shall be.transferred,, if
belonging to the state, by deposit in the Treasury, and
if found not. to belong to the state to be. ‘refunded.*
In either case the method is by warrant signed by
the Comptroller and countersigned by the Treasurer.
The Article is explicit in ‘requiring the ‘transfer, to
be made ‘as soon as’ which necessarily implies ‘not
before’ the ‘status’ of the money is ‘determined.’
Clearly the word ‘status, inciudes-every ess.ential
fact to its proper disposition, from the viewpoint
of the Treasurer, its then custodian, . . . . . .
“Under the Article no rightto demand the money
from the Treasurer could properly be asserted until
its ‘status’ is ‘d,etermined.’ There can be no s,erious
question but that ‘determined in the sense of the Arti-
cle means judicially determined. In any event, such
is its necess.ary meaning where .tbe Treasure~r and
Comptroller, each of whom must act to effectuate !a
transfer of the money, do not voluntarily assume the
responsibility of making such determination. To com-
pel their action a judicial proceeding is essential,
and this means a plenary and not a mere interlocu-
tory proceeding.,,
The rightof the State to collect rentals during the pen-
dency of litigation relating to the validity of such leases or the
Hon. Bascom Giles, Page 8, V-1204
authority of the Land Commissioner to lease the lands covered
thereby was involved in the recent case of Ohio Oil Co. v. Giles,
235 S.W.2d 630 (Tex. Sup. 1950). That was an original man-
damus proceeding in which the Ohio Oil Company and Melben
Oil Company sought to compel the refund of $123,360 in rentals
paid tothe Land Commissioner and to require him .Yto recog-
nize certain mineral leases as valid and, subsisting, without the
payment or necessity to pay any rentals for the period during
which” the leases were involved in litigation. Article 542li.
under which Ohlo and Melben sought this refund, provides:
“The running of the primary term of any oil, gas,
or mineral lease heretofore or hereafter issued by the
Commissioner of the General Land Office, which lease
has been, ‘is, or which may hereafter become involved
in litigation relating to the validity of such lease or to
the authority of the Commissioner of the General Land
Office to lease the land covered thereby, shall be sus-
pended, and all obligations imposed by such leases
shall be set at rest during the period of such litigation.
After the rendition of final judgment in any such liti-
gation the running of the primary term of such leases
shall commence again and continue for the remainder
of the period specified in such leases and all obligations
and duties imposed thereby shall again be operative;
provided such litigation has be,en instituted at least six
(6) months prior to the expiration of the primary term
of any such leases.,,
The Court upheld Article 54211 insofar as it related to
leases executed after its enactment and said that this Article ,ke-
lieves the lessees of the obligation to pay rentals during the”
period of litigation. (235 S.W.Zd at 637. Emphasis added.) Writ
of mandamus was issued by the Court ‘“commanding Bascom Giles,
R. S. Calvert, and Jesse James’ to refund to relators the sum of
$123,360, the amount of rentals paid by relators to Bascom Giles
under protest oneNovember 7, 1949, for the ensuing year.,,
However, the Court in the Ohio case did not pass upon
the question of whether the rentals ah would have been due under
the leases but for their suspension by Article 5421i during the period
of litigation will become due and payable upon the termination of the
litigation. The Court merely held that the lessee was relieved of
Hon. Bascom Giles. Page 9, V-1204
the obligation to pay rentals during the period of litigation, find-
ing it unnec’essary to decide whether Article 5421i forever re-
lieves State lessees of the obligation to pay rentals~ -for the per-
iod of litigation.
In view of the opinion of the Supreme Court in the Ohio
case, we are compelled to hold that the State had no right to=
quire the payment of rentals under State leases during the per-
iod that such lep.ses were involved in litigation re1ating:t.o their
validity or.to the authority of thenLand~commissioner to lease
the land conveyed thereby. The rental payments listed in your
letter having been made during the period that the leases were
involved in litigation within the meaning of Article 54211; these
payments should be ~refunded.to’the lessees under Article 4388.
.As you know, this office had previously differed yiith the .con-
elusion reached by the Supr~eme Court kthe Ohio case; and we.
so argued in the trial of that case, but the Co= opinion is now
binding and must beTfollowed.
‘This does not mean that the State does .not have the
J right, if the lessees choose to hold the leases after thstermi-
nation of the litigation involving the leases, to demand the pay-
ment of the rentals which fell due’during the litigation but were
suspended by Article 54211. As-above stated, the right of the
State to collect such rentals at that time was not ~passed’upon
by the Supreme Court in the Ohio case. It may be that if the
title of the State to the “tide1and’~area.k finally restored by
congressional action, the .rentals on leases’ in that area can be
recovered if the lessees elect to hold the leases.
It is our opinion, therefore, that the rental payments
listed in your letter should be refunded to the respective lessees,
subject to the right of the State to require their repayment if the
lessees elect to continue to hold the State leases after the termi-
nation of the litigation involving the leases.
For your guidance in the future, we call your’attention
to Senate Bill 146 of the 32nd Legislature, effective June 15,
1951, which clarifies Article 5421i by adding thereto the follow-
ing:
Y. . . Provided, further, that the lessee shall pay
all annual delay rentals and any royalties which accrue
during the period of litigation the same as during any
. . .
Hon. Bascom Giles, Page 10, V-1204
other period of the extended primary term. Such rent-
als paid during the litigation period shall be held in
suspense and returned to the lessee in the event the State
is unsuccessful in any such litigation.”
SUMMARY
Under the Supreme Court’s ruling in Ohio Oil CO.
v. Giles, 2.35 S.W.2d 630 (1950), the State had no right
to collect rentals from its lessees during the period
that the leases were involved in litigation relating to
the validity of ,such leases or the authority of the Land
Commissioner to lease the lands covered thereby.
Thes~e rentals, which were paid under an express or
implied threat of forfeiture and which are now being
held in suspense under Article 4388, V,C.S., should be
refunded to the respective lessees, subject to the right
of the State to require their repayment if the lessees~
elect to continue to hold the State leases after the ter-
mination of the litigation involving the leases.
Future payments of rentals will be governed by
~Senate Bill 146, Acts Stnd Legislature, effective June
15. 1951. passed by the Legislature after the decision
ip Ohio Oil Co. v. Giles. supra. which provides for
their continued payment during the period of litigation,
subject to being returned to the lessee in the event the
State is unsuccessful in the litigation.
Yours very truly.
PRICE DANIEL
APPROVED: AlhrneyGeneral
Charles D. Mathews
First Assistant
Price Daniel
Attorney General
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