Untitled Texas Attorney General Opinion

: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 JPL:mf