I ,
%-HE .iiTl?ORNEY GENERAL
OF TEXAS
Honorable C. D. Simmons
Comptroller, University of Texas
Austtn, Texas
Dear SLr: Opinion No. O-5393
Re: Interpreta'cIonof S.B. 287, Acts
1943, Regular Session, Fortg-
eighth Legislature.
We are in receipt of your opinion request reading
in part as follows:
"The Board of Regents of the University of
Texas has directed me to request of you an opinion
as to your interpretation of Senate Bill No. 287,
Acts Regular Session, 48th. Legislature.
"The board of Regents particularly desires
your interpretation of the effect and meaning of
the language of the Bill which reads as follows:
"'The Board of Regents of the Unlverslty and
the Commissioner of the General Land Office, In
considering an application for an extension or re-
newal of any such lease above described, shall take
into consideration in establishing the consldera-
tion for such lease the diligence with which the
lessee has followed his duties under the existing
lease, the present value of the land upon which an
extenslon or renewal of the lease Is sought, and
all other good business practices.'"
S. B. 287, Acts 1943, Regular Session, 48th. Legls-
lature, which now appears as Article 53416 of Vernon's An-
notated Civil Statutes, reads as follows:
"Section 1. In the case of any nonproducing
oil, gas or mineral lease on University land, if
one hundred twenty (120) days before expiration of
the primary term there be In effect any restrictions
issued by a Federal war agency prohlblt1ng the drill-
ing or completion of a well thereon, the holder of
such lease shall have the right to negotiate an ex-
tension or renewal of such lease for a perlod of not
Hon. C. D. Simmons, page 2 o-5393
longer then two (2) years with the Board of Regents
of the Unlverslty of Texas and the Commlssloner of
the Qeneral Land Office.
“The Board of Regents of the %lversltg of
Texas and the Commlssloner of the Qeneral Land Of-
flee, in 0onslderUg an appllcatlon for an exten-
sion or renewal of any suoh lease above desorlbed,
shell take lnto oondlderatton ln establishing the
oonslderatlon for suah lease the dlllgenoe with
which the lessee has followed his duties under the
existing lease, the present value of the lend upon
which an extension or renewal of the lease Is sought,
and all other good business practloes. The lessee
In presentlng his applloatlon for extenslon or re-
newal of such lease or leases shall present evidence ’
to the Board of Regents of the University of Texas
and to the Commlssloner of the ffeneral Land Office
showlng it was lmposslble for hlm or any of his oo-
owners to comply with the restrlctlons whloh he
claims prohlblted the drilling or oompletlon of the
well on said tract.
“If the lessee should claim es grounds for an
extenslon or renewal of any such lease that there
Is fnsuffiolent acreage wlthln the tract under lease
by him to comply with the Federal reatrlotlon then
no extension or renewal shall be granted unless said
leases also show that there la no adjacent and ad-
joining acreage to sald traot whereln said eppllcant
is a party in lntereat that could have been combined
wtth the tract upon whloh the applloatlon for ex-
tenslon or renewal Is made ln order to oomplg wlth the
Feclerel restriction.
“Sec. 2. The Commlssloner of the General Land
Office 1s hereby euthorieed to Issue to the lease
owner such instrument In writing in the nature of an
extension or renewal of such lease as may be neces-
sary or proper to carry into effect the foregoing
/ provlsion of this Aot.
“Sec. 3. The provlslons of this Act are and
shall be held and oonstrued to be oumuletlve of all
General Laws of thls state on the subject treated of
and embraced ln thls Act when not ln oonfllot here-
wlth, but ln oane of oonfllot, ln whole or In part,
this Aot shell control.
"960. 4. If any seotlon, subdlvlslon, para-
Hon. C. D. Simmons, page 3 o-5393
graph, sentence, or clause of this Act be held
to be unconstitutional, the remaining portions of
same shall nevertheless be held valid and binding
"Sec. 5. The fact that certain leases on
University lands are of such size or shape as to
create the probability that they cannot be devel-
oped under governmental restrictions on 011 devel-
opments, creates an emergency and Imperative public
necessity demanding the suspenslon of the Rule re-
qulring bills to be read on three several days, and
sa1d Rule is hereby suspended, and this Act shall
take effect and be in force from and after its
passage, and it is so enacted."
It is our opinion that 3. B. 287 gives to a lessee
of University land, who brings himself wIthin Its terms, the
right to a refusal of an extension or renewal of his lease
for such term as the Regents and the Land Commissioner may
fix (not to exceed two years) and upon a consideration to be
determined by them. The word "shall" is used in the first
paragraph of S. B, 287 ln connection with the granting of a
benefit or a right. Under such circumstances the meaning is
held to be mandatory rather than permissive. 39 Tex. Jur.
37. In other words the Regents and the Land Comm%ssloner may
make an extension or renewal with present lessees of Univer-
sity lands, who come within the terms of the Act, wIthout the
necessity of a public sale and competitive bidding as provided
for by Article 2603a, Vernon's Annotated Civil Statutes.
The Act gives the Board of Regents and the Land Com-
missioner broad discretion in the matter of fixing a consid-
eration. The Act makes no provision for an appeal from the
action of the Regents and the Land Commissioner. Their action
in fixing a consideration would be, in our opinion, final un-
less an interested party were able to show a clear case of an
abuse of discretion on their part. Securities State Bank of
San Juan v. State, 169 S. W. 2nd. 554, refused for want of
merit. However, the Regents and the Land Commissioner would
not be authorized to discriminate between lessees similarly
situated, either in regard to the consideration or the period
of their extension or revewal. Railroad Commission v. Shell,
139 Tex. 66, 161 S. W. (2) 1022.
The next question is whether or not Section 5, Arti-
cle 2603a, Vernon's Annotated Civil Statutes, which provides
for a bonus, a royalty of l/8 of gross production and a delay
rental of lO# per acre per year, applies to an extension or
renewal under S. B. 287. Article 2603a by its terms applies
to a sale at public auctton on competitive bids. The sale
Hon. C. D. Simmons, page 4 o-5393
must be held by the Board for Lease of University Lands, which
Board consists of two members of the Board of Regents and~the
Land Commissioner. Article 26C3a, Sec. 1, Vernon's Annotated
Civil Statutes. Senate Bill 287, on the other hand, author-
izes the entlre Board of Regents and the Land Commissioner to
grant an extension or renewal to present lessees for a limlt-
ed period without competitive bids. The provlslon In Art.
26C3a, Sec. 5 for assessing the highest bidder a special fee
of one (1%) percent of the total sum bid to pay the expenses
of the sale, including the fee of the auctioneer crying the
sale, would clearly not apply to an extension or renewal under
3. B. 287. The fact that the lessee's right to invoke the
provisions of 3. B. 287 is condltioned on a showing that he
has been unable because of Federal restrictions to enjoy the
drilling rights which his lease confers, lndfcates to our
mind an intention to give such a lessee a further opportunity
for enjoying such rights without penalty. We take the view
that 3. B. 287 was intended to stand In place of performance
for a maximum period of two years, Lf the Board of Regents
and the Land Commissioner should, in their good judgment, de-
termine that a lessee of University land Is entitled to in-
voke Its provisions and is deserving of its benefits.
The common law recognizes a doctrine of implled in-
tention by which certain klnas of contracts ar,esuspended be-
cause of temporary impossibility of performance artsing after
the date of execution and without fault of the partles.
The general rule is epitomized in the Restatement
on Contracts, Sec. 462, as follows:
"Temporary imposslbillty of such character
that if permanent it would discharge a promiser's
entire contractural duty, has that operation if
rendering performance after the impossibility
ceases would Impose a burden on the promisor sub-
stantially greater than would have been imposed
upon him had there been no impossibility; but other-
wise such temporary impossibility suspends the
duty of the promlsor to render the p;rformance promised
only while the impossibility exists.
See, also Vol. 6, Williston on Contracts
(Rev. Ed. 19383 Sec. 1957; 17 C.J.S. 954, 956.
We do not here hold that such rule obtains in Texas,
as we do not think that such a determination is necessary
in order to answer your question. However, we do belleve that
the Legislature in enacting 3. B. 287 had In mind the equitable
claims arising from the plight of a lessee who is unable to
Hon. C. D. Simmons, page 5 o-5393
reap the fruits of his lease because of a Federal ruling and
these are the same considerations that underlie the common
law doctrine just mentioned. Upon a consideration of the
special circumstances under whleh 3. B. 287 becomes operative
and in view of the objects of the Act, we are of the opinion
that the Act is complete within itself and that the provi-
sions of Article 2603a, requiring a minimum consideration
for leases let at public auction do not apply.
We do not think that your question involves a ae-
termination of the rights of lessees of University land under
Sec. 7, Title III of the Second War Powers Act, approved
March 27, 1942. That section provides:
“(7) No person shall be held liable for
damages or penalties for any default under any con-
tract or order which shall result directly or ln-
directly from compliance with this subsection (a)
or any rule, regulation, or order issued there-
under, notwithstanding that any such rule, regula-
tion or order shall thereafter be declared by ju-
dicial or other competent authority to be invalid."
U. 3. Cong. Service Code (1942) 247; Tit. 50, U.S.C.A.
APP. Sec. 633 (7).
Subsection (a) which is referred to in the above
quotation is the section conferring priority powers on the
President. This section is the present source of authority
for Conservation Order No. M-68 as amended (8 F.R. 104) and .
Preference Rating Order No. P-98, as amended (7 F.R. 2719).
These orders, by prescribing conditions under which priority
directives on strategic materials are held not to apply, ~111
have the effect of rendering temporarily Impossible the per-
formance by some lessees of the drilling provisions under
existing University leases.
It is expressly provided In Sec. 1501, Title XV of
the Second War Powers Act, 1942 (U.S. Cong. Service Code, 253;
Tit. 50 U.S.C.A. App. Sec. 645) that Title III of that Act,
which -includesSec. 7, above quoted, "shall remain in force
only until December 31, 1944, or until such earlier time as
Congress by concurrent resolution, or the President, may des-
ignate."
We are familiar with the rule which gives Federal
legislation precedence over other State statutes where Congress
has legislated in regard to a subject which is within i,tscon-
stitutional control and over which it has the right to assume
exclusive jurisdiction and has manifested its intentionto
deal therewith in full. 11 Am. Jur. 307; 17 R.C.L. 694;
, .
Hon. C. D. Simmons, page 6 o-5393
Neville v. G. C. & 3. F. Ry. Co. (Corn.App.) 252 S.W. 483.
Rbw ever, in our opinion, Sec. 7 of Title III of the Second
War Powers Act, 1942, Is by Its terms operative only to the
extent of absolving a lessee from liability "for damages or
penalties for any default." Such Fs the general rule with
reference to contracts under which performance is rendered
illegal or impossible because of conditions occurring sub-
sequent to the date of their execution. Cinquegrano v. T.A.
Clarke Motors(R.D.) 30 A(2d) 859; Scanti v. American Auto
Supply co., 36 N. Y. 3. (2d) 747; 20 Texas Law Review, 710.
The contrary rule seems to have been adopted ln Texas where
the impossibility in performance resulted from the adoptlon
of prohibltlon under the Local Option Statute. Houston Ice
& Brewing Co. v. Keenan (1905) 99 Tex. 79, 88 S.W. 197. The
right to a suspension of contracts during the period of tem-
porary impossibility does not deem to be covered by the Fea-
era1 Act above quoted. The Federal Act merely says that
"no person shall be held liable for damages or penalties for
any default under any contract" etc. After the expiration of
the primary term in a standard 011 and gas lease, if the de-
lay rentals have been paid and no well has been drilled, the
obllgatlons of the lessee are ordinarily at an end. Failure
to drill during the primary term is not a "default" unless
the absolute form of drillfng clause Is employed. 31 Tex.
Jur. 740. This Is not the form of lease which the statute
(Art. 2603a, Sec. 5, Vernon's Ann. Clv. St.) authorizes the
Board for Lease of University Lands to make, nor the lease
provided for in your Form No. 4. See our Opinion No. O-493,
issued on March 15, 1939, to Mr. Leo C. Haynes, Secretary of
the Board of Regents. We are not here concerned with whether
lessees of University lands have common law rights indepen-
dent of the Federal statute to a suspension of their lease
agreements for such period as the enjoyment of the drilling
rights thereunder may have been rendered illegal or impossible
as a result of compliance with a rule, regulation or order of
a Federal War Agency. Our holding is that S.B. 287 is not
rendered inoperative, either by reason of the Federal statute
or by reason of the lessee's common law rights. It clearly
gives a lessee of University lands, who comes within its
terms, a right to something he did not have before, viz. the
refusal on a present extension or renewal for a fIxed period
beyond the primary term of his lease.
Trusting that the foregoIng sufflclently answers
your inquiry, we are
, .
Hon. C. D. Simmons, page 7 0 -5393
Yours very truly
ATTORNEY GENERAL OF TEXAS
By sbagan Dickson
Fagan DLckbon
Assistant
FD:BT:wc
APPROVED JUNE 24, 1943
s/Grover Sellers
FIRST ASSISTANT
ATTORNEY GENERAL
Approved Opinion Committee By s/BWB Chairman