Untitled Texas Attorney General Opinion ( 1987 )

August 25, 1987
Honorable Gamy Mauro Opinion No. JM-774
commissioner
General Land Office Re: Whether the Veterans Land Board
Stephen F. Austin Building may impose a fee for delivery of a
1700 North Congress Avenue paid-in-full deed to a purchaser
Austin, Texas 78701 under the Veterans Land Program
Dear Mr. Mauro:
As chairman of the Veterans Land Board and Commissioner of the
General Land Office, you request advice on the authority of the
Veterans Land Board to collect the fees authorized by section 161.070
of the Natural Resources Code from veterans who have purchased land
through the board. The Veterans Land Board was created by constitu-
tional provision. See Tex. Const. art. III. 149-b. Article III,
section 49-b of the constitution provides for the creation and funding
of the Veterans Land Fund, to be used to purchase land for resale to
veterans on terms, prices, and interest rates provided by law. Id.
The legislature passed an enabling act in 1949. Acts 1949, 51st Leg,
ch. 318. at 592.
Statutes governing the Veterans Land Board are now codified in
chapter 161 of the Natural Resources Code. Section 161.070 of the
Code, the provision about which you inquire, provides in part:
(a) The board shall set and collect, for the
use of the state, reasonable fees in amounts
determined by the board for services it may
provide in connection with processing and
servicing of purchase applications and contracts
of sale and purchase and matters incidental to
these purchases. These fees may include but are
not limited to the following:
. . . .
(2) contract of sale and purchase transfer
fee for each transfer;
(3) mineral lease service fee for each
lease executed by purchasers;
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Bonorable Gamy Mauro - Page 2 (JM-774)
. . . .
(6) fee for servicing and filing each
easement;
(7) service fee for each contract of sale
and purchase;
(8) fee for homesite, severance, or
paid-in-full deed;
(9) title examination fee;
(10) recording fees;
. . . .
(13) fee for preparation of legal instru-
merits, including but not limited to deeds,
contracts, affidavits, and curative instru-
ments;
. . . .
(16) fees for any other services which may
be requested of the board.
(b) These fees may be added to the price of
any land sold or resold by the board.
(c) Fees or portions of fees that are in the
opinion of the board unused shall be refunded.
(Emphasis added).
Nat. Res. Code P161.070.
You particularly inquire about the fee for issuing a paid-in-full
deed pursuant to subsection (a)(8) of section 161.070. The factual
information and the briefing you have provided focus on the collection
of a fee for that service. We will restrict our answer to this fee
and will not consider other fees authorized by section 161.070, since
different legal and factual considerations may apply to each fee.
Your three questions are directed at determining whether the
board has authority to collect the fee for issuing a deed upon full
payment of the loan if the land purchase contract predates subsection
161.070(a)(8) of the Natural Resources Code.
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Honorable Garry Mauro - Page 3 (JM-774)
The 1949 legislation for the Veterans Land Program did not
specifically provide for fees. In 1961. a deed fee of $10 was
authorized, and a later amendment increased it to $20. Acts 1961,
57th Leg., ch. 269, $3, at 572; Acts 1973, 63d Leg., ch. 615, 56 at
1690 (codified as former V.T.C.S. art. 5421m. $21 (repealed in 1977)).
In 1983, the specific amount of the deed fee was deieted from section
161.070 of the Natural Resources Code, and the board was authorized to
set the amount of the fee. Acts 1983, 68th Leg., ch. 81, 921(o), at
355, 406. The board promulgated a rule setting the deed fee at $80 in
September 1983. 40 T.A.C. 9175;17(8) (1983).
You state that the longstanding practice of the board has been to
collect from a veteran the amount authorized at the time the deed is
issued, regardless of the date the contract between the board and the
veteran was executed. In the board's opinion, the fee is directly
related to services provided by the agency and the amount to be
collected is determined by the date the service is provided.
You have attached a sample contract executed in September 1954.
We will address your question in the context of its provisions.
When the state enters into a valid contract, it is as much bound
thereby as a private citizen would be by a similar contract. Board of
Regents of the University of Texas v. S 6 G Construction Co., 529
S.W.Zd 90 (Tex. Civ. App. - Austin 1975, writ ref'd n.r.e.); Seaway
Company v. Attorney General, 375 S.W.Zd 923 (Tex. Civ. App. - Houston
1964, writ ref'd n.r.e.). The authority of state officers and agents
to contract is controlled by the law in effect when the contract was
entered into. Fasekas v. University of Houston, 565 S.W.Zd 299 (Tex.
Civ. App. - Houston [lst Dist.] 1978, writ ref'd n.r.e.). appeal
dismissed, 440 U.S. 952 (1979); see State v. Ragland Clinic-Hospital,
159 S.W.Zd 105 (Tex. 1942); State. Steck Co., 236 S.W.Zd 866 (Tex.
Civ. App. - Austin 1951, writ ref'd). The laws existing when a
contract is made constitute part of the contract. United States Trust
Co. V. New Jersey, 431 U.S. 1, 19 at n. 17 (1977); Langever v. Miller,
76 S.W.Zd 1025 (Tex. 1934); Housing Authority of El Paso v. Lira, 282
S.W.Zd 746 (Tex. Civ. App. - El Paso 1955, writ ref'd n.r.e.).
The 1954 contract which you have attached to your request letter
was entered into at a time when the Veterans Land Board had no
statutory authority to charge fees for issuance of a deed when the
loan was fully paid. Fee statures are strictly construed, and fees
are not permitted by implication. Moore v. Sheppard, 192 S.W.Zd 559,
561 (Tex. 1946); Nueces County v. Currington, 162 S.W.Zd 687, 688
(Tex. 1942); State v. Moore, 57 Tex. 307. 321 (1882); Attorney General
Opinion Nos. JM-346 (1985); H-796 (1976); V-957 (1949). Thus, when
the 1954 contract was entered into, the board had no express or
implied authority to charge a fee for providing a paid-in-full deed.
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The contract, moreover. expressly incorporates the provisions of
the veterans land law as they existed when it was executed. The
contract states in part:
Whereas, the Veterans' Land Board of Texas has,
in accordance with the provisions of Acts Slst
Leg., R.S., 1949, ch. 318, as amended by Acts 52nd
Leg.. R.S., 1951, ch. 324, purchased a certain
tract of land hereinafter described in this
instrument; . . .
Whereas . . . a duly qualified Texas Veteran as
described in said Act, as amended, has complied
with the requirements of said Board to purchase
said Land in accordance with the provisions of
said Act which is made a part of this contract for
all purposes;
Now Therefore, the following named parties do
make this Agreement:
. . . .
9. Seller agrees to execute a deed under its
seal to the original purchaser of the land when
the entire indebtedness due the state under this
contract of sale is paid.
10. It is agreed between buyer and seller that
all of the conditions, limitations and require-
ments as well as all benefits and penalties
contained in the provisions of Acts Slat Leg.,
R.S., 1949, ch. 318, as amended by Acts 52nd Leg.,
R.S., 1951, ch. 324, together with all rules and
regulations promulgated by the Veterans' Land
Board, shall be binding upon the parties hereto in
the same manner as if they were fully recited
herein.
In this contract, the parties agree to exchange land for a
purchase price and interest payable over a period not to exceed 40
years. They also exchange other promises, including the board's
agreement to execute a deed when the debt is fully paid off. The
veteran contracted for delivery of a deed as one aspect of the total
consideration he received for his promise to pay the debt and to
comply with other conditions required in the contract. When he
complies with those conditions, the contract gives him a right to
receive a deed without paying additional consideration.
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Honorable Garry Mauro - Page 5 (JM-774)
F.
Imposition of the $80 fee for the deed would therefore change
the terms of the contract. We will consider whether the legislature
may constitutionally authorize the board to collect the fee from
purchasers whose contracts entitled them to delivery of the deed
without any additional payment for that purpose.
.Article I, section 10. clause 1, of the federal Constitution
provides:
No State shall . . . pass any . . . Law impairing
the Obligation of Contracts. . . .
Article I, section 16. of the Texas Constitution similarly
prohibits the enactment of "any law impairing the obligation of
contracts. . . ." The contract clauses of the federal and state
constitutions apply to contracts entered into by states. Von Hoffman
v. City of Quincy, 71 U.S. 535 (1866); Fasekas v. University of
Houston, 565 S.Wx 299 (Tex. Civ. App. - ilouston [lst Dist.] 1978,
i-2Gref'd n.r.e.). ameal dismissed, 440 U.S. 952 (1979); Determan v.
z2t;r;f,fz. iekai: 609 f;.W.Zd 565 (Tex. Civ. App. - Dallas 1980,
johnso,;. Smith, 246 S.W. 1013 (Tex. 1922).
The contract clause appears to proscribe "any" impairment, but
its prohibition is not absolute. United States Trust Co. v. New
Jersey, 431 U.S. at 21; Home Building and Loan Assn. v. Blaisdale, 290
U.S. 398, 428 (1934). In Home Building and Loan Assn. v. Blaisdale,
m, the Supreme Court upheld the Minnesota Mortgage Moratorium Law,
which allowed judicial extension of the time for redeeming a
foreclosed mortgage. The act was a temporary provision, adopted in
response to mortgagors' hardships during the Depression. The Supreme
Court found that a reservation of state power necessary to protect the
oublic interest was deemed to be Dart of all contracts. Home Building
and Loan Assn. v. Blaisdale, 290 U.S. at 439. But see Tr;avelers'
Insurance Co. v. Marshall, 76 S.W.Zd 1007 (Tex. 1934) (Texa;; mortgage
moratorium act held to violate article I, section 16. of the Texas
Constitution).
In City of El Paso v. Simmons, 379 U.S. 497 (1965), the Supreme
Court dealt with a 1941 statute limiting the time in which purchasers
of school lands could redeem land forfeited for failure to pay
interest. Under a 1910 statute, the purchaser could redeem the
property for an indefinite period by paying delinquent interest. The
1941 statute limited to five years the time in which forfeited land
could be redeemed, applying this provision to existing contracts.
The pul'pose of the statute was to restore confidence in the
stability and integrity of land titles. City of El Paso v. Simmons,
379 U.S. at 511. The indefinite period for redemption had encouraged
land speculation, in that purchasers would make the small down
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Honorable Garry Mauro - Page 6 m-7741
payment, fail to make interest payments, and then redeem the land if
it appeared likely to produce oil or gas. The Supreme Court held that
in view of the state's interest in restoring the stability and
integrity of land titles and enabling the state to administer its
property in a businesslike manner to maximize revenues for the public
schools, the 1941 statute did not impair the obligation of contracts.
It moreover pointed out that the five year statute of limitations
would protect anyone with a bona fida interest in his land.
United States Trust Co. v. New Jersey, 431 U.S. 1 (1977) arose
out of au agreement between New York and New Jersey on the financing
of their jointly owned Port Authority. In 1962 the two states agreed
with each other and with holders of Port Authority bonds not to divert
to other uses any revenues or resemes pledged as security for those
bonds. In 1974. both states enacted legislation repealing this
covenant in order to devote revenues to mass transit. The Supreme
Court determined that the 1962 covenant had been properly
characterized as a contractual obligation of the two states, and that
its repeal impaired the states' contract with the bondholders. 431
U.S. at 21.
In determining whether chat impairment violated the Contract
Clause the Supreme Court discussed the states' reserved power to adopt
general regulatory measures even though private contracts might be
impaired. The court then stated:
When a state impairs the obligation of its own
contract, the reserved-powers doctrine has a
different basis. The initial inquiry concerns the
ability of the State to enter into an agreement
that limits its power to act in the future.
United States Trust Co. v. New Jersey, 431 U.S. at 23.
Reviewing prior decisions, the Supreme Court pointed out that a
state could not contract away the police power or the power of eminent
domain, but that a state could bind itself in the future exercise of
rhe taxing and spending power. Id. at 24. However, an impairment of
a state's own financial obligations might be constitutional if it is
reasonable and necessary to serve an important public purpose.
Complete deference to the legislature's assessment of reasonableness
and necessity is not appropriate because the state's self-interest is
at stake. The court further stated that
a State cannot refuse to meet its legitimate
financial obligations simply because its would
prefer to spend the money to promote the public
good. . . .
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431 U.S. at 29. The repeal of the 1962 covenant could be sustained
only if it was "both reasonable and necessary to serve the admittedly
important purpose claimed by the State." 431 U.S. at 29. The court
determined that total repeal of the covenant was not essential. In
addition, the two states could have discouraged automobile use and
improved mass transit without modifying the contract at all. city of
El Paso v. Simnons, was distinguished in that the imposition of a
five-year statute of limitations on what was previously regarded as a
perpetual right of redemption was "quite clearly necessary" to achieve
the state's "vital interest in the orderly administration of the
school lands program." 431 U.S. at 31. Finally, the 1962 covenant
was adopted with full knowledge of the need for mass transportation in
the area; the repeal cannot be said to be reasonable in light of
changed circumstances.
We turn to a consideration of the $80 fee imposed for issuance of
a paid-in-full deed under subsection 161.070(a)(8) of the Natural
Resources Code. This provision was included in Senate Bill No. 288 of
the Sixty-eighth Legislature, which was enacted in 1983 to increase
fees for services performed by state agencies to more nearly cover the
administrative costs of delivering the service. Bill Analysis to
C.S.S.B. 288, 68th Leg., filed in Bill file to S.B. No. 288, Legisla-
tive Reference Library.
An interim committee was appointed by the Sixty-seventh Legisla-
ture to study fees collected by state agencies and to recommend
changes. The report of the interim committee noted that reliance on
fees has been necessitated by several factors, including a decreasing
dependence on the ability of the property tax to support services.
Senate Committee on Fees and Grants, Interim Report to the 68th Texas
Legislature at ii (Nov. 10, 1982). The report also stated that
factors such as cost recovery and inflation contributed to its
recommendations for fee increases. Id. at iii, It noted that rises
in the consumer price index since-fees were set accounted for
recommended increases in fees collected by the General Land Office.
The proposed increases in Veterans Land Program fees set in 1949 would
account for a $600,000 net gain. Id. at 14.
Thus, section 161.070(a)(8) of the Natural Resources Code was
part of a legislative program to increase revenues by bringing fees
up to date. Neither the report nor the bill analysis mention the
existence of coutract provisions relevant to payment for services
subject to fee increases.
We first consider whether the imposition of an $80 fee on the
land purchase contract is a significant enough change in contract
terms to raise the issue of impairment. In United States Trust Co. v.
New Jersey, the Supreme Court wrote that
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Honorable Gamy Mauro - Page 8 (JM-774)
a finding that there has been a technical impair-
ment is merely a preliminary step in resolving the
more difficult question whether that impairment is
permitted under the Constitution.
431 U.S. at 21. Discussing United States Trust Co. v. New Jersey in a
later case, the Supreme Court characterized it as recognizing that the
state's sovereignmpower has limits "when its exercise effects sub-
stantial modifications of private contracts." Allied Structural Steel
Co. v. Spannaus, 438 U.S. 234, 244 (1978). The Supreme Court stated
that the first inquiry must be whether the state law has operated as a
substantial impairment of a contractual relationship:
Minimal alteration of contractual obligations may
end the inquiry at its first stage. Severe
impairment, on the other hand, will push the
inquiry to a careful examination of the nature and
purpose of the state legislation. (Footnote
omitted).
Allied Structural Steel Co. v. Spannaus. 438 U.S. at 245. See also
Energy Reserves Group, Inc. v. Kansas Power & Light, 459 U.S. 400. 411
(1983).
In our opinion. the assesssent of the additional $80 fee for
issuance of a deed constitutes an impairment that is more than a
minimal or technical impairsent. The individual veteran who
contracted before 1962 to purchase land from the state expected to
receive a deed upon full payment of the price stated in the contract.
In effect, the state hopes to charge the veteran $80 for a service
which it contracted to provide free of charge. Viewed from this
perspective, we believe the impairment of the contract is significant
enough to require some examination of the nature and purpose of the
legislarion. Allied Structural Steel Co. v. Spannaus, 438 U.S. at
245.
The severity of the impairment increases the level of scrutiny
to which the legislation will be subjected. Enrrgy Reserves Group,
Inc. v. Kansas Power & Light, 459 U.S. at 411; Allied Structural Steel
co. v. Spannaus, E. Even if the impairment in this case is
characterized as not very severe, the legislation would not survive
the corresponding low level of scrutiny. In this case, the state has
impaired its owe contract in order to increase fee revenues to support
the Veterans Land Board. The state may bind itself in the future
exercise of its spending powers. United States Trust Co. V. New
Jersey, 431 U.S. at 24. Thus, it did not contract away an essential
aspect of its sovereignty in contracting to sell veterans lands for a
specific consideration. The legislature enacted Senate Bill No. 288
to increase revenues to state agencies. In our opinion, this reason
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does not justify the contract impairment at issue. As the Supreme
Court stated in United States Trust Co. v. New Jersey:
A governmental entity can always find a use for
extra money, especially when taxes do not have to
be raised. If a State could reduce its financial
obligations whenever it wanted to spend the money
for what it regarded as an important public
purpose, the Contract Clause would provide no
protection at all. (Footnote omitted).
431 U.S. at 26.
In our opinion, the $80 fee may not constitutionally be assessed
of land purchasers whose contracts pre-date any fee provision. We
need not, therefore, address article I, section 16, of the Texas
Constitution. Based on a brief study of cases construing article I,
section lb, it appears likely that imposition of the $80 fee would
violate that provision as well. See, e.g., Hutchings v. Slemons, 174
S.W.Zd 487 (Tex. 1943) (statute of frauds pertaining to real estate
broker's contracts violates article I. section 16, of the Texas
Constitution insofar as it applies to contracts made nrior to its
effective date); Travelers Insurance Co. v. Marshall, 78 S.W.2d 1007
(Tex. 1934); Dallas County Levee Improvement District No. 6 v. Rugel,
36 S.W.Zd 188 (Tex. Comm. App. 1931, judgmt adopted); Cape Conroe Ltd.
v. Specht, 525 S.W.Zd 215 (Tex. Civ. App. - Houston 114th Dist.] 1975,
no writ) (substantive rights and duties of parties to contract are
established by law at time of contracting; subsequent law which
channes such rinhts and duties violates article I, section 16, of the
Texas Constitution).
SUMMARY
The Veterans Land Board may not impose a fee
for delivery of a paid-in-full deed authorized by
section 161.070 of the Natural Resources Code on
.
purchasers of land whose contracts entitle them to
delivery of the deed without payment of such a
fee. A statute authorizing imposition of the fee
in such cases would impair the obligation of
contract and thus violate article I, section 10.
clause 1, of the United States Constitution. _
JIM MATTOX
Attorney General of Texas
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Honorable Garry Mauro - Page 10 ml-774)
MARY KELLER
Executive Assistant Attorney General
JUDGE ZOLLIE STEAKLEY
Special AssistantsAttorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Susan L. Garrison
Assistant Attorney General
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