Untitled Texas Attorney General Opinion ( 1983 )


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  •                                      The Attorney             General of Texas
    March 23, 1983
    JIM MATTOX
    Attorney General
    Honorable Joe C. Hanna                   Opinion No. JM-18
    Supreme Court Building
    P. 0. BOX 12546
    Chairman
    Austin. TX. 78711.2548         Energy Resources Committee               Re: Whether House Bill No. 226
    5121475.2501                   Texas House of Representatives           relating to reporting ownership
    ~46.~ 910/874.1367             P. 0. Box 2910, Capitol Station          of mineral interests severed
    Telecopier   512/475-0266      Austin, Texas   70769                    from surface estate and to
    proceedings for abandonment of
    1607 Main St., Suite 1400                                               unreported mineral interests
    Dallas. TX. 75201.4709                                                  violates article I, section 19
    2141742.8944                                                            of the Texas Constitution
    4824 Alberta Ave., Suite 160
    Dear Representative Hanna:
    El Paso. TX. 79905-2793
    9151533.3484                        You have requested our opinion regarding the constitutionality of
    T-
    House Bill No. 226, presently pending before the Sixty-eighth
    Legislature. The bill provides:
    ,c20 Dallas Ave., suite 202
    Houston, TX. 77002.6986
    7131650-0666                                Section 1. Policy. The purpose of this Act is
    to assure that productive use of mineral reserves
    and natural resources will not be prevented by the
    806 Broadway, Suite 312
    existence of abandoned mineral interests.
    Lubbock, TX. 79401.3479
    8061747.5238
    Section 2.   Definitions.   In this Act:
    4309 N. Tenth, Suite 6                        (1) 'Abandonment'     means  actual    and
    MCAII~~, TX. 78501.1685                    voluntary relinquishment of an interest in
    5121682.4547
    minerals that is intended to be permanent, by
    the owner of the interest.
    200 Main Plaza. Suite 400
    ~3x7 Antonio. TX. 78205.2797                  (2)  'Mineral interest' means an interest in
    5121225.4191                               minerals in place that is severed from the
    ownership of an interest in the surface, and
    An Equal Opportunltyl                      includes a fee interest. whether conditional or
    Affirmative Action Employer                not, executive right, royalty interest, life
    estate, estate for years, remainder, reverter,
    possibility of reverter, leasehold, or any
    other present possessory interest, future
    interest, equitable interest, or concurrent
    ownership interest.
    p. 76
    Honorable Joe C. Hanna - Page 2    (JM-18)
    (3) 'Interest in the surface' means a fee
    interest, whether conditional or not, from
    which a mineral interest has been severed.
    (4) 'Person' means     a  natural person,
    corporation, business trust, estate, trust,
    partnership, or association.
    (5) 'Surface owner' means a person who has
    concurrent or sole legal right or title, except
    the holder of a leasehold or an estate for
    years, to a present interest in real property
    from which a mineral interest has been severed.
    Section 3. Report of Ownership of Mineral
    Interest. (a) A person who owns a mineral
    interest on September 1, 1983. must file a report
    with the county clerk of each county in which part
    of the interest is located before September 1,
    1984. A person who acquires or creates a mineral
    interest after September 1, 1983, must file a
    report with the county clerk of each county in
    which part of the interest is located before the
    first anniversary of the date the person acquires
    or creates the interest.
    (b) The    report must    be   subscribed and
    acknowledged in the same manner as is required for
    a deed and must contain:
    (1) the name and address        of   the   person
    claiming the interest;
    (2) the date the person acquired or created
    the interest;
    (3) a legal description of the interest; and
    (4) a general description of the nature of the
    interest.
    Section   4. Recording    of   Reports. (a) A
    county clerk may charge the same filing fee for
    recording a report under this Act as is authorized
    for recording a deed.
    (b) Each county clerk shall maintain a public
    record of reports filed under this Act separately
    from other records in the clerk's office. The
    p. 77
    Honorable Joe C. Hanna - Page 3    (JM-18)
    clerk shall keep the record in the same manner as
    is required for deeds.
    Section 5. Effect of Failure to Report. An
    owner of a mineral interest who does not file the
    report required by this Act is presumed to have
    abandoned the interest, and title to the interest
    is presumed to belong to the surface owner.
    Section 6. Judicial Proceeding. A surface
    owner may file a petition for declaratory judgment
    in the district court of the county in which the
    real property is located, requesting the court to
    declare a mineral interest abandoned.
    Section 7. Notice of Proceeding. In an action
    for declaratory judgment under this Act, citation
    shall be issued to the last known owner or owners
    of the abandoned mineral interest as shown by the
    official records of the county clerk of the county
    where the property is located and shall be served
    in accordance with the Texas Rules of Civil
    Procedure.
    Section 8. Evidence of Nonabandonment. A
    mineral interest is not abandoned if the owner of
    the interest appears at the abandonment proceeding
    or if the owner files the report required by this
    Act before the court renders a judgment declaring
    the interest abandoned.
    Section 9. Vesting of Title. (a) If a court
    declares that a mineral interest is abandoned,
    title to the interest vests in the current owner
    or owners of the surface interest from which it
    was severed, with each owner taking the same share
    and the same type of ownership in the mineral
    interest as the person has in the surface.
    (b) A person who acquires title to a mineral
    interest in an abandonment proceeding under this
    Act may record in the same manner as a deed a
    certified copy of the judgment as evidence of
    title.
    Section 10. Applicability. This Act does not
    apply to a mineral interest owned by          a
    governmental body or agency.
    p. 78
    Honorable Joe C. Hanna - Page 4    (JM-18)
    For the following reasons. we conclude that House Bill No. 226 is
    unconstitutional under the due process clauses of the United States
    and Texas Constitutions. We do not reach the question of whether the
    bill is unconstitutional in other respects.
    The fourteenth amendment to the United States Constitution
    provides that no state may "deprive any person of life, liberty, or
    property without due process of law." Article I, section 19 of the
    Texas Constitution provides that no citizen of Texas shall be deprived
    of life. libertv. or orooertv "exceut bv due course of the law of the
    land*”   .       . -   -  .   .     -   .
    These guarantees are essentially synonymous. Mellinger v.
    City of Houston, 
    3 S.W. 249
    , 252 (Tex. 1887).
    Courts utilize a two-step analysis to determine whether a person
    has been deprived of life, liberty, or property without due process of
    law. First, the court decides whether a constitutionally cognizable
    life, liberty, or property interest exists. If it finds that such an
    interest does exist, it then decides what procedures constitute "due
    process of law" under the circumstances and whether those procedures
    have been followed. Ingraham v. Wright, 
    430 U.S. 651
    , 675 (1977);
    Sullivan v. University Interscholastic League, 
    599 S.W.2d 860
    , 863
    (Tex. Civ. App. - Austin 1980). aff'd in part, rev'd in part, 
    616 S.W.2d 170
    (Tex. 1981).
    In Texas, due process attaches to vested property rights in
    mineral estates. Brown v. Humble Oil and Refining Company, 
    83 S.W.2d 935
    (Tex. 1935). Therefore, our due process analysis of House Bill
    No. 226 must focus on the second step in the two-step process. The
    requirements of both procedural and substantive due process must be
    satisfied. Eggemeyer v. Eggemeyer, 
    554 S.W.2d 137
    , 140 (Tex. 1977).
    At a minimum, procedural due process requires that a deprivation
    of life, liberty, or property by adjudication be preceded by notice
    and opportunity for a hearing appropriate to the nature of the case.
    Mullane v. Central Hanover Bank & Trust Company, 
    339 U.S. 306
    , 314
    (1950). "Due course of the law of the land" requires a law that hears
    before it condemns, oroceeds uuon inauirv. and renders iudement onlv
    .                        I   -
    after trial. Union Central Life Insurance Company v. -Ch&nin&, 2k
    S.W. 982, 984 (Tex. 1894). The right to notice and sn opportunity to
    be heard must be granted at a meaningful time and in a meaningful
    manner. Fuentes v. Shevin, 
    407 U.S. 67
    , 80 (1972). The notice must
    be reasonably calculated to apprise interested parties of the pendency
    of the action and afford them an opportunity to present their
    objections. The notice must also afford a reasonable time for
    preparation. Constitutional requirements, however, are satisfied if,
    with due regard for the practicalities and peculiarities of the case,
    these conditions sre reasonably met. 
    Mullane, supra, at 313-18
    .
    p. 79
    Honorable Joe C. Hanna - Page 5    (JM-18)
    Section 7 of House Bill No. 226 provides for notice to certain
    mineral interest owners that a declaratory judgment proceeding has
    been instituted by the owner of the surface estate to have the court
    declare the mineral interest abandoned. The notice is to be issued to
    the last known owner or owners of the mineral interest as shown by the
    official records of the county clerk where the property is located and
    is to be served in accordance with the Texas Rules of Civil Procedure.
    On the other hand, the notice procedure fails to provide for service
    of citation to known owners not of record and to unknown owners.
    In Texaco, Inc. v. Short, 
    454 U.S. 516
    (1982), the United States
    Supreme Court dealt with an Indiana statute which was somewhat similar
    to House Bill No. 226. This statute, the Indiana Dormant Mineral
    Interests Act, provided that a severed mineral interest not used for a
    period of twenty years automatically lapsed and reverted to the owners
    of the surface estate unless the mineral interest owner had filed a
    statement of claim in the local county recorder's office. The statute
    contained a two-year grace period in which owners of mineral interests
    subject to lapse might preserve those interests by filing the
    statement of claim. The purpose of the statute, as articulated by the
    Indiana Supreme Court, was to remove impediments to the development of
    mineral interests that arose because of the existence of unused,
    -    stale, and abandoned mineral interests.
    One of the arguments made in Short was that the statute's notice
    provisions were constitutionally infirm because they did not require
    that any specific notice be given to a mineral owner prior to a
    statutory lapse of a mineral estate. Relying on Mullane v. Central
    Hanover Bank and Trust Company, surpa, the appellants contended that
    the lack of adequate notice deprived them of due process of law. The
    Supreme Court disagreed, however, stating:
    The reasoning in Mullane is applicable to a
    judicial proceeding brought to determine whether a
    lapse of a mineral estate did or did not occur,
    but not to the self-executing feature of the
    MineralLapse Act. The due process standards of
    Mullane apply to an 'adjudication' that is 'to be
    accorded finality.' (Emphasis 
    added). 454 U.S. at 535
    . The Court concluded that because the lapse of a
    mineral estate resulted, not from a judicial proceeding, but from the
    application of a self-executing statute, the existence of which
    everyone was presumed to be aware, the notice provisions of the
    statute were not constitutionally deficient.
    The feature that distinguishes House Bill No. 226 from the
    Indiana statute is that, under the former, a mineral interest is lost
    ,p   &    after a judicial proceeding. Even if one concedes that everyone
    p. 80
    Honorable Joe C. Hanna - Page 6    (JM-18)
    would, after House Bill No. 226 becomes effective, be presumed to be
    aware of its existence, one cannot conclude that everyone is presumed
    to be aware of the pendency of a judicial proceeding initiated under
    it. On the contrary, Mullane establishes that those who may be
    affected by the outcome of such a proceeding must be given such notice
    as is reasonably calculated to inform them of its pendency.
    We do not believe that the notice provisions of House Bill No.
    226 are reasonably calculated to apprise everyone who might be
    affected by a suit instituted thereunder of the pendency of that suit.
    As noted, these provisions fail to provide for any kind of notice,
    even notice by publication, to known owners not of record and to
    unknown owners. To take away the mineral interests of owners who are
    not served with any citation whatsoever would, in our opinion, clearly
    deprive those owners of due process of law.
    Although the lack of adequate notice provisions is sufficient to
    invalidate House Bill No. 226 on procedural grounds, we believe that
    the bill also violates substantive due process.        In determining
    whether substantive due process requirements are met, courts balance
    the gain to the public welfare resulting from the legislation against
    the severity of its effect on personal and property rights. A law
    violates substantive due process when it is arbitrary or unreasonable,
    i.e., if the social necessity of the law is not a sufficient
    justification for restricting the rights involved. In the Interest of
    B-M-N, 
    570 S.W.2d 493
    , 503 (Tex. Civ. App. - Texarkana 1978, no writ).
    In Texaco, Inc. v. 
    Short, supra
    , the United States Supreme Court
    held that the Indiana act met the constitutional requirements of due
    process. In reaching its conclusion, the Supreme Court stated:
    [J]ust as a State may create a property interest
    that is entitled to constitutional protection, the
    State has the power to condition the permanent
    retention of     that property    right   on   the
    performance of reasonable conditions that indicate
    a present intention to retain the interest.
    
    Id., at 526.
    The Court concluded that Indiana had not exercised this
    power in an arbitrary manner because each of the actions that the
    state required the mineral interest owner to take in order to avoid
    abandonment of his interest furthered a legitimate state goal. If the
    owner engaged in production, or collected rents or royalties from
    another person engaged in production. his interest was protected; this
    furthered the state's goal of developing mineral interests. If the
    mineral interest owner paid taxes, his interest was protected; this
    furthered the fiscal interests of the state. If the mineral interest
    owner filed a statement of claim, his interest was protected; this
    furthered the state's goal of developing mineral interests by
    p. 81
    Honorable Joe C. Hanna - Page 7    (~~-18)
    identifying and locating the owners of the mineral interests. "The
    State surely has the power to condition the ownership of property on
    compliance with conditions that impose such a slight burden on the
    owner while providing such clear benefits to the State." 
    Id., at 529-30.
    In our opinion, House Bill No. 226 is clearly distinguishable
    from the Indiana act. Under the latter, non-use for twenty years
    raises an irrebuttable presumption of abandonment, while House Bill
    No. 226 allows only a one-year period in which the mineral interest
    owner must file a statement of claim or suffer the institution of a
    judicial proceeding on the issue of abandonment can be instituted. It
    is conceivable that a court, when faced with a substantive due process
    challenge to House Bill No. 226, could rely on this time period
    difference to distinguish the holding in Short. More importantly,
    however, the two acts are distinguishable in terms of the conclusions
    that they permit. Under the Indiana act, it was the lack of 9      use
    of a mineral interest for a period of 20 years that resulted in the
    irrebuttable presumption of abandonment of the interest. Even if
    there were such lack of use, the owner of the interest could still
    retain it by filing a statement of claim. Under House Bill No. 226,
    on the other hand, it is only the failure to file a required report
    that creates the presumption that the interest has been abandoned.
    Whereas the Court in Short found, in effect, that it was not
    unreasonable to conclude that an owner of a mineral interest had
    abandoned that interest where he did nothing for a twenty-year period
    to indicate his intent to retain it, we believe that our courts would
    be loathe to find intent to abandon where the only evidence of such
    intent is the failure to file a particular report.
    The legislature may provide, as a rule of evidence for a judicial
    proceeding, that certain facts will raise a presumption of other
    facts, and such presumptions do not deny due process if there is a
    rational evidentiary relationship between the proven facts and those
    presumed. See Mobile, Jackson & Kansas City Railroad Company v.
    Turnipseed, 
    219 U.S. 35
    (1910) (injury to persons by operation of
    railroad is prima facie evidence of negligence). Clem v. Evans, 
    291 S.W. 871
    , 872 (Tex. Comm'n App. 1927, holding adopted) (presumption
    that promises to do future acts, made as inducement to enter into
    contract and not performed within reasonable time, were fraudulently
    made). In our opinion, a presumption of abandonment cannot rationally
    arise from the fact that a property owner fails to file a report
    within a one year period.      Such a presumption disregards other
    evidence relevant to abandonment, such as payment of taxes or efforts
    to produce minerals occurring shortly before the one year period.
    Compare Attorney General Opinion M-821 (1971) (presumption of
    abandonment of mineral estate arises from failure for twenty years to
    pay taxes, transfer estate, or explore for or produce minerals).
    p. 82
    .   .
    Honorable Joe C. Hanna - Page 8    (JM-18)
    In Lobley v. Gilbert, 
    236 S.W.2d 121
    (Tex. 1951). the Texas
    Supreme Court stated:
    A presumption is a rule which 'draws a
    particular inference as to the existence of one
    fact, not actually known, arising from its usual
    connection with other particular facts which are
    known or proved.'. . . It is founded upon and
    must conform to the commonly accepted experiences
    of mankind. . . .   It must be based upon an
    established fact and cannot rest upon a presumed
    fact. (Emphasis added). (Citations 
    omitted). 236 S.W.2d at 123
    , quoted in Beck v. Sheppard, 
    566 S.W.2d 569
    , 571
    (Tex. 1978). We do not believe that a valid presumption of intent to
    abandon a mineral interest may arise under this test where the only
    fact giving rise to the presumption is the failure to file a
    particular document.
    We therefore conclude that House Bill No. 226 is unconstitutional
    on substantive due process grounds. We believe, however, that there
    are methods of dealing with the problem of abandoned mineral interests
    which comport with the requirements of the constitution.           See
    generally Texaco, Inc. v. Short, 
    454 U.S. 516
    (1982). V.T.C.S. arz
    3272-3289 (escheat statutes).
    In closing, we note that either of these problems is sufficient
    to invalidate House Bill No. 226. Their impact in combination is even
    more offensive to the due process clause. To couple defective notice
    provisions with a defective presumption is. in our opinion, to produce
    too much weight for the scales of justice to withstand.
    SUMMARY
    House Bill No. 226 relating to proceedings for
    abandonment of unreported mineral interests is
    unconstitutional under the due process clauses of
    the United States and Texas Const tutions.
    dzh
    JIM     MATTOX
    Attorney General of Texas
    TOM GREEN
    First Assistant Attorney General
    p. 83
    .
    Honorable Joe C. Hanna - Page 9    (JM-18)
    DAVID R. RICHARDS
    Executive Assistant Attorney General
    Prepared by Jon Bible
    Assistant Attorney General
    APPROVED:
    OPINION COMMITTEE
    Susan L. Garrison, Chairman
    Jon Bible
    Carl Glaze
    Jim Moellinger
    Bruce Youngblood
    p. 84