Untitled Texas Attorney General Opinion ( 1989 )

JIM MA.rroX November 13, 1989
Honorable Bobby Joe Mann Opinion No. JM-1115
Palo Pinto County Attorney
Courthouse Re: Whether the Water Commis-
Palo Pinto, Texas 76072 sion has the authority to
create a district whose boun-
daries exclude mineral
estates located more than 300
feet below the surface of the
land and whether such mineral
estates must be taxed
(RQ-1457)
Dear Mr. Mann:
.. inform us that _in 1980 the Texas Water Commission
You
by written order granreo a petition authorizing the creation
of a municipal utility district within Palo Pinto County
designated %portsman‘s World Municipal Utility District.”
The petition approved by the commission set forth the
boundaries of the district, specifically excluding from the
boundary description the mineral estates located below a
depth of 300 feet under the surface area of the land
comprising the district. Consequently, as a practical
matter, all mineral interests within the surface boundaries
of the district below a depth of 300 feet from the surface
have been exempted from ad valorem taxation imposed by the
district since the district's creation.
Because of the requirement of article VIII of the Texas
Constitution that all property, except that specifically
exempted by the constitution, be taxed in any equal and
uniform manner, you ask the following question:
[A]re the mineral interests located under the
boundaries of the Sportsman's World Municipal
Utility District taxable for ad valorem taxa-
tion purposes by the Sportsman's World Munic-
ipal Utility District?
YOU also ask:
P. 5847
Honorable Bobby Joe Mann - Page 2 (JM-1115)
Does the Water Commission have the authority
to create a district whose boundaries exclude
a category of taxable property?
We will address initially your second question. We
answer it in the negative: the Texas Water Commission is
without authority to approve a petition authorizing the
creation of a municipal utility district that excludes from
its boundaries a particular class of taxable property,
specifically the mineral estates located below a depth of
300 feet from the surface area of the land comprising the
district.
There can be no question that, absent the Water
Commission order purporting to exclude from the boundaries
of the district the mineral estates below a depth of 300
feet under the surface of the land comprising the district,
such mineral estates would be taxable by the district. See.
u, Note, Ad Valom Tax&ion of Mineral Prooerty 21
Baylor L. Rev. 46 (1969). The issue then is whether' the
Water Commission has the authority to approve the creation
of a district that excludes such a category of taxable
property from the boundaries of the district.
The Sportsman's World Municipal Utility District was
created pursuant to section 59 of article XVI of the Texas
Constitution and chapter 54 of the Water Code. Section
54.013 of the code governs the composition of the district
and provides:
(a) A district may include the m in
all or part of any county or counties
including all or part of any cities and other
public agencies.
(b) The m composing a district need
not be in one body, but may consist of
senarate bodie of land separated by land
which is not' included in the district.
(Emphasis added.)
Section 54.014 of the code provides that, in order to
create a chapter 54 municipal utility district, a petition
requesting creation must be filed with the Texas Water
Commission [hereinafter the commission]. Section 54.015 of
the code sets forth the contents of the petition and
provides in pertinent part:
The petition shall:
p. 5848
Honorable Bobby Joe Mann - Page 3 (JM-1115)
(1) describe the of the pro-
posed district bv metes and bounQs or bv lot
if there is a recorded map
itiyefFt survey of the area . . . .
(Emphasis added.)
Section 54.020 of the code requires that, after proper
notice, the commission shall hold a hearing and Qhall
examine the petition to ascertain its sufficiency.18
Subsection (b) of section 54.020 provides that "[t]he com-
mission shall have jurisdiction to determine all issues on
the sufficiency of the petition and creation of the
district."
Section 54.021 of the code governs the granting or
denial of the petition and provides in relevant part:
(a) After the hearing of the petition if
it is found that the petition conforms to the
requirements of Section 54.015 of this code
and that the project is feasible and
practicable and is necessary and would be a
benefit to the m to be included in the
district, the commission shall so find by its
order and grant the petition.
(b) In determining if the project is
feasible and practicable and if it *
necessary and would be a benefit to the G
included in the district, the commission
shall consider:
. . . .
(3) whether or not the district and
its system and subsequent development
within the district will have an
unreasonable effect on the following:
(A) land elevation:
(W subsidence;
(C) groundwater level within
the region:
(D) recharge capability of a
groundwater source:
P. 5849
Honorable Bobby Joe Mann - Page 4 (JM-1115)
(El natural run-off rates and
drainage;
(P) water quality: and
((3 total tax assessments on
all land located within the district.
(c) If the commission finds that not all
of the u proposed to be included in the
district will be benefited by the creation of
the district, the commission shall so find
and exclude all m which is not benefited
from the proposed district and
She Drooosed district s bodies accord-
-. (Emphasis adde:.)
Neither section 54.013 nor any other section of the
code expressly authorizes the commission to approve a
petition authorizing the creation of a district that
excludes from its boundaries the mineral estate located
below the surface of the land comprising the district.
However, a brief submitted to us in connection with this
request concludes that the code impliedly authorizes the
creation of such a district. We summarize the argument as
follows:
Minerals in place are realty and, as such,
are subject to ownership, severance, and
;;d;; maer v. Stakeg, 294 S.W. 835 (Tex.
Dx s Co. v. Daua&&y 176 S.W. 717
(Tex.' 191:). A grant or keservation of
mineral interests by the fee owner effects a
horizontal severance and creation of two
separate and distinct estates: an estate in
surface and an estate in mineral.
m, 464 S.W.Zd 348 (Tex. 1971);
Ref. Co. v. Noa, 443 S.W.2d 35 (Tex. 1968).
Real estate ordinarily is taxed as a unit;
yet, where there has been a severance by
conveyance, exception, or reservation, so
that one portion of the realty belongs to one
person and other portions to others, each
owner should pay taxes under proper assess-
ment against him of the portion owned by him.
The fact that a portion may consist of
minerals or of a fractional interest therein
makes no difference. -v. NJxa:
State v. Downmgn, 134 S.W. 707 (Tex. Civ.
p. 5850
Honorable Bobby Joe Mann - Page 5 (JM-1115)
APP. 191>1), u, 231 U.S. 353 (19i3).
Because a grant or reservation of mineral
estates effects a horizontal severance and
creation of two separate estates, each of
which is taxable separately, the petition
seeking the creation of a chapter 54
municipal utility district may be drawn in
such a way as to exclude the mineral estate
and reflect that horizontal severance.
We disagree with this construction of the Water Code for two
reasons.
First, the severance of mineral interests by the 'fee
owner creates two separate mtateg in land. When the
severance is accomplished, each gstatg, that in the minerals
in place, and that in the remainder of the land, may be a
freehold, or an estate in fee simp1e.w aevs -Mexia
* co.
v. Gammon, 254 S.W. 296, 299 (Tex. 1923) (emphasis added).
The estate of a person is not the land itself, but the
status or relation that the law permits that person to bear
toward the land. &&&& v. Milti, 28 S.W. 940 (Tex.
1894). The term "estate" in law means the degree, quantity,
nature, and extent of one88 interest or ownership in land or
other tenements.
S.W.Zd 506 (Tex. 1962):
E ' (T:::
Comm'n App. 1931, judgm*t adopted). It may designate the
quantum, extent, or duration of one's ownership of a
particular item of property. Gibbs, i%zwr.a.
Different persons may, at the same time, bear different
relations, each constituting an estate in the land. Bouldin
Y. Mi.ue?cI-.
Sections 54.013 and 54.015 of the Water Code do not
provide that a municipal utility district comprise westates"
in land: rather they provide that a district comprise "area"
or "land" whose nboundariesVO are described by "metes and
bounds or by lot and block number." The word "land"
ordinarily includes a mineral estate, even when the minerals
are severed constructively from the surface. no110 v
own Heirs v. What&y 131 S.W.Zd 89 (Tex. 1::9;7
Tennantv. 110 S.W.Zd 53 (Tex. 1937);
eld v. Hoaq, 77 S.W.Zd 1021 (Tex. 1934).
Second, the petition to establish a district must
describe the wboundariesw by "metes and bounds or by lot and
block number." Water Code f 54.015. Boundaries mark out
the limits of the territory over which the district has
jurisdiction. m 2E. McQuillan, The Law of Municipal
p. 5851
Honorable Bobby Joe Mann - Page 6 (JM-1115)
Corporations f 7.02, at 359 (3d ad. rev. 1988). Boundaries
ordinarily are limits established laterally on the surface
of the land, and do not extend vertically to mark a
district's limits underground or in the airspace. $@= Doria
y. Suchowolsu, 531 S.W.Zd 360 (Tex. Civ. App. - San Antonio
1975, writ ref'd n.r.e.) ("boundary by aquiescence" is
generally a line established by a fence): 11 C.J.S.
Boundariee 9 1, at 538: & &I.G. Invesats v. E.P A,
;;:,",,f:."d1 (Ill. 1988) (boundaries generally involv;
not vertical measurement, but exception is made for
solid haste fill, which has boundaries expressed in
altitude).
%etes and bounds" refers to a method of measurement by
distances and angles from designated landmarks in relation
to adjoining properties. B. Garner, Dictionary of Modern
Legal Usage 359 (1987); set 11 C.J.S. Boundaries 5 4, at 542
(*metes" includes the exact quantity of land in square feet,
rods, or acres). Metes and bounds provide a two dimensional
measurement of land. A description of land by metes and
bounds indicates that its boundaries are on the surface, and
that the land is not limited by boundaries at a certain
subsurface depth or distance above the ground.
Thus, any district whose creation is approved by the
Water Commission consists of land marked out by boundaries
on the surface of the earth. The commission is not
authorized by the code to approve boundaries that limit the
district's jurisdiction vertically. Accordingly, we answer
your second question in the negative: The Water Commission
may not grant a petition seeking the creation of a chapter
54 municipal utility district whoae boundaries exclude the
mineral estate or a portion thereof below the surface of the
land comprising the district.
We note, however, that after the commission approves
the petition seeking creation of the district, but before
the district's governing board issues the district's first
series of bonds, the code requires the governing body of the
district to exclude "land or other property" from the
boundaries of the district under certain circumstances.
Section 54.701 provides in pertinent part:
(a) Before the board issues the first
series of district bonds payable in whole or
in part from taxes, the board may on its own
motion call a hearing on the question of the
exclusion of J&3.@from the district under the
provisions of Sections 54.702-54.707 of this
p. 5852
Honorable Bobby Joe Mann - Page 7 (JM-1115)
code, if the exclusions are practicable,
just, or desirable.
(b) The board must call a hearing on the
exclusion of w or otue*v from thg
er in the district
filed with the secretary of the board before
the district issues its first series of bonds
payable in whole or in part from taxes.
(Emphasis added.)
Section 54.704 of the code governs the petition for
exclusion from the district of "land or other property" and
provides in relevant part:
(a) A petition for exclusion of land must
accurately describe by metes and bounds or
lot and block number the land to be excluded.
A petition for exclusion of other property
must describe the property to be excluded.
Thus, it appears that the class of property that may be
excluded from the boundaries of the district by its
governing body m the initial petition to create the
district has been approved by the Water Commission is
greater than that which the commission may consider when
deciding whether to approve the initial petition. No case
decided under chapter 54 of the Water Code, which governs
municipal utility districts, has construed the phrase "land
or other propertyH that is set forth in section 54.701.
However, a case decided under chapter 51 of the code, which
governs water control and improvement districts and contains
a section virtually identical to section 54.701, has done
so.1
1. The 1925 codification of what later would become
chapter 51 of the Water Code provided that the district
comprise "land' and provided that "land" may be excluded
from the boundaries after its creation under certain
circumstances. No mention was made of "other property" or
"interests in land." Acts 1925, 39th Leg., ch. 25, 5 76, at
106. Two years later, section 76 of chapter 25 was amended
to provide that notice for exclusion of "land" from the
district must be afforded "to the owner or owners of the
(Footnote Continued)
p. 5853
Honorable Bobby Joe Mann - Page B (JM-1115)
W-s Countv Water Control 6 UggrovemeUst. No
, 304 S.W.Zd 281 (Tex. Civ. App - El Paso 1957,'
writ ref'd n.r.e.), the court of appeals upheld a trial
(Footnote Continued)
land and all others in anywise interested." Acts 1927, 40th
Leg., 1st C.S., ch. 107, 5 9, at 501. The "or other
property" language was included for the first time in a 1929
amendment to section 76:
After a district has been organized,
preliminary surveys have been completed, the
district does adopt plans for the
construction of a plant and improvements, and
before the district calls an election for the
authorization of construction bonds, there
rt be
anyexc::e- ::c"""""t"""""i
are
practicable, just or desirable, from the
district by means and upon conditions as
follows . . . .
Acts 1929, 41st Leg., ch. 280, 8 8, at 585. Such language
was retained in the 1957 amendment to then article 7680-76,
V.T.C.S. Acts 1957, 55th Leg., ch. 324, g 1, at 787. No
legislative history exists indicating what the legislature
meant by the phrase.
The Water Code was enacted in 1971, codifying the
general and permanent statutes relating to water rights,
water development, water quality control, river compacts,
and general law districts. Acts 1971, 62d Leg., ch. 58, at
110. The code was extensively amended by other 1971
amendments, including the addition of chapter 54, which
authorizes the creation of municipal utility districts. Id.
ch. 84, at 774. Title 4 of the code sets forth those code
provisions governing the creation and operation of 14
general law districts. Chapters 50 (containing provisions
generally applicable to general law districts), .52
(governing underground water conservation districts), 58
(governing irrigation districts), and 65 (governing special
utility districts), in addition to chapters 51 and 54, each
contain sections regarding the exclusion of "land or other
property" from the boundaries of the districts after the
petition seeking the creation of the district has been
granted. No case has construed the phrase under any of
(Footnote Continued)
p. 5854
Honorable Bobby Joe Mann - Page 9 (JM-1115)
court judgment excluding certain lands owned by one party
(who presumably owned both the surface and the subsurface
estates) and certain oil and gas leases owned by oil and gas
companies from the boundaries of a water control and
improvement district. The district comprised 140 square
miles of territory, SO percent of which was submerged by the
waters of two bays. The land that one party sought to be
excluded comprised 8,400 acres of Uustang Island. The oil
leases of the oil and gas companies were located under lands
that were submerged by the bays. The plans of the proposed
district did not call for, nor was any expenditure of
district funds shown for, providing service to any other
area other than the town of Port Aransas and the area
immediately adjacent thereto. Specifically, the plans did
not contain any provision for service either to the lands
sought to be excluded or to the submerged oil and gas
leases.
In affirming the trial court judgment excluding both
the land and the oil and gas leases, the court of appeals
stated:
The only two issues submitted to the jury
by the court were whether. the lands of
appellee Sam E. Wilson, Jr. would be
benefited by .the proposed improvements, and
as to whether the oil and gas leases of the
appellee oil companies would be benefited by
the proposed improvements. The jury answered
both questions in the negative. Appellant
objected to said issues because they were
immaterial, and because there was
evidence, and insufficient evidence, ::
support the jury's findings to said issues.
We overrule these points. There was ample
evidence to support the findings of the jury.
The question of benefit to the lands involved
is material, as is provided in the above
quoted statute.
(Footnote Continued)
these chapters, except for pueces County Water Control &
ist. No. 4 v. Wilsqn, 304 S.W.Zd 281 (Tex. Civ.
APP. - El Paso 1957, writ ref'd n.r.e.).
p. 5855
Honorable Bobby Joe Mann - Page 10 (JM-1115)
Ig, at 287: ~98 Attorney General Opinion H-881 (1976) (sets
forth background of law enacted by legislature granting
Corpus Christi certain submerged lands in Corpus Christi Bay
to use as public beach).
Thus, under chapter 51 of the Water Code, mineral
estates apparently can be excluded under subchapter 0 of
chapter 51 of the code. There is no authority, however, for
excluding such estates from the boundaries set forth in the
initial petition seeking the creation of the district that
must be passed on by the Water Commission. Analogously, we
assume that a court, if presented with a question of
exclusion of mineral estates under chapter 54 of the code,
would conclude that section 54.701 likewise authorized such
an exclusion under the phrase "land or other property."
See. e.a,, 59 Tex. Jur. 3d m SS l-4 (V1prope*yt'is a
broad term, referring not to a particular material object
but to the right and interest or domination rightfully.
obtained over such object, with the unrestricted right to
its use, enjoyment, and disposition, and includes not only
that which is perceptible to the senses but also that which
is intangible). We turn now to your first question.
You ask:
Are the mineral estates located under the
boundaries of the Sportsman's World Municipal
Utility District taxable for ad valorem tax
purposes by the Sportsman's World Municipal
Utility District?
Section 21.01 of the Tax Code provides that "[r]eal
property is taxable by a taxing unit u located in the unit
wJanuarv (emphasis added).2 Thus real property that is
not located within a taxing unit is not taxable by that
taxing unit. Mineral interests are interests in land and
2. Section 11, article VIII, of the Texas
Constitution sets forth the general rule governing situs of
property for purposes of taxation and provides in relevant
pa*:
All property, whether owned by persons or
corporations shall be assessed for taxation,
and the taxes paid in the county where
situated . . . .
p. 5856
Honorable Bobby Joe Mann - Page 11 (JM-1115)
are taxable in the taxing unit where the land islocated.
, 165
S.W.Zd 645 (Tex. 1943); m Countv v. Mid-w Oil &
Gas Co<, 254 S.W. 290 (Tex. 1923). Real property that is
omitted from the appraisal roll of a district is required to
be added to the roll and back appraised pursuant to section
25.21 of the Tax Code. In this instance, however, we are
unable to answer whether such excluded mineral interests
should be back appraised.
We do not have sufficient facts before us to determine
whether the initial petition proposing the creation of the
district is fatally flawed because of the failure to include
owners of the mineral estates. Section 54.014 of the Water
Code sets forth the requirements for the petition and
provides:
When it is proposed to create a district,
a petition requesting creation shall be filed
with the commission. The petition shall be
signed by a majority in value of the holders
of title of the land within the proposed
district, as indicated by the county tax
rolls. If there are more than 50 persons
holding title to the land in the proposed
district, as indicated by the county tax
rolls, the petition is sufficient if it is
signed by 50 holders of title to the land.
We do not have sufficient facts before us to determine
either whether the petition was signed by a majority in
value of the holders of title to the land when the value of
the mineral estates is added to the value of the surface
estates or whether there are more than 50 persons holding
title to the land in the district when the owners of mineral
estates are added. Nor are we empowered to make such
findings of fact.
In the matter of the creation and organization of
public and quasi-public corporations, there must be
substantial compliance with the conditions precedent
required by statut;;xa~l;;gCrutc~, 578 S.W.Zd 438
I writ ref‘d n.r.e.); State
eside vim 329
S.W.Zd 245 (Tex. Civ. App. - Fort Worth 1959, writ r;fld).
An irregularity, if harmless, in the creation of a municipal
corporation will not work an ouster under quo warranto.
We-s Countv ater Control & Imvrovement Dist. No. 4
270 S.W.Zd 672 (Tex. Civ. App. - Sk
p. 5857
Honorable Bobby Joe Mann - Page 12 (JM-1115)
Antonio 1954, writ ref'd n.r.e.); State ex rel. Miller vr
Troell, 207 S.W. 610 (Tex. Civ. App. - San Antonio 1918,
writ ref'd). In an instance in which the irregularity is
deemed sufficiently serious, a proposed district has been
declared to be without legal existence. fitv of Cornu
288 S.W.Zd 836 (Tex. Civ. App. - Sa:
writ ref'd) (court invalidated proposed
district when' relevant statute required petition to be
signed by "majority in number of the holders of title to t&
J&p& [within the proposed district] and the owners of a
majority in value of the lands ther& II and the owners of
the mineral estates were not considered in determining the
sufficiency of the petition: under the facts presented,
court found that less than a majority of landowners signed
No. 3 v. State, 73 S.W.Zd 1101 (Tex. Civ. App. - Texarkana
1934, writ dism'd) (irregularities in creation of levee
district would make district bonds voidable, not void).
Moreover, subsection (b) of section 54.701 of the code
provides:
The [governing] board [of the district]
must call a hearing on the exclusion of land
or other property from the district on the
wrA::enirtition of any landowner or property
the district filed with the
secretary of the board before the time the
first election on the question of the
issuance of bonds payable in whole or in part
from taxes is called.
The failure to provide for such a hearing amounts to a
denial of due process.
(Tex. 1927); State ex rel. Ma v. BaU
(Tex. 1927). We do not have sufficient facis before us to
determine, nor are we empowered to so determine, whether
such notice was, in fact, afforded.
We cannot answer your first question or other questions
about the possible consequences of our answer to your second
question. The ultimate resolution of such questions would
require us to make findings of fact, which we are not
empowered to make, and to evaluate the interests of various
parties who have relied on the boundaries of the district
established by the commission. &= Wallin-
Texas , 348 S.W.Zd 532 (Tex. 1961); b Sal18
p. 5858
Honorable Bobby Joe Mann - Page 13 (JM-1115)
OVement Dist. NO. 1 v. Gw 40 s.w.zd 892
(Tex. Civ. App. - San Antonio 1931, writ ref8& (when it is
claimed that a statute was not followed in establishing the
territorial limits of a special district as then
constituted, matter can be raised only by the state in a guo
warrant0 proceeding).
SUMMARX
Chapter 54 of the Water Code does not
authorize the Texas Water Commission to
permit the creation of a municipal utility
district that exc,ludesfrom its boundaries
the mineral estates located below a depth of
300 feet under the surface of the land
comprising the district. The code does
authorize the board of the district to
exclude such property after the Water
Commission has approved the petition seeking
the creation of the district. We are unable
to answer whether such mineral interests,
which were heretofore improperly excluded
from the district, should be added to the
district*s appraisal roll and back appraised
pursuant to section 35.21 of the Tax Code,
because we are given insufficient facts to
determine the validity of the creation of the
district, and we are not empowered to
determine such facts. The filing of an
information in the nature of guo warrant0 is
the proper method for resolving such a
matter, rather than the opinion process.
JIM MATTOX
Attorney General of Texas
WARYKELLER
First Assistant Attorney General
LOUMCCREARY
Executive Assistant Attorney General
JUDGE ZOLLIE STBARIBY
Special Assistant Attorney General
p. 5859
Honorable Bobby Joe Mann - Page 14 (JM-1115)
RICK GILPIN
Chairman, Opinion Committee
Prepared by Jim Moellinger
Assistant Attorney General
P. 5860