Untitled Texas Attorney General Opinion ( 1957 )

AUU-I-IN11.Twx~n
March 19, 1957
.
Honorable Earl Rudder
Commlasloner, Qeneral Land
Office
Aua tin, Texas
Opinion No. WW-59
Re: Authority of the School Land
Board to reaclnd Its action in
accepting a bld for lease of
school land when the acreage la
found to be materially different
from that stated In the adver-
tlaement for blda and related
ques tlona .
Dear Commlsaloner Rudder:
Your letter of February 25, 1957, requested our
oplnlon. on four questions relating to mineral leasing by
the School Land Board. .Becauae of the rather unuaual fact
situation Involved and Ita bearing upon our opinion, your
letter is set forth almost in its entirety at the beginning
of this opinion:
.~~“On October 24, 1956, the School Land Board
authorized advertlalng for 011 and gas lease.
among other land, a tract described a8 Tract a,
Aranaaa River, San Patrlclo and Refuglo Counties.
The .tract~ wae advertlaed aa containing approx-
imately 210 acrea and on the basis of a l/6 royal-
ty, $3.00 per acre annual rental and a minimum
bonus of $15.00 per acre. This action by the
Board waa under the provieiona of Article 542lc,
V.C.S. and othe,r applicable laws.
“Purauant to the advertleement, bids were
’ received on December 4, 1956 and the high bid
o on the tract here involved waa $87,000.00. At
the aame time the bidder aubmltted a separate
check in the amount of $870.00 ,ln payment of the
’ .
Honorable Earl Rudder, page 2 (No.WW-59)
Special Sale Fee ;,requlred by Article 5382d-1,
V.C.S. The high bid on this tract, aa well a8
other high bids, was accepted by the Board at
a meeting held on December 12, 1956.
“Immediately after the acceptance of *the
bid by the Board, the $87,000.00 waa cleared
to the Permanent Free School Fund and the $870.00
was cleared to the Special Fund provided bi
Article 5382id-1.
“After this time, but before a lease was
issued, I waa lnSox?ied. by the bidder that there
was some doubt as to the State’s title to the
,tract and further that there apparently was con-
sldizrably’ ,lesa acreage in the tract than the ad-
‘vertlsed 210 acrea. Based on this Information,
I verbally advised the bidder that I would wlth-
hold the Issuance of a lease until further lnvestl-
gation,could be made. The lease has not yet been
Issued. ‘~ ’
“The bidder has now submitted evidence to
the Board In the form OS a. survey ,oS the tract
which shows It to contain 54.97 acres as com-
pared to. the advertised acreage of,210 acres and
has’.requeated the Board to reconsider and rescind
its action of December 12, and refund his money
to him.
. .
“As noted above, the payments made.have bee;
cleared to the funds provided by law ahd cannot
now be &funded by this office. It. happens in
this case, however, that the’ bidder .la making
payments on other leases in the ,Sorm.oS royalty
. payments’which amount to approximately $8,500.00
er month;: These r,oyalty’ payments.;:: like the’
! 87.000.00 payment, sre depos1ted.M the State
Treasury. to ,the credit of the Permanent. School
Fund.. :’
., ‘. :
11. . . . ,.~. ! ; I,
,I*; :r ?ir vi&w> of. the .Soregolng’ Sac ta .and” c$rcum-
1 stsnces , your, ~offlclal opinion 18: requested on the
follblng ‘gtiatlona :~‘..- . ,,,,
.‘. ..,
lb Does the Sciiibbl Land Board have the
.1 ’
Honorable Earl Rudder, page 3 (No.WW-59)
authority to rescind Its action In accepting
;;; E;MYon,December 12, 1956 and now reJect
2. If your answer to question number 1
la In the afflimatlve, can I legally credit the
bidder on othet payments he la now’maklng on
other leases uqtll such time as thi? ~87,000.00
payment la absorbed?
3. IS your answer to question number 1 la
In the affirmative, can I legally credit the
bidder on payments he might make on Suture lease
salea until such time as the $870.00 payment la
absorbed?
4. IS your answers to questions riumbers
2 and 3 are In the negative, la there any other
way the bidder can secure a refund of the pay-
ments he has made?”
The questions will be answered separately and in
the order propounded.
1.
It Is apparent that a mistake OS Sect has been
made by both the School Land Board and the bidder. The
Board advertised for lease a tract of approximately 210
acrea. The bidder calculated his bid upon such acreage.
It was not until s.ometlme later that the mistake was dla-
covered and the actual acreage content of the tract to be
leased was determined; This situation la outside the
scope of Article 5421c, Vernon’s Civil Statutes, as the<’
statute did not anticipate nor provide for reclaalon by
the Board; Neither does this article prohibit such
action. It Is simply silent In this regard.
Ample authority la Sound, however, for the basic
premise that till State agencies must deal fairly and
equitably with those with whom they transact business.
That the State must do equity la evidenced by the Sollow-
ing language from State v. Bradford, 121 Tex. 515, 50 S.W.
2d 1065 (1932):
1 “The State has e right to exact strict
obedience to Its laws and Constitution, but
it should also be the policy of the State to
‘r,4i8 Honorable Earl Rudder, page 4 (No.WW-59) ,,
deal,Salrly with those uho, In good faith,
have. accepted‘lta offer to purchase public
lands upon terms fixed by the State. That
It Is the public policy of ,the State to deal
fairly with those viho have purchased Its
public landa and for some reason have not
received the.correct acreage so purchased ’
and conveyed, the Legislature enacted Article
5411, R.S.1925. . . .*
Equity requires that relief be granted when one
party Is injured by an agreement entered Into through a
mutual mistake as to a material fact. This principle has
always been recognized by Texas courts.
“That a contract may be entirely rescinded
upon the ground of mutual mistake, as well aa
for fraud, la well settled. In such cases,
where the parties auppoee they are bargaining
with reference to specific property which they
have In mind, when In fact It either does not
exist or Is materially different from what they
believed It to be, it la very evident that
their minds have not met and concurred so as
‘to constitute a contract as to the real subject
matter, as it Is afterwards ascertained to be,
and that the conveyance of the property as It
3 really exiata (though lt may be Identified as
therein described) does not evidence the true
Intention of the parties In making the con-
tract.” Pendarvis v. Qrax, 41 Tex. 326 (1874).
It Is irue that aome diligence. on the part of con-
tracting partlea ia required, 80 that mlatakea will not be
made. However, a party making an actual misrepresentation
of fact, even though made In good faith, cannot prevent a
recovery by the Injured party simply by saying that the ln-
jured party was negligent in not discovering the mlsrepre-
sentatlons as they were made. Host v. First National Bank,
247 S.W. 637 (Tex.Clv.App.1922) affirmed 259 S.W. 923.
The Courts have glven some criteria by which to
measure the .occaslon when the mistake Is OS such conse-
quence as to require equitable relief. The baalc require-
4 ment Is that the surplus or deficit so greatly exceed the
Honorable Earl Rudder, page 5 (No.WW-59)
amount of land contemplated that such error, IS known, would
have material1 Influenced’ the contract. g’Connel1 v. Duke
29 Tex. 299 (1867). The following caaea cite specific ex- ’
ample3 of errors oalllilg’ for relief.
O’Connell v. Duke, supra - 348 acrea excbas over
750 acres called.
, 6 S.W.2d 143 (Tex.Clv.App.,l928)
02 acrea ahort out of 2,000 called.
Hobertz v. Dunhaq 224 S.W. 549 (Tex.Clv.Ap
1928) 54.55 acres short out of 33 E ‘&x-es
called.
Cox v. Barton, 212 5.w.652 (Tex.Comm.App.1919)
16 acres short out of 100 acres
called.
Because of the existence of a mutual mistake of fact
as to the ! land available for leasing by the School Land Board,
a gross mistake of 155.03 acres short out OS 210 acres called
for, there was obviously never a meeting of the minds as to the
real subject matter of the lease to be awarded. For this rea-
son, It la our opinion that equity not only permits, but re-
quires, the Board to rescind Its action In accepting the bid
and now reJect the same ss requested by the bidder.
2.
Your second question suggests that other obllga-
tlona of the bidder to the Permanent Free School Fund be
credited as they came due until the consideration he has paid
for the lease that 1s not to be Issued la absorbed. We are
of the opinion that such procedure cannot legally be accom-
pllshed.
The retention of the $87,000.00 tendered by the
bidder, without the awarding of the lease, creates an ln-
debtedness on the part of the State In Savor OS the bidder.
This Indebtedness la to be retired by offsetting obllga-
tlona of the bidder as they accrue. There la no assurance
that these obligationi will Sully offset the lndebtedneaa,.
nor Is the rate of this retirement of lndebtednese certa’ln
or necessarily constant. Retaining the consideration wlth-
out aw$rdlng the lease wohld simply place the State In debt
270
Honorable Earl Rudder, page 6 (No.WW-59)
to the bidder, regardless of what provlslons are made for.
the retirement of the State’s Indebtedness. Such action
prohibited by Article III, Section 49 of the Texas Cons tl
tlon, which reads, In part:
,.
“No debt shall be created by or ‘ofi be-
half of the State, except to supply oaaua~
deSlclencles of revenue, repel lnvaalon,
. * suppress Insurrection, defend the State in
war, or pay existing debt; . . .’
While It la true that thla constitutional provl
allows the creation of a debt to pay existing debt, It Is
felt that the obligation of the State to return the bldde
money la such a debt as la contemplated by this section.
Historically, the debts spoken of In this manner were exr
of the revolutionary struggle with Mexico, expenses of gc
ment generally and deficiency appropriatiOn3 for salary E
other operating expenses of the State. The tender of a t
by a lease bidder can be returned In the manner dlacuasei
answer to your fourth question and does not create a debt
within the meaning of this constitutional provlalon. The
Sore, we are of the opinion that the anawer to your secor
question must be ‘In the negative.
3.
Your third question Is Identical with your sect
except that a different fund la involved. THe same reaal
applies, however, and your third question must also, In 1
opinion, be answered negatively.
4.
Your fourth inquiry la directed at a method of
turning the bonus to the bidder IS the bid can be redect
In our opinion, this may be accomplished by following th
procedures outlined In Article 5411a, V.C.S. This artic
was passed to cover exactly such altuatlona as this.
State, supra, The caption of the Act shows
clear lenislstlve Intent In this resoect. Acts 49th Len
R..i. +945, ch. 145, p. 190.
4 Because of the special nature of the Permanent
Free School Fund with Its Constitutional protections, SC
,
.
. *
: b
:c’;/ I
Honorable Earl Rudder, Page 7 (No.WW-59)
In Article VII, Sections 4 and 5, the application of Ar tlcle
5411a to this fund must be made In view of these protective
provls Ions. The pertinent portions of the sections are
as follows :
Section 4. “The lands herein set apart
to the Public Free School Fund, shall be sold
under such regulation, at such times, and on
such terms aa may be prescribed by l&wi and the
legislature shall not have the power to Grant
any relief to purchasera thereof. . . .
Section 5. '. . . And no law shall ever
be enacted appropriating any part of the permanent
or available school fund to any other purpose what-
ever; . . .”
Both of these sections are aimed at protecting the
established fund. They prohibit appropriations of parts of
the fund for any purposes save those specified In the Constl-
tiltion. But for moneys to partake of these protective sanction@
they must actually be a part of the fund. A contlnuPng appllca-
tlon of the equitable requltiments laid down In State v. Brad-
ford, aupra, discloses that the bonus paid by the bidder was
In good faith, but nevertheless erroneously, placed in the
School Fund. It should not have Eeached the fund, for there
was no meeting of the minds sufficient to give rise to a con-
tract obligating the bidder to tender a bonus. In the eyes
~of equity, this money was never actually a part of the fund.
In all oases we have Sound where these two protective
clauses were Invoked In behalf of the fund, It was never ques;
tloned but that the moneys or land Involved had clearly become
a part of the fund. These cases struck down attempts to
relinquish mineral rights to the surface owners of lands
dedicated to the fund, reduce Interest rates ‘on purchase in-
debtedness, appropriate moneys to other than school purposes,
etc. They never dealt with the situation where the recovery
aought was for moneys or land not properly a part of the fund.
Equity requires the action of the Board be rescinded
and the bid rejected. Equity also requires the bonus erroneous-
ly placed In the Permanent Free School Fund be recognized as
not actually a part of the fund at all and thus subJect to re-
fund under the provisions of Article 541la. Honeys paid
by the bidder and erroneously placed In the Permanent School
Fuhd or In the Lease Sales Fund may be refunded to the bidder
., .
Honorable Earl Rudder,.page 8 (No.WW-59)
by an appropriation authorized by Article +lla, such appro-
priation being baaed upon the bidder’s application for relief
to the Claims and Aocounta Committee of the Legislature.
‘I‘7:., > ,suMMARy
., I
1. The School Land, Board has the *
authority to,resclnd Its action In accep~t-
~,, lng the b/d on December 12,19.56, and now
reject the bid.
‘, 2. The Board cannot legally credit the
bidder on other .payments he la now making on
.other leases until such time as the $87,000.00
payment la absorbed.
3. The Board cannot legally credit the
bidder on payments he might make on future
lease sales until such time as the $870.00
payment la absorbed.
4. The bidder can secure a refund of
the payments he has made under the provisions
of Article 5411a, V.C.S., after approprla-
tions have been made therefor.
Yours very truly,
WILL WILSON
A,ttorney General
By &-+ * ‘pw)
APPROVED: Robert E. Anderson
Asalstant Attorney General
OPINION COUMITTEE
H. Orady Chandler
Chairman
RE%:bt
a