Untitled Texas Attorney General Opinion ( 1951 )

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September 25, 1951
Hon. Robert S. Calvert Opinion No. V-&293
Comptroller of Public Accounts
Austin, Texas Rc: Validity of tax alien on min-
eral estate after reversion
Dear Mr. Calvert: to remainderman.
Your letter requesting our opinion upon the above cap-
tioned matter reads as follows:
“We are enclosing a letter written to this Depart-
ment on May 20th by W. W. Anderson, Taq Assessor-
Collector, Yoakum County, Plains, Tcxes;i a copy of a
letter written to Mr. Anderson by the First National
Bank in Dallas, Texas, on May 17, 1951; and a copy of
a letter written to Mr. W. F. Worthington; Vice Presi-
dent of the First National Bank in Dallas,,Texas, by
Worsham, Forsythe ii Riley in regard to the possible
cancellation of taxes charged against oil and gas leases
and a royalty interest for the years 1936 ,and 1937 on
Sections 396, 397, 420 and 421 in Yoakud Ceunty. Ycu
will note from the correspondence that a reservation
of the mineral interest was limited to a period. of fif-
teen years, after which the interest, reverted to the fee
owners. Since the reservation of fifteen years has ex-
pired, we have been requested to advise the Tax Asses-
sor-Collector whether or not the taxes are coHectible,
and whether the original tax lien against, the mineral
interest is now a lien against the minerals now held by
the remainderman.
“Will you please advise whether or not the taxes
are collectible. This Department has made no ruling
on the question and so far as we know there is no liti-
gation pending that will determine the matter.”
Section 15 of Article VIIf of the Texas Constitution pro-
vides:
“The annual assessment made upon landed prop-
erty shall be a special lien thereon; and all property,
both real and personal, belonging to any delinquent tax-
payer shall be liable to seizure and sale for the payment
of all the taxes and penalties due by such delinquent; and
Hon. Robert S. Calvert, Page 2 (V-1293)
such property may be sold for the payment of the taxes
and penalties due by such delinquent, under such regu-
lations as the Legislature t-nay provide.”
Under the above section of the Constitution and the
statutes made in pursuance thereto, the tax collector may seize
and sell personal property of the delinquent for the taxes due on
real property, as well as personal, before resorting to the sale of
the realty. Wynne v. Simmons Hardware Co., 67 Tex. 40, 1 S.W.
568 (1886). The tax may be collected by sale of the particular
property on whi,ch it is assessed by enforcing the lien, or by the
sale of that or other property under a judgment of the court. City
of Henrietta v. Eustis, 87 Tex. 14, 26 S.W. 619 (1894).
Minerals contained in land when severed from the land
by a proper conveyance may be taxed separately from the land it-
self. State v. Downman, 134 S.W. 787 (Tex. Civ. App. 1911, error
ref.). :
You are therefore advised, in answer to the first por-
tion of your question, that taxes assessed against a mineral inter-
est, whether it is a working interest or a royalty interest, although
the mineral interest was limited to a period of 15 years by virtue
of A mineral reservation which has now expired, are collectible as
the personal obligation of the person to whom assessed and should
not be canceled by the tax assessor-collector.
The letter referred to in your opinion request sets
,forth the following fact situation:
“It appears that the taxes are delinquent for the
years 1936 and 1937. However, after reviewing the file
on this matter, I do not believe that these taxes can now
be legally assessed against these mineral interests
which are owned by Mrs, Lillian Shook Cunningham and
Mr. Robert BI Shook, for the following reason. The
minerals that are assessed are the minerals that were
reserved to R. H. Wellborn iu a deed dated May 1, 1933,
from R. H. Wellborn to Lillian Shook Cunningham, et
al. This reservation of minerals was only for a period
of 15 years from May 1, 1933, and unless oil, gas, or
other minerals were discovered within said 15-year
period and then for so long thereafter as said minerals
were produced in paying quantities. It appears that no
production of minerals of any kind or character was
ever secured from such land andby the expressed terms
of the reservation in the deed, such one-half reserva-
tion of minerals in favor of R. H. Wellborn automatical-
ly expired on May 1, 1948. By reason of this fact, the
Hon. Robert S. Calvert, Page 3 (V-1293)
lien that the Tax Assessor may have had on such min-
eral interests likewise would have expired on May 1,
1948. In other words, the lien for the taxes could not
be any greater than the interest upon which it was as-
sessed. The Tax Collector could, when these taxes
became delinquent in 1936 and 1937. have foreclosed
against R. H. Wellborn, or his assigns, upon the unex-
pired term of these interests, but could not have forc-
closed upon any greater interest. Since these inter-
ests all expired on May 1, 1948, the lien for taxes can-
not in my opinion be assessed against the Shooks. who
now own the property, because the assessment was not
made against the Shook8 originally or against their in-
terest, but simply against the limited term of 15 years
reserved by R. H. Wellborn.”
It appears from our investigation that there are two
distinct systems of ad valorem taxation in effect in different states.
In a portion of the states the rule announced by the courts in con-
struing the statutes of those states is that lands shall be valued AS
a whole,, irrespective of the separate estates that individuals may
own in them. In those states the person who enjoys the possession
of the real estate, as well as the profits, is charged with the tax.
In other states, by reason of the wording of the taxing statutes, sep-
arate estates in real estate are separately assessed and collected.
3 Cooley, Taxation (4th Ed, 1924) 2936. In stating the rules, Cooley
uses the following language:
‘“The legislature has power to provide either that
the tax-sale shall create a new title cutting off all prior
liens, encumbrances and interests, or to provide that
the tax purchaser shall acquire the interest only of the
person in whose name the land was assessed or of the
real owner. Observing the statutory directions and
precautions, and the principles of the common law and
of public policy, to which reference has been made, the
officer may transfer to the purchaser the full interest
in the land which has been assessed, and may convey
A complete and perfect title if such is the provision of
law on the subject,as in many states is the case. [Here
are cited numerous cases from various states; however,
Texas is not cited as a state that comes within that cat-
egory.] Indeed, it has been said that ‘The prevailing
opinion seems to be that a tax title is a new title, and
not merely the sum of old titles.’ Generally a tax-title
divests all interests in the land sold and vests in the
grantee an independent and paramount title. Where the
whole title is sold it cuts off and divests estates in re-
mainder or reversion, rent charges, trust estates. home-
Hon. Robert S. Calvert, Page 4 (V-1293)
stead interests, inchoate rights of dower, mortgages
and other encumbrances, judgment liens, and even back
taxes and tax-titles, unless other provision is made:
but in some states the sale is only of the title whichthe
person taxed had at the time, while in others nothing
passes but the title and interest of the parties who were
made defendants to the judicial proceedings anterior
to the sale. Where the distinct interests of different
owners are assessed separately, a sale of the land for
a tax against one does not cut off the interests of oth-
ers. . ~ *“
The rule as to the nature or quantum of estate ac-
quired by the purchaser at a tax sale is stated in an annotation in
75 A.L.R. 416 as follows:
“There are two opposing theories as to the ef-
fect of a tax sale and the nature or quantum of estate
acquired by the purchaser. They are thus summarized
by Malcolm, J., in Philippine Islands v. Adrian0 (1920)
41 Philippine, 112: ‘There are two distinct doctrines
on the subject of what passes by the sale of property
for back taxes. In many states where the tax is a
charge on the land alone, where no resort in any event
is contemplated against the owner or his personal es-
tate, and where the proceeding is strictly in rem, the
title conveyed by a sale for nonpayment of taxes is not
merely the title of the person who had been assessed
for the taxes and had neglected to pay them, but a new
and paramount title to the land in fee simple absolute,
created by an independent grant from the sovereign,
and free from all equities and encumbrances existing
prior to the sale upon the title of the previous owner.
According to this view, the tax title is a breaking up of
all titles, and operates not to support but to destroy
them, It is a new and perfect title emanating from the
state, and not merely the sum of old titles. The sec-
ond doctrine, prevailing in other jurisdictions where
the proceedings for the collection of taxes upon real
estate are looked upon as in personam, is that the pur-
chaser at the tax sale gets no better title than was held
by the person assessed. According to this view, where
the law requires the land to be listed in the name of the
owner, provides for a personal demand for the tax, and,
in case of default, authoriaes the seizure of the person-
al property of the delinquent in satisfaction of the tax,
and permits a sale of the land only when all other rem-
edies have been exhausted, the title is a derivative one,
and the purchaser acquires only the p,pparent interest,
whatever it is, of the tax delinquent.
Hon. Robert S. Calvert, Page 5 (V-1293)
In State v, Campbell, 41 SW. 937, 938 (Tent-i. Sup.
1897), there is a complete discussion of these two systems of ad
valorem taxation. The Tennessee Supreme Court, applying the
derivative title and separate assessment rule, concludes:
““So, then; the purchaser at a tax sale can only
acquire such interest derivatively as the tax debtor
had in the land, It is obvious the state cannot sell the
interests of remainder-men In such lands, against
whom no tax has been assessed. If the state can sell
such interests it is obvious the purchaser at such tax
sale would acquire all interests the state could sell.
But we have seen that, under the ruling in City of
Nashville v. Cowan, the purchaser only acquires such
interest as the tax delinquent owned in the land, ‘x&h-
out prejudice to the rights of other parties, such as
remainder-men, mortgagees, or other incumbrancers.’
Again, it is settled in this state that a tax on land, when
imposed, becomes a debt of the taxpayer, for which a
suit may be brought as upon any other debt. Mayor,
etc., V. McKee, 2 Yer. 167; Rutledge v. Fogg, 3 Cold.
568,”
We have been unable to find any Texas decisions di-
rectly in point upon the question before us, but by reason of the
following statutes and decisions of this State, it is our opinion that
Texas has ranged itself with those states whose legislation has
been framed to give th$e purchaser at a tax sale only a derivative
title. We are aware of the opinion by the Supreme Court of Texas
in Danciger v. State, 140 Tex. 252, 166 S.W.%d 914 (1942), which
held that the State would not be entitled to have a sale under exe-
cution of other property of the tax debtor until it had exhausted its
remedy under the order of sale. However, we do not deem this to
be controlling in that in Texas a suit for ad valorem taxes is not a
suit strictly in rem, and a personal judgment can be secured against
the tax debtor and any property of the tax debtor subject to execu-
tion may be levied upon,
Section 7 of Article 7345b, V.C.S., provides:
“In the case of foreclosure, an order of sale
shall issue, and, except as herein otherwise provided,
the land shall be sold thereunder as in other cases of
foreclosure of tax liens.*
Article 7328, V.C.S., provides, in part, as follows:
m
0 0 . and in case of foreclosure an order of sale
shall issue and the land sold thereunder as in other
n
cases of foreclmsure~ 0 . 0 a
Hon. Robert S. Calvert, Page 6 (V-1293)
Article 3816, V.C.S., provideo:
“When a sale has been made and the terma
thereof complied with, the officer shall execute and
deliver to the purchaser a conveyance of all the right,
title, interest and claim which the defendaat in exe-
cution had in and to the property ssld.”
The regular printed form of deeds used in tax forcclo-
sure suits in Texas contains the provision that only the right, title
and interest of the defendant in the tax suit is being conveyed. This
clearly shows the construction placed upon our turstfan statutes by
those charged with the collection of ad valorem taxes.
The opinion of the Supreme Ceurt of Texas in the early
case of Yenda v. Wheeler, 9 Tex. 406 (1853). clearly indicates that
the purchaser at a tax sale In Texas receivaa only a derivative
title. This case has been followed ia principle by other Texas
cases. Sanchez v. Hillyer-Deutrch-Jarratt Co., 27 S.W.2d 634(Tex.
Civ. App. 1930, error ref
22 S.W.Zd 688, 692 (Tex.
“It was recited in the petitim of the state, upon
which the tax judgment was based, ‘that the defendants
are now in possession of and are,claiming and assert-
ing ownership to all the land set .out and described.’
We agree with appellees that the state and all parties
holding under the tax judgment are bound by all the
recitations in this petition, and that appellant has not
acquired, under the foreclosure sale, the title of any
person not a party to that proceeding, and not embraced
within the term “unknown owners,’ nor the title of any
owner in actual or visible possession of the land.”
It is clear from the above cited Texas cases, as well
as from the wording of our tax statutes, that a tax foreclosure suit
in Texas is not strictly in rem; that a purchaser at a tax foreclo-
sure sale in Texas does not receive a new and paramount title to
the land in fee simple absolute, created by an independent grant
from the sovereign, free from all equities and encumbrances upon
the title of the previous owner, existing prior to the sale.
Where there has been a severance of the minerals in
a tract of land for a limited term of years, either by deed or res-
ervation, there are created two separate and distinct interests in
the land which are subject to taxation. Sheffield v. Ho
290, 77 S.W,2d 1021 (1934), The owner
term of years should render his interest for taxation at its true
market value, which value would be less than if he owned the min-
erals in fee. At the same time the owner of the fee should render
.. .
Hon. Robert S. Calvert, Page 7 (V-1293)
the surface for taxation, together with the value of the reversion-
ary interest that he owns in the minerals, The owner of the sur-
face would have the right to dispose of such reversionary interest,
and if he alienated it, the person acquiring the reversionary inter-
est would have an interest in real estate subject to taxation. It is
apparent that the surface estate in the land would have a greater
value by reason of the limitation imposed upon the mineral inter-
est, in that the mineral interest would revert to the owner of the
surface upon the termination of the term of years imposed upon
the mineral estate. The value of the mineral estate will necessar-
ily decrease as its term nears an end. while at the same time the
value of the surface will be enhanced in a like amount. These
facts should be taken into consideration in valuing the mineral es-
tate as well as the surface estate. O’Connor Y. Quintana Petro-
leum Co., 134 Tex. 179, 133 S.W.2d 112 (1939).
Article 7146, V.C.S., provides:
“Real property for the purpose of taxation,
shall be construed to include the land itself, wheth-
er laid out in town lots or otherwise, and all build-
ings, structures and improvements, or other fixtures
of whatsoever kind thereon, and all the rights and
privileges belonging or in any wise appertaining there-
to, and all mines, minerals, quarries and fossils in
and under the same.((
The Commission of Appeals in Electra Independent
School District v. W. T. Waggoner Estate, I40 Tex. 483 168 S .w. ,:
Zd 645 649 (1943) in
’ an opinion adopted-by the Suprem: Court,
after q)uoting Artille 7146, w, said:
“Under the statute quoted it has been held that
a conveyance of oil and gas in place in the ground is
an interest in realty which is subject to taxation in the
hands of the grantee. Texas Co. v. Daughtrty, 107 Tex.
226, 176 S.W. 717, L.R.A. 1917F. 989; Stephens Coun-
ty v. Mid-Kansas Oil & Gas Co., 113 Tex.-160, 254 S.W.
290, 29 A.L.R. 566. It has been held that minerals con-
tained in land when severed from the land by a proper
conveyance may be taxed separately from the land it-
self, State v, Downman, Tex. Civ. App., 134 S.W. 787,
writ refused; Downmsn v. State, 231 U.S. 353, 356, 357,
34 S. Ct. 62, 58 L.EX. 265. Royalty interests in oil and
gas acquired under instruments conveying minerals in
place are taxable as realty. Federal Royalty Co. v.
State, Tex. Civ. App., 42 S.W.2d 670; Sheffield v. Hogg,
124 Tex. 290, 77 S.W.2d 1021; Id., 1.24 Tex. 290. 80 S.
W.2d 741.
..,’,“. .,
Hon. Robert 5. Calvert,, Page B (V-&%93)
“Article 7144 of Vernen’n Amot.Wzd CiviI Stat-
utes of Texas, provides bow zeal e6Ws sbauld be ran-
de2Wd fQF t#lslutiOZS. ‘I. Tha uamu of the @armerr abrtrmt
number, number of survey, the aumber af the certifi-
cate, the name of the original grantee, the number of
acres, and the true and full value thereof. 2. , ,. . ’
“It has been decided by this Court t&at the lien
provided by Section I5 of Article 8 of the Constitution
of Texas, Vernon’s Ann. St., and deciaxatsry statutes
gutacted pclrsusnt thereto attaches only to each aepa-
rate tract or parcel of land for the taxes asSes6ed a-
gatu:t it. Richey v. Moor, 112 Ttx. 493, 249 S.W. 172.
. . .
Article 7328, V.C.S., provides, h part:
“The progex perPoas, including al1 record lien
br.?ide~rs, shalt be made partis defendant in 6uCh outt
. . .
Where the mineml Inters& wa6 separately assessed
agaiast the owner and the revrrefc+eny interest was or should have
been separately aeSe66ed s&n6t the tsmeindesmaa, the lien pro-
vided for in Section 15 sd Article YIfl of the Texas Comtituticn
we&d at&& only to the tnhOrai iCteCu6t tars the tax66 as8essed
against it; and the owner of the minerals,, together with the record
lien holders, if any, would be the aaly praper or necessary parfle
in a euit to foreclor,e tk6 conetit@ttial and statutory lien. The re-
meinderwm would bo aeitbea 6 ptopor war a necessary psrty. In
such a suit, if brought by the State lrofore the expiration of the dn-
erat estate, the parcharor at the tax foreeioxiure would acquire only
wlzrtever interest the dsfemkwt baa in the miaeral6, and upon the
expiration of the miners1 estate his tex titke wouid terminate. If
the State delays brin$hq a srsit lpinst the perron who owned a lim-
ited mineral estate until such time a6 the minerals had passed to
the remsindermtin, the State theruby loses its lien upon the prop-
erty.
Y#u are therekwe advhrd, in lasrler to the second
portion of your questioa, that the tw lien rgainrt a minePat inter-
est which wa6 limited to a term of 35 years er as Ioag thereafter
a6 oil aad gas is being produced from the land, which mineral in-
tere6t has sxplred by St6 own terms, is not a lien that can be en-
fercad against the minerals held by the ramaioderman.
. .
’
Hon. Robert S. Calvert, Page 9 (V-1293)
SUMMARY
Taxes assessed against mineral interests sev-
ered from the fee for a limited duration should net be
canceled after the expiration of the mineral term, as
the owner is personally liable for the taxes, Tex.
CowLArt, VIfI, Sec. 15. The tax lien against a mln-
oral interest severed from the fee for a limited dura-
tion cannot be enforced against the minerals owned
and held by the remainderman, either before er after
the mineral interest has expired by its own terms.
Yours, very truly,
PRICE DANIEL
Attorney Goners1
APPROVED:
W. V. Geppert
Everett Hutchinson Amidant
Executive Assistant
Price Daniel
c
Attorney General
WVG/mwb
;