                                 AUSTEN      in. ll%xAES




                             December        3.0, 1952


 Hon. Murray L. .Harrfs                     Opinfon No. V-1568
 County Attorney-
“wood county                                Re:   Tax.exemption   status of a
 Quitman, Texas                                   royalty interest belonging to
                                                  United Christian Missionary
                                                  Society, arising from the leas-
                                                  ing of lands of Jarvis Christian
-Dear   Mr.   Harris:                             College.

            You pre~sent for the opinion of this office              the question
contained in your letter of December    2, 1952 which               is copied below
for a statement of the’facts upon whfch our opfnfon                will be based,
with such additional facts.as  we may add disclosed                from the file
and our investiga.tfon of the records of the Secretary                of State.

              .Your     letter   follows:

               .*Jarvis College received its name from Major
         and Mrs. J. J. Jarvis of Ft. Worth, Texas, who, in
         1911, made a gift of 456 acres of land in Wood County,
        .Texas.   about one hundred miles east of Dallas, Texas.
         The Grant was made to the Christian Women’s       Board
         of Missions    whose work is now incorporated  fn the
         continufng program of the United Christian Missionary
         Society ‘on condftion that said corporation keep up and
         maintain a school for the elevation and education of the.
         Negro race on the land, or elsewhere in eastern Texas,
         in which school there shall be efficient and religious
         training.’

              %n January 13, 1912. school began at Jarvfs with
        thirteen elementary    students.   The surroundings     were
        primitive,  but the program went forward with courage
        and determination.     Gradually.  the transition was made
        from elementary     to secondary level, then to junior
        college and, finally, to senior college work, with recog-
        nftion by the Texas Department of Education in Septem-
        ber, 1951. Enrollment      in the Fall of 1948 was two hundred
        twenty-two   pupils, using twenty-one buildings.      The esti-
        mated valuation of the buildings and ground improvements,
        as of January, 1952, is approximately      $534,000.00.    and
        the equipment estimated value, $90,000.00.
    Hon. Murray   L. Harris,   page 2 (V- 1568)




               ‘The acreage, in the orfgfnal Grant having been
         considered  inadequate. so, in 1913 and 1924 the Chris-
         tian Women’s Board of Missions      purchased adjoining
         land, making a total of 8744 acres available for the
         campus and farm.

               *Jarvis Christian College is fully approved by
         the Southern Association  of Colleges and. Secondary
         schools.

               ‘Said school is owned and operated through a
         Board of Trustees    by the United Christian Missionary
         Society, which is the organizatfon  which handles miii-
         sionary .and benevolent work for the Christian Church,
         or Deciples of Christ, from whom they receive a yearly
         contribution.  which is used )n the education and mainte-
         nance of said school, and, in addition thereto, money
         is ~received from the sale of oil and/or gas from royalties
         on oil produced from said properties.

                ‘This institution (Jarvis College) iq-a non-profit
i         educational institution,   supported by the United Christian
          Misstonary    Society for the benefit of such members       of
         ‘the Negro rac~e as wish to avail themselves        of the edu-
          rational facilities  offered at. this Institution.

               “For many years prior to the discovery      of oil upon
         said lands in 1940, all of t&s lands herein involved have
         been dedicated and actually used for educational purposes;
         some of the lands ,b.efng used as campus;    othsr lands be-
         ing used as demonstration    tracts in agricu&ral     pursuits,
         and other lands used in reforestation    courses   conducted
         by the School for students enrolled therein, and a major
         portion of it used for buildings and campus.

               “All of ‘the land is under an Oil and Gas Lease and
         some of it is producing oil and gas. and the revenue
         therefrom   is being used for said work hereinabove   enu-
         merated.

               ‘%t the year 1940 the Women’s     Christian Missionary
         ,Society executed oil and gas leases on the lands involved,
         .reservfng.the   usual and customary   one-eighth  royalty
         interesf,   and~various leasehold  operators   are claiming
         under such leases and are now producfng oil and gas from
         parts of these lands, and are paying to the United Christian
         Missionary     Society the proceeds from the sale of such oil
.




    Hon. Murray   L. Harrfs,   page 3 ,(V-1568)




          and gas accrafng’ to the one-eighth     royalty   interest
          reserved  in the leases.

                %A11 ftinds..redeived by the Women’s   Christian
          Missionary    Society as royalties  are expended for
          educational purposes in maintaining the College and
          carrying out its co-educational    program.

                “In view of the above, are these royalties  sub-
          ject to the payment of ad valorem   tax, or, are they
           exempts from such ‘taxation under Article 7150. Re-
          ‘vised Civil Statute; 19253 *

                The records   of-the Secretary  of State disclose      that Jars-
    vis Chrfstian College, Hawkins,.Texas,     was incorporated        February
    11, 1939 with the followjng purpose clause:

                 .*The purpose for’which    this corporation  is
          created is to support and :maintain an esllcational
           institution that will give to the colored youth .of
          Texas practical domestic,      manual and agricultural.
           training, as w.ell a’s high grade instruction in the
           arts and sciences;    the support and maintenance to i
          be under the general control of the Home Depart-
          .ment, United Christian Mjssionary       Society, Deciples
           of Christ.”

               -The charter provides for.directors     and trustees not to
    exceed in number twenty-five.     There is no questfon as to the ex-
    emption from ad valorem taxes of the buildings and the campus
    upon which they are located, consisting    of 874i acres, of which
    456 acres were donated or given fn 1911 to the college by Major
    and Mrs. J. J. Jarvis.    This was inadequate for the purpose and
    plans for the college and adjoining additional land was purchased
    by the Christian Women’s     Board of Missions    of the Deciples of
    Christ which has the ,duty under its charter powers to support,
    maintain and control the college in cooperation wfth the local Board
    of Directors   and Trustees.   The corporation   has no capital stock.

                The questfon presented is the status of the one-eighth
    royalty received by the college from leases made upon the land
    constitutfng the campus for ad valorem   state and county taxes: that
    is, whether taxable or exempt.

                Certain types of property are exempt from tsxatlon by
    the exoressed   terms of the Constitution,    and this the Legislature
    has no power to tax. LowerColorado         River Authority v; Chemical
    Bank and Trust Company, 144 Tex. 326,         190 S .’W .2 d 48 . 0th er kinds
    Hon. Murray     L. Harris,   page 4 (V-1568)




    of property, and the property here in question is of that charac-
    ter, may be exempt from taxation by the Legislature    only by the
    authority conferred upon it under the Constitution of this State.
    This power is derived from Section 2 of ‘Article VIII of the
    Constitution which reads in part as follows:
                *
                  . . . the legislature   may; by general laws,
          exempt from taxation . . . all buildings used ex-
          clusively and owned by persons or associations
          of persons for school purposes and the .necessary
          furniture of all schools and property us.ed ex-
          elusively and reasonably      necessary    in c~onducting
          any association     engaged in promoting the religious,
          ed.ucational and physical development         of boys, girls,
          young men or young women operating under a State
          or National organization      of lilce character;   . . .”

                Pursuantto  the authority thus conferred upon the Legis-
    lature by Section.2 of Article VIII of. the Constitution quoted above,
    the Legislature  enacted Article 7150, V;C.S.i    in language in part
    as follows:
>
                 !‘A11 .public colleges, public academies,     and
          all endowment funds of institutions      of: learning
          and religion not used with a view to profit, and
          when the same are invested in bonds or mortgages,
           and all such buildings .used exclusively      and owned
          .by. persons .or.,associations  of .persons for school
           purposes;     . l,:.

                 If the ones-eighth oil   royalty interest here in question is
    exempt from ad valorem taxes, it must be by virtueof              the terms of
    Article 7150, V.C.S.,     quoted above.     The  exemptionfrom~taxation
    of the buildings and campus grounds co~istiing of.the entire acreage
    owned-and inalntained by the colleges is not questioned,          but does the
    same r~ule apply to the one-eighth oil royalty ,,intere.st ,here in ques-
    tion owned by thencollege or by ~the Women’s’. Christian Missionary
    Society of the Deciples of Christ, a religiout; organization?            We
    thi!nhit makes no difference whether owe consider           the corporation
    &    owner’ of the property or the Missionary        Society.    In either
    event, it is owned by persons or an association          of, persona and to
    that extent clearly falls within the ~purview of, Article        7.150, V~C.S..
    but our difficulty arises in determinkg         whether or not the one-
     eighth oil royal% interest here involved ‘%s mused exclusively           for
     school purposes. .    A  careful   search   of the opfnions   of this  Depart-
     ment and the decisions     of our ‘Appellate Courts fail, to reveal that
     this identical ques,tion has heretofore      been passed upon by @is
     Department or the Courts of this State. In the recent case of Harris
Hon. Murray   L. Harris,   page 5 (V-1568)




v. City of Fort Worth; 142 Tex. 600,~18O’S.W.2d~l31, Justice
Sharp of the Supr eme ~Court, in approving what Mr; Justice
Robertson said-in the early case of Cassiano v. Ursdie                  :
Academy,   64 Tex. 673. said:

            % has’been the policy of the state since~ 1849
      to encourage educational enterprises   by exempt-~
      ing them froth any shaie of the burdens of govern-
      ment. Pasrh. Dig., arts. 5147. 5148, 7485, 7688.
      . . .

            “The education of the masses       is now recog-
      niied as a function of ,state government.       Those who,
      fr~om charitable considerations,     to forward sectarian
      views, or for private profit, have organised or con-          .
      ducted schools, have assisted      the state in the per-
      formance     of a duty it owes to its citizens which can-
      not be too thoroughly performed,       and which thestate
      has never assumed that it had eitherthe means or
      the machinery of doing sufficiently       well without pri-
      vate assistance.      The .Ursuline Academy is perform-
      ing itspar.t-in   this branch of the public service,   and
      it should rather be encouraged by aids, than impaired
      in its usefulness    by a tax upon its revenues.”

             From this case, we think it may be said that the same
stric.tness of construction, will not be indulged where the exemption
is to religious and educational institutions   that otherwise would be
applied in considering    exemptions  to corporations   created and
operated for private gain or profit.

           *We think Texas will compare favorably      with any State in
the Union in the number, efficiency,   and value of educational insti-
tuttons owned and mafntained by religious    organizations.    Such
schools and colleges have been fostered and built up, and it has been
the policy of our State to encourage~them.

            It is conceded in your statement of facts that~ Jarvis
Christian College is a non-profit      educational institution supported
by the United Christian h&ssiionary Society for the benefit of such
members    of the negro race as wish to avail themselves           of the
educational facilities   offered by the college.’ It is likewise con-
ceded that all of the land involved has for many years and is now
dedicated and actually used for educational purposes as part of
the campus, demonstration       tracts .in agricultural’pursuits,.     and
training in reforestation    courses   conducted by the collegki        In
brief, all of the land is devoted to the educational. activities of the
college.
Hon. Murray     L. Harris,   page 6 (V-1568)




            The Supreme Court, in construing the language “used
with a view to profit” in the case of Harris v. City of Fort Worth,
supra, said:

             “Whatever  may be the ordinary signification
       of the words ‘used with a view to profit,’ we think
       that in these tax exemption provisions   of the stat-
       utes they mean only that the fund be not used with
       a view to private gain or profit.”

             It is admitted that the one-eighth oil royalty here in-
volved is expended in the furtherance       of the educational activities
of the college and, we thinlc. meets the constitutional      and statutory
requirement     that it is used for educational purposes and not for
profit.

            Neither Jarvis Christian College nor the Missionary
Society pQSSeSS     the facilities    to develop and produce oil from the
land here in question even if they possessed            the authority, which
we doubt, It is, therefore,       apparent that the only feasible and
practical method of producing revenue from oil under the land was
to execute an oil and gas lease such as was done here and leave the
development     to the lessees     from which the one-eighth       oil royalty is
received by the college.        We think the net result of what was ac-
complished    by the execution of the oil and gas lease was to convey
a determinable     fee to the lessees      of seven-eighths    of the oil in
place and retain the one-eighth         royalty in the college or Missionary
Society.   The lessor,    therefore,     continued its ownership of-the sur-
face and one-eighth     of the oil under the terms of the lease.          In other
words, there remains vested in the lessor the surface and one-
eighth of the oil after the execution of the oil leases.

            An oil and gas lease does not create the relationship   of
landlord and tennant.   The lessor may sell such oil royalty in the
same manner as applicable to the sale of other real estate under
the laws of this State.  Gulf Production Go. vI Warren,   99 S.W.td
616 (Tex.Civ.App.   1936. error ref.).

            We do not deem a discussion    of the doctrine of severance.
which prevails in this State asp to oil and gas in place and the surfare
upon the execution of an oil and gas lease essential    to the determina-
tion of the question here involved.

             It is sufficient to say that Jarvis Christian College or the
Missionary     Society is the owner of the surface and everything under
it or over’ it, in the absence of a severance     of the oil and gas. under
the surface.     Therefore,   upon the sale of the seven-eighths   minerals
and the retention by the lessor in the execution of an oil and gas
.




    Hon. Murray    L. Harris;   page 7 (V-1568)




    lease, seven-eighths     of the minerals became vested in the les-
    see and the college remained the’owner of the surface and one-
    eighth of the minerals.      The ownership-and     possession    of the
    surface would also extend to the possession         and ownership of
    one-eighth    of the minerals    represented   by the one-eighth    royalty,
    and this remains true until such minerals         and the surface are
    severed one from the other.         An oil and gas lease is in effect
    a sale and conveyance      of the oil and gas in place under the land
    described    in the conveyance     and is not in fa~ct a lease in the- brdi-
    nary acception of that term.        Gulf Production Company v. Warren,
    supra.   But, we do not construe the cases to hold that the one-
    eighth royalty retained by the lessor in the usual oil and gas lease
    operates as a severance       of the one-eighth   mineral interest from
    the surface.     The one-eighth    royalty owned and retained by the
    lessor is not severed from the surface estate.          It continues to
    be the property of the lessor so long as it is in place as a part of
    the realty.    Wagnor v. Wichita County, 298 Fed., pp. 818, 821.

                We are, therefore,  of the opinion that the exemption
    which prevails under the constitution and statutes of this state
    to the whole of the surface owned by the college or Missionary
    Society likewise extends to the one-eighth    oil royalty constituting
    a part of the whole of the real estate owned by the college,     and is,
    therefore, exempt from ad valorem taxes, and you ark accordingly
    so advised.


                                SUMMARY


                 Oil royalty produced from land owned by a non-
           profit educational college,    operated by a religious
           organization,    is exempt from ad valorem     taxes if
           produced from land comprising        the campus of the
           college,  all of which is used and dedicated to the edu-
           cational activities   of the college to the same extent
           as the surface of the land. The oil royalty retained
           by the lessor,    the owner of the sur.face. constitutes
           a part of the entire ownership of the land in that there
           has not been a severance      of such estate.  Hence, both
           the surface and the oil royalty are exempt from ad
           valorem    taxation under the constitution and statutes
Hon. Murray     L. Harris,   page 8 (V-1568)




      of this State if the royalty is likewise ex-
      clusively used in promoting the educational
      activities  of the college.

APPROVED:                              Yours very truly,

W. V. Geppert                             PRICE DANIEL
Taxation   Division                    Attorney General

E. ~Jacobson
Executive Assistant
                                       By      ,   ’
                                              e@Lk
Charles D. Mathews                          L. P. Lollar
First Assistant                             Assistant


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