Honorable Robert S. Calvert    Opinion No. M-1034
Comptroller of Public Accounts
State Finance Building         Re: Whether Article 5421c,
Austin, Texas     78701             Sec. lla, V.C.S., and
                                    the appropriation con-
                                    tained in the Ge,neral
                                    Appropriation Bill (S.B.
                                    11, Ch. 1047, 62nd Leg.,
                                    1971, R.S.) provide
                                    authority for payment of
                                    a certain claimed refund
                                    of bonuses, delay rentals,
                                    and special sales fees
                                    paid to the State by a
                                    lessee under terms of a
                                    lease where the leased
                                    development is prevented
Dear Mr. Calvert:                   by a federal agency?

        Your request for an opinion asks the following ques-
tion:

             "Does Article 5421c, Section lla, V.C.S.,
        and the appropriation contained in the General
        Appropriation Bill (S.B. 11, Ch. 1047, 62nd
        Leg., 1971, R.S.) provide authority for payment
        of a certain claimed refund of bonuses, delay
        rentals and special sales fees paid to the
        State by a lessee under terms of a lease
        where the leased development is prevented by
        a federal agency?"

       In addition, you have further requested whether the claim
may be validly paid under any State statute.

       House Bill 1862 was passed by the House on May 21, 1971,
and by the Senate on May 26, 1971, and approved by the Governor
and became effective on Nay 27, 1971; it adds Section lla to
Article 5421c, V.C.S.



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Honorable Robert S. Calvert, page 2       (M-1034)



       As stated in your request, the subject lease (Mineral
Lease No. 58676) was dated on October 5, 1965, and was entered
into between the State of Texas and Cabot Corporation for a
five year primary term. It is stated that the lease was
located in the Gulf of Mexico near a bombing range of the U.S.
Air Force and because of the danger involved, Cabot Corporation
was prevented from drilling the lease during the primary term
of the lease by the U.S. Corps of Engineers.   Then lessee paid
the State of Texas in good faith pursuant to their lease a
total of $32,703.00 for special sales fees,, bonuses and delay
rentals. Both the federal government and the lessee show that
it was impossible to grant a shooting or drilling permit dur-
ing the lease "since intensive bombing operations are in prog-
ress on a daily basis." Your opinion request also states that
the "School Land Board verified prerequisite facts which H.B.
1862 requires as basis for making refund."

         Section 44 of Article III, Constitution of Texas, pro-
vides:

              "The Legislature shall provide by law for
         the compensation of all officers, servants,
         agents and public contractors, not provided for
         in this Constitution, but shall not grant extra
         compensation to any officer, agent, servant or
         public contractors,~ after such public service
         shall have been performed or contract entered
         into, for the performance of the same; nor grant,
         by appropriation or otherwise, any amount of


         the same shall not have been provided for by
         pre-existing law; nor employ anyone in the
         name of the State, unless authorized by pre-
         existing law."  (Emphasis added.)

       Since the mineral lease is dated October 5, 1965, and
Article 5421c, Section lla, V.C.S., was effective on May 27, 1971,
said Article 5421c, Section lla, Vernon's Civil Statutes, does
not constitute pre-existing law to support payment of the claim.
This office accordingly previously refused to authorize payment
of the claim in a letter ruling, dated April 27, 1971, addressed
to the Chairman of the Claims Committee, House of Representa-
tives. We now consider, however, a different statutory basis
not dealt with or discussed in the letter ruling.

         Article 5411a, Section l(b), reads as follows:

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    Honorable Robert,S. Calvert, page 3     (M-1034)



               "Section 1. Upon proper proof as herein-
          after provided, the Comptroller of the State
          of Texas is hereby authorized and directed to
          draw his warrant in refund of monies paid into
          the State Treasury on public lands in good
          faith but where the funds to which such monies
          may be accredited or may have been accredited,
          are not entitled thereto in any of the follow-
          ing instances:
                II
                 . . .

                "(b) Where the payment is made in ac-
           cordance with law, but title cannot issue or
           possession cannot pass, because of conflict
           in boundaries, erroneous sales, erroneous
           lease or other cause:. . ."

           We believe that the Legislature intended by this statute
    to provide a remedy to a lessee of the State for refund of the
    considerationpaid   to the State under a lease when such con-
    sideration has materially and substantially failed, although
    neither party be at fault. The statute may thusbe read into
    the lease as though it were expressly incorporated therein as
    an integral part thereof. Anderson-Rerney Realty Co. vs. Sovia,
    41 S.W.Zd 279, 281 (1931). aff. 123 Tex. 100, 67 S.W.Zd 222:
    12 AmJur. 76,9; Contractsi.Sec. 240. It is well settled that
    failure of title or possession, being a material failure of aon-
    sideration for a lease, would give rise to a cause of action or
    remedy by lessee against a lessor for reformation, cancellation
    or return of the consideration oaid. See, for example, 42 Tex.
    Jur.2d 217, Oil & Gas, Sec. 92.- In 58 CJS 528, Mines & Minerals,
    Sec. 209b; Fender vs. Farr, 262 S.W.2d 539, 543 (Tex.Civ.App.
    1953, no writ).

           In R. C. Childress vs. 0. B. Siler, 272 S.W.2d 417, 420
    (Tex.Civ.App. 1954, ref., n.r.e.1, it is said:

                "Whenever covenants of seizin or good right
           to convey are contained in a deed or lease or
           assignment of a lease they import an intention
           on the part of the grantor to do more than give
           a quitclaim, they import an intention to convey
           the land or the described interest in the land
           itself."



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Honorable Robert S. Calvert, page 4     (M-1034)



       When the statute, Article 5411a, Section l(b), is read
into the lease, the latter necessarily provided that if title
or possession failed, the lessor State had a legal obligation to
return the monies paid to it by lessee. This was not in any way
altered by, but rather modifies, the clause in the lease (Sec-
tion 22), which provided in part:

            "Should Lessee be prevented. . .from
       conducting drilling operations thereon, or
       from producing oil and/or gas therefrom, after
       effort made in good faith, by reason of war,
       rebellion, riots, strikes, acts of God, or
       any order, rule or regulation of governmental
       authority, then while so prevented, Lessee's
       obligation to comply with such covenant shall
       be suspended. . ., provided, however, that
       nothing herein shall be construed to suspend
       the payment of rentals 'during the primary or
       extended term."

       It is apparent that while lessee was under a duty to
continuepaying rentals to lessor State or forfeit the lease
(Humble Oil & Refining Co. vs. Mullican, 192,S.W.Zd 770 [Tex.
Sup. 194611, nevertheless his remedy for return of the rentals
arose at least at the end of the primary term of the lease.
While either the lessee or lessor or both may bring an action
against a third party for tort during the lease, after its termina-
tion the lessor rather than the lessee is the proper party to sue
where no mining was performed under the lease. 58 CJS 423, Mines
& Minerals, Section 194.

        Further, in Cabot Corporation's application for payment
of claim against the State of Texas, the following certified
language by Cabot Corporation appears:

            "Moreover, the 'Notice for Bids' issued by
       the General Land Commissioner and Chairman of
       the School Land Board for the October 5, 1965
       sale of the subject Lease contained no notice
       or warning of such bombing activities or,condi-
       tions specified above and Cabot without knowledge
       of such facts bid for and purchased such Lease
       at such sale.

            "In summary, the subject Lease was not at
       the time of sale, or at any time during its
       primary term, subject to being explored and


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Honorable Robert S. Calvert, page 5     (M-1634)



       developed for oil and gas, the very purpose
       for which it was sold and purchased, and
       consequently, such Lease had no value. Unless
       we assume the School Land Board would know-
       ingly lease a worthless tract not subject to
       development, the situation arose from a mutual
       mistake of fact. In any event, the rights
       purported to be granted by the Lease were not
       subject to realization at the time the Lease
       was sold or at any time during its term.
       Cabot Corporation, therefore, makes the fore-
       going claim for refund."   (Emphasis added.)

       As clearly set out above in the Cabot affidavit, it is
clearly shown that Cabot Corporation had no knowledge that the
bombing range covered the acreage that it had leased, and it
logically follows that had Cabot realized that the acreage in
question could never be used for oil and gas purposes, then the
acreage would have never been leased from the State.

       Article 5411a, Section l(b), passed in 1945, was a pre-
existing law at the time of the dated mineral lease, and pos-
session of said lease could not be and was not delivered .to
Cabot Corporation, who acted in good faith and complied with
the terms of the five year lease. Coupled with the certified
Application of Claim by Cabot Corporation, the verification of
claim by the General Land Office of Texas and the appropriation
by the Legislature (S.B. 11, Ch. 1047, 62nd Leg., 1971, R.S.)
of funds to pay this claim, it is our opinion that payment of
said claim may be made promptly, pursuant to Article 5411a,
Section l(b). The previous ruling by this office, dated April
27, 1971, is accordingly overruled.


                            SUMMARY

            Where~a mineral lease was entered into between
       the State and a lessee and by virtue of federal
       military activities, the lessee was prevented from
       drilling thereunder and title or possession could
       not pass because of such federal activity, but
       the lessee in good faith complied with the terms
       of the lease, paying the State the bonuses, delay
       rentals and special sales fees, and Article 5411a,
       Section l(b), V.C.S., was a pre-existing law in
       effect at the time of the lease, the lessee's claim


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Honorable Robert S. Calvert, page 6       (M-1034)



       for refund of such payments to the State may
       be lawfully paid by the State to the lessee
       when coupled with the verification of the
       claim by the General Land Office and the
       legislative appropriation to pay such claim.

                                 Yo)z$!5very truly,




                                        ey General of Texas
Prepared by Jerry H. Roberts
Assistant Attorney General

APPROVED:
OPINION COMMITTEE

Kerns Taylor, Chairman
W. E. Allen, Co-Chairman
Linward Shivers
John Reeves
James Broadhurst
Marietta Payne
David Longoria

SAM MCDANIEL
Staff Legal Assistant

ALFRED WALKER
Executive Assistant

NOLA WHITE
First Assistant




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