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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 Yerg.   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




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