                   E

                                               AS




Mr. Henry Wade                           Opinion     No. WW-1336
District   Attorney
Records Building                         Re:    Liability    of an undivided
Dallas   2, Texas                               l/3 interest    in a tract   of
                                                land owned by the Dallas
                                                County Hospital    District
Dear Mr. Wade:                                  for ad valorem taxes.

        You have asked the opinion          of the Attorney      General as to
whether the Dallas County Hospital            District    (hereinafter    called
the District)      is liable    for ad valorem taxes for 1961 on its
one-third     (l/3) undivided      interest   in the fee in certain       real
property   owned by it on January 1, 1961. The other undivided
2/3 interests      were owned by, the Juliette         Fowler Homes, Inc. and
the Methodist      Home.    The  property    was  a  gift   to the District.

       You state       the   following   pertinent     facts:
                 ,1       The deed conveying      the pro-
           perty~ to-the      Dallas County Hospital
           District,      the Juliette     Fowler Homes,
           Inc.     and  the  Methodist    Home,   Waco,
           Texas,     is  dated   February   16,   1960.
           At the time of the receipt           the Dallas
           County~ Hospital       District   was put on
           notice     that all or a part of subject
           property      would be taken by the Highway
           Department and thus planning            on spe-
           cific     use was delayed until       action
           was taken by the Highway Department.

               "After   negotiation,        approximately
           one-half    of the lot was deeded,           for
           consideration,       to the State Highway
           Department,      which sale included         im-
           provements     thereon     in the form of a
           house-apartment        conversion.        During
           the period     from January 1 through
           July 15, 1961, however,             income from
           rentals    of the house received           by the
           District    totaled     a net of $82.33,
           like amounts being received              by the
           two charitable       institlti.ons.        mhe
                                                                               ’     .




Mr. Henry Wade, Page 2                                          Opinion        No. WW-1336



              house was then removed           by the   State
              Highway Department.

                  “After   such reduction     in the size
              of the property,     it was clear      that no
              use could be made of the property            as
              such and that the same should be sold
              as soon as feasible.        Rental income
              received   and income from sale,        when
              accomplished,    is planned for use,
              along with other available         funds,    in
              the development    of a tubercular        divi-
              sion of the Hospital      District.”

       The question       of   the   tax    liability    of   the   District       arises
because:

           1) The District    owns only an undivided
              interest    in the fee instead   of the
              entire   fee in the tract   of land;

           2) During a portion    of the year 1961
              persons  other than any of the owners
              were tenants   in possession    and using
              the property   in its entirety,    for
              which usage they paid money rentals
              to the joint   owners of the property.

         The law question arises   as to whether the undivided
interest    in the realty belonging   to the District was owned,
held or used by it in such an exclusive      manner and for a pub-
lic purpose as to be exempt from ad valoretn taxes levied      against
the land by the State of Texas, County of Dallas,      City of Dallas
and Dallas Independent    School District.

        The District was created  under authority    of Art. IX, Sec.
4 of our State Constitution    and the enabling   statute   therein
authorized,   Art. 4494n, V.C.S.

                                       1.


           Our opinion is that the undivided  interest  owned by the
District      in this realty  is exempt from these taxes.

                                       2.
         The District    was expressly authorized to accept  the pro-
perty as a gift       under Sec. 15 of Art. 4&9&n, which reads as
follows:
Mr. Henry Wade, Page 3                                          Opinion   NO. ~1-1336



               “Said Board of Managers of the
           Hospital     District    is authorized      on
           behalf    of said Hospital       District     to
           accept    donations,    gifts,    and endow
           ments for the Hospital         District,      to
           be held in trust       and administered
           by the Board of Managers for such
           purposes     and under such directions,
           limitations,snd       provisions     as may
           be prescribed       in writing    by donor,
           not inconsistent       with proper manage--
           ment and objects       of Hospital      District.”

                                     3.
         The subject of the tax in question    is an undivided   inter-
est in the fee simple title     to the entire    tract of land.    This
interest    is real property and unless   other provisions    of law
clearly    exempt it from ad valorem taxes it is subject      to such
taxes under the following    provisions   of our State Constitution
and statutes:

      a) Art. VIII,  Sec. 1 of our State              Constitution,
         which in its pertinent  portion              reads:
               I, . . . all property   in this State,
           whether owned by natural      persons   or
           corporations,     other than municipal,
           shall be taxed in proportion       to its
           value,      . .I’

       b) Art.    7146 reads:

               “Real property     for; the purpose of
           taxation,    shall  be construed     to in-
           clude the land itself,        whether laid
           out in town lots or otherwise,         and
           all buildings,     structures    and ii+
           provements,    or other fixtures      of what-
           soever kind thereon,       and all. the rights
           and privileges     belonging    or in any
           yise appertaining      thereto,   and all
           mines, minerals,      quarries   and fossils
           in and under the same.”

      c)   Art.   7319 which     reads:

               “For   the purpose of      taxation,     real
           property    shall  include     all lands     with-
           in this    State, and all      buildings     and
Mr. Henry Wade, Page 4                                                      Opinion         No. WW-1336


                  fixtures          thereon   and appertaining
                  thereto,          except   such as are expressly
                  exempted          by law.”

           d) Art. 7149, which                 in its     pertinent    portion,
              reads as follows:

                      “‘Tract   or lot. I - The term, ‘tract
                  or lot,’    and ‘piece   or parcel,’   of real
                  property,    and ‘piece    and parcel’  of
                  land, wherever used in this title,         shall
                  each be held to mean any quantity        of
                  land in possession      of, owned by or re-
                  corded as the property       of the same claim-
                  ant, person,    company or corporation.”

        Our State Constitution     and statutes relevant                                  to the situa-
tion  under consideration     provide  that the following                                  described
properties   shall  be exempt from ad valorem taxes:

           Art.     VIII,      Sec.     2 of      our Constitution,         in     its     pertinent
portion,          reads:
                      II. . . the legislature    may, by
                  seneral   laws. exemb     from taxation
                  public   property  used
                                        * for public     pur-
                  Ye    ~~




                  poses;   . . .” (underscoring     added).

           Art.     XI,      Sec.     9 of   our Constitution,         in    its         pertinent
portion,          reads:

                      “The property   of counties,   cities
                  and towns,    . . . and all other property
                  devoted exclusively      to the use and bene-
                  fit  of the public    shall  be exempt from
                  forced   sale and from taxation,     . . .I’
                  (underscoring    added).

           Art.        7150, V.C.S.,         in    its   pertinent    portions,            reads:

                     “The following   property     shall   be
                  exempt from taxation,    to-wit.     . .
                        $1
                         . .    .

                  "4.    All property,     whether real or
              personal,     belonging    exclusively     to this
            L State,    or any political      subdivision
              thereof,     . . .” (underscoring       added).
Mr. Henry Wade, Page 5                                        Opinion   No. WW-1336



                                      4

        The District    is a political        subdivision    of the State.
Bexar County Hospital       District    v. Crosby        160 Tex. 1.16, 327
S.W.2d 445 (1959).        Therefore    the lntereit       in the tract   of
land owned by the District         qualifies     for exemption     from ad
valorem taxes as being "public          property"      as required    by Art.
VIII,   Sec. 2 of our Constitution          (supra)    and as "belonging
exclusively   to.    . . any political       subdivision"     of this State
as required   by Art. 7150 (supra).

        But our Consiitution      further    requires       that property  to
be exempt must be            .devoted    exclusively        to the use and
benefit   of the public:     . .'I (Art. XI, Sec.          9, supra) or
I . . .used for public     purposes.     . .'I (Art.       VIII,  Sec. 2, supra).

         Our Supreme Court in Lower Colorado        River Authority      v.
Chemical Bank & Trust Co., 144 Tex. 326, 190 S.W.2d 48 (1945)
held that the portion        of Art. XI, Sec. 9 of our Constitution
which reads,     "all   other property    devoted exclusively     to the
use and benefit       of the public"    was not circumscribed     by the
doctrine    of ejusdem generis      by way of restricting      the appli-
cation    of this quoted portion      by any' of the preceding     portion
of the Section.        This Section   in its entirety     reads as follows:

               "The property       of counties,      cities
           and towns, owned and held only for
           public   purposes,      such as public        build-
           ings and the sites        therefor,     fire     en-
           gines and the furniture          thereof,      and
           all property    used, or intended           for
           extinguishing      fires,    public   grounds
           and all other property          devoted exclu-
           sively, to the use and benefit            of the
           public   shall  be exempt from forced
           sale and from taxation,          provided,
           nothing herein       shall prevent      the en-
           forcement    of the vendors lien,           the
           mechanics    or builders      lien,   or other,
           liens   now existing."

        Further distinguishing         governmental       and public    usage,
the   Court said:

               "'The test is not whether the pro-
           perty is used for governmental    pur-
           poses.    That is not the language of
           the Constitution.    This Court has
           never adopted that narrow limitation
           and the weight of authority    is opposed
Mr. Henry Wade, Page 6                                 Opinion   No. ~~-1336



           to it.    Much public    property   of
           municipalities      exempt from taxation
           has, and can have, no governmental
           use.    The test is whether it is
           devoted   exclusively    to a public   use.“’
           (at P. 51).
        Art. 7150, subd. 4 (supra)    has been held to require   that
property    exempt under its provisions   must be “used for public
pur oses”.     City of Abilene  v. State,  113 S.w.2d 631 (civ.App.
193 8 , error dism. ).  In this case the court said:

               “It is quite apparent that the
          exemption declared       in said R.S. 1925,
          art. 7150, is more comprehensive
          than the power which the Legislature
          possessed.      The purpose of the Legis-
          lature    is broad enough to exempt pub-
          lic property     regardless     of its use.
          This the Legislature        was expressly
          denied the power to do.           But it does
          not follow,     we think,    that the statute
          is for that reason wholly inoperative.
          We see no reason why it may not be
          operative,     as an exercise      of all of
          the power the Legislature          had, to de-
          clare   the exemption.       The declared
          exemption    includes    public    property
          used for public      purposes     and to that
          extent,    we think,   the statute      is
          valid   and operative.”        (at pages 635,
          636) (underscoring       added).

        Our Supreme Court confirmed this holding without making
reference   to this case in A. & M. Consolidated Independent
School Dist.   v. City of Bryan, 143 Tex. 348, 184 S.W.2d 914
T1945).
       We restate  that the subject    of the tax in question    is
only an undivided    l/3 interest   in the fee simple title   to the
entire  tract  of land.   All of this l&-interest     and estate     is
of the same undivided    but uniform kind, and is a freehold       inter-
+.

                “A freehold  is an estate   for
          life,    or in fee simole.    1 Wash-
          burn; Real Prop. 41; 42."       Bourn v.
          Robinson,     107 S.W. 873 (Civ.App.
          1908)t        p. 876); 22 Tex.Jur.2d
Mr. Henry Wade, Page 7                                      Opinion   No. WW-1336



          643, Estates,      Sec.   1.

        The general   principle    of law that separate   interests  in
realty   are separately     taxed to'the    several owners is well
stated in Hager v. Stakes,        11.6 Tex. 453, 294 S.W. 835 (1927)
as follows:

              "Real~estate    is ordinarily    taxed
          as a unit;    yet, where there have
          been severances     by conveyance,    excep-
          tion,  or reservation,     so that one por-
          tion of the realty     belongs    to one per-
          son and other portions      to others,    each
          owner should pay taxes under proper
          assessment    against  him of the portion
          owned by him." (at p. 842).

        The court cited   State v. Downman, 134 S.W. 787 (Civ.App.
lgll),   which was affirmed    by the U. S. Supreme Court in Down-
man v. State of Texas, 231 U.S. 353 (1913).       In its affirming
opinion   the Supreme Court said:

                "Usually   real estate      is taxed
          as a unit;     but as different        elements
          of the land are capable           of being
          severed and separately           owned, the
          statute     may' authorize     a separate
          assessment     against     the owners of
          the severed parts.          Accordingly,
          if the title      has been severed,
          land may be taxed to one, timber
          to another,      or land to one and coal
          to another.       The state court held
          that such was the law of Texas, in
          view of the general         language of
          the statute      defining     real estate
          as including      not only the land it-
          self,    but the buildings        on the land
          and the minerals        under the land."

        The statute considered by both courts    .was Article           5062,
Say~les' Ann. Civ. St. 1897, which was in every respect                pertinent
the same as present   Art. 7146, V.C.S.,  supra.

        The Court of Civil  Appeals held that the grant with
reference   to coal in the land in question   passed title to
the coal and created   a distinct   taxable property in the tract
of land.    It said:
Mr. Henry Wade, Page 8                                     Opinion   No. Ww-1336



               "The grant is more than a mere
          license     to enter and mine the coal;
          it is a conveyance         of the coal it-
          self,    . . . The title      passes to it
          as property.        It is true its value
          must be added to the valuation              of
          the land, but it by no means follows
          that it must be assessed            with it.
          The parties      have created      two dis-
          tinct    properties    in the same land;
          one holding      one property       right in
          the land, and the other a distinctly
          separate     property    interest      there-
          in.    The statute,      as before      said,
          when read in view of the constitu-
          tional    provision    quoted,     would re-
          quire the assessment         to be made
          in the names of the persons             or
          corporations      holding    such property
          interest     in the land.       True, the
          total    assessment    must equal the
          value of the land augmented by the
          value of the coal or mine, but the
          assessment     of each should be made
          separately     according     to the several
          holdings     to the end that each 'shall
          pay a tax in proportion           to the value
          of his,    her, or its property."'
          (at P. 795).
        The law is settled    that each freehold   estate   or interest
of the same unifol ?m kind in the sametract       of land is a separ-
ate entity    fol ? purposes of ad valorem taxation.      The following
authorities     support this proposition.

      a) The case of Galveston       Wharf Co. v.
         City of Galveston,      63 Tex. 14 (1@34)
         held that the undivided       l/3 interest
         owned by the City of Galveston         in cer-
         tain realty     and property   was exempt
         from ad valorem taxes.        The other 2/3
         undivided    interest   owned by the Galves-
         ton Wharf Co., a private       corporation,
         was held to be taxable       against   that
         corporation.      This interpretation       of
         the holding     of this case is confirmed
         by statement     of the court in Texas
         Turnpike Company v. Dallas County
         153 Tex. 479, 271 S.W.2d 400 (1954)
         (at p. 403).
Mr. Henry Wade, Page 9                                   Opinion   No. WW-1336



       b) a g/lOths    undivided    interest     owned in
          fee and the remaining        l/lOth    undivided
          fee interest     in the same lot of land
          held under a life      estate,     both by the
          same person,     are distinct      and severable
          taxable   estates    or interests.       Trimble v.
          Farmer, 157 Tex. 533, 305 S.W.2d 157 (1957).

       c)   Undivided  interests  created    by oil and
            gas leases   in the minerals   in a tract
            of land are separate   taxable    estates.

       Texas Co.    v.   Daugherty107 Tex. 226, 176 S.W. 717
       (&v.
        1915 ;                        124 Tex. 290, 77 S.W.2d
                      motion for rib.    overruled,      124 Tex.
              0 S.WI2d 741 (1935);    Victory    v. Hinson,       129
       Tex. 30, 102 S.W.2d 194 (193'1).      Euttram v. Gray
       County, 62 F.2d 44 (C.C.A.     5th'1932,     cert.   den.
       289 U.S. 728);   State v. University      of Houston,
       264 S.W.,2d 153 -(Civ.App.  1954, error ref.        n.r.e.).

         Further,    the case of Galveston   Wharf Co. v. The City of
Galveston,      supra, is conclusive   in establishing     the further
principle     that such an undivided    interest    may be "used!',   "de-
voted to",     and "belong    to" the owner "exclusively"     within the
meaning of Art. VIII,        Sec. 2 and Art. XI, Sec. 9 of our State
Constitution.        See also State v. University      of Houston,  supra.

        We believe    that our holding    with reference    to this exclu-
sive ownership     and use of an undivided     freehold   interest   of a
uniform legal     kind in a tract    of land is not in conflict      with
the cases of St. Edwards' College         v. Morris,   82 Tex. 1, 17 S.W.
512 (1891) and City of Longview v. Markham-McRee Memorial Hos-
pital,   137 Tex. 178, 152 S.W.2d 1112.        These two cases consi-
dered the exclusive       use of buildings;   the subject     of our consi-
deration   in this opinion     is property.

                                     5.
         You state that the District's          interest   in this land has
been held only for the purpose of sale or conversion                into cash
and that the rental         of the apartment house on the property          was
only a means of producing          a temporary income from the property
pending its sale.         This holding     and use by the District      was
for a public       purpose.     In addition   to the authorities     herein-
after    considered     we are of the opinion       that Art. 449&n, Sec.
15 (supra)      clearly   authorized    the District     to hold the undivided
interest     in the land and to receive         the income from it pending
sale of the property,         free from ad valorem taxes.
Mr. Henry Wade, Page 10                                    Opinion   No. WW-1336



       In State v. City of San Antonio;     147 Tex. 1, 209 S.W.2d
756 (19481, the facts   were that the City of San Antonio and
San Antonio Independent   School District     bought in the year 1938
a city lot at tax foreclosure     sale, for delinquent    ad valorem
taxes.   The owner of the lot continued     in possession    until   1946;
also he rented two buildings    thereon to tenants     and collected
all rents.

       The State   and county      argued   that   the   land
               II. . . was not owned and held by
          the city and school         district     during
         that     time only for public         purposes,
          as contemplated        by Art. XI, Sec. 9 of
          the Constitution.         . . because:     (1) no
          effort     was made during those years to
          sell    the lot;    (2) the lot was never put
          to any public       use because Barnes,         the
          former owner, was permitted            to remain
          in possession       and to receive      and retain
          the rents and profits          therefrom;      and
          (3) from the time the city and school
          district     got their     tax deed in 1938
          until    some time in 1946 he remained             in
          continuous      possession     without    being
          disturbed.”

       The trial   court’s    judgment decided   that       the city and
school  district   were 'owning and holding      said       property  solely
for the purpose    of collecting     taxes thereon.”         The Supreme
Court said that    this purpose

              “can mean nothing   except that they
          were holding  it until   it could be re-
          sold.   That was an owning and a hold-
          ing for a public   purpose,   under Art.
          XI, Sec. 9, . . .”

of our Texas Constitution,    and that Court held that because
the lot was held and owned by the city and school      district
and for the stated public    purpose that the land was exempt
from ad valorem taxes.     The Court in this case and on this
point cited  the case of City of Austin v. Sheppard,      144 Tex.
291, 190 S.W.2d 486. In this latter      case the Court said:

              “It is undisputed   that the pro-
          perty so purchased    is merely being
          held by the city until    it can find
          purchasers  who are willing    to pay
Mr. Henry Wade, Page 11                                       Opinion    No. WW-1336



          the    prices   asked   therefor."

In this later   case and on the basis           of the purpose stated in
this quotation,    the Court held that          the property  was being
held for a public    purpose.

       In the case of State v. City of Houston,     140 S.W.2d 277
(Civ.App.    1940, error ref.)   the Court held that the temporary
rental    of two houses upon a'tract  of land which was held by
the City, of Houston for the purpose of resale     did not change
the purpose of the holding     of the land from a public  purpose.

        Our holding  in this opinion  does not in any respect     con-
flict   with the two prior   opinions of the Attorney   General of
Texas, Nos. 0-2506 (1940) and V-1399 (1952).       Those opinions
may be distinguished    on the basis that the properties     therein
considered   were being held for proprietary   purposes   for the
production   of income only.

                            SUMMARY

                The undivided interest   in        the fee in the
      tract    of land held by the Dallas          County Hospital
      District    for purpose of sale and          conversion   into
      cash is held exclusively     and for         a public   purpose
      and is exempt from all ad valorem             taxes.

                                               Yours   very    truly,

                                               WILL WILSON
                                               Attorney General         of   Texas




                                                   W. E. Allen
                                                   Assistant


APPROVED:

OPINION COMMITTEE:
W. V. Geppert, Chairman

Jay Howell
Robert Lewis
Arthur Sandlin
Dudley McCalla

REVIEWEDFOR THE ATTORNEYGENERAL
By:  Houghton Brownlee, Jr.
