                                     The Attorney             General of Texas
                                                      March 23, 1983
     JIM MATTOX
     Attorney General


                                    Honorable Joe C. Hanna                   Opinion No. JM-18
     Supreme Court Building
     P. 0. BOX 12546
                                    Chairman
     Austin. TX. 78711.2548         Energy Resources Committee               Re: Whether House Bill No. 226
     5121475.2501                   Texas House of Representatives           relating to reporting ownership
     ~46.~ 910/874.1367             P. 0. Box 2910, Capitol Station          of mineral interests severed
     Telecopier   512/475-0266      Austin, Texas   70769                    from surface estate and to
                                                                             proceedings for abandonment of
     1607 Main St., Suite 1400                                               unreported mineral interests
     Dallas. TX. 75201.4709                                                  violates article I, section 19
     2141742.8944                                                            of the Texas Constitution

     4824 Alberta Ave., Suite 160
                                    Dear Representative Hanna:
     El Paso. TX. 79905-2793
     9151533.3484                        You have requested our opinion regarding the constitutionality of
T-
                                    House Bill No. 226, presently pending before the Sixty-eighth
                                    Legislature. The bill provides:
     ,c20 Dallas Ave., suite 202
     Houston, TX. 77002.6986
     7131650-0666                                Section 1. Policy. The purpose of this Act is
                                              to assure that productive use of mineral reserves
                                              and natural resources will not be prevented by the
     806 Broadway, Suite 312
                                              existence of abandoned mineral interests.
     Lubbock, TX. 79401.3479
     8061747.5238
                                                 Section 2.   Definitions.   In this Act:

     4309 N. Tenth, Suite 6                        (1) 'Abandonment'     means  actual    and
     MCAII~~, TX. 78501.1685                    voluntary relinquishment of an interest in
     5121682.4547
                                                minerals that is intended to be permanent, by
                                                the owner of the interest.
     200 Main Plaza. Suite 400
     ~3x7 Antonio. TX. 78205.2797                  (2)  'Mineral interest' means an interest in
     5121225.4191                               minerals in place that is severed from the
                                                ownership of an interest in the surface, and
     An Equal Opportunltyl                      includes a fee interest. whether conditional or
     Affirmative Action Employer                not, executive right, royalty interest, life
                                                estate, estate for years, remainder, reverter,
                                                possibility of reverter, leasehold, or any
                                                other present possessory interest, future
                                                interest, equitable interest, or concurrent
                                                ownership interest.




                                                          p. 76
Honorable Joe C. Hanna - Page 2    (JM-18)




               (3) 'Interest in the surface' means a fee
            interest, whether conditional or not, from
            which a mineral interest has been severed.

                (4) 'Person' means     a  natural person,
             corporation, business trust, estate, trust,
             partnership, or association.

                (5) 'Surface owner' means a person who has
             concurrent or sole legal right or title, except
             the holder of a leasehold or an estate for
             years, to a present interest in real property
             from which a mineral interest has been severed.

            Section 3. Report of Ownership of Mineral
         Interest. (a) A person who owns a mineral
         interest on September 1, 1983. must file a report
         with the county clerk of each county in which part
         of the interest is located before September 1,
         1984. A person who acquires or creates a mineral
         interest after September 1, 1983, must file a
         report with the county clerk of each county in
         which part of the interest is located before the
         first anniversary of the date the person acquires
         or creates the interest.

             (b) The    report must    be   subscribed and
          acknowledged in the same manner as is required for
          a deed and must contain:

             (1) the name and address        of   the   person
             claiming the interest;

             (2) the date the person acquired or created
             the interest;

             (3) a legal description of the interest; and

             (4) a general description of the nature of the
             interest.

             Section   4. Recording    of   Reports. (a) A
          county clerk may charge the same filing fee for
          recording a report under this Act as is authorized
          for recording a deed.

             (b) Each county clerk shall maintain a public
          record of reports filed under this Act separately
          from other records in the clerk's office. The




                                  p. 77
Honorable Joe C. Hanna - Page 3    (JM-18)




          clerk shall keep the record in the same manner as
          is required for deeds.

             Section 5. Effect of Failure to Report. An
          owner of a mineral interest who does not file the
          report required by this Act is presumed to have
          abandoned the interest, and title to the interest
          is presumed to belong to the surface owner.

             Section 6. Judicial Proceeding. A surface
          owner may file a petition for declaratory judgment
          in the district court of the county in which the
          real property is located, requesting the court to
          declare a mineral interest abandoned.

             Section 7. Notice of Proceeding. In an action
          for declaratory judgment under this Act, citation
          shall be issued to the last known owner or owners
          of the abandoned mineral interest as shown by the
          official records of the county clerk of the county
          where the property is located and shall be served
          in accordance with the Texas Rules of Civil
          Procedure.

             Section 8. Evidence of Nonabandonment. A
          mineral interest is not abandoned if the owner of
          the interest appears at the abandonment proceeding
          or if the owner files the report required by this
          Act before the court renders a judgment declaring
          the interest abandoned.

             Section 9. Vesting of Title. (a) If a court
          declares that a mineral interest is abandoned,
          title to the interest vests in the current owner
          or owners of the surface interest from which it
          was severed, with each owner taking the same share
          and the same type of ownership in the mineral
          interest as the person has in the surface.

             (b) A person who acquires title to a mineral
          interest in an abandonment proceeding under this
          Act may record in the same manner as a deed a
          certified copy of the judgment as evidence of
          title.

             Section 10. Applicability. This Act does not
          apply to a mineral interest owned by          a
          governmental body or agency.




                                  p. 78
Honorable Joe C. Hanna - Page 4    (JM-18)




     For the following reasons. we conclude that House Bill No. 226 is
unconstitutional under the due process clauses of the United States
and Texas Constitutions. We do not reach the question of whether the
bill is unconstitutional in other respects.

       The fourteenth amendment to the United States Constitution
provides that no state may "deprive any person of life, liberty, or
property without due process of law." Article I, section 19 of the
Texas Constitution provides that no citizen of Texas shall be deprived
of life. libertv. or orooertv "exceut bv due course of the law of the
land*”   .       . -   -  .   .     -   .
           These guarantees are essentially synonymous. Mellinger v.
City of Houston, 3 S.W. 249, 252 (Tex. 1887).

     Courts utilize a two-step analysis to determine whether a person
has been deprived of life, liberty, or property without due process of
law. First, the court decides whether a constitutionally cognizable
life, liberty, or property interest exists. If it finds that such an
interest does exist, it then decides what procedures constitute "due
process of law" under the circumstances and whether those procedures
have been followed. Ingraham v. Wright, 430 U.S. 651, 675 (1977);
Sullivan v. University Interscholastic League, 599 S.W.2d 860, 863
(Tex. Civ. App. - Austin 1980). aff'd in part, rev'd in part, 616
S.W.2d 170 (Tex. 1981).

     In Texas, due process attaches to vested property rights in
mineral estates. Brown v. Humble Oil and Refining Company, 83 S.W.2d
935 (Tex. 1935). Therefore, our due process analysis of House Bill
No. 226 must focus on the second step in the two-step process. The
requirements of both procedural and substantive due process must be
satisfied. Eggemeyer v. Eggemeyer, 554 S.W.2d 137, 140 (Tex. 1977).

     At a minimum, procedural due process requires that a deprivation
of life, liberty, or property by adjudication be preceded by notice
and opportunity for a hearing appropriate to the nature of the case.
Mullane v. Central Hanover Bank & Trust Company, 339 U.S. 306, 314
(1950). "Due course of the law of the land" requires a law that hears
before it condemns, oroceeds uuon inauirv. and renders iudement onlv
                    .                        I   -




after trial. Union Central Life Insurance Company v. -Ch&nin&, 2k
S.W. 982, 984 (Tex. 1894). The right to notice and sn opportunity to
be heard must be granted at a meaningful time and in a meaningful
manner. Fuentes v. Shevin, 407 U.S. 67, 80 (1972). The notice must
be reasonably calculated to apprise interested parties of the pendency
of the action and afford them an opportunity to present their
objections. The notice must also afford a reasonable time for
preparation. Constitutional requirements, however, are satisfied if,
with due regard for the practicalities and peculiarities of the case,
these conditions sre reasonably met. Mullane, supra, at 313-18.




                                  p. 79
     Honorable Joe C. Hanna - Page 5    (JM-18)




          Section 7 of House Bill No. 226 provides for notice to certain
     mineral interest owners that a declaratory judgment proceeding has
     been instituted by the owner of the surface estate to have the court
     declare the mineral interest abandoned. The notice is to be issued to
     the last known owner or owners of the mineral interest as shown by the
     official records of the county clerk where the property is located and
     is to be served in accordance with the Texas Rules of Civil Procedure.
     On the other hand, the notice procedure fails to provide for service
     of citation to known owners not of record and to unknown owners.

          In Texaco, Inc. v. Short, 454 U.S. 516 (1982), the United States
     Supreme Court dealt with an Indiana statute which was somewhat similar
     to House Bill No. 226. This statute, the Indiana Dormant Mineral
     Interests Act, provided that a severed mineral interest not used for a
     period of twenty years automatically lapsed and reverted to the owners
     of the surface estate unless the mineral interest owner had filed a
     statement of claim in the local county recorder's office. The statute
     contained a two-year grace period in which owners of mineral interests
     subject to lapse might preserve those interests by filing the
     statement of claim. The purpose of the statute, as articulated by the
     Indiana Supreme Court, was to remove impediments to the development of
     mineral interests that arose because of the existence of unused,
-    stale, and abandoned mineral interests.

          One of the arguments made in Short was that the statute's notice
     provisions were constitutionally infirm because they did not require
     that any specific notice be given to a mineral owner prior to a
     statutory lapse of a mineral estate. Relying on Mullane v. Central
     Hanover Bank and Trust Company, surpa, the appellants contended that
     the lack of adequate notice deprived them of due process of law. The
     Supreme Court disagreed, however, stating:

                  The reasoning in Mullane is applicable to a
               judicial proceeding brought to determine whether a
               lapse of a mineral estate did or did not occur,
               but not to the self-executing feature of the
               MineralLapse Act. The due process standards of
               Mullane apply to an 'adjudication' that is 'to be
               accorded finality.' (Emphasis added).

     454 U.S. at 535. The Court concluded that because the lapse of a
     mineral estate resulted, not from a judicial proceeding, but from the
     application of a self-executing statute, the existence of which
     everyone was presumed to be aware, the notice provisions of the
     statute were not constitutionally deficient.

          The feature that distinguishes House Bill No. 226 from the
     Indiana statute is that, under the former, a mineral interest is lost
,p   &    after a judicial proceeding. Even if one concedes that everyone




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Honorable Joe C. Hanna - Page 6    (JM-18)




would, after House Bill No. 226 becomes effective, be presumed to be
aware of its existence, one cannot conclude that everyone is presumed
to be aware of the pendency of a judicial proceeding initiated under
it. On the contrary, Mullane establishes that those who may be
affected by the outcome of such a proceeding must be given such notice
as is reasonably calculated to inform them of its pendency.

     We do not believe that the notice provisions of House Bill No.
226 are reasonably calculated to apprise everyone who might be
affected by a suit instituted thereunder of the pendency of that suit.
As noted, these provisions fail to provide for any kind of notice,
even notice by publication, to known owners not of record and to
unknown owners. To take away the mineral interests of owners who are
not served with any citation whatsoever would, in our opinion, clearly
deprive those owners of due process of law.

     Although the lack of adequate notice provisions is sufficient to
invalidate House Bill No. 226 on procedural grounds, we believe that
the bill also violates substantive due process.        In determining
whether substantive due process requirements are met, courts balance
the gain to the public welfare resulting from the legislation against
the severity of its effect on personal and property rights. A law
violates substantive due process when it is arbitrary or unreasonable,
i.e., if the social necessity of the law is not a sufficient
justification for restricting the rights involved. In the Interest of
B-M-N, 570 S.W.2d 493, 503 (Tex. Civ. App. - Texarkana 1978, no writ).

     In Texaco, Inc. v. Short, supra, the United States Supreme Court
held that the Indiana act met the constitutional requirements of due
process. In reaching its conclusion, the Supreme Court stated:

          [J]ust as a State may create a property interest
          that is entitled to constitutional protection, the
          State has the power to condition the permanent
          retention of     that property    right   on   the
          performance of reasonable conditions that indicate
          a present intention to retain the interest.

Id., at 526. The Court concluded that Indiana had not exercised this
power in an arbitrary manner because each of the actions that the
state required the mineral interest owner to take in order to avoid
abandonment of his interest furthered a legitimate state goal. If the
owner engaged in production, or collected rents or royalties from
another person engaged in production. his interest was protected; this
furthered the state's goal of developing mineral interests. If the
mineral interest owner paid taxes, his interest was protected; this
furthered the fiscal interests of the state. If the mineral interest
owner filed a statement of claim, his interest was protected; this
furthered the state's goal of developing mineral interests by




                                  p. 81
Honorable Joe C. Hanna - Page 7    (~~-18)




identifying and locating the owners of the mineral interests. "The
State surely has the power to condition the ownership of property on
compliance with conditions that impose such a slight burden on the
owner while providing such clear benefits to the State." Id., at
529-30.

     In our opinion, House Bill No. 226 is clearly distinguishable
from the Indiana act. Under the latter, non-use for twenty years
raises an irrebuttable presumption of abandonment, while House Bill
No. 226 allows only a one-year period in which the mineral interest
owner must file a statement of claim or suffer the institution of a
judicial proceeding on the issue of abandonment can be instituted. It
is conceivable that a court, when faced with a substantive due process
challenge to House Bill No. 226, could rely on this time period
difference to distinguish the holding in Short. More importantly,
however, the two acts are distinguishable in terms of the conclusions
that they permit. Under the Indiana act, it was the lack of 9      use
of a mineral interest for a period of 20 years that resulted in the
irrebuttable presumption of abandonment of the interest. Even if
there were such lack of use, the owner of the interest could still
retain it by filing a statement of claim. Under House Bill No. 226,
on the other hand, it is only the failure to file a required report
that creates the presumption that the interest has been abandoned.
Whereas the Court in Short found, in effect, that it was not
unreasonable to conclude that an owner of a mineral interest had
abandoned that interest where he did nothing for a twenty-year period
to indicate his intent to retain it, we believe that our courts would
be loathe to find intent to abandon where the only evidence of such
intent is the failure to file a particular report.

     The legislature may provide, as a rule of evidence for a judicial
proceeding, that certain facts will raise a presumption of other
facts, and such presumptions do not deny due process if there is a
rational evidentiary relationship between the proven facts and those
presumed. See Mobile, Jackson & Kansas City Railroad Company v.
Turnipseed, 219 U.S. 35 (1910) (injury to persons by operation of
railroad is prima facie evidence of negligence). Clem v. Evans, 291
S.W. 871, 872 (Tex. Comm'n App. 1927, holding adopted) (presumption
that promises to do future acts, made as inducement to enter into
contract and not performed within reasonable time, were fraudulently
made). In our opinion, a presumption of abandonment cannot rationally
arise from the fact that a property owner fails to file a report
within a one year period.      Such a presumption disregards other
evidence relevant to abandonment, such as payment of taxes or efforts
to produce minerals occurring shortly before the one year period.
Compare Attorney General Opinion M-821 (1971) (presumption of
abandonment of mineral estate arises from failure for twenty years to
pay taxes, transfer estate, or explore for or produce minerals).




                                  p. 82
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Honorable Joe C. Hanna - Page 8    (JM-18)




     In Lobley v. Gilbert, 236 S.W.2d 121 (Tex. 1951). the Texas
Supreme Court stated:

            A presumption is a rule which 'draws a
         particular inference as to the existence of one
         fact, not actually known, arising from its usual
         connection with other particular facts which are
         known or proved.'. . . It is founded upon and
         must conform to the commonly accepted experiences
         of mankind. . . .   It must be based upon an
         established fact and cannot rest upon a presumed
         fact. (Emphasis added). (Citations omitted).

236 S.W.2d at 123, quoted in Beck v. Sheppard, 566 S.W.2d 569, 571
(Tex. 1978). We do not believe that a valid presumption of intent to
abandon a mineral interest may arise under this test where the only
fact giving rise to the presumption is the failure to file a
particular document.

     We therefore conclude that House Bill No. 226 is unconstitutional
on substantive due process grounds. We believe, however, that there
are methods of dealing with the problem of abandoned mineral interests
which comport with the requirements of the constitution.           See
generally Texaco, Inc. v. Short, 454 U.S. 516 (1982). V.T.C.S. arz
3272-3289 (escheat statutes).

     In closing, we note that either of these problems is sufficient
to invalidate House Bill No. 226. Their impact in combination is even
more offensive to the due process clause. To couple defective notice
provisions with a defective presumption is. in our opinion, to produce
too much weight for the scales of justice to withstand.

                             SUMMARY

             House Bill No. 226 relating to proceedings for
          abandonment of unreported mineral interests is
          unconstitutional under the due process clauses of
          the United States and Texas Const tutions.

                                   dzh



                                         JIM     MATTOX
                                         Attorney General of Texas

TOM GREEN
First Assistant Attorney General




                                    p. 83
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    Honorable Joe C. Hanna - Page 9    (JM-18)




    DAVID R. RICHARDS
    Executive Assistant Attorney General

    Prepared by Jon Bible
    Assistant Attorney General

    APPROVED:
    OPINION COMMITTEE

    Susan L. Garrison, Chairman
    Jon Bible
    Carl Glaze
    Jim Moellinger
    Bruce Youngblood




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