I   ,




                 %-HE    .iiTl?ORNEY           GENERAL
                              OF       TEXAS




    Honorable C. D. Simmons
    Comptroller, University of Texas
    Austtn, Texas
    Dear SLr:                 Opinion No. O-5393
                              Re: Interpreta'cIonof S.B. 287, Acts
                                   1943, Regular Session, Fortg-
                                   eighth Legislature.
                 We are in receipt of your opinion request reading
        in part as follows:
                "The Board of Regents of the University of
           Texas has directed me to request of you an opinion
           as to your interpretation of Senate Bill No. 287,
           Acts Regular Session, 48th. Legislature.
                "The board of Regents particularly desires
           your interpretation of the effect and meaning of
           the language of the Bill which reads as follows:
                "'The Board of Regents of the Unlverslty and
           the Commissioner of the General Land Office, In
           considering an application for an extension or re-
           newal of any such lease above described, shall take
           into consideration in establishing the consldera-
           tion for such lease the diligence with which the
           lessee has followed his duties under the existing
           lease, the present value of the land upon which an
           extenslon or renewal of the lease Is sought, and
           all other good business practices.'"
             S. B. 287, Acts 1943, Regular Session, 48th. Legls-
    lature, which now appears as Article 53416 of Vernon's An-
    notated Civil Statutes, reads as follows:
                "Section 1. In the case of any nonproducing
           oil, gas or mineral lease on University land, if
           one hundred twenty (120) days before expiration of
           the primary term there be In effect any restrictions
           issued by a Federal war agency prohlblt1ng the drill-
           ing or completion of a well thereon, the holder of
           such lease shall have the right to negotiate an ex-
           tension or renewal of such lease for a perlod of not
    Hon. C. D. Simmons, page 2                  o-5393



        longer then two (2) years with the Board of Regents
        of the Unlverslty  of Texas and the Commlssloner of
        the Qeneral Land Office.
              “The Board of Regents of the %lversltg                 of
       Texas and the Commlssloner of the Qeneral Land Of-
       flee,    in 0onslderUg       an appllcatlon       for an exten-
       sion or renewal of any suoh lease above desorlbed,
       shell take lnto oondlderatton             ln establishing      the
       oonslderatlon      for suah lease the dlllgenoe            with
       which the lessee has followed his duties under the
       existing    lease,    the present      value of the lend upon
       which an extension         or renewal of the lease Is sought,
       and all other good business            practloes.      The lessee
       In presentlng      his applloatlon        for extenslon     or re-
       newal of such lease or leases             shall present     evidence   ’
       to the Board of Regents of the University                 of Texas
       and to the Commlssloner of the ffeneral Land Office
       showlng it was lmposslble           for hlm or any of his oo-
       owners to comply with the restrlctlons               whloh he
       claims prohlblted        the drilling      or oompletlon of the
       well on said tract.
               “If the lessee     should claim es grounds for an
       extenslon     or renewal of any such lease that there
       Is fnsuffiolent       acreage wlthln the tract under lease
       by him to comply with the Federal        reatrlotlon     then
       no extension     or renewal shall be granted unless         said
       leases also show that there la no adjacent            and ad-
       joining acreage to sald traot whereln said eppllcant
       is a party in lntereat        that could have been combined
       wtth the tract upon whloh the applloatlon            for ex-
       tenslon    or renewal Is made ln order to oomplg wlth the
       Feclerel restriction.

              “Sec. 2. The Commlssloner of the General Land
       Office 1s hereby euthorieed       to Issue to the lease
       owner such instrument     In writing    in the nature of an
       extension    or renewal of such lease as may be neces-
       sary or proper to carry into effect        the foregoing
/      provlsion    of this Aot.
             “Sec. 3. The provlslons    of this Act are and
       shall be held and oonstrued    to be oumuletlve     of all
       General Laws of thls state on the subject      treated     of
       and embraced ln thls Act when not ln oonfllot        here-
       wlth, but ln oane of oonfllot,    ln whole or In part,
       this Aot shell control.
             "960.   4.   If any seotlon,       subdlvlslon,     para-
Hon. C. D. Simmons, page 3         o-5393



    graph, sentence, or clause of this Act be held
    to be unconstitutional, the remaining portions of
    same shall nevertheless be held valid and binding
         "Sec. 5.  The fact that certain leases on
    University lands are of such size or shape as to
    create the probability that they cannot be devel-
    oped under governmental restrictions on 011 devel-
    opments, creates an emergency and Imperative public
    necessity demanding the suspenslon of the Rule re-
    qulring bills to be read on three several days, and
    sa1d Rule is hereby suspended, and this Act shall
    take effect and be in force from and after its
    passage, and it is so enacted."
         It is our opinion that 3. B. 287 gives to a lessee
of University land, who brings himself wIthin Its terms, the
right to a refusal of an extension or renewal of his lease
for such term as the Regents and the Land Commissioner may
fix (not to exceed two years) and upon a consideration to be
determined by them. The word "shall" is used in the first
paragraph of S. B, 287 ln connection with the granting of a
benefit or a right. Under such circumstances the meaning is
held to be mandatory rather than permissive. 39 Tex. Jur.
37.  In other words the Regents and the Land Comm%ssloner may
make an extension or renewal with present lessees of Univer-
sity lands, who come within the terms of the Act, wIthout the
necessity of a public sale and competitive bidding as provided
for by Article 2603a, Vernon's Annotated Civil Statutes.
         The Act gives the Board of Regents and the Land Com-
missioner broad discretion in the matter of fixing a consid-
eration. The Act makes no provision for an appeal from the
action of the Regents and the Land Commissioner. Their action
in fixing a consideration would be, in our opinion, final un-
less an interested party were able to show a clear case of an
abuse of discretion on their part. Securities State Bank of
San Juan v. State, 169 S. W. 2nd. 554, refused for want of
merit. However, the Regents and the Land Commissioner would
not be authorized to discriminate between lessees similarly
situated, either in regard to the consideration or the period
of their extension or revewal. Railroad Commission v. Shell,
139 Tex. 66, 161 S. W. (2) 1022.
         The next question is whether or not Section 5, Arti-
cle 2603a, Vernon's Annotated Civil Statutes, which provides
for a bonus, a royalty of l/8 of gross production and a delay
rental of lO# per acre per year, applies to an extension or
renewal under S. B. 287.  Article 2603a by its terms applies
to a sale at public auctton on competitive bids. The sale
Hon. C. D. Simmons, page 4         o-5393



must be held by the Board for Lease of University Lands, which
Board consists of two members of the Board of Regents and~the
Land Commissioner. Article 26C3a, Sec. 1, Vernon's Annotated
Civil Statutes. Senate Bill 287, on the other hand, author-
izes the entlre Board of Regents and the Land Commissioner to
grant an extension or renewal to present lessees for a limlt-
ed period without competitive bids. The provlslon In Art.
26C3a, Sec. 5 for assessing the highest bidder a special fee
of one (1%) percent of the total sum bid to pay the expenses
of the sale, including the fee of the auctioneer crying the
sale, would clearly not apply to an extension or renewal under
3. B. 287.  The fact that the lessee's right to invoke the
provisions of 3. B. 287 is condltioned on a showing that he
has been unable because of Federal restrictions to enjoy the
drilling rights which his lease confers, lndfcates to our
mind an intention to give such a lessee a further opportunity
for enjoying such rights without penalty. We take the view
that 3. B. 287 was intended to stand In place of performance
for a maximum period of two years, Lf the Board of Regents
and the Land Commissioner should, in their good judgment, de-
termine that a lessee of University land Is entitled to in-
voke Its provisions and is deserving of its benefits.
         The common law recognizes a doctrine of implled in-
tention by which certain klnas of contracts ar,esuspended be-
cause of temporary impossibility of performance artsing after
the date of execution and without fault of the partles.
         The general rule is epitomized in the Restatement
on Contracts, Sec. 462, as follows:
        "Temporary imposslbillty of such character
   that if permanent it would discharge a promiser's
   entire contractural duty, has that operation if
   rendering performance after the impossibility
   ceases would Impose a burden on the promisor sub-
   stantially greater than would have been imposed
   upon him had there been no impossibility; but other-
   wise such temporary impossibility suspends the
   duty of the promlsor to render the p;rformance promised
   only while the impossibility exists.
         See, also Vol. 6, Williston on Contracts
    (Rev. Ed. 19383 Sec. 1957; 17 C.J.S. 954, 956.
         We do not here hold that such rule obtains in Texas,
as we do not think that such a determination is necessary
in order to answer your question. However, we do belleve that
the Legislature in enacting 3. B. 287 had In mind the equitable
claims arising from the plight of a lessee who is unable to
Hon. C. D. Simmons, page 5         o-5393



reap the fruits of his lease because of a Federal ruling and
these are the same considerations that underlie the common
law doctrine just mentioned. Upon a consideration of the
special circumstances under whleh 3. B. 287 becomes operative
and in view of the objects of the Act, we are of the opinion
that the Act is complete within itself and that the provi-
sions of Article 2603a, requiring a minimum consideration
for leases let at public auction do not apply.
         We do not think that your question involves a ae-
termination of the rights of lessees of University land under
Sec. 7, Title III of the Second War Powers Act, approved
March 27, 1942. That section provides:
        “(7)  No person shall be held liable for
   damages or penalties for any default under any con-
   tract or order which shall result directly or ln-
   directly from compliance with this subsection (a)
   or any rule, regulation, or order issued there-
   under, notwithstanding that any such rule, regula-
   tion or order shall thereafter be declared by ju-
   dicial or other competent authority to be invalid."
   U. 3. Cong. Service Code (1942) 247; Tit. 50, U.S.C.A.
   APP. Sec. 633 (7).
         Subsection (a) which is referred to in the above
quotation is the section conferring priority powers on the
President. This section is the present source of authority
for Conservation Order No. M-68 as amended (8 F.R. 104) and       .
Preference Rating Order No. P-98, as amended (7 F.R. 2719).
These orders, by prescribing conditions under which priority
directives on strategic materials are held not to apply, ~111
have the effect of rendering temporarily Impossible the per-
formance by some lessees of the drilling provisions under
existing University leases.
         It is expressly provided In Sec. 1501, Title XV of
the Second War Powers Act, 1942 (U.S. Cong. Service Code, 253;
Tit. 50 U.S.C.A. App. Sec. 645) that Title III of that Act,
which -includesSec. 7, above quoted, "shall remain in force
only until December 31, 1944, or until such earlier time as
Congress by concurrent resolution, or the President, may des-
ignate."
         We are familiar with the rule which gives Federal
legislation precedence over other State statutes where Congress
has legislated in regard to a subject which is within i,tscon-
stitutional control and over which it has the right to assume
exclusive jurisdiction and has manifested its intentionto
deal therewith in full. 11 Am. Jur. 307; 17 R.C.L. 694;
                                                            ,    .




Hon. C. D. Simmons, page 6        o-5393


Neville v. G. C. & 3. F. Ry. Co. (Corn.App.) 252 S.W. 483.
Rbw ever, in our opinion, Sec. 7 of Title III of the Second
War Powers Act, 1942, Is by Its terms operative only to the
extent of absolving a lessee from liability "for damages or
penalties for any default." Such Fs the general rule with
reference to contracts under which performance is rendered
illegal or impossible because of conditions occurring sub-
sequent to the date of their execution. Cinquegrano v. T.A.
Clarke Motors(R.D.) 30 A(2d) 859; Scanti v. American Auto
Supply co., 36 N. Y. 3. (2d) 747; 20 Texas Law Review, 710.
The contrary rule seems to have been adopted ln Texas where
the impossibility in performance resulted from the adoptlon
of prohibltlon under the Local Option Statute. Houston Ice
& Brewing Co. v. Keenan (1905) 99 Tex. 79, 88 S.W. 197. The
right to a suspension of contracts during the period of tem-
porary impossibility does not deem to be covered by the Fea-
era1 Act above quoted. The Federal Act merely says that
"no person shall be held liable for damages or penalties for
any default under any contract" etc. After the expiration of
the primary term in a standard 011 and gas lease, if the de-
lay rentals have been paid and no well has been drilled, the
obllgatlons of the lessee are ordinarily at an end. Failure
to drill during the primary term is not a "default" unless
the absolute form of drillfng clause Is employed. 31 Tex.
Jur. 740. This Is not the form of lease which the statute
(Art. 2603a, Sec. 5, Vernon's Ann. Clv. St.) authorizes the
Board for Lease of University Lands to make, nor the lease
provided for in your Form No. 4. See our Opinion No. O-493,
issued on March 15, 1939, to Mr. Leo C. Haynes, Secretary of
the Board of Regents. We are not here concerned with whether
lessees of University lands have common law rights indepen-
dent of the Federal statute to a suspension of their lease
agreements for such period as the enjoyment of the drilling
rights thereunder may have been rendered illegal or impossible
as a result of compliance with a rule, regulation or order of
a Federal War Agency. Our holding is that S.B. 287 is not
rendered inoperative, either by reason of the Federal statute
or by reason of the lessee's common law rights. It clearly
gives a lessee of University lands, who comes within its
terms, a right to something he did not have before, viz. the
refusal on a present extension or renewal for a fIxed period
beyond the primary term of his lease.
         Trusting that the foregoIng sufflclently answers
your inquiry, we are
,   .




        Hon. C. D. Simmons, page 7         0 -5393


                                        Yours very truly
                                     ATTORNEY GENERAL OF TEXAS


                                        By sbagan Dickson
                                             Fagan DLckbon
                                                 Assistant
        FD:BT:wc

        APPROVED JUNE 24, 1943
        s/Grover Sellers
        FIRST ASSISTANT
        ATTORNEY GENERAL
        Approved Opinion Committee By s/BWB Chairman
