When a Texas law required one state agency to sell land to another, did the seller keep the mineral rights unless the law said so?

Texas AG Opinion JM-1170: Did a State Land Transfer Statute Let the Seller Keep the Minerals?

Plain-English summary

The engineer-director of the State Department of Highways and Public Transportation (the Highway Department) asked about Senate Bill 52, a 1987 law directing the Texas Board of Mental Health and Mental Retardation and the Texas Department of Corrections (TDC) to sell certain tracts of state-owned land to the Highway Department for $120.6 million. The Board of Mental Health and Mental Retardation delivered a deed conveying its tract without reserving anything, but TDC refused to execute a deed transferring full title, taking the position the legislature had not intended TDC to give up the mineral rights in the land. The Highway Department asked the Attorney General to construe the bill and decide whether it authorized TDC to reserve the minerals or required a fee-simple transfer.

The Attorney General concluded the bill required a full fee-simple conveyance. Under Texas case law, the legislature has exclusive control over the disposition of state-owned land, and when the legislature directs a transfer of land without expressly reserving any interest, the general rule that a grant of land conveys the entire fee-simple estate unless the conveyance is expressly limited applies with equal force to a statute requiring one state agency to transfer land to another. Senate Bill 52 said TDC "shall sell" the described tracts to the Highway Department without any language letting TDC keep the mineral estate, so the opinion found TDC lacked authority to reserve the minerals. The opinion also rejected two arguments TDC had raised: that the purchase price reflected only the value of the surface estate, and that a General Appropriations Act rider requiring mineral rights to be retained "unless impractical" when state land is sold applied here; the opinion found no requirement that a transfer between state agencies reflect "adequate compensation," and noted that regardless of which agency held title, the minerals would remain state property either way, so the rider had no bearing on the outcome.

Currency note

This opinion was issued in 1990, construing a 1987 statute. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule mentioned here.

Who this opinion affected (as of 1990)

The Department of Corrections and the Highway Department: The opinion resolved the two agencies' dispute over the 1987 land sale, concluding TDC had to convey the mineral estate along with the surface to the Highway Department, since Senate Bill 52 contained no language reserving minerals to TDC.

State agencies generally: The opinion reaffirmed that when the legislature directs one state agency to transfer land to another without expressly limiting the conveyance, Texas courts would likely apply the ordinary rule that a grant of land passes the fee-simple estate, minerals included, unless the statute says otherwise.

Common questions

Why did the Department of Corrections think it could keep the mineral rights?
TDC argued the purchase price reflected only the value the General Land Office had placed on the surface estate, and pointed to an appropriations-act rider requiring mineral rights to be retained when state land is sold "unless impractical." The opinion rejected both arguments.

Why didn't the purchase-price argument work?
Because the opinion found no requirement that a state agency receive "adequate compensation" when property in its custody is transferred to another state agency's custody, unlike a transfer of private property, so the price paid was not evidence the legislature meant to exclude the minerals from the sale.

Why didn't the appropriations-act rider requiring mineral retention apply?
Because regardless of whether TDC or the Highway Department held title, the minerals would remain the property of the state either way, so the rider's purpose, keeping minerals in state ownership, was satisfied no matter which state agency ended up holding the deed.

Background and statutory framework

In 1987 the legislature adopted Senate Bill 52, directing the Board of Mental Health and Mental Retardation and the Department of Corrections to sell described tracts of state-owned land to the Highway Department for a total of $120.6 million, to be purchased before August 31, 1988, from constitutionally dedicated and statutorily dedicated portions of the state highway fund as applicable under article VIII, sections 1-a and 7-b of the Texas Constitution. The Board of Mental Health and Mental Retardation conveyed its tract without reservation; TDC refused to convey full title, asserting the legislature had not intended TDC to transfer the mineral estate.

The opinion reasoned that the legislature has exclusive control over the disposition of state-owned land, citing Lorino v. Crawford Packing Co. and Conley v. Daughters of the Republic, and that under both case law and statutory law (Property Code § 5.001(a)), a grant of land is construed as a grant of a fee-simple estate unless the conveyance expressly limits it, citing Sharp v. Fowler and City of Stamford v. King, and applying an analogous rule to a statute requiring one state agency to transfer real property to another, the opinion found Senate Bill 52 contained no language indicating TDC should retain any interest in the land, so TDC lacked authority to reserve the mineral estate. The opinion distinguished two arguments TDC raised: first, that the price paid reflected only the surface estate's value, which the opinion found irrelevant because no "adequate compensation" requirement (of the kind that applies to takings of private property under article I, section 17 of the Texas Constitution) governs transfers of custody between state agencies; and second, that a General Appropriations Act rider requiring mineral-rights retention when state land is sold "unless impractical" required TDC to keep the minerals, which the opinion found inapplicable because the minerals would remain state property regardless of which agency, TDC or the Highway Department, held title.

Citations

Statutes and constitutional provisions:

• Tex. Const. art. VIII, § 1-a
• Tex. Const. art. VIII, § 7-b
• Tex. Const. art. I, § 17
• Tex. Prop. Code § 5.001(a)
• Acts 70th Leg., 2d C.S., ch. 2, § 1, at 5 (Senate Bill 52)
• General Appropriations Act, Acts 1989, 71st Leg., ch. 1263, art. V, § 83
• General Appropriations Act, Acts 1987, 70th Leg., 2d C.S., ch. 78, art. V, § 79

Cases:

• Lorino v. Crawford Packing Co., 175 S.W.2d 410, 414 (Tex. 1943)
• Conley v. Daughters of the Republic, 156 S.W. 197, 200 (Tex. 1913)
• Sharp v. Fowler, 252 S.W.2d 153 (Tex. 1952)
• City of Stamford v. King, 144 S.W.2d 923 (Tex. Civ. App.-Eastland 1940, writ ref'd)

Prior Attorney General opinions cited: JM-242 (1984), WW-207 (1980), WW-1273 (1962).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1170
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1990/jm1170.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

April 27, 1990

Mr. Arnold W. Oliver, P.E.
Engineer-Director
State Department of Highways and Public Transportation
DeWitt C. Greer State Highway Building
11th & Brazos
Austin, Texas 78701-2483

Opinion No. JM-1170

Re: Conveyance of land from the Texas Department of Corrections to the State Department of Highways and Public Transportation (RQ-1951)

Dear Mr. Oliver:

You ask about the construction of a bill requiring the Department of Corrections to transfer certain real property to the Department of Highways and Public Transportation (hereinafter Highway Department). Specifically, you ask whether the bill authorized the Department of Corrections to reserve the mineral rights in the land in question or whether the bill required the department to transfer title in fee simple.

In 1987 the legislature adopted Senate Bill 52, which provides in part as follows:

SECTION 1. CONVEYANCE OF PROPERTY. (a) On behalf of the state, the Texas Board of Mental Health and Mental Retardation and the Texas Department of Corrections shall sell to the State Department of Highways and Public Transportation the tracts of state-owned land that are described by Section 2 of this Act for a total amount of $120.6 million.

(b) Before August 31, 1988, the State Department of Highways and Public Transportation shall purchase the land for a total amount of $120.6 million. All the land that qualifies for the expenditure of constitutionally dedicated funds shall be purchased from the constitutionally dedicated portion of the state highway fund.[1] The remainder shall be purchased from the statutorily dedicated portion of the state highway fund.

Acts 70th Leg., 2d C.S., ch. 2, § 1, at 5 (footnote added).

You state that the Highway Department tendered the purchase price to the Board of Mental Health and Mental Retardation (hereinafter MHMR) and the Department of Corrections. MHMR delivered a deed conveying, without reservation, the property described in Senate Bill 52. The Department of Corrections, however, refused to execute a deed transferring title in fee simple and took the position that the legislature did not intend that the Department of Corrections transfer the mineral rights in the land in question.

1. Article VIII, section 1-a, Texas Constitution provides that revenues from motor vehicle registration fees and taxes on motor fuels and lubricants shall be used only for certain specified purposes, most of which have to do with financing of roads and highways. Article VIII, section 7-b provides:

All revenues received from the federal government as reimbursement for state expenditures of funds that are themselves dedicated for acquiring rights-of-way and constructing, maintaining, and policing public roadways are also constitutionally dedicated and shall be used only for those purposes.

Section 1(b) of Senate Bill 52 restates the constitutional requirement that the Highway Department may expend funds from the sources described in those constitutional provisions only for purposes set out in those constitutional provisions. We note that section 4(b) of Senate Bill 52 would allow the Highway Department to lease back to TDC for $1 a year any portion of the land acquired from TDC pursuant to Senate Bill 52. The constitutionality of such a lease would be in question if the Highway Department used funds subject to section 7-a or section 7-b of article VIII to purchase the land from TDC.

The legislature has exclusive control over the disposition of state-owned land. See Lorino v. Crawford Packing Co., 175 S.W.2d 410, 414 (Tex. 1943); Conley v. Daughters of the Republic, 156 S.W. 197, 200 (Tex. 1913); Attorney General Opinion JM-242 (1984). Senate Bill 52 states that the Department of Corrections "shall sell to the State Department of Highways and Public Transportation the tracts of state-owned land" described in the bill. The bill contains no language indicating that the Department of Corrections should retain any interest in that land. In grants of land, reservations of mineral interests must be by clear language. Sharp v. Fowler, 252 S.W.2d 153 (Tex. 1952). In Texas, under both case law and statutory law, a grant of land will be construed as a grant of an estate in fee simple unless the conveyance is expressly limited. City of Stamford v. King, 144 S.W.2d 923 (Tex. Civ. App.-Eastland 1940, writ ref'd); Prop. Code § 5.001(a). We think the courts would apply an analogous rule to construction of a statute requiring one state agency to transfer real property to another state agency. Therefore, we do not think the Department of Corrections was authorized to reserve to itself the mineral estate in the land described in Senate Bill 52. See generally Attorney General Opinion WW-207 (1980) (statutes governing Department of Corrections indicate legislative intent to regulate closely disposition of land under control of Department of Corrections); cf. Acts 1930, 41st Leg., 5th C.S., ch. 67, at 215 (authorizing Department of Corrections to sell certain property, but requiring that oil, gas, and mineral rights be reserved to state); Attorney General Opinion JM-242 (statute permitting board of regents "to transfer and convey" land under terms and conditions deemed advisable by regents allowed regents to convey easement or fee simple title).

Two arguments have been raised in support of TDC's position. One is that the amount to be paid by the Highway Department for the land held by TDC is the value the General Land Office placed on the surface estate in that land. However, there is no requirement that a state agency receive "adequate compensation" when state property in its custody is transferred to the custody of another state agency. See Attorney General Opinion WW-1273 (1962) (land acquired in name of county for construction of state highways is state property regardless of fact that deed is made out to county); see also Tex. Const. art. I, § 17 (requiring payment of adequate compensation when private property is taken for public purposes).

The other argument is that TDC's retention of the mineral rights is required by the following Appropriations Act rider:

No state lands shall be sold unless the mineral rights are retained by the state, unless impractical.

General Appropriations Act, Acts 1989, 71st Leg., ch. 1263, art. V, § 83; General Appropriations Act, Acts 1987, 70th Leg., 2d C.S., ch. 78, art. V, § 79. Regardless of whether TDC or the Highway Department holds title to the mineral rights in the land in question, those rights will be held by the state. Consequently, that rider has no application to your question.

SUMMARY

A bill requiring the Department of Corrections to transfer certain real property to the Department of Highways and Public Transportation did not authorize the Department of Corrections to reserve to itself the mineral estate in that land.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Sarah Woelk
Assistant Attorney General