Can a right of reverter in a deed be enforced against a Texas state agency that owns the property?

Plain-English summary

The Marshall Economic Development Corporation conveyed a building and land to Texas State Technical College under a deed with a "Fee Simple Determinable Condition." The condition required the College and its successors to use the property exclusively for specified educational purposes. The deed said that if the condition was not satisfied, the property would automatically revert to and be owned by the corporation, with no further act required, because the corporation intended to convey only a fee simple determinable estate.

The College no longer wanted the property and was unsure how to divest it given the reverter. Its chancellor asked the AG whether a right of reverter is enforceable against the property, reasoning that College property is state property and that state sovereignty principles generally keep local restrictions like ordinances and codes from applying to state or state-agency property. In essence, the question was whether the College actually held a fee simple absolute, an estate the owner can dispose of without condition, rather than the conditional estate the deed described.

The AG explained that a fee simple determinable is an estate that automatically expires when a limiting event happens, here the College's ceasing to use the property for the specified educational purposes. The corporation held a possibility of reverter, the grantor's future interest that takes effect automatically if the terminating event occurs. The AG noted that this office does not construe specific deeds, so it assumed the deed reserved a possible right of reverter and answered the legal question.

The chancellor's sovereignty argument did not change the result. The attorney general opinions he cited all concerned the principle that local governments' police powers (building and zoning ordinances, fire codes, building permits) generally do not apply to state property, because subordinate entities derive their powers from the State and the Legislature does not surrender the State's right to regulate its own property when it grants those powers. A right of reverter, by contrast, is a private property interest arising from the terms of a deed under Texas real-property principles, not a police power. The AG called police powers and real-property ownership rights fundamentally unrelated concepts.

Drawing on Texas Supreme Court decisions, the AG explained that the parties' intent expressed in the deed determines the extent of the estate granted, and that a right of reverter is a protected property interest, a claim to property the grantor never gave away, which a governmental entity can appropriate only by paying just compensation. A government grantee also does not extinguish a reverter by conveying the property to a third party; the buyer takes subject to it. The AG concluded that a state agency's ownership of a fee simple determinable conveyed by deed can terminate and title revert to the grantor according to the deed's terms.

Currency note

This opinion was issued in 2018. 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, deadline, or remedy mentioned here.

What the opinion meant for those who asked

The college chancellor who requested the opinion: The AG answered that the College's status as a state agency did not convert its fee simple determinable into a fee simple absolute. The opinion told him the College's interest could terminate and revert to the grantor under the deed's terms, so the reverter was not erased by sovereignty.

State agencies holding deeded property (as the opinion described them): The opinion treated a state agency's ownership of property conveyed by deed as generally governed by the deed's terms, including a possibility of reverter, rather than as automatic fee simple absolute ownership.

Grantors who deeded property to the State with a reverter (as described in the opinion): The opinion characterized a right of reverter as a protected property interest the grantor never gave away, which the AG said a governmental entity could appropriate only by paying just compensation, and which a conveyance to a third party would not extinguish.

Common questions

What is a fee simple determinable?
The AG described it as an estate that automatically expires when a limiting event happens, here the College's ceasing to use the property for the educational purposes the deed specified. The owner holds the property only as long as the condition is met.

Does a state agency get full ownership just because it is the State?
No. The AG explained that no sovereignty principle converts a fee simple determinable owned by the State into a fee simple absolute. The agency's ownership is governed by the deed's terms.

Why don't sovereignty principles defeat the reverter?
The AG distinguished police powers from property rights. Local police powers (like zoning) generally do not reach state property, but a right of reverter is a private property interest created by a deed, which the opinion called fundamentally unrelated to police powers.

Can the agency just sell the property to escape the reverter?
The AG indicated no. Citing Texas case law, the opinion explained that a governmental grantee does not extinguish a right of reverter by conveying the property to a third party; the buyer takes subject to it.

Background and statutory framework

This opinion turned on Texas real-property law rather than a statute. A fee simple determinable automatically expires upon a limiting event, and the grantor's possibility of reverter is the future interest that takes effect if that event occurs (Hoke v. O'Bryen, 281 S.W.3d 457, 460 (Tex. App.-San Antonio 2007, no pet.); Singer v. State, 391 S.W.3d 627, 632 n.1 (Tex. App.-El Paso 2012, pet. denied); Luckel v. White, 819 S.W.2d 459, 464 (Tex. 1991)). The parties' intent expressed in the deed determines the extent of the estate granted (Luckel, 819 S.W.2d at 461). University and college property is state property because such institutions have no existence independent of the State (Walsh v. Univ. of Tex., 169 S.W.2d 993, 993 (Tex. Civ. App.-El Paso 1942, writ ref'd)). A right of reverter is a protected property interest, a claim to property the grantor never gave away, which a governmental entity may appropriate only by giving just compensation (El Dorado Land Co. v. City of McKinney, 395 S.W.3d 798, 802-03 (Tex. 2013); ConocoPhillips Co. v. Koopmann, 547 S.W.3d 858, 867 (Tex. 2018); Leeco Gas & Oil Co. v. Cty. of Nueces, 736 S.W.2d 629, 631-32 (Tex. 1987)). A governmental grantee does not extinguish a reverter by conveying the property to a third party (Stewart v. Mobley, 500 S.W.2d 246, 250 (Tex. Civ. App.-Beaumont 1973, writ ref'd n.r.e.); Cypress-Fairbanks Indep. Sch. Dist. v. Glenn W. Loggins, Inc., 115 S.W.3d 67, 72-73 (Tex. App.-San Antonio 2003, pet. denied)). The local police powers of subordinate governmental entities generally do not apply to state property (Tex. Att'y Gen. Op. Nos. JM-117 (1983); MW-508 (1982); M-182 (1968)). Sovereign immunity may affect the procedure or remedy for asserting a reverter but not its ultimate enforceability (Tex. Parks & Wildlife Dep't v. Sawyer Tr., 354 S.W.3d 384, 389-90 (Tex. 2011)). The opinion process does not construe specific deeds (Tex. Att'y Gen. Op. No. JM-675 (1987)).

Citations

Cases and Attorney General opinions:

• Walsh v. Univ. of Tex., 169 S.W.2d 993, 993 (Tex. Civ. App.-El Paso 1942, writ ref'd)
• Hoke v. O'Bryen, 281 S.W.3d 457, 460 (Tex. App.-San Antonio 2007, no pet.)
• Singer v. State, 391 S.W.3d 627, 632 n.1 (Tex. App.-El Paso 2012, pet. denied)
• Luckel v. White, 819 S.W.2d 459, 464 (Tex. 1991)
• El Dorado Land Co. v. City of McKinney, 395 S.W.3d 798, 802-03 (Tex. 2013)
• ConocoPhillips Co. v. Koopmann, 547 S.W.3d 858, 867 (Tex. 2018)
• Leeco Gas & Oil Co. v. Cty. of Nueces, 736 S.W.2d 629, 631-32 (Tex. 1987)
• Stewart v. Mobley, 500 S.W.2d 246, 250 (Tex. Civ. App.-Beaumont 1973, writ ref'd n.r.e.)
• Cypress-Fairbanks Indep. Sch. Dist. v. Glenn W. Loggins, Inc., 115 S.W.3d 67, 72-73 (Tex. App.-San Antonio 2003, pet. denied)
• Tex. Parks & Wildlife Dep't v. Sawyer Tr., 354 S.W.3d 384, 389-90 (Tex. 2011)
• Tex. Att'y Gen. Op. No. JM-675 (1987)
• Tex. Att'y Gen. Op. No. JM-117 (1983)
• Tex. Att'y Gen. Op. No. MW-508 (1982)
• Tex. Att'y Gen. Op. No. M-182 (1968)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0209
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2018/kp0209.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

August 9, 2018

Mr. Michael Reeser Opinion No. KP-0209
Chancellor
Texas State Technical College Re: Whether a right of reverter on property
3801 Campus Drive owned by Texas State Technical College is
Waco, Texas 76705 enforceable against it as a state agency
(RQ-0210-KP)

Dear Mr. Reeser:

    You ask about the enforceability of a right of reverter contained in a real property deed

conveying property from an economic development corporation to a state agency. [1] You tell us
that the Marshall Economic Development Corporation (the "Corporation") conveyed a building
and real property to Texas State Technical College (the "College") in a deed containing a "Fee
Simple Determinable Condition" requiring that the College and any successors "shall use the
property exclusively for" specified educational purposes. Request Letter at 1. The deed further
provides that the Corporation grants the property

            for as long as the Fee Simple Determinable Condition is satisfied,
            and if the Fee Simple Determinable Condition is not satisfied, the
            Property will automatically revert to and be owned by Grantor [the
            Corporation] without the necessity of any further act on the part of
            the Grantor, it being Grantor's intent to convey a fee simple
            determinable estate to Grantee [the College]. [2]

    You tell us that the College no longer wishes to own the property but is uncertain about

how to divest itself of the property in light of the reverter. You question whether a right of reverter
is enforceable against the property because: (1) property belonging to the College is state property,
and (2) state sovereignty principles generally prevent local government property restrictions such
as ordinances and codes from applying to state or state agency property. Id. at 2 (citing several
attorney general opinions about local restrictions on state or agency property); see also Walsh v.
Univ. of Tex., 169 S.W.2d 993, 993 (Tex. Civ. App.-El Paso 1942, writ ref'd) (explaining that
university property is state property because the university has no existence independent of the
State). You inform us that the College intends to either disregard the right of reverter and sell the
property, sell the property subject to the right of reverter, or return the property to the Corporation,
depending on the answer to your question:

            [D]oes a right of reverter related to a Fee Simple Determinable
            Condition bind the State, or do the sovereign property rights of an
            agency of the State of Texas result in Fee Simple ownership of the
            property?

Request Letter at 1-3.

     In essence you ask whether the College owns a fee simple absolute, "an estate over which

the owner has unlimited power of disposition in perpetuity without condition or limitation." Hoke
v. O'Bryen, 281 S.W.3d 457, 460 (Tex. App.-San Antonio 2007, no pet.). However, the deed
from the Corporation characterizes the estate owned by the College as a "fee simple determinable."
Corporation's Brief at 1. "A 'fee simple determinable' is an estate that automatically expires upon
the happening of a limiting event," in this case the cessation of the College's use of the property
for the educational purposes specified. Hoke, 281 S.W.3d at 460. The Corporation claims a
possibility of reverter, see Corporation Brief at 4, which is "a future interest retained by a grantor
after conveying a fee simple determinable, so that the grantee's estate terminates automatically
and reverts to the grantor if the terminating event ever occurs." Singer v. State, 391 S.W.3d 627,
632 n.1 (Tex. App.-El Paso 2012, pet. denied) (quotation marks omitted); see also Luckel v.
White, 819 S.W.2d 459, 464 (Tex. 1991) ("The 'possibility of reverter' is the real property term of
art for what the grantor owns as a future interest in a determinable fee grant; it is the grantor's right
to fee ownership in the real property reverting to him if the condition terminating the determinable
fee occurs."). While this office does not determine rights under a specific deed, we assume for
purposes of this opinion that the deed, construed as a whole, reserves to the Corporation a possible
right of reverter. See Singer, 391 S.W.3d at 632-33 & n.2 (construing the language of a deed as a
whole to determine if it reserves a possibility of reverter); Tex. Att'y Gen. Op. No. JM-675 (1987)
at 3, 8 (stating that the opinion process is not intended to determine "[w]hether specific deeds
create covenants, conditions, or determinable fees").

      You do not identify any principle of sovereignty that would effectively convert a fee simple

determinable owned by the State or an agency into a fee simple absolute. The attorney general
opinions that you reference all concern the principle based on sovereignty that the police powers
of local governmental entities generally do not apply to property owned by the State. See Request
Letter at 2 (citing Tex. Att'y Gen. Op. Nos. JM-117 (1983) at 2-3 (concerning building and zoning
ordinances), MW-508 (1982) at 4-5 (concerning city fire codes), M-182 (1968) at 2 (concerning
municipal building permits)). One opinion explains the rationale for the principle, that because
subordinate governmental entities derive their existence and all of their powers from the State,
when the Legislature grants them police powers, it does not thereby surrender the State's right to
regulate its own property. See Tex. Att'y Gen. Op. No. M-182 (1968) at 2. Unlike police powers
that derive from the State, a right of reverter is a private property interest that derives from the
terms of a deed or other conveyance according to Texas real-property principles. Luckel, 819
S.W.2d at 464. Police powers and real property ownership rights are fundamentally unrelated
concepts.

     The parties' intent as expressed in the language of a deed determines the extent of the estate

or interest granted. See Luckel, 819 S.W.2d at 461. A right of reverter is a "claim[] to property
that the grantor never gave away." El Dorado Land Co. v. City of McKinney, 395 S.W.3d 798,
802-03 (Tex. 2013) (quotation marks omitted); accord ConocoPhillips Co. v. Koopmann, 547
S.W.3d 858, 867 (Tex. 2018). The Texas Supreme Court explained that a right of reverter is "a
protected property interest," which a governmental entity may appropriate, if at all, only by giving
just compensation. El Dorado Land Co., 395 S.W.3d at 801-04 (holding that a right of reverter is
a type of reversionary interest, which may be the subject of an inverse-condemnation claim);
accord Leeco Gas & Oil Co. v. Cty. of Nueces, 736 S.W.2d 629, 631-32 (Tex. 1987) (holding that
when a governmental entity is the grantee in a gift containing a right of reverter, the governmental
entity cannot take that right in condemnation without paying just compensation). Moreover, a
governmental entity does not extinguish a right of reverter by conveying the property to a third
party. See Stewart v. Mobley, 500 S.W.2d 246, 250 (Tex. Civ. App.-Beaumont 1973, writ ref'd
n.r.e.) (holding that when property conveyed to the United States in a deed containing a possibility
of reverter was sold to a third party, the third party took the property subject to the possibility of
reverter); Cypress-Fairbanks Indep. Sch. Dist. v. Glenn W. Loggins, Inc., 115 S.W.3d 67, 72-73
(Tex. App.-San Antonio 2003, pet. denied) (holding that a tax sale did not extinguish possibility
of reverter). [3] In sum, a state agency's ownership interest in real property conveyed to it by deed
is generally governed by the terms of the deed, and thus, an agency's ownership of a fee simple
determinable can terminate and title revert to the grantor upon the occurrence of the terminating
event specified in the deed.

                                SUMMARY

                   A state agency's ownership of a fee simple determinable
          interest in real property conveyed to it by deed can terminate and
          title revert to the grantor according to the terms of the deed.

                                       Very truly yours,

                                       KEN PAXTON
                                       Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

BRANTLEY STARR
Deputy First Assistant Attorney General

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

WILLIAM A. HILL
Assistant Attorney General, Opinion Committee

[1] See Letter from Mr. Michael Reeser, Chancellor, Tex. State Tech. Coll., to Honorable Ken Paxton, Tex. Att'y Gen. at 1 (Jan. 29, 2018), https://www.texasattorneygeneral.gov/opinion/requests-for-opinions-rqs ("Request Letter").

[2] See Brief of the Marshall Econ. Dev. Corp. at 1 (Mar. 2, 2018) ("Corporation's Brief") (on file with the Op. Comm.).

[3] Sovereign immunity may affect the procedure or remedy to assert a right of reverter, but not its ultimate enforceability. See Tex. Parks & Wildlife Dep't v. Sawyer Tr., 354 S.W.3d 384, 389-90 (Tex. 2011) (holding that sovereign immunity bars a suit that is in substance a trespass to try title action against the State, but does not prevent an owner from recovering possession of property unlawfully claimed by a state official on behalf of the State).