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## ATI-ORNEY GENERAL OF TEXAS

I' .'.:'j' ,: ~. : Hon. J. Earl Rudder Commissboner,General Land Office Austin, Texas

..

OplaionNo. S-166 :

:...RE:,

Rightsof the State in certain-Instances upon forfelture af a veteran's contract of'sale and pupchase under theVeterans' Land Program. :'

:?' Dear.Mr.:

Rudder: ~, You have requested an opinion on the following questions:

"1. In those caseswhere it becomes necessary for the Veterans' Land Board.,to forfei~t

a, veteran's contra~ct, landIt 1s:~ found that the'

veteran has executed a graz-~ lng lease on that particular traot.of land. with anotherparty, what is the legal stabs of thatpleases

contract~lnsofarasptheVet- : erans' Land Board Is ooncerne~d.

"2. Where.a veteranhas executed an agrlcultural~Lease.wlthanother party tom. operate the tract of.land.-being purchased through the ,Vetetians' Land Program, and It becomes necessary for theBoard to forfeit the veteran's~c~ontract, what Is the'status ~ofthis leasezontract and, what.r$ghts-accrue to the'Board as:to ownershlp.orpossession of any,crops growing on .that~ l:aad at the time of such forfeiture? .Your attention ls;called,to the fact that: In no instance, does the Board become a party to any such lease agreementby indicating their approvalHon. J. Earl Rudder - page 2 (US-166)

or disapproval of such.

"3

. In the case of 011 and gas leaseswhich may have been executed on land subject to forfeitureunder the terms of the Veteran's contract, such leasesbefore they become effectivemust be approved **by** the Chairman of theVeterans' Land Board and filed In that office. Are such 011 and gas leases affected in any way In the case of forfeitureof theveterans' land contract?

"4. Where a veteranpurchaserhas a growing crop on landshe Is purchasing through the Veterans' Land Program, and has mortgaged all or a portion of such crops,what rights accrue to theVeterans' Land Board to participate in theyield from such crops If forfeiture actionbecomes necessary?"

Article 5421m,Vernon's Civil Statutes, is cornmanly known as the "Veterans'Land Act.' Section 17 provides, In part:

"The sale of all lands hereunderby theBoard may be properly initiatedby contract of sale and purchase, and said contract shall be recorded In the deed records In the countywhere the land Is located. The purchaser shallmake an Initialpayment of at least five (5$)per cent of the selling price of the property. The balance of said selling price shall be amortizedover a period to be fixedby the Board, but not exceeding forty (40)years, togetherwith interest thereon at the rate of three (3s) per cent per annum]

. . .no property sold under the provisions of thisAct shallbe trankferred,sold
or conveyed, in whole or In part, until the purchaser has enjoyed possession for a period of'three (3) years from the date of purchase of said property and compliedwith all the terms and conditionsof thisAct and the rules and regulations of the Board; provided,however, that property sold under theprovisions.

.

Ron. J. Earl Rudder,‘- page 3 ~(S-166)

of this Act may be .,transferred, sold, dr conveyed at any timeafter the entire ,in; debtedness due the Board has been paid. When the entire Indebtedness, due the State under .the,

contract of sable

Is paid, the Chalrman,of the Veterans'Land Board shall execute ~adeed under its seal~to~'the.original purchaser.of.the land,which deed shall ,lnureto,thebenefit .ofthe legal.
owner 'of,s,ald

land,"

~Sectlon 18 providea:

?If at,ani'tlme.while the veteran Is Indebted:,totheaboardfor the land PMchased;,he.should~sxecute,oPth&e is In existence, .a~oll,~,gas and mineral lease covering such.land or any part thereof, at leastone-ha&f.{i/2) of.ailbonusmoney reoelved:

as.conslderatlon and one-half (l/i?) of all delay rentals paid under such leases and one-half (l/2) of all royalties received,(or,80much thereof asmay be required) shall be paid to the Boardby the owner of said lease and appliedby It toward the satlsfac,tlon of said lndebtedness. The lease made by the veteranwill be ofno force or effect until theBoard has ,recelvedIts portion themof, as hereIn provided."

Section 19 provides for the forfeiture of the contract of sale and purchase~lnthe followingmanner:

"In the event that any portionof the Interest or principal on any sale should not be'~pald~when

due, the contractof sale and purchase shall be subject to forfeitureby the Board, and such~forfelture, shallbe ef- :fectlve

when theBoard shallhavemet and '. passed a resolution directing theChairman ,of.the~ Board to endorse .uponthewrapper containing the papers of said sale, or upon the purchase.contract f,lled ln theLand Office, the word. 'forfeited,'orwords of ~! ,..Hon. J. Earl Rudder - page 4 (S-166)

similar Import,with the date of such action, and to sign officially; thereupon the .landsand all payments theretofore made shall become forfeited. ,A notice of the action of theBoard In forfeiting the original contract shall be ma.iledto the County Clerk of the courity wherethe land Is located, and the said Clerk shall enter on the margin of the 'pageor pages containing the record of the original contract,a notation of such forfeiture. Lands Included In such forfeited contract shallbe subject to resale under the same termsand conditions as though said lands had not theretofore been sold. In any casewhere the sale has been forfeitedand the title to the lands revested In theVeterans' Land Fund, the orlglnalpurchaser or his vendee shall have the right to reinstatehis claim In the purchase contract at any time prior to the date on which the Board shall have met and ordered the said lands to be advertised for resale, or for lease for mineral development,but not thereafter.

. . .'

The forfeiture of a defaulting veteran's contract of sale and purchase Is one of the few Instances in which formal resolutionby theBoard la required. Unlike many other duties of the Board which can be delegated to the Commissioner of the General Land Office, the forfeiture of
a contract of sale and purchase cannot be so delegated.

Section21 provides:

"The Board Is hereby authorizedand empowered to make and promulgate such rules and regulations under thisAct as.they shall deem to be necessary or advisable, and to enforce the same. It shall likewise have the power to prescribe the form and contents of all notices, bids, applications,awards, contracts, deeds, or Instrumentswhatsoever In any manner used by It In so carrying out such project and planwhen the same shallnot be in conflictwith law. The Board is hereby made the sole judge of forfeitureof any purchase contract under thisAct, and anyone.

Hon. J. Earl Rudder - page.5 (S-166)

avalllng'of the provislons of tNs Act shall by so.dolng agree to abideby the same; and should'the Board declare a forfeitux under said purchase contract, then the purohaserhereby a'i; rees to vacate the premiseswithin thirty 30)days after receipt of notice of such declaration." ,

The questionsyou have askedpresuppose that the transactionswith reference to the veteranand his lessee occurred subsequent to the execution of the contract of sale and purchase between the veteran and the State and before foffeltum'by the, Board for legal cause. It Is assumed, also, that the veteran's claimhas not been relnstated.
Not'only the'veterans'LandAct, but as well the 'contractof sale and purchase of record In the county clerk's office, puts on notice anyonewho deals with the veteran, that the contract Is subject to forfeiture so long as there remains unpaid any portion of the Interest and principal due on the contract. Thus, there Is mlsslng one .ofthe three elements essential to a bona fide purchase,namely, absence of notice. Therefore, the life of any type of lease contract, except an oil, gas and mineral leasewaspartlcu&ai?ly~provlded for In Section 18, entered into between the veteran andhis lessee, Is dependent upon the veteran's keeping currenthis obligations under,his ,contractof sale and purchase.

From a mading of the foregoingquoted sections, Itwill be ndted that the procedure for the contract of sale and purchase of land to a veteran, togetherwith the conditions attached thereto, Including the forfeiture provisions, Is rather definite and comprehensive. Apparently, the legislaturepatterned the forfeitureprovisions after earlier,laws authorizing forfeitureof sales of the public lands under certain circumstances.

In Lawless v.Wright, 86 S.W. 1039 (Tex.Clv.APP. 1905), itwas said:

"It Is the settled law that the State of Texas has the power and authorityto forfelt, through a declaration of &he Land Commissioner, a sale of Its lands, for the nonpayment by the:vendee of,the Intereston theHon. J. Earl Rudder - page,6 (S-166)

purchasemoney. Such being the law, the act of the Land Commissioner In forfeltlng thepurchase of the land by Fancher had the effect of restoring such land to the public domain of the state

. . .After the fo,rfelture

the land assumed the same status that it occupiedbefore the sale to Fancher, and the State'clearlyhad the right, which It exercised, of placing the land on themarketagain and selling It.

. . .n
~Ifthe veteran's contract of sale and purchase Is forfeited,there can be no claim of rlgh~t In anyone holding under him. 998 (1898). Frlstoe v. Blum, 92 Tex. 76, 45 S.W.

You are advised, therefore, In answer to your first questlon, that the grazing lease referred to expires and is of no further.forceand effect from and after forfeiture.

The answer toyour second questiondepends on the particular facts Involved at the time of forfeiture.Strlctly speaking,under the contractof sale and purchase, the State Is the owner of the legal title and the veteran Is the owner of the equitable title. The veteran Is entitled to possessionand heris not prohibited under theVeterans' Land Act from leasing the land for grazing or agricultural purposes. Although the land Is not held subject to a vendor's lien as such, yet It Is subject to forfeitureand repossession. The same principles of law governing the vendor and purchaser in an ordinary transactionInvolving the sale of land and the retention of the vendor's lien likewise apply to the contractof sale and purchasebetween the State and the veteran.

Where the land Is held subject to a vendor's lien, the lien debtor until title has been divestedby foreclosure, Is entitled to effect a constructiveseverance of crops growing on the land, and thus prevent them from passing to the purchaser at a foreclosure sale. w1111s v. Moore, 59 Tex. 628 (1883); Bowers v. Bryant Link Co., 15 S.W.2d 598 (Tex.Comm.App.1929).

The lien of a vendor of land does not extend to growing crops. Clv.App.1901). League v. Sanner Bros., 60 S.W. 898 (Tex.

One who takes a mortgage on crops to be grown by the purchaser has a right which is superior to..

,

Hon. J. Earl Rudder - page 7 (S-166)

any claim on the part of the vendor or a purchaserat a foreclosure sale to enforce the vendor's lien. Caldwell, Hughes & Patterson v. Yarborowh, 186 S.W. 350 (Tex.Clv. App.1916), Leanue v. Sanner Bras., supra.

A tenant Is entitled to his share of the crops grown on the land. In Brown v. Leath, 42 S.W. 655.(~ex. Clv.App.1897, error ref.) (concluslon,of facts In 44 S.W. 42), the court said:

"

. . . The lesseehad, under his lease, cult,lvated

the land; and at the time of the sale then

crop of cotton and cornwas maturing, and some of Itmatured. The lease severed the right to the rents from the realty, and the sale of the land under the'deed of trustdid not carry the title to the rents, or the crop on the premises standing at the date of the sale,whethBF mature or not. The lessee had the right of Ingress and egress for the purpose of gathering and preparing the crops for market or use. This Is no longer an open question In this state. (CitingWillis v.Moore, supra, and other cases). The fact that the tenant had notice of the mortgage by Its record Is lmmaterlal. It Is the right of themortgagor, before foreclosure, to sever the rents from the reversion. In this
case Itwas done by granting the lease.

. . ."

In Dlnwlddle v. Jordan, 228 S.W. 126 (Tex.Comm. App.1921), the court said:

"The doctrine of emblements Is the common law right of tenant,whose lease of uncertain duration has been terminatedwithout his fault and without previous knowledge upon his part, to enter upon the leased premises to cultivate,harvest, and remove the crops planted by him before the termination of the lease."

The court, In the same case, supra, quoted the Supreme Court of Indiana as follows:

"In order'to entitle one claiming to be a tenant, or his legal representative, to emblements, the follpwlng facts mustHon. J. Earl Rudder - page 8 (S-166)

appear: (1) The existence of a tenanoy of uncertainduration. (2)A termination of the tenancyby theAct of Cod or by the act of the lessor. (3) That the crop was planted by the tenant, or someone claiming under him, during his right of occupancy."

In the secondquestion poeed, the veteran has leased the land for agriculturalpurposes. The tenancy is in existence and is of uncertain duration because it is subject to terminationby forfeiture of the veteran's contract of sale and purchaseby the action of the Board. Secondly, the tenancyhas been terminated by forfeiture which Is the result of the landlord's (veteran's)act in not performing his part of the contract of sale and purchase. Thirdly, the tenant's~crophas been plantedby him, or someone claimingunder him, during his right of occupancy. Therefore,your second question is answered as follows:

Where a veteranhas.executed an agricultural lease to another party and the veteran's contract of sale and purchase is forfeitedby the Board, the lease Is terminated; however, the tenant is entitled to hls share of the crops. The State Is entitled to receive the landlord's I

veteran's lord's veteran'sI portion of the Brentprovided the landportionhas not been severedpreviously, eitheractually or constructively,by the landlord (veteran)prior to the forfeiture. We shall not attempt in this opinion to cover fully the matter of what constltutes a constructive severance,but we will note that
a sale or mortgage of the crops is a constructiveseverance. Willis v. Moore, supra;Bowers v. Bryant Link Co., supra.

The answer toyour third question Is in the negative. The status of an 011 and gas lease exekuted pursuant to the terms of Section 18 is not changedby forfeiture except to the extent that the State thereafter would be entitled to receive all annual delay rentals and royalties.

In Willis v.Moore, supra, the court said:

I,

. . .As, however, the crops are separate and distinct in theirnature from the land upon which they grow, the ownership of the one, evenHon. J. Earl Rudder - page 9 (S-166)

on mortgaged son, and the and whenever land covered of the Land, property,may be in one pertitle to the other in afiother; crops growing or standing upon by a lien given by the owner or acquiredby law, have in

. . law or In faci?

Deen severed in ownership,
or actually severed from the land prior to sale of the land under the lien, title ',. theretowill not pass by the foreclosure of the lien.

"A mortgagor is entitled to sever in law or fact the cropswhich stand upon his land at any time prior to the destruction of his titleby sale under the mortgage; this results from his ownership and consefluent right to the use and profits of the land,

. . ."

You are advised, in answer to your fourth question, that If a veteranpurchaserhas mortgaged all or a portion of the crops growing on lands he Is purchasing through the Veterans' Land Program,no rights accrue to the State to participate in the yield from such crops if forfeiture action becomes necessary, except to the extent only of the portion of cropswhich has not been severed, feiture. either actually or constructively,prior to forSUMMARY

A grazing lease executed by a veteran purchaser under the Veterans' Land Act expires and Is of no further force and effect from and after forfeiture of the veteran's contractof sale and purchase.

An agriculturallease executed by a veteran purchaser to another party Is terminatedby forfeitureof the veteran's contractof sale and purchase; however, the tenant is entitled to his share of the crops and the State Is entitled to the veteran'sportion of the rent provided the veteran'sportion has not been severed previously,either actually or constructively,by the veteran prior to forfeiture.- . .

Hon. J. Earl Rudder - page 10 (S-166)

The status of an oil and gas lease executed by the veteran and approvedby the Chairman of theVeterans'Land Board is not changed by forfeitureexcept to the extent that the State thereafter is entitled to receive all annual delay rentals and royalties.

If a veteran purchaserhasmortgaged all or a portion of the crops growing on lands he has contracted to purchase through the Veterans' Land Program,no rights accrue to the State to participate in the crops after forfeitureexcept to the extent of the portion of crops which has not been severed prior to forfeiture.

Yours very 'truly,

JOHN BEE SREPPERD AttorneyGeneral

APPROVED:

Mary K. Wall Reviewer

John Davenport Reviewer

Will D. Davis Special Reviewer

Davis Grant Special Reviewer

John Atchison Acting First Assistant

John Ben Shepperd Attorney General

JAA:bt