August 25, 1987 

Honorable Gamy Mauro 

commissioner 

General Land Office 

Stephen F. Austin Building 

1700 North Congress Avenue 

Austin, Texas 78701 

Opinion No. JM-774 

Re: Whether the Veterans Land Board 

may impose a fee for delivery of a 

paid-in-full deed to a purchaser 

under the Veterans Land Program 

Dear Mr. Mauro: 

As chairman of the Veterans Land Board and Commissioner of the 

General Land Office, you request advice on the authority of the 

Veterans Land Board to collect the fees authorized by section 161.070 

of the Natural Resources Code from veterans who have purchased land 

through the board. The Veterans Land Board was created by constitutional provision. See Tex. Const. art. III. 149-b. Article III, 

section 49-b of the constitution provides for the creation and funding 

of the Veterans Land Fund, to be used to purchase land for resale to 

veterans on terms, prices, and interest rates provided by law. Id. 

The legislature passed an enabling act in 1949. Acts 1949, 51st Leg, 

ch. 318. at 592. 

Statutes governing the Veterans Land Board are now codified in 

chapter 161 of the Natural Resources Code. Section 161.070 of the 

Code, the provision about which you inquire, provides in part: 

(a) The board shall set and collect, for the 

use of the state, reasonable fees in amounts 

determined by the board for services it may 

provide in connection with processing and 

servicing of purchase applications and contracts 

of sale and purchase and matters incidental to 

these purchases. These fees may include but are 

not limited to the following: 

. . . . 

(2) contract of sale and purchase transfer 

fee for each transfer; 

(3) mineral lease service fee for each 

lease executed by purchasers; 

p. 3641 
Bonorable Gamy Mauro - Page 2 (JM-774) 

. . . . 

(6) fee for servicing and filing each 

easement ; 

(7) service fee for each contract of sale 

and purchase; 

(8) fee for homesite, severance, or 

paid-in-full deed; 

(9) title examination fee; 

(10) recording fees; 

. . . . 

(13) fee for preparation of legal instrumerits, including but not limited to deeds, 

contracts, affidavits, and curative instruments; 

. . . . 

(16) fees for any other services which may 

be requested of the board. 

(b) These fees may be added to the price of 

any land sold or resold by the board. 

(c) Fees or portions of fees that are in the 

opinion of the board unused shall be refunded. 

(Emphasis added). 

Nat. Res. Code P161.070. 

You particularly inquire about the fee for issuing a paid-in-full 

deed pursuant to subsection (a)(8) of section 161.070. The factual 

information and the briefing you have provided focus on the collection 

of a fee for that service. We will restrict our answer to this fee 

and will not consider other fees authorized by section 161.070, since 

different legal and factual considerations may apply to each fee. 

Your three questions are directed at determining whether the 

board has authority to collect the fee for issuing a deed upon full 

payment of the loan if the land purchase contract predates subsection 

161.070(a)(8) of the Natural Resources Code. 

p. 3642 
I 

Honorable Garry Mauro - Page 3 (JM-774) 

The 1949 legislation for the Veterans Land Program did not 

specifically provide for fees. In 1961. a deed fee of $10 was 

authorized, and a later amendment increased it to $20. Acts 1961, 

57th Leg., ch. 269, $3, at 572; Acts 1973, 63d Leg., ch. 615, 56 at 

1690 (codified as former V.T.C.S. art. 5421m. $21 (repealed in 1977)). 

In 1983, the specific amount of the deed fee was deieted from section 

161.070 of the Natural Resources Code, and the board was authorized to 

set the amount of the fee. Acts 1983, 68th Leg., ch. 81, 921(o), at 

355, 406. The board promulgated a rule setting the deed fee at $80 in 

September 1983. 40 T.A.C. 9175;17(8) (1983). 

You state that the longstanding practice of the board has been to 

collect from a veteran the amount authorized at the time the deed is 

issued, regardless of the date the contract between the board and the 

veteran was executed. In the board's opinion, the fee is directly 

related to services provided by the agency and the amount to be 

collected is determined by the date the service is provided. 

You have attached a sample contract executed in September 1954. 

We will address your question in the context of its provisions. 

When the state enters into a valid contract, it is as much bound 

thereby as a private citizen would be by a similar contract. Board of 

Regents of the University of Texas v. S 6 G Construction Co., 529 

S.W.Zd 90 (Tex. Civ. App. - Austin 1975, writ ref'd n.r.e.); Seaway 

Company v. Attorney General, 375 S.W.Zd 923 (Tex. Civ. App. - Houston 

1964, writ ref'd n.r.e.). The authority of state officers and agents 

to contract is controlled by the law in effect when the contract was 

entered into. Fasekas v. University of Houston, 565 S.W.Zd 299 (Tex. 

Civ. App. - Houston [lst Dist.] 1978, writ ref'd n.r.e.). appeal 

dismissed, 440 U.S. 952 (1979); see State v. Ragland Clinic-Hospital, 

159 S.W.Zd 105 (Tex. 1942); State. Steck Co., 236 S.W.Zd 866 (Tex. 

Civ. App. - Austin 1951, writ ref'd). The laws existing when a 

contract is made constitute part of the contract. United States Trust 

Co. V. New Jersey, 431 U.S. 1, 19 at n. 17 (1977); Langever v. Miller, 

76 S.W.Zd 1025 (Tex. 1934); Housing Authority of El Paso v. Lira, 282 

S.W.Zd 746 (Tex. Civ. App. - El Paso 1955, writ ref'd n.r.e.). 

The 1954 contract which you have attached to your request letter 

was entered into at a time when the Veterans Land Board had no 

statutory authority to charge fees for issuance of a deed when the 

loan was fully paid. Fee statures are strictly construed, and fees 

are not permitted by implication. Moore v. Sheppard, 192 S.W.Zd 559, 

561 (Tex. 1946); Nueces County v. Currington, 162 S.W.Zd 687, 688 

(Tex. 1942); State v. Moore, 57 Tex. 307. 321 (1882); Attorney General 

Opinion Nos. JM-346 (1985); H-796 (1976); V-957 (1949). Thus, when 

the 1954 contract was entered into, the board had no express or 

implied authority to charge a fee for providing a paid-in-full deed. 

p. 3643 
Eonorable Garry Mauro - Page 4 (JM-774) 

The contract, moreover. expressly incorporates the provisions of 

the veterans land law as they existed when it was executed. The 

contract states in part: 

Whereas, the Veterans' Land Board of Texas has, 

in accordance with the provisions of Acts Slst 

Leg., R.S., 1949, ch. 318, as amended by Acts 52nd 

Leg.. R.S., 1951, ch. 324, purchased a certain 

tract of land hereinafter described in this 

instrument; . . . 

Whereas . . . a duly qualified Texas Veteran as 

described in said Act, as amended, has complied 

with the requirements of said Board to purchase 

said Land in accordance with the provisions of 

said Act which is made a part of this contract for 

all purposes; 

Now Therefore, the following named parties do 

make this Agreement: 

. . . . 

9. Seller agrees to execute a deed under its 

seal to the original purchaser of the land when 

the entire indebtedness due the state under this 

contract of sale is paid. 

10. It is agreed between buyer and seller that 

all of the conditions, limitations and requirements as well as all benefits and penalties 

contained in the provisions of Acts Slat Leg., 

R.S., 1949, ch. 318, as amended by Acts 52nd Leg., 

R.S., 1951, ch. 324, together with all rules and 

regulations promulgated by the Veterans' Land 

Board, shall be binding upon the parties hereto in 

the same manner as if they were fully recited 

herein. 

In this contract, the parties agree to exchange land for a 

purchase price and interest payable over a period not to exceed 40 

years. They also exchange other promises, including the board's 

agreement to execute a deed when the debt is fully paid off. The 

veteran contracted for delivery of a deed as one aspect of the total 

consideration he received for his promise to pay the debt and to 

comply with other conditions required in the contract. When he 

complies with those conditions, the contract gives him a right to 

receive a deed without paying additional consideration. 

p. 3644 
I 

F. 

Honorable Garry Mauro - Page 5 (JM-774) 

Imposition of the $80 fee for the deed would therefore change 

the terms of the contract. We will consider whether the legislature 

may constitutionally authorize the board to collect the fee from 

purchasers whose contracts entitled them to delivery of the deed 

without any additional payment for that purpose. 

.Article I, section 10. clause 1, of the federal Constitution 

provides: 

No State shall . . . pass any . . . Law impairing 

the Obligation of Contracts. . . . 

Article I, section 16. of the Texas Constitution similarly 

prohibits the enactment of "any law impairing the obligation of 

contracts. . . ." The contract clauses of the federal and state 

constitutions apply to contracts entered into by states. Von Hoffman 

v. City of Quincy, 71 U.S. 535 (1866); Fasekas v. University of 

Houston, 565 S.W louston [lst Dist.] 1978, 

i-2 

x 299 (Tex. Civ. App. - i 

Gref'd n.r.e.). ameal dismissed, 440 U.S. 952 (1979); Determan v. 

z2t;r;f, fz. iekai: 609 f ;.W.Zd 565 (Tex. Civ. App. - Dallas 1980, 

johnso,;. Smith, 246 S.W. 1013 (Tex. 1922). 

The contract clause appears to proscribe "any" impairment, but 

its prohibition is not absolute. United States Trust Co. v. New 

Jersey, 431 U.S. at 21; Home Building and Loan Assn. v. Blaisdale, 290 

U.S. 398, 428 (1934). In Home Building and Loan Assn. v. Blaisdale, 

m, the Supreme Court upheld the Minnesota Mortgage Moratorium Law, 

which allowed judicial extension of the time for redeeming a 

foreclosed mortgage. The act was a temporary provision, adopted in 

response to mortgagors' hardships during the Depression. The Supreme 

Court found that a reservation of state power necessary to protect the 

and Loan Assn. v. Blaisdale, 290 U.S. at 439. But see Tr; 

Insurance Co. v. Marshall, 76 S.W.Zd 1007 (Tex. 1934) (Texa; 

moratorium act held to violate article I, section 16. of the Texas 

oublic interest was deemed to be Dart of all contracts. Home Building 

avelers' 

; mortgage 

Constitution). 

In City of El Paso v. Simmons, 379 U.S. 497 (1965), the Supreme 

Court dealt with a 1941 statute limiting the time in which purchasers 

of school lands could redeem land forfeited for failure to pay 

interest. Under a 1910 statute, the purchaser could redeem the 

property for an indefinite period by paying delinquent interest. The 

1941 statute limited to five years the time in which forfeited land 

could be redeemed, applying this provision to existing contracts. 

The pul'pose of the statute was to restore confidence in the 

stability and integrity of land titles. City of El Paso v. Simmons, 

379 U.S. at 511. The indefinite period for redemption had encouraged 

land speculation, in that purchasers would make the small down 

p. 3645 
Honorable Garry Mauro - Page 6 m-7741 

payment, fail to make interest payments, and then redeem the land if 

it appeared likely to produce oil or gas. The Supreme Court held that 

in view of the state's interest in restoring the stability and 

integrity of land titles and enabling the state to administer its 

property in a businesslike manner to maximize revenues for the public 

schools, the 1941 statute did not impair the obligation of contracts. 

It moreover pointed out that the five year statute of limitations 

would protect anyone with a bona fida interest in his land. 

United States Trust Co. v. New Jersey, 431 U.S. 1 (1977) arose 

out of au agreement between New York and New Jersey on the financing 

of their jointly owned Port Authority. In 1962 the two states agreed 

with each other and with holders of Port Authority bonds not to divert 

to other uses any revenues or resemes pledged as security for those 

bonds. In 1974. both states enacted legislation repealing this 

covenant in order to devote revenues to mass transit. The Supreme 

Court determined that the 1962 covenant had been properly 

characterized as a contractual obligation of the two states, and that 

its repeal impaired the states' contract with the bondholders. 431 

U.S. at 21. 

In determining whether chat impairment violated the Contract 

Clause the Supreme Court discussed the states' reserved power to adopt 

general regulatory measures even though private contracts might be 

impaired. The court then stated: 

When a state impairs the obligation of its own 

contract, the reserved-powers doctrine has a 

different basis. The initial inquiry concerns the 

ability of the State to enter into an agreement 

that limits its power to act in the future. 

United States Trust Co. v. New Jersey, 431 U.S. at 23. 

Reviewing prior decisions, the Supreme Court pointed out that a 

state could not contract away the police power or the power of eminent 

domain, but that a state could bind itself in the future exercise of 

rhe taxing and spending power. Id. at 24. However, an impairment of 

a state's own financial obligations might be constitutional if it is 

reasonable and necessary to serve an important public purpose. 

Complete deference to the legislature's assessment of reasonableness 

and necessity is not appropriate because the state's self-interest is 

at stake. The court further stated that 

a State cannot refuse to meet its legitimate 

financial obligations simply because its would 

prefer to spend the money to promote the public 

good. . . . 

p. 3646 
Honorable Garry Mauro - Page 7 (JM-774) 

431 U.S. at 29. The repeal of the 1962 covenant could be sustained 

only if it was "both reasonable and necessary to serve the admittedly 

important purpose claimed by the State." 431 U.S. at 29. The court 

determined that total repeal of the covenant was not essential. In 

addition, the two states could have discouraged automobile use and 

improved mass transit without modifying the contract at all. city of 

El Paso v. Simnons, was distinguished in that the imposition of a 

five-year statute of limitations on what was previously regarded as a 

perpetual right of redemption was "quite clearly necessary" to achieve 

the state's "vital interest in the orderly administration of the 

school lands program." 431 U.S. at 31. Finally, the 1962 covenant 

was adopted with full knowledge of the need for mass transportation in 

the area; the repeal cannot be said to be reasonable in light of 

changed circumstances. 

We turn to a consideration of the $80 fee imposed for issuance of 

a paid-in-full deed under subsection 161.070(a)(8) of the Natural 

Resources Code. This provision was included in Senate Bill No. 288 of 

the Sixty-eighth Legislature, which was enacted in 1983 to increase 

fees for services performed by state agencies to more nearly cover the 

administrative costs of delivering the service. Bill Analysis to 

C.S.S.B. 288, 68th Leg., filed in Bill file to S.B. No. 288, Legislative Reference Library. 

An interim committee was appointed by the Sixty-seventh Legislature to study fees collected by state agencies and to recommend 

changes. The report of the interim committee noted that reliance on 

fees has been necessitated by several factors, including a decreasing 

dependence on the ability of the property tax to support services. 

Senate Committee on Fees and Grants, Interim Report to the 68th Texas 

Legislature at ii (Nov. 10, 1982). The report also stated that 

factors such as cost recovery and inflation contributed to its 

recommendations for fee increases. Id. at iii, It noted that rises 

in the consumer price index since-fees were set accounted for 

recommended increases in fees collected by the General Land Office. 

The proposed increases in Veterans Land Program fees set in 1949 would 

account for a $600,000 net gain. Id. at 14. 

Thus, section 161.070(a)(8) of the Natural Resources Code was 

part of a legislative program to increase revenues by bringing fees 

up to date. Neither the report nor the bill analysis mention the 

existence of coutract provisions relevant to payment for services 

subject to fee increases. 

We first consider whether the imposition of an $80 fee on the 

land purchase contract is a significant enough change in contract 

terms to raise the issue of impairment. In United States Trust Co. v. 

New Jersey, the Supreme Court wrote that 

p. 3647 
Honorable Gamy Mauro - Page 8 (JM-774) 

a finding that there has been a technical impairment is merely a preliminary step in resolving the 

more difficult question whether that impairment is 

permitted under the Constitution. 

431 U.S. at 21. Discussing United States Trust Co. v. New Jersey in a 

later case, the Supreme Court characterized it as recognizing that the 

state's sovereignmpower has limits "when its exercise effects substantial modifications of private contracts." Allied Structural Steel 

Co. v. Spannaus, 438 U.S. 234, 244 (1978). The Supreme Court stated 

that the first inquiry must be whether the state law has operated as a 

substantial impairment of a contractual relationship: 

Minimal alteration of contractual obligations may 

end the inquiry at its first stage. Severe 

impairment, on the other hand, will push the 

inquiry to a careful examination of the nature and 

purpose of the state legislation. (Footnote 

omitted). 

Allied Structural Steel Co. v. Spannaus. 438 U.S. at 245. See also 

Energy Reserves Group, Inc. v. Kansas Power & Light, 459 U.S. 400. 411 

(1983). 

In our opinion. the assesssent of the additional $80 fee for 

issuance of a deed constitutes an impairment that is more than a 

minimal or technical impairsent. The individual veteran who 

contracted before 1962 to purchase land from the state expected to 

receive a deed upon full payment of the price stated in the contract. 

In effect, the state hopes to charge the veteran $80 for a service 

which it contracted to provide free of charge. Viewed from this 

perspective, we believe the impairment of the contract is significant 

enough to require some examination of the nature and purpose of the 

legislarion. Allied Structural Steel Co. v. Spannaus, 438 U.S. at 

245. 

The severity of the impairment increases the level of scrutiny 

to which the legislation will be subjected. Enrrgy Reserves Group, 

Inc. v. Kansas Power & Light, 459 U.S. at 411; Allied Structural Steel 

co. v. Spannaus, E. Even if the impairment in this case is 

characterized as not very severe, the legislation would not survive 

the corresponding low level of scrutiny. In this case, the state has 

impaired its owe contract in order to increase fee revenues to support 

the Veterans Land Board. The state may bind itself in the future 

exercise of its spending powers. United States Trust Co. V. New 

Jersey, 431 U.S. at 24. Thus, it did not contract away an essential 

aspect of its sovereignty in contracting to sell veterans lands for a 

specific consideration. The legislature enacted Senate Bill No. 288 

to increase revenues to state agencies. In our opinion, this reason 

p. 3648 
Eonorable Garry Mauro - Page 9 (JM-774) 

does not justify the contract impairment at issue. As the Supreme 

Court stated in United States Trust Co. v. New Jersey: 

A governmental entity can always find a use for 

extra money, especially when taxes do not have to 

be raised. If a State could reduce its financial 

obligations whenever it wanted to spend the money 

for what it regarded as an important public 

purpose, the Contract Clause would provide no 

protection at all. (Footnote omitted). 

431 U.S. at 26. 

In our opinion, the $80 fee may not constitutionally be assessed 

of land purchasers whose contracts pre-date any fee provision. We 

need not, therefore, address article I, section 16, of the Texas 

Constitution. Based on a brief study of cases construing article I, 

section lb, it appears likely that imposition of the $80 fee would 

violate that provision as well. See, e.g., Hutchings v. Slemons, 174 

S.W.Zd 487 (Tex. 1943) (statute of frauds pertaining to real estate 

broker's contracts violates article I. section 16, of the Texas 

Constitution insofar as it applies to contracts made nrior to its 

effective date); Travelers Insurance Co. v. Marshall, 78 S.W.2d 1007 

(Tex. 1934); Dallas County Levee Improvement District No. 6 v. Rugel, 

36 S.W.Zd 188 (Tex. Comm. App. 1931, judgmt adopted); Cape Conroe Ltd. 

v. Specht, 525 S.W.Zd 215 (Tex. Civ. App. - Houston 114th Dist.] 1975, 

no writ) (substantive rights and duties of parties to contract are 

established by law at time of contracting; subsequent law which 

channes such rinhts and duties violates article I, section 16, of the 

Texas Constitution). 

The Veterans 

for delivery of 

section 161.070 

SUMMARY 

Land Board may not impose a fee 

a paid-in-full deed authorized by 

of the Natural Resources Code on 

. 

purchasers of land whose contracts entitle them to 

delivery of the deed without payment of such a 

fee. A statute authorizing imposition of the fee 

in such cases would impair the obligation of 

contract and thus violate article I, section 10. 

clause 1, of the United States Constitution. _ 

JIM MATTOX 

Attorney General of Texas 

p. 3649 
Honorable Garry Mauro - Page 10 ml-774) 

MARY KELLER 

Executive Assistant Attorney General 

JUDGE ZOLLIE STEAKLEY 

Special Assistants Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Susan L. Garrison 

Assistant Attorney General 

p. 3650