I
,

%-HE .iiTl?ORNEY GENERAL
OF TEXAS

Honorable C.D. Simmons Comptroller,University of Texas Austtn, Texas

Dear SLr: OpinionNo. O-5393 Re: Interpreta'cIon of S.B. 287, Acts 1943,Regular Session,Fortgeighth Legislature.

We are in receipt of your opinion request reading inpart as follows:

"TheBoard of Regents of the University of Texas has directedme to request of you an opinion
as to your interpretationof Senate Bill No. 287, Acts Regular Session, 48th.Legislature.

"Theboard of Regents particularlydesires your interpretationof the effect and meaning of the language of the Bill which reads as follows:

"'TheBoard of Regents of the Unlverslty and the Commissionerof the General Land Office, In consideringan application for an extension or renewal of any such lease above described, shall take into consideration in establishingthe conslderation for such lease the diligencewith which the lessee has followed his duties under the existing lease, the present value of the land uponwhich an extenslonor renewal of the lease Is sought,and all other good business practices.'"

S. B. 287, Acts 1943,Regular Session, 48th.Leglslature,which now appears as Article 53416 ofVernon's Annotated Civil Statutes, reads as follows:

"Section1. In the case of any nonproducing oil, gas ormineral lease on University land, if
one hundred twenty (120)days before expiration of the primary term there be In effect any restrictions issuedby a Federal war agency prohlblt1ng the drilling or completion of a well thereon, the holder of such lease shall have the right to negotiate an extension 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 Offlee, in 0onslderUg an appllcatlon for 

### an extension 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 renewal 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 ooowners 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 adjoining 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 

### extenslon 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 necessary 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 herewlth, 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 thisAct be held to be unconstitutional,the remainingportions of
same shall neverthelessbe held valid and binding

"Sec.5. The fact that certain leases on University lands are of such size or shapeas to create the probability that they cannotbe developedunder governmentalrestrictions on 011 developments, creates an emergencyand Imperativepublic necessitydemanding the suspenslonof theRule requlring bills to be read on three severaldays, and sa1dRule is hereby suspended,and this Act shall take effectand 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 himselfwIthin Its terms, the right to a refusal of an extension or renewal of his lease for such term as the Regents and the Land Commissionermay fix (not to exceed two years) and upon a considerationto be determinedby them. The word "shall"is used in the first paragraph of S. B, 287 ln connectionwith the granting of a benefit or a right. Under such circumstancesthe meaning is held to be mandatory rather than permissive. 39 Tex. Jur. 37. In otherwords the Regents and the Land Comm%sslonermay make an extension or renewal with present lessees of University lands,who come within the terms of the Act, wIthout the necessity of a public sale and competitivebidding as provided for by Article 2603a,Vernon's Annotated Civil Statutes.

The Act gives the Board of Regents and the Land Commissioner broad discretion in the matter of fixing a consideration. The Act makes no provision for an appeal from the action of the Regents and the Land Commissioner. Their action in fixing a considerationwould be, in our opinion, final unless an interestedparty were able to show a clear case ofan 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 Commissionerwould not be authorized to discriminatebetween lessees similarly situated, either in regard to the considerationor the period of their extension or revewal. 139 Tex. 66, 161 S. W. (2) 1022. Railroad Commissionv. Shell,

The next question iswhether or not Section 5, Article 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 competitivebids. The saleHon. C.D. Simmons, page 4 o-5393

must be held by the Board for Lease of UniversityLands, which Board consists of twomembers 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, authorizes the entlreBoard of Regents and the Land Commissionerto grant an extensionor renewal to present lessees for a limltedperiod without competitivebids. The provlslon InArt. 26C3a, Sec. 5 for assessing the highestbidder a special fee of one (1%)percent of the total sumbid 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'sright to invoke the provisions of 3. B. 287 is condltioned on a showing that he has been unable because ofFederal restrictions to enjoy the drilling rightswhich his lease confers, lndfcatesto our mind an intentionto give such a lessee a further opportunity for enjoying suchrights without penalty. We take the view that 3. B. 287 was intendedto 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,determine that a lessee of University land Is entitled to invoke Its provisionsand is deserving of its benefits.

The common law recognizes a doctrine of implled intentionby which certainklnas of contracts ar,esuspendedbecause of temporary impossibilityof performanceartsing after the date of executionand without fault of the partles.

The general rule is epitomized in the Restatement
on Contracts, Sec. 462, as follows:

"Temporary imposslbilltyof such character that ifpermanent itwould discharge a promiser's entire contracturalduty, has that operation if rendering performance after the impossibility
ceaseswould Impose a burden on the promisor substantiallygreater than would havebeen imposed upon him had there been no impossibility;but otherwise such temporary impossibility suspends the duty of the promlsor to render the p;rformancepromised onlywhile the impossibilityexists.

(Rev. See, also Vol. 6, Williston on Contracts Ed. 19383 Sec. 1957; 17 C.J.S. 954, 956.

We do not here hold that suchrule 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 Inmind the equitable claims arising from the plight of a lesseewho is unable toHon. C.D. Simmons,page 5 o-5393

reap the fruits of his lease because of a Federal ruling and these are the same considerationsthat underlie the common law doctrine justmentioned. Upon a considerationof the special circumstancesunderwhleh 3. B. 287 becomes operative and in view of the objects of the Act, we are of the opinion that the Act is completewithin itselfand that the provisions ofArticle 2603a, requiring a minimum consideration for leases let at public auction do not apply.

We do not think that your question involvesa aetermination of the rights of lessees of University land under Sec. 7, Title III of the SecondWar PowersAct, approved March 27, 1942. That sectionprovides:

“(7) No person shallbe held liable for damages or penalties for any default under any contract or orderwhich shallresult directly or lndirectly from compliancewith this subsection (a)
or any rule, regulation, or order issued thereunder, notwithstanding that any such rule, regulation or order shall thereafterbe declared by judicial 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 isreferred to in the above quotation is the section conferringpriority powers on the President. This section is the present source of authority for ConservationOrderNo. M-68 as amended (8 F.R. 104) and

. PreferenceRating OrderNo. P-98, as amended (7F.R. 2719). These orders,by prescribing conditionsunderwhich priority directives on strategicmaterials are held not to apply, ~111 have the effect of rendering temporarily Impossible the performanceby some lessees of the drilling provisionsunder existingUniversity leases.

It is expresslyprovided In Sec. 1501, TitleXV of the SecondWar 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 -includes

Sec. 7, above quoted, "shallremain in force only untilDecember 31, 1944, or until such earlier time as Congressby concurrentresolution, or the President,may designate."

We are familiarwith the rule which gives Federal legislationprecedence over other State statuteswhere Congress has legislated inregard to a subjectwhich iswithin i,tsconstitutionalcontrol and over which it has the right to assume exclusive jurisdictionand 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. Rbwever, in our opinion, Sec. 7 of Title III of the Second War PowersAct, 1942, Is by Its terms operative only to the extent of absolving a lessee from liability "fordamages or penalties for any default." Such Fs the general rule with reference to contractsunderwhich performance is rendered illegal or impossiblebecause of conditions occurring subsequent to the date of their execution. Cinquegranov. T.A. ClarkeMotors(R.D.) 30 A(2d) 859; Scanti v. American Auto Supply co., 36N. Y. 3. (2d) 747; 20 Texas Law Review, 710. The contrary rule seems to have been adopted ln Texas where the impossibilityin performanceresulted from the adoptlon of prohibltlonunder the Local Option Statute. Houston Ice & Brewing Co. v. Keenan (1905) 99 Tex. 79, 88 S.W. 197. The right to a suspensionof contractsduring the period of temporary impossibilitydoes not deem to be covered by theFeaera1Act above quoted. The Federal Act merely says that "noperson shallbe held liable for damages or penalties for any default under any contract" etc. After the expirationof the primary term in a standard 011 and gas lease, if the delay rentals have been paid and no well has been drilled, the obllgatlons of the lessee are ordinarilyat 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 leasewhich the statute (Art. 2603a, Sec. 5,Vernon's Ann. Clv. St.) authorizes the Board for Lease of University Lands tomake, nor the lease provided for inyour Form No. 4. See our OpinionNo. O-493, issuedon March 15, 1939, to Mr. Leo C.Haynes, Secretaryof the Board of Regents. We are not here concernedwith whether lessees of University lands have common law rights independent of theFederal statute to a suspensionof their lease agreements for such period as the enjoyment of the drilling rights thereundermay have been rendered illegal or impossible
as a result of compliancewith a rule, regulation or order of
a Federal War Agency. Our holding is that S.B. 287 is not rendered inoperative, eitherby 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 somethinghe did not have before, viz. the refusal on a present extensionor renewal for a fIxed period beyond the primary term of his lease.

Trusting that the foregoIng sufflclentlyanswers 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/GroverSellers FIRST ASSISTANT ATTORNEY GENERAL
Approved Opinion CommitteeBy s/BWB Chairman