# The Attorney General of Texas

March 23, 1983 JIM MATTOX Attorney General

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An Equal Opportunltyl Affirmative Action Employer HonorableJoe C. Hanna Chairman Energy ResourcesCommittee Texas House of Representatives P. 0. Box 2910, Capitol Station Austin,Texas 70769 OpinionNo. JM-18
Re: Whether House BillNo. 226 relating to reportingownership of mineral interests severed from surface estate and to proceedings for abandonment of unreported mineral interests violates article I, section 19 of the Texas Constitution
Dear RepresentativeHanna: You have requestedour opinionregarding the constitutionalityof House Bill No. 226, presently pending before the Sixty-eighth Legislature. The bill provides:

Section 1. Policy. The purpose of thisAct is to assure that productive use of mineral reserves and natural resourceswill not be preventedby the existenceof abandonedmineral interests. Section 2. Definitions. In thisAct: (1) 'Abandonment' means actual and voluntary relinquishment of an interest in minerals that is intended to be permanent, by the owner of the interest. (2) 'Mineralinterest'means an interest in minerals in place that is severed from the ownership of an interest in the surface, and includesa fee interest.whether conditionalor not, executive right, royalty interest, life estate, estate for years, remainder, reverter, possibility of reverter, leasehold, or any other present possessory interest, future interest, equitable interest, or concurrent ownership interest.

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(3) 'Interest in the surface' means a fee interest, whether conditional or not, from which a mineral interesthas been severed. (4) 'Person' means a natural person, corporation, business trust, estate, trust, partnership,or association. (5) 'Surface owner' means a person who has concurrentor sole legal right or title,except the holder of a leasehold or an estate for years, to a present interest in real property fromwhich a mineral interesthas been severed. Section 3. Report of Ownership of Mineral Interest. (a) A person who owns a mineral interest on September 1, 1983.must file a report with the county clerk of each county inwhich part of the interest is located before September 1, 1984. A person who acquires or creates a mineral interest after September 1, 1983, must file a report with the county clerk of each county in which part of the interest is located before the first anniversary of the date the person acquires or creates the interest. (b) The report must be subscribed and acknowledgedin the samemanner as is required for a deed andmust contain: (1) the name and address of the person claiming the interest; (2) the date the person acquired or created the interest; (3) a legaldescriptionof the interest;and (4) a general descriptionof thenature of the interest. Section 4. Recording of Reports. (a) A county clerk may charge the same filing fee for recordinga reportunder thisAct as is authorized for recordinga deed. (b) Each county clerk shallmaintain a public record of reports filed under thisAct separately from other records in the clerk's office. The

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clerk shall keep the record in the samemanner as is required for deeds. Section 5. Effect of Failure to Report. An owner of a mineral interestwho does not file the report required by this Act is presumed to have abandoned the interest,and title to the interest is presumed tobelong to the surface owner. Section 6. Judicial Proceeding. A surface ownermay file a petition for declaratory judgment in the district court of the county in which the real property is located, requesting the court to declareamineral interestabandoned. Section 7. Notice of Proceeding. In an action for declaratory judgment under this Act, citation shall be issued to the last known owner or owners of the abandonedmineral interest as shown by the official recordsof the county clerk of the county where the property is located and shall be served in accordance with the Texas Rules of Civil Procedure. Section 8. Evidence of Nonabandonment. A mineral interest is not abandoned if the owner of the interestappearsat the abandonmentproceeding or if the owner files the report requiredby this Act before the court renders a judgment declaring the interestabandoned. Section 9. Vesting of Title. (a) If a court declares that a mineral interest is abandoned, title to the interestvests in the current owner or owners of the surface interest from which it was severed,with each owner taking the same share and the same type of ownership in the mineral interestas thepersonhas in the surface. (b) A person who acquires title to a mineral interest in an abandonment proceeding under this Act may record in the same manner as a deed a certified copy of the judgment as evidence of title. Section 10. Applicability. This Act does not apply to a mineral interest owned by a governmentalbody or agency.

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For the followingreasons.we conclude thatHouse BillNo. 226 is unconstitutionalunder the due process clauses of the United States and Texas Constitutions. We do not reach the question of whether the bill is unconstitutionalin other respects. The fourteenth amendment to the United States Constitution provides that no state may "deprive any person of life, liberty, or property without due process of law." Article I, section 19 of the Texas Constitutionprovides thatno citizenof Texas shallbe deprived of life. libertv. or orooertv "exceutbv due course of the law of the land*”

. . - - . . - .

These guarantees are essentially synonymous. Mellinger v. City of Houston, 3 S.W. 249, 252 (Tex. 1887).
Courts utilize a two-stepanalysis to determinewhether a person has been deprivedof life, liberty,or propertywithout due process of law. First, the court decides whether a constitutionallycognizable life, liberty, or property interestexists. If it finds that such an interest does exist, it then decides what procedures constitute "due process of law" under the circumstancesand whether those procedures have been followed. Ingraham v. Wright, 430 U.S. 651, 675 (1977); Sullivan v. University Interscholastic League, 599 S.W.2d 860, 863 (Tex. Civ. App. - Austin 1980). aff'd in part, rev'd in part, 616 S.W.2d 170 (Tex. 1981).
In Texas, due process attaches to vested property rights in mineral estates. Brown v. Humble Oil and Refining Company, 83 S.W.2d 935 (Tex. 1935). Therefore, our due process analysis of House Bill No. 226 must focus on the second step in the two-step process. The requirements of both procedural and substantive due process must be satisfied. Eggemeyerv. Eggemeyer,554 S.W.2d 137, 140 (Tex. 1977).
At a minimum, proceduraldue process requires that a deprivation of life, liberty, or property by adjudication be preceded by notice and opportunity for a hearing appropriate to the nature of the case. Mullane v. Central Hanover Bank & Trust Company, 339 U.S. 306, 314 (1950). "Due course of the law of the land" requiresa law thathears before it condemns, oroceeds uuon inauirv. and renders iudement onlv

. I - after trial. Union Central Life Insurance Company v. -Ch&nin&, 2k S.W. 982, 984 (Tex. 1894). The right to notice and sn opportunity to be heard must be granted at a meaningful time and in a meaningful manner. Fuentes v. Shevin, 407 U.S. 67, 80 (1972). The notice must be reasonablycalculated to apprise interestedparties of thependency of the action and afford them an opportunity to present their objections. The notice must also afford a reasonable time for preparation. Constitutional requirements,however, are satisfied if, with due regard for the practicalitiesand peculiarities of the case, these conditionssre reasonablymet. Mullane,supra, at 313-18.

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Section 7 of House Bill No. 226 provides for notice to certain mineral interest owners that a declaratory judgment proceeding has been institutedby the owner of the surface estate to have the court declare themineral interestabandoned. The notice is tobe issued to the lastknown owner or owners of themineral interestas shownby the officialrecords of the county clerkwhere theproperty is locatedand is tobe served in accordancewith the TexasRules of Civil Procedure. On the other hand, the notice procedure fails to provide for service of citationto known ownersnot of recordand tounknown owners.

- In Texaco, Inc. v. Short, 454 U.S. 516 (1982), the United States

SupremeCourtdealtwith an Indiana statutewhich was somewhat similar to House Bill No. 226. This statute, the Indiana Dormant Mineral InterestsAct, provided that a severedmineral interestnot used for a period of twentyyears automaticallylapsedand reverted to the owners of the surface estate unless the mineral interest owner had filed a statementof claim in the local countyrecorder'soffice. The statute containeda two-yeargraceperiod inwhich owners ofmineral interests subject to lapse might preserve those interests by filing the statementof claim. The purpose of the statute,as articulatedby the Indiana SupremeCourt,was to remove impedimentsto the developmentof mineral interests that arose because of the existence of unused, stale,and abandonedmineral interests.
One of the argumentsmade in Shortwas that the statute'snotice provisions were constitutionally infirm because they did not require that any specific notice be given to a mineral owner prior to a statutory lapse of a mineral estate. Relying on Mullane v. Central Hanover Bank and Trust Company, surpa, the appellants contended that the lack of adequatenotice deprived them of due process of law. The SupremeCourtdisagreed,however, stating:

The reasoning in Mullane is applicable to a judicial proceedingbrought to determinewhether a lapse of a mineral estate did or did not occur, but not to the self-executing feature of the MineralLapse Act. The due process standards of Mullane apply to an 'adjudication'that is 'tobe accorded finality.' (Emphasisadded). 454 U.S. at 535. The Court concluded that because the lapse of a mineral estate resulted,not from a judicialproceeding,but from the application of a self-executing statute, the existence of which everyone was presumed to be aware, the notice provisions of the statutewere not constitutionallydeficient.

,p The feature that distinguishes House Bill No. 226 from the

Indiana statute is that,under the former,a mineral interest is lost & after a judicialproceeding. Even if one concedes that everyone

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would, after House Bill No. 226 becomes effective,be presumed to be aware of its existence, one cannot conclude that everyone is presumed to be aware of the pendency of a judicial proceeding initiatedunder it. On the contrary, Mullane establishes that those who may be affectedby the outcome of such a proceedingmust be given suchnotice as is reasonablycalculated to inform them of itspendency.
We do not believe that the notice provisions of House Bill No. 226 are reasonably calculated to apprise everyone who might be affectedby a suit institutedthereunderof thependency of that suit. As noted, these provisions fail to provide for any kind of notice, even notice by publication, to known owners not of record and to unknown owners. To take away themineral interestsof ownerswho are not servedwith any citationwhatsoeverwould, in our opinion, clearly deprive those owners of due process of law. Although the lack of adequate notice provisions is sufficient to invalidateHouse Bill No. 226 on procedural grounds, we believe that the bill also violates substantive due process. In determining whether substantivedue process requirements are met, courts balance the gain to the publicwelfare resulting from the legislationagainst the severity of its effect on personal and property rights. A law violates substantivedueprocesswhen it is arbitraryor unreasonable, i.e., if the social necessity of the law is not a sufficient justification for restrictingthe rights involved. In the Interestof B-M-N, 570 S.W.2d 493, 503 (Tex.Civ.App. - Texarkana 1978,no writ).
In Texaco, Inc.v. Short,supra, the United States Supreme Court held that the Indiana act met the constitutionalrequirements of due process. In reaching its conclusion,the SupremeCourt stated:

[J]ust as a State may create a property interest that is entitled to constitutionalprotection, the State has the power to condition the permanent retention of that property right on the performanceof reasonableconditionsthat indicate a present intention to retain the interest. Id., at 526. The Court concluded that Indianahad not exercised this power in an arbitrary manner because each of the actions that the state required the mineral interest owner to take in order to avoid abandonmentof his interest furthereda legitimate state goal. If the owner engaged in production, or collected rents or royalties from anotherperson engaged inproduction.his interestwas protected; this furthered the state's goal of developing mineral interests. If the mineral interest owner paid taxes, his interest was protected; this furthered the fiscal interestsof the state. If the mineral interest owner filed a statement of claim, his interest was protected; this furthered the state's goal of developing mineral interests by

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identifying and locating the owners of the mineral interests. "The State surely has the power to condition the ownership of property on compliance with conditions that impose such a slight burden on the owner while providing such clear benefits to the State." Id., at 529-30.
In our opinion, House Bill No. 226 is clearly distinguishable from the Indiana act. Under the latter, non-use for twenty years raises an irrebuttablepresumption of abandonment, while House Bill No. 226 allows only a one-year period in which the mineral interest owner must file a statement of claim or suffer the institution of a judicialproceedingon the issue of abandonmentcanbe instituted. It is conceivablethat a court,when facedwith a substantivedue process challenge to House Bill No. 226, could rely on this time period difference to distinguish the holding in Short. More importantly, however, the two acts are distinguishablein terms of the conclusions that they permit. Under the Indiana act, it was the lack of 9 use of a mineral interest for a period of 20 years that resulted in the irrebuttable presumption of abandonment of the interest. Even if there were such lack of use, the owner of the interest could still retain it by filing a statement of claim. Under House Bill No. 226, on the other hand, it is only the failure to file a required report that creates the presumption that the interest has been abandoned. Whereas the Court in Short found, in effect, that it was not unreasonable to conclude that an owner of a mineral interest had abandoned that interestwhere he did nothing for a twenty-yearperiod to indicatehis intent to retain it, we believe that our courtswould be loathe to find intent to abandon where the only evidence of such intent is the failure to filea particularreport. The legislaturemay provide,as a rule of evidence for a judicial proceeding, that certain facts will raise a presumption of other facts, and such presumptions do not deny due process if there is a rational evidentiary relationshipbetween the proven facts and those presumed. See Mobile, Jackson & Kansas City Railroad Company v. Turnipseed, 219 U.S. 35 (1910) (injury to persons by operation of railroad is prima facie evidence of negligence). Clem v. Evans, 291 S.W. 871, 872 (Tex. Comm'n App. 1927, holding adopted) (presumption that promises to do future acts, made as inducement to enter into contract and not performed within reasonable time, were fraudulently made). In our opinion,a presumptionof abandonment cannotrationally arise from the fact that a property owner fails to file a report within a one year period. Such a presumption disregards other evidence relevant to abandonment, such as payment of taxes or efforts to produce minerals occurring shortly before the one year period. Compare Attorney General Opinion M-821 (1971) (presumption of abandonmentof mineral estate arises from failure for twentyyears to pay taxes, transferestate, or explore for or produceminerals).

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In Lobley v. Gilbert, 236 S.W.2d 121 (Tex. 1951). the Texas SupremeCourt stated:

A presumption is a rule which 'draws a particular inference as to the existence of one fact, not actually known, arising from its usual connection with other particular facts which are known or proved.'.
. . It is founded upon and must conform to the commonly accepted experiences of mankind.
. . . It must be based upon an established fact and cannot rest upon a presumed fact. (Emphasisadded). (Citationsomitted). 236 S.W.2d at 123, quoted in Beck v. Sheppard, 566 S.W.2d 569, 571 (Tex. 1978). We do not believe that a valid presumption of intent to abandon a mineral interest may arise under this test where the only fact giving rise to the presumption is the failure to file a particulardocument.
We thereforeconcludethatHouse BillNo. 226 isunconstitutional on substantive due process grounds. We believe, however, that there aremethods of dealingwith theproblem of abandonedmineral interests which comport with the requirements of the constitution. See generally Texaco, Inc. v. Short, 454 U.S. 516 (1982).V.T.C.S. arz 3272-3289 (escheatstatutes).
In closing,we note that either of these problems is sufficient to invalidateHouse BillNo. 226. Their impact in combinationis even more offensive to the due process clause. To couple defectivenotice provisionswith a defectivepresumption is. in our opinion, to produce toomuch weight for the scalesof justice towithstand.
SUMMARY
House Bill No. 226 relating to proceedings for abandonment of unreported mineral interests is unconstitutionalunder the due process clauses of theUnited Statesand Texas Const tutions. dzh

JIM MATTOX AttorneyGeneral of Texas TOM GREEN FirstAssistantAttorney General

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DAVID R. RICHARDS ExecutiveAssistantAttorney General Preparedby Jon Bible AssistantAttorney General
APPROVED: OPINION COMMITTEE
SusanL. Garrison, Chairman Jon Bible Carl Glaze Jim Moellinger BruceYoungblood

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