JIM MA.rroX November 13, 1989

Honorable Bobby Joe Mann Palo Pinto CountyAttorney Courthouse Palo Pinto, Texas 76072 Opinion No. JM-1115

Re: Whether the Water Commission has the authority to create a districtwhose boundaries exclude mineral estates locatedmore than 300 feetbelow the surface of the land andwhether suchmineral estatesmust be taxed (RQ-1457)

DearMr. Mann:

You informus that in

.. _ 1980 the Texas Water Commission by written order granreo apetition authorizing the creation of a municipal utility districtwithin Palo Pinto County designated %portsman‘s World MunicipalUtility **District. ”**  The petition approved by the commission set forth the boundaries of the district, specificallyexcluding from the boundary description themineral estates located below a depth of 300 feet under the surface area of the land comprising the district. Consequently, as a practical matter, allmineral interestswithin the surface boundaries of the district below a depth of 300 feet from the surface have **been** exempted from ad valorem taxation imposedby the district since the district's creation.

Because of the requirementof articleVIII of the Texas Constitution that all property, except that specifically exemptedby the constitution,be taxed in any equal and uniform manner, you ask the followingquestion:

[A]rethe mineral interests locatedunder the boundaries of the Sportsman'sWorld Municipal Utility District taxable for ad valorem taxation purposesby the Sportsman'sWorld MunicipalUtility **District?**

YOU also ask:

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Does the Water Commissionhave the authority to create a districtwhose boundaries exclude a category of taxableproperty?

We will address initially your second question. We answer it in the negative: the Texas Water Commission is without authority to approve a petition authorizing the creation of amunicipal utility district that excludes from its boundaries a particular class of taxable property, specificallythe mineral estates locatedbelow a depth of 300 feet from the surface area of the land comprising the district.
There can be no question that, absent the Water Commissionorder purporting to exclude from the boundaries of the district themineral estatesbelow a depth of 300 feetunder the surface of the land comprising the district, suchmineral estateswould be taxableby the district. See. u, Note, Ad Valom Tax&ion ofMineral Prooerty 21 Baylor L. Rev. 46 (1969). The issuethen iswhether' the Water Commissionhas the authorityto approve the creation of a district that excludes such a category of taxable property from the boundaries of the district.

The Sportsman's World Municipal Utility District was createdpursuant to section 59 of articleXVI of the Texas Constitution and chapter 54 of theWater Code. Section 54.013 of the code governs the composition of the district andprovides:

(a) A district may include the m in all or part of any county or counties includingall or part of any cities and other public agencies.
(b) Them composinga district need not be in one body, but may consist of senarate bodie of land separated by land which is not' included in the district. (Emphasisadded.)
Section 54.014 of the code provides that, in order to create a chapter 54 municipalutility district, a petition requesting creation must be filedwith the Texas Water Commission [hereinafterthe commission]. Section 54.015 of the code sets forth the contents of the petition and provides inpertinentpart:

The petition shall:

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(1) describe the of the proposed districtbv metes andbounQs or bv lot itiyefFt if there is a recorded map

survey of the area
. . . . (Emphasisadded.)
Section 54.020 of the code requires that, after proper notice, the commission shall hold a hearing and Qhall examine the petition to ascertain its sufficiency.18 Subsection (b)of section 54.020provides that "[t]he commission shallhave jurisdiction to determine all issues on the sufficiency of the petition and creation of the district."
Section 54.021 of the code governs the granting or denial of the petition and provides in relevantpart:

(a) After the hearing of the petition if it is found that the petition conforms to the requirementsof Section 54.015 of this code and that the project is feasible and practicable and isnecessary and would be a benefit to them to be included in the **district,** the commission shall so find **by** its order and grant the petition.
(b) In determining if the project is feasible and practicable and if it * necessary and would be a benefit to the G included in the district, the commission shall consider:

. . . . (3) whether or not the district and its system and subsequent development within the district will have an unreasonableeffect on the following:

(A) land elevation:
(W subsidence;
(C) groundwater level within the region:
(D) recharge capability of a groundwater source:

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(El natural run-off rates and drainage;
(P) water quality: and
((3 total tax assessments on all land locatedwithin the district.
(c) If the commission finds that not all of the u proposed to be included in the districtwill be benefitedby the creation of the district, the commission shall so find and exclude allm which isnot benefited from the proposed districtand She Drooosed district s bodies accord-

-. (Emphasisadde:.)

Neither section 54.013 nor any other section of the code expressly authorizes the commission to approve a petition authorizing the creation of a district that excludes from its boundaries the mineral estate located below the surface of the land comprising the district. However, a brief submitted to us in connectionwith this request concludes that the code impliedly authorizes the creation of such a district. We summarizethe argument as follows:
Minerals inplace are realty and, as such,

are subject to ownership, severance, and ;;d;;maer v. Stakeg, 294 S.W. 835 (Tex.
(Tex.'Dx s Co. v. Daua&&y 176 S.W. 191:). 717

A grant or keservation of mineral interestsby the fee owner effects a horizontal severance and creation of two separate and distinct estates: an estate in surface and an estate inmineral.
m, 464 S.W.Zd 348 (Tex.1971); Ref. Co. v. Noa, 443 S.W.2d 35 (Tex. 1968). Real estate ordinarily is taxed as a unit; yet, where there has been a severance by conveyance, exception, or reservation, so that one portion of the realtybelongs to one person and other portions to others, each owner shouldpay taxes under proper assessment against him of the portion owned by him. The fact that a portion may consist of minerals or of a fractional interest therein makes no difference. -v. NJxa: State v. Downmgn, 134 S.W. 707 (Tex. Civ.

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APP. 191>1)

, u, 231 U.S. 353 (19i3). Because a grant or reservation of mineral estates effects a horizontal severance and creation of two separateestates, each of which is taxable separately, the petition seeking the creation of a chapter 54 municipal utility districtmay be drawn in such a way as to exclude the mineral estate and reflect that horizontal severance.

We disagreewith this constructionof the Water Code for two reasons. First, the severance of mineral interests by the 'fee owner creates two separate mtateg in land. When the
severance is accomplished,each gstatg, that in the minerals in **place,** and that in the remainder of the land,may be a freehold,or an estate in fee simp1e.w aevs Mexia - * co. v. Gammon, 254 S.W. 296, 299 (Tex.1923) (emphasis added). The **estate** of a person is not the land itself, but the status or relation that the lawpermits that person to bear toward the land. &&&& v. Milti, 28 S.W. 940 (Tex. 1894). The term "estate" in lawmeans the degree, quantity, nature, and extent of one88 interestor ownership in land or other tenements. E S.W.Zd 506 (Tex.1962): '(T::: Comm'nApp. 1931, judgm*t adopted). It may designate the quantum, extent, or duration of one's ownership of a particular item of property. Gibbs, i%zwr.a. Differentpersons may, at the same time, bear different relations,each constitutingan estate in the land. Bouldin Y. Mi.ue?c

I-. Sections 54.013 and 54.015 of theWater Code do not provide that a municipalutility district comprise westates" in land: rather they provide that a district comprise "area" or "land" whose nboundariesVOare described by "metes and bounds or by lot and block number." The word "land" ordinarily includesa mineral estate, evenwhen the minerals
are severed constructively from the surface. no110 v own Heirs v. What&y Tennantv. 131 S.W.Zd 89 (Tex. 1::9;7 110 S.W.Zd 53 (Tex. 1937); eld v. Hoaq, 77 S.W.Zd 1021 (Tex.1934).
Second, the petition to establish a district must describe the wboundarieswby "metesand bounds or **by** lot and block number." Water Code f 54.015. Boundariesmark out the limits of the territory over which the district has jurisdiction. m 2E. McQuillan, The Law of Municipal

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Corporations f 7.02, at 359 (3dad. rev. 1988). Boundaries ordinarily are limits established laterallyon the surface of the land, and do not extend vertically to mark a district's limitsunderground or in the airspace. $@= Doria y. Suchowolsu, 531 S.W.Zd 360 (Tex.Civ.App. - San Antonio 1975,writ ref'd n.r.e.) ("boundary by aquiescence" is generally a **line** established by a fence): 11 C.J.S. Boundariee 9 1, at 538: & &I.G. Invesats v. E.P A, ;;:,",,f:."d

1 (Ill. 1988) (boundaries generally involv; notverticalmeasurement,but exception ismade for solid haste fill, which has boundaries expressed in altitude).

%etes and bounds" refers to amethod ofmeasurement by distances and angles from designated landmarks in relation to adjoiningproperties. B. Garner, Dictionary **of** Modern LegalUsage 359 (1987);set 11 C.J.S.Boundaries 5 4, at 542 (*metes"includesthe exact quantityof land in square feet, **rods,** or acres). Metes and bounds provide a two dimensional measurement of land. **A** description of land by metes and bounds indicatesthat itsboundaries are on the surface, and that the land is not limited by boundaries at a certain subsurfacedepth or distance above the ground.
Thus, any district whose creation is approvedby the Water Commission consistsof landmarked out by boundaries
on the surface of the earth. The commission is **not** authorizedby the code to approveboundaries that limit the district's jurisdictionvertically. Accordingly,we answer **your** second question in the negative: The Water Commission may not grant a petition seeking the creation of a chapter 54municipal utility district whoae boundaries exclude the mineral estate or a portion thereofbelow the surface of the land comprising the district.

We note, however, that after the commission approves the petition seeking creation of the district, but before the district'sgoverningboard issues the district's first series of bonds, the code requiresthe governingbody of the district to exclude "land or other property" from the boundaries of the district under certain circumstances. Section 54.701provides inpertinentpart:

(a) Before the board issues the first series of districtbonds payable inwhole or inpart from taxes, the boardmay on its own motion call a hearing on the question of the exclusion of J&3.@from the district under the provisions of Sections 54.702-54.707of this

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**code,** if the exclusions are practicable, just, or desirable.
(b) The boardmust call a hearing on the exclusion ofw or otue*v from thg

er in the district filedwith the secretaryof the board before the district issues its first series of bonds payable in whole or **in** part from taxes. (Emphasisadded.)
Section 54.704 of the code governs the petition for exclusion from the district of "landor other property" and provides in relevantpart:

(a) A petition for exclusion of landmust accuratelydescribe by metes and bounds or lot and block number the land to be excluded. A petition for exclusion of other property must describe the property to be excluded.
Thus, it appears that the class ofproperty thatmay be excluded from the boundaries of **the district**  by its governing body m the initial petition to create the districthas been approved by the Water Commission is greater than that which the commission **may** consider when decidingwhether to approve the initialpetition. No case decided under chapter 54 of the Water Code,which governs municipal utility districts,has construedthe phrase "land
or other propertyH that is set forth in section 54.701. However, a case decidedunder chapter 51 of the code, which governswater control and improvementdistricts and contains
a sectionvirtually identicalto section so.1 54.701,has done

1. The 1925 codificationof what laterwould become chapter 51 **of** the **Water** Code provided that the district comprise "land' and provided that "land" may be excluded from the boundaries after its creation under certain circumstances. No mentionwas made of "otherproperty" or "interests in land." Acts 1925, 39th Leg., ch. 25, 5 76, at 106. Two years later, section 76 of chapter 25 was amended to provide that notice for exclusion of "land" from the districtmust be afforded "to the owner or owners of the (FootnoteContinued)

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### W-s Countv Water Control 6 UggrovemeUst. No

, 304 S.W.Zd 281 (Tex.Civ.App - El Paso 1957,' writ ref'd n.r.e.), the court of appealsupheld a trial

(FootnoteContinued) land and all others in anywise interested." **Acts** 1927, 40th Leg., 1st C.S., ch. 107, 5 9, at 501. The "or other property" languagewas included **for** the first time in a 1929 amendment to section 76:

After a district has been organized, preliminary surveyshave been completed, the district does adopt plans for the constructionof a plant and improvements,and before the district calls an election for the authorizationof construction bonds, there

rt be exc::e- any ::c"""""t"""""i are practicable, just or desirable, from the districtby means and upon conditions as follows

. . . .
Acts 1929, 41st Leg., ch. 280, 8 8, at 585. Such language
was retained in the 1957 amendment to then article 7680-76, V.T.C.S. Acts 1957, 55th Leg., ch. 324, g 1, at 787. No legislativehistory exists indicatingwhat the legislature meant by the phrase.
The Water Code was enacted in 1971, codifying the general and permanent statutes **relating** to water rights, water development, water quality control, **river** compacts, and general law districts. Acts 1971, 62d Leg., ch. 58, at 110. The code was extensively amended **by** other 1971 amendments, including the addition of chapter 54, which authorizes the creation of municipalutility districts. Id. ch. 84, at 774. Title 4 of the code sets forth those code provisions governing the creation and operation of 14 general law districts. Chapters 50 (containing provisions generally applicable to general law districts), .52 (governingunderground water conservation districts), 58 (governingirrigationdistricts),and 65 (governing special utility districts), in addition to chapters 51 and 54, each contain sections regardingthe exclusion of "land or other property" **from** the boundaries of the districts after the petition seeking the creation of the district has been granted. No case has construed the phrase under any of (FootnoteContinued)

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court judgmentexcluding certain lands owned by one party (whopresumably owned both the surface and the subsurface estates) and certain oil and gas leases ownedby oil and gas companies from the boundaries of a water control and improvementdistrict. The district comprised 140 square miles of territory, SO percent ofwhich was submergedby the waters of two bays. The land that one party sought to be excluded comprised 8,400 acres ofUustang Island. The oil leases of the oil and gas companieswere located under lands that were submergedby the bays. The plans of the proposed district did not call for,nor was any expenditure **of** district funds shown for, providing service to any other area other than the town of PortAransas and the area immediatelyadjacent thereto. Specifically,the plans did not contain any provision for service either to the lands sought to be excluded or to the submerged oil and gas leases.

In affirming the trial court judgment excluding both the land and the oil and gas leases, the court of appeals stated:
The only two issues submittedto the jury

by the court **were** whether. the lands of appellee Sam E. Wilson, Jr. would be benefitedby .the proposed improvements, and
as to whether the oil and gas leases of the appellee oil companieswould be benefited by the proposed improvements. The jury answered both questions in the negative. Appellant objected to said issuesbecause they were immaterial, and because there was evidence, and insufficient evidence, :: support the jury's findingsto **said** issues.

We overrule these points. There was ample evidence to support the findingsof the jury. The question of benefit to the lands involved is **material,** as isprovided in the above quoted statute.

(FootnoteContinued) these chapters, except **for** pueces County Water Control &

ist.No. 4 v. Wilsqn, 304 S.W.Zd 281 (Tex.Civ. APP. - El Paso 1957,writ ref'd n.r.e.).

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Ig, at 287: ~98 Attorney GeneralOpinion H-881 (1976) (sets forthbackground of law enacted by legislature granting Corpus Christi certain submerged lands in Corpus Christi Bay to use as public beach).
Thus, under chapter 51 of the Water Code, mineral estates apparently can be excludedunder subchapter 0 of chapter 51 of the code. There isno authority,however, for excluding such estates from the boundaries set forth in the initialpetition seeking the creation of the **district** that must be passed on by the Water Commission. Analogously, we assume that a court, if presented with a question of exclusion ofmineral estatesunder chapter 54 of the code, would conclude that section 54.701 likewise authorized such an exclusion under the phrase "landor other property." See. e.a,, 59 Tex.Jur. 3dm SS l-4 (V1prope*yt' is a broad term, referring not to a particularmaterial object but to the right and interest or domination rightfully. obtained over such object,with the unrestricted right to itsuse, enjoyment,and disposition,and includesnot only thatwhich isperceptibleto the sensesbut also that which is intangible). We turn now to your first question.

You ask:

Are the mineral estates located under the boundaries of the Sportsman'sWorld Municipal Utility District taxable for ad valorem tax purposes by the Sportsman'sWorld Municipal Utility District?
Section 21.01 of the Tax Code provides that "[r]eal property **is taxable**  **by a**  taxingunit u located in the unit wJanuarv (emphasisadded).2 Thus real property that is not located within a taxing unit is not taxable by that taxing unit. Mineral interestsare interests in land and

2. Section 11, article VIII, of the Texas Constitution sets forth the general rule governing situs of property forpurposes of taxation and provides in relevant pa*:
All property,whether ownedby persons or

corporations shallbe assessed for taxation, and the taxes paid in the county where situated

. . . .

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are taxable in the taxing unit where the land is located.

, 165 S.W.Zd 645 (Tex.1943);m Countvv. Mid-w Oil & Gas Co<, 254 S.W. 290 (Tex.1923). Real property that is omitted from the appraisalroll of a district is required to be added to the roll andback appraisedpursuant to section 25.21 of the Tax Code. In this instance,however, we are unable to answerwhether such excluded mineral interests shouldbe back appraised.

We do not have sufficient factsbefore us to determine whether the initialpetition proposing the creation of the district is fatally flawedbecause of the failure to include
owners of the mineral estates. Section 54.014 of the Water Code sets forth the requirements for the petition and provides:
When it isproposed to create a district,

a petition requestingcreation shallbe filed with the commission. The petition shall be signed by a majority invalue of the holders of title of the land within the proposed district, as indicated by the county tax rolls. If there are **more** than 50 persons holding title to the land in the proposed district, as indicated by the county tax rolls, the petition is sufficient if it is signedby 50holders of title to the land.

We do not have sufficient factsbefore us to determine eitherwhether the petition was signed by a majority in value of the holders of title to the landwhen the value of the mineral estates is added to thevalue of the surface estates or whether there aremore than 50 persons holding title to the land in the districtwhen the owners of mineral estates are added. Nor are we empowered to make such findingsof fact.

In the matter of the creation and organization of public and quasi-public corporations, there must be substantial compliance with the conditions precedent requiredby statut;;xa~l;;gCrutc~, 578 S.W.Zd 438 Iwrit ref‘d n.r.e.); State

esidevim 329 S.W.Zd 245 (Tex.Civ.App. - FortWorth 1959,writ r;fld). An irregularity, ifharmless, in the creation of a municipal corporationwill not work an ousterunder quo warranto. 

## We-s Countv ater Control & Imvrovement Dist.No. 4 270 S.W.Zd 672 (Tex.Civ.App. - Sk

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Antonio 1954,writ ref'd n.r.e.);State ex rel.Miller vr Troell, 207 S.W. 610 (Tex. Civ.App. - San Antonio 1918, writ ref'd). In an instance in which the irregularity is deemed sufficientlyserious, a proposed districthas been declared to be without legal existence. fitv of Cornu 288 S.W.Zd 836 (Tex.Civ.App. - Sa: writ ref'd) districtwhen' relevant (court invalidated proposed statute required petition to be signedby "majority in number of theholders of title to t& J&p& [withinthe proposeddistrict] and the owners of a majority in value of the lands ther& II and the owners of the mineral estateswere not considered in determining the sufficiencyof the petition:under the facts presented, court found that less than a majority of landowners signed

No. 3 v. State, 73 S.W.Zd 1101 (Tex.Civ.App. - Texarkana 1934,writ dism'd) (irregularitiesin creation of levee districtwouldmake districtbonds voidable, not void).
Moreover, subsection (b)of section 54.701 of the code provides:

The [governing] board [of the district]

must call a hearing on the exclusion of land
or otherproperty from the district on the wrA::enirtition of any landowneror property

the district filed with the secretary of the board before the time the first election on the question of the issuance of bonds payable inwhole or inpart from taxes is called.
The failure toprovide for such a hearing amounts to a denial of due process. (Tex.1927);State ex rel. Ma v. BaU (Tex.1927). We do not have sufficient facisbefore us to determine,nor arewe empowered to so determine, whether such noticewas, in fact,afforded.

We cannot answeryour first question or other questions about the possible consequencesof our answer to your second question. The ultimate resolution of such questions would requireus to make findings of fact,which we are not empowered tomake, and to evaluate the interestsof various parties who have relied on the boundaries of the district establishedby the commission. &= WallinTexas , 348 S.W.Zd 532 (Tex.1961);b Sal18

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OVement Dist. NO. 1v. Gw 40 s.w.zd **892** (Tex.Civ.App. - San Antonio 1931,writ ref8& (whenit is claimed that a statutewas not followed in establishing the territorial limits of a special district as then constituted,matter can be raised only by the state in a guo warrant0 proceeding).

SUMMARX

Chapter 54 of theWater Code does not authorize the Texas Water Commission to permit the creation of a municipal utility district that exc,ludes from its boundaries the mineral estates locatedbelow a depth of 300 feet under the surface of the land comprising the district. The code does authorize the board of the district to exclude such property after the Water Commissionhas approved the petition seeking the creation of the district. We are unable to answer whether such mineral interests, which were heretofore improperly excluded from the district, should be added to the district*s appraisal roll andback appraised pursuant to section 35.21 of the Tax Code, becausewe are given insufficient facts to determine the validity of the creation of the district, and we are not empowered to determine such facts. The filing of an information in the nature of guo warrant0 is the proper method for resolving such a matter, rather than the opinionprocess.

JIM MATTOX Attorney General of Texas

WARYKELLER **First** AssistantAttorney General

LOUMCCREARY ExecutiveAssistantAttorney General

JUDGE ZOLLIE STBARIBY SpecialAssistantAttorney General

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RICK GILPIN Chairman,Opinion Committee Preparedby Jim Moellinger AssistantAttorney General

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