Honorable Robert S. Calvert Opinion No. M-1034 

Comptroller of Public Accounts 

State Finance Building Re: Whether Article 5421c, 

Austin, Texas 78701 Sec. lla, V.C.S., and 

the appropriation contained in the Ge,neral 

Appropriation Bill (S.B. 

11, Ch. 1047, 62nd Leg., 

1971, R.S.) provide 

authority for payment of 

a certain claimed refund 

of bonuses, delay rentals, 

and special sales fees 

paid to the State by a 

lessee under terms of a 

lease where the leased 

development is prevented 

Dear Mr. Calvert: by a federal agency? 

Your request for an opinion asks the following question: 

"Does Article 5421c, Section lla, V.C.S., 

and the appropriation contained in the General 

Appropriation Bill (S.B. 11, Ch. 1047, 62nd 

Leg., 1971, R.S.) provide authority for payment 

of a certain claimed refund of bonuses, delay 

rentals and special sales fees paid to the 

State by a lessee under terms of a lease 

where the leased development is prevented by 

a federal agency?" 

In addition, you have further requested whether the claim 

may be validly paid under any State statute. 

House Bill 1862 was passed by the House on May 21, 1971, 

and by the Senate on May 26, 1971, and approved by the Governor 

and became effective on Nay 27, 1971; it adds Section lla to 

Article 5421c, V.C.S. 

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Honorable Robert S. Calvert, page 2 

. I 

(M-1034) 

As stated in your request, the subject lease (Mineral 

Lease No. 58676) was dated on October 5, 1965, and was entered 

into between the State of Texas and Cabot Corporation for a 

five year primary term. It is stated that the lease was 

located in the Gulf of Mexico near a bombing range of the U.S. 

Air Force and because of the danger involved, Cabot Corporation 

was prevented from drilling the lease during the primary term 

of the lease by the U.S. Corps of Engineers. Then lessee paid 

the State of Texas in good faith pursuant to their lease a 

total of $32,703.00 for special sales fees,, bonuses and delay 

rentals. Both the federal government and the lessee show that 

it was impossible to grant a shooting or drilling permit during the lease "since intensive bombing operations are in progress on a daily basis." Your opinion request also states that 

the "School Land Board verified prerequisite facts which H.B. 

1862 requires as basis for making refund." 

vides: 

Section 44 of Article III, Constitution of Texas, pro- 

"The Legislature shall provide by law for 

the compensation of all officers, servants, 

agents and public contractors, not provided for 

in this Constitution, but shall not grant extra 

compensation to any officer, agent, servant or 

public contractors,~ after such public service 

shall have been performed or contract entered 

into, for the performance of the same; nor grant, 

by appropriation or otherwise, any amount of 

the same shall not have been provided for by 

pre-existing law; nor employ anyone in the 

name of the State, unless authorized by preexisting law." (Emphasis added.) 

Since the mineral lease is dated October 5, 1965, and 

Article 5421c, Section lla, V.C.S., was effective on May 27, 1971, 

said Article 5421c, Section lla, Vernon's Civil Statutes, does 

not constitute pre-existing law to support payment of the claim. 

This office accordingly previously refused to authorize payment 

of the claim in a letter ruling, dated April 27, 1971, addressed 

to the Chairman of the Claims Committee, House of Representatives. We now consider, however, a different statutory basis 

not dealt with or discussed in the letter ruling. 

Article 5411a, Section l(b), reads as follows: 

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Honorable Robert,S. Calvert, page 3 (M-1034) 

"Section 1. Upon proper proof as hereinafter provided, the Comptroller of the State 

of Texas is hereby authorized and directed to 

draw his warrant in refund of monies paid into 

the State Treasury on public lands in good 

faith but where the funds to which such monies 

may be accredited or may have been accredited, 

are not entitled thereto in any of the following instances: 

II . . . 

"(b) Where the payment is made in accordance with law, but title cannot issue or 

possession cannot pass, because of conflict 

in boundaries, erroneous sales, erroneous 

lease or other cause:. . ." 

We believe that the Legislature intended by this statute 

to provide a remedy to a lessee of the State for refund of the 

considerationpaid to the State under a lease when such consideration has materially and substantially failed, although 

neither party be at fault. The statute may thusbe read into 

the lease as though it were expressly incorporated therein as 

an integral part thereof. Anderson-Rerney Realty Co. vs. Sovia, 

41 S.W.Zd 279, 281 (1931). aff. 123 Tex. 100, 67 S.W.Zd 222: 

12 AmJur. 76,9; Contractsi.Sec. 240. It is well settled that 

failure of title or possession, being a material failure of aonsideration for a lease, would give rise to a cause of action or 

remedy by lessee against a lessor for reformation, cancellation 

or return of the consideration oaid. See, for example, 42 Tex. 

Jur.2d 217, Oil & Gas, Sec. 92.- In 58 CJS 528, Mines & Minerals, 

Sec. 209b; Fender vs. Farr, 262 S.W.2d 539, 543 (Tex.Civ.App. 

1953, no writ). 

In R. C. Childress vs. 0. B. Siler, 272 S.W.2d 417, 420 

(Tex.Civ.App. 1954, ref., n.r.e.1, it is said: 

"Whenever covenants of seizin or good right 

to convey are contained in a deed or lease or 

assignment of a lease they import an intention 

on the part of the grantor to do more than give 

a quitclaim, they import an intention to convey 

the land or the described interest in the land 

itself." 

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Honorable Robert S. Calvert, page 4 (M-1034) 

When the statute, Article 5411a, Section l(b), is read 

into the lease, the latter necessarily provided that if title 

or possession failed, the lessor State had a legal obligation to 

return the monies paid to it by lessee. This was not in any way 

altered by, but rather modifies, the clause in the lease (Section 22), which provided in part: 

"Should Lessee be prevented. . .from 

conducting drilling operations thereon, or 

from producing oil and/or gas therefrom, after 

effort made in good faith, by reason of war, 

rebellion, riots, strikes, acts of God, or 

any order, rule or regulation of governmental 

authority, then while so prevented, Lessee's 

obligation to comply with such covenant shall 

be suspended. . ., provided, however, that 

nothing herein shall be construed to suspend 

the payment of rentals 'during the primary or 

extended term." 

It is apparent that while lessee was under a duty to 

continuepaying rentals to lessor State or forfeit the lease 

(Humble Oil & Refining Co. vs. Mullican, 192,S.W.Zd 770 [Tex. 

Sup. 194611, nevertheless his remedy for return of the rentals 

arose at least at the end of the primary term of the lease. 

While either the lessee or lessor or both may bring an action 

against a third party for tort during the lease, after its termination the lessor rather than the lessee is the proper party to sue 

where no mining was performed under the lease. 58 CJS 423, Mines 

& Minerals, Section 194. 

Further, in Cabot Corporation's application for payment 

of claim against the State of Texas, the following certified 

language by Cabot Corporation appears: 

"Moreover, the 'Notice for Bids' issued by 

the General Land Commissioner and Chairman of 

the School Land Board for the October 5, 1965 

sale of the subject Lease contained no notice 

or warning of such bombing activities or,conditions specified above and Cabot without knowledge 

of such facts bid for and purchased such Lease 

at such sale. 

"In summary, the subject Lease was not at 

the time of sale, or at any time during its 

primary term, subject to being explored and 

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Honorable Robert S. Calvert, page 5 (M-1634) 

developed for oil and gas, the very purpose 

for which it was sold and purchased, and 

consequently, such Lease had no value. Unless 

we assume the School Land Board would knowingly lease a worthless tract not subject to 

development, the situation arose from a mutual 

mistake of fact. In any event, the rights 

purported to be granted by the Lease were not 

subject to realization at the time the Lease 

was sold or at any time during its term. 

Cabot Corporation, therefore, makes the foregoing claim for refund." (Emphasis added.) 

As clearly set out above in the Cabot affidavit, it is 

clearly shown that Cabot Corporation had no knowledge that the 

bombing range covered the acreage that it had leased, and it 

logically follows that had Cabot realized that the acreage in 

question could never be used for oil and gas purposes, then the 

acreage would have never been leased from the State. 

Article 5411a, Section l(b), passed in 1945, was a preexisting law at the time of the dated mineral lease, and possession of said lease could not be and was not delivered .to 

Cabot Corporation, who acted in good faith and complied with 

the terms of the five year lease. Coupled with the certified 

Application of Claim by Cabot Corporation, the verification of 

claim by the General Land Office of Texas and the appropriation 

by the Legislature (S.B. 11, Ch. 1047, 62nd Leg., 1971, R.S.) 

of funds to pay this claim, it is our opinion that payment of 

said claim may be made promptly, pursuant to Article 5411a, 

Section l(b). The previous ruling by this office, dated April 

27, 1971, is accordingly overruled. 

SUMMARY 

Where~a mineral lease was entered into between 

the State and a lessee and by virtue of federal 

military activities, the lessee was prevented from 

drilling thereunder and title or possession could 

not pass because of such federal activity, but 

the lessee in good faith complied with the terms 

of the lease, paying the State the bonuses, delay 

rentals and special sales fees, and Article 5411a, 

Section l(b), V.C.S., was a pre-existing law in 

effect at the time of the lease, the lessee's claim 

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Honorable Robert S. Calvert, page 6 (M-1034) 

for refund of such payments to the State may 

be lawfully paid by the State to the lessee 

when coupled with the verification of the 

claim by the General Land Office and the 

legislative appropriation to pay such claim. 

Yo)z$!5 very truly, 

Prepared by Jerry H. Roberts 

Assistant Attorney General 

ey General of Texas 

APPROVED: 

OPINION COMMITTEE 

Kerns Taylor, Chairman 

W. E. Allen, Co-Chairman 

Linward Shivers 

John Reeves 

James Broadhurst 

Marietta Payne 

David Longoria 

SAM MCDANIEL 

Staff Legal Assistant 

ALFRED WALKER 

Executive Assistant 

NOLA WHITE 

First Assistant 

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