**AUSTEN in.**  **ll%xAES**

December 3.0, 1952

Hon. Murray L. .Harrfs County Attorney- “wood county Quitman, Texas Opinfon No. V-1568 Re: Tax.exemption status ofa royalty interest belonging to United Christian 

### Missionary Society, arising from the leas- -Dear Mr. Harris: ing of lands ofJarvis Christian College. You pre~sent for the opinion of this office the question contained inyour letter of December 2, 1952 which is copied below for a statement of the’facts uponwhfch our opfnfon will be based, with such additional facts.as we may add disclosed from thefile and our investiga.tfon of the records ofthe Secretary ofState.

.Your letter follows: .*Jarvis College received its name from Major andMrs. J. J. Jarvis ofFt. Worth, Texas, who, in 1911, made a gift of456 acres of land inWood County, .Texas. about one hundred miles east of Dallas, Texas. The Grant was made to the Christian Women’s Board ofMissions whose work is now incorporated fn the continufng program of the United Christian Missionary Society ‘on condftion that said corporation keep upand maintain a school for the elevation and education of the. Negro race on the land, or elsewhere in eastern Texas, inwhich school there shall be efficient and religious training.’ %n January 13, 1912. school began at Jarvfs with thirteen elementary students. The surroundings were primitive, but the program went forward with courage and determination. Gradually. the transition was made from elementary to secondary level, then tojunior college and, finally, to senior college work, with 

### recognftion by the Texas Department ofEducation in September, 1951. Enrollment inthe Fall of 1948 was two hundred twenty-two pupils, using twenty-one buildings. The estimated valuation ofthe buildings and ground improvements, as of January, 1952, is approximately $534,000.00. and the equipment estimated value, $90,000.00.Hon. Murray L. Harris, page 2 (V- 1568)

i ‘The acreage, in the orfgfnal Grant having been considered inadequate. so, in 1913 and 1924 the Christian Women’s Board ofMissions purchased adjoining land, making atotal of 8744 acres available for the campus and farm. *Jarvis Christian College is fully approved by the Southern Association of Colleges and.Secondary schools.

‘Said school is owned and operated through a Board ofTrustees by the United Christian Missionary Society, which is the organizatfon which handles miiisionary .andbenevolent work for the Christian Church, or Deciples of Christ, from whom they receive ayearly contribution. which is used )nthe education and maintenance of said school, and, inaddition thereto, money is ~received from the sale ofoil and/or gas from royalties on oil produced from said properties.

‘This institution (Jarvis College) iq-a non-profit educational institution, supported by the United Christian Misstonary Society for the benefit of such members of

‘theNegro rac~eas wish to avail themselves of the edurational facilities offered at.this Institution. “For many years prior to the discovery ofoil upon said lands in 1940, all oft&slands herein involved have been dedicated and actually used for educational purposes; **some** ofthe lands ,b.efngused as campus; othsr lands being used as demonstration tracts inagricu&ral pursuits, and other lands used in reforestation courses conducted by the School for students enrolled therein, and amajor portion of it used for buildings and campus. “All of‘theland is under anOil and Gas Lease and some ofit is producing oil and gas. and the revenue therefrom is being used for said work hereinabove enumerated.

‘%t the year 1940 theWomen’s Christian Missionary ,Society executed oil and gas leases on the lands involved, .reservfng.the usual and customary one-eighth royalty interesf, and~various leasehold operators are claiming under such leases and are now producfng oil and gas from parts ofthese lands, and are paying to the United Christian Missionary Society the proceeds from the sale ofsuch oil.

Hon. Murray L. Harrfs, page 3,(V-1568)

and gas accrafng’ to the one-eighth royalty interest reserved in the leases. %A11ftinds..redeived by the Women’s Christian Missionary Society as royalties are expended for educational purposes in maintaining the College and carrying out its co-educational program.

“Inview ofthe above, are these royalties subject to the payment ofadvalorem tax, or, are they exemptsfrom such ‘taxation under Article 7150. Re-

‘vised Civil Statute; 19253 * The records of-the Secretary of State disclose that Jarsvis Chrfstian College, Hawkins,.Texas, was incorporated February 11, 1939 with the followjng purpose clause:

.*The purpose for’which this corporation is created is to support and:maintain an esllcational institution that will give to the colored youth .of Texas practical domestic, manual and agricultural. training, as w.ell a’shigh grade instruction inthe 

### arts and sciences; the support and maintenance to i be 

### under the general control of the Home Depart- .ment, United Christian Mjssionary Society, Deciples of Christ.” -The charter provides for.directors and trustees not to exceed innumber twenty-five. There 

### is no questfon as to the exemption from ad

### valorem taxes 

### ofthe buildings and the campus uponwhich they are located, consisting of 874i acres, ofwhich 456 acres 

### were donated 

### orgiven fn 1911 to the college by Major and

### Mrs. J. J. Jarvis. This was inadequate for the purpose and plans for the college and adjoining additional land was purchased by the Christian Women’s Board of Missions ofthe Deciples of Christ which has the,duty under its charter powers to support, maintain and control the college in cooperation wfth the local Board ofDirectors and Trustees. The corporation has no capital stock.

The questfon presented is the status ofthe one-eighth royalty received by the college from leases made upon the land constitutfng the campus for advalorem state and county taxes: that is, whether taxable or exempt.

Certain types ofproperty are exempt from tsxatlon by the exoressed terms of the Constitution, and this the Legislature has no power to tax. LowerColorado River Authority v; Chemical Bank and Trust Company, 144 Tex. 326, 190 SW d48

.’ .2

. 0th

### er kindsHon. Murray L. Harris, page 4 (V-1568)

of property, and the property here in question is ofthat character, may be exempt from taxation by the Legislature only by the authority conferred upon it under the Constitution of this State. This power is derived from Section 2of‘Article VIII ofthe Constitution which reads inpart as follows:

*

. . .the legislature may; by general laws, exempt from taxation

. . .all buildings used exclusively and owned by persons or associations ofpersons for school purposes and the.necessary furniture ofall schools and property us.ed exelusively and reasonably necessary in c~onducting any association engaged in promoting the religious, ed.ucational and physical development ofboys, girls, young men or young women operating under aState or National organization oflilce character;

. . .” Pursuantto the authority thus conferred upon the Legislature by Section.2 ofArticle VIII of.the Constitution quoted above, the Legislature enacted Article 7150, V;C.S.i in language in part as follows: > !‘A11.public colleges, public academies, and

all endowment funds of institutions of:learning and religion not used with aview to profit, and when the same are invested inbonds or mortgages, and all such buildings .used exclusively and owned .by.persons .or.,associations of.persons for school purposes; . l

,:. Ifthe ones-eighth oil royalty interest here inquestion is exempt from advalorem taxes, it must be by virtueof the terms of Article 7150, V.C.S., quoted above. The exemptionfrom~taxation ofthebuildings and campus grounds 

### co~istiing of.the entire acreage owned-and inalntained by thecolleges is not questioned, but does the same r~uleapply to the one-eighth oil royalty ,,intere.st ,here inquestion owned by thencollege or by~theWomen’s’

. Christian Missionary Society ofthe Deciples of Christ, a religiout; organization? We thi!nhit makes no difference whether oweconsider the corporation & owner’ 

### ofthe property or theMissionary Society. In either event, itis owned by persons or anassociation of,persona and to that extent clearly falls within the ~purview of,Article 7.150, V~C.S.. but our difficulty arises in determinkg whether or not the oneeighth oil royal% interest here involved ‘%s musedexclusively for school purposes. . A careful search of the opfnions of this Department and the decisions of our ‘Appellate Courts fail, to reveal that this identical ques,tion has heretofore been passed upon by **@is** Department or the Courts ofthis State. In the recent case of HarrisHon. Murray L. Harris, page 5 (V-1568)

v. City ofFort Worth; 142 Tex. 600,~18O’S.W.2d~l31, Justice Sharp ofthe Supreme ~Court, inapproving what Mr; Justice Robertson said-in the early case of Cassiano v. 

### Ursdie : Academy, 64 Tex. 673. said:

% has’been the policy ofthe state since~ 1849 to encourage educational enterprises by exempt-~ ing them 

### froth any 

### shaie oftheburdens 

### ofgovernment. Pasrh. Dig., arts. 5147. 5148, 7485, 7688.

. . . “The education ofthe masses is now recogniied as afunction 

### of,state government. Those who, fr~omcharitable considerations, toforward sectarian views, or for private profit, have organised or con- . ducted schools, have assisted the state in the performance ofaduty it owes to its citizens which cannot be too thoroughly performed, andwhich thestate has never assumed that ithad 

### either the means or the

### machinery of doing sufficiently well without private assistance. The .Ursuline Academy 

### is performing itspar.t-in this branch of the public service, and itshould rather be encouraged by aids, than impaired inits usefulness by a tax upon its revenues.” From this case, we think itmay be said that the same stric.tness of construction, will not be indulged where the exemption is toreligious and educational institutions that otherwise would be applied in considering exemptions to corporations created and operated for private gain or profit.

*Wethink Texas will compare favorably with any State in the Union inthe number, efficiency, andvalue of educational instituttons owned and mafntained by religious organizations. Such schools and colleges have been fostered and built up, and ithas been the policy ofour State to encourage~them.

It is conceded inyour statement offacts that~Jarvis Christian College is anon-profit educational institution supported by the United Christian h&ssiionary Society for the benefit of such members ofthe negro race as wish to avail themselves ofthe educational facilities offered by the college.’ Itis likewise conceded that all of the land involved has for many years and is now dedicated and actually used for educational purposes as part of the campus, demonstration tracts .inagricultural’pursuits,. and training in reforestation courses conducted by the collegki In brief, all ofthe land is devoted to the educational. activities ofthe college.Hon. **Murray** L. Harris, page 6 (V-1568)

The Supreme Court, inconstruing the language “used with aview toprofit” in the case ofHarris v. City ofFort Worth, supra, said:“Whatever may be the ordinary signification ofthe words ‘used with aview toprofit,’ we think that in these tax exemption provisions of the statutes they mean only that the fund be not used with aview to private gain or profit.” It is admitted that the one-eighth oil royalty here involved is expended in the furtherance of the educational activities ofthe college and, we thinlc. meets the constitutional and statutory requirement that it is used for educational purposes and not for profit. Neither Jarvis Christian College nor the Missionary Society **pQSSeSS** the facilities to develop and produce oil from the land here in question even if they possessed the authority, which we doubt, Itis, therefore, apparent that the only feasible and practical method of producing revenue from oil under the land was to execute an oil and gas lease such as was done here and leave the development to the lessees from which the one-eighth oil royalty is received by the college. We think the net result ofwhat was accomplished by the execution of the oil and gas lease was to convey adeterminable fee to the lessees of seven-eighths of the oil in place and retain the one-eighth royalty in the college or Missionary Society. The lessor, therefore, continued its ownership of-the surface and one-eighth of the oil under the terms of the lease. In other words, there remains vested inthe lessor the surface and oneeighth ofthe oil after the execution of the oil leases.

An oil and gas 

### leasedoes not create the relationship of landlord and tennant. The lessor may sell such oil royalty in the same manner as applicable to the sale of other real estate under the laws of this State. Gulf Production Go. vI Warren, 99 S.W.td 616 (Tex.Civ.App. 1936. error ref.).

We do not deem a discussion of the doctrine of severance. which prevails in this State aspto oil and gas in place and the surfare upon the execution of an oil and gas lease essential to the determination of the question here involved.

It is sufficient to say that 

### Jarvis Christian College or the Missionary Society is the owner of the surface and everything under it or over’ it, in the absence of a severance of the oil and gas. under the surface. Therefore, upon the sale of the seven-eighths minerals and the retention by the lessor in the execution ofan oil and gas.

Hon. Murray L. Harris; page 7 (V-1568)

lease, seven-eighths of the minerals became vested in the lessee and the college remained the’owner ofthe surface and oneeighth ofthe minerals. The ownership-and possession of the surface would also extend to the possession and ownership of one-eighth of the minerals represented by the one-eighth royalty, and this 

### remains true until such minerals and the surface 

### are severed one from the other. An oil and gas lease is in effect a sale and conveyance of the oil and gas in place under the land described in the conveyance and is not infa~cta lease in the-

### brdinary acception 

### ofthat term. Gulf Production Company v. Warren, supra. But, we do not construe the cases to hold that the oneeighth royalty retained by the lessor in the usual oil and gas lease operates as a severance ofthe one-eighth mineral interest from the surface. The one-eighth royalty owned and retained by the lessor is not severed from the surface estate. It continues to be the property ofthe lessor so long as it is inplace as a part of the realty. Wagnor v. Wichita County, 298 Fed., pp. 818, 821.

We are, therefore, ofthe opinion that the exemption which prevails under the constitution and statutes of this state to the whole ofthe surface owned by the college orMissionary Society likewise extends to the one-eighth oil 

### royalty constituting a part ofthe whole ofthe real estate owned by the college, and is, 

### therefore, exempt from advalorem taxes, and you 

### ark accordingly so advised.

SUMMARY

Oil royalty produced from land owned by anonprofit educational college, operated by a religious organization, is exempt from advalorem taxes if produced from land comprising the campus ofthe college, all ofwhich is used and dedicated to the educational activities of the college to the same extent as the surface ofthe land. The oil royalty retained by the lessor, the owner of the sur.face. constitutes a part ofthe entire ownership of the land in that there has not been a severance of such estate. Hence, both the surface and the oil royalty are exempt from ad valorem taxation under the constitution and statutesHon. Murray L. Harris, page 8 (V-1568)

of this State if the royalty is likewise exclusively used in promoting the educational activities of the college. APPROVED: 

### Yours very truly, 

### W. V. Geppert PRICE DANIEL Taxation Division Attorney General
E. ~Jacobson Executive Assistant Charles D. Mathews e@Lk By , ’ L. P. Lollar First Assistant Assistant

LPL:mw