I
Interest in production ,from oil wells drilled under contract 'Submitted'is an interest in real estate within contem- .plationof dFticle,'l+725 proaiding &ire insurance qompany.may make loans upon first liens secured by real estate: .
li&&a~ie .Walt& C. Wiocitiaid Chairman Board of.Inaurance~:Co~ssiop~~,~,., .Austiri,Texas Dearsir: Opinion.Bo~~.,O~ti6~. ', Ref'~Inv0St&its of insurance ~~hoq.++$ se~ctired~byoil payments.: , .We are in receipt of ,your letter of May 23, .1939, requesting our'opinion upon the questions and facts hereinafter .setout. 'On July 26, 1938, the Board of Mineral Development of the state .of Texas entered into.a contract with,the G. W. Drilling Company a corporation, providing for the drilling of oil-wells on a portion of what~is known as the.bed iafthenBig Wichita Eiver in Nichita County, .Texas. The terms of this contract will be discussed more 'fully in the course of this opinion.. It is pro- posed thati.'this contract, and all benefits thereunder, shall be assigned to the Murwyn Investment Company,.a corporation, which company will'assume the carrying ou$ of the contract, and in consideration of the aa~signmentwill~axecute as',ev;idence.of in- debtedness its notes secured.by a lien upon the prbperties or interest assigned to it. This evidence of indebtedness will then be transferred to the Reserve Loan Life Insur,anceCornpang+ which indebtedness will be secured by a lien on the minerals.o,r - - . .. .
Eon. Walter C. Woodward, Page 2, O-865
mlneral Interest acqtiiredby the Muriyn Investment Company under the above.lpentionedcontract. The queitlon which'you wish to have answdred IS, whether or not the-notes secured by the interest aaquitiedby Q.'W. Drilling Company under the above mentione'dcimtract with the Board of Kineral Development-are secured6y peal estate, and whether they are seourlties in whiah life Insurance companies are authorized to invest th<'funds as provided in Article 4725? Revised Civil statutes, 1925.. 'Artiole4725, Revised .ClvilL,Statuies, 1925, proviqes, In part, as folloks~ '. *a'-life.'lntkanek aompang :organlied .x&d& .&i' litwe: ijit& 8 Stattimay fives% In ~or~l+s3~':uljon qab~~]c+d~d;qgit&+ItIea; '. und.nOne &hells, vlst~".: ... .: j : ,' ?2, ,.ItmCry+xxi.ah$ Or -its.f-uzids~~&d B99utmaiatlons;&akIng.as seonri,ty.th~~for'smh &i~lat&al as.,vndglr thi pr;eHo.~k'~&~~.~, 41;9lslq it may *IlV?tst'*li;'-It . lpake liians.tipc+I&t. .,'.. lIens.aaon.rea~,~~~t.~t~~..~e.t~t~e. $0 ~M~+@-la +.ld a+..hi-- 9 :;;:s~:.;::.:; value o$ whlah.1 4C&%.,' morg:'than+A&-'. am~~.,lqaned.thereonr ,. . .._ ; ..:. :'c ...'.",'_ .::, momp&h, in hii w&-~ti~Rei& Prop&t$;:pdi&ae$ S&&o~'SS .-' stat4.sthat: . ?In t~Zs..coiintry~-:SjQtfi-py &tatixteian@9omnion~lk~,~ L. the ,teq .!renl-estaM'~is..geii~~~~~~~~.~or:.~~.Iphr;cfse *l*s,;, tenementu, and'h~SditBnients~~!" ':
The oontrizctsets outAn gr&St detail the .~bllg&ti$ons.of tte-, . aontractor with Fefesence to the .pi%per @4&ling ofnells, tke ~equlpmen.t'tobe used, and.otQer prov$sIons ordinarily found fin a~~~drIll+gcontra+. ,: _ : .~..
In the event the state deeires'that aotitradtor6perate'all of ihe well drilled u&er this ~drilling-eontractupon the Board of .MItieral Development ~nlshing,aontraij~of.wIth a certified. .ao'pyof a..resolutionof ,such%oar& to the sffeat3hat the sta.te has elected that the Contra&or shall operate..#nohwella, then 'contrkctor, oblsgatea itself to operate the #me.while they are.i3owIng.at.a co'stoften cents (lO#) per bai%el$'and $t~ further obllgat.es'Itselfto.so operate.sald.M1,&9 If,'as and when same are.stand~dleed'or plaoed on the pump'at.a-~cost-of Hon. Walter c. Woodward, June 2, 1939, p&e3, O-86
twenty'cents (209!)per barrel, which said cost of operations, whether flowing or pumping shall be borne out of seventy-five