Can a Texas city or county keep the mineral rights when it resells tax-foreclosed land?

Plain-English summary

Karnes County Attorney Herb Hancock asked the Attorney General whether a taxing unit can keep, or "reserve," the mineral interests when it resells land that it acquired through a tax foreclosure. The situation came from a tract in Karnes City: the city foreclosed for delinquent taxes, got no high enough bid, took the property itself and held it in trust for several taxing entities, then sold it to Karnes County, leaving the delinquent taxpayer's mineral interests out of the deed. The question was whether section 34.05 of the Tax Code lets a taxing unit resell the surface while holding back the minerals.

The AG walked through how chapter 34 of the Tax Code handles foreclosed property. When a property gets no sufficient bid at a tax foreclosure sale, it can be "bid off" to the taxing unit that started the sale, which then takes title for the benefit of itself and all the other taxing units with liens. Once the taxing unit has the property, section 34.05 lets it resell at any time, but the resale deed has to convey "the right, title, and interest acquired or held by each taxing unit" that was party to the foreclosure judgment. That phrase was the heart of the question.

A 1951 opinion (V-1302) had read the predecessor statute, which said the buyer "shall receive all of the right, title, and interest ... as was acquired and is then held," to forbid a taxing unit from keeping any mineral interest. When the Legislature recodified that language into section 34.05, it dropped the words "all of" and changed "acquired and is then held" to "acquired or held," so the AG took a fresh look. Reading the current text by its plain words, the office concluded that "the right, title, and interest acquired or held" still means all of the rights, title, and interests the taxing unit holds, because a rule of statutory construction treats the singular as including the plural. The shift to "or" could mean the interests a unit ends up holding at resale might differ from what it first acquired, but that did not create any power to reserve interests.

The AG was careful about what it was and was not deciding. It did not address whether a taxing unit could convey or dispose of mineral interests at some point before a section 34.05 sale. It answered only the question asked: at the time of the section 34.05 resale, may a taxing unit hold back the minerals instead of conveying everything it then holds? The plain language said no, and section 34.05 contains no language authorizing a taxing unit, by itself or for other taxing units, to reserve any interest in a resale deed. Applying the rule that when a statute grants a power and prescribes the method of using it, that method is the only one allowed, the AG concluded a court would likely hold that section 34.05 does not let a taxing unit reserve mineral interests it holds at the time of resale. A footnote added that, on the facts given, the office could not determine whether the delinquent taxpayer's minerals should have been included in this particular resale deed, because that is a fact question outside the opinion process.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later Attorney General opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

County Attorney Hancock and the Karnes-area taxing units (as the opinion described it): The opinion concluded that a court would likely hold section 34.05 does not authorize a taxing unit to reserve mineral interests it holds at the time it resells tax-foreclosed property. It declined to decide, on the facts presented, whether the delinquent taxpayer's minerals should have been on the deed for the specific tract.

Cities, counties, and other taxing units (as the opinion described it): The opinion described the resale deed under section 34.05 as required to convey all rights, title, and interests the taxing unit holds at resale, with no statutory authority to hold any interest back. It treated the prescribed resale method as the only permitted one.

Mineral owners, buyers, and title examiners (as the opinion described it): The opinion described a section 34.05 resale as conveying whatever interests, including minerals, the taxing unit holds at the time of the sale, so it treated an attempted reservation of minerals in the resale deed as unauthorized. It expressly did not address a taxing unit's authority to dispose of minerals before a section 34.05 sale.

Common questions

Can a Texas taxing unit keep mineral rights when it resells tax-foreclosed land?
The AG concluded a court would likely say no. Section 34.05 requires the resale deed to convey all the right, title, and interest the taxing unit holds at the time of resale, and it contains no language allowing the unit to reserve any interest.

What is a tax-foreclosure "bid off" sale?
The AG explained that when foreclosed property gets no sufficient bid, it can be "bid off" to the taxing unit that started the sale, which takes title for itself and all other taxing units that had liens in the suit.

Why did the AG revisit a 1951 opinion?
The AG explained that the 1951 opinion (V-1302) read the older statute, which said the buyer received "all of" the right, title, and interest "acquired and is then held." The Legislature later dropped "all of" and changed the wording to "acquired or held," so the office reexamined the result under the current text and reached the same conclusion.

Does section 34.05 stop a taxing unit from ever dealing with the minerals?
The AG did not say that. It expressly declined to address whether a taxing unit could convey mineral interests before a section 34.05 sale, and answered only that the unit cannot reserve minerals it holds at the time of the resale.

Who decides if the specific deed should have included the minerals?
The AG did not decide that. It explained that whether the delinquent taxpayer's mineral interests should have been included on this particular resale deed is a fact question that the opinion process does not resolve.

Background and statutory framework

Chapter 34 of the Tax Code governs the sale and acquisition of property subject to tax foreclosure (Tex. Tax Code Ann. §§ 34.01-.23 (West 2008 & Supp. 2013)). Property that fails to draw a sufficient bid may be "bid off" to the initiating taxing unit (id. § 34.01(j) (West Supp. 2013)), which takes title for itself and all other lienholding taxing units (id. § 34.01(k)), with the deed vesting good and perfect title including the defendant's interest subject to redemption (id. § 34.01(k), (n)). Acquiring minerals at such a sale requires that they were taxed with the surface and were similarly delinquent (Pounds v. Jurgens, 296 S.W.3d 100, 108 (Tex. App.-Houston [14th Dist.] 2009, pet. denied)); a mineral estate consists of five interests (French v. Chevron U.S.A., Inc., 896 S.W.2d 795, 797 (Tex. 1995)).

Section 34.05 then authorizes resale at any time by public or private sale (Tex. Tax Code Ann. § 34.05(a) (West Supp. 2013)) with a deed conveying the right, title, and interest acquired or held by each taxing unit party to the judgment (id. § 34.05(e), (k) (West Supp. 2013)). The AG compared this to the predecessor statute construed in Tex. Att'y Gen. Op. No. V-1302 (1951), which had used "all of the right, title, and interest ... as was acquired and is then held."

Reading section 34.05 by its plain language (In re Lee, 411 S.W.3d 445, 451 (Tex. 2013); Tex. Gov't Code Ann. § 311.011(a) (West 2013)) and the rule that the singular includes the plural (id. § 311.012(b)), the AG concluded the phrase means all rights, title, and interests held at resale. It noted that "or" is typically disjunctive (Spradlin v. Jim Walter Homes, Inc., 34 S.W.3d 578, 581 (Tex. 2000)), so interests acquired and interests held could differ, but found no authority to reserve any. Applying the principle that a prescribed statutory method excludes all others (Cobra Oil & Gas Corp. v. Sadler, 447 S.W.2d 887, 892 (Tex. 1969), citing Foster v. City of Waco, 255 S.W. 1104, 1105 (Tex. 1923)), the AG concluded section 34.05 does not authorize reserving minerals at resale, while a footnote left the fact-specific deed question unresolved (Tex. Att'y Gen. Op. No. GA-0876 (2011) at 1).

Citations

Statutory provisions:

• Tex. Tax Code Ann. §§ 34.01-.23 (West 2008 & Supp. 2013) (sale and acquisition of tax-foreclosed property)
• Tex. Tax Code Ann. § 34.01(j) (West Supp. 2013) (sufficient bid; property bid off to the taxing unit)
• Tex. Tax Code Ann. § 34.01(k) (title held for the benefit of all lienholding taxing units)
• Tex. Tax Code Ann. § 34.01(k), (n) (deed vests title including the defendant's interest)
• Tex. Tax Code Ann. § 34.05(a) (West Supp. 2013) (resale by public or private sale)
• Tex. Tax Code Ann. § 34.05(e), (k) (West Supp. 2013) (resale deed conveys right, title, and interest acquired or held)
• Tex. Gov't Code Ann. § 311.011(a) (West 2013) (words read in context, per grammar and common usage)
• Tex. Gov't Code Ann. § 311.012(b) (singular includes the plural)

Cases:

• Pounds v. Jurgens, 296 S.W.3d 100, 108 (Tex. App.-Houston [14th Dist.] 2009, pet. denied)
• French v. Chevron U.S.A., Inc., 896 S.W.2d 795, 797 (Tex. 1995)
• In re Lee, 411 S.W.3d 445, 451 (Tex. 2013)
• Spradlin v. Jim Walter Homes, Inc., 34 S.W.3d 578, 581 (Tex. 2000)
• Cobra Oil & Gas Corp. v. Sadler, 447 S.W.2d 887, 892 (Tex. 1969)
• Foster v. City of Waco, 255 S.W. 1104, 1105 (Tex. 1923)

Prior Attorney General opinions:

• Tex. Att'y Gen. Op. No. V-1302 (1951)
• Tex. Att'y Gen. Op. No. GA-0876 (2011)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-1072
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2014/ga1072.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

July 30, 2014

The Honorable Herb Hancock Opinion No. GA-1072
Karnes County Attorney
210 West Calvert Re: Whether a taxing unit may reserve mineral
Karnes City, Texas 78118 interests on property that is acquired through
tax foreclosure and then resold pursuant to
section 34.05 of the Tax Code (RQ-1182-GA)

Dear Mr. Hancock:

You ask whether a taxing unit may reserve mineral interests on property that is acquired through tax foreclosure and then resold under section 34.05 of the Tax Code.[1] You explain that Karnes City initiated a tax foreclosure sale on a certain tract of land and then acquired the property after it failed to receive a sufficient bid. Request Letter at 1; see TEX. TAX CODE ANN. § 34.01(j) (West Supp. 2013) (explaining what constitutes a sufficient bid for a tax foreclosure sale property). You tell us that Karnes City then "held the property in trust" for multiple taxing entities until it sold the property to Karnes County. Request Letter at 1. You state that the deed of sale to Karnes County "did not include the mineral interests that were owned by the [delinquent taxpayer] in the tax sale." Id. You question whether section 34.05 authorizes the taxing unit, "on behalf of itself and the other participating taxing units, [to] reserve mineral interests" on the property in the resale deed. Id.

Chapter 34 of the Tax Code governs the sale and acquisition of property subject to tax foreclosure. See TEX. TAX CODE ANN. §§ 34.01-.23 (West 2008 & Supp. 2013). Under section 34.01, a property that fails to receive a sufficient bid at a tax foreclosure sale may be "bid off" to the taxing unit that initiated the sale. Id. § 34.01(j) (West Supp. 2013). When a property is "bid off," the taxing unit "takes title to the property for the use and benefit of itself and all other taxing units that established tax liens in the suit." Id. § 34.01(k). The deed to the taxing unit "vests good and perfect title in the purchaser or the purchaser's assigns," which includes "all the interest owned by the defendant, including the defendant's right to the use and possession of the property, subject only to the defendant's right of redemption." Id. § 34.01(k), (n). To acquire mineral interests[2] at a tax foreclosure sale, "those interests must have been taxed together with the surface and thus have been similarly delinquent and subject to the foreclosed tax lien." Pounds v. Jurgens, 296 S.W.3d 100, 108 (Tex. App.-Houston [14th Dist.] 2009, pet. denied).

After the property has been "bid off," section 34.05 authorizes the taxing unit to resell it "at any time by public or private sale." TEX. TAX CODE ANN. § 34.05(a) (West Supp. 2013). When the property is resold, section 34.05 provides that the deed must "convey[] to the purchaser the right, title, and interest acquired or held by each taxing unit that was a party to the judgment foreclosing tax liens on the property." Id. § 34.05(e), (k). This provision gives rise to your question.

In Attorney General Opinion V-1302, this office addressed a similar question involving the statutory predecessor to section 34.05. See Tex. Att'y Gen. Op. No. V-1302 (1951) at 1-2. Former article 7345(b), section 9, provided that when a taxing unit resells property acquired at a tax foreclosure sale and held on behalf of other taxing units, the purchaser at resale "shall receive all of the right, title, and interest in said property as was acquired and is then held by said taxing unit."[3] Construing that language, the opinion concluded that when a property is resold under former article 7345(b), section 9 "all of the right, title, and interest in said property is to be conveyed by the taxing unit and acquired by the purchaser. This precludes the retention by the selling taxing unit of any mineral interest in the land." Tex. Att'y Gen. Op. No. V-1302 (1951) at 2. When the Legislature recodified this language in section 34.05, it removed "all of" before "the right, title, and interest," and changed the phrase "acquired and is then held" to "acquired or held."[4] We thus reexamine the authority of a taxing unit to reserve mineral interests on property it acquired at a tax foreclosure sale when the property is resold under the current statutory language of section 34.05.

Construction of any statute starts with a consideration of its plain language, which is the best indicator of the Legislature's intent. In re Lee, 411 S.W.3d 445, 451 (Tex. 2013). "Words and phrases shall be read in context and construed according to the rules of grammar and common usage." TEX. GOV'T CODE ANN. § 311.011(a) (West 2013). Section 34.05 refers to "the right, title, and interest acquired or held," which plainly means all of the rights, title, and interests acquired or held by each taxing unit. See id. § 311.012(b) (providing the rule of statutory construction that the singular includes the plural and vice versa); cf. Tex. Att'y Gen. Op. No. V-1302 (1951) at 2 (concluding that the statutory predecessor of section 34.05 required the conveyance of all of the right, title, and interest in the property). The phrase "acquired or held" can be read to suggest that the rights, title, and interests originally acquired by a taxing unit at the tax foreclosure sale may be different from what is held by a taxing unit at the time the property is resold. See Spradlin v. Jim Walter Homes, Inc., 34 S.W.3d 578, 581 (Tex. 2000) (stating that the word "or" is typically disjunctive, "signifying a separation between two distinct ideas"). Under that construction, the property interests originally acquired at the tax foreclosure sale may not be the exact property interests that are conveyed at resale.

We do not answer here whether a taxing unit has authority, prior to a section 34.05 sale, to convey mineral interests in property acquired in a tax foreclosure sale. We understand your question to be whether, at the time of the section 34.05 sale, a taxing unit may reserve mineral rights rather than convey all the property interests it holds at that time. Notwithstanding any change in the nature of the taxing unit's interests in the property that may have occurred between acquisition and resale, the plain language of section 34.05 plainly requires that all rights, title, and interests held by the taxing unit at the time the property is resold must be conveyed in the deed. Section 34.05 contains no language authorizing a taxing unit, by itself or on behalf of other taxing units, to reserve any interest when reselling a property it acquired at tax foreclosure sale.

It is well established that "where a power is granted, and the method of its exercise prescribed, the prescribed method excludes all others, and must be followed." Cobra Oil & Gas Corp. v. Sadler, 447 S.W.2d 887, 892 (Tex. 1969) (orig. proceeding) (citing Foster v. City of Waco, 255 S.W. 1104, 1105 (Tex. 1923)). Section 34.05 authorizes a taxing unit to resell property acquired at a tax foreclosure sale and provides a specific method for doing so that does not allow for the reservation of any property interests in the resale deed. Thus, a court would likely conclude that section 34.05 does not authorize a taxing unit to reserve mineral interests on property it acquired at a tax foreclosure sale if it holds such interests at the time the property is resold.[5]

SUMMARY

A court would likely conclude that section 34.05 of the Tax Code does not authorize a taxing unit to reserve mineral interests on property acquired at a tax foreclosure sale if it holds such interests at the time the property is resold under that section.

Very truly yours,

GREG ABBOTT
Attorney General of Texas

DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

Stephen L. Tatum, Jr.
Assistant Attorney General, Opinion Committee

[1] Letter from Honorable Herb Hancock, Karnes Cnty. Att'y, to Honorable Greg Abbott, Tex. Att'y Gen. at 1 (Jan. 27, 2014), http://www.texasattorneygeneral.gov/opin ("Request Letter").

[2] "A mineral estate consists of five interests: 1) the right to develop, 2) the right to lease, 3) the right to receive bonus payments, 4) the right to receive delay rentals, and 5) the right to receive royalty payments." French v. Chevron U.S.A., Inc., 896 S.W.2d 795, 797 (Tex. 1995).

[3] Act of June 5, 1947, 50th Leg., R.S., ch. 454, § 1, sec. 9, 1947 Tex. Gen. Laws 1061, 1061, repealed and recodified by Act of May 26, 1979, 66th Leg., R.S., ch. 841, § 1, sec. 34.05, § 6(a)(1), 1979 Tex. Gen. Laws 2217, 2298-99, 2329 (amended 2011) (current version at TEX. TAX CODE ANN. § 34.05(e), (k) (West Supp. 2013)).

[4] Compare Act of June 5, 1947, 50th Leg., R.S., ch. 454, § 1, sec. 9, 1947 Tex. Gen. Laws 1061, 1061 (repealed and recodified 1979), with TEX. TAX CODE ANN. § 34.05(e), (k) (West Supp. 2013).

[5] On the facts as you have presented them, we cannot definitively determine in this instance whether the mineral interests owned by the delinquent taxpayer at the tax foreclosure sale should have been included on the resale deed. See Tex. Att'y Gen. Op. No. GA-0876 (2011) at 1 (noting that questions of fact are not resolved in the opinion process).