Office of the Attorney General — State of Texas John Cornyn The Honorable Bill Ratliff Chair, Senate Finance Committee Texas State Senate P.O. Box 12068 Austin, Texas 78711
Re: Whether an oyster-bed lease authorized by chapter 76 of the Parks and Wildlife Code is a perpetual lease or an annual lease, and related questions (RQ-0163-JC)
Dear Senator Ratliff:
You ask a number of questions regarding oyster-bed leases under chapter 76 of the Parks and Wildlife Code. Because you do not ask about any particular lease or situation, we answer your questions in general terms and only with reference to chapter 76. We conclude that a chapter 76 oyster-bed lease is a periodic, year-to-year lease that may be terminated at the end of any lease year by giving reasonable notice of the termination; it is not a perpetual lease. We also conclude that an oyster-bed leaseholder is authorized to sell or convey the oyster-bed lease, and that the lease does not expire when the leaseholder dies. Additionally, chapter 76 does not prohibit a family member or family business partner from acting as an agent for other leaseholders; rather it proscribes the "control" of more than 100 acres of submerged land by the same person. No person may exercise power or authority over more than 100 acres of submerged land pursuant to one or more oyster-bed leases. Finally, we conclude that control of more than 100 acres of land covered by water pursuant to another person's oyster-bed lease is not a "lease-breaking condition" that allows the state to cancel the lease by which such control is exercised.
Your first series of questions pertains to the terms and conditions of an oyster-bed lease:
In a lease between the state and an individual, does the absence of a stated term of the lease grant that leasehold in perpetuity, or does a lessee's payment of annual rent on leased lands render the lease an annual one? If the state, at some point in the future, revokes or renegotiates terms of these leases, will it owe compensation for lost property rights to these leaseholders? If the leasehold is indeed granted in perpetuity, does the leaseholder have an unlimited right to sell or convey the lease? Does the lease expire when the leaseholder dies, or can it be conveyed to heirs?
Letter from Honorable Bill Ratliff, Chairman, Senate Finance Committee, Texas State Senate, to the Honorable John Cornyn, Texas Attorney General, at 1 (Dec. 15, 1999) (on file with Opinion Committee) [hereinafter "Request Letter"].
Before addressing your specific questions in detail, we review the statutes regarding oyster-bed leases. All beds and bottoms and the products of the beds and bottoms of bays and inlets in this state and that part of the Gulf of Mexico within the jurisdiction of the state are state property. See Tex. Parks Wild. Code Ann. § 1.011(c) (Vernon 1991). The state may permit use of the waters and the bottoms and taking of products therefrom. See id. The Parks and Wildlife Department (the "Department"), a state agency, is directed to regulate the taking and conservation of all forms of marine life and shells, and to administer the laws relating to fish, oysters, and marine life in accordance with the Parks and Wildlife Code (the "Code"). Id. §§ 1.011(d), 11.001, 12.001(a); see also 31 Tex. Admin. Code ch. 58 (1999) (Oyster and Shrimp). Chapter 76 of the Code deals with oyster-bed leases and is the codification of various statutes enacted in 1919 and earlier. See Act of July 21, 1919, 36th Leg., 2d C.S., ch. 73, 1919 Tex. Gen. Laws 191; Act of May 30, 1975, 64th Leg., R.S., ch. 545, subtit. D, 1975 Tex. Gen. Laws 1405, 1568. Under chapter 76, an oyster bed or reef, other than a natural oyster bed, is subject to "location" by the Department. See Tex. Parks Wild. Code Ann. § 76.003 (Vernon 1991); see also id. §§ 76.001("A natural oyster bed exists when at least five barrels of oysters are found within 2,500 square feet of any position on a reef or bed."), 76.004(c) (natural oyster bed, bay shore area within 100 yards of shore, area subject to riparian rights, and area already under certification as location are not subject to location). Any United States citizen or domestic corporation may apply for a certificate authorizing the applicant to plant oysters and make a private oyster bed at a described location. See id. § 76.006(a), (b). If the location is subject to certification, see id. § 76.009, the Department must issue a certificate that describes the location by metes and bounds and with reference to compass points and natural objects, see id. § 76.012.
Chapter 76 provides little guidance as to the nature, terms, or conditions of an oyster-bed location certification. Only section 76.017 deals to a limited extent with the terms and conditions of an oyster-bed location certification, referring to it as a "lease" and providing that:
(a) No rental fee is owed on any location when oysters are not sold or marketed from the location for a period of five years after the date of the establishment of the location.
(b) When oysters are sold or marketed from the location and thereafter, the holder of the certificate shall pay to the department $3 per acre of location per year. In lieu of that payment, the commission may set the required payment under this section in a greater amount.
(c) Rental fees are due annually by March 1.
(d) The failure to pay any rental when due terminates the lease.
Id. § 76.017 (emphasis added); see also
Based on the limited provisions of section 76.017 of the Code, we conclude that an oyster-bed lease authorized under chapter 76 is a periodic, year-to-year lease that is terminable at the end of any lease year with reasonable notice. At common law, there are four kinds of tenancies, classified as follows: (1) tenancy for a definite term or term for years; (2) periodic tenancy, as from year-to-year or month-to-month; (3) tenancy-at-will; and (4) tenancy at sufferance. See generally
49 Tex. Jur.3d Landlord and Tenant §§ 24-27 (1986); Restatement (Second) of Property §§ 1.4, 1.5, 1.6 (1977). The classification is important because it determines the incidences of a tenancy. See generally 49 Tex. Jur.3d Landlord and Tenant §§ 24-27 (1986); Restatement (Second) of Property §§ 1.4, 1.5, 1.6 (1977). To classify the oyster-bed lease, we look at its terms under section 76.017. No rent is required for a five-year period if no oysters are sold or marketed from that location; and the lease terminates at the end of that period if no oysters are sold or marketed. See Tex. Parks Wild. Code Ann. § 76.017(a), (b) (Vernon 1991);
Our construction of a chapter 76 oyster-bed lease as a periodic, year-to-year lease is supported by Texas case law dealing with leases generally. By way of background, an at-will tenancy is one that is terminable at the will of either party to the lease at any time, seeHolcombe v. Lorino,
The Texas courts' conflation of at-will and periodic tenancies is relevant for our purposes because it has implications for the lessee's right to notice of termination. A periodic tenancy is differentiated at common law from other tenancies by the notice requirement: "[The periodic tenancy] was developed by the English judges for purpose of relieving the injustice resulting from the power of both the landlord and the tenant to summarily terminate the tenancy at will. . . . The implication in law of an agreement to give notice to terminate the tenancy was the vehicle by which the courts sought to remove the old injustices of the tenancy at will. This requirement of notice was a distinguishing factor between the year to year tenancy and the other tenancies." See generally Edward G. Northcut, Creation and Termination of Periodic Tenancies, 15 Baylor L. Rev. 329 (1963) (footnotes omitted). But with respect to the Texas case law, it has been noted that: "As to year to year tenancies it seems to be the law in Texas, that a year to year tenancy terminates `at the end of each year at the will of either party.' Evidently no notice is required to terminate a year to year tenancy and either party may end this tenancy, presumably, at the end of any year he desires." Id. at 338 (footnotes omitted).
No Texas case, however, has specifically addressed the notice requirement for a year-to-year tenancy. Sellers v. Spiller, dealing specifically with the sufficiency of notice to terminate a month-to-month tenancy appears to adopt the common-law rule that such tenancy may be terminated only upon reasonable notice: "it appears that [notice to vacate] was not given within a reasonable time of the date on which Spiller sought to terminate his tenancy. In contracts from month to month, a month's notice in advance of intention to vacate, where time of notice is not prescribed by statute nor by the terms of the contract, has been held to be a reasonable time." Sellers,
We believe that a termination notice is required to terminate a periodic, year-to-year oyster-bed lease because its ultimate duration is uncertain.1 Cf. Bockelmann, 788 S.W.2d at 571(lease for definite term, with a beginning and ending date, does not require termination notice because tenancy for definite term simply expires at end of the lease term). If rental is paid by March 1, the lease continues for an additional year and there is no statutory limit to the number of years for which it may be so continued. There is no final lease ending date because the annual period does not define the duration of the lease. Thus, although the lease terminates upon failure to pay the annual rent, and it is terminable at the end of any lease year, the particular year in which it will terminate is unknown. Notice in these circumstances is not only reasonable, but necessary to protect the lessee. We believe a Texas court confronted with this issue would follow the common-law rule requiring notice to terminate a year-to-year lease. See Sellers,
A chapter 76 oyster-bed lease, in our opinion, is not a lease for one year or a definite term such as would not require notice of termination. A lease creates a tenancy for a definite term if the tenancy has a specified beginning and ending date. See Bockelmann,
Neither is a chapter 76 oyster-bed lease, in our opinion, a perpetual lease. Perpetual leases are not favored by Texas courts, and a lease will not be construed to create a perpetual leasehold interest unless the intent to create such interest is evidenced by clear and unequivocal language. See Philpot v. Fields,
Although there is no definite ending date after the 20 year term, that date is tied to the cessation of the use of the land for certain definitely ascertainable purposes. . . . It appears that the parties intended to create a perpetual right to lease the land. When the parties' intent is made clear, courts should enforce the agreement as written, even though perpetual rights are not favored.
Id.
While we are not convinced that Philpot correctly states the law, a chapter 76 oyster-bed lease is distinguishable from the Philpot lease. We do not have before us the language of a particular oyster-bed lease, but we note that such a lease is a creature of chapter 76. Chapter 76 does not evidence a clearly expressed intent to authorize a perpetual leasehold interest. See also Oglesby,
Furthermore, because chapter 76 does not authorize a perpetual leasehold interest, the Department may not enter into or provide for a perpetual lease. The Department, like any state agency, is a legislative creature and possesses only such powers as are delegated to it expressly and impliedly by the legislature. State v. Jackson,
You also ask in your first series of questions: "If the state, at some point in the future, revokes or renegotiates terms of these leases, will it owe compensation for lost property rights to these leaseholders?" Request Letter at 1. While not completely clear, you appear to ask about possible, unspecified claims of unconstitutional "taking" of unspecified vested rights under an oyster-bed lease contract arising from unspecified actions taken by the state, assuming the oyster-bed leases are perpetual. In view of our conclusion that a chapter 76 oyster-bed lease is not a perpetual lease, we do not address this question. Moreover, we note that such a determination cannot be made in the abstract, dependent as it is on, among other considerations, the particular actions complained of taken by the state, the legal theory of the taking claim, and the particular property interest affected. See, e.g., State v. OperatingContractors,
You additionally ask in your first series of questions whether a leaseholder has an "unlimited" right to sell or convey the lease or whether the lease expires on the death of the leaseholder. See Request Letter at 1. These questions also appear to be premised on a conclusion that an oyster-bed lease creates a perpetual leasehold interest. However, we do not believe that these questions arise only in the context of a perpetual lease.
We first conclude that chapter 76 implicitly authorizes an oyster-bed leaseholder to sell or convey an oyster-bed leasehold interest. Section 76.039 of the Code, which prohibits certain acts relating to oyster-bed locations, provides as follows: "This section does not affect the right of a person to sell or assign an oyster location or private bed." Tex. Parks Wild. Code Ann. § 76.039(b) (Vernon 1991). By its terms, this provision clearly assumes that the right to sell or convey oyster-bed leases exists and reiterates that this right continues. We find no express restrictions in chapter 76 on a leaseholder's right to sell or convey an oyster-bed lease. Of course, the leaseholder cannot convey any more interest than the leaseholder has under the lease. Cf.Shipman v. Mitchell,
We conclude second that a chapter 76 oyster-bed lease does not expire on the death of the leaseholder. Again, no provision in chapter 76 addresses this issue, but under the common law, a periodic tenancy does not terminate on the death of the leaseholder. Restatement (Second) of Property § 1.5 cmt. f (1977) ("The death of one party to a periodic tenancy does not terminate the lease."); see also Frazier v. Wynn,
In this regard we note that the Texas cases conflating at-will and periodic tenancies when a lease is of uncertain duration, but rent is paid or accepted periodically, see Virani,
Your next three questions pertain to the meaning and consequences of "control" of more than 100 acres of submerged land that is prohibited by section 76.007 of the Code:
When a family member or family business partner acts as an agent for several oyster bed leaseholders, does that violate Parks and Wildlife Code, Sec.
76.007 . . .? What constitutes `control'? If it is proven that individuals do indeed control more than 100 acres at a time, is that a lease-breaking condition?
Request Letter at 2.
Section 76.007 of the Code provides that: "No person may own, lease, or control more than 100 acres of land covered by water under certificates of location." Tex. Parks Wild. Code Ann. § 76.007 (Vernon 1991). But neither section 76.007 of the Code nor another provision provides a remedy for a violation of section 76.007.
With respect to your first question, neither section 76.007, or any other provision we have found prohibits a family member or family business partner from acting as an agent for other oyster-bed leaseholders. Section 76.007 does not prohibit an agency relationship. Rather, it proscribes "control" of more than 100 acres of submerged land by the same person pursuant to an oyster-bed lease.
Neither section 76.007 nor another provision defines "control." When the legislature fails to define a word or term, we must ascribe to the word or term its ordinary meaning. See Monsanto Co. v. Cornerstones Mun.Util. Dist.,
While control of more than 100 acres of land under water pursuant to an oyster-bed lease is prohibited, we do not believe it is a "lease-breaking condition" that allows the state to cancel a lease by which such control is exercised for the following reasons. Texas courts generally do not favor conditions or limitations, the violation of which results in the termination of a leasehold interest. See Sirtex Oil Indus., Inc. v.Erigan,
Additionally, with respect to a contract that is not on its face illegal, determining whether the contract violates a statute requires looking at the specific facts of the case and the intention of the parties in executing the contract. See Texas Employers' Ins. Ass'nv.Tabor,
In the present case, it is not clear to us that any illegality, i.e., violation of section 76.007, appears on the face of an oyster-bed lease. Clearly, a person who controls 100 acres of land under water pursuant to an oyster-bed lease is ineligible to control additional locations under section 76.007 through a lease in his or her name. And the Department does not, we assume, grant a lease to a person who already leases or controls 100 acres pursuant to an oyster-bed lease given section 76.007's proscription. Consequently, we presume that control over more than 100 acres is acquired or exercised through a lease in another person's name, and the lease that "violates" section 76.007 is with a person other than the "violator" of the statute, i.e., the person controlling more than 100 acres of submerged land. Thus, a lease by which control over more than 100 acres is exercised would not on its face show a violation of section 76.007. To support a termination of such a lease for violation of section 76.007 and prevail, the state would have to show a court facts and intentions surrounding the questionable lease establishing its illegality when it was executed.
Yours very truly,
JOHN CORNYN Attorney General of Texas
ANDY TAYLOR First Assistant Attorney General
CLARK KENT ERVIN Deputy Attorney General — General Counsel
ELIZABETH ROBINSON Chair, Opinion Committee
Sheela Rai Assistant Attorney General — Opinion Committee