UNIVERSITY 
 
 OF CALIFORNIA 
 
 LOS ANGELES 
 
 SCHOOL OF LAW 
 LIBRARY
 
 LAW 
 
 OF 
 
 OILflm/NATURALGAS 
 
 A HAND BOOK 
 
 OF 
 
 THE STATUTES OF TEXAS AND THE DECISIONS OF 
 
 ITS COURTS RELATING TO OIL AND NATURAL 
 
 GAS, THE ORGANIZATION AND OPERATION 
 
 OF OIL AND GAS COMPANIES, AND THE 
 
 OWNERSHIP AND TRANSFER OF 
 
 MINERAL RIGHTS. 
 
 A. E. WILKINSON, Reporter to Supreme Court 
 and]. A. RICHARDSON, of the. Austin Bar. 
 
 L. STCC.K, AUST 
 
 1915
 
 v 
 
 1915 
 
 COPYRIGHT, 1915, BY 
 A. E. WILKINSON AND J. A. RICHARDSON.
 
 PREFACE. 
 
 The recent development of extensive oil and gas fields 
 in Texas and the activity displayed in their exploration 
 and mining operations therein are thought to justify this 
 effort to present, in brief and convenient form, the stat- 
 utes of this State and the rulings of its courts bearing 
 on the subject. 
 
 We have included so much of the General Corporation 
 Laws as have any application, the statutes relating to 
 mines and mining, those regulating oil and gas wells, the 
 act governing issuance and sales of corporate stock, com- 
 monly known as the Blue Sky Law, and a concise sum- 
 mary of the rulings of the appellate courts of the State 
 on mineral rights in land, their ownership acquisition 
 and transfer. 
 
 Large sums of money are being invested in these in- 
 terests by men who have had little opportunity to learn 
 the law governing the rights and contracts with which 
 they are dealing. Lawyers called upon to advise them 
 sometimes find themselves entering upon a new field, and 
 compelled to search through many volumes of statutes 
 and reports for an answer to the questions asked them. 
 Even those who have made special study of the subject 
 may welcome a manual like the present, which brings 
 into brief compass the information required. 
 
 We have sought to bring this presentation of the sub- 
 ject up to date, by including important statutes enacted 
 by the present Legislature (the 34th) and recent decisions 
 of the appellate courts accessible to the profession only 
 through advance sheets of the volumes in which they are 
 to appear. Questions of great interest are involved in 
 some of these rulings and in cases pending and not yet 
 determined, to which attention is called. 
 
 We have added forms for the creation of corporations 
 and for the sale or lease of mining rights in oil and nat- 
 ural gas, such, as have been approved or are in com- 
 mon use. 
 
 A. E. WILKINSON, 
 J. A. RICHARDSON.
 
 CONTENTS. 
 
 PAGE. 
 
 CORPORATION LAWS OF TEXAS 7-53 
 
 MINING LAWS OF TEXAS 54-64 
 
 FRANCHISE TAX 64-67 
 
 OIL AND GAS WELLS 67-71 
 
 BLUE SKY LAW AND ATTORNEY GENERAL'S OPINION 72-108 
 
 MINERALS AND MINING RIGHTS 109-135 
 
 What are minerals 109 
 
 Ownership . . . 109-110 
 
 Tenants in common Ill 
 
 Tenants for years Ill 
 
 Ways and easements 111-112 
 
 Rivers and tidal waters 112-113 
 
 Separation from title to soil 113-114 
 
 Conditional contracts and leases .... 114-120 
 
 Options and unilateral contracts .... 120-122 
 
 Contracts for operation 122-123 
 
 Public Lands 123-124 
 
 Employer's liability 124 
 
 Taxation, state and federal 125-135
 
 CORPORATION LAWS OF TEXAS. 
 
 (From Constitution, Revised Statutes, 1911, and later 
 Acts. Only such laws as relate to the subject of oil and 
 gas companies are included.) 
 
 CONSTITUTION OF TEXAS, ART. 12. 
 
 Section 1. No private corporation shall be created ex- 
 cept by general laws. 
 
 Section 2. General laws shall be enacted providing for 
 the creation of private corporations, and shall therein 
 provide fully for the adequate protection of the public 
 and of the individual stockholders. 
 
 Section 6. No corporation shall issue stock or bonds 
 except for money paid, labor done, or property actually 
 received, and all fictitious increase of stock or indebted- 
 ness shall be void. 
 
 NOTE. Certain corporations created for public service, though char- 
 tered as private corporations, are quasi-public and subject to regula- 
 tion in the public interest. City Water Co. vs. State, 33 S. W., 259. 
 Oil and gas wells, though private property, are subject to statutory 
 regulations, in the public interest, to prevent wasting the supply in 
 their fields. Ohio Oil Co. vs. Indiana, 177 U. S., 190. 
 
 REVISED STATUTES, 1911. 
 Title 25. 
 
 CORPORATIONS PRIVATE.
 
 8 LAW OF OIL AND NATURAL GAS 
 
 CHAPTER I. 
 
 PRELIMINARY PROVISIONS. 
 
 Article 1117. Corporations Classified. Corporations are 
 either public or private. (Act of April 23, 1874, p. 120. 
 P. D., 5932. Acts 1873, p. 42.) 
 
 Article 1118. Public Corporations. A public corpora- 
 tion is one that has for its object the government of a 
 portion of the State. (P. D., 5933.) 
 
 Article 1119. Private Corporations. Private corpora- 
 tions are of three kinds : First, religious ; second, corpora- 
 tions for charity or benevolence; and, third, corporations 
 for profit. (R. S., 1879, 564. P. D., 5934.) 
 
 NOTE. A gas company is a private corporation. The fact that it 
 is quasi-public, being 1 engaged in public service, does not prevent 
 its exercise of powers conferred on all private corporations, such 
 as to borrow money and to mortgage its property by deed of trust. 
 Pumphrey vs. Threadgill, 9 Texas Civ. App., 184, 28 S. W. 450. But 
 a public service corporation can not sell or mortgage its franchise 
 as a corporation. City Water Co. vs. State, 88 Texas, 602, 32 S. W., 
 1033. And it may be dissolved for failure to perform its functions. 
 Id. A corporation is a "person," coming within the equal protection 
 clause of the fourteenth amendment to the constitution of U. S. State 
 vs. T. & P. Ry. Co., 143 S. W., 223. 
 
 CHAPTER II. 
 
 CREATION OF CORPORATIONS. 
 
 Article 1120. Private Corporations May be Created. 
 Private corporations may be created by the voluntary as- 
 sociation of three or more persons for the purposes and 
 in the manner hereinafter mentioned. (Acts 1874, p. 
 120. Acts 1897, p. 188; P. D., 5935.) 
 
 NOTE. The Secretary of State may refuse to file a charter expressing 
 a purpose not authorized by the statute. Miller vs. Tod, 95 Texas, 
 404, 67 S. W., 483 ; Ramsey vs. Tod, 95 Texas, 614, 93 Am. St., 875 , 69
 
 LAW OF OIL AND NATURAL GAS 9 
 
 S. W., 133 ; American Salt Co vs. Heidenheimer, 80 Texas, 344, 15 S. W., 
 1038. His rulings and those of the Attorney General on these ques- 
 tions are not judicial determinations, but may be persuasive on the 
 courts in case of doubt. Fire Ass'n. vs. Love, 101 Texas, 381, 108 S. W., 
 158 ; Houston & T. C. E. B. Co. vs. State, 95 Texas, 507, 68 S. W., 777 ; 
 Galveston, H, & S. A. Ey. Co. vs. State, 81 Texas, 572, 17 S. W., 67; 
 State vs. Gunter, 36 Texas Civ. App., 381, 81 S. W., 1028. 
 
 Corporations can not be formed for two purposes expressed in 
 distinct paragraphs of the statute (Article 1121) except as specially 
 authorized by paragraphs 72, 73, Article 1121 post. G. C. & S. F. Ey. 
 Co. vs. Morris, 67 Texas, 692, 4 S. W., 156 ; Eamsey vs. Tod, 95 Texas, 
 614, 69 S. W., 133; Borden vs. Tres Palacios Eice Co., 82 S. W., 463. 
 A body not legally organized, but acting under color of law, may be 
 a de facto corporation. American Salt Co. vs. Heidenheimer, 80 
 Texas, 344, 15 S. W., 1038. And its existence not to be questioned 
 collaterally. Conley vs. Daughters of Eepublic, 151 S. W., 883. But 
 only where there has been an effort to comply and the defects are 
 merely formal. Allen vs. Long, 80 Texas, 261, 16 S. W., 43. Such 
 as failure to elect directors. Conley vs Daughters of Eepublic, supra. 
 
 Article 1121. For What Purposes Corporations May 
 be Created. The purposes for which private corporations 
 may be formed are: 
 
 13. The manufacture and supply of gas, and the sup- 
 ply of light, heat, and electric motor power, or either of 
 them, to the public by any means. 
 
 16. For the establishment and maintenance of oil com- 
 panies, with the authority to contract for the lease and 
 purchase of the right to prospect for, develop and use, 
 coal and other minerals, petroleum, and gas; also, the 
 right to erect, build and own, all necessary oil tanks, cars, 
 and pipes, necessary for the operation of the business of 
 the same. (Act of March 31, 1915, Laws, 34th Leg., 
 p. 225.) 
 
 NOTE. Paragraph 16, of Article 1121, is here given as amended by 
 Act of March 31, 1915. The paragraph as it stood in the Eevised 
 Statutes of 1911 was as follows : 
 
 "16. For the establishment and maintenance of oil companies, 
 with authority to contract for the lease and purchase of the right 
 to' prospect for, develop, and use, coal and other minerals, and pe- 
 troleum ; also, the right to erect, build, and own, all necessary oil 
 tanks cars, and pipes, necessary for the operation of the business of 
 the same. (Acts, 1897, p. 188)."
 
 10 LAW OF OIL AND NATURAL GAS 
 
 The Act. of 101. > is printed in full, following 1 this note. The second 
 section of the Act confers the same powers on corporations heretofore 
 created under paragraph 16. The amendment was obviously designed 
 to remove any doubt as to the powers of such companies to operate 
 for the production of natural g.is, which was not specifically enumer- 
 ated among the minerals to be mined. It would seem, however, 
 that a fair construction of this paragraph, as it stood before the 
 amendment, would include natural gas under the "other minerals" 
 mentioned. Even a strict application of the rule of construction which 
 would limit such general language to like minerals to those specially 
 enumerated would reach this result. Those mentioned are such as 
 are useful for the production of light and heat. Petroleum and 
 natural g;is are commonly found in the same general field of ex- 
 ploration. They are produced by the same method of mining, that 
 is, by bored wells. And the prospector would generally be unable to 
 determine which he might strike. 
 
 This paragraph gives only the authority to contract for the lease 
 and purchase of the right to prospect for, develop, and use the minerals 
 mentioned ; but the right to purchase and hold real estate otherwise 
 than by lease or contract for prospecting and mining, so far as 
 appropriate to the corporate business, is conferred on all private cor- 
 porations. Art. 1140, par. 4, and note, Art. 1175 and note. Under 
 these, it seemfe such corporations would have the power to purchase 
 and hold in fee the land necessary for their operations, as well as 
 to lease or to buy merely the mineral rights. 
 
 For form of a purpose clause of a corporation created under this 
 paragraph, see Form II, post. 
 
 GENERAL LAWS, 34TH LEG., P. 225. 
 [S. B. No. 282.] CHAPTER 144. 
 
 An Act to amend Title 25, Chapter 2, Article 1121, Subdivision 16, Re- 
 vised Statutes of Texas, 1911, providing for the creation of private 
 corporations for the establishment and maintenance of oil companies 
 with authority to contract for, lease and purchase ; of the right to 
 prospect for, develop and use coal and other minerals, by adding 
 thereto the right to contract for the lease and purchase, of the right 
 to prospect for, develop and ut-e gas ; and declaring an emergency. 
 
 Be it enacted by the Legislature of the State of Texas: 
 
 SECTION 1. That Article 1121, Subdivision 16, of Title 
 25, Chapter 2, of the Revised Statutes of the State of
 
 LAW OF OIL AND NATURAL GAS 11 
 
 Texas, 1911, be amended so as to hereafter read as fol- 
 lows: 
 
 "For the establishment and maintenance of oil com- 
 panies with the authority to contract for the lease and 
 purchase of the right to prospect for, develop and use coal 
 and other minerals, petroleum and gas; also the right to 
 erect, build and own all necessary oil tanks, cars and pipes 
 necessary for the operation of the business of same." 
 
 SEC. 2. All private corporations heretofore created un- 
 der the provisions of Subdivision 16, Article 1121, Chap- 
 ter 2, Title 25, Revised Statutes of Texas of 1911, shall, 
 in addition to the powers therein enumerated, have the 
 power to contract for the lease and purchase of the right 
 to prospect for, develop and use gas; also erect, build and 
 own all necessary oil tanks, cars and pipes necessary for 
 the operation of the business of same. 
 
 SEC. 3. The fact that there is no authority for the 
 creation of corporations to contract for the lease and pur- 
 chase of right to prospect for, develop and use gas cre- 
 ates an emergency and an imperative public necessity that 
 the constitutional rule requiring that bills be read on three 
 several days be suspended, and said rule is hereby sus- 
 pended and that this Act take effect and be in force from 
 and after its passage, and it is so enacted. 
 
 NOTE. S. B. No. 282 passed the Senate M#rch 19, no vote given. 
 Passed the House March 19, no vote given. 
 
 Approved March 31, 1915. 
 
 Takes effect 90 days after adjournment. 
 
 (Article 1121, Rev. Stats., 1911, continued.) 
 
 39. For the purpose of doing business in any State or 
 foreign country: 
 
 (a) The establishment of land companies to buy, own, 
 sell and convey real estate and minerals, and engage in 
 mining, agriculture and stock raising. 
 
 (c) The acquisition, construction, maintenance, oper- 
 ating and owning of power and illuminating plants and 
 systems of every character.
 
 12 LAW OF OIL AND NATURAL GAS 
 
 72. Private Corporations may be created for, or after 
 being created, may be so amended as to include two or 
 more of the following purposes, namely: The construc- 
 tion or purchase and maintenance of mills and gins; the 
 manufacture and supply to the public, by any means, of 
 ice, gas, light, heat, water and electric motor power, or 
 either, in connection with such mills and gins, or either, 
 the harvesting of grain or the harvesting and threshing 
 of grain; provided, that the authorized capital stock of all 
 corporations, authorized by this subdivision shall not ex- 
 ceed two hundred and fifty thousand dollars. (Acts 1903, 
 p. 227.) 
 
 73. Private corporations may be created for, or after 
 being created may so amend their charters so as to in- 
 clude two or more of the following purposes, namely: 
 The supply of water to the public for irrigation, power, 
 municipal or domestic purposes; the manufacture of and 
 supply of ice to the public ; the generation of and supply 
 of gas, electric light and motor power to the public; the 
 manufacture, supply and sale of carbonated water to the 
 public; the operation of cottonseed oil mills and the oper- 
 ation of cotton compresses. Provided, that corporations 
 including more than one of the purposes named in this 
 article shall pay the franchise tax provided by law for 
 each of the purposes so included in their said charters 
 or amendments thereto; and provided further that the 
 authorized capital stock of corporations created under or 
 authorized by this article which shall include irrigation 
 and any one or more of the other purposes named in this 
 article, shall not exceed $1,000,000; and that the author- 
 ized capital stock of corporations created under or au- 
 thorized by this article which shall include waterworks, 
 for the supply of water to the public or municipalities, 
 and any one or more of the other purposes named in this 
 article except irrigation, shall not exceed $500,000, and 
 that the authorized capital stock of corporation so author- 
 ized by this article for any two or more of the purposes 
 named in this article except irrigation and waterworks
 
 LAW OF OIL AND NATURAL GAS 13 
 
 or the supply of water to the public, shall not exceed 
 $200,000. (Acts 33rd Leg., p. 352.) 
 
 NOTE. The foregoing enumeration of the purposes for which cor- 
 porations may be chartered contains no provision suitable for the 
 organization of a natural gas company with power at once to produce 
 such gas from wells, to transport it to points where it may find a 
 market, and there sell it to consumers. A gas company created under 
 paragraph 13, ante, if the right to "manufacture and supply" were 
 held to cover the production of natural gas from wells, would be 
 without the power to exercise eminent domain or construct pipe 
 lines from the wells to towns where there might be a demand for its 
 consumption. An oil company organized under paragraph 16, ante, 
 would have the right, under the amendment of March 13, 1915, "to 
 prospect for, develop and use coal and other minerals, petroleum and 
 gas." It had, in the opinion of the writers, siich power even before 
 the amendment. But it would have no power to construct pipe 
 lines for its transportation to market. A pipe line company organ- 
 ized under Articles 1303-1308, post, would be authorized only to "store, 
 transport, buy and sell," and would be a common carrier obliged to 
 transport for all without discrimination (Art. 1308). If it is desired 
 to organize a natural gas company to produce such article from its 
 wells, lay pipe lines for its transportation to such towns as can be 
 reached by that means, and then sell to consumers, it should be char- 
 tered under the Act of March 25, 1911, Laws, 32d Leg., ch. Ill, p. 228, 
 which is held by the Attorney General's department to authorize the 
 creation of a company with such powers. See that Act, post, p. 45, 
 and note thereto. 
 
 Article 1122. Charter and What it Must Set Forth. A 
 charter must be prepared setting forth: 
 
 1. The name of the corporation. 
 
 2. The purpose for which it is formed. 
 
 3. The place or places where its business is to be 
 transacted. 
 
 4. The term for which it is to exist. 
 
 5. The number of its directors or trustees, and the 
 names and residences of those who are appointees for the 
 first year. 
 
 6. The amount of its capital stock, if any, and the num- 
 ber of shares into which it is divided. 
 
 7. The charter of a bridge or ferry company shall
 
 14 LAW OF OIL AND NATURAL GAS 
 
 also state the stream intended to be crossed by the bridge 
 or ferry. 
 
 8. The charter of a road company shall also state: 
 First, the kind of a road intended to be constructed; 
 second, the places from and to which the road is intended 
 to be run ; third, the counties through which it is intended 
 to be run; fourth, the estimated length of the road. 
 (P. D., 5937.) 
 
 NOTE. For approved form of charters under this article, see post, 
 Form I. Some preliminary organization is assumed in the statute, 
 since directors must be designated and stock subscribed. Articles 1122. 
 1125, 1127, post; Smith vs. First Nat. Bank, 43 Texas Civ. App., 495, 95 
 S. W. 1116. This subject of sale of stock before chartering, and how 
 expenses of promotion and organization are to be met is now strictly 
 regulated by the Act of August 31, 1913 (The Blue Sky Law), post, pp. 
 72-81. 
 
 Article 1123. Charter Must be Subscribed and Ac- 
 knowledged. The charter of an intended corporation 
 must be subscribed by three or more persons; two of 
 whom at least must be citizens of this State, and must be 
 acknowledged by them before an officer duly authorized 
 to take acknowledgment of deeds ; provided, that all char- 
 ters for the purposes named in clauses two and three of 
 Article 1121 of this chapter and title may be subscribed 
 by married women, who may also be stockholders, officers 
 and directors thereof; and their acts, contracts and deeds 
 shall be as binding and effective for all purposes of said 
 corporation as if they were males; and the joinder and 
 consent of their husbands and privy examinations separate 
 and apart from them shall not be required. (Acts 1887, 
 p. 103.) 
 
 NOTE. The statute does not require that the citizenship of all the 
 corporators appear on the face of the instrument, nor provide how it 
 is to determined ; but the Secretary of State has authority to inquire 
 into the fact. If none of them were citizens the approval of the char- 
 ter by the Secretary created them a de facto corporation. The State 
 could forfeit the charter because illegally obtained, but the corporators 
 were not liable as partners to persons dealing \vith them. American 
 Salt Co. vs. Heidenheimer, 80 Texas, 344, 15 S. W., 1038.
 
 LAW OF OIL AND NATURAL GAS 15 
 
 Article 1124. Business Firm Shall Give Notice of In- 
 tention to Incorporate. Whenever any banking, mercan- 
 tile or other business firm desires to become incorporated 
 without a change of the firm name, such firm shall, in 
 addition to the notice of dissolution required at common 
 law, give notice of such intention to become incorporated, 
 for at least four successive weeks, in some newspaper 
 published at the seat of State government, and in the 
 county in which such firm has its principal business office, 
 if there be a newspaper in such county, and, if not, then 
 in some newspaper published in some adjoining county; 
 and until such notice shall have been so published for the 
 full period above named, no change shall take place in 
 the liability of such firm or the members thereof. 
 
 Article 1125. Private Corporations for Profit Must 
 Subscribe Full Amount of Stock and Pay Fifty per cent 
 of Same, Before Being Chartered. The stockholders of 
 all private corporations created for profit with an au- 
 thorized capital stock under the provisions of this chapter, 
 shall be required, in good faith, to subscribe the full 
 amount of its authorized capital stock, and to pay fifty 
 per cent thereof before said corporation shall be chartered. 
 (Acts 1901, p. 18. Acts 1897, p. 192. Acts 1907, p. 309, 
 Sec. 1.) 
 
 Article 1126. Secretary of State to Receive, File and 
 Record Charter, on Satisfactory Evidence of Compliance, 
 and Payment of Fees and Franchise Tax. Whenever the 
 stockholders of any such company shall furnish satisfac- 
 tory evidence to the Secretary of State that the full 
 amount of the authorized capital stock has in good faith 
 been subscribed, and fifty per cent thereof paid in cash, 
 or its equivalent in other property or labor done, the 
 product of which shall be to the company of the actual 
 value at which it was taken, or property actually received, 
 it shall be the duty of said officer, on payment of office 
 fees and franchise tax due, to receive, file and record the 
 charter of such company in his office, and to give his cer- 
 tificate showing the record thereof. (Id.) 
 
 Article 1127. Satisfactory Evidence Defined. Satisfac-
 
 16 LAW OF OIL AND NATURAL GAS 
 
 tory evidence above mentioned shall consist of the affidavit 
 of those who executed the charter, stating therein: 
 
 1. The name, residence and postoffice address of each 
 subscriber to the capital stock of such company. 
 
 2. The amount subscribed by each, and the amount 
 paid by each. 
 
 3. The cash value of any property received, giving its 
 description, location and from whom and the price at 
 which it was received. 
 
 4. The amount, character and value of labor done, from 
 whom, and price at which it was received. (Id.) 
 
 Article 1128. Secretary of State May Require Other 
 Evidence. If the Secretary of State is not satisfied, he 
 may, at the expense of the incorporators, require other 
 and more satisfactory evidence before he shall be re- 
 quired to receive, file and record said charter. (Id.) 
 
 NOTE. For approved forms of the affidavits required by Articles 
 1125-1128, see post. Form IV. As to how stock is to be paid for, 
 and for what consideration in property or services rendered it can be 
 issued, see Article 1146 and note thereunder. 
 
 Article 1131. Must be Filed with Secretary of State, 
 Etc. Such charter shall thereupon be filed in the office of 
 the Secretary of State, who shall record the same at length 
 in a book to be kept for that purpose, and retain the 
 original on file in his office. A copy of the charter, or of 
 the record thereof, certified under the great seal of the 
 State, shall be evidence of the creation of the corporation. 
 (Act April 23, 1874, Sec. 9. P. D., 5940.) 
 
 NOTE. The Secretary of State may be compelled by mandamus from 
 the Supreme Court to file a charter which complies with the law, 
 where he refuses so to do. Miller vs. Tod, 95 Texas, 404, 67 S. W., 
 483 ; Ramsey vs. Tod, 95 Texas, 614 ; 69 S. W., 133 ; G. C. & S. F. Ry. Co. 
 vs. Morris, 67 Texas, 692, 4 S. W., 156. 
 
 Article 1132. Corporations Shall Exist from Time of 
 Filing Charter, Etc. The existence of the corporation 
 shall date from the filing of the charter in the office of the 
 Secretary of State, and the certificate of the Secretary of
 
 LAW OF OIL AND NATURAL GAS 17 
 
 State shall be evidence of such filing. (Id., Sec. 10. 
 P. D., 5941.) 
 
 NOTE. No proceeding's short of filing the charter create the indi- 
 viduals into a corporation. Bank of De Soto vs. Reed, 50 Texas Civ. 
 App., 102, 109 S. W., 259. But after it is filed their liability for the 
 undertaking's of its owners and managers becomes that of stockholders. 
 Bank vs Texas Inv. Co., 74 Texas, 421, 12 S. W., 101. 
 
 Article 1133. Charter May Be Amended, How. Any 
 private corporation heretofore organized or incorporated, or 
 which may hereafter be organized or incorporated, for any 
 of the purposes mentioned in this chapter may amend or 
 change its charter or act of incorporation by filing, authen- 
 ticated in the manner required by this chapter as to an orig- 
 inal charter of incorporation, such amendments or changes 
 with the Secretary of State; and, in case of a corporation, 
 created by special act of the Legislature, said corporation 
 shall cause the amendments or changes to its charter to be 
 authenticated as required in the case of an original charter 
 of incorporation, and filed with the Secretary of State, 
 together with the original charter of such company, and 
 such amendments thereto, or changes therein, if any, as 
 have been made by special act of the Legislature; and the 
 same shall be recorded by the Secretary of the State, fol- 
 lowed by the proposed amendments or changes thereof. 
 (Id., Sec. 10. P. D., GOllb.) 
 
 NOTE. As to amendments which increase capital stock see note to 
 Article 1145 post. 
 
 Article 1134. When Amendments Shall Take Effect. 
 The amendments or changes provided for in the preceding 
 articles shall take effect and be in force, from the date 
 of the filing thereof with the Secretary of State; and the 
 certificate of the Secretary of State shall be evidence of 
 such filing. (Id.) 
 
 Article 1135. Amendments, What Void and What Valid. 
 No amendment or change violative of the Constitution 
 or laws of this State or any of the provisions of this
 
 18 LAW OF OIL AND NATURAL GAS 
 
 title shall be of any force or effect; amendments or 
 changes may include additional purpose for which private 
 corporations may be incorporated to that contained in 
 its original or amended charter, as are specified in 
 subdivision 72 of Article 1121; but such amendments 
 which so change the original purpose of such corpora- 
 tion as to prevent the execution thereof shall be of no 
 force or effect. (Acts 1903, p. 227.) 
 
 Article 1137. Renewal and Consolidation of Two or 
 More Such Corporations, Etc., How. Any two or more 
 of such corporations may revive and consolidate their 
 charters under a new corporate name, or under the name 
 of either, with all privileges, immunities and rights of 
 property, real and personal, enjoyed by each at the date 
 of the expiration of their several charters, by, in like 
 manner, filing a charter, which shall recite the fact of 
 consolidation, accompanied by certified copies of said 
 original charters; provided, the provision thereof shall 
 not be construed to relieve any corporation from the 
 payment of occupation taxes, now or hereafter required 
 by law. (Id.) 
 
 NOTE. Consent of stockholders is necessary to consolidation. Clark 
 vs. Brown, 108 S. W., 421. Purchase by one corporation of the property 
 and franchises of another does not effect a consolidation. Supreme 
 R. F. M. C. vs. Erickson, 131 S. W., 92. Nor show identity of the two 
 concerns. McLean & D. vs. Pressed Brick Co., 128 S. W., 442. Nor 
 sxibject the purchaser to the seller's liability to an injured servant. 
 Abilene C. Oil Co., vs. Anderson, 41 Texas Civ. App., 342, 91 S. W., 607. 
 As to consolidation of corporations of different states see : "VWialey 
 vs. Bankers Union, 39 Texas Civ. App., 385, 88 S. W., 259; Gordon vs. 
 American P. of S., 141 S. W., 331. 
 
 Article 1138. Existence of Corporation Shall not be 
 Disputed Collaterally. No person who assumes an obliga- 
 tion to an ostensible corporation, as such, shall resist the 
 enforcement of such obligation, on the ground that there 
 was in fact no such corporation, until that fact shall 
 have been adjudged in a direct proceeding had for the 
 purpose.
 
 LAW OF OIL AND NATURAL GAS 19 
 
 NOTE. This proceeding- can only be had by the State. Troutman 
 vs. McCleskey, 7 Texas Civ App., 561, 27 S. W., 173 ; Oriental vs Barclay, 
 16 Texas Civ. App., 193, 41 S. W., 117; Oriental Inv. Co. vs. Sline, 
 41 S. W., 130; Conley vs. Daughters of Republic, 151 S. W., 877; 
 Railway Co. vs. Anderson County, 150 S. W., 250 ; Dillard vs. Lumber 
 Co., 141 S. W., 1023. 
 
 Article 1139. Legislature May Alter, Reform or Amend. 
 All charters or amendments to charters, under the 
 provisions of this chapter ,shall be subject to the power 
 of the Legislature to alter, reform or amend the same. 
 (Act April 23, 1874, Sec. 9.) 
 
 CHAPTER III. 
 
 POWERS AND DUTIES OF PRIVATE CORPORATIONS AND DUTIES 
 OF STOCKHOLDERS IN REFERENCE THERETO, ETC. 
 
 Article 1140. General Powers of Corporations. Every 
 private corporation, as such, has power: 
 
 1. To have succession by its corporate name for the 
 period limited in its charter, not to exceed fifty years, 
 and when no period is limited, for twenty years. 
 
 2. To maintain and defend judicial proceedings. 
 
 3. To make and use a common seal. 
 
 4. To purchase, hold, sell, mortgage or otherwise con- 
 vey such real and personal estate as the purposes of the cor- 
 poration shall require, and also to take hold, and convey 
 such other property, real, personal, or mixed, as shall be 
 requisite for such corporation to acquire in order to 
 obtain or secure the payment of any indebtedness or 
 liability due, or belonging to, the corporation. 
 
 5. To appoint and remove such subordinate officers and 
 agents as the business of the corporation shall require, 
 and to allow them a suitable compensation. 
 
 6. To make by-laws not inconsistent with existing 
 laws for the management of its property, the regulation 
 of its affairs and the transfer of its stock. 
 
 7. To enter into any obligation or contract essential 
 to the transaction of its authorized business.
 
 20 LAW OF OIL AND NATURAL GAS 
 
 8. To increase or diminish by a vote of its stock- 
 holders, cast as its by-laws may direct, the number of 
 its directors or trustees, to be not less than three nor more 
 than twenty-one; provided, that any corporation formed 
 under subdivisions 1, 2 and 3, Article 1121, may increase 
 the number of its directors or trustees to not more than 
 twenty-five. (Id. Acts 1907, p. 301. Acts 1909, p. 
 225. P. D., 5942.) 
 
 NOTE. Par. 1. The company acquires no other powers than right 
 to corporate existence except as these are conferred by the statute. 
 Ft. Worth etc. By. Co. vs. Bosedale St. Ey. Co., 68 Texas, 163, 7 S. W., 
 381 ; Lyons-Thomas Hdw. Co. vs. Perry Stove Mfg. Co., 86 Texas, 149, 
 22 L. E. A., 802, 24 S. W., 16; Scott vs. Farmers & M. Nat'l Bank, 
 66 S. W., 495. But it has implied authority to do whatever is necessary 
 or appropriate to the exercise of the powers expressly given. Dillard 
 vs. Lumber Co., 141 S. W., 1023. It may foster its own business by 
 such means as are usual in such business and directly beneficial ; 
 but not by unusual means of only indirect benefit, as where one 
 street railway company extended its credits to another through a 
 joint issue of bonds. North Side Ey. Co. vs. Worthington, 88 Texas, 
 562, 30 S. W, 1055. It was held that a corporation for selling liquor 
 may become suretj r on the bond of a saloon-keeper, as a means of 
 promoting its sales, though he was only a possible customer. Munoz 
 vs. Brassel, 108 S. W., 417. But the contrary was held as to the power 
 of a lumber company to become surety on a building contractor's 
 bond. W. C. Bowman Lbr. Co. vs. Pierson, 139 S. W., 618. This 
 latter ruling is now before the Supreme Court for review, it having 
 required the question to be certified because of conflict in the de- 
 cisions. Bank vs. Conner, 106 Texas, , 172 S. W., 1106. A corpora- 
 tion cannot indorse accommodation paper. Deaton Gro. Co. vs. Int. 
 Harv. Co., 47 Texas Civ App., 267, 105 S. W., 556; Waller vs. Gorman 
 Merc. Co., 141 S. W., 833. Its power to become a guarantor or surety 
 for another is limited to contracts proper for the promotion of the 
 business for which it was chartered. Forty Acre L. S. Co. vs. West Tex. 
 Bk. & Tr. Co., Ill S. W., 417; South Tex. Nat. Bk. vs. LaGrange Oil 
 Mill Co.. 40 S. W., 328; Gaston & Ayres vs. Campbell Co., 130 S. W., 
 222; North Tex. St. Bk. vs. Crowley-S. Com. Co., 145 S. W., 1027. It 
 can not enter into partnership with others. Markowitz vs. Greenwall 
 Theat. Circuit, 75 S. W., 74 ; Sabine Tram Co. vs. Bancroft, 16 Texas 
 Civ. App., 170, 40 S. W., 837. It may act as trustee in matters within 
 scope of charter powers. Conley vs. Daughters of Bepublic, 151 S. W., 
 877. 
 
 Par. 2. Should sue or be siied by corporate name. Southern Pac.
 
 LAW OF OIL AND NATURAL GAS 21 
 
 Co. vs. Burns, 23 S. W,, 288. Its capacity in this respect is the same 
 as natural persons. Conley vs. Daughter of Republic, 151 S. W., 877. 
 And it is entitled to the same rights of action and measure of dam- 
 ages. Eailway Co. vs. Broussard, 69 Texas, 617, 7 S. W., 374 ; Railway 
 Co. vs. Telegraph Co., 69 Texas, 277, 5 Am. St., 45, 5 S. W. 517. It may 
 sue its members. Article 1171 post. Allegation that plaintiff or de- 
 fendant is incorporated can only be denied under oath. Rev. Stats. 
 Article 1906. 
 
 Par. 3. Corporate seal is required in conveyance of land. Post, 
 Article 1173. But not to a sale or mortgage of chattels. Fowler vs. 
 Bell, 35 S. W., 822. 
 
 Par. 4. As to right to acquire and hold land, see post, Article 1175 
 and note. The right to sell is an incident to ownership. Knowles 
 vs. Traction Co., 121 S. W., 232. An oil company may lease its real 
 piroperty to another to be operated for it by the lessee on a royalty 
 basis. State vs. Guffey Pet. Co., 85 S. W., 1084. 
 
 Par. 5. May appoint a general manager, though not mentioned 
 as an officer in charter or by-laws. Hamni vs. Drew, 83 Texas, 77, 
 18 S. W., 434; M&rkowitz vs. Greenwall Theat. Circuit, 75 S. W., 74. 
 
 Par. 6. A by-law is a permanent rule for conducting the corporate 
 business, as distinguished from a resolution or single act. Steger 
 vs. Davis, 8 Texas Civ. App., 23, 27 S. W., 1068. Power to make and 
 change by-laws. Gabel vs. Houston, 29 Texas, 336 ; Tempel vs. Dodge, 
 
 89 Texas, 68, 32 S. W., 514, 33 S. W., 222. They mjust not be incon- 
 sistent with charter. Gabel vs. Houston 29 Texas, 336 ; Clark vs. 
 Brown, 108 S. W., 421; Mathis vs. Pridham, 1 Texas Civ. App., 58, 20 
 S. W., 1015. May create a contract with stockholder. Howe G. & 
 M. Co. vs. Jones, 21 Texas Civ. App., 198, 51 S. W., 24. By-laws regu- 
 lating transfers of stock. Seeligson vs. Brown, 61 Texas, 114. As to 
 by-laws of benefit society as affecting the rights of their members, 
 see : Splawn vs. Chew, 60 Texas, 532 ; Byrne vs. Casey, 70 Texas, 247, 
 8 S. W., 38; Knights and L. of H. vs. Grace, 60 Texas, 569; Duer vs. 
 Supreme Council, 21 Texas Civ. App., 493, 52 S. W., 109 ; Association 
 vs. Taylor, 23 Texas Civ. App., 367, 56 S. W., 553; Eversberg vs. Su- 
 preme Tent, 33 Texas Civ. App., 549, 77 S. W., 246; Grand Lodge vs. 
 Stumpf, 24 Texas Civ. App., 309, 58 S. W.. 840 ; Home Circle vs. Shelton, 
 81 S. W., 84 ; Sovereign Camp vs. Carrington, 41 Texas Civ. App., 29, 
 
 90 S. W., 921. A recent and important discussion of the power to 
 affect the rights of stockholders by by-laws or resolutions will be 
 found in Yeaman vs. Galveston City Co., 106 Texas, , 167 S. W., 710. 
 
 Par. 7. See note under paragraph 1 above, as to the implied powers 
 conferred on corporations. May borrow money, and for that purpose 
 may guaranty the note of another to the extent that it receives pro- 
 ceeds. Gaston & Ayres vs. Campbell Co., 104 Texas, 576 ; Waller vs. 
 Gorman Merc. Co., 141 S. W., 833. May issue and sell bonds. Article 
 1162 post and note. Corporation can make only such contracts as are
 
 22 LAW OF OIL AND NATURAL GAS 
 
 essential or proper to carrying on its authorized business. Contracts 
 not within the scope of such business are invalid. Thus : Acquiring 
 land not for corporate purpose. Scott vs. Bank, 66 S. W., 495. Ex- 
 change of land for personal property. Land Co. vs. McCormick, 85 
 Texas, 416. Lending its credit to another company by joint issue 
 of bonds. North Side Ry. Co. vs. Worthington, 88 Texas, 562, 30 S. W., 
 1055. As to its power to become guarantor or surety for another 
 see, further, note to paragraph one above. Persons contracting with 
 the corporation for consideration received are estopped from denying 
 its power to make the contract. Bond vs. Terrell Mfg. Co., 82 Texas, 
 309, 18 S. W., 691; Petroleum. Co. vs. Townsite Co., 48 Texas Civ. 
 App., 555, 107 S. W., 609; Smith vs. White, 25 S. W., 809; Keys vs. 
 Building .& L. Assn., 25 S. W., 809 ; Bond vs. Mfg. Co., 82 Texas, 309. The 
 corporation is also estopped from claiming that its act was invalid, 
 as beyond its charter powers, so far as it has received benefits. Live- 
 stock Co. vs. Bank & Tr. Co., Ill S. W., 417; Gaston & Ayres vs. 
 Campbell Co., 130 S. W., 222 ; Kincheloe Irr. Co. vs. Hahn Bros. & Co., 
 146 S. W., 1187; Cont. Fire Assn. vs. Masonic Temple Co., 26 Texas 
 Civ. App., 139, 62 S. W., 930. But neither party is estopped while the 
 contract remains wholly executory. San Antonio Hdw. Co. vs. Sanger, 
 151 S. W., 1104. 
 
 Article 1141. Unpaid Stock Payable When; Proof of 
 Payment. The stockholders of all corporations chartered 
 as provided in Articles 1125 to 1128, inclusive, as modi- 
 fied by Article 1129, shall, within two years from the 
 date of the filing of such charter by the Secretary of 
 State, pay in the unpaid portion of the capital stock 
 of such company; proof of which shall, within said 
 time, be made to the Secretary of State, in the manner 
 provided in Articles 1126 to 1128, inclusive, for the 
 filing of charter. (Acts 1907, p. 309, Sec. 2.) 
 
 Article 1142. On Default of Payment, Secretary of 
 State to Forfeit Charter, How. In case of failure to pay 
 the unpaid portion of capital stock, and to make proof 
 thereof to the Secretary of State within two years from 
 the date of the filing of the charter, the charter of 
 such company shall, because thereof, become forfeited; 
 which forfeiture shall be consummated without judicial 
 ascertainment by the Secretary of State entering upon 
 the margin of the ledger kept in his office relating to 
 such corporations the word "forfeited," giving the date 
 and reason therefor. (Id.)
 
 LAW OF OIL AND NATURAL GAS 23 
 
 Article 1143. Notification of forfeiture; Record of 
 Same; Relief from Forfeiture Within Six Months, Con- 
 ditions of, Etc.; Revival. The Secretary of State shall 
 notify such corporations by mailing to the postoffice 
 named as its principal place of business, or to any other 
 place of business of such corporation, addressed in its 
 corporate name, a written or printed statement of the 
 date and fact of such forfeiture ; a record of the date and 
 fact of such notice must be kept by such officer; pro- 
 vided, that the stockholders of any such corporation 
 whose charter has been forfeited as above provided who 
 shall, within six months from the date of such forfeiture, 
 and not thereafter, pay in full the unpaid capital stock of 
 such company and furnish to the Secretary of State 
 proof of such fact as required herein, and, in addition, 
 shall pay the Secretary of State, as fees belonging to 
 his office, the sum of five dollars per month for each 
 month and fractional part thereof between the date of 
 forfeiture and settlement, the company shall be re- 
 lieved from such forfeiture; and said officer shall write 
 on the margin of said ledger the word "revived," giving 
 the date thereof. (Id.) 
 
 Article 1144. On Failure to Revive, Affairs of Cor- 
 poration Wound up; Provided Right to Avoid For- 
 feiture Within Two Years, But no Prejudice to Creditor. 
 If the stockholders should fail to cause the charter 
 powers of said corporation to be revived, as just pro- 
 vided, then, and in such event, the affairs of such com- 
 pany shall be administered and wound up as on disso- 
 lution; provided, however, the stockholders of any such 
 company shall have the right, at any time within the 
 two years given, to make payment of the unpaid portion 
 of the capital stock, to reduce the same so that by re- 
 duction, or reduction and payment, the full amount of 
 the capital stock authorized by such reduction shall be 
 paid, and thus avoid a forfeiture of the charter; but no 
 creditor of said company shall in anywise be prejudiced 
 by such reduction of its capital stock in any claim or
 
 24 LAW OF OIL AND NATURAL GAS 
 
 cause of action such creditor may have against such 
 company or any stockholder or officers thereof. (Id.) 
 
 Article 1145. May Increase Its Capital Stock, How. 
 A corporation may increase its authorized capital by a 
 two-thirds vote of all its stock; provided, that no 
 stock shall be issued except for money paid, labor done 
 or property actually received. And when such vote is 
 given in favor of the increase, the same may be done 
 by the board of directors, trustees, or managing board, 
 of such corporation; and, upon such increase of stock 
 being made in accordance with the above provisions and 
 certified to the Secretary of State by the directors, 
 together with satisfactory proof, which shall be the affi- 
 davit of the directors showing that the full amount 
 of the increase has been in good faith subscribed, and 
 fifty per cent thereof paid, and in other respects con- 
 forming to the proof required as an original application 
 for charter, or showing that such portion thereof has 
 been subscribed or subscribed and paid, as is required 
 for the corporation, thus increasing its stock, and, if the 
 Secretary of State is satisfied that the increase of stock 
 has been made in accordance with law and that the re- 
 quirements of law have been complied with as to the 
 subscription and payment of stock and in other respects, 
 as on an original application for charter, he shall file 
 such certificate of increase; and thereupon the same shall 
 become a part of the capital stock of such corporation. 
 Such certificate shall be filed and recorded in the same 
 manner as the charter. (Id., Sec. 3.) 
 
 NOTE. Previous to the Act of 1907, Session Laws, p. 310, Section 3, 
 Article 576, Rev. Stats.. 1876. Article 652, Rev. Stats., 1895, permitted in- 
 crease of capital stock only to double the amount of its authorized 
 capital. It was held that an amendment to the charter under Article 
 571, Rev. Stats., 1876, Article 647, Rev. Stats., 1895 (Article 1133, ante) 
 was subject to the same restriction, and invalid if it increased the 
 stock beyond such limit. Kampmann vs. Tarver, 87 Texas, 491, 29 S. 
 W., 768. But the limit appears to be removed by the present article, 
 which is found in the Act of 1907.
 
 LAW OF OIL AND NATURAL GAS 25 
 
 Article 1146. Watering Stock Prohibited; Forfeiture 
 for Violation. No corporation, domestic or foreign, do- 
 ing business in the State, shall issue any stock whatever, 
 except for money paid, labor done, which is reasonably 
 worth at least the sum at which it was taken by the 
 corporation, or property actually received, reasonably 
 worth at least the sum at which it was taken by the 
 company. Any corporation which violates the provisions 
 of this article shall, on proof thereof in any court of 
 competent jurisdiction, forfeit its charter, permit or 
 license, as the case may be, and all rights and franchises 
 which it holds under, from or by virtue of the laws of this 
 State. (Id. Sec. 5; Constitution, Art. 12, Sec. 6.) 
 
 NOTE. Stock being only authorized to issue for money paid to, 
 property received by, or labor done for the corporation, money paid 
 or services rendered previous to incorporation in promotion, sales 
 of stock, and other preliminary expenses, can not be made the basis 
 of corporate liability, much less of stock issues. Weatherford etc. 
 Ky. Co. vs. Granger, 86 Texas, 350, 24 S. W., 795. Money paid means 
 cash. It may be payable in installments ; but stock can not be issued 
 for money to be paid by subscriber "at such time as he could ar- 
 range." San Antonio Irr. Co. vs. Deutschmann, 102 Texas, 201, 114 
 S. W!., 1174. The property must be of a substantial character, such as 
 could be subjected to payment of claims against the corporation and 
 secure stockholders in their rights ; and an unpatented secret formula 
 for a compound to prevent gasoline from exploding was not such 
 property. O'Bear-Nester Glass Co. vs. Anti-explo Co., 101 Texas, 431, 
 108 S. W., 967. It must be such as the corporation by its charter 
 was authorized to hold. See opinion of Attorney General on Blue 
 Sky Law, post p. 106. The labor performed must be labor for the 
 corporation, not labor in its promotion. Neither can such promotion 
 expenses, save in a few excepted particulars, attorneys fees, charter 
 fees, franchise ta,x, etc., be paid out of the proceeds of sale of stock, 
 as debts of the corporation. See "Blue Sky Law," by which these 
 matters are fully regulated, post pp. 72-81. A contract by the 
 promoter, which the corporation subsequently adopts, and of which 
 it receives the benefit, may be made the basis of corporate liability; 
 but not the promoter's services, before incorporation, in obtaining 
 such contract. Weatherford etc. Ry. Co. vs. Granger, 86 Texas, 350, 
 24 S. W., 795. See, also, Article 1165, post. 
 
 A general statement of the rights of the promoter arising out of 
 things done before incorporation may be made in these terms : For 
 all property or rights which the corporation takes over from him for
 
 26 LAW OF OIL AND NATURAL GAS 
 
 its purposes, he may receive in stock their fair value at the time of 
 incorporation. By this means he may get compensation for his services 
 in acquiring, prospecting, developing, etc., so far as these have been 
 fruitful in enhancing the value up to the time such property passes 
 to the corporation. But these services and expenditures were ren- 
 dered to himself, not to the corporation. It owes no debt for them ; 
 can not issue him stock for them ; can not pay him for them out 
 of the sale of stock to others. Of organization expenses incurred, a 
 few (attorneys fees, charter and license fees, etc.) the corporation may 
 pay out of its capital received from the sale of stock. As to all others 
 it can not reimburse the promoters either by issuing them stock or 
 paying them from sales of stock, at least such appears to be the con- 
 struction of the act by the Attorney General. But as to this see note, 
 po.st, on p. 108. 
 
 Article 1147. Watered Stock and Bonds not for Money, 
 Etc., Quo Warranto Suit to Cancel. Where any corpora- 
 tion has issued and has outstanding any stocks or 
 bonds, given or issued for any purpose, other than money 
 paid to, labor done for, or property actually received by 
 the corporation, it shall be the duty of the Attorney 
 General of this State, when convinced that the facts exist 
 which authorize the action, to institute quo warranto or 
 other appropriate judicial proceedings in some court of 
 competent jurisdiction in Travis county, or in any other 
 county of this State where such corporation may be 
 sued, to have any stocks or bonds issued in violation 
 of the Constitution and statutes of this State, canceled, 
 expunged and held for naught; and, within the meaning 
 of the above, is included any bond or stock given in re- 
 newal, or in lieu of any originally issued, for purposes 
 other than those mentioned above, also any issued by 
 any corporation with which the corporation originally 
 issuing any such stocks or bonds has merged or been 
 consolidated and given by said issuing corporation, in 
 the place of those originally issued for purposes other 
 than as mentioned above. (Acts 1907, p. 342, Sec. 3.) 
 
 Article 1148. Suit May be Dismissed or not Brought 
 Under What Conditions. If any suit authorized under 
 Article 1147 has been instituted, the same shall be dis- 
 missed at the cost of the defendant, or if not instituted, 
 no action shall be brought, if the defendant corporation
 
 LAW OF OIL AND NATURAL GAS 27 
 
 shall surrender, or cause to be surrendered, to the court 
 or to the Railroad Commission of Texas, for destruction, 
 all such illegal stocks complained of, and also the illegal 
 bonds complained of, with proper and legal releases there- 
 of, suitably executed for record, with such other written 
 evidences and documents as may be necessary to show that 
 such stocks or bonds are no longer outstanding against 
 the corporation. (Id., Sec. 4.) 
 
 Article 1149. Remedies Cumulative. The rights and 
 remedies given by the last two articles are cumulative, 
 and shall not affect, change or repeal any other remedies 
 or rights now existing in this State for the enforcement, 
 payment, or collection of fines, forfeitures and penalties. 
 (Id., Sec. 6.) 
 
 Article 1150. Increase in Certain Cases Validated. 
 That in all cases where the amount of the capital stock 
 of any corporation has heretofore been increased by 
 more than one increase thereof to an amount in excess 
 of double the amount of the original capital, and such 
 increase has been made with the sanction of the Secretary 
 of State, under his construction of the law, such increase 
 shall be, and the same is hereby, validated and declared 
 legal. (Acts 1893, p. 123.) 
 
 Article 1151. Unpaid Increase of Stock Payable When; 
 Forfeiture for Default. In case of failure by the stock- 
 holders to .pay the unpaid portion of an increase of 
 stock within two years from the date of the filing of 
 the certificate of increase in the office of the Secretary 
 of State, the charter of such company shall be forfeited; 
 and the provisions of Article 1145 of this chapter shall 
 govern the same, as in case of an original creation of 
 a corporation. (Acts 1907, p. 311, Sec. 3.) 
 
 Article 1152. May Decrease Stock, How. A corpora- 
 tion may decrease its capital stock by such amount as 
 its stockholders may decide by a two-thirds vote of all 
 its outstanding stock, in like manner as is required for 
 an increase as above provided; but no such decrease shall 
 prejudice the rights of any creditor of such corporation 
 in any claim or cause of action such creditor may have
 
 28 LAW OF OIL AND NATURAL GAS 
 
 against the company, or any stockholder or director there- 
 of; nor shall such decrease become effective until full proof 
 is made by affidavit of the directors to the Secretary of 
 State of the financial condition of such corporation, giv- 
 ing therein all its assets and liabilities, with names and 
 postoffice addresses of all creditors and amount due 
 each; and the Secretary of State may require, as a 
 condition precedent to the filing of such certificate of 
 decrease, that the debts of such corporation be paid or 
 reduced. (Id., Sec. 3.) 
 
 Article 1153. Quorum of Directors and Annual Elec- 
 tions. A majority of the directors or trustees shall con- 
 stitute a quorum, and be competent to fill vacancies in 
 the board, and to transact all business of the corporation. 
 An annual election shall be held for directors or trustees, 
 at such time and place as the by-laws of the corporation 
 may require. (Id., Sec. 15. P. D., 5946.) 
 
 Article 1154. President and Secretary to be Chosen. 
 
 The directors or trustees shall choose one of their num- 
 ber president, and shall appoint a secretary and treasurer 
 and such other officers as they may deem necessary for 
 the corporation. (Id., Sec. 16. P. D., 5947.) 
 
 Article 1155. By-laivs May be Adopted, Altered, Etc. 
 The directors or trustees may adopt by-laws for the 
 government of the corporation; but such by-laws may be 
 altered, changed or amended by a majority vote of the 
 stockholders at any election or special meeting ordered for 
 that purpose by the directors or trustees, on a written 
 application of a majority of the stockholders or members. 
 (Id., Sec. 17. P. D., 5948.) 
 
 Article 1156. May Increase Number of Directors or 
 Trustees. All corporations heretofore created, and now 
 in existence, under any law of this State, are hereby 
 authorized to increase the number of directors or trus- 
 tees of any such corporation. (Id., Sec. 18. P. D., 5949.) 
 
 Article 1157. Failure to Elect Directors Shall Not 
 Dissolve, Etc. In case it should happen that an election 
 for directors or trustees should not be held on the day 
 appointed by the by-laws of any corporation, such cor-
 
 LAW OF OIL AND NATURAL GAS 29 
 
 poration shall not, for that reason, be deemed to be dis- 
 solved; but it shall be lawful on any other day to hold 
 a meeting and elect its directors or trustees, in such 
 manner as shall be prescribed by the by-laws thereof. 
 (Id., Sec. 19. P. D., 5950.) 
 
 NOTE. Faihire to elect directors will not prevent recognition as a 
 de facto corporation. Conley vs. Daughters of Kepublic, 151 S. W., 883. 
 
 Article 1159. Directors Shall Have General Mange- 
 ment, Etc. The directors or trustees shall have the 
 general management of the affairs of the corporation, 
 and may dispose of the residue of the capital stock, at 
 any time remaining unsubscribed, in such manner as the 
 by-laws may prescribe. (Id., Sec. 21. P. D., 5952.) 
 
 Article 1160. Directors Shall Cause Record to be Kept, 
 Etc. They shall cause a record to be kept of all stock sub- 
 scribed and transferred, and of all business transactions; 
 and their books and records shall, at all reasonable times, 
 be open to the inspection of any and every stockholder. 
 (Id., Sec. 21.) 
 
 Article 1161. Shall Report to Stockholders and Make 
 Dividends. They shall, also, when required by one-third 
 of the stockholders thereof, present reports in writing of 
 the situation and amount of business of the corporation, 
 and declare and make such dividends of the profits from the 
 business of the corporation as they shall deem expedient, 
 or as the by-laws may prescribe. (Id., Sec. 21.) 
 
 Article 1162. May Borrow Money. Corporations shall 
 have power to borrow money on the credit of the corpora- 
 tion, not exceeding its authorized capital stock, and may 
 execute bonds or promissory notes therefor, and may 
 pledge the property and income of the corporation. (Acts 
 1883, p. 98, Sec. 13. P. D., 5944.) 
 
 NOTE. The corporation can issue bonds only for its own benefit, not 
 for that of another. North Side Eailway Co. vs. Worthington, 88 
 Texas, 562, 30 S. W., 1055. It may pledge its property for payment. 
 Pumphrey vs. Threadgill, 9 Texas Civ. App., 184, 28 S. W., 450. And 
 may pledge its bonds for borrowed money. Western S. & M. Co.
 
 30 LAW OF OIL AND NATURAL GAS 
 
 TS. U. S. & Mex. Trust Co., 41 Texas Civ. App., 478, 92 S. W., 986. 
 It may issue bonds for property received. Thayer vs. Wathen, 17 
 Texas Civ. App., 382, 44 S. W., 906. And may sell its bonds at a 
 discount. North Side Ey. Co. vs. Worthington, 88 Texas, 562, 30 S. W., 
 1'055 ; Mathis vs. Pridham!, 1 Texas Civ. App., 58, 20 S. W., 1015. 
 
 Article 1164. Corporation Restricted to Objects of Its 
 Creation. No corporation, domestic or foreign, doing bus- 
 iness in this State, shall employ or use its stock, means, 
 assets, or other property, directly or indirectly, for any 
 other purpose whatever than to accomplish the legiti- 
 mate objects of its creation or those permitted by law. 
 (Acts 1907, p, 312, Sec. 5.) 
 
 Article 1165. Restrictions Upon Creation of Debts. 
 No corporation, domestic or foreign, doing business in 
 this State, shall create any indebtedness whatever except 
 for money paid, labor done, which is reasonably worth 
 at least the sum at which it was taken by the corporation, 
 or property actually received, reasonably worth at least 
 the sum at which it was taken by the corporation. (Id.) 
 
 Article 1166. Contributions to Political Parties or 
 Candidates, Etc., By Corporation Officers, Etc., Forbidden. 
 No corporation, domestic or foreign, doing business in 
 the State shall, directly or indirectly, contribute or pay 
 any part of its assets, property or funds to any political 
 party, or .to any officer or campaign manager of any 
 political party, or to any person whatsoever, for or on 
 account of such party, nor to any candidate for any 
 office, before or after nominations are made, or to aid 
 in defraying the expenses of any candidate for office, 
 or to any person for or on account of aid in defraying 
 the expenses of a candidate for office, or to any person 
 whatsoever, for, or on account of aid in maintaining or 
 defraying the expenses of any campaign or political head- 
 quarters, or to any person whatsoever, for or on account 
 of the success or defeat of any question to be voted upon 
 by the qualified voters of this State, or any subdivision 
 thereof. (Acts 1907, p. 312, Sec. 5.) 
 
 Article 1167. Penalty for Violation of Either of the 
 Last Three Preceding Articles. Any corporation which
 
 LAW OF OIL AND NATURAL GAS 31 
 
 shall violate any of the provisions of either of the three 
 last preceding articles, shall, on proof thereof in any 
 court of competent jurisdiction, forfeit its charter, per- 
 mit or license, as the case may be, and all rights and 
 franchises which it holds under, from, or by virtue of, 
 the laws of this State. 
 
 Whenever it appears that the money, assets, property, or 
 funds of a corporation have been issued, paid out or used, 
 in violation of any of the provisions of either of the three 
 last preceding articles, by any agent, attorney, director, 
 or officer of such corporation, it shall be held and con- 
 sidered the act of the corporation, unless, within one 
 year from the date of such violation, it has caused to be 
 entered through its board of directors on its records in 
 this State, an order repudiating the wrong and perman- 
 ently dismissing from its service all persons directly or 
 indirectly connected with such violation. (Id., Sec. 5.) 
 
 Article 1168. Stock of Corporation is Personal Estate. 
 The stock of any corporation created under this title 
 shall be deemed personal estate, and shall be transferable 
 only on the books of the corporation in such manner as the 
 by-laws may prescribe. (Id., Sec. 24. P. D., 5955.) 
 
 Article 1169. Directors May Require Payment of Stock. 
 The board of directors or trustees of any corporation 
 may require the subscribers to the capital stock of the 
 corporation to pay the amount by them respectively sub- 
 scribed, in such manner,, and in such installments, as 
 may be required by the by-laws. (Id., Sec. 25. P. D., 
 5956.) 
 
 Article 1170. Stock Forfeited, When and How. If any 
 stockholder shall neglect to pay any installment, as 
 required by the board of trustees, the directors or trustees 
 may declare his stock and all previous payments forfeited 
 to the use of the company; but no stock shall be for- 
 feited until the directors or trustees have caused a 
 notice in writing to be served on him personally, or by 
 depositing the same in the postoffice, properly directed 
 to him at the post office nearest his usual place of 
 residence, stating that he is required to make such payment
 
 32 LAW OF OIL AND NATURAL GAS 
 
 at the time and place specified in said notice, and that 
 if he fails to make the same his stock and all previous 
 payments thereon will be forfeited for the use of the 
 company; which notice may be served, as aforesaid, at 
 least thirty days previous to the day on which such 
 payment is required to be made. (Id., Sec. 26. P. D., 
 5957.) 
 
 Article 1171. Corporation May Sue Its Own Members. 
 All bodies corporate may sue for, recover and receive 
 from, their respective members all arrears or other 
 debts, dues or other demands which are now, or hereafter 
 may be, owing to them, in like mode, manner and form 
 as they might sue for, recover and receive the same 
 from any person not a member of their body. (Id., Sec. 
 27. P. D., 5958.) 
 
 Article 1172. Misnomer Shall Not Vitiate. No mis- 
 nomer of any corporation shall defeat or vitiate any gift, 
 grant, conveyance, devise, or bequest to the same. (P. D., 
 5965.) 
 
 Article 1173. Corporation May Convey Lands, How. 
 Any corporation may convey lands by deed, sealed with 
 the common seal of the corporation, and signed by the 
 president or presiding member or trustee of said cor- 
 poration, or in common form without seal by its attorney 
 in fact, where the instrument constituting such attorney 
 in fact is executed in said manner first mentioned; and 
 such deed, when acknowledged by such officer or attorney 
 in fact to be the act of the corporation, or proved in 
 the manner prescribed for other conveyances of lands, 
 may be recorded in like manner and with the same effect 
 as other deeds; and all conveyances by corporations 
 heretofore executed in the manner herein set forth shall 
 be held valid so far as regards the manner of execution. 
 (Acts 1905, p. 230. P. D., 5966.) 
 
 Article 1174. Principal Office Must Be Kept in State. 
 Each corporation or joint stock company of every de- 
 scription, whether organized and acting under a special 
 charter or general law of the State, shall keep its principal 
 office within this State. (P. D., 5962.)
 
 LAW OF OIL AND NATURAL GAS 33 
 
 CHAPTER IV. 
 
 LAND ACQUISITION, ETC., OF, RESTRICTED. 
 
 Article 1175. Purchase of Land, Unless Necessary to 
 Business or to Secure Debts, Prohibited. No private cor- 
 poration shall be permitted to purchase any land under the 
 provisions of this chapter, unless the lands so pur- 
 chased are necessary to enable such corporation to do 
 business in this State, or except where such land is 
 purchased in due course of business, to secure the pay- 
 ment of debt. (Acts 1893, p. 36. Acts 1897, p. 48.) 
 
 NOTE. The right of the corporation to purchase and hold the land 
 can only be questioned by the State. Scott vs. Farmers and M. Natl. 
 Bank, 97 Texas, 57, 104 Am. St., 835, 75 S. W., 7; S. C. Civ. App., 66 
 S. W.. 485; Knowles vs. Northern Texas Trac. Co., 121 S. W., 232; 
 Schwab Cloth. Co. vs. Claunch. 29 S. W., 922 ; Eay vs. Foster, 53 S. W.. 
 54. But it can not compel the execution of a conveyance from a 
 trustee of land it has no right to acquire. Scott vs. Bank, 66 S. W., 
 495. And lands acquired, but which it had no power to take and hold, 
 may be subjected to claims of its creditors. Bank vs. Construction 
 Co., 138 S. W., 443. 
 
 Article 1176. Excess of Land Over Necessary Amount 
 to be Alienated, When. All private corporations authoriz- 
 ed by the laws of Texas, as provided in Article 1121, 
 to do business in this State, whose main purpose is not 
 the acquisition or ownership of lands, as mentioned in 
 preceding articles, which have, heretofore, or may here- 
 after, acquire by lease, purchase or otherwise more land 
 than is necessary to enable them to carry on their business, 
 shall, within fifteen years from the time this law takes 
 effect, or the date said land may be hereafter acquired, 
 in good faith, sell and convey in fee simple all lands so 
 acquired, and which are not necessary for the trans- 
 action of their business. (Id.)
 
 34 LAW OF OIL AND NATURAL GAS 
 
 CHAPTER V. 
 
 REPORTS BY CERTAIN CORPORATIONS. 
 
 Article 1182. Certain Corporations to Make Reports 
 to Secretary of State. Every corporation within this 
 State owning, leasing or operating in this State, in cities 
 or towns of over twenty-five hundred population, ac- 
 cording to the last official census of the United States, 
 a street railway, electric lighting or power plant furnish- 
 ing light and power to the public, gas plant furnishing 
 gas to the public, water plant furnishing water to the 
 public, and sewerage company furnishing sewerage to 
 the public, shall annually, on or before the first day of 
 March of each year, file a report with the Secretary of 
 State, upon blank forms to be furnished by the Secretary 
 of State, showing the following facts: 
 
 1. The authorized capital stock of such corporation, 
 the amount of such stock, that has actually been issued, 
 and how much of such stock actually issued is common, 
 and how much preferred, and how much is due upon un- 
 paid stock. 
 
 2. The bonded indebtedness of such corporation, and 
 how many bonds have been actually sold, the rate of 
 interest upon such bonds, and when such bonds mature, 
 and the price at which such bonds were sold. 
 
 3. Any other fixed lien or mortgage upon such prop- 
 erty, and the amount thereof. 
 
 4. The floating indebtedness of such corporation, in- 
 cluding all bills payable of whatever nature. 
 
 5. The value of the visible tangible property of such 
 corporation, giving separate values of lands, machinery, 
 buildings, tracks and equipment, and in gross, all bills 
 receivable and cash on hand. 
 
 6. The annual cost of operating such corporation, 
 showing under separate items: (a) amount paid for 
 salaries; (b) amount paid for labor; (e) fixed charges, 
 including interest, taxes and insurance, giving each
 
 LAW OF OIL AND NATURAL GAS 35 
 
 separately; (d) amount paid for fuel; (e) amount paid 
 for extensions, repairs and maintenance, giving each 
 separately; (f) amount paid for claims or suits for 
 damages; (g) amount paid for miscellaneous expenses. 
 
 7. The annual gross earnings of such corporation, 
 including revenues from every source, showing by sep- 
 arate items amount received by departments, such as 
 amount received for light, amount received for sewerage, 
 for power, water, gas, amount received for street rail- 
 way fares and tickets. (Acts 1905, p. 40, Sec. 1.) 
 
 Article 1183. Same Subject. The corporations men- 
 tioned in Article 1182 shall also make to the Secretary 
 of State, upon blanks to be furnished by him, reports 
 as to the price charged the public for sewerage, gas, 
 water, light, power, and the price charged per passenger 
 upon street railways, and if any such corporations have con- 
 tracts with cities or towns for furnishing water or light, 
 then, the amount of such charge. (Id., Sec. 2.) 
 
 Article 1184. Reports to Be Under Oath, Etc. The 
 reports provided for in Articles 1182 and 1183 shall be 
 under oath, and shall be made by any officer of the 
 corporation having knowledge of the facts, or its general 
 manager or superintendent. (Id., Sec. 3.) 
 
 Article 1185. Copies of Reports to Be Filed With 
 Mayor and With County Clerk, Recorded, Etc. A true 
 copy of the reports required by the provisions of this 
 chapter, sworn to as provided, shall be filed annually, on 
 or before the first day of March of each year, with the 
 mayor of the city or town where the corporation has its 
 principal place of business; and there shall also be filed 
 at the same time a true copy of said reports with the 
 clerk of the county court of the county in which such 
 corporation has its principal place of business; and the 
 same shall be, by said clerk, delivered to the commis- 
 sioners' court; and such reports shall be recorded in a 
 properly indexed book, to be kept for that purpose, and 
 open to the inspection of the public at all times. (Id., 
 Sec. 4.)
 
 36 LAW OF OIL AND NATURAL GAS 
 
 Article 1186. Penalty. Any such corporation as de- 
 scribed in Article 1182, which shall for thirty days wil- 
 fully fail or refuse to file the reports in the manner pro- 
 vided by this chapter, shall forfeit and pay to the State 
 one hundred dollars for each and every day during which 
 it shall continue in default; which shall be recovered by 
 suit in a court of competent jurisdiction by the Attorney 
 General of the State of Texas. (Id., Sec. 5.) 
 
 NOTE. For reports required of all corporations subject to the pay- 
 ment of an annual franchise tax, see post, Act of April 7, 1913, Laws. 
 33d Leg., Ch. 153, p. 327. 
 
 CHAPTER VIII. 
 
 LIABILITY OF STOCKHOLDERS AND DIRECTORS. 
 
 Article 1198. When and How Stockholders May Be 
 Made Liable on Execution. If any execution shall have 
 been issued against property or effects of a corporation, 
 except a railway or a religious or charitable corporation, 
 and there cannot be found any property whereon to levy 
 such execution, then the execution may be issued against 
 any of the stockholders to an extent equal to the amount 
 of stock unpaid; but no execution shall issue against any 
 stockholders, except upon an order of the court in which 
 the action, suit or other proceeding shall have been 
 brought or instituted, made upon motion in open court, 
 after a reasonable notice in writing to the person or 
 persons sought to be charged; and, upon such motion, 
 such court may order execution to issue accordingly; or 
 the plaintiff in execution may proceed by action to charge 
 the stockholders with the amount of his judgment, in 
 accordance with the liability of the stockholders. P. D., 
 5960. 
 
 Article 1199. Secretary Shall Furnish Names, Etc., 
 of Stockholders to Plaintiff. The Secretary or other 
 officer having charge of the books of any corporation, 
 on demand of the plaintiff in any execution against
 
 LAW OF OIL AND NATURAL GAS 37 
 
 the corporation, his agent or attorney, shall furnish 
 such plaintiff, his agent or attorney with the names and 
 places of residence of the stockholders as far as known, 
 and the amount of stock held by each, as shown by the 
 books of the corporation. (P. D., 5961.) 
 
 Article 1200. Directors Liable for Debts of Corporation, 
 When and to What Extent. If the directors of any cor- 
 poration shall knowingly declare and pay any dividend 
 when the corporation is insolvent, or any dividend the 
 payment of which would render it insolvent, they shall 
 be jointly and severally liable for all the debts of the 
 corporation then existing, and for all debts of the corpor- 
 ation which thereafter, during the time such directors 
 respectively remain in office, shall be contracted. The 
 amount for which they shall be so liable shall not exceed 
 the amount of such dividend ; and if any of the directors 
 shall be absent at the time of declaring the dividend, or 
 shall object thereto, at the time such dividend is de- 
 clared, and shall file their objections in writing with 
 the secretary or other officer of the corporation having 
 charge of the books, they shall be exempted from said 
 liability. (Acts 1874, p. 120. Acts 1871, 2 S. S., p. 66. 
 Acts 1893, p. 123. P. D., 5959.) 
 
 CHAPTER X. 
 
 DISSOLUTION OF PRIVATE CORPORATIONS. 
 
 Article 1205. Corporation is Dissolved, How. A cor- 
 poration is dissolved: 
 
 1. By expiration of the time limit in its charter. 
 
 2. By a judgment of dissolution rendered by a court 
 of competent jurisdiction. 
 
 3. Where four-fifths in interest of all the stock out- 
 standing shall vote in favor of a dissolution at a stock- 
 holders' meeting called for that purpose on notice signed 
 by a majority of the directors, stating time, place and 
 object of the meeting, served personally, or by mail, at
 
 38 LAW OF OIL AND NATURAL GAS 
 
 least thirty days next before the meeting. If, at said 
 meeting, four-fifths in interest of all the stockholders of 
 said company shall signify their consent in writing to 
 the dissolution of the corporation, such consent in writing, 
 together with a list of the directors and officers of the 
 company, giving the postoffice address and place of resi- 
 dence of each, certified by the president and secretary and 
 treasurer as true and correct action of the stockholders, 
 shall be filed with the Secretary of State; or when, with- 
 out a stockholders' meeting, all the stockholders of the 
 corporation consent in writing to a dissolution, the same 
 shall be certified to as above and filed with the Secretary 
 of State. When any such certificate as above mentioned 
 is filed with the Secretary of State, he shall issue a cer- 
 tificate that such consent has been filed and that the 
 corporation is dissolved; and said officer shall so note on 
 the ledger in his office. (Acts 1907, p. 311, Sec. 4. 
 P. D., 5968.) 
 
 4. A corporation is dissolved whenever, under any 
 special provision of law, its charter is forfeited without 
 judicial ascertainment. 
 
 5. Where a corporation created under this title or a 
 general law of this State shall fail to commence active 
 operations within three years after filing its charter with 
 the Secretary of State, its charter is hereby forfeited, 
 and the corporation is dissolved. (P. D., 5969.) 
 
 6. Whenever a corporation upon proper judicial ascer- 
 tainment is found to be insolvent. 
 
 Article 1206. Unless Receiver Appointed, President, 
 Etc., to Be Trustees, and Close Business. Upon the dis- 
 solution of any corporation, unless a receiver is appointed 
 by some court of competent jurisdiction, the president 
 and directors or managers of the affairs of the corpora- 
 tion at the time of its dissolution, by whatever name they 
 may be known in law, shall be trustees of the creditors 
 and stockholders of such corporation, with full power 
 to settle the affairs, collect the outstanding debts, and 
 divide the moneys and other property among the stock- 
 holders, after paying the debts due and owing by such cor-
 
 LAW OF OIL AND NATURAL GAS 39 
 
 poration at the time of its dissolution, as far as such 
 money and property will enable them after paying all 
 just and reasonable expenses; and to this end, and for 
 this purpose they may, in the name of such corporation, 
 sell, convey and transfer all real and personal property 
 belonging to such company, collect all debts, compromise 
 controversies, maintain or defend judicial proceedings, and 
 to exercise the full power and authority of said company 
 over such assets and properties; and the existence of 
 every corporation may be continued for three years after 
 its dissolution from whatever cause for the purpose of 
 enabling those charged with the duty to settle up its 
 affairs ; and, in case a receiver is appointed by a court for 
 this purpose, the existence of such corporation may be 
 continued by the court so long as in its discretion it is 
 necessary to suitably settle up the affairs of such cor- 
 poration. (Id., Sec. 7.) 
 
 Article 1207. Trustees Responsible to Creditors, Etc., 
 to What Extent. The trustees mentioned in the pre- 
 ceding article shall be severally responsible to the creditors 
 and stockholders of such corporation to the extent of its 
 property and effects that shall have come into their hands. 
 (P. D., 5971.) 
 
 Article 1208. Liability of Stockholders to Creditors and 
 to Each Other. If any corporation created under this 
 title or any general statute of this State, except rail- 
 way, or charitable or religious corporations, be dissolved, 
 leaving debts unpaid, suit may be brought against any 
 person or persons who were stockholders at the time of 
 such dissolution, without joining the corporation in such 
 suit; and if judgment be rendered and execution satisfied, 
 the defendant or defendants may sue all who were stock- 
 holders at the time of dissolution for the recovery of 
 the portion of such debt for which they were liable; and 
 the execution upon the judgment shall direct the collection 
 to be made from property of each stockholder respectively ; 
 and if any number of stockholders defendants in the 
 case shall not have property enough to satisfy his or their 
 portion of the execution, then the amount of deficiency
 
 40 LAW OF OIL AND NATURAL GAS 
 
 shall be divided equally among all the remaining stock- 
 holders, and collections made accordingly, deducting from 
 the amount a sum in proportion to the amount of stock 
 owned by the plaintiff at the time the company dis- 
 solved. (P. D., 5972.) 
 
 Article 1209. Stockholder May Compel Contribution. 
 If any stockholder pay more than his due proportion of 
 any debt of the corporation, he may compel contribution 
 from the other stockholders by action. (P. D., 5973.) 
 
 Article 1210. Only Liable for Unpaid Stock. No stock- 
 holder shall be liable to pay debts of the corporation be- 
 yond the amount unpaid on his stock. (P. D., 5974.) 
 
 Article 1211. Members or Officers of Defunct Corpora- 
 tion Not to Do Business Under Old Corporate Name, Etc. 
 When any charter or permit heretofore or hereafter 
 granted under the laws of the State of Texas to any cor- 
 poration to do business in said State shall have been for- 
 feited, it shall be unlawful for any persons who were 
 members or officers of said defunct corporation at the 
 time of such forfeiture to do business in Texas under the 
 old corporate name of such corporation, or to use the same 
 or like signs or advertisements which were used by such 
 corporation before such forfeiture. (Acts 1905, p. 335.) 
 
 CHAPTER XXI. 
 
 GAS AND WATER CORPORATIONS. 
 
 Article 1282. Privileges of Such Corporations. Any 
 gas or water corporation shall have full power to manu- 
 facture and sell and to furnish such quantities of water 
 or gas as may be required by the city, town or village 
 where located, for public or private buildings, or for 
 other purposes; and such corporation shall have power 
 to lay pipes, mains and conductors for conducting gas 
 or water through the streets, alleys, lanes and squares 
 in such city, town or village, with the consent of the mu- 
 nicipal authorities thereof, and under such regulations 
 as they may prescribe. (P. D., 5992.)
 
 LAW OF OIL AND NATURAL GAS 41 
 
 Article 1283. May Contract with Cities, Etc. The mu- 
 nicipal authorities of any city, town or village, in which 
 any gas, light or water corporation shall exist, are hereby 
 authorized to contract with any such corporation for the 
 lighting or supplying with water the streets, alleys, lots, 
 squares and public places in any such city, town or village. 
 (P. D., 5993.) 
 
 / 
 CHAPTER XXIV. 
 
 OIL, GAS, SALT, ETC., COMPANIES. 
 
 Article 1303. How Corporation May be Formed. Any 
 number of persons, not less than three, may organize 
 themselves into a corporation for the purpose of storing, 
 transporting, buying and selling of oil and gas, salt, brine 
 and other mineral solutions in this State. (Acts 1899, 
 p. 202, Sec. 1.) 
 
 -Article 1304. Same Subject. The manner and method 
 of organizing such corporations shall be the same as pro- 
 vided by law for the organization of private corporations 
 in Chapter 2 of this title, and the provisions of this chap- 
 ter shall apply to all corporations already organized for 
 any of the purposes of this chapter. (Id., Sec. 2.) 
 
 Article 1305. Powers of Corporation. Such corpora- 
 tions shall have power to store and transport oil and gas, 
 brine and other mineral solutions, and to make reasonable 
 charges therefor; to buy, sell and furnish oil and gas for 
 light, heat and other purposes; to lay down, construct, 
 maintain and operate pipe lines, tubes, tanks, pump sta- 
 tions, connections, fixtures, storage houses, and such ma- 
 chinery, apparatus, devices and arrangements as may be 
 necessary to operate such pipes and pipe lines between 
 different points in this State ; to own, hold, use and occupy 
 such lands, rights of way, easements, franchises, build- 
 ings and structures as may be necessary to the purpose 
 of such corporation. (Id., Sec. 3.) 
 
 NOTE. The powers of a corporation created under Article 1303 are 
 further enlarged by the Act of March 6, 1915, Laws, 34th Leg., p. 82. 
 The Act is given in full, pp. 43, 44, post.
 
 42 LAW OF OIL AND NATURAL GAS 
 
 Article 1306. Right of Condemnation. Such corpora- 
 tion shall have the right and power to enter upon, con- 
 demn and appropriate the lands, rights of way, ease- 
 ments and property of any person or corporation, and 
 shall have the right to lay its pipes and pipe lines across 
 and under any public road or under any railroad, railroad 
 right of way, street railroad, canal or stream in this State, 
 and to lay its pipes and pipe lines across or along and 
 under any street or alley in any incorporated city or 
 town in this State, with the consent and under the di- 
 rection of the board of aldermen or city council of such 
 city or town. The manner and method of such condem- 
 nation shall be the same as is provided by law in the case 
 of railroads; provided, that such pipe or pipe lines shall 
 not pass through or under any cemetery, church or col- 
 lege, schoolhouse, residence, business or store house, or 
 through or under any building in this State, except by 
 the consent of the owner or owners thereof; and provided, 
 further, that all such pipes and pipe lines, when same shall 
 pass through or over the cultivated or improved lands of 
 another, shall be well buried under ground at least twenty 
 inches under the surface, and such surface shall be prop- 
 erly and promptly restored by such corporation unless 
 otherwise consented to by the owner or owners of such 
 land; provided, further, that if such pipes or pipe lines 
 shall be laid over or along any uncultivated or unimproved 
 lands of another, and such lands shall thereafter become 
 cultivated or improved, such pipes or pipe lines shall be 
 buried by said corporation as hereinbefore provided, with- 
 in a reasonable time after notice by the owner of such 
 lands, or his agent, to said corporation or any agent there- 
 of; and provided, further, that whenever such pipes or 
 pipe line shall cross any public road or highway, railroad, 
 street railroad, or street or alley, the said pipes and pipe 
 lines shall be so buried and covered as not to interfere 
 with the use and occupancy of such road, highway, street 
 or alley by the public, or use and occupancy of such rail- 
 road or street railroad by the owner or owners thereof;
 
 LAW OF OIL AND NATURAL GAS 43 
 
 and provided, further, that such pipe lines so laid shall not 
 exceed eight inches in diameter. (Id., Sec. 4.) 
 
 NOTE. A pipe line company is liable for damages caused by oil 
 escaping from its pipes and contaminating the water of a creek, 
 whereby cattle drinking therefrom were killed, and this irrespective of 
 negligence in permitting such escape. But the court would not judi- 
 cially recognize that petroleum was poisonous and liable to produce 
 such result. Texas Co. vs. Earles, 164 S. W., 28. 
 
 Article 1307. Right to Borrow Money, Issue Stock, 
 Mortgage Franchises, Etc. Such corporation shall have 
 the right to borrow money, to issue stock and preferred 
 stock, to mortgage its franchises and property to secure 
 the payment of any debt contracted for any of the pur- 
 poses of such corporation, and shall possess all the rights 
 and powers of corporations for profit in this State, wher- 
 ever the same may be applicable to corporations of this 
 character. (Id., Sec. 5.) 
 
 Article 1308. Discrimination Unlawful. It shall be 
 unlawful for any corporation organized under this chapter 
 to discriminate against any person, corporation, firm, as- 
 sociation, or place in the charge for such storage or trans- 
 portation, or in the service rendered, but shall receive, 
 store or transfer oil or gas for any person, corporation, 
 firm or association upon equal terms, charges and condi- 
 tions with all other persons, corporations, firms, or asso- 
 ciations for like service. (Id., Sec. 6.) 
 
 GENERAL LAWS, 34TH LEG., P. 82. 
 S. S. B. No. 78.] CHAPTER 41. 
 
 An Act providing for the enlargement of the powers of corporations 
 organized under Chapter 24, of Title 25, of the Revised Civil Statutes 
 of 1911, for the purpose of storing, transporting, buying and selling 
 oil and gas, salt, brine and other mineral solutions in this State, 
 and declaring an emergency. 
 
 Be it enacted by the Legislature of the State of Texas: 
 
 SECTION 1. Corporations heretofore or hereafter organ- 
 ized under the provisions of Chapter XXIV of Title 25
 
 44 LAW OF OIL AND NATURAL GAS 
 
 of the Revised Civil Statutes of 1911, and which shall file 
 with the Secretary of State a duly authorized acceptance 
 of the provisions of this Act, are hereby declared to have, 
 in addition to the powers enumerated in said chapter, the 
 power to carry on the business therein authorized outside 
 of as well as within this state; to own and operate re- 
 fineries, casing and treating plants, sales offices, ware- 
 houses, docks, ships, tank cars and vehicles necessary in 
 the conduct of their business; and to cause the formation 
 of corporations outside of this state, not exceeding one 
 in any state, territory or foreign country, whose purposes 
 and powers exercised shall be only those conferred by law 
 upon the forming or holding corporation as incorporated 
 under the laws of Texas and own and hold the stock of 
 such corporations when the effect of such formation or 
 stock holding is not substantially to lessen competition or 
 otherwise to violate laws prohibiting trusts and monopo- 
 lies and conspiracies in restraint of trade. 
 
 SEC. 2. The present condition of the law on this sub- 
 ject and the importance of the change herein contemplated 
 creates an emergency and an imperative public necessity 
 that the constitutional rule requiring bills to be read on 
 three several days in each house be and the same is 
 hereby suspended, and that this Act become a law from 
 and after its passage, and it is so enacted. 
 
 [NOTE. S. S. B. No. 78 passed Senate by vote of 20 
 yeas, 4 nays, February 19, 1915. Passed House by vote 
 of 88 yeas, 37 nays, March 4, 1915.] 
 
 Approved March 6, 1915. 
 
 Takes effect 90 days after adjournment.
 
 LAW OF OIL AND NATURAL GAS 45 
 
 CORPORATIONS FOR GENERATING, TRANSPORTING AND 
 SELLING GAS, ETC. 
 
 (Act of March 25, 1911, Laws, 32d Leg., p. 228.) 
 
 SECTION 1. That any number of persons, not less than 
 three, may organize themselves into a corporation for the 
 purpose of generating, manufacturing, transporting and 
 selling gas, electric current and power in this State. 
 
 SEC. 2. The manner and method of organizing such 
 corporations shall be the same as provided by law for the 
 organization of private corporations under Chapter 2, 
 Title 21, of the Revised Civil Statutes of the State. 
 
 SEC. 3. Such corporation shall have the power to gen- 
 erate, make and manufacture, transport and sell gas, elec- 
 tric current and power to individuals, the public and mu- 
 nicipalities for light, heat, power and other purposes, and 
 to make reasonable charges therefor; to construct, main- 
 tain and operate power plants and substations and such 
 machinery, apparatus, pipes, poles, wires, devices and ar- 
 rangements as may be necessary to operate such lines at 
 and between different points in this State; to own, hold, 
 and use such lands, rights of way, easements, franchises, 
 buildings and structures as may be necessary for the pur- 
 pose of such corporation. 
 
 SEC. 4. Such corporation shall have the right and 
 power to enter upon, condemn and appropriate the lands, 
 rights of way, easements and property of any person or 
 corporation, and shall have the right to erect its lines 
 over and across any public road, railroad, railroad right 
 of way, interurban railroad, street railroad, canal or 
 stream in this State, and any street or alley of any incor- 
 porated city or town in this State, with the consent and 
 under the direction of the governing board of such city 
 or town. The manner and method of such condemnation 
 shall be the same as is provided by law in the case of 
 railroads, pipe lines, telephone and telegraph lines; pro- 
 vided, that such lines shall be constructed upon suitable
 
 46 LAW OF OIL AND NATURAL GAS 
 
 poles in the most approved manner and maintained at a 
 height above the ground at least twenty-two (22) feet; 
 or pipes may be placed under the ground as the exigencies 
 of the case may require. 
 
 SEC. 5. Such corporation shall have the right to bor- 
 row money, to issue stock and preferred stock, to mort- 
 gage its franchises and property to secure the payment 
 of any debt contracted for any of the purposes by such 
 corporation, and shall possess all the rights and powers of 
 corporations for profit in this State, wherever the same 
 may be applicable to corporations of this character. 
 
 SEC. 6. It shall be unlawful for any corporation organ- 
 ized under this act to discriminate against any person, 
 corporation, firm, association or place in the charge for 
 such gas, electric current or power, or in the service ren- 
 dered under similar and like circumstances. (Acts 32nd 
 Leg., p. 228.) 
 
 NOTE. It is held by the Attorney General, that "gas" in this statute 
 includes natural gas. That "it was the intention of the Legislature 
 to authorize the creation of a single corporation with the triple right 
 to produce gas, transport it through the country from the point of 
 production to the place of market, and then sell it to the public." 
 That "the liberation of natural gas from the earth" is to produce or 
 "generate" it, and is included in the powers conferred by Section 2. 
 
 The opinion also suggests a form for the purpose clause in the 
 charter of a corporation under this Act which it would be well to 
 follow. It is given in the accompanying forms, No. III. See report 
 of Attorney General for years 1912-1914, p. 287. 
 
 [Rev. Stats., 1911, Continued.] 
 CHAPTER XXVI. 
 
 FOREIGN CORPORATIONS. 
 
 Article 1314. Permit to Do Business, Etc., in State 
 Must be Obtained, and How. Hereafter, any corporation 
 for pecuniary profit, except as hereinafter provided, or- 
 ganized or created under the laws of any other State, or of 
 any territory, or of any foreign government, sovereignty 
 or municipality, desiring to transact business in this State,
 
 LAW OF OIL AND NATURAL GAS 47 
 
 or solicit business in this State, or establish a general or 
 special office in this State, shall be, and the same is hereby, 
 required to file with the Secretary of State a duly certi- 
 fied copy of its articles of incorporation; and, thereupon, 
 the Secretary of State shall issue to such corporation a 
 permit to transact business in this State. (Acts 1897, 
 p. 167.) 
 
 May be Limited to One or More Purposes. If such cor- 
 poration is created for more than one purpose, the per- 
 mit may be limited to one or more purposes. (Id.) 
 
 Showing as to Stock by Foreign Corporations. Pro- 
 vided, that foreign corporations obtaining permits to do 
 business in this State shall show to the satisfaction of the 
 Secretary of State that at least one hundred thousand dol- 
 lars, in cash, of their authorized capital stock has been 
 paid in, or that fifty per cent of their authorized capital 
 stock has been subscribed, and at least ten per cent of the 
 authorized capital has been paid in, before such permit 
 is issued. (Acts 1901, pp. 18-19.) 
 
 Article 1315. Permit to Do Business, Affidavit As Con- 
 dition of Issuance; Requisites of. As a condition prece- 
 dent to the issuance by the Secretary of State of a permit 
 to any foreign corporation, authorizing it to do business 
 in this State, the president, vice-president, secretary, or 
 treasurer, or two of the directors of such corporation, 
 shall make and subscribe an affidavit in writing stating 
 that such corporation is not a trust or organization in 
 restraint of trade in violation of the laws of this State, 
 has not, within twelve months next preceding the making 
 of such affidavit, become or been a party to any trust 
 agreement of any kind or character whatsoever, which 
 would constitute a violation of any anti-trust law of the 
 State existing at the date of such affidavit, and has not, 
 within that time, entered into, or been in anywise a 
 party to, any combination in restraint of trade, within 
 the United States of America, and that no officer of such 
 corporation has, within the knowledge of affiant, within 
 twelve months next preceding the date of such affidavit, 
 made, on behalf of such corporation or for its benefit any
 
 48 LAW OF OIL AND NATURAL GAS 
 
 such contract, or entered into, or become a party to, any 
 such combination in restraint of trade. Such affidavit in 
 writing shall be personally subscribed and sworn to by 
 such affiant or affiants before some officer who is by law 
 duly authorized to administer oaths, and the jurat of such 
 officer shall be attested by his official signature and seal 
 of office; and such affidavit in writing so attested shall 
 be filed in the office of the Secretary of State before the 
 issuance of any such permit. (Acts 1909, S. S., pp. 
 267-8. Id.) 
 
 Article 1316. Secretary of State to Require Proof in 
 What Case. It shall be the duty of the Secretary of State 
 to require satisfactory proof as to the amount of capital 
 actually invested in this State before issuing any permit to 
 any foreign building and loan company to do business in 
 this State. (Id., p. 267.) 
 
 Article 1317. Rights Under Permit. Such corporation, 
 on obtaining such permit, shall have and enjoy all the 
 rights and privileges conferred by the laws of this State 
 on corporations organized under the laws of this State. 
 (Acts 1897, p. 167.) 
 
 Article 1317a. Right to Purchase, Hold, Sell, Mortgage, 
 Etc., Real and Personal Estate; Provisions as to Alienation. 
 Such corporations, under such permits, shall be author- 
 ized and empowered to hold, purchase, sell, mortgage or 
 otherwise convey such real estate and personal estate 
 as the purposes of such corporation may require, and 
 also, to take, hold, and convey such other property, real, 
 personal or mixed, as may be requisite for such corpora- 
 tion to acquire, in order to obtain or secure the payment 
 of any indebtedness or liability due, or which may become 
 due, or belonging to, the corporation; provided, that, if 
 such corporation so obtaining a permit to do business 
 in this State, shall acquire any real estate under the pow- 
 ers herein conferred, it shall alienate all real property 
 so acquired by it not necessary for the purposes of such 
 corporation, within fifteen years from the time of acqui- 
 sition, and provided, further, that such corporation shall 
 alienate all real estate acquired by it for the purposes
 
 LAW OF OIL AND NATURAL GAS 49 
 
 of such corporation, within fifteen years from the expira- 
 tion of the time for which the permit is issued, or, if such 
 permit be renewed, or such corporation be otherwise au- 
 thorized to carry on business in this State, then such cor- 
 poration shall alienate such real estate within fifteen years 
 after the expiration of the time for which such permit 
 is extended, or it is so authorized to carry on business in 
 this State; and provided, further, that if such corpora- 
 tion shall cease to carry on business in this State, that it 
 shall alienate all such real estate so acquired by it, within 
 fifteen years after the time it shall cease to carry on bus- 
 iness in this State. (Id.) 
 
 Article 1318. No such Corporation Can Maintain Any 
 Suit, Unless. No such corporation can maintain any suit 
 or action, either legal or equitable, in any of the courts 
 of this State upon any demand, whether arising out of 
 contract or tort, unless at the time such contract was 
 made, or tort committed, the corporation had filed its ar- 
 ticles of incorporation under the provisions of this chap- 
 ter in the office of the Secretary of State for the purpose 
 of procuring its permit. (Id.) 
 
 Article 1319. Corporations Exempted from Provisions 
 Hereof. The provisions of this chapter shall not apply to 
 corporations created for the purpose of constructing, build- 
 ing, operating or maintaining any railway, or to such cor- 
 porations as are required by law to procure certificates of 
 authority to do business from the Commissioner of Insur- 
 ance and Banking. (Id.) 
 
 Article 1320. Permit to Extend for Period of Ten 
 ears. No permit shall be issued for a longer period than 
 ten years from the date of filing such articles of incorpo- 
 ration in the office of the Secretary of State. (Id.) 
 
 Article 1321. Evidence. Either the original permit or 
 certified copies thereof by the Secretary of State shall be 
 evidence of the compliance on the part of any corporation 
 with the terms of this chapter. A certificate of the Secre- 
 tary of State to the effect that the corporation named 
 therein has failed to file in his office its articles of incor- 
 poration shall be evidence that such corporation has in no
 
 50 LAW OF OIL AND NATURAL GAS 
 
 particular complied with the requirements of this chap- 
 ter. (Id.) 
 
 NOTE. To "transact business" in the State does not imply the car- 
 rying on of its main business here. A single and isolated transaction, 
 such as the erection of an industrial plant, including labor and ma- 
 terials, is distinguishable from the mere sale by the foreign corpora- 
 tion of the machinery used and set up therein. The latter would 
 constitute interstate commerce, for which no permit would be neces- 
 sary ; the former a transaction of business for which a permit must 
 be obtained. S. E. Smythe Co. vs. Ft. Worth Glass & S. Co., 105 
 Texas, 8, 142 S. W., 1157. 
 
 The State may prescribe the conditions under which a foreign cor- 
 poration may do business in the State, having the power absolutely 
 to exclude it; and it may tax the privilege. Gaar, Scott & Co. vs. 
 Shannon, 52 Texas Civ. App., 634, 115 S. W., 361; Cont. Oil Co. vs. 
 Van Winkle Gin Co., 131 S. W., 415. But the statute can not be made 
 to apply to transactions constituting interstate or foreign commerce. 
 Miller & Co. vs. Goodman, 91 Texas, 41, 40 S. W., 718 ; T. & P. Ry. Co. 
 vs. Davis, 93 Texas, 378, 54 S. W., 381; DeWitt vs. Berger Mfg. Co., 
 81 S. W., 334; Geiser Mfg. Co. vs. Gray, 126 S. W., 610; Allen vs. 
 Tyson-Jones Buggy Co., 91 Texas, 22, 40 S. W., 393; Lasater vs. Pur- 
 cell M. etc. Co., 22 Texas Civ. App., 33, 54 S. W., 425 ; Pasteur Vaccine 
 Co vs. Burkey, 22 Texas Civ. App., 232, 54 S. W., 804; Gale Mfg. Co. 
 vs. Finkelstein, 22 Texas Civ. App., 241, r>4 S. W., 619. Such corpora- 
 tions, without permit, may sue for debts or for the recovery of prop- 
 erty, provided the right arose otherwise than from the transaction 
 in the State of business which was not interstate commerce. Security 
 Co. vs. Panhandle Co., 93 Texas, 575, 57 S. W., 22 ; Brown vs. Guaranty 
 Sav. L. & Inv. Co., (sale of corporate stock and loan of money there- 
 on) 102 S. W., 138; Norton vs. Thomas & Sons, 93 S. W., 711; Lake 
 View Land Co. vs. San Antonio Trac. Co., 95 Texas, 252, 66 S. W., 
 766; Mansur etc. Imp. Co. vs. Beer, 19 Texas Civ. App., 311, 45 S. W., 
 972; Gale Mfg. Co. vs. Finkelstein, 22 Texas Civ. App., 241, 54 S. W., 
 619. 
 
 ACT OF APRIL 7, 1913. 
 
 Corporations. Requires annual reports to be made be- 
 tween first day of January and first day of February. 
 
 H. B. No. 578. CHAPTER 153. 
 
 An Act to require all corporations that are required by law to pay 
 
 an annual franchise tax to make a report to the Secretary of State 
 
 between the first day of January and the first day of February,
 
 51 
 
 and prescribing what the report shall contain ; prescribing penalties 
 for failure to make such report, and providing such reports shall 
 only be subject to inspection by parties who are interested di- 
 rectly in the subject miatter of such reports, and declaring an 
 emergency. 
 
 Be it enacted by the Legislature of the State of Texas: 
 
 SECTION 1. All corporations that are now required by 
 law to pay an annual franchise tax, shall, between the 
 first day of January and the first day of February of each 
 and every year, be required to make a report to the Sec- 
 retary of State, on blanks furnished by him, which report 
 shall give the authorized capital stock of the corporation, 
 the capital stock issued and outstanding, the surplus and 
 undivided profits of the corporation, the names and ad- 
 dresses of all the officers and directors of the corporation, 
 the amount of mortgages, bonded or other indebtedness 
 of each corporation, and the amount of the last annual, 
 semi-annual or quarterly dividend. If the capital stock 
 issued and outstanding plus the surplus and undivided 
 profits shall exceed the authorized capital stock, the fran- 
 chise tax shall be based on this amount instead of the au- 
 thorized capital, but if it shall be less, then the franchise 
 tax shall be based on the amount of capital stock, but no 
 corporation shall be required to pay a greater rate of 
 franchise tax by reason of its having a surplus than a cor- 
 poration that has no surplus. 
 
 SEC. 2. Any corporation which shall fail or refuse to 
 make the report as provided in Section 1 hereof, shall be 
 subject to a fine of ten dollars for each and every day 
 after the first day of February that they shall fail to 
 make such report. The Attorney General of the State is 
 hereby empowered and directed to bring suit against such 
 corporation in either of the district courts of Travis county, 
 in the name of the State of Texas for the collection of 
 such penalties that may be due by reason of such failure. 
 
 SEC. 3. The reports required by this act shall be 
 deemed to be privileged and not for the inspection of the 
 general public, but any party or parties who are in-
 
 52 LAW OF OIL AND NATURAL GAS 
 
 terested in the subject matter of any report, may, upon 
 valid request in writing made to the Secretary of State, 
 secure a copy of same. 
 
 SEC. 4. The following officers of each and every cor- 
 poration shall be deemed competent to make the report 
 required by this act: The president, vice-president, secre- 
 tary, treasurer or general manager, and all reports pro- 
 vided for in this act shall be signed officially and sworn to 
 before some officer authorized by law to administer oaths. 
 
 SEC. 5. All laws and parts of laws in conflict with this 
 act are hereby repealed, but where this act is not in con- 
 flict with any existing law, it shall be held to be amenda- 
 tory thereof. (Acts 33rd Leg., p. 327.) 
 
 [Rev. Stats., 1911, Continued.] 
 
 Title 58. 
 CHAPTER I. 
 
 FEES OF OFFICE. 
 2. SECRETARY OF STATE. 
 
 Article 3837. Fees of State Department. The Secre- 
 tary of State, besides other fees that may be prescribed 
 by law, is authorized and required to charge for the use 
 of the State the following fees: [Provisions relating to 
 certain classes of corporations omitted.] 
 
 For each and every charter, amendment or supplement 
 thereto, of a private corporation created for any other 
 purpose, intended for mutual profit or benefit, a fee of 
 fifty dollars shall be paid when said charter is filed ; pro- 
 vided, that, if the authorized capital stock of said corpo- 
 ration shall exceed ten thousand dollars, it shall be re- 
 quired to pay an additional fee of ten dollars for each ad- 
 ditional ten thousand dollars of its authorized capital stock, 
 or fractional part thereof, after the first. * 
 
 For each foreign corporation obtaining permit to do 
 business in this State shall pay fees as follows: Fifty 
 dollars for the first ten thousand dollars of its author-
 
 LAW OF OIL AND NATURAL GAS 53 
 
 ized capital stock, and ten dollars for each additional ten 
 thousand dollars, o;r fractional part thereof; provided, 
 that the fee required to be paid by any foreign corpora- 
 tion for a permit to engage in the manufacture, sale, 
 rental, lease or operation of all kinds of cars, or to en- 
 gage in conducting, operating or managing any telegraph 
 line in this State, shall in no event exceed ten thousand 
 dollars; provided, however, that mutual building and loan 
 companies, so called, whose stock is not permanent, but 
 withdrawable, shall pay a fee of fifty dollars for the first 
 one hundred thousand dollars, or a fractional part thereof, 
 of its authorized capital stock, and ten dollars for each ad- 
 ditional one hundred thousand dollars, or a fractional part 
 thereof; and where the company is a foreign one, then the 
 fee shall be based upon the capital invested in the State 
 of Texas. (Acts 1907, 'S. S., p. 500. Acts 1905, p. 135. 
 Acts 1889, p. 93. Acts 1889, p. 87. Acts 1883, p. 72. 
 Acts 1909, S. S., p. 267.) 
 
 Article 3838. Minimum Fees in Certain Cases. The 
 minimum fee for any foreign building and loan company 
 shall be two hundred and fifty dollars; provided, further, 
 that the fee required to be paid by any foreign corpora- 
 tion for a permit to do the business of loaning money in 
 this State shall in no event exceed one thousand dol- 
 lars. (Id.) 
 
 Article 3839. Pending Suit Not Affected. Nothing in 
 this chapter, nor in Articles 1315 and 1316, shall in any- 
 wise affect any suit now pending in the name, or in behalf 
 of, the State of Texas, as against any foreign corpora- 
 tion. (Id.) 
 
 Article 3840. Fees Paid in Advance to Secretary and 
 by Him to Treasury Monthly. All fees mentioned in Ar- 
 ticles 3837 and 3838 shall be paid in advance into the 
 office of the Secretary of State, and shall be by him paid 
 into the State Treasury monthly. (Id.)
 
 54 LAW OF OIL AND NATURAL GAS 
 
 Title 93. 
 
 MINES AND MINING. 
 CHAPTER I. 
 
 Article 5904. (3498a) Reserved Lands Opened to Ex- 
 ploration and Purchase, Etc. All public school, university, 
 asylum and public lands specially included under the op- 
 eration of this title, all the lands now owned by the State 
 situated within the reservation known as the "Pacific 
 Reservation," which were taken off the market and re- 
 served from sale by an act approved January 22, 1883, 
 containing valuable mineral deposits, are hereby reserved 
 from sale or other disposition, except as herein provided, 
 and are declared free and open to exploration and pur- 
 chase under regulations prescribed by law, by citizens 
 of the United States and those who have declared their 
 intention of becoming such. (Act 1895, p. 197.) 
 
 Article 5905. (3498c) Mining District Created. It 
 shall be the duty of the Commissioner of the General Land 
 Office in all lands designated as mineral lands to unite 
 a suitable number of mineral locations into mining dis- 
 tricts, in each of which shall be a surveyor, who must 
 either be the surveyor of the district or county or a reg- 
 ular appointed deputy and an officer qualified to admin- 
 ister oaths. (Id.) 
 
 Article 5906. (3498d) Mining Claims Limited, Etc. 
 A mining claim upon veins or lodes of quartz or other 
 rocks in place bearing silver, gold, cinnabar, lead, tin, 
 copper and other valuable metals, excluding deposits of 
 kaolin, baryta, salt, marble, fire clay,, iron ore, coal, oil, 
 natural gas, gypsum, nitrates, mineral paints, asbestos, 
 marls, natural cement, clays, onyx, mica, precious stones, 
 or any other non-metallic mineral, and stone valuable 
 for ornamental or building purposes, or other valuable 
 building material, may equal but shall not exceed one 
 thousand five hundred feet along the mine or vein or lode.
 
 LAW OF OIL AND NATURAL GAS 55 
 
 No such claim shall exceed twenty-one acres in total area. 
 The end lines of each claim shall be parallel to each other, 
 and all claims shall be in the form of a parallelogram or 
 square, unless such form is prevented by adjoining rights 
 or boundaries of the section in which the claim lies. The 
 locater under this title shall be entitled to the use of all 
 the superficial area between the inclosing lines of the 
 claim, and to all minerals thereon and between the side 
 and the end lines, extending downward vertically, until 
 the rights secured by posting are forfeited as provided; 
 and in all conflicts priority of location shall decide. (Id.) 
 
 Article 5907. (3498e) Locater to Post Claim. The 
 locaters of any mining claim shall post up at the center 
 of one of the end lines of the same a written notice, stat- 
 ing the name of the location and of the claim and date 
 of posting, and describe the claim by giving the number 
 of feet in length and width and the direction the claim 
 lies in length from the notice, together with the section, 
 if known, and the county, and shall place stone monuments 
 at the four corners and otherwise describe the corners 
 so that they can be readily found. The notice shall be 
 placed in a conspicuous place so it can be readily seen. 
 (Id.) 
 
 Article 5908. (3498f) Application for Survey of 
 Claim, Requisites of. The locater shall, within three 
 months after the date of posting the required notice, file 
 with the county surveyor of the county in which the land, 
 or a part thereof, is situated an application in writing 
 for the survey of the claim, giving the name of the claim 
 and such designation of its boundaries and location as to 
 enable the surveyor to identify the land. The application 
 shall be accompanied by a fee of twenty dollars, unless its 
 tender is waived, and also with an affidavit attached 
 thereto that the applicant has found valuable minerals, 
 stating the kind, on the claim, also the date of the first 
 posting of the notice on the claim by the applicant and 
 that the notice has not been post-dated nor changed in its 
 date. Upon receiving the application and affidavit and 
 fee, the surveyor shall record the application and affida-
 
 56 LAW OF OIL AND NATURAL GAS 
 
 vit and shall forthwith proceed to survey the claim. After 
 the field-notes are recorded and a plat of the survey is 
 made by the surveyor, he shall deliver the application 
 and affidavit, together with the field-notes and plat, to the 
 applicant or his agent, who shall forward same to the 
 Commissioner of the General Land Office with one dollar 
 as a filing fee. When the applicant forwards the papers 
 aforesaid to the Commissioner, he shall at the same time 
 forward to the State Treasurer one-fifth of the aggregate 
 price of the land as the first payment thereon. The ap- 
 plicant shall also file in the Land Office with his other pa- 
 pers his obligation to the State for the remaining unpaid 
 purchase money, binding himself to pay to the State of 
 Texas, at the State Treasury in Austin, Texas, one-fifth 
 of the unpaid purchase price, together with four per cent 
 interest annually after the date of the filing of said pa- 
 pers in the Land Office, and until the entire purchase price 
 and interest are fully paid. The papers aforesaid shall 
 be filed in the Land Office within sixty days from the date 
 the application was filed with the county surveyor, and 
 not thereafter. The fee of twenty dollars shall cover all 
 charges by the surveyor in connection with any one claim. 
 A claim filed on under this title for gold, silver, cinnabar, 
 lead, tin or copper, zinc- tungsten, molybdenum and ura- 
 nium, may be paid out in full at any time within five 
 years from the date the papers were filed in the Land 
 Office. All mineral lands shall be sold at such price as 
 may be fixed by the Land Commissioner, but in no event 
 shall the same be sold at a price less than twenty-five 
 dollars per acre, nor until he has ascertained approxi- 
 mately their value, provided, that no person, firm or cor- 
 poration, or association of persons shall be permitted to 
 locate or file on more than five claims of twenty-one acres 
 within a radius of five miles. This article shall apply only 
 to the claims filed on land containing the minerals herein 
 named. (Id. Amended Act 1905, Laws 29th Leg., p. 148.) 
 Article 5909. 3498g. Claimant Must Do What Pend- 
 ing Patent. Upon the failure of any one of the several 
 owners to contribute his proportion of the expenditure
 
 LAW OF OIL AND NATURAL GAS 57 
 
 required in this title within the necessary time, the co- 
 owner or co-owners who have paid the fees, or interest or 
 principal, may, at the expiration of the time in which the 
 payment was to be made and was so made by him, give 
 notice in writing to such defaulting co-owner, or give such 
 notice by publication in a newspaper published in the 
 county where the claim is, if any, if none in such county, 
 then in the newspaper published nearest the mining 
 claim, for at least once a week for ninety days. If, after 
 such personal notice in writing, or by publication, such 
 delinquent shall fail or refuse to contribute his propor- 
 tion of the expenditure required, his interest in the claim 
 shall cease beyond the amount which he may have previ- 
 ously expended, thereon, and become the property of his 
 co-owners who may have made the required expenditures. 
 An affidavit of the co-owners of the facts, accompanied 
 with the notice given, shall, when recorded in the proper 
 county surveyor's office, be sufficient evidence of such de- 
 linquency and forfeiture in all interest in such claim. If 
 patent shall be applied for on such claim, it shall be is- 
 sued to the owners, if the proper evidence of forfeiture 
 of such interest be filed in the Land Office. This article 
 shall apply only to the claims filed on land containing 
 the minerals named in the preceding article. (Id. Amended 
 Act 1905, Laws 29th Leg., p. 148.) 
 
 Article 5910. 3498h. Rights Accruing to the Claimant. 
 When a tunnel is run for the development of a vein 
 or lode, or for the discovery of mines, the owner of such 
 tunnel shall have the right of possession of all veins or 
 lodes within two thousand feet of the surface of such 
 claim on the line thereof, not previously known to exist, 
 discovered in such tunnel to the same extent as if dis- 
 covered from the surface; and locations on the line of 
 such tunnel of veins or lodes not appearing on the surface 
 made by other parties after the commencement of the tun- 
 nel and while the same is being prosecuted with reasonable 
 diligence shall be invalid; but failure to prosecute the 
 work in the tunnel for six months shall be considered as
 
 58 LAW OF OIL AND NATURAL GAS 
 
 an abandonment of the right of all undiscovered veins on 
 the line of said tunnel. (Acts 1895, p. 197.) 
 
 Article 5911. (3498i.) Conditions Precedent to Issue of 
 Patent. Whenever the owners of any mining claim shall 
 desire a patent, they shall, within five years after the filing 
 of the application for survey, file their application for a 
 patent upon their claim with the Commissioner of the 
 General Land Office, accompanied by the receipt of the 
 State Treasurer showing that twenty-five dollars per acre 
 has been paid by the applicant for patent to the State 
 Treasurer. Whereupon such patent shall issue, unless 
 protest is filed as hereinafter provided for in Article 
 5913. (Id.) 
 
 Article 5912. (3498J) Right of Purchase. Within 
 twelve months after the filing of the affidavit hereinafter 
 provided for, any person or association of persons, qual- 
 ified as required by Article 5904, shall have the right to 
 purchase and obtain patent by compliance with this title 
 of any of the lands of the State which are specified or in- 
 cluded in Article 5904, containing valuable deposits of 
 kaolin, baryta, salt, marble, fire clay, iron ore, coal, oil, 
 natural gas, gypsum, nitrates, mineral paints, asbestos, 
 marl, natural cement, clay, onyx, mica, precious stones 
 or any other non-metallic mineral and stones valuable for 
 ornamental or building purposes, or other valuable build- 
 ing material, in legal subdivisions, in quantity not exceed- 
 ing one section; provided, that where any such parties 
 shall have heretofore expended, or shall hereafter expend, 
 five thousand dollars in developing the aforesaid mineral 
 resources of any of said lands, such party shall have the 
 right to buy one additional section and no more, and to 
 include in the purchase any section, or part thereof, on 
 which the work may have been done. The land so pur- 
 chased may be in different sections, and all embraced in 
 one or more obligations, not to exceed the quantity stated. 
 The purchaser shall pay not less than fifteen dollars per 
 acre where the land shall be situated ten miles or less of 
 any railroad in operation, and not less than ten dollars 
 per acre where the land is over ten miles from such rail-
 
 LAW OF OIL AND NATURAL GAS 59 
 
 road, one-tenth of the purchase money to be paid in cash 
 to the State Treasurer on or before the expiration of the 
 twelve months aforesaid; and the purchaser shall file the 
 Treasurer's receipt with the Commissioner of the General 
 Land Office, together with an obligation to pay the State 
 of Texas the remainder in nine equal annual installments, 
 with interest at four per cent per annum from date, sub- 
 ject to forfeiture as in other cases; and all said lands 
 are reserved from sale or other disposition than under 
 this title; and where application is made to buy any of 
 the lands herein named, except under this title, the pur- 
 chaser shall swear that there are none of the minerals 
 named in this title on said lands, so far as he knows, 
 or has reason to believe, or does believe; provided, fur- 
 ther, that this article shall not authorize the sale of lands 
 containing valuable deposits of gold, silver, lead, cinnabar, 
 copper or other valuable metal; provided, further, that 
 any person desiring to acquire any lands under the pro- 
 visions of this article shall have the right to prospect 
 said land for a period of twelve months before making 
 any payment thereon, upon condition that said prospector 
 shall file with the proper surveyor his affidavit in writing, 
 setting forth that he has gone upon the land in good faith 
 with the intention of purchasing the same under the pro- 
 visions of this article, and in said affidavit, give a reason- 
 able description of the land. After the filing of said 
 affidavit, the said surveyor shall immediately forward 
 same to the Commissioner of the General Land Office, who 
 shall take said section off the market until the expiration 
 of said twelve months after the filing of said affidavit 
 with the surveyor. (Id.) 
 
 NOTE. The application to purchase mineral lands under this article 
 must point out with reasonable certainty the land sought to be 
 purchased. Where it designated parts of different sections, aggre- 
 gating more than the applicant was entitled to purchase, and applied 
 for "all or any of these lands," the application was properly rejected. 
 Brown vs. Kobison, 103 Texas, 551, 131 S. W., 401. An applicant is 
 entitled by compliance with this Act, making known to the Com- 
 missioner that the lands are mineral bearing, to purchase them as
 
 60 LAW OF OIL AND NATURAL GAS 
 
 such under the law, though they were classified as agricultural or 
 grazing lands. The Commissioner could determine the fact that they 
 were mineral bearing and sell them as such, independent of the 
 classification. Colquitt-Tigner Min. Co. vs. Itogan, 95 Texas, 452, 68 
 S. W., 154. As to the right of the Commissioner to require relinquish- 
 ment of mineral rights from one applying to purchase as dry grazing 
 land a survey so classified, see Thaxton vs. Terrell, 99 Texas, 562 ; 
 Schendell vs. Rogan, 94 Texas, 585. As to purchase as grazing land 
 of surveys classified as mineral bearing, see, Camp vs. Smith, 166 
 S. W., 22. 
 
 Article 5913. (3498k) Contest of Patent. Any per- 
 son desiring to contest the issue of patent may do so by 
 filing with the Commissioner of the General Land Office 
 a protest setting forth the grounds of objection generally, 
 and that protestant has an interest in the subject matter ; 
 which protest shall also state that the same is presented 
 in good faith and not to injure or delay the applicants, 
 or any of them, and the same shall be verified by affidavit. 
 Whereupon it shall be the duty of the Commissioner to 
 withhold patent until the controversy is ended; provided, 
 that, if the protestant shall not, within thirty days after 
 filing his protest, institute suit in the court having juris- 
 diction thereof in the county where the claims are located, 
 his protest shall constitute no further barrier to the issu- 
 ance of patent. A certified copy of the petition, or a cer- 
 tificate of the clerk of the court where suit is pending, 
 shall be sufficient evidence to the Commissioner of the 
 pendency of the suit, and of the filing of said suit. When 
 the land in controversy lies partly in two counties, suit 
 may be brought in either. More than one claim shall 
 not be embraced in the same patent or application. The 
 suits here provided for shall be entitled to precedence of 
 trial on the docket. (Id.) 
 
 Article 5914. (3492) Location on Land Disposed of 
 Since April 14, 1883. When a location has been made 
 and land disposed of by the State since the passage of 
 the Act of 1883, for disposition of minerals on the land 
 embraced in Article 5904 of this title, if such location was 
 made subsequent to the disposition by the State of such 
 lands, and the locator or his assignees have not abandoned
 
 LAW OF OIL AND NATURAL GAS 61 
 
 said claim, but are working it in good faith, the locator 
 and his assignees shall nevertheless be entitled to the use 
 of the mineral and to the superficial area as in other 
 cases; and, if the case is such that the fee in the land 
 can not pass by patent, a patent may issue to all the 
 minerals in the claims, and shall be license from the State 
 to enter upon and work said claim and extract the mineral 
 therefrom. In cases provided for in this article when the 
 fee does not pass, the price shall be twenty dollars per 
 acre, and the locator, or his assignee, shall in addition 
 pay to the owner of the land in fee the fair value of the 
 land so taken up by his claim, and roads and fences neces- 
 sary to give him ingress and egress thereto, and be liable 
 for any damages which may result to the owner of the 
 land in fee. All other provisions of this title shall apply 
 to said location. (Id.) 
 
 Article 5915. (3498) Forfeiture of Claims. If the ap- 
 plication and affidavit provided for in Article 5908 are not 
 filed with the proper county surveyor within ninety days 
 from the date of the first posting, and if the application, 
 affidavit, field-notes, filing fee and obligation are not filed 
 in the Land Office, or the first payment is not paid to the 
 State Treasurer, within sixty days as required in Ar- 
 ticle 5908, the file and claim thereunder shall be void. If 
 any part of an annual interest, or any part of an annual 
 payment of principal, remains unpaid for thirty days 
 after it becomes due on any claim, such claims shall be 
 subject to forfeiture by the Commissioner of the Gen- 
 eral Land Office by an indorsement on the obligation, "For- 
 feited," signed officially by him, and thereupon all pay- 
 ments shall also be forfeited to the fund to which the 
 land originally belonged. All forfeited claims may be 
 reinstated upon written request of one or more owners 
 filed in the Land Office and payment of all interest and 
 principal due; provided, no rights of another has not in- 
 tervened at date of filing said request in the Land Office. 
 One interested in a claim at the time it was forfeited 
 shall not be eligible to re-locate or re-file upon the same 
 land for himself or on behalf of any other person, and
 
 62 LAW OF OIL AND NATURAL GAS 
 
 any such location or attempt to locate by such person shall 
 be wholly void. Whenever any land theretofore covered 
 by a forfeited claim shall be re-located, the locator or lo- 
 cators and each of them shall make an affidavit that the 
 location is made without any contract or agreement or 
 understanding of any kind ; that none of the parties there- 
 tofore owning an interest in the forfeited claim before the 
 re-location have or is to have any interest in the same 
 under the new location. In all other cases where an affi- 
 davit is required by this title, it may be made by one 
 or more of the parties cognizant of the facts. This ar- 
 ticle shall apply only to claims on land containing the 
 minerals named in Article 5908. (Id. Amended Act 1905, 
 Laws 29th Leg., p. 148.) 
 
 Article 5916. (3498n) Applicant to Make Oath. 
 Whenever an application shall be made to buy or obtain 
 title to any of the lands embraced in Article 5914, 5904, 
 except where the application is made under this title, the 
 applicant shall make oath that there is not, to the best of 
 his knowledge and belief, any of the minerals embraced in 
 this title thereon; and, when the Commissioner has any 
 doubt in relation to the matter, he shall forbear action 
 until he is satisfied. Any such sale or disposition of said 
 lands shall be understood to be, with the reservation of the 
 minerals thereon; to be subject to location as herein pro- 
 vided. (Acts 1895, p. 197.) 
 
 NOTE. A purchaser of lands classed as agricultural or grazing 1 , and 
 not known to contain minerals, is not required to file this affidavit. 
 Schendell vs. Eogan, 94 Texas, 585. 
 
 Article 5917. (3498o) Placer Claims Subject to Loca- 
 tion. Claims usually called placers, including all forms 
 of metallic deposits, excepting veins of quartz or rock in 
 place, shall be subject to entry and patent under like cir- 
 cumstances and conditions and upon similar proceedings 
 as are provided for vein or lode claims. All placer claims 
 located shall conform as near as practicable with exist- 
 ing surveys and their subdivisions; and no such location 
 shall include more than forty acres for each individual
 
 LAW OF OIL AND NATURAL GAS 63 
 
 claimant, and shall not exceed three hundred and twenty 
 acres for any association of persons. The price which 
 shall be paid for such placer shall not be less than ten 
 dollars per acre, together with all costs of proceedings as 
 before provided. (Id.) 
 
 Article 5918. (3498p) Application May Embrace Non- 
 Adjacent Non-Mineral Land. Where non-mineral land not 
 contiguous to the vein or lode is issued by the prospector 
 of such vein or lode for mining or milling purposes, such 
 non-adjacent surface ground may be embraced and in- 
 cluded in an application for a patent for such vein or lode, 
 and the same may be patented therewith, subject to the 
 same preliminary requirements as to survey and notice as 
 are applicable to veins or lodes; but no location of such 
 non-adjacent lands shall exceed ten acres, and payment 
 for the same must be made at the same rate as fixed by 
 this title for the superficies of the lode. The owner of a 
 quartz mill or reduction works, not owning a mine in con- 
 nection therewith, may also receive a patent for a mill 
 site, as provided in this section. (Id.) 
 
 Article 5919. (3498q) Purposes for Which Timber 
 May be Felled. Any owner or worker of mining claim 
 under this title is authorized to fell and remove for build- 
 ing and mining purposes any timber or any tree growing 
 or being upon unoccupied lands as described in Article 
 5914, 5904, said lands being mineral and subject to entry 
 only as mineral lands, under such rules and regulations as 
 may be prescribed for the protection of timber and under- 
 growth upon such lands and for other purposes. (Id.) 
 
 Article 5920. (3498r) Vested Rights Not Affected. 
 Nothing in this title shall ever be so construed as to either 
 destroy, invalidate or impair any valid claim, right or 
 interest existing in, to or concerning any lands whatever 
 at the passage of this title, of any pre-emptor, purchaser, 
 actual settler, locator or other person whatsoever. (Id.) 
 
 Article 5921. (3498s) Proceeds Appropriated. The 
 net proceeds of all sales of mining lands under the pro- 
 visions of this title shall inure to the benefit of the State 
 and the respective funds for which the lands mentioned
 
 64 LAW OF OIL AND NATURAL GAS 
 
 in Article 5914, 5904 are set apart under the constitution 
 and laws of the State; and it shall be the duty of the 
 Comptroller, State Treasurer and Commissioner of the 
 General Land Office to see to it and have said proceeds 
 so paid rightly placed to the credit of the particular and 
 proper fund. 
 
 Article 5922. (3498t) Surveyors to Administer Oaths. 
 For the purpose of effectually carrying out the provis- 
 ions of this title, all county or district surveyors are 
 hereby specially authorized and empowered to administer 
 oaths, take affidavits and make certificates thereof. 
 
 NOTE. The foregoing- articles of the Revised Statutes, 5904-5922, 
 constitute Chapter 1 of Title 93, relating to Mines and Mining. Chap- 
 ter 2 of this title relates to the duties of the State Mining Board and 
 to coal mining regulations, and is omitted as inapplicable to mining 
 operations for petroleum and gas, which are conducted by boring. 
 The regulation of such wells is by Title 134, on the subject "Wells 
 Oil, Gas, and Water," Articles 7847-7854, post. 
 
 Title 126. 
 
 % 
 
 TAXATION. 
 
 CHAPTER III. 
 
 FRANCHISE TAX. 
 
 Article 7393. Tax to Be Paid by Domestic Corpora- 
 tions. Except as herein provided, each and every private 
 domestic corporation heretofore chartered, or that may 
 hereafter be chartered, under the laws of this State, shall 
 on or before the first day of May of each year, pay in ad- 
 vance to the Secretary of State a franchise tax for the 
 year following, which shall be computed as follows, viz: 
 Fifty cents on each one thousand dollars, or fractional 
 part thereof, of the authorized capital stock of such cor- 
 poration, unless the total amount of capital stock of such 
 corporation issued and outstanding, plus its surplus and 
 undivided profits, shall exceed its authorized capital stock;
 
 LAW OF OIL AND NATURAL GAS 65 
 
 and in that event the franchise tax of such corporation 
 for the year following shall be fifty cents on each one 
 thousand dollars of capital stock of such corporation is- 
 sued and outstanding, plus its surplus and undivided prof- 
 its; provided, that such franchise tax shall not in any case 
 be less than ten dollars; provided, that, where the au- 
 thorized capital exceeds one million dollars, such franchise 
 tax shall be fifty cents for each one thousand dollars up 
 to and including one million dollars, and for each addi- 
 tional one thousand dollars, in excess of one million dollars, 
 it shall be twenty -five cents. (Act 1907, p. 503, Sec. 1.) 
 
 Article 7395. Only Part of Tax to Be Paid, When. 
 Whenever a private domestic corporation is chartered in 
 this State, and whenever a foreign corporation is author- 
 ized to do business in this State, and such corporation 
 shall be required to pay in advance to the Secretary of 
 State, as its franchise tax from that time down to and 
 including the thirtieth day of April next following, only 
 such proportionate part of its annual franchise tax, as 
 hereinabove prescribed, as the period of time between the 
 date of filing of its articles of incorporation or the issu- 
 ance of its permit to do business, as the case may be^and 
 on the first day of May next following, bears to a calendar 
 year. (Id., Sec. 3.) 
 
 Article 7396. Certain Affidavits May Be Required. 
 For the purpose of determining the amount of the first 
 franchise tax payment required by this chapter of any 
 domestic corporation which may be hereafter chartered, 
 or of any foreign corporation which may hereafter apply 
 for a permit to do business within this State, and also for 
 the purpose of determining the correctness of any report 
 which is provided for in this chapter, the Secretary of 
 State may, whenever he may deem it necessary or proper 
 to protect the interests of the State, require any one or 
 more of the officers of such corporations to make and file 
 in the office of the Secretary of State an affidavit or affi- 
 davits in writing, which shall be subscribed by such officer, 
 and by him sworn to before some officer who is by law 
 duly authorized to administer oaths, and verified by his
 
 66 LAW OF OIL AND NATURAL GAS 
 
 seal of office, setting forth fully the facts concerning the 
 amount of the surplus and undivided profits, respectively, 
 if any, of such domestic or foreign corporation; and until 
 the Secretary of State shall be fully satisfied as to the 
 amount of such surplus and undivided profits, respectively, 
 if any, he shall not file the articles of incorporation of 
 such proposed domestic corporation, or issue such permit, 
 or accept such franchise tax. (Id., Sec. 4.) 
 
 Article 7397. Reports to Be Filed, Etc. For the pur- 
 pose of ascertaining and determining the amount of any 
 annual franchise tax prescribed by this chapter, except- 
 ing only the first tax to be paid by any domestic corpo- 
 ration which may hereafter be chartered, or of any for- 
 eign corporation which may hereafter be authorized to 
 do business in this State, the president, vice-president, 
 general manager, secretary, treasurer and superintendent 
 of each and every domestic or foreign corporation em- 
 braced within the provisions of this chapter, shall annu- 
 ally and between the first and tenth days of March, and 
 also whenever called upon by the Secretary of State to 
 do so, report to the Secretary of State, in writing, and 
 under oath, as required by the preceding article, the total 
 amounts of the capital stock issued and outstanding, and 
 the surplus and undivided profits, respectively, if any, 
 of such corporation on the first day of March next pre- 
 ceding; and the Secretary of State may ascertain such 
 facts from other sources; and, if the true aggregate of 
 such amounts shall exceed the authorized capital stock of 
 such corporation as disclosed by its then current original 
 or amended articles of incorporation, the amount of its 
 annual franchise tax for the year beginning the first day 
 of May next thereafter, shall be thereon collected and 
 paid; otherwise its annual franchise tax shall be calcu- 
 lated and paid upon the amount of its authorized capital 
 stock as shown by its aforesaid original or amended ar- 
 ticles of incorporation. The making and filing by any 
 one of such officers of such corporation of the record re- 
 quired by this article shall relieve the other officers of 
 such corporation from the duty of making any report
 
 LAW OF OIL AND NATURAL GAS 67 
 
 required by this article, except such report or reports as 
 may be required by the Secretary of State. (Id., Sec. 5.) 
 Article 7398. Supplemental Tax to Be Paid When Cap- 
 ital Increased. In the event of increase in the authorized 
 capital stock of any domestic or foreign corporation, it 
 shall also pay in advance a supplemental franchise tax 
 thereon for the remainder of the year down to and in- 
 cluding the thirtieth day of April next thereafter, the 
 amount of which shall be determined as is provided in 
 Article 7395 in case of the first franchise tax payment 
 to be made under this chapter by a domestic corporation 
 which may be hereafter authorized to do business within 
 this State. (Id., Sec. 6.) 
 
 NOTE. The following articles of the Revised Statutes upon this 
 subject are omitted : Arts. 7394, 7401, relating- to foreign corporations. 
 Arts. 7397, 7400, 7404, 7'405, relating to forfeitures and penalties for 
 non-payment. Art. 7403, applying only to certain specified corpora- 
 tions. Art. 7406, relating to corporations in process of liquidation. 
 
 Title 134. 
 
 WELLS OIL, GAS. 
 
 Article 7847. Wells, How Cased. The owner or oper- 
 ator of any well being constructed for the production of 
 petroleum oil, natural gas, or mineral water, shall, before 
 drilling into the oil or gas bearing rock, in case [incase] 
 such well with good and sufficient wrought iron or steel 
 casing, in such manner as shall exclude all surface or fresh 
 water from the lower part of such well from penetrating 
 the oil or gas bearing rock. Should any well be drilled 
 through the first into a lower oil or gas bearing rock, the 
 same shall be cased in such manner as will exclude all 
 fresh water above the last oil or gas bearing rock pene- 
 trated. (Acts 1899, p. 68.) 
 
 Article 7848. Abandoned Wells to be Filled. The own- 
 er or operator of any well constructed for either or any 
 of the purposes named in the preceding article, when 
 about to abandon or cease operating the same, and before
 
 68 LAW OF OIL AND NATURAL GAS 
 
 drawing the casing therefrom, shall securely fill such well 
 with rock, sediment or with mortar, composed of two parts 
 sand and one part cement or other suitable material to 
 the depth of two hundred feet above the top of the first 
 oil or gas bearing rock, and also in such manner as shall 
 prevent the gas and oil from escaping therefrom. If the 
 owner or operator of any such well shall fail to or shall 
 inefficiently comply with the provisions of this article, then 
 the owner of the land upon which the well is situated 
 shall forthwith comply therewith. If all the persons here- 
 inbefore named shall fail to or inefficiently fill such well 
 in the manner hereinbefore described, then it shall be 
 lawful for any person, after written demand therefor to 
 any of said persons, to enter the premises where such well 
 is situated, take possession thereof and fully comply with 
 the provisions of this article. The reasonable cost and 
 expense thereof shall forthwith be paid by the owner or 
 operator of the well, and on his default by the owner 
 of the land. The amount of such reasonable cost and ex- 
 pense shall forthwith be a lien upon the fixtures and ma- 
 chinery and leasehold interest of the owner and operator 
 of said well, as upon the title and interest of the land 
 owner in the land upon which said well is situated, and 
 may be recovered and enforced against said owner or op- 
 erator, in the order named, in any court of competent 
 jurisdiction. (Id. Sec. 2.) 
 
 Article 7849. Gas' to be Confined Until Utilized. Any 
 person, co-partnership, or corporation in possession, either 
 as owner, lessee, agent or manager, of any well producing 
 natural gas, in order to prevent the said gas from wast- 
 ing by escape, shall, within ten days after penetrating the 
 gas bearing rock in any well hereafter drilled, shut in 
 and confine the gas in said well until and during such 
 time as the gas therein shall be utilized for light or fuel 
 or power; provided, that this shall not apply to any well 
 that is operated for oil. (Id. Sec. 3.) 
 
 Article 7850. Limitation on Use of Gas for Illuminat- 
 ing Purposes. It shall be unlawful for any person, co- 
 partnership or corporation to use natural gas for illumi-
 
 LAW OF OIL AND NATURAL GAS 69 
 
 nating purposes by what are known as flambeau lights; 
 but nothing herein shall prohibit the use of "Jumbo" bur- 
 ners, or any other burners consuming no more gas than 
 such "Jumbo" burners, but the person, co-partnership, or 
 corporation, consuming such gas and using such burners 
 in the open air, shall inclose the same in glass globes or 
 lamps; and any one using such gas in the open air, or in 
 and around derricks, shall turn off said gas not later than 
 eight o'clock in the morning of each day such lights are 
 burning or used, and shall not turn on or relight the 
 same between the hours of eight o'clock a. m. and five 
 o'clock p. m. (Id. Sec. 4.) 
 
 Article 7851. Penalties; Disposition of Fines. Any 
 person, copartnership, or corporation violating any of the 
 provisions of this chapter shall be liable to a penalty of 
 one hundred dollars, to be recovered with the cost of suit 
 in a civil action, in the name of the State of Texas, in 
 any court of competent jurisdiction in the county in which 
 the act shall be committed or omitted. Such suit may be 
 brought at the instance of any resident of the State of 
 Texas, without security or liability of cost. The amount 
 of said penalty when collected shall be paid, one-half into 
 the school fund of the county in which said suit is brought 
 and one-half to said person at whose instance said suit 
 shall be brought. (Id. Sec. 5.) 
 
 Article 7852. Duties of Persons Where Salt Water Ap- 
 pears in Wells. If any person or persons in this State, 
 boring any well or wells for oil, gas or mineral waters, 
 shall pierce any cap-rock or other geological formation 
 in such manner as to cause a flow of salt water or fresh 
 water injurious to any oil well or wells already bored, or 
 to any oil or gas deposits, and which shall or may prob- 
 ably result in the injury of such oil or gas field, or to 
 such oil or gas wells already bored, such person or per- 
 sons shall, if the flow of water can not be cased off, im- 
 mediately abandon all work upon such well and plug and 
 fill up the same in such manner and with such materials 
 as will stop the flow of said water; and it shall be unlaw- 
 ful for any well owner, or person boring any such well, to
 
 70 LAW OF OIL AND NATURAL GAS 
 
 remove the casing from the well drilled until the flow of 
 water shall be stopped, either by casing off or plugging 
 such well. The provisions of this article shall only apply 
 where such cap-rock or other formation is pierced at a 
 depth below the horizon at which oil or gas has already 
 been discovered. If any well shall be abandoned from 
 any cause, the same shall be securely plugged and sealed. 
 (Acts 1905, p. 228, Sec. 7.) 
 
 Article 7853. District Courts; Jurisdiction and Super- 
 vision.; May Appoint Superintendent, Make Regulations, 
 Etc. The district courts of each county in this State, and 
 the judges thereof in vacation, shall have jurisdiction to 
 enforce the provisions of this chapter; and they are here- 
 by authorized and empowered, either in term time or in 
 vacation, upon the application of any person or persons 
 interested either as land owners, lessees of land or as well 
 owners, in any oil or gas field in this State, in its discre- 
 tion, to appoint some suitable person or persons as super- 
 intendent of such oil or gas field, and to require of such 
 person a bond, the amount thereof to be fixed by the 
 court, conditioned that such superintendent shall obey and 
 carry out the rules, regulations, orders and decrees which 
 may be from time to time prescribed and entered by said 
 court for the protection of such oil or gas field, and the 
 persons employed therein, from fire or other causes likely 
 to be injurious to the properties and operations in such 
 field, and with power and authority to enforce, under the 
 orders of said court, a strict compliance by all persons 
 with all the requirements of the laws of this State gov- 
 erning the boring and operation of oil or gas wells in oil 
 or gas fields; and said courts are authorized and empow- 
 ered to make from time to time such rules and regula- 
 tions for the government of such oil and gas fields and 
 the operation carried on therein, and the handling of the 
 oil or gas products, as may, in the discretion of the court, 
 be necessary or requisite for the protection of the several 
 interests in said oil and gas field from fire or other prob- 
 able injurious cause. The court may require of the per- 
 sons who apply for the appointment of a superintendent
 
 LAW OF OIL AND NATURAL GAS 71 
 
 of any oil or gas field or other protective order proper 
 security for the payment of any and all costs of court, 
 including the salaries of any superintendents, or necessary 
 employes under him, as well as for such other costs and 
 expense as may be necessary to be expended in the pro- 
 tection of such oil or gas field and enforcement of the or- 
 ders of said courts. (Id. Sec. 8.) 
 
 Article 7854. Suits and Penalties, How Brought. Any 
 person or persons, co-partnership, corporation, or associa- 
 tion of persons, violating any of the provisions of this 
 chapter, or who shall fail or refuse to obey any order or 
 decree, rule or regulation, made or promulgated by said 
 district courts requiring any act to be done or omitted, 
 shall be liable to penalty of not less than five hundred 
 dollars nor more than five thousand dollars, to be ascer- 
 tained by the verdict of the jury of the court trying the 
 cause; said sum to be recovered with the costs of suit in 
 a civil action brought for that purpose in the name of 
 the State of Texas, in any court of competent jurisdic- 
 tion, in the county in which the act complained of shall 
 have been committed or omitted; and such suit may be 
 brought at the instance of any resident of the State of 
 Texas, without security or liability for costs; and the 
 amount of said penalty when collected shall be paid into 
 the school fund of the county in which said suit is brought. 
 Such suit may be brought at the instance of either the dis- 
 trict attorney or the county attorney of the county in 
 which the act was committed or omitted. (Id. Sec. 9.)
 
 72 LAW OF OIL AND NATURAL GAS 
 
 THE BLUE SKY LAW. 
 
 CORPORATIONS REGULATING THE SALE OF THE STOCK 
 
 OF SAME. 
 
 H. B. No. 9.] CHAPTER 32. 
 
 An Act to regulate and supervise the sale and purchase, in this State, 
 of stocks of private, foreign and domestic corporations organized 
 for profit, which propose to increase their capital stock ; and to 
 regulate and supervise the sale and purchase, in this State, of stocks 
 of private, foreign and domestic corporations being organized and 
 hereafter organized or proposed to be organized, for profit; and to 
 regulate and supervise the offering or contracting for sale and 
 purchase of such stock of such corporation or proposed corporation, 
 and to fix commission and promotion fees allowed to be charged ; 
 and providing for service of process, examination fees, and exempting 
 certain corporations from the effect of this Act ; providing penalty 
 for the violation of the provisions of this Act, and declaring an 
 emergency. 
 
 Be it enacted by the Legislature of the State of Texas: 
 
 SECTION 1. Every private corporation, foreign or domes- 
 tic, organized for profit, which is now attempting or shall 
 hereafter attempt to increase its capital stock, and every 
 proposed corporation attempted to be organized which 
 shall, directly or indirectly, through itself, its agents or 
 employes, or through any person or association of persons, 
 holding companies, sales companies or otherwise, or 
 through any other agents, sell or contract to sell any 
 stock of such corporation or proposed corporation, upon 
 which sale or proposed sale or contract of sale any part 
 of the proceeds derived or to be derived therefrom are 
 used or to be used, directly or indirectly, for the payment 
 of any commission, promotion, organization fee or other 
 expenses incident, directly or indirectly, to the sale of its 
 shares of stock, except attorney's fees, charter fees, fran- 
 chise tax, permit fees and stationery and supplies, shall 
 be subject to the provisions of this act.
 
 LAW OF OIL AND NATURAL GAS 73 
 
 SEC. 2. This act shall also apply to any mining, oil or 
 gas corporation increasing its stock or proposed mining, 
 oil or gas corporation attempting to sell stock in which 
 any land or mineral or thing of value is to be procured 
 from, in or under such land that has been or is to be 
 placed as an asset with or in the corporation or proposed 
 corporation, whether any promotion fee is charged or not, 
 and to any townsite corporation or proposed townsite cor- 
 poration. 
 
 SEC. 3. Before offering for sale or contracting to sell, 
 directly or indirectly, any stock of such proposed corpo- 
 ration, or such increased stock of any existing corporation, 
 or before selling any stock in any townsite corporation 
 as provided in Section 2, such corporation, or those pro- 
 moting or having charge of the sale of stock of any pro- 
 posed corporation, shall file, under oath, in the office of 
 the Secretary of State, where, under the law, a charter 
 would be filed in his department, or in the office of the 
 Commissioner of Insurance and Banking, where, under 
 the law, a charter would be filed in his department, to- 
 gether with a filing fee of twenty dollars, the following 
 documents: A statement showing in full detail the plan 
 upon which the corporation proposes to increase its cap- 
 ital stock or upon which the promoters or those having 
 charge of the sale of stock of any proposed corporation 
 proposes to sell its stock and organize the corporation, 
 together with a copy of all the forms of contracts, stock 
 (or deeds, if the same shall come under Section 2 hereof) 
 to be used by the corporation or promoters, or those hav- 
 ing charge of the sale of stocks of any proposed corpora- 
 tion in connection with such stock sales. The statement 
 shall further show the name, location and domicile of such 
 corporation, and the names of its officers or proposed offi- 
 cers, if any, promoters, and the addresses of all the 
 parties; the amount of capital stock of any corporation 
 already organized, the proposed increase, or the proposed 
 capital stock of the corporation to be organized, and the 
 price at which the stock is proposed to be sold; and the 
 price at which the stock is proposed to be sold shall not
 
 74 LAW OF OIL AND NATURAL GAS 
 
 be changed without filing with the secretary or commis- 
 sioner, as the case may be, a statement of such change, 
 which shall be subject to his approval. Any such corpo- 
 ration promoters of such proposed corporation shall 
 furnish the secretary or commissioner such other infor- 
 mation as may be necessary or proper concerning the sale 
 of its stock. 
 
 If it shall be a corporation organized under the laws of 
 any other jurisdiction, it shall file with the secretary or 
 commissioner a copy of its charter, and such other evi- 
 dence of its authority as the secretary or commissioner 
 may require. 
 
 Said statement shall also show the commission, promo- 
 tion fee and other estimated incidental expenses proposed 
 to be charged for the organization of such proposed cor- 
 poration, or the increase in the capital stock of any cor- 
 poration already organized, and how the commissions or 
 fees are to be paid. 
 
 If the corporation or proposed corporation comes under 
 Section 2 hereof, the officers of the corporation, or the 
 promoters of the proposed corporation shall state the facts 
 upon which they base their estimate of the actual value 
 of the property which is to become an asset of the cor- 
 poration, and the secretary or commissioner shall require 
 such proof as he may deem proper to establish the actual 
 value of the property. 
 
 The secretary or commissioner shall have the right to 
 employ such experts as he may deem necessary, and the 
 experts shall be employed at the expense of the corpora- 
 tion or promoters of a proposed corporation. 
 
 No corporation proposed to be organized for the pur- 
 pose of buying and selling town sites and town lots shall 
 hereafter be granted a charter by the Secretary of State, 
 or if a foreign corporation shall not be granted a permit 
 to do business in the State of Texas unless the incorpo- 
 rators of said proposed corporation or officer of such for- 
 eign corporation shall file with the Secretary of State 
 each and every document, contract and all papers referred 
 to in Section 3 of this act, as well as a general statement
 
 LAW OF OIL AND NATURAL GAS 75 
 
 of the plan of its proposed townsite, and a general state- 
 ment of its methods of advertising same, together with 
 a sample copy of its advertising literature, and no charter 
 shall be granted any corporation unless after the compli- 
 ance with the provisions of this act and in the judgment 
 of the Secretary of State, such business of any proposed 
 townsite corporation will be honestly and fairly conducted 
 both to the corporation and to the public. And each and 
 every corporation in this State now existing or hereafter 
 organized desiring to engage in the sale of townsite lots 
 or sites shall, prior to such sale, file with the Secretary 
 of State a general plan of said proposed lots to be sold, 
 as well as a copy of any and all proposed contracts to be 
 made with the public in the sale thereof, and a general 
 statement of the literature proposed to be issued, and all 
 matter referred to in Section 3 hereof, and if in the 
 judgment of the Secretary of State said sale will be con- 
 ducted both honestly and fairly to the corporation and to 
 the public, a permit to conduct said sale shall be granted. 
 This provision shall not be construed to authorize the 
 creation of any corporation for any purpose not now au- 
 thorized by the laws of this State. 
 
 SEC. 4. The secretary or commissioner, upon the re- 
 ceipt of the information as provided for in Section 3, shall 
 grant or refuse such permit. 
 
 If the secretary or commissioner shall decide that the 
 sale of stock will be fairly and honestly conducted, both 
 to the corporation and to the public, such permit shall be 
 granted, provided that the commissions, promotions and 
 other incidental expenses, exclusive of the exempted ex- 
 penses mentioned in Section 1 of this act shall not be more 
 than fifteen (15) per cent of the price at which such stock 
 is to be sold as shown by the application or amended ap- 
 plication. 
 
 Provided, that where any proposed corporation has al- 
 ready sold its stock, or a part thereof, or any part thereof 
 has been subscribed at the time this act shall take effect, 
 this act shall not affect stock previously sold or subscribed 
 nor any contracts made in reference to same; but if any
 
 76 LAW OF OIL AND NATURAL GAS 
 
 of the stock of said proposed corporation remains unsold 
 or unsubscribed, said corporation shall, nevertheless, be 
 entitled to a permit upon complying with the other condi- 
 tions of this act, including the future sale or subscription 
 of any of its stock. 
 
 The commission or promotion fee shall be paid to the 
 agent or promoter as the stock is sold by him and paid for 
 by the purchaser. The stock shall be considered as paid 
 for when paid for in cash, property or labor. 
 
 No permit shall be granted unless there shall appear 
 upon the subscription lists and contracts of such corpo- 
 ration or proposed corporation, in bold type, the amount 
 of the commissions, promotion fees and other estimated 
 expenses incident to the sale of such stock, and the in- 
 terest which the officer, agent, employe or promoter sell- 
 ing or contracting to sell such stock has in such sale; 
 nor shall such permit be granted until the applicants 
 therefor have entered into a bond for not less than one 
 thousand dollars ($1000) nor more than one hundred 
 thousand dollars ($100,000), the same to be fixed by the 
 secretary or commissioner at not more than ten per cent 
 of the stock proposed to be issued. The said bond shall 
 be payable to the secretary or commissioner, as the case 
 may be, and his successor in office, conditioned that the 
 facts set forth in the application for such permit, and 
 the proof and statements offered to such secretary or 
 commissioner, upon which the application is based, are 
 true, and that they will comply with the provisions of this 
 act in the sale of the stock of such corporation or proposed 
 corporation. Said bond may be made with individual 
 sureties or a surety company authorized to do business in 
 the State of Texas, and the bond shall be approved by the 
 secretary or commissioner. 
 
 SEC. 5. If a permit shall be refused by the secretary 
 or commissioner the parties applying therefor may bring 
 suit in the district court of Travis county, Texas, to re- 
 quire said secretary or commissioner to issue such permit. 
 
 SEC. 6. Any person who shall be induced to purchase 
 any stock of any corporation or proposed corporation by
 
 LAW OF OIL AND NATURAL GAS 77 
 
 the officers, agents, employes, promoters or trustees, by 
 reason of any misrepresentation of any material fact con- 
 cerning such stock, such person or persons shall have the 
 right to bring suit upon the bond above provided for, and 
 such bond shall be subject to, and security for, such person 
 so purchasing the stock, provided that such person shall 
 not be entitled to recover more than the money paid, or 
 the actual value of the property given, or the labor per- 
 formed, in exchange for such stock, with legal interest 
 from the date of the payment or the performance of the 
 services, or the transfer of the property. 
 
 One or more recoveries upon such bond shall not vitiate 
 the same, but it shall remain in full force and effect, but 
 no recoveries upon such bond shall ever exceed the full 
 amount of same, and upon suits being filed in excess of 
 the amount of same, the secretary or commissioner may 
 require a new bond, and if the same is not given within 
 thirty days, he may cancel the permit herein provided for. 
 
 Whenever any permit has been issued, the corporation 
 or persons receiving the same shall file a list of the names 
 of their or its authorized officers, agents and employes, 
 and the postoffice address of each; and, in case of the 
 change of any of its officers, agents or employes, it shall 
 file a list of such changes with the secretary or com- 
 missioner. 
 
 SEC. 7. All moneys or other things of value collected 
 by such corporation or the promoters of a proposed cor- 
 poration, for the sale of its stock, or contract for the sale 
 of its stock, shall be deposited by said corporation to its 
 credit, or by the promoters of a proposed corporation, to 
 the credit of its proposed officers or trustees, with the ex- 
 ception of the amount allowed for commissions, promotion 
 fees and other incidental expenses, with a bank, bank and 
 trust company or trust company incorporated under the 
 laws of this State, or of the United States. 
 
 SEC. 8. All such corporations, and the organizers or 
 trustees of proposed corporations shall keep a set of books, 
 which shall show the amount of money, or other things 
 of value received by such corporation or proposed cor-
 
 78 LAW OF OIL AND NATURAL GAS 
 
 poration, from the sale of its stock, or from contracts of 
 sale of its stock, and such books shall show the number 
 and amounts of stock sold or contracted' to be sold, by 
 whom sold, and to whom sold, or contracted to be sold, 
 and the postoffice address of each. Said books shall at 
 all times be open for inspection by the secretary or com- 
 missioner, or his duly authorized agent. 
 
 SEC. 9. Whenever the secretary or commissioner shall 
 have information that any corporation, or the promoters 
 of the proposed corporation, its officers, agents or em- 
 ployes, are not complying with the terms of this act in 
 the sale of its stock they shall notify such corporation, or 
 the officers, agents or employes or the promoters of the 
 proposed corporation to appear, within twenty days, and 
 show cause why such permit should not be canceled, and 
 after the hearing such secretary or commissioner shall 
 have the right to cancel such permit if the proof shall 
 show that such corporation or proposed corporation, or 
 its officers, agents or employes are not complying with 
 the terms of this act, but the parties or corporation hold- 
 ing such permit shall have the right to bring suit, in 
 the district court of Travis County, Texas, against the sec- 
 retary or commissioner, to reinstate such permit to sell 
 stock. 
 
 SEC. 10. No permit to sell stock shall ever be issued 
 to any foreign corporation which has not at the time of 
 making application for permit at least fifty per cent of 
 its capital stock subscribed and paid in, providing that 
 this shall not apply to any foreign corporation engaged 
 exclusively in the business of lending money in this State, 
 nor to any insurance company that is required by law to 
 obtain a permit from the Commissioner of Insurance and 
 Banking. 
 
 SEC. 11. Each foreign corporation or the promoters 
 of any proposed foreign corporation desiring to sell or 
 contract to sell its stock in this State shall first file with 
 the secretary or commissioner a like power of attorney 
 to that provided for life insurance corporations in Article 
 4773, Revised Civil Statutes of the State of Texas of 1911,
 
 LAW OF OIL AND NATURAL GAS 79 
 
 and service may be had upon the corporation and the 
 secretary or commissioner, as the case may be, as therein 
 provided for, and the secretary or commissioner, as the 
 case may be, upon receipt of such process as is therein 
 provided for, shall proceed as is provided for him to do in 
 Article 4774, Revised Civil Statutes of the State of Texas 
 of 1911, and the secretary or commissioner's acts and 
 conduct in regard to such power of attorney, and such 
 process shall be the same as is provided for in said 
 Articles 4774 and 4773, and the effect, force and result 
 of such acts shall be the same as therein provided for. 
 
 SEC. 12. It shall hereafter be unlawful for any officer, 
 agent or employe or trustee, or holding company, or sales 
 agents, or person, or association of persons in this State 
 to sell, or offer to sell, or contract to sell, directly or in- 
 directly, for such concern, any stock of any corporation or 
 proposed corporation, subject to this act, which has been, 
 proposed to be, is now being, or may hereafter be organ- 
 ized for profit, without first complying with the pro- 
 visions of this act, and any person so offending shall be 
 guilty of a misdemeanor, and upon conviction shall be 
 fined not less than twenty-five dollars nor more than two 
 thousand dollars, and in addition thereto may be impris- 
 oned in the county jail for any period not more than one 
 year, or by both such fine and imprisonment. 
 
 SEC. 12a. At the expiration of two years from the 
 granting of a permit under this act if the proposed cor- 
 poration has failed to organize, then all subscribers must 
 be refunded the amount paid to the promoter or trustee; 
 provided, however, that the secretary or commissioner 
 may grant an extension of time for the sale of securities. 
 
 SEC. 13. This act shall be construed to be cumulative 
 of any other law or laws of this State. 
 
 SEC. 14. The terms of this act shall not apply to any 
 national bank, nor to any corporation having a charter 
 granted under any act of the Congress of the United 
 States, nor to any State bank, bank and trust company 
 or trust company organized under the laws of this State, 
 nor to any corporation organized under the Federal Re-
 
 80 LAW OF OIL AND NATURAL GAS 
 
 clamation Act, approved June 17, 1902, or the regulations 
 established by the Secretary of the Department of the 
 Interior in pursuance thereof. Nor shall the terms of 
 this act apply to any corporation or the promoters of any 
 corporation organized under the laws of Texas which does 
 not sell or contract to sell its stock to more than twenty- 
 five bona fide purchasers; provided, it does not act as the 
 agent or trustee, holding company or sales company in the 
 promotion of any concern which is included under the 
 terms of this act. Nor shall this act apply to any railroad 
 or railway company, or interurban railroad or rail- 
 way company, or street railroad or railway company. 
 Nor shall this act apply to the sale of stock of 
 a corporation by a bona fide owner of same, who 
 had in good faith bought the same, and who in the 
 purchase and sale of same was and is not acting directly 
 or indirectly as promoter or agent of such corporation. 
 Nor shall this act apply to a bona fide stock or stock 
 broker in the sale of stock, which stock has been by such 
 corporation sold and issued to a bona fide purchaser prior 
 to the offering of same for sale by such broker; provided, 
 that such purchaser or broker was not acting, directly or 
 indirectly, as promoter of such corporation. 
 
 SEC. 15. All moneys collected under the terms of this 
 act by the secretary or commissioner shall be quarterly 
 deposited by him with the State Treasurer and credited 
 to the general fund. Whenever the secretary or commis- 
 sioner shall deem it necessary to examine the books of 
 any corporation or proposed corporation, subject to the 
 provisions of this act, or investigate its financial condition? 
 he shall do so at the expense of the corporation or pro- 
 posed corporation under investigation, and the corpora- 
 tion or the agents of the corporation or proposed corpo- 
 ration being investigated shall pay to the secretary or 
 commissioner, or his agent, making the investigation his 
 actual expenses and seven dollars and fifty cents per day 
 for such investigation, which said expenses shall be paid 
 at the termination of such investigation by the concern 
 investigated.
 
 LAW OF OIL AND NATURAL GAS 81 
 
 SEC. 16. Whenever the word "secretary" is used in this 
 act it shall be considered to mean Secretary of the State 
 of Texas, and whenever the word "commissioner" is used 
 in this act it shall be considered to mean Commissioner of 
 Insurance and Banking of the State of Texas. 
 
 SEC. 17. The fact that there is no law in this State 
 regulating the sale of stocks of numerous corporations 
 which are selling such stocks throughout this State, many 
 of which are worthless, and the fact that the people of 
 this State are being imposed upon by unscrupulous per- 
 sons selling such worthless stocks, creates an emergency 
 and an imperative public necessity that the constitutional 
 rule requiring that bills be read on three several days be 
 suspended, and that this act shall take effect and be in 
 force from and after its passage, and it is so enacted. 
 
 [NOTE. H. B. No. 9 was passed by the House August 
 14, 1913, but no vote given ; House granted request of Sen- 
 ate for return of bill August 19, 1913, and concurred in 
 Senate amendments August 19, 1913, by the following 
 vote: yeas 69, nays 35, and was passed by the Senate Au- 
 gust 19, 1913, but no vote given.] 
 
 Approved August 21, 1913. 
 
 Takes effect 90 days after adjournment. 
 
 DIGEST OF OPINION OF ATTORNEY GENERAL 
 CONSTRUING THE LAW. 
 
 1. (a) The Blue Sky Law does not apply to the sale 
 of stock by corporations which had been chartered prior 
 to the date the law went into effect, in so far as their orig- 
 inal stock is concerned. 
 
 (b) It does not apply to the increased capital stock of 
 corporations chartered prior to the time the law went into 
 effect, where such increase took place prior to the taking 
 effect of this Act of the Legislature. 
 
 2. (a) The following classes of corporations are ex- 
 empt from the provisions of the Blue Sky Law: All cor-
 
 82 LAW OF OIL AND NATURAL GAS 
 
 porations, or the promoters thereof, which do not directly 
 or indirectly agree to pay any commission, promotion or 
 organization fees incident to the sale of its stock, unless 
 such corporations are mining, oil, gas or townsite cor- 
 porations. In the case of the last named character of cor- 
 porations the provisions of the law apply, regardless of 
 the question of the payment of promotion or other fees 
 incident to the organization. 
 
 (b) The terms of the Act do not apply to any national 
 bank nor to any corporation having a charter granted 
 under any Act of Congress, nor to any State bank or trust 
 company organized under the laws of this State,, nor to 
 any corporation organized under the Federal Reclamation 
 Act, nor does the Act apply to any corporation or its 
 promoters where such corporation organized under the 
 laws of this State does not sell or contract to sell its stock 
 to more than twenty-five bona fide purchasers; provided, 
 such corporation does not act as agent or trustee, holding 
 or sales company, in the promotion of any concern in- 
 cluded within the terms of the Act. This exemption ap- 
 plies to mining, oil, gas and townsite corporations the 
 same as it does to other corporations. 
 
 (c) The Act does not apply to any railroad corpora- 
 tion, interurban nor street railway. 
 
 (d) It does not apply to the sale of stock of the cor- 
 poration by a bona fide owner of the same, who in good 
 faith bought the same and is not acting, directly or in- 
 directly, as a promoter or agent of the corporation. 
 
 (e) Nor does the Act apply to a bona fide stock or 
 stock broker in the sale of stock, which stock has been 
 theretofore issued and sold, bona fide, to some purchaser; 
 provided, however, that such purchaser or broker is not 
 acting, directly or indirectly, as promoter of the corpo- 
 ration. 
 
 3. (a) The Blue Sky Law applies to townsite, mining, 
 oil and gas corporations incorporated under the laws of 
 this State where its increased capital stock is paid out 
 of the surplus earnings of the corporation ; provided, how-
 
 LAW OF OIL AND NATURAL GAS 83 
 
 ever, that the purpose of the increase is to sell the stock 
 based on its increased capital. 
 
 (b) But where the increased capital is paid in by the 
 existing stockholders and the stock is issued directly to 
 them, or where the stock is issued against the surplus 
 earnings of the company in the nature of a stock divi- 
 dend, then such acts do not come under the provisions of 
 the law. 
 
 (c) Any act of the corporation which does not amount 
 to a sale of stock by it or by promoters for it, is not sub- 
 ject to the law. 
 
 4. Certain portions of Section 3 of the Act are uncon- 
 stitutional and should be disregarded. 
 
 5. If a foreign corporation had secured its charter and 
 was in all things duly incorporated prior to the enactment 
 of the Blue Sky law then the sale of its original capital 
 stock would not come within the terms and provisions of 
 the Blue Sky Law. 
 
 6. (a) Promotion fees, commissions, organization 
 fees and other incidental expenses incurred prior to the 
 chartering of the corporation, cannot be paid out of the 
 capital stock of the corporation taken at its par value, 
 and such fees must be collected from the purchasers of 
 stock in addition to par value of the stock. 
 
 (b) Attorney's fees, charter fees, franchise taxes, 
 permit fees and expenditures for stationery and supplies 
 may be paid out of the capital stock taken at its par value. 
 
 (c) A promoter is one who actively engages in the 
 financing and organization of an enterprise under the cor- 
 porate form, and may be defined as a person to bring 
 about the incorporation and organization of corporations. 
 
 (d) The constitutional provision providing that cor- 
 porations can only issue stock for money paid, labor done 
 or property actually received, means money paid to the 
 corporation, labor done for the corporation and property 
 actually received by the corporation. 
 
 (e) The word "property," as used in the Constitu- 
 tion, means something substantial and capable of being
 
 84 LAW OF OIL AND NATURAL GAS 
 
 made an asset of the corporation, which might respond in 
 law to the claims of creditors. 
 
 (f) The term "money paid" is definite and plain. It 
 does not mean that the stock may be sold for money to 
 be paid, but must be sold for cash. Of course, the pay- 
 ments may be made in installments, but the stock must 
 be paid for in money. 
 
 (g) The property which may be received by a corpo- 
 ration in payment of stock must be such property as the 
 corporation has authority under its charter to take and 
 hold ; if the property is not such as is necessary or proper 
 for the conduct of the corporation's business, then it 
 could not issue stock therefor. 
 
 (h) The labor performed by a promoter or stock 
 salesman is not labor performed for the corporation and 
 can not be paid for out of the capital stock of the corpo- 
 ration, and if paid by the corporation, must be paid out 
 of a sum of money collected for such purpose in addition 
 to the par value of the capital stock. 
 
 OPINION. 
 
 ATTORNEY GENERAL'S DEPARTMENT, 
 
 AUSTIN, TEXAS, February 10, 1914. 
 
 Hon. F. C. Weinert, Secretary of State, Capitol. 
 
 DEAR SIR: This department has from time to time 
 rendered you various opinions construing what is known 
 as the Blue Sky Law. You have stated to us that you de- 
 sired to publish the holdings heretofore made in regard 
 to this measure in a pamphlet with the forms prepared 
 by this department for your use and have requested that 
 the several holdings heretofore made by us be placed in 
 one opinion for the convenience of your department and 
 of those who might have occasion to consider the rulings 
 of this department on the questions in issue. This opinion 
 is now written for the purpose stated.
 
 LAW OF OIL AND NATURAL GAS 85 
 
 The subject of this discussion is what is known as the 
 Blue Sky Law, being Chapter 32, Acts of the First Called 
 Session of the Thirty-third Legislature. This measure was 
 approved by the Governor on August 21, 1913, and became 
 a law ninety days after the adjournment of the Legisla- 
 ture, which adjournment took place on August 19, 1913. 
 The law, therefore, became effective on the 18th day of 
 November, 1913. 
 
 1. 
 
 The first question for consideration is: Does the Blue 
 Sky Law apply to the sale of stock by corporations which 
 had been chartered prior to the date the law went into 
 effect, as to their original issue of capital stock, and does 
 it apply to the increased capital stock of corporations 
 where such increase took place prior to the taking effect 
 of this Act of the Legislature? 
 
 We answer this question in the negative and say that the 
 law does not apply to such corporations. This is appa- 
 rent from the consideration of the context of the Act. 
 For example, Section 1 of the Act provides in substance 
 that every private corporation attempting at the time the 
 Act takes effect or which might thereafter attempt to in- 
 crease its capital stock, and every proposed corporation 
 attempting to be organized when the Act takes effect or 
 thereafter, must comply with the provisions of the Act, 
 provided, of course, such corporations do not come within 
 the exceptions named in the Act. 
 
 Section 3 of the Act also makes it clear that the pro- 
 visions of the Act apply only to increase of capital stock 
 of existing corporations made after the Act takes effect 
 and to corporations chartered after the Act takes effect, 
 for it provides, in substance, the following: 
 
 "Before offering for sale or contracting to sell, di- 
 rectly or indirectly, any stock of such proposed cor- 
 poration, or such increased stock of any existing cor- 
 poration, etc."
 
 86 LAW OF OIL AND NATURAL GAS 
 
 A part of Section 4 also reads to the same conclusion : 
 
 "Provided, that where any proposed corporation has 
 already sold stock, or a part thereof, or any part 
 thereof has been subscribed at the time this Act shall 
 take effect, this act shall not affect stock previously 
 sold or subscribed nor any contracts made in refer- 
 ence to same." 
 
 If, however, the context of the Act should give rise to 
 any doubt as to this issue, the caption of the Act settles 
 the question of construction. The caption reads as fol- 
 lows: 
 
 "An Act to regulate and supervise the sale and 
 purchase, in this State, of stocks of private, foreign 
 and domestic corporations organized for profit, which 
 propose to increase their capital stock; and to regu- 
 late and supervise the sale and purchase, in this State, 
 of stocks of private, foreign and domestic corpora- 
 tions being organized and hereafter organized or pro- 
 posed to be organized, for profit; and to regulate and 
 supervise the offering or contracting for sale and 
 purchase of such stock of such corporation or pro- 
 posed corporation, and to fix commission and promo- 
 tion fees allowed to be charged; and providing for 
 service of process, examination fees, and exempting 
 certain corporations from the effect of this Act; pro- 
 viding penalty for the violation of the provisions of 
 this Act, and declaring an emergency." 
 
 It is a well recognized rule of construction that the cap- 
 tion of the Act is one of the proper sources to which we 
 may look in determining the meaning and intent of the 
 Act. 
 
 State vs. Delesdenier, 7 Texas, 76. 
 Byrnes vs. Sampson, 74 Texas, 79. 
 
 Walraven vs. Farmers, etc., National Bank, 96 Texas, 
 331. 
 Texas-Mexican Ry. Co. vs. Jarvis, 69 Texas, 527.
 
 LAW OF OIL AND NATURAL GAS 87 
 
 This construction is also consistent with the due regard 
 for the vested rights of existing corporations. If we 
 should hold that the provisions of this Act apply to the 
 increased capital stock of corporations where the increase 
 had been made under provisions of law prior to the taking 
 effect of the Act, then we should meet with serious consti- 
 tutional objections to the Act; because such increase of 
 capital would have been made under existing law and the 
 right of the corporation to dispose of this stock in the 
 manner then provided by statute would be a vested right, 
 which could not be interfered with by the Legislature, 
 even under the provisions of our law which reserved to 
 the State the right to alter or amend the charters of cor- 
 porations or the laws governing the same. In other words, 
 the limitations placed by this Act on the right of a cor- 
 poration to sell its stock, the manner of its sale and the 
 method of its contracting with parties for the sale of the 
 same are not the regulation of an existing right, but in 
 many respects the destruction of an existing right and 
 are such character of regulation as to substantially im- 
 pair the rights of a corporation whose stock was issued 
 under the old law or whose capital or increased capital 
 was provided for under the old law. The rule is stated 
 thus by Judge Cooley in his great work on Constitutional 
 Limitations : 
 
 "The maxim, Sic utere tuo ut alienum non laedas, 
 is that which lies at the foundation of the power; and 
 to whatever enactment affecting the management and 
 business of private corporations it cannot fairly be 
 applied, the power itself will not extend. It has ac- 
 cordingly been held that when a corporation was char- 
 tered with the right to take toll from passengers over 
 their road, a subsequent statute authorizing a certain 
 class of persons to go toll free was void. This was 
 not a regulation of existing rights, but it took from 
 the corporation that which they before possessed, 
 namely, the right to tolls, and conferred upon indi- 
 viduals that which before they had not, namely the 
 privilege to pass over the road free of toll. Towers,
 
 88 LAW OF OIL AND NATURAL GAS 
 
 it is said in another case, 'which can only be justified 
 on this specific ground (that they are police regula- 
 tions), and which would otherwise be clearly prohib- 
 ited by the Constitution, can be such only as are so 
 clearly necessary to the safety, comfort, and well-be- 
 ing of society, or sr imperatively required by the 
 public necessity, as tt lead to the rational and satis- 
 factory conclusion that the framers of the Constitu- 
 tion could not, as men of ordinary prudence and fore- 
 sight, have intended to prohibit their exercise in the 
 particular case, notwithstanding the language of the 
 prohibition would otherwise include it.' And it was 
 therefore held that an act subsequent to the charter 
 of a plank road company, and not assented to by the 
 corporators, which subjected them to a total forfeiture 
 of their franchises for that which by the charter was 
 cause for partial forfeiture only, was void as im- 
 pairing the obligation of contracts. And even a pro- 
 vision in a corporate charter, empowering the Legis- 
 lature to alter, modify, or repeal it would not author- 
 ize a subsequent act which, on pretense of amendment, 
 or of a police regulation would have the effect to 
 appropriate a portion of the corporate property to 
 the public use. And where by its charter the corpo- 
 ration was empowered to construct over a river a 
 certain bridge, which must necessarily constitute an 
 obstruction to the navigation of the river, a subse- 
 quent amendment making the corporation liable for 
 such obstruction was held void, as in effect depriving 
 the corporation of the very right which the charter 
 assured to it. So where the charter reserved to the 
 Legislature the right of modification after the corpo- 
 rators had been reimbursed their expenses in con- 
 structing the bridge, with twelve per cent interest 
 thereon, an amendment before such reimbursement, 
 requiring the construction of a fifty-foot draw for 
 the passage of vessels, in place of one of thirty-two 
 feet, was held unconstitutional and void." (Cooley's 
 Constitutional Limitations, pp. 710-712.)
 
 89 
 
 So we suggest that if any construction other than that 
 which we give this law should be given it, then serious 
 constitutional objections are met with, and we believe that 
 it is proper for us to give the Act a construction which 
 will make it in this respect constitutional. The general rule 
 is that a statute should not be held invalid if it can be 
 so construed, considering all its provisions, as to make it a 
 valid one, and a construction which would render the 
 statute unconstitutional will not be adopted where a con- 
 stitutional purpose can fairly be derived from its terms. 
 
 Brown vs. City of Galveston, 97 Texas, 1. 
 Robinson vs. Varnell, 16 Texas, 382. 
 G. H. & S. A. Ry. Co. vs. State, 93 S. W., 464. 
 Runge & Co. vs. Wyatt, 25 Texas Supp., 292. 
 Womack vs. Womack, 17 Texas, 1. 
 Madden vs. Hardy, 92 Texas, 613. 
 
 So on the whole we conclude, and so advise you, that the 
 Blue Sky Law does not apply to the increased capital 
 stock of corporations where such increase was made prior 
 to the time the Act took effect, and that it does not apply 
 to the capital stock of corporations which were incorpo- 
 rated prior to the time the Act took effect. Of course, the 
 Act will apply to all increases of capital stock made after 
 the Act took effect, whether such corporations were in- 
 corporated prior to that time or since that time, provided, 
 of course, the corporations are not within the exceptions 
 specified in the Act. 
 
 2. 
 
 (a) You are advised that the following classes of cor- 
 porations are exempt from the provisions of this Act : All 
 corporations, or the promoters thereof, which do not di- 
 rectly or indirectly agree to pay any commission, pro- 
 motion, organization or other fees or expenses incident 
 to the sale of its stock, unless, of course, such corporations 
 are mining, oil, gas or townsite corporations; in the event 
 a corporation is a mining, oil, gas or townsite corpora-
 
 90 LAW OF OIL AND NATURAL GAS 
 
 tion, then the provisions of the Act apply regardless of 
 whether or not a promotion fee or other fee incident to 
 the sale of the stock is charged. 
 
 (b) The terms of the Act do not apply to any national 
 bank nor to any corporation having a charter granted 
 under any Act of Congress or of the United States, nor to 
 any State bank or bank and trust company or to any 
 trust company organized under the laws of this State, nor 
 to any corporation organized under the Federal Reclama- 
 tion Act, approved June 17, 1902, or the regulations es- 
 tablished by the Secretary of the Interior in pursuance 
 thereof. Nor do the terms of the Act apply to any cor- 
 poration or the promoters of any corporation organized 
 under the laws of Texas which does not sell or contract 
 to sell its stock to more than twenty-five bona fide purchas- 
 ers, provided, of course, such corporation does not act as 
 agent or trustee, holding company or sales company in 
 the promotion of any concern which is included under the 
 terms of this Act. 
 
 This exemption applies to mining, oil, gas and townsite 
 corporations the same as it does to other corporations. 
 
 (c) The Act does not apply to any railroad or railway 
 corporation or interurban railroad or railway company 
 or to any street railroad or railway company. 
 
 (d) Nor does the Act apply to the sale of stock of 
 the corporation by a bona fide owner of the same who in 
 good faith bought the same and who in the purchase and 
 sale of the same is not acting directly or indirectly as a 
 promoter or agent of such corporation; and 
 
 (c) Nor does the Act apply to a bona fide stock or 
 stock broker in the sale of stock, which stock has been by 
 such corporation sold and issued to a bona fide purchaser 
 prior to the offering of same for sale by such broker; pro- 
 vided, of course, that such purchaser or broker was not 
 acting, directly or indirectly, as promoter of such cor- 
 poration.
 
 LAW OF OIL AND NATURAL GAS 91 
 
 3. 
 
 Among the other questions propounded by you is the 
 following : 
 
 "Does Chapter 32, Acts of the First Called Session 
 of the Thirty-third Legislature, apply to townsite, 
 mining, oil and gas corporations incorporated under 
 the laws of this State where all of the increase is paid 
 in cash or paid out of the surplus earnings of the 
 corporation?" 
 
 We answer this question and state that where the pur- 
 pose of the corporation is to sell the stock upon its in- 
 creased capital, then that such corporation comes under 
 the terms and provisions of the law regardless of whether 
 or not the increased capital was paid in cash or whether 
 the stock is issued against the surplus earnings of the cor- 
 poration, but where the increased capital is paid in by 
 the existing stockholders and stock is issued directly to 
 them, or where the stock is issued against the surplus 
 earnings of the company in the nature of a stock dividend 
 and no promotion fee of any kind is charged, then the cor- 
 poration in that matter does not come under the provisions 
 of the law; the reason being that no sale of the stock is 
 made and the purpose of the Act is to regulate, as stated 
 in the caption, "the sale and purchase in this State of 
 stocks, etc." 
 
 Any act of the corporation which does not amount to a 
 sale of stock by it or by promoters for it would not be 
 subject to the provisions of the law, except, of course, 
 where such act is material to the sale of the stock, when 
 it might or might not come under the provisions of the 
 law, depending on the nature and quality of the act. 
 
 4. 
 
 We now direct your attention to a portion of Section 3 
 of this Act, which is wholly void and of no effect, and
 
 92 LAW OF OIL AND NATURAL GAS 
 
 should be disregarded by you. This part of the section 
 is as follows: 
 
 "No corporation proposed to be organized for the 
 purpose of buying or selling townsites and town lots 
 shall hereafter be granted a charter by the Secretary 
 of State, or if a foreign corporation shall not be 
 granted a permit to do business in the State of Texas, 
 unless the incorporators of said proposed corporation 
 or officer of such foreign corporation shall file with 
 the Secretary of State each and every document, con- 
 tract and all papers referred to in Section 3 of this 
 Act, as well as a general statement of the plan of 
 its proposed townsite, and a general statement of its 
 methods of advertising same, together with a sample 
 copy of its advertising literature, and no charter shall 
 be granted any corporation unless after the compli- 
 ance with the provisions of this Act and in the judg- 
 ment of the Secretary of State, such business of any 
 proposed townsite corporation will be honestly and 
 fairly conducted both to the corporation and to the 
 public. And each and every corporation in this State 
 now existing or hereafter organized desiring to en- 
 gage in the sale of townsite lots or sites shall, prior 
 to such sale, file with the Secretary of State a general 
 plan of said proposed lots to be sold, as well as a copy 
 of any and all proposed contracts to be made with the 
 public in the sale thereof, and a general statement 
 of the literature proposed to be issued, and all matter 
 referred to in Section 3 hereof, and if in the judgment 
 of the Secretary of State said sale will be conducted 
 both honestly and fairly to the corporation and to 
 the public a permit to conduct said sale shall be 
 granted. This provision shall not be construed to 
 authorize the creation of any corporation for any pur- 
 pose not now authorized by the laws of this State." 
 
 It will be noted from a reading of the foregoing excerpt 
 from the Act that it relates wholly and solely to the incor- 
 poration of townsite corporations and the conduct of the
 
 LAW OF OIL AND NATURAL GAS 93 
 
 business of townsite companies in the sale of town lots. 
 In other words, it requires certain conditions of townsite 
 companies before they may be incorporated, and requires 
 them to obtain a permit on certain conditions before they 
 may be permitted to sell their lots. This subject is one 
 entirely foreign to the general purposes of the bill and 
 has no relations to the sale and purchase of stocks. We 
 do not know the history of its incorporation in the pro- 
 visions of this measure, but it is very clear that the subject 
 of the provision quoted above is not embraced within the 
 caption of the Act and such omission to place it in the 
 caption is fatal to the provision. 
 
 We direct your attention to Section 35, Article 3, of our 
 Constitution, which provides: 
 
 "No bill (except general appropriation bills, which 
 may embrace the various subjects and accounts, for 
 and on account of which moneys are appropriated) 
 shall contain more than one subject, which shall be 
 expressed in its title. But if any subject shall be em- 
 braced in an act which shall not be expressed in the 
 title, such act shall be void only as to so much thereof 
 as shall not be so expressed." 
 
 We have already quoted the caption or title of this Act, 
 and it is not necessary here to re-state the same, but the 
 title of the Act has to do only with the supervision of the 
 purchase and sale of stocks and in no part of the same 
 makes any reference to imposing terms upon which town- 
 site companies may be incorporated or imposing terms 
 under which townsite companies may be permitted to sell 
 their town lots. The title in substance is: 
 
 "An Act to regulate and supervise the sale and pur- 
 chase in this State of stocks of private, foreign and 
 domestic corporations which propose to increase their 
 capital stock; and to regulate and supervise the sale 
 and purchase, in this State, of stocks of private, foreign 
 and domestic corporations being organized, etc."
 
 94 LAW OF OIL AND NATURAL GAS 
 
 There is absolutely nothing in the title to the Act indi- 
 cating any intention to pass a law regulating the incor- 
 poration of townsite companies or the sale of town lots. 
 Therefore, so much of the Act as we have just quoted 
 above, relative to incorporating townsite companies and 
 the sale and obtaining permits to sell town lots by such 
 companies, is unconstitutional, void, of no effect and 
 should be disregarded by you. 
 
 Art. 3, Sec. 35, of the Constitution. 
 M. K. & T. Ry. Co. vs. The State, 102 Texas, 155. 
 Clark vs. Commissioners, 54 Kansas, 634. 
 Henderson vs. Insurance Co. 20 L. R. A., 829. 
 State vs. Co. Comm., 47 Neb., 428. 
 
 In the case of M. K & T. Ry. Co. vs. State, cited above, 
 the caption of the bill denned it to be: "An Act to pro- 
 tect the rights and property of the traveling public and the 
 employes of the railroads in the State of Texas." The first 
 and second sections of the Act made it unlawful for rail- 
 road companies to run any passenger train, freight train, 
 or light engine outside of the yard limits with less than 
 the full crews of the number of men specified for each. 
 The Supreme Court of this State held that the caption was 
 wholly insufficient and that it did not express the subject 
 of the Act. In passing upon the .question, the court said : 
 
 "Is that subject expressed in the title? We think it 
 clear it is not. The title no more expresses and di- 
 rects attention to that subject than it would to any 
 other legislation which might have been written under 
 it, the tendency of which might have been to protect 
 the lives and property of the traveling public and of 
 railroad employes, such as laws directed against rob- 
 bers, the obstruction of or injury to tracks, interfer- 
 ence with cars and engines, or regulating the conduct 
 of persons at crossings, or the giving of signals, and 
 numerous others that might be instanced. A title so 
 general as that of this Act gives no intimation of the
 
 LAW OF OIL AND NATURAL GAS 95 
 
 particular subject to which the body of the Act is con- 
 fined. That which is expressed in the title is not the 
 subject of the Act, but the general end or purpose to 
 be subserved. * * * The title must not only ex- 
 press a subject, but must express that which is dealt 
 with in the body of the Act. No authority but the 
 plain language of the Constitution is needed for that 
 purpose." 
 
 The evident purpose of the Constitution in requiring 
 that the subject should be stated in the bill and that there 
 should not be two purposes in any one bill, was to prevent 
 (a) hodge podge or log-rolling legislation; (b) to prevent 
 surprise or fraud upon the Legislature by means of pro- 
 visions in bills, of which the titles give no intimation, and 
 which might, therefore, be overlooked and carelessly or 
 unintentionally adopted; and (c) to fairly apprise the peo- 
 ple through such publication of legislation as is usually 
 made of the subjects of legislation that are being consider- 
 ed, in order that they may have an opportunity of being 
 heard by petition or otherwise, if they shall desire. (Cooley 
 on Constitutional Limitations, p. 172.) 
 
 Concerning this matter Judge Cooley has said: 
 
 "1. The Evils Designed to be Remedied. The Con- 
 stitution of New Jersey refers to these as 'the im- 
 proper influences which may result from intermixing 
 in one and the same act such things as have no proper 
 relation to each other.' In the language of the Su- 
 preme Court of Louisiana, speaking of the former 
 practice: 'The title of an Act often afforded no clue 
 to its contents. Important general principles were 
 found placed in Acts, private or local in their opera- 
 tion; provisions concerning matters of practice or ju- 
 dicial proceedings were sometimes included in the 
 same statute with matters entirely foreign to them, 
 the result of which was that on many important sub- 
 jects the statute law had become almost unintellig-
 
 96 LAW OF OIL AND NATURAL GAS 
 
 ible, as they whose duty it has been to examine or act 
 under it can well testify. To prevent any further 
 accumulation to this chaotic mass was the object of 
 the constitutional provision under consideration.' The 
 Supreme Court of Michigan say: 'The history and 
 purpose of this constitutional provision are too well 
 understood to require any elucidation at our hands. 
 The practice of bringing together into one bill sub- 
 jects diverse in their nature and having no necessary 
 connection, with a view to combine in their favor the 
 advocates of all, and thus secure the passage of sev- 
 eral measures, no one of which could succeed upon 
 its own merits, was one both corruptive of the legisla- 
 tor and dangerous to the State. It was scarcely more 
 so, however, than another practice, also intended to 
 be remedied by this provision, by which, through dex- 
 terous management, clauses were inserted in bills of 
 which the titles give no intimation, and their passage 
 secured through legislative bodies whose members 
 were not generally aware of their intention and ef- 
 fect. There was no design by this clause to embar- 
 rass legislation by making laws unnecessarily restrict- 
 ive in their scope and operation, and thus multiplying 
 their number; but the framers of the Constitution 
 meant to put an end to legislation of the vicious char- 
 acter referred to, which was little less than a fraud 
 upon the public, and to require that in every case 
 the proposed measure should stand upon its own 
 merits, and that the Legislature should be fairly sat- 
 isfied of its design when required to pass upon it.' 
 The Court of Appeals of New York declare the ob- 
 ject of this provision to be 'that neither the members 
 of the Legislature nor the people should be misled by 
 the title.' The Supreme Court of Iowa say: 'The 
 intent of this provision of the Constitution was, to 
 prevent the union, in the same Act, of incongruous 
 matters, and of objects having no connection, no re- 
 lation. And with this it was designed to prevent sur- 
 prise in legislation, by having matter of one nature
 
 LAW OF OIL AND NATURAL GAS 97 
 
 embraced in a bill whose title expressed another.' 
 And similar expressions will be found in many other 
 reported cases. It may, therefore, be assumed as set- 
 tled that the purpose of these provisions was: First, 
 to prevent hodge-podge or 'log-rolling' legislation; 
 second, to prevent surprise or fraud upon the Legisla- 
 ture by means of provisions in bills of which the titles 
 gave no intimation, and which might therefore be 
 overlooked and carelessly and unintentionally adopted ; 
 and, third, to fairly apprise the people, through such 
 publication of legislative proceedings as is usually 
 made, of the subjects of legielation that are being 
 considered, in order that they may have opportunity 
 of being heard thereon, by petition or otherwise, if 
 they shall so desire." 
 
 However, the mere fact that that portion of the Act 
 just above quoted by us is unconstitutional does not neces- 
 sarily render the Act void, for the reason that the Con- 
 stitution itself has provided against just such a contin- 
 gency, for the constitutional provision referred to con- 
 tains this clause: 
 
 "But if any subject shall be embraced in an Act 
 which shall not be expressed in the title, such Act 
 shall be void only as to so much thereof, as shall 
 not be so expressed." 
 
 In holding that portion of the Act quoted and here 
 under consideration unconstitutional and void we have 
 given this Act the most considerate and tenderest con- 
 struction which we could give it. If we were to hold 
 that the portion of the Act quoted was embraced within 
 the caption, then very clearly the caption would contain 
 two subjects and would be in violation of the Constitution 
 and the whole Act rendered void. 
 
 82 Texas, 496. 
 
 San Antonio vs. Gould, 34 Texas, 49. 
 
 State vs. McCracken, 42 Texas, 383.
 
 98 LAW OF OIL AND NATURAL GAS 
 
 We have preferred, therefore, to give the Act a con- 
 struction which, if possible, will render it constitutional 
 by eliminating from the Act the unconstitutional and 
 void provision referred to and quoted. We have here- 
 tofore cited authorities showing that this is a correct 
 rule of construction. It is also one generally recognized 
 by the courts of the country. (Cooley's Constitutional 
 Limitations, p. 177.) 
 
 5. 
 
 The next question for consideration is that suggested 
 in your letter of December 24th and answered in our 
 departmental opinion No. 1079, which question was 
 whether or not the Blue Sky Law would apply to the 
 sale of stocks made in this State under a contract with 
 a foreign corporation, where the contract was made prior 
 to the enactment of the Blue Sky Law. 
 
 In reply to this inquiry, we beg to advise you that 
 if the foreign corporation referred to had secured its 
 charter and was in all things duly incorporated prior 
 to the enactment of the Blue Sky Law, then the sale 
 of its stock would not come within the terms and pro- 
 visions of the Blue Sky Law; in other words, the opinion 
 heretofore rendered you is as applicable to foreign cor- 
 porations as it is to domestic corporations. It is un- 
 necessary for us to enter into a detailed discussion to sup- 
 port the view here expressed, but we call your attention 
 to the caption of the Blue Sky Law. That part to 
 which we direct your attention reads as follows: 
 
 "An Act to regulate and supervise the sale and 
 purchase, in this State, of stocks of private, foreign 
 and domestic corporations organized for profit, which 
 propose to increase their capital stock; and to regu- 
 late and supervise the sale and purchase, in this* 
 State, of stocks of private, foreign and domestic 
 corporations being organized or hereafter organized 
 or proposed to be organized, for profit; * * *"
 
 LAW OF OIL AND NATURAL GAS 99 
 
 You will note from the foregoing that the caption covers 
 three classes of corporations or proposed corporations : 
 
 (1) Foreign and domestic corporations already char- 
 tered but which propose to increase their capital stock. 
 
 (2) Proposed domestic or foreign corporations being 
 organized but which have not received their charters; and 
 
 (3) Proposed corporations, that is, corporations which 
 may be proposed to be organized after the Blue Sky Law 
 goes into effect. t 
 
 Section 1 of the Act is not quite so definite as the cap- 
 tion and embraces the two classes named above in one 
 provision, that is, it classifies them as proposed cor- 
 porations. That part of Section 1, to which it is necessary 
 to refer, reads as follows: 
 
 "Every private corporation, foreign or domestic, 
 organized for profit, which is now attempting or 
 shall hereafter attempt to increase its capital stock, 
 and every proposed corporation attempted to be 
 organized, etc. * ' * *" 
 
 It is very clear, therefore, from the caption and the 
 first section of the Act that it does not apply to the sale 
 of the original stock of either a domestic or foreign 
 corporation where such corporation was chartered before 
 the Blue Sky Law went into effect. However, if such 
 domestic or foreign corporation had not been fully 
 chartered, that is to say, if it was merely in a process 
 of promotion, or had merely secured a permit to organize 
 a corporation, as is necessary in some of the States, then 
 the Blue Sky Law would apply to the sale of its stock in 
 Texas, except to that portion of the stock which had 
 already been sold or which had been contracted to be 
 sold prior to the enactment of the Blue Sky Law. The 
 exception is embraced within Section 4 of the Blue Sky 
 Law, and is, in part, as follows: 
 
 "Provided, that where any proposed corporation 
 has already sold its stock, or a part thereof, or any
 
 100 LAW OF OIL AND NATURAL GAS 
 
 part thereof has been subscribed at the time this 
 Act shall take effect, this Act shall not affect stock 
 previously sold or subscribed nor any contracts made 
 with reference to same; but if any of the stock of 
 said proposed corporation remains unsold or un- 
 subscribed, said corporation shall, nevertheless, be 
 entitled to a permit upon complying with the other 
 conditions of this Act, including the future sale or 
 subscription of any of its stocks. * * *" 
 
 # 
 
 This, of course, means that if the stock in a proposed 
 corporation is sold or subscribed for previous to the en- 
 actment of the Blue Sky Law, then such law should not 
 apply to so much of the stock as was subscribed or sold, 
 but that the Blue Sky Law did, as to such proposed 
 corporation, apply to all unsubscribed or unsold stock at 
 the time the Blue Sky Law went into effect. 
 
 It is not very clear from the letter, attached to your 
 communication, whether or not the corporation to which 
 he refers had already been chartered at the time the Blue 
 Sky Law went into effect. If it had been chartered and 
 the corporation stock referred to was the original capital 
 stock of the corporation, then, of course, the sale of that 
 stock would not be under the Blue Sky Law; but if the 
 corporation had not been chartered but was merely in 
 the process of organization, then the Blue Sky Law would 
 apply. In such case, the mere fact that a contract had 
 been made to sell the stock of such proposed corporation 
 prior to the enactment of the Blue Sky Law would be 
 immaterial, as such contract would subordinate the right 
 of the State to regulate the sale of stocks within its boun- 
 daries. This question would probably be presented if the 
 corporation was already chartered and was offering for 
 sale its capital stock, and it is probable that the purpose 
 of the Legislature in writing the law as written was to 
 keep this suggested question from arising.
 
 LAW OF OIL AND NATURAL GAS 101 
 
 6. 
 
 The next question for consideration is whether or 
 not promotion fees, commissions, organization fees, and 
 other incidental expenses incurred prior to the chartering 
 of the corporation may be paid out of the capital stock of 
 the corporation, or must such fees be paid out of the 
 par value of the capital stock of the corporation? 
 
 The answers to this question involves an examination 
 into two other questions: 
 
 (a) The nature of the services rendered by the pro- 
 moter, stock salesman, or other person bringing into ex- 
 istence the corporation or selling its stcok. 
 
 (b) The constitutional and statutory method of pay- 
 ing in the capital stock of corporations chartered under 
 the laws of Texas. 
 
 We will consider the questions in the order named. 
 
 Section 1, Chapter 32, General Laws of the First Called 
 Session of the Thirty-third Legislature, appears to divide 
 the pre-corporate expenses of a corporation into two 
 general classes. The first class consists of those expen- 
 ditures designated as "any commission, promotion or 
 organization fee or other expenses incident, directly 
 or indirectly, to the sale of its shares of stock," and the 
 second class is composed of "attorney's fees, charter fees, 
 franchise tax, permit fees, and stationery and supplies." 
 
 It is only those corporations in a general way which 
 are brought into existence by incurring the first class 
 expenditures that come within the terms of the Blue Sky 
 Law. Section 2 of the Act designates certain corporations 
 which come within the law, however, regardless of the 
 question of incurring the expenses mentioned in the 
 first class designated, but it is not necessary in this para- 
 graph of this, opinion to discuss those exceptions. The 
 second class of expenses, it will appear, may be incurred 
 by the corporation, or assumed by it, after its organiza- 
 tion, without bringing the corporation within the terms 
 of the Blue Sky Law. For the purpose of convenience 
 we will designate all the various expenditures referred
 
 102 LAW OF OIL AND NATURAL GAS 
 
 to in the first class as taken from Section 1 of the Act 
 as promotion fees ; that is, for the purpose of this opinion, 
 we describe commissions, promotion fees, organization 
 fees, and other expenses incident, directly or indirectly, 
 to the sale of shares of corporate stock as promotion fees. 
 A promoter is one who actively engages in the financ- 
 ing and organization of an enterprise under the corporate 
 form; promoters have been defined by an eminent author- 
 ity as persons who bring about the incorporation and 
 organization of corporations. 
 
 Conyngton on Corporate Organization, Sec. 225. 
 Cook on Corporations, Sec. 650. 
 Dickerman vs. Northern Trust Co., 176 U. S., 203. 
 Thompson on Corporations, Sec. 415. 
 
 It may be stated, therefore, that the purpose of the 
 promoter is to bring into existence a corporation, but 
 the contracts made by him in carrying into effect this 
 purpose are not contracts with the corporation, but only 
 contracts between the promoter and the incorporators, or 
 between the incorporators themselves. The corporation 
 must have a full and complete organization and existence 
 as a legal entity before it can enter into any kind of 
 contract or transact any business. The doctrine which 
 obtains generally in the United States and which has 
 been adopted in Texas is, that engagments of promoters do 
 not bind the future corporation, unless the corporation, 
 expressly or impliedly, ratifies them. The corporation 
 may, after its creation, of course, ratify agreements 
 which are within its corporate powers, but the contract of 
 the promoter himself is not the contract of the corpor- 
 ation, and, therefore, the services rendered by him are 
 not services for the corporation. 
 
 Thompson on Corporations, Sec. 480. 
 W. M. W. & N. W. Ry. Co. vs. Granger, 86 Texas, 
 352 et seq. 
 Conyngton on Corporate Organization, Sec, 229.
 
 LAW ->F OIL AND NATURAL GAS 103 
 
 The Granger case, *,apra, defines the status of a pro- 
 moter and the rights of those contracting with him in 
 line with the propositions just made by us, and is alto- 
 gether a very clear and convincing opinion written by 
 Judge Gaines while he was Associate Justice of the Su- 
 preme Court of this State. In the opinion referred to 
 this rule is stated as follows: 
 
 "It is generally held, that in the absence of such 
 provision in the act of incorporation in case of a 
 special charter, or in the general law or in the 
 articles of incorporation under a general law, no 
 implied promise can be imputed to a corporation to 
 pay for the services of a corporator or promoter be- 
 fore the corporation comes into existence. A contract 
 made by promoters may be adopted by a corporation, 
 expressly or impliedly, by exercising rights under it; 
 but otherwise it is not binding upon such corpora- 
 tion." (86 Texas, 356.) 
 
 In its opinion the court held also that services given 
 by an attorney in preparation of the articles of incorpora- 
 tion which are usually necessary services, if made under 
 a contract with the promoter, could not be collected from 
 the corporation after it was chartered, unless the cor- 
 poration, after it came into existence, agreed to pay the 
 same. The court said: 
 
 "Such services are usually necessary, and it would 
 seem that the corporation should pay for them. Such 
 payment is frequently provided for in the act of 
 incorporation, or in the articles when the incorpora- 
 tion is effected under a general law. When such 
 is the case, persons who take stock in the company 
 are chargeable with notice that a liability for this 
 purpose has already been created, and it is proper for 
 the corporation to discharge it. But in the absence 
 of such provision in the statute or in the articles, 
 it may be unjust to shareholders to charge the cor-
 
 104 LAW OF OIL AND NATURAL GAS 
 
 poration with liabilities of which they had no actual 
 knoivledge at the time they accepted the shares. We 
 therefore hold, with some hesitation, that claims for 
 the necessary expenses of the organization, under our 
 statute, should not be excepted from the general rule 
 applicable to contracts made before the corporation 
 has come into legal existence. (86 Texas, 357.) 
 
 It would appear, therefore, to be settled law of this 
 State that the expenditures heretofore referred to as 
 class 1, described in Section 1 of Chapter 32, supra, 
 and even the attorney's fees in class 2, described in said 
 section, when such expenditures are incurred or authoriz- 
 ed by the promoters, or in the promotion of the corpora- 
 tion, are not in any sense the liabilities of the corporation, 
 unless adopted by the corporation after it is chartered, 
 and that in all probability they could not be adopted by 
 the corporation over the protest of its stockholders, unless 
 the subscription contracts contain a clause showing the 
 subscriber that such expenditures would be adopted by 
 the corporation with its liabilities after the charter is 
 issued. The entire trend of authority would show, which 
 is the proposition we here submit, that services rendered 
 prior to the time the charter is granted are services which 
 are rendered to the incorporators themselves and not to 
 the corporation as such, and that therefore all labor done 
 or money expended in this direction is not necessarily 
 labor done for the corporation nor money expended for 
 it. It is true that there are certain expenses, such as 
 attorney's fees, charter fees, franchise tax, permit fees, 
 stationery and supplies, which are those expenditures re- 
 ferred to by us as class 2 of Section 1 of the Act, which 
 are in reality for the corporation and may be adopted 
 by it, but the expenditures referred to as class 1 of Sec- 
 tion 1 of the Act are not expenditures necessarily for the 
 corporation. 
 
 (c) We will next consider the constitutional and stat- 
 utory method of paying in the capital stock of corporations 
 chartered under the laws of this State.
 
 LAW OF OIL AND NATURAL GAS 105 
 
 The Constitution of this State in Article 12, Section 6, 
 provides : 
 
 "No corporation shall issue stocks or bonds except 
 for money paid, labor done, or property actually re- 
 ceived, and all fictitious increase of stock or indebt- 
 edness shall be void." 
 
 Analyzed, this section of the Constitution means that 
 the corporation cannot issue its stock except for-: (1) 
 Money paid to the corporation; (2) labor done for the 
 corporation; (3) property actually received by the cor- 
 poration. The courts have held that the money paid to 
 the corporation must not be less than the par value of 
 the stock and that where paid up stock of a corporation 
 has been issued to subscribers for double the amount of 
 their subscription, they are liable for the unpaid part 
 of their stock if debts were contracted by the corporation 
 before they transferred the stock. 
 
 Nenny vs. Waddill, 25 S. W., 308. 
 Mathis vs. Pridham, 20 S. W., 1015. 
 Thompson on Corporations, Sees. 1652, 1653, 1578, 1579, 
 1582, 1583, 1685. 
 
 The term "paid up, non-assessable stock" can only mean 
 stock that is made non-assessable by reason of the fact 
 that the amount for which it calls has been fully paid. 
 Street Railway Co. vs. Adams, 87 Texas, 130. 
 
 The word "property," as used in the Constitution, must 
 be something substantial; the terms in which this sec- 
 tion of the Constitution referred to is expressed show 
 that it was intended that the assets of the corporation 
 should be something substantial and of such a character 
 that they could be subjected for the payment of claims 
 against the corporation, as well as to secure the share- 
 holders in their rights in the capital stock. O'Bear- 
 Nester Glass Co. vs. Antiexplo Co., 101 Texas, 431. 
 
 The term "'money paid" is very definite and plain and
 
 106 LAW OF OIL AND NATURAL GAS 
 
 does not mean that stock can be sold for money to be 
 paid, but must be sold for cash. Of course, it can be 
 paid for in installments, but it must be paid for in money, 
 or in property actually received or by labor actually per- 
 formed for the company. San Antonio Irrigation Co. vs. 
 Deutschmann, 102 Texas, 201. 
 
 It is obvious also that the property which the corpora- 
 tion is authorized to receive in payment of its stock must 
 be such property as the corporation has authority under 
 its charter to take and hold. If the property is not 
 necessary to the conduct of its authorized business, then 
 any contract for its purchase, either for stock or cash, 
 is, unless expressly permitted by its charter, ultra vires, 
 and stock issued therefor would not be paid up stock. 
 
 Conyngton on Corporate Organization, Sec. 222. 
 Powell vs. Murray, 3d Appel. Div. (N. Y.), 273. 
 Montgomery vs. Brush El. Co., 48 App. Div. (N. Y.), 12. 
 Thompson on Corporations, Sees. 1604, 1605, 1606, 1643. 
 
 Mr. Thompson in his work thus states the rule: 
 
 "A corporation cannot accept payment for shares in 
 specific property, unless such property is of a kind 
 which the corporation is authorized by law to take 
 and hold. Thus a railway company which is not author- 
 ized to receive and hold lands and goods cannot accept 
 payment for its shares in lands or goods. (Sec. 1643.) 
 * * * And even where the statute or other govern- 
 ing instrument, by its terms, requires payment in 
 money, yet unless the language is such as to im- 
 port a prohibition of anything but money, the 
 courts are generally agreed that payment may be 
 made in any kind of property which the corporation 
 may lawfully purchase in the prosecution of its 
 business, provided it be done in good faith. The 
 reason is that the law is practical in its require- 
 ments and does not require the parties to such a con- 
 tract to do the vain thing of the subscriber finding
 
 LAW OF OIL AND NATURAL GAS 107 
 
 money wherewith to pay his subscription, and the 
 corporation then handing the money back to him 
 in payment of property which it desires to purchase 
 of him. That circumlocution may be avoided, and 
 the property may be conveyed directly in satisfaction 
 of what the subscriber owes for his shares. The 
 general rule, then, is that if 'a man contracts to 
 take shares, he must pay for them/ to use a homely 
 phrase, 'in meal or in malt.' He must either pay 
 in money or in money's worth; if he pays in one 
 or the other, that will be a satisfaction. He may 
 pay in any kind of property or services which the 
 corporation has power to purchase for its use, pro- 
 vided the transaction be had in good faith and the 
 property conveyed at a fair valuation." Thompson 
 on Corporations, Sec. 1605. 
 
 It will appear from a consideration of these authorities 
 that the money referred to in the Constitution must be 
 paid to the corporation; that the property referred to 
 must be such property as the corporation can use and 
 be delivered to the corporation; and it would follow, we 
 think, that the labor to be performed, as referred to 
 in the Constitution, must be labor performed for the 
 corporation. Since we have concluded that the labor 
 performed by a promoter in promoting the corpora- 
 tion and the expenditures incurred by him outside 
 of attorney's fees and preparation of the charter, charter 
 fees, franchise tax fees, permit fees, and stationery and 
 supplies are incurred, not for the corporation but for 
 the incorporators, it must follow that the class of ex- 
 penditures herein generally defined as promoters fees, and 
 being the first class expenditures referred to in Sec- 
 tion 1, Chapter 32, supra, are not expenditures or services 
 for and on behalf of the corporation, and, therefore, can 
 form no part of the capital stock of the corporation; for 
 the reason that this class of expenditures or service 
 are not money paid to the corporation nor property re- 
 ceived by the corporation nor labor done for the corpora-
 
 108 LAW OF OIL AND NATURAL GAS 
 
 tion, and stock, under our Constitution, could not be issued 
 in payment therefor. 
 
 It follows from the foregoing that commissions, pro- 
 motion fees, organization fees, and other expenses in- 
 cident, directly or indirectly, to the sale of the shares 
 of the capital stock of the corporation cannot be paid out 
 of the par value of the capital stock of the corporation; 
 and, if such fees are paid by the corporation, then they 
 must be paid by an amount collected over and above the 
 par value of the capital stock of the corporation. At- 
 torney's fees, charter fees, franchise taxes, permit fees, 
 and expenditures for stationery and supplies, although 
 incurred prior to the filing of the articles of incorporation, 
 may be paid out of the capital stock of the corporation 
 after its charter is granted. 
 
 We believe that the foregoing answers substantially 
 the various questions propounded to us by your de- 
 partment. Yours very truly, 
 
 C. M. CURETON, 
 Assistant Attorney General. 
 
 This opinion has been passed upon, approved by the 
 department in executive session, and is now ordered 
 recorded. B. F. LOONEY, 
 
 Attorney General. 
 
 NOTE. The correctness of the conclusions reached by the Attorney- 
 General on the last point considered the sixth in the foregoing 
 opinion, may be questioned. The statute deals with the expenses of 
 promotion, commissions on stock sales, etc., incurred before as well as 
 after the corporation was created, and apparently subjects both to th^ 
 same rule. They are limited in amount, are required to be disclosed 
 to the purchaser of stock, and must be made known to the Secretary 
 of State as a prerequisite for obtaining- permit to sell stock. Before 
 the passage of this Act such expenses incurred after incorporation 
 were debts which it could be compelled to pay out of its capital. Those 
 incurred before incorporation were not its debts and it could not 
 ordinarily be held for them. See note, ante, pp. 25-26. Also Weather- 
 ford, etc., Ry. Co. vs. Granger, 86 Texas. 350. But this would hardly 
 be the case, even under the above decision, where such payment w;is 
 contemplated in the original plan of organization, and the stock pur- 
 chased with distinct notice of this fact; and this announced plan and 
 notice to purchasers of stock is secured by the present statute.
 
 LAW OF OIL AND NATURAL GAS 109 
 
 MINERAL RIGHTS IN LAND OWNERSHIP, TRANS- 
 FER AND MINING. 
 
 1. 
 
 WHAT ARE MINERALS. 
 
 All constituents of the earth's crust, whether solid, 
 liquid, or fluid. Thus petroleum is a mineral. Texas Co. vs. 
 Daugherty, Sup. Ct, 176 S. W., 717; S. C. in Civ. App., 
 160 S. W., 129; Swayne vs. Lone Acre Oil Co., 98 Texas, 
 597, 86 S. W., 740, affirming 78 S. W., 380; Southern Oil 
 Co. vs. Colquitt, 28 Texas Civ. App., 292; 69 S. W., 169. 
 And also natural gas. Texas Co. vs. Daugherty, Sup. 
 Ct., 176 S. W., 717; S. C. in Civ. App., 160 S. W., 130; Ohio 
 Oil Co. vs. Indiana, 177 U. S., 190; Westmorland Etc. 
 Nat. Gas Co. vs. DeWitt, 130 Pa. St., 465, 5 L. R. A., 731. 
 
 2. 
 
 OWNERSHIP. 
 
 Like other minerals, oil and natural gas belong to the 
 owner of the soil. Southern Oil Co. vs. Colquitt, 28 
 Texas Civ. App., 292, 69 S. W., 169. They pass by the 
 State's patent to its grantee. Heil vs. Martin, 70 S. W., 
 430; State vs. Parker, 61 Texas, 265. And by the ordi- 
 nary form of conveyance of title to the land. But being 
 part of the soil (Benavides vs. Hunt, 79 Texas, 383, 15 
 S. W., 396) conveyance must be in writing. Rev. Stats., 
 art. 1103. It should be acknowledged and recorded. Rev. 
 Stats., art. 6824. And where the land is homestead the 
 wife must join and make privy acknowledgement. South- 
 ern Oil Co. vs. Colquitt, 28 Texas Civ. App., 292, 69 
 S. W., 169. Title to the minerals, such as oil and gas, 
 where separated from that to the soil by conveyance, is 
 still an interest in real property and taxable as such. 
 Texas Co. vs. Daugherty, Sup. Ct., 176 S. W., 717 ; S. C. in 
 Civ. App., 160 S. W., 129.
 
 110 LAW OF OIL AND NATURAL GAS 
 
 But the title of the owner of the soil is modified by 
 the peculiar nature of the mineral in the case of petroleum 
 and natural gas. He has the exclusive right to seek them 
 in his own soil and reduce them to possession. But until 
 he has done so he has no recourse against any other pro- 
 prietor who, by tapping the same reservoir by borings 
 on his own land, draws them away from their situs and 
 reduces them to his own possession. Ohio Oil Co. vs. 
 Indiana, 177 U. S., 190. The same rule is recognized 
 in Texas in regard to subterranean waters which flow 
 or percolate through the soil; and it is held that the 
 right of any proprietor to draw them away from the 
 land of others into his own wells is absolute, and not 
 subject to the limitation of reasonable use or quantity. 
 Houston & T. C. Ry. Co. vs. East, 98 Texas, 146, 81 
 S. W., 279. 
 
 This peculiarity in the nature of fluid or liquid min- 
 erals has an important bearing on the question of the 
 right of the State to regulate oil and gas wells (Ohio Oil 
 Co. vs. Indiana, supra) and also upon the construction 
 and effect of leases and contracts for mining them, as 
 will appear by cases hereafter cited on that subject. 
 The right to such migratory and nomadic minerals has 
 been quaintly likened by the courts to that in animals 
 ferae naturae, which the proprietor of the land has the 
 exclusive privilege of hunting and capturing on his 
 own premises, but no claim upon them when they stray 
 to the lands of another. Ohio Oil Co. vs. Indiana, supra. 
 
 But such ownership of the oil and gas, when conveyed 
 separately by the owner of the soil to another, though 
 under the form of a mining lease giving rights to pros- 
 pect, develop and mine for a royalty, is not a mere 
 license giving the grantee no interest in the minerals till 
 mined and reduced to possession, but a grant to an inter- 
 est in the land, and taxable by the State as such. Texas 
 Co. vs. Daugherty, Sup. Ct, 176 S. W., 717; S. C. in Civ. 
 App,. 160 S. W., 129.
 
 LAW OF OIL AND NATURAL GAS 111 
 
 JOINT OR COMMON OWNERS. 
 
 Tenants in common being equally entitled to the pos- 
 session and use, either may open and work mines, or 
 convey to others his right to do so. But this is subject to 
 the rights of his cotenant who would be entitled to his 
 proportion of the proceeds after deducting the cost of 
 production. Swayne vs. Lone Acre Oil Co., 85 Texas, 
 597, 86 S. W., 740, affirming Lone Acre Oil Co. vs. Swayne, 
 78 S. W., 380. But where such cotenancy was only to 
 the extent of a life interest, and without the right to 
 mine (which would be to commit waste, and be permis- 
 sible to the life tenant only where his estate was created 
 by deed, not where created by operation of law, as by 
 inheritance) such life tenant would have no interest in 
 the product of the mines. Swayne vs. Lone Acre Oil Co., 
 95 Texas, 597, 86 S. W., 740. 
 
 TENANTS FOR YEARS. 
 
 The ordinary tenant for years, unless rights to minerals 
 were specificially conferred by his lease, has no right 
 to open mines or confer mining rights on others, since 
 he has no right to commit waste. Swayne vs. Lone Acre 
 Oil Co., supra. 
 
 OWNERS OF EASEMENTS. 
 
 One who owns a mere easement, or right of way over 
 land, has no right to its minerals and can convey none. Thus 
 a city could not sink wells in its public streets to obtain a 
 supply of water, where the title to the fee was in an adjoin- 
 ing lot owner. O'Neal vs. City of Sherman, 77 Texas, 182, 
 14 S. W., 31. This case followed Dubuque vs. Benson, 
 23 Iowa, 248, a case of mining lead in the street. A 
 different ruling was made in that State in a case of a 
 coal mine where the fee to the street was in the city. 
 Des Moines vs. Hall, 24 Iowa, 234. So it has been held 
 that a railway company could confer no right to mine for
 
 112 LAW OF OIL AND NATURAL GAS 
 
 oil on land over which it had a mere right of way, not 
 owning the fee. Right of Way Oil Co. vs. Gladys City 
 Oil G. & M. Co., 106 Texas, - , 157 S. W., 737, affirm- 
 ing Gladys City Oil G. & M. Co., vs. Right of Way Oil 
 Co., 137 S. W., 171; and this though the deed con- 
 veying the right of way granted "for the purpose of con- 
 structing, maintaining and operating its railroad" the 
 right to take and use all "timber, stone, earth and min- 
 erals" found within the right of way granted. This was 
 held to refer ouly to surface minerals, not to oil, though 
 the introduction of oil burning engines had rendered 
 that mineral useful in operating. (Id.) Conveyances 
 of land bounded on stieets, alleys or public roads carry 
 title to the center of such highway, if the grantor so 
 owns. Cocke vs. Texas & N. 0. Ry. Co., 46 Texas Civ. 
 App., 303, 103 S. W., 407; Wiess vs. Goodhue, 46 Texas 
 Civ. App., 142, 102 S. W., 793; Day vs. Chambers, 62 
 Texas, 190; Mitchell vs. Bass, 26 Texas, 372. But other- 
 wise as to boundary on right of way of railway. Couch 
 vs. Texas & P. Ry. Co., 99 Texas, 464, 90 S. W., 860. 
 
 RIVERS AND BAYS. 
 
 Riparian proprietors on seas or bays, and on tide 
 water streams, hold only to line of ordinary high tide. 
 Galveston vs. Menard, 23 Texas, 349; Galveston C. S. 
 Bathing Co. vs. Heidenheimer, 63 Texas, 559 ; Roseborough 
 vs. Picton, 12 Texas Civ. App., 113, 34 S. W., 791; De- 
 Merit vs. Robison, 102 Texas, 358, 116 S. W., 796. The 
 same rule applies to streams not navigable at common 
 law, but declared so by statute; that is, those retaining an 
 average width of thirty feet (Rev. Stats., art. 5338). 
 The rights of riparian proprietors theron end at the 
 water line, and the State retains title to the bed of the 
 stream. City of Austin vs. Hall, 93 Texas, 591, 57 S. W., 
 563. The State has made provision for sale of its mineral 
 lands (Rev. Stats., arts. 5904-5922). But these laws do 
 not apply to or permit sale of a tract on the coast, part 
 of a shallow bay covered by the flow of the tide but bare
 
 LAW OF OIL AND NATURAL GAS 113 
 
 at ebb. DeMerit vs. Robison, 102 Texas, 358, 116 S. W., 
 796. Presumably this decision would be followed as to 
 the beds of streams navigable by statute. The State was 
 held entitled to grant, by special act, land under a tide 
 water bayou. Baylor vs. Tillebach, 20 Texas Civ. App., 
 490, 49 S. W., 720. But its grant is not presumed to have 
 that effect. Roseborough vs Picton, 12 Texas Civ. App., 
 34 S. W., 791. And, as shown above, such grants are not 
 authorized by its general laws. But as to what rights the 
 public may exercise while the title to the bed of a stream 
 remains in the public (in this case taking gravel) see Goar 
 vs. City of Rosenburg, 53 Texas Civ. App., 218, 115 S. W., 
 653. 
 
 3. 
 
 SEPARATION OF MINERAL RIGHTS FROM TITLE TO SOIL BY 
 SALE OR LEASE. 
 
 The title to the minerals may be separated from the 
 general title to the soil by transfer by its owner of the 
 minerals only. But while they remain in the soil they still 
 constitute real property. Staley & Barnsdall vs. Derden, 121 
 S. W., 1136 ; Texas Co. vs. Daugherty, Sup. Ct, 176 S. W., 
 717. And can only be conveyed in such manner as the land 
 itself, that is by deed in writing. Benevides vs. Hunt, 79 
 Texas, 15 S. W., 396. Where the land is homestead the 
 wife must join and privily acknowledge a conveyance 
 of the mineral rights. Southern Oil Co. vs. Colquitt, 28 
 Texas Civ. App., 292, 69 S. W., 169. 
 
 ABSOLUTE SALE. 
 
 The transfer may be by an absolute and unconditional 
 sale of the mineral rights by the proprietor of the soil 
 for a fixed price. In such case the purchaser is under 
 no obligation to develop the mineral resources of the 
 land; and, on the other hand, may be compelled to pay 
 the purchase money whether any oil is found or not, as 
 was ruled in Whited vs. Johnson, 167 S. W., 812, where
 
 114 LAW OF OIL AND NATURAL GAS 
 
 the contract was to pay $10,000 for "all of the oil, gas, 
 coal and sulphur in and under" the tract "that may be 
 found by drilling and mining operations which may here- 
 after be conducted on said land." 
 
 CONDITIONAL CONTRACTS AND LEASES. 
 
 A more common form of contract for mineral rights 
 is that of a sale or lease for a term of years in which 
 the proprietor retains an interest in the development, 
 usually by way of a royalty, or proportion of the net 
 proceeds of the mining to be conducted by the lessee. 
 Such agreements are upon conditions either expressed in 
 or implied from the contract. Where there is an ex- 
 press promise as to the things to be done by the lessee 
 he forfeits his rights by failure to perform, though such 
 performance was not the sole consideration. Where there 
 is no express promise to develop, or perform any par- 
 ticular work, but the sole or principal consideration is 
 the development of mineral rights and payment of royal- 
 ties to the lessor from the product of the well, there is 
 an implied undertaking by the lessee to prosecute pros- 
 pecting and mining with reasonable diligence and he for- 
 feits his rights by failure to do so. Numerous cases in 
 Texas illustrate the application of these principles. 
 
 Thus in Emery vs. League, 31 Texas Civ. App., 474, 72 
 S. W., 603, in which writ of error was refused, the 
 consideration was $10 paid, and agreement to prospect 
 and develop and pay lessor 12 1-2 per cent of gross 
 output. The lease was from a tenant in common with 
 others and the lessee was to secure partition before com- 
 mencing operations, which were to be on the lessor's 
 part. He also reserved the right to abandon operations 
 if found unprofitable. It was held that this was a mere 
 unilateral or option contract; the lessee acquired no 
 rights until, within a reasonable time, he commenced 
 performance; he having failed to even secure the neces- 
 sary partition, the lessor was entitled to cancellation of 
 the lease.
 
 LAW OF OIL AND NATURAL GAS 115 
 
 Where the contract is unilateral or optional, time is of 
 the essence of the contract. Presidio Mining Co. vs. 
 Bullis, 68 Texas, 581, 4 S. W., 860. 
 
 Where the undertaking of the lessee was to develop 
 within six months, as a condition of acquiring rights, a 
 paying well, the contract defining that term as one which 
 produced a stated number of barrels per day, and he 
 brought in a well producing oil in paying quantities, but 
 to a less amount, there was no performance and he for- 
 feited his rights. McLean vs. Kishi, 173 S. W., 502. 
 
 In Hodges vs. Brice, 32 Texas Civ. App., 358, 74 S. W., 
 590, consideration of $4 was recited but the principal 
 consideration was the lessee's promise to develop, and to 
 commence boring a well in six months. He failed to do 
 anything for several years, and it was held that he ac- 
 quired no rights and had no interest requiring him to 
 be made a party to a suit to foreclose a lien on the land. 
 
 In Roberts & Corley vs. McFadden, Weiss & Kyle, 32 
 Texas Civ. App., 47, 74 S. W., 105 (writ of error re- 
 fused) there was no consideration for a lease of oil 
 rights other than the lessee's agreement to develop. But 
 it was provided that he could terminate the lease at 
 any time. This was held a unilateral contract, a mere 
 option, under which he acquired no rights till perform- 
 ance. It did not cast a cloud on lessor's title; he might 
 annul it at any time; and he did so by selling the land 
 to another prior to any performance. Similarly in J. M. 
 Guffey Pet. Co. vs. Oliver, 79 S. W., 884, a lease which 
 was terminable at the will of the lessee on payment of $4. 
 was held terminable by the lessor also, to whom no such 
 right was expressly reserved, on repaying the cash con- 
 sideration paid and compensating the lessee for expend- 
 itures made. See also Owens vs. Texarkana Pet. Co., 
 169 S. W., 192, post. 
 
 In National Oil & Pipe Line Co. vs. Teel, 95 Texas, 
 591 (in Ct. of Civ. App., 67 S. W., 545, where contract 
 is given in full) the proprietor sold the mineral rights 
 for an interest in the mined product, the grantee under- 
 taking to drill within two years, and, failing that, having
 
 116 LAW OF OIL AND NATURAL GAS 
 
 the right to prevent forfeiture by paying a yearly rental 
 of $100. This was held to be unilateral, giving the 
 grantee no interest in the minerals but a mere option or 
 right to acquire such interest by performance. This be- 
 ing a mere equitable right, even if supported by an in- 
 dependent consideration, an assignee took it subject to any 
 defense the grantor had against the grantee, such as 
 fraud in procuring the contract. 
 
 Somewhat similar was the case of Witherspoon vs. 
 Staley, 156 S. W., 557 (writ of error refused). The oil 
 rights were conveyed for $25 and royalties to be paid. 
 It was to be forfeited if operations were not commenced 
 in six months; but this the grantee could prevent by pay- 
 ing $25 every sixty days. He was not bound to do either. 
 This .was held unilateral and a mere option; being op- 
 tional as to one it was, while unperformed, optional as 
 to both; so the grantor could refuse to keep it alive by 
 accepting further payments when no work had been done. 
 
 Distinguishable from the foregoing case is the earlier 
 one of Great Western Oil Co. vs. Carpenter, 43 Texas 
 Civ. App., 229, 95 S. W., 57 (writ of error refused). 
 This was an oil and gas lease for royalties; the lessee 
 undertook to sink a well in a given time, but was en- 
 titled to prevent forfeiture for failure by renewing lease 
 for another year on payment of 10 cents per acre rental. 
 This was held not unilateral since the performance of 
 his undertaking was not optional with the lessee, as in 
 the cases of Hodges vs. Brice, Emery vs. League, Roberts 
 vs. McFadden, and Oil Co. vs. Teel, supra, which are all 
 distinguished. 
 
 Forney vs. Ward, 25 Texas Civ. App., 443, 62 S. W., 
 108, involved the question of what would be a commence- 
 ment of drilling, where time therefor was limited by the 
 terms of the lease. It was held a question of fact. The 
 lessee had done nothing but haul lumber onto the prem- 
 ises for the erection of a derrick, on the last day allowed 
 for beginning.
 
 LAW OF OIL AND NATURAL GAS 117 
 
 IMPLIED OBLIGATION TO DEVELOP. 
 
 In J. M. Guffey Petroleum Company vs. Oliver, 79 
 S. W., 884 (writ of error refused) it was held that 
 a lease for mining oil and natural gas in consider- 
 ation of royalties to the lessor, was on an implied 
 condition of diligence, good faith and reasonable develop- 
 ment, and could be forfeited for lessee's failure therein. 
 
 The foregoing case cites and follows Benavides vs. Hunt, 
 79 Texas, 383, 15 S. W., 396, which was a lease of right 
 to mine coal, giving lessor one-third of the net profits. It 
 was there held that, though there was no express agree- 
 ment by the lessee to operate the mine if discovered, 
 such promise was implied in case coal was found which 
 could be mined at a profit. 
 
 In J. M. Guffey Pet. Co. vs. Jeff Chaison Townsite Co., 
 48 Texas Civ. App., 555, 107 S. W., 609, the lessee had 
 sunk a paying well on the property, and was under no 
 express contract to sink others. But it was held to be 
 his duty to use reasonable diligence and care to protect 
 the property against the drawing off the supply of oil 
 by other wells upon adjoining tracts, and to sink ad- 
 ditional wells on the property for this purpose, if neces- 
 sary. The suit sought damages, not forfeiture, for this 
 default. 
 
 Owens vs. Corsicana Pet. Co., 169 S. W., 192. The land 
 was leased for years for the production of oil, gas and 
 coal, in consideration of $28.20 cash and of a royalty of 
 one-eighth to the lessor. The lessee was to bore a well 
 in one year or to pay a quarterly rental of $28.20, and 
 could terminate the lease at any time by paying $5, the 
 lessor disclaiming any right to terminate the lease him- 
 self on account of this provision. Held that the $5 to be 
 paid for surrender of the lease was a merely nominal con- 
 sideration. The contract was unilateral and a mere op- 
 tion. If terminable by one party it was terminable by 
 the other. The lessee drilled no well on the land, but 
 sunk wells on tracts adjoining it upon three sides, thus 
 drawing off the supply from this land. The lessor, it
 
 118 LAW OF OIL AND NATURAL GAS 
 
 was held, could refuse the quarterly rent tendered and 
 forfeit the lease. The primary consideration was to ob- 
 tain for the lessor the advantage of development and the 
 lessee was bound to use diligence therein. Nearly all 
 Texas authorities are reviewed and followed or distin- 
 guished. But writ of error was granted in this case and 
 it is now pending (Cor. Pet. Co. vs. Owens) in Supreme 
 Court. 
 
 EFFECT OF COMPLIANCE BY LESSEE. 
 
 It has already appeared that a contract purporting to 
 convey to the lessee the right to oil under the land and 
 to sink wells and take it therefrom, if it is not an absolute 
 sale, as in Whited vs. Johnson, 167 S. W., 812, noted 
 above, but one where the lessee or grantee is to mine on 
 payment of royalties, has been held to confer upon him 
 no title to the oil itself, but only a right to acquire title 
 by performing the express or implied obligations of the 
 contract on his part (Emery vs. League, Hodges vs. 
 Brice, Roberts & Corley vs. McFadden, Weiss & Kyle, 
 National Oil & Pipe Line Co. vs. Teel, and other cases 
 ante. But compare Texas Co. vs. Daugherty, Sup Ct., 
 176 S. W., 717.) We should rather, perhaps, to be accur- 
 ate, recognize three classes of these transfers: (1) an 
 absolute sale of the mineral rights; (2) a transfer of a 
 present right to the minerals, but on conditions subse- 
 quent, under which the grantee forfeits his rights by 
 failure to perform them; (3) transfers giving no present 
 right to the minerals, but a right to acquire title to them 
 by performance of certain conditions. Of the first class is 
 Whited vs. Johnson, supra; of the second, Texas Co. vs. 
 Daugherty, supra; of the third, National Oil & P. L. Co. 
 vs. Teel, supra. But whether the conveyance be of the 
 second, or of the third class, where the grantee has per- 
 formed all that was required of him under the con- 
 tract, he then acquires an interest in the oil under the 
 land. 
 
 Thus, a lessee who was bound by his contract to sink
 
 LAW OF OIL AND NATURAL GAS 119 
 
 a well within a certain time did so and it proved not a 
 paying well. In that event his contract gave him the 
 right to sink other wells but did not require him to do 
 so. He did not drill any others; but the lessor did and 
 obtained a paying well. It was held that the lessee was 
 entitled to his proportion, under the contract, of the 
 yield of this well less the expenditures of the lessee in 
 its production. O'Neil vs. Sun Co., 123 S. W., 172. Writ 
 of error refused. 
 
 A lessee drilled a well and obtained oil in paying 
 quantities. He drilled two others which were failures. 
 His contract did not bind him to do more. The first 
 well, after it had been pumped for some time, with due 
 payment of royalties, ceased to be profitable, and he 
 abandoned its operation and sunk no more wells. The 
 lessor sued to cancel his lease. It was held that, having 
 performed all the contract required of him he acquired 
 rights to the oil under his lease for its full term of 20 
 years, and it could not be forfeited because he abandoned 
 work. McAfee vs. Grubb, 164 S. W., 925, following 
 O'Neil vs. Sun Co., supra. But writ of error was granted 
 in this case, and it is now pending (Grubb vs. McAfee) 
 in Supreme Court. 
 
 A lessee corporation which had agreed to compromise 
 a suit for cancellation of its lease, consenting to such 
 cancellation, could not avoid such agreement by showing 
 that it had previously given another an option to pur- 
 chase the lease, or that the controlling interest in its 
 stock had changed hands since the agreement. Southern 
 Oil Co. vs. Wilson, 22 Texas Civ. App., 534, 56 S. W., 
 429. 
 
 It is evident that some confusion still exists in the 
 rulings of the appellate courts as to the construction and 
 effect of transfers or leases of mineral rights. It is to 
 be hoped that the subject may be cleared up by the de- 
 cisions of the Supreme Court in the cases of Grubb vs. 
 McAfee and Corsicana Pet. Co. vs. Owens, which are 
 still before that court on writ of error granted.
 
 120 LAW OF OIL AND NATURAL GAS 
 
 OPTIONS AND UNILATERAL CONTRACTS. 
 
 A contract by which the owner of property agrees with 
 another person that he shall have the right to buy the 
 property at a fixed price within a certain time, is an op- 
 tion; and, if based upon a valuable consideration, such 
 contract is binding and may be enforced. Williams vs. 
 Graves, 7 Texas Civ. App., 366, 26 S. W., 334. But time 
 is of the essence of the contract, and the vendee must 
 comply with the conditions of his purchase within the 
 period limited. Johnson vs. Portwood, 89 Texas, 245, 34 
 S. W., 596 ; Washington vs. Rosario Mining, Etc., Co., 28 
 Texas Civ. App., 430, 67 S. W., 459; Killough vs. Lee, 2 
 Texas Civ. App., 262, 21 S. W., 970; Viser vs. Rice, 33 
 Texas, 139. 
 
 As to whether the payment or recital of payment of a 
 merely nominal consideration, such as one dollar, will 
 support such a contract, see National Oil & P. L. Co. vs. 
 Teel, 95 Texas, 586, 68 S. W., 979, affirming 67 S. W., 545; 
 Great Western Oil Co. vs. Carpenter, 43 Texas Civ. App., 
 229, 95 S. W., 57 ; Cobb vs. Beall, 1 Texas 342, 347 ; Davis 
 vs. Turner, 26 Texas, 98. 
 
 A promise may furnish valuable consideration for a 
 promise. But it must be an absolute agreement; and if 
 performance of the undertaking of either party is only 
 optional with him, it alone will not supply a consideration 
 for the other's contract. In such case, both must be bound 
 or neither will be. James vs. Fulcrod, 5 Texas, 519; Ar- 
 nold vs. Chamberlain, 14 Texas Civ. App., 634, 39 S. W., 
 201; Lane & Saylor vs. Scott & Culver, 57 Texas, 367; 
 Williams vs. Graves, 7 Texas Civ. App., 365, 26 S. W., 334. 
 
 But if an independent valuable consideration sufficient 
 to support the contract has been paid, the fact that fur- 
 ther undertakings by the purchaser were not absolute 
 but merely things which were to be done at his option, 
 would not render the contract void as being an option 
 or unilateral contract without consideration. If the mat- 
 ters left optional with him were conditions to his acquir- 
 ing or retaining the rights granted, either expressly or
 
 LAW OF OIL AND NATURAL GAS 121 
 
 by implication, he might forfeit his rights by failure to 
 perform, but the question becomes then one of forfeiture 
 of a conditional grant, rather than of the validity of an 
 optional or unilateral contract. This distinction may 
 not always have been kept in mind in the language of 
 the decisions above reviewed. Compare: Presidio Min- 
 ing Co. vs. Bullis, 68 Texas, 581, 4 S. W., 860; Emery vs. 
 League, 31 Texas Civ. App., 474, 72 S. W., 603; Roberts 
 & Corley vs. McFadden, Weiss & Kyle, 32 Texas Civ. App., 
 47, 74 S. W., 105; National Oil & P. L. Co. vs. Teel, 95 
 Texas, 586, 68 S. W., 979; S. C., 67, S. W., 545; Wither- 
 spoon vs. Staley, 156 S. W., 557; Great Western Oil Co. 
 vs. Carpenter, 43 Texas Civ. App., 229, 95 S. W., 57; 
 Owens vs. Corsicana Pet. Co., 169 S. W., 192. 
 
 The suggestion may be ventured that the fact that the 
 purchaser is not bound to complete the performance which 
 would give him title, does not render his contract either 
 void or voidable, if there is a consideration to support it 
 other than such performance. And this would be true 
 although the performance was the main consideration 
 moving the seller or lessor to enter into the contract. The 
 fact that it was the main consideration would, however, 
 have an important bearing upon the time and circum- 
 stances under which the grantor would be entitled to 
 treat the grantee's contract as forfeited by his non-com- 
 pliance with the conditions. Though the existence of a 
 valuable independent consideration might suffice to sup- 
 port an optional contract, that is a grant conditioned on 
 subsequent performance by the grantee of things which 
 he is left free to perform or not, the time for exercising 
 an option, as has already appeared, must be fixed and 
 reasonable, and its reasonableness might depend on the 
 subject matter dealt with and the attendant circumstances. 
 This consideration might have some bearing on a case 
 like that' of Owens vs. Corsicana Pet. Co., above men- 
 tioned, where the lessee postpones development by paying 
 the alternative rental, and meanwhile draws off the oil 
 into his wells on adjoining land. 
 
 This subject has recently been considered by the Su-
 
 122 LAW OF OIL AND NATURAL GAS 
 
 preme Court of the United States in Guffey vs. Smith, 
 (April 5, 1915) 35 Sup. Ct. Reporter, 526, 237 U. S., 101, 
 reversing Smith vs. Guffey, 120 C. C. A., 436, 202 Fed., 
 106. The court hold the lease (similar to that in the 
 Owens case, supra) not voidable by the lessor, though a 
 right to terminate it was reserved to the lessee, follow- 
 ing the rule of property established by the decisions in 
 Illinois, where the case originated. The lessee was held 
 entitled to injunction against mining operations by the 
 lessor or a subsequent lessee from him, and to an account- 
 ing for the profits already accruing therefrom. 
 
 The decision turned upon the question whether such 
 an optional right to terminate, reserved to the lessee, 
 though conceded not to create, at law, a tenancy at will 
 terminable by the lessor also, was so inequitable and lack- 
 ing in mutuality as to preclude the lessee from maintain- 
 ing the action for equitable relief by injunction. The 
 court held that it was not, and awarded the lessee such 
 relief, refusing, in this, to follow rulings of the Supreme 
 Court of Illinois to the contrary. 
 
 This decision and the numerous cases cited therein 
 and in briefs of counsel afford a good starting point for 
 investigating the result of the rulings in other states upon 
 this and related questions growing out of such leases. 
 They are numerous and not harmonious; and a review of 
 them is beyond the scope of this work, which is not de- 
 signed to go beyond a statement of the law as adjudged 
 in Texas. 
 
 CONTRACTS FOR OPERATION. 
 
 Concerning contracts other than those between .the 
 owner of the soil and his grantee or lessee, a few decisions 
 may be noted: 
 
 An oil company has been held entitled to lease to an- 
 other its real property, though it has itself begun mining 
 thereon, to be operated for it by the lessee for a royalty. 
 - Stark vs. Guffey Pet. Co., 80 S. W., 1080. 
 
 A contract by one oil company to operate the well of 
 another, and to take out and pay for a fixed amount
 
 LAW OF OIL AND NATURAL GAS 123 
 
 monthly, was for the protection of the owning company 
 from loss by exahustion of the supply by others. Its of- 
 fer to take out and pay for the same amount subsequently 
 did not cover this. And an agreement for the cancella- 
 tion of the lease did not relieve it from the liability pre- 
 viously incurred in operating under it. Alabama Oil, Etc., 
 Co. vs. Sun Co., 99 Texas, 606, 92 S. W., 253, reversing 
 90 S. W., 202. 
 
 An oil company contracted to supply fuel oil to certain 
 industries, but it was to be relieved from its undertaking 
 in case of "failure of oil wells." Under the circumstances 
 shown this was construed to mean failure of their own 
 wells to flow by natural pressure. They were not bound 
 to continue the supply, at the terms named, when they 
 could obtain it from their wells only by pumping. San Ja- 
 cinto Oil Co. vs. Ft. Worth, Etc., Power Co., 41 Texas 
 Civ. App., 293, 93 S. W., 173. 
 
 A contract for drilling an oil well, with provision for 
 the proprietor continuing the work after the contractor 
 abandoned it, was construed in Hammond vs. Decker, 102 
 S. W., 453. 
 
 4. MINERAL RIGHTS IN PUBLIC LANDS. 
 
 The United States acquired no title to the public lands 
 of Texas by its admission to the Union. Articles of An- 
 nexation, Sayle's Early Laws, Vol. 1, Art. 1531. Conse- 
 quently the mining laws of the Federal Government, ap- 
 plicable only to its own lands, are not in effect here. The 
 acquisition of mineral lands and mining rights in Texas is 
 regulated by its own laws. Revised Statutes, Articles 
 5904-5922, ante. The ownership of minerals in the soil 
 underlying bays and navigable streams has been consid- 
 ered under paragraph 2 above. 
 
 The early policy of the State reserved the minerals in 
 its grants of lands. Cowan vs. Hardeman, 26 Texas, 217. 
 But these mineral rights were later released to the owners 
 of patented land. Const. 1866, Art. 7, Sec. 39; State vs. 
 Parker, 61 Texas, 265.
 
 124 LAW OF OIL AND NATURAL GAS 
 
 The Act of April 4, 1883, which reserved the minerals in 
 school land to the State, did not provide for the sale of 
 the minerals separately, but for mining claims to be 
 worked for a royalty to the State. The Act of March 29, 
 1889, authorized the sale of mineral bearing lands with 
 the minerals, but not sale of the minerals separately. 
 Where land was sold as grazing land in December, 1887, 
 though the minerals should be held not to have passed by 
 the sale, there was no law in 1900 authorizing another to 
 enter a mining claim upon it or to buy the minerals from 
 the State separate from the land. Heil & Schuster vs. 
 Martin, 96 Texas, 209, 71 S. W., 814. 
 
 These regulations were succeeded by the present law, 
 the Act of 1895, permitting prospecting and the sale of 
 the land with the minerals. Decisions as to the right to 
 purchase under this, Act are collected in the note to Ar- 
 ticle 5912, Rev. Stats., ante. 
 
 5. EMPLOYER'S LIABILITY. 
 
 Oil and gas companies, in their relations to their em- 
 ployes, come under the provisions of the Act of April 
 16, 1913, commonly known as the Employer's Liability 
 Law. Laws 1913, pp. 429-438. By* Section 1 of this Act, 
 contributory negligence of an erpploye injured or killed 
 is no longer a full defense to actions therefor, but merely 
 a ground for abatement in the amount of damages. It is 
 no longer a defense that the injury was caused by the neg- 
 ligence of a fellow servant. Nor is the defense of as- 
 sumed risk allowable except when the injury was inten- 
 tionally incurred by the employe. 
 
 Companies or individuals employing more than five em- 
 ployes may become members of the "Texas Employers' 
 Insurance Association", and in this case, by the payment 
 of premiums for insurance of their employes against ac- 
 cident, recourse of the latter for injury, or of their heirs 
 in case of death from injury, may be had only against such 
 insurance fund, the right thereto being determined by the 
 "Industrial Accident Board", or by action against such 
 Board.
 
 LAW OF OIL AND NATURAL GAS 125 
 
 TAXATION. 
 
 STATE AND COUNTY. 
 
 The recent important ruling on the liability of the 
 estate conveyed by an oil lease to taxation as an interest 
 in real property has already been noted. Texas Co. vs. 
 Daugherty, Sup. Ct., May 21, 1915; 176 S. W., 717. In 
 that case the Texas Oil Co. had been taxed as owner of 
 interests in various tracts of land in which it held oil 
 and gas rights by leases, all substantially to the same 
 effect. These instruments, for a valuable consideration, 
 "granted, bargained, sold and conveyed all the oil, gas, 
 coal, and other minerals in and under" the respective 
 tracts of land. They gave the usual drilling and mining 
 rights, conditioned on the beginning of drilling operations 
 by the grantee within one year, with the alternative of 
 continuing the contract in force for three years by pay- 
 ment of an annual rental. On development of a paying 
 well, grantee's rights were made absolute, subject to pay- 
 ment of royalties on the oil and gas produced, for the 
 period of twenty years, and so much longer as oil or gas 
 continued to be produced in paying quantities. Each in- 
 strument concluded with the following clause: 
 
 "This lease is not intended as a mere franchise, but 
 is intended as a conveyance of the property and privileges 
 above described, for the purposes herein mentioned and 
 it is so understood by all parties hereto." 
 
 The owners of the fee had rendered these lands for 
 taxation at their fair market value, subject to the rights 
 conferred on the lessees by the contracts, and considering 
 their value as oil bearing lands, present or prospective, 
 as limited to the royalties reserved in the leases. The 
 rights of the lessee were taxed separately as interests held 
 by it in the land. 
 
 The oil company claimed that oil and gas, owing to 
 their fugitive character, were not capable of being con- 
 veyed in situ, the owner of the soil having himself no 
 absolute title to them, but merely a right to acquire
 
 126 LAW OF OIL AND NATURAL GAS 
 
 title by reducing them to possession and confining them. 
 That until severed and extracted from the soil these sub- 
 stances were incapable of ownership as property; and 
 that the conveyances passed no title to them, but merely 
 a privilege of so acquiring title. 
 
 This claim was not allowed. The court held that oil and 
 gas were minerals, and a part of the soil; that the trans- 
 fer of them, like that of any other minerals, was a con- 
 veyance of an interest in the soil; and that the estate 
 acquired by the grantee was taxable as an interest in 
 land owned by it. The authorities on the subject are 
 fully reviewed, and the distinction is drawn between leases 
 which convey an interest in the realty, and those which 
 confer a mere privilege of acquiring title to such elements 
 when severed from the soil. 
 
 For taxation by the State other than the ad valorem tax 
 on real and personal property, see the statutes, ante, pp. 
 64-67. 
 
 UNITED STATES INTERNAL REVENUE. 
 
 By the Act of Congress of October 22, 1914, revenue 
 stamps are required to be affixed to various documents 
 by the person signing or issuing them, under penalty of 
 a fine not to exceed $1000 or imprisonment not exceeding 
 six months, or both. This Act is too recent to have met 
 with any extensive judicial or departmental construction; 
 but we append to the portions of it quoted below a digest 
 of rulings under similar provisions of the Act of 1898, 
 taken from a circular recently issued by the Acting Com- 
 missioner of Internal Revenue. The instruments relating 
 to transactions in oil and gas which require such stamps, 
 as enumerated in Schedule A of said Act, with the rulings 
 mentioned, are as follows: 
 
 Bonds, debentures, or certificates of indebtedness issued 
 on and after the first day of December, nineteen hundred 
 and fourteen, by any asociation, company, or corporation, 
 on each $100 of face value or fraction thereof, 5 cents, 
 and on each original issue, whether on organization or
 
 LAW OF OIL AND NATURAL GAS 127 
 
 reorganization, of certificates of stock by any such asso- 
 ciation, company, or corporation, on each $100 of face 
 value or fraction thereof, 5 cents, and on all sales, or 
 agreements to sell, or memoranda of sales or deliveries or 
 transfers of shares or certificates of stock in any asso- 
 ciation, company, or corporation, whether made upon or 
 shown by the books of the association, company, or cor- 
 poration, or by any assignment in blank, or by any de- 
 livery, or by any paper or agreement or memorandum or 
 other evidence of transfer or sale, whether entitling the 
 holder in any manner to the benefit of such stock, or to 
 secure the future payment of money or for the future 
 transfer of any stock, on each $100 of face value or frac- 
 tion thereof, 2 cents ; Provided, That it is not intended by 
 this act to impose a tax upon an agreement evidencing a 
 deposit of stock certificates as collateral security for 
 money loaned thereon, which stock certificates are not 
 actually sold, nor upon such stock certificates so deposited : 
 Provided further, That in case of sale where the evidence 
 of transfer is shown only by the books of the company 
 the stamp shall be placed upon such books; and where the 
 change of ownership is by transfer certificate the stamp 
 shall be placed upon the certificate; and in cases of an 
 agreement to sell or where the transfer is by deliverey 
 of the certificate assigned in blank there shall be made 
 and delivered by the seller to the buyer a bill or memo- 
 randum of such sale, to which the stamp shall be affixed; 
 and every bill or memorandum of sale or agreement to 
 sell before mentioned shall show the date thereof, the 
 name of the seller, the amount of the sale, and the matter 
 or thing to which it refers. 
 
 Certificate of profits, or any certificate or memorandum 
 showing an interest in the property or accumulations of 
 any association, company, or corporation, and on all trans- 
 fers thereof, on each $100 of face value or fraction thereof, 
 2 cents. 
 
 Certificate of any description required by law not other- 
 wise specified in this act, 10 cents.
 
 128 LAW OF OIL AND NATURAL GAS 
 
 Contract : Broker's note, or memorandum of sale of any 
 goods or merchandise, stocks, bonds, exchange, notes of 
 hand, real estate, or property of any kind or description 
 issued by brokers or persons acting as such, for each note 
 or memorandum of sale, not otherwise provided for in this 
 act, 10 cents. 
 
 Conveyance: Deed, instrument, or writing, whereby 
 any lands, tenements, or other realty sold shall be granted, 
 assigned, transferred, or otherwise conveyed to, or vested 
 in, the purchaser or purchasers, or any other person or 
 persons, by his, her, or their direction, when the consider- 
 ation or value of the interest or property conveyed, ex- 
 clusive of the value of any lien or encumbrance thereon, 
 exceeds $100 and does not exceed $500, 50 cents; and for 
 each additional $500 or fractional part thereof in excess 
 of $500, 50 cents : Provided, That nothing contained in this 
 paragraph shall be so construed as to impose a tax upon 
 any instrument or writing given to secure a debt. 
 
 Power of attorney or proxy for voting at any election 
 for officers of any incorporated company or association, 
 except religious, charitable, or literary societies, or public 
 cemeteries, 10 cents. 
 
 Power of attorney to sell and convey real estate, or to 
 rent or lease the same, to receive or collect rent, to sell 
 or transfer any stock, bonds, scrip, or for the collection 
 of any dividends or interest thereon, or to perform any 
 and all other acts not hereinbefore specified, 25 cents: 
 Provided, That no stamps shall be required upon any 
 papers necessary to be used for the collection of claims 
 from the United States for pensions, back pay, bounty, 
 or for property lost in the military or naval service. 
 
 (1) When a bond is said to be issued. Whenever a 
 corporation issues a bond, and there accrues to the cor- 
 poration a benefit or consideration for issuing the same, 
 the bond is subject to taxation. (Vol. 2, Treas. Dec. 
 (1898), No. 20156.) 
 
 (2) Stamp tax; certificates of stock; sales and trans-
 
 LAW OF OIL AND NATURAL GAS 129 
 
 fers of certificates of stock. (Vol. 2, Treas. Dec. (1898), 
 No. 19607.) 
 
 (3) In reckoning the stamp tax on transfers of cer- 
 tificates of shares, the tax is reckoned on the face value. 
 (Vol. 2, Treas. Dec. (1898), No. 19710.) 
 
 (4) Transfers of shares or certificates of stock; how 
 stamps are to be attached; stamp tax to be reckoned on 
 face value of certificate. (Vol. 2, Treas. Dec. (1898), 
 No. 19888.) 
 
 (5) Transfers of stock from guardian to ward sub- 
 ject to taxation. (Vol. 2, Treas. Dec. (1898), No. 20070.) 
 
 (6) Preferred stock issued in lieu of common stock not 
 taxable when there is no change of ownership. (Vol. 1, 
 Treas. Dec. (1899), No. 20694.) 
 
 (7) Where brokers acting in behalf of their principals 
 buy stock and receive stamped bills of sale in their own 
 names, they may transfer such stock on the books of the 
 corporation to the names of their principals without ad- 
 ditional stamp tax. (Vol. 1, Treas. Dec. (1899), No. 
 20727.) 
 
 (8) Certificates of stock of a foreign corporation when 
 sold or delivered within the United States are liable 
 to the same tax as certificates of stock of any domestic 
 corporation. (Vol. 1, Treas. Dec. (1899), No. 20793.) 
 
 (9) "Puts" and "calls." The Attorney General de- 
 cided that the former are not subject to tax, but that the 
 latter, being agreements to sell, are taxable. (Vol. 1, 
 Treas. Dec. (1899), No. 21151.) 
 
 (10) When a certificate of stock is presented for trans- 
 fer and power of attorney on the back thereof is dated 
 prior to July 1, 1898, although the name of the transferee 
 is not filled in until after that date, both the power of 
 attorney and the certificate are required to be stamped. 
 (Vol. 1, Treas. Dec. (1899), No. 21277.) 
 
 (11) No tax on the closing of a stock transaction caus- 
 ed by margin being exhausted because of market going 
 against speculator. (Vol. 2, Treas. Dec. (1899), No. 
 21707.)
 
 130 LAW OF OIL AND NATURAL GAS 
 
 (12) The circumstances under which the memoranda 
 issued by brokers evidencing the sale or purchase of 
 stock need or need not be stamped. (Vol. 2, Treas. Dec. 
 (1899), No. 21711.) 
 
 SALES OF TRANSFERS OF STOCK. 
 
 Following rulings are taken from Circular No. 503, 
 Revised November 14, 1898 : 
 
 (13) In reckoning the stamp tax on transfer of certifi- 
 cate of stock, the tax is reckoned on the face value. In 
 reckoning this tax, the fact that only part of the face value 
 of shares subscribed for and issued has been paid by the 
 shareholders is not to be taken into consideration. 
 
 (14) Where stock is sold at the par value of $100, 
 and upon which it appears that only $25 have been paid, 
 the tax is to be reckoned upon the face value of $100, and 
 not upon the $25. 
 
 (15) Where one certificate represents several shares, 
 the tax of 2 cents on each $100 or fraction thereof is to 
 be reckoned on the face value of the certificate, and not 
 on the face value of each separate share. 
 
 (16) On transfer of one certficate representing 500 
 shares, $5 par value, the stamp tax required is 50 cents. 
 
 (17) When stock is transferred for which no certificate 
 has been issued, and the evidence of transfer is shown 
 only by books of the company, the stamps should be 
 placed upon such books. Where the change of ownership 
 is by the transfer of a certificate, and the certificate 
 contains a blank form of assignment on the back, which is 
 filled in by the insertion of the name of the person to 
 whom the stock is transferred, the stamp should be placed 
 upon the certificate. 
 
 (18) In case of an agreement to sell, or where the 
 transfer is, by the delivery of the certificate, signed in 
 blank, the name of the transferee or vendee to be filled in 
 afterwards, there should be made and delivered by the 
 seller to the buyer a bill or memorandum of sale, to which 
 the stamp should be affixed.
 
 LAW OF OIL AND NATURAL GAS 131 
 
 (19) Where certificates of shares were sold and de- 
 livered before July 1, 1898, entry of transfer on corporate 
 books after June 30 does not require stamp. 
 
 (20) New certificates of stock issued to holder in lieu 
 of original certificate, and remaining in his ownership, do 
 not require stamps. 
 
 (21) When certificate of stock is sold and stamp tax 
 is paid on memorandum thereof, upon transfer of this 
 certificate to purchaser's name no additional tax for such 
 transfer is required. Where one certificate represents 
 several shares of stock (however large the number of 
 shares), on transfer of this certificate the stamp tax is 
 to be reckoned on its face value and not on the face 
 value of each separate share of stock which it represents. 
 
 (22) Transfers of stock from parties occupying fidu- 
 ciary relationship to those for whom they held the stock 
 are transfers subject to taxation. 
 
 (23) A owns a certificate of 100 shares of stock; he 
 transfers 50 shares to B; there are two certificates of 50 
 shares each issued in lieu of the 100-share certificate, 50' 
 shares going to A and 50 shares to B. The tax imposed 
 is on the transfer to B; there is no tax on A's transfer 
 to himself. 
 
 (155) An instrument authorizing the secretary to trans- 
 fer stock on the books of the company held not to be tax- 
 able as a power of attorney. (Vol. 2, Treas. Dec. (1899), 
 No. 21467.) 
 
 (156) An instrument appointing an attorney in fact 
 to transfer stock on the books of the company requires to 
 be stamped as a power of attorney, but an instrument 
 authorizing the secretary to make the transfer is held 
 not to be a power of attorney. (Vol. 2, Treas. Dec. (1899), 
 No. 21563.) 
 
 Among the conveyances above mentioned and requiring 
 stamps, may be included many of the current forms of 
 leases conveying mineral rights in oil and gas, and trans- 
 fers of such leases. It is only instruments transferring an 
 interest in realty which are required by the Act to be
 
 132 LAW OF OIL AND NATURAL GAS 
 
 so stamped. But, as already seen, those which convey 
 title to the minerals are of this character, though the 
 mineral is still in the soil, and not mined or reduced to 
 possession. Leases which grant a mere privilege of 
 prospecting and mining, conveying no interest in the min- 
 eral until reduced to possession, would transfer to the 
 lessee no interest in the realty, and would not come under 
 the Act. 
 
 The question of what constitutes an interest in the land 
 itself being one of Texas law, the Federal courts and 
 authorities would, it may be assumed, follow the rulings 
 of the Supreme Court of Texas on that subject, as an- 
 nounced in Texas Co. vs. Daugherty, supra. See Guffey 
 vs. Smith, 237 U. S., 101, advance sheets. 
 
 The Act of 1914 also imposes a license tax upon brokers. 
 This, followed by some judicial and departmental rulings 
 upon the similar enactments of 1898, is as follows: 
 
 Second. Brokers shall pay $30. Every person, firm, 
 or company whose business it is to negotiate purchases 
 or sales of stocks, bonds, exchange, bullion, coined money, 
 bank notes, promissory notes, or other securities, for 
 themselves or others, shall be regarded as a broker: 
 Provided, That any person having paid the special tax 
 as a banker shall not be required to pay the special tax 
 as a broker. 
 
 (21) The loaning of money for oneself or for others 
 on commission does not subject the lender to special tax 
 as a broker; but if a person makes it a business to negot- 
 iate purchases or sales of stocks, bonds, exchange, bullion, 
 coined money, bank notes, promissory notes, or other se- 
 curities, for himself or others, he is required to pay the 
 tax. "It is only when making sales and purchases is his 
 business, his trade, his profession, his means of getting 
 his living, or making his fortune that he becomes a broker 
 within the meaning of the statute." (Warren vs. Shook, 
 91 U. S., 704.) 
 
 (22) Persons or firms acting as agents for parties loan-
 
 LAW OF OIL AND NATURAL GAS 133 
 
 ing money upon promissory notes secured by mortgages 
 are not brokers. 
 
 (23) A lawyer can make investments for clients with- 
 out being liable, unless he does it to such an extent that 
 it can be called a "business." 
 
 (24) Loan and mortgage companies not liable for 
 loaning money on notes or bonds secured by mortgage 
 or trust deed on real estate. If they purchase notes, bonds, 
 or other securities they bec6me liable as brokers. 
 
 (25) A person engaged in the business of placing loans 
 secured by notes and mortgages upon real estate, acting 
 simply as agent, receiving a commission for his services 
 in obtaining the application for the loan and attending 
 to the execution of the papers, is not a broker. 
 
 (26) A person engaged in the business of selling real 
 estate, acting as the agent of the owner in finding pur- 
 chasers and receiving a commission for his services, is 
 not a broker. 
 
 (27) When persons negotiate purchases or sales of 
 promissory notes, if these are only occasional acts and 
 do not constitute their regular business, they are not 
 brokers within the meaning of the act. 
 
 (28) Bucket-shop proprietors giving memorandum of 
 transactions are required to pay special tax as brokers. 
 
 (29) The principal's special-tax stamp for his place of 
 business in another city covers the transactions only at 
 that place of business and can not cover the business 
 done elsewhere at a branch office. 
 
 (30) Broker's tax is not required to be paid at branch 
 offices where a clerk is employed whose sole duty is to 
 receive orders and transmit them by wire to the head 
 of the office. The mere receipt and transmission by 
 clerks of orders is not regarded as carrying on the bus- 
 iness of a broker, (Vol. 2, Treas. Dec., No. 19843.) 
 
 (31) Special tax must be paid for every branch office 
 where the employee in charge not only receives and 
 transmits orders with the money to the main office, but 
 also receives from the main office moneys for disburse-
 
 134 LAW OF OIL AND NATURAL GAS 
 
 ment to customers, or keeps accounts with the customers 
 at the branch office, or does other business with re- 
 lation to the transactions of brokers at such branch office. 
 Separate special tax must be paid and a separate stamp 
 taken out for every "bucket shop," whether such office is 
 called a branch office or a main office. (Vol. 2, Treas. 
 Dec. (1898), No. 20374.) 
 
 (32) It is the language of the statute, and not the 
 ordinary and usual meaning of the word "broker," which 
 must govern in determining who is a broker required to 
 pay a special tax. (Vol. 1, Treas. Dec. (1899), No. 
 20549.) 
 
 (33) While a mining syndicate or other association is- 
 suing certificates of stock in a company organized by it 
 is not required to pay a special tax as a broker therefor, 
 a manager or other person employed by it to sell such 
 certificates on commission is a broker and required to 
 pay special tax. (Vol. 1, Treas. Dec. (1899), No. 20637.) 
 
 (34) An express or railway agent doing business for 
 his principals only, not a broker. (Vol. 1, Treas. Dec. 
 (1898), No. 20106.) 
 
 Persons engaging in only occasional dealings in oil 
 property or stock of companies may not always be able to 
 decide whether their transactions bring them within the 
 definition of a broker under this Act. No precise defini- 
 tion can be safely given. The test appears to be whether 
 such dealings by them are sufficient to constitute engaging 
 in a business. We are permitted to add the following 
 copy of a circular letter used by the United States Col- 
 lector at Austin, Hon. A. S. Walker, in answer to fre- 
 quent inquiries addressed to him upon this question: 
 
 "In reply to your telephone inquiry to this office today, 
 you are advised that the Act of Oct. 22, 1914, imposes 
 a broker's tax of $30.00 per annum on every person, firm 
 or company whose business it is to negotiate purchases 
 or sales of stock, promissory notes or other securities for 
 themselves or others. Under this statute your company
 
 LAW OF OIL AND NATURAL GAS 135 
 
 would have the right to sell its own stock without in- 
 curring liability, or any individual would have the same 
 right, and either your company or an individual would 
 have the right to employ an agent for that purpose, under 
 an exclusive contract calling for compensation by salary 
 or by commission, and under those conditions the agent 
 would not incur liability unless he were at the same time 
 engaged in the business of negotiating purchases or sales 
 of stock as provided in the law. The right referred 
 to of employing agents will not authorize an evasion of 
 the law, it being necessary that such employment should 
 be in good faith. The payment of the broker's tax for 
 an office at one place would permit the transaction of 
 business at other places through the usual channels, by 
 mail or otherwise, but if it were intended that more than 
 one office should be maintained, each office would be 
 liable to a separate tax. To incur liability under this 
 statute, it is not necessary that a man shall devote his 
 exclusive attention to the brokerage business. He may 
 be liable, and still have another occupation for means of 
 livelihood, but it is necessary that he shall make it a 
 substantial part of his business. One isolated trans- 
 action would not create liability."
 
 136 LAW OF OIL AND NATURAL GAS 
 
 FORMS. 
 
 FORM I. 
 CHARTER OF A DOMESTIC CORPORATION. 
 
 STATE OF TEXAS, 
 County of 
 
 Know all men by these presents : That we, 
 
 and , all citizens of 
 
 county, Texas, under and by virtue of the laws of 
 
 this State, do hereby voluntarily associate ourselves together for the 
 purpose of forming' a private corporation under the terms and condi- 
 tions hereinafter set out, as follows : 
 
 1. The name of this corporation is 
 
 2. The purpose for which it is formed (here quote the statutory 
 purpose). 
 
 3. The place where the business of the corporation is to be trans- 
 acted is at County, Texas. 
 
 4. The term for which it is to exist is years. 
 
 5. The number of directors shall be and their names 
 
 and postoffice addresses are as follows: 
 
 6. The amount of capital stock is $ divided into 
 
 shares of $ each, all of which capital stock has been sub- 
 scribed, and 50 per cent paid in, as per affidavit, attached hereto. 
 
 In testimony whereof we hereunto sign our names this day 
 
 of.... ., 191.... 
 
 STATE OF TEXAS, 
 County of 
 
 Before me, the undersigned authority, on this day personally ap- 
 peared , 
 
 and , known to me to be the persons 
 
 whose names are subscribed to the foregoing instrument, and severally 
 acknowledged to me that he executed the same for the purpose and 
 consideration therein expressed. 
 
 In testimony whereof I hereunto subscribe my name and affix the
 
 LAW OF OIL AND NATURAL GAS 137 
 
 seal of my office, this day of , A. D. 191 
 
 [SEAL.] (Name) 
 
 (Office) 
 
 NOTE. This concise and comprehensive form was suggested by Hon. 
 F. C. Weinert, when Secretary of State, in his pamphlet containing 
 the principlal corporation laws of the State, from which we take the 
 liberty of borrowing it. We would, however, add the suggestion that 
 it is not always advisable, nor would it in all cases be quite sufficient, 
 to confine the statement of the purpose for which the corporation is 
 formed to the language of the statute itself. 
 
 FORAI II. 
 
 PURPOSE CLAUSE FOR CHARTER OF AN OIL COMPANY. 
 
 The purpose of this corporation is, the establishment and mainte- 
 nance of an oil company, with authority as follows : to purchase and 
 hold land in the operation of its business containing deposits of coal, 
 others minerals, petroleum, and gas or the title to such minerals apart 
 from the fee in the land ; to mine, develop and use such minerals, by 
 borings, wells, or other mining operations appropriate to their pro- 
 duction at the surface, and to sell and market the same ; to contract 
 for the lease and purchase of the right to prospect for, develop, and 
 use coal and other minerals, petroleum and gas ; to erect, build, 
 and own all oil tanks, cars, and pipes necessary for the operation 
 of the business aforesaid, and to acquire and own the land necessary 
 therefor; and, generally, to exercise all powers with reference to the 
 acquisition, mining, use, and sale of such minerals which are ex- 
 pressly or by implication conferred by the laws of the State of Texas 
 upon a corporation created under Articles 1120, 1121, of the Revised 
 Statutes of Texas, for the purposes specified in Paragraph 16, of said 
 Article 1121. 
 
 NOTE. The charters of oil companies in this State have usually fol- 
 lowed, literally, in the purpose clause, the language of paragraph 16, 
 Article 1121. It seems probable, but not quite certain, that such 
 purpose clause would confer all the powers above enumerated. But 
 a charter may by its terms give more restricted powers than the laws 
 permit to be conferred on the corporation and this form is suggested 
 as one which would remove some possible doubt as to the power of 
 the corporation to do all which it is authorized by the law to acquire 
 a right to do.
 
 138 LAW OF OIL AND NATURAL GAS 
 
 FORM III. 
 
 PURPOSE CLAUSE IN CHARTER OF CORPORATION FOR PRODUCING, TRANSPORTING 
 
 AND SELLING GAS. 
 
 The purpose of this corporation is to produce, make and manufacture 
 gas by natural or artificial means and to transport and sell the same 
 to individuals, the public and municipalities for light, heat, power 
 and other purposes and to make reasonable charges therefor, to con- 
 struct, maintain and operate power plants, substations and such 
 machinery, apparatus, pipes, devices and arrangements as may be 
 necessary to operate such lines at and between different points in 
 this State and to conduct the business of this corporation at and 
 between different points in this State ; and generally to do any and 
 all things and to exercise any and all powers as a gas company set 
 forth in Chapter III of the General Laws passed by the Regular 
 Session of the Thirty-second Legislature. 
 
 NOTE. This form for the purpose clause of a natural gas company is 
 the one suggested by the Attorney General in his opinion holding that 
 such corporations were authorized by the Act therein mentioned. 
 See Report of Attorney General for 1912- 1914, p. 287. 
 
 FORM IV. 
 
 AFFIDAVIT TO ACCOMPANY ORIGINAL CHARTER, OR AMENDMENT TO CHARTER 
 INCREASING CAPITAL STOCK. 
 
 STATE OF TEXAS, 
 County of 
 
 Before me, the undersigned authority, on this day personally ap- 
 peared known to me, who, having been by me 
 
 first duly sworn, on oath say each for himself : 
 
 That they are the identical parties who executed the charter of 
 
 company as incorporators (or that they comprise the present 
 
 board of directors of the company), that the full 
 
 amount of the (increased) capital stock of said company has been 
 
 in good faith subscribed and $ thereof paid in; that the 
 
 following are the namtes and postoffice address of the parties sub- 
 scribing to the capital (or increased capital) stock: 
 
 Name. Postoffice Address.
 
 LAW OF OIL AND NATURAL GAS 139 
 
 That the amount subscribed by each and the amount paid by each is 
 as follows : 
 
 Name. Amount Subscribed. Amount Paid. 
 
 That the above subscriptions were paid as follows :* 
 
 Subscribed and sworn before me this day of A. D. 191 
 
 Notary Public County, Texas. 
 
 *Here should be added the manner of payment, whether in cash, 
 property or labor, describing the property or labor, as provided in 
 Art. 1126, R. S. 
 
 Proof of final payment must be made in same manner as proof of 
 payment of original capital stock. 
 
 NOTE. This affidavit should accompany the charter, to supply the 
 information requiied to be furnished to him by Articles 1125-1128, 
 Revised Statutes. The form is that suggested by Secretary of State 
 Weinert in his pamphlet on the corporation laws. 
 
 LEASES AND CONTRACTS. 
 
 The reported decisions give in full a number of leases and contracts, 
 the construction and effect of \vhich have been considered by the 
 courts, and \vhich may be used as forms for these agreements in the 
 light of such rulings. Among these the following may be consulted : 
 
 O'Neil vs. Sun Co., 123 S. W., 172, in which performance by the 
 lessee of the conditions prescribed was held to give him a right to oil 
 taken from the leased tract, though produced by a well sunk by the 
 lessor. Writ of error was refused by the Supreme Court. 
 
 Emery vs. League; 31 Texas Civ. App., 474, 72 S. W., 603. A lease 
 by a tenant in common, which was held forfeited by the failure of 
 the lessee to procure partition as agreed. Writ of error refused. 
 
 McAfee vs. Grubb, 164 S. W., 925, gives the form of a lease under 
 which the lessee was held to have acquired a right to the oil for the 
 full term of his lease, twenty years, by his compliance with the con- 
 tract, though subsequently he ceased operations. But in this case 
 writ of error has been granted, and it is now pending in the Supreme 
 Court. 
 
 The contract considered in Witherspoon vs. Staly, 156 S. W., 557, 
 and there held forfeited by the lessee's failure to perform, will be 
 found in full in the report of the case on a former appeal, 138 S. W., 
 1191. In the second appeal writ of error was refused by the Supreme 
 Court. 
 
 The contract passed on by the Supremte Court in National Oil &
 
 140 LAW OF OIL AND NATURAL GAS 
 
 Pipe Line Co. vs. Teel, 95 Texas, 591, 68 S. W., 979, is given in full 
 in the opinion of the Court of Civil Appeals, 67 S. W., 545. 
 
 From these and from other cases which give only the material pro- 
 visions of the contracts or the parts involved in the decisions, forms 
 may be found which cover nearly all the provisions commonly con- 
 tained in instruments of this character. It has been thought proper, 
 however, to insert some specimens of the formfe of oil and gas leases 
 in common use, for the convenience of those not having time or oppor- 
 tunity to consult them in the reported decisions. 
 
 FORM V. 
 
 THE STATE OF TEXAS, 
 County of 
 
 Know all men by these presents : That 
 
 of County, Texas, the Part of the First 
 
 Part, in consideration of the sum of paid by 
 
 Part of the Second Part, the receipt of which is hereby acknowl- 
 edged, and the further consideration hereinafter mentioned, 
 
 Have granted, bargained, sold and conveyed, and do by these pres- 
 ents grant, bargain, sell, and convey unto the said part of the 
 
 Second Part, heirs and assigns, all of the oil, gas and 
 
 coal and other minerals in and under the following described land, 
 together with the right of ingress and egress at all times for the pur- 
 pose of drilling, mining and operating for mineral and to conduct 
 all operations and to lay all pipe necessary for the production, mining 
 and transportation of the oil, gas, water, coal or other minerals, with 
 the right to use sufficient water, gas or oil to operate said property, 
 and shall have the right to remove all machinery, fixtures and im- 
 provements placed thereon at any time, reserving, however, to the 
 
 part of the First Part the equal one of all oil produced and 
 
 saved upon said premises to be delivered in the pipe line to the credit 
 of the part of the First Part free of charge. 
 
 If coal is found, the Part of the Second Part agree to pay to 
 
 the First Party 4 cents per ton for every ton of the same that is 
 mined and marketed, payable quarterly; if gas or other minerals are 
 
 found, Second Party agrees to pay the First Party for the 
 
 product each year, payable quarterly, for the product of each well, 
 
 while the same is being used off the premises ; and Part of the 
 
 First Part, by furnishing own pipe and connections, shall 
 
 have sufficient gas free of cost for use in one dwelling house on the 
 premises, so long as the gas is utilized off the premises, but at his 
 own risk. 
 
 Whenever First Party shall request it, Second Party shall bury all 
 oil and gas lines, and pay all damage done to the growing crops by 
 reason of burying and removing the same.
 
 141 
 
 No well shall be drilled within feet of any building now on said 
 
 premises without the consent of the First Party. 
 Said land being of the following description, to-wit : 
 
 Containing Acres, more or less ; 
 
 To HAVE AND TO HOLD THE ABOVE DESCRIBED PREMISES unto the said 
 part of the Second Part, their heirs and assigns, on the fol- 
 lowing conditions : In case operations for either the drilling of a 
 well for oil or gas mining or other minerals is not commenced and 
 
 prosecuted with due diligence within from this date, then this 
 
 grant shall immediately become null and void as to both parties ; 
 provided, that Second Party may prevent such forfeiture from year 
 
 to year by paying to the First Party the sum of $ per 
 
 until such well is commenced, or until shipments from such mines have 
 begun, and it is agreed that the completion of a well shall operate 
 as a full liquidation of all rental under this provision during the 
 remainder of the term of this lease, which payments can be made 
 
 at Bank of or payable direct to 
 
 part of the first part. 
 
 In case the part of the Second Part should bore and discover 
 
 either oil or other minerals, then in that event this grant, encum- 
 brance and conveyance shall be in full force and effect for twenty- 
 five years fromi the time of the discovery of said product, and as 
 much longer as oil, gas or other minerals can be produced in paying 
 quantities thereon. Whenever sales are being made of the product 
 produced on the land above described, a settlement thereof shall be 
 made at the end of each quarter. 
 
 This grant is not intended as a mere franchise, but is intended as 
 a conveyance of the property above described for the purpose herein 
 mentioned, and it is so understood by both parties to this agreement. 
 
 The part of the Second part may at any time execute an instru- 
 ment admitting and declaring this contract cancelled and upon de- 
 livery of the same to the part of the first part or upon the filing 
 
 of the same for record, this contract and all liabilities and payments 
 under it, from and after such time shall cease and determine. 
 
 It is understood between the parties to this agreement that all 
 
 conditions between the parties hereunto shall extend to their heirs, 
 executors, administrators and assigns. 
 
 WITNESS our hands, this the day of 191.... 
 
 (To Be Acknowledged sarnie as Deeds.)
 
 142 LAW OF OIL AND NATURAL GAS 
 
 FOBM VI 
 
 THE STATE OF TEXAS, 
 County of 
 
 Know all men by these present : That I 
 
 of the County of and State of Texas, have and by these 
 
 presents do hereby demise, let and lease unto the 
 
 hereinafter styled the succes- 
 sors and assigns, the tract of land herein described, for the purpose 
 of exploiting the same for, and the production of minerals therefrom ; 
 and also grant and convey all of the oil, gas and other minerals 
 in and under said land, as also the exclusive right of drilling and 
 operating thereon for oil or gas, together with a right of way for and 
 a right to lay pipe lines to convey water, oils, steam and gas, and the 
 right to have sufficient water, oil and gas from the premises to drill 
 and operate any wells that may be bored, and also such other priv- 
 ileges as are reasonably requisite for the conduct of said operations, 
 uid the right to remove, at any time, from said premises, any and all 
 
 property which may have been placed thereon by said 
 
 The said premises as to which this instrument does apply are situat- 
 ed in County, State of Texas, and described as follows : 
 
 TO HAVE AND TO HOLD unto the said successors 
 
 and assigns for the term and under the provision, as follows, to-wit : 
 
 1. There is hereby expressly guaranteed to said 
 
 the right at any time before the expiration of twelve months from 
 this date to begin operations of drilling a well for oil on said prem- 
 ises, and also the right to extensions of time in which to begin such op- 
 erations, for successive periods of six (6) months, on conditions that the 
 
 said shall, on or before the first day of each 
 
 respective six months pay to or deposit to 
 
 credit in the Bank of the sum of 
 
 ($ ) Dollars; provided, that if such pay- 
 ment shall not be made on or before first day of each such res- 
 pective six months period, then and on such default, this lease shall 
 wholly determine ; and provided, further, that these successive periods 
 in which the right may be acquired to begin the operation of drilling 
 a well in search of oil or gas, shall not exceed in the aggregate five 
 (5) years from this date, and if such operations shall not be begun 
 on or before the expiration of said five (5) years from this date, then 
 this lease shall wholly determine. 
 
 2. If said shall avail of the right herein 
 
 guaranteed and begin operations of drilling of a well on said prem- 
 ises, then from and after the beginning of such operations, said
 
 LAW OF OIL AND NATURAL GAS 143 
 
 shall not be required to make any further money 
 
 payments hereunder; provided, however, if said 
 
 shall begin such operations of drilling a well but shall fail to prosecute 
 such operations with reasonable dilligence, then this lease shall be- 
 com|e of no effect. 
 
 If shall begin such operations of drilling a 
 
 well either within the fixed twelve months period from this date or 
 within any extension period for which it may have paid as above 
 
 provided, then said shall have the right to make 
 
 as many attempts to find oil or gas please...., and to continue 
 
 the exercise of such right as long as please...., even be- 
 yond said term of five years from this date ; provided only, such at- 
 tempts shall be successive in the sense that until oil or gas be found 
 not more than sixty days shall elapse between the cessation or aban- 
 donment of work on one well and the beginning of work on another. 
 
 3. If, in the exercise of the right hereby conferred, oil or gas be 
 
 found in paying quantities on said land, then the said 
 
 shall deliver as royalty to said free of expense 
 
 ( ) part of all the oil saved from that pro- 
 duced, such delivery to be made either in tanks with connection by 
 lessor provided, or into any pipe line that may be connected with the 
 well ; and if any well on said premises produces gas in paying quan- 
 tities, and such gas is used o'r marketed off the premises by said 
 
 , then the said shall be paid at 
 
 the rate of One Hundred ($100.00) Dollars per year for each and 
 every such well, such payments to be made at the end of each such year 
 
 4. If, as a result of any explorations under this contract, any other 
 
 minerals than oil or gas shall be found in quantities deemed by 
 
 to be paying, then shall have the right to mine 
 
 for and produce same, paying to the lessor what, under all circum- 
 stances, may be reasonable royalty. 
 
 5. It is expressly declared that if oil, gas or other minerals, or 
 
 any of them, be found in paying quantities, then the said 
 
 shall become at once vested with an estate in and to all the min- 
 erals underlying said land, with right to produce the same, and any 
 and all of same, as long as any one of said minerals shall be pro- 
 duced in paying quantities. 
 
 6. It is agreed that without the written consent of both parties 
 
 hereto, no well shall be drilled within ( ) 
 
 feet of the present buildings on said premises, and that the use of 
 the surface of the land is hereby granted only so far as may be 
 necessary to conduct mining operations, including the saving, storing 
 and transporting the minerals. 
 
 7. It is further provided that if oil or gas or other minerals in pay- 
 ing quantities shall be found, and the - successors or 
 assigns hereunder, should conclude that do not desire to
 
 144 LAW OF OIL AND NATUBAL GAS 
 
 operate under this lease, then the right is conferred to surrender the 
 same upon payment of One Hundred ($100.00) Dollars to the lessor, 
 and such right of surrender shall also confer the privilege of re- 
 moving from said premises any and all material placed thereon by 
 said , successors and assigns. 
 
 8. It is further agreed that all the conditions and terms herein 
 shall extend to the heirs, executors, legal representatives, successors 
 and assigns, of the parties hereto. 
 
 The said has this day paid to the said 
 
 the sum of ($ ) Dollars, the receipt whereof is 
 
 hereby acknowledged, and which payment is received in full satis- 
 faction of any and every right hereby granted, including the right 
 to extend the privilege of exploration of said land. 
 
 Witness the signatures of the parties hereto this the day 
 
 of.... . A, D. 191.... 
 
 Lessor. 
 
 Lessee. 
 By 
 
 Agent. 
 (To Be Acknowledged same as Deeds.) 
 
 FORM VII 
 
 Know all men by these presents : That 
 
 of the Postoffice of , State of , hereinafter 
 
 called lessor (whether one or more), for and in consideration of 
 dollars, cash in hand paid, receipt of which is here- 
 by acknowledged, do hereby lease unto hereinafter 
 
 called lessee, the following described land, situated in the County of 
 State of Texas: 
 
 for the purpose of prospecting for oil, gas and sulphur, and the pro- 
 duction of the same therefrom, together with the exclusive right of 
 ingress and egress at any and all times to prospect, drill, mine and 
 otherwise operate hereunder, and the right to erect, maintain and 
 remove all necessary or proper structures and appliances, including 
 the right to pull the piping from wells, and to install, maintain 
 and remove all tanks and other means of storage and all pipes and 
 other means of transportation ; and, subject to the royalties here-
 
 LAW OF OIL AND NATURAL GAS 145 
 
 inafter mentioned, there is hereby granted and conveyed to said lessee 
 all of the oil, gas and sulphur in and under said land. 
 
 The royalties above mentioned shall be (a) on oil, a quantity equal 
 to one-eighth of all produced and saved, the same to be delivered at 
 the wells or to the credit of the lessor in the pipe line to which the 
 wells may be connected ; (b) on natural gas, at the rate of two hun- 
 dred dollars per annum, payable quarterly, for each well producing 
 gas exclusively, and from which gas is then being used or sold off the 
 premises, it being understood that the lessor shall have the privilege, 
 at the lessor's own risk and expense, of making connections and using 
 gas from such wells free of charge for one dwelling on said land; (c) 
 on gas produced from oil wells, when such gas is used or sold off 
 the premises at the rate of ten dollars per annum for each well 
 while the gas is being used or sold, and when such gas is used for 
 the manufacture of gasoline there shall be an additional payment at 
 the rate of ten dollars per annum for each \vell while gas is being 
 so used for the manufacture of gasoline; and (d) on sulphur, at the 
 rate of one dollar per ton for all mined and marketed from said land. 
 But it is understood and agreed that the lessee shall have the free use 
 of oil, gas, wood and water from said land for all purposes of de- 
 velopment and operation. 
 
 If operations for the drilling of an oil or gas well are not begun 
 
 on said land on or before the first day of , 191.... 
 
 this lease shall terminate as to both parties, unless the lessee on or 
 before that date shall pay or tender to the lessor, or to the credit 
 
 of the lessor in the Bank at , 
 
 (which shall continue as the depository regardless of changes in own- 
 ership of the land,) the sum of dollars, which 
 
 payment or tender may be made by the check or draft of the lessee, 
 and, however made, shall operate to confer on the lessee" the privil- 
 ege of deferring the time limit for six months from said date. There- 
 after, in like manner and upon like payments or tenders of said 
 amount, the time limit may be further deferred for additional periods 
 of six months successively, provided always that this lease can not 
 be kept in force by such payments in the absence of drilling opera- 
 tions for a longer period than five years from the date last above set 
 forth. But nothing in this paragraph contained shall obligate the 
 lessee, against its wish or option, to make any such payment or to drill 
 or otherwise carry on operations hereunder. And it is understood and 
 expressly agreed that the consideration first recited in this lease, 
 the down cash payment, and the obligation of the grantee contained 
 in the next ensuing paragraph thereof, shall be held to support and 
 sustain, not only the privileges granted . to the date first written in 
 this paragraph, namely, the date when this lease is to terminate 
 unless an additional payment or tender is made, but also the lessee's 
 option of extending that period from time to time and keeping this
 
 146 LAW OF OIL AND NATURAL GAS 
 
 lease in force as aforesaid, as well as any and all other rights and 
 privileges conferred on the lessee by this instrument. 
 
 If during the period of this lease or the extensions of the time 
 limit for drilling, and within five years from the date above set 
 forth, and prior to the discovery of oil or gas on said leased land, 
 there shall be drilled on adjacent land and within 200 feet of any line 
 of said leased land, a well producing as much as 50 barrels of oil per 
 day for thirty consecutive days, the lessee will, with reasonable dili- 
 gence, begin and prosecute the drilling of a well on said leased land 
 in a faithful effort to find and produce oil in paying quantities. 
 
 After operations for the drilling of an oil or gas well shall have 
 been begun on said leased land it shall not be necessary for the les- 
 see to make any further payments in lieu of drilling operations as 
 provided in the second preceding paragraph hereof in order to keep 
 this lease in force ; and during said period of five years drilling opera- 
 tions may be suspended from time to time, without terminating this 
 lease, provided the lessee shall have paid or tendered, or shall then 
 pay or tender, the amount hereinbefore mentioned for the then cur- 
 rent period of six months, including the time of such suspension, 
 and provided further that after such operations are so begun no such 
 payment or tender shall be necessary when the operations are being 
 carried on in good faith and the period of suspension is less than 
 thirty days. 
 
 If the lessee shall sink a well or shaft and discover oil, gas or sul- 
 phur in paying quantities in or under the above described land, then 
 this lease shall remain in full force and effect for ten years from 
 such discovery, and as much longer as oil, gas or sulphur shall be 
 produced therefrom in paying quantities ; and, having so discovered oil. 
 gas or sulphur in paying quantities, the lessee shall be exempt from 
 loss or forfeiture of this lease, in whole or in part, except after ju- 
 dicial ascertainment that the lessee has failed to perform its duty and 
 discharge its obligations hereunder and a reasonable opportunity 
 thereafter to prevent such loss or forfeiture, and in event of final 
 loss or forfeiture there shall be reserved to the lessee each producing 
 well or mine with 10 acres of land surrounding the same to be des- 
 ignated by the lessee. 
 
 No well shall be drilled nearer than two hundred feet to any 
 house or barn now on said land, unless by consent of the lessor, and 
 nothing herein contained shall deprive the lessor of the full use and 
 enjoyment of said land, subject to the privileges and estate hereby 
 granted, and when requested by the lessor the lessee shall bury its pipe 
 lines so that they will not interefere with cultivation. 
 
 If the interest owned by the lessor in said land is or shall prove 
 to be less than the entire fee the royalties and moneys herein pro- 
 vided for shall be delivered or paid to the lessor in the proportion 
 only that the interest of the lessor bears to the entire fee.
 
 LAW OF OIL AND NATURAL GAS 147 
 
 If the estate of either party hereto is assigned and the privilege 
 of assigning in whole or in part is expressly allowed the covenants 
 hereof shall extend to the assigns and successive assigns, but no 
 change in ownership of the land or the rentals or royalties, by pur- 
 chase or otherwise, shall be binding on the lessee until it shall have 
 been furnished with notice and proper evidence of such change. 
 
 IN TESTIMONY WHEEEOF this instrument is signed this the 
 
 day of 19 
 
 Witnesses : 
 
 (To Be Acknowledged same as Deeds.) 
 
 FORM VIII. 
 
 STATE OF TEXAS, 
 County of 
 
 Know all men by these presents : That this memorandum of agree- 
 ment this day made and entered into by and between 
 
 of County, Texas, parties of the first part and 
 
 of County, Texas, 
 
 parties of the second part, 
 Witnesseth : 
 
 That whereas, the parties of the first part own certain land situated 
 
 in County, Texas, which is supposed to be underlaid 
 
 with oil and gas, which they desire developed, and a part of which 
 the party of the second part is desirous of developing for oil. It 
 is therefore mutually agreed between the parties hereto : 
 
 1. That the parties of the first part for the consideration here- 
 inafter mentioned will allow the party of the second part to enter 
 upon and take possession of the following described portion of said 
 land for the purpose of developing the same for oil, to-wit : 
 
 2. That the party of the second part hereby agrees for the con- 
 sideration hereinafter stated, to enter upon and undertake the de- 
 velopment of said land for oil, and within days from the date 
 
 hereof to commence one well thereon, and to furnish all machinery 
 
 and material, and at own expense, bore or sink the said well 
 
 to the depth of feet or more, unless oil is found in 
 
 paying quantities at lesser depth, and in constructing said well to use 
 ordinary care, skill and diligence, and to complete the same in any 
 event within months from this date. 
 
 3. That if oil is developed in paying quantities in the said well,
 
 148 LAW OF OIL AND NATURAL GAS 
 
 then the party of the second part agrees to begin within days 
 
 from the completion of said well, the boring of another well on said 
 
 land and to furnish all material and machinery at own 
 
 expense and to prosecute the work of sinking said second well with 
 ordinary care, skill and diligence, and sink the same to the depth 
 
 of at least feet, or more, unless oil in paying quantities is developed 
 
 at lesser depth; and if oil is developed in said second well then the 
 
 party of the second part is to bore at own expense a third 
 
 well upon said land and to continue at own expense within 
 
 a reasonable time boring other wells on said land so long as oil is 
 found in paying quantities and to such number as is necessary for 
 the reasonable development of the entire said tract of land, due regard 
 being had to the interests of all parties hereto and the development 
 of other land in the vicinity of said tract being considered. 
 
 4. That if oil is not discovered in paying quantities in the first 
 well the party of the second part shall have the right to discontinue 
 boring on said land and shall at once surrender to the parties of the 
 first part the possession thereof ; but if oil in paying quantities is 
 developed in the first well but not in the second well, then the party 
 of the second part shall have the right, upon surrendering to the 
 parties of the first part, possession of all of the said tract of land 
 except acres surrounding the said first well, to stop drill- 
 ing on said land, in which event all rights of the party of the second 
 part under this agreement shall cease, except the right to operate the 
 said first well until it is exhausted. 
 
 5. That if oil is developed the party of the second part shall use 
 due diligence in producing the same and shall furnish all material, 
 labor, machinery and fixtures necessary to the development of said 
 land and the storing and preserving of all oil produced therefrom and 
 in consideration thereof and of the development of said land shall re- 
 tain and own of all oil produced and saved from the said 
 
 premises from developed wells which have to be pumped or operated 
 
 with compressed air, and of all oil produced from 
 
 wells which gush; and in consideration of this lease the parties of 
 the first part shall own the remaining part of all oil pro- 
 duced and saved from said land which shall be delivered by the party 
 of the second part free of cost to the parties of the first part, in 
 tanks furnished by the party of the second part, or in pipe lines des- 
 ignated by the parties of the first part, all necessary connections 
 with the tanks and pipe lines to be made by and at the expense of the 
 party of the second part. 
 
 6. That the party of the second part reserves the right on the 
 termination of this lease to remove from the premises all improve- 
 ments and machinery placed thereon by and shall have 
 
 that right provided it is exercised and same removed within
 
 LAW OF OIL AND NATURAL GAS 149 
 
 days after the termination of this lease, but if not so removed the 
 same shall become the property of the parties of the first part. 
 
 7. The party of the second part shall keep correct books of account 
 showing 1 the production of each and every well as well as the share or 
 proportion due to the parties of the first part, which books shall bfe 
 kept open for the inspection of all parties interested in this agree- 
 ment, at all reasonable times. 
 
 8. The parties of the first part shall have the right to have at any 
 and all times a representative upon the ground who shall have ac- 
 cess to the tanks, wherever oil is stored, with the right to measure 
 the same, and shall be afforded all reasonable facilities for investi- 
 gating the amount of oil produced from said land and the condition of 
 the wells and generally overlook the interests of the parties of the 
 first part with relation to this lease. 
 
 9. The only consideration for this contract of lease being the pros- 
 pective royalty above provided for, the vesting of any right herein- 
 under in the party of the second part or the continuance thereof, if 
 once vested, shall be conditioned upon the faithful performance by the 
 party of the second part of all and every of the covenants, obligations 
 
 and agreements hereinabove recited to be performed by 
 
 and a failure upon the part of the party of the second part to per- 
 form any one or more of such covenants, obligations or agreements 
 at any time for a period of thirty days shall at the option of the par- 
 ties of the first part operate to forfeit all rights held by 
 
 under this instrument and upon notice of such forfeiture being given 
 
 to the party of the second part by the parties of the first part 
 
 shall thereby cease to have any right in said premises and shall sur- 
 render the same to the parties of the first part free of all claim, and 
 the parties of the first part shall have the right to re-enter and retake 
 possession of said premises and eject the party of the second part 
 therefrom and shall not be liable for any damages done on account 
 thereof. 
 
 Witness our hands this day of , 191 
 
 (Signed in duplicate, each party retaining a copy.)
 
 INDEX. 
 
 References are to pages. 
 
 ABANDONMENT. PAGE. 
 
 Of operation of wells 67-68 
 
 ACTIONS. 
 
 To determine corporate existence 18-19 
 
 Capacity to sue and be sued 20-21 
 
 By creditor of corporation 23-24 
 
 Decrease of capital stock 27-28 
 
 By foreign corporation . . , 49-50 
 
 For penalties on act regulating wells 71 
 
 On refusal of permit to sell stock 76 
 
 On bond given for stock sales 76-77 
 
 To reinstate permit to sell stock 78 
 
 ACCOMMODATION PAPER. 
 
 Corporation cannot sign 20 
 
 AFFIDAVITS. 
 
 Of payment of capital stock 15-16 
 
 Of subsequent payment of \inpaid capital stock 22 
 
 Of subscription and payment of increased stock 24 
 
 Of financial condition of corporation 27-28 
 
 To reports required of corporation 35 
 
 As condition for permit to foreign corporation 47-48 
 
 Officers authorized to make 52 
 
 To determine amount of franchise tax 65-66 
 
 To accompany original charter 138-139 
 
 AGENTS. 
 
 Power of corporation to appoint 19 
 
 Power to appoint general manager 21 
 
 Disclaiming act by corporation 31 
 
 Sale of stock by 78-79 
 
 ALIENATION. 
 
 Of lands company is not authorized to hold 33-48 
 
 AMENDMENT. 
 
 Of charter by corporation 17-18 
 
 Of charter by legislature 19 
 
 Of by-laws by corporation 28 
 
 ATTORNEY'S FEES. 
 
 As promotion expenses of corporation 72-101
 
 152 INDEX 
 
 ATTORNEY GENERAL. PAGE. 
 
 To bring suit for penalties 51 
 
 Opinion construing- Blue Sky Law 81-108 
 
 BAYS AND TIDAL WATERS. 
 
 Mineral rights in 112,113 
 
 BLUE SKY LAW. 
 
 Effect on sale of stock 25, 26, 108 
 
 Statute regulating sales of stock 72-81 
 
 Opinion of Attorney General construing same 81-108 
 
 BONDS. 
 
 Extending credit of corporation. Note 20 
 
 For what purposes issued 26 
 
 Action for unlawful issuance 26-27 
 
 Eeport of bonded indebtedness 34 
 
 For compliance with Blue Sky Law 76 
 
 Action upon such bond 77 
 
 BOOKS. 
 
 To be kept by corporation 29, 77, 78 
 
 BROKERS. 
 
 Internal revenue license tax on 132-135 
 
 BY-LAWS. 
 
 Power of corporation to make 19 
 
 Note on same 21 
 
 Making and amendment of 28 
 
 CARS. 
 
 Power of pipe line to own 44 
 
 CASINO. 
 
 Of oil and gas wells 67 
 
 CHARTERS. 
 
 Must be by general law 7 
 
 What charter must contain 13-14 
 
 To be subscribed and acknowledged 14 
 
 Incorporation of business firm 15 
 
 Affidavit to accompany. 16 
 
 Amendment of 17-18 
 
 Amendment by legislature 19 
 
 Fee for filing 52 
 
 Form for charter of corporation . 136 
 
 CITIES. 
 
 Power of gas company to contract with 40-41
 
 INDEX 153 
 
 > 
 
 CITIZENSHIP. PAGE. 
 
 Of subscribers to charter , 14 
 
 COMMISSIONS. 
 
 On sale of stock. Note 25, 26, 108 
 
 Regulation by Blue Sky Law 72-81 
 
 Construction of Act by Attorney General 81-108 
 
 CONDEMNATION. 
 
 Power to exercise eminent domain. Note 13 
 
 For purposes of pipe line 42 
 
 CONDITIONS. 
 
 In contracts and leases of oil and gas rights 114-122 
 
 CONSOLIDATION. 
 
 Of two or more corporations 18 
 
 CONSTITUTION. 
 
 Creation of private corporation 7 
 
 CONSIDERATION. 
 
 Of option or unilateral contract 120-121 
 
 CONTRACTS. 
 
 Power of corporation to make 
 
 Implied authority. Note 
 
 Becoming surety for another. Note 
 
 To act as trustee. Note 
 
 To acquire and hold land. Note 
 
 Power to purchase land 
 
 Leases and contracts for mining rights 114-122 
 
 CONTRIBUTION. 
 
 To stock-holder paying debt of corporation 40 
 
 CONVEYANCES. 
 
 Of land by corporation. Note 21 
 
 How made by corporation 32 
 
 CORPORATIONS. 
 
 Constitutional provisions 7 
 
 Classification of 8 
 
 Creation of 8-19 
 
 Powers and duties of 19-33 
 
 Acquisition of land by 33 
 
 Reports required of 34-36 
 
 Liability of stockholders and directors 36-37 
 
 Dissolution of 37-40 
 
 Gas and water companies 40-41 
 
 Pipe line companies 41-44 
 
 Companies to produce ana sell gas 45-46 
 
 Foreign corporations 46-50
 
 154 INDEX 
 
 PAGE. 
 
 Reports to determine franchise tax 50-52 
 
 Fees required to be paid 52-53 
 
 Regulations of sales of stock 72-108 
 
 COURTS. 
 
 Jurisdiction in enforcement of regulation of wells 70-71 
 
 CREDITORS. 
 
 Rights on decrease of capital stock 27-28 
 
 Liability of stockholders to 39-40 
 
 DEBTS. 
 
 Decrease of stock as affecting 27-28 
 
 Restrictions upon creation 30 
 
 Reports in regard to 34 
 
 DEEDS. 
 
 By corporation 21-32 
 
 Separating title to minerals from, that of the soil 113-114 
 
 DEPOSIT. 
 
 Of money received from sale of stock 77 
 
 DIRECTORS. 
 
 Named in charter 13 
 
 Increase or decrease of number. .1 20, 28 
 
 Power to increase capital stock 24 
 
 Power to decrease stock 27-28 
 
 Quorum and annual elections 28 
 
 Effect of failure to elect 28-29 
 
 Have general management of corporate affairs 29 
 
 Records and books to be kept by 29, 77, 78 
 
 Reports and dividends to stockholders 29 
 
 Declaring dividend when insolvent 37 
 
 Repudiating political contribution 31 
 
 Liability for debts of corporation 37-39 
 
 Act as trustees on dissolution 39 
 
 DISCRIMINATION. 
 
 Transportation of gas by pipe line 13-43 
 
 DISSOLUTION. 
 
 Winding up affairs of corporation 23 
 
 How corporation dissolved .' 37-38 
 
 Appointment of receiver on dissolution 38-39 
 
 Officers and directors as trustees - 38-39 
 
 Liability of stockholders to creditors 39-40 
 
 Contribution between stockholders 40 
 
 Limit of stockholders' liability. 40
 
 INDEX 155 
 
 DIVIDENDS. PAGE. 
 
 Declaring when company is insolvent 37 
 
 DOCKS. 
 
 Power of pipe line company to own 43-44 
 
 EASEMENTS. 
 
 Mineral rights in streets and highways , 111-112 
 
 EMINENT DOMAIN. 
 
 Eight of pipe line company to condemn 42 
 
 Eight of gas company to condemn 45-46 
 
 Title to minerals in street or right of way 111-112 
 
 EMPLOYEE'S LIABILITY. 
 
 Eegulated by statute 124 
 
 ESTOPPEL. 
 
 To deny croporate power. Note 22 
 
 EXISTENCE OF CORPORATION. 
 
 Dates from time of filing charter 16-17 
 
 Not collaterally disputed 18 
 
 FEDERAL LAWS. 
 
 Not applicable to Texas public lands 123 
 
 Internal revenue 126-135 
 
 FEES OF OFFICE. 
 
 Payment of charter fee and franchise tax 15 
 
 On reinstatement of forfeited charter 23 
 
 Charter fee 52-53 
 
 Plan for sale of corporate stock 73 
 
 FILING. 
 
 Corporate charter 15-16 
 
 Corporation exists from time of filing charter 16-17 
 
 Amendments to charter 17 
 
 Plan for sale of corporate stock. . , > 73 
 
 FOREIGN CORPORATIONS. 
 
 Obtaining permit to do business 46-50 
 
 Fee on obtaining permit 52-53 
 
 Sale of stock by 98-100 
 
 FORFEITURES. 
 
 For failure to pay up capital stock 22-23 
 
 For watering stock 25 
 
 For failing to commence operations 38 
 
 Of mining claims 61
 
 156 INDEX 
 
 FORMS. PAGE. 
 
 Charter of domestic corporation 136 
 
 Purpose clause of charter of oil company 137 
 
 Purpose clause for gas company 138 
 
 Affidavit to accompany charter or amendment 138-139 
 
 Leases and contracts for mineral rights 139-149 
 
 FRANCHISE TAX. 
 
 Corporations created for more than one purpose 12-13 
 
 Payment on filing charter 15 
 
 Reports to determine amount ,. . . . 51-52 
 
 Fee for filing charter 52 
 
 For permit of foreign corporation 52-53 
 
 Annual tax on corporations 64-67 
 
 GAS. 
 
 Obtaining rights in public lands 58-62 
 
 Regulation of wells ' 67-71 
 
 Is a mineral and part of the soil 109 
 
 Modification of title by fluid nature 110 
 
 Ownership by title to soil 109-113 
 
 Separated from title to soil by conveyance 113-114 
 
 Mining contracts and leases 114-124 
 
 GAS COMPANIES. 
 
 Incorporation of 9-13 
 
 Privileges of such corporations 40-41 
 
 Companies for transporting, storing and selling 41-44 
 
 Corporations for generating, transporting and selling 44-46 
 
 Regulation of sale of stock 72-108 
 
 GUARANTY. 
 
 Power of corporation to become surety. Note 20-21-22 
 
 HOMESTEAD. 
 
 Wife to join in couveyance of mineral rights 113 
 
 INCREASE. 
 
 Of capital stock 24-27 
 
 INSOLVENCY. 
 
 Declaring dividends when insolvent. 37 
 
 Dissolution of corporation on 38 
 
 INTERNAL REVENUE. 
 
 Federal laws imposing 126-135 
 
 JOINT OWNERS. 
 
 Mineral rights of Ill
 
 INDEX 157 
 
 LAND. PAGE 
 
 Corporate seal required in conveyance 21-33 
 
 Eight to purchase and hold 48-49 
 
 Mining claims on public domain 54-64 
 
 LEASES. 
 
 Authority of oil company to lease 9-10 
 
 Eights of tenants for years HI 
 
 Of mining rights on another's land 114-119 
 
 Forms of mining leases ,. . 139-149 
 
 
 MINERALS. 
 
 Oil and natural gas 109 
 
 Title of owner of soil 109-110 
 
 Fluid and liquid minerals 110 
 
 Joint or common owners ,. Hi 
 
 Eights of tenants for years Ill 
 
 Eights in streets, ways and easements 111-112 
 
 Underlying rivers and bays 112-113 
 
 Title separated from that of the soil 113-114 
 
 Contracts and leases for mining 114-116 
 
 Implied obligation to develop 117-118 
 
 Title acquired by performance 118-119 
 
 Options and unilateral contracts 120-122 
 
 Contracts for operation 122-123 
 
 Acquiring rights in public lands 123-124 
 
 Taxation of mineral right in land 125-126 
 
 MARRIED WOMAN. 
 
 As stockholders or officers of corporations. . . . ; 14 
 
 Conveyance of mineral rights in homestead. Note 113 
 
 MINES AND MINING. 
 
 Acquiring mining rights in public land 54-64 
 
 Eegulation of oil and gas wells 67-73 
 
 MINING DISTRICT. 
 
 In public lands 54 
 
 MORTGAGES. 
 
 Power of corporation to mortgage 19 
 
 Eeports of mortgages on property 34 
 
 Mortgages of franchises and property for borrowed money 43 
 
 By foreign corporation 48 
 
 Eeports to determine franchise tax 51 
 
 NAME. 
 
 Of corporation in charter 13 
 
 Succession by corporate name 19 
 
 Suit by corporate name. Note 20-21 
 
 Misnomer not to vitiate grant. .- 32
 
 158 INDEX 
 
 NATURAL GAS. PACK. 
 
 Obtaining- rights in public land 58-62 
 
 Regulation of wells 67-71 
 
 Is a mineral and part of the soil 109 
 
 Modification of title by fluid nature 110 
 
 Belongs to owner of soil 109-113 
 
 Separated from title to soil by conveyance 113-114 
 
 Mining contracts and leases 114-124 
 
 OFFICE. 
 
 Principal office must be kept in state 32 
 
 Office outside of the state 44 
 
 OFFICERS. 
 
 Power to appoint and remove 19 
 
 Power to appoint general manager 21 
 
 Quorum of directors and annual elections 28 
 
 Political contribution of corporate funds 30 
 
 As trustees of dissolved corporation 38-39 
 
 Doing business under old corporate name 40 
 
 Names of officers to be reported 51 
 
 Authorized to make report 52 
 
 Superintendent of oil or gas field 70 
 
 Names to be reported before sale of stock 73 
 
 OIL. 
 
 Acquiring mining rights in public lands 58-62 
 
 Regulation of wells 67-71 
 
 Is a mineral and part of the soil 109 
 
 Title of owner of soil to 109 
 
 Modification of title by liquid nature 110 
 
 Rights of joint or common owner Ill 
 
 Rights of tenant for years Ill 
 
 Rights in streets, ways and easements 111-112 
 
 Underlying rivers and tidal waters 112-113 
 
 Separation of title from, soil 113-114 
 
 Conditional contracts and leases 114-116 
 
 Conditions implied from lease 117-118 
 
 Compliance with conditions by grantee 118-119 
 
 Options and xinilateral contracts 120-122 
 
 Contract for operating wells 122-123 
 
 Taxation of oil rights apart from land 125-126 
 
 OIL COMPANIES. 
 
 Purposes for which they may be created 9-13 
 
 Form of charter 13-14 
 
 Companies for storing, transporting and selling 41-44 
 
 Regulation of wells by statute 67-71 
 
 Sale of stock by 72-108
 
 INDEX 159 
 
 OPTIONS. PAGE. 
 
 Validity of optional contract '. 120-122 
 
 OWNERSHIP. 
 
 Of minerals while in the soil 109-110 
 
 PATENT. 
 
 To public mineral lands . .< 60 
 
 Passes title to minerals 109 
 
 PAYMENT. 
 
 For capital stock subscribed 15 
 
 Proof of such payment 15-16 
 
 Form of affidavit to show payment 138-139 
 
 Of increased capital stock 24 
 
 How stock subscription paid 25-26 
 
 Of funds for political purposes 30 
 
 PEBMIT. 
 
 To foreign corporation to do business 46-50 
 
 To sell stock in corporation 72-108 
 
 PENALTIES. 
 
 Forfeiture of charter 30-31 
 
 For failure to make report 36-51 
 
 For failure to comply with regulations of wells 69-71 
 
 PERFORMANCE. 
 
 Of conditions in grant of mineral rights 118-119 
 
 PETROLEUM. 
 See Oil. 
 
 PIPE LINES. 
 
 Discrimination by prohibited 43 
 
 For storing, transporting, buying and selling 41-44 
 
 Of company for generating and selling gas 45-46 
 
 PLACE OF BUSINESS. 
 
 To be named in charter 13 
 
 Corporation prohibited from making 30-31 
 
 POWERS OF CORPORATION. 
 
 General powers 19-22 
 
 To increase capital stock 24 
 
 To adopt by-laws 28 
 
 To increase number of directors 28 
 
 Of directors of corporation 29 
 
 To borrow money ; 29-43 
 
 To execute bonds and notes 29 
 
 To pledge property and income for borrowed money 29
 
 160 INDEX 
 
 PAGE. 
 
 To sue its own members 32 
 
 To convey land 32 
 
 To purchase and hold land 33 
 
 To dissolve corporation 37-38 
 
 Of gas and water companies 40-41 
 
 Of oil, gas and salt companies 41 
 
 Condemnation of lands by such companies 42 
 
 To borrow, issue stock, and mortgage 43-46 
 
 To operate outside the state 43-44 
 
 To mine, transport and sell gas 45 
 
 To condemn easement for pipe line 45-46 
 
 Of foreign corporation under permit 48-49 
 
 PBOMOTEB. 
 
 Payment of promotion expenses 25-26 
 
 Regulation of promotion expenses 72-108 
 
 PROMOTION EXPENSES. 
 
 How paid i 25-26 
 
 Regulation of by statute 72-108 
 
 PUBLIC DOMAIN. 
 
 Disposition of mineral lands 54-64, 123, 124 
 
 PUBLIC INTEREST. 
 
 Regulations against wasting supply of oil and gas. Note . . 7 
 
 PURPOSE. 
 
 For which oil and gas companies may be formed 9-13 
 
 To be stated in the charter 13 
 
 Forms of purpose clauses 137-138 
 
 RECEIVERS. 
 
 To close out corporation business 38-39 
 
 REPORTS. 
 
 By gas company to state 34-36 
 
 To determine annual franchise tax 50-52, 66 
 
 REVIVAL. 
 
 Of forfeited charter 23 
 
 RIGHT OF WAY. 
 
 Minerals underlying railway 111-112 
 
 RIVERS AND BAYS. 
 
 Minerals underlying 112-113 
 
 RIPARIAN PROPRIETARIES. 
 
 Mineral rights of 112-113
 
 INDEX 161 
 
 SALES. PAGE. 
 
 Of public mineral lands 58-62 
 
 Of stock in oil or gas companies 72-108 
 
 Of mineral rights in land 113-122 
 
 SEAL. 
 
 Right of corporation to use 19 
 
 Required in corporate conveyance of land 21, 32 
 
 SECRETARY OF STATE. 
 
 Duties with reference to filing charters. .< 15-16 
 
 With reference to payment of capital stock 22-24 
 
 Reports by corporations to 34-35 
 
 Permit to foreign corporation 47-48 
 
 Fees collected by 52-53 
 
 Franchise tax collected by 64-68 
 
 Permits to sell stock by 72-81 
 
 SHIPS. 
 
 Right of pipe line company to own 44 
 
 STAMPS. 
 
 Required by internal revenue law 126-132 
 
 STOCK AND STOCKHOLDEBS. 
 
 For what stock may issue 7 
 
 Amount designated in charter 13 
 
 Married woman as stockholder and incorporator 14 
 
 Amount to be subscribed and paid 15 
 
 Showing how stock is paid for 16 
 
 Increase in number of directors , 20 
 
 Unpaid stock 22-23 
 
 Increase in capital stock i 24-27 
 
 Watering stock 25-26 
 
 For what stock can be issued. Note 25-26 
 
 Decrease in capital stock . . : 27-28 
 
 Reports by directors to stockholders 29 
 
 Neglect to pay installment 31-32 
 
 Reports as to stock issued 34 
 
 Liability of stockholders 36-37 
 
 Dissolution by consent of stockholders 38 
 
 Liability of stockholders on dissolution 39 
 
 Contribution between stockholders 40 
 
 Liability on unpaid stock , 40 
 
 Reports as to stock authorized and issued 51 
 
 Franchise tax based on capital stock 64-67 
 
 Regulation of sale of stock 72-108 
 
 For what issued and how paid 105-108
 
 162 INDEX 
 
 STREET AND HIGHWAYS. PAGE. 
 
 Rights to minerals underlying 111-112 
 
 SUPERINTENDENT. 
 
 Of oil and gas fields 70 
 
 SURETY. 
 
 Power of corporation to become. Note . . . . 20-22 
 
 TANKS. 
 
 Pipe line company may maintain 41 
 
 TAXATION. 
 
 Payment of franchise tax 12 
 
 Fee on filing charter .t 15, 52 
 
 Reports to determine amount 51-52 
 
 Por permit of foreign corporation 52-53 
 
 Annual tax on corporations 64-67 
 
 Ad valorem tax on mineral rights 125-126 
 
 United States internal revenue 126-135 
 
 TENANTS. 
 
 Have no interest in minerals Ill 
 
 TERM. 
 
 For which corporation is to exist 13 
 
 Where period is not designated by charter 19 
 
 Of permit to foreign corporation 49 
 
 TRUSTEES. 
 
 Corporate officers trustees on dissolution 38-39 
 
 UNILATERAL CONTRACT. 
 
 Validity of 120-122 
 
 UNITED STATES. 
 
 Mineral laws of 123 
 
 Internal revenue 126-135 
 
 WASTE. 
 
 Opening mines on land Ill 
 
 WATERED STOCK. 
 
 Prohibition against 25-27 
 
 WATERS. 
 
 Salt water appearing in wells 69-70 
 
 Rights of riparian owners 112-113 
 
 WELLS. 
 
 Regulation of oil and gas wells % 67-71 
 
 Contracts for operation 122-123
 
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