*1 COMPANY, AND THE OREGON BASIN OIL GAS Cоrporation, A Appellant,
Plaintiff COMPANY, Corporation, THE OIL OHIO Respondent.
Defendant (2d) 198) 2547; 1952; (No. September 9th, 248 Pac. *2 plaintiff appellant For the the cause sub- upon Downing, mitted the brief of Warwick M. Denver, Cheyenne, O’Leary Colorado and Wilfred Wyoming, argument Downing and oral of Mr. Denver, David Rosner of Colorado. respondent
For the defendant and the cause was sub- Everett, George mitted the brief of W. H. Doll Gee, Casper, Wyoming, and J. Ellery W. all of C. R. Gray, Cheyenne, Wyoming, and Norman D. both of argument oral Mr. Everett.
OPINION ILSLEY, Justice. Oregon Company, plaintiff Basin Oil & Gas appellant, brought against The Ohio Oil Com-
and suit pany, respondent, recover some to defendant and royalty $11,828.99, from which deducted sum was respondent appellant by what as and for interest of the appel- appellant’s tax on claimed share of the was to be production was The case lant’s interest in the of oil. judgment agreed and of facts tried statement action, dismissing appellant’s cause of entered was whereupon this court. appeal taken to a direct summary agreed of facts shows
A statement appellant predecessors be- in interest of lands, the ginning July 26, acquired oil certain leases, deеds, claims, which, mining con- placer title to lodged conveyances finally re- tracts various mesne appellant spective interests in the oil lands respondent respondent. January date Since gas operator produced from the oil and was the lands, subject prescribed tax which was Wyoming Article 3 of the Constitution Sec. incl. provisions 32-1006 32-1001 Sec. of Sec. respond- 1945; provisions pursuant such W.C.S. production to the State tax ent made due return of the Board Equalization and such Board produced for fixed the assessed valuation of the Board, in purposes, whereupon accordance taxation standing, long duly practice certified to with its County, Wyoming, taxing the valu- Park authorities of against levied and as- were ation taxes assessments were made the levies and sessed. After paid respondent tax and the same was billed for the County, Wyoming, upon all oil Treasurer of Park gas the lands covered the vari- *5 during period controversy ous leases. That in gas produced herein the oil and be would sold and proceeds by respondent, received and settlement was by rendering made each month appel- a statement showing gas lant produced, amount of oil and money charge of amount received and the and deduc- appellant’s for tion tax on produced, oil interest and the appellant amount due for remittance charges was made The check. total made re- spondent portion production for the tax on said represented by appellant’s interest covered the 1939 production including production, the 1949 mak- ing years in all aggregating $11,828.99 eleven forth, first above set appellant for which seeks recov- ery. copiеs monthly Photostatic statements on which is shown appellant’s a deduction tax for on production covering interest in the time and matter controversy agreed are attached to the statement of copies leases, facts as well contracts, deeds, of all conveyances assignments. are also There attached copies Statement of ap- Facts of letters between pellant respondent wherein, under date of June Downing, president appellant Mr. company, demands money return of the deducted on as tax oil рroduced. reply by letter, The July under date of 1945, by respondent refusing Mr. for the Everett production refund letters, taxes. The marked Ex- “U”, “V”, “X”, together hibits “W” and with the monthly above, represent statements referred to all of appellant communications between the and re- spondent respect charges with production. for tax on Appellant started suit November 1947. Other than monthly statements and the letters above referred to, there were no respect other communications in production. the tax on Reference to other matters agreed statement of fact will be made in the course opinion. of this appellant on The the oil as contends tax from, proceeds. should deducted its not be respondent production insists that the tax on the should deducted. provision original
There mineral lease of *6 July follows: as part agrees lease, “As a the lessee consideration of this pay all said taxes assessed and levied on lands and perform
to do and the so-called assessment work may required mining is or which United States be laws of Wyoming of of the State Statutes regulations mining and in which the after be situated.” and district rules hereby may now or lаnds leased are here- provision through This all been carried of the has parties in transactions between and is still effect. interpretation provision necessarily must The this light be made in the of the transactions between the parties harmony provi- and in with the constitutional statutory Wyoming. and the sions law provision originally provided Another of the lease part for the lessor to one-tenth of the oil have and gas, give two was later modified so as to lessor percent same, provi- one-half and so would sion now read: lease, “As a further the lessee consideration of this agrees royalty to deliver lessor two and to the said part gas percent
one-half saved from said have and all oil and found in and land, provided lessee shall right charge royalty use free of and all oil gas may fuel.” need as question royalty The whether or as to not a interest personal property, real or if in oil lands is discussed general terms, prove confusing may than in be more subject pursue in helpful. To who desire those suggest study respect to all of we its ramifications Chapter twenty Gas, of Summers Permanent Oil purposes For the Edition. of the instant case we deem principles they it advisable to discuss of law apply Wyoming, having in mind our constitutional statutory present Supreme laws as well as our Court decisions. interests, including oil,
As taxation of mineral provides: Constitution that; provides “Article Section ‘All lands and im- assessment, provements thereon shall be listed for separately.’ for taxation valued and assessed provides “Article Section that: ‘All mines * * mining other valuable *, coal, mineral, claims from which oil or deposit, may be be shall improvements, taxed lieu of as addition to the surface lаnds, gross thereof, product on the taxes on the prescribed may by law; provided, product proportion of all mines shall be taxed in ” the value thereof.’ statutory provisions which were enacted with *7 respect gross products taxation of the of mines quoted in accord with the provi- above constitutional sions, 32-1001, are now contained in Section 32-1006 having inch 1945. The W.C.S. first enactment been Chapter made in 81 Session Laws and was which original in effect when the lease referred herein part executed in 1913. This of Sec. 32-1001 W.C.S. part 1945 was enacted in 1903 and still a is of Wyoming lаw, follows: as gross product mining “The of all mines and claims * * * coal, petroleum, which or other crude min- oil, gas, deposit is, or eral natural or other valuable or may produced, being hereafter be while the same are operated, or simply worked in owner, owners, lessee, but not while the same are development, the course of shall be returned operator or thereof for assess- taxation, provided ment for and taxed in the manner for in Article and tax such shall be in addition to upon may im- the surface tax which be assessed claims, mining in and prоvements of or such mines while the of of claims lieu taxes land such * *” * being operated; are or same worked premise. is Let us There start with unassailable question here involved that under the law the lands no claims, placer beginning even were as from the legal subject though title to taxation. so even This is States, in the brief remains in the United the statement notwithstanding. appellant contrary of “Eights cluded in a United Property. Although fee in the land in- as — mining location remains vested patent issued, perfected min- States until a is regarded and, ing property itself in the fullest claim is as such, mаy of term as transferred or sense mortgaged, be subject pass by descent; is or it will may sold under and taxation and be seized and liens execution. While sessory, rights only pos- are locator’s regarded property interest as real his is protection of classes real same as other accorded the although through government may, Thus, estate. Office, cancel found Land a claim the General nullity, dispose of a valid and sub- to be a cannot sisting quired making compensation, re- due one without Jur. § law.” Am.
And, further: since the estate defined the courts “Nature of the enactment general mining laws. [*] [*] [*] property mining perfected under the law is “A claim may bought, highest term, sense sold, conveyed pass by It is descent. sub- and will payment ject of the debts to administration and sale inheritable, vendible, the deceased owner. It legal freehold,’ ‘subject taxable, estate ‘a judgment.’ It the effect of of a has lien docketed right present and grant by States of *8 the United located, at possession lands least for exclusive mining sary more purposes. possession not neces- Actual protection acquired to the title such a for the grant. any claim It is valid for location than it is other its nature real estate. “Although may patent, the locator obtain a patent on security.” Lindley adds but his little Sec. p. Third Mines Edition
We think it has become axiomatic in that place suggests oil in is real estate. Mr. that Summers royalty usually property, “oil real royalty but personal property.” oil is Summers Oil & Gas Perma- 572, p. Wyo- nent Edition Vol. Sec. 351. The first ming subject Snyder Wyo. case on the is State 758, having 212 P. to do with the matter of the roy- distribution of school funds obtained from certain oil alties on from school The lands. Court said: quite “A fundamental faсt seems to have been over- may certain, looked. A document have a definite effect parties as relationship are not at all may between the thereto and determine the rights existing between them. But we subject here concerned with a of that dealing only kind. are here with side of We one contract, roy- or side that receives is entitled to the rent, alty dispute only and the existed between the permanent
two
on
one
beneficiaries
side—the
fund
Snyder Wyo.
the income
fund.” State vs.
163-
187,
273
degree
physi-
ever,
slightest
the
in
affect
could not
the
If
corpus
land.
it
the
of the
cal
comes from
fact
clearly
per-
disposed
all,
the effect is
taken and
of at
corpus,
the
disposition
of the
that much
manent
authority
land,
irrespective
principal of
the
go
proceeds
done,
pursuant
must
to which
the
is
rights existing
according
be-
the
the
to
tween them —in
beneficiaries
permanent
of
fund
this case
constitution,
according
to the intention
dedicated,
and we can
corpus
property
is
subterfuge
saying
by simply
take it therefrom
no
royalties
In Boatman vs.
Andre
P.
quiet
question
the suit
one to
title
and involved the
gas
of an abandonment
lease
of an
and the can-
cellation of the same. This court held:
*10
right
merely
“That
created
the lease
for
is
search
gas аnd,
found,
oil and
if either
to remove
is
it from
appear
profit
the land
a
This
leased.
it a
would
make
prendre,
hence,
incorporeal hereditament,
an
may
which
lost
be
abandonment.”
We now come to Denver Joint Stock Land Bank vs.
Wyo. 523,
Dixon
(2d)
122 P.
842. Here the mort-
gagor
mortgage
making
a
executed
to a bank without
rights
a reservation of the oil
and later the
ac-
bank
quired
property
way
the
of a Sheriff’s Deed. This
mortgage
rights
court held
the
royalty
that
carried the
property.
discussing
ques-
and constituted real
In
the
rights
tion
prop-
as to
whether
involved were real
erty
personal property
(at
or
page 534)
said:
this court
accordingly
Snyder, supra,
“We
held
State v.
that
ground, part
corpus
when oil is taken from the
of the
scarcely
thereof
that the
taken. So
is
that
it can
be doubted
right
partially
is at least
connected
with
land,
in real
wholly
be
and cannot
said to be
unmixed with one
property.
may
said,
terminology
It
be
our
under
dividing property
personal,
into real and
to be
a
one of
not, then, perhaps surprising
dual nature.
It is
particular
some of
stances,
courts
have under
circum-
right
personal property.”
considered the
as
question
The court then discusses the
further
in this
pages
same case
at
and 543:
subject
“Since
law on this
is said to be still in the
may
repeat
formative state it
not be amiss to
and am-
plify
part
some of the
in the
statements made
earlier
opinion, indicating, perhaps
independent
of this
why
additional reason
such as herein
interests
involved
property, or
personal
be
real and not
considered
should
lan-
stating
merely in different
perhaps,
these reasons
goes
case
guage.
back to
some extent
That view to
right
Snyder, supra,
is this: The
ex rеl. v.
of State
merely
after
attach
not
royalty interest
does
oil
to a
the
ground
merely
be-
from the
has
been severed
has
issuing
property.
rent
personal
It
not
is
come
goes further
produce
land. It
of the
annual
of the
out
extending
which
neces-
right,
it does to oil
than that.
land,
particular
to and is
extends
to come from
is
is,
land,
corpus
sarily
accordingly,
with the
connected
right
oil which still
in the
which exists
be,
it
it
though may
place,
it
follows
inchoate
inis
has
ground
attached after it
from the
and still
comes
property.
property
personal
personal
call it
To
become
right
stage
its
particular
on
of the
emphasizing a
is but
right
ignores
which
It
it is a
way
fulfillment.
corpus
land.
part
necessarily
extends to
ground in
the oil
possible
were
divide
it
If
such a manner
royalty por-
land in
that the
royalty
could, together with the
found
would be
tion
royalty inter-
interest,
owner of the
delivered
real
clearly
considered as
intact,
would be
then
est
theory
equiva-
possible,
but in
property.
lent of
is not
That
bringing the oil to the
right, aside from
right
surface,
royalty
substantially
of the owner of
real
particular
The fact that
land.
interest
*11
terminology
severed,
our
under
рroperty, when
becomes
property,
not ob-
classification, personal
should
and
right. Terminology is con-
of the
the real nature
scure
necessary,
venient,
abused.”
it should not be
but
and in fact
(Wyo.), 238 P.
Hageman
vs.
& Pond et al
Clark
In
gas
in land
919,
oil and
interests
(2d)
held that
it was
Dixon, supra.
citing
property,
Land Bank vs.
are real
royalty may
right
re-
be
that a
observed
It is also
executed,
granted
lease
mineral
is
before
served or
“perpetual non-
generally
right
a
termed
such
and
right
granted
royalty,” where no
participating
making future leases.
participate in
reserved
ques-
supra,
had the
Snyder,
this court
In State
construing
interpreting
sections
and
it
tion before
2,
Wyoming
of Article YII of the
Constitution
respect
arising
disposition
proceeds
with
to the
of the
the sale
from
of oil
from
school
state’s
stated,
part
realty
lands. As there
inoil
situ is a
of the
corpus
and when severed from the
retains that char-
way
permanent
acteristic so
to find its
into the
school
Snyder
fund. We think that
is sound doctrine in the
stops
provisions
case when one
to consider the
of Sec.
Article
State Constitution:
following
perpetual
“The
are declared to bе
for
funds
purposes,
only
school
of which the annual income
can
* * *
appropriated,
moneys arising
to-wit:
all
thirty-
the sale or lease of sections number sixteen and
state,
township
six in each
or
lands selected
may
Wyo. 180,
be selected in lieu
thereof.”
277 provide “gross Section Art. 15 should for a tax on the product thereof, may prescribed law,” be as instead upon of a tax the real estate. Co., Wyo.
In Miller 505-508, vs. Buck Creek Oil 269 P. it was said: “where the lease is silent on subject, obligation pay the ordinarily the taxes rests upon lessor, general yields but this rule to a con- trary presumption balancing where ever considera- Again tions lead that result.” in same case: “If mining provides lease a the lessor shall have as royalty might (whiсh a certain share be some cases large very share) a of minerals taken from the land, might considered, purpose, well be for the at least, taxation, of that the lessor was the owner of the royalty, that, which he received and assumed agreement regard payment absence property production, party tax based on each the lease intended that he should be liable for the tax production. on his County share of See Wolfe v. Beckett, Ky. 252, (N. S.) 105 S.W. 17 L.R.A. Co., Wyo. 505, Miller 688.” vs. Buck Creek Oil P. this So matter of taxation has been considered Court, although in the Miller vs. Buck Creek Oil nothing case was mentioned in lease con- Co. under pay production. sideration to who should the tax on part We have referred the first Sec. 32-1001 1945, supra. Special In the W.C.S. December 1933 Legislature Session this Section was adding: amended “* * * prior be said tax shall lien first products upon, so levied the tax thus levied against person collected from the shall be same was whom levied, person personal if such has real or State, payment property within the out of which can enforced, duty County and it shall be
278 otherwise, distraint, to by attachment Treasurer person the tax from the as- first endeavor collect however, therefor; provided, that if the tax can sessed against collected, may tax be enforced not so said extracted, products from which such shall be the land be a from date of its assessment shall and said tax lien on the land.” Laws the Sess.) (Spec. ch. 1933 § Wyoming legislature the It does seem that had thought gross the product tax a tax on the was the have been no occasion for real estate there would passage stated of this amendment. As Circuit Appeals in Board Com- for the 10th Circuit Cоurt County 74 F. vs. Bernardin missioners Sweetwater legislative (2d) 809, referring enactment: in to this legislative construction of “It therefore amounts gross product tax statute to Art. 15 and the Sec. product. upon the A con- that the tax severed effect legislature, by the indicated of a as struction statute enactment, subsequent consideration as is entitled to interpreting Bailey such vs. statute. Clark aid 651; 284, 22 Ed. Nat. Bank vs. State L. First Wall. 640-658; 486; Tiger vs. 68 L. Ed. Missouri 263 U. S. 286-309, 55 L. Ed. Investment Co. U. S. Western 738.” of Miller vs. Buck the decision case
Since Co., supra, other have discussed the courts Creek Oil opinion con- well as the principles set forth in that provi- provisions and the of Sec. Art. 15 stitutional law, Wyoming respect produc- with sions 32-1001 contained in sections tion tax now incl. 32-1006 say, States District Court
That is to United Appeals for Court of the United States Circuit pass the nature had occasion 10th Circuit doing, Wyoming production tax. In the decisions so case and State Miller vs. Buck Creek Oil Co. supra, in connection with Snyder, were reviewed Wyoming provisions Constitutional referred above. Statutes Kennedy’s Judge conclusion First National
It al, Chicago Co. et vs. Central Coal Coke Bank Supp. 436-437 that: F. “ foregoing ‘By the I inclined to am belief Supreme Court leans toward the doctrine announced courts, many when severed other mineral so personal property and taxable as land becomes Case, Wyoming least, court At in Buck such. Creek *14 production has the tax statute considered and has found portion paid by that a the of the tax should be me, only property, of which it seems to is lessee consistent with the the upon theory that the tax is the the product after severed from land and it becomes * * * personal property.’ the of holds status “ adopt theory any is which will with- ‘It difficult logic, the mineral when severed stand assault of property, personal the earth other unless is than specifically otherwise has been declared constitu- it tional ” provision by legislative enactment.’ or regard phase affirming to this of
In the decision upon Ap- appeal to Circuit Court of the case the 10th County peals under name of Board of Commission- the 809, (2d) County F. of vs. Bernadin 74 ers Sweetwater 812, 813, Judge Phillips sec- reviewed discussed Constitution, 1, 2, 15 well 3 of Art. tions state, gross production tax of statutes as the stated: “ minerals, when is settled that coal other ‘It well found, they be- realty in which are the
severed from 762, Gracey, 24 personalty. v. 94 U. S. Forbes come L. Shaw, 29, 313; Carpenter 134 P. v. Okla. 272 Ed. 363, grounds 50 393, S. Ct. on other U. S. reversed Co., 478; Kelley v. Ohio St. 74 L. Ohio Oil Ed. Rep. 63 Am. St. 39 L.R.A. 49 N. E. whether the necessary to determine therefore It is they gross product have after tax a tax on the minerals is severed, realty the measured or a on been tax gross product requires
the mineral con- thereof. This pertinent statutory struction of the constitutional and * * * provisions Wyoming.’ of “ statute, verbiage, stripped provides ‘The of gross product mining of while all claims mines they owners, lessee, being operatеd, owner, are shall be returned operator taxation, or and assessed for and that such tax shall addition to tax as- be in upon improvements mines, sessed the surface of such and in lieu of taxes such claims’ ‘land of they being gross product while are worked. is the thing which must be returned assessment and tax- for ation, phrase and not the land. The ‘in lieu taxes imposed upon land,’ indicates tax to be that the is imposed upon the product land, instead and that exempted during latter to be such time as it being operated production worked min- for * ** erals.’
We are not unmindful deсisions of some of contrary However, other states reach a conclusion. we pro- find that statutory other states have different visions and some of the have states constitutional no taxing restriction the matter of mines as real estate. illustrate, Hogg (2d) To v. Sheffield S. case W. Hinson, Victory (2d) 1021 and 102 S.W. 194 cited by counsel are A Texas cases. careful check all Texas discloses that statutes mines minerals *15 Chapter 6, are taxed as real estate. See Art. 7146 Rev. II, Civil Statutes Texas Vol. 1925.
What is the at appel- situation case bar between respondent? lant and The terms of the 1913 lease parties to explicit. the intention of the seems clear and *“* * agrees The pay lease sets forth the lessee all to ** taxes assessed and levied on said lands Because provision of the constitutional herein discussed there are no taxes assessed and levied on these lands until produced. category is discovered and In what did appellant respondent place the and oil when discovered produced? per- the oil real and Was estate was or it property?. re- in this sonal their intention What was gard agreed by state- as disclosed their actions? The dispute after of shows on and ments facts without that 1, 1939, January when first and dur- oil was ing 1940, 1942, 1944, years when taxes 1943 and charged respondent by were deducted appellant, objection such of was made to account no question by The not raised appellant deduction. was by appel- until at which time letter June objected return de- lant and demanded of the tax so Respondent by reply July of letter ducted. per- properly the tax deducted tax on
claimed as a This property return tax. and refused the sonal Dur- instituted November suit was not until by ing many re- time were sent all of statements this showing appellant spondent by the amount and received of tax produced and the amount deducted. of oil long acceptance over a of these statements time, controversy period between when no existed respondent an appellant seems us to amount acquiescence proposition admission properly “actions deductible. Sometimes the tax was speak court than words.” As stated louder Milling 5Wyo. 165 P. Malin Denio Co. vs. J. W. 1113: parties contract know to a be assumed “It is to terms, least its and are the what was meant best liable to be mistaken as is alert rights, the intention; party each to its his protect insist on interests and to his own during parties done that whatever is done performance contract period they intended terms as understood and under its mis- liable to been Parties are far less have be. should during meaning their contract
taken re- period flects that practical harmonious construction while intention, subsequent they are when than law, impelled and one them to resort have differences of them then seeks with the аt a construction variance *16 practical they placed upon construction have it of what provision.” (6 R.C.L., p. intended 853.) its Rohrbaugh Wyo. 514, 448; See vs. Mokler 26 188 P. Wyo. 497, National (2d) First Bank vs. Ennis 14 P. 201; Wyoming Abstract & Title Co. vs. Wallick 64 Wyo. 458-464, (2d) 384; Holliday Templin 196 P. Wyo. 94, (2d) 103 P. agree At this time and in this case we cannot with respondent counsel for special their as to defence of “account stated.” There is more involved here than an parties. account between the There is a contract exist- ing parties, between the terms are dis- pute. is, therefore, question It construction of the contract.
Finding judgment no error in the record the trial court is affirmed.
Affirmed. Blume, J., Riner, C. J. concur. Rehearing 12, 1952,
Petition for denied Nov. without opinion.