25 So. 2d 457 | Miss. | 1946
Lead Opinion
Prior to January 1, 1944, the appellant Smith County Oil Company owned the oil, gas and other minerals under the 19,086 acres of land in Simpson County, the subject of this controversy, with full rights of ingress and egress for the discovery and recovery of said oil, gas and minerals. All other rights and estates in said land were, and still are, owned by the South Mississippi Land Company.
On April 15, 1944, the Smith County Oil Company leased to the Hunt Oil Company for said land all the said oil, gas and minerals, the principal provision of said lease being as follows:
"Lessor in consideration of ten dollars ($10.00) in hand paid, and of the royalties herein provided and of the agreement of the Lessee herein contained, hereby grants, leases and lets exclusively unto Lessee for the purpose of investigating, exploring, prospecting, drilling and mining for and producing oil, gas and all other minerals, laying pipe lines, building roads, tanks, power stations, telephone lines and other structures thereon to produce, save, take *23 care of, treat, transport and own said products and housing its employees, the following described land in Simpson County, Mississippi, to wit:" describing them.
The additional consideration by way of royalties was to be one eighth of the oil produced, giving the lessee the right to pay the said one eighth in money from time to time as the oil was produced.
It will thus be seen that the exclusive right to explore for and to take the oil and other minerals and the exclusive possession for that purpose was vested in the lessee. What was left to the lessor, the Smith County Oil Company, and all that was left, was either (1) the ownership of the entire interest in the oils and other minerals in place under the surface, or else (2) the ownership of an eighth interest therein, or else simply a royalty of an undivided one eighth when, but not until, discovered and raised to the surface. It is not necessary here to decide which of these three results was produced, for if either of the first two, then what the lessor had left was oils and minerals under the surface where it could not be inspected and after inspection estimated and appraised, indeed no man knows whether there are any oil or minerals under said land. If all that appellant had left was a royalty in the minerals when produced this does not become assessable ad valorem until produced and brought to rest upon the surface.
All this was decided in Gulf Refining Co. v. Stone,
If the lessee does not obtain the exclusive surface rights, and the lessor retains in part such surface rights, — if there is or may be hereafter any such a lease, — a different and a more difficult question would be presented, which we will not approach until it is squarely before us.
It follows that the attempted assessment against appellant of "One-eighth interest in oil, gas and mineral rights," in said lands was without authority, and the trial court should have so held.
Reversed, and judgment here for appellant.
Dissenting Opinion
Is a royalty interest in a mineral lease assessable for taxes? That is the question involved in this case. In Summers on Oil and Gas, Perm. Ed., p. 203, Sec. 783, it is said: "A separate mineral fee interest in oil and gas in place created by grant or exception, the interest created in the lessee by the ordinary oil and gas lease, the royalty interest reserved in the lessor in an oil and gas lease, a perpetual royalty interest in oil and gas created prior to lease for production, and an over-riding royalty interest created out of the interest of the oil and gas lessee are all property interests, real or personal, and subject to taxation. In a majority of the jurisdictions all of these interests, apart from the question of taxation, have been held to be real property. But whether in a particular jurisdiction such interests are taxable as real property in the county of the situs of the land or as personal property at the domicile of the owner, depends upon the *25 conclusion of the court in a particular jurisdiction as to the nature of the particular interest, the provisions of the tax statutes of the particular state, and their interpretation by the court as applied to the particular type of interest."
In 51 Am. Jur., page 455, Sec. 439, it is said: "Although there seems to be authority otherwise, a royalty interest reserved by a lessor under an oil and gas lease, in the absence of contradictory enactments, is usually held subject to a general ad valorem property tax, whether such interest remains the property of the lessor or has been transferred by him to another."
An annotation in 128 A.L.R., page 851, discusses cases from the different states, which discussion reveals that the quoted rule prevails where there is no statute substituting another method of taxation for such ad valorem tax.
Mississippi has no statute substituting another method of taxation, but, on the other hand, it does have a statute expressly making such mineral interests taxable. Section 9770, Code 1942, provide that "whenever any buildings, improvements or structures, mineral, gas, oil, timber or similar interests in real estate . . . are owned separately and apart from and independently of the rights and interests owned in the surface of such real estate, or when any person reserves any right or interest, or has any leasehold in the elements above enumerated, all of such interests shall be assessed and taxed separately from such surface rights and interests in said real estate, and shall be sold for taxes in the same manner and with the same effect as other interests in real estate are sold for taxes." That statute further makes it the duty of the owner of any such interest to make a return thereof to the tax assessor and place a value thereon.
If it be said that the difficulty in placing a value upon such royalty interests defeats the power to assess them for taxes, the reply to that in this case is that the Smith County Oil Company has sold and transferred to different *26 purchasers all the royalty interest which it reserved under the lease in question (although it makes no point as to that in this case); therefore, appellant and the various purchasers of separate interests in such royalty have themselves placed a value thereon. The statute makes it the duty of all of them to place a value upon their respective holdings for the benefit of the tax assessor. Having themselves placed a value thereon, can they successfully complain that the tax assessor does the same thing?
In my opinion, Gulf Refining Co. v. Stone,
Alexander, J., joins in this dissent.
Addendum
Suggestion of error overruled.