*1 overriding as the of the or oil far satisfaction so Appeals Court of Civil is re- is concerned. The the trial and that of court affirmed. versed dissenting. Smedley Associate Justice Opinion delivered March 1954. Whittenburg A. J.
The State of Texas v. et al February 24, A-4281. No. Decided 1954. Rehearing overruled March (265 569) S.W. 2d Series *2 Evans, Klett, Plains, Bean <6 Attorney, New, County Paul Lubbock, petitioners. Bean, and Robt. H. holding percent- Appeals that the erred Court Civil the value of
age payment determines of an of which production out reversionary in the fraction of reversing judgment of the payable, and in holding that petitioner, and in its court in its instruction for trial rendering judgment personal the trial in error court was belongs against persons that had never for taxes due on upon parties rendered was taxed to the because belonged payments which to the defendants its existence. Quintana Co., 2d Petroleum 134 Texas State v. Houser, 968; 1112; v. 138 Texas S.W. 2d State v. State Co., 392, 88 Mallet Land & Cattle Humphrey, Sanders, Scott, Saunders & C. J. Ad- Smith аnd kins, Folley, Adkins, Hawkins, Amarillo, all McConnell & respondents. points presented by petitioners
In rebuttal of the
cited:
State,
271;
v.
Corsicana,
Whelan
252 S.W. 2d
Simkins v.
972;
County
Bank,
Dallas
Dallas National
Texas
tenburg, Whittenburg, executors of the estate of J. A. and others respondents of the Producing Refining executed to Denver and Company gas leases, Surveys lessee two oil and one Nos. 863, 831 and Survey D, the other of Block John H. No. ,grantee, Gibson County. in Yoakum Each of the leases reserved to the one-eighth lessors as free equal part of all produced premises, and saved from leased and a one-
eighth gas royalty; and the leases reserved also to the produced lessors an additional by of the to be one-fourth minerals lessee, expense lessors, free of cost or delivered provided the credit lessors same manner as delivеry one-eighth royalty, lessors, heirs, of the “until their representatives assigns shall have from received the net proceeds derived from the sale said additional in- one-fourth money equal per terest reserved sum $1,250.00 acre for every each and Survey acre in the above described lease.” being land school section sold the State with reservation minerals, survey provided lease that the lessee pay should to the State of Texas its of the share consideration payments requirements other make in accordance with the Relinquishment of the Act. $1,250.00 The valuation for taxation of
per acre, payable minerals, out of the one-fourth admittedly such, an interest subject in land and taxable as matter of controversy produced herein. under Oil was soon payments production regularly leases. from made measuring limiting and full $2,400,000 completed early reservation the one-fourth interest $2,400,000 payable reservation, Of $2,000,000 under the payable respondents. During to the $284,093.56, 1940 and received the sum of *4 leaving unpaid remaining $1,715,- sum of due thereon the remaining portion payment, 906.44. unpaid of the oil percentage portion payment, this to the rounded to bore whole figures, years even and the assessed valuation each of the following on the oil reversion is shown table: validity of the prima facie case made a
The State by of the official introduction in evidence assessed Statutes; Annotated Civil State Article Vernon’s records. App., Co., Tex. Republic Civ. Gas v. Natural respondents, if then rested writ ref. w.m. burden go proof they expected prevail, forward which with avoiding In dis requirements law for valuation. meet the charge burden, respondents with contented themselves of this highlighting comparative values certain records introduction of placed by them and on owned on the unlimited 1/8 reversionary рroduction interest owned lessee % They out of to made. offered no which be testimony market whatever as to the value involved any property of reversionary three interests —the oil production, or the unlimited *4 royalty. any testimony Neither did offer of the market 1/8 of, Equalization or the value assessed the Boards of on any property county. other like VIII, provides
Article Section 1 of the Constitution equal “Taxation shall property be and uniform” and that all proportion value, “shall be taxed in to its be ascer- shall may provided by tained By law.” Article Revised Statutes, 1925, Legislature Civil has directed that “real property money,” shall be valued at its true and full value in by Article equalization 7212 has directed boards of hear evi- touching dence the “market value or true value” thereof. Our interpreted provisions courts have these to mean that assessed valuations shall be based on reasonаble cash “the market value” property. Rowland Tyler, v. App., Tex. Com. 2d 756.
Since state, the courts of this in common with the courts of jurisdictions, recognized other early uniformity that exact equality of unattainable, Rosenburg Weeks, taxation was 899, 901; Texas Cooley Taxation, Edition, 4th Vol. 1, 259, they sought through have lay § down certain rules which the valuations, of an force attack on assessed duly fixed equalization, may boards of be measured. It is now well settled that the assessment of for tax *5 purposes quasi-judicial is a function of equalization boards of and that no attack on valuations fixed such boards can or will be sustained proof fraud, jurisdic in the absence of or want of tion, illegality, adoption arbitrary or the of an and fundamental ly plan erroneous or Houser, of scheme State valuation. v. 138
210 28, 968, 970-971;
Texas 2d Baker, 156 S.W. Druesdow Tex. v. App., 493, Moreover, Com. 229 S.W. when their official presumed action is attacked it will be chаrged that such boards dis- public agencies according their duties law and good Zachry Uvalde, City acted in App., faith. v. of Tex. Com. 417; Dist., 42 2d S.W. Lubbock Hotel v. Lubbock Co. Ind. Sch. writ; App., 776, Tex. Civ. 85 2d S.W. no Hinkson v. Lorenzo Dist., App., 1008, Ind. Sch. Tex. Civ. 2d 109 writ dism. S.W. grossly may, it held that While has been a excessive valuation law, illegality fraud be sufficient establish such or toas void, Holland, App., 17 render valuation Johnson v. Texas Civ. denied; 71, City 210, 43 writ of Sweetwater v. Baird De S.W. 801, Co., App., writ; no velopment 203 Tex. Civ. S.W. Simkins Corsicana, writ; City App., 792, Tex. 86 S.W. 2d no v. Civ. Dist., App., Tex. 2d v. French Ind. Sch. Civ. 115 S.W. Howth 1036; Howth, 211, 134 Ind. Sch. Dist. v. Texas 134 French S.W. 1036, equal emphasis judg that mere held with errors 2d it is judge jury trial differs that a with the valua or fact ment avoiding suffice as fixed not a basis the board’s will tion Baker, Corsicana, supra; City v. Houser, supra. Druesdow v. action. Simkins supra; State v. equalization fixed attacked
If a a board is valuation ground arbitrary discrimination, of unlawful on the show, comparatively, instances, in other isolated sufficient suit, greater property was valued equal value than that Bank, 439, less, County 179 Texas at Dallas v. Dallas Nat. property 288, was omitted from the 2d or even that other S.W. Houston, altogether, City v. Bassett Lbr. Co. tax rolls Sam 879; City 2d v. J. J. & Texas of Wichita Falls Co., App., Tex. writ re M. Taxman Ref. Civ. App., ; Beaumont, Tex. Civ. fused Howth v. of a de writ, except the omission was result no where permit arbitrary plan or certain classes scheme to
liberate burden, City escape tax property to their fair share Baker, App., refused. 178 S.W. writ Tex. Civ. Houston not nec prevail discrimination it is To of unlawful basis showing taxpayer comparative with all essary that make Bank, county, County v. Nat. Dallas other Dallas showing in that supra, a reasonable make least but he must respect. Ibid. an the board followed arbi made because the attack is When values, taxpayer, prevail, fixing
trary plan or scheme of illegal only plan was must show not *6 plan worked his to substantial use also one but Tyler, Baker, supra; Rowland v. injury. v. Druesdow Ind. Sch. supra; Hotel Co. Lubbock App., Lubbock Tex. Com. may theory not “A said: mere page it is Dist., supra, where * * adoption mere than the more litigated *. There must be be The wrong taxation. fundamentally principle or method of a wrong fundamentally upon adoption a grant ‘the relief courts substantially in method, application principle or ” complainant.’ jures the appeal the valu- contended on have not The payment Equalization the oil by the on fixed Boards ation's there- grossly cash market value in excess of the reasonable were cannot, year, they in the record any indeed since there is of in as (1) do contend is no of such value. What evidence fundamentally adopted an Boards followed valuing wrong payment at plan scheme of their oil substan- royalty, tially placed on value as was their unlimited same refusing failing factor of to take into cоnsideration the diminishing (2) the Boards un- value the oil year lawfully by failing, discriminated them from to year, to lower value on the oil and raise reversion. foregoing respondents’
Basic both contentions is assertion that the Board failed and refused to follow this Court’s Quintana opinion Co., State of Texas v. Petroleum Texas 112, 117, 843, interpreting 133 S.W. 128 A.L.R. require, one, like instant cases that the valua- tion on oil must be decreased and the valuation on year payments the holding increased made. reversion each Quintana response was made in to an ex- case pressed payments fear held that if such oil State right lose on the rever- taxable State would its to taxes sionary pay- interest of the lessee when the out, paying recoup. ment simply loss it could never Court that, fear at set this It was not said in that case rest. regardless affecting of other reason- factors and considerations value, required equalization able cash market boards of would be diminishing place payment value on increasing reversionary only value on the interest. It was said that, assuming production, continued pay- become less and the reversion valuable more valuable must into con- ments were and that “these be taken made facts sideration” in such interests. single Apart from circumstance that the assessed valua- tion decreased and the valu- assessed year, reversion was not ation increased each a circum- standing which, alone, stance would not fact raise a issue that the *7 Board failed and refused to the consider factor in mentioned the Quintana case, there no is evidence in the record that Board the contrary, failed to testimony consider it. On the the of Bert Bartlett, deputy during tax years 1942, a assessor-collector the positive time at the of the trial is that the along factor a was considered with number of other such factors reserves, allowables, price length of as the oil amount of and the required payment pay time for oil of the to out. These factors important Quin- equally as as factor the mentioned in the determining case in the tana reasonable cash market of value the payment reversion, record, and of the and under this which proof, way knowing devoid we have no of is of now whether the illegal, arbitrary ultimate valuations fixed the Board were discriminatory. Irrespective of the absence of evidence to show failure Quintana case, Boards to consider the factor mentioned in the contend nevertheless that the Board acted arbitrari- ly illegally by assigning substantially to the oil assigned same value as was to their commensurate unlimited royalty. They themselves admit that this was true some for years involved, instance, as, they say of in their brief that nearly in “the onе-fourth was valued royalty.” 20% than if it had been unlimited It would be in- more strange rule, application deed of in which result striking down assessed valuations for the 1942 to 1946, inclusive, placed when the value substantially the as the value same on the unlimited standing and would valid the leave assessed valuation such at when value was fixed more than un- 20% dealing royalty. years 1942-1946, with limited But alone period record show does that figure substantially at was assessed same as a commensurate royalty, any proof prejudice record is of unlimited devoid of injury respondents. to state, late of the courts this of Under the decisions of some above, recognized it is that obtain from which are cited relief according arbitrary taxpayer fixed rule the a valuation some injury. of the latest must show substantial subject Montgomery One cases on Ref’g. County Co., Humble Tex. Oil & App., proof 335. In case on the trial Civ. found, of the Board court that whereas trial and thе showed Equalization Montgom- property all non-mineral had assessed arbitrarily Humble’s it had assessed County value ery at 10% value, fixed their properties mineral 33-1/3% hearing Board. at the conducted own witnesses sought Board’s injunction court an from the trial and obtained Humble admittedly ground taxes on its collection of the same assessment voided without nature of the upheld injury. court this conten- necessity proof The trial proof declining trial make tion, require that Humble in excess of fact that the assessed valuation 10% declining valua- permit the evidence that the State to offer not, fact, cash in excess of reasonable tion was 10% Appeals properties. re- The Court Civil market value holding injunction, and dissolved the versed injury proof no could be in the absence evidence was, fact, more of its valued at than Humble’s 10% *8 hearing value, saying: that think fact market and “We Equalization no or contest was issue before the Board of being properties proposed mineral of the over properties the actual market value one-third of about holding injunction any suit for that in a for cannot be reason showing in- did not that it had have the burden of been Humble of, complained by Board that jured of the and such acts proposed in fact was one-third of the actual valuation about property.” stamped we Hum- market value its mineral While “Refused, error,” application writ of error no reversible ble’s foregoing only question one the record reflects that was if application and presented in the could hot have refused it we agreed make had not that the burden on to we proof rested Humble offering thereby injury by evidence of market value and showing properties assessed in excess the value on its perceived any It of applying is not how basis could exist sound 10%. by rule in the collection different suit the State for taxes. Respondents showing no this offered evidence in case respective values of the market and the unlimited royalty. may grossly It well be unlimited undervalued, arbitrary placing event the same of the respond- injured value on than benefited rather ents. if
Even it were conceded that on unlimited the assessment royalty was and that based its market value the limited substantially valuable, payment was, law, as a matter less yet lacking any proof there would injury. be While assess against property persons ments are made and not equalization by boards of are directed Article 7174 assess each property granted separately, judicial only relief is persons unjust disproportionate to relieve them tax bur grow illegal dens that discriminatory out of assessments. A taxpayer subjected cannot show that has been to discrimina he by illegal tion assessment, by an or virtue being thereof rеquired unjust disproportionate he is to bear burden, by proof property share of tax separate inter ests of substantially different market are values owned him assessed at value, separate property the same or that interests equal market values him owned substan assessed tially showing only necessary different values. He can make the by proof property substantially that his interests are assessed higher property greater than equal market value interests clearly owned Missouri, others. This is rule laid down Ry. K. Hassell, & T. App., Co. of Texas v. 57 Tex. Civ. 12 denied, approval Supreme writ cited with Court of the Druesedow, United States in Baker U.S. Sup. Ct. L. Ed. 212. applies
Much of equal what has been said with force to the high placed contention that the valuation on the oil year year compared failure to lower it from with the low valuation on the reversion and the failure to raise it from year Here, agаin, establishes unlawful discrimination. testimony no respective market of the two values interests was offered. From it will the table set out above *9 January 1942, noted only that in had the oil 14% paid preceding years. been four At that rate appeared it Board, assuming pro- would have continued to the duction, discharge it full require that would the 28% obligation, discharge- remaining then the balance 24% unpaid. drop price Reduced a in oil would allowables or the lengthened pay-out may have period. The estimated reserves remaining not such support have been the oil as to belief that pay-out at the end period would value. be of substantial Moreover, reversionary had an the owner of interest invest- ment on expect any it could no return of character long pay-out period. addition, payment was to In the oil production delivered lessee could free costs and before thе any vested, realize it return from it interest after % necessary pay- first recoup producing that it the cost of determining ment. All important of these in were factors aught reversionary market and value of interest by Equaliza- Board of them were considered know all of we degree, existed, albeit in somewhat lesser All of them also tion. 1944, 1945, testimony The of Mr. Bartlett and 1946. the re- tried to ascertain market value of that the Boards per- place it an valuation the same and to on assessed version assessing centage property. other testimony used in There is no so. did not do any proof injury respondents Neither is from the may disparity grossly in these values. reversion have been was, If fact alone undervalued. this would not entitle the respondents to have the assessed valuations on their oil payment declared void. Appeals holding think the Court of Civil was in
We error in respondents go.to record that werе entitled jury on this foregoing issues. We are also convinced the Court reversing judgment ground the trial erred court’s on the other opinion. discussed in its respondents Petitioner sued number of as the heirs of
George Whittenburg against A. the taxes levied the interest owned George those heirs A. Whittenburg Estate, and sued several of the taxes, Hedgecoke of the Mattie beneficiaries Estate for the levied against in the oil estate, owned against personal judgment was rendered respondents, who George Whittenburg, jointly heirs of A. severally, personal was rendered the beneficiaries Hedgecoke jointly severally. of the Mattie Complaint Estate George is made that each of Whittenburg the heirs of A. is or only was the owner of an undivided interest and George Whittenburg entire interest owned all of heirs, A. Hedgecoke and that beneficiaries of the Mattie beneficiary only interest, Estate was the an undivided responsible only thаt each should have been held for the tax on his undivided interest. Saratoga It Independent seems that Bashara v. Dis- School
trict, support this conten- tion but for the fact assessments made in the manner in which the rendered. record shows *10 property jointly by the interest or George owned A. Whittenburg heirs was rendered and assessed in the name of George Whittenburg heirs, A. receipts pay- and tax show that by George ments were Whittenburg and for made A. heirs of 216 royalty
the taxes on
the surface and
owned
them and assessed
way against
is the same
them as heirs. The
is
same
true with
respect
rendition and assessment of the interest owned
Hedgecoke
receipt
the Mattie
Estate and of the
to that estate
year
for the
taxes
on its surface and
interests.
stipulated by
parties
It was
and found
the trial court that
Hedgecoke
the estate of
among
Mattie
was distributed
the re-
spondents who were
estate,
sued as beneficiaries of that
and that
so distributed to them had a value in
excess
against
taxes claimed
them.
opinion
In our
rendering personal
there was no error
judgment
against
jointly
George
Whittenburg
heirs of
A.
years
for the taxes for the
inclusive,
1942 to 1949
and no error
rendering personal
judgment
jointly against
the beneficiaries
Hedgecoke
of the Mattie
Estate for
the taxes for the
1948.
State,
App.,
Denman v.
Tex.
252;
Civ.
Mortgage
2d
State
Corporation
Ludwig,
;
Texas
950 French
Independent
Howth,
School
211, 214, 215,
District v.
1036;
Dallas Title
Trust
Cliff,
&
Co. v.
of Oak
App., 217,
8 Tex. Civ.
spondents had Appeals before the Court of Civil and find no sufficient reason therein for judg- reversal of the trial court’s Accordingly judgment ment. Appeals of the Court of Civil is reversed and the of the trial court is affirmed. Opinion February 24, delivered Smedley
Mr. joined by Justice Justices Brewster Smith, dissenting. agree
I cannot with majority its decision respondents’ there was a valid valuаtion of years for taxes for the carefully 1942 to inclusive. I have record, my opinion examined the conclusively entire and in unquestionably demonstrates that pay- the valuations of the oil taxing ment for those were made officials accord- fundamentally ance with an unfair method or plan respondents, that discriminated owners property, equality uniformity and denied them the guaranteed by taxation that Section 1 Article VIII of the granted Texas. The district court should have Constitution peremptory respondents’ motion instruction in so far as it the taxes for the 1942 to applied and should have
217 as as- petitioner’s for taxes denying claim rendered years. for levied and those sessed gas leases the oil and as to execution of The facts the one-eighth 1937, the July 20, of
respondents reservation one-fourth of an additional further reservation and the and lessees, of cost free produced to bе of the minerals net from the lessors, receive expense should until lessors one-fourth proceeds sale of the additional from the derived per $1,250.00 acre money equal sum of interest reserved majority. correctly stated in the of production and continuous substantial before The of oil was sought col- during period to be and which the taxes are involved in this undisputed lected. the land The evidence is that country.” was “in about area suit considered to be the best regularly full Payments production and the from made were limiting measuring $2,400,000 the reserva- of and early completed in 1949. tion of one-fourth interest was beginning production There from the before was substantial steady of the balance 1942 a the amount reduction remaining unpaid payment. on the oil complaint and well-founded notwithstanding steady amount of reduction of the steady consequent due on the oil reduc balance and the payment, Equalization tion the value of Board fixing the value of the oil used arbi taxation trary discriminatory wrongfully plan fixed and or method which royalty; the value as if wrongfully were an the Board unlimited arbitrarily con and failed refused to take into and being sideration the fact that the of the oil steadily year, reduced each and to make fair failed and refused division the value of the one-fourth reserved interest between lessee, persistently and the lessors Board valuing wrongfully refused to follow rule for the such Quintana (O’Conner) as set out in State Texas Company, Petroleum respondents’ prejudice injury. 128 A.L.R. all to county employed experts or of Yoakum to make recom- interests, mend valuations so or made adopted recommended and the them used Tax Assessor Equalization. Board of in- For the Equalization, clusive the Board of the leasehold working Refining Producing interest of Company, Denver five-eighths represеnting only considered interest min- interest, deducting seven-eighths eral from the one-fourth reserved for the oil and it substantial making five-eighths interest, values on the changes no considerable in 1942 to At the values *12 during placed it same time each of those the nominal valuation of in the on what is described assessment $500 consisting right “equity,” “reversion” or the to receive “1/4 $1,250 per leasehold if and has estate when acre been 8/8 fully paid proceeds out of the of a one-fourth reserved interest of gas.” change oil all the and No in was made the assessed during “equity” years. of the “reversion” or five It remained the constant $500.
During years, 1946, the same five 1942 to the and assessor one-eighth Equalization the Board of royalty valued the interest separately and also valued and the one-fourth assessed interest payment $1,250 per reserved to the lessors for the of the sum of During reserved, acre. pay- the those so the oil intеrest ment, by was valued Equalization Board it as if were an royalty. example, one-eighth unlimited free royalty For on year Sections 831 and $90,280, 863 for the 1942 was valued at one-eighth payment against oil A. assessed the J. Whit- tenburg estate $90,030- for that was valued at The same valuing payment method of the oil as if it were unlimited during was followed five-year period. the entire This is shown giving valuations, the exhibits the details of the the correct- petitioner agreed. ness of which And course of trial petitioner agreed stipulated period “the payments substantially, were taxed at at the same valuation as a royalty interest, exception commensurate with the of less reversionary for the $500 interest.” Of the total oil unpaid remained in 85% 82% in yet in in 1946. And 77% 68% 60% Equalization failed, refused, Board of indeed to take
into consideration the constant reduction of amount remain- ing unpaid. spite place It continued of that the same value royаlty. the oil that it aon commensurate And “equity” continued to assess lessee’s royalty or “reversion” at Thus in $500. relation to and in relation lessee’s interest, more imposed upon than fair its share of the value was payment. doing Equalization In failed so the Board of take into consideration fact that interest or estate greater imposed lessee had value on account of limitation upon the one-fourth interest for the than reserved had reserved interest have had if the one-fourth been it would limitation; into consideration and it failed to take without here, assuming production that, as there was fact continued year as more valuable each or estate the lessee became interest one-fourth approached all the reserved time when consideration failed to take into the lessee. And it vest decreased the fact the value regularly made unpaid pаyments amount was reduced by undisputed evidence production. out of It is further shown plan year protested the method ig- protests were their used in and that nored. undisputed
All of the facts set out are established above evidence.
It that when the is settled the decisions this state taxing employ unjust of valu officials method *13 ing assessing here, property property, and was done against and owner is entitled to relief valuations assess Lively Missouri, Ry. Co., 102 Texas ments. v. Kansas & Texas 545, Corsicana, 792; 852; 120 of 2d S.W. 86 Simkins v. S.W. 558, County, id. Dallas National Bank v. 2d 142 Dallas 173 S.W. 439, 271; 288; State, Texas 179 252 2d 2d S.W. v. S.W. Whelan 1076; Richardson, 11, State v. 126 2d French Texas 84 S.W. Independent Howth, 211, School Texas District v. 1036; Houser, 968; 2d State v. 138 Texas Saratoga District, Independent
Bashara v. School 532, 163
Repeatedly majority the in the fact is stressed of respondents proof that no of the reasonable cash market offered value of the oil evidence that the valuations no fixed reasonable cash market the Board were excess Indeed, opinion, value. and seems to be that is the theme of the disregards the au- reason the decision made. The view respondents attack thorities cited It is that do not above. true being market valuations as in excess of reasonable cash taxing necessary proved that the value. That is not when it is fundamentally unjust used an unfair and officials valuations, arriving so method in at the when against in the respondents made work or result discrimination required imposition respondents of more taxes would be than pay to had a fair used- method valuation been Ry. Co., Missouri, example, Lively & Texas
For Kansas property required be Texas law that 120 S.W. value, valued taxes at full its market and the State Tax apportioned County Board had portionate to pro- certified Dallas its
part railway intangible company’s the value assets, representing tangible company’s full market value of the in- County, county assets in ap- Dallas and the officials proved the assеssment made value. so on full These officials had property people valued and county assessed the in the sixty-six per fair value. In two-thirds cent its market railway company’s enjoin successful suit the collection of among authorities, taxes as assessed county it the other grounds, ground defended railway company’s on the property beyond was not assessed its true The court held value. the assessment was should invalid and reduced be proportion same placed of value as was mass county. holding in the In ap- so the court said: fact that “The pellee required pay was not more than it should does satis- fy right owning property the constitutional to have all others territory subject same to like taxation to bear their equal proportion government. of the burden of That is a sub- right stantial may asserted and enforced in courts.” In that although case the assessment was held be invalid was on a vаlue, valuation not in true excess true but on value.
In the instant developed case facts were not to show that like oil properties interests in other than the here involved land were valued in substantially amounts less than the valuation respondents’ property. But was discrimination as between and the owner another very property involved, is, respondents, here between owners of the oil and the leasehold owner inter- *14 Respondents charged est. for with the full value taxation of the one-fourth payment, for full reserved the oil or the value charged less che prac- nominal sum of with lessee was $500- tice’Tlynothing, is, on that the nominal its so- valuation $500 “equity.” called “reversion” of the “re- or The assessed value through years “equity” version” or remained at $500 946, although proportion pay- to > in of the oil its value to that obviously increasing year necessarily ment was each as the being steadily balance due on the oil reduced. was arbitrarily result of the method thus used was that each paid required lessee interest, pay was than should its less have required under the are majority pay the required should on their interest than be more valuing made, pay. in very is not And this discrimination property, similar same owned in the but in interests property. discriminatory clearly It unfair than is thus more but similar comparisons made the valuations when three- undivided example, an property. one owns For different one- undivided property and owns in another fourths interest valued interest is property. The one’s in fourth interest the same at is valued $10,000, other’s for while the taxation which relief on account of clear case of discrimination $10.00—a granted course. a matter of County, 173 Similarly, Bank Dallas National Dallas 288, 2d where id. 142 Texas illegal in the valua the bank discrimination rejected taxation, a defense property tion court of its the contention to the the assessment bank’s suit invalidate legal injury, that its county suffered no bank assessment, market value. all, upon than actual or after less 792, 793, Corsicana,
In Simkins v. arbitrarily capriciously or court said: “If Board acts applies wrong ascertaining value, principles then such the true citing courts,” may be set aside authorities. Houser, 28, 33, In State of Texas v. 156 S. W.2d a opinion, if of the court’s after statement rule fairly just honestly board valuation for to fix endeavors taxing purposes, part subject is to review on its mistake court, following: contains course if a “Of board adopts fundamentally illegal, arbitrary, method is wrong, excessive, grossly or if the valuation the decision of may such board be attacked and set aside.” valuing respondents’ Here method Board in used illegal, years 1946 was taxation for the 1942 to arbitrary, fundamentally wrong, such was the and because Appeals correctly method used the Board the Court оf Civil held that the assessment aside. should be set wrong fundamentally
The method used was because dispute record each of the five shows without giving persisted value as Board the oil the same royalty. if it were an payment In of those unlimited one-eighth was valued at twice the royalty, although unlimited reserved one-fourth interest for the because it was limited to the *15 automatically full stated amount and terminate when substantially payment made, necessarily less had been was royalty. a value than unlimited commensurate fundamentally The method used was wrong unfair and be- persisted declining cause the Board to reduce the valuation payment oil when its value necessarily steadily decreasing as the amount steadily of the balance due decreased. during must years It be remembered that produc- these five very continuous, tion was substantial and and that the balance during period being due was the entire payments reduced regularly made. fundamentally wrong method used was and discrimina- tory because 1942 to 1946 the Board continued to value if it were unlimited valuation, although declined to reduce its the balance due on the steadily declining, oil during and at the same time and each of those valued the lessee’s interest one-fourth, reserved referred “equity,” to as “reversion” or $500, the nominal sum of and did not increase that valuation. illegal The method arbitrary because, although used was given the rule payments for the valuation of oil such as that here Quintana involved in State of Texas (O’Connor) v. Pe Company, troleum 134 Texas 2d 843, 850, 128 A.L.R. was called to the attention of the taxing officials, they urged it, they to follow taxing failed and Apparently, refused to follow it. officials followed the Appeals decision of the case, Court of Civil in that the effect of charge against lessors, was to respondents, taxes full value of the fractiоnal interest reserved for the royalty, as if reducing it were unlimited and without the valuation as the balance due on less, became charge and to none of the value of that reserved in fractional terest save the nominal sum of the lessee- The rule $500 Quintana case, set out in 179, 189, 112, 117, is: apparent that, “It is production, where there is substantial here, right part a produced, of the minerals as subject right to the limitation that when ceases certain sum proceeds- thereof, has been realized from the not of as great right equal part value as would be to an minerals subject limitation; apparent and it is further right limited, assuming value of the lessor’s or interest so con- production, tinued year. will decrease each These must be facts taken into consideration in such taxation. apparent Likewise it is under leasehold estate this lease greater has imposed upon value on accоunt the limitation
223 upon the interest, provision that the with the reserved 7/32 shall vest reservation the under the of title termination 7/32 been if interest had lessee, it have the the in than 7/32 apparent, still as- limitation; it is further and reserved without suming estate will production, leasehold that continued the approaches when year time each as the more become valuable must be these And vest in lessee. the interest will the facts 7/32 tax- valuing estate the leasehold taken into consideration added.) (Emphasis ation.” stating that opinion majority in error of the is assessed record, no save the amounts is valuations, evidence the Quin- the rule of the that Board to follow the refused contrary, valuing record payment. tana oil On the case part Board persistent shows of and obstinate refusal on the February 2, 1940, respondents early to wrote follow it. As they County in re- letter to tax of Yoakum collector correct uncertainty had as to the ferred to the existed fact that valuing of method this Court’s decision of this before Quintana case, pointed the leasehold that owner out relying opinion of Civil interest had been Appeals Court length case, quoted in that this Court’s from according Quintana case, carefully explained and payment it the should value the interest reserved for the according to their be divided between respective and the the lessors lessee adjustments Following small interests. this letter some years were made for the valuations it thoroughly but evidence that demonstrated record disregarded deliberately Board for the rule They called thus their did not decrease attention. placed respondents’ left at nominal sum interest. valuation of lessee’s $500 respond- year by record protests also contains written made each Further, placed payment. ents of Mr. the valuations on the oil Bartlett, at- deputy collector, that he tax assessor and testified meetings hear- Equalization tended of the Board of ings years 1942, he knew for the and that respondents continually pointed year that as out from production their inter- paid off virtue of year, and the est in less valuable became year, lessee’s interest more valuable each became reduced, he said that valuation of the oil but should repre- agree Questioned did not whether he with contention. get every year trying to present sentatives were answered: position, the Board to Bartlett consider their Mr. laughed “They here, we and for a down number coming when we saw them objectors again.” comes the —there Despite protests all of these the Board adhered to its property, kept placing method on the oil the same values on a commensurate unlimited royalty, charged the whole the reservеd one-fourth respondents, except paltry charged sum $500 *17 against the lessee. support To its proof conclusion that is no the use by taxing the unjust authorities of an in method valuing majority the of the refers testimony deputy collector, the tax assessor and Bert Bart- lett, that arriving valuations, several factors were used in at the including reserves, allowable, the price oil, amount the etc. testimony given Such leading Mr. Bartlett in answer to questions, testimony but the generally was directed to the valu- ing producing in properties being interests oil instead of di- specifically rected valuing to the method of the here Futhermore, involved. testimony isolated is not contradic- tory apparent record, of what including is from entire the Mr- testimony, Bartlett’s toas the method which the valuations of the interests here involved were made.
That county employed experts, method was this: The referred investigate engineers, to аs tax producing properties oil the place values on properties. the different interests in those experts proposed made what Mr. referred to Bartlett values, county officials, to be submitted to the which were used county officials, exceptional the instances. It was those save experts who, arriving values, took into consideration the producing the various factors such as the wells and number Having investiga- the other factors referred to. above made the tion, seven-eighths working experts the set a inter- value on the one-eigth royalty interest, if est and value on then they royalty found that an interest taken out of the had been working interest, they propor- or out its value a used for working part royalty tionate of the valuation of the or of the interest, giving consideration to different terms of over- riding royalty oil contained in the instrument creating retaining it. testified that if two differ- Bert Bartlett being one-eighth persons royalty, ent owned one-sixteenth each, taxing value owned took one-half of the officials one-sixteenth; one-eighth royalty of the for the value overriding royalty method was when was found the same taking followed, is, using owned, that whatever fraction was provided interest, royalty valuation that had been overriding expenses. royalty operating And he did not bear payments, same method was used testified Whittenburg case, this and was used in case. apparent testimony
It from this and from the record evi- showing year of the dence the valuations county experts tax and of that when and the taxing by respond- officials came to owned value the they payable mineral ents found that it was out of a one-fourth charged expenses, accordingly operating interest not with gave they upon they value that had decided for unlimited charged royalty, and the whole of one-fоurth interest respondents, and that valued it each from 1942 to thus increasing reducing never it and never “equity” in lessee’s “reversion” or one-fourth. reserved illegality plan The unfairness and used do not consist in original failure to take various into factors consideration in the *18 engineers royalty of
valuation tax did the interest. The arriving take them into consideration in at the valuation illegality royalty on the unlimited interest. The and unfairness arbitrary in royalty are valuing the use of the value of unlimited oil the to the the refusal reduce valuation payment of the oil as the amount the on of balance due it was steadily by payments, arbitrary reduced and in the refusal to divide respondents the of the one-fourth interest between charging and the against respondents. lessee of instead all of it majority argues arbitrary the of that even if an valuing respondents’ property unfair method was used in they pay are to entitled no relief and must on that valuatiоn be- proof cause respondents injured there no that have the been repeated of a use such method. This harks back to the statement respondents proof heretofore answered that the made no value, valuations exceeded the fair market have therefore they required by judgment pay not shown that more to the pay. taxes than should Furthermore, respondents under the have record us before injured by arbitrary unjust been It the method- use clearly legal appears taxing if the officials had followed subjected and fair method would have been payment great taxes such a amount judgment trial imposes upon court’s If oil them.
had been valued at than unlimited less the value been, respondents’ should have less. taxes would have been for had reduced
If the valuation taxes been steadily due on less each as the balance its became reduced, year, respondents’ taxes as it should have been pay- been less. If all of one-fourth reserved for have charged against respondents fair division ment had not but been lessee, respondents and the had been made between its value respondents’ taxes would have been less. written, justifica-
Too much has been but seems to proves tion for it in firm record made conviction that illegal fundamentally conclusively arbitrary of an use wrong valuing respondents’ for taxation for method in years 1942 to 1946 inclusive. judgment declaring
A and assess- invalid valuations denying years 1942 to inclusive and ments made for the recovery taxes, penalty petitioner a on the basis deprive petitioner of of those need not taxes years, property for for the could be rendered those right petitioner proper and prejudice without to the make thereon. fair and reassessment and collect taxes revaluation majority pаrt opinion which I do not dissent from years valid the valuations and assessments for holds not show the Board 1948 and the record does for those followed 1946. It did not method that it used for the 1942 to years place the same values three later gave royalty, did not and it that it to like fractional interests of give “equity” the mere nominal or “reversion” the lessee’s valuations, valuations, or some value years $500. compared values to the
1947 to 1949 are excessive when *19 given royalty, they, or least some the unlimited given them, proportion to the the values are amounts out given to “equity” “reversion,” is lessee’s when consideration remaining unpaid. percentages Such the differences, however, of the oil caused clearly to have been shown wrong. fundamentally plan the use under years may valid be sustained as those State, 2d Victory such 138 Texas S.W. decisions as v. 968; 760; Houser, 2d State of Texas v. 417; Zachry Uvalde, (Com. App.) v. District, Independent Lubbock Hotel School Co. Lubbock 776. Opinion February delivered
Rehearing 31, 1954. overruled March