Summary
In Cummings, the Court held the statute retroactive only because the legislature expressed a clear intent that it be applied retroactively.
Summary of this case from Anderson v. Jackson Municipal Airport AuthOpinion
May 9, 1949.
1. Judgments — vested rights — statute withdrawing right to sue state.
Under Chap. 127, Laws 1944, by which consent was given to sue the state for the recovery of taxes paid when there was no liability therefor, a decree was rendered in favor of the taxpayer for taxes paid on mineral interests from which the state appealed and pending the appeal Chap. 445, Laws 1948 was enacted withdrawing the consent of the state to be sued for the recovery of any taxes paid on any mineral interests: Held that the taxpayer had a vested right in his decree which could not be divested by the subsequent legislation.
2. Statutes — consent of state to be sued for taxes paid when no liability therefor applies to such taxes paid before as well as after date of the statute.
Chapter 127, Laws 1944 which allowed suit against the state for taxes paid when there was no legal liability therefor, applies to such taxes paid prior to the enactment of the statute as well as to those paid thereafter.
3. Taxation — royalty interests in oil or gas.
A royalty interest in land from which oil is actually being produced is a property interest and is assessable for ad valorem taxes.
4. Taxation — owner of surface and also of royalty interests then in production — separately assessable.
An owner of the surface also owned under a lease executed by him a royalty interest then in production, and these ownerships being separately assessable were so assessed to the knowledge of the owner: Held that the payment by him of the taxes under the surface assessment did not discharge the taxes due under the separate assessment of the producing royalty interest.
Headnotes as approved by Roberds, J.
APPEAL from the chancery court of Yazoo County, M.B. MONTGOMERY, Chancellor.
John E. Stone, Assistant Attorney General, M.M. McGowan, District Attorney, Campbell Campbell, and Green Green, for appellant.
Hendrix v. Foote, 38 So.2d 111, controlling and conclusive, the cases contra followed by the chancellor in this aspect being specifically overruled. Stern v. Parker, 200 Miss. 41, 27 So.2d 402.
The opinion in Hendrix v. Foote, supra, was delivered by Mr. Justice Montgomery who was the chancellor that followed the declarations (or assumed declarations) of this court in the Gulf Refining Company v. Stone case, 197 Miss. 713, 21 So.2d 19 and Smith County Oil Company v. Board of Supervisors of Simpson County, 200 Miss. 18, 25 So.2d 457; so that herein we have the true exposition by Mr. Justice Montgomery of that legislatively intended in Section 9770 and it is perfectly obvious that but for the Gulf Refining Company and the Smith County Oil Company cases, he would have in the chancery court rendered precisely the same decree as he did in the Supreme Court in this cause. This opinion is herein controlling and being on the precise point should be so thus herein considered and so being this court would in virtue thereof be relieved of determining all of the constitutional difficulties presented on the motion to abate, it being the obligation of this court, if possible not to determine a serious constitutional question. Compare M.L. Virden Lbr. Co. v. Stone, 33 So.2d 841, wherein it is said: "Where Supreme Court can determine cause on question of applicability of statute without passing upon validity of statute, it will do so."
"Constitutionality of statute not decided, unless necessary to dispose of case." Maxey v. State, 140 Miss. 570, 106 So. 363.
Compare Stuart v. Board of Supervisors, 195 Miss. 1, 11 So.2d 212; 4 Miss. Dig., "Constitutional Law," Key 46. Compare Spector Motor Service v. McLaughlin, 323 U.S. 101, 106, 89 L.Ed. 101, wherein it is said: "If there is one doctrine more deeply rooted than any other in the process of constitutional adjudication, it is that we ought not to pass on questions of constitutionality — . . . unless such adjudication is unavoidable."
So that when, under the Foote case, the specific assessment of the royalty interest held by the appellees was sustained as appropriate, there would thus be no necessity of adjudicating whether or not this Senate Bill 377 was constitutional, for, in the instant case, there was no necessity for its passage. In short, as at the date of its enactment that which presently is the rule was thought not so to be and so thinking, the Legislature sought to rectify and make the assessment accord with the act as they intended to have it enforced.
Incidentally, as to the differentiation in value between the production of the royalty and the production under the working interest, this precise point was considered in Waggoner v. Wichita County, 298 Fed. 818, where thereasto Mr. Justice Atwell said, page 820: "The testimony shows that immediately after January 1, 1923, the defendants called witnesses and advised themselves as to the best method of equitably taxing the royalty owner and the lessee's rights. This investigation resulted in the fixing of the $1,000 per barrel for the royalty owner's oil and $450 per barrel for the operators' oil. This took into consideration the fact that the operator might dig dry holes, and would have large expense for the impedimenta necessary to carry on the drilling and the production and the labor. This testimony and this finding is, to the mind of the court, satisfactory and right . . ."
Furthermore, in that cause he likewise held in accord with the Foote case that royalty was assessable as realty. Thereasto he was affirmed, 3 F.2d 962, CCA 5th, and subsequently in 273 U.S. 113, 71 L.Ed. 566. Therein it was held purely a State question as to whether royalty be assessed as realty or as personalty. Phillips Petroleum Co. v. Townsend, 63, Fed. 2d 293. See also State v. Quintana Petroleum Co., 133 S.W.2d 112, 134 S.W.2d 1016, 128 A.L.R. 843, supplemented by 162 A.L.R. 420; 51 Am. Jur., "Taxation," Sec. 439; 61 C.J., "Taxation," Sec. 777. See also, 101 A.L.R. 1393; 16 A.L.R. 513.
Compare Brown v. Humble Oil Refining Co., 126 Tex. 296, 83 S.W.2d 935-40, 87 S.W.2d 1069, 99 A.L.R. 1107, and Annotation, 1119, which was confidently relied upon by the Attorney General in the trial of this case below and in the opinion therein it was specifically thus declared (99 A.L.R. 1113): ". . . It is now, however, recognized that when an oil field has been fairly tested and developed, experts can determine approximately the amount of oil and gas in place in a common pool, and can also equitably determine the amount of oil and gas recoverable by the owner of each tract of land under certain operating conditions."
And in this record the methods of so doing were demonstrated by the witnesses for the appellant.
Appellees have no cause of action for recovery of taxes paid on ad valorem assessments of royalty in virtue of Senate Bill 377.
It is apparent that Senate Bill 377 repeals in part Chapter 127, Laws of 1944, by withdrawing the consent of the state to be sued as contained in said Chapter 127, Laws of 1944, and also by its express provisions abates the suit herein entertained, and by its express provisions is retrospective in its application to the suit at bar.
The rules of law as laid down in the case of Musgrove v. V. N.R.R. Co., 50 Miss. 677 (1874), are peculiarly applicable to the present case. The case of Deposit Guaranty Bank Trust Co. v. Williams, 193 Miss. 432, 9 So.2d 638, is very much in point.
Chapter 127, Laws of 1944, prospective and did not embrace taxes precedently paid.
We deny that the appellees may herein sue the State for said Chapter 127, Laws of 1944, amending Section 9979, Code of 1942, is prospective, not retrospective and this court is conclusively bound by the decision on this section rendered in Mississippi Central R. Co. v. City of Hattieburg, 163 Miss. 311, 141 So. 897. Compare White v. State, 190 Miss. 589, 195 So. 479; but if not, we further submit that this court has properly construed Section 9770 in the case of Hendrix v. Foote, supra.
Henry Barbour, and Ray, Spivey Cain, for appellees.
I. Gulf Refining Company v. Stone and Smith County Oil Company v. Supervisors of Simpson County were established precedents and property rules in Mississippi, and they can and should be reconciled with Hendrix v. Foote, in the present case. Gulf Refining Co. v. Stone, 197 Miss. 713, 21 So.2d 19; Smith County Oil Company v. Board of Supervisors of Simpson County, 200 Miss. 18, 25 So.2d 457; Oil Gas Journal (Jan. 6, 1945); 19 Amer. Jur. Sec. 72, Page 704, et seq.; State ex rel Barker v. Chicago A.R. Co., 265 Mo. 646, 178 S.W. 129, L.R.A. 1916C, 309; Hendrix v. Foote, (36 So.2d 145), 38 So.2d 111; Hawkins v. Mangum, 78 Miss. 97, 28 So. 872; 25 Am. Eng. Enc. L., 65; 51 Am. Jur., Sections 647, 649, 650, 654, 663, pages 614-615, 616, 620, 625; Stuart v. Board of Supervisors, 11 So.2d 212; Boyd v. Coleman, 146 Miss. 449, 111 So. 600; Stern v. Parker, 200 Miss. 27, 25 So.2d 787; Sections 9770, 9772, Code of 1942; Section 1, Chapter 409, Laws of 1946; McNatt v. Hyman, 38 So.2d 107.
II. Reversal of the present cases will implicitly declare the oil severance tax unconstitutional, provoke extensive litigation, play havoc with the finances of the State and ignore a golden opportunity to bring uniformity into the decisions of Mississippi as to the nature of interests in oil and gas and set at rest methods of their taxation. Adams v. Bank of Oxford, 78 Miss. 532, 29 So. 402; Daily v. Swope, 47 Miss. 367; Clarksdale Insurance Agency v. Cole, 87 Miss. 637, 40 So. 228; Knox v. Southern Paper Co., 143 Miss. 870, 108 So. 288; Thompson v. Kreutzer, 112 Miss. 165, 72 So. 891; Chicago R.I. P.R. Co. v. Robertson, 122 Miss. 417, 84 So. 449; Hawkins v. Mangum, 78 Miss. 97, 28 So. 872; Gulf S.I.R. Co. v. Adams, 90 Miss. 559, 45 So. 91; Senate Bill 377, Laws of 1948; Stern v. Parker, supra; Hendrix v. Foote, supra; Sections 9772, 9770, 9825, 9826, 9828, 9829, 9833, 9760, 9762, 9763, Code of 1942; Sections 181 and 112, Constitution of 1890.
III. Although the question was already foreclosed by this court as a matter of law, the evidence in the present case clearly demonstrates the correctness of the fundamental rule of Gulf Refining Company v. Stone, that producing royalty interests were not susceptible of such assessment and inspection as our constitution contemplates and requires. Gulf Refining Co. v. Stone, supra; Smith County Oil Co. v. Supervisors, supra; Official Report of State Tax Commission on Severance Tax.
IV. Under Stern v. Parker, both royalty assessments involved here are void because the fee simple estate in all tracts were separately assessed without exception of or reference to a separate mineral interest. Stern v. Parker, 200 Miss. 27, 25 So.2d 787.
V. Section 9970, Code of 1942, does not authorize separate assessments of royalty interests of W.F. Cummings and wife, even if it makes possible a constitutional assessment of royalty owned separately from the surface. Section 9770, Code of 1942; Hendrix v. Foote, supra; Stern v. Parker, supra; McNatt v. Hyman, supra; 51 Am. Jur., Sec. 650, p. 616.
VI. These appellees are entitled to the benefit of the amendment of Section 9979, Code of 1942, by Chapter 127, Laws of 1944, allowing appeal from the Attorney General's ruling on their claims for refund. Garret v. Beaumont, 24 Miss. 377; State ex rel Knox v. Union Tank Car Co., 151 Miss. 797, 119 So. 310; Pan American Petroleum Corp. v. Miller, 154 Miss. 565, 122 So. 393; Chapter 127, Laws of 1944; State v. Mississippi Institute of Aeronautics, 22 So.2d 373; Mississippi Cent. R. Co. v. City of Hattiesburg, 163 Miss. 311, 141, So. 897; Pearl River Co. v. Lacey Lumber Co., 124 Miss. 85, 86 So. 755; Union Land Timber Co. v. Pearl River County, 141 Miss. 131, 106 So. 534; Schmitter v. Sunflower County, 156 Miss. 227, 125 So. 534, 126 So. 39.
VII. Senate Bill 377, Laws of 1948, is unable to abate these causes on appeal. Stone v. McKay Plumbing Co., 200 Miss. 792, 30 So.2d 91.
The primary question for decision herein is whether a royalty interest in land from which oil was actually being produced was legally assessable for ad valorem taxes in the years 1941 to 1943. Secondary questions are involved and will be developed later in the opinion.
Appellee, Barbour, during said years, and appellee, Cummings, through the years 1942 and 1943, owned such an interest in separate tracts in the Tinsley oil field in Yazoo County, this State, which interests were assessed for ad valorem taxes for the respective years, and which taxes the parties paid without protest. Barbour was the owner of no other estate, or right, in the land, or the lease thereon, but Cummings also owned, and resided on, the surface of the land above his mineral interests, on which land he had theretofore executed the usual oil and gas lease, reserving his mineral rights.
All taxes, including that against the leasehold, the fee, the well operator, the surface owners, and other royalty owners, were all duly paid.
In 1947 Barbour and Cummings, by separate proceedings, petitioned the State Auditor of Public Accounts for a refund of the taxes so paid by them upon such royalties, contending that under the cases of Gulf Refining Co. v. Stone, State Tax Commissioner, 197 Miss. 713, 21 So.2d 19, decided February 26, 1945, and Smith County Oil Company v. Board of Sup'rs of Simpson County, 200 Miss. 18, 25 So.2d 457, 26 So.2d 685, handed down on March 25, 1946, suggestion of error overruled May 13, 1946, no authority existed to assess such royalty interests ad valorem; that, therefore, they did not owe the tax and had a legal right to recover the same from the State and its subdivisions. The Auditor referred the question to the Attorney General of the State, who gave it as his opinion the taxes had been legally assessed and the claims should be denied. Accordingly, the Auditor rejected the demands for refund. Petitioners then acting under authority of Chapter 127, Laws of Mississippi 1944, filed their claims in the Chancery Court of Yazoo County. The learned Chancellor awarded a decree for the petitioners, concluding that said two cases authorized recovery and that he was bound by them.
The two causes, by agreement, were heard and decided together by the Chancellor, and are being so decided by us on this appeal. It is disclosed also that these two cases are typical of some two hundred and eleven other claims, similar in all substantial facts, now pending in said County, awaiting the outcome of this appeal.
On October 27, 1948, after the appeal had reached this Court, the State filed a motion to abate it, together with all proceedings to recover said taxes, contending that this was the effect of Chapter 445, Laws of Mississippi 1948, purporting to bring about that result. That motion this Court passed for decision upon the hearing of the cause upon the merits.
Therefore, the questions confronting us are, first, whether Chapter 445, Laws of 1948, had the effect of divesting out of the judgment-creditors the right to recover the taxes, if such were illegally paid, and of abating the appeal; second, whether Chapter 127, Laws of 1944, conferring the right to sue the State for recovery of illegally paid taxes, was retroactive as to rights accruing prior to passage of the Act or was prospective only; third, whether the royalty interests, under the circumstances here, were, at the times mentioned, subject to assessment for ad valorem taxes, and, fourth, as to Cummings, whether his ownership of and payment of taxes on the surface of the land, under the conditions here, constituted a payment of the taxes on his mineral rights.
(Hn 1) The first question was settled against the contention of the State by the decision on the Suggestion of Error in the case of Stone, State Tax Commissioner, v. McKay Plumbing Co., 200 Miss. 792, 813, 26 So.2d 349, 30 So.2d 91. We deem it unnecessary to weave that thread over again. It is enough to say that the vested rights recognized by that decision are too fundamental and the danger of their abolishment by legislative fiat too great to justify retraction of the principles of law therein announced.
On the second question, the right of a taxpayer to sue the State for taxes illegally paid, such right did not exist before March 31, 1944, the effective date of Chapter 127, Laws of 1944. Before that time, and beginning with Chapter 196, Laws of 1926, provision was made for presenting claims for such refunds, but there was no express authority to sue therefor in case the claims were denied. So that the right of appellees herein to sue rests upon said Chapter 127, Laws of 1944. But we think that Chapter conferred the right of suit even as to taxes paid prior to its passage, for these reasons:
The Act itself says "If any person, firm or corporation has paid, or shall hereafter pay . . ." taxes for which there was no liability, suit therefor could be brought to recover the same, if payment by the Auditor should be refused. The Act expressly applies to one who "has" paid such taxes.
The statute contains this provision:
"Provided further, that nothing in this section shall be construed as authorizing the refunding of state taxes paid into the state treasury through error, or otherwise, or satisfying a judgment or decree against the state except through an appropriation therefor by the legislature."
By Chapter 77, Miss. Laws 1938, page 67, the Legislature appropriated $50,000 to refund payment of erroneously paid ad valorem, and other specified, taxes, without, by its terms, limiting such payments to taxes erroneously paid after passage of the Act.
In State ex rel. Rice, Attorney General, v. Mississippi Institute of Aeronautics, 198 Miss. 288, 22 So.2d 372, an action brought under said Chapter 127, this Court affirmed a refund of income taxes paid on March 12, 1943, prior to the effective date of said Chapter 127.
(Hn 2) Therefore, the statute applies to refund of taxes illegally paid before, as well as after, its passage.
Were the producing royalty interests assessable ad valorem? No point is here made as to the method of assessment, the valuation or that it is a double assessment. Appellees plant themselves on the proposition that under Gulf Refining Co. and Smith County Oil Co. cases, supra, such an assessment cannot be legally made. The Smith County case did not involve a producing royalty. It dealt with the power to assess minerals in non-producing lands. It did hold that such under-surface interests were not assessable for the reason they could not be seen and valued by the appraiser. However, Hendrix v. Foote, Miss., 38 So.2d 111, impliedly, and Bailey v. Federal Land Bank, Miss. 40 So.2d 173 not yet reported in State reports, expressly overruled the Smith County Oil Company case. The Gulf Refining Company case involved the constitutionality of the severance, or, as the statute denominates it, privilege tax, law imposing a tax upon the privilege or activity of producing oil. As one ground for holding such tax constitutional the main opinion did say that under-ground oil and minerals were not assessable ad valorem. However, as pointed out in the Bailey case, supra, that pronouncement was not necessary to a decision of the questions involved in the Gulf case. In other words, this Court has not held that a producing royalty interest is not assessable ad valorem. As stated, the Gulf case was the only case involving such royalty interest. The other related cases — Smith County Oil Co., Hendrix v. Foote; Bailey, State Tax Collector, v. Federal Land Bank, all supra, and McNatt v. Hyman, Miss. 38 So.2d 107, — all dealt with assessments of minerals under lands non-producing when assessed. Besides, the taxes here involved were paid several years prior to the decisions in the Gulf and Smith County Oil cases. On the other hand, we expressly stated in the Bailey case, supra, that (Hn 3) "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 overriding royalty interest created out of the interest of the oil and gas lessee are all property interests, real or personal, and subject to taxation —," and that "assessments are made upon the value of that interest and not upon the entire mineral value of the land. Under the usual royalty clauses of oil and gas leases, one-eighth of the oil and gas, or the value thereof, is reserved to the lessor. This is a property interest and is therefore taxable. . . ."
We, therefore, hold that the royalty interests herein were taxable.
(Hn 4) Dealing now with the fourth question, Cummings owned and paid taxes upon the surface above his mineral rights. Did he thereby pay taxes on his minerals under the circumstances of this case? The answer to this question is not without doubt and has given us much concern. We have concluded that under the facts here the surface tax payment did not include Cummings' royalty interest in said land. Cummings relies upon Stern v. Parker, 200 Miss. 27, 25 So.2d 787, 27 So.2d 402. We note, in the first place, that case involved the ownership of minerals in non-producing land. Conceding, for sake of the discussion, that no practical method exists for valuing non-producing mineral interest for tax purposes, that reason does not necessarily apply to royalty interest in producing properties. There is ample evidence in this record to justify the conclusion that methods exist for determining, with sufficient degree of accuracy for tax purposes, the value of various royalty interests in producing oil wells. The chancellor did not pass upon that fact. He thought all evidence on that question was irrelevant, on the assumption the question was foreclosed by Gulf Refining Co. and Smith County Oil cases. The opinion in the Parker case also stressed the fact that in making the assessment the assessor had valued the entire property — the surface and the minerals — and had included the total value within the one assessment. In the case at bar there were two assessments — one of the surface, another of the royalty interest, demonstrating that the assessor never intended to include in the surface assessment the value of the royalty interest.
Again, in the opinion overruling the suggestion of error in the Parker case it was said that the assessment of the surface, in order to convey the fee at a tax sale, should be "without any reservations or exceptions or limitations either in the particular assessment or elsewhere on the roll." Again, in that case, the court said, "Here the assessment was of the appropriate surface description without any reservation or qualification or limitation appearing anywhere on the assessment rolls." The opinion also stressed the duty of the owner to have his property assessed. Now, in the case at bar, Cummings either turned in the assessment of the surface and of the royalty interest, or he knew such separate assessments and valuations had been made, because he paid both assessments. He knew the valuation of the surface was not intended to include the value of the royalty interest. He had that knowledge from the rolls as well as actual knowledge of the fact. It cannot be said in this case the assessment of the surface was "without any reservations or exceptions or limitations either in the particular assessment or elsewhere on the roll." The royalty assessment was an exception, or reservation, to the assessment of the fee under the surface assessment, and that fact was shown by the rolls for each year. In these facts lie the vital distinction between the case at bar and the Stern-Parker case.
It would never do to say that an assessment of the surface necessarily covers the fee when the same roll shows that the minerals in place, or the royalty interest in producing properties, have been separately assessed. If so, thousands of under-surface owners, whose minerals have been separately assessed and paid upon, would lose their properties under sales of surface assessments. See McNatt v. Hyman, Miss. 38 So.2d 107.
Section 9770, Code of 1942, requires all the interests in real estate, including oil and gas rights, to be returned to the assessor for assessment, and such interests may be entered on the line or lines following that containing assessment of the surface, or upon a page or pages of the rolls following the assessment of the lands of the county, the value of such mineral interests to be included in the recapitulation of the roll. Therefore, no particular form is prescribed for assessing such interests.
That statute also provides that when oil, gas or mineral interests are owned separate and apart from the surface, "or when any person reserves any right or interest, or has any leasehold in the elements above enumerated . . .," such interest may be assessed separately from the surface ownership.
Reversed and judgment here for appellant.
Montgomery, J., took no part in this decision.