Sheffield v. Hogg

• Decision Date: 31 December 1934
• Docket Number: No. 6130.,No. 6001.,6001.,6130.
• Citation: 77 S.W.2d 1021
• Parties: SHEFFIELD, Tax Collector (STATE, Intervener) v. HOGG et al.<SMALL><SUP>*</SUP></SMALL> FEDERAL ROYALTY CO. v. STATE.
• Court: Texas Supreme Court

Page 1021

77 S.W.2d 1021

SHEFFIELD, Tax Collector (STATE, Intervener) v. HOGG et al.^*

FEDERAL ROYALTY CO. v. STATE.

No. 6001.

No. 6130.

Supreme Court of Texas.

December 31, 1934.

Error to Court of Civil Appeals of First and Eighth Supreme Judicial District.

Suit by W. C. Hogg and others against George W. Sheffield, Tax Collector of Brazoria County, wherein the State of Texas intervened; and suit by the State of Texas against the Federal Royalty Company. To review a judgment of the Court of Civil Appeals [38 S.W.(2d) 353], which reversed judgment for George W. Sheffield, Tax Collector, and the State of Texas and rendered judgment for W. C. Hogg and others, George W. Sheffield, Tax Collector, and the State of Texas bring error; and to review a judgment of the Court of Civil Appeals [42 S.W.(2d) 670], which affirmed a judgment for the State, the Federal Royalty Company brings error.

Judgment of the Court of Civil Appeals in the Hogg case reversed and judgment of district court affirmed; and judgment of the Court of Civil Appeals in the Federal Royalty Company case affirmed.

In No. 6001:

Rucks & Enlow, A. R. Rucks, Floyd Enlow, and Carlos B. Masterson, all of Angleton, G. P. Dougherty and F. T. Baldwin, both of Houston, and James V. Allred, Atty. Gen., for plaintiffs in error.

Stephen L. Pinckney and David M. Picton, Jr., both of Houston, for defendants in error.

In No. 6130:

Ike S. Handy, of Houston, for plaintiff in error.

Hart Johnson, of Fort Stockton, Brian Montague, of Del Rio, and James V. Allred, Atty. Gen., and F. O. McKinsey, Asst. Atty. Gen., for the State.

GREENWOOD, Justice.

The above-styled two cases will be determined under one opinion. In their consequences, the cases affect directly the subject-matter of mineral royalties in Texas, which furnish an important basis for the state's oil industry. Involving the correct solution of taxation of royalties on minerals—liquid, solid, and gaseous—they require the determination of the rights acquired by lessors and lessees under conveyances and contracts under which much of our minerals of untold value are owned and held. The questions presented by the two cases are logically too closely related for much that is said in one case not to apply to what is said in the other.

For convenience, in this opinion cause No. 6001 will be called the "Hogg Case," and cause No. 6130 will be called the "Federal Royalty Company Case."

The questions for decision in the Hogg Case, save some relating to the manner and validity of the assessment of the properties, may be sufficiently discussed under the concise statement of the nature and result of the suit and the statement of the undisputed facts, contained in that part of the opinion of the Court of Civil Appeals which is copied as follows:

"This suit was brought by appellants against the tax collector of Brazoria county, the county of Brazoria, two independent school districts, and a navigation district in said county, the commissioners' court, and all the officials of said county and districts having to do with the assessment of property for taxation and the collection of taxes in said county, to enjoin the collection of taxes levied and assessed upon one-eighth of the oil and other minerals in lands owned by appellants in said county for the year 1927.

"Five private oil corporations engaged in the production of oil on the lands of appellants in the county were also made defendants.

"Before the trial in the court below the state of Texas intervened in the suit and sought recovery against appellants for alleged delinquent taxes due for the year 1927, with interest, penalties, and costs. * * *

"Plaintiffs are, and were on January 1, 1927, the owners of the lands in Brazoria county described in their petition, in and under which the oil and other minerals assessed for taxes by the tax assessor of the county for that year as plaintiffs' and defendant oil companies' property was situated. On June 6, 1913, plaintiffs being then the owners of these lands, executed to John Hamman the contract of sale and lease referred to in plaintiffs' petition. This instrument, which is denominated a `Mineral Lease Contract,' in its first contractual paragraph declares: `That, for and in consideration of the sum of One Dollar ($1.00) cash in hand to first parties paid by second party, the receipt whereof is acknowledged, and of the covenants and agreements herein embraced and hereby undertaken by second party, first parties do transfer and set over, sell and convey (under the terms and conditions hereof, and for the period and purpose herein set forth) all the gas, oil, sulphur and other minerals and mineral substances whatsoever on, in and under the hereinafter described land, and the exclusive right and privilege to go on and upon said land, and to take possession thereof, for the purposes of drilling for and prospecting therefor and, after the finding thereof, the development and production of same, and to that end, shall have the right to do and perform all proper and desired acts and things in the premises, especially the right to use all necessary water thereon or therein, and to erect any and all works and buildings, construct derricks, place machinery, and construct and place all manner of tanks and pipe lines desired.'"

The Court of Civil Appeals here refers to paragraph fifth of the contract of sale and lease, which reads as follows:

"Fifth: (a) In consideration of this lease second party agrees that first parties shall have the following royalty of the gross production of all oil or gas wells on said lands, to-wit: one-eighth of all oil and one-eighth of all gas; and first parties' one-eighth royalty interest in all oil and gas marketed from said land to be paid over to them by second party at the end of each month, or whenever second party shall receive pay therefor, such royalty to be delivered by second party to the credit of first parties in any pipe-line or pipe-lines which said first parties may designate, and which connect with the wells or connect with the settling tanks of second party, free of any charge to first parties, or into said first parties' own private storage upon said land, or upon their other land adjoining, at the expense of said first parties; and first parties shall have one-eighth interest in all money realized from gas marketed from said land, as a royalty to be paid over to them, or their order, at the end of each month, or whenever second party shall receive pay therefor.

"(b) If sulphur or other minerals are produced on said land, second party shall pay first parties $1.00 per ton of 2240 pounds for each ton thereof produced and saved from said land; quarterly settlements to be made by second party with first parties by either the payment to them in person of proper amount or by its deposit to their credit in their bank, or its successor in business."

After referring to paragraph fifth, the court proceeds with its statement of undisputed facts, as follows:

"Plaintiffs, none of whom are residents of Brazoria county, rendered for taxes for the year 1927 all of their property in the county of Brazoria, both real and personal. This rendition of their property did not list or include any part of the unproduced oil or other minerals underlying the lands described in their petition, but contained the following notation by them: `Note: It is not the intention to render any of the oil, gas, sulphur or other minerals in the above lands, as said minerals were transferred, set over, sold and conveyed by Will C. Hogg, Miss Ima Hogg, Mike Hogg, and Tom Hogg to John Hamman per instrument dated June 6, 1913, recorded in Book 125, pages 53 et seq., of the Deed Records of Brazoria County, which instrument covers all of said land.'

"This rendition was accepted and approved by the tax assessor and commissioners' court of the county, and all taxes levied on the property therein rendered were paid by plaintiffs in December, 1927. The tax assessor, however, placed upon the unrendered roll and assessed for taxes for that year against plaintiffs and the defendant oil companies, jointly, one-eighth of the oil and minerals underlying these lands. None of the taxes accruing upon this rendition and assessment were paid by plaintiffs or the defendant oil companies. These are the taxes the collection of which from them plaintiffs ask to be enjoined, and for which, with interest, penalties, and costs, the intervener, the state of Texas, sought and recovered judgment against plaintiffs in the court below.

"The defendant oil companies, each of whom held under transfer and conveyance from John Hamman separate portions of the oil and other minerals conveyed to him by plaintiffs by the instrument before set out, rendered for taxes and paid the taxes for the year 1927 on seven-eighths of the oil and minerals in and under the several tracts of land described in the respective conveyances to them from Hamman."

The main question to be decided in the Hogg Case is the correctness of the proposition in the argument for defendants in error W. C. Hogg and others, viz.: "The rule of construction applicable to the Hogg-Hamman instrument should be this: Because of the fact that the parties thereto did use apt words of conveyance of all the minerals in place, and because there is no ambiguity in such language in the instrument, and because there is no language in the instrument that can fairly be construed, either as an exception of any of the minerals expressly conveyed, or as a reservation of title by defendants in error of any such minerals, therefore no other fair construction of such instrument can be made than that the parties thereto meant what they clearly stated in the granting clause of the instrument, wherein Miss Ima Hogg et al. `do transfer and set over, sell and convey * * * all of the gas, oil, sulphur and other minerals and mineral substances whatsoever on, in and under the hereinafter described land, and...