Commonwealth v. Garrett

• Citation: 202 Ky. 548,260 S.W. 379
• Parties: COMMONWEALTH, BY REVENUE AGENT, v. GARRETT, AND NINE OTHER CASES.
• Decision Date: 28 March 1924
• Court: Court of Appeals of Kentucky

260 S.W. 379

202 Ky. 548

COMMONWEALTH, BY REVENUE AGENT, v. GARRETT, AND NINE OTHER CASES.

Court of Appeals of Kentucky.

March 28, 1924

Appeal from Circuit Court, Estill County.

Proceedings by the Commonwealth, on the relation of its Revenue Agent against Robert McDonald Garrett, against Wallace Barnes against J. F. McKinney, against Mrs. Joseph M. Garrett against Louise Garrett, against W. P. Williams, against W L Marcum, against Isaac Chaney, against Enoch Puckett, and against Thomas Henderson, respectively, to require them to list omitted property. Judgments for defendants, and the Commonwealth appeals. Reversed in each case.

John W. Walker, of Irvine, M. M. Logan, of Bowling Green, and D. O. Myatt and B. W. Gilfillan, both of Louisville, for the Commonwealth.

THOMAS J.

The above cases were proceedings instituted in the county court of Estill county by the commonwealth, through its revenue agent as relator, to require the respective appellees to list as omitted property for certain named years the royalty interest of one-eighth of the oil produced on their lands by their respective lessees to whom they had leased it for the purpose of extracting the oil therefrom, and upon whose lands the owners of the leases had actually installed oil-producing operations from which the appellees were deriving the royalty under the terms of their leases. In some of the cases answers were filed denying that the property sought to be assessed was assessable as a separate item of property from the real estate owned by the answering defendants, but that, if it was so assessable, it was not omitted because it had been included in the valuation placed upon the land when it was assessed by defendants for the years mentioned. The county court held that the royalty interest sought to be assessed by the proceedings could not be assessed separately from that of the land, or, in other words, that it was not a separate item of property upon which the owner should pay taxes. The revenue agent prosecuted appeals to the Estill circuit court, and it decided the cases upon an agreed statement of facts by the parties without, as it appears, taking into consideration the condition of the pleadings, and that statement was:

"That the defendant is the owner of a tract of land in Estill county, and has leased the same for oil and gas, with the provision in the lease that all the oil and gas in and under said lands it let to the lessee, and with the further provision that the lessee shall pay and deliver to the defendant one-eighth of all the oil and gas produced and saved from the premises, delivered free of cost in tanks and pipe lines to the credit of defendant, and, further, that defendant has listed his said land for taxation for the period covered by the statement herein, and upon this agreed statement of facts this cause was submitted to the court to determine whether the said royalty is taxable separate and apart from and in addition to balance of the estate of defendant in said land."

The court thereupon adjudged as a matter of law "that there has been no severance of the said oil royalty from the land, and that there has been no omission of said royalty from assessment for taxation, and adjudges that plaintiffs' petition be dismissed," and from that judgment the commonwealth, by its revenue agent, prosecutes these appeals.

Perhaps in a majority of jurisdictions the character of property or interest, by whatever name called, sought to be assessed here is not taxable as a separate item of property, because under the laws of the forum it was conclusively presumed that its value was included in the assessment of the land by the owner and out of which the royalty interest issued; and an examination of the opinions shows that the given reason was correct under the wording of the statutes of those jurisdictions, an illustration of which is the case of State v. Royal Mineral Association, 132 Minn. 232 156 N.W. 128, and reported in Ann. Cas. 1918A, 145, which was a proceeding to tax the same character of property as is...