Crocker National Bank v. McFarland Energy, Inc.
Decision Date | 17 February 1983 |
Citation | 140 Cal.App.3d 6,189 Cal.Rptr. 302 |
Parties | CROCKER NATIONAL BANK, etc., et al., Plaintiffs and Respondents, v. McFARLAND ENERGY, INC., a California Corporation, Defendant and Appellant. Civ. 65632. |
Court | California Court of Appeals Court of Appeals |
Bright and Brown, and James S. Bright, Gregory C. Brown, John J. Harris, Los Angeles, for defendant and appellant.
Margolis, Burrill & Besser, and Robert S. Besser, Los Angeles, for plaintiffs and respondents.
In 1965 Joseph M. Thomas conveyed certain property to a trust he had created two years before for the benefit of his children. The instrument was entitled, "Conveyance Of Perpetual, Expense And Deduction Free Royalty." The property in question was a one-sixth interest in oil, gas and other hydrocarbon substances produced from described real estate in Kern County.
The conveyance included paragraph 7 requiring grantor to pay certain taxes. That paragraph contained the following provision:
The conveyance also provided in another paragraph, "It is the purpose and intent of this conveyance of royalty that it shall (except as specifically set forth herein) be free and clear of all expenses and deductions of every kind and nature, all of which expenses shall be paid by or for the account of Grantor and shall be without any reimbursement by Grantee."
Appellant McFarland Energy, Inc. (herein appellant) succeeded to the interest of Joseph M. Thomas in 1974. Respondents Crocker National Bank and R.A. Ganong (herein respondents) are the trustees of the trust.
In 1980 the U.S. Congress enacted a "Windfall Profit Tax". (26 U.S.C.A. § 4986 et seq.) Section 4986 provides,
Shortly after the tax became effective, appellant and respondents engaged in correspondence over the question of which should bear the burden of the tax. Thereafter, respondents filed this action for declaratory relief. The matter was tried on stipulated facts.
The appeal is from that judgment.
Is the Windfall Profit Tax a tax, assessment or charge upon or referable to any operations or acts of appellant on the land, within the meaning of paragraph 7 of the conveyance?
In the language of the statute, the Windfall Profit Tax is a tax "imposed on the windfall profit from taxable crude oil removed from the premises." Thus, as oil is removed and sold, a tax is imposed on the revenue realized. The tax is to "be paid by the producer of the crude oil." 26 U.S.C.A. § 4986(b).
Producer is defined as follows, "Except as provided in subparagraph (B), 1 the term 'producer' means the holder of the economic interest with respect to crude oil." (26 U.S.C.A. § 4996(a)(1)(A).)
The tax is calculated by referring to the amount for which the oil is sold. (26 U.S.C.A. § 4988(c)(1).)
Under the conveyance in question, who is the holder of the economic interest with respect to the crude oil? It seems to ...
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...removal, other language would have been used. [Crocker Nat'l Bank v. McFarland Energy, Inc., 140 [526 A.2d 1040] Cal.App.3d 6, 189 Cal.Rptr. 302, 304 (Ct.App.1983) (emphasis See also Lewis v. Reagan, 516 F.Supp. 548, 553 (D.D.C.1981) ("The Windfall Profit Tax taxes the increased income that......
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...85 L.Ed. 284 (1940); Werner v. Hearst Publishing Co., 297 F.2d 145, 148 (9th Cir.1961). In Crocker National Bank v. McFarland Energy, Inc., 140 Cal.App.3d 6, 189 Cal.Rptr. 302 (2d Dist.1983) (hearing denied), the California Court of Appeal interpreted a tax clause in an oil and gas lease co......
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