Federal Land Bank of Houston v. State

• Decision Date: 05 May 1958
• Docket Number: No. 6766,6766
• Parties: FEDERAL LAND BANK OF HOUSTON, Appellant, v. STATE of Texas, Appellee.
• Court: Texas Court of Appeals

Page 621

314 S.W.2d 621

FEDERAL LAND BANK OF HOUSTON, Appellant, v. STATE of Texas, Appellee.

No. 6766.

Court of Civil Appeals of Texas, Amarillo.

May 5, 1958.

Rehearing Denied June 23, 1958.

Underwood, Wilson, Sutton, Heare & Boyce, Amarillo, B. L. Templeton, Houston, for appellant.

Richards & Ferguson, Dalhart, for appellee.

CHAPMAN, Justice.

Dallam County, acting for itself and the State of Texas, brought this suit against appellant, the Federal Land Bank of Houston for the collection of ad valorem delinquent taxes, penalty and interest for the years 1954, 1955 and 1956, assessed against an undvided one-half mineral interest owned by appellant in the east one-half of Section 63, Block 4, Capital Syndicate Subdivision of Dallam County, Texas, and to establish and foreclose a lien upon the Bank's mineral interest to satisfy such taxes, penalties, interest and court costs. Texline Independent School District was impleaded, as required by law in such cases, but made default. The case was tried to the court and judgment rendered for the State of Texas and Dallam County for a total of $8.20, penalty interest and taxes, an amount completely disproportionate to the questions of law involved.

The record before us shows that prior to 1954 Dallam County had made no attempt to separately classify mineral interests for the purpose of taxation. A few owners of severed minerals had voluntarily rendered them through the years and when so done the taxing authorities had accepted them at the values rendered and had accepted the tax payments therefor when made. Beginning in the year 1954 and continuing for all the years thereafter, to the time of trial, severed mineral interests were placed on the tax rolls of Dallam County whether or not rendered by the owners thereof and were classified and valued at $1 per mineral acre for all mineral interests other than royalties and mineral leaseholds; 50cents per royalty acre for all royalty interests; and $1 per leasehold care for all oil and gas leasehold interests for the year 1954; and 75cents per acre for the same for 1955 and 1956.

The mineral interests owned by appellant in Dallam County was stipulated by the parties. Appellant's computation based thereon shows it owned in fee one-half of the minerals under 4,023 acres; that it owned for a term of 50 years, beginning on various dates in 1940 and 1941 all minerals under 4,253.9 acres; that it owned one-half of the right to lease as to all minerals in 640 acres and that it owns one-half of one-eighth non-participating royalty in the minerals under 75,695.81 acres. Appellee, having raised no issue as to the figures just related, we may accept them as correct.

The Commissioner's Court ordered the tax assessor to place all the several mineral interests of Dallam County on the tax rolls for the year 1954 for the first time. The assessor did so and continued to do so each year up to the time of trial of this case, and notices were sent to those owning such interests, including appellant. He sent a notice to appellant about October 1, 1954. The assessor testified, 'I wrote them several times asking them to render and they wouldn't answer a letter and they didn't come back either.'

In the court below appellant contended the method by which appellee assessed and levied the taxes was capricious, arbitrary, illegal and fundamentally wrong for the reasons that (1) the taxing authorities by a deliberate, arbitrary and preconceived plan assessed all severed oil, gas and mineral interests which were owned by persons not owning the surfaces of the land in and under which such mineral interests lie without assessing and levying taxes on the mineral interests owned by the persons owning the surfaces thereof; (2) the taxing authorities assessed and levied taxes on all severed mineral interests, that is, oil, gas and other minerals indiscriminately at the same value and for the same amount of $1 per acre base, wholly irrespective of the actual value of such severed minerals; (3) all severed nonparticipating oil, gas and mineral royalties not owned by the person owning the surface in the land were assessed at the same value of 50cents per acre, irrespective of the market value of same; (4) all oil and gas leasehold estates created by oil and gas leases were assessed at $1 per acre irrespective of the value thereof; (5) the taxing authorities by a deliberate and arbitrary pre-conceived plan did not assess and levy taxes on money on deposit in banks in Dallam County and did not assess and levy taxes on the surface owners and those who owned both the surface and mineral interests thereunder in the same proportion of the values thereof as they assessed the owners of severed mineral interests, thus resulting in oil, gas and mineral interests of appellant being taxed at a greater rate and resulting in more taxes against it than would otherwise be necessary.

Since no findings of fact were requested this court must consider the testimony in the light most favorable to appellees, but even in doing so the record reveals that on land of like quality there was no variation in the assessed value where any part of the minerals were separated from the surface. In other words, over the entire county, systematically, lands which had all the mineral interests in the same ownership with the surface were valued on the same basis as like quality land where part of the mineral interests were severed. Specifically, in this case Section 63, Block 4, C.S.S., in which appellant owned an undivided one-half mineral interest in the east one-half, was valued for taxes on exactly the same basis as the other sections of the same quality where all the mineral interests were intact--owned completely by the surface owners. Appellees argue in their brief that this type of proof does not establish that the unsevered mineral interests were not valued for taxes. We cannot agree with this contention and believe the only deduction that can be made from the testimony of this case is that the taxing authorities since 1954 have systematically followed a plan of taxing severed minerals and leaving untaxed the mineral interests that are still intact--still owned by the persons owning the surface.

In substance, the record also shows that all severed mineral interests of the same type were valued respectively on the same basis throughout the county regardless of their location and actual value; that the mineral interest in controversy located in the southwest quadrant of the county was worth about $5 an acre maximum, while mineral interests in the northeast and southeast quadrants were worth from twice to three times as much; that the market value of Section 63, Block 4, C.S.S. was $45 per acre and the sections around it were approximately of the same value, or more, where all minerals were intact; that they were valued for tax purposes at $3 per acre, 1/15 of their market value, while the mineral interest here involved was valued at 1/5 of its market value.

The record shows that of the total acres in Dallam County of 866,482.55 approximately 48 per cent of the minerals were owned in common with the surface and were not valued for tax purposes separately. We also believe the only fair deduction that can be made from the record is that they were not valued for taxation by adding their market value to that of the surface. Additionally, the record shows there was on deposit in the banks of Dallam County in 1954 subject to taxation $8,768,414 not listed on the tax rolls and not taxed.

We are not willing to say that the system of taxation above outlined shows an intentional, malicious and prejudiced attitude on the part of the taxing authorities toward appellant or any other property owner. It is not necessary that officers intended specifically to discriminate or injury property owners. It is sufficient that by their action they denied appellant the equal protection of the Constitution and Laws of the State. Lively v. Missouri, K. & T. Ry. Co. of Texas, 102 Tex. 545, 120 S.W. 852; Brown County Water Improvement Dist. No. 1 v. McIntosh, Tex.Civ.App., 164 S.W.2d 722; Garza Land & Cattle Co. v. Redwine Independent School Dist., Tex.Civ.App., 282 S.W. 905. The record showing that all land in the county and all mineral interests thereon had a market value, we do feel compelled to say the system above outlined did not follow statutory mandates for arriving at the value of all the property for tax purposes. It ignored market value as a basis for valuation and having done so it shows an illegal and fundamentally erroneous principal of taxation. City of Arlington v. Cannon, 153 Tex. 566, 271 S.W.2d 414. However, to obtain relief from taxes arrived at through the use of an illegal and fundamentally erroneous plan of valuation, the taxpayer must show substantial injury. City of Arlington v. Cannon, 153 Tex. 566, 271 S.W.2d 414; Druesedow v. Baker, Tex.Com.App., 229 S.W. 493, affirmed Baker v. Druesedow, 263 U.S. 137, 44 S.Ct. 40, 68 L.Ed. 212; State v. Whittenburg, 153 Tex. 205, 265 S.W.2d 569. When considered on a comparative basis we believe the record of this case shows that the valuations used show substantial injury to appellant. We have said that approximately half the unsevered mineral interests were not taxed. Considered in the light most favorable to appellees the surface of the land was taxed at only about half the value as the severed mineral interest here involved was taxed. Additionally, almost $9,000,000 in the banks of the county subject to taxation was not taxed. Certainly it is taxable, despite the practical difficulties encountered in doing so. Whelan v. State, 155 Tex. 14, 282 S.W.2d 378.

The mere fact that the money on deposit in the banks of Dallam County was not taxed or that the unsevered mineral interests were not taxed does not of itself make the tax system complained about herein illegal. The law is well settled that a taxing unit does not lose its right to taxes...