People ex rel. Hargrave v. Phillips

• Decision Date: 21 May 1946
• Docket Number: 29506.,Nos. 29505,s. 29505
• Citation: 67 N.E.2d 281,394 Ill. 119
• Parties: PEOPLE ex rel. HARGRAVE, County Collector, v. PHILLIPS. SAME v. NEEL.
• Court: Illinois Supreme Court

394 Ill. 119

67 N.E.2d 281

PEOPLE ex rel. HARGRAVE, County Collector,

v.PHILLIPS.

SAME

v.NEEL.

Nos. 29505, 29506.

Supreme Court of Illinois.

May 21, 1946.

Appeals from White County Court; A. W. Elliott, Judge.

Proceeding by the People, on the relation of Baylus Hargrave, County Collector, against James E. Phillips, and by same petitioner against Mary Neel for judgment for certain taxes. From adverse orders, plaintiffs appeal. The cases were consolidated.

Affirmed.

Albert McCallister, State's Atty., of Carmi (Conger & Elliott, of Carmi, of counsel), for appellant.

Ulys Pyle, of Carmi, for appellee James E. Phillips.

Kern & Pearce, of Carmi, for appellee Mary Neel.

GUNN, Justice.

The appellees, James E. Phillips in No. 29505, and Mary Neel in No. 29506, each filed objections to the application of the collector of White county for judgment for certain taxes assessed against them. The county judge sustained the objections of both appellees, and the People have appealed to this court, as the revenue is involved. The cases have been consolidated for opinion.

The facts in the two cases are almost identical except for amounts and, for that reason, only those in the Neel case are stated. Mary Neel is the owner of 40 acres of land which was valued at $450 in the 1943 assessment of real estate. The tax on this valuation was $21.24, which was paid. This same land was also leased to the Pure Oil Company for the production of oil and gas, from which the appellee was to receive one eighth of all that was produced and saved from said premises. This royalty interest of appellee was separately assessed, under the designation of ‘mineral deed,’ as of the value of $5410, and the resulting tax levied was $255.35, which was paid by appellee under protest. The objection of appellee was directed to the last item on the ground there was no authority to tax the rental or royalty from an oil lease as land. The appellant contends there has been a severance of the surface and mineral estates, authorizing a separate taxation under section 7 of the Mining Act. Ill.Rev.Stat. 1943, chap. 94, par. 7.

The oil lease was dated June 8, 1936, and was in the form of the usual oil lease. The granting clause reads as follows: ‘The said lessor, for and in consideration of ten dollars, cash in hand paid, the receipt whereof is hereby acknowledged, and of the covenants and conditions hereinafter contained on the part of lessee to be paid, kept and performed, has granted, demised, leased and let, and by these presents does grant, demise, lease and let unto the said lessee for the sole purpose of mining and operating for oil and gas, and of laying of pipe lines, and of building tanks, power stations and structures thereon, to produce, save and take care of said products, all that certain tract of land * * *.’

The rental clause reads: ‘the said lessee covenants and agrees: 1st. To deliver to the credit of lessor, free of cost, in the pipe line to which lessee may connect wells on said land the equal one-eighth part of oil produced and saved from the leased premises.’

Section 7 of the Mining Act, above cited, provides: ‘When the owner of any land shall convey, by deed or lease, any mining right therein, such conveyance shall be considered as so separating such right from the land that the same shall be taxable separately, * * *.’ By clear language this section provides the owner must convey a mining right. It is immaterial whether the conveyance is by deed or by lease, but the right must be conveyed. The term ‘convey’ has been construed to mean the same as a grant which passes title. Cross v. Weare Commission Co., 153 Ill. 499, 38 N.E. 1038,46 Am.St.Rep. 902;Nickell v. Tomlinson, 27 W.Va. 697;Fuller v. Hubbard, 6 Cow., N.Y., 13, 17, 16 Am.Dec. 423;Quinton v. Mulvane, 71 Kan. 687, 81 P. 486;Vann v. Edwards, 135 N.C. 661, 47 S.E. 784,67 L.R.A. 461.

The question therefore arises, Does the oil lease to the Pure Oil Company convey a taxable estate in the land of appellee, separate from the rent or royalty to be paid, or is the rent or royalty an incorporeal right which accompanies the ownership of the land, and is therefore a part of the land itself? In this State we have held that rent is the compensation for the use of land. Scully v. People, 104 Ill. 349;Grommes v. St. Paul Trust Co., 147 Ill. 634, 35 N.E. 820,37 Am. St. Rep. 248. In the Scully case we held specifically that rent in arrears is a chose in action and taxable as a credit, but rent to grow due is a part of the land and incident to it, and passing as such to a grantee, and is therefore not subject to taxation against the owner of the land, which is also taxed, and therefore the taxing of rents before due is the taxing of something included in the taxation of the land. This case is conclusive if receiving a part of the oil or gas produced is considered rent.

Royalty received from an oil and gas lease has been determined and held to be rent. Ohio Oil Co. v. Wright, 386 Ill. 206, 53 N.E.2d 966;Stoddard v. Illinois Improvement and Ballast Co., 275 Ill. 199, 113 N.E. 913;Von Baumbach v. Sargent Land Co., 242 U.S. 503, 37 S.Ct. 201, 61 L.Ed. 460. A mining lease is a lease in fact as well as in name. Gartside v. Outley, 58 Ill. 210, 11 Am.Rep. 59;Consolidated Coal Co. v. Peers, 150 Ill. 344, 37 N.E. 937;State v. Royal Mineral Ass'n, 132 Minn. 232, 156 N.W. 128, Ann.Cas. 1918A, 145; Boeing v. Owsley, 122 Minn. 190, 142 N.W. 129. Under a mining lease the minerals belong to the lessor as long as they remain in the land, but the lessee has the right to explore and reduce them to possession, upon which he pays the reserved royalty or rent. People ex rel. Carrell v. Bell, 237 Ill. 332, 86 N.E. 593, 19 L.R.A.,N.S., 746, 15 Ann.Cas. 511;Poe v. Ulrey, 233 Ill. 56, 84 N.E. 46;Triger v. Carter Oil Co., 372 Ill. 182, 23 N.E.2d 55;Updike v. Smith, 378 Ill. 600, 39 N.E.2d 325. Unaccrued rent is not personal property; it is a part of the land. Pollock v. Farmers Loan & Trust Co. 158 U.S. 601, 15 S.Ct. 912, 39 L.Ed. 1108;Scully v. People, 104 Ill. 349;Watson v. Penn, 108 Ind. 21, 8 N.E. 636,58 Am.Rep. 26;Den ex dem. Farley v. Craig, 15 N.J.L. 195; Van Wicklen v. Paulson, 14 Barb., N.Y., 654.

The principle is well stated in State v. Royal Mineral Ass'n, 132 Minn. 232, 156 N.W. 128, 129, Ann.Cas. 1918A, 145: ‘Unaccrued rents are not personal property. They are incorporeal hereditaments. They are an incident to the reversion and follow the land. (Citations.) They pass with a sale or devise of the land. (Citations.) If transferred apart from the land, the provision of the statute of frauds relating to sales of land applies. (Citations.) In fact, although separable from the reversion, that are, until such separation, part of the land. (Citations.)’

Under the foregoing well-settled principles a deed by appellee conveying the land upon which the lease was given would convey the lease and the right to receive unaccrued rentals. This would appear rather conclusively to show there had never been created a separate...