Santa Rita Oil Co. v. State Bd. of Equal., 7504.

Citation112 Mont. 359
Decision Date12 September 1941
Docket NumberNo. 7504.,7504.
PartiesSANTA RITA OIL CO. v. STATE BOARD OF EQUALIZATION et al.
CourtUnited States State Supreme Court of Montana

112 Mont. 359

SANTA RITA OIL CO.
v.
STATE BOARD OF EQUALIZATION et al.

No. 7504.

Supreme Court of Montana.

Sept. 12, 1941.


Original proceeding by the Santa Rita Oil Company against the State Board of Equalization and others to enjoin assessment, levy and collection of certain taxes. On defendant board's petition to vacate an injunction order, 54 P.2d 117, 101 Mont. 268.

Motion granted and injunction vacated in part.

MORRIS, J., dissenting.


Louis P. Donovan, of Shelby, for plaintiff.

John W. Bonner, Atty. Gen., Howard M. Gullickson, Asst. Atty. Gen., and I. W. Choate, counsel for State Board of Equalization, of Helena, for defendants.


JOHNSON, Chief Justice.

The defendant State Board of Equalization has petitioned for the vacation of the injunction order issued by this court on February 20, 1936, pursuant to its decision rendered on January 22, 1936, reported in 101 Mont. 268, 54 P.2d 117, 128. The order to show cause was issued and served upon the plaintiff, Santa Rita Oil and Gas Company, and upon the Texas Company and the Blackfoot Indian Tribe, interveners in the original action. A hearing was held on the order to show cause and briefs were filed. The modification is sought upon the ground that since the rendition of the decision and the issuance of the injunction order there have been changes in the applicable law, rendering the continuance of the injunction unjust, unreasonable and inequitable.

There is no occasion to repeat here the court's analysis of the original pleadings and issues. It is sufficient to say that in the complaint plaintiffs sought injunctive relief against the computation, assessment, levy and collection of certain taxes on oil and gas production under a lease of trust patent Indian land, upon the sole ground that in extracting the oil and gas the plaintiff was an instrumentality of the federal government and thus immune from taxation by the state. In its opinion this court found that the injunction should be issued forbidding the defendant board to take any steps for the collection of (1) royalty owners' net proceeds tax (imposed by Chapter 189 of the Political Code, sections 2088 to 2096.2, inclusive, Rev.Codes 1935), for the reason that the royalty interests accruing to the Indian allottee under a trust patent of lands whose legal title remains in the federal government may not become the subject of state taxation; (2) the operators' net proceeds tax (imposed by the same statutes), and the oil producers' license tax or gross production tax (imposed by Chapter 217 of the Political Code, sections 2397 to 2408, inclusive, Rev.Codes 1935) for the reason that the lessee under an oil and gas lease of Indian trust patent land was an instrumentality of the federal government and thus not taxable by the state. Thus the reasons for the decision were that the taxes were upon (1) the property or (2) an instrumentality of the federal government. The decision provides that the injunction is to continue “until such time as [appropriate] and valid congressional consent is given to the imposition of any or all of these taxes.” The injunction was issued “forever” restraining and enjoining defendant in the premises without referring to the above limitation, but the omission was immaterial, as noted in Santa Rita Oil & Gas Co. v. State Board of Equalization, 112 Mont. 224, 114 P.2d 521. It should be borne in mind (1) that the royalty owners' net proceeds tax was enjoined as a tax upon the property of the federal government, and (2) that the operators' net proceeds tax and the oil producers' license tax or gross production tax were enjoined as taxes upon an instrumentality of the federal government. While defendant's application is for the vacation of the entire injunction order it makes no attack upon the first ground, that the royalty owners' net proceeds tax was invalid because amounting to a tax upon the federal government's property, but only upon the second ground, that the taxes upon the operator were invalid because constituting taxes upon the federal government's instrumentality. No reason appearing why the injunction should not stand against the defendant board and its members as to the royalty owners' net proceeds tax, that matter is eliminated from consideration.

With reference to the other two taxes the defendant's contention is that the law has been changed, not by congressional Act, as contemplated in the decision, but by judicial interpretation. As its authority upon the question this court in its decision cited Choctaw, O. & Gulf R. R. v. Harrison, 235 U.S. 292, 35 S.Ct. 27, 59 L.Ed. 234;Gillespie v. State of Oklahoma, 257 U.S. 501, 42 S.Ct. 171, 66 L.Ed. 338;Jaybird Mining Co. v. Weir, 271 U.S. 609, 46 S.Ct. 592, 70 L.Ed. 1112, and Burnet v. Coronado Oil and Gas Co., 285 U.S. 393, 52 S.Ct. 443, 76 L.Ed. 815. The Choctaw, Gillespie and Jaybird cases held the lessees of Indian trust patent land to be such instrumentalities of the federal government, and the Coronado case held lessees of state school lands to be such instrumentalities of the state government, that their proceeds under the leases could not be taxed by the other government. The United States Supreme Court clearly considered the questions identical and in each case denied the right of either the state or the federal government to impose the tax on the instrumentality of the other. In 1938 the United States Supreme Court in Helvering, Com'r of Internal Revenue, v. Mountain Producers Corporation, 303 U.S. 376, 58 S.Ct. 623, 626, 82 L.Ed....

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