Shaffer Oil & Refining Co. v. Treasurer of Creek County
| Decision Date | 26 November 1935 |
| Docket Number | 21037. |
| Citation | 52 P.2d 76,175 Okla. 6,1935 OK 1172 |
| Parties | SHAFFER OIL & REFINING CO. v. COUNTY TREASURER OF CREEK COUNTY et al. |
| Court | Oklahoma Supreme Court |
Syllabus by the Court.
1. Evidence examined and held to support the finding of the trial court that alleged omitted property was not included or listed in returns made previously by the property owner to the county assessor.
2. By virtue of section 12434, O.S. 1931, prior to its amendment by chapter 103, Sess. Laws 1933, machinery, appliances, and equipment used in and around a producing oil or gas well and actually and exclusively used in the operation of such well are relieved from the burdens of ad valorem taxes by reason of the payment of gross production tax on the products of such well. However, where such property is devoted to two uses, one of which, if exclusive, would excuse it from the payment of ad valorem taxes under the gross production tax law, the other of which, if exclusive, would subject it to ad valorem taxes, and where the different component parts of such property are incapable of classification according to exclusive use, the taxable status of such property should be determined on a pro rata basis according to use, and the proportionate part of the property devoted to a use not connected with the production of oil or gas should be listed and assessed for ad valorem taxation and the value of the property should be allocated accordingly.
3. When a question of public policy or public interest is involved an appellate court may review a case on a theory not presented in the trial court.
Appeal from County Court, Creek County; Sebe Christian, Judge.
Proceeding by the County Treasurer of Creek County and others against the Shaffer Oil & Refining Company to list and assess alleged omitted property. From a judgment listing and assessing the property as omitted, the Shaffer Oil & Refining Company appeals.
Judgment reversed and cause remanded with directions.
G. Earl Shaffer, Fred D. Leonard, and W. F. Semple, all of Tulsa, and Rainey, Flynn, Green & Anderson, of Oklahoma City, for plaintiff in error.
W. F Pardoe and Leroy J. Burt, both of Sapulpa, J. Berry King, Atty. Gen., and F. M. Dudley, Asst. Atty. Gen., for defendants in error.
This case involves an effort on the part of the tax ferret of Creek county to list and assess for taxation certain alleged omitted personal property belonging to the Shaffer Oil & Refining Company.
The property involved is located in section 33, township 17 north, range 7 east, and is described as
Following the procedure prescribed by sections 12346 and 12348, O.S. 1931, this matter was first considered by the county treasurer and later on appeal by the county court. Both the treasurer and the county court decided that the property involved was subject to ad valorem taxation for the years 1919 to 1928, inclusive, and that the property had not been listed and assessed for those years.
The property owner brings the case to this court on appeal complaining in substance, first, that the property was not subject to ad valorem taxation during the years mentioned because it was actually used in the production of oil and gas and therefore excluded from the class of property subject to ad valorem taxation by payment of the gross production tax; and; second, that the property was not in fact "omitted property," but, on the contrary, had been listed and assessed for ad valorem taxes for each of the years mentioned and the taxes thereon paid. In other words, the property owner urges that it gratuitously paid ad valorem taxes on this property which in reality it could not have been compelled to pay as a matter of law.
We shall first examine the case for the purpose of determining whether the property involved was listed and assessed for ad valorem taxes during the period of time involved.
The property owner owns and operates a casing-head gasoline plant in the southwest quarter of section 4, township 16 north, range 7 east, which is something more than one mile distant from the so-called "vacuum plant" now sought to be taxed. During each of the years mentioned, the property owner filed a tax return with the county assessor. The returns were substantially the same and it is therefore sufficient to quote only one which reads:
"Assessment Return January 1, 1920, Shaffer Oil and Refining Company's Physical Property in Creek County, Oklahoma, for Manufacturing Casinghead Gasoline.
J. A Chapman farm situated in Southwest Quarter of Section 4-16N-7E
1 Casinghead gasoline plant consisting of four units listed below, together with necessary equipment for operating of same:
4-Bessemer units consisting of four high stage compressors 7 1/4 X 20 and four low stage compressors 14 X 20 driven by 80 HP Bessemer engines (age 2 yrs)"
The property owner contends that the words "together with necessary equipment for operating of same" are broad and general and include the vacuum plant. This contention is disputed by the face of the returns. An examination thereof discloses that the only property purported to be returned for taxation is that located on the Chapman farm situated in southwest quarter of section 4, township 16 north, range 7 east. The vacuum plant, even though it be considered a part of the gasoline plant, is not located on the Chapman farm, but is a mile away. The general catch-all phrase relied on by the taxpayer is by the terms of the return restricted to the "necessary equipment" located at the place designated.
The returns alone amply support the finding of the trial court that the vacuum plant was not included therein and was not listed and assessed for ad valorem taxation during the years mentioned. Other evidence touching upon this point need not be reviewed. We decline to disturb the finding of the trial court on this disputed question.
We shall next review the contention of the property owner that the property involved was excused from the payment of ad valorem taxes by reason of the payment of gross production tax.
By the terms of our statutes, gross production tax is in lieu of ad valorem tax on certain designated property. Section 12434, O.S. 1931, provides in part: "The payment of the taxes herein imposed shall be in full and in lieu of all taxes by the state, counties, cities, towns, townships, school districts and other municipalities upon any property rights attached to or inherent in the right to said minerals, upon leases * * for petroleum or other crude oil or other mineral oil, or for natural gas upon the mineral rights and privileges for the minerals aforesaid belonging or appertaining to land, upon the machinery, appliances and equipment used in and around any well producing petroleum or other crude or mineral oil or natural gas, * * * and actually used in the operation of such well or mine; and also upon the oil, gas, asphalt or ores bearing minerals hereinbefore mentioned during the tax year in which the same is produced, and upon any investment in any of the leases, rights, privileges, minerals or property hereinbefore in this paragraph mentioned or described." (The above statute is amended by section 5, chapter 103, Sess.Laws 1933, with which amendment we are not concerned in this action.)
Under the foregoing legislative enactment, machinery, appliances, and equipment used in and around any oil or gas well and actually used in the operation of such well are excused from the payment of ad valorem taxes by virtue of the payment of gross production tax. Kenoyer v. Board of Equalization of Ottawa County, 130 Okl. 3, 264 P. 891; Josey Oil Co. v. Board of Commissioners, 107 Okl. 266, 231 P. 272. The property thus used need not be immediately adjacent to a producing well or wells, the principal test being the character of its actual use. In re Assessment of Omitted Property of Prairie Oil & Gas Co., 159 Okl. 181, 13 P.2d 580.
In the case of Going, County Treas., v. Shaffer, 89 Okl. 46, 213 P. 736, and the subsequent case of Board of Equalization of Carter County v. Carter Oil Co., 152 Okl. 99, 3 P.2d 816, 77 A.L.R. 1060, it is stated in substance that in order for equipment to be exempt from ad valorem taxation, it must be an indispensable agency in the production of oil. The use of the word "indispensable" in those cases was unfortunate, since by implication it indicates that if the use of the particular equipment could be dispensed with, it is subject to ad valorem taxation, notwithstanding the payment of gross production tax. A great deal of property used in connection with the production of oil could be eliminated and production accomplished without its use. Such property, though actually used in producing oil, is in a strict sense dispensable. Its actual use under the terms of the statute (section 12434) excludes it from the mass of property subject to the burden of ad valorem taxation. notwithstanding its dispensable character.
In order that future confusion may be avoided, the language used in the two cases last above cited is modified to the extent that machinery, appliances, and equipment actually used in the production of oil in and around an oil well may be relieved of ad valorem taxation even though in a strict sense such property is a dispensable agency.
We now turn our attention to the property involved in this case for the purpose of determining whether it was actually...
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