State v. Roden Coal Co.

• Decision Date: 16 November 1916
• Docket Number: 2 Div. 572
• Citation: 197 Ala. 407,73 So. 5
• Parties: STATE v. RODEN COAL CO.
• Court: Alabama Supreme Court

73 So. 5

197 Ala. 407

STATE v. RODEN COAL CO.

2 Div. 572

Supreme Court of Alabama

November 16, 1916

Appeal from Circuit Court, Bibb County; B.M. Miller, Judge.

Tax proceedings by the State of Alabama against the Roden Coal Company. Judgment for defendant, and plaintiff appeals. Affirmed.

W.L Martin, Atty. Gen., and Harwell G. Davis, Asst. Atty. Gen for the State.

Tillman Bradley & Morrow, and E.L. All, all of Birmingham, for appellee.

GARDNER J.

It is insisted on the part of the state that the leasehold interest of the Roden Coal Company referred to in the above statement of facts is subject to taxation as an interest in land embraced within the provisions of subdivision 1 of section 2082 of the Code, which reads as follows:

"Every piece, parcel, tract, or lot of land in this State, including therein all things pertaining to such land, and all structures and other things so annexed or attached thereto, as to pass to a vendee by conveyance of such land; and every separate or special interest in any land, such as mineral, timber, or other interest, when such interest is owned by a person other than the owner of the surface or soil." The language of this statute is plain and unambiguous. The separate interest in any land, such as mineral or timber, is the subject of taxation under the express words of the statute, "when such interest is owned by a person other than the owner of the surface or soil."

In discussing a question of a character similar to that here under consideration, and a statute using the word "held" instead of "owned," the Supreme Court of West Virginia, in the case of State v. South Penn Oil Co., 42 W.Va. 80, 24 S.E. 688, said:

"In the assessment law the term 'property' is used, not in the sense of the right of ownership, but of the thing owned, which is listed for taxation opposite the name of the owner. *** The court took the view, in construing the statute, that the word 'held' meant 'owned,' in the sense of at least freehold ownership; that the party to be separately assessed must own the mineral privilege or interest, if not in fee, at least to the extent of a freehold; that a mere lessee for years, paying royalty or rent in kind, has a chattel interest; but that the entire ownership of the whole corpus remains undivided in the lessor. A lessee, in the proper sense, may, by contract, have the right to the possession, and the possession, of the coal, as a part *** of the ownership of the thing owned is vested in him; and the statute contemplates a case in which the other party has become the owner of the mineral or coal and 'holds' it as such owner. And in that common-law sense, adopted by the general assessment law, the ownership to be assessed cannot be divided into parts less in quantity than a freehold. ***

"Thus far we have endeavored to show that the true interpretation of the act for the reassessment of real estate does not contemplate or require separate assessment of minerals from the land, except where separate freehold interests are held or owned, for the purpose is not to increase the value of the land, and thereby increase the taxes, but to divide the taxation, where there is divided ownership; so that each owner may be assessed, held liable, and proceeded against directly by the state for his part, and no more, and that his land shall not be returned delinquent for taxes, and sold for a tax on the coal or oil which another man owns."

The Supreme Court of Kansas, in the case of Kansas Co. v. Board of Com'rs, 75 Kan. 335, 89 P. 750, discussing a similar tax provision, reached the same conclusion, although the wording of the statute was somewhat different. That court said:

"It is contemplated that there shall be an estate consisting of what is left after the mineral rights have been carved out, and that there shall be an estate consisting of the mineral rights which have been segregated. The statute further contemplates that each estate must vest in a separate person. The respective proprietors are called 'owners,' and the estate in the minerals is nothing short of the right or title to the minerals themselves as they lie in the ground. When such a state of affairs exists, the statute regards the owner of the mineral rights as the proprietor of a distinct item of property which is taxable to him, apart from that which is taxable to the owner of the tract, or parcel, or lot in which the minerals are located, and it makes provision for separate lists, entries, descriptions, valuations, etc. The right or title to the minerals, as the statute expresses it, is taxed as realty. The owner is charged with taxes according to the value of his interest, and the owner of the overlying strata is taxed according to the value of the remaining interest in the land. But there must be a severance of the right to the mineral and nonmineral portions of the land, respectively, before there can be a division in taxation."

Clearly, therefore, under the very language of the statute, according to sound principles, and in harmony with these well-considered cases, the person against whom the mineral rights of the property are assessed for taxation must be the owner, at least to the extent of a freehold interest. Indeed, this proposition does not seem to be controverted by counsel for the state in their brief; but their argument is based upon the theory that by such contract there has been vested in the Roden Coal Company an estate in the coal in the mine leased, a proper subject of taxation.

The lease under which the Roden Coal Company operated this mine was for a term of 19 years, and stipulated for the payment by the lessee, as rent or royalty, of 8 cents per ton on all coal of every quality mined, and the payment of $250 per month as the minimum rent. It is termed a lease by the parties, and contains many provisions of forfeiture on the part of the lessee, such as default in payment of any installment, or failure on the part of lessee to work the mine with reasonable diligence, and like matters. There is no provision indicating the conveyance of any present interest in the coal, and no words of "bargain and sale."

Contracts concerning mineral rights have been the subject of frequent discussion by several of the courts of last resort in recent years. In the case of Harvey Coal Co. v. Dillon, 59 W.Va. 605, 53 S.E. 928, 6 L.R.A. (N.S.) 628, 636, 637, the Supreme Court of West Virginia has treated the subject and reviewed many of the authorities. The opinion quotes many definitions applicable to the question here under consideration, such as:

"A 'freehold interest' is an estate for life or in fee; a 'chattel real' for a less estate. *** Bouvier's Law Dictionary says: 'Real chattels are interests which are annexed to or concern real estate;

as a lease for years of land.' "

Speaking of leases of this character, the opinion proceeds:

"The statute charged land only to the freehold owner. Just as I have once said above, in this case the coal company has right of possession of the coal and of the land to mine that coal, but no title to the very coal or land--only a right to coal in connection with the intangible right to produce coal, to make it personal property for market. These leases, in their plain import, mean that the surface owner owns the whole land and everything in place in it, and that the lessee simply has a usufructuary right in connection with the land, right to use the land for a purpose, a terminable right, which may be long or short in years; that is, a mere chattel real, issuing out of lands, but constituting a distinct estate, a valuable one as property, and which is property, and therefore taxable, if the state see proper to do so. It must be a mere leasehold, a chattel real. Not being a freehold, and being incorporeal, a mere right to use the land for a purpose, what can it be but a leasehold for years? It must be something in the legal eye. It cannot be nondescript." In discussing some of the Pennsylvania cases in which it was held that the grantee acquired title to the coal in situ, it was pointed out that the contracts there under review by that court vested a present interest in the grantee or lessee in the mineral. The opinion quotes from the Court of Appeals of New York in the case of Genet v. D. & H. Canal Co., 136 N.Y. 593, 32 N.E. 1078, 19 L.R.A. 127, as follows:

"Whatever we may think

...