Stepp v. Pike County Board of Sup'rs

• Decision Date: 10 March 1922
• Citation: 238 S.W. 408,194 Ky. 176
• Parties: STEPP v. PIKE COUNTY BOARD OF SUP'RS ET AL.
• Court: Kentucky Court of Appeals

238 S.W. 408

194 Ky. 176

STEPP v. PIKE COUNTY BOARD OF SUP'RS ET AL.

Court of Appeals of Kentucky.

March 10, 1922

Appeal from Circuit Court, Pike County.

John Stepp appeals from an assessment of coal for taxation by the Board of Supervisors of Pike county and others. The assessment was affirmed by the quarterly court, and by the circuit court, and the taxpayer appeals. Affirmed.

W. W Barrett, of Pikeville, for appellant.

E. C O'Rear, of Frankfort, and Overton S. Hogan, of Williamstown, for appellees.

MOORMAN J.

The appellant, John Stepp, is the owner of 644.6 acres of land in Pike county. In 1904 he leased to the Borderland Coal Company the exclusive right and privilege of mining and shipping all coal from the land, with the right to build houses, tipple etc., on the surface. The lessee agreed to pay 8 cents a ton royalty on all coal mined and shipped from the premises, and to guarantee a minimum annual royalty after the third year of $3,000. The Borderland Coal Company later assigned the lease to the Borderland Coal Corporation.

In April, 1920, the board of supervisors of Pike county summoned appellant to appear before it to show cause why he had not listed for taxation, as of July 1, 1919, the minerals and mineral products in and under the land. At that hearing the board assessed against appellant as of that date the coal and minerals in and under the land, at a valuation of $6,446. Appellant appealed from the finding of the board to the quarterly court, and, that court having sustained the board then to the circuit court, which also sustained the assessment. He is here complaining of the judgment of the circuit court.

The ground of complaint is that the lease is in fact a conveyance of the title to the minerals in the land, and, that position being established, it is assumed that appellant has no assessable interest in the lease. Kincaid v. McGowan, 88 Ky. 91, 4 S.W. 802, 9 Ky. Law Rep. 987, 13 L. R. A. 289; Ball v. Clark, 150 Ky. 383, 150 S.W. 359, and other authorities are cited in which the rule is announced that there may be separate and distinct estates in, and separate and distinct conveyances of mineral and surface rights in, the same land. These authorities are not questionable but they are not deemed pertinent to the real question at issue. As we view that question, it is immaterial whether the lease in controversy conveys an absolute estate in the minerals, or only a right to take them from the land. Section 4039 of Kentucky Statutes, as construed in Commonwealth v. R. G. Dun & Co., 126 Ky. 108, 102 S.W. 859, 31 Ky. Law Rep. 561, 10 L. R. A. (N. S.) 920, Mt. Sterling Oil & Gas Co. v. Ratliff, 127 Ky. 1, 104 S.W. 993, 31 Ky. Law Rep. 1229, Wolf County v. Beckett, 127 Ky. 252, 105 S.W. 447, 32 Ky. Law Rep. 167, 17 L. R. A. (N. S.) 688, and Purcell v. City of Lexington, 186 Ky. 381, 216 S.W. 599, seems to us decisive of the controversy.

Appellant relies mainly on the case of Wolf County v. Beckett, supra, but that case, in our opinion, sustains the view adopted by the lower court in entering judgment in conformity with the ruling of the board of supervisors. There were two questions involved in that case, viz.: (1) Are oil and gas wells held under lease taxable? (2) If they are taxable who should pay the tax, the lessor or lessee?

In discussing the first question, it was pointed out that under section 4020, Kentucky Statutes, all real and personal estate within the state, and all personal estate of persons residing in the state, are subject to taxation, unless exempt under the Constitution. It was decided that oil and gas wells held under lease are subject to the taxable burdens imposed upon other property by the laws of the state.

Answering the second inquiry, it was held, under the lease there presented, that the title to the oil and gas was in the lessee, that he owned property in it of recognized value, and that it was taxable as against him. The court did not stop there, but, as a necessary incident to the disputed point, decided that both the lessor and lessee had valuable and taxable property in the lease. It was said:

"Why is not a long lease, vesting the lessee with right to take coal, not a valuable separate property? The surface owner has lost dominion over the coal. The lessee has complete dominion. Still each has a property, taxable distinctly, if the state elects to do so, because they are different properties, and each one ought to

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