Waggoner v. Wichita County

• Citation: 298 F. 818
• Decision Date: 12 April 1924
• Docket Number: 148.
• Parties: WAGGONER et al. v. WICHITA COUNTY et al.
• Court: U.S. District Court — Northern District of Texas

298 F. 818

WAGGONER et al. v. WICHITA COUNTY et al.

No. 148.

United States District Court, N.D. Texas, Wichita Falls Division.

April 12, 1924

Thompson Barwise, Wharton & Hiner, of Fort Worth, Tex., and Joe Carrigan, of Wichita Falls, Tex., for plaintiffs.

Bullington Boone & Humphrey, E. L. Fulton, and E. T. Duff, all of Wichita Falls, Tex., for defendants.

ATWELL District Judge.

W. T Waggoner and the W. T. Waggoner estate, the latter being a trust, bring their bill against the defendant county and its county judge and commissioners and tax collector. It is alleged that all of the parties reside in the Northern district of Texas; that the plaintiffs are the owners of certain oil royalties in 12,000 acres of land in Wichita county, Tex.; that on January 1, 1923, the date for the fixing of the 1923 taxes, which the defendants are attempting to collect, and will collect summarily unless prevented, the oil wells on the said lands were producing oils in such quantities that the plaintiffs' one-eighth thereof was equal to 723 barrels per day; that the defendants assessed the plaintiffs, by reason of such production and ownership $723,000 valuation, and on this valuation figured the tax; that this was arbitrary and discriminatory, excessive and erroneous; that the defendants arrived at this amount by figuring at the rate of $1,000 per barrel for each barrel that was produced on January 1st, but that the plaintiffs really did not have the title to any oil on said date, nor at any time subsequent, because a long time prior to that date they had executed oil and gas leases on said lands for a mentioned consideration; that it was provided in such leases that the plaintiffs should receive royalties equal to one-eighth of all of the oil produced and saved, which was to be delivered at the wells when produced, or to the credit and for the account of the plaintiffs, in pipe lines to which the wells might be connected; that in this way the lessees of the various leases became the owners, in all respects, so far as taxation laws of Texas were concerned, of the oil in, on, and under said lands, until the same was produced, and delivered, when produced, to the plaintiffs, and that therefore the lessees or their assignees were liable and responsible for the taxes; that the discrimination and intentional and wrongful findings and assessing by the defendants of the taxes against the plaintiffs was made on an unequal, inequitable basis, and were unjust and arbitrary, and without reference to the facts, and were in fact contrary to the facts; that the defendants exempted from taxation large quantities of personal property of other persons in Wichita county, such as oil derricks, rod lines, oil well casing in the wells and on hand on leases, tubing for pumping, engines, pump jacks, gathering lines, storage tanks, boilers, houses, and water lines, etc., aggregating the sum of $500,000; that such action of the defendants was a violation of the Texas laws, which guarantee equality and uniformity, and was a deprivation of the plaintiffs' right to be immune from having their property taken without due process of law; and that such action denied the plaintiffs the equal protection of the laws guaranteed by the Fourteenth Amendment to the Constitution.

Allegations showing the existence of no legal remedy as adequate as the equitable remedy were also made, so as to bring the suit clearly within the cases cited below. The plaintiffs asked that the defendants be enjoined from in any manner enforcing or attempting to enforce the collection of the taxes.

The defendants denied that there was any discrimination or arbitrary action in the fixing of the tax rate. They denied that the entire eight-eighths of the oil was conveyed to the lessee. They alleged that only seven-eights was conveyed, and that one-eighth was the property of the plaintiffs, and had never been transferred; that the lessees were sold seven-eighths of the oil and the right to mine for it, and that the lessees agreed to lift plaintiffs' one-eighth from under the ground and deliver it to the plaintiffs free of cost; that the one-eighth was not intangible personal property, but that it was a mineral and belonged to the plaintiffs; that they followed a uniform method in ascertaining the production of the wells in the county, and that from this method they figured the average amount which would indicate the number of barrels produced on the 1st day of January of the taxable year; that this was the procedure for every one; that for each barrel so produced by the royalty owner a valuation of $1,000 was made, and that for each barrel produced by the lessee-- the working interest, so called-- a valuation of $450 was fixed, which included all of the present property used in the sinking of the well and the subsequent production of the oil therefrom; that the working interest was burdened with the operation of the lease, and that this proportion was fair and equitable.

The suit comes properly in this court under the following decisions: Raymond v. Chicago Union Traction Co., 207 U.S. 20, 28 Sup.Ct. 7, 52 L.Ed. 78, 12 Ann.Cas. 757; Kirby v. Lakeshore & Michigan Southern, 120 U.S. 130, 7 Sup.Ct. 430, 30 L.Ed. 569; Wilson v. Illinois Southern Railway Co., 44 Sup.Ct. 203, 68 L.Ed. . . ., decided January 14, 1924 (which distinguishes the case of Keokuk & Hamilton Bridge Co. v. Salm, 258 U.S. 122, 42 Sup.Ct. 207, 66 L.Ed. 496); Johnson v. Wells Fargo Express Co., 239 U.S. 243, 36 Sup.Ct. 62, 60 L.Ed. 243; Colvin v. Jacksonville, 158 U.S. 459, 15 Sup.Ct. 866, 39 L.Ed. 1053; Greene v. Louis & Interurban Railroad Co., 244 U.S. 502, 37 Sup.Ct. 673, 61 L.Ed. 1280, Ann. Cas. 1917E, 88; section 24 of the Judicial Code (Comp. St. Sec. 991); Wells Fargo & Co. v. Johnson, 214 F. 188, 130 C.C.A. 528, L.R.A. 1916C, 522; Bank of Arizona v. Howe (D.C.) 293 F. 601; Waggoner v. Baylor County (D.C.) 298 F. 822.

The testimony shows that immediately after January 1, 1923, the defendants called witnesses and advised themselves as to the best method of equitably taxing the royalty owner and the lessee's rights. This investigation resulted in the fixing of the $1,000 per barrel for the royalty owner's oil and $450 per barrel for the operators' oil. This took into consideration the fact that the operator might dig dry holes, and would have large expenses for the impedimenta necessary to carry...