Wolfe County v. Beckett

• Citation: 127 Ky. 252,105 S.W. 447
• Parties: WOLFE COUNTY ET AL. v. BECKETT ET AL.
• Decision Date: 20 November 1907
• Court: Court of Appeals of Kentucky

105 S.W. 447

127 Ky. 252

WOLFE COUNTY ET AL. v. BECKETT ET AL.

Court of Appeals of Kentucky.

November 20, 1907

Appeal from Circuit Court, Wolfe County.

"To be officially reported."

T. M Beckett and others appealed to the county court from final action of the board of supervisors of Wolfe county in fixing a valuation upon property for taxation, and on affirmance of such action by that court appealed to the circuit court where they filed a petition against Wolfe county and the commonwealth to declare invalid the supervisors' action. From the judgment, the county and the commonwealth appeal. Reversed and remanded.

G. B Stamper and S. G. Sample, for appellants.

Fulks &amp Hovermale and Gourley, Redwine & Gourley, for appellees.

CLAY C.

Appellee T. M. Beckett listed for taxation in Wolfe county for the year 1907, along with other property, property of the value of $1,000 under the items, "Steam engines and boilers." This the board of supervisors for the county raised to $3,000. Under the items, "Coal mines, oil, gas and salt wells," he listed property of the value of $14,000. This the board of supervisors raised to $55,825. Appellee Milton Garver listed for taxation in the same county for the year 1907 under the items, "Coal mines, oil, gas and salt wells," property of the value of $2,500. This valuation the board of supervisors raised to $5,000. Appellee Morehead Oil & Gas Company had listed to it by the board of supervisors for the year 1907, under the items, "Coal mines, oil, gas and salt wells," property of the value of $15,000. From the final action of the board of supervisors, appellees herein appealed to the Wolfe county court. That court sustained the action of the board of supervisors. Appellees then appealed to the Wolfe circuit court. There they filed a petition alleging that they held the oil and gas wells by leases, but they had no title to the realty covered by their respective leases; that the leases simply gave them a license or privilege to go upon the lands, and drill and explore for oil, and pump the same; and that the oil under the lands covered by the leases was realty until severed from the soil, and was not properly taxable to appellees. They then asked that the action of the board of supervisors in listing the oil and gas wells to them be declared to be invalid, and that the valuation as fixed by the assessor be adjudged to be the proper valuation of the personal property to be listed by each of the appellees. A demurrer was interposed by appellants, Wolfe county and the commonwealth of Kentucky, which was overruled by the court, and, the appellants having declined to plead further, the court entered judgment to the effect that the oil in place and in oil wells, except as oil is produced by same, is a part of the realty and belongs to the owner of the surface until it is taken from the ground, or until the owner makes absolute deed to the oil under the surface, thus separating it from the realty, and that a lease for a term of years, or any time less than a life estate, is not such an interest in real estate as requires the tenant or lessee to pay the taxes on the leased premises. From that judgment the county of Wolfe and the commonwealth of Kentucky are here on appeal.

It will be observed that this appeal involves the following questions: (1) Are oil and gas wells held under lease taxable? (2) If they are taxable, who should pay the tax, the lessor or lessee?

Before passing upon these questions, it may be well to advert to the general principles of law regulating the subject of taxation. It is well settled that the power to impose taxes is one so unlimited in force, so searching in extent that the courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest in the discretion of the authority which exercises it. McCulloch v. State of Maryland, 4 Wheat. (U. S.) 431, 4 L.Ed. 579. It may touch property in every shape--in its natural condition, in its manufactured form, and in its varied transmutation. It may touch business in the almost infinite forms in which it is conducted--in professions, in commerce, in manufacture, in transportation. State Tax on Foreign-Held Bonds, 15 Wall. (U. S.) 309, 21 L. Ed.

179. Everything to which the legislative power extends may be the subject of taxation, whether it be person or property, franchise or privilege, occupation or right. Nothing but special constitutional limitation upon legislative authority can exclude anything to which the authority extends from the grasp of the taxing power, if the Legislature in its discretion shall select it for revenue purposes. Cooley on Taxation page 9. This extends to property, whether it be tangible or intangible, and it matters not in what the intangible property consists, whether privilege, corporate franchises, contracts, or obligations. It is enough that it is property, which, though intangible, exists, which has value, produces income, and passes current in the markets of the world. To ignore this intangible property, or to hold that it is not subject to taxation at its accepted value, is to eliminate from the reach of the taxing power a large proportion of the wealth of the country. People v. Tax Commissioners, 199 U.S. 1, 25 S.Ct. 705, 50 L.Ed. 65.

Bearing these principles in mind, what has the Legislature declared to be taxable? Section 4020, Ky. St. 1903, provides as follows: "All real and personal estate within this state, and all personal estate of persons residing in this state, and of all corporations organized under the laws of this state, whether the property be in or out of this state including intangible property, which shall be considered and estimated in fixing the value of corporate franchises as hereinafter provided, shall be subject to taxation, unless the same be exempt from taxation by the Constitution, and shall...