
    HAGER et al. v. STAKES, Tax Collector, et al.
    (No. 4360.)
    Supreme Court of Texas.
    May 4, 1927.
    1. Courts &wkey;>l07 — Supreme Court, merely entering judgment In accordance with opinion of Commission of Appeals, adopts its view as to determination of case only.
    Where the Supreme Court does not adopt the opinion of the Commission of Appeals, but merely enters judgment in accordance with its opinion, it does no more than to adopt the view of the Commission of Appeals as to the proper determination of the case.
    2. Taxation <&wkey;63 — Oil leases, requiring delivery of fractions of minerals to lessor, balance to belong to lessee, left title to fraction in lessor as “real .property” subject to taxation (Vernon’s Sayles’ Ann. Civ. St. 1914, art. 7503).
    Under oil and gas leases requiring lessee to deliver fractions of the oil to the lessor, “balance of such oil being the property of lessee,” to pay stipulated sums for gas wells and reasonable royalty on other minerals, held that title to fraction of minerals not conveyed remained in lessor, and that such fraction was “real property” within Vernon’s Sayles’ Ann. Civ. St. 1914, art. 7503, making all property, real, personal, or mixed, subject to taxation.
    [Ed. Note. — For other definitions, see Words and Phrases, First and Second Series, Real Property.]
    3. Taxation <&wkey;>63 — Lease conveying minerals subject to royalty of oil and stipulated sums for gas left title to royalty in lessor as “real property” subject to taxation (Vernon’s Sayles’ Ann. Civ. St. 1914, art. 7503).
    Under oil and gas lease conveying “such minerals subject to the royalties' hereinafter reserved,” which were one-eighth of the oil produced and stipulated sums for gas, title to one-eighth of oil held to remain in lessor and to be “real property” within Vernon’s Sayles’ Ann. Civ. St. 1914, art. 7503, making all property, real, personal, or mixed, subject to taxation and all of the gas to be conveyed to the lessee.
    4. Taxation <&wkey;>63 — Under instrument conveying undivided interest in land for cash and fraction of oil, title to royalty was in lessor as “real property” subject to taxation (Vernon’s Sayles’ Ann. Civ. St. 1914, art. 7503).
    Under instrument conveying undivided seventeen-eighteenths interest in land in fee simple for a consideration of cash and one-eighth of seventeen-eighteenths of the petroleum produced and saved, and providing that the obligation to deliver the oil should run with the land and be obligatory on the successors of the les- ' see, title to such fraction of the oil held to remain in the lessor and to be “real property” within the meaning of Vernon’s Sayles’ Ann. Civ. St. 1914, art. 7503, making such taxable. ,
    5. Taxation &wkey;»63 — Under lease requiring royalty oil be delivered to lessor andr authorizing lessee to buy it, royalty was “real property” subject to taxation (Vernon’s Sayles’ Ann. Civ. St. 1914, art. 7503).
    Under lease of land for oil, and providing that one-sixth of the oil found be delivered to the lessor, not expressly declaring what portion of the oil should belong to the lessee, and providing that the lessee might at his option buy the royalty oil at the market price, title to the royalty oil held to remain in the lessor and to be “real property” within the meaning of Vernon’s Sayles’ Ann. Civ. St. 1914, art. 7503, making all property, real, personal, or mixed, subject to taxation.
    6. Mines and minerals <&wkey;48 — Minerals in place are “realty.”
    Minerals in place are “realty,” subject to ownership, severance, and sale.
    7. Mines and minerals <&wkey;55 (I)— Severance of minerals may be accomplished1 by conveyance or by exception or reservation.
    Either a conveyance of the minerals or an exception or reservation in a conveyance may accomplish a severance of the minerals.
    8. Mines and minerals <&wkey;55(l) — Interest in minerals can be transferred only by deed sufficient to convey interest in land, but technical words are unnecessary.
    One owning a tract of land or an undivided interest therein, including minerals, can transfer interest in minerals in place only by a deed which contains words sufficient to convey an interest in land, but technical words aré not necessary, and effect will be given to whatever language discloses the intent to transfer.
    9. Taxation <&wkey;63 — -Different owners of different severed portions of realty should pay .taxes on separate portions, though portions consist of minerals or fractional interests therein.
    Where real estate has been severed by con-, veyance, exception, or reservation, so that one portion belongs to one person and other portions to others, each owner should pay taxes under assessment against his portion, though such portion consists of minerals or a fractional interest therein.
    10. Taxation <&wkey;57 — Ail property of every kind is taxable (Vernon’s Sayles’ Ann. Civ. St. 1914, art. 7503).
    Under the Constitution and statutes, particularly Vernon’s Sayles’ Ann. Civ. St. 1914, art. 7503, all property of every kind is subject to taxation.
    11. Taxation <&wkey;63 — Taxes on minerals in place . or fractions thereof should be assessed and collected as on other real property.
    Where the property being taxed consists of minerals in place or fractions thereof, the taxes should be assessed and collected the same as on any other species of real property.
    
      12. Taxation <&wkey;63 — Interest in minerals in place is taxable as real property, whether belonging to original lessor or his assignee.
    Regardless of whether an interest in minerals in place belongs to the original lessor or to his assignee, it is taxable as real property.
    13. Taxation &wkey;>63 — Royalty interests under oil and gas leases were taxable as real property where lands were situated.
    Where royalty interests under leases for mining oil, gas, and other minerals were real property, they were taxable in the county where the lands were situated.
    Certified Questions from Court of Civil Appeals of Ninth Supreme Judicial District.
    Suit for injunction by Lee Hager and another against D. W. States, Tax Collector, and others. From an order sustaining a general demurrer to the petition, plaintiffs appealed to Court of Civil Appeals. On certified questions.
    Questions answered.
    I. S. Handy, of Houston, for appellants.
    Thompson & Barwise, of Ft. Worth, as amicus curiae.
    Dan Moody, Atty. Gen.,- R. J. Randolph, Ass’t Atty. Gen., and R. Lee Davis, of Orange, for appellees.
    Goggans & Allison, of Brectenridge, amicus curiae.
   GREENWOOD, J.

The certificate of the Honorable Court of Civil Appeals for the Ninth Supreme Judicial District is as follows :

“To the Honorable Supreme Court of the State t>f Texas:
“This is an appeal from an order of the district court of Orangé county, sustaining a general demurrer to appellants’ petition. The nature of their petition and the issues involved are thus stated by them in their brief:
“ ‘On January 1, 1923, Lee Hager was the owner of the fee-simple title to certain lands in Orange county, Tex., and the owner of a royalty interest in the oil produced from these lands, and, in addition, was the owner of an.' interest in the oil produced from certain other lands in which he háfl no claim to the surface or other title to any of the oil, gas, or other minerals under such land. About December 1, 1923, Lee Hager transferred and assigned all of these interests to the Federal Royalty Company.
“ ‘Subsequent to the 1st of January, 1923, the tax assessor of Orange county assessed to Lee Hager the interests above mentioned; these, assessments being for the purpose of assessing the royalties as an interest in the lands designated. Objection was made by Lee Hager before the county board of equalization to those assessments on the ground that the law did not permit the assessment of royalty interest. The equalization board, however, confirmed the assessments as placed upon the tax rolls, and the tax collector demanded payment of the taxes' thereon. This suit was brought to enjoin the tax collector from further attempting to collect such taxes and to enjoin the county assessor and county commissioners from further assessing for taxation any royalty interest owned by Lee Hager or the Federal Royalty Company.
“ ‘Upon trial of the ease, it was agreed that Lee Hager was the owner of the properties described in the petition, subsequent to the conveyances which were fully set out in the petition, and that for the purpose of this suit, the valuations assessed were correct.
“ ‘The petition shows that prior to January 1, 1923, Lee Hager was the owner of a tract of 3.94 acres of land in Orange county, Texas, and that prior to January 1, 1923, he had executed an “oil and gas lease” to the Atlantic Oil Producing Company, which is fully set out in the pleading, and in which the following language is used:
“ ‘ “Know all men by, these presents: That Lee Hager, of Harris county, state of Texas, herein called lessor, whether one or more, does hereby lease, demise and let unto the Atlantic Oil Producing Company, herein called lessee, and to its heirs, successors, and assigns, the herein described premises for the purpose and with the exclusive right of exploring, mining, drilling, and operating for oil, gas, coal, sul-phur, lignite, salt, and other minerals, or water, with the right to erect, maintain, use, and remove all buildings,” etc.'
“ ‘The consideration for this contract is stated to be §10, and the further obligation with reference to the payment of royalty:
“ ‘ “Should oil be found in paying quantities in any well, drilled by lessee upon the above-described premises, lessee agrees to deliver to lessor in pipe line (lessor paying pipe line charges), or settling tanks with which lessee may connect the well or wells, the equal one-sixth part of all the oil produced and saved from such premises; the balance of such oil being the property of lessee.”
“ ‘The contract contains further provisions with reference to royalty to be paid on gas or-other minerals.
“ ‘The petition further shows that prior to January 1, 1923, Lee Hager was the owner of a 16-acre tract and an undivided four-fifths interest in an 11.99-acre tract in the Bradley Garner survey, and that prior to January 1, 1923, he had executed a conveyance to the Farish-Watts-Collins, Inc., an instrument which is fully set out in the amended petition, and which contains this provision:.
“ ‘ “The purpose of this lease is such that, so long as it remains in force, the lessee shall have the exclusive right to prospect and drill on said land for oil and gas and remove the same therefrom; to erect and maintain thereon and remove therefrom all necessary and proper structures and equipment. * * * And subject to the royalties hereinafter reserved, all of the oil and gas in and under said land is hereby granted and conveyed to the lessee.
“ ‘ “The royalties reserved by the lessor and which shall be paid by the lessee are: (a) On oil, a quantity equal to one-eighth of all produced and saved, the same to be delivered at the wells or to the credit of the lessor in the pipe line to which the wells may be connected.”
“ ‘That on the 21st day of May, -1923, the title to the oil, gas, and other minerals described in the foregoing instrument, reverted to the plaintiff, Lee Hager, and on the same day the said Lee Hager executed an instrument to W. M. McMahon, which, instrument contained the following provision:
“ ‘ “The purpose of this lease is such that, so long as it remains in force, the lessee shall have the exclusive right to prospect and drill on said land for oil and gas and remove the same therefrom; to erect and maintain thereon and remove therefrom all necessary or proper structures and equipment, * * * And subject to the-royalties hereinafter reserved, all of the oil and gas in and under said land is hereby granted and conveyed to the lessee.
“ ‘ “The royalties reserved by lessor and which shall be paid by lessee, are: (a) On oil, a quantity equal to one-eighth of all produced and saved, the same to be delivered at the wells or to the credit of the lessor in the pipe line to which the wells may be connected.”
********
“ ‘That, prior to January 1, 1923, Lee Ha-ger was the owner of an undivided interest in 11.99 acres of land out of the Bradléy-Garner survey, but that on the 28th day of September, 1921, he, joined by W. M. Gunstream, executed to the Atlantic Oil Producing Company an instrument which contains the following provisions:
“‘“Know all men by these presents: That Lee Hager, of Houston, Harris county, Tex., and W. M. Gunstream, of Orange county, Tex., herein called lessor, whether one or more, does hereby lease, demise, and let unto the Atlantic Oil Producing Company, herein called lessee, and to its successors and assigns, the herein described premises, for the purpose and with the exclusive right of exploring, mining, drilling, and operating for oil, gas, coal, sulphur, lignite, salt, and other minerals, or water; with the right to erect, maintain, use and remove all buildings, structures,” etc.
“ ‘The consideration for the instrument is stated to be $10 and the further provision with reference to the payment of royalty, to wit:
“ ‘ “Should oil be found in paying quantities in any well drilled by lessee upon the above-described premises, lessee agrees to deliver to lessor in the pipe line (lessor paying pipe line charges), or settling tanks, with which lessee may connect the well or wells, the equal 16 per cent, part of all the oil produced and saved from such premises; the balance of such oil being the property of lessee.”
“ ‘That prior to January 1, 1923, Lee Hager was the owner of an interest in 84.06 acres of land in the S. M. Luce survey, but that on the 26th day of June,-1913, he executed an instrument to the J. M. Guffey Petroleum Company, which instrument contains the following provisions:
“ ‘ “Know all men by these presents: That for the consideration hereinafter stated, I, Lee Hager of said Harris county, Tex., have granted, bargained, sold, and by these presents do,grant, bargain, sell, and convey unto the J. M. Guffey Petroleum Company, a corporation, created under the laws of the state of Texas, all of my interest, the same being seventeen-eighteenths undivided, in a tract of land in Orange county, Tex., being a portion of the Sarah M. Luce survey, situated on Cow bayou, located by virtue of certificate No. 36 — 94, issued to Sarah M. Luce and patented to J. M. Wingate, assignee, September 29, 1886, by patent No. 215, in volume 26, said patent being recorded in the deed records of Orange county, Tex., in Rook 2, p. 425,” etc.
“ ‘It also contains the following provisions:
“ ‘ “The considerations for this conveyance are as follows:'
“ ‘ “First, $2,238.81, paid by the J. M. Guffey Petroleum Company, the receipt whereof is hereby acknowledged; and
“ ‘ “Second, one-eighth of seventeen-eighteenths of all petroleum which said J. M. Guffey Petroleum Company, its successors and assigns hereunder may produce and save from the land above described, such portion of the petroleum to be delivered free of expense to me, the said Lee Hager, my heirs or "assigns, at the well or at my or their option into any pipe line which may connect with the well.”
“ ‘This instrument also contains the following provision:
“ ‘ “It is agreed that no obligation is imposed on said J. M. Guffey Petroleum Company, its successors or any holder of title under it, to drill or operate for oil on said premises, but that I, the said Lee Hager, my heirs and assigns, shall have such part of such petroleum only if and when produced.”
“ ‘That prior to January 1, 1923, the said Lee Hager was the owner of a tract of 22.14 acres of land in the Wm. Dyson league, but that on the 12th day of October, 1920, the said Lee Hager executed an instrument to the Gulf Producing Company, which contains the following provisions :
“ ‘ “Know all men by these presents: That we, Lee Hager and P. S. Moore, of the county of Harris, state of Texas, hereinafter called lessor (whether one or more), have and by these presents do hereby lease, demise, and let unto the Gulf Producing Company, hereinafter styled lessee, the tract of land hereinafter described, with the exclusive right of exploiting the same for and producing oil and gas therefrom, and to that end also grant the exclusive right of drilling and operating thereon, for oil and gas, together with rights of way for telephone and telegraph lines and right to lay pipe lines and operate the same,” etc.
“ ‘This instrument contains the following provision :
“ ‘ “If oil shall be found on said premises, lessee shall deliver as royalty to lessor, free of expense, one-sixth part of the oil saved from that produced, after deducting such part as may be used for drilling and operating on the land and treating the oil or gas so as to make it merchantable; such delivery to be made either into tanks supplied by lessor with connections by lessor provided, or into any pipe line that may be connected with the well; or lessee may, at lessee’s option, buy such royalty oil, paying the current market price in the field at the time of production.”
“ ‘The pleadings further show that on January 1, 1923, Lee Hager was the owner of the fee-simple title to a tract of 3.312 acres of land in the Wm. Dyson league, taxes on which the plaintiff offered to pay and tendered the registry of the court.
“ ‘The plaintiffs’ petition shows that said Lee Hager is assessed with 8.08 acres of land, but alleges that said Lee Hager did not own any such tract of land, and that as a matter of fact no such tract of land existed. This allegation is supported by affidavit of Lee Hager.
“ ‘The basis of the appeal from the judgment sustaining a demurrer to plaintiffs’ petition, denying the injunction and dismissing the suit, is strictly a Question of law; the trial court holding that royalty on oil arid other minerals is an interest in real estate and subject to taxation,’
“As we understand the holding of the Commission of Appeals in Jones v. O’Brien, 251 S. W. 208, the royalty interest retained by a lessor in the oil and minerals conveyed to the lessee by leases of the character involved in this case'is personal property. Again, as we understand the holding in Stephens County v. Mid-Kansas Oil & Gas Co., 113 Tex. 160, 254 S. W. 290, 29 A. L. R. 566, the effect of such leases is to sever the estate in the oil and other minerals in place from the other interests in the land described in the leases and to vest in the lessee, as was said by the Commission of Appeals in Caruthers v. Leonard, 254 S. W. 782, ‘a determinable fee, or' fee simple determinable’ and not ‘an estate upon conditions subsequent.’
“Again, as we understand your holding in the Stephens County Case, Caruthers v. Leonard, supra, and Texas Co. v. Davis, 113 Tex. 321, 254 S. W. 304, 255 S. W. 601, the effect of such conveyances is to vest in the lessee the title to all the oil and other minerals in place and to leave nothing in the lessor but, the possibility of reverter and the right to receive his profit from the exploitation of the land by the lessee or his assigns.
“However, these conclusions do not, as we understand this case, answer the questions of law presented, and, being in doubt as to their proper solution, we most respectfully certify for your consideration the following questions:
"Question No. 1. Have we correctly stated the effect of your holdings in the cases cited supra?
“•Question No. 2. If the ‘royalty’ interest retained by the lessor under the leases involved herein is ‘personal property,’ then is it of that nature for all purposes, including taxation, or for taxation purposes is it one of ‘the rights and privileges belonging or in any wise appertaining’ to the land described in the conveyances, as enumerated by article 7504, Vernon’s Sayles’ Civil Statutes, defining ‘real property,’ for the purposes of taxation? As bearing on this question, we would cite Mount Sterling Oil & Gas Co. v. Ratliff, 127 Ky. 1, 104 S. W. 993.
“Question No. 3. Is the royalty interest retained in the instruments involved in this suit property within the meaning of article 7503, Vernon’s Sayles’ Civil Statutes, which provides: ‘AH 'property, real, personal or mixed, except such as may be hereinafter expressly exempted, is subject to taxation, and the same shall be rendered and listed as herein prescribed’ ?
“Question No. 4. If you answer question No. 3 in the affirmative, then against whom is such interest taxable (a) when the royalty interest is retained and owned by the original lessor and used and enjoyed by him in connection with his surface rights and as an incident of the ownership of the fee in the land; (b) when the original lessor has sold his royalty interest in his land and it is owned by parties other than himself and the lessee and his assigns — that is to say, when the surface rights and the fee in the land subject to the lease is owned by A, the interest in and under the lease is owned by the lessee, B, or his assigns, and the royalty interest is owned separately by a third person, O? In further explanation of this case, we state that it appears from appellants’ petition that they own the fee and royalty in certain of the lands within the terms of subdivision (a) of this question, and that in the other lands they own only a royalty interest within the meaning of subdivision (b) of this question.
“Question No. 5. If the royalty interest, as retained by the instruments involved in this suit, is subject to taxation, in what county is it taxable, in the county where the land to which the royalty appertains is situated, or in the county where the owner lives and has his habitat for the purpose of taxation? In this case the land is situated in Orange county, while the owners of the royalty interest live and have, their habitat for the purpose of taxation in Harris county.”

There are statements in the opinion in Caruthers v. Leonard, 254 S. W. on pages 782 and 783, to the effect that the lease there discussed did vest title in the lessee to all the minerals in place, leaving the lessor nothing save a possibility of reverter. The opinion in that case was by the Commission of Appeals, and was not adopted by the Supreme Court, and therefore the court did no more, as has repeatedly been pointed out, “than to simply adopt the view of the Commission as to the determination to be made of the cause.” McKenzie v. Withers, 109 Tex. 256, 206 S. W. 503; Stephens County v. Mid-Kansas Oil & Gas Co., 113 Tex. 167, 254 S. W. 290, 29 A. L. R. 566. The Caruthers Case was rightly determined, regardless of the legal effect of the lease in reserving a mineral estate to the lessor; for Leonard was not entitled to recover any part of the rentals for which he sued, because the writing under which he claimed expressly stipulated that, if the lease under which the rentals accrued was valid, then he (Leonard) bought subject to all the terms of such lease, and the lease was valid and one of its terms provided for the payment of such'rentals. Jones v. O’Brien (Tex. Com. App.) 251 S. W. 208, which was correctly followed in O'Brien v. Jones (Tex. Civ. App.) 274 S. W. 242, determined nothing except that parties may contract for the sale of oil as personalty, after its severance from the soil, and that such a contract is without the statute of frauds. The gist of Judge German’s opinion is summarized in these sentences :

“We think the petition is very reasonably susceptible of the construction that defendant in error intended to allege that the only subject of the contract between him and Jones was the interest in the oñe-eighth royalty, as commonly understood; that is, an interest in the oil after being separated from the soil and placed in pipe lines or other depositories, or an interest in the money value thereof. As against a general demurrer, we think the petition should be given this construction as coming within its intendments. Upon a trial,, if it should be found as a matter of fact that the parties were contracting with reference to the entire subject-matter of the conveyance from Hand to O’Brien, plaintiff in error may urge all such rights as he may have under the statute of frauds, as applied to that character of contract. * * * Construing the petition as alleging a contract relating to personalty, the statute of frauds has no application.”

The cases of Stephens County v. Mid-Kansas Oil & Gas Co., 113 Tex. 160, 254 S. W. 290, 29 A. L. R. 566, and Texas Co. v. Davis, 113 Tex. 321, 254 S. W. 304, 255 S. W. 601, do not decide that such leases as are here involved invest the lessees with title to all the oil and minerals in place and leave the lessors nothing but possibilities of reverter and rights to portions of oil and other minerals when reduced to personal property.

In neither case was the question argued by counsel for any party as to whether the lessee owned all the minerals or only a fractional interest in the minerals. The question- certified in the Stephens County Case was whether the Mid-Kansas Oil &, Gas Company acquired “such interests or estates in land,” under the recited leases, as were subject to separate taxation. The answer to the question was that the company did acquire “interests and estates in the lands which were subject to separate taxation.”

The instruments under which the Mid-Kansas Oil & Gas Company claimed its rights or estates were certified to have been substantially in the form of the lease set forth in 113 Texas Reports at pages 164 and 165, 254 S. W. 290. The court held that these instruments gave the lessee the exclusive right to possess, use, and dispose of the gas and oil in place, for terms which might never end, and concluded that therefore the instruments invested the lessee with title to the oil and gas, since “dominion over a thing could not well be completer than it is in those persons who may, at their will, assign it to any other person, with or without consideration, for a time which may be forever.” In the sentence first announcing the conclusion that the minerals became the property of the lessees, the court took pains to point out that the lessee did hot have to deliver any portion of the gas or oil to the lessors, or their assigns, but could pass title to all of the gas and oil to a purchaser.

The suit by Davis and others against the Texas Company and others was, as shown by the opinion, “for the recovery of nine-tenths the oil, gas and other minerals.” 113 Tex. 330, 254 S. W. 306. Since the right of the assigns of those granting the original lease in the Davis Case was not challenged to the fractional portion, viz. one-tenth, of the minerals, which was deliverable to the lessors or their assigns, no such questions as are here presented could arise in the Davis Case. Moreover, clauses appear in the lease set out in the Davis Case, as at page 328 (254 S. W. 304, 255 S. W. 601) which may grant full power of disposition of all the minerals to the lessee and authorize him to make, at the end of each quarter, purely moneyed settlements therefor.

In considering, whether the lessor was properly taxed as owner of one-eighth the oil reserved for delivery to him under a certain lease, the Supreme Court of the United States recently said, through Associate Justice Stone:

“The case of Stephens County v. Mid-Kansas Oil & Gas Co., supra, is relied upon by appellants, but in that ease the lease, in other respects similar to those now under consideration, provided that the lessee at his option should pay the stipulated royalties in oil or cash. It thus conferred on the lessee the essentials of ownership — possession, with unrestricted power of appropriation and disposition of the oil. The lessee was therefore properly taxed as owner. The considerations which led to that result lead to the conclusion here that the ownership of the royalty oil remained in the lessor who retained the power of disposition and the right to receive possession, and that his interest was properly taxed as realty.” W. T. Waggoner Estate v. Wichita County, 47 S. Ct. 273, 71 L. Ed. —.

Precisely the same distinction was drawn between the leases involved, in the Stephens County Case and those here involved by the United States Circuit Court of Appeals for the Fifth Circuit, when it declared in the case of W. T. Waggoner Estate v. Wichita County, 3 F.(2d) at page 964:

“No provision was made for the lessee becoming the owner of the part of the oil produced which was required to be delivered to the lessor. In this respect the instruments in question are materially different from the one which was under consideration in the case of Stephens County v. Mid-Kansas Oil & Gas Co., 113 Tex. 160, 254 S. W. 290, 29 A. L. R. 566. By the terms of the instrument which was in question in that case the lessee was required to pay to the lessor 10 per cent, of the market price of gas produced, and, as to oil produced, the lessee was given the option of delivering one-eighth thereof to the lessor or paying to him the market price in cash thereof. It was held that that instrument gave the lessee therein dominion over the oil and gas in the land described. As above indicated, the leases in question in the instant ease do not evidence a purpose to give to the lessees therein ownership, dominion of, or the right to dispose of the part of'the oil produced which was required to be delivered to the lessor, and those instruments contain no provision under which the lessees could acquire or become entitled to that part of the oil produced.”

In determining the Waggoner Case in the district court for the Northern District of Texas, Judge Atwell said:

“The Supreme Court of the State of Texas, in the cases of Texas Co. v. Daugherty, 107 Tex. 226, 176 S. W. 717, L. R. A. 1917F, 989, Stephens County v. Mid-Kansas Oil & Gas Co. [113 Tex. 160] 254 S. W. 290 [29 L. R. A. 566], Humphreys-Mexia Co. v. Gammon [113 Tex. 247] 254 S. W. 297 [29 L. R. A. 607], Texas Co. v. Davis (Tex. Sup.) 254 S. W. 304, Robinson v. Jacobs [113 Tex. 231] 254 S. W. 309, and Munsey v. Marnet [113 Tex. 212] 254 S. W. 311, has been equally emphatic in holding that the oil in place — all mineral — is realty and subject to taxation. Even without federal court holdings, the Constitution, the Legislature, and the highest court of the state, speaking to the same effect with reference to a subject, would indicate, not only a ruling action, but a public policy, that might not be contradicted in any other jurisdiction, when in that jurisdiction a construction of the acts of the governing officers of that state were being scrutinized, with the thought of undoing what they had done in harmony with their own laws.” Waggoner v. Wichita County, 298 F. 821.

Judge Atwell clearly pointed out what differentiates leases, such as those now under consideration, from the leases involved in the Stephens County Case, when he added:

“There is no provision in the leases which have been offered in evidence which warrants us in finding that the lessor sold anything to the lessee except seven-eighths of the mineral. There is no right of alienation on the part of the lessee of the one-eighth royalty; the one-eighth continued to be, as it always was, the property of the lessor, and so long as it is ‘in place’ it is a part of the realty.”

The leases from Lee Hager to the Atlantic Oil Producing Company and from Lee Hager and W. M. Gunstream, called lessor, to the Atlantic Oil Producing Company, which are set out in the certificate and copied in full in the accompanying transcript, each recite for consideration a small money payment and the lessee’s obligation to deliver to the lessor in pipe line or settling tanks a stated fraction of all oil produced and saved from the premises. Each lease demises and lets' certain land to the lessee for the purpose and with the exclusive right to drill and mine and produce the minerals. Each of these leases provides for the payment to the lessor of stipulated sums of money for gas wells and of reasonable royalty on any other minerals produced save oil and gas. There is no express grant of all the minerals. There is nothing in either lease to authorize the lessee to appropriate the portion of the oil required to be delivered to the lessor. On the contrary, each lease, after providing for the delivery of a stated fraction of oil to the lessor, contains this significant language: “The balance of such oil being the property of lessee.” And, when each lease makes provision for the payment of reasonable royalty on minerals other than oil and gas, it continues, “and the minerals so produced, royalty excepted, shall be the property of lessee.” Assuming, as does the certificate of the honorable Court of Civil Appeals, that the lessor in each of these leases owned each tract of land leased, or an undivided interest therein, at the time each lease was executed, and bearing in mind that the minerals or any portion thereof could be severed and separately owned, and that the minerals or a fraction of same could be conveyed, in place, only as part of the realty, there is no escape from the conclusion that the portion of the oil and other minerals not conveyed, but required to be delivered to the lessor, continued to belong to the lessor, and continued to be realty.

Such was the conclusion of the United States Supreme Court in the Waggoner Case, where the court said:

“It is to be noted that the leases contain no words of grant of the minerals as such, but the lands are demised solely for the purpose of drilling and mining. The lessees are in terms given neither title, right $£ appropriation, no.r power of disposition of the share of the oil which is to be delivered to the lessor when severed from the soil. * * * In the absence of controlling authority in the Texas courts, we can find in the terms of the leases themselves no basis for the contention that the lessor granted or conveyed away his entire interest in the oih” W. T. Waggoner Estate et al. v. Wichita County et al., 47 S. Ct. 273, 71 L. Ed. —.

The language of each lease to the Atlantic Oil Producing Company,, defining the property of the lessee as not all the oil but only the remainder after the delivery of the lessor’s portion, refutes the contention that the contracting parties ever intended all the oil to become the property of the lessee. Equally conclusive is the language defining the extent of the lessee’s property right in the other minerals save oil and gas.

The instruments executed by Lee Hag-er to Farish-Watts-Collins, Inc., and to W. M. McMahon are in almost identical language. They would have the same legal effect in so far as concerns the questions certified. Each instrument leases One tract of land and an undivided interest in another for the purpose of conferring on the lessee the exclusive right to prospect for and produce oil and gas therefrom. The grant of minerals is made in the following words:.

“And, subject to the royalties hereinafter reserved, all of the oil and gas in and under said lánd is hereby granted and conveyed to the lessee. The royalties reserved by the lessor and which shall be paid by the lessee are: (a) On oil a quantity equal to one-eighth of all produced and saved, the same to be delivered at the wells or to the credit of the lessor in the pipe line to which the wells may be connected; (b) on natural gas, at the rate of $200 per an-num, payable quarterly, for each well producing gas exclusively; * * * (e) on gas produced from oil wells, when such gas is used off the land or sold by the lessee and is not used for the manufacture of gasoline, at the rate of $25 per annum for each well while the gas is being so used or sold, but, when such gas is used for the manufacture of gasoline, the payment, inst-ead of .at the rate last mentioned, shall be at the rate of $50 per annum for each well while such gas is being so used for the manufacture of gasoline.”

We think the parties were about as careful as could have been expected had they invoked the aid of able and experienced counsel to use language in these instruments designed tó leave no fair doubt that the lessor- was meant to remain the owner, as he was before he executed the instruments, of one-eighth the oil in the leased lands. Making the grant of all the oil and gas subject to the royalties reserved could have had no other rational intent than to except from the minerals conveyed the equal one-eighth part of the oil. As said in the case of Texas Co. v. Davis, supra:

“Our object is to announce a rule which is truly consonant with the real intent of the contracting parties.” 113 Tex. 335, 254 S. W. 309.

We do this when we declare that the instruments now under consideration could not invest the lessee with a greater portion than seven-eighths of the oil, though clearly investing the lessee with all the gas, under the principles declared in the Stephens County Case.

The intent of the parties is not so readily ascertained when we come to consider the terms of the instrument executed by Lee Hager to the J. M. Guffey Petroleum Company. As that instrument appears in full in the transcript, Hager purports to grant and convey to the petroleum company, its successors and assigns, in fee simple forever, with covenant of special warranty, an undivided seventeen-eighteenths interest in a certain 150-acre tract of land. The instrument sets out that its considerations are ’$2,-238.80 cash, and “one-eighth, of seventeen-eighteenths of all petroleum which said J. M. Guffey Petroleum Company, its successors and assigns hereunder, may produce and save from the land above described; such portion of the petroleum to be delivered free of expense to me, the said Lee Hager, my heirs or assigns, at the well, or, at my or their option, into any pipe line which may connect with the well.” Immediately after setting out the obligation of the lessee to deliver the stated fraction of oil, the instrument continues:

“This covenant shall run with the land, and on sale of said interest hereby conveyed in said premises, shall pass to and become obligatory upon the successive owners of the right and title hereby conveyed. It is agreed that no obligation is imposed on said J. M. Guffey Petroleum Company, its successors, or any holder of title under it, to drill or operate for oil on said premises, but that I, the said Lee Hager, my heirs and assigns, shall have such part of such petroleum only if and when produced.”

We have concluded that, giving effect to all the language of this instrument, it does not grant or convey all the grantor’s undivided seventeen-eighteenths of the petroleum in this 150 acres of land, despite the positive terms of the granting and habendum clauses. Por we think a dominant purpose of the parties was to make impossible any other disposition of one-eighth of seventeen-eighteenths of this petroleum than its delivery to the lessor, or his assigns, as the property of the lessor or his assigns. Hence no matter how poorly expressed, there being words disclosing such purpose, there is excepted from the grant the one-eighth part of the seventeen-eighteenths of the petroleum. It is obvious that the instrument negatives the view that the obligation to deliver a portion of the oil was intended to a mere personal covenant of the lessee or its assigns. Likewise, the obligation was not meant to inure to the personal benefit of the lessor. It was meant to benefit the owner of an estate in the land and to permanently run with the land.

The controlling principle here was applied in Cravens v. White, 73 Tex. 579, 11 S. W. 543, 15 Am. St. Rep. 803, when the court said, through Chief Justice Stayton:

“The concluding clause of that deed shows clearly that it was not the intention of its makers that the 120 acres of land therein referred to should pass to appellee, and, however unusual the form of the deed may be, effect must be given to the intention of the makers.”

The rule is stated in 8 Ruling Case Law, § 151, p. 1094, as follows:

“Whatever it may be called, whether exception or reservation, a provision intended to secure a right in the grantors that otherwise would pass to the grantee by the deed must be given effect according to the intent of the parties gathered from the nature of the subject-matter and the language used. Accordingly, where there is a specific negation of intention to convey a certain part, it will be taken as excepted, as where * * * the descriptive clause recites that ‘the grantor reserves the ownership of the well on or near the east line of the lot hereby conveyed.’ ”

The court, in an opinion of Chief Justice Phillips, stated the legal effect of a lease to be to invest the grantee with “the right to seven-eighths of the oil if found.” That lease contained language less clear than that now before us to except from the grant or to reserve to the lessor one-eighj:h of the minerals. For that lease “recited that the grantors, in consideration of 828.20 paid by the grantee, the receipt being acknowledged, had granted, sold, etc., unto the grantee all the oil, gas, coal, and other minerals in and under the land described, with the exclusive right to drill, mine, and operate thereon for producing oil, gas, coal, and other minerals, to be held by the grantee for the term of ten years from the date of the instrument and as much longer as oil, gas or other minerals were produced in paying quantities, yielding to the grantors the one-eighth part of all oil produced and saved from the premises.” Corsicana Petroleum Co. v. Owens, 119 Tex. 570, 571, 222 S. W. 154, 155.

The court may have given similar effect to the royalty provisions of the oil leases purporting to grant all the minerals in and under the land in Texas Co. v. Daugherty, 107 Tex. 236, 176 S. W. 720, L. R. A. 1917F, 989, when the court stated:

“There was imposed no limit upon the grantee’s right to the oil and gas, save as to the royalty payable to the grantor.”

The lease of Lee Hager and P. S. Moore to the Gulf Producing Company is different from the two leases to the Atlantic Oil Producing Company in only one respect. After Hager and Moore demise the land for the purpose of exclusive oil exploration and production by the Gulf Producing Company, with the agreement that, if oil be found, one-sixth part shall be delivered to Hager and Moore, or their assigns—all substantially as in the leases to the Atlantic Oil Producing Company. Hager’s and Moore’s lease does not contain any express declaration as to what portion of the oil shall belong to the Gulf Producing Company, but it' does contain this provision, “or lesseee may, at lessee’s option, buy such royalty oil, paying the current market; price in the field at the time of production.”.

There is a radical difference between the provision of Hager’s and Moore’s lease requiring the lessee to buy one-sixth of the oil from them, unless that portion of the oil be delivered to them, and the provision in the leases involved in the Stephens County Case, which gave the lessee the option to sell as his own property one-eighth of the oil produced.

We think the provision requiring the oil to be delivered to Hager and Moore or requiring it to be purchased from Hager and Moore, coupled with the absence of words sufficient to divest Hager and Moore of one-sixth of the oil, makes plain that the lease left unimpaired Hager’s and Moore’s title to one-sixth the oil.

Our answers to all the certified questions might be rested on the following propositions :

First. That minerals in place are realty, and such are subject to ownership, severance, and salé, as^settled by the decisions in Texas Co. v. Daugherty, 107 Tex. 234, 176 S. W. 717, L. R. A. 1917F, 980, and Stephens County v. Mid-Kansas Oil & Gas Co., 113 Tex. 160, 254 S. W. 290, 29 A. L. R. 566.

Second. That a severance may 'be accomplished by means of a conveyance of the minerals or by means of an exception or reservation in a conveyance, as clearly pointed out in the opinion of Chief Justice Cureton in Humphreys-Mexia Co. v. Gammon, 113 Tex. 256, 254 S. W. 296, 29 L. R. A. 607, and in the cases there cited.

Third. That in every instance one who owns a tract of land or an undivided interest therein, including the minerals, can be divested of his interest in minerals in place only by a deed containing words sufficient to operate as a conveyance of ah interest in land, as distinctly held in W. T. Waggoner Estate v. Wichita County, 47 S. Ct. 273, 71 L. Ed. .—, and in States Oil Corporation v. Ward (Tex. Com. App.) 236 S. W. 446. However, no technical words arq necessary, but effect will be given to whatever language discloses the intent to divest the owner of his numeral estate, in whole or in part.

Fourth. Each of the leases set out in the certificate left the lessor with an interest in minerals which was real property.

Fifth. Real estate is ordinarily taxed as a unit; yet, where there have been severances by conveyance, exception, or reservation,'so that one portion of the realty belongs to one person and other portions to others, each owner should pay taxes under proper assessment against him of the portion owned by him. The fact that a portion may consist of minerals or of a fractional interest therein makes no difference, as outlined in State v. Downman (Tex. Civ. App.) 134 S. W. 795, and Downman v. Texas, 231 U. S. 356, 357, 34 S. Ct. 62, 58 L. Ed. 264.

Sixth. The Texas Constitution and statutes leave no room for doubt that all property of every kind is subject to taxation, and, as long as such property consists of minerals- in place or fractions of same, the taxes should be assessed and collected thereunder as on any other species of real estate.

We answer to question No. 1 that your certificate correctly states the effect of certain expressions in the opinion in Caruthers v. Leonard, and incorrectly interprets the opinions in Jones v. O’Brien, and in Texas Co. v. Davis, and in Stephens County v. Mid-Kansas Oil & Gas Co., which last ease should be given the meaning ascribed to it by the Supreme Court of the United States, by the United States Circuit Court of Appeals for the Fifth Circuit, and by the United States District Court for the Northern District of Texas.

We answer to question No. 2 that the interests retained by the lessor under each of the leases set out in your certificate was not personal property.

We answer to question No. 3 that the interests retained by these lessors was property and was real property within the meaning of article 7503,- Vernon’s Sayles’ Texas Civil Statutes.

We answer to question No. 4 that it is utterly immaterial whether an interest in minerals in place belongs to the original lessor or to his assign; the interest is taxable as real property.

We answer to question No. 5 that the interests of the lessors or of their assigns in the minerals involved in the leases set out in the certificate are taxable in Orange county, where the lands are situated. 
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