Title: Sutherland v. Meridian Granite Co.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

JOHN SUTHERLAND and MINERVA SELBE SUTHERLAND v. meridian granite company,  a Delaware Corporation, d/b/a MARTIN MARIETTA MATERIALS.  MERIDIAN GRANITE COMPANY,  a Delaware Corporation, d/b/a MARTIN MARIETTA MATERIALS v. JOHN SUTHERLAND and MINERVA SELBE SUTHERLAND2012 WY 53Case Number: S-11-0091, S-11-0092Decided: 04/11/2012This opinion is subject to formal revision before publication in Pacific Reporter Third.  Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building, Cheyenne, Wyoming 82002, of any typographical or other formal errors so that correction may be made before final publication in the permanent volume.  
APRIL 
TERM, A.D. 2011
 
JOHN 
SUTHERLAND and MINERVA SELBE SUTHERLAND,
Appellants 
(Plaintiffs),v.MERIDIAN GRANITE COMPANY, a Delaware Corporation, 
d/b/a MARTIN MARIETTA MATERIALS,
Appellee 
(Defendant).MERIDIAN GRANITE COMPANY, a Delaware Corporation, d/b/a 
MARTIN MARIETTA MATERIALS,Appellant (Defendant),v.JOHN 
SUTHERLAND and MINERVA SELBE SUTHERLAND,Appellees 
(Plaintiffs).
 
Appeal 
from the District Court of Laramie County
The 
Honorable Thomas T. C. Campbell, Judge 
 
 
Representing 
Sutherlands:
 
Bruce 
S. Asay, Associated Legal Group, LLC, Cheyenne, 
Wyoming.
 
Representing 
Meridian Granite Company:
 
Franklin 
D. O’Loughlin and Jaclyn K. Casey, Rothgerber, Johnson & Lyons, LLP, Denver, 
Colorado.  Argument by Mr. 
O’Loughlin.
 
Before KITE, C.J., 
and GOLDEN, HILL, VOIGT, and BURKE, JJ.
 
BURKE, J., delivers 
the opinion of the Court; HILL, J., files a dissenting opinion, in which GOLDEN, 
J., joins.
 
BURKE, 
Justice.
 
[¶1]        
John 
Sutherland and Minerva Selbe Sutherland entered into a mining lease granting 
Meridian1 the right to conduct mining 
operations on the Sutherlands’ property.  
A dispute developed between the Sutherlands and Meridian regarding the 
Sutherlands’ obligation to pay taxes relating to the mineral production.  The dispute led to litigation.  On cross-motions for summary judgment, 
the district court ruled that the Sutherlands were obligated to pay the disputed 
taxes.  It therefore granted 
Meridian’s motion and denied the Sutherlands’.  The Sutherlands appealed the district 
court’s ruling, and Meridian filed a cross-appeal.  We affirm.
 
ISSUES
 
[¶2]      
The Sutherlands 
present a single issue:
 
Did the district 
court err in allowing Meridian to deduct ad valorem and severance taxes from 
payments to the Sutherlands when such tax payments are not required by the 
State?
 
In its cross-appeal, 
Meridian raises four issues:
 
A.           
 Did the district court err in allowing 
the Sutherlands to pursue claims barred by the applicable statutes of 
limitation?
 
B.           
Did the district 
court err when it failed to dismiss the Sutherlands’ claims based on the 
doctrine of laches?
 
C.           
Did the district 
court err in allowing the Sutherlands to pursue a claim for declaratory judgment 
when the Sutherlands simultaneously asserted a claim for breach of 
contract?
 
D.           
Did the district 
court err in denying Meridian’s motion to dismiss for failure to join an 
indispensable party, where the party not joined was a party to the contract at 
issue?
 
FACTS
 
[¶3]        
In 
September, 1988, the Sutherlands executed a mining lease with Granite Canyon 
Quarry, a joint venture, with Meridian as the “managing joint venturer.”  The single mining lease covers two 
separate parcels of property, identified as “Parcel 1” and “Parcel 2.”  The Sutherlands own both the surface 
estate and the mineral estate of Parcel 1, but only the surface estate of 
Parcel 2.2  The mining lease requires Meridian to 
pay a “Production Royalty” to the Sutherlands of 10¢ per ton on all minerals 
produced and sold from Parcel 1, and 6¢ per ton on all minerals produced and 
sold from Parcel 2.3
 
[¶4]        
With 
regard to the payment of taxes, the mining lease contains this 
provision:
 
Lessor [Sutherlands] 
shall pay when due all general and ad valorem taxes levied and assessed against 
the Premises and any taxes imposed upon or measured by advance royalties or 
Production Royalties paid to Lessor.  Lessee [Meridian] shall pay when due all 
taxes lawfully assessed and levied against improvements and equipment placed 
upon the Premises by Lessee, upon production from the Premises except such 
portions thereof as are payable for Production Royalty paid to Lessor and upon 
other rights, property and operations of Lessee.
 
[¶5]        
Throughout the term 
of the mining lease, Meridian has made royalty payments to the Sutherlands, but 
has withheld amounts asserted by Meridian to reflect the Sutherlands’ share of 
ad valorem and severance taxes.  The 
amounts withheld by Meridian have been used to pay a portion of the taxes paid 
by Meridian.  The Sutherlands 
objected to Meridian’s withholding as early as 1990, when mining operations were 
being conducted only on Parcel 1.  
They maintained their objections in 2003 after mining operations began on 
Parcel 2.  After considerable 
correspondence between the parties, the Sutherlands acquiesced to Meridian’s 
withholding taxes relating to mineral production on Parcel 1, but continued to 
object to withholding taxes relating to mineral production on Parcel 2.  The Sutherlands’ position, simply 
stated, was that they owed taxes for Parcel 1 because they owned the minerals, 
but they did not owe taxes for Parcel 2 because they did not own the 
minerals.  Meridian continued to 
assert that the Sutherlands were liable for taxes for both Parcel 1 and 
Parcel 2.
 
[¶6]        
On May 7, 2008, the 
Sutherlands filed a complaint against Meridian in state district court, claiming 
generally that Meridian was wrongfully withholding taxes for Parcel 2.  They asserted a breach of contract claim 
and also sought declaratory judgment.  
Meridian answered, raised several affirmative defenses, and filed a 
motion to dismiss.  Both parties 
filed motions for summary judgment.  
After a hearing, the district court denied Meridian’s motion to 
dismiss.  It denied the Sutherlands’ 
motion for summary judgment.  It 
granted Meridian’s motion for summary judgment, ruling against Meridian on the 
affirmative defenses but in favor of Meridian on the merits.  Both parties filed timely 
appeals.
 
STANDARD OF 
REVIEW
 
[¶7]        
We 
review a district court’s summary judgment rulings de novo, using the same materials and 
following the same standards as the district court.  The facts are considered from the 
vantage point most favorable to the party who opposed the motion, and we give 
that party the benefit of all favorable inferences that may fairly be drawn from 
the record.  Cook v. Shoshone First Bank, 2006 WY 13, ¶ 11, 126 P.3d 886, 889 (Wyo. 2006); Garcia v. Lawson, 928 P.2d 1164, 1166 (Wyo. 
1996).  Summary judgment is 
appropriate when there are no genuine issues of material fact and the moving 
party is entitled to judgment as a matter of law.  W.R.C.P. 56(c).
 
DISCUSSION
 
[¶8]        
A 
mineral lease is a contract, and is interpreted under general principles of 
contract interpretation.  Wyoming Bd. of Land Comm’rs v. Antelope Coal 
Co., 2008 WY 60, ¶ 8, 
185 P.3d 666, 668 (Wyo. 2008). 
 Our purpose in interpreting any 
contract is to ascertain the true intent of the parties.  State v. Pennzoil Co., 752 P.2d 975, 978 (Wyo. 1988). 
 If the language of a contract is 
plain and unequivocal, that language is controlling.  Dewey v. Dewey, 2001 WY 107, ¶ 20, 33 P.3d 1143, 
1148 (Wyo. 2001).  The plain meaning 
of the contract is the meaning which the language would convey to reasonable 
persons at the time and place of its use.  Dickson v. Thomas (In re Estate of 
Thomas), 2009 WY 10, 
¶ 7, 199 P.3d 1090, 1094 
(Wyo. 2009).  We interpret the 
language of an unambiguous agreement as a matter of law, and rely on extrinsic 
evidence only if the contract is ambiguous.  Union Pacific Resources Co. v. Texaco, 
882 P.2d 212, 219-20 (Wyo. 
1994).
 
[¶9]        
The parties do not 
dispute any material facts, leaving only the question of which party is entitled 
to judgment as a matter of law.  The 
key to answering this question is the language of the mining lease governing the 
payment of taxes, excerpted here:
 
Lessor [Sutherlands] 
shall pay when due all general and ad valorem taxes levied and assessed against 
the Premises and any taxes imposed upon or measured by advance royalties or 
Production Royalties paid to Lessor.
 
[¶10]     
The Sutherlands focus 
on the lease’s requirement that they must pay “all general and ad valorem taxes 
levied and assessed against the Premises.”  
They assert that the mining lease defines the term “Premises” to refer to 
the surface and mineral estates of Parcel 1, but only to the surface estate of 
Parcel 2.  Severance and ad valorem 
taxes on Parcel 2 are therefore not levied against the “Premises,” and on this 
basis, the Sutherlands contend that they are not required to pay these 
taxes.
 
[¶11]     
We agree with the 
Sutherlands that the taxes at issue are not levied or assessed against “the 
Premises.”  Indeed, in Wyoming, 
mineral severance and ad valorem taxes are imposed on the mineral product after 
severance, not upon the lands or “Premises” at all.  See Oregon Basin Oil & Gas Co. v. The 
Ohio Oil Co., 70 Wyo. 263, 280, 248 P.2d 198, 205 (Wyo. 1952).  However, the Sutherlands overlook the 
fact that the mining lease requires them to pay taxes levied against the 
Premises “and any taxes imposed upon or 
measured by advance royalties or Production Royalties paid to Lessor.”  (Emphasis added.)  The Sutherlands are obligated to pay not 
only taxes levied against the Premises, but also taxes imposed upon or measured 
by royalties.
 
[¶12]     
The taxes at issue in 
this case are “imposed upon or measured by advance royalties or Production 
Royalties paid to Lessor.”  Meridian 
asserts that royalty payments are, and must be, included in the calculation of 
severance and ad valorem taxes.  In 
support of that assertion, Meridian offered undisputed evidence on summary 
judgment that the Wyoming Department of Revenue’s Form 8301, the “Annual Gross 
Products Report for Miscellaneous Minerals,” requires the taxpayer to report all 
royalties.  Of particular 
significance to this case, Form 8301 specifically requires the taxpayer to 
include the value of the private royalties as part of the taxable value of the 
minerals.  Because the taxable value 
of the minerals includes the value of the private royalties, it follows that the 
severance and ad valorem taxes at issue are “measured by” the royalties Meridian 
pays to the Sutherlands.  
Accordingly, the unambiguous language of the mining lease obligates the 
Sutherlands to pay the taxes attributable to those 
royalties.
 
[¶13]     
The Sutherlands argue 
against this conclusion, emphasizing that the State of Wyoming imposes severance 
and ad valorem taxes only on the owner of the minerals.  They rely 
on the established Wyoming rule that, “with regard to taxes assessed on the 
gross products of a mine or well, both the lessee and lessor are responsible for 
payment in proportion to their ownership shares.”  Ashland Oil Co. v. Jaeger, 650 P.2d 265, 268 (Wyo. 1982), 
citing Miller v. Buck Creek Oil Co., 38 Wyo. 505, 269 P. 43 (1928), and Oregon 
Basin Oil & Gas Co. v. Ohio Oil Co., 70 Wyo. 263, 248 P.2d 198 (1952).  As the Sutherlands do not own any share 
of the mineral estate of Parcel 2, they assert that they are not liable for 
any share of the taxes.
 
[¶14]     
The 
Sutherlands also point to Wyo. Stat. Ann. § 39-14-703(c)(i) (LexisNexis 
2007), which provides that “the lessor is liable for . . . taxes on the product 
removed only to the extent of the lessor’s retained 
interest under the lease, whether royalty or otherwise, and the lessee 
or his assignee is liable for all other property taxes due on production under 
the lease.”  (Emphasis added.)  As the Sutherlands do not own the 
mineral estate of Parcel 2, they have no “retained interest” in the 
minerals, and so claim that they are not liable for the taxes.4
 
[¶15]     
The consistent flaw 
in the Sutherlands’ arguments is that they disregard the language of the mineral 
lease.  The Sutherlands are correct 
about the general rule that lessors and lessees pay taxes in proportion to their 
ownership interests.  But that rule 
is general only, and does not apply in all cases.  As we said in Ashland, 650 P.2d  at 268, “the rule will 
be applied unless the parties to the lease 
specifically provide as part of their agreement that some other arrangement for 
payment of taxes on the gross product has been agreed upon.”  (Emphasis added.)  Similarly, in Miller, 38 Wyo. at 509, 269 P.  at 45, we 
said that, “It 
would seem no more than just that, in the absence of contract, the tax 
ought ultimately to be borne by the parties in proportion to their respective 
interests in the production that is the basis of the tax.”  (Emphasis added.)

[¶16]     
There is no absence 
of contract in the case before us.  
The mining lease provides that the Sutherlands must pay “any taxes 
imposed upon or measured by advance royalties or Production Royalties paid to 
Lessor.”  When the Sutherlands and 
Meridian specifically agreed to some other arrangement for the payment of taxes, 
they rendered the general rule inapplicable.
 
[¶17]     
As to the 
Sutherlands’ statutory argument, they may be correct that the government would 
hold only Meridian, not the Sutherlands, liable for the severance and ad valorem 
taxes.  But as between themselves, 
the Sutherlands and Meridian agreed to allocate the tax burdens 
differently.  That agreement may not 
be binding on the government when it collects the taxes, but it is valid and 
enforceable between the Sutherlands and Meridian when they pay the taxes.  As the district court reasoned, 
“Ultimately, the Court need not decide whether the Sutherlands would owe the 
taxes under [Wyo. Stat. Ann.] § 39-14-703(c), because the plain language of 
the lease imposes tax liability upon the Sutherlands.”  
 
[¶18]     
Finally, we consider 
the Sutherlands’ assertion that their tax obligation on Parcel 2, where 
they own only the surface estate, should be different from their tax burden on 
Parcel 1, where they own both surface and minerals.  Again, the Sutherlands’ argument ignores 
the language of the mining lease, which requires Meridian to pay the Sutherlands 
only 6¢ per ton on all minerals produced and sold from Parcel 2, but 10¢ per ton 
on all minerals produced and sold from Parcel 1.  Because the Sutherlands receive less 
royalty on minerals produced from Parcel 2, they also pay less in taxes.  More significantly, the royalty 
provision of the mining lease demonstrates that Meridian and the Sutherlands 
could, and did, draft provisions treating the parcels differently when they 
intended to treat them differently.  
In contrast, the mining lease’s provision for taxes makes no distinction 
between Parcel 1 and Parcel 2.  This 
helps to confirm the conclusion that the 
plain language of the mining lease reflects the parties’ intent that the 
Sutherlands would pay their share of taxes on both Parcel 1 and 
Parcel 2.  

 
[¶19]     
The district court 
did not err when it denied the Sutherlands’ motion for summary judgment and 
granted summary judgment in favor of Meridian.  As Meridian recognizes in its 
cross-appeal brief, our affirmation of the district court’s judgment makes it 
unnecessary to address the issues raised by Meridian in its 
cross-appeal.
 
[¶20]     
Affirmed.
 
 
HILL, 
Justice, 
dissenting with whom, GOLDEN, 
Justice, joins.
 
[¶21]   I respectfully dissent from the 
majority opinion.  In September of 
1988 the Sutherlands executed a mining lease with Granite Canyon Quarry, a joint 
venture, by Meridian Aggregates Company, “the managing joint venturer.”  The mining lease involves two separate 
parcels identified as Parcel 1 and Parcel 2.  As to Parcel 1 the Sutherlands own both 
the surface estate and mineral estate.  Parcel 2 is a split estate where the 
Sutherlands own the surface estate and the BLM at the time of the execution of 
the lease owned the mineral estate.  
Exhibit A contains the legal descriptions and identifies the parcels as 
follows: “PARCEL 1 (Lessor owns surface and mineral estate)” and “PARCEL 2 
(Lessor owns surface estate only).”
 
[¶22]   Article XIII of the lease, entitled 
“BLM EXCHANGE” at Section 13.1 provides:
 
Lessors 
and Lessee understand that Lessee is attempting to acquire from the Bureau of 
Land Management (“BLM”) the minerals owned by BLM in certain of the lands 
comprising the Premises.
 
This 
provision clearly provides that at the time of the lease Meridian was seeking 
the right to take and produce the minerals from the BLM.  The only interest owned by the 
Sutherlands and transferred to Meridian at the time of the lease with regard to 
Parcel 2 was the surface rights.  At 
the time of the mining of the minerals acquired by Meridian from the BLM as to 
Parcel 2, the surface would be exempt from Wyoming mineral taxation as stated in 
Wyo. Const., art. 15, § 3, which provides:
 
All 
mines and mining claims from which gold, silver and other precious metals, soda, 
saline, coal, mineral oil or other valuable deposit, is or may be produced shall 
be taxed in addition to the surface improvements and in lieu of taxes on the lands, on the 
gross product thereof, as may be prescribed by law; provided, that 
the product of all mines shall be taxed in proportion to the value thereof.  [Emphasis added.]
 
[¶23]   As we explained in Oregon Basin Oil & Gas Co. v. Ohio Oil 
Co., 248 P.2d 198, 203 (Wyo. 
1952):
 
Here 
in section 3 of Article 15, we have a restriction with respect to the taxation 
of lands.  In the law of taxation 
this inhibition is unusual yet it is found in constitutions of the western 
states.  It is a wise 
provision.  The early settlers and 
pioneers who developed the West were aware of the necessity for such a 
provision.  Many an early day mining 
prospector held on to his claim, with a pick and shovel and a sack of grub, 
because he was sure that his claim would not be lost through a tax sale.  It was found through practical 
experience that it was time enough to levy a tax when the prospector had 
produced something with which to pay.
 
[¶24]   In Board of Comm’rs v. Bernardin, 74 F.2d 809, 812-13 (10th Cir. 1934) the Tenth Circuit Court 
of Appeals noted,
 
The 
phrase 'in lieu of taxes on the land,’ indicates that the tax is to be imposed 
on the product instead of the land, and that the latter is to be exempted during 
such time as it is being worked or operated for the production of 
minerals.
 
Id. 
at 812-13.
 
[¶25]   With regard to the payment of 
taxes, the lease at Article VII provides:
 
[L]essor 
shall pay when due all general and ad valorem taxes levied and assessed against the 
Premises and any taxes imposed upon 
or measured by advance royalties or Production Royalties paid to Lessor.  Lessee shall pay when due all taxes 
lawfully assessed and levied against improvements and equipment placed upon the 
Premises by Lessee, upon production from 
the Premises except such portions thereof as are payable for Production Royalty 
paid to Lessor and upon other rights, property and operations of Lessee. 
Provided, however, that nothing contained herein shall impose upon either party 
any obligation to pay any taxes levied or assessed against the other party in 
the nature of an income tax.  [Emphasis added.]
 
[¶26]   The Wyoming gross products tax is a 
property tax which taxes the value of the mineral produced. The gross product 
tax is an ad valorem tax on personal property. 
 Ashland Oil Co. v. Jaeger, 650 P.2d 265, 268 (Wyo. 1982).  The Sutherlands have never owned or 
claimed any ownership in the minerals produced from Parcel 
2.
 
[¶27]   The Sutherlands assert that as 
owners of only the surface of Parcel 2, they have no responsibility or liability 
under Wyoming law for the payment of taxes imposed upon minerals produced from 
Parcel 2.  I agree. The surface 
estate becomes tax exempt under the Wyoming Constitution when minerals are 
produced on this estate.
 
[¶28]   Although the Sutherlands can agree 
to pay taxes for Meridian by contract, it is not equally true that Meridian can 
impose taxes on an otherwise exempt interest and thereafter deduct the taxes on 
the exempt interest from their own tax liability.  In other words, only the State, more 
specifically the legislature, can impose taxes.  In addition, even the legislature could 
not impose a tax where the constitution exempts the surface interest as to 
Parcel 2.  Wyo. Const., art. 15, § 
14 provides “The power of taxation shall never be surrendered or suspended by 
any grant or contract to which the state or any county or municipal corporation 
shall be a party.”  Section 13 
states, “[n]o tax shall be levied, except in pursuance of law, and every law 
imposing a tax shall state distinctly the object of the same, to which only it 
shall be applied.”
 
[¶29]   The law as it related to the 
imposition of Wyoming production taxes in 1988 becomes part of the contract. 
 Century Ready-Mix Co. v. Lower & 
Co., 770 P.2d 692, 696 (Wyo. 
1989).  From statehood to the 
present time, ad valorem or property tax on minerals has been and is imposed 
upon the minerals produced from the land 
in lieu of the taxes on the lands.
 
[¶30]   Ownership of the minerals is the 
important question for ad valorem tax liability purposes.  See, e.g., Wyo. 
Stat. Ann. §§ 39-3-101(c)(d) and 39-3-102(d) 
(Michie 1990); Union 
Pac. Resources Co. v. State, 
839 P.2d 356, 361 (Wyo. 1992); 
Bernardin, 74 F.2d 809.  The ad valorem tax on mineral production 
is a tax on the value of the minerals as produced.  Union Pac. Resources Co., 839 P.2d 361. 
 Wyoming State Tax Comm’n v. BHP Petroleum 
Co., 856 P.2d 428, 439 (Wyo. 
1993).  Here, the Sutherlands would 
only be “taxpayers” for ad valorem taxes with regard to Parcel 2 production if 
they owned, or had an interest in, the minerals at the time of 
production.
 
[¶31]   The authority to create a taxpayer 
belongs exclusively to the Wyoming legislature and we have no power or authority 
to expand taxpayer status.  Wyo. 
Const., art. 15, § 3; Rocky Mountain Oil 
& Gas Ass’n v. State Bd. of Equalization, 749 P.2d 221, 240 (Wyo. 1987).  Under Wyoming law Meridian cannot cause 
the Sutherlands to become “taxpayers” when the Sutherlands would not otherwise 
be subject to the taxes under Wyoming law.  
Meridian cannot by virtue of Wyoming law subject the surface estate to 
Wyoming mineral taxes by simply defining the terms of the payment for the 
surface estate as a royalty.  The 
surface, regardless of how the parties to a contract define the compensation for 
the surface, remains exempt under Wyoming law during the mining of the 
minerals.  With regard to minerals 
produced under lease, the
 
lessor 
[was] liable for the [payment] of [property] ad valorem taxes on the product 
removed only to the extent of the lessor’s retained interest under the lease, 
whether royalty or otherwise, and the lessee or his assignee [was] liable for 
all other property taxes [ad valorem] due on production under the 
lease[.]
 
Wyo. 
Stat. Ann. § 39-3-101(d) (Michie 1985).  See same language in current statutes at 
Wyo. Stat. Ann. § 39-14-603(c)(i) (LexisNexis 2011).
 
[¶32]   The relevant contract as to Parcel 
2 is the contract between the BLM and Meridian.  The minerals on parcel 2 are produced 
pursuant to a lease, a sale, or an exchange with the BLM, not the 
Sutherlands.  Admittedly, the 
Sutherlands do have a retained interest in the surface, but that interest is not 
subject to tax, or more accurately, it is exempt under the Wyoming Constitution 
as explained above.
 
[¶33]   The fact that the Sutherlands are 
compensated on a flat rate per ton for the surface rights (which is the only 
thing they own as to Parcel 2) does not make them the owners of the mineral 
production for ad valorem tax purposes.  Under Wyoming constitutional and 
statutory law, the surface of Parcel 2 is exempt during the time the minerals 
are produced from the mine or mining claim.  Wyo. Const., art. 15, § 3; Wyo. Stat. 
Ann. § 39-11-105(a)(xxviii) (LexisNexis 2011).  The statute cited provides:  “The following property is exempt from 
property taxation: … (xxviii) Lands for mines or mining claims as prescribed by 
section 3, article15, Wyoming constitution and defined by W.S. 39-11-102 
(c)(viii)[.]”  The owners of the 
minerals produced from Parcel 2 would be either Meridian or the BLM, or 
both.
 
[¶34]   Meridian received their interest in 
the minerals from the federal government, after they executed a contract with 
the Sutherlands for the surface estate of parcel 2.  Upon production of the minerals from 
Parcel 2 the surface became exempt.  
The retained interest of the federal government, if any, plus the 
interest of Meridian became subject to the taxes due on the production of 
minerals.
 
[¶35]   The only Wyoming taxes imposed are 
on the production of the minerals, which are not measured by or computed on the 
royalties paid to the Sutherlands as the lessor of the surface estate.  The 6 cents per ton is irrelevant to the 
computation, measurement, or calculation of the taxes on the minerals being 
produced from parcel 2.  The taxable 
estate is the mineral estate.
 
[¶36]   The Wyoming Constitution controls 
this matter, and the Sutherlands’ surface estate in Parcel 2 is exempt by 
Wyoming law.  Meridian has no power 
or authority to make the Sutherlands’ surface interest in Parcel 2 subject to 
taxes.  Under the lease the lessor 
of the surface agreed to pay when due all general and ad valorem taxes levied 
and assessed against the premises.  
The minerals under Parcel 2 are not included in the premises nor are any 
taxes imposed upon or measured by advance royalties or production royalties paid 
to the lessor.  The lessor of the 
minerals under Parcel 2 is the BLM, not the Sutherlands.  Furthermore, while Meridian pays advance 
or production royalties to the Sutherlands as the lessor, there are no Wyoming 
taxes imposed upon or measured by the Sutherlands’ surface interest.  The Sutherlands’ surface interest in 
Parcel 2 is exempt by virtue of the mining of the minerals by Meridian acquired 
from the BLM.
 
[¶37]   Under Parcel 1 the Sutherlands were 
paid a royalty on the production of the minerals of 10 cents per ton for the 
mining of the minerals from Parcel 1.  
Under Parcel 2 the Sutherlands were paid a rental of the surface, which 
is the only thing they owned with regard to Parcel 2, of 6 cents per ton for the 
surface rights.  The difference is 
that under Wyoming law, more specifically, the Wyoming Constitution, the royalty 
paid for the minerals is subject to tax, while the surface is exempt.  This has been the case since 
statehood.  For these reasons I 
respectfully dissent.
 
FOOTNOTES
1The mining lease was 
signed by the president of Meridian Aggregates Company, while the 
defendant named in this case is Meridian Granite Company.  The record does not indicate the 
relationship between the two companies, and the parties appear to make no 
distinction.  In this opinion, we 
will refer to the Appellee generally as “Meridian.”
2The 
mineral lease indicates that the BLM owned the mineral estate of Parcel 2 as of 
the date of the lease, but Meridian was “attempting to acquire” those 
minerals.  The record reflects that 
Meridian has conducted mining operations on Parcel 2, but does not establish how 
Meridian acquired the rights to do so, or whether the mineral estate is now 
owned by Meridian or the BLM.  As 
these details prove unnecessary to our decision, we, like the parties, will 
overlook them.
 
3The 
mineral lease also provides for “Advance Royalty” payments, but these are only 
prepayments of the “Production Royalty,” and Meridian may “recoup and recover 
all such Advance Royalty payments [by reducing the] Production Royalty which may 
become payable” to the Sutherlands.
4The 
Sutherlands further contend that, because they do not own the mineral estate of 
Parcel 2, the payments they receive from Meridian are not royalties at all, but 
only payments for surface damage.  We agree that their interest in Parcel 2 
is not a typical lessor’s royalty, which is “created upon the granting of a 
leasehold in the mineral estate by means of a reservation to the owner.”  3 Rocky Mountain Mineral Law Foundation, 
American Law of Mining 
§ 85.02[2][a] (2d ed. 2011).  However, the term royalty is defined more 
broadly to include “[c]ompensation for the use of property, usually copyrighted 
material or natural resources, expressed as a percentage of receipts from using 
the property or as an account per unit produced.”  Black’s Law Dictionary 1330 (6th ed. 1990).  The Sutherlands are compensated for use 
of the surface of Parcel 2 by payment of 6¢ per ton produced, and these payments 
may be referred to as royalties.  
But as the district court observed, “the exact nature of the Sutherlands’ 
ownership interest . . . [is] of little importance given the clear 
language of . . . the lease.”