Case Name: TABER, Treas., v. INDIAN TERRITORY ILLUMINATING OIL CO.
Court: Oklahoma Supreme Court
Jurisdiction: Oklahoma
Decision Date: 1935-03-12
Citations: 177 Okla. 67
Docket Number: No. 25794
Parties: TABER, Treas., v. INDIAN TERRITORY ILLUMINATING OIL CO.
Judges: McNEILL, G. J., and BUSBY, PHELPS, and GIBSON, JJ., concur.
Reporter: Oklahoma Reports
Volume: 177
Pages: 67–74

Head Matter:
TABER, Treas., v. INDIAN TERRITORY ILLUMINATING OIL CO.
No. 25794.
March 12, 1935.
Rehearing Denied April 30, 1935'.
Second Petition for Rehearing Denied May 12, 1936.
Guy L. Horton, Co. Atty., for plaintiff in error.
W. P. McGinnis, Fred M. Carter, Archibald Bonds, and Donald Prentice, for defendant in error.

Opinion:
RILEY, J.
This is an appeal by the county treasurer of Payne county from a judgment rendered in favor of the defendant in an action commenced by it, hereinafter referred to as plaintiff, to recover certain taxes paid under protest.
The principal question is whether the property assessed and upon which the tax was levied is taxable by the state of Oklahoma or its political subdivisions.
There is also a question raised as to whether the remedy of plaintiff, if any it had, was by way of appeal from the county equalization board.
The tax levied was for the year 1933, and the plaintiff contends that the question of whether said property was liable for taxes was, as to the year 1933, res adjudicata in that the same property, used for the same purpose, had been held exempt from taxes by a judgment of the district court of Payne county in an action involving taxes for the years 1931-1932, and that said judgment was not appealed from and necessarily decided the same question as here •involved.
The property in question belonged to and was used by plaintiff in the development and operation of a departmental oil and gas lease owned by plaintiff and covering lands of a restricted Pawnee Indian allottee known as the Wilson-Moore land.
Plaintiff made its return to the county, assessor showing that it had on said land certain equipment, such as one pumping unit, one tank, certain easing, tubing, etc., of the total value of $1,078.03, in and around exhausted oil wells, which it conceded was taxable, and other property on said land consisting of one dwelling, portable, one garage, one tool house, engines, pump, water well equipment, tanks, derricks, casing, tubing, rods, pipe lines, and one "trailer truck" of the aggregate value of $15,869.23, claimed to have been used in and around producing wells on restricted Indian lands, and claimed as exempt from taxation.
Plaintiff alleged in its petition that the county assessor accepted said list and schedule as rendered and assessed the property for taxation for the year 1933-31 as of the value of $1,078.07, exempting the property listed as being used in and about producing wells. That thereafter, and without notice to 'plaintiff, the value of plaintiff's property was increased on the tax rolls to $16,947.29, thus including the property claimed as exempt, and that such increase was not made by the county board of equalization ; that no notice of such increase was given plaintiff, and it had no knowledge thereof until January, 1934, when the taxes became due and payable, and, as to the property claimed to be exempt, were paid under protest. That at the time plaintiff discovered the increase the Payne county board of equalization had long since adjourned, and that plaintiff had no opportunity to appear before said board and protest the increase, and if denied relief there, to appeal as provided by law.
It was also alleged that on February 24, 1933, the district court of Payne county rendered a judgment holding isaid property exempt from taxation for the year 1932-33, and that said judgment became final, and that there had been no change in the use of same, and that said judgment was res adjudicata as to the attempted assessment, thereof for the year 1933-34.
A copy of said judgment was attached to the petition and made a part thereof.
Demurrer to the petition being overruled, defendant answered by general denial.
Trial was had upon the issues, resulting in a judgment for plaintiff, and defendant appeals.
The trial court, while holding the property exempt under the evidence, refused to hold the question res adjudicata.
It may be said that there is conflict in the authorities on this question even where it is conceded that the facts are identical.
But in a casé of this kind it is clear that the trial court was correct in its ruling on the question. It must be borne in mind that the theory of plaintiff was that property owned by it and located on restricted Indian land which had in fact been used in the past in connection with the operation of producing wells, but which were no longer producing oil and gas, was taxable. That is, that the derricks and equipment of "abandoned" wells are taxable. It can be readily seen that, under the issues joined in this case, the defendant could, if the facts warranted, have shown that many_ of the wells had been abandoned and that the status of the derricks and equipment in and about such wells had been changed in the course of one year. Unless it be conceded that the facts were the same, the rule of res adjudicata would not apply even in those jurisdictions where the rule prevailed.
It is contended that the court erred in holding exempt from taxation that part of plaintiff's property necessary and in fact used in and about the producing wells.
The land from which the oil was produced is restricted Indian land, not located in Osage county, and there could be no gross production tax collected, and plaintiff's property used in connection therewith could not be exempt under the "in lieu" provision of the gross production tax laws of the state.
We are bound by the holding of the Supreme Court of the United States in Gillespie v. State, 257 U. S. 501, 66 L. Ed. 338; Jaybird Mining Co. v. Weir, Co. Treas., 271 U. S. 609, 70 L. Ed. 1112.
It is generally held that federal instru-mentalities are not subject to a state tax. This rule has been recognized since the decision in McCulloch v. Maryland, 4 Wheat. 316, 4 L. Ed. 579.
In the Gillespie Case, supra, Gillespie was a lessee of restricted Indian lands. It was sought to enforce a tax on the net income derived by lessee from the sale of his share of oil and gas received under his leases. In the opinion it is stated:
"It is agreed that the lessee was an instrumentality used by the United States in carrying out duties to the Indians that it had assumed, and that the only question in the case is whether he is liable to this Rind of tax."
After quoting from Indian Terr. Ill. Oil Co. v. Oklahoma, 240 U. S. 530, the following :
"A tax upon the leases is a tax upon the power to make them, and could be used to destroy the power to make them,"
—it is said:
"The step from this to the invalidity of the tax upon income from the leases is not long." . , j<«y ¡
In the Jaybird Mining Case, supra, the mining company had and was operating a mining lease on restricted Indian land. It was therein said:
"The lessee is an agency or instrumentality employed by the government for the development and use of the restricted land and to mine ores therefrom for the benefit of its Indian wards."
And:
"It is elementary that the federal government in all its activities is independent of state control. This rule is broadly applied; and, without congressional consent, no federal agency or instrumentality can be taxed by state authority."
If the lessee is an instrumentality employed by the government for the development and use of the restricted Indian land, certainly the equipment used by the lessee in so doing is so essentially connected with such agency or instrumentality as to be a part thereof.
This being true, such federal agency or instrumentality cannot be taxed by state authority without congressional consent. Such consent has not been given, and the inability of the state to tax same, no matter how reasonable, or how universal and undiscriminating, is well established.
Furthermore, section 6 of the lease provides :
" And all sums due as royalty shall be a lien on all improvements, tools, movable machinery and all other personal chattels used in operating said property, and upon all of the unsold oil obtained from the land herein leased, as security for payment of said royalty."
The power to tax would carry with it the power to enforce the tax by sale of the property, and thus interfere with the lien in favor of the lessor.
The lease also provides:
" The lessee shall not remove therefrom any buildings or permanent improvements erected thereon during the said term by the said lessee, but said buildings and improvements shall remain a part of said land and become the property of the owner of the land as a part of the consideration for this lease, excepting the tools, derricks, boilers, boiler houses, pipe lines, pumping and drilling outfits, tanks, engines, and machinery, and the casing of all dry or exhausted wells, which shall remain the property of the lessee and may be removed at any time prior to 60 days after the termination of the léase by forfeiture or otherwise. »
Therefore the garage and tool house, and possibly the dwelling, though listed as "portable", when placed upon the premises became the property of the owner of the land as a part of the consideration for the lease, and was not subject to taxation.
It is suggested that the property should be held liable to taxation under the rule announced in Thomas v. Gay, 169 U. S. 264, 42 L. Ed. 740; Wagoner v. Evans, 170 U. S. 588, 42 L. Ed. 1154, and other cases of a similar nature. These cases were doubtless considered in Jaybird Mining Co. v. Weir, supra, since they were cited by Mr. Justice Brandéis in his dissenting opinion.
Thomas v. Gay, supra, and many of the cases cited by defendant herein were cited by the author of the opinion in Weir v. Jaybird Mining Co., 104 Okla. 271, 232 P. 425. If ore belonging to the lessee after it had been extracted from the restricted lands in the possession of the lessee and stored in bin, and clearly personal property under the law, was not taxable because the lessee was a federal agency or instrumentality employed by the government for the development and use of restricted Indian land,' and for the benefit of its Indian wards, we would be reluctant to hold that its ma chinery, tools, and other necessary equipment used in. the production of the oil would he taxable, although it is said by way of dicta in Re Skelton, etc., 81 Okla. 134, 197 P. 495, that the "plants, mills, smelters and machinery are subject to the same rate of property tax which other property bears." But that case was decided before the Gillespie Case, supra, and the Jaybird Mining Co. Case, supra.
As we understand the two latter cases, they, and particularly the Jaybird Mining Co. Case, in effect, overrule In re Skelton, etc., supra.
It is contended that plaintiff herein has not availed itself of the proper remedy in that it should have appeared before the board of equalization as provided in section 12646, O. S. 1981, as amended by section 6, ch. 115, S. L. 1933.
The contention is entirely without merit. Plaintiff alleged, and the evidence shows, that it had no notice whatever of the change in the assessment until long after the first Monday in June, 1933, when by law the sessions of the equalization board must close under said section, as amended.
As late as October 25, 1933, the county assessor of Payne county, by letter, in response to an inquiry from plaintiff, informed plaintiff that the assessed value of plaintiff's property in the particular township in which the land was located was $1,078.03, the exact amount in which it was rendered.
It also appears reasonably certain that the change in the assessment was not made until late in August, 1933, and not then by the board of equalization, but by the county assessor under the direction of the county attorney. No chance whatever was given plaintiff to present its grievance to ihe board of equalization.
If the county attorney did as a matter of fact instruct the county assessor to make the change long after he knew the board of equalization had adjourned finally, and when he knew the board could not legally hold a session, he should not be heard to urge the advantage thus sought to be gained.
Judgment affirmed.
McNEILL, G. J., and BUSBY, PHELPS, and GIBSON, JJ., concur.