Title: Denver National Bank v. STATE COMM. OF REVENUE & TAX.
Citation: 177 Kan. 274, 279 P.2d 257
Docket Number: 39,443
State: Kansas
Issuer: Kansas Supreme Court
Date: January 22, 1955

177 Kan. 274 (1955)
279 P.2d 257
THE DENVER NATIONAL BANK OF DENVER, COLORADO, Ancillary Executor of the Estate of Joseph J. Hall, Deceased, Appellee,
v.
THE STATE COMMISSION OF REVENUE AND TAXATION OF THE STATE OF KANSAS, Appellant.
No. 39,443

Supreme Court of Kansas.
Opinion on rehearing filed January 22, 1955.
Ervin G. Johnston, of Peru, and Paul Hurd, of Topeka, both argued the cause and were on the briefs for the appellant.
Richard M. Driscoll, of Russell, argued the cause and Jerry E. Driscoll, of Russell, was with him on the briefs for the appellee.
Harold R. Fatzer, attorney general, Thomas M. Evans, assistant attorney general, and Charles C. McCarter, assistant attorney general, as amicus curiae.
The opinion of the court was delivered by
SMITH, J.:
This is an opinion on rehearing. The judgment was affirmed in an opinion filed on July 6, 1954. (See Denver National Bank v. State Commission of Revenue &amp; Taxation, 176 Kan. 617, 272 P.2d 1070.) This court sustained a motion for a rehearing and set the argument for our December session. It was reargued and resubmitted. Because of some argument pursuant to the motion *275 for rehearing this opinion on rehearing will be filed. The facts were stated in the former opinion. However, for convenience in following the court's present position in the matter they shall be restated here.
It was an appeal from a judgment of the district court reversing an order of the commission of revenue and taxation sustaining an order of the director of revenue assessing inheritance tax on certain working interests in oil and gas properties. The case was tried on an agreed statement of facts. That statement will be set out verbatim here. It is as follows:
The district court considered this stipulation and incorporated in its journal entry a rather detailed memorandum holding that the working interests in question were incorporeal and intangible and the property was without the jurisdiction of the state. The order of the tax commission was reversed and the appellant was given judgment for $1,214.63.
The commission appealed from that judgment.
The specifications of error were that the district court erred in its finding and conclusion that the oil and gas lease was intangible personal property under the laws of Kansas; that there was nothing in the record to show or indicate that the leases themselves had a *277 taxable situs in the state; that it was the interest of the deceased that was being taxed; that the property attempted to be taxed was without the jurisdiction of the state; and that it erred in overruling the motion for a new trial made by and on behalf of the state commission of revenue and taxation.
The action arose from the provisions of two sections. One is G.S. 1949, 79-1501. That is the section imposing an inheritance tax. It provides as follows:
The other section is G.S. 1949, 79-1501 (e). That section provides:
*278 Our opinion stated:
We then construed G.S. 1949, 79-1501 (e) and held that the working interests we were considering were a chose in action, decedent's right to be paid by the operator of the lease his share of the oil or gas produced from the lease which arose under an oil and gas lease and since an oil and gas lease was merely a license to explore and produce, was personal property, an incorporeal hereditament, a profit a prendre, the interests arose no higher than the instrument under which they were created and took on the same character  hence were intangible.
On the motion for rehearing counsel for the tax commission took first a vigorous exception to the statement in the opinion to the effect that Colorado is what is termed a reciprocal state, that is, that the statutes of Colorado extended the same immunity to Kansans owning certain types of property in Colorado as was being claimed for the estate of decedent, a resident of Colorado, owning a certain type of property in Kansas. They concede the stipulation of facts did have the statement to which reference has been made, and which was quoted above. They state now, however, they did not intend to convey the impression that a resident of Kansas owning rights similar to these in Colorado would be granted the same immunity from the inheritance tax that is claimed for the estate of this resident of Colorado owning them in Kansas. In this connection they refer in their motion for a rehearing to a statute of Colorado, which provides that
Also, another section, namely Section 6 and 6b, Chapter 85, 1935 Colorado Statutes Annotated, states:
They argue from these that Colorado is not a reciprocal state and that G.S. 1949, 79-1501 (e) does not apply to a resident of *279 Colorado. This argument was raised for the first time in the motion for a rehearing. We understood the quoted paragraph of the stipulation to mean just what it says. The learned district judge evidently gave it the same construction since in his memorandum opinion, which we are fortunate enough to have as a part of this record, the court devoted all its attention to consideration of the question whether these interests were intangible and treated that question as though the matter of reciprocity was conceded and had been argued by counsel for both sides in the district court. Certainly it was so argued when the appeal was submitted to us on its original presentation. The learned district judge himself stated in his memorandum opinion it was so agreed. It is clear the argument that Colorado is not a reciprocal state was not presented to the district court. Hence the effect of the commission's argument on this point is to ask that we reverse the trial court's judgment on a question that was not presented to that court. This we will not do. The point is raised too late. We decide cases on the record made in the lower court and submitted to us. No legal point is much better buttressed by the authorities than this. Some cases in point are Railway Co. v. Cooper, 57 Kan. 185, 45 Pac. 587, and Board of Education v. Clark, 64 Kan. 430, 67 Pac. 862.
The motion for a rehearing took exception to the statement in our opinion that the right of the decedent was a right to be paid, by the operator of the leases, a share of the oil and gas produced. They make the categorical statement, the undisputed evidence showed the decedent himself was the operator of the leases. The commission then from this statement argues, our conclusion the decedent owned only a chose in action was not good. Here again we must point out, the pleadings in the record, as well as the stipulation, stated that decedent owned a percentage of the working interests. The trial court also so considered it. Furthermore, counsel at the argument when the appeal was here the first time so argued. Actually we are prevented from considering this point here by the same rule already announced.
Following the argument just discussed, the commission in its motion for a rehearing argues that for taxation purposes oil and gas leases are not intangible property. With this argument the commission deals with the real point in the appeal. In this connection the commission cites G.S. 1949, 79-329. That section provides as follows:
Based on this statute, the commission makes the categorical statement that in the light of it we cannot say the legislature meant oil and gas leases to be other than tangible property. We fail to see how this follows. While we did not deal with this section in our opinion we did consider it when reaching our decision. The fact that oil and gas leases are personal property has no bearing on whether they are tangible or intangible. The section cited is part of the statutes dealing with ad valorem taxation. It is no part of the inheritance tax act. In this case, the casing, tubing and other equipment and other material on these leases were separately enumerated and appraised and the inheritance tax on it was paid as a matter of course. The commission cites and quotes from Robinson v. Jones, 119 Kan. 609, 240 Pac. 957, to sustain its argument on this point. This opinion deals with the matter of valuing an oil and gas lease for ad valorem taxes. It contains the statement, however, that:
It appears such is precisely the result of the trial court's judgment here. The physical things on these leases were included in a separate listing and the inheritance tax was paid while the intangible interests were held to be intangible and exempted from the inheritance tax.
In our consideration of this appeal we took note of the fact that the trial court considered these working interests to be analogous to patents, franchises, copyrights, rents, ways and incorporeal property generally. In this connection we have considered G.S. 1949, 79-3108. That was Section 1, Chapter 312 of the Laws of 1931, commonly known as the intangible tax act. It provides as follows:
We have no trouble in concluding that an oil and gas lease is a written instrument "evidencing, calling for, fixing or showing a fixed obligation, determined or determinable, at present or in the future." In considering this motion for a rehearing we have again examined the authorities cited in our original opinion. We find them to be controlling.
The judgment of affirmance is adhered to.
HARVEY, C.J.: dissents.