Affirming.
The White Log Jellico Coal Company being the owner in fee of 795 acres of coal land, on October 9, 1916, leased the property to the J. B. Jellico Coal Company for a term of 20 years on the royalty of 20 cents a ton of the coal mined, and it was provided in the lease that, if the lessee became bankrupt, the lease should terminate. The lessee took possession of the property and operated it. The lessor gave in for taxation its real estate, which was assessed to it at $30,000. It paid its taxes. The property held under the lease was assessed to the lessee at a valuation of $10,000, and it paid the taxes for some years. It failed, however, to pay the taxes upon the assessments which were made as of July 1, 1923, and July 1, 1924. In December, 1925, it became bankrupt, and in March, 1926, the White Log Jellico Coal Company leased the property to the Commodore Jellico Coal Company for a term of years for a royalty of 17 cents a ton. This suit was filed on November 1, 1926, by the commonwealth against the White Log Jellico Coal Company and the Commodore Jelico Coal Company to enforce a lien against the real estate in their hands for the taxes due by the J. B. Jellico Coal Company upon the assessments made of its property in 1923 and 1924. The defendants filed answer setting up the facts above stated. The plaintiffs demurred to the answer. The court overruled the demurrer. *Page 274 The plaintiffs declined to plead further, and the circuit court dismissed the action. The plaintiffs appeal.
The only interest in the property held by the J. B. Jellico Coal Company was the rights acquired under its lease. This was the property assessed. Section 4021, Kentucky Statutes, provides:
"The commonwealth, and each county, incorporated city, town or taxing district, shall have a lien on the property assessed for the taxes due them respectively (for five years) which shall not be defeated by gift, devise, sale, alienation, or any means whatever, unless the gift, devise, sale or alienation shall have been made for more than five years before the institution of proceedings to enforce the lien, and nothing shall be exempt from levy and sale for taxes and cost incident to the sale."
Under this statute, the lien of the commonwealth for the taxes is "on the property assessed." The property assessed was what was acquired by the lessee under the lease. When the lessee became bankrupt, the lease ended. The lessee had no more rights in the property after that than he would have had if the 20 years had expired on that day. He had a limited estate, and, when his estate terminated by the happening of the condition on which it depended, it was at an end, and there was nothing for the lien of the commonwealth to rest on. The Commodore Jellico Coal Company acquired nothing by its lease belonging to the J. B. Jellico Coal Company. The White Log Jellico Coal Company always owned the property subject to the lease, and when the lease ended, it owned the property without any restriction upon its right. It did not then succeed to any right of the J. B. Jellico Coal Company. The rights of the J. B. Jellico Coal Company ceased when it became bankrupt. In Moss v. Board of Supervisors, 203 Ky. 813, 263 S.W. 368, it was held that the lessee in a case like this must give in his property under the lease for taxation. That case followed two previous cases holding the same thing. But the liability of the lessor for these taxes was not presented in that case. In American Railway Express Co. v. Com., 190 Ky. 636, 228 S.W. 433, 30 A.L.R. 543, it was held that, where one corporation conveys all its assets to another corporation, and thus practically ceases *Page 275 to exist, without paying its debts, the purchasing corporation takes the property subject to an equitable lien for the debts. But that is not this case, for here the defendants took no right or property that belonged to the J. B. Jellico Coal Company. The rights of that company in the property simply ceased when it became bankrupt.
By section 4023, Kentucky Statutes, both the holder of the legal title and the life tenant are liable for the taxes. But as between themselves it shall be the duty of the life tenant to pay the taxes. So it was held in Joyes v. City of Louisville, 82 S.W. 432, 26 Ky. Law Rep. 713, that the remainderman was liable for the taxes assessed against the land during the lifetime of the life tenant. This was because the land was assessed and the taxes were made by the statute a lien on the land. But the Legislature has by section 4039 required the lessee of coal, oil, or gas privileges to list his property under the lease for taxation personally and to pay the taxes, thus providing for a different mode of assessment of this class of property. Raydure v. Board of Supervisors, 183 Ky. 84,209 S.W. 19. If the property had been sold for the taxes before the bankruptcy of the lessee, the purchaser at the tax sale would only have acquired the lessee's rights under the lease. The lessor by the bankruptcy of the lessee has lost the benefit of his lease, and has been compelled to rent the property for a lower royalty; but he is no more liable for the taxes due by the lessee now than he was before the lease expired. It requires a large amount of money to open and operate a coal mine. Engines and other machinery must be bought; a large amount of personal property must be collected. The assessment of the property of the lessee includes all this, and so the state's lien is confined to the property assessed.
Judgment affirmed.
Whole court sitting, Judges Thomas, Logan and Willis dissenting.