Is a royalty interest in a mineral lease assessable for taxes? That is the question involved in this case. In Summers on Oil and Gas, Perm. Ed., p. 203, Sec. 783, it is said: "A separate mineral fee interest in oil and gas in place created by grant or exception, the interest created in the lessee by the ordinary oil and gas lease, the royalty interest reserved in the lessor in an oil and gas lease, a perpetual royalty interest in oil and gas created prior to lease for production, and an over-riding royalty interest created out of the interest of the oil and gas lessee are all property interests, real or personal, and subject to taxation. In a majority of the jurisdictions all of these interests, apart from the question of taxation, have been held to be real property. But whether in a particular jurisdiction such interests are taxable as real property in the county of the situs of the land or as personal property at the domicile of the owner, depends upon the *Page 25 conclusion of the court in a particular jurisdiction as to the nature of the particular interest, the provisions of the tax statutes of the particular state, and their interpretation by the court as applied to the particular type of interest."
In 51 Am. Jur., page 455, Sec. 439, it is said: "Although there seems to be authority otherwise, a royalty interest reserved by a lessor under an oil and gas lease, in the absence of contradictory enactments, is usually held subject to a general ad valorem property tax, whether such interest remains the property of the lessor or has been transferred by him to another."
An annotation in 128 A.L.R., page 851, discusses cases from the different states, which discussion reveals that the quoted rule prevails where there is no statute substituting another method of taxation for such ad valorem tax.
Mississippi has no statute substituting another method of taxation, but, on the other hand, it does have a statute expressly making such mineral interests taxable. Section 9770, Code 1942, provide that "whenever any buildings, improvements or structures, mineral, gas, oil, timber or similar interests in real estate . . . are owned separately and apart from and independently of the rights and interests owned in the surface of such real estate, or when any person reserves any right or interest, or has any leasehold in the elements above enumerated, all of such interests shall be assessed and taxed separately from such surface rights and interests in said real estate, and shall be sold for taxes in the same manner and with the same effect as other interests in real estate are sold for taxes." That statute further makes it the duty of the owner of any such interest to make a return thereof to the tax assessor and place a value thereon.
If it be said that the difficulty in placing a value upon such royalty interests defeats the power to assess them for taxes, the reply to that in this case is that the Smith County Oil Company has sold and transferred to different *Page 26 purchasers all the royalty interest which it reserved under the lease in question (although it makes no point as to that in this case); therefore, appellant and the various purchasers of separate interests in such royalty have themselves placed a value thereon. The statute makes it the duty of all of them to place a value upon their respective holdings for the benefit of the tax assessor. Having themselves placed a value thereon, can they successfully complain that the tax assessor does the same thing?
In my opinion, Gulf Refining Co. v. Stone, 197 Miss. 713,21 So.2d 19, does not hold contrary to the view herein expressed. The Court was there dealing with a privilege or activity tax and it was not necessary to hold in that case that minerals in place are not taxable, but if necessary, such holding, in my judgment, was erroneous. Without prolonging the discussion I think, with great deference to my brethren, that the majority opinion erroneously and unnecessarily nullifies to a large extent Section 9770, Code 1942, and deprives the State and its subdivisions of an important source of revenue, which will likely result in many demands and much litigation to recover taxes which, under the holding in this case, have been illegally paid.
Alexander, J., joins in this dissent.