dissenting.
I would affirm. Before indicating my basis for disagreement with the majority opinion, I first note wherein I agree with it. I agree that under Wyoming law, the oil becomes personal property upon severance. I agree that it is then subject to tax and that the levy is customarily made against the operator. I agree that unless otherwise understood between the parties, the lessor or assignee with reserved royalty rights is chargeable with his proportional share of the taxes. My consideration of this case begins with these propositions.
The result reached in the majority opinion is based on the conclusion therein recited that:
“ ⅜ * * [Although the various assignments note that each assignee takes subject to the various rights and liabilities attaching thereto, the original assignment executed between Polar Oil and Empire State Oil is not in the record. We can only assume that it also makes no mention of taxes or who is liable for their payment. * * *”
Although the assignment of the lease (the lease itself was between the United States and Polar Oil Company) referred to is not part of the record, the stipulation of facts by the parties recognizes the “overriding royalty” to be:
“ * * * based on the gross production * * * originally reserved by Polar Oil Company * * * under Assignment of an Oil and Gas Lease * * * to Empire State Oil Company on June 29, 1918 * * (Emphasis added.)
There is no question but that the record reflects the existence of the lease assignment by Polar Oil Company (appellees’ predecessor in interest) to Empire State Oil Company (appellants’ predecessor in interest),1 the fact that it reserved a 5% overriding royalty to Polar Oil Company, and the fact that the royalty was “based on the gross production.” (Emphasis added.) It is also of record in this case that the parties and their predecessors in interest have acted pursuant to such assignment since 1918 with payment of the overriding royalty being made on the gross production, including payment of the taxes.
The majority opinion directs us to making an assumption that the pertinent assignment makes no mention of taxes or tax liability. There is no more reason to make such assumption than is there to make the contrary assumption. Most current lease *271forms do have specific provisions for payments of taxes.2 But, assuming that such clause was not in the 1918 lease or in the assignment of it, the stipulated terms thereof are sufficiently indefinite and ambiguous with reference to tax obligations to make necessary a consideration of external aids to construction, such as the historical performance of the parties under the instrument.
The use of the term “overriding royalty” has a well-recognized meaning. We have said that it is:
“ * * * as an interest in oil and gas production at the surface, free of the expense of production, and in addition to the usual land owner’s royalty reserved to the lessor in an oil and gas lease. * * * ” (Footnote omitted.) Cities Service Oil Company v. Pubco Petroleum Corporation, Wyo., 497 P.2d 1368, 1372 (1972).
“Gross” production under oil leases has the same meaning:
“There is a distinction between an overriding royalty and a ‘carried interest,’ which latter is a share in the net production, without any contribution to the drilling expense; whereas an overriding royalty is a share in the gross production.” (Emphasis in original.) Glassmire, Law of Oil and Gas Leases and Royalties, 2nd ed. 1938, p. 241.
That being the case, inquiry must be made into the meaning attached to the word “gross” in the reservation of an overriding royalty on the gross production. Since the expenses of production are already eliminated in an overriding royalty, to what can the terms “gross” or “net” apply if not to subsequent charges against production, such as taxes, transportation costs, etc.? The use of the words “overriding royalty” plus the use of the word “gross” must mean payment of 5% of the production without any deduction. The word “gross” means whole, entire, total, without deduction. Allstate Insurance Company v. State Board of Equalization, 169 Cal.App.2d 165, 336 P.2d 961 (1959); Hartford Electric Light Co. v. McLaughlin, 131 Conn. 1, 37 A.2d 361 (1944); Cities Service Oil Co. v. Geolograph Co., 208 Okl. 179, 254 P.2d 775 (1953); State v. Hallenberg-Wagner Motor Co., 341 Mo. 771, 108 S.W.2d 398 (1937). Thus, the plain meaning of the words of the assignment, as the parties have stipulated such words to be, supports the decision of the district court. -
But should such words reflect an ambiguity or indefiniteness in the terms of the assignment, thus necessitating and making proper an effort to ascertain the intent of the parties, the conduct of the parties over a long span of years expresses the understanding that th.e taxes be paid by appellants.
The majority opinion gives reliance to the decision in Miller v. Buck Creek Oil Co., 38 Wyo. 505, 269 P. 43 (1928), in reaching its result. The district court properly distinguished this case from Miller v. Buck Creek Oil Co. as follows:
“The Court feels that it is important to such issue that the lessee, Empire since 1949 and Ashland since 1972, the time of its acquisition and until 1975 paid all of the production and severance taxes for production from the lease. This conduct of the parties shows to the Court the practical construction placed on this issue. Even Ashland for three years followed in the footsteps of its predecessor and as lessee paid the Plaintiffs’ taxes. This evidence coupled with the fact that the royalty assignment to Plaintiffs’ predecessors in title does not involve taking oil in kind and the further fact that the royalty is based on gross clearly distinguishes this case from the Miller vs. Buck *272Creek Oil Co. case. This conduct of the original parties to the agreement followed by like conduct of their predecessors both before and after 1969 establishes an agreement as to who is responsible for the taxes and by reason of such renders section 39-6-304 W.S.1977 not applicable.”
Oregon Basin Oil & Gas Co. v. Ohio Oil Co., 70 Wyo. 263, 248 P.2d 198 (1952), also discussed in the majority opinion, concerned a provision in the lease by which lessee agreed “to pay all taxes assessed and levied on said lands.” The question before the court was whether or not the gross production tax. was a tax on real property or on personal property. It was held to be a tax on personal property, wherefore the provision requiring the lessee to pay the taxes “on said lands” would not apply. The case ■has no pertinency to this case in which the understanding was that payment of the overriding royalty was to be “based on the gross production” — be it real property or personal property.
Of interest in the Oregon Basin Oil & Gas Co. v. Ohio Oil Co. case, supra, is the fact that the tax was deducted by lessee from remittances to lessor as reflected on the accompanying statements for five or six years. We commented thereon as follows at pages 205-206 of 248 P.2d:
“The acceptance of these statements over a long period of time, when no controversy existed between appellant and respondent seems to us to amount to an admission or an acquiescence in the proposition that the tax was properly deductible. Sometimes ‘actions speak louder than words.’ As stated by this court in J. W. Denio Milling Co. v. Malin, 25 Wyo. 143, 165 P. 1113, 1115;
“ ‘It is to be assumed that the parties to a contract know best what was meant by its terms, and are the least liable to be mistaken as to its intention; that each party is alert to protect his own interests and to insist on his rights; and that whatever is done by the parties during the period of the performance of the contract is done under its .terms as they understood and intended it should be. Parties are far less liable to have been mistaken as to the meaning of their contract during the period while harmonious and practical construction reflects that intention, than they are when subsequent differences have impelled them to resort to law, and one of them then seeks a construction at variance with the practical construction they have placed upon it of what was intended by its provisions.’ 6 R.C.L., p. 853.
“See Rohrbaugh v. Mokler, 26 Wyo. 514, 188 P. 448; First National Bank v. Ennis, 44 Wyo. 497, 14 P.2d 201; Wyoming Abstract & Title Co. v. Wallick, 64 Wyo. 458-464, 196 P.2d 384; Holliday v. Templin, 56 Wyo. 94, 103 P.2d 408.”
In this case, the taxes were not deducted over a much longer period of time. The same logic should be applicable.
In summary, I start with the recognition that the word “royalty” means a share of the proceed or profit reserved by the owner of land for permitting another to develop the land for oil or gas. Watkins v. Slaughter, Tex.Civ.App., 183 S.W.2d 474 (1974), aff’d 144 Tex. 179, 189 S.W.2d 699 (1945); Robinson v. Milam, 125 W.Va. 218, 24 S.E.2d 236 (1942). The lessee agrees to deliver the oil to the royalty holder in the pipeline to which lessee converts his wells. Lessee’s purchaser buys lessor’s oil at the “posted price” pursuant to a division order from lessor (royalty holder). If the lease provides for payment of the royalty “in kind” and the lessor exercises the privilege of taking the oil in kind, the lessee must deliver the oil to lessor rather than into the pipeline used by lessee. ' Usually lessor is obligated to furnish the tanks or pipelines necessary to receive such oil. An overriding royalty is a royalty interest free of expense of production. In this case, regardless of any reference to taxes which may have been in the first assignment of the lease, the parties stipulated that it provided for an overriding royalty on the gross production. The words “overriding” and “gross” each provide for the same result. One of the words is redundant unless one of *273them is taken to provide for payment without additional deductions. That this was intended is fortified by the harmonious and practical construction given to the contract over many years in which lessee paid the taxes.
. If the existence of such assignment is successfully contested, appellants, themselves, would have no rights whatsoever in the production.
. E.g., the following is a typical clause from a federal lease form:
“ * * * the lessee agrees:
“(k) Taxes and wages, freedom of purchase. —To pay when due, all taxes lawfully assessed and levied under the laws of the State or the United States upon improvements, oil and gas produced from the lands hereunder, or other rights, property or assets of the lessee; to accord all workmen and employees complete freedom of purchase, and to pay all wages due workmen and employees at least twice each month in the lawful money of the United States.”