DocketNumber： No. 1058
Citation Numbers： 29 Wyo. 163, 212 P. 758
Judges： Blume, Kimball, Potter
Filed Date： 2/15/1923
Status： Precedential
Modified Date： 7/20/2022
This is an action in mandamus brought in this court by the State on relation of School District No. 1 of Weston County against the Treasurer of the State of Wyoming. The present State Treasurer has been substituted as party defendant. Issues have been properly joined. It is not necessary to make a lengthy statement of the facts. The State, pursuant to legislative authority, has heretofore entered into certain agreements with other parties, denominated as “oil and gas operating leases,” leasing unto the parties of the second part certain school lands for the purpose of drilling, boring, operating for and producing therefrom mineral oil and gas, with the right and privilege of using o much of the surface of said land as may be necessary in connection with said work. The leases are for five years, and provide for an annual rental as well as certain royalties on the oil and gas produced. The legislature, by Chapter 66, Session Laws 1921, provided that one-third of the rents and royalties, and bonuses, received from these leases should be credited to the land income fund, two-thirds to the permanent school fund, but that from and after two years from the passage of the act, all of it should be credited to the said permanent fund. By Chapter 147 of the same Session Laws, which is but an amendment of Section 144 of the Wyoming Compiled Statutes of 1920, the legislature provided for the distribution of the income fund, including the rents of unsold school land. Relator contends that the provisions of Chapter 147, supra, govern in this case, because, being a later law than Chapter 66, supra, repeals the latter by implication; that accordingly all the royalties should be turned into the land income fund. Under the view we take of this case, it is unnecessary to determine
The case has been well presented and argued by able and learned counsel on both sides. The royalties from oil and gas leases have of late been coming into the state treasury in ever increasing amounts, so much so that the legislature, bearing in mind the economic stringency then existing, and desirous of fostering the betterment of the schools of the state, deemed it best that at least a portion thereof should be applied to the current needs thereof. Mention was made in the oral argument that an attempt had been made to pilfer from and rob the permanent fund. No such intention, of course, could be attributed to the legislature. On account of the apparent conflict hereinafter referred to, existing in our constitution, it is no surprise that men should have differences of opinion on the subject, and we have not the slightest doubt that the members of the legislature, in passing the laws mentioned, were actuated by the highest and most honorable motives, particularly in view of the fact that the permanent as well as the income -fund both are destined for the ultimate benefit of the schools of the state.
We think, in the first place, that the Treasurer of the state, as custodian and conserver of the funds, has sufficient Interest therein so as to rais.e the question whether or not the legislative acts in question are in conflict with the Constitution, in an action in mandamus where it is sought to compel him to pay out the said funds or a portion thereof. (Van Horn v. State, 46 Nebr. 62; State ex rel v. Claussen,
“But when doubts do arise in the minds of the court as to the interpretation to be put upon a provision of a constitution, if after a careful examination of the provision, and after all the lights, to which it is proper to resort, have been made use of for the purpose of ascertaining its-true meaning, the court construing the provision still has doubts whether the legislation complained of is an infraction of the instrument, the court upon such doubts alone is bound to pronounce in favor of the validity of the act. The court does not, in such case, sustain the validity of the act, because other persons or courts have doubted its constitutionality, but because the court itself, after using all the aids that it has a right to use, in its own mind, acting for itself and upon its own responsibility, is not able to say beyond a reasonable doubt that the act is unconstitutional. ’ ’
By Section 4 of the Act of Admission there was granted to this state for the support of the common schools all of Sections 16 and 36, or lands selected in lieu thereof. Section 13 of the same act provides that mineral lands are excluded from the grant. Section 5 of the act provides:
‘ ‘ That all lands herein granted for educational purposes shall be disposed of only at public sale, the proceeds to constitute a permanent school fnud, the interest of which only shall be expended in support of said schools. But said lands*180 may, under sueb regulations as the legislature shall prescribe, be leased for periods of not more than five years, in quantities not exceeding one section to any one person or company. ’ ’
Section 2 of Article 7 of the State Constitution in part provides:
“The following are declared to be perpetual funds for school purposes, of which the annual income only can be appropriated, to-wit: * * * all moneys arising from the sale or lease of sections number sixteen and thirty-six in each township in the state, and the lands selected or that may be selected in lieu thereof.” etc.
If this provision stood alone in the Constitution, and were not modified or explained by any other provisions therein, the intention would be plain and clear, and in such event the receipts from all leases, as well as from all sales of the lands in question, would belong, beyond the peradventure of a doubt, to the permanent and not the income fund.
Relator relies on the provisions of Section 7 of the same article, which provides for the income fund, and is as follows :
“The income arising from the funds mentioned in the preceding section, together with all the rents of the unsold ■school lands, and such other means as the legislature may provide, shall be exclusively applied to the support of free schools in every county of the state. ’ ’
It is the contention of relator that all the proceeds of the leases in question are “rents” within the meaning of the latter section, and that hence the proceeds, including mineral royalties, at least when directed by the legislature, must go into the income fund and be distributed as directed by Section 8 of Article 7 of the Constitution. We need not determine, as to whether or not, should we sustain this contention, the proceeds would automatically go into the income fund, but it is clear that in such event the legislature could at least direct all of the proceeds to go there, and
It is apparent that Section 7, supra, construed in connection with Section 8 following, deals with the land income fund, a fund that subserves current needs, and is to be distributed from time to time as provided by Section 8. Sec. 2, supra, on the other hand, deals with the permanent fund. Sec. 6 of the same article, provides that the permanent fund shall remain inviolate and shall be invested only in certain securities. Hence, it would seem that the “income” mentioned in said Section 7 consists mainly, if not entirely, of interest on the fund mentioned in the preceding section; it is revenue derived from a source which is not itself depleted. The term “rent” is used in the same section; it is placed, as it were, in interrelation with “income,” and seems to deal with proceeds similar to that of interest, namely, those derived from a source which is not itself depleted. This idea seems to be indicated more clearly in Section 8 following, which provides for the distribution of the money mentioned in said Section 7, and reads, in part, as follows:
“Provision shall be made by general law for the equitable distribution of such income, etc. ’ ’
We think it is clear that the word “income” as used in Section 8 includes both the income as well as the rental mentioned in Section 7; but using the one term only, seemingly treats the income and rental mentioned-in said Section 7 of the same or similar character, both derived from
Section 2, supra, of the Constitution, on the other hand, deals with a fund that is intended to be permanent. The grant under Sections 4 and 5 of the Act of Admission, or the patents issued pursuant thereto, give the land itself, the whole and every part of it, without exceptions. Whatever was part and parcel of the land passed thereby as the origin and source of the permanent fund. True, mineral leases may not have at all been thought about when the Constitution was adopted, but the language is broad enough so as to require the proceeds of leases arising from the corpus of the land to be put into the permanent fund.- Some consideration, by some one or more, was given to the subject, it appearing on the printed copy of the substitute for files 59, 28 and 8 of the Constitutional convention, that the words “or leases” are enclosed by pencil marks. The whole section, as well as Section 7, was evidently taken from the Constitution of the State of Nebraska. It is not likely that Constitutional conventions of both states adopted the provisions thoughtlessly. In any event, the provision was left in, and we must give it full consideration insofar as it does not conflict with a later provision. Every word used in Section 2, supra, of the Constitution, unless it be the word “lease,” is used for the purpose of effectuating a permanent fund. We do not think that the one word is an exception. As we believe that the words “income” and “rent” as used in Section 7 are closely related, so we believe that the words “sale” and “lease” as used in Section 2 are also closely related, both used for the purpose of effecting a similar purpose, namely, the disposal of part of the corpus of the land.
We fear that relator has laid too much stress upon mere terminology, used in cases that have no application here. Thus a great many cases involving mineral leases have been cited by relator in which the proceeds therefrom have been called rent. Some of these cases involve the construction of the instrument under which the mining was done or intended to be done, such, for instance, as to whether the grantee therein had a mere license or a better title; others relate to the right of the state to interfere and regulate the flow of oil or gas or the drilling for it; others' to the question of taxes; others as to whether or not a mechanic’s lien could be filed against a mine under lease; others, as to whether the grantor, being at least by analogy the landlord, could have a landlord’s lien. None of these cases have any bearing here; none of them required determination as to what kind of rent was involved. It becomes, of course, often quite important to determine the effect of the written agreement between parties. In the case of Genet v. Delaware & Hudson Co., 136 N. Y. 953, for instance, an action was brought for damages for negligently destroying a mine. The defendant claimed that under the document under which it operated the mines it became the owner of the coal; and hence was not liable for damage. The - court, however, held that the lease was not a conveyance; that the compensation to be paid was rental, and that the company was liable for negligent operation. So in Austin v. The Hunt
A fundamental fact seems to have been quite overlooked. A document may have a certain, definite effect as between the parties thereto and may determine the relationship and rights existing between them. But we are not at all concerned here with a subject of that kind. We are dealing here with only one side of the contract, the side that receives or is entitled to the royalty and rent, and the dispute exists only between the two beneficiaries on that one side —the permanent fund and the income fund. If a trustee, with power, acting for two beneficiaries, makes a lease or any other contract with a third party, this lease or contract will not at all effect the relationship or rights of the beneficiaries as between themselves, unless, of course, these rights are — in accordance with the true facts, — specifically provided for, which is not done in this case. Hence the rights of the beneficiaries as between themselves must be sought for outside of the provisions of the leases involved in the case at bar. This must be clear. Oil and gas, while in situ, are part of the realty, part of the corpus of the land. When a portion of it is taken away, the proceeds necessarily arise out of the corpus, and it is humanly impossible to change that simple, plain, physical fact. The character of the proceeds can, obviously, at least as between the beneficiaries, in no possible manner be changed by the nature of the documentary authority pursuant to which the oil and gas is taken out of the ground. Documents do not possess the power of an alchemist, neither do they wield a magician’s wand. Whether the oil be taken out of the ground pursuant to a license, lease, sale or any other grant, or without any authority whatever, could not in the slightest degree affect the physical fact that it comes from the corpus of the land. If taken and disposed of at all, the effect is clearly a permanent disposition of that much of the corpus, the principal of the land, and irrespective of the authority
Hence we can readily see, that if we want to receive any light from adjudicated cases and other authorities, we must turn to that class which deals with the disputes arising on one side of a mineral lease only — those involving the rights of the parties entitled to receive or not receive the royalty. Fortunately, we have many of them, and it will be noted that in them the relation of landlord and tenant is not at all disputed as between the parties to the lease; and that the proceeds of the lease constitute rent is not denied.
A life tenant has the right to the income from property including rental which arises from the ordinary use of the property. The remainderman or revisioner owns the prin
“The principle upon which the whole matter depends is the same both in English and in Scotch law, and I should be inclined to think that it would be very much the same in every country, for it is the nature of things that causes it to be so. Where there is ‘produce,’'such as minerals*190 which, when once taken away, is never replaced, it is in a very different position from, I may say, apples or fruits of that kind, which are annually reaped and which replace themselves. That they are different in the nature of things is obvious enough. When there is an estate consisting partly of minerals or things of that sort, and partly of animal products in the other sense, such as fruits and the like, and that estate comes to a person with a limited interest, the remainder being in somebody else, the question would arise, What is to be done with the produce ? The law of England, and I believe of every country, the feudal law and the civil law too, would say that in that case the person who has the limited interest takes, beyond all doubt, the annual produce, the grass, the apples, and things of that sort, and applies them to his own use as he pleases, as long as his interest lasts. But it would follow, from the strict rule which I have mentioned before, that minerals, whether the mines had been opened or not, would remain a part of the soil belonging to the person who was to have the ultimate interest in the soil: the remainderman, as he would be called in England, or the fiar as he would be called in Scotland, would take them all. ’ ’
Accordingly, under the common law, life estates, whether conventional or arising by operation of law, were impeachable for waste, unless the instrument creating a conventional life estate expressed a contrary intention. (Poole v. Union Trust Co., 191 Mich. 162, 167.) And courts have been unanimous in holding, or at least substantially so, that a life tenant has no right whatever, as against a remainder-man, to open up new mines or quarries or oil or gas wells, or lease the land for that purpose to others. He may be enjoined from doing so; such a lease made is void; the proceeds arising therefrom belong to the remainderman, if he receives them. (21 C. J. 947, 949; Shulthis v. MacDougal, 162 Fed. 331; Hook v. Garfield Coal Co., 112 Iowa 210, 83 N. W. 963; Prout v. Hay Oil Co., 263 Ill. 54, 105 N. E. 26; Kenton Gas etc. Co., 17 Ohio Cir. Ct. 101; McCoy v.
“The only management and control contemplated was that which had to do with the annual proceeds of the land. The authority of the trustee was to grant ordinary farming leases, in accordance with the ordinary terms of the neighborhood, but not unusual leases of unopened mines. * * * Granting that the trustee held the title in fee, he held it for the benefit of the remainderman as well as the life tenant, and had no right to waste the estate for the benefit of the life tenant, at the expense of the remainderman. It is a well established rule of law that the opening of new mines upon land by a life tenant amounts to waste. * * * The same rule applies to oil wells. Oil is a mineral and part of the realty. Owing to its fugitive nature, a grant of oil under the ground is a grant, not of the oil in place in the earth, but of such oil as the grantee may find there and save. * * * There were no oil wells on the land at the time of the testatrix’ death. A tenant for life under such circumstances would have no right to operate for oil on the land. * * * Neither could a trustee operate for his benefit. The taking out of the oil would be waste which a court of equity will enjoin.”
At the time of the grant of the school lands to the income and permanent funds involved in the case at bar, no mines had been opened, no oil or gas wells existed on the land. No provision, express or implied, is contained in the grant permitting the trustee for the fund entitled only to the income to open up new mines on the lands granted. And, applying
In the case of Barnes v. Keys, 36 Okla. 6, 127 Pac. 261, the court said:
“It is settled by a long line of decisions, beginning with Stoughton v. Leigh, 1 Taunt. 402, that a life tenant cannot open new mines. * * * The doctrine or theory of these cases is that the opening of new mines is a permanent injury to the inheritance, constituting waste. In other words, it is held that the minerals are' part of the land itself, and that the life tenant has no right to take minerals any more than he would have the right to sell or dispose of a part of the surface of the laird. But * * * the ques-ion is, all having agreed that the lease should be made, what interest would each have in the income from the lease. It*193 would seem that their interests would be the same as if that much land has been sold; the life tenant would be entitled to the income from the purchase price. * * * And it follows that the proceeds of the oil belong to the remainder-man just as the proceeds of the land itself would; but the owner of the life estate would have the right to interest on the royalties produced during his life. ’ ’
In the case of Meredith v. Meredith, (Ky.), 235 S. W. 757, the court, in a similar case, said:
"In the recent case of Crain, Gdn. v. West Adm’r., 191 Ky. 1, 239 S. W. 51, in referring to these cases, we said: ‘In those eases it was held that inasmuch as the life tenant had no right to open the new mines, nor to the products of the mines when opened, and the remaindermen had no right to the use of the land during the life tenancy, the life tenant was entitled to the interest on the income or use of the royalties during life, but the corpus of the royalties, like the land from which it came, was the property of the re-mainderman, and should be preserved for them.’ In none of these cases, however, was there any agreement between the parties as to how they should divide among themselves the royalties retained in the lease, and they were, therefore, divided by the court according to their primary interest in the land; to the life tenant the income for life on the whole of the-royalties, and to the remainderman the preserved corpus of the royalties after the death of the life tenant. Such distribution, in the absence of an agreement between the parties, is in accord with reason and meets with our approval. ”
In the case of Minner v. Minner, 84 W. Va. 679, 100 S. E. 509, the court, after stating that the life tenant had only the right to continue operating mines already opened, said in part:
"All else belongs to the corpus of the estate, and must be preserved intact. Hence it is waste for such tenant to.open or authorize the opening of new wells. (Williamson v. Jones, 43 W. Va. 562, 27 S. E. 411, 38 L. R. A. 694, 64 A. S.*194 R. 891.) In case lie does so, the yield therefrom is not part of the issues and profits, but a part of the corpus of the estate, and the proceeds or return derived from the sale of such product must be preserved and invested for delivery to the remainderman or revisioner upon the commencement of his estate. These proceeds now stand in the place of and represent that part of the corpus which has been removed. This question is usually presented in the form'of a joint lease by the life tenant and remainderman, reserving royalty or rent, and in such case the royalty or rental, being part of the corpus, is invested and preserved for the remainder-man ; but the interest thereon, being the yield therefrom, is paid to the life tenant, since the nature of his estate entitles him to the yield from the corpus of the realty.5 ’
So in the case of Swayne v. Lone Acre Oil Co., 98 Tex. 597, 69 L. R. A. 986, 86 S. W. 740, 8 A. & E. Ann. Cas. 1117, in a case where the life tenant had only a third interest of the land, the court said in part:
‘ ‘ It is too well settled to require citation of authority that while it is not waste for a tenant by the curtesy or by a tenant in dower to work an open mine, it is waste to open a new mine. In other words, the tenant of a life estate punishable for waste has no right to remove the minerals, when the land had not been devoted to mining purposes before the creation of his estate. Oil before its extraction is a mineral and is a part of the land, and insofar as the question under discussion is concerned it is to be considered like iron, coal, lead, or other mineral substance, * * *. The right of the life tenant is to the use and not to the corpus of .the estate, and where his title is in an undivided interest and not in the whole of the land, and a sale is ordered for partition, his right in the proceedings is not a part proportionate to the undivided interest in which he has the life estate, but to the interest on that part as long as the life estate may continue to exist. In speaking on this subject in reference to the remainderman, Chief Justice Marshall in Herbert v. Wren, 7 Cranch. 379, says.- ‘They have a right to insist*195 that, instead of a sum in gross, one third of the purchase money shall be set apart, and the interest thereof paid annually to the tenant in dower during’ her life.’ The rule thus stated is followed in North Carolina. (Ex parte Winstead, 92 N. Car. 703.) The same principle is announced in Alabama. (McQueen v. Turner, 91 Ala. 273, 8 So. 863; Kelley v. Deegan, 111 Ala. 152, 20 So. 378.”
That under such circumstances the remainderman is entitled to the principal and the life tenant to the interest only is also held in Blakley v. Marshall, 174 Pa. St. 425, 34 Atl. 764; McFadden’s Estate, 224 Pa. St. 443; Deffenbaugh v. Hess, 225 Pa. St. 638, 74 Atl. 608, 36 L. R. A. N. S. 1099; Stewart v. Tenant, 52 W. Va. 559, 44 S. E. 223; Eakin v. Hawkins, 52 W. Va. 124, 43 S. E. 211; Campbell v. Wardlaw, 8 App. Cas. 641. The principle is also approved in Matlack v. Kline, - Mo. App. -, 190 S. W. 408. So in Dicken v. Hamer, 2 Law Times 276, and Maher’s Adm’r. v. Maher, 73 Vt. 243, it Avas held that the consent of the life tenant to the lease for mining gave him no interest in the mineral found. The principle first mentioned AAras applied in regard to timber in the case of Keniston v. Gorrell, 74 N. H. 53, 64 Atl. 1101, where the court said:
‘ ‘ Conceding that the plaintiff had no right to cut and sell any of the timber * * * she nevertheless had the right to have it remain upon the premises; and as it has been severed without her fault, she is entitled to an estate for life in the proceeds, and to have.the proceeds invested and the interest paid to her.”
Counsel for relator rely especially on the case of State v. Evans, 99 Minn. 220, 108 N. W. 958, 9 Ann. Cas. 520, where under a constitution similar to ours, the Supreme Court of Minnesota held mineral leases similar to those involved in the case at bar to be valid. The -direct point involved fin that case was whether the leases were in violation of the constitutional provision requiring all school lands to be sold at public auction. The court in the opinion refers to the royalties as rents; it did not refer to it as ordinary rent,
Denied.