C. Duty and Covenants to pay Taxes.

Taxes on coal, like other minerals, whether in place or mined, are of course, in the absence of covenant, payable by the owner thereof. If there is a severance of ownership of surface and mineral in place, the latter being land, the owner is liable to taxation thereon as land.1 The obligation is not transferred to the owner of the surface by calling the instrument creating the mineral estate a "lease." If it creates an ownership of the minerals, the "lessee" (vendee) must pay the taxes thereon; if it creates but an estate for years, or a privilege or license to mine, the "lessor" must pay the taxes on the unmined coal.

This general rule may be changed by contract, and the obligation of paying taxes on unmined coal as between lessor and lessee may be put upon the "lessor" (vendor), though the lease amounts to a sale, and creates an absolute ownership in the "lessee (vendee). In this event, if the vendee or "lessee," upon demand, pays the tax to the proper collector, he may recover the amount thereof from the lessor, or set it off in action for royalty or rent.

Pennsylvania.

Logan v. Washington County, 29, 373 (1857). Where the owner of coal land has sold the right to take all the coal that is in his land, and retained the land itself, the owner of the land and the owner of the coal are each taxable according to their several interests. But this principle does not justify a higher valuation on the two interests taken separately, than there would have been if both had continued in the same person.

Chevington & Bunn Co. v. Lewis, 10 W. N. C. 196 (1881). The tax imposed upon the corporations by the seventh section of the act of April 24, 1874 (P. L. 68), of three cents upon each and every ton of coal mined by such corporations, or by their lessees, is a tax upon the corporate franchises, to be measured by the number of tons so mined, and not a tax upon the coal itself.

The lessees in a coal-mining lease covenanted to pay all taxes and imposts whatsoever assessed or charged during the continuance of the lease upon the demised premises, or any part thereof, or upon the coal produced therefrom. Held, that this clause of the lease does not include the tax on the corporation (the lessors) imposed by the seventh section of said act of April 24, 1874, which tax is payable by the corporation and not by the lessees.

Sanderson v. City of Scranton, 105, 469 (1884). Where the surface of land and the minerals in place thereunder have been severed by the agreement or conveyance of the owner, and the respective divisions have become vested in different owners, the municipal authorities are bound to levy their taxes according to the ownership and

1 Illinois, Hurd's Rev. Stats. 1895, ch. 94, sec. 6, p. 1053.

value of these divisions. And each owner can be made responsible only for the tax on his own interest, whether underlying strata or surface.

The liability of the owner of coal or mineral in place for taxes levied thereon results from the nature of his estate or interest, and therefore he is not relieved from this responsibility, on the principle inclusio unius est exclusio alterius, by an express covenant in the instrument of severance that he shall pay all taxes levied upon the coal mined, without recourse to the lessor to refund the same.

D. L. & W. R. R. Co. v. Sanderson, 109, 583 (1885). Vendee in last case having paid taxes on the coal in place, under protest, brought this action to recover the amount thereof from the vendors. It was held that no recovery could be had, and the principle of Sanderson v. Scranton was approved.

City of Scranton v. Gilbert, 16 W. N. C. 28 (1885). When the title to the surface of land and to the coal thereunder is vested in one person, the whole must be assessed together for purposes of taxation as land. The surface and the coal cannot be separately valued and assessed, as in the case where the surface and substrata are vested in different owners. The fact that in such case the aggregate valuation on the surface and on the coal beneath is no greater than should be put on the land, does not authorize the separate valuation and assessment of the coal.

Hecksher v. Sheafer, 17 W. N. C. 323 (1886). While, as a general rule for the purposes of taxation, all improvements upon land, such as houses, coal breakers, etc., constitute part of the land, yet persons owning different portions thereof may agree among themselves to such an apportionment of the taxes in respect of such improvements as they may see proper.

A lease of coal land contained a covenant on the part of lessees to pay all taxes upon improvements: Held, that the lessees were bound by said covenant to pay the increased amount of taxes assessed upon the land by reason of its increased value in consequence of the erection upon it of houses, coal breakers, etc., by such lessees.

Woodward v. D. L. & W. R. R. Co., 121, 344 (1888). There was a provision in the coal lease in this case that the lessees should pay all taxes which might be imposed upon the surface of that portion of the land occupied by them and upon the improvements by them made thereon, and upon the coal after it was mined, and that the lessors should pay all the taxes imposed upon the coal in the ground, and upon the surface not occupied by the lessees. The lessors were bound by this covenant, although the lease was such an instrument as under Sanderson v. Scranton conveyed a fee simple in the coal, and the lessees having paid taxes on the coal in place could recover the amount thereof from the lessor.

This liability of the lessors arises from the contract, and is not released by a subsequent conveyance to the lessees of a portion of the surface, with a provision that it should in no way affect their interest in and title to the coal under the lease, nor the rights of either party under its provisions, which were to remain as if the said conveyance had not been made.

Flory v. Heller, 1 Monaghan, 478 (1889). This was a lease of land with the privilege of quarrying for slate, with a provision that machinery and fixtures placed there by lessee should belong to him.

The landlord was assessed taxes on the land and paid the same, and the tenant was assessed taxes on the quarry and machinery which he had placed upon the land. Held, the tenant cannot deduct taxes paid by him from royalties due the landlord as rent.

Miles v. D. & H. Canal Co., 140, 623 (1891). In a lease of coal land which created a divided ownership of coal and surface there was a provision that the lessors should pay all taxes on the leased land; they were held liable for the taxes on both surface and coal in place. And the lessees having paid taxes demanded of them upon the coal in place had the right to retain the amount thereof out of royalties otherwise due the lessor.

Pettibone v. Smith, 150, 118 (1892). A covenant in a coal lease providing "that the said lessees shall pay all and every the United States, State, and local taxes, duties and imposts on the coal mined, the mining improvements of every kind, and the surface and coal land itself," does not include a municipal assessment to defray the cost of building a sewer, and to provide for the cost of grading a street.

D. Rent and Royalty.1

"Mining rent" is a term which is used to mean the consideration money of a mining lease, whether that lease creates a tenancy, grants a license or an incorporeal right, or conveys a fee.

It may be (1) a fixed sum; (2) a certain annual sum; (3) a royalty on the amount of minerals extracted payable at fixed intervals or times; (4) such a royalty, but not less in the aggregate than a fixed amount each year; (5) such a royalty and a covenant to mine a certain minimum amount or pay royalty thereon.

As rent must be something issuing out of the thing granted, and not a part of the thing itself, when the consideration is a part of the minerals, it is not strictly a rent, but an exception.

According as the lease creates a fee, an incorporeal right, a tenancy or license, the rent may be either purchase-money or a true rent.

If the lease out of which it arises is a true lease of the soil or a grant of a right to take minerals, the money or thing which is paid therefor is rent and has all the qualities thereof.2 It is a preferred debt. It is income, and such as has accrued goes to the personal representatives, and not to the heir of a decedent. It belongs to the life tenant as profits.3

1 See also title "Forfeiture," p. 147.

See pages 8-14, where the cases on

2 North Carolina Code, 1883, sec. 1763. this point are collected.

If on the other hand the rent arises from a conveyance which passes a freehold estate in the minerals, it is the purchase-money thereof, and has none of the qualities of rent. The fact that it is called rent, that it is paid in certain amounts at fixed intervals, does not establish its nature. If it is paid for the minerals in the ground and not merely for the use of the premises, it is not rent properly so called, but purchase-money, a part of the corpus of the estate and not of the profits issuing out of it.1

Although it is purchase-money, the duty to pay is absolute and does not depend upon the existence of a corresponding amount of minerals, unless, of course, made so dependent by the terms of the lease.2

Whatever may be the nature of the estate granted, the rent is not dependent upon the taking of minerals, unless rendered so by the terms of the instrument creating it.

The remedies for non-payment of rent are an action on the contract in all cases; if the amount of the rent is dependent upon the amount of mineral taken, a bill for an account will lie. And if the consideration is a true rent, the ordinary remedy for the recovery of rent by distress is available by the landlord.

When a lease has been assigned by the lessee, even with the landlord's consent, the original lessee is not relieved from liability upon the covenants contained in the lease. The covenant to pay rent being one which runs with the land, the assignee is liable thereon. But of course he is liable only for rent which accrues after the assignment.3

In the absence of other arrangement by the terms of the lease or contract, where the consideration is in the shape of a royalty, or is otherwise fixed by the amount of minerals mined, it is the duty of the lessee to ascertain that amount. The returns of the lessce as to the amount mined, if accepted by the lessor, are conclusive on him in the absence of full and satisfactory evidence of fraud or mistake. If they are not accepted, or settlements are not made upon them without objection, their correctness may be assailed by the lessor in the same manner as may that of any other account. In such case expert testimony is admissible to

1 In Indiana, owners of land and others interested in the rental or royalty of coal mined have a lien therefor provided by statute. Rev. Stat. 1888, sec. 5471.

2 See Chap. III., Div. I.

3 See further, Chap. IV., Div. I., where the cases are collected.

show the territory mined and the amount which it should have yielded.

In Ohio the interest of lessors of coal mines is protected by statute, which gives the right of access to and examination of the machinery by which the coal is weighed, and also of the accounts thereof.1

Lehigh Zinc & Iron Co. v. Bamford, 150, 665 (1893). United States. A lease of a zinc mine and concentrating works for ten years was upon a specified royalty per ton for ore concentrated, payable annually, but in case the royalty in any one year fell below $1,000, then such a sum was to be paid as to make the annual rent that year amount to $1,000. Held, that the lease intended the payment of the minimum rent of $1,000 should be made annually, and should not be postponed to the end of the

term.

Manning v. Frazier, 96, 279 (1880). Where the owner Illinois. of land bargains and sells all the mineral thereunder, and grants to the vendee the right to enter and search for said minerals, and to dig, mine, explore, and occupy with the necessary structures, and to mine and remove all the coal, limestone, etc., for which the vendee agrees to pay a stipulated price per ton for the various minerals removed, payable quarterly, the grantor will have a vendor's lien on the minerals not mined and removed, for unpaid purchase-money, which he may enforce by a sale of the minerals in the ground. The stipulated price is purchase-money of the real estate, not of the minerals removed. It is not a collateral covenant.

The payment of so much per ton is only a mode of ascertainment of the purchase-money, the amount due each quarter depending upon the quantity mined during the preceding three months.

Consolidated Coal Co. v. Peers, 150, 344 (1894). In consideration of the lease of the sole right to mine coal, the lessee agreed to begin mining coal from said land within twelve months from the date of said lease, and to guarantee the lessor a yearly royalty of not less than $1,200 after the expiration of twelve months from that date; and that if after the expiration of one year no coal should be mined from said tract of land, and the said lessee should pay the monthly instalments of $100, said payment should be considered as advanced royalty, and said lessee was to have the right to mine coal sufficient to make the amount of coal mined equal the amount of royalty paid, provided that the royalty paid should not be less than $100 per month; that said lessee should carry on the work in a good and workmanlike manner, and take as much coal from said land as a proper regard for the safety of the mine would admit, and to pay the plaintiffs a royalty of threeeighths of a cent per bushel for all coal mined, etc., and that such royalty should be paid monthly on the twentieth day of the month for coal mined the preceding month.

1 Rev. Stat. 1890, sec. 305.