MAY WANT LAW AMENDED It is quite probable that the next legislature will be asked to amend the new Home Ownership Law so that borrowers of money under the law may retire their loans any time they can do so after the expiration of at least two years. As it is now, the loans are made to cover twenty-three years and they cannot be retired under that time according to a ruling of the attorney general's office. While the payments each year are small, many farmers borrowing money under the law wish to cancel their loans sooner than that and as consequence, the opportunity to borrow money has not proven as attractive as it was thought it might. The matter of amending the law has been discussed by the school land commission at various times, but nothing definite decided upon. It is very probable that the amendment will be called for when the legislature meets again.

a

STATE GOVERNMENT EXPENSE According to figures compiled by State Auditor Howard, it cost $1,209,084.82 to run the state government during the first 3 months of the year. Of this amount it is stated $272,420.41 was used for building and betterments, furniture, equipment, and apparatus, livestock, lands and improvements. There are seventytwo accounts, or institutions and departments embraced in the state government as classified in the report. Of this amount there is approximately $50,000.00 taken out for the expense of the special session of the legislature.

PAY FOR SEPARATE SCHOOLS

In a decision of the Supreme Court, the opinion written by Chief Justice Kane, rail. road companies operating in the state must pay additional taxes for the maintenance of separate, or negro schools. The case came up from McCurtain county and is directed against the Frisco railroad. The judgment of the McCurtain county district court is affirmed in the case. Attorneys for the road say that in this particular instance it will ost the company upwards of $40,000.

OPINION ON ROAD LAW

Cities and towns may lower the amount required to be paid for road duty, or the number of days to be worked, according to an opinion from the attorney general's office to T. L. Swinford of Mill Creek. The latter inquired concerning the amendments to the road law made by the special session of the legislature. House Bill 37 of the special session amended previous laws on the subject and provided that persons eligible should work four days on the road or pay $5 in lieu. Mr. Swinford, in his inquiry, wanted to know if this applied generally, and referred to it as a roll tax. There is no law in the state requiring a poll tax. The attorney general replying to the inquiry said that while the road law was general in nature, it was in the province of the cities and towns to lower the amount to be paid.

REPLIES TO MATTHEWS Prosecution, if any, in the alleged third degree practices of police department officials, an investigation of which was made by W. D. Matthews, state commissioner of charities and corrections, will have to be made by the commissioner himself, according to a letter from Mayor Overholser to the commissioner. The mayor in his communication says he does not believe the evidence given by some of the witnesses, that in his mind much of the testimony given was that of criminals who wanted to place as much disrepute as possible on the police department.

The mayor says he is as much in favor of prohibiting any "third degree' methods as anyone; that one man who had been found guilty of ill treating a prisoner had been dismissed, and that any other guilty of such treatment would meet the same fate, but that in future no accusation against an officer would be sufficient for him to take any executive action, that the accused would have to be given a trial.

CONDITION OF GUARANTY FUND

The total warrant indebtedness of the bank guaranty fund increased from $680,009.40 on December 31, 1915, to $756,724.91 on March 31, 1916, according to the report on the condition of the fund made by P. C. Dings, treasurer of the fund. However, on March 31 there was cash on hand of $101,334 which is more than the cash on hand at the previous report. More than $82,000.00 had been collected during the quarter on failed banks, and $34,769.43 of warrants were sold for cash. Warrants to the amount of $21,590.80 were retired during the quarter and $37,480.70 was paid in interest on those outstanding. rants issued for claims against the guaranty fund occurred in three notable instances, the Farmers and Merchants bank of Coweta for $25,000.00; Farmers and Merchants bank of Mountain View for $15,420.00, and the Union State bank of Muskogee for $22,963.00. Warrants taken up by banks with cash and held by the banking board in lieu of collateral, $511,193.21; warrants outstanding secured by state and municipal bonds and warrants, $245,531.70.

War

CANNOT USE THE APPROPRIATION

The appropriation of $2,500 made by the special session of the legislature for the state auditor to secure data as to the physical value of public service corporations, cannot be used to replenish the contingent fund of the auditor which has been used in postage in connection with the collection of the gross production tax, according to an opinion rendered by the attorney general's office. Mr. Howard explained that he had exhausted his fund for postage in collecting gross production tax, and asked if he could use the other to replenish the contingent fund. Collection of the gross production tax under the new three per cent. laws is just begun.

opinions of the court on the hearing and rehearing, which require some reconciliation. It appears from the findings of the referee that on March 16, 1896, the Osage Nation of Indians in Oklahoma Territory entered into a contract with one Edwin B. Foster, by the terms of which Foster had a blanket lease upon the Osage Indian reservation for the sole purpose of prospecting and drilling wells and mining and producing petroleum and natural gas only. The lease was for a term of ten years and was approved by the Secretary of the Interior. By an act passed March 3, 1905, Congress extended the lease as to 680,000 acres for ten years. The lease has therefore expired. Prior to its extension in 1905, the lease was assigned to the oil company.

The oil company has sub-let to more than one hundred persons and corporations and the operations upon most of the lands covered by the lease have been and are conducted by sublessees. A small portion, the amount not appearing, is operated by the company.

By the terms of the lease as extended the sub-lessees are required to pay a royalty of 16 of the oil produced upon the property, of which 24 goes to the company and 24 to the Indians, the payments on behalf of the latter being made to the Indian Agency under and by virtue of the rules and regulations of the Department of the Interior.

The oil company has laid pipe lines upon the leased lands for conveying natural gas and it has been its practice to furnish gas to the sub-lessees for use as fuel for their drilling and pumping operations at a flat rate, the amount of which is not disclosed. The company also furnished gas during 1911 for domestic consumption to the residents of Bigheart and Avant, two small towns in which it had no franchise, in the Osage Nation adjacent to the pipe lines of the company. also furnished gas to a local corporation in the city of Bartlesville, which company held a franchise for and was engaged in the business of selling gas to the residents of that city and also to a local distributing company at the town of Ochelata for use in the business of the latter company in selling gas to the inhabitants of that town.

It

By the terms of the contract with the Osage Indians the company was required to furnish gas free to the Osage citizens for use in the public institutions of the Osages under certain conditions named.

The oil company is primarily engaged in the business of oil production and its operations in the gas business are conducted as an incident to the development of the oil territory and the production of oil, and, to some extent, as a matter of accommodation to the citizens of Bigheart and Avant, and other persons residing along the company's pipe lines.

In 1911 the company made a sworn return of $53,835.10 as the actual cash value of that part of its property engaged in the public service by reason of the gas business transacted by the company. The valuation was raised by the Board of Equalization to $538,350.00. Certain of the company's property

was returned to local assessors and assessed at $52,830.02. All of its property is situated in Osage and Washington counties, Oklahoma, and the total value of its stock, including all its property, tangible and intagible, on February 1, 1911, was $500,000.00.

The property returned to the Board of Equalization and to the local assessors did not include the lease, sub-leases, contracts and franchises of the company, but only its physical property, it being contended by the company that such lease, sub-leases, contracts and franchises were not subject to taxation.

The total value of the company's property of every kind located in Oklahoma over and above the amount locally assessed was $447,169.98 on February 1, 1911.

The gas business of the company has not been profitable but has been and is valuable as an adjunct to its oil operations.

Against the confirmation of the report of the referee the court said that the oil company made four contentions: (1) That it was not a public service corporation and that the Board of Equalization was without authority to assess its property. (2) That its oil and gas leases were not property used in any public service rendered by it. (3) That the leases were not subject to taxation in the hands of the lessee or his assigns. (4) That in exercising rights under the laws and by the act of Congress extending the lease the oil company was a Federal agency, or exercised a privilege or franchise granted by the Federal Government, and that the lease, therefore, was not subject to taxation.

The court held: (1) That the company was a public service corporation (2) That the Board of Equalization had the power to assess to the company other property than that used in connection with public service. (3) That the oil and gas lease was property and must be assessed in the name of the owner of the lease and not in the name of the lessor; and (4) That by reason of the act of Congress of 1905 the gas, oil and other minerals under the lands remained the property of the Osage Tribe, and that the power of Congress over the property could not be questioned. And, distinguishing between the property of the Federal agent and the operations of such agent, it was held "that the tax sought to be levied was not invalid because sought to be levied upon a Federal agency or upon a franchise granted by the Federal government; or because it interferes with the power of congress to regulate commerce between the Indian Tribes."

On rehearing the court modified or changed its view. The changes and the reasons for them are not easy to represent. In the first opinion the report of the referee was confirmed and it was adjudged "that the property of appellant (oil company) be assessed as recommended by the referee in his report. ' In the second opinion the report of the referee is again confirmed and the estimate of the property of the company at -500,000 held to be sustained by the testimony taken by the referee; but the reasoning of the opinions is

quite different. For a statement of the dif terence we may adopt for convenience that of the Attorney General of the State. He says, " the essential difference between the original opinion and the opinion on rehearing being that in the original opinion it was held that oil and gas leases, as such, constitute property as defined by the Constitution and statutes of the State of Oklahoma, and as such was subject to taxation by said state, while the opinion on rehearing held that oil and gas leases, as such, were not defined as personal property subject to taxation under the statutes of Oklahoma, nor by the Constitution of said state, and, therefore, could not be taxed as personal property; but that under the statutes the market value of the capital stock of said corporation could be taken into consideration by the State Board of Equaliza. tion in assessing the properties of said company and could be properly considered as an element of value in assessing said properties, and that the evidence taken before the referee as to the amount of the capital stock of said company and the market value thereof, together with its tangible assets, was sufficient to sustain the assessment made by the State Board of Equalization."

It is clear that the Board of Equalization and the referee sustaining its action proceeded upon the consideration that the leases constituted taxable property and the first opinion of the court confirming the report of the referee had its basis in the same consideration. That consideration was regarded as untenable in the second opinion but the court adhered to its former conclusion, that is, that the report of the referee should be confirmed. The Board of Equalization, the referee, and the court in its first opinion, regarded the leases as tarable entities. In the second opinion it was held that they could not be so regarded under the constitution of the State, but the court gave them effective represenation in the capital stock of the company and the latter then was taken as evidence that the value of the property of the oil company was $500,000.00. Whether the constitution of the State permits this accommodation we are not called upon to say. We are clear it cannot be permitted to relieve from the restraints upon the power of the State to tax property under the protection of the Federal Government. That the leases have the immunity of such protection we have decided.

In Choctaw & Gulf R. R. v. Harrison, 235 U. S. 292, the railroad company was the lessee of certain coal mines, obliging itself to take out annually specific amounts of coal and to pay a stipulated royalty. It proceeded ac tively to develop the mines, either directly or through its agent, and took therefrom large quantities of coal and fully complied with the obligations assumed. The State of Okla. homa attempted to tax the company under the law of the state requiring every person en. gaged in the mining or production of coal to make a report of the kind and amount produced to the actual cash value thereof, and at the same time pay to the State Treasurer

a gross revenue tax in addition to the taxes levied upon an ad valorem basis upon such mining property, equal to 2 per cent. of the gross receipts from the total production. The law held to be invalid as attempting to tax an instrumentality through which the United States was performing its duty to the Indians.

The application of the case to that at bar needs no assisting comment. A tax upon the leases is a tax upon the power to make them, could be used to destroy the power to make them. If they cannot be taxed as entities they cannot be taxed vicariously by taxing the stock, whose only value is their value, or by taking the stock as an evidence or measure of their value, rather than by directly estimating them as the Board of Equalization and the referee did. The assessment by the board was of the leases as objects of taxation, having no immunity under Federal law. This was repeated by the referee, and he made it clear that the assessment was so constituted. There was, he reports, a local assessment by the assessors of Osage and Washington counties of $52,830.02, and that the total value of the oil company's "property of every kind located in Oklahoma, over and above the amount locally assessed, was $447,169.98, on February 1, 1911," and he recommended a judgment for the latter amount. And, we repeat, there is no doubt of what elements it was composed. The gas business, he reports, was not "of itself profitable" but was

valuable as an adjunct to the company's oil operations."' He was explicit as to what the stock of the company represented, saying that "the total value of said company's stock, including all its property, tangible and intangible, on the first day of February, 1911, was $500,000.00.'' It is manifest, therefore, when the court took the stock as evidence of the value of the property of the company the court took it as evidence of the value of the leases and thereby justified their assessment and taxation. This, for the reasons we have stated, was error.

It follows from these views that the assessment against the oil company, SO far as it included the leases, whether as separate objects of taxation or as represented or valued by the stock of the company, is invalid.

(Judgment reversed and case remanded for further proceedings not inconsistent with this opinion.)

ROYALTY INTEREST NOT TAXABLE

Royalty interest of oil production in school districts is not taxable, but the treasurer of the district should make a report to the state auditor just as if the tax would be collected, is the opinion rendered from the attorney general's office to Auditor Howard. While the fact that royalty interest is not taxable is pretty well understood, the attorney general believes that it would be better, so that a perfect check might be kept, that district school treasurers make a report just the same as if the tax was charged and collected.

(APRIL 5, 1916)

DIVISION No. 1.

Commissioner Collier-H.

B.

Lockett V. Theo. Maxfield company, Oklahoma county court; reversed and remanded.

Commissioner Rummons-M. V. French et al. v. Premier Petroleum company, Nowata district court; reversed and remanded. A. D. Clark v. First National Bank of Marseilles, Ill., Tulsa district court; affirmed.

Orders of Division No. 1-Deming Investment company v. W. C. Hoover; dismissed by plaintiff in error. Rock Island Railroad v. J. G. Davis; dismissed by plaintiff in error; Estate of Cornelia Folsom, petition for rehearing denied. R. M. Mountcastle v. Cora Miller; stricken from April assignment according to stipulation; M. K. & T. v. Dux Dabney; plaintiff in error given ten days from March 30 to file brief according to stipulation. Hen. ry Wilmering v. W. W. Hinkle, plaintiff in error; allowed until April 6 to file brief. Fidelity Mutual Life Insurance company v. Anna Dean et al, petition for rehearing denied. Betsey Colbert v. W. H. Higginbotham, petition for rehearing; denied. Alpha Rivers, Anna Campbell, Myrtle Lane and Elsie Roads v. School District No. 51, Noble county; all cases consolidated and petition for rehearing denied. A. M. McClennan v. Charles Ehrig, petition for rehearing denied. B. B. Eoff, sheriff, v. A. Lair; petition for rehearing denied. Dr. Koch Vegetable Tea company v. William Davis; motion to reinstate case denied. American Home Life Insurance company v. Citizens Bank of Headrick; stricken from April assignment according to stipulation. Rock Island v. Fred Brockmeier; sticken from April assignment according to stpulation.

DIVISION No. 2.

Commissioner Burford-Rock Island Railroad v. E. A. Schands, Pottawatomie county superior court; affirmed. Home Insurance company of New York v. Tennie and B. E. Mobley, Carter county district court; affirmed. E. J. Albright et al. v. M. G. Wiley, administrator, Texas county district court; reversed.

Commissioner Galbraith-L. B. Campbell v. Anna Dick et al., Craig county district court; affirmed. Tams Bixby v. R. R. Cravens, et al., Muskogee county district court; affirmed.

DIVISION No. 3.

perior court; reversed and remanded. Commissioner Bleakmore-A. W. Anderson v. A. W. Kelly, et ux., Major county district court; affirmed.

Orders from the Division-Eckles v. Reeburgh, plaintiff in error given ten days to file brief; defendant in error 20 days thereafter to file answer; D. C. Pryor v. Western Paving company et al., transferred to supreme court; Rice Stix C. G. company v. W. C. Lee et al., plaintiff in error, allowed to file brief out of time; defendant in error given 20 days to file answer brief; J. W. Graves Co. v. C. W. Ester, permission given to withdraw case-made to be corrected under direction and supervision of the trial court within 30 days from this date; Sam Horton v. Prague National Bank; plaintiff and defendant allowed to file typewritten briefs; cause transferred to supreme court; M. K. & T. Ry v. Marcus L. Taylor, stipulation as to filing briefs granted; motion to strike from assignment denied; A. H. Baughman v. Charles T. Heberd; plaintiff in error given until April 11 to file briefs and defendant in error until April 26 to file answer brief. In the matter of the estate of W. L. Byars, deceased, dismissed as per stipulation; Davidson v. Ardmore State Bank, petition for rehearing denied; Central Exchange bank v. O. D. Williams, petition for rehearing denied: Sinopoulo Oil company et al. v. Thomas A Bell et al., plaintiff in error 30 days after the motion to dismiss has been passed on in which to file brief; defendant in error 20 days thereafter to file answer.

DIVISION No. 4.

Commissioner Matthews-W. M. Standley and A. B. Deming v. Lee Cruce and other members of a former board of equalization, Logan county district court, affirmed; C. J. Pendergraft et al. v. Sarah J. Phillips, Oklahoma county court; affirmed.

Division Orders-Frisco and Samue! L. Fivecoat v. Mizzie Williams, motion for rehearing denied; Van Arsdale-Osborne Brokerage company v. R. L. Riner, et al, motion of defendant for rehearing denied; T. J. Herron v. J. F. Harbour, motion of defendant for rehearing denied; Continental Gin company v. Ira L. Arnold, motion for rehearing granted.

COURT ORDERS APRIL 5, 1916 Commercial National Bank v. S. A. Phillips. Motion to dismiss appeal overruled.

E. E. Doggett v. Anna E. Doggett. Motion for suit money overruled.

State v. Chickasha Cotton Oil company et al. Motion to dismiss overruled.

State et al. v. Chickasha Cotton Oil company, et al. Motion to dismiss overruled.

Southwestern Surety Insurance company v. J. Ramsey Davis. Petition for rehearing overruled.

Sarah Henley, nee Taylor, v. Fred W. Davis,