Untitled Texas Attorney General Opinion

’ I.:? OFFICE OF THE ATTORNEY GENERAL OF TEXAS iI I AUSTIN j <TJ -o.uAml -a-

Hon. Fred Erieman Criminal Diatriot Att&ney Gregg county Longview, Texae Dear Sir:

any liable for taxes on inten-

rully 0onsidereU your tment upon the above a confined to a dieous- e the eubjeot matter of thin the jurisdiction

provisions from the Aot as follows~ Yk’he oorporation * * * shall be exempt from all ,tazazion now or hereafter imposed by the United Stetee, or by any state, oouuty, munloipality, or looal taxing authority; exoept that any r~eal property of the corporation shall be subjeot to Stats, Territorial, County, munioipal, or loaal taxatiod to the am extent acoording to its value aa other real property ie taxed.

Eon. .Fred Plsiuan, page g

*he exemptions provided for in the preoodiug senteuoe with respeot to taxation * * * #hell be oonrtrued to be applicable not only with rsapeot to the Fieoonrtruction Finanoe Oorporatlon but also with respect to the Defense Flaut Corporation, the Defense Supplies Corporation * * * and any other aorporetion heretofore or hereafter organized or oreeted by the Beoonstruotion yinanoe Corporetian under Seotlon 5d of this Aot, ae amended, to aid the Government*o$ $he United States in it.8 National derenee program vgueh exemptions ahall aleo be oonstrued to be epplioeble to * * * personal property owned, by the Reoonstruotion Finance Corporation or by any oorpore- tion referred to iu * * * the preceding sentenoe, but such exemptions ehall not be oonstruea to be nppli- oable in any State to any building whioh are oonsldered by the lawa of auoh State to be personal property for taxation purp0ess.v We also are in receipt of a right of way easement oonveyed by Gaines T. Shmlta to Defense Flaut Corporation, whioh yoi.1 advise is the type of instrument beiug used gener- ally. In this oonneotion, you also advise that the deed conveyingthe prpperty in fee, upon whioh said propertJ, storage tanka and pumping equil;caent are looated, is ala0 nede to the Defense Plant Corporation. The pertinent @or- tlone of the right of way easement are as followa: “K?W#ALLI.fEN BY T!E3EI’RESlWTS: That Gainee T. ShOulIa, a single man Of the poetofri0e of Headquartera Division, Freeidio, California, in the State of Celi- fornia for and in consideration of Eighty-three aud SO/100 ($83.60) Dollars Cash in hand paid, receipt of whioh la hereby aoknowledged, do hereby grant, bargain, sell aud oonvey unto Defense Plant Corporation, a oor- poration controlled by the United States of Amerioa and created pursuant to Seotion Sd of the Reoonatruotion Finance Corporation Act, as amended, and its auccesaoro and aasfgns the right to lay, operate, renew, alter, inspect and maintain a pipe line for the trauaportatlon of oil, gas, petroleum produots or any other mteriel or substanae ‘uhioh oan be tramported through a pipe line, or any one or ::lore of said substances, Grantee selecting tile route upon, over, under and throu& the following described land situate in the County of Gregg, State of Texaa:

(Eere follows desoription)

350 Hon. Fred ETlsman, page 5

*and also the right, upon the payment of the llks oon- sideration, to lay, operate, renew, alter, inspeot and maintain a seoond pipe line for like transportation, adjabent to and parallsl with the first pipe line; and Grantee at any and all reasonable times shall have tfie right of ingress and egress to and from such pipe lines, sod may r8move the same in whole or in part at will. *TO ABATE ANDTO HOLDthe said easements unto said Defense Plant aorporation, its sucosssors and assigns, so long as such structures or any thereof are meinteined. *By eoceptanoe hereof, Grantee agrees to bury such pipe line so that they will not interfere with the cultivation or drainage of the land and also to pay any and all damages to stook, crops, fences and land whioh may be suffered from the oonstructlon, operations, renewal, inspeation or maintenenoe of auoh pipe lines." %e have been unable to find any federal rtatuts which defines *real pr0i:erty.v Therefore, for the purposes of this opinion, we shall give tha term Its usualmeaaing. In the Ytate of Texas real proporty for the pur- pose of taxation is defined by Artiole 7146, Vernon's Anno- tated Civil 3tatutes of Texas, whioh reads as followst %osl proprty for t?,e purpose of taxation, shall be oonstrued to inolude the land itself, whethar laid out in town lots or otherwise, and all buildings, struo- tures and improvements, or other fixtures of whatsoever kind tharees, and all the rights and 5Wivileg88 belonging or in any w&ae appertaining thereto, and all mines, mln8r8l.8, quarries and fossils in and under the sa-ae.” An easement is an Interest in land. It is so stated in PR C. J. S. 620. The Texas decisions are in aooord with this doctrine. '&-fastv. Gieaen, 242 3. W. 312, writ of error refused. *An easement in land Is an interest ln land and therefore is land.* Burgess v. city and County of Dallas Levee Improvement Dietriot, 155 3, X. (2d) 408, writ of error refused.

351 loll.rred Eriaasaa,Pago 4

In view of the foregoins quoted authorities, in 0~ opinion the easement is taxable au real properg. The easemeat referred to being real property, we now oome to a oonsibaration of whether the pipe line haa become a part of the realty, 1. e., the easement. In this ~onnedtion, it should be noted that there is not involre$ in the inetant situation a landlord-tenant relationship, nor la there Involve4 a mortgagor-mortgagee relationship. It la to be noted that the instrument oonveying the right of way for the pipe line contains this stipulation, *Grantee map remove the 881&ein w-hole or in gart at will.* Said rtipulation has reference to the pipe lines whloh it is oonteinplated will be put in the ground by the grantee. ~..-~--It is obvious that the pipe line, prior to the time the pipe was plaoed in the ground, was personal propertY. Upon being plaoed in the ground, if it beoame a *fIxturea then It beoams real roperty and la taxable as aueh. If it

did not beoome a fix kr e, then of oourae it would retain its 8tatua as personal property. In the ease of Rutohins v. Kaataraon, deaided bY otx Supreme Oourt at the Galverton term in 1879, and reported In 46 Texas Reports 861, Mr. Aaeooiate Justlae Xooro had this to say: "The word frirture*,ir a legal term, whioh Lord Oampbell seems to doubt, it Is universally oonoeded, la, 68 a aubatautlve term, or modern origin. hi, an ha8 been frequently said, there is no other legal term in so general uae to whioh there haa been more different and aontradiotory eignlrioetione attaohed. (-11 on Mxtures, 8&) To a great Begree, this has been oooadioned by the different standpoints from whioh the questions touohlng its applioation have been viewed: the relation of the perties regarding it, the degree of fixedness of the property involved, and the purpose or intention with whioh the a.rtio~Ie in question was annexed to or plaoed upon the land. The neoessPry oonsequence of this absenae of certainty and uniformity in the use of the ~0x6, has ocoasioned confusion and

oonfliot in the dealsions on the subjeat, in reepeot to the rights of parties interested in ita determina- tion In the great number of oases in whioh, in reoent times, it h~asbeen under dfeoueaion; and eapeoially in referenae to the proper teats for determining whether the particular artiole in. question should be regarded as a fixture or not, *It is said, the weight 0r the modern authorftlee establish the dootrine that the true oriterion ror determining whether a ahattel has beoome an immovable fixture, oonaUts in the united application of the following tests: "lat. Has there been a real or construotive annexation 0r the artlole in question to the realty? "2d. Was there a fitness or adaptation of aueh artiole to the uaea or purpoaea of the realty with which it la oonneoted? *al. Whether or not It was the intention of the party ~maakiwthe annexation that the chattel should beao=k a permanent aoeeasion to the rreshold?-this intention being inferable from the nature of the article, the relation and situation of the parties inter~eted, the pollay of the law in respeot thereto, the mode of annexation, and purpose or uae for which the annexation is nade. W&ndof these three teate, pre-eminence is to,be given to the question of intention to make the article a permeaent aoceaaion to the freehold, while the othere are o?~ierlyof value as evldenoe as to thia intention. @well on Fixtures, 21, 22.) *IIt is also to be noted, that ow.'ng to the greater relative imI#ortance and valuenow attached to chattels than rorserly, end, in the interest of manufacture and oommerce, a muoh more liberal rule bee been adopted, in determining whether or not chattels whioh have been plsoed upon land by'lessesa an8 tenants are permanently annexed to it, than once prevailed. It is well BeStled

c.

Fred Eciaaan, page 6

however that there has bean no such modification in the ancient rule, in the abamoe of eridenaa of lnton- tion to vary their rights, a% botnean grantor and grantee. (8 Kent, 545; Kinsill v. Billi~a, 35 Iowa, 154; De 5rarrenreid v. Stubba, 4 Humph., 451.)" The ease of Yaro Co., Ino., v. State, US S. Iv. (2d) 510, decided by our Court of Civil Appeal8 at Aemrillo in January, 1943 rehearing denied Febrmry 15, 1945, and in which 0-e nit or error wee refuaetl, rarer8 with ap- proml to the enunaiationof grinoipleaas set forth in the above quoted oaae of Hutohina v. Masterson. The oourt said irr putt @The controversyreaolrea Itself into a queaticn of whether or not the cadng, rod%, tub-, pumpa, tenk8, et& were peraonal propwrty or a part of the realty. . + . n. . .

"Arlrtiole 9146 or tha Revised Oirll Statute8 pro- vides: *Real property ror the purpaae or taxation, #hell bo oonatruod to inolude the lend it8elf, whether laid out In town lota or othmwiae, end all buildinga, etraetureaand Larprwementa,or other rixtw08 or what- aoever kind thereon, end all the rights end privllegea belonging or in w wlae app@Helniag thereto, end all mine%, minerala, querriee and foseils in end under the Bame.' *In this conneotion, it aecma that the *buildingcl, atruoturea and improvements, or other fixturea of what- aoever k!.nd thereon* applisa to the improvement% pleas4 on the aurraoe of realty but that acme does not appu to 'all minea, minerals, quarries and foeails in and under the ame.' "It does not eeem that the rule is changed by the provieionr of article 9319, R. C. S.,~ich provider an r0ilara t *For the purpoee of taxation,reel property shell lnalude all lends, within this State, end all bulldinee and fixtttrea'thereon and appertaining thereto, except such as ere exi.u%esly exempted by law.'

354 ---

"Appellee tries to make a distinction between the rule making aooe8roriesor applianoea suoh aa theae a part of the realty for taxable purposes and any other rul.es governing the question ot whether such appliances or aooessoriar are personal property or a pert of the realty. After naking an exhaustive researoh we have failed to rind any dietihotion or any difierenoe in the rule8 applicable in suoh oases. *A good teat and a true oriterion whioh is orten followed to detsrmlne whethar proysrty Is peraonal or real 18 laid down in the oaae of Fiutohins. Y. Waatsraon dc Street in 46 Tex. 651, 664, 66 Am. Rep. 666, aa fol- lowat w*lat. Baa there be8n a real or conetruotite annera- tlcn of the artiols in queetlon to the realty? *‘2d. BDaathere a iitnesa or adaptation of suah artiole to the uses or purposes of the realty with whlah it 1.3 aonneotea? l'6d. mether or not it wea the intentLon of the party msk-int, the annexation that the chattel should beoome~a"permanant aocasaion to the rreaholdT-thlr intantion bedng inrerable from the nature of the utlole, the relation and situatlan of the parties interested, the polioy of thalaw in respaat thereto, the mode of annesatlon, and purpose or use for whloh the annexatian 18 ride. **And of these three testa, pre-eminence Is to be given to the questfon of intention to make the artiole a permanent aaceasion to the rreehold, while the other8 are ohfeily of value as evldenoo as to this intention.1 *mile appellant contends that the orip,inel leeee- hold in guestion here from V:. T. Zaggoner to Barkley lb keadows provided that the oe&ng, roda, tubing, tanks, eta., may be renovad by the lessee irom the leasehold, we find only a small part of said lease In the reoord in this case and such a provlafon, ii made, was not contained in that part of the leesehold in the reoord.

355 r

However, it stands to reason that the intention of the partiee to the original lease sontreet wmld be to place the oaeing,rods, tubing and evsn the pump6 and tanks on suoh a leasehold tor temporary use only with the full intention of removing the% onto other leases ii desired, and certainly in oaseproduotlon beoame unprofitable es was the ease with the leasehold iA queI3tiOn.

The applloable rules are also stated in 86 0, J. 3. 89%. aa roilore I . Prdinarily the courts hold that Gor an arti& ;o beoams a tlrture thare must anlte the rollon- ing requisites: (1) annexation to the realty or something appurtenant thareto; (a) adaptability or appliaation oi the ahattel airlxed to the use or purpoee to whioh the realty is appropriatsd; and (3) the iatsntion or the party making ths aanexetfon to msJce a perrnaaent asoes- 810~ t4 the fr ehold.* lfhe requieit abeled “(I)* above is perhapa eaal4 eatleried. Aooorrliq \ to e t6ZnII ab the iAStraPl6At OOAvayiAg the right of way, the grant&s weeo to burr the pipe line Ln the ground below plow depth. Bequiolte "(2)" ia apparently uatlsriea ror the reason that the easement was aoqulred on4 for the purpoae Or maintaining a pips line, or possibly two pips lines, aorQa8 the lend in question. IA rsaent years mere and more weight has been gfrea to requisite v(3)*, until it is AOWregarded as the major test in determining whether ar not parsonal property has beaome a rixture. As stated in the ieregoing Texas deaisions, *And of these three tests, pre-eminence is to be given to the question of intention to make the'artlale a permanent aooession to ths freehold while the others ars chiefly of value as evidenoo a8 to this iAtaAtiQA.*

Hon. Fred Erieman, page 9

The only eridenoe of the intention of' ths partiss with rsspeot to whethar or not they Intend ths pipe line In question to beomne a fixture is the above quoted exoerpt from thee oonrepine instrumant, where it is reoited that the grantee *may remove t?!e same (meaning the pipe line) in whole or in part at will,* Absent other and oontrolling svldanoe eatablloblng sn lntantion of the parties to make the pips line a fixture, we would be oonatrained to say that ths pips line is not a fixture but is personal property and tharsfore not subjest to being taxed as real property. In our opinion the pumping equipment Is a part or the realty. It Is losated on property owned In fse. by Ds- fsnse PlantAorporation. wa hare baon plaosd In poaaaa8ion of no fam whloh lndloate the pumping equlpmsnt was not .intendedby the parties ts become a part of' the realty. A number of deoieions support the propsaltion that pumping eqtiwnt beoomes a part of the realty when annbnd tJmreto. (See Blain Y. Corbin, 51 Ga. App. 498, 180 S. E. e54; First State h 8aringa Bank T. Olirsr, 101 Or. 49, 198 P. 990~ Bell v. Bank of Perrle 58 Cal. Afir, (ad) 66, 185 P. (9d) 829; Rlnbrand well Dri&ing Co., ., t. L. h 3. Thsatres, Ino., 80 A. (ad) 35.8.)~ ,' We also are of the.oplnion that the buildings inquired about are taxable as real property. Although in the great majority of oases the burden of proof is upon one aseertlng that the olrou.matanoes of annexation of ger- sonalty to realty are such as to make the article a part of the realty, such is not the oase with buildings. Build- ings ars presumed to be a part of the realty. 36 Cf. J. 3. 1006-1008.

Yours very truly GPB:AkW