Wyoming Supreme Court Justices Disagree: Were Tax Assessments of Minerals Constitutional?

As noted in a prior blog post, Wyoming’s Supreme Court Justices agree most of the time. In fact, in 2016 more than 95% of the Court’s orders and opinions were unanimous. This post highlights a recent disagreement between the members of the Wyoming Supreme Court in the case of Anadarko Land Corp. f/k/a Union Pacific Land Resources Corp., and Three Sisters, LLC v. Family Tree Corporation, 2017 WY 24, 389 P.3d 1218 (Wyo. 2017) concerning a 1911 tax assessment that changed–or did it–the ownership of minerals in 2017.

This case features the appeal of a district court decision upholding the validity of a 1911 Laramie County tax assessment against minerals owned by Anadarko Land Corporation’s (“Anadarko”) predecessor-in-interest¹. Anadarko’s predecessor, the Union Pacific Railroad, acquired the mineral interests at issue in a Patent issued by the United States in 1901. In 1911, Laramie County assessed taxes on these unproduced minerals. Anadarko’s predecessor did not pay the assessed taxes, and Laramie County put the mineral interests up for bid at a tax sale. When no bids were made for the mineral interests, Laramie County acquired the minerals and then, by a tax deed in 1919, sold the mineral interests to Iowa Land & Livestock Company. At this point, two divergent chains of title emerged. One chain derived from Anadarko’s predecessor and the other from the Laramie County tax sale

On June 24, 2014, Family Tree Corporation (“Family Tree”) filed a quiet title action arguing that Anadarko and Three Sisters had clouded its title to the mineral interests at issue. Anadarko and Three Sisters responded by arguing that the 1911 tax assessment of the minerals in place and subsequent tax sale was unconstitutional and invalid, making the 1919 tax deed void ab initio. The district court found that “while modern law would not allow taxation of minerals in place, Laramie County’s taxing authority was much broader under Wyoming law in 1911.” Id. at 389 P.3d 1222. Based on its analysis, the district court found that neither Anadarko nor Three Sisters had a claim to the mineral interests and quieted title in Family Tree.

On appeal, the Wyoming Supreme Court narrowed its focus to consider “[w]hat types of defects in a tax assessment will render a tax deed void?” Id. at 1224. Justice Hill, writing for the majority answered that question by stating as follows:

A deed is void-and therefore not subject to the statute of limitations-when the taxing entity lacked the authority or jurisdiction to issue it. When the alleged defect is one in the tax assessment itself, we will find a lack of authority or jurisdiction on the part of the taxing entity only if there was a total want of jurisdiction, meaning there was no arguable basis for jurisdiction and the tax assessment was a clear usurpation of power.

Id. at 1231. Based on that holding, the Wyoming Supreme Court found that the 1911 tax assessment was valid because it was not a clear jurisdictional error, but merely an “error in the manner of taxation-in the when and how of the assessment.” Id. at 1230. Thus, the Wyoming Supreme Court affirmed the district court’s judgment.

Justice Fox was the lone dissenting member of the court. In her dissent she notes that she would have found the tax deed void because:

… Article 15, § 3 of the Wyoming Constitution prohibits the taxation of minerals in place; and it meant the same thing in 1911, even though it may have been misunderstood at that time. To the extent there were statutes in 1911 which may have authorized taxation of minerals in place, they were unconstitutional.

Id. at 1231 (citations omitted). Further Justice Fox states, “[h]ere the county completely lacked authority to tax minerals in place. There was no arguable basis for jurisdiction and the tax assessment was a clear usurpation of power.” Id. For this, and other reasons, Justice Fox would have held the tax deed to be void and would have quieted title in Anadarko and Three Sisters.

This case showcases another rare example of disagreement on the Wyoming Supreme Court. The decision is also significant because of the frequency with which issues related to tax titles and certainty to title in minerals are raised in the natural resource dependent state of Wyoming.  The full text of the opinion can be found on the Wyoming Supreme Court’s website.

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 ¹The district court also upheld the tax sale and tax deed that emanated from the failure to pay taxes as assessed in 1911.