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Lessor hereby warrants and agrees to defend the title
to said land and agrees that Lessee at its option may
discharge any tax, mortgage or other lien upon said
land, either in whole or in part, and if Lessee does
so, it shall be subrogated to such lien with right to
enforce same and apply rentals and royalties accruing
hereunder toward satisfying same. * * *
This provision addresses a situation where the lessor would be
responsible for a third-party lien; e.g., where the lessor failed
to discharge a tax or mortgage obligation. Under those
circumstances, Exxon, as lessee, would be entitled to satisfy the
third-party lien and become subrogated to the third-party's
rights against the lessor. Thus, the provision does not
contemplate a situation such as the instant one. Indeed, we note
that in the complaint filed against the interest owners in the
Jarvis Christian litigation, Exxon never claimed that the
provision was applicable to the litigation.
Finally, petitioner contends that the opinion of the Court
of Appeals for the Ninth Circuit in Propstra v. United States,
supra, supports its position that it is entitled to a deduction
on its Federal estate tax return in the amount claimed. In
Propstra, at the time of his death, the decedent's property had
been encumbered by liens of the Salt River Valley Water Users
Association (Association) for past due assessments and penalties.
The Association's bylaws denied it the power to adjust the
claims. The estate's executrix deducted decedent's one-half
share of the liens on the Federal estate tax return. Twenty-two
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