BOARD OF COUNTY COMMISSIONERS, ETC. v. Seber

MURRAH, Circuit Judge.

The appellees, as un-enrolled full-blood Creek Indians, instituted this suit in their own behalf against the duly constituted officials of Creek County, Oklahoma, a municipal corporation, to recover ad *666valorem taxes and penalties theretofore paid, plus 6% interest from the date of payment; for cancellation of the assessed and unpaid taxes, and for a judgment declaring the nontaxable status of certain lands located in Creek County, Oklahoma, of which they were the grantees from their mother, Wosey John, now Deere (since deceased), a full-blood enrolled Creek Indian. The lands in question were purchased for and on behalf of Wosey John, now Deere, by the Secretary of the Interior from non-Indian owners1, out of accumulated trust or restricted funds derived as proceeds from oil and gas produced from the restricted allotment of the said Wosey John, now Deere, pursuant to Section one of the Act of May 27, ,1908, 35 Stat. 312.

One parcel of land purchased on December 11, 1915, consisted of property located within the city limits of Sapulpa, Oklahoma ; one tract purchased March 24, 1920, consisted of 7% acres of agricultural land; and another tract purchased December 8, 1927, consisted of 80 acres of agricultural land, all located in Creek County, Oklahoma. Each of the deeds to Wosey John, now Deere, contained a provision restricting the land against alienation or encumbrance unless approved by the Secretary of the Interior, or unless otherwise provided by law.

On March 4, 1931, the said Wosey Tohn„ now Deere, in consideration of “$1.00 and love and affection”, and with the consent and approval of the Secretary of the Interior, conveyed all of the lands in question to her children and heirs (appellees here), reserving unto herself a life estate in the lands, together with the rents and profits therefrom. The deed of conveyance contained a provision against alienation or encumbrance unless approved by the Secretary of the Interior, with a further provision in the habendum clause as follows: “To have and to hold said described premises, unto said grantees, their heirs and assigns, forever, free, clear and discharged of all * * * taxes, judgments, * * * and other liens and encumbrances of whatsoever nature * * * ”.

Thereafter and on December 10, 1937, in consideration of “$1.00 and love and affection”, the said Wosey John, now Deere, conveyed her life estate, heretofore reserved in all of the land, to the appellees. The conveyance was not approved by the Secretary of the Interior, but the Superintendent of the Five Civilized Tribes certified that the land in question was purchased for the appellees to be held in trust by the United States of America for their benefit by virtue of their being full-blood Creek Indians, not enrolled, and that the deed was executed and approved pursuant to the Act of May 27, 1908, supra. On December 16, 1937, the appellees executed a certificate designating the agricultural lands, consisting of 87% acres, as their homestead. The said certificate was approved by the Secretary of the Interior on March 24, 1938, and duly filed in the office of the county clerk of Creek County, Oklahoma.

Prior to 1936, all the lands in question, whether held in the name of Wosey John, now Deere, or her children (appellees here), were subject to taxation by the State of Oklahoma and its political subdivisions, McCurdy v. United States, 246 U.S. 263, 38 S.Ct. 289, 62 L.Ed. 706; United States v. Gray, 8 Cir., 284 F. 103; United States v. Ransom, 8 Cir., 284 F. 108, Id., 263 U.S. 691, 44 S.Ct. 230, 68 L.Ed. 508; see, also, Shaw v. Gibson-Zahniser Oil Corporation, 276 U.S. 575, 48 S.Ct. 333, 72 L.Ed. 709, and apparently taxes were levied, assessed and collected on the said lands as unrestricted and nonexempt lands in Oklahoma.

The appellees paid the ad valorem taxes and penalties levied and assessed against all the lands in question for the taxable years 1936 and 1937, and the taxes and penalties levied and assessed against the agricultural land (which had been designated as a homestead on December 16, 1937), for the taxable year 1938, and a part of the taxable years 1939 and 1940. The Creek County officials levied and assessed taxes against all of the property, including the homestead, for the taxable years 1940 and 1941, and assert the power to continue to levy and assess taxes against all of the lands in question, and to collect the taxes by sale as provided by the laws of Oklahoma.

Effective Tune 20, 1936, Congress passed an Act (Public No. 716, 49 Stat. 1542), “To relieve restricted Indians whose lands have been taxed or have been lost by *667failure to pay taxes, and for other purposes”. By Section one of the Act, Congress appropriated $25,000.00 to be expended under rules and regulations prescribed by the Secretary of the Interior for the payment of taxes, penalties, and interest, assessed against individually owned Indian lands, the title to which is held subject to restrictions against alienation or encumbrance, except with the consent or approval of the Secretary of the Interior, and heretofore purchased out of trust or restricted funds of an Indian, where the Secretary finds that such land was purchased with the understanding and belief on the part of said Indian that after purchase it would be nontaxable, and for redemption or reacquisition of any such lands heretofore or hereafter sold for nonpayment of taxes.

Section two of the Act provides, “All lands the title to which is now held by an. Indian subject to restrictions against alienation or encumbrance except with the consent or approval of the Secretary of the Interior, heretofore purchased out of trust or restricted funds of said Indian, are hereby declared to be instrumentalities of the Federal Government and shall be nontaxable until otherwise directed by Congress”. (See Senate Report No. 2168, 74th Congress, Second Session. House Report No. 2398, 74th Congress, Second Session).

After passage of the Act of June 20, 1936, supra, it was found that the provisions of Section two thereof would apply to lands and other property purchased by restricted Indian funds which would exempt from taxation vast quantities of property, such as business buildings and farm lands which were not homesteads, and would consequently place an unfair burden upon taxable lands included within the taxing jurisdiction. Accordingly, the Commissioner of Indian Affairs appeared before the Senate Committee on Indian Affairs and suggested an amendment to the Act of June 20, 1936, supra. (See Senate Report No. 332, 75th Congress, First Session). Accordingly, the Act of May 19, 1937, Public No. 96, 50 Stat. 188, 25 U.S.C.A. § 412a, amended Section two of the Act of June 20, 1936, supra, to read as follows: “All homesteads, heretofore purchased out of the trust or restricted funds of individual Indians, are hereby declared to be instrumentalities of the Federal Government and shall be nontaxable until otherwise directed by Congress: Provided, That the title to such homesteads shall be held subject to restrictions against alienation or encumbrance except with the approval of the Secretary of the Interior: And provided further, That the Indian owner or owners shall select, with the approval of the Secretary of the Interior, either the agricultural and grazing lands, not exceeding a total of one hundred and sixty acres, or the village, town, or city property, not exceeding in cost $5,000, to be designated as a homestead”.

Tax immunity as to all the lands involved is asserted for the years 1936 and 1937 under the provisions of Section two of the Act of June 20, 1936, supra, while immunity is claimed on the designated homestead only for the years 1938, 1939, 1940 and thereafter, under the provisions of the amendatory Act of May 19, 1937, supra. The principal question for decision is whether all the lands are exempt from ad valorem taxation under the Act of June 20, 1936, supra, for the period during which the said Act is applicable; and whether the designated homestead is exempt from taxation under the amendatory Act of May 19, 1937, supra, for the period during which it is applicable. Subsidiary to the principal question is the determination of the taxable period during which the original and the amendatory acts are applicable to the lands involved.

The trial court sustained the contentions of the appellees, gave judgment for the amount of the taxes and penalties paid, plus 6% interest from the date of payment; cancelled the assessed but unpaid taxes and penalties as illegal and void, and perpetually enjoined the taxing authorities (appellants here) from further levy or assessment of ad valorem taxes on the designated homestead. D.C., 38 F.Supp. 731.

On appeal, as below, the jurisdiction over the subject matter is challenged for lack of diversity of citizenship, but clearly, the controversy involves the validity, construction, or effect of a law of the United States, upon the determination of which the result depends. The right or immunity asserted here is such that it will be supported if the law is given one construction and effect, and defeated if it receives another. Shulthis v. McDougal, 225 U.S. 561, 32 S.Ct. 704, 56 L.Ed. 1205; Gully v. First National Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70. The requisite amount in controversy is present and the court had jurisdiction of the sub*668ject matter regardless of diversity of citizenship.

The constitutionality of the acts involved here is also challenged on the grounds that Congress is without power, under the Federal instrumentality doctrine, to create a tax-free instrumentality from otherwise taxable lands by purchase of the same with trust or restricted funds of a restricted Indian, and by prohibiting their alienation without the consent and approval of the Secretary of the Interior.

Undoubtedly the Secretary of the Interior was authorized to purchase the lands in question from the trust or restricted funds of Wosey John, now Deere, and to restrict their alienation or encumbrance without the Secretary’s consent and approval. Section one of the Act of May 27, 1908, supra; Sunderland v. United States, 266 U.S. 226, 45 S.Ct. 64, 69 L.Ed. 259; United States v. Law, 8 Cir., 250 F. 218; United States v. Brown, 8 Cir., 8 F.2d 564; United States v. Goldfeder, 10 Cir., 112 F.2d 615. Likewise the Secretary of the Interior was authorized to approve the conveyance from Wosey John, now Deere, to her full-blood restricted children, subject to the same restrictions, and the said lands retained their restricted character in the grantees. Clinkenbeard v. United States, 10 Cir., 109 F.2d 730, and Act of January 27, 1933, 47 Stat. 777.

Aside from the historically paramount power of Congress to legislate for and on behalf of its Indian wards, United States v. Kagama, 118 U.S. 375, 6 S.Ct. 1109, 30 L.Ed. 228; Cherokee Nation v. Hitchcock, 187 U.S. 294, 23 S.Ct. 115, 47 L.Ed. 183; United States v. Rickert, 188 U.S. 432, 23 S.Ct. 478, 47 L.Ed. 532; Tiger v. Western Investment Company, 221 U.S. 286, 31 S.Ct. 578, 55 L.Ed. 738; Choate v. Trapp, 224 U.S. 665, 32 S.Ct. 565, 56 L.Ed. 941; United States v. Wright, 4 Cir., 53 F.2d 300, the State of Oklahoma, has by acceptance of statehood under Section one of the Enabling Act (Act of June 16, 1906, 34 Stat. 267), conceded the power and authority of the United States government to make any law or regulation respecting Indians, their lands, property, or other rights by treaties, agreement, law or otherwise. Tiger v. Western Investment Company, supra; Ex parte Webb, 225 U.S. 663, 678, 32 S.Ct. 769, 56 L.Ed. 1248; United States v. Sandoval, 231 U.S. 28, 48, 34 S.Ct. 1, 58 L.Ed. 107. The State of Oklahoma has recognized the paramount jurisdiction of the Federal Government to legislate for and on behalf of its Indian wards with respect to lands located within state boundaries. Gleason v. Wood, 28 Okl. 502, 114 P. 703, 705; McIntosh v. Dill, 86 Okl. 1, 205 P. 917; Wynn v. Fugate, 149 Okl. 210, 299 P. 890; Mashunkashey v. Mashunkashey, Okl.Sup., - P.2d -1 decided September 29, 1942; United States v. Board of Commissioners of Osage County, D.C., 26 F.Supp. 270, 275. By these acts (Acts of June 20, 1936 and May 19, 1937, supra), Congress has assumed a guardianship over the affairs of restricted Indians, with respect to which it has the undubitable power to legislate and by such legislation to protect its guardianship against encroachment or impairment by the state through its taxing powers.

But the restrictions against alienation imposed by the Secretary of the Interior, in virtue of his power and duty to supervise Indians and Indian affairs, do not without more operate to effect an immunity from state taxation. Restrictions against alienation imposed by the Secretary of the Interior do not necessarily create a tax-free government instrumentality. McCurdy v. United States, supra; United States v. Gray, supra; United States v. Ransom, supra; Shaw v. Gibson-Zahniser Oil Corporation, supra; Choteau v. Burnet, 283 U.S. 691, 51 S.Ct. 598, 75 L.Ed. 1353; Superintendent Five Civilized Tribes v. Commissioner, 295 U.S. 418, 55 S.Ct. 820, 79 L.Ed. 1517; Landman v. Commissioner of Internal Revenue, 10 Cir., 123 F.2d 787. Lands allotted to individual Indians in pursuance of a treaty or act of Congress, by the terms of which it is agreed between the United States Government and the tribe, assented to. by the state, that the lands thus allotted in severalty shall remain tax-free for a stipulated period, creates a vested property right in the individual allottee which neither the national nor state government may impair or invade. It is a vested property right protected by the constitution, and any attempt to invade or impair will be judged in the light of the treaty obligations of the United States, and especially in the light of the obligation which the United States Government has historically assumed in relation to its intercourse with the Indian tribes. Act of June 28, 1898, 30 Stat. 495, 507; *669Act of May 27, 1908, 35 Stat. 312. United States v. Thurston County, 8 Cir., 143 F. 287; United States v. Rickert, supra; Carpenter v. Shaw, 280 U.S. 363, 50 S.Ct. 121, 74 L.Ed. 478; Choate v. Trapp, supra; Ward v. Board of County Com’rs of Love County, 253 U.S. 17, 40 S.Ct. 419, 64 L.Ed. 751; Bryan County v. United States, 10 Cir., 123 F.2d 782.

But unlike lands allotted in severalty to members of the Five Civilized Tribes, under an agreement or treaty, providing for immunity from taxation until removed by the terms of the agreement or treaty, tax immunity here depends upon the express will of Congress, and must be found within the plain terms of the legislation relied upon to effect the exemption. Shaw v. Gibson-Zahniser Oil Corporation, supra. By the Act of June 20, 1936, as amended by the Act of May 19, 1937, supra, Congress has plainly expressed a purpose to protect lands purchased with trust or restricted funds of a restricted Indian so long as the said lands are restricted from alienation without the approval of the Secretary of the Interior, and to effect that purpose, Congress has declared such lands to be instrumentalities of the Federal Government and exempt from taxation until otherwise directed by Congress. The history of the legislation, as well as the text of the acts, indicates quite clearly a Congressional purpose to fulfill its obligation to this particular class of Indians arising out of an erroneous assumption that the restricted character of the lands in question operated to create a tax-free instrumentality by necessary implication. See McCurdy v. United States, supra; Shaw v. Gibson Zahniser Oil Corporation, supra; United States v. Ransom, supra; United States v. Gray, supra; Landman v. Commissioner of Internal Revenue, supra; Superintendent Five Civilized Tribes v. Commissioner, supra.

But the appellants contend that in order to come within the scope of Section two of the Act of June 20, 1936, supra, the lands must have been “heretofore purchased out of trust or restricted funds of said Indian”, and that since March 4, 1931, and particularly for the taxable years 1936 and 1937, the lands sought to be taxed were held not by the restricted Indian whose trust or restricted funds purchase the land, but by the grantees of the said Indian as a gift; that none of the lands was purchased by the restricted funds of the appellees, hence they do not come within the purview of the Act declaring a government instrumentality.

It is true that no trust or restricted funds of the appellees were invested in the lands in question. The appellees held the same as a gift from their mother, whose trust or restricted funds were used to purchase same, and it may be admitted that when considered by its technical language, without regard to its natural meaning or purpose, and without relation to the amendment (May 19, 1937), there is cause for doubt concerning the application of the original act to lands, the title to which has passed from the Indian whose trust or restricted funds purchased the same. But when, on March 4, 1931, Wosey John, now Deere, conveyed the lands to the appellees, she, by express language in the deed of conveyance, retained unto herself a life estate, together with the improvements thereon and the rents and profits therefrom. She warranted the title against judgments, taxes, liens, and encumbrances of whatsoever nature. As such life tenant, she held the dominant and taxable estate, and it was her statutory duty to pay all lawful taxes levied against the land so long as she retained the life estate. Revised Laws of Oklahoma of 1910 § 6644, 60 O.S.A. § 69; Helm v. Belvin, 107 Okl. 214, 232 P. 382; Riley v. Collier, 111 Okl. 130, 238 P. 491; Waldon v. Baker, 184 Okl 492, 88 P.2d 352; Tiffany on Real Property, Vol. 1, § 63; Rothschild v. Weinthel, 191 Ind. 85, 131 N.E. 917, 132 N.E. 687, 17 A.L.R. 1384; Thayer v. Shorey, 287 Mass. 76, 191 N.E. 435, 94 A.L.R. 311.

It follows that she is entitled to the tax immunity granted by the Act whilst she owned the dominant estate, and the appellees, as vested remaindermen, are entitled to the benefits of the tax immunity which attached to the land while Wosey John, now Deere, held the life estate therein. Since Wosey John, now Deere, retained the life estate until December 10, 1937, and until after the effective date of the amendatory Act of May 19, 1937, all the lands in question were immune from taxation for the period during which the original Act is applicable as “lands * * * heretofore purchased out of trust or restricted funds of said Indian”. When, on December 10, 1937, Wosey John, now Deere, conveyed her life estate in the lands to the appellees, and the appellees became *670obligated, to pay all lawful taxes assessed against the land, the Congress had previously and on May 19, 1937, eliminated the ambiguity provoking language contained in the original act by declaring that all homesteads heretofore purchased with trust or restricted funds of an individual Indian, restricted against alienation without the approval of the Secretary of the Interior, were instrumentalities of the Federal Government and exempt from all taxes, provided the homestead was selected in accordance with the amendment. Consequently, the homestead, when designated, is embraced within the amendatory Act of May 19, 1937, and is exempt from taxation for the period during which it is applicable. The agricultural lands were selected and designated as a homestead by the appellees on December 16, 1937, six days after acquisition of title thereto on December 10, 1937. The designation was not formally approved by the Secretary of the Interior until March 4, 1938, but we think the formal approval by the Secretary related back to the date of the designation.

The taxable year in Oklahoma is the fiscal year and begins July first and not January first. Real estate is assessable in the name of the owner thereof on January first of any year, and the taxes thus assessed are levied as of July first of the same year, which is the beginning of the current, fiscal, and taxable year. In re Texas Company’s Assessment, 168 Okl. 94, 31 P.2d 929. Real estate assessable in the name of the owner on January first of any year does not change its taxable status or become exempt from taxation for the ensuing taxable year beginning July first, because it acquired a nontaxable character between the date of the assessment on January first and the date of the levy on the following July first. Board of Commissioners of Comanche County v. Central Baptist Church, 136 Okl. 99, 276 P. 726, 63 A.L.R. 1327, as corrected In re Texas Company’s Assessment, supra, 31 P.2d page 931. The taxable status of all property in Oklahoma is fixed as of January first of each year for the ensuing taxable year beginning July first, and its status as fixed on that date is not changed by intervening circumstances affecting its taxability between the date of the assessment and the levy date. In re Assessment of Champlin Refining Company, 186 Okl. 625, 99 P.2d 880. It follows that property not assessable as of January first of any year, because exempt from taxation, is nontaxable for the following fiscal and taxable year beginning July first, although it may have become subject to taxation between the assessment date on January first and the levy date on the following July first. In re Sinclair Prairie Oil Company, 175 Okl. 289, 53 P.2d 221, 229. See, also, In re Assessment of Champlin Refining Company, supra.

The exemption granted here is based upon the power of the Federal Government to create a Federal instrumentality out of lands heretofore taxable by the State of Oklahoma, and to immunize them against state taxation. But there is nothing in the acts here involved indicating an intention or purpose to disrupt the orderly procedure by which the State of Oklahoma pursues its statutory scheme of taxation, so long as such procedure does not circumvent or proscribe the declared purpose of the national enactment. We see no reason here to depart from the orderly procedure as outlined by the state law in the determination of the period in which the respective exempting acts have application to the lands embraced within the compass of the Acts. The right to be vindicated is a Federal right, but state laws have a distinct relevancy and they are entitled to a respectful consideration. Their observance here will result in a synchronization of state and Federal law and give vitality to both, while to ignore them would result in doubt and confusion. Board of Commissioners of Jackson County v. United States, 308 U.S. 343, 60 S.Ct. 285, 84 L.Ed. 313; Cf. United States v. Alabama, 313 U.S. 274, 61 S.Ct. 1011, 85 L.Ed. 1327.

When measured by this rule, all of the lands in question were subject to taxation and therefore assessable on January 1, 1936, on which date the taxable status was fixed; they were therefore subject to taxation on the levy date which was July 1, 1936 for the ensuing taxable year ending June 30, 1937, although declared exempt from state taxation on June 20, 1936.

By the same rule, all of the lands in question, having been declared exempt from taxation on June 20, 1936, were not subject to taxation by the state, therefore nonassessable on January 1, 1937, for the ensuing fiscal and taxable year beginning July 1, 1937. The lands were therefore exempt from taxation for the taxable year *671beginning July 1, 1937. In re Sinclair Prairie Oil Company, supra; In re Assessment of Champlin Refining Company, supra.

On January 1, 1938, all of the lands, except the designated homestead, were assessable for taxation because nonexempt under the amendatory Act of May 19, 1937, and the homestead having been selected in accordance with the amendment by the appellees on December 16, 1937, was exempt from taxation for the taxable year beginning July 1, 1938, and thereafter, so long as restricted against alienation without the approval of the Secretary of the Interior or until otherwise directed by Congress.

It is also contended that since the appellees did not pursue the statutory remedy provided by Section 12665, O.S.1931, 68 O.S.A. §§ 263—15.49 and 15.50), which remedy is exclusive, they may not by these proceedings recover the taxes paid without protest. But it is true, as the appellants concede, that the appellees were put to the choice of either paying the taxes assessed and levied against the property, or having the lands sold to satisfy the same as provided by the laws of Oklahoma. The taxes were therefore not paid voluntarily, but under compulsion and duress. Ward v. Board of County Com’rs of Love County, supra, 253 U.S. page 24, 40 S.Ct. 419, 64 L.Ed. 751; Carpenter v. Shaw, supra, 280 U.S. page 369, 50 S.Ct. 121, 74 L.Ed. 478. “This exemption is not subject to violation by the state tax laws or administrative officials, directly or indirectly. So far as the state taxing power is concerned, the exempt lands do not exist”, and to the extent herein observed, “The land is as effectively without the pale of the tax laws and their administration as if they were located in another state. All proceedings of the taxing power, having as their effect a violation of this exemption, are without jurisdiction and void, * * *”. Hutchison v. Brown, 66 Okl. 250, 167 P. 624, 628. See, also, Johnson v. Jackson, 156 Okl. 148, 9 P.2d 950.

The above authorities relate to a tax deed covering tax exempt lands, but we think the principle has application here. It follows that the right to recover taxes, illegal and void because beyond the jurisdiction of the taxing authorities, cannot be made to depend upon any procedural requirements of the State of Oklahoma, the effect of which would deny a vested right of immunity granted by a law of the United States. Carpenter v. Shaw, supra. See, also, Board of Commissioners of Jackson County v. United States, supra.

The contention with reference to the statute of limitations need not be noticed since we hold that all of the lands involved here were not exempt from taxation for the taxable year beginning July 1, 1936 and ending June 30, 1937, hence the taxes levied, assessed, and paid for this period, together with the penalties, were lawful and not recoverable. All other taxes assessed and paid, and held to be illegal and void, are concededly within the statute of limitations.

We conclude that the trial court erroneously granted a recovery for the taxes and penalties for the taxable year beginning July 1, 1936; furthermore the allowance of interest on the taxes paid, held to be illegal and void, is disallowed under the authority of Board of Commissioners of Jackson County v. United States, supra; Bryan County v. United States, supra.

As modified, the judgment is affirmed.

Although not definitely established, we assume that all of the land involved here formerly belonged to non-Indian owners, and as such was taxable by the State of Oklahoma.

Not released by Court at date of publication.