United States v. Oklahoma Tax Commission

PHILLIPS, Circuit Judge. These cases involve the power of the state of Oklahoma to impose an inheritance tax upon the restricted estates of deceased full-blood Indians. Lucy Bemore was a full-blood Seminole Indian, enrolled opposite Seminole Roll No. 1563. She died intestate December 23, 1932. She left surviving, her husband, Lewis Bemore, a one-fourth blood Creek Indian, and a son, Thomas, an unenrolled full-blood Seminole Indian, who inherited her estate in equal shares. Wosey Deere was a full-blood Creek Indian, enrolled opposite Creek Roll No. 9546. She died September 2, 1938. She left surviving, her husband, Milford Thomas, a seven-eighths blood Cherokee Indian, and two daughters and one son, all full-blood Creek Indians, to whom her estate passed. Nitey was a full-blood Seminole Indian, enrolled opposite Seminole Roll No. 1446. She died August 17, 1930. She left a will devising and bequeathing her estate, in equal shares, to her five surviving full-blood Seminole children. Each of the three deceased Indians, respectively, at the time of her death was domiciled in and a resident of the state of Oklahoma. Oklahoma assessed an inheritance tax upon the transfer of each of their estates. The Secretary of the Interior paid the amount of each tax under protest, and the United States brought these actions pursuant to the provisions of 68 O.S.A. § 1475, to recover the amounts paid, with interest. Each of the deceased Indians died seized of lands, restricted against alienation, being homestead and surplus allotments or lands purchased with restricted funds title to which was taken under a restricted form of deed, and personal property and cash held as trust funds in the custody and control of the Secretary of the Interior. From judgments denying each of the several claims, the United States has appealed. Under the first proviso of § 9 of the Act of May 27, 1908, 35 Stat. 315, restricted lands of allottees of the Five Civilized Tribes which passed by inheritance to full-blood Indian heirs remained subject to-qualified restrictions. Under the amendment of April 12, 1926, 44 Stat. 239, lands-passing to a full-blood Indian of the Five Civilized Tribes by devise are also subject to such qualified restrictions.1 Hence, the lands which passed by inheritance to the-full-blood heirs of Bemore and Deere and by devise to the full-blood devisees of Nitey remained subject to qualified restrictions.2 Sec. 23 of the Act of April 26, 1906, 34 Stat. 137, 145, as amended by § 8 of the Act of May 27, 1908, 35 Stat. 312, 315, authorized a member of the Five Civilized Tribes to devise and bequeath all of his estate, real and personal, including his restricted allotments, without restriction or condition, but provided that a will of a full-blood Indian devising real estate should not be valid if it disinherited the “parent, wife, spouse, or children” of such full-blood Indian, unless it was acknowledged before and approved by a judge of the United States Court for the Indian Territory, a United States Commissioner, or a judge of a county court of the state of Oklahoma.3 Ch. 162, O.S.L.1915, § 1, O.S.1931, § 12469, applicable to the Bemore estate, in part reads: “A tax is hereby laid upon the transfer to persons * * * of property * * *: “First: By will or the intestate laws of this state; * * *.” Ch. 66, Art. 5, O.S.L.1935, applicable to the Deere and Nitey estates, in part reads as follows: “A tax is hereby levied upon the transfer of the net estate of every decedent, * * * [637] to persons, * * * by will or the intestate laws of this state, * * Section 1. There is nothing in the treaties or acts of Congress which expressly exempts estates of members of the Five Civilized Tribes from the imposition of an inheritance tax.4 Congress has not expressly consented to the imposition of such a tax. The United States contends that the property passed, not under the laws of Oklahoma and not with Oklahoma’s permission, but under federal law, and that the restricted estates were federal instrumental-ities and not subject to tax by the state without the assent of the Federal government. The Oklahoma Enabling Act of June 36, 1906, 34 Stat. 267, 277, § 21, provides that: “ * * * all laws in force in the Territory of Oklahoma at the time of the admission of said State into the Union shall be in force throughout said State, except as modified or changed by this Act or by the constitution of the State, and the laws of the United States not locally inapplicable shall have the same force and effect within said State as elsewhere within the United States.” By § 1 of the Oklahoma Enabling Act, 34 Stat. 267, Congress provided that nothing contained in the constitution of Oklahoma should be construed to limit or impair “the rights of person or property pertaining to the Indians” within Oklahoma or to limit or affect the authority of the United States to make any law or regulation respecting such Indians, their lands, property or other rights by treaties, agreement, law or otherwise. Sec. 2 of the Schedule of the Oklahoma Constitution provides that “All laws in force in the Territory of Oklahoma at the time of the admission of the State into the Union, which are not repugnant to this Constitution, and which are not locally inapplicable, shall be extended to and remain in force in the State of Oklahoma until they expire by their own limitation or are altered or repealed by law.” By the Act of April 28, 1904, 33 Stat. 573, § 2, Congress declared that all laws of Arkansas theretofore put in force in the Indian Territory should be taken to “embrace all persons and estates in said Territory, whether Indian, freedmen, or otherwise.” The adoption of the Arkansas law was intended to be merely provisional.5 The provisions of the Enabling Act above quoted substituted the Oklahoma law of descent for that of Arkansas theretofore put in force in the Indian Territory.6 In Childers v. Beaver, 270 U.S. 555, 559, 46 S.Ct. 387, 388, 70 L.Ed. 730, involving the power of the state of Oklahoma to impose an inheritance tax upon the transfer of the restricted estate of a deceased Qua-paw Indian, the court said: “Congress provided that the lands should descend and directed how the heirs should be ascertained. It adopted the provisions of the Oklahoma statute as an expression of its own will; the laws of Missouri or Kansas, or any other state, might have been accepted. The lands really passed under a law of the United States, and not by Oklahoma’s permission. “It must be accepted as established that during the trust or restrictive period Congress has power to control lands within a state which have been duly allotted to Indians by the United States and thereafter conveyed through trust or restrictive patents. This is essential to the proper discharge of their duty to a dependent people, and the means or instrumentalities utilized therein cannot be subjected to taxation by the state without assent of the federal government.”7 In Childers v. Pope; 119 Okl. 300, 249 P. 726, 728, the Supreme Court of Oklahoma said: “We therefore must hold that the real estate and the mineral interests in this case were cast under the law of the United States, which adopted the Oklahoma Statute. * * * We are of the opinion that the inheritance tax is authorized to be assessed, levied, and collected by the state or the United States, and the authority is given for the privilege of allowing or authorizing a party to transmit by a will, deed, or conveyance to be operative after the death of decedent, or by operation of law in case of an intestate decedent, under the [638] laws of descent and distribution applicable to the transfer of said estate. * * * Under the Beaver case, it being held that the real property passed by permission of the laws of the United States, and not by Oklahoma law, then, no inheritance tax can be collected by plaintiff against the allotment, inherited lands, or tribal mineral interests of the deceased.” The power to assess an inheritance tax rests on the principle that since the rights to receive or transmit property are not natural rights, but are creatures of the legislature, they are completely subject to taxation and control by the authority which created them.8 Under the holding in Childers v. Beaver, supra, and Childers v. Pope, supra, in the instant cases, the rights of the deceased Indians to transmit the property, and the rights of the heirs and beneficiaries to receive such property, flowed not from state laws as such, but from laws of the United States, and the property passed with the permission of the United States rather than with Oklahoma’s permission. It follows that Oklahoma may not impose an inheritance tax upon the passing of the estates herein involved. It is true that the instrumentality doctrine, as applied to restricted lands of Indians, has been limited by the decision of the Supreme Court of the United States in Helvering v. Mountain Producers Corporation, 303 U.S. 376, 383-387, 58 S.Ct. 623, 82 L.Ed. 907, which expressly overruled the Coronado and Gillespie cases,9 but Childers v. Beaver, supra, has not been overruled, and this court is still bound by that decision. Restricted Indians in Oklahoma enjoy the privileges and protection of local laws. The local courts are open to them for the redress of grievances. The estates of deceased members of the Five Civilized Tribes are administered in the county courts of Oklahoma. Their wills are probated and their heirs determined in such courts. Members of the Five Civilized Tribes are citizens of Oklahoma10 and enjoy the privileges and benefits of that citizenship. It would seem to the writer of this opinion that the Enabling Act should be construed as consenting to the application of the local law of Oklahoma with respect to the devolution of property of Indians who are domiciled in and residents of that state, and that such property should be regarded as passing under the laws of Oklahoma and subject to inheritance tax by Oklahoma, but that view could only prevail if Childers v. Beaver, supra, were overruled. Whether it shall stand or be overruled, only the Supreme Court of the United States may decide. The judgments are reversed and the causes remanded, with instructions to enter judgments for the amount of the tax paid on the transfer of each estate, with interest at three per cent per annum from the date of the respective payments. Footnotes [1] Whitchurch v. Crawford, 10 Cir., 92 F.2d 249, 251; Burgess v. Nail, 10 Cir., 103 F.2d 37, 42. [2] Parker v. Richard, 250 U.S. 235, 238, 39 S.Ct. 442, 63 L.Ed. 954; United States v. Gypsy Oil Co., 8 Cir., 10 F.2d 487, 489; Holmes v. United States, 10 Cir., 53 F.2d 960, 961; United States v. Mid-Continent Petroleum Corp., 10 Cir., 67 F.2d 37, 42; Commissioner v. Owens, 10 Cir., 78 F.2d 768, 775; Glenn v. Lewis, 10 Cir., 105 F.2d 398, 400. [3] See Wilson v. Greer, 50 Okl. 387, 151 P. 629, 630. [4] Landman v. Commissioner, 10 Cir., 123 P.2d 787. [5] Slmlthis v. McDougal, 225 U.S. 561, 571, 32 S.Ct. 704, 56 L.Ed. 1205; Jefferson v. Pink, 247 U.S. 288, 292, 38 S.Ct. 516, 62 L.Ed. 1117. [6] Jefferson v. Fink, 247 U.S. 288, 294, 38 S.Ct. 516, 62 L.Ed. 1117. [7] See, also, Childers v. Pope, 119 Okl. 300, 249 P. 726. [8] People v. McCormick, 327 Ill. 547, 158 N.E. 861, 864; Stebbins v. Riley, 268 U.S. 137, 140, 45 S.Ct. 424, 69 L.Ed. 884, 44 A.L.R. 1454; Chanler v. Kelsey, 205 U.S. 466, pages 479, 480, 27 S.Ct. 550, at page 554, 51 L.Ed. 882, dissenting opinion of Mr. Justice Holmes; In re Anderson’s Estate, 205 Iowa 324, 218 N.W. 140, 142; In re Fish’s Estate, 219 Mich. 369, 189 N.W. 177, 178, 179; Strauss v. State, 36 N.D. 594, 162 N.W. 908, 909, L.R.A.1917E, 909; In re Watson’s Estate, 226 N.Y. 384, 123 N.E. 758, 761; In re Shepherd’s Estate, 150 Mise. 653, 271 N.Y.S. 120, 122; In re Diffing-ham’s Estate, 196 Cal. 525, 238 P. 367, 370; State v. Walker, 70 Mont. 484, 226 P. 894, 896; In re Heck’s Estate, 120 Cr. 80, 250 P. 735, 737; In re Sherwood’s Estate, 122 Wash. 648, 211 P. 734, 737. [9] Burnet v. Coronado Oil & Gas Co., 285 U.S. 393, 52 S.Ct. 443, 76 L.Ed. 815; Gillespie v. State of Oklahoma, 257 U.S. 501, 42 S.Ct. 171, 66 L.Ed. 338. [10] Palmer v. Cully, 52 Okl. 454, 153 P. 154, 157, Ann.Cas. 1918E, 375.