UNITED STATES v. MASON
Argument of Griswold
Chief Justice Warren E. Burger: We will hear arguments next in 72-606, Oklahoma against Mason.
Mr. Solicitor General, you may proceed whenever you are ready.
Mr. Griswold: May it please the Court.
In the present fluid state of our law, court spend a good deal of time going over all ground, that is the situation in this case.
The case is here on certiorari to review a judgment of the Court of Claim.
The suit there was begun by the administrators of the estate of Rose Mason, who was a restricted Osage Indian, acting pursuant to this Court’s decision in West against the Oklahoma Tax Commission in 334 U.S.
The Osage agency of the Department of the Interior filed an Oklahoma estate tax return on her estate and paid the tax due.
The claim in the suit in the court below is that this payment though in conformity with a decision of this Court conceded to be squarely in point and not overruled, was in fact a breach of trust, because the United States should have known that the West case would be overruled by this Court.
The Court of Claim so held and held the United States liable to the estate for the amount of the tax paid.
Chief Justice Warren E. Burger: Couldn't it be something less than that Mr. Solicitor General that there was enough of the question about the West case that some precautions might have been taken.
Mr. Griswold: Yes Mr. Chief Justice, I think that's true, but I suppose that's almost always true with respect to a trustee.
If there is a decision 20 years old, maybe there are various things which might have happened, and he ought to present it to a court again.
I think that the question of the duty of a subordinate agency of the United States to question decision of this Court ought not to arise to the dignity of a breach of trust.
At any rate, that's the issue in this case.
Justice Harry A. Blackmun: Mr. Solicitor General does the record show the approximate size of the decedent’s estate.
I take if the tax, the state tax was $8,000, but which would indicate a very substantial estate as I recall the estate inherent --
Mr. Griswold: I believe that the items are indicated on Page 6 of the Appendix and they would appear on a quick addition to come to about a $125,000 for the estate, Osage headrights 48,000, security of sales and trust 19,000, surplus trust funds 48,000 and two other items.
On the quick adding I get something like a $120,000-125,000, on which the tax paid was $7,700.
The United Stated brought Oklahoma into the case there as a third-party defendant and the court below also held that Oklahoma was liable to the United States in the amount of the tax.
Both Oklahoma and the United have sought review of this decision, and I shall appear for a 20 minutes and Mr. Duncan representing Oklahoma will use the other 10 minutes.
In order to determine whether the United States committed a breach of trust it will be necessary to review some decisions.
Now, there are three decisions of this Court which are particularly relative.
The first of these decided 30 years ago, Oklahoma Tax Commission against the United States, an opinion by Justice Black dealt with restricted Osage property, and although the United Stated appeared there and vigorously contended as it shown by the brief file, that the restricted Osage property was not subject to Oklahoma inheritance tax.
This Court reviewed the situation, concluded that there was nothing in the Osage Allotment Act which a established a tax exemption and directly held that the restricted property was subject to Oklahoma inheritance tax.
Justice Murphy dissented in was one of the dissenters in that case, but just five years later there came up the case of West against the Oklahoma Tax Commission in 334 U.S. where Justice Murphy wrote the opinion.
That case involved property held in trust for an Osage Indian.
Identical types of property to that which is involved here, item by item, the same types of property, trust property and the Court again, revealing the situation, held that the Oklahoma inheritance tax was applicable to property held in trust by the United States for an Osage Indian.
It was less than eight years later that third of these cases came to the court.
Now that is Squire against Capoeman in 351 U.S, an opinion by Chief Justice Warren.
That case involved Quinaielt Indians in the Sate of Washington under a different statued, the General Allotment Act.
It was an income tax case not an inheritance tax case; it was a federal income tax case, where the guardian was seeking to take a tax from the words property and it was a tax on capital gain derived from the sale of timber on the Indians land when the timber constituted the only substantial value of those lands.
And the court and Squire and Capoeman held that that federal income tax was not due.
I think it can surely be said though that the Squire court did not understand that it was overruling the West case nor was its decision so understood by others at that time.
It can be said that the approach of the Court in the West case -- in the Squire case was not wholly consistent with that of the Court in the West case.
But the cases were distinguishable as I have said, west was an inheritance tax case or Squire was an income tax case.
West involved a state tax or Squire involved a federal tax.
Justice Harry A. Blackmun: You just mentioned -- does everyone conceive that there is no difference between the Osage Allotment Act and the General Allotment Act or purposes of this case.
Mr. Griswold: No Mr. Justice, I think there are clear distinctions between the Osage Allotment Act and the General Allotment Act including the two items that were specifically relied on by the Court in the West case.
The obligation to return the property, I forgot the exact word I was about to say undiminished, but I am not sure that is --
Justice Harry A. Blackmun: It’s the Squire case?
Mr. Griswold: Sorry Mr. Justice?
Justice Harry A. Blackmun: It’s the Squire case, it relied on the Squire case?
Mr. Griswold: In the Squire case, the General --
Justice Harry A. Blackmun: The obligation to return the property.
Mr. Griswold: The obligation to return the property and a provision that the property should be subject to taxation after a certain date which carried an implication that it was not subject to taxation beforehand.
The Court of Claims relied on certain subsequent developments, a decision in the Court of Claims in Big Eagle against the United States in 300 Federal Section 19 -- F. 2nd 1962.
That was a federal income tax case and the Court of Claims held that the Squire case meant that the federal income tax could not be collected from trust property, such as is involved here.
And there is a later case in 1968 called Beartrack against the United States, where the United States settled by payment in full.
I don't want to suggest that there was a compromise, because of doubt about liability, settled by payment in full.
A federal estate tax case involving Osage property, and finally after the text was paid here, and incidentally the Beartrack case was after most of the tax was paid here.
In Revenue Ruling 69-164 in 1969, the Treasury issued a ruling that Osage trust property is not subject to the federal estate tax.
Whether these actions were right or wrong, they did not deal directly with the question of the liability of the estate of an Osage Indian or estate inheritance taxes.
Moreover they were actions taken by the Treasury and the Justice Departments.
Now, the government is necessarily large in complex with many subdivisions of responsibilities and it is asking a lot through a subordinate office of the Interior Department in Oklahoma to keep abreast of these developments in other departments on a matter not directly in point.
Now this Court had decided the West case.
This was known to the appropriate officers of the Interior Department.
They acted accordingly.
They ought to be able to rely on a decision of this Court, which has not been overruled nor even remotely questioned here.
In this connection I would like to call attention to the decisions of this Court just three weeks ago yesterday in McClanahan against the Arizona State Tax Commission and the Mescalero Apache Tribe against Jones.
Not only do these cases show the extreme complexity and uncertainty of the field of state taxation of Indians, but in the Mescalero case, this Court, on Page 11, cited Oklahoma Tax Commission against the United States and Squire against Capoeman in the same paragraph indeed back-to-back it might be said.
Now Oklahoma Tax Commission was the case on which the West decision is based and it hardly seems likely that this Court three weeks ago contemplated that Squired had overruled Oklahoma Tax Commission.
Squire is a case to be dealt with, of course, but it's a federal income tax case involving a very special kind of income tax, a capital gains tax, imposed on the realization of most of the value of the Indians’ property by the sale of the timber which gave it its value.
Oklahoma Tax Commission and West involve a estate inheritance tax often treated differently from an income tax as in the case, for example, of the federal estate tax as applied to the transfer of state municipal bonds where the income is not taxable, but the Court, over a period of 75 years, has held that a transfer tax on death can properly be collected, or so a responsible officer in the Osage agency in Oklahoma might have understood and felt and acted accordingly.
By appropriate standards of the law of trust this was not a breach of trust, we contend, and the United States should not have been held liable for complying with a decision of this Court.
The liability imposed here is so novel that we have not been able to find trust decisions directly in point, but we have cited Professors Scott’s strides and we believe it supports our position that the Court of Claims went too far in finding liability here.
Of course if the United States is liable, we support the decision below in holding that Oklahoma is liable to indemnify the United States as a third-party defendant.
The ultimate question here, of course, is whether West should be overruled.
On that question I find myself in a dilemma where the United States is trustee for the Indians and I am obligated to represent the Indians as I did here last Monday.
And the United States is been held liable and has tax revenues taken the general situation, and I am obligated to represent the United States in the capacity too.
In private practice when such a conflict of interest develops, a lawyer must withdraw from one of the representations.
Now that is not so easy in public office.
We have only limited authority to retain outside counsel and even if such counsel were retained they would still be subject to the overall authority of the Attorney General and the conflict would remain.
It is inherent in the situation.
The President has asked Congress to establish an Indian Trust Council Authority, which would resolve this particular problem, but this is not been done.
It has been suggested that the Solicitor General might ask various interested agencies of the government to file briefs or to incorporate the view of the different agencies in a single brief.
It is not clear though that this would always meet the responsibility of the Solicitor General to this Court.
For one of the functions of this Solicitor General, I suppose, is to reconcile and ajust diversion views of government officers, and so far as possible to present a single view to this Court.
Now this area can be one of great difficulty, where there are often widely diversion views with respect to Indian problems depending on whether one looks at it solely from the point of view of the Indians or whether he seeks to deal with and to reconcile as far as possible many competing governmental interests, such as the taxing power or the law of governmental instrumentalities or the responsibility for the enforcement of criminal law.
In many cases it has been possible to work these things out and to present a unified view.
That was done, for example, McClanahan and Mescalero.
In another cases the difficulties have been acute as in the Agua Caliente case where the Court asked the Solicitor General to state his views and he did so, although endeavoring to make it plain that his view was not shared by some other officers of the government.
In this case we have filed a brief in which we have endeavored the state both sides as fairly and evenly as possible without taking an official position.
Consequently on this final question I ask the Court to consider the materials in our brief.
If the time has come when West should be overruled, this Court is the place where that action should be taken.
If the West Case can still stand, it would be helpful if this Court would state that effect and in terms which would indicate whether the decision is applicable to federal income and the state taxes as well.
Justice William J. Brennan: Mr. Solicitor General and even if that world rule I take it your position would be nevertheless the liability was erroneously --
Mr. Griswold: Yes Mr. Justice.
Our position would be that it was not a breach of trust to comply with an outstanding unqualified decision of this Court as to which this Court and never indicated, in any way, the slightest doubt, and as to which only three weeks ago it seemed to regard.
Justice William J. Brennan: So you would press for reversal here even if we were to overrule.
Mr. Griswold: We would press for reversal even if you were to overrule it.
It is not --
Justice Byron R. White: Would West take with it Oklahoma Tax Commission in 319 U.S.?
Mr. Griswold: Would --
Justice Byron R. White: Would overruling West take with it Oklahoma Tax Commission?
Mr. Griswold: I would thank so Mr. Justice.
I have never been able to see any distinction between the restricted property in this case and trust property, and I think the Court in the West case regarded Oklahoma Tax Commission as the clear and controlling authority.
Justice Byron R. White: But a state privilege to tax wouldn’t mean the federal (Inaudible) and as a matter of federal tax policy or as federal -- the federal government wouldn’t need to impose its taxes.
Mr. Griswold: Not necessarily, although it is quite clear that the actions which have been taken by federal executive representatives have been taken based on a view that the approach in Squire weakens the West.
Justice Byron R. White: But I would suppose that Congress expressly said in so many words that federal estate taxes to apply in Indian property.
That would be the end of the matter.
Mr. Griswold: Congress could say so, there isn't a slightest doubt.
Congress hasn't said so the --
Justice Byron R. White: It's just a -- it’s a matter of administrative application of the existing estate tax.
Mr. Griswold: Influence, Mr. Justice, by impressions created as to whether this Court in Squire so impaired the West case that yet ought not to be followed.
There is no view from Congress as to whether the tax -- there has been no action by Congress in this field from the beginning and certainly not since the Oklahoma Tax Commission and West were decided.
Justice Byron R. White: Well, certainly there has never been any indication that Congress disagree to either West or Oklahoma?
Mr. Griswold: No, nor agreed or disagreed.
Justice Potter Stewart: Or Squire.
Mr. Griswold: Or Squire, that's right.
In either event, the Court should reverse the decision below insofar as it held the United States liable a breach of trust.
For the officers of the United States should not rightly be held in default for failing to attack a decision of this Court, which has never been qualified or doubted here.
Chief Justice Warren E. Burger: Thank you Mr. Solicitor General.
Argument of Paul C. Duncan
Mr. Paul C. Duncan: Mr. Chief Justice, may it please the Court.
As the Solicitor General has pointed out, this is a very difficult situation which both the United States Government and State of Oklahoma find to serve in today.
State of Oklahoma is in particularly difficult position, because as the Solicitor General indicates, under the Court of Claims decision, if the United States is found to be liable for a breach of fiduciary relationship then the ultimate responsibility for the payment of this breach rests with State of Oklahoma.
Now since 1947, State of Oklahoma has gone about collecting the tax in question conformity with this Court's decision in West.
Justice Harry A. Blackmun: They must tax on the barrel head, at issue here for Oklahoma.
Mr. Paul C. Duncan: Yes, sir I have -- would not, of course, in this particular case I suggest this is --
Justice Harry A. Blackmun: Overall.
Mr. Paul C. Duncan: Yes, sir.
They have -- respondents have filed a class action lawsuit with regard to all the other Osage Indian estates so similarly situated, and although we have not been able to arrive with a figure we anticipated, it's actually several million dollars, depending, of course, upon what timeframe that might be ultimately applied.
The Court of Claims in deciding the case, did say that as of 1967-1968 when the Rose Mason case came about that the Federal Government breached it fiduciary relationship at that time.
He did not apparently foreclosed the possibilities and under different circumstances they might go back even to an earlier period of time, some time I guess would have to be necessitated by the advent of the Capoeman case in 1954.
It couldn't go back prior to that time, but the State of Oklahoma recognized that this places a possible severe tax brief on consequence if the Court of Claim's decision is to allowed to stand.
Justice Harry A. Blackmun: Mr. Duncan, suppose the United States in this case, they had taken the position that it wouldn't pay the inheritance tax.
What would Oklahoma have done?
Mr. Paul C. Duncan: Well, we would have -- I think that we would have had to taken the United States to court --
Justice Byron R. White: In Court of Claims.
Mr. Paul C. Duncan: -- in reliance upon the -- I reliance upon the West decision, yes Your Honor.
Justice Harry A. Blackmun: So you do feel that the West is correctly decided?
Mr. Paul C. Duncan: Well, I think that the practicality of the situation required the State to have taken the government to court with regard to West, whether or not West is still should be considered with law, should this Court decide otherwise, would not place a severe burden upon State of Oklahoma, if we are talking about perspective actions only.
Justice Harry A. Blackmun: The reason I asked this last question is because I think I didn't find in your brief any statement to the effect that you felt that West was a correct decision.
Mr. Paul C. Duncan: Well --
Justice Byron R. White: Well, a lot of trust properties have inspired it?
Mr. Paul C. Duncan: Yes, sir.
Justice Byron R. White: I mean -- and so the client (Inaudible) significant.
I mean it isn't going to go on forever?
Mr. Paul C. Duncan: No, that's correct.
I believe there are approximate there -- it’s in neighbor to 500-550 present restricted Osage Indians estates at the present time or Osage accounts at the present time that might become involve and --
Justice Lewis F. Powell: And the idea what they aggregate is --
Mr. Paul C. Duncan: In the future, in the past.
Justice Lewis F. Powell: The existing ones.
Mr. Paul C. Duncan: No, sir, I do not.
In with regard to the past, we do not have any information, because the tax has been paid through the Bureau of Indian Affairs, through the Department of the Interior, through the Oklahoma Tax Commission, as with any other estate tax we paid and the Oklahoma Tax Commission is not seen fit in the past to segregate this money or even pave your ways specific accountancy.
Accounting of the money is collected from the Osage estate.
If some rule is set down for Oklahoma would be liable for all these in the past even to 1967-68, we would have to go back and rely on the records of the Department of the Interior.
Justice William H. Rehnquist: Mr. Duncan, a following up on Justice Blackman's question, I can certainly see why the Solicitor General of the United States feels itself in a difficult position here, since it's both a fiduciary for the Indians and representative of the United States.
I too was surprised to see that the State of Oklahoma didn’t take the position that West is rightly decided.
You are not a trustee for the Indians; the Indians presumably have very capable council.
You have a decision and favor of your state that says you are entitled to tax.
Mr. Paul C. Duncan: Mr. Justice, I am sorry, we gave that impression.
We feel feel that the West decision is good law at the present time.
The only point the State was trying to make in its brief was if the Court wishes to change that ruling or feels that way should no longer be the state of the law.
It should not impose the burden upon State of Oklahoma for the past actions of the Federal Government in collecting the tax for the breach of duty of their own.
Now we feel that, of course, until this Court says otherwise that the West decision unless be considered good law, we do not feel the Capoeman case although, the rational perhaps is different in the Capoeman case.
We do not feel it had a direct overruling effect on the West decision and the West would still be the correct interpretation of the law, and certainly had not this come about, we would still be making every attempt to collect the tax.
Justice Potter Stewart: Now we don't at least in theory in this case, we don't need to decide anything more than what you have just argued, do we, in order to decide in your favor that until or in last the West case is overruled, it's to be considered law.
Without expressing any view on whether or not to -- without either over overruling or affirming it, isn't that correct?
That's really all it represents, that's what your argument is.
Not that the West case is -- should be overruled or should not be overruled.
That's simply that until it’s overruled, it's the law that has to be followed, and the Court of Claims was wrong in doing so.
Mr. Paul C. Duncan: Yes sir just -- that's, of course, what we argued at the time the Court of Claim --
Justice Potter Stewart: At least, in theory, we wouldn’t -- don’t need to say anything more in order to decide in your favor, in this case.
We wouldn't have to say whether or not the West case should be overruled or is going to be overruled, and certainly we wouldn't have to over -- wer wouldn't have to reaffirm it, in order to decide in your favor.
Mr. Paul C. Duncan: Well, I believe that's correct.
The only question that I think might be is whether or not you have overruled, and of course, I think the resondents take the position, the Court of Claims takes the position that this Court has overruled the case insofar as to --
Justice Potter Stewart: Now you erode it and undermined that whatever, but nobody claims that it's been expressively overruled.
Mr. Paul C. Duncan: No, that's correct.
And that -- of course, we have relied on and we argued this before the Court of Claims but they did not accept this argument.
It's interesting to note that with regard to this undermining our eroding of the West decision, the Court of Claims also relied upon a number of cases, as Solicitor General has referred to including the Internal Revenue Ruling, which Oklahoma was not a part to had no part in, in which the State of Oklahoma takes position at these rulings, by an inferior court, cannot in any way, although they are expressions of the interpretation by that court or that agency with regard to the these ancillary tax questions, they in and of themselves cannot possibly overrule the decision of this Court.
Justice Thurgood Marshall: All you need to say is that as of the time this case was heard in the Court of Claim, it was a good law, West was a good law, that's all you have to do.
Mr. Paul C. Duncan: Yes sir, that’s exactly --
Chief Justice Warren E. Burger: You don’t even need the adjective, do you?
It was the law of this Court?
Mr. Paul C. Duncan: That’s right, it was law --
Justice Thurgood Marshall: It was the law.
Mr. Paul C. Duncan: It was the law, that’s --
Justice Thurgood Marshall: But you don’t need anymore than that, do you?
Mr. Paul C. Duncan: No.
Justice Byron R. White: Do I understand that you position is on the refund of inheritance taxes?
Mr. Paul C. Duncan: Yes, Your Honor, 68 O.S, Section 227, provides for the general timing in which a refund can be claimed.
It’s one year of statue limitations when it’s a mistake of law or a question of law or on three years on question of fact.
However, there is a provision, subtitle 2.
It provides the estate tax must be questioned at the time of payment, and this would fall under that category.
So at the time they would have had to have contested under the Oklahoma statute at the time that this payment was made.
Justice Byron R. White: Now what -- the Oklahoma Tax Commission against the Texas Company 336, that’s also involved here.
Mr. Paul C. Duncan: Well, of course, the Court, you referred to it in your opinion in Mescalero and although it has not -- it was not a part of my brief at the time it -- we were relied --
Justice Byron R. White: Well, let’s assume West -- Let’s assume West is -- that Oklahoma Tax Commission (Inaudible)?
What about (Inaudible)
Mr. Paul C. Duncan: Well, I would like for the Texas Company case to stay however if the West decision goes, it’s the court who returns the West decision, which is the case, on all four squarely in point, it’s hard to imagine that we are going to have some other case that’s going to put us in a better situation.
Justice Byron R. White: Well I know -- I just want to make clear that you would -- you conclude that the Texas Company case was (Inaudible) than West?
Mr. Paul C. Duncan: Well, I would assume that it would be trouble also.
Justice William J. Brennan: Sort of a a dominant theory.
Mr. Paul C. Duncan: Yes sir.
Chief Justice Warren E. Burger: Thank you Mr. Duncan.
Argument of Charles A. Hobbs
Mr. Charles A. Hobbs: Mr. Chief Justice and may it please the Court.
One point brought up by the Solicitor General, I would like to reply to immediately and that is, he referred to conflict of interest in the government when it comes to representing questions of Indian rights as are raised in this case.
He said that some times it’s possible to solve the problem by reaching an accommodation between divergent views of agencies of the government.
That is a perfectly correct, tenable way to handle divergences among the various agencies, which are not trusties of the Indians but ones you see the government were in the half of the trustee, of the Indians, there is no substitute for a separate voice speaking for the Indians.
This could be done by hiring special counsel or it could be done as the Solicitor General referred as presenting two different views in one brief and that was done in Steven’s case in the Ninth Circuit.
Last year, one of the most recent cases construing Capoeman in a way inconsistent with West.
Chief Justice Warren E. Burger: Does that really solve, in a technical sense, the conflict problem, because the special counsel would still be speaking for the United States, the same United States that his trustee is, is that not so?
Mr. Charles A. Hobbs: The same problem occurs in the public defender area where the government employs both sides of the fence there, but I think we are used the accepting the loyalty, diverging loyalty of the both sides of the counsel there, and I think that could grow up with respect to Indian rights.
Our basic theme is that the West case was good law -- well never was good law, but was entitled to be followed until 1956 when Capoeman overruled it.
You don’t need an expressed overruling of a case in order to render it bad law or invalid law.
Capoeman did so by implication and so we say that when Capoeman made its ruling, it related back to West and declared West in the case it in turn defended on Oklahoma Tax Commission.
Justice Thurgood Marshall: Mr. Hobbs, it has never been overruled, right?
Mr. Charles A. Hobbs: West, to this day, has never been expressly overruled.
Justice Thurgood Marshall: As -- it wasn’t my question, has it ever been overruled?
Mr. Charles A. Hobbs: West?
Justice Thurgood Marshall: Yes.
Mr. Charles A. Hobbs: Yes, your honor.
It was overruled in 1956 by this Court.
Justice Thurgood Marshall: And what language said?
Mr. Charles A. Hobbs: It was, by implication, and --
Justice Thurgood Marshall: Ah, overruled by implications.
What does a lawyer do when he is advising his client; he tells him that this is overruled by implication?
Mr. Charles A. Hobbs: The trustee should have advice the word or rather should have taken action to hire an attorney and have this question resolved in 1956.
Justice Thurgood Marshall: Do you mean he could have gotten a better timing than the Solicitor General’s office?
Mr. Charles A. Hobbs: No, it’s the Solicitor General’s --
Justice Thurgood Marshall: It’s no where --
Mr. Charles A. Hobbs: -- Office who should have been one to do it.
Justice Thurgood Marshall: Well who -- well, what other lawyer could have given better advice than that?
Mr. Charles A. Hobbs: I am not sure I follow the question, but the United States --
Justice Thurgood Marshall: The question is where you have got the case that is on all forth with your case.
How can you get better advice than to say that is still the law?
Mr. Charles A. Hobbs: Eight lower courts have disagreed with you Your Honor and have held that the --
Justice Thurgood Marshall: We are not considering any lower court; we are considering a decision of this Court.
Mr. Charles A. Hobbs: Of course but there is a --
Justice Thurgood Marshall: Now what court of competent jurisdiction has overruled this Court?
Mr. Charles A. Hobbs: No lower court can overrule this Court.
Only this court can do so and did so in 1956.
Justice Thurgood Marshall: Well, even if this Court now says that West should be overruled, do you win?
Mr. Charles A. Hobbs: Well, we then reach the question of fiduciary liability but ultimately we would win, yes.
Justice Thurgood Marshall: (Inaudible)
Mr. Charles A. Hobbs: I think it’s a necessary conclusion.
It has been suggested during the argument of Mr. Duncan that that perhaps all these Court needs to decide is that West has never been overruled.
This would throw us back to another court, I assume to try another way to get a ruling of this Court that West has been overruled.
I suppose if we arrange our jurisdictional amounts properly, we can go in the Federal District Court.
We could go through the Oklahoma State Authorities, of course, and come back up here that way, but that’s inevitable.
The day that this Court overrules West as we feel it will unless it puts a dam across entire tied of the law since 1956, it must do that to keep West alive.
If West is overruled, it then becomes the duty of the United States to get that money back for the Indians that it is wrongfully paid over to the State of Oklahoma.
Justice Thurgood Marshall: Why it was wrongfully paid over?
Mr. Charles A. Hobbs: If West is as I said --
Justice Thurgood Marshall: When I call back to time West was decided?
Mr. Charles A. Hobbs: West was decided 1948.
Justice Thurgood Marshall: What does it go by there from?
Mr. Charles A. Hobbs: Yes, the United State is not subject to the statue of limitations at least until 1977.
Justice Thurgood Marshall: So it will go back forever?
Mr. Charles A. Hobbs: Well, that could go back to 1947.
Justice Thurgood Marshall: Why not forever?
Mr. Charles A. Hobbs: Pardon?
Justice Thurgood Marshall: Why not forever?
Mr. Charles A. Hobbs: Well, Oklahoma didn’t collect the tax earlier than that.
Justice Thurgood Marshall: Oh, I see.
Mr. Charles A. Hobbs: We are just dealing with 24 years of taxation.
Our theory is that whether we hold that the fiduciary duty here was clearly breached, you had Capoeman in 1956.
It was the talk of the Bar whether this now caused a reevaluation of West Oklahoma Tax Commission, Choteau v. Burnet, a recent dicta in that, and our law firm began litigation the following year of which this case today is in combination to test this premise.
The Capoeman case was also our case.
Justice Byron R. White: Well the court -- I thought you are telling the court was relevant enough to be retained its client -- and do you think West Oklahoma relevant enough to be cited in there because that was -- if they were cited, they were litigated within?
Mr. Charles A. Hobbs: Well, one must draw its own conclusion as to why they weren’t cited.
My by conclusion is that they could not handle, could not reconcile Capoeman with West and that it was therefore, wiser for the sake of --
Justice Byron R. White: Was there a law of enactment involved?
Mr. Charles A. Hobbs: Yes but there is so parallel, it’s almost impossible to reach different conclusions under them.
Justice Byron R. White: Well that’s your argument?
Mr. Charles A. Hobbs: Yes, of course.
Justice Thurgood Marshall: And the Capoeman case did you ask this Court to overruled West?
Mr. Charles A. Hobbs: No.
We did not.
Justice Thurgood Marshall: Why?
Mr. Charles A. Hobbs: I don’t know.
Justice Thurgood Marshall: You said it was so horrible?
Mr. Charles A. Hobbs: I wasn’t with the firm at that time, I can’t personally answer here.
Justice Thurgood Marshall: Well, you looked into the brief, didn’t you?
Mr. Charles A. Hobbs: Yes.
Justice Thurgood Marshall: But in the brief --
Justice Byron R. White: I am looking at it right now.
Justice Thurgood Marshall: Did the brief asked that it be overruled?
Mr. Charles A. Hobbs: I don’t know Your Honor.
It’s my recollection from a reading sometime ago over the brief that we did not ask that it be overruled.
It wasn’t necessary to get into that.
It was -- it would have been easy to leave that for a later day, today, but to conclude my point, we say that government has reached to his fiduciary duty by not taking action after 1956 to test the validity of West and see if it's still was good law.
Certainly there were good minds of thought that it had undermined the West case and if the duty didn’t accrue then its certainly accrued at some point over the years up to the time where it actually paid the tax in this case.
There were seven cases decided by the lower courts in an unbroken row deciding that the Capoeman case reverses the spirit of those cases in the 1930s and 1940s which include West and Oklahoma Tax Commission that they didn't hold so outlawed, but you by comparing the language it is perfectly plain that the parallelism was inconsistent.
They were parallel case but inconsistent.
Justice William H. Rehnquist: I suppose you would be possible to decide that the government perhaps did have an obligation to begin testing through litigation after 1956 even though this Court were to decide and West was still good law.
There you have a breach of duty, but no damage resulting from?
Mr. Charles A. Hobbs: Correct and we would take that position.
The duty of the government became more and more pronounced as the years went on and in these lower cases kept ticking off entire West decisions and finally in the -- when it pay the tax – it paid the tax in two bytes.
The first byte was September 1967 then two things, well and the Beartrack case which was another case we had brought involving Federal death taxes which cannot be distinguished from West we say neither can an income tax cases we say.
At any rate the Beartrack case, the government gave up and agreed to a refund, paid the refund and the Internal Revenue Service subsequently held that the -- it wouldn't collect Federal death taxes anymore.
After that the government still pays Oklahoma the Debt tax in this case.
We say by that time all the bells were ringing in the watchman should have awakened and done his duty and did not, but should you find that there was no liability for failure to bring suit and nevertheless reach the West case and in this case and a squarely brought before you rethink, should you just agree it will be before you in a couple of years later, when you decide there was, there is no longer good law of you do at that moment the government has a duty to file suit for refund.
It can do so.
It's not subject to the Oklahoma Statue of Limitations, that's settled law and therefore it could go back and collect all of the refunds that were erroneously paid, especially erroneously paid at Capoeman case.
There was a question as to how much money is involved here.
We happen to know something about that.
Oklahoma has a budget.
The Oklahoma State Authorities send us a budget and for fiscal year ending 1963 the budget would be $1.1 billion of the revenues to cover that.
$700 million will be raised by Oklahoma from it's own sources and $400 million will be given to it by the Federal government.
Of the $700 million raised by Oklahoma from it's own sources, largely taxes $15 million comes from death taxes in Oklahoma.
Of the $15 million there is no breakdown to show how much was Osage property, but the Osage Agency has a advised that over a six-and-half year period the payments to Oklahoma averaged $21000 a -- $26000 a year.
Oklahoma has been collecting taxes for 24 years and so if you assume that the $26000 a year is an average, it come to $624,000.
That would be a5 total refund of all estate taxes ever paid.
It's a --
Justice William H. Rehnquist: Would there be other tribes in the Osage involved?
Mr. Charles A. Hobbs: Osage is extremely unique.
They are the only tribe in Oklahoma that still has a reservation.
They, it to me it would be not necessarily true that other tribes would have a change in their tax situation.
I am not sure, I haven't studied it, but Osage is the only one with a reservation in Oklahoma.
I would like to give some of the historical background because I think the Court should have this when it considers whether the West case is still good law.
The -- to me the critical fact to keep in mind when you are considering the West case and the Oklahoma Tax Commission case is this.
When this court made that decision involving state taxes, it was assumed by everyone that this Indian property was subject to Federal Estate and Income taxation.
This Court had held and superintendent in five tribe's case in 1935 in a broad general statement, not subject to qualification that Indians pay income taxes on their trust property unless there is an express exemption.
This was taken to mean and later held to mean that Indians pay taxes like everyone else unless there is an express exemption.
By 1943 when Oklahoma tax Commission case came up, it was generally assumed and not doubted and the Internal Revenue Service was collecting on this assumption that Federal taxes were correct.
Now this Court or any other tribunal would have a very hard time finding the state taxes should not lie if Federal taxes would lie and the Court at that time was assuming a federal taxes did lie. It has said as much with respect to income taxes.
The Internal Revenue Service was collecting the death taxes.
Now the court in West and Oklahoma Tax Commission really made a ruling of law which should not be overruled.
It still a good law.
It said after reviewing the situation and finding that these properties were taxable it's said, however, should any of these properties not be subject to direct taxes than there would be no death tax.
That is a rule of law.
We say still good.
The only thing wrong with those cases is that they mistakenly assumed because of some language which has been overruled, now I will show in while in a minute, that the Osage property and the Creek property in the other was subject to Federal Taxation.
Had this Court realized that Federal taxes wouldn't lie and it later held that in Capoeman, well then it's a fortiori that it would not have held the tax taxes lie.
It's an error to a law of state taxes if federal Taxes don't lie.
The state taxes are not fortiori case.
Now as this taxes of history that explains how the court get all the track on that --
Justice Potter Stewart: It's not a fortiori case in which direction?
You said earlier that it would be very difficult and extremely anomalous to hold that state taxes didn't apply if Federal taxes did?
Mr. Charles A. Hobbs: That's right.
Justice Potter Stewart: But does it work the same way in the opposite direction?
Mr. Charles A. Hobbs: Well No, if Federal taxes then a fortiori state taxes.
Justice Potter Stewart: Yes.
Mr. Charles A. Hobbs: If state taxes --
Justice Potter Stewart: It's nit a fortiori tax --
Mr. Charles A. Hobbs: Not a fortiori but very compelling, very difficult not to find the other.
Justice Potter Stewart: But it's certainly not a fortiori?
Mr. Charles A. Hobbs: No, no, the a fortiori runs in the direction I said.
Justice Potter Stewart: Some can be a fortiori in both directions by definition?
Mr. Charles A. Hobbs: No, no of course not.
Justice Byron R. White: Isn't the whole question a statutory question?
Mr. Charles A. Hobbs: Yes it is, interpretation of statues.
Justice Byron R. White: Strictly statue and the Congress easily could I suppose they exempt Indian property from it's own estate tax and still permit states to tax?
Mr. Charles A. Hobbs: Certainly it could.
Justice Byron R. White: And you must and you are saying that -- you are relying on implied exemption from state, from states estate taxes.
There is no express exemption in the statute?
Mr. Charles A. Hobbs: No, of course not.
Justice Byron R. White: And there is no expressed exemption in the regulations or anything else?
Mr. Charles A. Hobbs: Right nor in the Capoeman case.
Justice Byron R. White: No, no.
Mr. Charles A. Hobbs: We say that the construction --
Justice Byron R. White: Except with the court read the particular allotment statue there to imply an exemption.
Mr. Charles A. Hobbs: Yes, and here is what the court saw in the Capoeman case.
It saw a governmental undertaking when this tribal property had been broken up and distributed to the members of the tribe, it saw a governmental undertaking to hold this property in trust.
This is vital to our case.
This is the heart of our case to hold this property interest until the Indian was competent to compete in society by himself.
During this interval he would be trained by the United States to talk to manage his own affairs and presumably hopefully soon he would at the melting pot and he is confident as anybody else.
In the mean time this property was beheld in trust, undiminished by any claims, a simple Indian is at the mercy of loan sharks and speculators who want to buy his land.
Congress knew this and so have made the land an alienable.
No charges or incumbencies were to be placed on this land on this land.
From this, well --
Justice Harry A. Blackmun: But this Indian has died?
Mr. Charles A. Hobbs: Well, there is no Mr Justice Blackmun.
There should because no question that the death is not significant in the impact of this tax exemption.
Exemption carries forward, it bridges the death and goes until the heir becomes competent.
This is clear from the language of the General Allotment Act which says that the United State shall hold this land in trust for the Indian or in case he dies, his heir until becomes competent.
And it's also expressly so in the Osage Allotment Act.
In our brief, in footnote on page 11, we cite four of the many references to the concern that Congress cottage had for the heirs.
Furthermore the West and Oklahoma Tax Commission cases when they say, if this property is exempt from direct tax, then it is exempt from death tax, sort of forecloses that question we feel.
We feel that the Capoeman has proved that these properties are exempt from direct taxes and that therefore under West and Oklahoma Tax Commission, there aren't any overruling at all, they are still good law when they say that therefore no death tax.
So we don't think that the death is relevant here.
But back to the General Allotment Act, the trust relationship, determination of the trust when the Indian became competent, the freedom from the charge of incumbency, this Court held in Capoeman, may will be sufficient to support the tax exemption.
Now there was more in the Capoeman case.
Now the General Allotment Act was passed in 1887.
The Osages weren't allotted and incidentally the Osages were left out of the General Allotment Act by a fluke.
The General Allotment Act was supposed to fly to all Indians in the country with a few exceptions.
And those exceptions were the Indians who held their lands in fee and the Osages were believed to own their lands in fee, but because they were in Oklahoma, but unlike any other tribe in Oklahoma they didn't, their lands were in trust.
Therefore the Osages were not under the General Allotment Act.
In 1903 this Court held that when the General Allotment Act exempts land from levy, attachment or the charge of incumbency, that means tax exemption, that was the Rickert case 1903.
Now, the next thing that happens is in 1906.
Congress amends the General Allotment Act and it says that, for the first time adds the idea that the trust period can end sooner that the 25 years extended, if the Indian becomes competent sooner than that time.
And it says, “after he reaches the point of competency, the trust will end and he gets his land and all restrictions as to alienation and taxation are lifted.
Now, this implies that Congress thought that the land was free of tax after that point and well so.
Only three years ago this Supreme Court in 1903 had held restriction on alienation added up to a tax exemption.
So Congress assumed on very good authority in 1906 that the restriction on alienation was equivalent of a tax exemption.
Now when we come to the Osage Allotment Act also in 1906, we have Congress very much aware of all this at the time.
Congress says that the Osage property, the tribal land will be alloted to the individual Osages.
They will pick 160 acres of land and that's going to be tax exempt.
The rest of their land which would be several hundred acres, Congress said will be taxable.
Congress expressly said that this land would be taxable.
Now the implication is that when Congress doesn't say the Osage property is taxable then it isn't.
When it came to the minerals, it wasn't was to just divide up the minerals along with the surface rights, so what they did was they took they whole mineral estate as if it were a single body or reservation, held in trust for the Osage tribe and alloted the minerals by allotting head rights to the individual Osages.
Now each head right just like the General Allotment Act was to be inalienable until the Indian became competent.
The parallelism is compelling.
The Congress also permitted still another tax.
In 1919, this Court had held that --- because Congress had not authorized an Oklahoma Gross Production Tax, no such tax could lie and that's an important case.
It's holding that silence in this context means no taxes.
So Oklahoma then went to Congress and persuaded Congress to pass statutes expressly authorizing the Oklahoma Gross Production Tax and Congress did so in 1921.
From that day to this, Congress or Oklahoma has collected and no one has challenged it, the gross production tax on all this head right minerals.
Incidentally there is so much, I am not going to be able to cover, but one thing I wanted you to know that these head rights have diminished in value and annual income.
They are now paying about $3,300 a year.
In the 1910s and the 1920s, they were paying enormous amounts of money and I am sure you are familiar with some of the stories that arose from that time.
Justice Lewis F. Powell: Suppose if fiduciary had not been to government, I realize you have an Indian involved here, but let's assume you had a private fiduciary, a lawyer in Oklahoma representing a private estate in which all of the other facts and circumstances in this case existed substantially. The Supreme Court decision not overruled except of some lawyers who did think it was overruled by implication.
Would you feel that that fiduciary was subject to be surcharged to same extent and in the same manner as the government, as fiduciary in this case?
Mr. Charles A. Hobbs: Well as in this case, certainly.
I would say the fiduciary liability doesn't start out full blown in 1956.
There is more to the story.
A case was decided in 57, in 58, 62, 63, 66, 67, two in 68.
By 68, when this tax was finally paid any fiduciary, in my opinion any fiduciary would have been surcharged for failure bring a suit to get the question cleared up.
I think to review those lower Court cases will compel the same conclusion.
They don't say West is overruled.
They don't dare tackle it, but it's clear from what they say, that they are just regarding it less, that they are regarding it as overruled.
And a lawyer has to look at these things in order to properly advise his client or a trustee to take care of his beneficiary's property, he has to look at the tide of the law that flows along.
Justice Thurgood Marshall: What about the Solicitor General's suggestion that just three weeks ago, we didn't think it was overruled?
Mr. Charles A. Hobbs: Well, you say that in Capoeman in my opinion showing that you -- there are many ideas in that case that you still have full-blown agreement with.
The citing of Oklahoma Tax Commission in the way you cited it in those cases sheds, in my opinion shed --- it does not put anyone on warning that you still think West is a good case.
West is a complicating case and it goes with, excuse me, Oklahoma Tax Commission.
We don't ask it be overruled.
We ask it to be modified.
The part of the land exempt from direct taxes is also exempt from death taxes is a good ruling.
We don't suggest that that be overruled.
So the parts of West --
Justice Byron R. White: And you aren't suggesting, you know, a return to federal-instrumentality law?
Mr. Charles A. Hobbs: Excuse me Your Honor?
Justice Byron R. White: And you aren't requesting any return to federal-instrumentality which Oklahoma Tax Commission is heavily involved in?
Mr. Charles A. Hobbs: Well the case is perfectly valid and accepted by the Bar, the Indian Bar with that respect, federal-instrumentality rule.
That was what Tax Commission was all about.
That was in the midst of the tumbling of this federal-instrumentality rule which Courts had relied on for Indian Tax Exemption and it wasn't discovered until Capoeman that there is another basis for finding tax exemption and that is really a sounder basis where you examine statutes carefully, the suite of statutes for each tribe and reach an individual conclusion for each tribe.
Justice Byron R. White: In West the Court said expressly that we don't find any exemption here.
There must be an express exemption.
We are saying there isn't one and there isn't going to be one until Congress comes along and itself gives one under this General Allotment?
Mr. Charles A. Hobbs: I am not sure I follow.
Isn't it --
Justice Byron R. White: Isn't that said -- that is what the Court said in West?
Mr. Charles A. Hobbs: Yes I was following an idea, first born in the Choctaw (ph) case 1931, carried along in Superintendent of Five Tribes --
Justice Byron R. White: But that's what it's conclusion was.
It said that Congress in effect if you want us --- if there has to be an exemption, provide one?
Mr. Charles A. Hobbs: But Capoeman said it wasn't necessary to do that and that's why they are inconsistent.
They both can't stand together.
Justice Potter Stewart: Wasn't part of the – at least part of the rationale of Capoeman be proposition that it could hardly be presumed that the guardian would tax the ward and that there was emphasis in part's of the opinion upon that relationship and that relationship simply doesn't exist in this case?
Mr. Charles A. Hobbs: It does Your Honor.
It most assuredly does.
Justice Potter Stewart: Nor in West, no -- the Oklahoma is not the guardian of these Indians?
Mr. Charles A. Hobbs: Oh!
I am sorry.
No the United States is.
Justice Potter Stewart: Exactly and that was United states tax in Capoeman?
Mr. Charles A. Hobbs: Well, I was troubled by that language in Capoeman because that language harks back to 1924 Attorney General's ruling which followed a line of cases that said just that.
Now that line of cases was overruled in the 30s and 40s.
I confess I can't remember the case or cases that did it, but there weak read when Capoeman came along.
The strength of Capoeman is in examining the General Allotment Act and --
Justice Potter Stewart: Well and that is your view, that is the way you read it, but concededly there was language in Capoeman opinion along the lines I have indicated, was there not, that it is hardly to be presumed that the guardian would tax the ward for the guardian's benefit.
And also there is a language in the Capoeman opinion, as I remember that said that the, guardian as guardian United States as the guardian was the one who determined when then how the timber would be cut and therefore was in a conflict of interest as a tax collector?
Mr. Charles A. Hobbs: Well the United States --
Justice Potter Stewart: TO maximize or the income or whatever?
Mr. Charles A. Hobbs: The United States has a great deal to say when this oil is pulled out of the ground.
Justice Potter Stewart: Yes but this is an Oklahoma Tax Return?
Mr. Charles A. Hobbs: But if the guardian is not going to tax his own ward that it is always been regarded at least by myself that if the Federal Tax does not lie, estate tax a fortiori does not lie.
Justice William H. Rehnquist: But maybe a fortiori is in the other direction?
Justice Potter Stewart: That is what I was --
Justice William H. Rehnquist: The language of Justice Stewart quotes from Capoeman is the dominant force in that case?
Mr. Charles A. Hobbs: No I have been -- I have learned through many cases in many text books, I reached that conclusion through that and that is the way I see it, that the Federal Tax is the hardest tax defined that lies.
No, I am sorry the estate tax is the hardest defined that it lies.
The -- I have met confusion.
Justice Byron R. White: Because it was -- the Court was trying to accommodate two federal statutes there.
Justice Potter Stewart: Right.
Justice Byron R. White: Federal tax statutes and a Federal allotment statute?
Mr. Charles A. Hobbs: Perhaps what I meant to say is based on this.
The State in order to tax must number one find Jurisdiction and number two must find congressional intent to permit.
Whereas in the case of Federal tax you need only find congressional intent to permit.
You do not have the jurisdiction problem.
Justice Byron R. White: The Court in West said you have to find an express exemption?
Mr. Charles A. Hobbs: Capoeman said you did not have find an express exemption.
Justice Byron R. White: For a federal tax?
Mr. Charles A. Hobbs: True.
An argument I have not made here, but have made in the brief, is that the Osage reservation still a reservation and if the Mescalero case applies to Osage then Oklahoma has no Jurisdiction to impose any tax whatsoever except those taxes that Congress has specifically authorized which would be a tax on the non-homestead land and the gross production tax.
So we rely on Mescalero.
Justice Potter Stewart: So this property here is not timber, it is a mineral property permit, is it not?
Not oil and gas and you say that each had now has about an income of something over $3000 a year?
Mr. Charles A. Hobbs: Correct.
Justice Potter Stewart: It used to be astronomically high, did it not?
Mr. Charles A. Hobbs: Yes.
Justice Potter Stewart: Up in the --
Mr. Charles A. Hobbs: It is petering out.
The figure four or five hundred --
Justice Potter Stewart: Are the reason of depletion --
Mr. Charles A. Hobbs: Yes it is gone.
Justice Potter Stewart: Was it oil or gas or both?
Mr. Charles A. Hobbs: Oil, some gas, mostly oil.
They are on secondary recovery methods now and that is going to peter out.
I would like to make one final quote from the Mescalero case which also supports our position.
Mescalero said that, “in the special area of state taxation, absent session of jurisdiction or other Federal statutes permitting it, there has been those satisfactory authority for taxing Indian reservation lands or Indian income from activities carried on, within the boundaries of the reservation.”
Now as we argue more fully in the brief, we question where Oklahoma gets to the jurisdiction to impose this tax.
They have the same constitution that Arizona does, it disclaims jurisdiction.
Congress has to permit two taxes and we can see that those lie, but where is the jurisdiction.
Under the McClanahan or following his quotation from the Mescalero case where is the jurisdiction to impose the tax in this case.
Osage is the only reservation left in Oklahoma, but is a reservation, shown as such in the BIA maps.
Justice Potter Stewart: Yeah, and this – the decedent was lived on reservation, where the reservation Indian --
Mr. Charles A. Hobbs: Yes.
The Solicitor General suggested that is not alleged in the record, but it is a fact.
Justice Potter Stewart: But it is not in the record, you can hardly – anyway if it is not the racket it means that you have not relied on it up till now?
Mr. Charles A. Hobbs: That is right, we have not relied on that.
Chief Justice Warren E. Burger: Thanks you, Mr Hobbs.
Mr. Charles A. Hobbs: Thank you, Your Honor.
Chief Justice Warren E. Burger: Thank you Mr. Solicitor General.
The case is submitted.