Shaw v. Oil Corporation

• Decision Date: 09 April 1928
• Docket Number: No. 234,GIBSON-ZAHNISER,234
• Citation: 48 S.Ct. 333,276 U.S. 575,72 L.Ed. 709
• Parties: SHAW, State Auditor of Oklahoma, v. OIL CORPORATION et al
• Court: U.S. Supreme Court

276 U.S. 575

48 S.Ct. 333

72 L.Ed. 709

SHAW, State Auditor of Oklahoma,

v GIBSON-ZAHNISER OIL CORPORATION et al.

No. 234.

Argued Feb. 29 and March 1, 1928.

Decided April 9, 1928.

Messrs. V. P. Crowe, of Enid, Okl., and Edwin Dabney, of Oklahoma City, Okl., for Show. Shaw. for Gibson-Zahniser Oil Corporation.

Mr. Justice STONE delivered the opinion of the Court.

Defendants in error brought this suit in the District Court for Western Oklahoma against plaintiff in error to recover state taxes paid under protest. Judgment was given for the plaintiff, and the case is now pending on writ of error in the Circuit Court of Appeals for the Eighth Circuit. That court has certified to this questions of law concerning which it asks instructions for the proper decision of the cause. Judicial Code, § 239 (28 USCA § 346).

The certificate discloses that defendants in error are the assignees of a departmental oil and gas lease of land belonging to Miller Tiger, a full blood Creek Indian. The leased land was purchased for Tiger while a minor by his guardians, with the permission of the county court of Okmulgee county, Oklahoma. The purchase price came from the accumulated royalties of a departmental lease of his restricted alloted lands. The purchase was made of a non-Indian citizen of Oklahoma and the deed, in compliance with conditions exacted by the Secretary of the Interior and the county court, provided that the land 'should not be alienated or leased during the lifetime of the grantee prior to April 26, 1931, without the consent of and approval by the Secretary of the Interior.' Before the purchase in 1915 the land had been subject to state, county, and municipal taxation. Since then local ad valorem taxes on the land have been paid without objection by the United States Indian agency. The tax now in question was levied and collected under Comp. Stat. Okl. 1921, § 9814, which imposes on those engaged in the production of oil and gas a tax equal to 3 per cent. of the gross value of the oil and gas produced 'less the royalty interest.' The questions certified are as follows:

(1) Had the Secretary of the Interior, on October 24, 1915, when this land was purchased, power to exempt from such state taxation land purchased under his supervision for a full-blood Creek Indian with trust funds of that Indian, where the land so purchased was, at that time, subject to all state taxes?

(2) Is that tax a forbidden tax upon a federal instrumentality?

In Sunderland v. United States, 266 U. S. 226, 45 S. Ct. 64, 69 L. Ed. 259, a restriction against alienation like that in the present case imposed by the Secretary on lands purchased for a Creek Indian, as were Tiger's, under section 1, c. 199, of the Act of May 27, 1908, 35 Stat. 312, was held to be a valid exercise of the power of the Secretary to remove restrictions from the land of full-blood Indians 'wholly or in part, * * * 'under such rules and regulations concerning terms of sale and disposal of the proceeds for the benefit of the respective Indians as he may prescribe." In an earlier case, McCurdy v. United States, 246 U. S. 263, 38 S. Ct. 289, 62 L. Ed. 706, this court had held that a similar restriction upon lands similarly purchased for an Osage Indian could not have the effect contended for there, and here, of exempting the land from state taxation for the reason that under the applicable provisions of a different statute, section 5, c. 8o, Act of April 18, 1912, 37 Stat. 86, the Secretary was without authority to impose the restriction. And, in United States v. Ransom, 263 U. S. 691, 44 S. Ct. 230, 68 L. Ed. 508, affirming (C. C. A.) 284 F. 108, it was held, on the authority of McCurdy v. United States, supra, that the state had power to tax lands purchased for a Creek Indian citizen with restrictions against alienation imposed by the Secretary under section 1 of the Act of May 27, 1908, which was the statute later passed on in Sunderland v. United States, supra. The construction to be placed on these decisions is that the lands now in question, and hence the interest of the lessee in them, are not such instrumentalities of the government as will be declared immune from taxation in the absence of an express exemption by Congress and that the mere act of the Secretary in imposing the restriction is not the exercise of any power which may reside in Congress to exempt them from taxation.

What governmental instrumentalities will be held free from state taxation, though Congress has not expressly so provided, cannot be determined apart from the purpose and character of the legislation creating them. Metcalf & Eddy v. Mitchell, 269 U. S. 514, 46 S. Ct. 172, 70 L. Ed. 384. The end sought and the mode of attaining it adopted by Congress in the legislation providing for the welfare of the Indians by setting apart, by allotment or otherwise, tribal lands or the public domain, restricted for their benefit, led to the conclusion that those lands and the uses of them were so intimately connected with the performance of governmental functions as clearly to require independence of all state control so complete that nothing short of an express declaration by Congress would have subjected them to state taxation.

Governmental agencies similarly held to be exempt are national banks, First National Bank of Hartford v. Hartford, 273 U. S. 548, 47 S. Ct. 462, 71 L. Ed. 767; bonds of the national government, Weston v. City Council of Charleston, 2 Pet. 449, 467, 7 L. Ed. 481. Such were and still are the restricted allotted or tribal lands of the Indians. Neither leases of those lands, Indian Territory Illuminating Oil Co. v. Oklahoma, 240 U. S. 522, 36 S. Ct. 453, 60 L. Ed. 779; nor the exploitation of the land by the lessee, Howard v. Gipsy Oil Co., 247 U. S. 503, 38 S. Ct. 426, 62 L. Ed. 1239; Large Oil Co. v. Howard, 248 U. S. 549, 39 S. Ct. 183, 63 L. Ed. 416; Choctaw, O. & Gulf R. R. v. Harrison, 235 U. S. 292, 35 S. Ct. 27, 59 L. Ed. 234; Jaybird Mining Co. v. Weir, 271 U. S. 609, 46 S. Ct. 592, 70 L. Ed. 1112; nor his income from the lease, Gillespie v. Oklahoma, 257 U. S. 501, 42 S. Ct. 171, 66 L. Ed. 338, may be taxed by the state.

The early legislation affecting the Indians has as its immediate object the closest control by the government of their lives and property. The first and principal need then was that they should be shielded alike from their own improvidence and the spoliation of others but the ultimate purpose was to give them the more independent and responsible status of citizens and...