Battese v. Apache County

• Decision Date: 25 June 1981
• Docket Number: No. 15328,15328
• Citation: Battese v. Apache County, 630 P.2d 1027, 129 Ariz. 295 (Ariz. 1981)
• Parties: Stanley C. BATTESE and Kathy Battese, husband and wife, Appellees, v. APACHE COUNTY and Arizona Department of Revenue, Appellants.
• Court: Arizona Supreme Court

Page 1027

630 P.2d 1027

129 Ariz. 295

Stanley C. BATTESE and Kathy Battese, husband and wife, Appellees, v. APACHE COUNTY and Arizona Department of Revenue, Appellants.

No. 15328.

Supreme Court of Arizona, In Banc.

June 25, 1981.

Robert K. Corbin, Atty. Gen., by Ian A. Macpherson, Asst. Atty. Gen., Phoenix, for appellants.

Wayne H. Bladh, Window Rock, for appellees.

HAYS, Justice.

The State of Arizona appeals from cross-motions for summary judgment decided in favor of the Batteses. We are asked to uphold the ad valorem taxation by the State of two lots and improvements located within the boundaries of the Navajo Indian reservation and surrounded by Indian trust lands. These lots are owned in fee simple by the Batteses, both enrolled members of the Navajo tribe. We take jurisdiction pursuant to Rules of Civil Appellate Procedure, rule 19(e), 17A A.R.S., and affirm the judgment of the trial court.

The crux of the argument asserted by the State is based upon the chain of title of the Batteses' land. Originally, the Batteses' two lots (hereinafter subject property) were homesteaded by Thomas Osborne, a non-Indian. At that time, the subject property bordered the then existing Navajo Indian reservation, the boundaries of which were defined in the treaty of June 1, 1868 between the United States and the Navajo tribe. This treaty also recognizes the Navajo tribe as a self-governing Indian tribal organization. Osborne first filed for a homestead entry on the subject property on June 21, 1902. Not until November 6, 1908 did Osborne make final proof of his homestead entry, and on May 11, 1909 a patent to the property was finally issued by the United States Government. In the interim, on November 9, 1907, President Roosevelt issued Executive Order No. 709 which withdrew additional land surrounding the then existing reservation "from sale and settlement and set (it) apart for the use of the Indians ... Provided, That this withdrawal shall not affect any existing valid rights of any person."

In 1934 Congress further enlarged the Indian trust lands and established the exterior boundaries by the Act of June 14, 1934, ch. 521 § 1, 48 Stat. 960, to what is now the presently existing Navajo Indian Reservation of Arizona. This Act also provided that "(a)ll valid rights and claims initiated under the public land laws prior to the approval hereof involving any lands within the area so defined, shall not be affected by this Act." Section 2 of this 1934 Boundary Act authorized the owners of such property to relinquish or reconvey to the United States any portion of the property or to select lands outside the reservation in lieu of the property owned within the newly established reservation boundaries. The subject property was never relinquished nor reconveyed and was acquired by the Batteses through Osborne's successors in interest as evidenced by a joint tenancy deed dated October 30, 1975.

The State applies the relation-back doctrine in maintaining that the Osborne lands were effectively patented upon filing for a homestead entry in 1902, not in 1909, the date the patent was issued. The reservation expanded around the subject property and thus, the State asserts, the expansion of the reservation in 1907 and later in 1934 did not transform nor ever include Osborne's fee-patented lands as reservation trust lands since both Acts contained provisos to not affect any "existing valid rights," i. e., Osborne's patent entry of 1902. The State concludes then that the subject property does not constitute a part of the reservation and therefore that no jurisdictional hurdle exists to halt the State's imposition of the ad valorem tax on the Batteses' real property located within the State. We are again confronted with marking the boundary between federal and state jurisdiction in resolving this taxation question.

For over 100 years the Supreme Court has adhered to the rule that States do not have authority to impose taxes on lands comprising Indian reservations. The Kansas Indians, 72 U.S. (5 Wall.) 737, 18 L.Ed. 667 (1867). Today the exemption of Indian lands and Indian income from state taxation is based upon the doctrine of federal preemption. McClanahan v. State Tax Commission of Arizona, 411 U.S. 164, 93 S.Ct. 1257, 36 L.Ed.2d 129 (1973); Mescalero Apache Tribe v. Jones, 411 U.S. 145, 93 S.Ct. 1267, 36 L.Ed.2d 114 (1973); Department of Revenue v. Hane Construction Co., 115 Ariz. 243, 564 P.2d 932 (App.1977). This doctrine has been consistently applied since the analysis was set forth in the McClanahan decision and more recently has been construed by the United States Supreme Court in Moe v. Confederated Salish & Kootenai Tribes, etc., 425 U.S. 463, 475-76, 96 S.Ct. 1634, 1642, 48 L.Ed.2d 96 (1976), stating:

"In McClanahan this Court considered the question whether the State had the power to tax a reservation Indian, a Navajo, for income earned exclusively on the reservation. We there looked to the language of the Navajo treaty and the applicable federal statutes 'which define the limits of state power.' 411 U.S., at 172, 93 S.Ct., at 1262, 36 L.Ed.2d, at 136. Reading them against the 'backdrop' of the Indian sovereignty doctrine, the Court concluded 'that Arizona ha(d) exceeded its lawful authority' by imposing the tax at issue. Id., at 173, 93 S.Ct., at 1263, 36 L.Ed.2d, at 136. In Mescalero, the companion case, the import of McClanahan was summarized:

'(I)n the special area of state taxation, absent cession of jurisdiction or other federal statutes permitting it, there has been no satisfactory authority for taxing Indian reservation lands or Indian income from activities carried on within the boundaries of the reservation, and McClanahan v. Arizona State Tax Commission, supra, lays to rest any doubt in this respect by holding that such taxation is not permissible absent congressional consent.' 411 U.S., at 148, 93 S.Ct., at 1270, 36 L.Ed.2d, at 119. " (Emphasis added).

The State seeks to avoid the applicability of McClanahan and the many subsequently aligned decisions on the grounds that the original "non-Indian fee-patented" title removes this land from those being included within the term "Indian reservation lands," for tax exemption purposes. In our interpretation of the Navajo treaty, statutes, and relevant case law, we adhere to the rule of construction requiring that doubtful expressions be resolved in favor of the Indians. McClanahan, supra. The language used in the Acts and authorities mentioned to describe the lands which have been reserved to the Indians, and accordingly removed from state jurisdiction, includes "reservation lands," "Indian property," "property within the exterior boundaries of a reservation," "property within the limits of a reservation," and "Indian country," as defined in 18 U.S.C. § 1151(a) ¹ for criminal jurisdictional purposes. We conclude that the Batteses' property comes within those lands Congress intended to be exempt from state taxation. We note, "(t) here is no magic in the word 'reservation.' " Mescalero Apache Tribe v. Jones, supra, 411 U.S. at 161, 93 S.Ct. at 1277 (Douglas, J., concurring and dissenting in part). The relevant cases which have applied the McClanahan analysis, discussed infra, exemplify the position that the property's status as trust, nontrust, and/or fee-patented land, is not determinative of the property's status as exempt from state taxation. The exemption applies if the subject property is owned by enrolled Navajo tribal members and is located within the present physical boundaries of the Navajo reservation.

In summary, the United States Supreme Court cases illustrate the frustration of State attempts to tax property owned in fee by reservation Indians. Personal income derived from reservation sources and earned by reservation Indians cannot be taxed by the State, McClanahan, supra ; personal property taxes cannot be imposed upon motor vehicles owned by such Indians, nor can cigarette taxes be levied on sales made on the reservation to reservation Indians Moe v. Confederated Salish & Kootenai Tribes, supra.

Under some circumstances, even conduct of non -Indians on the reservation is governed by tribal and not state laws, Williams v. Lee, 358 U.S. 217, 79 S.Ct. 269, 3 L.Ed.2d 251 (1959). But the decisions which find no exemption from state taxation or exclusion from state authority are readily distinguishable. They involve non-Indians and focus on the degree of the burden imposed by the State and its interference with tribal self-government. The burden was held to be minimal in Washington v. Confederated Tribes of Colville, 447 U.S. 134, 100 S.Ct. 2069, 65 L.Ed.2d 10 (1980), where the State taxed cigarette sales of on-reservation purchases made by non-members of the tribes.

Two recent decisions by the United States Supreme Court further stress the significance of the Indian or non-Indian status of the individual taxed. Central Machinery Co. v. Arizona State Tax Commission, 448 U.S. 160, 100 S.Ct. 2592, 65 L.Ed.2d 684 (1980); White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 100 S.Ct. 2578, 65 L.Ed.2d 665 (1980). In White Mountain Apache Tribe v. Bracker, 100 S.Ct. at 2584, the Court reaffirmed that when on-reservation conduct involving only Indians is at issue, state law is generally inapplicable, for the State's generalized interest in raising revenue is insufficient to permit intrusion of the federal interest in encouraging self-government. In the instant case we are dealing with the Batteses, tribally enrolled Indians who share in the aspects of self-government upon which the tradition of immunity is based. The State's interest in ad valorem property taxation for revenue purposes is not a sufficient interest to justify intrusion.

The United States Supreme Court's recent pronouncement discussing the conflict of tribal and state authority does not provide the purported support for the State's interpretation of reservation lands. A question...