Big Eagle v. United States, 158-59.

CourtCourt of Federal Claims
Writing for the CourtPER CURIAM
Citation300 F.2d 765
PartiesHayes BIG EAGLE (1), Ruby Bolton (2), and Charles Whitehorn (3) v. The UNITED STATES.
Docket NumberNo. 158-59.,158-59.
Decision Date09 May 1962

300 F.2d 765 (1962)

Hayes BIG EAGLE (1), Ruby Bolton (2), and Charles Whitehorn (3)

No. 158-59.

United States Court of Claims.

March 7, 1962.

Rehearing Denied May 9, 1962.

John W. Cragun, Washington, D. C., for plaintiffs.

Philip R. Miller, Washington, D. C., with whom was Asst. Atty. Gen., Louis F. Oberdorfer, for defendant. Edward S. Smith and Eugene Emerson, Washington, D. C., were on the brief.


This case was referred pursuant to Rule 45, 28 U.S.C. to Trial Commissioner Marion T. Bennett, with directions to make findings of fact and recommendations for conclusions of law. The commissioner has done so in a report filed July 27, 1961. Plaintiffs elected to submit the case on the commissioner's report without brief. Defendant filed its exceptions to the commissioner's report and brief and the case was submitted to the court on oral argument by counsel for the parties. Since the court is in agreement with the findings and recommendations of the trial commissioner, as hereinafter set forth, it hereby adopts the same as the basis for its judgment in this case. Plaintiffs, therefore, are entitled to recover and judgment, together with interest as provided by law, will be entered in favor of plaintiffs Hayes Big Eagle (1) in the sum of $151, Ruby Bolton (2) in the sum of $172.39 and Charles Whitehorn (3) in the sum of $96.01.

It is so ordered.

This is a tax refund case before the court pursuant to its jurisdiction under 28 U.S.C. §§ 1346(a) (1) and 1491. The issue is whether royalty income from Osage tribal mineral deposits credited to the individual trust accounts of noncompetent Osage Indians is exempt from Federal income tax. The essential facts are stipulated.

Prior to the Osage Allotment Act of June 28, 1906, 34 Stat. 539, the Osage reservation was held by the United States in trust for the Osage tribe. By the act, the tribal lands and funds were equally divided among the 2,229 tribal members. The lands were surveyed and allotted directly to individuals and the minerals were evenly divided through the provision for "headrights," which is the term used to describe a right to 1/2229th share of the distributable income from the minerals, plus a reversionary title to a like share of the minerals whenever the mineral trust terminates. The act provided that the royalties derived from the extraction of the minerals be placed in the United States Treasury and held in trust for a period of 25 years to the credit of the individual members of the tribe, subject to periodic distributions. By statutory amendment the trust period has been

300 F.2d 766
extended to 1983 (52 Stat. 1034, section 3). While the trust exists, legal title to the minerals is in the United States as trustee, but thereafter the minerals will vest absolutely in the allottees or their heirs. See section 2(7) and section 5 of the act, supra. These basic arrangements have not been changed in any of the 12 amendments to the act between 1906 and 1957.1

At all times material here, the plaintiff taxpayers were adult, fullblood, Osage Indians who have never received certificates of competency. In addition, Big Eagle is under guardianship. Each of the three individuals had inherited an interest in the Osage tribal trust fund as follows: Hayes Big Eagle, 1.47916 mineral headrights; Ruby Bolton, 1.00073 headrights; and Charles Whitehorn, 1.33333 headrights, of which one was his original headright and the remaining .33333 was inherited. For the calendar year 1953, the plaintiffs received mineral headright income as follows:

 Hayes Big Eagle ............ $2,501.85
                 Ruby Bolton ................ 1,692.64
                 Charles Whitehorn .......... 2,255.20

The income listed above was all collected by defendant's duly authorized officers and credited to each petitioner's individual trust account. The funds were not distributed directly to them, for disbursements from the trust accounts could only be made upon application and according to their need as determined by the Secretary of Interior or his authorized representative.

The duly authorized agents of defendant at the Osage Indian Agency prepared Federal income tax returns for each of these plaintiffs covering the year 1953. The returns were filed on the following dates:

 Hayes Big Eagle ...... June 18, 1954
                 Ruby Bolton .......... April 12, 1954
                 Charles Whitehorn .... June 10, 1954

The defendant by its officers paid itself as Federal income tax for 1953 the following sums: $151 from the trust account of Hayes Big Eagle; $172.39 from the trust account of Ruby Bolton; and $96.01 from the trust account of Charles Whitehorn. These funds were credited to the special tax account and periodically the Osage Agency transferred the accumulated funds in a lump sum to the Internal Revenue Service.

Timely claims for refund were filed on behalf of plaintiffs but denied by the District Director of Internal Revenue, as noted in the findings of fact. This suit followed.

No Federal income tax has heretofore been collected from the mineral right or headright income of noncompetent Osage Indians. Defendant now asserts that such income is taxable for two reasons. Defendant cites the broad provisions of the Internal Revenue Code of 1939 (26 U.S.C. §§ 11(a), 21(a), 22(a)), stating that said provisions impose a tax on the net income of "every individual" derived "from any source whatever." Defendant also says that the Osage Allotment Act, as amended, neither expressly nor impliedly confers tax exempt status on either the taxpayers themselves or on their headright income.

To refute the first defense, plaintiffs rely upon the decision of the U.S. Court of Appeals for the Tenth Circuit in Mary Blackbird v. Commissioner, 10 Cir., 38 F.2d 976, 977 (1930).2 The case is

300 F.2d 767
squarely in point. The identical issue was presented as to taxation of income from the mineral-based headrights of a noncompetent Osage Indian. These rights were held in trust by defendant. The court said
"* * * As to Mary Blackbird, we are disposed to yield our assent to the soundness of the contention. She is a restricted full-blood Osage. Her property is under the supervising control of the United States. She is its ward, and we cannot agree that because the income statute, Act of 1918 (40 Stat. 1057), and Act of 1921 (42 Stat. 227), subjects `the net income of every individual\' to the tax, this is alone sufficient to make the Acts applicable to her. Such holding would be contrary to the almost unbroken policy of Congress in dealing with its Indian wards and their affairs. Whenever they and their interests have been the subject affected by legislation they have been named and their interests specifically dealt with. Elk v. Wilkins, 112 U.S. 94, 100, 5 S.Ct. 41, 44, 28 L.Ed. 643: `General acts of Congress did not apply to Indians, unless so expressed as to clearly manifest an intention to include them.\' In Choate v. Trapp, 224 U.S. 665, 32 S.Ct. 565, 56 L.Ed. 941, the court, after noting the general rule that exemptions from taxation are to be strictly construed, said at page 675 of 224 U.S., 32 S.Ct. 565, 569:
`But in the government\'s dealings with the Indians the rule is exactly the contrary. The construction, instead of being strict, is liberal; doubtful expressions, instead of being resolved in favor of the United States, are to be resolved in favor of a weak and defenseless people, who are wards of the nation, and dependent wholly upon its protection and good faith. This rule of construction has been recognized, without exception, for more than a hundred years, and has been applied in tax cases.\'"

The court in Blackbird also cited opinions by the Attorney General to the effect that it had never been the practice to legislate for the Indian generally along with the rest of the people and that legislation, especially revenue laws, should not be applied to Indians unless Congress in clear and unambiguous language so directed. 34 Ops. Att'y Gen. 439; 35 Ops. Att'y Gen. 4, 1107.

Following the Blackbird decision in 1930, the Revenue Service in 1936 again asserted its right to collect a tax under circumstances precluded by decision G. C.M. 16100, XV-1CB80. But, this ruling was revoked when it was realized that the decision in Blackbird constituted an estoppel of judgment. G.C.M. 18242, 1937-1CB57. The third assertion of taxability (G.C.M. 26399, 1950-2CB8) brings this case in issue. Defendant feels that under the rationale of Commissioner v. Sunnen, 333 U.S. 591, 68 S.Ct. 715, 92 L.Ed. 898, it is no longer collaterally estopped on account of the weakening of the Blackbird doctrine by the next two cases now referred to.

Defendant says that Blackbird's wings have been clipped by the Supreme Court and cites Chouteau v. Burnet, 283 U.S. 691, 51 S.Ct. 598, 75 L.Ed. 1353 (1931). Although the name is spelled differently in the references given, the Indian seems to be the same one involved in the Blackbird case, reference to whom is made in the preceding footnote. The case was before the Supreme Court to review a judgment of the Tenth Circuit Court of Appeals, affirming a decision of the Board of Tax Appeals, Chouteau v. Commissioner, 14 B.T.A. 1254. Chouteau was a competent Indian so certified. The Supreme


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