Eastern Band of Cherokee Indians v. Lynch

• Decision Date: 10 October 1980
• Docket Number: Nos. 79-1588,79-1589,s. 79-1588
• Citation: 632 F.2d 373
• Parties: EASTERN BAND OF CHEROKEE INDIANS, June Taylor Maldonado, individually and on behalf of all other similarly situated persons, Appellants, v. Mark G. LYNCH, Individually and as Secretary of Revenue for the State of North Carolina; The North Carolina Department of Revenue; Glenn McHan, Odell Grant, William G. Davis, individually and as Commissioners for the County of Swain; The County of Swain, Appellees, v. UNITED STATES of America, Amicus Curiae. EASTERN BAND OF CHEROKEE INDIANS, Appellant, v. Mark G. LYNCH, Secretary of Revenue for the State of North Carolina; Department of Revenue, Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 373

632 F.2d 373

EASTERN BAND OF CHEROKEE INDIANS, June Taylor Maldonado,

individually and on behalf of all other similarly

situated persons, Appellants, v. Mark G. LYNCH, Individually and as Secretary of Revenue for

the State of North Carolina; The North Carolina Department

of Revenue; Glenn McHan, Odell Grant, William G. Davis,

individually and as Commissioners for the County of Swain;

The County of Swain, Appellees, v. UNITED STATES of America, Amicus Curiae.

EASTERN BAND OF CHEROKEE INDIANS, Appellant, v. Mark G. LYNCH, Secretary of Revenue for the State of North

Carolina; Department of Revenue, Appellees.

Nos. 79-1588, 79-1589.

United States Court of Appeals, Fourth Circuit.

Argued June 3, 1980.

Decided Oct. 10, 1980.

Ben Oshel Bridgers, Sylva, N. C. (Holt, Haire & Bridgers, P. A., Sylva, N. C. on brief), for appellants.

David C. Shilton, Washington, D. C. (Edward J. Shawaker, Dept. of Justice, Sanford Sagalkin, Deputy Asst. Atty. Gen., Washington, D. C., on brief), for the United States as amicus curiae.

Myron C. Banks, Sp. Deputy Atty. Gen., Raleigh, N. C. (Rufus L. Edmisten, Atty. Gen. of North Carolina, Raleigh, N. C., on brief), for appellees.

Before BUTZNER and HALL, Circuit Judges, and WILLIAM M. KIDD, United States District Judge for the Southern District of West Virginia, sitting by designation.

BUTZNER, Circuit Judge:

The Eastern Band of Cherokee Indians and June Taylor Maldonado, an enrolled member of the Band, appeal the district court's dismissal of their consolidated suits for declaratory judgment. The district court held that North Carolina may impose taxes on the income earned on the Eastern Cherokee Reservation by members of the Band who reside on the reservation. The court also ruled that Swain County, where the reservation is situated, may levy, pursuant to state law, taxes on personal property located on the reservation and owned by members of the Band residing there.

No federal statute expressly preempts the authority of North Carolina to impose these taxes on members of the Eastern Band. Conversely, no federal statute expressly permits the state to levy the taxes. The crux of this case, therefore, is whether the Band was required to show that a federal statute expressly prohibits this taxation, or whether the state was obliged to demonstrate federal permission to tax. The district court found that the members of the Band have been citizens of North Carolina for more than a century and that the federal government had acquiesced in state taxation of their lands before 1925. Consequently, the court ruled that the Band must show that federal legislation exempted its members from state income and personal property taxes. It upheld the validity of the taxes because no federal law expressly prohibits the state from imposing them.

We conclude, however, that because the United States recognizes the Band as an Indian tribe and holds in trust the Indian reservation on which its members live, the state must show express federal permission to impose these taxes. No statute grants this permission, and we therefore reverse the judgment of the district court.

I

We begin with an examination of the Eastern Band's relationship to the state of North Carolina and to the United States. In United States v. Wright, 53 F.2d 300 (4th Cir. 1931), Judge Parker recounted the history of the Band. We need not repeat his exhaustive narrative. For the purpose of this case, a relatively brief summary of the Band's history suffices to establish the background of the state's claim that the Indians are subject to its taxing power and the Band's claim that Congress has preempted the state's authority to impose the taxes in question.

The Cherokee were one of several tribes that originally occupied the lands now composing North Carolina, South Carolina, Tennessee, Georgia, and Alabama. England claimed sovereignty over this territory but recognized the rights of the Indians to possession of the land on which they lived and to self-government. In accord with the Treaty of Paris ¹ signed at the end of the Revolutionary War, the United States succeeded to England's sovereignty. When Indian possessory rights to any particular land were extinguished, the rights passed to the state in which such land was situated.

With the 1785 Treaty of Hopewell, ² the United States initiated a policy of extinguishing Cherokee possessory rights in the southeast, including North Carolina. This goal was at least formally attained in 1835 with the Treaty of New Echota, ³ under which the Cherokee Nation ceded to the United States all possessory rights to lands east of the Mississippi and agreed to move west.

Not all of the Cherokees, however, left the southeastern states. Some remained pursuant to Article 12 of the Treaty of New Echota, which provided that those Cherokees willing to become citizens of the states in which they resided could seek from the commissioners named in the Treaty permission to remain in the east. Still other Cherokees eluded the United States military officers in charge of the Cherokee removal. In 1838 the Cherokees remaining in North Carolina were estimated to number not more than 1,200.

In 1848, Congress established a fund for the North Carolina Cherokees and provided that Indians remaining in North Carolina would receive only the interest of their portion of the fund, while each Indian moving west would be paid his share of the principal. ⁴ In 1855, Congress abandoned this incentive to Cherokee removal and in its place provided for payment of the principal to all North Carolina Cherokees. ⁵ The 1855 federal legislation conditioned payment on North Carolina's consent that the Cherokees could remain. This consent was given by the state in 1866. ⁶ The Cherokees used the federal payments to help purchase the land which would eventually become the Eastern Cherokee Reservation.

In 1868, Congress instructed the Secretary of the Interior to take "the same charge of the Eastern or North Carolina Cherokee as of other tribes of Indians." ⁷ During the next few years, Congress passed several statutes designed to save the Eastern Band from divestment of their land due to a hopelessly confused title. ⁸

Later, the Eastern Band brought suit to establish its right to a pro rata share of trust funds set apart by treaty ⁹ for the Cherokee Nation. The Supreme Court held that the Eastern Band had no cognizable claim because Band members were no longer part of the Cherokee Nation but rather were citizens of North Carolina, bound by that state's laws. Cherokee Trust Funds, 117 U.S. 288, 309, 6 S.Ct. 718, 727, 29 L.Ed. 880 (1866). ¹⁰

In 1887, Congress, embracing as a national goal the assimilation of most Indian tribes, enacted the General Allotment Act, ¹¹ which allocated specific tracts of reservation lands to individual tribe members. The General Allotment Act contemplated that each allotment would be held in trust for 25 years by the United States for the benefit of the Indian to whom the allotment had been made, and at the end of that period, each Indian would receive a fee simple interest in the allotted property. Until the expiration of the 25 years, the allotments were to carry restrictions on alienability and contract. The Allotment Act did not apply in terms to the Eastern Band holdings, which had been privately purchased by the tribe. ¹²

Two years after passage of the Allotment Act, North Carolina issued a corporate charter authorizing the Eastern Band to exercise all powers belonging to corporations under state law. ¹³ This charter was amended in 1897 to confer on the tribe limited powers of government pertaining to the control of tribal property. ¹⁴

Meanwhile in 1892, Congress appropriated a sufficient sum of money to redeem the Band's property after it had been sold to satisfy state and local taxes. ¹⁵ The 1892 legislation also authorized the Secretary of the Interior to pay the annual taxes on the Eastern Cherokee land.

In 1924, Congress included the Eastern Band property in the federal allotment program by authorizing the United States to hold the tribe's land in trust. The Act also instructed the Secretary of the Interior to draw up a roll of tribe members, survey the land, and allot holdings with 25-year restrictions on alienation. ¹⁶ Although authorizing state taxation of the tribal lands for the 1925 taxation year, the Act expressly stated that after 1925 there could be no taxation of restricted lands.

It was against this factual background that Judge Parker wrote the Wright opinion. ¹⁷ In Wright, North Carolina challenged the constitutionality of the provision in the 1924 Act prohibiting state taxation of the Eastern Band Reservation after 1925. Although the court acknowledged that Eastern Band members were citizens of North Carolina and subject to its laws, it held that such citizenship did not deprive the federal government of the power to legislate for the protection and economic welfare of the Band. The court concluded that the prohibition against state taxation was constitutional and stated further that by virtue of the conveyance in trust to the United States, there could be no state taxation of the lands unless Congress expressly consented. Wright heavily relied on the extensive federal involvement with the tribe:

(T)he life of this band of Indians, from an economic standpoint, both in its relation to the federal government and to the state, has been for more than sixty years practically that of other Indian tribes. Politically they have been subject to the laws of the state, but economically they have been wards of the federal government and cared for as such under the provisions of its laws. ¹⁸

Shortly after the court decided Wright, the federal policy toward Indians shifted from encouraging assimilation to favoring the preservation of Indian communities. Congress therefore enacted the Indian Reorganization Act of 1934, ¹⁹ which prohibited future allotments and extended...