United States v. Mason Oklahoma v. Mason 8212 654, 72 8212 606, Nos. 72

• Court: United States Supreme Court
• Writing for the Court: MARSHALL
• Citation: 93 S.Ct. 2202,37 L.Ed.2d 22,412 U.S. 391
• Parties: UNITED STATES, Petitioner, v. Archie L. MASON et al. State of OKLAHOMA, Petitioner, v. Archie L. MASON and Margaret R. Mason, etc., et al. —654, 72—606
• Docket Number: Nos. 72
• Decision Date: 04 June 1973

412 U.S. 391 93 S.Ct. 2202 37 L.Ed.2d 22 UNITED STATES, Petitioner,

v.

Archie L. MASON et al. State of OKLAHOMA, Petitioner, v. Archie L. MASON and Margaret R. Mason, etc., et al.

Nos. 72—654, 72—606. Argued April 18, 1973. Decided June 4, 1973.

Syllabus

The United States did not breach its fiduciary duty as trustee of Indian property by paying the Oklahoma inheritance tax assessed against the estate of decedent, a restricted Osage Indian, in reliance on West v. Oklahoma Tax Comm'n, 334 U.S. 717, 68 S.Ct. 1223, 92 L.Ed. 1676, which had upheld the validity of that tax as applied to the same kind of estate. Pp. 394—400.

198 Ct.Cl. 599, 461 F.2d 1364, reversed.

Sol. Gen. Erwin N. Griswold, for the United States.

Paul C. Duncan, Oklahoma City, Okl., for State of Oklahoma.

Charles A. Hobbs, Washington, D.C., for respondents.

Mr. Justice MARSHALL delivered the opinion of the Court.

The issue in these cases is whether a trustee in the course of administering its fiduciary obligations is en-

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titled to rely on a directly relevant decision of this Court which has neither been overruled nor questioned. The Court of Claims ruled that the United States breached its fiduciary duty by failing to resist payment of Oklahoma's estate tax on certain trust property held by the United States acting as trustee for the benefit of the Osage Indians. The Court of Claims recognized that this Court, in West v. Oklahoma Tax Comm'n, 334 U.S. 717, 68 S.Ct. 1223, 92 L.Ed. 1676 (1948), had squarely upheld the validity of Oklahoma's inheritance tax as applied to restricted Osage Indians. But the lower court believed that West had been so undermined by later decisions of this and other courts that the United States had an obligation to challenge its continuing validity. Since the court also believed that such a challenge would have been successful, it upheld both the plaintiffs' claim against the United States for the amount of the tax and the United States' third party claim against Oklahoma for indemnification. We reverse. We hold that the United States was entitled to rely on West in paying the tax and thus did not breach its fiduciary obligations. It follows that the plaintiffs below suffered no compensable damages and that the claim over by the United States drops out of the case.

I

The facts and legal background of this dispute may be briefly stated. Before 1906, the Osage Reservation was held in trust for the Osage Tribe by the United States.¹ In that year the Osage Allotment Act, 34 Stat.

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539, was passed, which divided tribal land equally among members of the Tribe. However, an individual Indian was not permitted to alienate the land unless 'the Secretary of the Interior, in his discretion, . . . (issued) . . . a certificate of competency, authorizing him to sell and convey any of the lands deeded him by reason of this Act.'² 34 Stat. 542.³ In addition, the Act created so-called 'headrights' which are each tribal member's individual share of the income derived from the minerals located on the land. The minerals and this income were to be placed in trust for the individual tribal members, subject to periodic distribution from income, until 1984, when legal title to the minerals together with the accumulated income would vest in the individual Indians. ⁴ Various tribal funds were also placed in trust until that year. As amended, the Act provides that land and funds which are either restricted or held in trust 'shall not be subject to lien, levy, attachment, or forced sale . . . prior to the issuance of a certificate of competency.' 61 Stat. 747.

The decedent in this case, Rose Mason, was an Osage Indian who had not received a certificate of competency. Pursuant to the Osage Allotment Act, the United States held certain of her property in trust for her. Upon

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her death intestate, an Oklahoma estate tax return was filed which included in her gross estate these trust properties. The Federal Government then paid Oklahoma some $8,087.10 in estate taxes out of the trust properties. Although the decedent's administrators were discharged in 1968, in 1970 the estate was reopened for the purpose of permitting the administrators to challenge the United States' payment of the tax. A suit was filed in the Court of Claims alleging that the United States had breached its fiduciary duty in making the payment,⁵ and that court upheld the claim together with the United States' third-party claim against Oklahoma. See 198 Ct.Cl. 599, 461 F.2d 1364 (1972). We granted certiorari because of the seeming inconsistency between the decision below and our prior decision in West v. Oklahoma Tax Comm'n, supra.⁶ 409 U.S. 1124, 93 S.Ct. 936, 35 L.Ed.2d 256.

II

In Oklahoma Tax Comm'n v. United States, 319 U.S. 598, 63 S.Ct. 1284, 87 L.Ed. 1612 (1943), this Court ruled that it could not infer a tax immunity extending to estate taxes on Osage property from the fact that Congress had placed restrictions on the alienability of the property. The West Court extended that ruling to property, such as that involved in this case, held in trust for the Osage Indians. The Court held that by placing the property in trust, Con-

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gress did not intend to immunize it from local taxation. Moreover, the federal-instrumentality doctrine was found to be no bar to Oklahoma's estate tax. Although this doctrine had been used in earlier cases to invalidate state property taxes on trust property, see, e.g., McCurdy v. United States, 264 U.S. 484, 44 S.Ct. 345, 68 L.Ed. 801 (1924); United States v. Rickert, 188 U.S. 432, 23 S.Ct. 478, 47 L.Ed. 532 (1903), the Court distinguished estate taxes since '(a)n inheritance or estate tax is not levied on the property of which an estate is composed. Rather it is imposed upon the shifting of economic benefits and the privilege of transmitting or receiving such benefits.' 334 U.S., at 727, 68 S.Ct., at 1228. Discerning no congressional intent to immunize Osage trust property from state taxation and no constitutional bar to the tax, the Court upheld Oklahoma's claim.

As the Court of Claims itself recognized, the West decision 'applied to the very type of trust property now before us.' 198 Ct.Cl., at 609, 461 F.2d, at 1370. Nonetheless, the court thought that the rationale of West had been substantially undermined by Squire v. Capoeman, 351 U.S. 1, 76 S.Ct. 611, 100 L.Ed. 883 (1956), which held that the profits from the sale of timber on the land of a Quinaielt Indian held in trust for him pursuant to the General Allotment Act, 25 U.S.C. § 331, was immune from federal capital gains taxes.

It must be noted, however, that the Squire Court did not purport to question or overrule West, and, indeed, did not so much as mention that decision. The Squire case involved a different tax by a different level of government on the trust properties of a different tribe held pursuant to a different statute. As the West decision itself made clear, decisions relating to other types of taxes are not readily transferable to the area of estate and gift taxation where the tax is imposed on the transfer of property rather than on the property itself or the

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income it generates. Cf. Plummer v. Coler, 178 U.S. 115, 20 S.Ct. 829, 44 L.Ed. 998 (1900...