Title: State v. Zay Zah

State: minnesota

Issuer: Minnesota Supreme Court

Document:

259 N.W.2d 580 (1977) STATE of Minnesota, et al., Appellants, v. ZAY ZAH et al., Respondents, A. J. Powers, et al., Defendants. No. 46834. Supreme Court of Minnesota. October 21, 1977. Rehearing Denied November 17, 1977. *581 Aurel L. Ekvall, County Atty., Bagley, for appellants. John M. Holmes, Indian Legal Assistance Program, Duluth, for respondents. James W. Moorman, Acting Asst. Atty. Gen., Raymond N. Zagone, Edward J. Shawaker, Dept. of Justice, Washington, D.C., amicus curiae (seeking affirmance). Tupper, Smith & Seck, Kent P. Tupper, Gerald L. Seck, Peter W. Cannon and Kimball D. Mattson, Walker (seeking affirmance), for Wh. Earth Res. Bus. Comm., amicus curiae. George Goodwin, Bureau of Indian Affairs, Minneapolis, amicus curiae (seeking affirmance); Bernard P. Becker, St. Paul (of counsel). Considered and decided by the court en banc. SCOTT, Justice. This is an appeal in an action to quiet title to real estate. Eugene and Laurie Stevens commenced the action in June 1974 in the district court of Clearwater County. In July 1974 the State of Minnesota and the County of Clearwater were joined as party plaintiffs. The matter was heard before the district court on August 28, 1975. On March 1, 1976, the court entered an order for judgment in favor of defendant George Aubid, Sr., the sole heir of defendant Zay Zah. Plaintiffs appeal from this judgment. We affirm. *582 This case was submitted to the district court upon a stipulation of the following facts: The district court concluded that the 1927 trust patent issued to Zay Zah continues in effect, thus making George G. Aubid, Sr., sole surviving heir of Zay Zah, the "sole beneficial owner and cestui que trust" of the disputed property. We find the legal issue presented by these facts to be: Was the property in question subject to tax forfeiture following the expiration of the original trust patent, or did that patent remain in effect beyond the initial 25-year term? The parties agree that during the original 25-year period of the trust patent given to Zay Zah in 1927, the property was not subject to state taxation. Appellants cite United States v. Rickert, 188 U.S. 432, 23 S. Ct. 478, 47 L. Ed. 532 (1903), to this effect. Appellants and respondents assert different bases for this tax exemption, however. Appellants claim that the Clapp Amendment, discussed infra, eliminated the "trust" aspect of the patent, but could not divest the right not to be taxed during the duration of trust patent. This of course leads to the conclusion that taxation could begin when the 25 years expired. Respondents on the other hand, argue that the "trust status" of the allotment was in itself a constitutionally protected vested property right, thereby preventing taxation not only during the 25-year period, but also thereafter by reason of indefinite extension of the "trust status" by the Wheeler-Howard Act of 1934. The pertinent part of that statute states: Appellants' argument makes the Wheeler-Howard Act inapplicable because there would be no "trust" to continue following the 25-year period. The crux of the matter is therefore the relationship between the trust patent issued to Zay Zah in 1927 and the Clapp Amendment. The trust patent contains the following relevant language: The Clapp Amendment, dated June 21, 1906, 34 Stat. 353, reads in relevant part as follows: A straightforward application of this statute would indicate that Zay Zah's trust patent in 1927 actually conveyed a fee simple, thus subjecting the property to taxation from the beginning. As stated above, however, the parties are in agreement that the land was not taxable during the 25-year period from 1927 to 1952. Appellants' position that taxation was barred solely due to a "vested right to tax immunity" passes over the character of the taxation involved. Logic would dictate that if Zay Zah received a fee simple in 1927 by reason of the Clapp Amendment, the land would have been subject to state taxation ab initio; but if Zay Zah had received a trust patent, meaning that the land was held by the Federal government in trust for him, it would not be subject to state taxation. See, United States v. Rickert, 188 U.S. 432, 437, 23 S. Ct. 478, 480, 47 L. Ed. 532, 536. The vested right to be free from state taxation must derive from somewhere, and its only possible source was the trust patent itself. After all, it is the land which is exempt from property tax, not the individual who happens to own or possess the land at any given time.[1] The principle established by Rickert is that land held in trust by the United States is exempt from state taxation during the period of that trusteeship, and none of the rights derived from the trust can be divested without due process under the Fifth Amendment. This analysis is supported by Morrow v. United States, 243 F. 854 (8 Cir. 1917), wherein the Eighth Circuit resolved a matter similar to the present case. The Court of Appeals stated the issue to be The positions taken by the parties were these: The court began its analysis as follows: The court held that exemption from taxation was one of the rights intended to pass with the trust patent under the Nelson Act: The only distinguishing factor between the present case and the Morrow case is that in Morrow, the trust patent was issued prior to the passage of the Clapp Amendment, while in the present case the patent was issued approximately 20 years after the Clapp Amendment. This fact fails to distinguish Morrow since appellants admit that Zay Zah's property was not taxable from 1927 to 1952, because there was a "vested right to tax immunity" during this period. As made clear in Morrow, this exemption is derived directly from the trust patent itself: This court followed the Morrow decision in Warren v. County of Mahnomen, 192 Minn. 464, 257 N.W. 77 (1934), a case similar on its facts to Morrow. In Warren we stated: Although Warren similarly involved a trust patent issued prior to the Clapp Amendment, this again will not serve to distinguish it from the present case. The case of Mahnomen County v. United States, 319 U.S. 474, 63 S. Ct. 1254, 87 L. Ed. 1527 (1943), does not require a different interpretation of the Clapp Amendment. That case also involved a trust patent issued prior to the Clapp Amendment, but dealt with a somewhat different question, whether a county had to refund property taxes assessed by the county and paid by an Indian during the period of a trust patent. In holding that the taxes need not be refunded, the United States Supreme Court made the following remarks concerning the effects of the Clapp Amendment: The Clapp Amendment is thus seen to have the effect of permitting Indians covered by its terms to convert their trust patents, whether issued before or after the passage of the Amendment, into fee simple titles subject to taxation. Nevertheless, once the trust patent has been issued, it cannot be so converted without the consent of the patentee. The binding trust agreement continues in full effect, with its attendant tax exemption, until its term expires or the patentee accepts title in fee simple. This reading of the Clapp Amendment is fully consistent with Morrow v. United States, supra, and Warren v. County of Mahnomen, supra. In the instant case it is undisputed that Zay Zah took no action to convert his trust patent into a fee simple as permitted by the Clapp Amendment. The trust created in 1927 therefore continued in full effect until 1952; the freedom from taxation during that period being derived from the "legal *587 relationship of trusteeship" established by the patent. Under the terms of the trust patent Zay Zah's land would have become his in fee simple in 1952, thereafter fully subject to state taxation. Respondents assert, however, that the Wheeler-Howard Act, 25 U.S. C.A., § 462, extends Zay Zah's trust patent indefinitely. Since Zay Zah's trust patent was in existence at the time of the Wheeler-Howard Act, § 462 must be interpreted as extending the trust period unless contrary considerations can be found. Appellants admit that "read alone, the Wheeler-Howard Act would seem to extend indefinitely the trust period and restrictions placed on any Indian land." Appellants' principal argument against such extension is that the mixed-blood Indians of the White Earth Reservation were "fully emancipated by virtue of the Clapp Amendment." They cite the following cases to support their argument: United States v. Waller, 243 U.S. 452, 37 S. Ct. 430, 61 L. Ed. 843 (1917); Dickson v. Luck Land Company, 242 U.S. 371, 37 S. Ct. 167, 61 L. Ed. 371 (1917); Baker v. McCarthy, 145 Minn. 167, 176 N.W. 643 (1920); and United States v. Spaeth, 24 F. Supp. 465 (D.C.Minn. 1938). However, the first two cases were explicitly distinguished in the Morrow decision: In both these cases, the Indian patentees had voluntarily chosen to alienate their lands as permitted by the Clapp Amendment, but neither case addresses the issue in the present case, where the Indian patentee wishes to retain the trust status of the land. The case of Baker v. McCarthy, supra, involved the sale of land held under a trust patent by the heirs of the original patentee. In that case this court held the sale valid, taking the following view of the Clapp Amendment: If controlling, such language would make the Wheeler-Howard Act totally inapplicable, *588 since by this analysis Zay Zah, being an adult mixed-blood Indian in 1927, would have held a fee simple from the issuance of the "trust patent." The Baker decision, however, cannot be reconciled with our later decision in Warren v. County of Mahnomen, supra. The Warren case clearly holds that land held under a trust patent is exempt from taxation, relying upon the Morrow case as noted above. Further, in Warren we explicitly noted the importance of no fee simple patent having been issued: The "trusteeship" theory of Warren and Morrow cannot be squared with the "automatic fee simple" theory of Baker. Therefore, the district court was not in error to conclude that Warren "overruled Baker, at least by implication." The final case relied upon by appellants to show the ineffectiveness of § 462 of the Wheeler-Howard Act is United States v. Spaeth, 24 F. Supp. 465 (D.C.Minn.1938). The issue in Spaeth was whether Executive Orders of 1920 and 1927 had extended trust patents of Indians who were affected by the Clapp Amendment. The factual situation was somewhat unusual in that all but two of the Indians involved had received fee title patents from the government, though they had not requested such patents. The court in Spaeth stated: The court summarized, "A title tantamount to fee by reason of legislative enactment [i.e., the Clapp Amendment] existed in the allottee." The Executive Order could thus not extend a trust because "the President did not intend to extend something that did not exist." Ibid. The court concluded with the following remarks: *589 As discussed above, this reasoning is not consistent with the "trusteeship" basis for tax exemption explained in Morrow. Commenting upon the Spaeth decision, the district court in the instant case noted in its memorandum: There is simply no way to reconcile the granting of a fee simple via a trust patent with a vested right to tax immunity under that same patent. While it is undoubtedly true that the Clapp Amendment "emancipated" certain Indians to the extent that they could, if they wished, obtain fee title to their lands and then be required to pay taxes thereon, it could not at one and the same time automatically make trust patents into fee patents and yet maintain the tax-exempt status of the land. This status, admittedly not destroyed by the Clapp Amendment even as to trust patents issued subsequent to its passage, can only arise from the fact that the land was indeed still held in trust by the Federal government under a binding agreement with the White Earth Indians. The district court therefore correctly held that the decision in Spaeth is not consistent with the holding of Morrow v. United States, supra, which we accepted in Warren v. County of Mahnomen, supra, and affirm herein. We conclude that the trusteeship agreement between Zay Zah and the United States did not terminate in 1952, but was rather extended indefinitely by the Wheeler-Howard Act of 1934. It follows that the tax-exempt status of this land, derived as it was from the trust agreement, did not terminate in 1952, and hence the land did not become subject to forfeiture for nonpayment of taxes. Equitable title under the trust remained in Zay Zah, and has now passed to his sole heir George Aubid, Sr.; fee title remains in the United States unless and until the holder of the trust patent applies for and obtains from the United States a fee patent. We reach this result based solely upon the facts of this case. We intimate no opinion as to what might be the result in a different factual setting such as, but not limited to, a situation where title to former trust patent property has already been quieted. Affirmed. WAHL, J., not having been a member of this court at the time of the argument and submission, took no part in the consideration or decision of this case. YETKA, Justice (concurring specially). Although I must concur in the result reached in this case, I believe that it contributes to the still unresolved problems which are the product of shifting Federal policies towards Indian tribes. I am particularly concerned with the specific result in the present case, because there is no accurate estimate of the number of titles and amount of land affected. The attempt to limit this decision narrowly to its facts cannot be wholly successful. Its reasoning is bound to be persuasive in cases involving other land titles, even where title has already been quieted. This possibility raises serious due process considerations which were not before us in the present case but are just below the surface. In Bryan v. Itasca County, 303 Minn. 395, 406, 228 N.W.2d 249, 256 (1975), reversed, 426 U.S. 373, 96 S. Ct. 2102, 48 L. Ed. 2d 710 (1976), we expressed misgivings about the twists and turns of Federal policy toward Indians as follows: The fact that the statutory interpretation espoused by this court was ultimately incorrect only serves to highlight those misgivings. The passage in 1953 of Public Law 280, 67 Stat. 583,[1] as amended, 18 U.S.C.A., § 1162, and 28 U.S.C.A., § 1360, marked the beginning of the most recent assimilation policy toward Indians, but as suggested in Bryan v. Itasca County, 426 U.S. 373, 387, 96 S. Ct. 2102, 2111, 48 L. Ed. 2d 710, 720 (1976), that policy is not as strong today, if it ever was a total assimilationist policy.[2] It appears now that the Federal government wishes to preserve Indian culture and strengthen tribal self-government. The state's dilemma in the present situation is clear from an examination of Public Law 280 and the present case. Since jurisdiction has been asserted by the state over criminal and civil matters on most reservations, there is an increased need for services and personnel. However, removal of additional lands from taxation, as in the present case, shrinks the tax base which provides funds for the services. If, as suggested by the United States Supreme Court in Bryan, extension of state taxing power would cripple tribal self-government, and if as suggested by the present opinion state and local power to tax Indian-owned lands is more restricted than previously supposed, the state and local tax burdens will be even greater. If Federal policy contemplates strengthened tribal government (cf. Bryan v. Itasca County, 426 U.S. 373, 388, note 14, 96 S. Ct. 2102, 2111, 48 L. Ed. 2d 710, 721) with reliance on state and local governments to provide services that would otherwise be unavailable, then the Federal government must accept the financial responsibility for providing the services.[3] If states cannot tax tribal property on the reservation or lands allotted to individual Indians, they must be reimbursed for providing services on the reservations. The existence of this dilemma has been recognized since the passage of Public Law 280 (see, colloquy between Congressman Young and Chief Counsel Sellery of the Bureau of Indian Affairs, quoted in Bryan, 426 U.S. 381, 96 S. Ct. 2108, 48 L.Ed.2d 717). Taxation is not the only area of uncertainty in Federal Indian policy. One commentator has noted generally with regard to the status of all Indian treaty rights the following: The basic point is the same as in the present case primarily because of the lack of coherent or consistent Federal policy. The continuing uncertainty about the status of Indian tribes and land holdings can only serve to exacerbate tensions between the white and Indian communities. While property tax exemption is viewed by Indians *591 as a right deriving from special historical status and a means of strengthening cultural identity, it is viewed by whites as a privilege and a lack of fundamental fairness. This kind of problem could be solved by a consistent Federal policy exercised with more concern for its long range effects. The Federal government has exclusive and plenary power to legislate for Indian tribes. This power is derived from several sources. U.S.Const. art. 1, § 8, provides in part that: The other constitutional source from which the Federal government derives its power over Indian tribes is the treaty power found in U.S.Const. art. 2, § 2, which provides in part that: See, Morton v. Mancari, 417 U.S. 535, 94 S. Ct. 2474, 41 L. Ed. 2d 290 (1974). Because of the breadth given this power by the courts the Federal government may treat Indian tribes as "wards" with special status, despite the constitutional requirement that all who are citizens be treated equally.[4] The breadth of the Federal power over Indian tribes and its resulting conflicts with equal protection theory require that the power be exercised with regard to its effect on non-Indians as well as Indians.[5] KELLY, J., took no part in the consideration or decision of this case. WAHL, J., not having been a member of this court at the time of the argument and submission, took no part in the consideration or decision of this case. [1] This principle is clearly stated by the Supreme Court in Choate v. Trapp, 224 U.S. 665, 32 S. Ct. 565, 56 L. Ed. 941 (1912), a case involving Oklahoma Choctaw and Chickasaw Indians holding tax-exempt lands under trust patents. Referring to the language in the Curtis Act, the act pursuant to which the Indians had received their patents, 30 Stat. 495, 507, that "all land shall be non-taxable," the court stated that this "naturally indicates that the exemption is attached to the landonly an artificial rule can make it a personal privilege." 224 U.S. 675, 32 S. Ct. 569, 56 L. Ed. 946. [1] Subsequently amended by 69 Stat. 795, 72 Stat. 545, and 84 Stat. 1358. [2] The General Allotment Act of 1887, 24 Stat. 388, as amended, 25 U.S.C.A., §§ 331 to 358, was part of an earlier Federal assimilation policy which ended in 1934. See, discussion in Kake Village v. Egan, 369 U.S. 60, 82 S. Ct. 562, 7 L. Ed. 2d 573 (1962). [3] The Indian Financing Act of 1974, 88 Stat. 77, 25 U.S.C.A., § 1451 to § 1543, and the Indian Self-Determination and Education Assistance Act, 88 Stat. 2203, 25 U.S.C.A., § 450, et seq., provide funds for internal tribal development. The missing ingredient is aid for states providing services. [4] The Fifth Amendment due process clause requires that the Federal government treat citizens equally, just as the Fourteenth Amendment requires the states give all citizens equal protection of the laws. Bolling v. Sharpe, 347 U.S. 497, 74 S. Ct. 693, 98 L. Ed. 884 (1954). Even though the United States Supreme Court has held that equal protection and Indian preference are not incompatible, the problems underlying such conflicts still exist. See, Morton v. Mancari, 417 U.S. 535, 94 S. Ct. 2474, 41 L. Ed. 2d 290 (1974); cf. United States v. Antelope, 430 U.S. 641, 97 S. Ct. 1395, 51 L. Ed. 2d 701 (1977). [5] One possible alternative is retrocession of jurisdiction to the Federal government under 25 U.S.C.A., § 1323. The result of this, however, can lead to unequal treatment of Indians and whites which nonetheless is not vulnerable to equal protection and due process attack. Retrocession would be consistent with current Federal policy and would serve to alleviate some of the financial burdens on local government. The state has taken advantage of this law in one limited instance. See, L. 1973, c. 625.