author: WATSON, District Judge.'

text:
    In re BOSAK.
    No. 7453.
    District Court, M. D. Pennsylvania.
    May 25, 1934.

      O’Malley, Hill, Harris & Harris and John P. Kelly, all of Scranton, Pa., for bankrupt.
    W. A. Skinner, of Scranton, Pa., for Scranton Lackawanna Trust Co.
    M. J. Martin, of Scranton, Pa., for trustee.
   WATSON, District Judge.'

This is a review of the referee’s order directing Michael Bosak, the bankrupt, to turn over to the trustee of his bankrupt estate $45,000, and directing Michael Bosak and the Scranton Lackawanna Trust Company to turn over to the trustee policies of life insurance on the life of Michael Bosak.

Michael Bosak was adjudged a bankrupt January 11, 1932, on a creditors’ petition filed November 20, 1931. Testimony was taken before the referee under section 21a of the Bankruptcy Act (11 USCA § 44 (a). Subsequently, the trustee petitioned the referee for a rule on the bankrupt and the Seranton-Laekawanna Trust Company to show cause why they should not turn over to the trustee the sum of $45,000 and the life insurance policies, which rule to show cause was granted. The bankrupt filed with the referee a motion to dismiss the trustee’s petition and a motion to determine the bankrupt’s claim of exemption. The Scranton Lackawanna Trust Company filed with the referee a motion to dismiss the trustee’s petition for want of jurisdiction, and, without waiving the objections to the jurisdiction, filed at the same time an answer to the trustee’s petition. No formal disposition of the motions to dismiss were made by the referee. The bankrupt filed no answer to the trustee’s petition and offered no evidence.

If it appeared in the course of the proceedings before the referee that the bankrupt probably controlled or was possessed of money or property that rightfully belonged to his estate, the correct proceedings to compel delivery would have been commenced by presenting to the referee a petition making definite averments upon this subject and offering a definite issue. To such a petition the bankrupt would be entitled to reply, and, upon the issue raised by his answer, both parties would have had the right to offer evidence not only that which had already been taken, but such further evidence as might be relevant. The facts would thus appear, and the proper order would have the necessary support. Here, however, there was a petition, but there was no answer thereto by the bankrupt, and, therefore, no issue to which the evidence can be definitely applied. In re Ruos (D. C.) 164 F. 749; Matter of Natelle DeGottardi (D. C.) 114 F. 328, 7 A. B. R. 723.

In Re Samuel Lasch, 12 A. B. R. 158, (referee’s opinion) it was held: “An order upon the bankrupt to pay over money is in the nature of a criminal proceeding, and his failure to obey such an order would be followed by a commitment to jail. He is, therefore, entitled to a distinct issue upon petition and answer and testimony taken thereunder.” In Boyd v. Glucklich (C. C. A.) 116 F. 131, 134, it was held: “Dispatch in judicial proceedings is commendable, but, in proceedings involving the liberty of a citizen, he has a right not only to be informed of the precise claim against him, but, after receiving that information, he has a right to a reasonable time to prepare his answer and present his proofs, and, lastly, to be heard by counsel on the law and facts of the ease.” In Oriel v. Russell, 278 U. S. 358, 49 S. Ct. 173, 174, 73 L. Ed. 419, it was said: “The charge upon which the order is asked is that the bankrupt, having possession of property which he knew should have been delivered by him to the trustees, refuses to comply with his obligation in this regard. It is a charge equivalent to one of fraud, and must be established by the same kind of evidence required in a case of fraud in a court of equity. A mere preponderance of evidence in such a case is not enough. The proceeding is one in which coercive methods by imprisonment are probable and are foreshadowed. The referee and the court in passing on the issue under such a turnover motion should therefore require clear evidence of the justice of such an order before it is made. Being made, it should be given weight in the future proceedings as one that may not be collaterally attacked by an effort to try over the issue already heard and decided at the turnover.”

On the record which is before me, I must decline to make an order that might be followed by the imprisonment of the bankrupt.

Now, May 25, 1934, the order of the referee is annulled. This matter is remanded to the referee, and the referee is directed to dispose of the motions to dismiss. If the motions to dismiss are denied, the referee is directed to permit the trustee, if he shall be so advised, to file an amended petition, particularly specifying the property which he claims is wrongfully withheld. A reasonable notice shall be given to the bankrupt and to the Scranton Lackawanna Trust Company of the hearing on the petition, and the bankrupt shall be permitted to answer the same under oath, and to submit to a further examination under oath if the court shall so direct. The Scranton Lackawanna Trust Company shall be permitted to answer an amended petition if same is filed. All parties shall be permitted to introduce such further testimony as they shall be advised.


source: Caselaw Access Project

author: WOODWARD, District Judge.

license: Public Domain

text:
    PRUDENTIAL INS. CO. OF AMERICA v. REITZ et al.
    No. 411.
    District Court, N. D. Illinois, W. D.
    March 19, 1934.
    Kenneth E. Midgley, of Kansas City, Mo., and Franklin P. Searle, of Rock Island, 111. (William C. Michaels and Henry I. Eager, both of Meservey, Michaels, Blackmar, New-kirk & Eager, of Kansas City, Mo., and Connelly, Walker, Searle & Hubbard, of Rock Island, 111. of counsel), for plaintiff.
    Kennard & Gresham, of Kansas City, Mo., for defendants.
   WOODWARD, District Judge.

A number- of motions are pending in the above-entitled matter which will be disposed of in logical sequence.

1. Plaintiff moves to strike from the files the disclaimer of the defendant Abbie L. Reitz.

The record shows that the defendant Abbie L. Reitz was personally served with process on November 20, 1932. On February 23, 1933, no answer having been filed by her, an order was entered “that the bill in this cause be taken pro eonfesso as to said defendant in accordance with the provision of the rules in such cases.” The record fails to show that this order was made upon notice. A minute was made on the docket as to the entry of the order pro eonfesso. The docket fails to show that a copy of the decree pro eonfesso was mailed to the defendant Abbie L. Reitz. On April 17, 1933, Abbie L. Reitz filed a disclaimer. On May 18, 1933, the plaintiff filed a motion to strike the disclaimer from the files.

Rule 5 of the Equity Rules (28 USCA § 723) provides that “all motions and applications in the clerk’s office * * * for taking bills pro eonfesso * * * shall be deemed motions and applications grantable of course by the clerk. * * * ”

Rule 4 of the Equity Rules (28 USCA § 723) provides that “neither the noting of an order in the Equity Docket nor its entry in the Order Book shall of itself be deemed notice to the parties or their solicitors; and when an order is made without prior notice to, and in the absence of, a party, the clerk, unless otherwise directed by the court or judge, shall forthwith send a copy thereof, by mail, to such party or his solicitor and a note of such mailing shall be made in the Equity Docket, which shall be taken as sufficient proof of due notice of the order.”

Rule 12 of the Equity Rules (28 USCA § 723) provides in part that “at the bottom of the subpeena shall be placed a memorandum, that the defendant is required to file his answer or other defense in the clerk’s office on or before the twentieth day after service, excluding the day thereof; otherwise the bill may be taken pro eonfesso.”

Rule 16 of the Equity Rules (28 USCA § 723) makes it the duty of the defendant to file his defense within the time named in the subpoena as required by rule 12, and “in default thereof the plaintiff may, at his election, take an order as of course that the bill be taken pro eonfesso; and thereupon the cause shall be proceeded in ex parte.”

By rule 17 of the Equity Rules (28 USCA § 723) the court may, for good cause shown, set aside the decree pro eonfesso within the thirty days and enlarge the time for the defendant to answer.

On behalf of the defendant it is contended that no notice of the entry of the decree pro eonfesso was ever given as required by Equity Rule 4, and therefore that the decree never became effective.

There seem to be no adjudicated cases, at least none have been called to the attention of the court, as to whether rule 4 requires a copy of the order pro eonfesso to be mailed to the defendant.

As the court views this record, the question suggested in briefs of counsel is immaterial and need not be decided. The disclaimer was filed after the decree pro eonfesso was entered. No motion has been made nor order entered vacating or setting aside the -decree pro eonfesso. The record simply stands that the decree pro eonfesso has been entered and thereafter the disclaimer has been filed.

Such being the condition of the record, the only question then is as to whether or not the disclaimer has been properly filed. It is clear from the authorities that, after a decree pro eonfesso has been entered, the party in default cannot appear in any way thereafter either by pleading or on hearing or at the final hearing. Clifton v. Tomb (C. C. A.) 21 F.(2d) 893; Frow v. De La Vega, 15 Wall. (82 U. S.) 552, 21 L. Ed. 60. A disclaimer is, of course, a pleading. The entry of the decree pro eonfesso precludes the right to file an answer. The court, therefore, allows the motion to strike the disclaimer of Abbie L. Reitz from the files.

2. The defendant Melvin TL Reitz, on April 17, 1933, filed his answer, and by paragraph 1 thereof moved to dismiss the bill for want of equity.

By its bill the plaintiff seeks the cancellation of two policies of insurance on the ground of fraud in their procurement. Both policies were issued at the same time and involve identical questions. In this statement of facts, only the policy first described in the bill will be referred to.

On January 5, 1931, the plaintiff issued to the defendant Melvin H. Reitz its policy of life and indemnity insurance whereby it agreed, in consideration of the payment of the stipulated premiums, to pay to the defendant Abbie L. Reitz, mother of Melvin H. Reitz, upon due proof of the death of Melvin H. Reitz, 120 monthly installments of $200 each, in the time and manner specified in the policy, and in addition other payments in the event of the insured’s death by accident, and to pay to the insured, as total and permanent disability benefits, the sum of $200 per month upon the applicant becoming totally and permanently disabled. The policy was based upon a written application of the defendant Melvin H. Reitz, consisting, among other things, of questions and answers. It is alleged in the bill that the answers to certain questions were false and untrue and were willfully and fraudulently made with the intent and purpose of inducing the plaintiff to issue the policy. The bill further states that the policy was issued in reliance upon the statements made in the application. The policy contained a clause making it incontestable after two years from the date of its issue except for nonpayment of premium. The right to change the beneficiary was reserved by the insured.

The last payment of premium made by the insured was on January 5, 1932. On April 7, 1932, the insured made a written claim to the plaintiff alleging that since August 12, 1931, he had become totally and permanently disabled and demanded payments of the disability benefits.

The motion to dismiss is based upon the contention that the facts alleged in the bill show that the plaintiff had a plain, adequate, and complete remedy at law. Bills involving similar facts have been before the courts comparatively recently. That part of the motion based upon the theory of the adequacy of the remedy at law will be denied on the authority of the cases of New York Life Insurance Co. v. Halpern (D. C.) 47 F.(2d) 935; New York Life Insurance Co. v. Jensen (D. C.) 38 F.(2d) 524; Brown v. Pacific Mutual Life Insurance Co. (C. C. A.) 62 F.(2d) 711; Lincoln National Life Insurance Co. v. Peake (D. C.) 10 F.(2d) 366; New York Life Insurance Co. v. Hurt (C. C. A.) 35 F.(2d) 92.

It is next contended that on the face of the bill it is shown that the plaintiff had, before the policy was issued, received knowledge of the alleged disability of which it complains. This contention is based upon that part of the bill which alleges that, after the making of the first application, the defendant Melvin H. Reitz requested the plaintiff in writing to amend Ms application for insurance so that the policy applied for migM be issued on a plan other than that originally applied for “in the Special A Disability 2 rating class,” and agreed in writing that the amendment should form part of the original application and a copy thereof should be attached to the policy when issued. The further allegation is made that the policy when issued provided that it was placed in “Special A Disability 2 rating class” of risks and the premium charged accordingly. It is contended, therefore, that by reason of this application and of this provision in the policy the plaintiff is estopped to claim fraud. The bill contains no explanation of what constitutes a “Special A Disability 2 rating class,” The bill does not disclose what facts were stated in order to secure such rating. So far as appears from the bill, in making such rating, the plaintiff depended upon the truthfuMess of the answers to the other questions set out and wMeh the plaintiff alleges to have been false and untrue. This point is without-merit.

It is next claimed that it appears affirmatively from the face of the bill that the plaintiff has an adequate remedy at law. TMs contention is based upon the averments of the bill that the premium for the first three years was to be $400.60 per year; that the first-annual premium was paid on January 5-, 1931 (the policy being delivered. January 32, 1931); and that a further and additional premium of $106.20 was paid on January 5, 1932, being a quarterly payment of the premium. On April 7, 1932, defendant made claim in writing to the plaintiff alleging that since August 12, 1931, he had become totally and permanently disabled. It would appear from the allegations last referred to that the policy lapsed on April 4, 1932, by reason of the nonpayment of premium. If the policy lapsed for.nonpayment of premium, then it would seem that the plaintiff would have an adequate remedy at law. Although not averred in the pleading, it is tacitly assumed in the argument of counsel, both for the plaintiff and the defendant, that there was an extension of thirty days’ grace before a lapse could be declared. But, irrespective of this question, the bill further states “that it was also provided in said policy that payment would be waived of any premium or premiums, the duo date of which, as specified in the policy, should occur after the commencement of said continuous disability.” If the defendant Melvin H. Reitz were in fact totally and permanently disabled on August 12, 1932, then the policy had not lapsed.

The bill further alleges that the defendant is not disabled. The plaintiff claims by its bill that it has both a legal and equitable defense. If the defendant was not disabled, it could urge that defense at law. The bill, however, sets up another defense, namely, fraud in the inception of the contract which can be more adequately, fully, and completely determined in equity.

The motion to dismiss the bill will be overruled.

3. The plaintiff has filed three separate motions which, may be summarized as follows: (a) Motion to strike out certain parts of paragraph 2 of the answer of the defendant Melvin H. Reitz; (b) motion to strike out certain parts of paragraph 3 of the answer of the defendant Melvin H. Reitz; (e) motion to strike out parts of paragraph 7 of the answer of the defendant Melvin H. Reitz; and (d) motion-to strike out paragraph 14 of the answer of the defendant Melvin H. Reitz.

The motions will severally be denied. In denying these motions the court has not taken into consideration the agreed statement of facts which were transmitted with the briefs and arguments of counsel.

The court is denying these motions for the reason that it deems it fairer to both parties to pass upon the questions of law attempted to be raised by these motions on the final hearing rather than on the pleadings. On the final hearing it is to be assumed that the full records in the eases referred to will be before the court, and it is much more desirable to consider these defenses with the full and complete facts before the court than it is on the pleadings.


author: KNOX, District Judge.

text:
    THE NELLIE MURRAY. THE BERN. THE PERTH AMBOY No. 1. THE EXBROOK.
    District Court, S. D. New York.
    March 10, 1934.

      Foley & Martin, of New York City, for libellant.
    Haight, Smith, Griffin & Deming, of New York City, for claimant.
   KNOX, District Judge.

The within motion is granted. At the time of the dismissal of the action, its prosecution had been stayed pending determination of limitation proceedings. Through oversight of this fact, the suit was placed upon a calendar call that was designed to weed out dead suits. It should not have been upon that calendar. True enough, proctors for libelant should have detected the fault and they did not do so. Nevertheless, I think, the outstanding stay should be held to protect their client and that the dismissal is within the exceptions of an “error of process” connected with the defaults of clerks as set forth in U. S. v. Mayer, 235 U. S. 55, 35 S. Ct. 16, 59 L. Ed. 129.


author: HOLMES, District Judge.

text:
    In re FAZAKERLY.
    No. 3042.
    District Court, S. D. Mississippi, Jackson Division.
    May 31, 1934.
    Green, Green & Jackson, of Jackson, Miss., for creditors.
    E. L. Trenholm, of Jackson, Miss., for trustee.
    Earl Brewer, of Jackson, Miss., for bankrupt.
   HOLMES, District Judge.

Petitioners are creditors of the bankrupt, their claims have been allowed; and only a small percentage thereon has been paid, there not being sufficient assets in the estate to pay all claims in full. They seek to review an order of the referee dated October 26, 1933, to set aside an order made by the referee on June 7, 1933, which purported and undertook to release to the bankrupt, “as exempt property, free from any and all claims or rights of his said trustee in bankruptcy, or of his creditors,” a certain claim or claims against Armour & Co., and others, based on alleged violations of the anti-trust laws of the United States and of the state of Mississippi, involving triple damages in the sum of $540,000; plus attorney’s fees of $50,000, or an aggregate amount of $590,000.

No such claim was listed by the bankrupt in his schedule of assets, or therein claimed by' him as exempt, as it, seems that he was unaware of the existence of the same until some time after his adjudication as a bankrupt. The order assailed does not purport on its face to be, and in fact is not, one authorizing the referee to disclaim title to worthless and burdensome property, or to refuse to take the same into his possession. No petition for direction or authority so to do was filed by the trustee, or by any one else, and no written petition of any kind was filed by any one praying for the order that was actually entered. Creditors were given no notice whatever, but the trustee and his attorney were consulted and made no objection, their attitude being one of unwillingness to involve the estate in litigation of a protracted and expensive character, upon claims of doubtful value. The trustee pursued a policy of hands off. Under advice of Ms attorney, who refused to draw the order, the trustee refused to- apply to the court to grant it, but orally advised the court that he had no objection to- it.

In the circumstances wMeh surrounded the referee, upon a proper application and notiee, an order to the trustee to abandon the elaims as property burdensome to the estate may have been fully warranted, and possibly would have been entered by him; but no such order was applied for or granted. The order, for whose phraseology no one professes responsibility, was presented to the referee by the attorney for the bankrupt in the subsequent litigation on the elaims, and was entered by the referee, believing it to be for the best interests of the estate. The order is plain and unambiguous; it is unnecessary to look beyond its four comers to determine its purpose, scope, and effect. It is not one authorizing tbe trustee to disclaim title to worthless and burdensome property. It recites that the trustee has declined to prosecute the suit on behalf of the estate and has consented to the release of said claim to the bankrupt, and “has relinquished all his interest as such trustee in said claim or elaims, as exempt property, to' said bankrupt”; and then proceeds to the effective part of the order, as follows: “It is therefore ordered and adjudged that all claims or causes of action that said bankrupt has or might have against Armour & Company and other parties by reason of alleged violation of the anti-trust laws of the state and nation be, and are hereby, fully and completely released to said bankrupt, as exempt property, free from any and all claims or rights of his said trustee in bankruptcy, or of his creditors.”

As the property was not exempt, and was not claimed as exempt, and, so far as appears, was not susceptible of such a claim, the order should be set aside. I agree with the referee as to the inadvisability of embarking upon hazardous and expensive litigation. It is well settled that a trustee in bankruptcy is not bound to accept property which will burden rather than benefit the estate. It is not his duty to accept title to property which he considers worthless, and his opinion may be based on the fact that assertion of ownership may involve a lawsuit of doubtful issue; hut the simple practice necessary to effectuate a surrender of the title was not observed in this ease. It seems that the referee may act without calling a meeting of the creditors, hut it is said that “safe practice suggests that the creditors be consulted and their wishes observed.” 2l Collier, p. 1743. The proof does not sustain the recital in the order that the trustee consented to its contents. The trustee says: “Trenholm and my agreement was that we would not proseeute the ease and that we would not take any action whatever in regard to releasing it. If Mr. Fazakerly wanted to proceed I would not intervene but Mr. Trenholm and I agreed to sit still and do nothing.”

In a nutshell, the gist of the creditors’ complaint is that the bankrupt never listed this claim, no notice was ever given them about its abandonment, and the trustee never applied for authority to disclaim title to it as burdensome to the estate. The only person who asked for its release to the bankrupt was tbe attorney for the bankrupt himself, who, without written petition and without formal notice to any one, presented an order which provided for its full and complete release to the bankrupt as exempt property. There is not a word in tbe order and there was no proof before the referee that it was worthless. No claim is made before me that the bankrupt is entitled to claim the property as exempt, and none was made before the referee on the motion now.under review; neither is there anything in the record to show that any claim was ever made before the referee that the property was exempt. I am, therefore, constrained to hold that, the property not being exempt, the order was. ineffective to set it aside to the bankrupt as such, or to divest the trustee of such title, if any, as was conferred upon him under and by virtue of tbe bankruptcy law. There can be no question of estoppel by tbe trustee because the claim was not listed by the bankrupt, and the trustee was not fully advised as to the nature or merits of the claim or claims.

The decision of the referee is reversed, the order annulled, and the entire matter referred to the referee, with instructions to authorize the trustee to sell such title, if any, as he may have in said claim or claims as a part of the assets of the estate; subject to tbe approval of the referee, said sale to be made to best advantage, and without warranty of title, value, or validity, and without recourse on the trustee for any cause whatever.


author: BOOTH, Chief Justice. LITTLETON, Judge.

text:
    VANDERLIP v. UNITED STATES.
    No. 41993.
    Court of Claims.
    May 7, 1934.

      Ellsworth C. Alvord, of Washington, D. C. (Ralstone R. Irvine and Carbery O’Shea, both of Washington, D. C., on the brief), for the plaintiff.
    George H. Foster, of Washington, D. C., and Frank J. Wideman, Asst. Atty. Gen., for the United States.
    Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
   BOOTH, Chief Justice.

The pertinent facts of this ease are stated in the findings and the opinion of the court. The record is not open to serious controversy, for it is made up as to vital issues involved upon documentary evidence. If the unlimited waiver of the statute of limitations executed in accord with section 250 (d) of the Revenue Act of 1921, 42 Stat. 265, is a valid and binding one, it is then apparent that the collection of the tax for which a refund is herein claimed was timely. To this issue the opinion of the court is addressed.

On October 2, 1921, the plaintiff’s attorney in fact, acting under a written and duly executed power of attorney so to' do, signed an unlimited waiver of the statute of limitations as to the assessment and collection of the tax herein sought to be recovered. This waiver was lawfully signed by the Commissioner and duly filed in the Bureau. On March 10, 1923, the Commissioner notified the plaintiff that the waiver was invalid and that a jeopardy assessment of an additional tax of $77,836.17 would be made immediately. The five-year period for the assessment and collection of the tax expired on April 1, 1923, and the jeopardy assessment was made by the Commissioner on March 31,1923. On April 26, 1923, the plaintiff filed a claim for abatement of the additional tax, and thereafter on January 30, 1926, the Commissioner abated $13,920.09 of the tax. The Collector on March 10, 1926, collected from the plaintiff $63,916.08, together with $10,478.73 interest. Thus it appears that the assessment of the additional tax was timely. The collection of the same is challenged, among other grounds, on the asserted invalidity of the waiver. The power of attorney conferred upon plaintiff’s attorney in fact the unrestricted right and authority to do all things essential to be done coneérning plaintiff’s business and financial affairs, except sign deeds for real property. This instrument is comprehensive in its provisions; the plaintiff was abroad and intentionally made it so. He was a person of large means and large estate involving a multiplicity of business transactions which inevitably included the item of taxation, a fact which, if the plaintiff did not actually know, he must be charged with knowing.

The plaintiff’s argument is addressed- to a contention that the power of attorney did not authorize the waiver of any of plaintiff’s rights. To sustain the same a great number of state and federal eases are cited. We will not review them because they simply exemplify the fundamental rule that the authority to act under such a written instrument must be ascertained from the terms of the same. In other words, its scope is limited to its provisions.

Tested by this familiar rule of law, the power of attorney in this case, after specifying certain subjects included within its scope, recites as follows:

“To settle, compound, compromise, and adjust by payment or otherwise any claims or demands which may be made against me; and, in general, to have the full and complete charge and management of my property and interests, and to do any act or thing in relation thereto which may to him seem advisable, in the same manner and to as great an extent as if the same belonged to him personally (except to sell real estate * * *).”

It is hardly necessary to emphasize the scope of conferred authority to “settle, compound, compromise,” and adjust claims. In each instance the surrender, as well as the acquisition, of legal rights, is distinctly involved if the transaction becomes effective. The collection of an income tax unpaid is generally preceded by a demand for payment, and assuredly it is an enforceable claim which under certain circumstances may be summarily enforced. This plaintiff, in the name of his attorney in fact and under the precise power of attorney now challenged, filed a refund claim on August 19,1921, for $572.67 for an alleged overassessment of 1916 taxes, and the same was allowed, the refund made and accepted. Aside from other rules of law deemed invulnerable, the plaintiff may not recognize the validity of the power of attorney when it is to his interest.so to do, and subsequently repudiate it when adjustment of his later taxes demonstrates that by so doing he may secure an additional and substantial refund thereof. Naumkeag Steam Cotton Co. v. United States, 2 F. Supp. 126, 76 Ct. Cl. 687; Id., 289 U. S. 749, 53 S. Ct. 694, 77 L. Ed. 1495.

After the execution of the waiver under discussion, the plaintiff filed a claim in abatement of the additional tax for 1917. The Commissioner, acting upon the abatement claim, abated $13,920.09 of the additional tax on January 30, 1926, reducing the amount of the tax from $77,836.17 to $63,-916.08. Therefore, it is apparent that at the time of the execution of the waiver the plaintiff, acting through his attorney in fact, gained a substantial benefit by waiving the statute of limitations for the collection of the additional tax. A lawful waiver of the statute of limitations for the collection of a tax may not be said to be indubitably a waiver of a right, for the provision of law. granting such a procedure comprehended the difficulties inherent in the ascertainment of the correct tax in involved and great estates and business transactions, and the right of waiver is of mutual benefit to both the taxpayer and the government. Its filing stays immediate collection of the tax and results not infrequently in substantial refunds and credits which a time limit would otherwise prohibit. Aldridge v. United States, 64 Ct. Cl. 424; Colonial Trust Co. v. United States, 55 F.(2d) 512, 73 Ct. Cl. 549, certiorari denied 286 U. S. 560, 52 S. Ct. 643, 76 L. Ed. 1294. The instant ease demonstrates exactly what is meant, for as late as 1926 the plaintiff received an abatement of his tax liability as herein pointed out.

The Commissioner approved the waiver, and the statute in this respect was fully complied with. Later, he advised the plaintiff that a waiver executed by an attorney “is held to be invalid,” and proceeded to resort to a jeopardy assessment of the additional tax. No reason appears of record why the Commissioner determined the waiver to be invalid except that it was executed by an attorney. In this instance it was executed by an attorney in fact and unless some legal impediment existed which in and of itself precluded the possibility of an attorney in fact acting for another under a letter of authority sufficient in terms to authorize the act, it would seem as though the Commissioner exceeded his authority in holding the same invalid. To hold otherwise would be to repose in the Commissioner the right to construe instruments of this character, in view of the statute, and thereby prejudice the express rights which the statute gives to both the taxpayer and the government.

While it was optional with the Commissioner under the statute to accept the waiver, once having signed it, it was a valid waiver and continued in effect until' terminated under the law or legal regulations of the Commissioner.

The plaintiff in his own name ratified and confirmed the action of his attorney in fact in filing the waiver, and received substantial benefits from so doing. On April 26, 1923, the plaintiff individually filed the claim in abatement and his tax liability was decreased thereby to the extent of $13,920.09. The plaintiff must have known, at least knowledge is by law imputed to him, that the statute of limitations for the collection of the tax had expired more than twenty days pri- or to the filing of this elaim, and notwithstanding the jeopardy assessment of the tax, if the plaintiff intended to rely upon the expiration of the statute of limitations for collection then was the time to assert the right. The waiver being valid, the collection of the tax was timely.

Much is said with respect to 'the practice of the Bureau obtaining at the time the facts set forth in the findings transpired. It is sufficient to observe that the practice stated was found by the Supreme Court to be contrary to law. Bowers v. New York & Albany Lighterage Co., 273 U. S. 346, 47 S. Ct. 389, 71 L. Ed. 676. The petition is dismissed. It is so ordered. ,

LITTLETON, Judge.

I concur in the decision dismissing the petition on the ground that, if the waiver was invalid, the provisions of section 611 of the Revenue Act of 1928 (26 USCA § 2611) are applicable and preclude recovery of the amount sued for which is not claimed to have been in excess of the tax due for the year involved.

The Commissioner of Internal Revenue proceeded throughout in accordance with his published decisions, namely, that the statute of limitation did not apply in any ease to collection of a tax by demand of the Collector or by distraint if a timely assessment thereof had been made. I — 1 C. B. 305; I— 2 C. B. 218. In such cases it was the practice to assess the tax within the period provided in the statute, invite a elaim for abatement, and postpone efforts to collect awaiting the filing of a elaim for abatement, and, if such a claim was filed, to further withhold collection until a decision had been made thereon. Under this practice collection of the tax was made in many cases after it had become barred and, had section 611 not been enacted, the amounts so collected would have been refundable under the decision in Bowers v. New York & Albany Lighterage Co., 273 U. S. 346, 47 S. Ct. 389, 71 L. Ed. 676, decided February 21, 1927. In that case it was held (1) that distraint by the Collector was a proceeding within the meaning of section 250 (d) of the Revenue Act of 1921; (2) that collection of the tax became barred upon the expiration of five years after the return was filed, unless the period was extended in accordance with the statute; and (3) that a tax collected after the expiration of the statutory period of limitation could be recovered in a suit by the taxpayer. As a. result of the situation thus arising and in order to withdraw the defense of the statute of limitation to the collection of a tax not in excess of the amount due in cases where, under the administrative practice, the Department had delayed collection believing same was not barred, and where a elaim in abatement was filed, section 611 of the Revenue Act of 1928 was enacted. This section follows:

“If any internal-revenue tax (or any interest, penalty, additional amount, or addition to such tax) was, within the period of limitation properly applicable thereto, assessed prior to June 2, 1924, and if a claim in abatement was filed, with or without bond, and if the collection of any part thereof was stayed, then the payment of such part (made before or within one year after the enactment of this act [May 29, 1928]) shall not be considered as an overpayment under the provisions of section 607 [section 2607], relating to payments made after the expiration of the period of limitation on assessment and collection.”

The act of 1928 was introduced in the House of Representatives early in December 1927, and the Committee on Ways and Means, to which it was referred, recommended its passage in House Report No. 2, December 7, 1927, 70th Congress, 1st Sess., and, on page 34, made the following explanation of the purpose of section 611:

“See. 611. Collections in Cases in Which Claims in Abatement Were Filed.

“Prior to the enactment of the Revenue Act of 1924 it was the administrative practice to assess immediately additional taxes determined to be due. Upon the assessment, taxpayers were frequently permitted to file claims in abatement with the collector and thus delay the collection until the claim in abatement could be acted upon. . If this practice had not been followed, undue hardship undoubtedly would have been imposed upon the taxpayer. It was supposed that there was no limitation upon the collection by distraint of the amount ultimately determined to be due. However, the Supreme Court has recently held in a ease in which the period for assessment expired prior to the enactment of the 1924 act, that the period for collection was limited to five years from the date on which the return was filed. Decisions upon claims in abatement are being made every day. Amounts have been paid, are being paid, by the taxpayer even though the statute of limitations may have run. Exceptionally large amounts are involved. Accordingly, it is of utmost importance to provide that the payments already made should not be refunded. In order to prevent inequality, it is also provided that the amounts not yet paid may be collected within a year after the enactment of the new act.

“Your committee appreciates the fact that this provision will probably be subjected to severe criticism by some of the taxpayers affected. However, it must be borne in mind that the provision authorizes the retention and collection only of amounts properly due, and merely withdraws the defense of the statute of limitations. If it is determined that the amount paid is in excess of the proper tax liability, computed without regard to the statute of limitations, such excess will constitute an overpayment which may be refunded or credited as in the case of any other overpayment.”

When the Revenue Bill of 1928 came before the Senate early in May, 1928, section 611 was entirely eliminated by Senate Amendment No. 190 on the ground that the statute of limitation should be made effective as to both the government and the taxpayer. See Senate Finance Committee Report No. 960, May 1, 1928, 70th Congress, 1st Sess., page 42. The section was restored in conference with an amendment to the section as passed by the House eliminating a provision that, in cases falling within the section, “a distraint or proceeding in court for the collection of such part may be begun within one year after the enactment of this act.” The conference report, No. 1882, 70th Congress, 1st Sess., stated, on page 22, as follows: “Amendment No. 190: The House bill (sec. 611) provided that in eases in which a tax was assessed within the period of limitation upon assessments, and thereafter (whether before or after the expiration of such period) a claim in abatement was filed, with or without a bond, and if proceedings for the collection of the tax were not promptly instituted (as would have been the ease had the claim in abatement not been filed), then (1) if any part of the amount covered by the claim in abatement was thereafter paid, such amount should not be refunded, solely because of the fact that it was paid after the running of the statute, and (2) in cases where the amount was not paid, it could be collected by distraint or proceedings in court begun within one year after the enactment of the new law. The Senate amendment struck out this section; and the House recedes with an amendment retaining the prohibition upon refunds, as above described, and eliminating the authority for' collection.”

Plaintiff construes the section as applying solely to cases where timely collection was not made because of the filing of a claim in abatement before the expiration of the statutory period for collection. But this construction seems to be too narrow. The language of the section discloses a purpose to withdraw the defense of the statute of limitation with respect to collection of a tax not in excess of the amount due in those cases where the department delayed collection in order that the taxpayer might receive the benefit, through an abatement claim, of a full and thorough consideration of the ease before being required to make payment. I think a proper construction of the section does not require the holding that collection within the statutory limitation period must have been stayed by an abatement claim previously filed. Congress recognized- that in those eases where assessment of a tax had been made without previously giving notice thereof and affording the taxpayer an opportunity for a hearing collection was withheld in order that the taxpayer might have consideration of the case after a hearing on an abatement claim and appeal. It also knew that in a great many cases the assessment was made very near the last day of the period of limitation; that it was the practice to allow at least ten days after assessment for the filing of an abatement claim and that this time was frequently extended. I think it is clear therefore that the word “stayed” was used in the sense of delayed or postponed, and had reference to a stay before, as well as after, the filing of the abatement claim. This seems clear enough from the ' fact, as disclosed in the committee reports, that the primary purpose of the section was to validate collections made after the expiration of the applicable period of limitation because of the erroneous view consistently followed by the department, that such limitation did not apply to collection where timely assessment had been made. Compare Graham & Foster v. Goodcell, 282 U. S. 409, 51 S. Ct. 186, 190, 75 L. Ed. 415. Congress, however, did not deem it proper to withdraw from the taxpayer the right to rely upon the statute of limitation unless he had availed himself of the extended privilege of filing a claim for abatement of the assessment, the collection of which had been withheld or postponed for that purpose. The revenue statutes authorized the Commissioner, when he believed that collection of the tax due would be jeopardized by delay, to make assessment and collection thereof without giving the usual thirty-day notice or awaiting the conclusions of a hearing. In such case the taxpayer had a remedy through a claim for refund. However, in the ease at bar, the Commissioner, when he advised the taxpayer on March 10, 1923, that immediate assessment of an additional tax would be made, in order that collection might not be jeopardized by delaying the assessment until after notice and appeal under section 250 (d) of the Revenue Act of 1921, did not promptly institute a proceeding to collect but invited a claim for abatement and appeal prior to collection. The tax was assessed on March 31, one day before the statutory period of five years for assessment and collection expired. No steps to collect were taken by the Collector at New York, and'on April 23 the Commissioner wired the Collector to accept a claim for abatement. The abatement claim was accordingly filed three days later and shows that a hearing before the Commissioner on the matter of the correctness of the amount assessed had been arranged for June 27, 1923. The ease of Graham & Foster v. Goodcell, supra, clearly lays down the rule that the stay referred to in section 611 does not need to be a legal stay to make that section applicable. In that ease the plaintiffs contended that “the stay to which section 611 referred was not simply a voluntary delay in enforcing payment.” But the court said the word “stay” could not be limited to a mandatory stay, and that a postponement by the Commissioner, while acting under the belief that the statute did not bar proceedings for collection, “created the situation to which section 611 was directed.” This is the situation which we have in the case at bar. The findings show that the Commissioner, believing that proceedings for collection by distraint were not barred, postponed the collection of the tax to permit the filing of a claim for abatement, which, upon its filing, further postponed collection until the claim was decided. The filing of the abatement claim in the instant ease, as a matter of law, did not operate to stay the proceedings. The stay was entirely voluntary on the part of the Collector, but, as stated in Graham & Foster v. Goodcell, supra, it was voluntary proceedings that Congress intended to be covered by section 611. In the ease of Oak Worsted Mills v. United States, 36 F.(2d) 529, 68 Ct. Cl. 539, a claim for abatement was filed at a time when there was no authority under the statute for such aetion. In other words, the abatement claim was a nullity except as it. was given effect by section 611. See, also, Petroleum Iron Works v. United States, 5 F. Supp. 558, decided by this court January 8, 1934. In the case at bar the claim for abatement in itself could not and did not accomplish a legal stay. It did, however, delay the collection of the tax after the Commissioner had made a jeopardy assessment and when all parties concerned appear to have proceeded on the theory that the tax could still be legally collected. The statute of limitation was not pleaded in the claim for abatement of the assessment. Section 611 must be interpreted in the light of the purpose intended to be accomplished, and, when so construed, I think it is applicable to the ease at bar and precludes recovery of the tax and interest paid March 10, 1926. The section makes no distinction between an abatement claim filed within the limitation period and one-filed afterward, and I think none was intended. Congress did not proceed in the enactment of this section on the theory that an abatement claim constituted a waiver of the limitation statute, nor that the filing of such claim revived the legal right to collect a tax otherwise barred. It recognized that collection of a tax after the applicable period of limitation was illegal under provisions of other acts, whether an abatement claim was filed before or after the expiration of such period. The section was wholly designed to take away from the taxpayer the right to obtain a refund of a tax correctly due in a case where it had been timely assessed, collection stayed, and a claim for abatement filed. It simply prescribed three conditions under which a payment made after the expiration of the applicable period of limitation should not be considered an overpayment. The plaintiff’s construction requires that a fourth condition be added, namely, that in order for the section to become applicable the abatement claim must have been filed within the statutory period for collection. Had this been intended, the section would doubtless have been differently worded.

On the whole, I am of opinion that section 611 withdraws the defense of the statute of limitation in all eases where proceedings for collection of the tax were not promptly instituted, because of the belief that the statutory limitation did not apply to collection of a tax timely assessed, and where a claim for abatement was filed, whether such filing occurred before or after the expiration of the limitation period.

In reaching this conclusion I have not overlooked the decisions in Neuland v. Bowers (D. C.) 38 F.(2d) 842, and G. C. M. 4879, VII-2 C. B. 9, to the effect that collection of the tax must have been stayed by a claim for abatement filed before the expiration of the statutory period for collection; however, I am unable to concur in these decisions for the reasons hereinbefore stated.

I am authorized to state that Judge GREEN and Chief Justice BOOTH concur in this opinion.


author: FRANKLIN E. KENNAMER, District Judge.

text:
    UNITED STATES v. HUGHES, County Treasurer, et al.
    No. 488.
    District Court, N. D. Oklahoma.
    May 1, 1934.

      John M. Goldesberry, U. S. Dist. Atty., of Tulsa, Okl., and Louis N. Stivers, Asst. U. S. Dist. Atty. and Osage Tribal Atty., T. J. Leahy, and Leahy, MacDonald & Files, all of Pawhuska, Okl., for complainant.
    F. M. Dudley, Asst. Atty. Gen., of Oklahoma, and James P. Devine, Co. Atty., Frank T. McCoy, John R. Pearson, and L. A. Justus, Jr., all of Pawhuska, Okl., for defendants.
   FRANKLIN E. KENNAMER, District Judge.

This action was instituted by the United States for and on behalf of certain designated restricted members of the Osage Indian Tribe and restricted Osage Indian heirs of specifically designated deceased members of the Osage Tribe of Indians against the county treasurer, county assessor, members of the board of county commissioners, and the tax ferret of Osage county, Okl. The object of the action is to enjoin the defendants from assessing personal property, choses in action, and money owned by the restricted members of the Osage Indian Tribe in their possession or in the possession of guardians and administrators, for taxation, and from placing the same upon the tax rolls of Osage county.

The action is limited to property of restricted Osage Indians, the members of the Osage Tribe who have not been granted certificates of competency and who are under the guardianship of the United States. The action is not directed to assessments levied upon real estate, but refers only to personal property, choses in action, and cash.

The ease was referred, and the master reported his findings to the court. -Upon exceptions being filed to the master’s report, hearings have been had before the court and a decision announced. In order to aid counsel in the preparation of the proper decree herein, legal conclusions of the court will be set forth.

It is necessary to consider the various acts of Congress for a determination of the questions presented, and the effective dates of the pertinent acts make it necessary to classify the property. This was undertaken by counsel in the presentation of the ease before the master, and a stipulation was entered into relative to the taxability of properties of the members of the Osage Tribe of Indians involved in this action, as follows:

“No. 1. Funds and property other than real property in the hands of such members of the Osage Tribe of Indians, or their guardians, or administrators, special and general, or the executors of their Last Will, on hand January 1st of each year preceding March 3rd, 1921.

“No. 2. The balance on hand January 1st of each year succeeding March 3rd, 1921, and up to and including January 1st, 1925, of the $1000.00 provided to be paid under the Act of March 3rd, 1921 to adult members of the Tribe, or to their guardians, or their administrators, special or general, of their estate, or their executors of their Last Will, and also money paid to such Indians out of their funds under said Act for the support and maintenance of their minor children and widows’ allowance, if any, and all property, other than real estate, which may have been purchased by such Indians out of the $1000.-00 paid them quarterly, or the money paid to them for the support of their minor children on hand, or in the hands of such Indians on January 1st of each of said years, or in the hands of their guardians, or administrators, special and general, of their estate, or the executors of their Last Will.

“No. 3. The money paid quarterly to members of the Osage Tribe of Indians under the Act of February 27th, 1925, or to their guardians, administrators, special and general, of -their estates, or executors of their Last Will, including widow’s allowance and money paid for the maintenance or minor children, same as provided in Classification No. 2 above.

“No. 4. All monies paid by the Secretary of the Interior after the passage of the Act of March 3rd, 1921, to guardians of such Indians in excess of $1000.09 quarterly, and $500.00 for the support of the minor children of such Indians, and property or securities, in which such excess money was invested by said guardians during the time such funds, or property in which the funds were invested, were in the hands of such guardians, including (A) excess funds actually returned to the Secretary of the Interior; and (B) properties, monies, securities and investments accounted for purchased with such excess funds and left under settlement with the Secretary of the Interior in the hands of guardians, administrators, special and general of their estate, and executors of their Last Will.

“No. 5. Property purchased by funds in the hands of guardians for such Indians after February 27, 1925, and monies in the hands of guardians, administrators, special and general, of their estates, and executors of their Last Will, after the passage of said Act of February 27th, 1925.

“No. 6. Monies borrowed by the guardians, administrators or executors as such on hand January 1st of each year, whether with or without the consent of the Secretary of the Interior.

“No. 7. Rentals from real estate, whether homestead, surplus, inherited or purchased real estate.

‘‘No. 8. Interest received by such Indians, their guardians or administrators, special and general, of their estates, or executors of their Last Will, from the following sources, to-wit:

“A-Interest on trust funds allotted to such Indians under the Act of Congress of June 28th, 1906.

“B-Interest on notes secured by real estate mortgages where state mortgage tax not paid.

“C-Interest on United States Bonds.

“D-Interest on State, County or Municipal Bonds, including School District bonds.

“E-Interest on funding bonds.

“F-Interest on deposits in banks, including certificates of deposit, where chose in action tax not paid and not rendered for assessment.

“G — Interest on other investments, if any.

“No. 9. Funds and property in the hands of guardians, administrators, special and general, of their estate, and executors of their Last Will, prior to the distribution of the same.

“No. 10. Funds mentioned in Classification No. 9 after distribution to the heirs.

“No. 11. Monies received from the sale of unrestricted property.

“No. 12. Monies received from the sale of restricted property.

“No. 13. Inherited monies and property in the hands of guardians prior to 1925 and not distributed through administrators or executors.

“No. 14. Balance of funds at the close of guardianship returned to the Osage Indian Agency.”

The propriety of the classification will become apparent upon a consideration of the acts of Congress and the other principles governing such matters.

The contention of complainant is that the-property of restricted Osage Indians, purchased with restricted funds or funds over which the United States has complete control for and on behalf of its dependent wards,, is not subject to taxation by the state of Oklahoma. It concedes that all property purchased with funds over which the government has no control, and which are designated as unrestricted funds, is subject to taxation. The taxing authorities, defendants herein, urge that, when funds are released by the United States to the members of the Osage Tribe of Indians, their guardians or administrators, such funds become unrestricted, and, if invested in property, such property is taxable by the state of Oklahoma. They further insist that property acquired with funds of deceased members of the Osage Tribe of Indians in the hands of administrators, is'taxable, while complainant contends that such property, if held by the administrator for distribution to restricted heirs of the deceased members, is not taxable. Complainant further contends that guardians for members of the Osage Tribe of Indians are mere instrumentalities and agencies of the federal government for the administration of the affairs of the tribal members, and that funds or property in their hands, if for incompetent members of the tribe, is not taxable, just as such funds or property is not subject to taxation by the state of Oklahoma if held by the federal government for the dependent members of the tribe.

The Act of Congress of June 28,1906 (34 Stat. 539), provided for the enrollment of members of the Osage Tribe of Indians; it further provided for the division of the funds, as well as about a million and a half acres of land which the federal government held in trust for the members of the tribe. Provision was made for an equal division among the members of the tribe of the trust fund and the lands, and it was divided by placing to the credit of each member of the tribe his pro rata share, which was to have been held for the benefit of himself and his heirs for the period of 25 years and then paid over to them respectively. The oil, gas, ' coal, and other mineral rights in and under the land were reserved to the tribe for the period of 25 years, and by subsequent acts of Congress the period has twice been extended beyond the 25 years specified in the act. Disposition was also made of other lands, and provision was made for the issuance of certificates of competency by the Secretary of the Interior for any adult member, subject to the act and rules and regulations to be promulgated thereunder. It is unnecessary to consider the details of the act for the determination of the questions involved herein. Upon the issuance of a certificate of competency to an adult member of the tribe, all his surplus lands, which were lands in addition to lands sot apart for him .as a homestead, became taxable.

By the Act of April 18,1912 (37 Stat. 86, 87), Congress authorized the Secretary of the Interior to pay to any member of the tribe, under rules and regulations to be prescribed by him, all or part of the funds held for his benefit, provided the Secretary of the Interior was satisfied that the allottee was competent or that such payment would be to the manifest best interest and welfare of such tribal member.

The Act of March 3, 1921 (41 Stat. 1249), provides, among other things, that the Secretary of the Interior shall cause to be paid, quarterly, to each adult member of the Osage Tribe having a certificate of competency, his or her pro rata share of the interest on trust funds, the bonus received from the sale of leases, and the royalties received during the previous fiscal quarter, and $1,-000 quarterly to incompetent adult members and $500 quarterly for minors. Provision was also made for the payment to the guardians of the incompetent members and for the investment of the remainder of the funds credited to the incompetent members. The United States Supreme Court, in Work v. United States ex rel. Lynn, 266 U. S. 161, 45 S. Ct. 39, 69 L. Ed. 223, held that under the provisions of this act only $1,000 quarterly could be paid to the legal guardians for incompetent and adult members of the tribe, and that all other funds of said incompetent should be withheld by the Secretary of the Interior and disposed of or invested as provided in section 4 of the act (41 Stat. 1250). Subsequent to this decision, Congress amended the Act of March 3, 1921, by the Act of February 27, 1925 (43 Stat. 1008 [25 USCA § 331 note]), which provided, among other things, that: “All moneys now in the possession or control of legal guardians heretofore paid to them in excess of $4,000 per annum each for adults and $2,000 each for minors under the Act of Congress of March 3, 1921, relating to the Osage Tribe of Indians, shall be returned by such guardians to the Secretary of the Interior, and all property, bonds, securities, and stock purchased, or investments made by such guardians out of said moneys paid them shall be delivered to the Secretary of the Interior by them, to be held by him or disposed of by him as he shall deem to be for the best interest of the members to whom the same belongs.”

It was further provided in said act that: “All funds other than as above mentioned, and other property heretofore or hereafter received by a guardian of a member of 'the Osage Tribe of Indians, which was theretofore under the supervision and control of the Secretary of the Interior or the title to which was held in trust for such Indian by the’ United States, shall not thereby become divested of the supervision and control of the Secretary of the Interior or the United States be relieved of its trust; and such guardian shall not sell, dispose of or otherwise encumber such fund or property without the approval of the Secretary of the Interior, and in accordance with orders of the county court of Osage County, Oklahoma.”

The above provisions of congressional acts clearly evidence an intention and design of Congress that the United States shall have supervision and control, through the Secretary of the Interior, of all property, bonds, securities, and stock purchased or investments made, of all restricted Osage allottees, except $4,000 annually for adults and $2,000 annually for minors. The latter act expressly reimposes restrictions upon the property upon incompetent members of the Osage Tribe, whether the property is in the actual control of the Secretary of the Interior, or in the hands of guardians. Defendants seriously contend that, as the funds due incompetent Osage allottees are released to. their guardians, who in turn invest such funds in personal property which had theretofore been subject to taxation by the state of Oklahoma, such property continued to be taxable even though held for the benefit of restricted Osage Indians. Reliance is placed upon the case of McCurdy v. United States of America, 246 U. S. 263, 38 S. Ct. 289, 62 L. Ed. 706, in support of this contention. The cited case involved the taxability of real estate purchased by a trustee with funds held by the Department of the Interior for an incompetent Osage allottee. The United States Supreme Court held in the cited ease that the real estate, subject to taxation prior to the purchase for the incompetent Indian, continued to be taxable. The ease, however, is not controlling of the questions here presented. The principles upon which the decision is based are wholly different from those involved in the instant ease. At the outset, it shpuld be observed that the cited ease was decided March 4, 1918, and prior to the enactment of the Act of March 3,1921, and the Act of February 27,1925. The court, in considering the Acts of June 28, 1906, and of April 18, 1912, concluded that the Secretary of the Interior was authorized to prescribe the rules and regulations under which funds shall be released, but that he was not given authority under those acts to exercise control of any property in which the funds released may thereafter have been invested, or otherwise to create with the released funds a governmental instrumentality for the protection of the O sages. The court further concluded that there was nothing in the act, or in the fact to which it applied, that indicated a purpose to extend governmental control to property in which released funds may have been invested. It was further announced that the regulations contemplated supervision of the expenditure of the money, and not control of the property, if any, for which the money was expended. Although restrictions upon alienation were inserted in the deed, the court concluded that tins was not a continuation of control reserved by the Secretary of the Interior. Since the decision of -the cited ease, as above stated, Congress provided, by the Act of March 3, 1921, as amended by Act Feb. 27, 1925 (25 USCA § 331 note) that only $4,000 annually should be paid to incompetent adult Osage Indians, and $2,000 to minors. Although the entire funds to the credit of the incompetent members of the tribe were paid to the guardians of such incompetents, still the erroneous payment of such excess funds did not constitute a release of such funds. The error in the payment was established in the decision of Work v. United States, supra, and after that decision, provision was made by Congress in the Act of February 27, 1925, for the return of all property and investments made by the guardians to the Secretary of the Interior. Accountings were required of such guardians, and they were credited with $4,000 annually for all adult members and $2,000 annually for all minors. It has been judicially determined that, while an Indian is still a ward of the nation, there is power in Congress to reimpose restrictions on property already freed. Brader v. James, 246 U. S. 88, 38 S. Ct. 285, 62 L. Ed. 591; McCurdy v. United States, supra. Even if payments of excess funds by the Secretary of the Interior to guardians of incompetent Osage allottees constituted a release of such funds, and the property purchased therewith and investments made by use of such funds, had become freed, still Congress, by passing the Act of February 27, 1925, reimposed restrictions upon all such property, and placed all such property under the direct control of the Secretary of the Interior. By so doing, such property was exempt from taxation by the state of Oklahoma.

In Jaybird Mining Company v. Weir, 271 U. S. 609, 46 S. Ct. 592, 593, 70 L. Ed. 1112, the Supreme Court of the United States stated the following: “It is elementary that the federal government in all its activities is independent of state control. This rule is broadly applied; and, without congressional consent, no federal agency or instrumentality can be taxed by state authority. ‘With regard to taxation, no matter how reasonable, or how universal and undiseriminating, the state’s inability to interfere has been regarded as established since McCulloch v. Maryland, 4 Wheat. 316, 4 L. Ed. 579. Johnson v. Maryland, 254 U. S. 51, 55, 41 S. Ct. 16, 65 L. Ed. 126, 128. And see Farmers’ & M. Sav. Bank v. Minnesota, 232 U. S. 516, 34 S. Ct. 354, 58 L. Ed. 706; Choctaw, O. & G. R. Co. v. Harrison [235 U. S. 292, 35 S. Ct. 27, 59 L. Ed. 234], supra; Gillespie v. Oklahoma, 257 U. S. 501, 505, 42 S. Ct. 171, 66 L. Ed. 338, 340.”

It is urged that, because restricted funds were invested in property theretofore taxed by the state of Oklahoma, such property continued to be subject to taxation, even though owned by a restricted Osage allottee or held by a guardian or administrator for such restricted tribal member. This reasoning is unsound because whenever property, whether subject to state taxation or not, comes into the control of a federal agency or instrumentality, it cannot be taxed by the state. An elementary example is the purchase of real estate which had been subject to state taxation, by the Post Office Department of the United States government, as a site for a post office. Upon its acquisition by the United States, it is no longer taxable by the state. By the same token, the purchase of chattels or personal property by the federal government relieves such chattels of state tax burdens. The same is true whether such property is acquired by the federal government for governmental purposes, or whether acquired by a federal agency or instrumentality for the benefit of its Indian wards. The United States Supreme Court, in United States v. Rickert, 188 U. S. 432, 23 S. Ct. 478, 480, 47 L. Ed. 532, considered the authority of the state of South Dakota to tax land and personal property allotted to Indians within that state, and employed the following language in disposing of the controversy:

“If, as is undoubtedly the ease, these lands were held by the United States in execution of its plans relating to the Indians,— without any right in the Indians to make contracts in reference to them, or to do more than to occupy and cultivate them, — until a regular patent conveying the fee was issued to the several allottees, it would follow that there was no power in the state of South Dakota, for state or municipal purposes, to assess and tax the lands in question until at least the fee was conveyed to the Indians. These Indians are yet wards of the nation, in a condition of pupilage or dependency, and have not been discharged from that condition. They occupy these lands with the consent and authority of the United States; and the holding of them by the United States under the act of 1887, and the agreement of 1889, ratified by the act of 1891, is part of the national policy by which the Indians are to be maintained as well as prepared for assuming the habits of civilized life, and ultimately the privileges of citizenship. To tax these lands is to tax an instrumentality employed by the United States for the benefit and control of this dependent race, and to accomplish beneficent objects with reference to a race of which this court has said that ‘from their very weakness and helplessness, so largely due to the course of dealing of the Federal government with them and the treaties in which it has been promised, there arises the duty of protection, and with it the power'. This has always been recognized by the Executive and by Congress, and by this court, whenever the question has arisen.’ United States v. Kagama, 118 U. S. 375, 384, 6 S. Ct. 1109, 1114, 30 L. Ed. 228, 231. So that if they may be taxed, then the obligations which the government has assumed in reference to these Indians may be entirely defeated; for by the act of 1887 the government has agreed at a named time to convey the land to the allottee in fee, discharged of the trust, ‘and free of all charge or encumbrance whatsoever.’ To say that these lands may be assessed and taxed by the county of Roberts under the authority of the state is to say they may be sold for the taxes, and thus become so burdened that the United States could not discharge its obligations to the Indians without itself paying the taxes imposed from year to year, and thereby keeping the lands free from encumbrances. * * *

“The answer to this question is indicated by what has been said in reference to the assessment and taxation of the land and the permanent improvements thereon. The personal property in question was purchased with the money of the government, and was furnished to the Indians in order to maintain them on the land allotted during the period of the trust estate, and to induce them to adopt the habits of civilized life. It was, in fact, the property of the United States, and was put into tlie hands of the Indians to be used in execution of the purpose of the government in reference to them. The assessment and taxation of *the personal property would necessarily have the effect to defeat that purpose.”

Although restricted adult allottees were entitled to $4,000 per year, and minors, $2,-000 per year, still such sums, in the hands of guardians appointed for minors and incompetent adults, retain their restrictive character by virtue of section 1 of the act of 1925 (25 USCA § 331 note) which provides:

“All payments to legal guardians of Osage Indians shall be expended subject to the joint approval in writing of the court and the superintendent of the Osage Agency.”

It has been determined in Hickey v. United States, 64 F.(2d) 628 (10 C. C. A.), that Congress reimposed restrictions and subjected to the supervision and control of the Secretary of the Interior all funds in the hands of guardians, which in their inception were under such supervision and control, and that upon the resignation of a guardian it became his duty to immediately deliver such funds to the Superintendent of the Osage Indian Agency. Therefore, whatever funds were in the hands of guardians of restricted, incompetent, and minor Osage Indians since the passage of the 1925 act were restricted, and not subject to taxation by the state of Oklahoma. All such funds which had been turned over to the Indians by their guardians are taxable by the state in the hands of such Indians. All personal property acquired by investments of such funds by guardians, whether in the hands of guardians or their wards, is subject to taxation because the restriction goes only to the funds, and not to the property in which such funds are invested. It clearly appears that, whenever the money, i. e. the $4,000 annually to adults and $2,000 annually to minors is expended by the guardian, with the approval of the court and the Superintendent of the Osage Agency, whether such property is held by the guardian or delivered to the Indian, it is freed of restrictions and is subject to taxation by the state.

The above conclusions pertain only to the $4,000 released to adult incompetent Osage Indians and $2,000 to minor members of the Osage Tribe.

The remaining question for decision is the taxability of property or funds in the hands of administrators and executors. This question may be disposed of by a consideration of the principles of law heretofore expressed relative to the status of property, from taxation standpoint, in the hands of incompetent allottees and their guardians. Funds or property acquired by the investment of such funds in the hands of administrators or executors are not taxable by the state of Oklahoma if the funds or property acquired by the investment of such funds are restricted. If payments had wrongfully been made by the Secretary of the Interior to executors or administrators of incompetent deceased Osage allottees, and if such payments had been invested in personal property, under the acts above referred to, such funds or the property acquired with such funds would all be subject to the control of the Secretary of the Interior, and would remain trust property and be free from state taxation. It is my view that, if the property in the hands of executors or administrators is subject to the control of the United States government for and on behalf of the dependent Osage allottee, it is not taxable.

The various acts of Congress provide that the income of the deceased allottee shall be paid to the heirs of the deceased, and the administrators and executors were without any right to receive the income derived from the interest of a deceased allottee in the mineral resources of the tribe, but the same should have been credited to the heirs and held under the supervision and control of the Secretary of the Interior. Provision was made in the Act of June 28, 1906, for the distribution of the lands, mineral interests, and moneys held in trust by the United States to the individual members of the Osage Tribe, or their heirs, at the expiration of 25 years, which term has been extended. It also provided that the descent to the heirs shall be in accordance with the laws of the territory of Oklahoma, or, in the event Oklahoma became a state, according to the laws of the state, and also provided that, if the decedent left no issue, nor husband, nor wife, that the interest should go to the father and mother equally. This is the only provision in all the acts of Congress relating to the distribution of funds to the members of the Osage Tribe which prescribes what shall become of the mineral interest after the death of the allot-tee. Under the act, no creditor had a right to take over, by legal process, or have the lands, moneys, or mineral interests of a member of the Osage Tribe of Indians levied upon to satisfy any judgment for debt. See Neilson v. Alberty, 36 Okl. 490, 129 P. 847.

The Act of April 18, 1912, conferred authority upon the courts of Oklahoma to administer upon the estate of a member of the Osage Tribe of Indians, and jurisdiction was given to the county courts of the state of' Oklahoma in probate matters of Osage allottees, subject to limitations upon the manner in which such jurisdiction shall be exercised. The act (section 7) provided that the lands or funds of Osage tribal members shall not be subject to any claim against the same arising prior to the grant of the certificate of competency, and that no lands or moneys inherited from Osage allottees shall be subject to be taken or sold to secure the payment of any indebtedness incurred by such heir prior to the time such land and money was turned over to such heirs. Inherited moneys were made liable for funeral expenses, as well as expenses of last illness of the deceased Osage allottee, and it was further provided that nothing contained in the act should be construed so as to exempt any such property from liability for taxes. The act referred only to moneys that the deceased had at the time of his death or which were due him at that time. No provision was made for the payment of the indebtedness of the deceased allottee or any moneys that may come to his heirs, except the reference to the funeral expenses and expenses of last illness. It thus appears that the intent and purpose of the congressional acts is that the heirs of the deceased allottees shall take over the right to receive the subsequent quarterly payments after the allottee’s death that come from the mineral interests and the tribal property of tho deceased allottee’s. Reasons have been advanced for such legislation, which appear to be sound. Among the purposes advanced is that Congress was undertaking to protect the heirs of deceased members of the tribe, because it was apparent that many of the heirs would be unallotted members of the tribe, and would not have participated in the distribution of the tribal property. This, it is asserted, was not only a protection to the Indian, but was a protection to the government from having to appropriate moneys in the future for the support of such heirs.

The Circuit Court of Appeals for the Tenth Circuit in Taylor v. Tayrien et al., 51 F.(2d) 884, held that an Osage allottee had no vested interest nor interest that could be assigned or transferred, nor interest subject to the jurisdiction of the courts, in the future income of the tribe derived from its mineral resources. The precise question was whether or not the headright of an Osage allottee of less than one-half blood, with a certificate of competency, passed to his trustee in bankruptcy. It was determined that such a headright or interest of the allottee in the future income of the tribe derived from its mineral resources does not pass to his trustee in bankruptcy, and was not subject to the jurisdiction of the bankruptcy courts. The Supreme Court of Oklahoma decided that the income accruing to the headright of a deceased Osage allottee, subsequent to the death of such allottee, is not an asset of the estate of such decedent which can be appropriated for the payment of claims of creditors. Denoya v. Arrington, Executor, 163 Okl. 44, 20 P.(2d) 563. Thus, if such future incomes cannot be used for the payment of claims of creditors, then they should pass to the heirs or devisees immediately upon the death of the allottee. Such funds should not be paid to the administrators or executors of such deceased allottees, but should pass directly to the heirs or devisees. If such heirs or devisees are incompetent because of minority or because of not having a certificate of competency, such funds should be distributed to such heirs in accordance with the provisions of the congressional acts. If such funds had erroneously been paid to administrators and executors, the funds, or investments made with such funds, are subject to the control of the Secretary of the Interior, and are subject to be retaken by the Secretary of the Interior and held in trust by the Interior Department. The courts of Oklahoma were without jurisdiction of the members of the Osage Tribe until Congress conferred jurisdiction upon them. Such jurisdiction was conferred subject to limitations, and by reason thereof the executors and administrators of deceased incompetent Osage allottees are agencies and instrumentalities of the federal government. Properties and funds in their hands, restricted in character, and under the control of the Secretary of the Interior, retain their character as trust funds, and it can make no difference whether the funds and the property acquired from investing such funds are in the hands of administrators or executors of deceased incompetent allottees, or in the hands of the Secretary of the Interior ; if they are restricted funds, or property acquired from investing such funds, they are not subject to taxation. I therefore conclude that such funds, whether in the hands of the Department of the Interior or in the hands of executors or administrators of deceased incompetent Osage allottees, whether paid over by the Department of the Interior or by guardians to such executors and administrators, erroneously or unlawfully, by reason of the congressional acts above referred to, such funds or property are restricted in character, subject to the control and domination of the Secretary of the Interior, and are not subject to taxation.

Applying the conclusions herein reached to the classifications set out herein, appropriate findings of fact should be made as follows:

1. Funds and property other than real property in the hands of such members of the Osage Tribe of Indians, or their guardians, or administrators, special and general, or the executors of their last will, on hand January 1st of each year preceding March 3, 1921, are subject to taxation by the defendants or taxing authorities of Osage county, Okl., for the reason that such funds were released to Osage allottees or their guardians or administrators, and the control of such funds or property is not retained by the United States government for the allottees.

2. The balance on hand January 1st of each year succeeding March 3, 1921, and up to and including January 1, 1925, of the $1,000 provided to be paid under the Act of March 3, 1921, to adult members of the tribe, or to their guardians, or their administrators, special and general, of their estates, or their executors of their last will, and also money paid to such Indians out of their funds under said act for the support and maintenance of their' minor children’s and - widow’s allowance, if any, and all property, other than real estate, which may have been purchased by such Indians out of the $1,000 paid them quarterly, or the money paid to them for the support of their minor children on hand, or in the hands of such Indians on January 1st of each of said years, or in the hands of their guardians, or administrators, special and general, of their estate, or the executors of their last will — these funds or property acquired by investment of such funds are subject to taxation by the state of Oklahoma, because it was intended that $1,-000 per quarter should be released from the trust funds for adults and $500' per quarter for minors, and a congressional intent is apparent that no control whatever was to have been retained over such payments by the federal government.

3. The money paid quarterly to members of the Osage Tribe of Indians under the Act of February 27, 1925, or to their guardians, administrators, special and general, of their estates, or executors of their last will, including widow’s allowance and money paid for the maintenance of minor children, same as provided in classification No. 2 above— such funds in the hands of guardians, administrators, or executors are not subject to taxation.because of the restrictions imposed upon such funds. Property acquired from investments of such funds should be subject to taxation because no intention appears to retain control or supervision over such property.

4. All moneys paid by the Secretary of the Interior after the passage of the Act of March 3, 1921 (41 Stat. 1249), to guardians of such Indians in excess of $1,000' quarterly, and $500 for the support of the minor children of such Indians, and property or securities, in which such excess money was invested by said guardians during the time such funds, or property in which the funds were invested, were in the hands of such guardians, including (a) excess funds actually returned to the Secretary of the Interior, and (b) properties, moneys, securities, and investments accounted for purchased with such excess funds and left under settlement with the Secretary of the Interior in the hands of guardians, administrators, special and general, of their estate, and executors of their last will— such moneys or property acquired by investing such funds are not subject to taxation by the state of Oklahoma, because restrictions were imposed upon the moneys and properties in excess of $1,000 quarterly for adults and $500 for minors, and all such moneys and properties, whether held by the Secretary of the Interior or accounted for but held by guardians, administrators, or executors, were restricted, and held in trust by the United States, and its agencies, guardians, administrators, or executors, and were not subject to taxation.

5. Property purchased by funds in the hands of guardians for such Indians after February 27, 1925, and moneys in the hands of guardians, administrators, special and general, of their-estates, and executors of their last will, after the passage of said Act of February 27, 1925' — such property is not subject to taxation unless acquired from investing the $1,000 quarterly payments for adults and $500.00 quarterly payments for minors, for the reason that such funds were restricted and the property acquired by investments of such funds likewise was restricted, and under the control of the federal government for the dependent Osage allot-tees.

6. Moneys borrowed by the guardians, administrators, or executors as such on hand January 1st of each year, whether with or without the consent of the Secretary of the Inteiioi — all such funds borrowed without the consent of the Secretary of the Interior are subject to taxation by the state of Oklahoma, because no control of such funds is retained by the federal government; all moneys borrowed by guardians, administrators, or executors with the permission of the Secretary of the Interior, are not subject to taxation by the state of Oklahoma because of the trust character of such funds, the guardians, administrators, and executors being agencies of the federal government in administering the affairs of the dependent Osage allottees.

7. Rentals from real estate constituting a homestead of incompetent Osage allottees are not subject to taxation by the state of Oklahoma; rentals from the surplus real estate of such allottees are taxable whether said lands were inherited or allotted. Rentals from real estate purchased by or for incompetent Osage tribal members are not subject to taxation, if purchased with restricted funds, and where such real estate is under the control and domination of the federal government for its dependent wards. However, rentals from real estate purchased for incompetent Osage allottees from unrestricted funds, and over which the federal government does not exercise control, are subject to taxation.

8. Interest received by such Indians from guardians or administrators or executors on trust funds allotted to such Indians under the Act of Congress of June 28, 1906, is not subject to taxation, and neither is interest on notes secured by real estate mortgages where said mortgage tax is not paid, interest on United States bonds, interest on state, county, or municipal bonds, interest on funding bonds, interest on deposits in banks, including certificates of deposit, where chose in action tax not paid and not rendered for assessment, nor interest on other investments, if the notes, bonds, deposits, or investments were acquired by expending restricted funds. Such property continues to be restricted and as such is under the control of the federal government and is not taxable by the state.

9. Funds and property in the hands of guardians, administrators, special and general, of their estate, and executors of their last will, prior to the distribution of the same, is not subject to taxation by the state of Oklahoma unless such property, or a portion thereof, came from funds released from trust, such as the $1,000 quarterly payments for adults and $500 for minors.

10. Funds mentioned in classification No. 9 after distribution to the heirs are not taxable for the reasons stated with reference to classification No. 9.

11. Moneys received from the sale of unrestricted property are taxable by the' state of Oklahoma.

12. Moneys received from the sale of restricted property are not taxable by the state of Oklahoma because of the control of the federal government over such funds.

13. Inherited moneys and property in the hands of guardians prior to 1925 and not distributed through administrators or executors are subject to taxation if such funds and property are properly in the hands of such guardian, having been lawfully paid to them by the Secretary of the Interior, and if not held in trust by said guardians as an agency of the federal government; if unlawfully held by such guardian, or held for the benefit of the Secretary of the Interior, such moneys and property are not subject to taxation.

14. Balance of funds at the close of guardianship returned to the Osage Indian Agency is not subject to taxation because of the control of the federal government over such funds.

A decree may be entered in accordance with the conclusions herein announced.