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    The purpose and the scope of the act are unmistakably revealed in the report on the bill of the Committee on the Judiciary to the House of Representatives, which report incorporated letters to that Committee discussing the bill from the Department of Justice and the War Department. The report emphasizes the need for a more speedy and convenient method of prosecuting minor Federal offenses which, under existing law, must be prosecuted in the Federal district courts. Reference is made principally to the distance of the Federal district courts, to the necessary delay in reaching trial, and to the inconvenience resulting to the defendant and to the Government. Similar arguments of procedural convenience are the burden of the letters of the Justice and War Departments. (H.R. Report No. 2579, 76th Cong. 3d sess.)

    This interpretation that the petty offenses covered by the act must be Federal offenses within the jurisdiction of the Federal courts is made inescapable by the provision in the act for election by the defendant of a trial before the Commissioner or before the Federal district court which has jurisdiction of the offense. If the offense is not one within the jurisdiction of a Federal district court, the purpose, as well as the provisions, of the bill no longer has application. The function of the United States Commissioner under the act is to relieve the Federal district court of the burden of athe minor cases, to the advantage of all parties.

    The act may, in my opinion, be held to apply to offenses committed on Indian reservations, although the matter is not entirely free from doubt. My reason is that the act may be characterized as a general law "as to the punishment of crimes committed in any place within the sole and exclusive jurisdiction of the United States" and as such it becomes applicable to Indian reservations under 25 U.S.C.A. sec. 217, which section extends all such laws to the Indian country. It is not necessary, under this reasoning, to determine whether an Indian reservation is a place under the concurrent or exclusive jurisdiction of the United States to which the act by its terms directly applies. I conclude that any white person or Indian who commits within an Indian reservation a Federal offense which comes within the prescribed definition of a petty offense and for which he is subject to trial in a Federal district court may be tried before the United States Commissioner, provided he consents to such procedure.

    However, as the law relates only to Federal offenses, it in no way affects the trial and punishment of offenses defined by tribal law and regulation. Such offenses continue to be tried by the tribal authorities and are not subject to prosecution before the Commissioner or the Federal district courts. The act, in my opinion, is no more applicable to offenses under tribal law than it is to offenses under State law committed within Indian reservations.

    My conclusion is the same in regard to offenses defined by the law and order regulations of this Department as such offenses are not offenses over which the Federal district courts have jurisdiction. Section 1 of the act describes the offenses subject to the jurisdiction of the United States Commissioners as "petty offenses against the law, or rules and regulations made in pursuance of law." This reference to rules and regulations makes the act applicable to violations of Federal regulations which are made a Federal offense by statute. The law and order regulations of this Department have a peculiar status. There is no statute providing in terms for regulations governing the conduct of Indians on Indian reservations or making violation of such regulations a Federal offense cognizable in the Federal district courts. In the extensive analysis of the authority for these departmental law and order regulations, set forth in my memorandum of February 28, 1935, it was pointed out that these regulations were sanctioned by congressional appropriations over 60 years for the employment of Indian judges and Indian police and for maintaining law and order on Indian reservations. The authority for the regulations was also found in the tribal power over the internal relations of Indians on Indian reservations, the Interior Department assisting in this regard where tribal organization was weak.

    The discussion of the bill on the floor of the House of Representatives on July 1, 1940, does indicate that two or three of the Congressmen participating in the discussion believed that the bill would permit the United States Commissioners to try offenses against tribal laws and regulations if the defendant and the tribal court consented to such procedure. Such an understanding of the bill is a natural one to reach without close scrutiny of all the terms of the bill, in view of the broad general language of the title of the bill and of the opening sentence. However, much of the discussion consisted in raising questions as to the application of the bill to Indian reservations and was not advanced as conclusive. The discussion, moreover, loses weight by reason of the fact that it was based upon the premise that tribal courts had jurisdiction over offenses by white persons on Indian reservations, which premise is erroneous. In any case, discussion of the provisions of a bill on the floor of Congress can determine the interpretation of the bill only in the event its provisions are ambiguous. In the case of this act the provisions, when read as a whole, are not ambiguous. As concluded
 

previously, they provide solely for a new procedure to relieve the Federal district courts of the trial of certain Federal offenses, designated as petty offenses, now within their jurisdiction.

                                                                                                                                            NATHAN R. MARGOLD,

    The Office of Indian Affairs has addressed to you the attached undated letter concerning the claims of individual Sioux Indians on specified Indian reservations in North and South Dakota and Montana for leases of personal property authorized to be adjudicated by the act of May 3, 1928 (45 Stat. 484). This letter was referred to me by the Acting Commissioner in his memorandum of May 4, 1940. The claims involved are generally referred to as the "Sioux pony claims."

    In February, March, and April, 1932, the Department approved the recommendations of the Indian Office determining the rights of the Indians under the 1928 act. On February 1, 1939, Hon. Francis Case, of the House of Representatives, requested a rehearing in regard to certain classes of claims, which request was granted by the Indian Office letter of February 27, approved March 14, 1939. In that letter it was suggested that Ralph M. Case, attorney for the Indians, submit a bill of particulars showing each claim that ought to be reopened and the point of fact or law as to which an error was allegedly made by the Department. Such a statement was submitted by Mr. Ralph M. Case on November 14, 1939, with a notion for reconsideration of specified decisions of the Department, supported by a brief and argument. The present Indian Office letter, if approved, would reaffirm the previous action of the Department and reject all claims except two.

    I have examined with some care the contentions of the claimants, through their attorney, and of the Indian Office, and I believe the proposed action by the Department should be reconsidered in the light of certain legal principles which should govern the construction and application of the act of May 3, 1928.

    For your information I am setting forth a synopsis of the history and character of the Sioux pony claims. For many years the Sioux have asserted claims for personal property, particularly horses and arms, taken from them by military authority on various occasions in the latter part of the nineteenth century, and particularly in 1876. Three acts of Congress were passed appropriating fixed sums to pay pony claims at designated agencies. The act of March 2, 1889 (25 Stat. 888, 899), authorized payment up to $28,200 to such individual Indians of the Red Cloud and Red Leaf Bands of Sioux as were deprived by the United States of ponies in 1876, at the rate of $40 for each pony. The act of January 18, 1891 (26 Stat. 720), authorized payment up to $200,000 to such individual Indians of the Standing Rock and Cheyenne River Reservations as were deprived of ponies in 1876, at the same rate per pony. The act of June 21, 1906 (34 Stat. 325, 374), authorized payment of $6,320 to 15 Sioux Indians of the Pine Ridge Agency for the loss of property for reasons of military expediency while they were in amity with the United States. The act of May 3, 1928, was the first act to authorize a general investigation of such claims, leaving the amount of compensation to be determined by the Secretary of the Interior and reported to Congress for later appropriation.

    Under the 1928 act, between 15,000 and 20,000 claims of all types were filed, including those for allotments of land and loss of improvements, as well as for loss of personal property. A report on the type of claims now involved in the present letter was made to Congress in a letter from the Secretary of the Interior on December 13, 1932, which showed that only an inconsiderable number of claims of this type were allowed. Four claims were allowed of the 511 filed by the Indians of the Pine Ridge Agency; 16 were allowed of the 524 filed on the Standing Rock Reservation; 4 were allowed of the 520 filed at the Cheyenne River Agency; and on the Rosebud Reservation in place of the 289 claims for ponies lost from 1874 to 1884 there were substituted two lists of claims prepared by Lieutenant Lee covering ponies and cattle stolen by white citizens of the United States from 1875 to 1878. These claims on the Lee list amounted to $10,555, all of which were allowed. The total claims allowed amounted to $19,357, to cover which an appropriation was made by the act of February 16, 1933 (47 Stat. 818).

    The attorney for the claimants seeks reconsideration of the action by the Department on the ground (1) that the construction and application
 

of the term "hostility" in the act of 1928 were erroneous as a matter of law, (2) that the Indians who received part payment under the prior acts of Congress are entitled to claim the balance of the amount under the 1928 act, and (3) that erroneous decisions were made on the facts of miscellaneous claims. This division of the subject will be followed in the consideration of the contentions.

    The act of May 3, 1928, is as follows:

    "The Secretary of the Interior be, and he is hereby, authorized and directed to investigate, hear, and determine the claims of the individual Indians whose names are enrolled on the approved rolls of the following Indian agencies: Rosebud, Pine Ridge, Lower Brule, Crow Creek, Cheyenne River, Yankton, Sisseton, and Flandraeux, in the State of South Dakota; Fort Peck, in the State of Montana; Fort Totten, in the State of North Dakota; Standing Rock, in the States of North and South Dakota; and Bantee, in the State of Nebraska; Provided, That the Secretary of the Interior is authorized to make all rules and regulations necessary to carry out the provisions of this Act; Provided further, That the claims which shall be investigated under this Act shall be individual claims for allotments of land and for loss of personal property or improvements where the claimants or those through whom the claims originated were not members of any band of Indians engaged in " hostilities against the United States at the time the losses occurred. If any such claims shall be considered meritorious, the Secretary of the Imerior shall adjust same where there is existing law to authorize their adjustment, and such other meritorious claims he shall report to Congress with appropriate recommendation."

    The controversy between the claimants' attorney and the Indian Office over the construction of the hostility clause may be summarized as follows:

    Mr. Ralph Case, in a letter of November 14, 1931, to the Commissioner of Indian Affairs, maintained (1) that all the main band subdivisions of the Sioux Tribe were in amity with the United States throughout the Sioux War and that the hostile bands were the groups of Sioux drawn from various of the main subdivisions of the tribe and banded together under the leadership of warring chiefs, and (2) that there was no hostility anywhere on the part of the Sioux Indians after March 11, 1877, which date is given as the end of the Sioux War.

    The Indian Office in its reply of November 25, 1931, approved by the Department December 1, 1931, stated that the act of May 3, 1928, should be given a liberal construction in favor of the claimants as its provisions were remedial, and that the hostility clause should not be construed to include individual members of a hostile band where such individuals were not themselves actually engaged in hostilities.

    In a subsequent Indian Office letter of December 10, 1931, addressed to the Secretary of the Interior, and approved December 14, certain claims connected with the capture of Chief Gall were disposed of by adopting a construction of the 1928 act which was used as a precedent in the case of similar claims. The ruling in this case was, in effect, that where a hostile band encamped with friendly Indians and such Indians "afforded comfort" to the hostile band, the friendly Indians were not eligible to receive compensation. Bcause of the importance of the ruling, the language of the essential part of the letter is quoted as follows:

    "If such individuals, as they themselves assert, were not actually numbered among the immediate followers of Chief Gall, it may be fairly assumed that such individuals were at least affording comfort to Gall's band, if not more than that, and their relationship to him and his followers certainly could not be interpreted as hostile to them and in amity with the United States Government."

    The present brief of Mr. Ralph Case contends that the Indian Office letter of December 10, 1931, should be overruled and the Indian Office letter of November 25, 1931, should be followed. He reiterated that the Sioux War ended March 11, 1877, and that thereafter there were no hostile bands, asserting that the capture of Chief Gall in 1880, for example, was not accompanied by any hostilities.

    The position of the Indian Office in its present letter is that the Sioux War continued until the last surrender, that of Chief Sitting Bull in 1881, and that all the Sioux Indians were "intermittently or permanently hostile," since the agency Indians provided supplies and support to the hostile Indians (1.0. letter, pp. 3, 6, 11, 12).

    On these contentions my conclusions are that:

    (1) The bands engaged in hostilities referred to in the 1928 act were not, at any time relevant to these claims, the 10 original subdivisions of the Sioux Tribe but they were the groups of Indians from various of these subdivisions who banded together under the leadership of warring chieftains for the purpose of carrying on war against the United States.

    (2) The Sioux War cannot be said to have ended on March 11, 1877, and each hostile band must be considered as remaining hostile until it accepted the military terms of surrender. The last surrender occurred in the case of Chief Sitting Bull on July 19, 1881.

    (3) The position of the Indian Office, both in its letter of November 25 and its letter of December 10, 1931, described above, is in my opinion erroneous. In the case of the November 25 letter, the activity of the individual Indian at the time of the loss of property is immaterial, if he was at the time a member of a band engaged in hostilities. As regards the ruling of December 10, 1931, if an individual was not a member of a hostile band, the fact that he was affording aid and comfort to the hostiles did not make him a member of such a band or ineligible to receive compensation for the loss of his property.

  Conclusion 1. The facts surrounding the Sioux War as recorded in the reports of the Secretary of War and of the General of the Army and of the Commissioner of Indian Affairs, and as found by the Court of Claims in a number of cases, are that the hostile bands consisted of groups of Indians drawn from various of the main subdivisions of the tribe and operating for the duration of the war under the leadership of various chiefs. The war was fought in Montana and Wyoming by these bands while the main body of the tribe remained within the Great Sioux Reservation in Dakota and at the Red Cloud and Spotted Tail Agencies in Nebraska.

    Since an outline for the facts connected with this war is essential, I quote the following from the survey of the war included as findings of fact in the case of The Sioux Tribe v. United States, 85 Ct. Cl. 181, at 188, 189:

    "8. The attitude of the Sioux roaming in the valley of the Yellowstone became so increasingly hostile and threatening that in December 1875 the Interior Department 'decided to make a final attempt to induce these Indians to come into their agencies, and issued an order requiring them to go upon their reservations by the 3lst of January (1876) or be regarded as hostile and turned over to the military.' The Indians refused to obey, and on February 21 [1], 1876, they were turned over to the War Department for appropriate action. On March 17, 1876, the troops of the United States attacked the band of Indians under Crazy Horse 'thereby beginning the war which culminated in the annihilation of Custer and his command in June 1876, and which continued until the surrender of the remnants of Lame Deer's band on September 10, 1877. During the progress of this war the hostiles received large accessions from the different agencies, a count of the Indians at the agencies by the military establishing the fact that the numbers remaining were from one-third to one-half the numbers previously reported for issue. The number of warriors in the field during the course of the hostilities was esti mated by the Secretary of War to be from 2,500 to 3,000. In July 1881 there were held as prisoners of war, as a result of successive captures and surrenders in the years 1873 to 1880, more than 1,600 Sioux at Fort Keegh, Montana, and 1,125 at Fort Buford, Montana. On July 19, 1881, Sitting Bull and his immediate band, numbering 187, surrendered at Fort Buford, and on July 29 all of these Indians, numbering 2,858, were transferred to Fort Yates at the Standing Rock Agency."

Salois v. United States, the Northern Cheyenne and the Sioux Indians, 33 Ct. Cl. 326, in which it was said that a minority can separate itself from a band or tribe and become a separate band for peace or war. The Sioux bands particularly considered were those of Crazy Horse and Sitting Bull. There are a number of similar cases relating to other tribes. In the case of Connera v. United States and the Cheyenne Indians, 180 U.S. 271, aff'g 33 Ct. Cl. 317, the Supreme Court declared:

"To constitute a 'band' we do not think it necessary that the Indians composing it be a separate political entity, recognized as such, inhabiting a particular territory, and with whom treaties had been or might be made. Those peculiarities would rather give them the character of tribes. The word 'band' implies an inferior and less permanent organization, though it must be of sufficient strength to be capable of initiating hostile proceedings." (p. 275).

  Conclusion 2. The date of the ending of the Sioux War is the subject of consideration only because the claimants' attorney alleges that no hostilities existed involving any Sioux after March 11, 1877. In my opinion, not only is that date not established as the end of the war, but no general date is relevant since the date of surrender of each band is the determining date of the cessation of hostilities on the part of that band.

    The attorney for the claimant bases his contention that the Sioux War ended March 11, 1877, on the Salois case, supra, and the caseof Boughton v. The United States and the Sioux Indians, No. 9326, Court of Claims, unrecorded. Both of these cases involve depredations committed by Indians on white persons and the question was whether the tribe to which the Indians belonged was in amity with the United States and therefore liable for the damage done. In the Salois case the depredations were committed by either Ogalalla Sioux or Western Cheyenne Indians and occurred in July 1876 in Nebraska near Fort Robinson within the Red Cloud Agency. The court held that both the Ogalalla Indians (which were one main subdivision of the Sioux) and the Northern Cheyenne Indians were in amity with the United States. The court found that the Sioux War began with the attack by the United States on the band of Crazy Horse on March 17, 1875, and that Crazy Horse surrendered at the Red Cloud Agency in May 1877. The court also found that the last hostile Cheyenne band, under Dull Knife, surrendered at the agency in January 1877. The court did not deal with the other hostile bands who were not connected with the Red Cloud Agency. The case, therefore, does not decide when the Sioux War ended, except as to the particular hostile bands important to the case.

    In the Boughton case the depredations occurred in Lawrence County, South Dakota, which was in the Black Hills country. The depredations occurred in January and August 1876 and on March 11, 1877. The court held that the Sioux Indians were in amity with the United States in January 1876 and on March 11, 1877, but not in August 1876. The holding is not that the Sioux War ended on March 11, 1877, but simply that the Sioux Indians were in amity on that date. This unreported case contains no opinion or discussion of the facts but simply the ultimate finding of fact as to amity. Except for the consideration that the case involved the Black Hills country, the ownership of which was an object of the Sioux War, the case is in conflict with the later Salois case which found the Indians remaining at the agencies to be in amity with the United States in the summer of 1876. The case of Boston v. United States and the Ogallala Sioux Indians and the Sioux Tribe, No. 3082, Court of Claims, unreported, is cited by the attorney for the claimants for the reverse of its actual holding. The case did not hold that the hostilities of the Ogallala ceased in October 1876 but held that at the time of the depredation in October 1876 in the Black Hills country the defendant Indians were not in amity with the United States. Here again there is no discussion nor opinion, and this case, like the Boughton case, is in conflict with the Salois case in so far as it treats the Sioux as at war in the summer and autumn of 1876. These cases make no analysis of the situation as to hostility and no distinction between the friendly and the hostile Sioux, and in this respect I consider whatever weight these cases may have overcome by the Salois case and by the official reports of the War and Interior Departments. See, particularly, Reports of the Secretary of War, 1876 pages 27-39, 1877 pages 55, 56; Reports of the Commissioner of Indian Affairs, 1876 pages XIV-XV, 1877 pages 14-17.

    Conclusion 3. The conclusion of the Indian
 

Office in its letter of November 25, 1981, that the determining factor is the activity of the individual claimant and not his membership in a band whose activities were hostile, is a misreading of the plain terms of the 1928 act. If property was taken by the military authorities from an Indian who was a member of the band of Sitting Bull or Crazy Horse or any of the other war chieftains up to and including the surrender of the band, or up to and including his individual surrender, by which he dissociated himself from the band, the claimant is not entitled to compensation whether or not he himself was actually engaged in hostilities at the time the loss occurred.

    The conclusion of the Indian Office in its letter of December 14, that Indians who afford comfort to the hostiles are to be classed as hostiles, although not members of a band engaged in hostilities, is likewise erroneous. The war was not between the United States and all individual Sioux Indians nor the United States and the Sioux Tribe. It was between the United States and the organized hostile bands outside the Great Sioux Reservation, which bands were recognized as being capable of conducting war and negotiating peace. The ultimatum issued by the Indian Office in 1875 to the belligerent Indians outside the Great Sioux Reservation requiring them to return to the reservation or be considered hostile, which ultimatum was followed by the turning over of such Indians to the military authorities, is determinative evidence of who the enemy was in that war. The acts of individuals within the Great Sioux Reservation, or at any of the agencies in Montana or North Dakota, in supplying aid and comfort to one side in the war do not make such individuals at war with the other side or identify them as belligerents (cf. Oppenheim's International Law, 5th ed., vol. 2, p. 523; Moore International Law Digest, vol. 7, sec. 1308).

    The activity of the United States military authorities and the official reports of that period all recognize the distinction between the hostile Indians in the field and the reservation Indians at the agencies and the sympathy of the reservation Indians for the hostile bands and willingness to provide material assistance to them. Nevertheless, Congress provided for compensating these Indians in the three acts prior to 1928 and recognized the distinction between the Indians of hostile bands and those not so participating in the war in the act of 1928 itself. Moreover, the argument that all the Sioux were intermittently or permanently hostile up to 1881 is untenable in view of the fact that after 1877 only a very few hostile bands who had not yet surrendered remained, and the main leader of the war, Chief Sitting Bull, was in Canada during that period. Furthermore, even during the years 1876 and 1877, when most of the military engagements occurred, the military authorities kept close guard over the reservation Indians, enrolling them and handling their affairs as a separate group, and treating the hostiles returning to the reservation as belligerents and confiscating their property as the property of prisoners of war. On this point I quote from the brief of the United States in the Boughton case, at pages 252, to 253:

    "* * * The defendants' contention is that the reservation Indians were, by compulsion, on their various reservations, indeed, at the very agencies; and that the hostile Sioux were in the section of the country where the stock were driven.

    "In support of the first proposition, the court will notice that for over a year prior to this date the Sioux Indians from the reservations had been going in small numbers from the reservation to the hostile camps; but after the Custer massacre vigorous military measures were resorted to for the purpose of subduing the hostiles and preventing any more reservation Indians leaving the agencies. The war records for 1876 show that troops were brought from the various military divisions of the Army to accomplish this work. (Report Secretary of War, 1876, p. 445.) It is shown that General Sheridan caused an enrollment of the reservation Indians and the arrest of any hostiles that might come into the reservation. It will further be noticed that in September, 1876, the Secretary of War authorized the military to assume control of the agencies in the Sioux country, and this they did in a most vigorous way, and a sufficient military force was put in and about every agency, not only to prevent hostiles from coming in and getting provisions, but to see that none left the agencies; and this military force went so far as to count and enroll every Indian on the reservation in the Sioux country and to even take away their ponies and their arms. It was thus ascertained that more than one-half of these Indians were out with the hostiles.

    "With such complete control over the agencies by the military, it can not be thought probable or possible that it was the agency Indians that took from the claimant 800 head of cattle. * * *"

field or as a condition of surrender. It is immaterial whether the surrender occurred at an agency or in the field or whether the surrendered property was delivered to the military authorities at the agency or in the field. If the case of the capture of Chief Gall is used as an example, there could be no recovery for the taking of property from Chief Gall or his followers upon their surrender at the Fort Peck Agency, although no actual fighting occurred at the time, as the taking was part of the terms of surrender required of hostile bands. However, recovery should be allowed for property taken from Indians at the Fort Peck Agency who were not members of Chief Gall's band, even though they afforded comfort to that hostile band upon its arrival at the agency.

    My conclusion as to the construction and application of the qualifying clause in the 1928 act, that claimants may not be members of any band engaged in hostilities against the United States, may be summarized as follows:

    Where the claimant was a follower of any of the chiefs fighting the United States, or, in other words, a member of a hostile band, he cannot recover his property taken by the military authorities up to and including the occasion of his own surrender when he relieved himself of membership in the hostile band, or of the surrender of the chief of whose band he had remained a member. In the application of this principle to the Sioux hostilities, it may be said that if property was taken from a reservation Indian it was probably taken from a friendly Indian, unless it is shown to have been taken as an incident of his military surrender or the surrender of the chief in whose band he was a member.

    The motion for reconsideration submitted by the attorney for the claimants is also based on the contention that the Indians who received part payment on their pony claims prior to the 1928 act are privileged to claim and to receive compensation for the balance of their claims under that act. The acts of March 2, 1889, and of January 19, 1891, cited in Part I, provided that the sum paid to each Indian under the acts should be taken and accepted in full compensation for all losses sustained. It is admitted that the full amount of the claims of the Indians was not met by the compensation provided for by these acts. The Indian Office takes the position that the regulations formulated under the 1928 act excluded from consideration the claims designated as "balance pony claims" and that the previous payment of part of the claims prevented payment of the balance, both under the acts authorizing payment and the regulations (I.O. letter, p. 34).

    The Indian Office regulations for the execution of the 1928 act did not, in my opinion, exclude consideration of the "balance pony claims" but merely required that the facts connected with any payment upon a claim be ascertained and reported by the investigator. This is indicated by the following quotation from the regulations (I.O. letter, pp. 31, 32):

    "Care should be given to see that the affidavit of the claimant for loss of personal property or improvements recites * * * that he has not himself or through any members of his family received from the United States or any official representing the Government, any payment or property in settlement or any part settlement of the claim. Should there have been such a part settlement by property or cash, he should give all the facts.

    "Special care should be taken by you to see that no settlement of any kind has heretofore been made by the Government with the claimant * * *."

    The application of the principles stated in Parts I and II of this memorandum must be made in the first instance by the Indian Office. From the papers now before this office, it is not possible to determine the merits of individual claims. The particular claims cited by the attorney which involve the question of hostility should be measured by the test proposed in Part I of this memorandum. Those involving part payment should be recon-
 

sidered under the ruling in Part II of this memorandum. Wherever any of the particular claims were denied on the ground that the evidence was insufficient to establish the loss, this office must give prima facie weight to the determination on this point by those examining the evidentiary material. The burden is upon the claimants to overcome a decision of the Indian Office placed on this ground. However, as the letter of the Indian Office is not responsive to the various allegations made by the attorney for these claimants on the particular claims listed, I will briefly survey these claims indicating those which, on the information before me, merit reconsideration.

1. Class 2 (a). Ponies taken at Fort Peck in 1881.

    This claim involves the application of the test of hostility.

1. Class 2 (a). Ponies taken near Fort Yates in 1876.

2. Class 2 (d). Property taken in 1863 at Dry Bone Hill Creek.

1. Class 2 (a). Ponies taken east of the Missouri River in 1876. These claims were rejected for insufficient evidence.

2. Class 2 (d). Property taken at Dry Bone Hill Creek in 1863.

1. Class 2 (a). Claims No. 1 to No. 244, inclusive.

    Losses at Fort Heogh, Montana, and at Fort Buford.

    These claims involve application of the test of hostility.

    Claims for losses occurring at Cheyenne River and Standing Rock Reservations.

2. Class 2 (f). Claims No. 1 to No. 5, inclusive. Losses at Slim Buttes.

3. Class not numbered. Property taken at Camp Poplar, Montana, 1881.

    These claims involve the application of the test of hostility.

    The discussion of the losses occurring at Dry Bone Hill Creek in 1863 covers these claims.

1. Class 2(a). Claims No. 1 to No. 9 and No. 11 to No. 145.

    Part of these claims was rejected as the evidence did not establish the losses. The remainder involves the application of the test of hostility.

2. Class 2 (a). Property taken at Fort Heogh, Fort Buford, and Camp Poplar, Montana. These claims involve application of the test of hostility.

3. Class 2 (a). Balance pony claims.

4. Class 2 (d). Property taken at Dry Bone Hill Creek in 1863.

5. Class not numbered. Claims connected with the capture of Chief Gall.

    These claims involve the application of the test of hostility.

1. Class 2 (a). Claims 1 to 305.

    Those claims designated as balance pony claims should be reconsidered in the light of Part II of this memorandum.

2. Class 2 (d). Property taken at Dry Bone Hill Creek.

3. Class 2 (f). Property taken at Slim Buttes.

1. Class 2 (a). Claims 1 to 189.

2. Class 2 (f). Property taken at Slim Buttes.

3. Claims No. 1 to No. 32 for unclassified losses.

    Claims No. R 29 and R 30.

OSCAR L. CHAPMAN,
Assistant Secretary.

Re:

Validity and effect of resolution of Navajo Tribal Council for the prevention of the introduction and use of peyote within the Navajo Reservation.

1. Until the ordinance contained in the resolution is approved and adopted as part of the law and order regulations for the

Navajo Reservation, it is not in effect.

2. No legal objection is found to the approval of the ordinance and its incorporation in the law and order regulations.

Memorandum to the Commissioner of Indian Affairs:

    You have informally requested a statement from me on the validity and effect of the resolution to prevent the introduction and use of peyote on the Navajo Reservation adopted by the Navajo Tribal Council on June 30, 1940, by a vote of 52 to 1. I understand that certain Indians have been arrested under this resolution and are held under temporary commitment.

    The resolution recites that great quantities of peyote have been recently brought into the reservation and that its use is not connected with any Navajo religious practice and is in contradiction to the traditional ceremonies of the Navajo people. On the basis of this recital, it is resolved that peyote is harmful and foreign to the Navajo way of life, that a certain ordinance shall be added to the code of tribal offenses approved by the Secretary of the Interior on June 2, 1937, punishing the sale, use, or possession of peyote within the Navajo country, that the tribal courts shall enforce the resolution by appropriate action, and that any person having a peddler's license who is found trafficking in peyote shall have his license forever cancelled.

    The superintendent submitted this resolution to the Department with his letter of June 18, 1940, in which he stated that the resolution represented the opinion of the overwhelming majority of the Navajo people and recommended its approval. By a letter of August 12 to the superintendent the Commissioner commented on this resolution saying that he understood ordinances passed by the Navajo Council are not subject to review by the Department and that, if this resolution were subject to approval, he would hesitate to recommend approval on the basis of his present information.

    The ordinances and resolutions of the Navajo Tribe on internal affairs are not subject to departmental review unless that is requisite under some statute or regulation. There is no constitution defining the relation in this respect between the Department and the tribe. However, in this case the council did not adopt the resolution as one to have effect upon its passage but incorporated in the resolution an ordinance to be added to the law and order code approved by the Secretary of the Interior on June 2, 1937. The council was evidently acting pursuant to section 36 of the code, which provides:

    "Any Indian who violates an ordinance designed to preserve the peace and welfare of the tribe, which was promulgated by the Tribal Council and approved by the Secretary of the Interior, shall be deemed guilty of an offense and upon conviction thereof shall be sentenced as provided in the ordinance."

    Several of the Indians are said to be nonmembers of the tribe. If the ordinance had been in effect, it would have embraced them under the definition of court jurisdiction in the law and order code.

    The part of the resolution providing for the cancellation of peddlers' licenses also is of no effect, in my opinion, unless it is adopted as part of the departmental regulations, in this case the Regulations on Traders on the Navajo, Zuni and Hopi Reservation. These regulations place the matter of peddlers' licenses under the superintendent but permit the governing bodies of the reservations covered by the regulations to charge peddlers fees (25 CFR 277.27b, 277.27c). The council might, however, enact an ordinance covering the exclusion or removal from the reservation of persons whose presence was considered injurious to the tribe, and whether or not it would be subject to approval would depend upon its scope and the methods proposed for its enforcement. That question is not raised by this resolution.

    I see no legal reason why the law and order ordinance may not still be approved and thereupon enforced. The tribal council has done all that it need do and there is no time limit on approval. The resolution is still before the Washington office for consideration and should be submitted by the Indian Office to the Department with a recommendation either for its approval or disapproval.

    On the merits of the resolution, I see no legal objection based on the argument of religious liberty. It is clearly established that the provisions of the United States Constitution do not bind the legislative action of a tribe. Talton v. Mayes, 163
 

U.S. 376; 55 ID. 14, 22. Moreover, even if a constitutional question of religious liberty were raised, this may be a case where the prohibition of a religious practice, as distinct from a religious opinion, is not in violation of the Constitution because the practice is harmful and contrary to the welfare and morals of the community. Reynolds v. United States, 98 U.S. 145; Davis v. Benson, 133 U.S. 333.

    It has been suggested that the fact that Congress has omitted reference to peyote in its appropriations for the pay of Indian Service employees engaged in the suppression of deleterious drugs would prohibit the enforcement of this tribal ordinance by any person paid with Federal funds. If Congress omitted the word "peyote" deliberately, the most that can be inferred is that Congress did not itself determine that peyote is to be classed with liquor, marihuana and deleterious drugs. It would not prevent the suppression of peyote if in any given situation, or if in general, it should prove to be a deleterious drug. But in any case the wording of the appropriation provision is such that the reference to suppression of deleterious drugs is used as a description of a group of employees who are to be paid from the appropriation. It does not restrict the activities of the, other officials covered by the appropriation for maintaining order, namely the judges and Indian police, who are obligated to enforce any legal tribal ordinance, whether the drugs it may seek to suppress are deleterious or not.

    It is now the function of the Indian Office to determine in the first instance the policy question of whether the ordinance contained in the resolution shall be placed in the law and order code, taking into consideration the findings and decision of the tribal council, the relevant evidence submitted in supporting the resolution, and the relation of the Navajo situation to the general question of peyote control.

                                                                                                                                            NATHAN R. MARGOLD,

M-30923                                                                                                                                            December 13, 1940.

Re:

Authority of the Secretary of the Interior to enter into agreement with certain owners of land bordering on the Big Wind River, Wyoming, by the terms of which agreement the common boundary line of all lands adjoining the river in certain sections of T. 3 N., R. 1 W., W. R. M., would be fixed at the center of Big Wind River as shown by the official 1890 survey map approved April 15, 1891.

1. Such an agreement would, in effect, change the boundary of an Indian reservation, contrary to the provisions of the act of Congress approved March 3, 1927 (44 Stat. 1347, 25 U.S.C. sec. 398D).

2. The Secretary of the Interior is prohibited by the act of Congress approved June 12, 1906 (34 Stat. 255, 41 U.S.C. sec. 11), from entering into such an agreement.

3. The Secretary of the Interior is not vested with statutory authority to dispose of Indian tribal lands.

4. The Secretary of the Interior is bound by the limitations imposed by the act of Congress approved March 3, 1905 (33 Stat. 1016), as amended by the act of Congress approved August 19, 1916 (39 Stat. 579), when disposing of lands ceded by the Shoshone Indians to the United States.

MY DEAR MR. SECRETARY:

    You have requested my opinion regarding your authority to enter into an agreement with certain owners of land bordering on the Big Wind River, Wyoming, by the terms of which agreement the common boundary lines of all lots or parcels of land adjoining the river in Secs. 21, 22, 27, and 28, T. 3 N., R. 1 W., W.R.M., would be fixed at the center of Big Wind River, as shown by the official 1890 survey map approved April 15, 1891. The lines of such lots would be a line drawn as nearly at right angles as possible from the bank of said river to the center line thereof. Under the agreement the boundary, so fixed, would remain the boundary for all time regardless of any changes which might have taken place in the course of the river or which might occur in the future. By the agreement, all parties thereto would convey so much of any present interest they might have in the lands as would be necessary to effectuate the purposes thereof.

    Included in the area which would be affected by the proposed agreement are fee patented lands, allotted and tribal lands of the Shoshone Indians of the Wind River Indian Reservation, Wyoming, and lands ceded by the Shoshone Indians to the
 

United States by the agreement dated April 21, 1904, ratified March 3, 1905 (33 Stat. 1016), on the latter of which there are certain outstanding oil and gas leases issued under the authority of the act of Congress approved August 21, 1916 (39 Stat. 519), entitled "An Act To authorize the Secretary of the Interior to lease, for production of oil and gas, ceded lands of the Shoshone or Wind River Indian Reservation in the State of Wyoming."

    The agreement was suggested by the Superior Oil Company and the British American Oil Producing Company, which companies are lessees of a major portion of the land adjoining the river in the above sections. Oil production in the Pilot Butte field, of which the land in question is a part, has declined and the companies desire to make a deep test of the area. The companies will not proceed with the test until they are satisfied as to the boundaries of the lots adjoining Big Wind River on which they hold leases. The companies have expressed the view that because of the lack of definite information as to where title to a portion of these lands lies, the practical solution of the problem is an agreement such as here proposed. Because title to that portion of the land involved which is allotted, tribal, and ceded is held by the United States for the benefit of the individual Indians or the tribe, the companies desire that you, as the representative of the United States under whose jurisdiction matters relating to Indian affairs have been placed, be a party to the proposed agreement.

    Before discussing your authority to enter into such an agreement, I shall set out briefly the circumstances which brought about the existing uncertainty regarding the boundary lines in question.

    By treaty with the Shoshone (Eastern Band) the Bannock Tribes of Indians dated July 3, 1868, and ratified on February 16, 1869 (15 Stat. 673), the United States agreed that the following land:

"* * * commencing at the mouth of Owl creek and running due south to the crest of the divide between the Sweetwater and Papo Agie rivers; thence along the crest of said divide and the summit of Wind River mountains to the longitude of North Fork of Wind river; thence due north to mouth of said North Fork and up its channel to a point twenty miles above its mouth; thence in a straight line to head-waters of Owl creek and along middle of channel of Owl creek to place of beginning, * * *"

    The State of Wyoming, in which the lands in question are located, was admitted to the Union in the year 1890. The Constitution of Wyoming contains the following provision relating to public lands:

    "The people inhabiting this state do agree and declare that they forever disclaim all right and title to the unappropriated public lands lying within the boundaries thereof, and to all lands lying within said limits owned or held by an Indian or Indian tribes, and that until the title thereto shall have been extinguished by the United States, the same shall be and remain subject to the disposition of the United States and that said Indian lands shall remain under the absolute jurisdiction and control of the congress of the United States: * * *." (Art. XXI, sec. 26.)

"* * * Beginning in the midchannel of the Big Wind River at a point where said stream crosses the Western boundary of the said reservation; thence in a southeasterly direction following the midchannel of the Big Wind River to its conjunction with the Little Wind or Big Pope-Agie River, near the northeast corner of township one south, range four east; thence up the midchannel of the said Big Popo-Agie River in a southwesterly direction to the mouth of the North Fork of the said Big Popo-Agie River; thence up the midchannel of said North Fork of the Big Popo-Agie River to its intersection with the southern boundary of the said reservation, near the southwest corner of section twenty-one, town ship two south, range one west; thence due west along the said southern boundary of the

said reservation to the southwest corner of the same; thence north along the western boundary of said reservation to the place of beginning: * * *"

"* * * for the survey and field and office examination of the unsurveyed portion of the ceded lands, and the survey and marking of the outboundaries of the diminished reservation, where the same is not a natural water boundary; * * * "

    In 1916, as a result of an application for an oil and gas lease on certain islands within the Big Wind River in the sections which would be affected by the proposed agreement, the Department caused an investigation to be made of the character of these islands in order to determine whether or not title thereto was vested in the tribe or in the owners of allotted and patented lands along the banks of the river. It was determined by this investigation that the islands were permanent bodies of land which were in existence at the time of the 1890 survey, although unsurveyed at that time.

    On October 25, 1916, the Department determined that the midchannel of the river, which is the dividing line between the ceded land and the diminished reservation, lay to the north of the islands and that, therefore, the islands were within the diminished reservation. The Department decided further that title to the islands was vested in the tribe rather than in the riparian owners of the land on the adjoining bank of the river. This latter determination was based on the fact that the islands were not within the meander lines of the 1890 survey and the conclusion was reached that at the time allotments were made covering the land on the bank of the river, it was the intention of the Government that the allotments terminate at the meander lines. Support for this decision was found in the fact that when the allotments on the bank of the river were made the acreage included in each allotment was specified, such acreage being figured to the meander lines. As a result of this determination the islands were leased as tribal property for a period of 10 years. The lease expired by its own terms in 1926, and the Department thereafter refused to approve leases of the islands, basing its refusal on the condition of the oil and gas industry at that time and upon the conservation policy of the Department. Prior to this refusal, the General Land Office had caused a field examination to be made of the islands covered by the above lease, and the official plat of the islands was approved by the General Land Office on February 15, 1928.

    In January 1930 the Department was informed that the State of Wyoming had issued an oil lease on a portion of the bed of Big Wind River which runs through the sections now under consideration. This lease covered the bed of the river adjacent to certain unrestricted land, certain restricted allotments, tribal lands, and vacant ceded lands, the latter of which were subject to lease for oil and gas mining purposes by the Secretary of the Interior under the authority of the act of August 21, 1916, supra. In order to determine what action should be taken in connection with this lease, the General Land Office was requested for an opinion as to the navigability of the river, and on February 10, 1930, that office stated that in the opinion of the engineer who had made the last survey of the islands, the river was nonnavigable at that point. The General Land Office was careful to point out, however, that the question of navigability was one of fact and that such a question was not within its province to determine. The matter was then referred to the Department of Justice with the request that appropriate action be taken to cancel the parts of the lease covering lands under the jurisdiction of this Department and to clear title to the lands covered thereby. Prior to the institution of any legal proceedings to accomplish these purposes, the lease in question expired by its own terms, and since no other lease issued by the State was outstanding at that time, no further action was taken in the matter by the Department of Justice.
 

    Subsequently, the State of Wyoming issued other oil and gas leases covering the bed of the river, on the ground that the river is navigable. The District Counsel for the Irrigation Service of the Office of Indian Affairs states that one such lease, issued in 1938, involving lands in the sections under discussion was cancelled by the State because it did not wish to become involved in litigation with the owners of adjoining lands. On June 21, 1940, the Department, in a letter addressed to the Superintendent of the Wind River Agency, stated:

    "The information tends to indicate that the river at this point is non-navigable. This is a question of fact. The evidence at hand is believed to justify this Department in treating the river as non-navigable, but if the question should ever be brought before the courts it must be recognized that any holdings by this Department would not be binding upon the courts."

    First: Does the State of Wyoming have any interest in the bed of the Big Wind River at the point in question?

    The answer to this question may depend upon (a) whether or not the particular part of the river here in question was navigable when Wyoming was admitted into the Union; (b) upon the power of the Congress to grant away the bed of a navigable stream prior to such admission and while the land is still held in the status of a territory; and (c) upon whether or not, if title was retained by the United States at such admission, such title has been lost through any acts of the United States or the tribe.

    (a) It is well settled that title to the beds of all rivers navigable at the time of the admission of a State into the Union passes to the State upon its admission, while title to the beds of nonnavigable rivers remains in the United States. United States v. State of Utah, 283 U.S. 64. The companies proposing the agreement to settle the boundary dispute took the question of the navigability of the river up with the State officials and they have submitted an opinion from the Attorney General of Wyoming dated April 25, 1940, in which he stated that the bed of the Big Wind River would be the property of the State of Wyoming provided the river was navigable at the time Wyoming was admitted into the Union. He also expressed the opinion that the river was not navigable at that time and that, therefore, title to the river bed remained in the United States.

    While the Department has already taken the position that the river is nonnavigable and the State of Wyoming is apparently not disposed at this time to assert any claim to the bed thereof, it should be pointed out that the opinions of neither the Department nor the Attorney General of the State of Wyoming have any binding effect upon the question and if at any time a question should be raised as to whether or not title to the bed of the river passed to the State of Wyoming upon her admission into the Union or remained in the United States the question would be cognizable in the Federal courts. See Brewer-Elliott Oil and Gas Company et al. v. United States et al., 260 U.S. 77; and United States v. State of Utah, supra. If such a controversy arose, any agreement such as here proposed would be null and void in so far as it related to any interests which the State of Wyoming might be determined to have in the bed of the river.

    (b) That the Congress has the power to make grants of lands below high water mark of navigable waters in a territory of the United States to carry out certain public purposes is settled by the United States Supreme Court in the case of Shively v.
Bowlby, 152 U.S. 1, 48, wherein it was said:

    "We cannot doubt, therefore, that Congress has the power to make grants of lands below high water mark of navigable waters in any Territory of the United States, whenever it becomes necessary to do so in order to perform international obligations, or to effect the improvement of such lands for the promotion and convenience of commerce with foreign nations and among the several States, or to carry out other public purposes appropriate to the objects for which the United States hold the Territory."

    In the case of the Shoshone Indians, the land on both sides of the river was set apart by treaty for their use and occupancy long prior to the date of the admission of the State of Wyoming into the Union. As the United States then owned the bed of the river, a reasonable construction of the treaty would require that the river, whether navigable or not, be considered as included within the reservation. Donnelly v. United States, 228 U.S. 243.

    (c) Assuming title to have been retained by the United States in 1890 irrespective of the navigability of the river, the navigability or nonnavigability
 

of the river may nevertheless be important in determining the rights of the State. If the river were nonnavigable in 1890, no subsequent action taken by either the United States or the tribe short of a grant of the riparian land in question could vest title to the river bed in the State. If the river were navigable in 1890 but title remained away from the State because the river bed had been reserved as a part of the Indian reservation, the question might well arise whether such reservation of the river bed title was intended to be effective only during the period of Indian ownership so that the State's title might attach as upland disposals were made pursuant to the cession in 1904 of the Indian title to the United States.

    Second: Is the survey made in 1890 the proper basis for determining the boundary between the lands ceded to the United States and those retained by the tribe under the agreement of 1904 as ratified in 1905?

    The river was not surveyed at the time of the ratification of the agreement but certain subsequent surveys made by the Department tend to establish the fact that between the years 1890 and 1905 certain avulsive changes in the bed of the river took place and that the survey may have been erroneous. The usual rule of law is that when the course of a river which is the boundary between parcels of land changes gradually and imperceptibly, the river in its changed course remains the boundary and owners of the land on the banks thereof benefit thereby as alluvial formations are deposited on their land. Likewise, owners of the land adjacent to a river lose title to any part of their land which may be washed away by the same means which may add to their territory. Nebraska v. Iowa, 143 U.S. 359. Further, where a stream which is a boundary, from any cause, suddenly abandons its old and seeks a new bed, such change of channel works no change of boundary; and that boundary remains as it was, in the center of the old channel.

    "These propositions, which are universally recognized as correct where the boundaries of private property touch on streams, are in like manner recognized where the boundaries between States or nations are, by prescription or treaty, found in running water. Accretion, no matter to which side it adds ground, leaves the boundary still the center of the old channel. * * *

        *                *                *                *                *                *                *                *                *

    "* * * The boundary, therefore, between Iowa and Nebraska is a varying line, so far as affected by these changes of diminution and accretion on the mere washing of the waters of the stream." [Nebraska v. Iowa, pp. 361 and 370; see also the cases cited therein.]

    Third: As the disposals of land by allotment or otherwise were based on the 1890 survey, a serious question arises as to the acreage conveyed by such disposals in view of the changes which had already taken place or which have thereafter taken place in the course of the river. See Oklahoma v. Texas, 258 U.S. 574, 597.

    Fourth: Did the Department err in determining that certain islands in the river, which subsequent surveys of the Department show to have been in existence in 1890, were within the diminished portion of the reservation and therefore tribal lands? If it be established as a fact that these islands lay north of the midchannel of the river in 1905, were they not, then, included in the cession?

    While the answers to the above questions may not be necessary to a determination of the question as to your authority to enter into the proposed agreement, answers to some of them would clearly be necessary before you could give intelligent consideration to the agreement. The companies proposing the agreement have not submitted, and I do not find in the record, any facts upon which you could determine how such an agreement would affect the interests of any individual Indians, the tribe, or the United States In other words, you do not know how much land would be gained or lost by reason of the agreement, or the value thereof.

    Turning to the question presented, there are certain statutory limitations which, in my opinion, specifically prohibit your entering into the proposed agreement.

    The first of these is found in the act of June 12, 1906 (34 Stat. 255, 41 U.S.C. sec. 11):

"* * * No contract or purchase on behalf of the United States shall be made, unless the same is authorized by law or is under an appropriation adequate to its fulfillment, except in the War and Navy Departments, for clothing, subsistence, forage, fuel, quarters, transportation, or medical and hospital supplies,

which, however, shall not exceed the necessities of the current year: * * *."

    A further limitation upon your authority to execute the proposed agreement is section 4 of the act of Congress approved March 3, 1927 (44 Stat. 1347, 25 U.S.C. sec. 398D), which provides:

    "That hereafter changes in the boundaries of reservations created by Executive order, proclamation, or otherwise for the use and occupation of Indians shall not be made except by Act of Congress: Provided, That this shall not apply to temporary withdrawals by the Secretary of the Interior."

    In my opinion, the true boundary as it exists today between the Indian reservation and the ceded lands, some of which ceded lands having been allotted to individual Indians, some having been fee patented and some apparently still being held by the United States and leased under the authority of the 1916 act, supra, is the midchannel of the Big Wind River as fixed by the agreement of cession, as such midchannel may have changed by a slow and imperceptible process.

    While I am not in a position to determine, and it is not my function to do so, what changes may have occurred in the line of the midchannel of the Big Wind River between 1905 and the present time or by what process such changes took place, certainly the center line of the river as it existed in 1896 is not the boundary of the reservation as it exists today. As the agreement would effect a change in the boundary of the reservation, I am of the opinion that you are without authority to enter into such an agreement in view of the clear prohibition of the act of March 3, 1927, supra.

    Aside from this specific limitation, it is my opinion that when Congress has itself determined where the boundary of an Indian reservation shall be, there is no residue of authority left in the Secretary of the Interior to alter that determination.

    Further, the agreement might have the effect of disposing of tribal, allotted and ceded lands. While you may approve conveyances of land allotted to individual Indians of such tribes as have not accepted the provisions of the act of Congress approved June 18, 1934 (48 Stat. 984), commonly referred to as the Indian Reorganization Act (and the Indians of the Wind River Agency have not accepted the provisions of this act), I am aware of no general statutory authority vested in you to dispose of Indian tribal lands. As the agreement might conceivably work out to deprive the tribe of lands vested in it by reasons of its inherent right to accreted land, you would be unauthorized to make such a disposition of that land in the absence of express statutory authority. Further, your authority to deal with that part of the land covered by the proposed agreement which represents undisposed of ceded land is limited by the act of 1905, supra, ratifying the cession, and by the act of 1916, supra, neither of which permits such a disposition of lands as proposed in the agreement submitted.

    In conclusion, I am of the opinion that you have not been authorized by law to enter into the proposed agreement.

                                                                                                                                             NATHAN R. MARGOLD,

Approved: December 13, 1940

OSCAR L. CHAPMAN, Assistant Secretary.

Memorandum for the Commissioner of Indian Affairs:

    The case of the application of Frank Pettus, an unallotted restricted Osage Indian, for a tax-exemption certificate covering certain lands in Osage County, Oklahoma, was the subject of a memorandum of the Acting Solicitor to your office of April 12, 1940. That memorandum held that the lands covered by the application did not come within the terms of the act of May 19, 1937 (50 Stat. 188), providing for tax exemption of Indian homesteads, as the expenditure of restricted funds for the purchase
 

of the land was not made until after the passage of the 1937 act. In your memorandum of July 1, you again referred the question to me, asking reconsideration of the decision with a view to determining whether under the doctrine of relation the title
can be said to have vested prior to the passage of the act. I have reexamined the question in the light of your suggestions and have come to a favorable decision.

    The precise facts in the case are of particular importance. The land is part of certain restricted Osage allotments made taxable by the act of June 28, 1906 (34 Stat. 539), as amended by the act of April 18, 1912 (37 Stat. 86). In February 1937 proceedings were begun in the Osage County Court to partition the allotments among the three joint heirs. On April 10 a deed was executed by the sheriff under the order and judgment of the court conveying to Frank Pettus, subject to restrictions, the major share of the land for a consideration of $6379.62, recited in the deed as paid. This consideration represented the one-third share in the land possessed by Frank Pettus plus $3,599.74 required to be paid by Frank Pettus to equalize his share in the estate. On April 21 the superintendent reported the transaction to the Indian Office, transmitted the order of the court, including the sheriff's deed in question, and reported the amount of the restricted funds to the credit of Frank Pettus. On June 25 the sheriff's deed was approved and the superintendent was authorized to pay the amount necessary to be paid into court out of the restricted funds of Frank Pettus.

    The partition occurred under section 6 of the act of April 18, 1912, which provided that

"* * * * the lands of deceased Osage allottees, unless the heirs agree to partition the same, may be partitioned or sold upon proper order of any court of competent jurisdiction in accordance with the laws of the State of Oklahoma: Provided, That no partition or sale of the restricted lands of a deceased Osage allottee shall be valid until approved by the Secretary of the Interior."

    The terms of the 1937 act under which these lands must be found entitled to tax exemption, if they are to be relieved of taxation, are as follows:

    "All homesteads, heretofore purchased out of the trust or restricted funds of individual Indians, are hereby declared to be instrumentalities of the Federal Government and shall be nontaxable until otherwise directed by Congress: Provided, That the title to such homesteads shall be held subject to restrictions against alienation or encumbrance except with the approval of the Secretary of the Interior: And Provided Further, That the Indian owner or owners shall select, with the approval of the Secretary of the Interior either the agricultural and grazing lands, not exceeding a total of one hundred and sixty acres, or the village, town, or city property, not exceeding in cost $5,000, to be designated as a homestead."

    Therefore, the question now is whether so much of the land acquired by Frank Pettus through the partition proceedings as is represented by his investment of restricted funds can be declared tax exempt where the partition was not approved by the Secretary of the Interior and the funds were not in fact paid over to the vendors until after passage of the 1937 act. In other words, can such land be described as "heretofore purchased" out of trust or restricted funds? If the principle of the doctrine of relation can be applied in this case, the approval of the purchase by the Department, including the approval of the deed and of the expenditure of restricted funds, would relate back to the date of the purchase and so render the transaction completed prior to the passage of the 1937 act.

    The doctrine of relation has been described as the principle by which an act done at one time is considered by a fiction of the law as done at some antecedent period. It is usually invoked where several proceedings are essential to complete a transaction, as, for example, a conveyance, and the last proceeding is found to take effect as of the date of the first proceeding. It is a doctrine applied for the purpose of promoting justice and giving effect to the intention of parties. Gibson v. Chouteau, 13 Wall. 92; Peyton v. Desmond, 129 Fed. 1 (C.C.A., 8th, 1904). The doctrine is normally applied to determine the validity of conflicting conveyances as between the parties thereto and to determine the rights of third parties arising under incompleted purchases. For example, in public land transactions the issuance of a patent is held to relate back to the date of the application for the patent in order to relieve third parties of liability for waste or trespass for acts done subsequent to the application and prior to the patent. Peyton v. Desmond, supra; Tel-
 

ler v. United States, 117 Fed. 577 (C.C.A., 8th 1902).

    The most relevant cases are those Indian land cases where approval of the Secretary of the Interior is necessary to the validity of a conveyance of the land and where the approval is held to be retroactive and to take effect as of the date of the deed or lease involved. Lomax v. Pickering, 173 U.S. 26; Lykins v. McGrath, 184 U.S. 169; Harris v. Bell, 254 U.S. 103; Anchor Oil v. Gray, 257 Fed. 277 (C.C.A., 8th, 1919); Hallam v. Commerce Mining & Royalty Co., 49 F. (2d) 103 (C.C.A., 10th, 1931); Dale v. Winters Oil Co., 243 Pac. 200 (Okla. 1924); and see Hampton v. Ewart, 22 F. (2d) 81, 90 (C.C.A., 1927). In these cases the question was the validity of the deed or lease which was not approved until after an intervening interest of a third party, due to death of the grantor of conflicting conveyances, or until after an intervening statute removing the restrictions on alienation or otherwise changing the requirement of approval. In all these cases the approval was held to relate back to the date of the deed or lease in order to make the transaction complete before the intervention occurred. The courts in several of these cases pointed out that restrictions on Indian property are imposed to guard against imposition on the Indian owner; thus, approval having been given, its purpose is satisfied, and there is no reason why it should not operate as of the date of the transaction approved.

    The application of the doctrine of relation to a question of taxability was involved in the case of McCurdy v. United States, 264U.S. 484, where a reverse situation existed to that involved in the present case. Osage allotments were made in 1908 but the deeds were not signed and approved until July 19, 1909. The question was whether they were taxable as of March 1, 1909. The court held that the doctrine of relation would be used only to do justice and not imposed to create burdens or to place the Indians in a disadvantageous position by making lands taxable which were in fact still held in trust.

    Under these precedents showing the policy and the application of the doctrine of relation, I can conclude that the approval of the conveyance by the Department, carrying with it the authority for expenditure of restricted funds, can be held to relate back to the date of the sheriff's deed when the lands representing the restricted funds were purchased by Frank Pettus. The application of the doctrine in this case will undoubtedly promote justice. The parties had done all that they could to complete the purchase before the statute was enacted and nothing remained but review by Government officials. If that action had occurred more promptly, the transaction might have been approved before the passage of the act. Moreover, the approval was of the same character as the approval necessary in those cases, above cited, where the approval was held to relate back to the date of the conveyance, since the purpose of protecting the Indian against imposition had been fulfilled. Finally, the facts in this case are parallel to the facts in those cases where the doctrine of relation was applied, for at the time the statute was passed the transaction was complete except for its consummation by approval. Since in this case the approval carried with it the release of the restricted funds, it is not significant that the restricted funds owned by the purchaser were not actually paid to the vendors until after the act.

    Even in the absence of application of the doctrine of relation it might be said as a matter of statutory interpretation that at the time of the statute the purchase was made within the contemplation of the statute. The parties were bound by the executed deeds, and they could be released only by disapproval on the part of the Government. The consideration, although not actually paid, was recited as paid, and the purchaser was obligated to fulfill the payment upon the release of the funds.

    Accordingly, a tax-exemption certificate covering so much of the land of Frank Pettus acquired by the sheriff's deed of April 10, 1937, as represents the investment of his restricted funds can be approved by the Department under the act of May 19, 1937, up to the acreage or value limitation recited in that act.

                                                                                                                                            NATHAN R. MARGOLD,

Memorandum forthe Commissioner of Indian Affairs:

    It is suggested that all superintendents, officers and field agents be reminded of a provision in the Code of Federal Regulations, Department of the Interior, title 25, Indians, section 151.2, which requires the submission of a written statement relative to the irrigability of lands to be sold and whether or not there are any unpaid construction, maintenance and operation charges. This regulation also provides in connection with "the issuance of patents or deeds direct to the Indian or purchaser of Indian allotments embracing irrigable lands" that the
 

papers forwarded to the Department for action shall recite the fact that the lands are within an irrigation project and accordingly are subject to the provisions of .the act of March 7, 1928 (45 Stat. 210, 25 U.S.C. 387). That statute provides that unpaid construction, operation and maintenance costs of all Indian irrigation projects are first hens on the land. Should the land not be within an irrigation project a certification to that effect should be made in the correspondence accompanying the deeds and related papers.

    Requests for my approval of the title to lands acquired from Indians and non-Indians and deeds by restricted Indians are very often submitted for approval of the Secretary without meeting the requirements of this regulation. While construction coats are deferred on Indian-owned land by the act of July 1, 1932 (47 Stat. 564), operation and maintenance charges as a general rule are collectible and are liens on such lands. With the single exception of Indian lands which are leased for a term longer than three years, the Indian owners of lands on the Fort Hall Indian Reservation have the right to receive water without payment of assessments for operation and maintenance charges. (See 56 I.D. 7.) It should be observed that non-Indians must pay construction costs in addition to operation and maintenance charges.

    It is felt that more careful compliance with this regulation will facilitate the determination of the validity of titles to lands to be sold or acquired within an irrigation project of the Indian Irrigation Service.

                                                                                                                                            NATHAN R. MARGOLD,

M-30898                                                                                                                                              December 23, 1940.

Re:

Interpretation of contract with attorney covering cases involving Federal estate, gift, or income tax assessments against restricted Five Tribes or Quapaw Indians.

The discretion of the Secretary is absolute subject to the limitation that no nonGovernment attorney other than the one party to the contract can be employed in such cases; and

When an adverse ruling of the Bureau of Internal Revenue has been transmitted to the attorney for action and he has secured a holding favorable to the Indians, the fee to be paid him for establishing such precedent should be determined by the Secretary on a quantum meruit basis, taking into consideration similar savings obtained for other Indians in all cases pending at the time of the final holding; and

The fee so determined should be borne equitably by all Indians so benefited.

MY DEAR MR. SECRETARY:

    You have requested my opinion as to the proper interpretation to be given the contract whereby this Department employed Huston Thompson and his associates to represent restricted Five Tribes Indians in protesting the payment of Federal income and estate taxes. The contract was executed on June 5, 1936, and was amended on September 5, 1938, to include gift taxes assessed against such Indians, and on April 20, 1939, to include gift, income and estate taxes charged against restricted Quapaw Indians. The principal questions requiring consideration are: (1) what discretion does the Secretary have in determining whether a case is to be transmitted to the attorney for action: and (2) what discretion does the Secretary have in determining the fee to be paid the attorney for savings effected by him, to include or exclude consideration of savings secured by the Secretary of the Interior and his subordinates (a) where such savings are secured without reference to work performed by the attorney in question, and (b) where such savings are secured in reliance upon precedents established through the efforts of the attorney.

    For your convenience a copy of the original contract is attached to this opinion as Exhibit A.

    The events which provoked the contract are summarized in a memorandum opinion by the Solicitor on May 1, 1936, approved by the Secretary on May 7:

    "Prior to the recent decision of the Supreme Court in the Sandy Fox case, 295 U.S. 418, this Department, the Attorney General and the lower courts had ruled that the income derived by Indians from their restricted lands was not taxable under the Federal revenue laws. The Supreme Court in the Sandy Fox case not only held that the reinvestment income of a Five Tribes Indian was taxable, but used language strongly indicating that the original of primary income was taxable save

where there is an express exemption. Since that decision the Internal Revenue Department has made certain rulings with respect to the liability of these Indians for both income and estate taxes. This necessitates, of course, considerable readjustment requiring the attention of trained help if the rights of the Indians are to be fully protected. In this process of readjustment questions are likely to arise which can only be settled in the courts and it is generally recognized that the attorneys in this Department and in the Department of Justice cannot represent the Indians in litigation of this nature against the United States."

    "* * * Conferences with him developed that specific cases in which services needed to be rendered had not been determined and would not be determined until after investigation and examination of the records of the Internal Revenue Department and the Office of the Superintendent for the Five Civilized Tribes had been made. * * *"

    "The attorney shall proceed at once to make such investigation as may be necessary to determine the respective rights of the several restricted Indians * * * and to report to the Secretary * * * the status of any claims for income or estate taxes made by the Bureau of Internal Revenue * * * and to advise the Secretary and render any services that may be desired by him in the premises."

    "The responsibility for the filing of the Federal Estate Tax returns involved in the present cases devolve upon the Secretary of the Interior or some subordinate of his office. This responsibility on the part of the Department of the Interior is recognized by the Treasury Department, see IT 1366, C. B. June, 1922, Page 242. The Board of Tax Appeals has so ruled. (See Harjo v. Commissioner, 34 B.T.A. 467)"

    In connection with the discretionary power of the Secretary to handle Indian tax cases through a subordinate, section 198 of title 18, United States Code, should be noted. The section provides penalties for an officer of the United States who is interested in a claim against the United States "otherwise than in discharge of his proper official duty"; but I do not believe that the statute is applicable to an employee of the Department of the Interior who as part of his official duties computes the taxes due the Government from restricted Indians and confers with the Bureau of Internal Revenue
 

in determining what amount is to be paid. The Secretary has not attempted to litigate any controversies with the Bureau of Internal Revenue, nor has any intention to do so been expressed. Any difficulty which may arise over the right of the Secretary to act for restricted Indians in tax matters would properly be settled between the Bureau and the Department and not between the Department and the contracting attorney.

    This discussion of the Secretary's discretionary power leads to several conclusions as to the purpose and scope of the contract. First, it was intended not that every case involving a gift, income, or estate tax of a restricted Five Tribes or Quapaw Indian should be transmitted to the attorney for action but that those cases in which exemptions or adjustments are disallowed by the Bureau can be so transmitted if the Secretary decides they should be tested. Conceivably, if the Secretary desires to do so and the Bureau is agreeable a case might be handled by the Department before the Board of Tax Appeals and no service required of the attorney unless court action is involved. Second, once the disputed points which the Secretary wishes tested by the attorney have been decided administratively or by litigation the Secretary may cease to require the services of the attorney. However, if disputes should arise which require legal services Mr. Thompson will continue to have precedence over other non-Government attorneys until such time as the contract is revised or terminated. Subject to this one limitation, I conclude that the Secretary has unlimited discretion to decide whether in any particular matter the services of an attorney are necessary.

    (2) (a) It follows that where employees of the Interior Department render services resulting in tax savings to Indians, without reference to work performed by the contract attorney, the said attorney is not entitled to compensation for the services performed by the Government employees. The rule that permits an attorney to secure compensation for services rendered by another (McGowan v. Parish, 237 U.S. 285 (1915) ) is limited to a situation where matters entrusted to the attorney by his client are wrongfully withdrawn from the attorney's control. Such is not this case. No outside attorney other than Mr. Thompson has been employed. Instead, the Secretary, consistently with his discretionary power under the contract, merely elects to act for himself in certain cases.

    (b) The remaining question is concerned with the right of the attorney to collect fees in a case which was not transmitted to him for action but in which the Secretary secures a tax reduction on the basis of one or more precedents established through the efforts of the attorney. The cases in which a question is presented are divisible into two main classifications: first, those considered contemporaneously with the case in which a precedent is established; and, second, those considered subsequently.

    As to the first group, when the Secretary desires the attorney to appeal an adverse holding by the Bureau it is not necessary that every case then pending and in which the holding is involved be appealed separately. The use of a test case is a simpler and more desirable method of procedure. All of I he pending cases of the class being tested are generally transmitted to the attorney for him to hold and settle after the principle has been established, but the Secretary need not do so. Since the administrative ruling or rulings to be appealed may involve but a small part of the total tax levied against an individual Indian, the Secretary may choose to withhold that case and himself dispose of the other questions it presents. However, the cost of the appeal should not be borne by any one Indian, but the expense should be shared equally by all those who are benefited by the outcome of the appeal. In requesting the test action the Secretary does so with the expectation of extending its benefits to every similar pending case. In evaluating on a quantum meruit basis the work which the attorney performs the value of his services should be considered in connection with all of the cases pending and presenting the same question. This view is in accord with the equitable rule enunciated by the Supreme Court in Central Railroad v. Pettus, 113 U.S. 116 (1884) wherein it was held that attorneys in a representative bondholder's action were entitled to:

"reasonable counsel fees, which, upon every ground of justice, should be estimated with reference as well to the claims of the complainants who undertook to protect the rights of all the unsecured creditors, as of the claims of those who accepted the fruits of the labors of complainants and their solicitors."

    As to cases subsequent in time to the case or cases in which precedents are established, the general rule applies, namely, that the mere fact that the services which an attorney renders his client are beneficial to a third person does not impose any
 

obligation upon such third person to make payment to the attorney for the benefits derived. As was said in O'Doherty v. Bickel, 166 Ky. 708, 179 S.W. 848 (1915):

    "As well might it be contended that the attorney who obtains the enunciation of a new doctrine of the law should have compensation from all who are thereafter in virtue of that doctrine victorious in the courts."

    It is my recommendation that in all cases not already submitted to the attorney or finally settled with the Bureau of Internal Revenue, the Department obtain for the Indians all tax reductions which the Bureau will grant and that after these have been obtained, the Secretary consider the desirability of transmitting the tax assessment to the attorney for his recommendation as to further action. Then, if the Secretary so decides, the attorney can be given the opportunity to seek a further saving upon which he would be entitled to a fee. It is my further recommendation that the attorney be allowed to submit his claim for a fee in each case involving a Federal income, estate, or gift tax assessed against a restricted Five Tribes or Quapaw Indian in which determination of tax liability was pending when the attorney established any precedent or precedents relied upon in obtaining the reduction. There may be further situations which, although they do not constitute pending cases at the time the precedent in question is established, were in fact considered by the Department, when the test case in question was agreed upon, as prospective cases likely to benefit from the establishment of a favorable precedent in such test case. It is my recommendation that the attorney be allowed to submit his claim in cases of this type as well as in the pending cases to which reference has been made above. Each claim of the attorney should state the principle or principles for which he asserts recognition was obtained through his efforts, and should state the nature of the services which he performed in obtaining a saving in the particular case. With this information before him the Secretary can determine on a quantum meruit basis the fee to be paid and the Indians who are to be charged with its payment. However, I recommend that hereafter the fee of the attorney for establishing a precedent not be evaluated until the tax liability on items to which the precedent is applicable has been finally agreed upon with the Bureau of Internal Revenue, in all cases which the attorney wishes to have considered by the Department in the fixing of such fee.

                                                                                                                                            NATHAN R. MARGOLD,

Approved: December 23, 1940.
OSCAR L. CHAPMAN, Assistant Secretary.

M-30604                                                                                                                                                  January 24, 1941.

Re:

Whether the profits from the sale of Government bonds bought with restricted funds of an adult Osage Indian without a certificate of competency would be considered income from his investments, and hence required to be paid over to the Indian, pursuant to a provision of section 1 of the act of June 24, 1938 (52 Stat. 1034), relating to the tribal and individual affairs of the Osage Indians of Oklahoma, or whether such profits constitute an increase in the capital or principal and are hence subject to control and reinvestment by the Secretary of the Interior.

Profits from the sale of investments bought with restricted funds of an incompetent Osage Indian do not constitute income within the meaning of section 1 of the act of June 24, 1938 (52 Stat. 1034), and hence need not be paid over to the Indian as income.

MY DEAR MR. SECRETARY:

    My opinion has been requested on whether the profits from the sale of Government bonds bought with restricted funds of an adult Osage Indian
 

without a certificate of competency would be considered income from his investments, and hence required to be paid over to the Indian pursuant to a provision of section 1 of the act of June 24, 1938 (52 Stat. 1034), relating to the tribal and individual affairs of the Osage Indians of Oklahoma, or whether such profits constitute an increase in the capital or principal and are hence subject to control and reinvestment by the Secretary of the Interior. The relevant provision of the statute reads:

    "* * * Rentals due such adult members from their lands and their minor children's lands and all income from such adults' investments, including interest on deposits to their credit, shall be paid to them in addition to the current allowances above provided."

    The first of these acts is the act approved June 28, 1906 (34 Stat. 539). That act reserved to the tribe the oil, gas, coal, and other minerals underlying the lands therein divided among the members of the tribe and provided that all funds belonging to the tribe, all moneys due, and all moneys that may become due should be held in trust by the United States for the period of 25 years from January 1, 1907, but that the interest which might accrue on said funds should be paid quarterly to the individual members thereof. The act further provided that the royalty received from tribal mineral leases should be distributed on a pro rata basis to the individual members of the tribe quarterly, along with the interest on the trust funds. The income received by the individual members of the tribe, by reason of the above provisions, increased to such proportions during the ensuing years that gross extravagance and waste prevailed. Thereupon, the Congress directed that from and after the passage of the act of March 3, 1921 (41 Stat. 1249), the Secretary of the Interior should cause to be paid over to adult members not having a certificate of competency $1,000 per quarter and to invest the remainder in securities prescribed by the act for the benefit of each individual member.

    The 1906 and 1921 acts were later amended in particulars pertinent to this discussion by the act approved February 27, 1925 (43 Stat. 1008). That act liberalized the provisions of the 1921 act relating to quarterly payments by directing that:

    "* * * Rentals due such adult members from their lands and their minor children's lands and all income from such adults' investments shall be paid to them in addition to the allowances above provided."

    By the act of March 2, 1929 (45 Stat. 1478), it was provided that the lands, moneys, and other property now or hereafter held in trust or under the supervision of the United States for the Osage Tribe of Indians, the members thereof, or their heirs and assigns, should continue subject to such trust and supervision until January 1, 1959, unless otherwise provided by act of Congress.

    The act of June 24, 1938, supra, provides, among other things, that when an adult member without a certificate of competency has surplus funds in excess of $10,000, there shall be paid to such member sufficient funds from his accumulated surplus which, together with his current income, shall equal $1,000 per quarter. Where such a member has surplus funds of less than $10,000, such Indian shall receive quarterly only his current income, not to exceed $1,000 per quarter. The provision contained in the 1925 act, for the payment of rentals from land, and income from their investments, in addition to the current allowances, was amended to include "interest on deposits to their credit." The trust period, extended by the 1929 act, was extended by the 1938 act to January 1, 1984, unless otherwise provided by act of Congress.

    From this brief resume of the pertinent provisions of legislation dealing with Osage affairs, it may be seen that the investments made by the
 

Secretary of the Interior of the surplus funds of the individual Osages were investments of funds held under the supervision of the United States, and that in dealing with these funds, the Secretary of the Interior is a trustee, appointed by Congress. It will also be seen that, while Congress has liberalized to a certain extent the provisions relating to quarterly payments to adult Osages without certificates of competency, by permitting them to receive in addition to specific allowances rentals from their lands, income from investments, and interest on deposits, yet there has been no abandonment of the policy that the surplus funds are to remain under the supervision of the United States. In fact, the latest act specifically provides that the lands, moneys, and other properties now or hereafter held in trust or under the supervision of the United States shall so remain.

    As stated in the case of United States v. Wailer, 243 U.S. 452:

    "* * * The tribal Indians are wards of the Government, and as such under its guardianship. It rests with Congress to determine the time and extent of emancipation. * * **'

    Economists, lexicographers, and jurists have found difficulty in precisely defining "income." Doyle v. Mitchell Brothers Co., 247 U.S. 179, 185. Yet, the numerous types of pecuniary and non-pecuniary gains or profits and the variations in their classifications by legislatures have caused the solution of many important legal problems to depend upon the definition of this word. One of the legal fields in which this term has been very important is that of future interests. Some of the major issues of the law of taxation involve the distinction between capital and income. This is due to the general rule that income, in order to be taxable, must consist of pure gain or profit and may not proceed from the corpus or principal and that when not derived from personal exertion, income is something produced by but not impairing capital. See Gavit v. Irwin, 275 Fed. 643, 645; Sargent Land Co. v. Von Baumbach, 207 Fed. 423, 430.

    One of the most quoted judicial discussions on capital and income is contained in the opinion of the United States Supreme Court in Eisner v. Macomber, 252 U.S. 189, 206:

    "The fundamental relation of 'capital' to 'income' has been much discussed by economists, the former being likened to the tree or the land, the latter to the fruit or the crop; the former depicted as a reservoir supplied from springs, the latter as the outlet stream, to be measured by its flow during a period of time. For the present purpose we require only a clear definition of the term 'income,' as used in common speech, in order to determine its meaning in the Amendment; and, having formed also a correct judgment as to the nature of a stock dividend, we shall find it easy to decide the matter at issue.

    "After examining dictionaries in common use (Bouv. L.D.; Standard Dict.; Webster's Internat. Dict.; Century Dict.), we find little to add to the succinct definition adopted in two cases arising under the Corporation Tax Act of 1909 (Stratton's Independence v. Howbert, 231 U.S. 399, 415; Doyle v. Mitchell Bros. Co., 247 U.S. 179, 185) -'Income may be defined as the gain derived from capital, from labor, or from both combined, provided it be understood to include profit gained through a sale or conversion of capital assets, to which it was applied in the Doyle Case (pp. 183, 185)."

    "* * * Here we have the essential matter: not a gain accruing to capital, not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value proceeding from the property, severed from the capital however invested or employed, and coming in, being 'derived,' that is, receivedor drawn by the recipient (the taxpayer) for his separate use, benefit and disposal;-that is income derived from property. Nothing else answers the description."

    "In determining the definition of the word 'income' thus arrived at, this court has consistently refused to enter into the refinements of lexicographers or economists and has approved, in the definitions quoted [Eisner v. Macomber, supra, and others], what it believed to be the commonly understood meaning of the term which must have been in the

minds of the people when they adopted the Sixteenth Amendment to the Constitution. * * *

            *                                *                                *                                *                                *

   "Gray v. Darlington, 15 Wall. 63, much relied upon in argument, was sufficiently distinguished from cases such as we have here in Hays v. Gauley Mountain Coal Co., 247 U.S. 189, 191. The differences in the statutes involved render inapplicable the expressions in the opinion in that case (not necessary to the decision of it) as to distinctions between income and increase of capital."

    "The research of counsel had developed an incredible amount of judicial exposition upon the meaning of the word 'income' used in different relations in statutes and ordinances concerning taxes and excises, federal and state, and in wills and contracts, public and private. The mere citation of cases covers pages. In the litigious field of federal and state income taxation the word always carries the implication of gains, profits or increment. That mode of taxation is designed to reach gains distinguished from possessions. Eisner v. Macomber, 252 U.S. 189, 40 S. Ct. 189,64 L. Ed. 521, 9 A. L. R. 1570. Sometimes the same implication must be ascribed to the word 'income' in other fields of taxation. Lewellyn v. Pittsburgh, B & L. E. R. Co., 3 Cir. 222 F. 177; Doyle v. Mitchell Bros. Co., 247 U.S. 179, 38 S. Ct. 467, 62 L. Ed. 1054. But not always.

    "The word has often been used in relation to occupation and excise taxation and in wills and contracts, public and private, in a different sense. There are many situations and contexts in which the word is used to mean money that comes in without reference to any gain or profit, * * *

            *                                *                                *                                *                                *

    ' "Income", like most other words, has different meanings dependent upon the connection in which it is used, and the result intended to be accomplished.'

    "We conclude that the term 'gross income' cannot be said to convey the same definite and inflexible significance under all circumstances and wherever used. Its meaning depends on the connection in which it is used and the result intended to be accomplished. Here we must ascribe that meaning which conforms the contract to the intent of the parties." (Italics supplied.)

    "* * * money or other property received by the trustee as the proceeds of a sale or exchange of the principal of trust property is principal. * * *

    "* * * profits arising from the sale or exchange of the principal of trust property or any enhancements in the value of the principal of trust property are allocable to principal, not income; and losses incurred by the sale or exchange or destruction of or damage by casualty to the trust property are chargeable to principal." (Restatement of the Law of Trusts, sec. 233.)

    Sec. 811. "It is self-evident that a trustee to pay over income ordinarily has no power to apply capital to the benefit of the cestui, or to pay it over to him. * * *"

    Sec. 823. "It is, of course, common that a trustee who has a power of sale, but no duty to sell, disposes of trust property and makes a profit on the sale, when the sale price is compared with the inventory or cost price of the property. Such a profit is quite universally held to go to the capital of the trust fund [see Matter of Vedder's Will, 15 N.Y.S. 7981.* * *

    "There are many instances in the books where lands, bonds, or other property has been given to the trustee by the settlor, or bought by the trustee as an investment, and the trustee has had the option of selling or retaining the investment but has decided to sell at a time when he could realize a gain over the inventory or cost price. These gains in changing investments are to be credited to the capital of the trust, and no part of them