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House v. United States

August 25, 1944


Appeals and Cross-Appeal from the District Court of the United States for the Eastern District of Oklahoma; Eugene Rice, Judge.


Before PHILLIPS, BRATTON, and HUXMAN, Circuit Judges.

HUXMAN, Circuit Judge.

Leona Richard Fox, Wanda Richard Curtis, Florence Marie Barnett, now Townsend, George Barnett, Jr., and Rina Richard Howell, now Urquhart, instituted this action against H. G. House in the state court of Oklahoma.The petition alleged that plaintiffs were the heirs of Eastman Richard, deceased; that the defendant had occupied a fiduciary relationship toward the deceased during his lifetime; that as a result thereof he had received money and property of a value in excess of $300,000 which belonged to the deceased, and that they were entitled to an accounting thereof at his hands, as heirs of the deceased. An amended complaint was filed in which H. G. House and R. L. Simpson were joined in their representative capacities as executors of the estate of Eastman Richard. The action was removed to the United States District Court for the Eastern District of Oklahoma.

The deceased was a full blood restricted Creek Indian, and all of the plaintiffs, save one, are restricted Indians. The action was removed pursuant to the provision of the Act of April 12, 1926, 44 Stat. 239. The United States filed an amended bill of intervention in which it alleged the restricted Indian status of the deceased and of the plaintiff heirs. It further alleged that the greater portion of the estate of the deceased Eastman Richard consisted of restricted property; that the defendant H. G. House secured the release of large funds from the Department of the Interior through misrepresentations. It also alleged the fiduciary relationship existing between House and Richard, and that as a result thereof the defendant House came into the possession of large sums for which he should be compelled to account. All parties have appealed from the decision of the trial court. The points raised by the respective appeals will be developed in the course of the opinion. A somewhat detailed statement of the facts is necessary to a comprehension of the questions raised.

Eastman Richard was enrolled as a full blood Creek Indian. He was a poor, unlearned Indian, of very limited intelligence. His own allotment, as well as property he inherited from other Indians, became very valuable when oil was discovered thereon. The discovery of oil made him a very wealthy man. All the money which was accumulated from oil royalties came from restricted property and was under the control of the Secretary of the Interior. The Department released more than $1,300,000 to Richard over a period of ten years prior to the time House became active in his affairs.Richard soon experienced all the woes and tribulations which usually befall poor, ignorant Indians when they come into great wealth.

Richard had a number of wives. It appears that he may have had several wives at the same time. He had children by most of these wives. He had many poor relatives whom he supported. He paid their bills, bought their groceries and automobiles, and furnished them living quarters. At one time he expressed a desire to move to Checotah to school his children. When opposition developed to this, he established his own town, which he called Richardsville. Title to the land on which Richardsville was established was taken on a Carney-Lacher form of deed. He owned and operated a general mechandise store, a bank, a cotton gin and a drug store. He also bought numerous houses and barns. He hired managers to operate these various enterprises for him. In addition to spending the $1,300,000 which was released to him, he contracted debts of approximately $117,000. This indebtedness consisted of mortgages, judgments and open accounts.

This was his status about June 16, 1924, when he began his association with House. On this date House executed a contract with Richard in which he undertook to secure a settlement of all his outstanding debts and obligations. The contract left blank the amount of his fee for this service. After the execution of this contract, House went to Washington and worked out an arrangement with the Commissioner of Indian Affairs for release of sufficient funds to pay these debts.The Department also approved a fee of $7,000 to House for his services in these matters.

On November 9, 1925, a new agreement was made between Richard and House. It provided in substance that House was to be retained and employed as Richard's agent and business manager for a term of five years, and was to receive as compensation fifteen per cent of all sums received by Richard. Three days later House procured a written agreement from Richard in which he agreed to give House a note for $25,000 secured by a mortgage on all his property as security for any sums which might become due to House under his contract of employment. On March 6, 1930, House obtained a further note for $12,500, secured by a chattel mortgage on personal property and royalties.

After the execution of the contract of November 9, 1925, House took active charge of Richard's affairs. He procured letters from Richard to Mr. Wallen, the Superintendent of Indian Affairs at Muskogee, and to the Riggs National Bank, directing them to send all payments to Richard to House's private postoffice box. All checks were made payable to Richard. At first these checks were endorsed by Richard and were then deposited to his credit in the bank. Payments were made from this account upon the check of Richard countersigned by House. This procedure was followed until January 1, 1931. Thereafter House deposited all checks received by Richard in his own account in the name of H. G. House Agency, where the funds were co-mingled with other funds in the account. From that time all payments made on behalf of Richard were made upon checks signed by H. G. House, Agent. Most of these checks were countersigned by Richard. This practice continued until Richard's death. After the contract of November 9, 1925, the Superintendent of the Five Civilized Tribes at Muskogee released to Richard by monthly check his entire accumulated monthly income. Such payments were made by the Superintendent without authorization or direction from the Secretary of the Interior or the Commissioner of Indian Affairs at Washington.

The accounting was divided into five sections. The first section included the time prior to November 9, 1925, during which House attempted to clear up the outstanding indebtedness of Richard. Section two covered the period from November 10, 1925, to December 31, 1930, the time during which the checks made payable to Richard were deposited in his account in the bank and were dispersed by checks signed by him and countersigned by House. The third section included the period from January 1, 1931 to the time of Richard's death, covering the period during which Richard's checks were deposited in the account of H. G. House, Agent, and were dispersed by checks signed by House, as Agent, and countersigned by Richard. The fourth section of the account dealt with insurance which was placed on Richard's property through House, and covered disbursements made by House for the payment of insurance premiums. The fifth section of the account related to fees which House had received from Richard.

Appellant House contends that the cause of action was not removable to the United States District Court under Section 3 of the Act of April 12, 1926. This contention is based on the argument that the funds involved were not restricted. Our conclusion, hereinafter set out, that the funds were restricted, should dispose of this contention. It is true, as pointed out by House, that the petition upon its face failed to allege facts showing that the action was removable. This action was not, however, removed under the general removal statute, but under Section 3 of the Act of April 12, 1926. The broad general purpose of this Act is to enable litigants claiming an interest in allotted lands or in the proceeds therefrom to file suit in the state courts, serve the government with notice of the pendency of the suit, and thus bind the government by the result of the litigation. The government by the passage of this Act yielded to that extent its exclusive jurisdiction of its restricted Indian wards, but in doing so it reserved the right to remove all such cases to the federal court for trial. Caesar v. Burgess, 10 Cir., 103 F.2d 503; United States v. Fixico, 10 Cir., 115 F.2d 389, 392. The right of removal comes when a notice is served upon the government showing that an interest of one of its Indian wards is involved in the action. The notice in this case, served upon the Superintendent of the Five Civilized Tribes, specifically set out that the plaintiffs were restricted Indians and that the suit involved the right to inherit allotted lands and moneys of the deceased restricted Indians. This clearly gave the government the right to remove the case to the federal court under Section 3 of the Act of 1926.

Appellant House challenges the court's finding that the funds in controversy were restricted. It is conceded that these funds came from restricted property and were originally restricted in the hands of the Secretary of the Interior. But it is argued that restrictions were removed when the Superintendent of the Five Civilized Tribes released Richard's monthly income to him as it accrued. It is urged that he had authority to remove the restrictions by releasing these funds under the ...

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