Before PHILLIPS, HUXMAN, and MURRAH, Circuit Judges.
Eastman Richard*fn1 was an enrolled fullblood Creek Indian owning both his individual allotment and allotments he had inherited. Oil production from these allotments resulted in royalty payments under oil and gas leases accumulating to Richard's credit in the Union Agency at Muskogee, Oklahoma. Richard was an adult and competent.
In 1919, an action was brought against Richard in the District Court of Muskogee County, Oklahoma, seeking damages for alleged alienation of affections. A verdict was returned against Richard for $2,000. From an order granting the plaintiff in that action a new trial, Richard appealed to the Supreme Court of Oklahoma. The State Supreme Court required Richard to file a supersedeas bond of $5,000. Richard's lawyer requested Ogden to execute the bond as surety. Ogden was president of the First National Bank of Muskogee,*fn2 and required that a $5,000 cashier's check be deposited with the bank to indemnify him as surety. J. Vance, a bookkeeper in the Union Indian Agency at Muskogee, signed Richard's name to the regular application form for disbursement of restricted funds under date of March 6, 1920, for the recited purpose of "special cash payment $5000.00 for deposit in the First National of Muskogee, Okla. as indemnification for appeal bond." It was a rather common practice for clerks in the Indian Agency to sign the Indian's name to an application for disbursement of funds. But the disbursements were made by check payable to the Indian and his personal endorsement of the check was required. The application duly passed through the regular channels at the Agency and was finally approved by the Assistant Superintendent. Richard's oil royalty account was charged with $5,000, and D. Buddrus, the Agency cashier, issued a check in that amount payable to Richard. Neither the Secretary of the Interior nor the Commissioner of Indian Affairs approved the release of the funds.
On March 6, 1920, Hockman, assistant cashier of the bank, gave the bank's receipt to Buddrus for the $5,000 check. The bank received the proceeds of the check and issued its own cashier's check, payable to itself, in the amount of $5,000, and held the cashier's check to indemnify Ogden. Ogden and H. W. Gibson then executed the supersedeas bond as sureties. Richard's appeal was dismissed by the Supreme Court of Oklahoma on August 31, 1920. Shortly thereafter, the suit was compromised. The cashier's check remained in the bank until November 12, 1925. The bank then, having been advised that there was no longer any obligation on the supersedeas bond, endorsed the cashier's check to the order of Richard. The latter then endorsed the check in blank and it was deposited to his credit in his account at the bank.
Richard died March 31, 1934. His heirs brought this action in the District Court of Muskogee County against the bank and Ogden to recover the proceeds of the $5,000 check, on the ground that the funds were restricted and that the bank should have returned them to the Agency rather than to have deposited them to Richard's account. Notice of the pendency of the action was served on the Superintendent for the Five Civilized Tribes. The United States petitioned for removal and the cause was removed under § 3 of the Act of April 12, 1926, 44 Stat. 240. The United States intervened in the action. From a judgment for the bank and Ogden, the United States and the heirs appealed. Thereafter, the United States dismissed its appeal. The cause is now pending here on the appeal of the heirs.
Section 2 of the Act of May 27, 1908, 35 Stat. 312, in part provides:
"That leases of restricted lands for oil, gas or other mining purposes, * * * may be made, with the approval of the Secretary of the Interior, under rules and regulations provided by the Secretary of the Interior, and not otherwise."
Pursuant to § 2, the Secretary of the Interior prescribed Regulations governing the leasing of land and removal of restrictions of members of the Five Civilized Tribes. Section 20 of such Regulations reads in part as follows:
"All royalties, rents, or payments due under leases which have been or may be approved by the Secretary of the Interior shall be paid to the United States Indian Agent at Union Agency, Muskogee, Okla., or to such other person as may be designated by the Secretary of the Interior, for the benefit of the various lessors, or, in cases of minors and incompetents, shall be deposited as hereinafter specified. * * * No royalties on such leases shall be paid by the lessee direct to the lessors or their representatives. * * *"
Section 25 of such Regulations, as amended July 23, 1910, and November 29, 1912, reads in part as follows:
"All royalties, rents or payments accruing under any lease made for or on behalf of any minor or incompetent shall be held by the United States Indian Superintendent, Union Agency, or such other disbursing officer as may be designated by the Secretary of the Interior, to the credit of the guardian (or curator) of such minor or incompetent and shall be paid to such guardian (or curator) upon voucher executed by him and approved by the Judge of the County (Probate) Court having jurisdiction. * * *
Provided, however, that the said superintendent, or other officer in charge of the Union Agency, is authorized, in his discretion, where considered for the best interests of any adult, minor, or incompetent lessor, or his or her heirs, for whose account royalties, rents or payments accruing under any lease have been paid to said superintendent, to withhold the disbursement of such royalties, rents or payments, wholly or in part from any such adult, or guardian or curator of any such minor or incompetent, or his or her heirs, until such time or times as the payment thereof is considered best for the benefit of said lessor, or his or her heirs."
The funds disbursed to Richard were restricted while they remained in the custody of the Indian Agency. The restrictions were removed if the funds ...