When the question is so posed, we think that the answer is obvious. There is no doubt that the United States serves in a fiduciary capacity with respect to these Indians and that, as such, it is duty bound to exercise great care in administering its trust. See, e. g., Seminole Nation v. United States, 316 U.S. 286, 296-297 (1942). But it has long been recognized that a trustee is not an insurer of trust property. As Professor Scott has written, “A trustee is under a duty in administering the trust to exercise such care and skill as a man of ordinary prudence would exercise in dealing with his own property.” 2 A. Scott, Trusts 1408 (3d ed. 1967) (hereinafter cited as Scott). See, e. g., Phelps v. Harris, 101 U.S. 370, 383 (1880). It follows that “if the trust property is lost or destroyed or diminished in value, the trustee is not subject to a surcharge unless he failed to exercise the required care and skill.” 2 Scott 1419.
Applying these familiar principles to the facts before us, we are required to decide whether the United States can be said to have acted with less than the requisite care in refusing to contest the Oklahoma tax. When the State asserts a doubtful tax claim against trust property, the trustee is often presented with a close question. Normally, the trustee is obligated to pay taxes on the trust estate, and, indeed, if he negligently fails to do so, he may be held liable for any resulting penalty. See, e. g., 2 Scott 1422. Yet, as these cases demonstrate, if he pays the tax, he may similarly be called upon to reimburse the trust estate for the amount of the tax.
In order to avoid placing a trustee on the horns of this dilemma, most courts which have considered the problem have given a trustee broad discretion to pay taxes claimed by the State so long as the trustee’s judgment that the taxes are valid or that the costs and risks of litigation outweigh the advantages is not wholly unreasonable. See, e. g., Crutcher v. Joyce, 146 F.2d 518, 519 (CA10 1945); In re Estate of Miller, 259 Cal. App. 2d 536, 550, 551, 66 Cal. Rptr. 756, 766 (1968); In re Estate of Wehrhane, 41 N. J. Super. 158, 166, 124 A. 2d 334, 338 (1956); Henshie v. McPherson & Citizens State Bank, 177 Kan. 458, 479, 280 P. 2d 937, 953 (1955); In re Vanderbilt’s Will, 190 Misc. 824, 850, 77 N. Y. S. 2d 403, 427 (1948); Selleck v. Hawley, 331 Mo. 1038, 1056-1057, 56 S. W. 2d 387, 395-396 (1932).
Thus, even if the West case had never been decided, the plaintiffs below would still have had difficulty in making out a case that the United States had breached its fiduciary duty by paying the tax. But, of course, West had been decided at the time the tax was paid, and we therefore deal here with an assertion of taxing authority which was not merely plausible but had been expressly approved by a decision of this Court. Generally, when a trustee is in doubt as to what course to pursue, the proper procedure for him to follow is to conform his conduct to the instructions given him by the courts. See, e. g., Mosser v. Darrow, 341 U.S. 267, 274 (1951). Here, the United States did just that, and plaintiffs below ask us to find that obedience to the instructions of this Court constitutes a breach of fiduciary duty.
United States v. Mason, 93 S. Ct. 2202, 412 U.S. 391 (1973).
If the United States can be a fiduciary to the indians, then, yes, the answer to the question is that IRS agents are fiduciaries. And since they are fiduciaries then that means they have fiduciary duties which is good for us and bad for them. They will not like the fact that you are reading these posts. Read on.
Also, the principles discussed in the case above seem to indicate that employers are also fiduciaries and with that comes a duty to make an investigation into what the law is and follow it. They are not going to be happy about this discovery.