IN RE: TARRANT'S ESTATE. McGRATH, Atty. Gen. et al. v. BROWN et al.
Facts: William Tarrant died January 13, 1946. His last will and testament was duly admitted to probate in the County of Los Angeles and the public administrator was appointed administrator with the will annexed. The pertinent provisions of the will on this appeal are as follows:
‘Third: I give and bequeath unto the Pension Fund of the Canadian Pacific Railway Company of the Dominion of Canada with General Offices at Montreal, Canada, one-third of my estate.
‘Fourth: I give and bequeath unto the Pension Fund of the Great Northern Railway Company, a corporation, with head offices at St. Paul, Minnesota, one-third of my estate.
‘Fifth: I give and bequeath unto the Pension Fund of the Railroad Retirement Board with Headquarters at Washington, D. C., which fund is administered by the Treasury Department of the United States Government, one-third of my estate. If said Retirement Board cannot accept, then this one-third to go to the other two Pension Boards mentioned herein in equal parts.’
After paying all debts and providing for all charges and expenses of administration, the administrator filed his first and final account and report and petitioned for instructions relative to the distribution of the estate. After a hearing the probate court held that the bequest to the pension funds by the testator was invalid and since decedent had no known heirs the property should escheat to the State of California.
From such order all of the Legatees have appealed.
Question: Were the bequests invalid under Section 27 of the California Probate Code which reads as follows?
‘A testamentary disposition may be made to the state, to counties, to municipal corporations, to natural persons capable by law of taking the property, to unincorporated religious, benevolent or fraternal societies or associations or lodges or branches thereof, and to corporations formed for religious, scientific, literary, or solely educational or hospital or sanatorium purposes, or primarily for the public preservation of forests and natural scenery, or to maintain public libraries, museums or art galleries, or for similar public purposes. No other corporation can take under a will, unless expressly authorized by statute.’
This question must be answered in the affirmative.
First: The bequest to the pension fund of the Canadian Pacific Railway Company (third paragraph of the will) was invalid for the reason stated by The Honorable John Gee Clark, trial judge, in his opinion as follows:
‘The nature of the pension fund of the Canadian Pacific Railway Company is disclosed by the deposition of George Armstrong Smyth, Superintendent of Pensions and Staff Registrar in the service of the Canadian Pacific Railway Company at its Head Office at Windsor Station, Montreal.
‘The witness testified that, ‘The Canadian Pacific Railway Company Pension Trust Fund is a fund wherein are deposited pension contributions of the employees of the Railway Company and any Railway, Steamship or other Company controlled by Canadian Pacific Railway Company, equal to three (3%) percent of the salary or wages earned by such employees. In addition, contributions are made from time to time by Canadian Pacific Railway Company directly to the Trust Fund.’
‘The witness produced, in connection with his deposition, Rules and Regulations of the Pension Department, revised to February 28, 1949. It is there revealed in Rule 31, that ‘the establishment and continuance of this system of pensions insofar as the Company's contributions are concerned is purely voluntary on the part of the Company, which reserves the right to alter, suspend or discontinue from time to time and in whole or in part its contribution towards pension allowances or to the Trust Fund * * *’
‘The Pension Trust Fund is administered by the Canadian Pacific Railway Company as trustee and as such the Company does not have any direct beneficial interest therein.
‘It is clear that under Section 27 of the Probate Code, the Canadian Pacific Railway Company itself cannot be made a beneficiary under the will of a California citizen but it may receive a bequest as trustee if such bequest is for a charitable purpose. (Estate of Henderson, 17 Cal.2d 853, 859, 112 P.2d 605). No charitable purpose is expressed in the bequest to the Pension Fund of the Canadian Pacific Railway Company.
‘From an examination of the Rules and Regulations, it does not appear that this contribution would in any way increase the benefits to the beneficiaries of such pension fund, nor decrease the contributions from the employees. It appears that the contributions from the employees are insufficient to maintain the fund and that the Canadian Pacific Railway Company supplements those contributions but is careful to assume no obligation so to do. The practical effect of any contribution to the pension fund would be to relieve the Canadian Pacific Railway Company from making a contribution which it would otherwise make in order to maintain the fund. The direct beneficiary therefore of the testator's bounty in the case at bar would in effect be the Canadian Pacific Railway Company which, by the law of California above referred to, is prohibited from taking.’
This pension fund falls within the class described in Estate of Henderson, 17 Cal.2d 853, 859, 860, 112 P.2d 605, 609, reading thus:
‘If a group of individuals agree to contribute equal amounts into a fund to be used for the benefit of all, such a group may well be said to be non-charitable in nature because each individual is providing only for his own welfare and does not intend to make a free contribution toward the assistance of others. If an outsider, however, receiving no benefits from the organization, makes a gift to it, that gift may well be a charitable one * * *.’
The trial judge drew proper inferences from the facts, holding that the bequest would not be charitable and that its effect would be to relieve the railway company of contributions to the pension fund which would make the railway company the direct beneficiary. This finding is binding upon the appellate court and is in accordance with the holding of this court in California Employment Commission v. Betthesda Foundation, 54 Cal.App.2d 348, 128 P.2d 874. In such case defendant had contended it was organized and operated exclusively for charitable purposes and claimed to be exempt from making contributions under the California Unemployment Insurance Act. In sustaining the trial court's findings to the contrary this court said at page 351 of 54 Cal.App.2d, at page 876 of 128 P.2d, ‘The general rule that the findings of the trial court will not be disturbed on appeal if the record discloses substantial evidence to support them is applicable to the present appeal. All intendments are in favor of the judgment of the lower court. * * * The trial court could draw reasonable inferences from the facts established and base its findings thereon. In making its findings the trial court was not bound by the articles of incorporation of defendant or the fact that it was organized under section 606 of the Civil Code but it could take into consideration the actual conduct of defendant and its methods of operation.’
Second: The bequest to the pension fund of the Great Northern Railway Company (fourth paragraph of the will) was likewise invalid for these reasons stated by the trial judge which we hereby adopt:
‘There is an association, incorporated in July of 1915 under the laws of the State of Minnesota named the Veterans Association of the Great Northern Railway Company and the purposes of the Association as set forth in its Articles are as follows:
“The general purpose and plan of operation of the corporation shall be to cultivate social relations among its members; to create and maintain mutual interest in the common welfare of its members and of the Great Northern Railway Company; to increase and diffuse knowledge of railway science, organization and administration; to establish and administer a pension fund for the benefit of its members; to acquire and take by purchase, gift, devise, bequest, etc. * * *'
‘Jacob H. Marthaler, President of the Association, testified as follows:
“The funds of the Association are used in part for the actual expenses of running the organization, such as for clerical help in keeping our records, and some of the costs of holding conventions are assumed. Outside of actual expenses of organization, all funds are used to aid needy members, their widows and families. The contributions are received through payment of membership fees and annual dues of $3.00 and in addition to a number of officers of the Great Northern Railway Company have made donations to the Association.'
‘He further testified that, ‘it is the policy of the Association to assist those members who are receiving small pensions or annuities from the Railroad Retirement Board by making quarterly donations to supplement pensions which are inadequate to take care of their everyday living expenses. We have in the past and are at present assisting members or their widows with the payment of taxes, fuel bills, doctor and hospital bills, medicines, etc. * * *’
‘It is the contention of this Association that they are entitled to receive the bequest to the Pension Fund of the Great Northern Railway Company.
‘The Railroad Retirement Act enacted August 29, 1935 [45 U.S.C.A. §§ 215–228 note] by the Congress of the United States, provided for a general pension system for all employees of carriers subject to the Interstate Commerce Act [49 U.S.C.A. § 1 et seq.]. It does not appear from any of the evidence before the court that there is any separate pension fund at the present time for the Great Northern Railway Company, although one of the purposes of the Veterans Association of the Great Northern Railway Company at the time of its establishment in 1915 was to establish and administer a pension fund for the benefit of its members.
‘The only funds which the Veterans Association of the Great Northern Railway Company have to administer are the dues of $3.00 each from the members plus such donations they may receive from interested persons and the funds are not used for the purpose of paying pensions but to aid needy members and their widows and families.
‘The court from such testimony cannot infer that the testator intended by a bequest to a non-existent pension fund of the Great Northern Railway Company that a bequest was intended to the Veterans Association of the Great Northern Railway Company and no reasonable application of the doctrine Cy-pres would appear to make it so apply.’ (See Estate of Zilke, 115 Cal.App. 63, 66, 1 P.2d 475.)
Third: The bequest to the pension fund of the Railroad Retirement Board (fifth paragraph of the will) is likewise invalid for the reasons stated by the trial judge as follows:
‘It appears that the funds, therefore, which are appropriated for the purpose of paying the pension benefits under the Railroad Retirement Act are appropriated by Congress in such amounts as shall be estimated to be necessary by the Railroad Retirement Board. The amount of the benefits is fixed by law and any donation to this fund would not change these established benefits but would serve only to reduce the amount necessary to be appropriated by Congress for the purpose of maintaining the fund. In effect then, this bequest is indirectly one to the Government of the United States and not for a charitable purpose.
‘The employees contribute to the Treasury of the United States and only those making such contribution are entitled to obtain the benefits of the pension fund and the disbursement of such fund is not based in any way upon need. Therefore the contributions to the pension funds would be no more charitable than a contribution to any mutual benefit society or mutual insurance company.
‘The effect of such a bequest to the Treasury of the United States would relieve the federal tax payers but the Legislature of the State of California has prohibited such bequest and therefore the court cannot hold that the relief of federal tax payers is a charitable purpose.
‘In the Estate of Burnison, 33 Cal.2d 638, 204 P.2d 330, the matter of bequest to the United States Government is discussed and it is there held that such bequests are not permitted under Section 27 of the Probate Code. That case also discusses the Estate of Hendrix, 77 Cal.App.2d 647, 176 P.2d 398, wherein a bequest to the United States Veterans Administration for the purpose of rendering to disabled veterans of the World War, such aid, comfort and assistance as may to them be most helpful and profitably determined by said organization was upheld.
‘The trial court in the case at bar was also the trial court in the Hendrix case and apparently rendered a proper decision but upon the erroneous ground that a bequest to the United States was authorized, for the Supreme Court indicated in the Estate of Burnison that the result in the Hendrix case was proper for the reason that it appeared to be a gift for charitable purposes in pursuance of the intent of the donor.
‘In the case at bar, no charitable purpose is particularly set forth in any of the bequests to the pension funds and only in the event that these pension funds could be held to be charitable in their nature could such a bequest be held a bequest for charitable purposes.
‘It appears clear to the court that these pension funds do not conform to requirements of charitable bequests but are in effect restricted to a class whose participation in the benefits is based upon contribution made by them directly or indirectly to such fund. It further appears that in fact no advantage would accrue to any of the beneficiaries of the pension funds by way of a reduction of their contributions or by an increase in their benefits.’
The foregoing discussion is in accordance with the rule announced in Estate of Rive, 98 Cal.App.2d 104, 105, 219 P.2d 475, 476 (hearing denied by the Supreme Court), wherein Mr. Presiding Justice Peters, speaking for the court, says:
‘The sole question presented on this appeal is whether the United States government may, in this state, lawfully be named as a legatee under a will. The precise question has been decided adversely to the respondent by the decisions of the Supreme Court of California in Estate of Burnison, 33 Cal.2d 638, 204 P.2d 330, 331, and Estate of Sanborn, 33 Cal.2d 647, 204 P.2d 335, 336. In the Burnison case the California Supreme Court held that a bequest to ‘The United States government U. S. A.’ was void under section 27 of the Probate Code, while in the Sanborn case a similar ruling was made as to a bequest to the ‘United States of America.’ The two cases were appealed to the United States Supreme Court, which disposed of both appeals in a single decision, United States v. Burnison, 339 U.S. 87, 70 S.Ct. 503, 94 L.Ed. 675, in which it was held that the interpretation of section 27 of the Probate Code by the Supreme Court of California to the effect that the United States government could not lawfully take by will in this state did not violate the supremacy or the equal protection, or the privileges and immunities clauses of the United States Constitution.'
The decree is affirmed.
MOORE, P. J., and WILSON, J., concur.