IN RE: the ESTATE of Elsie M. ALLIE

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District Court of Appeal, First District, Division 1, California.

IN RE: the ESTATE of Elsie M. ALLIE, Deceased. Myrtle MARQUARDT and Stella Kranz, Appellants, v. Mitchell S. CASH, Respondent.*

No. 17825.

Decided: March 17, 1958

Emmet B. Hayes, San Francisco, for appellants. Cooper, White & Cooper, Sheldon G. Cooper, John E. Schaeffer, San Francisco, for respondent.

March 18, 1956, Joseph Allie died intestate and without issue. Thereupon, $5,000 became payable to his widow, Elsie Allie, as beneficiary under a National Service Life Insurance Policy which the United States government had issued upon his life in May of 1951.

April 25, 1956, Elsie died intestate and without issue. The proceeds of the life insurance policy had not yet been paid to her. They were later paid into her estate pursuant to a clause of the policy which declared that ‘if a beneficiary survives the Insured and is entitled to the proceeds of this policy in one sum, and dies before receiving payment, the proceeds of this policy will be payable to the estate of such beneficiary.’

Question: Upon the death of Elsie did the proceeds of this policy go to her sole heir (her brother, Mitchell Cash) pursuant to section 225 of the Probate Code, or in equal shares to her sole heir and to the heirs of Joseph (his sisters Myrtle Marquardt and Stella Kranz) pursuant to section 228 of the Probate Code?*

But for the possible effect of certain federal statutes the answer would be that these proceeds went in equal shares to Elsie's heir and to Joseph's heirs pursuant to the provisions of section 228.

According to section 225 the separate property of a person who dies intestate, leaving neither issue nor spouse, goes to his parent or parents if either be living and if not then to his brothers and sisters and the descendants of deceased brothers and sisters.

This is modified by section 228 as to so much of the estate as was ‘[1] community property of the decedent and a previously deceased spouse, and [2] belonged or went to the decedent by virtue of its community character on the death of such spouse, or came to the decedent from said spouse by gift, descent, devise or bequest * * *’

If both of these conditions are met and there is no lineal descendant of the deceased spouse, ‘one-half of such community property goes to’ the heirs of the decedent ‘and the other half goes to’ the heirs of the deceased spouse.

Here, it appears that community funds were used in paying the premiums upon this policy, inferred from the following facts recited in the Settled Statement: ‘The deceased and her husband were married on September 4, 1926. There is no evidence other than that the assets of the estate were acquired during the marriage by the earnings of the parties. The premiums on the insurance policies were paid during the marriage. There is no evidence that the payments thereon were made from funds other than community property of the parties.’ See In re Estate of Adams, 132 Cal.App.2d 190, 204–205, 282 P.2d 190. This satisfies the first condition of section 228.

As to the second condition of that section, it might be said that the half of the proceeds which represented the spouse's community interest came to decedent from him ‘by gift,’ in view of his having designated her as beneficiary. Her half belonged or went to her ‘by virtue’ of its community character or ‘by gift’ from him to her (in view of his designation of her as beneficiary), it would not matter which.

We observe that it was at one time held that when a husband took out a policy on his own life in favor of his wife, premium payments made with community funds were in the nature of inchoate gifts from him to her. The matured upon his death and gave the proceeds the character of separate property of hers if she survived him. In re Estate of Miller, 23 Cal.App.2d 16, 18, 71 P.2d 1117, and In re Estate of Lissner, 27 Cal.App.2d 570, 577, 81 P.2d 448. Later cases disapproved of the Miller and Lissner cases and disallowed that doctrine, with the result that the proceeds in such a case take on and retain the community character given them by the premium payments, whether viewed as coming to the surviving spouse by devolution or by gift. See In re Estate of Rattray, 13 Cal.2d 702, 713–716, 91 P.2d 1042, an inter vivos transaction; In re Estate of Perkins, 21 Cal.2d 561, 571, 134 P.2d 231.

Accordingly, under California law, if unaffected by any federal statute, the proceeds of the National Service Life Insurance Policy went one-half to Elsie's heir and one-half to Joseph's heirs as prescribed in section 228 of the Probate Code.

We find nothing in the policy itself that indicates a different disposition in this case. The provision for payment to the estate of the beneficiary if the beneficiary survives and is entitled to payment in one sum but dies before payment, is not in conflict with our section 228 when, as here, the surviving spouse is the beneficiary. After the money thus reaches the estate of the beneficiary, the federal government has no further concern with it, insofar as anything expressed in the contract of insurance is concerned. Nor do we find anything in the federal statute (38 U.S.C.A. § 802) that indicates an intent to regulate the disposition of the money after it thus comes into the hands of the personal representative of the beneficiary in such a case as this. Peculiarly apt are the words of the court in Re Estate of Perryman, 133 Cal.App.2d 1, 3, 283 P.2d 298, 299, concerning the federal Civil Service Retirement Act: ‘Nothing in the act indicates any intent of Congress to restrict distribution of the fund by the administrator to whom it is paid. Lacking such provision, there is * * * no reason against distribution under the state law of succession.’

We are not concerned with the case in which ‘no beneficiary survives the Insured.’ In such a case, the policy declares that the proceeds are payable ‘to the Insured's estate.’ Nor are we concerned with the case in which ‘a beneficiary not entitled to the proceeds of this policy in one sum survives the Insured and dies before receiving any installments.’ In such a case, according to the policy, settlement will be ‘made as if the beneficiary had died before the Insured.’ The latter was the situation in Singleton v. Cheek, 284 U.S. 493, 497, 52 S.Ct. 257, 76 L.Ed. 419, based upon 38 U.S.C.A. § 802, as it formerly read. Nor are we concerned with the case in which someone other than the spouse of the insured is made the beneficiary, facts which were present in Wissner v. Wissner, 338 U.S. 655, 70 S.Ct. 398, 94 L.Ed. 424, resulting in a conflict between the federal law (38 U.S.C.A. § 802) and the California inheritance law. The federal statute prevailed over the local law.

Attention has been directed to section 454a of Title 38 of the U.S.Code Annotated, which provides in part: ‘Payments of benefits due or to become due shall not be assignable, and such payments made to, or on account of, a beneficiary under any of the laws relating to veterans shall be exempt from taxation, shall be exempt from the claims of creditors, and shall not be liable to attachment, levy, or seizure by or under any legal or equitable process whatever, either before or after receipt by the beneficiary.’ Just how this statute conflicts with section 228 of our Probate Code and thus supersedes any of the provisions of the latter, respondent has not explained to our satisfaction. No taxes, no creditors' claims, no attachments, levies or other seizures and no assignments are here involved. We perceive in such a statute no intent upon the part of Congress to set aside the California law of descent and succession.

It would take words more explicit than any we find in section 802 or in section 454a to evince a congressional intent to override the provisions of section 228 of our Probate Code in the situation presented by the facts of this case. See Clark v. Allen, 331 U.S. 503, 517, 67 S.Ct. 1431, 91 L.Ed. 1633.

The portion of the judgment appealed from (that which declares the proceeds of the National Service Life Insurance Policy distributable solely to Mitchell S. Cash) is reversed with directions to conduct further proceedings not inconsistent with the views herein expressed.


FOOTNOTE.  The trial court held that the proceeds of this policy and the proceeds of a certain other policy went to Elsie's sole heir but that the remainder of her estate went in equal shares to her heir and to Joseph's heirs. ‘Joseph's heirs appealed from the whole of the decree but have since narrowed the scope of their appeal to the portion of the decree which deals with the proceeds of the National Service Life Insurance Policy, as indicated in the question above stated.

FRED B. WOOD, Justice.

PETERS, P. J., and BRAY, J., concur.

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