, -. . - 

THE ATTORNEY GENERAL 

OF TEXAS BAA wd 

Mr. Robert S. Calvert OPINION NO. W-273 

Comptroller of Pub110 Accounts 

Capitol Station Re: Further Interpretation 

Austin, Texas of a question of inherltanoe tax to be 

assessed against the 

estate of R.O. C. 

Dear Mr. Calvert: Brumley 

R. 0. C. Brumley purchased numerous government bonds with Community funds. All of the bonds were 

payable to R.O.C. Brumley or his wife, Fannie E. Brumley, 

and were so registered. After Mr. Brumley's death, his 

till was admitted to probate. Under the terms of the 

will his entire one-half interest in the community estate 

was expressly devised to his two daughters. The surviving 

co-owner wife has furnished the Comptroller with a disclaimer in which she states that she did not participate 

in the purchase of the bonds or advise as to whom they 

should be payable; that the bonds were considered by the 

co-owners as belonging to each individually in undivided 

one-half community interests subject to testamentary dlsposition, and that she refuses to accept any interest 

or ownership In the undivided one-half interest owned by 

the decedent at the time of his death on the ground that the 

decedent's one-half interest passed to the decedent's 

daughters under his will. 

You request the proper method of computing the 

inheritance taxes levied bs Article 7117. _ Vernon's Civil 

Statutes, under these facts. 

The pertinent treasury regulation (it Is 

latlon and not a statute but is valid for the purpose 

reads as follows: 

"If either coowner dies without having 

presented and surrendered the bond for payment or authorized reissue, the surviving 

coowner will be recognized as the sole and 

',.absolute owner of the bond and payment or 

reissue will be made only to such survivor, 

as thou the bonds were registered in his 

name al%e." (Rnphasis supplied) 
.,_^. 

Hon. Robert S. Calve& Page 2 Opinion No. WW-273 

The phrases "will be 

appearing in this regulation 

recognized" and "as though" 

are significant. We think 

this means nothing more than for the purpose of making 

payment of the bonds by the Federal Government, the survlvor will be recognized as the owner as thoughthe bonds'were 

registered in the nsme of the survivor alone, Congress 

and the officials of the Federal Treasury were aware that 

an intolerable situation would be presented In the payment 

of the bonds unless some uniform standard be evolved by which 

the'Federa1 Government could make payment without being involved in the aotual determination of the title and ownership of the bonds and the settlement of conflicting claims 

which would inevitably arise. Apt words were chosen such as 

"will be recognized" and "as though" without any attempt 

to comniit.the'Treasury Department to the actual determlnatlon 

of title and ownership of the bonds. Under the regulation,, 

the Treasury Department could pay with impunity without determining actual title and ownership and without being lnvolved in the settlement of conflicting claims. This, we 

think was all that was attempted to be accomplished by the 

regulation. We do not interpret this regulation as an attempt upon the part of Congress or the Treasury Department 

to create, modify, or divest property rights. We shall not 

attribute to Congress or the Treasury Department, as applied 

to the problem here considered, an unwarranted invasion of 

the power of the State to determine for itself property 

enc,ompassed within our community property law. 

We think the Supreme Court of the State of Louisiana, 

which, like Texas, is a community property State, has clearly 

stated the purpose of the regulation of the Treasury Department pertaining to payment to the surviving co-owner in the 

case of Slater v..Culpepper, 22 La. 962, 64 So. 2d 334, 37 

A.L.R. 2d 1216 in this language: 

.Manifestly, these regulations, as has 

bien previously said by this court, were designed solely to facilitate the Government 

by providing a simple method fop the payment 

of savings bonds, so that it would not be 

subjected to the inconvenience and delays 

attendant to the settlement of conflicting 

or disputed claims." 

There is nothing before us to suggest that it was 

the Intention of R.O.C. Brumley, by gift or otherwise, by 

the use of the co-payment provision, to make a transfer of 

one-half of the community estate to the estate of Fannie E. 

Brumley, the surviving wife. Indeed, we think the opposite 

is true. 
. . . - 

Hon. Robert S. Calvert Page 3 Opinion No. W-273 

Under'the community property law of this State 

the husband Is the manager of,the estate and is privileged 

to invest the community funds, independent of the consent 

of the wife', so long as he aots In good faith In protecting her Interest. We must conoede that the oommunity 

funds could not have been more safely Invested than in 

this case. 

962, 64 

Reverting to the case of Slater v.Culpepper,22 La. 

So. 2d 334, 37 A.L.R. 26 1216, we quote further 

from it as follows: 

"The stipulation of counsel does 

recite that Mrs. Ryrnrn acted for herself 

In handling the purchase; but it states 

also that she acted for her husband and 

the community of acquets and gains. More 

than likely she was serving primarily as 

the community's representative, partlcularly since its funds were being used and the 

husband, or the head master of the community, 

was at the time physically lncapaoltated to 

act. Nevertheless, assuming that Mrs. Rynum 

could end did act individually with respect ~~' '~. 

to her community one-half interest in the 

funds invested, we fail to find anything to evidence 

a clear and definite intention on her part 

to donate her portion of the investment to 

the husband in prospect of death--an essential 

for our concluding as plaintiffs would have 

us do. The bonds themselves do not suggest 

that intention, they having been registered 

and issued on the described co-ownership form. 

Neither does it appear that a donation mortis 

causa Is contemplated by the appropriate 

Treasury Department regulations which formed 

a part of the contract to purchase. True, 

they do state that on the death of the co-owner 

the bonds will be paid to the survivor or 

to his estate. On the other hand they also 

provide that if the co-owners die in a common 

disaster, and It cannot be determined who died 

first, the bonds will be considered as belonging to both estates." 
. . . . , 

Hon. Robert S. Calvert Page 4 Opinion No. WW-273 

The Supreme Court of Louisiana in an earlier case 

than the Slater case, Winsberg v. Winsberg, (1952) 220 La. 

398, 56 Sn 730 had this to say: 

"'Federal Government is neither concerned with nor interested in the appllcation and enforcement of State laws respecting succession or inheritance of property. 

Indeed, it seems manifest that the regulations of the Treasury Department for the 

payment of savin s bonds (relied on by defendant in this case 7, were designed solely to 

facilitate the Government, by providing a 

simple method for the liquidation of these 

obligations, so that It would not be subjected 

to the inconvenience and delays attendant to 

the settlement of aonflictlng or disputed 

claims. There was not, in our opinion, any 

intention to interfere with the enforcement 

of the laws of descent and distribution of 

the various States. Therefore, forasmuch 

as the payment on death clause contained in 

such bonds must be considered as a valid 

appendage to our laws respecting the forms 

or dispositions mortis causa, it appears 

logical to apply all provisions pertaining 

to testamentary dispositions, except those 

dealing with forms, in determining rights 

and liabilities under such a devise.' The 

court further said: ,"Bere in seeking authority 

for a construction of a Federal regulation 

or a reasonable fmplication therefrom, loose 

construction could come to mean the right of 

the Federal Government to do in its regulations whatever was not forbidden by the United 

States Constitution, provided the act was 

deemed to be for the general good, If such 

a theory of constitutional construction were 

to prevail and the original notion of the 

Constitution as a grant of power, under which 

everything not granted was withheld, were to 

be replaced by the rule that everything not 

withheld was granted, the Federal Government 

would be admittedly supreme and the reserved 

rights of the States would speedily become 

only a formula of words.8" 
Hon. Robert S. Calvert Page 5 Opinion No. WW-273 

The Supreme Court of Iowa In the case of Slnift 

v.~Sinift, 229 Iowa 256; 293 N.W. 841 stated'thatmd 

not question'the authority of Congress to enact legislation authorizing the ?.ssuanoe of bonds determining the 

right of ownership as it might see fit but that the regulation did not have that effect. The Court held, as did 

the Supreme Court of Louisiana, that the regulation In 

question was merely to expedite the work of the Department 

in connection with payment or the transfer or exohange 

of co-ownership bonds. 

the Ohio 

In the case of Foraker v. Koohs (1931) 180 N.E. 743, 

Court of Appeals was ooncerned with these facts. 

A husband and wife purohased with their joint funds a United 

States Savings Bond which was registered In their name in 

the alternative as co-owners, and retained by the husband in 

his bank safety deposit box. After the wife's death, the 

husband had the bonds reissued as a coupon bond In his name 

alone. The court said that under state law, in the absence 

of a definite contract for survivorship the presumption 

arising from the purchase of the bond was that the interest 

of the joint owners was equal without survivorship, and 

that the bond belonged equally to the estate of the wife and 

the estate of the husoand who died subsequently. In this 

opinion the court said: 

,t 

. . . 'It is true that, for the purpose of 

registration and transferring, the rules of 

the United States Treasury recognize the 

survivor as the proper party to whom transfer 

of the bond should be made. That rule is 

for the convenience of the United States 

government In the transaction of its business, 

and does not and cannot confer title in the 

Liberty bond, or create a contract of survivorship in the bond in the state of Ohio, where 

a contract of survivorship is not presumed.'" 

In Texas, Jus accrescendi has been abolished, and -- survivorship rights mu3 be expressly created, Chandler vs. 

Kountee, 130 S.W. (2) 327, (Tex. Civ. App., error ref. 1939). 

Pt may be that in non-community property States (and a 

majority of the States fall In that category) the Treasury 

regulation justifies the rule that the surviving co-owner 

is the sole owner of the bonds. Whether that rule be sound 

or unsound as applied In the non-community property States 

we need have no concern. But In our State where the community 

property rule prevails, we think it is unsound and unfair and 

should not be followed. 
, .~. . 

Ron. Robert S. Calvert Page 6 Opinion No. W-273 

~If we felt that the Courts of our State had committ&d UE to the survivor take all rule as to these bonds, 

we would feel Impelled to follow, but su6h is not the case. 

This a&l18 for some e%pleiiation of’ the cases which have 

been ooneidered to have’some bearing upon this question. 

There are only three su&i oases whi&%e ah&l1 &Liaouss 

briefly tHe$ Are Edd8.v. I(fltcb611, 143 Tex. 307, 184 S.W. 

823, 156 A.L.R. 470' McF~hllll~, 253 S.W. 2d 

9.53 (Writ refused n; reversible error); and H&lain v. 

Holder, 279 S.W. 26 105 (Writ refused, N.R.E. ) . 

The Edds’case Involved primarily a construction of 

the will of m. Rohde which gave to his wife, Julia E. 

Rhode, e life estate in his share of the community e6tete 

with power of sale ana authority to use the proceeds without 

accountability therefor, with the remainder at her death 

to his heirs at law. After 0. D. Rhode’s death, Julia E. 

Rhode, his surviving wife aoquired five United States Savings 

bonds by the use of proceeds from the sale of reel estate 

beldnglng to the community Estate. She thereafter died with 

these bonds In her possession. The bonds were made payable 

to Julia E. Rohde and upon her death to Reta B. Edds. Unlike the bonds Involved here they were made payable to a 

aesignetea benefloiery upon the death of Mrs. Rohde. The 

oontroversy as to these bonds was between Mrs. Edds end 

the administrator of the estate of 0. D. Rohae and involved 

only a one-half undivided interest therein. It was agreed 

that there was no controversy as to the other one-half of 

said bond.? sinaethey were purchased from the proceeds of 

the sale of a portion of the community estate of 0. D. Rohde 

and his wife, Julia E. Rohde. 

The Supreme Court did not decide this case upon 

the theory that the Treasury Regulations had the effect 

of making R&e B. Edds the sole owner of the one-half 

community, but upon the theory that a valid .oontract had 

been made by the registered owner and the Ciovernment for 

the benefit in part of a third party, the designated beneficiary who acquired a vestea Interest though It was defeasible at the time the contract was made. There Is no 

beneficiary involved es to the bonds here involved, as Is 

true in the Edds aase. Moreover the law es to third 

party contra=is not Involved In the bonds with which 

we are here ooncerned. 

The McFarland case does not actually Involve coownership payment of bonds by the husband and wife es Is 

the case here. Moreover, If this aase should be oonstrued 
_..,-. - 

Hon. Robert S. Calvert Page~7 Opinion No. WW-273 

es confirming the right of the survivor husband or wife 

to take full'title and ownershi~p, upon the death of 

either, of Government Savings bonds purchased with community 

funds, then it is in principal In conflict with the case 

of McCleinv~Holder,~~ S.W. 2d 105 bv the Court of Civil 

Appeals at Galveston (Writ refused, n.r.e.). It Is true that 

government bonds were not involved in the McClaln case, but 

the bonds involved were ao-payment bonds e-theory of 

the survivor acquiring full title and ownership was involved. The Court rejected the right of the survivor to 

take full title and ownership of the bonds; and since 

there was no will Involved, ordered a partltltlon of the 

bonds according to the laws of descent and distribution 

as contended by those who opposed the complete ownership 

In the survivor. Where there is a conflict between decisions of two Courts of Civil Appeals which has not been 

resolved by the Supreme Court, we are at liberty to choose 

between the two decisions; and we prefer to follow the 

McClaln v. Holder case In preference to McFarland v. 

Phillips as being in accord with our concept of community 

property laws of this state and based upon better reason 

and justice. 

It Is apparent from whet we have Bela that It Is 

our opinion that the one-half community lntere'st in the 

United States Savings bonds purchased with community funds 

of Fannie E..Brumley and R.O.C. Brumley, husband and wife, 

payable to them as co-owners, passed upon the death of 

R. 0. C. Brumley to his two daughters, by his will, and 

that they owe the inheritance tax on said one-half interest. 

The surviving wife, Fannie E. Brumley, owes no tax. 

To the extent that this opinion may be in conflict 

with prior opinions of this office they are expressly overruled. 

S U M M,A R,Y 

Upon the death of either husband or wife, the 

community one-half interest of the deceased 

spouse in United States Savings Bonds, which 

are payable to husband and wife as co-owners. 

passes to the devisees named in the will and 

not to the surviving spouse. 
Hon. Robert S. Calvert Page 8 Opinion No. W-273 

To the extent that this opinion may be In 

conflict with prior opinions of this office 

they are expressly overruled. 

Yours very truly 

WILL WILSON 

:y$p;;<+ 

LPL/fb A&Unt 

APPROVED: 

OPINION COMMITTEE 

George P. Blackburn, Chairman 

Joseph G. Rollins 

J. Milton Richardson 

B. H. Tlmmins, Jr. 

Houghton Brownlee, Jr. 

REVIEWED FOR THE ATTORNEY GENERAL 

By: James N. Ludlum