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UNITED STATES V. ZAZOVE, 334 U. S. 602 (1948) - US SUPREME COURT DECISIONS ON-LINE
US Supreme Court Decisions On-Line> Volume 334 > UNITED STATES V. ZAZOVE, 334 U. S. 602 (1948)
UNITED STATES V. ZAZOVE, 334 U. S. 602 (1948)
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United States v. Zazove, 334 U.S. 602 (1948)
5. But when the respective assumptions and consequences of each of the two alternative interpretations of § 602(h)(2) presented chanroblesvirtualawlibrary
Page 334 U. S. 603
in this case are tested against the legislative history and the statute viewed in its entirety, it is clear that the one incorporated in Regulation 3450 is that intended by Congress. Pp. 334 U. S. 612-624.
In a suit by a beneficiary, the District Court sustained the validity of Regulation 3450 of the Veterans' Administration as being in accord with § 602(h)(2) of the National Service Life Insurance Act of 1940. The Circuit Court of Appeals reversed. 162 F.2d 443. This Court granted certiorari. 332 U.S. 835. Reversed, p. 334 U. S. 624. chanroblesvirtualawlibrary
Page 334 U. S. 604
The issue remaining for determination by the District Court upon remand was the validity of Regulation 3450. It sustained the regulation as properly issued pursuant to chanroblesvirtualawlibrary
Page 334 U. S. 605
The Administrator, acting under the general rulemaking power given him by the Act, [Footnote 5] promulgated Regulation 3450 (set forth in the margin) [Footnote 6] shortly after the enactment chanroblesvirtualawlibrary
Page 334 U. S. 606
of the statute, to put § 602(h) into operation. The regulation provides, for beneficiaries covered by clause (1), that "payment shall be made in 240 equal monthly installments at the rate of $5.51 for each $1,000 of such insurance." The amount of the monthly installment is so calculated that the sum of the 240 installments equals the face value of the insurance plus 3% interest per annum. chanroblesvirtualawlibrary
Page 334 U. S. 607
In reversing the District Court, the Circuit Court of Appeals held this method of calculation set forth by Regulation 3450 to be inconsistent with the provisions of § 602(h)(2). It construed the latter provisions, in accord with the respondent's contention, as plainly requiring chanroblesvirtualawlibrary
Page 334 U. S. 608
that the total of the equal monthly installments payable over a period of 120 months certain should equal the face value of the insurance, plus interest. Under this construction, Mrs. Zazove is entitled to receive $48.08, instead of $29.50, as her monthly installment, so that the total of the 120 payments certain will amount to $5,000 (plus interest), instead of $3,450 (plus interest) as determined by the Veterans' Administration, with the monthly installments due her if she survives the period of guaranteed payments continuing at the same rate. Taking into account Mrs. Zazove's life expectancy as estimated by the American Experience Table of Mortality, the actual cash value of this $5,000 insurance policy at the time of the insured's death would amount of $8,145 under respondent's construction, instead of $5,000 as determined by the regulation. [Footnote 8]
In arriving at its decision, the majority of the Circuit Court of Appeals reasoned that the terms of § 602(h)(2) are clear and unambiguous; that nothing is said in the statute about equalizing the sum over the life expectancy of the beneficiary, and that Congress unmistakably prescribed payment of the face value plus interest in equal monthly installments over a period of 120 months certain. The major difficulty with this reasoning lies in the inadequate consideration that it gives to the full extent of the payment provided by § 602(h)(2). In effect, the Circuit Court of Appeals majority stopped short, in its reading of the terms for payment of the insurance in that subsection, at the end of the phrase "in equal monthly installments for one hundred and twenty months certain." By stopping short at that phrase, the court failed to consider the alternative possibility that Congress intended the immediately following phrase, "with such payments continuing during the remaining lifetime of such beneficiary," chanroblesvirtualawlibrary
Page 334 U. S. 609
Moreover, the very presence of the term "certain" in the phrase "equal monthly installments for one hundred and twenty months certain" suggests a view contrary to that reached by the court below. It will be noted that, when Congress had in mind, as it clearly did in the case of § 602(h)(1), that a fixed number of installments provided for should equal the face value of the insurance, there was no occasion for the use of "certain" in describing the installments to be made and, indeed, the term is not found in § 602(h)(1). While the inclusion of the term in describing the fixed number of installments to be paid under § 602(h)(2) might conceivably be a mere superfluity, its presence at least suggests the far greater probability that it was used in the specialized technical sense in which it is generally employed in the insurance field -- namely, to indicate a guaranty that a designated number chanroblesvirtualawlibrary
Page 334 U. S. 610
of monthly payments shall be forthcoming, where a policy provides an option for equal monthly installments continuing throughout the lifetime of a payee, with the individual installment varying in amount depending on the age of the beneficiary when the policy matures. [Footnote 9]
There is, of course, a marked distinction between the criteria for judicial construction of an ordinary commercial insurance contract and construction of the provisions of an act of Congress setting up a system of national life insurance for servicemen to be administered by a governmental agency. The statutory provisions, where ambiguous, are to be construed liberally to effectuate the beneficial purposes that Congress had in mind. In this respect, judicial construction of the statute may appear similar to construction of a commercial policy, where ambiguous provisions are generally construed in favor of the insured. In the latter case, construction favorable to the chanroblesvirtualawlibrary
Page 334 U. S. 611
insured rests on the theory that
Moreover, a 1946 amendment to § 608, designed to eliminate the finality of the decisions of the Administrator on chanroblesvirtualawlibrary
Page 334 U. S. 612
insurance matters, [Footnote 14] amended the last sentence of § 608 to add the words set out in italics:
The proper meaning of § 602(h)(2) becomes apparent when the respective assumptions and consequences of each of the two alternative interpretations before us are tested against the legislative history, and the statute viewed in its entirety. The construction adopted by the Circuit chanroblesvirtualawlibrary
Page 334 U. S. 613
Court of Appeals would result in conferring a far greater return to beneficiaries in the group covered by § 602(h)(2), i.e., over thirty at the time of the insured's death, than the return to which first beneficiaries covered by § 602(h)(1), i.e., under thirty at the insured's death, are entitled. It is unquestioned that the latter group, under the original statutory provisions, [Footnote 15] were entitled only to 240 monthly installments (i.e., over a 20-year period) which, in the aggregate, equal the face value plus interest, with no further installments payable thereafter, whether or not the payee survived that limited period. But, under the ruling of the Circuit Court of Appeals, payments in many if not most, of the cases involving the former group of beneficiaries would exceed the face value of the policy, since any first beneficiary who survived the 10-year period of § 602(h)(2) would automatically secure more than that amount. In fact, the actual value of a policy at maturity, to a 30-year old beneficiary, under this ruling would be almost two and a half times its face amount, [Footnote 16] whereas the 29-year old beneficiary, paid in accordance with § 602(h)(1) (whose interpretation is not open to question), could never receive more than the face amount, plus interest. And the aggregate of guaranteed and continuing payments made at so high a rate under § 602(h)(2) would necessarily greatly exceed the total face value of the policies issued under the statute. [Footnote 17] chanroblesvirtualawlibrary
Page 334 U. S. 614
This sharp disparity between the two different groups of beneficiaries does not result under the regulation, since chanroblesvirtualawlibrary
Page 334 U. S. 615
the age of the first beneficiary is used by the regulation as the basis of an actuarial calculation pursuant to a formula whereby total payments under § 602(h)(2) approximate the face value of the policies, plus interest. The extent of the difference in result is indicated by the table, set forth in the margin, [Footnote 18] of comparative present values of the monthly installments under the regulation and under the view of the Circuit Court of Appeals, taking into account the beneficiary's life expectancy as shown by the American Experience Table of Mortality.
The Circuit Court thought it probable that Congress originally intended the higher rate of benefit payments to be restricted to the beneficiaries covered by § 602(h)(2) because that group of persons over 30 at the time of the serviceman's death would include parents, who would be at least middle-aged, and "young widows with small children whose ten years of monthly payments would end at the most needed time." [Footnote 19] This would hardly serve to explain, however, why Congress would intentionally discriminate in so substantial a manner against a similarly deserving but slightly younger widow in the under-thirty category by failing to extend comparable benefits to the latter group. chanroblesvirtualawlibrary
Page 334 U. S. 616
The Circuit Court of Appeals was of the opinion that Congress intended the Government to bear the burden of this extraordinary liability. By express provisions in the 1940 Act, Congress specified that the United States would bear the administrative costs of the insurance system, [Footnote 21] excess mortality and disability cost resulting from the extra hazards of war, [Footnote 22] and the cost of reimbursing the reserve fund for waiving recovery of benefit payments erroneously made where it would be inequitable to require repayment. [Footnote 23] Congress obviously contemplated that the reserve fund to meet the liabilities of National Service Life Insurance policies was to be self-supporting, sustained by the premiums paid and by the yield of premiums invested, in all respects aside from those exceptional situations where the statute specifically designated that the Government would bear the financial burden. Yet Congress chanroblesvirtualawlibrary
Page 334 U. S. 617
nowhere specified that the United States would bear the huge cost of the enhanced liability that it would necessarily have anticipated had it impressed upon § 602(h)(2) the meaning that respondent finds there, and that striking omission is persuasive, in the absence of cogent considerations to the contrary, that no generosity of this magnitude was contemplated. [Footnote 24]
The World War Veterans Act, 1924, [Footnote 26] provided for payment of insurance benefits in 240 equal monthly installments, but authorized the Veterans' Administration (formerly the Veterans' Bureau) to provide in the contract chanroblesvirtualawlibrary
Page 334 U. S. 618
It seems apparent to us that the congressional draftsmen, in framing § 602(h)(2), were undoubtedly striving to incorporate into the 1940 Act a provision modeled on the "life annuity with 240 payments certain option" set up by Regulation 3068 under the World War Veterans Act of 1924, deviating materially only in the number of payments guaranteed. True, § 602(h)(2) does not itself define expressly the method of computation to be used by the Administrator in determining the size of the monthly installments in any given case. But, taking into account the factors previously set forth, and considering them against the background of experience under the 1924 Act, the only reasonable conclusion is that Congress intended the calculation to be an actuarial one, based on the age of the beneficiary. To subscribe to the opposite conclusion, we must believe that Congress intended, by its wording of § 602(h)(2), to bestow upon beneficiaries of World War II servicemen total payments completely disproportionate to those available to beneficiaries of World War I servicemen. To believe that chanroblesvirtualawlibrary
Page 334 U. S. 619
Congress, by the enactment of a somewhat ambiguous provision, intended this disproportionate result along with the other disparities that have been shown to be required by the respondent's view puts too great a strain upon the imagination.
Another example, closer to the concise form of § 602(h)(2), chanroblesvirtualawlibrary
Page 334 U. S. 620
though using the term "fixed", rather than "certain," is an option which provides for
In any event, the subsequent legislative history of the chanroblesvirtualawlibrary
Page 334 U. S. 621
statute clearly indicates congressional approval of the construction put upon § 602(h)(2) by Regulation 3450. A proposed bill was suggested in a letter written by the Administrator of the Veterans' Administration to Congress in June, 1944, to amend §§ 602(h)(1) and 602(h)(2) of the 1940 Act by authorizing "the election of a refund life income in lieu of the mode of payments now provided." [Footnote 30] In explaining the necessity of the amendment, the Administrator pointed out that, if
In other words, the amendment was proposed partly to extend a life income option to beneficiaries covered by § 602(h)(1), who theretofore had been eligible only for the 240-payment plan, and partly to provide a solution for the inequitable situation presented in certain cases covered by the provisions of § 602(h)(2), when the 120 installments certain amounted to less than the face value of the policy and the first beneficiary died before having received an amount equal to that face value. The inequitable situation thus considered to be present under § 602(h)(2) and sought to be ameliorated by the proposed amendment could not have existed, of course, chanroblesvirtualawlibrary
Page 334 U. S. 622
if the Circuit Court of Appeals were correct in the construction it has put upon § 602(h)(2).
Similar recognition that, in many instances, "the aggregate amount of insurance actually payable" under the original mode of settlement provided by § 602(h)(2) chanroblesvirtualawlibrary
Page 334 U. S. 623
"amounted to much less than the face of the policy" was given by the House Committee on World War Veterans' Legislation, in recommending a 1946 amendment to permit policies on which payments had been made prior to the 1944 act to elect the refund life income plan. [Footnote 35] The 1946 bill also included a provision setting up optional modes of settlement for insurance maturing on or after August 1, 1946, and the third option was couched in language identical in every significant respect to that used in the original § 602(h)(2). [Footnote 36] Accordingly, when Congress enacted the 1946 bill, it in effect incorporated the old provision of § 602(h)(2), which was the basis for Regulation 3450, and, in our view, thereby accepted the construction embodied in that regulation, which had been so clearly brought to its attention on this and prior occasions. chanroblesvirtualawlibrary
Page 334 U. S. 624
See Aschenbrenner v. United States Fidelity & Guaranty Co., 292 U. S. 80, 292 U. S. 84 et seq.; Manufacturers' Accident Indemnity Co. v. Dorgan, 58 F.9d 5, 956.
@Cf. 9 U. S. 7-8.