Court Opinion

ID: 9773429
Source: CourtListenerOpinion
Date Created: 2023-08-29 17:45:43.820794+00
Date Added: 2024-06-11T07:31:53.672825
License: Public Domain

Mr. Justice Walker,
joined by Justices Calvert and Smith, dissenting.
If this were the only situation that could arise involving ownership of “or” bonds purchased with community funds, there would be little reason for disagreeing- with the majority holding on that question. It is my view, however, that we are now drifting into a position that will either prove untenable or will lead to inconsistent or undesirable results. This case probably represents the point of no return, and I would hold that upon the death of the husband, the wife as surviving co-owner was under a duty to account to his estate for one-half of the value of the bonds at the time of his death.
It should be observed at the outset that the Texas decisions bearing on the question are not necessarily controlling here. In Edds v. Mitchell, 143 Texas 307, 184 S.W. 2d 823, 158 A.L.R. 470, we were concerned with “p.o.d.” bonds purchased by a life tenant with power of disposition. Community funds evidently were not involved in either McFarland v. Phillips, Texas Civ. App., 253 S.W. 2d 953 (wr. ref. n.r.e.), or Chamberlain v. Robinson, Texas Civ. App., 305 S.W. 2d 817, and our courts have never considered the federal regulations in the light of our laws dealing with community property and the power of the marital partners to contract with respect thereto.
At first glance, these decisions seem to point to the conclusion reached by the majority in the present case, because a uniform rule governing ownership of “or” bonds after the death of one of the co-owners is undoubtedly desirable. The difficulty is that the holding in this case cannot lead to uniform results unless we are willing to close our eyes to some of the principles that are rather deeply imbedded in the community property laws of this state. It is said by the majority that the solution as to the property rights of the surviving co-owner rests in contract. If *285this be true, then the Texas law is an important consideration in determining whether ownership of the bonds is effectively vested by contract in the surviving co-owner.
Since there is nothing in our law to prevent a husband from making a contract affecting community property for the benefit of the wife, the case in which he invests community funds in bonds payable to him or the wife seemingly presents little difficulty provided he dies first. A number of situations will doubtless arise, however, in which a consistent application of the Texas law will require us to say that the purported contract is ineffective and that absolute ownership does not vest in the surviving co-owner. The most obvious, of course, is the case in which the husband invests community funds in bonds payable to him or the wife and the wife dies first.
In that situation the bonds undoubtedly became part of the community estate upon their acquisition. Under our law the husband can acquire the wife’s community therein only by one of the following three methods: (1) partition between the spouses in accordance with the provisions of Sec. 15, Art. 16, of the Constitution and Art. 4624a, Vernon’s Ann. Texas Civ. Stat., (2) bequest or descent, or (3) gift inter vivos. No difficulty will be presented by the cases in which bonds have been set apart to the husband in a valid partition between the spouses or in which the wife’s interest passes to the husband by her will or under the laws of descent and distribution. Absent any of these circumstances, however, it cannot be said that the wife’s interest belongs to the husband after her death except upon the theory of a gift inter vivos.
Facts necessary to establish a gift in praesenti are lacking in the typical case, and the right of the husband to the wife’s one-half of any bonds on hand at the time of her death must depend upon whether a valid survivorship contract in his favor has been made. That is a matter expressly dealt with by Sec. 46 of the Probate Code. After stipulating that the interest of one joint owner who dies before severance shall descend and vest in his heirs or legal representatives, this statute contains the following proviso:
“* * * Provided, however, that by an agreement of joint owners of property, the interest of any joint owner who dies may be made to survive to the surviving joint owner or joint owners, hut no such agreement shall he inferred from the mere *286fact that the property is held in joint ownership(Emphasis supplied).
An investment by the husband of community funds in “or” bonds certainly does not amount to an agreement by the wife that the securities shall be the exclusive property of the husband in the event of her prior death. There simply is no agreement in writing by the joint owners of the property as required by the statute, and the right of survivorship cannot be inferred from the mere fact that the property is held in joint ownership. In a case where the wife dies first, therefore, it cannot -consistently be said that a solution as to the property rights of the surviving co-owner rests in contract.
When that situation arises, it seems to me that we shall be compelled to choose between two alternatives. The first would be to recognize that the majority holding applies only in cases where the husband dies first. If that route is followed, there will be no uniform rule and whether the surviving co-owner becomes the absolute owner of the bonds will depend entirely upon chance. That treatment of the problem can hardly be regarded as fair to the marital partners and their estates.
The other course would be to say that the federal regulations are paramount, and that all of our laws affecting the rights and powers of the marital partners with respect to their community property must yield thereto. We carefully refrained from taking that step in the Edds case, and I feel that it should be avoided now and in the future. The majority opinion seems to intimate, however, that we are ready to adopt this approach when it states that “to give supremacy to the Federal regulations no more affects community property than laws of descent and distribution.”
A recent decision of the Supreme Court of the United States makes it clear that the states are free to enforce their local laws with respect to a transaction involving Federal securities provided the matter is of purely local concern, the dispute is between private parties, and the rights of the United States are not involved. In Bank of America National T. & S. Ass’n. v. Parnell, 352 U.S. 29, 77 Sup. Ct. 119, 121, 1 Law Ed. 2d 93, the court said:
“Securities issued by the Government generate immediate interests of the Government. These were dealt with in Clear-field Trust and in National Metropolitan Bank v. United States, *287323 U.S. 454, 89 L. Ed. 383, 65 Sup. Ct. 354. But they also radiate interests in transactions between private parties. The present litigation is purely between private parties and does not touch the rights and duties of the United States. The only possible interest of the United States in a situation like the one here, exclusively involving the transfer of Government paper between private persons, is that the floating of securities of the United States might somehow or other be adversely affected by the local rule of a particular state regarding the liability of a converter. This is far too speculative, far too remote a possibility to justify the application of federal law to transactions essentially of local concern.”
The Treasury Department is required to follow state statutes and decisions in determining ownership of property for estate tax purposes. Allen v. Henggeler, 8th Cir., 32 Fed. 2d 69; Hernandez v. Becker, 10th Cir., 54 Fed. 2d 542. It seems quite anomalous then for a state court to say that Treasury Department regulations override its local laws in matters of purely private ownership.
Instead of choosing either of the alternatives suggested above, I would draw the line at the point where we now stand. The earlier Texas decisions already mentioned need not be disturbed, but the principle there applied should not be extended to securities acquired with community funds. Both ownership and devolution of the latter class of property should be controlled and determined by established principles of community property law. If this approach is adopted, the conclusion to be reached under any state of facts will probably be fair to both of the marital partners and their estates. It also will not produce the undesirable tax consequences of the majority holding in this case.
The intent of the alleged donor is always a crucial inquiry in any case of asserted gift. Since the bonds in the Edds case contained an express declaration to “pay on death,” it was not unreasonable to say that the purchaser intended for them to belong to the surviving beneficiary. The presumption of an intention to make a gift is also justified in the situation where “or” bonds were purchased by the deceased co-owner with his or her separate funds. I cannot believe, however, that the average husband and wife who invest community funds in this type of property intend to forego the right to dispose by will, or to deprive their respective heirs of the right to receive, one-half of the proceeds in the event either should die before the bonds *288are cashed. In most cases their only purpose is to provide a convenient means of cashing the bonds, and we should not hold that the proceeds become the absolute property of the survivor unless an intention to make a gift is evidenced by something more than the Federal regulations and the form in which the bonds are issued.
It was pointed out in the Edds case that the situation of the parties to bonds which are payable on death to a designated beneficiary is substantially the same as that of the insured and beneficiary under a policy of life insurance. This should be a pointed reminder of the difficulties which were encountered in the life insurance cases once a departure was made from accepted principles of community property law. It should be noted, moreover, that while the proceeds of a life insurance policy purchased with community funds were held to belong to the designated beneficiary in the absence of fraud, our decisions suggest that the heirs or legatees of a deceased spouse might have a claim for one-half of the cash surrender value of the policy as it existed at the time of death. See Warthan v. Haynes, 155 Texas 413, 288 S.W. 2d 481; Volunteer State Life Ins. Co. v. Hardin, 145 Texas 245, 197 S.W. 2d 105, 168 A.L.R. 337; Womack v. Womack, 141 Texas 299, 172 S.W. 2d 307. There are even more compelling reasons for reaching such a result in the case of “or” bonds purchased with community funds. The surviving co-owner is undoubtedly the legal owner for the purpose of cashing the bonds but should in equity be required to account to the estate of the deceased co-owner for one-half of the value of the bonds as of the time of the latter’s death.
Opinion delivered November 5, 1958.
Rehearing overruled December 31, 1958.