National Union Bank v. McNeal

The effect of the conclusion announced in the opinion of Mr. Justice Blease is that the commuted insurance paid by the government to the administrator of the dead soldier, is to be distributed as follows:

To the illegitimate children of Daisy
Carter, wife of the soldier, one-half
.....................................                    $1,847.50
To Nathan Carter, father of the soldier,
one-half of the remaining
half ................................         $923.75
And one-half of one-half — one-fourth
— of the interest of Cornelia Currence,
$923.75 .....................................  230.93     1,154.68
______
 
To Julia Carter, mother of the soldier,
one-half of one-half — one-fourth
— of the interest of Cornelia
Currence, $923.75 .....................                     230.94
To Robert Currence, husband of
Cornelia Currence, one-half of her
interest $923.75 ......................                     461.88
_________
$3,695.00

Of the commuted insurance there will thus be paid to the illegitimate children of Daisy Carter, none of them in theslightest degree related to or dependent upon the soldier, $1,847.50, and to the father and mother, presumably dependent, $1,154.68 plus $230.94, $1,385.62 — a result that I cannot believe is within the spirit of the Act of Congress.

The purpose of the act is disclosed in the opening paragraph of the act:

"In order to give to every commissioned officer and enlisted man * * * when employed in active service * * * protection for themselves and their dependents." (38 U.S.C.A., § 511.)

It is also provided that the insurance, which necessarily covers the installments as well as the commuted insurance, "shall be payable only to a spouse, child, grandchild, parent, brother or sister," which was later amended by including other relatives. (38 U.S.C.A., § 511.)

It is also provided that the insured shall at all times have the right to change the beneficiary, but only "within the classes herein provided"; that is, to some one of the relatives specifically enumerated above. (38 U.S.C.A., § 512.)

The provision in the act of 1925 (38 U.S.C.A., § 514), directing that in the event that the beneficiary should die pending the payments of the 240 installments, the commuted insurance shall be paid to the estate of the insured, clearly contemplates that the insurance shall be paid to those heirs at law as could have been made beneficiaries, according with the expressed intention that the insurance shall be for the protection of the insured and his dependents, among whom it must be assumed the permitted beneficiaries are included.

There are quite a number of State decisions which sustain the position taken in the opinion of Mr. Justice Blease, in addition to those cited by him. Palmer v. Mitchell,117 Ohio St., 87, 158 N.E., 187, 55 A.L.R., 556; Williams v.Eason, 148 Miss., 446, 114 So., 338, 55 A.L.R., 574;State v. Cross, 147 Wn., 441, 266 P., 711; Woodworthv. Tepper, 152 Md., 332, 136 A., 536, 55 A.L.R., 578;Battaglia v. Battaglia (Tex.Civ.App.), 290 S.W. 296;Smallwood's Est., 156 Tenn., 222, 300 S.W. 572; Fink'sEst., 191 Wis. 349, 210 N.W., 834.

The question does not appear to have reached any of the federal Courts since the passage of the act of 1925. The cases of Cassarello v. U.S. (D.C.), 271 F., 486; Helmholzv. Horst (C.C.A.), 294 F., 417; Salzer v. U.S. (D.C.), 300 F., 764, affirmed (C.C.A.), 300-F., 767, certiorari denied 273 U.S. 702, 47 S.Ct., 90, 71 L.Ed., 884.

While strongly interpretative of the intent of the act, they involved a construction of the act prior to the amendment of 1925, and are not strictly apposite to the present situation.

The case, however, of Sutton v. Barr, 219 Ky., 543,293 S.W., 1075, is squarely in point; its reasoning is quite appealing to my conception of the law.

In that case the beneficiary of the insurance policy was the mother of the soldier, who had, after the death of the father of the soldier, married a second husband. The insurance was awarded to her upon the death of the soldier in 1918, and the installments were paid to her until her death in 1924. She left surviving her the second husband and a granddaughter, and by her will the granddaughter was the legatee of what might be coming to the beneficiary from the government. The soldier left as his heirs at law his mother, the beneficiary, and several brothers and sisters. An administrator of the estate of the dead soldier was appointed and to him the government paid the commuted insurance amounting to $3,695, the exact amount paid in the case at bar. In a contest as to the distribution of the fund, the granddaughter claimed it as the legatee of the beneficiary;the second husband claimed one-half of it as the heirat law of his wife, the beneficiary; the brothers and sisters claimed it as the sole heirs at law of the soldier, at the time of the death of their mother, the beneficiary. The Court said:

"It is earnestly insisted for appellants that as by the act of Congress this money is paid to the administrator of the deceased, the administrator holds it for distribution under the statute of Kentucky, and that the fact that the mother was the beneficiary in the policy in no way lessens her rights as the heir of her son. In other words, it is insisted that the mother takes this money as the heir of her son, and that she is no less entitled to it than she would be if she had not been named as the beneficiary in the policy.

"On the other hand, it is insisted that under the acts of Congress, taken as a whole, the heirs of the son in being at the time of the death of the beneficiary take the property and not those who were his heirs at his death. The Circuit Court adopted this view. This question is not new, but we have not been able to find any express authority upon it. It is suggested in Salzer v. United States (D.C.), 300 F., 764, but not decided.

"Some force must be given to the provision of the original act that the insurance shall only be paid to certain classes of persons. It was the plain purpose of Congress in making this provision to confine the benefits of the insurance to the relatives of the deceased. If any other construction is adopted in cases like this, the bulk of the fund might go to strangers to the deceased or persons having no natural claim on him. To illustrate, the purpose of the act was to protect the beneficiary, but it was not the purpose of the act to protect, as in this case, the second husband of the beneficiary. If Mrs. Sutton took this fund she could devise it as she pleased, and so all the interest of those naturally connected with the deceased soldier could be defeated. We must give some force to the evident intention of Congress that if the designated beneficiary did not survive the insured the insurance should be payable to such persons within the permitted class of beneficiaries as would be entitled to his personal property in case of intestacy. Plainly the same rule should apply where the beneficiary survives the insured but dies before the money is payable.

"The judgment of the Circuit Court is in accord with thespirit and purpose of the acts of Congress. Any other constructionof the act would lead to a distribution of the fundin a way plainly not contemplated by Congress." (Italics added.)

It seems to me, therefore, that to allow the insurance to be paid to the illegitimate children of Daisy Carter violates the purpose of the act in limiting the beneficiaries to the named relatives of the soldier and the provision that the changed beneficiary shall belong to one of the classes specified. The payment of the commuted insurance to the administrator of the soldier is but a convenient channel of distribution, and to allow the stranger heirs of the beneficiary to participate is violative of the foregoing provisions. The payment to them cannot be reconciled with the positive statement of the Act, unaffected by the Act of 1925, that the insurance shall be paid only to certain relatives.

"So far as disclosed by this record, it was neither the intent nor the purpose of either of the contracting parties [the U.S. and the soldier] to enter into a contract of insurance on the life of Marshall for the benefit of his half-brother and half-sisters." Helmholz v. Horst (C.C.A.), 294 F., 417.

In Salzer v. U.S. (D.C.), 300 F., 764, affirmed on appeal, 300 F., 767, by the Circuit Court of Appeals, and certiorari denied by Supreme Court, 273 U.S. 702,47 S. Ct., 90, 71 L.Ed., 884, the soldier insured, Sebastian Salzer (evidently a misprint for Sebastian Ryan), died October 16, 1918; his wife, the beneficiary, died the following day, each intestate. The insured left neither father, mother, brother, sister, grandparent, nor descendent surviving him; his wife left surviving her, a father, mother, and sister. Mrs. Ryan's father, Salzer, died in 1919, leaving surviving him, his widow, Mrs. Delia Salzer, mother of Mrs. Ryan; Mrs. Salzer was appointed administratrix of Salzer, her husband's estate and as such sued for the installments payable during the period from October 17, 1918, the date of the death of Mrs. Ryan, to August, 1919, the date of the death of her husband, Salzer, upon the theory that, upon the death of Mrs. Ryan, the installments were inherited by Mrs. Ryan's father, the husband of Delia Salzer. The Court denied her claim. The Circuit Judge who heard the case said:

"The real question is: Does the person who at the death of the insured would take his personal property in case of intestacy acquire a vested interest in all subsequent instalments, even though a designated beneficiary acquires no such vested interest? * * * If in this case the wife, as the person entitled to her husband's estate on intestacy, took at his death a vested interest in the instalments payable after her own death, then the instalments might go to persons notwithin the designated classes. * * * The person entitled to the insurance, whether on the death or in the absence of a named beneficiary, must trace his claim directly fromthe insured."

Upon appeal, the Circuit Court of Appeals said:

"We find it unnecessary to add much to the clear and careful opinion of Judge Mack. It is, and indeed must be, conceded that under a certificate of war risk insurance the beneficiary does not acquire a vested interest on the death of the insured. [citing cases.] Upon the facts here existing, the disposition of the insurance must be in accordance with the intestacy laws of New York. The question, then, is whether the insurance shall go to those who would benefit under the New York statute as the relatives of the deceased soldier or as the relatives of Rose M. Ryan, the wife of the deceased soldier, who died the day after Ryan died. * * * We are satisfied that the legislation in question evidences the intent of Congress that the intestacy laws shall operate inrespect of the relatives of the deceased soldier."

As I have indicated above, this case involved a construction of the law prior to the amendment of 1925; but I find nothing in that amendment calculated to affect the reasoning of the Salzer case.

"Those claiming under beneficiary of war risk [insurance] policy, acquire no interest in instalments falling due after beneficiary's death." Storum's Estate,128 Misc. Rep., 168, 218 N.Y.S., 394.

"Beneficiary of war risk insurance policy has no vested interest in insurance, and unpaid instalments on beneficiary's death pass to next of kin under state statute. Storum's Estate, 128 Misc. Rep., 168, 218 N.Y.S., 394.

"It is evident therefore that the beneficiary named by the insured, or designated by law, took no vested interest in this insurance other than to the accrued payments during the time the beneficiary was entitled to receive the same and that further instalments would not pass by the law of descent and distribution to the heirs of the beneficiary, nor could the beneficiary devise the same by will." Helmholz v. Horst (C.C.A.), 294 F., 417.

Aside from the expressed, manifest purpose of the act to provide for the protection of the soldier and his dependents, it strikes me as a most illogical contention that the beneficiary who is given a definite interest in the insurance, the right to collect the installments so long as she might live (limited of course to 240), and has lost all of her interest by death pending the completion of the installments, shall be held to have acquired a vested right in something which only came into existence by reason of her death.

The illegitimates can be entitled to participate in the fund only as heirs of their mother, who must herself have possessed the right; this cannot be when the right came into existence at her death. And so with Robert Currence, the husband of Cornelia.

Where property is devised for life to a certain person, who was an heir of the testator, with remainder over to the heirs of the testator, without qualifying words indicating a limitation to surviving heirs, the death of the life tenant would not destroy the vested remainder of the life tenant in the fee, as a tenant in common with the other heirs; this vested remainder of the life tenant would be transmissible to his heirs. McFadden v. McFadden, 107 S.C. 101,91 S.E., 986; Avinger v. Avinger, 116 S.C. 125, 107 S.E., 26.

This is based upon the essential fact that the life tenant all the while from and after the death of the testator owned a vested remainder in the fee which was not terminated by his death but descended to his heirs. As is said in theMcFadden case, quoting from Evans v. Godbold, 6 Rich. Eq., 26:

"Without the use of it [referring to the word ``surviving'], the heirs of testator at his death would have taken a vested interest, transmissible to their representatives, and widowers and widows of the children, not heirs of the testator, would have taken shares."

This presents an entirely different situation from that presented in the case at bar. The latter does not at all present a case of particular estate and remainder. During the lifetime of the beneficiary, the estate of the insured possessed nothing more than an expectant interest, which could only come into existence upon the death of the beneficiary during the 240-instalment period. It was not a vested interest even in the estate of the insured, and certainly the interest of the beneficiary in that expectant interest could not be endowed with a higher quality than the interest of the estate. If only an expectant interest, an interest which did not exist at all during the life of the beneficiary and which came into existence only at her death, it was not such a contingent interest even that was transmissible.