In Re Verchot's Estate

¹ Reported in 104 P.2d 490. This is an appeal by the administrator of the estate of an intestate decedent, and by the next of kin of the same decedent, from that part of a decree of distribution wherein the commuted value of the unpaid balance of a war risk insurance policy issued to decedent was ordered to be distributed to the administrator with the will annexed of the estate of decedent's father.

The facts of the case are not in dispute. Louis Satollie Verchot, a soldier in the United States army during the world war, was issued a yearly renewable term war risk insurance policy in the amount of ten thousand dollars. He named his mother, Eugenie Verchot, beneficiary, and his father, Louis Verchot, alternate beneficiary, in the certificate of insurance.

The insured, a bachelor, died intestate in 1919, leaving his mother and father as his only heirs. Installments were accordingly paid on the policy by the United States government to the mother, as beneficiary, until her death on November 6, 1935, and thereafter to the father, Louis Verchot, as alternate beneficiary, until his death on May 6, 1936.

The mother had died testate, leaving all of her property to her husband, Louis Verchot, father of the insured. The father likewise died testate, leaving all of his property to specific beneficiaries and to a residuary beneficiary, none of whom was next of kin of any of the Verchots. The commuted value of the balance of the war risk insurance, amounting to $1,958, was paid by the United States government on September 28, 1937, to the administrator of the estate of the insured.

At the final hearing in the insured's estate, on March 21, 1939, the court entered a decree distributing these funds, which were the sole assets of that estate, to the administrator with the will annexed of the father's estate for distribution as ordinary assets of the latter estate. If the decree is upheld, the funds in question will be distributed to a parochial school, the residuary legatee named in the will of the insured's deceased father.

Counsel are agreed that the questions involved upon this appeal are the following:

(1) Does the commuted value of war risk insurance of an intestate deceased insured person (whose only heirs are his mother and father), pass to the insured's next of kin determined (a) as of the date of the insured's death [affirmed by the superior court], or (b) as of the date of the distribution of the insured's estate [negatived by the superior court]?

(2) Do the wills of the insured's mother and father (beneficiaries under the policy and sole heirs of the insured) operate upon the war risk insurance [affirmed by the superior court]?

(3) Is payment limited to the "permitted classes" referred to in the Federal statute [negatived by the superior court]?

We will consider questions 1 and 3 together. Question 2 will be discussed separately.

Upon the two questions considered together, it is appellants' position that the insurance proceeds should be distributed to the intestate insured's next of kin determined as of the date of the distribution of such funds, upon the theory that the insured's estate is a mere conduit for passing the funds to those persons within the permitted classes of beneficiaries who, under the state intestacy laws, are entitled to the personal property of the deceased insured.

[1] Inasmuch as the war risk insurance involved in this case is a product of the acts of Congress, it is well that we have before us the pertinent Federal statutes.

The Act of March 4, 1925, c. 553, § 12, 43 Stat. 1308, as amended by the Act of July 3, 1930, c. 863, § 1, 46 Stat. 1016, 38 U.S.C.A. (Sup.), § 511, provides in part as follows:

"Yearly renewable term insurance shall be payable only to a spouse, child, grandchild, parent, brother, sister, uncle, aunt, nephew, niece, brother-in-law, or sister-in-law, or to any or all of them."

From a reading of that entire section, it is apparent that this provision has reference solely to the permitted classes of persons from which the insured may designate the beneficiary of his yearly renewable term insurance.

The situation with which we are here particularly concerned is covered by the specific provisions of § 14 of the Act of 1925 (c. 553, § 14, 43 Stat. 1310, 38 U.S.C.A., § 514), which read:

"If no person within the permitted class be designated as beneficiary for yearly renewable term insurance by the insured either in his lifetime or by his last will and testament or if the designated beneficiary does not survive the insured or survives the insured and dies prior to receiving all of the two hundred and forty installments or all such as are payable and applicable, there shall be paid to the estate of the insured the present value of the monthly installments thereafter payable, said value to be computed as of date of last payment made under any existing award." (Italics ours.)

In the case of In re Cross' Estate, 152 Wash. 459,278 P. 414, decided in 1929, the identical question here involved was presented. After a thorough consideration of the matter, this court receded from the position that it had theretofore thrice taken, in successive appeals involving the same estate (In reCross' Estate, 147 Wash. 441, 266 P. 711; In re Cross'Estate, 147 Wash. 699, 266 P. 712; In re Cross' Estate,148 Wash. 422, 269 P. 339), and held on the final appeal that

". . . the proceeds of the insurance policy should be distributed, in the estate of LeRoy W. Cross [the insured], to those living at the time of the distribution who come within thepermitted class, in the order of their priority under the laws of the state of Washington, they to receive as beneficiaries under the policy, and not as heirs at law." (Italics ours.)

That was an En Banc decision, and we would be constrained to follow it were it not for the fact that, since the date of that decision, the supreme court of the United States has considered the same question and has arrived at a contrary conclusion.Singleton v. Cheek, 284 U.S. 493, 76 L. Ed. 419, 52 S. Ct. 257, 81 A.L.R. 923 (decided February 15, 1932).

In that case, wherein the facts were analogous to those in the case at bar, the supreme court of the United States pointed out that the statute applicable to such cases had been amended in a very important respect. The statute in existence prior to 1925 provided that, if a person to whom such yearly renewable term insurance was awarded died, or his rights were otherwise terminated after the death of the insured, but before all of the two hundred and forty monthly installments had been paid, then the monthly installments payable and applicable should be payable to such person or personswithin the permitted class of beneficiaries as would, under the laws of the state of residence of the insured, be entitled to his personal property in case of intestacy. 41 Stat. 376.

That provision, however, was amended by § 14 of the Act of 1925 (c. 553, § 14, 43 Stat. 1310, 38 U.S.C.A., § 514), which the supreme court quoted exactly as it has been set out above. The court, through Justice Sutherland, then disposed of the matter in the words of the following paragraph:

"By that amendment, the rule, which, upon the happening of the contingencies named in the prior acts, limited the benefit of the unpaid installments to persons within the designated class of permittees, was abandoned, and ``the estate of the insured' was wholly substituted as the payee. All installments, whether accruing before the death of the insured or after the death of the beneficiary named in the certificate of insurance, as a result, became assets of the estate of the insured as of the instant of his death, to be distributed to the heirs of the insured in accordance with the intestacy laws of the state of his residence, such heirs to be determined as of the date of his death, and not as of the date of the death of the beneficiary. The state courts, with almost entire unanimity, have reached the same conclusion."

That decision is directly in point, and is conclusive of these four propositions: (1) The restriction of payment to "permitted classes," after the death of the named beneficiary, no longer obtains. (2) All installments of such insurance which accrue before the death of the insured or after the death of the beneficiary become assets of the estate of the insured as of the instant of the insured's death. (3) Such assets are to be distributed to the heirs of the insured in accordance with the intestacy laws of the state of the insured's residence. (4) Such heirs are to be determined as of the date of the insured's death, and not as of the date of the death of the beneficiaries.

[2] Since we are here concerned with the construction of Federal statutes, the decision of the supreme court of the United States is authoritative and is binding upon us. Aberdeen Savings Loan Ass'n v. Chase, 157 Wash. 351, 289 P. 536,290 P. 697, 71 A.L.R. 232.

Consequently, the decision of this court in the case of In reCross' Estate, 152 Wash. 459, 278 P. 414, in which a different result was reached, must be, and hereby is, overruled. Incidentally, it may be stated that there is a practical unanimity of authority upon the propositions established by theSingleton case. Access to the cases may be gained through reference to 6 C.J.S. 515, 519, § 85, and 97 A.L.R. 1308.

[3, 4] The second question involved in this appeal is whether the wills of the father and mother, the sole heirs of the insured, and the beneficiaries under the policy, operate upon the war risk insurance.

It is appellants' position that the funds did not pass by those wills because (1) such funds are incapable of bequest, and (2) the wills should be considered as not having mentioned the insurance. In other words, they contend that the mother and father died intestate as to those funds.

It is to be kept in mind that the question here is not whether a beneficiary under a war risk insurance certificate may bequeath the balance of the fund remaining after his death, but whether the distributee of the insured's estate has the right to bequeath it. The fact that the distributee is also the beneficiary under the policy is merely a coincidence; it is not a controlling consideration.

It may be conceded that the Congress of the United States, having full control over war risk insurance, could have limited the benefit of such funds to certain classes of persons, and could have restricted, or even negatived, any passing of title thereto either by will or through the laws of descent and distribution. But Congress did not do that. On the contrary, by the Act of 1925 (43 Stat. 1310, 38 U.S.C.A., § 514), as construed by the supreme court of the United States, it was provided that the commuted value of the unpaid installments of such insurance becomes an asset of the estate of the insured as of the instant of his death, and is to be distributed to his heirs in accordance with the laws of intestacy of the state of his residence. When, therefore, the funds have been paid into the insured's estate, the state law of descent and distribution becomes operative under the formula provided by the Federal act.

We are not here concerned with the right of the insured to bequeath such funds. It is conceded that he died intestate, and that his mother and father were his only heirs at law. It is also immaterial here whether the mother be considered as having died testate or intestate, for in either event her husband, father of the insured, was her sole heir. We have therefore to consider only the right of the father to pass the funds by will.

We have no case from this state directly in point upon the immediate question. However, while there are a few decisions from other states to the contrary (In re Knight's Estate,226 Mo. App. 1042, 48 S.W.2d 71; State ex rel. Lankford v. Fidelity Deposit Co.,228 Mo. App. 953, 74 S.W.2d 904; 232 Mo. App. 979, 123 S.W.2d 552), the great weight of authority is that, although the beneficiary, as such, under a war risk certificate of insurance, has no such interest in payments maturing after his death as may be bequeathed, nevertheless, when the beneficiary also has the status of a distributee of the estate of the insured, the latter status will support the distributee's right to bequeath his interest in the insurance fund. Hansbarger v. Spangler, 117 W. Va. 373, 185 S.E. 550; In re Hall, 205 N.C. 241, 171 S.E. 61;Terry v. Rogers, 168 Va. 25, 190 S.E. 168; First Nat. Bank v.Forester, 223 Ala. 218, 135 So. 167; Wade v. Wade, 192 Ark. 7,90 S.W.2d 214.

This rule fits in with, and is the natural concomitant of, the generally accepted rule that, on the death of an intestate, those entitled to his personal property as his heirs or distributees acquire a vested equitable right in and to the property of the deceased, subject to the satisfaction of all debts, charges, and expenses of the administration, of the intestate's estate, and on final distribution of his estate the title of the distributees relates back to the intestate's death. 18 C.J. 878 et seq., § 136; 16 Am. Jur. 786 et seq., §§ 20, 21.

This court has always recognized that the right of heirship, or the right of "inheritance" as used in the law of descent, applies as well to personalty as it does to real estate, and that under both Rem. Rev. Stat., § 1364 [P.C. § 9861] (relating to the distribution of personalty), and § 1366 [P.C. § 9863] (relating to real property), the estate vests immediately upon the death of the ancestor in the heir or devisee entitled thereto, subject only to the rights of creditors. In re Turner's Estate,191 Wash. 145, 70 P.2d 1059. While the title to personal property does not immediately vest in the heir, his interest inthe estate does.

We therefore adopt the rule heretofore stated as being supported by the weight of authority, and hold that, where a beneficiary in a certificate of war risk insurance also has the status of a distributee of the estate of the insured, he may, as distributee, bequeath his interest in the insurance fund.

[5] Appellants' final contention is that, in any event, the language of the wills of the insured's father and mother does not cover the insurance fund.

For reasons already stated, we need not consider the will of the mother. Whatever interest she may have had in the fund clearly passed to her husband, the father of the insured.

The pertinent provision of the father's will reads:

"All the rest, residue and remainder of my estate I give, devise and bequeath unto The Catholic Assumption School of Bellingham, Washington."

That the testator by that language intended to dispose of any and all interests capable of being bequeathed by him, would appear to be too clear to require discussion. The language is capable of but one interpretation, namely, that the testator intended to, and did, leave all the residue and remainder of his property, of whatever description, to the legatee and devisee therein specifically named.

The residuary clause of a will is just as much a part of the will as any other provision contained therein, and a disposition of the property to which it applies is just as effective as a disposition pursuant to any other provision. In re Butler'sEstate, 129 Wash. 638, 225 P. 629.

The test of power of disposition by a residuary clause is whether the property belonged to the testator, and not whether the testator knew that the property was his. The legal effect of such a clause is to cover everything capable of being passed by will which is not otherwise well disposed of, and includes such property as the testator may have forgotten or overlooked, or to which he may not have known that he had title. 69 C.J. 419, §§ 1477, 1478; 28 R.C.L. 296, § 272.

Appellants rely upon the following cases: In re Smith'sEstate, 141 Misc. 651, 253 N.Y. Supp. 825; In re Henry'sEstate, 153 Misc. 208, 275 N.Y. Supp. 454; In re Baker'sEstate, 164 Misc. 622, 1 N.Y. Supp. 2d 72: and Spongberg v.Lidstrom, 187 Minn. 650, 245 N.W. 636, 247 N.W. 679.

In the Smith and Spongberg cases, the decisions involved the construction of the will of the insured. That is not the situation here. In this case, the insured died intestate, and the question here is whether the fund passed by the will of the distributee of the insured's estate. In the Henry case, and also in the Baker case, the will of the insured's distributee was involved, but those decisions were rested upon findings of absence of intention on the part of the testator to include the funds in the residuary clause. Special circumstances were present in those cases which led to those results.

In the case at bar, there is nothing to indicate that it was not the intention of the testator to bequeath the fund in question to the residuary legatee in the will. On the contrary, all the circumstances, it seems to us, support the usual presumption that the residuary clause carries with it every interest, whether known or unknown, immediate or remote, unless such clause by express provision, or by necessary implication, excludes some particular fund or interest of the estate.

The judgment is affirmed.

BLAKE, C.J., MAIN, MILLARD, ROBINSON, SIMPSON, JEFFERS, and DRIVER, JJ., concur.