Summary
In Union Nat. Bank v. Jessell, 358 Mo. 467 [ 215 S.W.2d 474], there had been a joint and mutual will in which both spouses agreed that all of their property should go into a testamentary trust.
Summary of this case from Chase v. LeiterOpinion
No. 40672.
December 13, 1948.
1. WILLS: Joint Will of Husband and Wife: Obligation of Survivor. There was a joint and mutual will executed by husband and wife and the surviving husband was bound by the terms of the will which required the survivor to devise the estate in trust for certain beneficiaries.
2. WILLS: Actions: Equity: Pleading: Declaratory Judgment Act: Construction and Enforcement of Joint Will: Jurisdiction of Trial Court: Defects in Petition Waived. A court of equity has jurisdiction in a declaratory judgment action to construe and enforce by specific performance a joint will of husband and wife. Any defects in the petition were waived by going to trial without objection on that theory.
3. WILLS: Equity: Specific Performance: Bonds: Joint Will of Husband and Wife: Violation by Surviving Husband: Specific Performance Against Children: United States Savings Bonds Ordered Cashed. Where a joint will of husband and wife was violated by the surviving husband who purchased United States Savings Bonds with his children named as surviving owners, it is not contrary to either the laws of the United States or the regulations of the Treasury Department to require the children to cash the bonds and then turn the proceeds over to the trust named in the will.
Appeal from Greene Circuit Court. — Hon. Hiram F. McLaughlin, Judge.
AFFIRMED.
Linton Hader and William R. Collinson for appellants; Guy W. Green, Jr., of counsel.
(1) The trial court erred in taking jurisdiction of the action as a will construction suit. No facts to sustain an action for a construction of the will of Charles W. H'Doubler were alleged in the petition. The will of Sarah E. H'Doubler was not before the court for purposes of construction. 1 Page on Wills, sec. 102, p. 218; Plemmons v. Plemmous, 139 S.W.2d 910; Stolle v. Stolle, 66 S.W.2d 912; Legg v. Wagner, 155 S.W.2d 146. (2) The purchase of the government bonds and their registration in the name of testator, payable on death to his children was not a testamentary disposition. Matter of Deyo, 180 Misc. 32, 42 N.Y.S.2d 379; In re Kalina's Will, 184 Misc. 367, 53 N.Y.S.2d 775; United States v. Dauphin Deposit Trust Co., etc., 50 F. Supp. 73; Edds v. Mitchell, 184 S.W.2d 823; Franklin Washington Trust Co. v. Beltram, 29 A.2d 854; 186 A.L.R. 245 et seq. (3) The court erred in holding that the testator did not have a right to invest his money in the bonds, because testator had a right to dispose of his own separate estate as he saw fit during his lifetime. 68 C.J., pp. 490, 501, secs. 101, 117; Page on Wills, sec. 197, p. 398; Clark v. Clark, 4 S.W.2d 807. (4) The court erred in holding that the money invested in the bonds was part of the estate of Charles W. H'Doubler and that they must be sold and the proceeds turned over to the estate, because the action is purely one to determine the legal title to the bonds in question. Plemmons v. Pemberton, 139 S.W.2d 910; In re Murray's Estate, 20 N.W.2d 49. (5) Defendants Margaret N. Claxton, Frances H'Doubler and Pearle M. Jessell are entitled to the bonds as beneficiaries of a valid contract made for their benefit. Crow v. Kaupp, 50 S.W.2d 995; Secs. 7996, 8070, Mo. R.S.A.; Borden v. Erickson, 201 S.W.2d 404; Ball v. Mercantile Trust Co., 297 S.W. 415; Melinik v. Meier, 124 S.W.2d 594; In re Kalina's Will, 184 Misc. 367, 53 N.Y.S.2d 775; In re Deyo, 180 Misc. 32, 42 N.Y.S.2d 379; U.S. v. Dauphin Deposit Trust Co., 50 F. Supp. 73; Franklin Washington Trust Co. v. Beltram, 29 A.2d 854; In re Murray's Estate, 20 N.W.2d 49; In re Di Santos' Estate, 142 Ohio St. 223, 51 N.E.2d 639; Conrad v. Conrad, 152 P.2d 221; Edds v. Mitchell, (Tex.), 184 S.W.2d 823; 168 A.L.R. 245 et seq. (6) The beneficiaries are entitled to the bonds by virtue of the supremacy clause of the Federal Constitution. In re Briley, 155 Fla. 798, 21 So.2d 595; Harvey v. Rockliffe, 141 Me. 169, 41 A.2d 455; In re Stanley's Estate, 102 Colo. 422, 82 P.2d 332; Succession of Tanner, 24 So.2d 642; Myers v. Hardin, 186 S.W.2d 925; In re Murray's Estate, 20 N.W.2d 49; In re Di Santos' Estate, 142 Ohio St. 223, 51 N.E.2d 639; Conrad v. Conrad, 152 P.2d 221; Franklin Washington Trust Co. v. Beltram, 29 A.2d 854.
Schwab Carr and Farrington Curtis for respondent.
(1) The circuit court as a court of equity had the right to construe the will and render a declaratory judgment adjudicating the ownership of the proceeds in the bonds when paid. Stewart v. Shelton, 201 S.W.2d 395; Laws 1943, pp. 375, 378; First Baptist Church v. Robberson, 71 Mo. 326; Clark v. Carter, 200 Mo. 515, 98 S.W. 594; Haugh v. Bokern, 30 S.W.2d 47, 325 Mo. 1143; State ex rel. and to Use of Clay County State Bank v. Waltner, 145 S.W.2d 152; Rawlings v. Rawlings, 332 Mo. 503, 58 S.W.2d 735; Secs. 1126, 1127, 1129, R.S. 1939. (2) In the joint and mutual will of the spouses, they contracted that, if the husband survived the wife, he should have all property presently owned and subsequently acquired, but at his death said property, together with any property which the husband might thereafter acquire, was expressly made the property of the testamentary trust and subject to its terms. Bower v. Daniel, 198 Mo. 289, 95 S.W. 347. (3) Where provision is made for property remaining after first taker's death, a life estate is created, and a life tenant, even having power under will to sell and dispose of property, can make disposition only for a valuable consideration. Shelton v. Shelton, 348 Mo. 820, 155 S.W.2d 187; Masterson v. Masterson, 130 S.W.2d 629; Graham v. Stroh, 342 Mo. 686, 117 S.W.2d 258. (4) The donee of a life tenant cannot retain the gift. Restatement of Laws — "Restitution", sec. 168, p. 684; 65 C.J. 986, sec. 910; 21 C.J. 941, sec. 73. (5) Change of condition or circumstance between date of will and death of testator was immaterial. Hannibal Trust Co. v. Elzea, 315 Mo. 485, 286 S.W. 371. (6) When spouses hold joint property neither may defeat the right of the other to take as survivor, but, by agreement, both by will may devise a remainder after life enjoyment by the surviving spouse. Stewart v. Shelton, 201 S.W.2d 395; Plemmons v. Pemberton, 346 Mo. 45, 139 S.W.2d 910. (7) The Regulations of the United States Treasury Department governing United States Savings Bonds are not involved in this case. Treasury Regulations, Department Circular No. 530, Fourth Revision, Secs. 315.3 and 315.17; 31 U.S.C.A. 757C; Perry v. Strawbridge, 209 Mo. 621, 108 S.W. 641, 16 L.R.A. (N.S.) 244, 123 Am. St. Rep. 510; 14 Ann. Cas. 92; Eisenhardt v. Siegel, 119 S.W.2d 810; Barnett v. Coney, 27 S.W.2d 757.
Sam M. Wear, United States Attorney, by Earl A. Grimes, Assistant United States Attorney, amicus curiae.
(1) On the basis of the applicable treasury regulations, the plaintiff, as the surviving designated beneficiary, is the sole and absolute owner of the United States Savings Bonds in question. The Treasury regulations applicable to the savings bonds involved are contained in Department Circular No. 530, Fourth Revision. (2) The treasury regulations are valid and have the force and effect of Federal Law. The ultimate source of the Federal power to issue United States Savings Bonds and to promulgate regulations governing their ownership, transfer, and payment is Article I, Section 8, Clause 2, of the Constitution of the United States which provides in part as follows: "The Congress shall have Power . . . To borrow Money on the credit of the United States."
By Article I, Section 8, Clause 18, of the Constitution, Congress is given the power: "To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or office thereof." (3) The Federal borrowing power has been held to include the power to issue bonds, as obligations of the United States, in any appropriate form in return for the money borrowed. Legal Tender Case, 110 U.S. 421, 444. (4) And to fix the amount to be borrowed and the terms of payment. Perry v. United States, 294 U.S. 330, 351. (5) In exercise of its constitutional power to borrow money on the credit of the United States, Congress enacted Section 22 of the Second Liberty Bond Act, as amended, providing as follows: "The Secretary of the Treasury, with the approval of the President, is authorized to issue, from time to time, through the Postal Service, or otherwise, bonds of the United States to be known as `United States Savings Bonds.' The proceeds of the Savings Bonds shall be available to meet any public expenditures authorized by law and to retire any outstanding obligations of the United States bearing interest or issued on a discount basis. The various issues and series of the Savings Bonds shall be in such forms, shall be offered in such amounts within the limits of Section 752 of this title and shall be issued in such manner and subject to such terms and conditions consistent with subsections (b) and (c) hereof, and including any restriction on their transfer, as the Secretary of the Treasury may from time to time prescribe" Act of Sept. 24, 1917, Ch. 56, Sec. 22, as added by Act of Feb. 4, 1935, Ch. 5, Sec. 6; 49 Stat. 21; 31 U.S.C. § 757c . Pursuant to the authority conferred upon him by the foregoing legislation, the Secretary of the Treasury issued regulations governing the issuance, transfer, ownership, and payment of United States Savings Bonds, the pertinent provisions of said regulations having already been set forth above. (6) The power given to the Secretary of the Treasury to make regulations governing the issuance and transfer of savings bonds was properly delegated by Congress. Hampton v. United States, 276 U.S. 394; Buttfield v. Stranahan, 192 U.S. 472; United States v. Grimaud, 220 U.S. 506. (7) The power was properly exercised because the regulations issued by the Secretary were reasonably adapted to the execution of the legislative purpose. Hence, the Treasury regulations are clearly valid. McCulloch v. Maryland, 4 Wheat. 316, 421. (8) And have the force and effect of Federal law. United States v. Birdsall, 233 U.S. 223; Maryland Casualty Co. v. United States, 251 U.S. 342; United States v. Sacks, 257 U.S. 37; United States v. Janovitz, 257 U.S. 42. (9) The treasury regulations, having the force of Federal Law, must be held to supersede inconsistent state law by virtue of the "Supremacy Clause" of the Constitution. Art. VI, Clause 2, of the Constitution. Farmers Bank v. Minnesota, 232 U.S. 516; Missouri v. Gehner, 281 U.S. 313. (10) The form in which the State burden is sought to be imposed is immaterial. Hence, it has been held that the transactions of the Federal Government are as free from State Regulation as they are from State taxation. Osborn v. Bank of United States, 9 Wheat. 738; Ohio v. Thomas, 173 U.S. 276; Johnson v. Maryland, 254 U.S. 51; Hunt v. United States, 278 U.S. 96; Arizona v. California, 283 U.S. 423; Stewart Co. v. Sadrakula, 309 U.S. 94; Mayo v. United States, 319 U.S. 441. (11) So, also, a local law prohibiting resulting trusts was held not to prevent the United States from conveying public land to the actual beneficial purchaser. Irvine v. Marshall, 20 How. 558. (12) A Federal statute exempting homestead lands conveyed by the United States in fee simple from execution after such conveyance was held to supersede state execution and exemption laws. Ruddy v. Rossi, 248 U.S. 104. (13) And a Federal law giving claims of the United States priority over wage claims in state court equity receivership proceedings was considered to prevail over a State statute granting priority to wage claims in such proceedings. United States v. Emory, 314 U.S. 423. (14) In cases directly involving disputed title to savings bonds, the courts have consistently upheld the federally based right of the surviving beneficiary or co-owner to sole and absolute ownership as against the claim of the estate of the deceased registered owner predicated upon state law. United States v. Dauphin Deposit Trust Co., 50 F. Supp. 73; Warren v. United States, 68 C. Cls. 634, certiorari denied 281 U.S. 739; In re Estate of Louis DiSanto, 142 Ohio St. 223, 51 N.E.2d 639; In re Stanley's Estate, 102 Colo. 422, 80 P.2d 332; In re Deyo's Estate, 42 N.Y.S.2d 379, 180 Misc. 32; Franklin Washington Trust Co. v. Beltram, 133 N.J. Eq. 11, 29 A.2d 854; Laufersweiler v. Richmond, 22 Ohio Opinions 265, 8 Ohio Supp. 76. (15) Among the many unreported cases upholding the title of surviving beneficiaries and co-owners by virtue of the applicable Treasury regulations as against various adverse claims based upon inconsistent State laws, are the following: In the Matter of the Estate of Andrew S. Levy, Deceased, (Orphans' Court, Camden County, New Jersey); Klenck v. Crocker First Natl. Bank (Superior Court, San Francisco, California, No. 294300); In re Estate of August P. Ohlin and In re Estate of Orson S. Killick (both in the Circuit Court, Cook County, Illinois); In re Estate of Clara Courtney (Probate No. 4916, District Court, Fayette County, Iowa); In re Estate of Patenaude (County Court, Palm Beach County, Florida). (16) Quite apart from the supremacy of Federal Law, the bonds constitute binding contracts enforceable according to their tenor, under which the surviving designated beneficiary is entitled to their sole legal and beneficial ownership upon the death of the registered owner. Federal contracts governed by Federal Law. United States v. Tingey, 5 Pet. 115; Irvine v. Marshall, 20 How. 558; United States v. Clearfield Trust Co., 130 F.2d 93; affirmed 318 U.S. 363; Byron Jackson Co. v. United States, 35 F. Supp. 665; United States v. Grogan, 39 F. Supp. 819; Kolker v. United States, 40 F. Supp. 972. (17) When the question arises in a State court, it is clear that it, too, must follow Federal, rather than State, law in determining the consequences of the transaction. U.S. Const., Art. VI. Cl. 2; Garrett v. Moore-McCormack Co., Inc., 317 U.S. 239. (18) As a matter of Federal contract law, it is quite clear that decision must go for the surviving designated beneficiary. Section 22 of the Second Liberty Bond Act, as amended, and the regulations thereunder (which, as shown above, have the force and effect of law) form a part of the bond contracts, not only by express reference therein but also under the established doctrine that "laws which subsist at the time and place of the making of a contract . . . enter into and form a part of if, as fully as if they had been expressly referred to or incorporated in its terms" Farmers and Merchants Bank v. Federal Reserve Bank, 262 U.S. 649; Russell Co. v. United States, 261 U.S. 514; Northern Pacific Ry. v. Wall, 241 U.S. 87; Rees v. City of Watertown, 19 Wall. 107; Campagnie Generale Transatlantique v. American Tobacco Co., 31 F.2d 663; certiorari denied, 280 U.S. 555; Eastern Building Corp. v. United States (two cases, Nos. 45222 and 45269), 96 C. Cls. 399 and 438, certiorari denied 317 U.S. 650. (19) The rule is applicable to the Government's own contracts, as well as to those of private parties. Russell Co. v. United States, supra; Eastern Building Corp. v. United States, supra.
The Union National Bank, the executor of Charles W. H'Doubler's will, instituted this action for a declaratory judgment. The petition prayed for a construction of Mr. H'Doubler's will, for instructions as to the proper distribution of the estate and particularly for a declaration whether United States Savings Bonds totaling $30,000 are the individual property of his three children or whether they are the property of the trust provided for in the will, and "for such other relief as may be just and equitable." The defendants are the testator's three children and six grandchildren. If the bonds properly belong in the testamentary trust the son and two daughters will share in the income of the trust for life and eventually the six grandchildren will receive the principal estate. If they do not belong in the trust they are the absolute property of the three children. The Series "G" bonds are payable to Mr. H'Doubler as purchaser and upon his death are payable to the son and two daughters. They were purchased in 1942 from his personal funds and from funds which came to him from his wife's estate. They were delivered to the son and are not mentioned in the will.
The trial court found and decreed that the will which Mr. H'Doubler and his wife executed in 1939 was a reciprocal, joint and mutual will, that Mrs. H'Doubler died in 1942 and Mr. H'Doubler probated the will, administered her estate and received the net proceeds. In its opening paragraph the will recites that "Each of us has been induced to become a party to this instrument in consideration of the other party doing likewise, it being understood and agreed between ourselves that neither may change in any particular the provisions hereof without the written consent of the other." The will gave the survivor his or her property for life and required the survivor to devise and bequeath "all the rest, residue, and remainder of our property, real, personal or mixed, wheresoever situate which we now own or may hereafter acquire, jointly or severally, . . . with any other property which the said Charles W. H'Doubler may thereafter acquire," to the trust. Mr. H'Doubler died in 1945 and his estate is being administered under that selfsame will. The trial court decreed that Mr. H'Doubler was bound by the terms of the will and could not purchase and dispose of the bonds contrary to its provisions. Accordingly the court ordered the children to cash the bonds and turn the proceeds over to the executor of the will. The three children appeal from the order and decree.
In substance their argument here falls into two broad general classes: First, that the court erred in taking jurisdiction of the action as a will construction suit because no facts were alleged which called for a construction of Mr. H'Doubler's will and Mrs. H'Doubler's will was not before the court for construction, the only issue made by the pleadings being whether the bonds were or were not a part of the estate of the deceased. Second, it is urged that the court erred in ordering the bonds sold and the proceeds turned over to the estate because the action is solely for the purpose of determining the legal title to the bonds which, as a matter of law, is in the three children as the beneficiaries of a valid contract made for their benefit. In this connection it is urged that the bonds were issued under the superior authority of the laws of the United States and the regulations of the United States Treasury Department, by which they become the property of the named survivors and may only be paid to them and a state court may not decree to the contrary.
At the outset, for the purposes of this opinion, certain of the appellants' arguments may be conceded. It may be conceded, in ordinary circumstances, that Mr. H'Doubler had a right to and even that he did purchase the bonds with his own separate estate. If so and they were delivered to his children before his death it may be conceded that they did not become a part of his estate. It may also be conceded, if these were the only circumstances, that the children were the donee beneficiaries of valid contracts made for their benefit and therefore the legal owners of the bonds. It may be admitted that the purchase and registration of the bonds in the name of the [476] testator payable upon his death to his children was not a testamentary disposition of his property. But all these arguments are beside the point if Mr. H'Doubler was indubitably bound with his wife by the compact (17 Mich. L.R. 677, 681) and inviolate terms of a joint and mutual will. Plemmons v. Pemberton, 346 Mo. 45, 139 S.W.2d 910; Findley v. Johnson, (Mo.) 142 S.W.2d 61 and the annotations in 43 A.L.R. 1020; 57 A.L.R. 607; 60 A.L.R. 627; 102 A.L.R. 491. The appellants tacitly admit that Mr. and Mrs. H'Doubler executed a joint and mutual will and upon this appeal they do not complain of the court's finding in this respect.
As we have said, their initial argument here is that the court erred in taking jurisdiction of the cause as a will construction suit because Mrs. H'Doubler's will was not before the court for construction and no facts were alleged which called for a construction of Mr. H'Doubler's will, the only issue under the pleadings being the legal title to the bonds and whether they were or were not a part of the estate of the deceased. The appellants analyze the petition and seek to demonstrate that it presents but a single justiciable issue, legal title to the bonds. They say, therefore, that the court had no jurisdiction to determine the equitable title to the bonds because "The action is not one involving equity jurisdiction for fraud or mutual mistake" or "an action by the heirs or by the plaintiff as trustee to enforce a contract to devise property, the only method of enforcing such agreement."
In its essence the appellants' argument is addressed to the character and quality of the relief the court may appropriately grant in an action for a declaratory judgment. The petition, admittedly, is not as broad and specific as it might have been but the appellants, instead of attacking the petition, entered their appearance and filed an answer in which they sought to justify the purchase, registration and gift of the bonds as a part of Mr. H'Doubler's separate estate. They stipulated all the essential facts and in effect entered into a submission of the cause upon the respective theories of the parties without objection and having done so they are accordingly bound if the relief decreed may be granted in this type of an action. Stewart v. Shelton, 356 Mo. 258, 262-263, 201 S.W.2d 395, 397-398; Mo. R.S.A., Secs. 847.63, 847.82.
In the Stewart case, an action to declare a joint and mutual will to have been irrevocable and to set aside deeds, it was appropriately pointed out that equity is the historical affinity of an action for a declaratory judgment. After all, there being no objection to the petition or to the form of the action and a stipulation of the evidence, it is the established facts which compel the quality and extent of the relief the court should grant. State ex rel. Clay County State Bank v. Waltner, 346 Mo. 1138, 145 S.W.2d 152. Our Declaratory Judgment Act, particularly Sections 1126-1127, 1129-1130 and 1137, Mo. R.S.A., "authorizes courts of record to declare right, status, and other legal relations, `whether or not further relief is or could be claimed,' and provides that `further relief based on a declaratory judgment or decree may be granted whenever necessary or proper. The application therefore shall be by petition to a court having jurisdiction to grant the relief. If the application be deemed sufficient, the court shall, on reasonable notice, require any adverse party whose rights have been adjudicated by the declaratory judgment or decree, to show cause why further relief should not be granted forthwith.' It is generally held, under statutes containing provisions of this kind, that declaratory and coercive relief may be combined in the same proceeding — that both declaratory and coercive or executory relief may be sought and granted in a single action." Annotation 155 A.L.R. 501, 503. Accordingly it has become accepted that a declaratory judgment may be supplemented by an injunction or a decree of specific performance. Borchard, Declaratory Judgments, pp. 431, 551, 557. It was only by reference to the joint and mutual will, pleaded and in evidence, and the attendant circumstances that it could be justly determined and declared whether the estate or the children were entitled to the bonds and it [477] was only by relief analogous to specific performance that the court could adequately declare and enforce the rights of the parties. It follows, in all the circumstances of this case, that the court had jurisdiction to construe the joint and mutual will and enforce compliance with its applicable provisions. Stewart v. Shelton, supra; State ex rel. Clay County State Bank v. Waltner, supra.
The United States Treasury Bonds are governed by the laws of the United States and the regulations of the United States Treasury Department and, on their face, are payable to the named beneficiaries. Warren v. U.S., 68 Ct. Cl. 634; In re Deyo's Estate, 42 N.Y.S. (2) 379; In re Kalina's Will, 53 N.Y.S. (2) 775 and the collection of cases in 168 A.L.R. 245. In this case, however, the court has not decreed otherwise. The court has decreed that the named payees cash the bonds and deliver the proceeds to the executor in accordance with the will and there is nothing in this phase of the decree contrary to either the laws of the United States or the regulations of the United States Treasury Department. Those laws and regulations do not prevent the declaration of a resulting trust in bonds purchased in fraud of marital rights. Succession of Geagan, 212 La. 574, 33 So.2d 118; Makinen v. George, 19 Wn. (2) 340, 142 P. (2) 910, 917. And they do not prevent the recovery of the proceeds of bonds if they have been purchased with fraudulently acquired funds or funds expended in fraud of creditors. Katz v. Driscoll, (Cal.) 194 P. (2) 822; Ibey v. Ibey, 93 N.H. 434, 43 Atl. (2) 157. In this connection it is not necessary to characterize the conduct of the testator. It is sufficient to say that the testator was obligated by the compact of the joint and mutual will with his wife to devise and bequeath their property to the trust regardless of his subsequent good intentions and changed circumstances. The purchase and gift of the bonds to the children was in direct violation of that compact.
Accordingly the judgment is affirmed. Westhues and Bohling, CC., concur.
The foregoing opinion by BARRETT, C., is adopted as the opinion of the court. Ellison, J., and Tipton, P.J., concur; Leedy, J., absent.