, -. . -
THE ATTORNEY GENERAL
OF TEXAS BAA wd
Mr. Robert S. Calvert OPINION NO. W-273
Comptroller of Pub110 Accounts
Capitol Station Re: Further Interpretation
Austin, Texas of a question of in-
herltanoe tax to be
assessed against the
estate of R.O. C.
Dear Mr. Calvert: Brumley
R. 0. C. Brumley purchased numerous govern-
ment bonds with Community funds. All of the bonds were
payable to R.O.C. Brumley or his wife, Fannie E. Brumley,
and were so registered. After Mr. Brumley's death, his
till was admitted to probate. Under the terms of the
will his entire one-half interest in the community estate
was expressly devised to his two daughters. The surviving
co-owner wife has furnished the Comptroller with a dis-
claimer in which she states that she did not participate
in the purchase of the bonds or advise as to whom they
should be payable; that the bonds were considered by the
co-owners as belonging to each individually in undivided
one-half community interests subject to testamentary dls-
position, and that she refuses to accept any interest
or ownership In the undivided one-half interest owned by
the decedent at the time of his death on the ground that the
decedent's one-half interest passed to the decedent's
daughters under his will.
You request the proper method of computing the
inheritance taxes levied bs Article 7117.
_ Vernon's Civil
Statutes, under these facts.
The pertinent treasury regulation (it Is
latlon and not a statute but is valid for the purpose
reads as follows:
"If either coowner dies without having
presented and surrendered the bond for pay-
ment or authorized reissue, the surviving
coowner will be recognized as the sole and
',.absoluteowner of the bond and payment or
reissue will be made only to such survivor,
as thou the bonds were registered in his
name al%e." (Rnphasis supplied)
.,_^.
Hon. Robert S. Calve& Page 2 Opinion No. WW-273
The phrases "will be recognized" and "as though"
appearing in this regulation are significant. We think
this means nothing more than for the purpose of making
payment of the bonds by the Federal Government, the survlv-
or will be recognized as the owner as thoughthe bonds'were
registered in the nsme of the survivor alone, Congress
and the officials of the Federal Treasury were aware that
an intolerable situation would be presented In the payment
of the bonds unless some uniform standard be evolved by which
the'Federa1 Government could make payment without being in-
volved in the aotual determination of the title and owner-
ship of the bonds and the settlement of conflicting claims
which would inevitably arise. Apt words were chosen such as
"will be recognized" and "as though" without any attempt
to comniit.the'TreasuryDepartment to the actual determlnatlon
of title and ownership of the bonds. Under the regulation,,
the Treasury Department could pay with impunity without de-
termining actual title and ownership and without being ln-
volved in the settlement of conflicting claims. This, we
think was all that was attempted to be accomplished by the
regulation. We do not interpret this regulation as an at-
tempt upon the part of Congress or the Treasury Department
to create, modify, or divest property rights. We shall not
attribute to Congress or the Treasury Department, as applied
to the problem here considered, an unwarranted invasion of
the power of the State to determine for itself property
enc,ompassedwithin our community property law.
We think the Supreme Court of the State of Louisiana,
which, like Texas, is a community property State, has clearly
stated the purpose of the regulation of the Treasury Depart-
ment pertaining to payment to the surviving co-owner in the
case of Slater v..Culpepper, 22 La. 962, 64 So. 2d 334, 37
A.L.R. 2d 1216 in this language:
.Manifestly, these regulations, as has
bien previously said by this court, were de-
signed solely to facilitate the Government
by providing a simple method fop the payment
of savings bonds, so that it would not be
subjected to the inconvenience and delays
attendant to the settlement of conflicting
or disputed claims."
There is nothing before us to suggest that it was
the Intention of R.O.C. Brumley, by gift or otherwise, by
the use of the co-payment provision, to make a transfer of
one-half of the community estate to the estate of Fannie E.
Brumley, the surviving wife. Indeed, we think the opposite
is true.
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Hon. Robert S. Calvert Page 3 Opinion No. W-273
Under'the community property law of this State
the husband Is the manager of,the estate and is privileged
to invest the community funds, independent of the consent
of the wife',so long as he aots In good faith In protect-
ing her Interest. We must conoede that the oommunity
funds could not have been more safely Invested than in
this case.
Reverting to the case of Slater v.Culpepper,22 La.
962, 64 So. 2d 334, 37 A.L.R. 26 1216, we quote further
from it as follows:
"The stipulation of counsel does
recite that Mrs. Ryrnrnacted for herself
In handling the purchase; but it states
also that she acted for her husband and
the community of acquets and gains. More
than likely she was serving primarily as
the community's representative, partlcular-
ly since its funds were being used and the
husband, or the head master of the community,
was at the time physically lncapaoltated to
act. Nevertheless, assuming that Mrs. Rynum
could end did act individually with respect ~~''~.
to her community one-half interest in the
funds invested, we fail to find anything to evidence
a clear and definite intention on her part
to donate her portion of the investment to
the husband in prospect of death--an essential
for our concluding as plaintiffs would have
us do. The bonds themselves do not suggest
that intention, they having been registered
and issued on the described co-ownership form.
Neither does it appear that a donation mortis
causa Is contemplated by the appropriate
Treasury Department regulations which formed
a part of the contract to purchase. True,
they do state that on the death of the co-owner
the bonds will be paid to the survivor or
to his estate. On the other hand they also
provide that if the co-owners die in a common
disaster, and It cannot be determined who died
first, the bonds will be considered as belong-
ing to both estates."
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Hon. Robert S. Calvert Page 4 Opinion No. WW-273
The Supreme Court of Louisiana in an earlier case
than the Slater case, Winsberg v. Winsberg, (1952) 220 La.
398, 56 Sn 730 had this to say:
"'Federal Government is neither con-
cerned with nor interested in the appllca-
tion and enforcement of State laws respect-
ing succession or inheritance of property.
Indeed, it seems manifest that the regula-
tions of the Treasury Department for the
payment of savin s bonds (relied on by defend-
ant in this case7, were designed solely to
facilitate the Government, by providing a
simple method for the liquidation of these
obligations, so that It would not be subjected
to the inconvenience and delays attendant to
the settlement of aonflictlng or disputed
claims. There was not, in our opinion, any
intention to interfere with the enforcement
of the laws of descent and distribution of
the various States. Therefore, forasmuch
as the payment on death clause contained in
such bonds must be considered as a valid
appendage to our laws respecting the forms
or dispositions mortis causa, it appears
logical to apply all provisions pertaining
to testamentary dispositions, except those
dealing with forms, in determining rights
and liabilities under such a devise.' The
court further said: ,"Berein seeking authority
for a construction of a Federal regulation
or a reasonable fmplication therefrom, loose
construction could come to mean the right of
the Federal Government to do in its regula-
tions whatever was not forbidden by the United
States Constitution, provided the act was
deemed to be for the general good, If such
a theory of constitutional construction were
to prevail and the original notion of the
Constitution as a grant of power, under which
everything not granted was withheld, were to
be replaced by the rule that everything not
withheld was granted, the Federal Government
would be admittedly supreme and the reserved
rights of the States would speedily become
only a formula of words.8"
Hon. Robert S. Calvert Page 5 Opinion No. WW-273
The Supreme Court of Iowa In the case of Slnift
v.~Sinift, 229 Iowa 256; 293 N.W. 841 stated'thatmd
not question'the authority of Congress to enact legisla-
tion authorizing the ?.ssuanoeof bonds determining the
right of ownership as it might see fit but that the regu-
lation did not have that effect. The Court held, as did
the Supreme Court of Louisiana, that the regulation In
question was merely to expedite the work of the Department
in connection with payment or the transfer or exohange
of co-ownership bonds.
In the case of Foraker v. Koohs (1931) 180 N.E. 743,
the Ohio Court of Appeals was ooncerned with these facts.
A husband and wife purohased with their joint funds a United
States Savings Bond which was registered In their name in
the alternative as co-owners, and retained by the husband in
his bank safety deposit box. After the wife's death, the
husband had the bonds reissued as a coupon bond In his name
alone. The court said that under state law, in the absence
of a definite contract for survivorship the presumption
arising from the purchase of the bond was that the interest
of the joint owners was equal without survivorship, and
that the bond belonged equally to the estate of the wife and
the estate of the husoand who died subsequently. In this
opinion the court said:
,t. . .'It is true that, for the purpose of
registration and transferring, the rules of
the United States Treasury recognize the
survivor as the proper party to whom transfer
of the bond should be made. That rule is
for the convenience of the United States
government In the transaction of its business,
and does not and cannot confer title in the
Liberty bond, or create a contract of survivor-
ship in the bond in the state of Ohio, where
a contract of survivorship is not presumed.'"
In Texas, Jus accrescendi
-- has been abolished, and
survivorship rights mu3 be expressly created, Chandler vs.
Kountee, 130 S.W. (2) 327, (Tex. Civ. App., error ref. 1939).
Pt may be that in non-community property States (and a
majority of the States fall In that category) the Treasury
regulation justifies the rule that the surviving co-owner
is the sole owner of the bonds. Whether that rule be sound
or unsound as applied In the non-community property States
we need have no concern. But In our State where the community
property rule prevails, we think it is unsound and unfair and
should not be followed.
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Ron. Robert S. Calvert Page 6 Opinion No. W-273
~If we felt that the Courts of our State had com-
mitt&d UE to the survivor take all rule as to these bonds,
we would feel Impelled to follow, but su6h is not the case.
This a&l18 for some e%pleiiationof’the cases which have
been ooneidered to have’some bearing upon this question.
There are only three su&i oases whi&%e ah&l1 &Liaouss
briefly tHe$ Are Edd8.v. I(fltcb611, 143 Tex. 307, 184 S.W.
823, 156 A.L.R. 470' McF~hllll~, 253 S.W. 2d
9.53 (Writ refused n; reversible error); and H&lain v.
Holder, 279 S.W. 26 105 (Writ refused, N.R.E. ) .
The Edds’case Involved primarily a construction of
the will of m. Rohde which gave to his wife, Julia E.
Rhode, e life estate in his share of the community e6tete
with power of sale ana authority to use the proceeds without
accountability therefor, with the remainder at her death
to his heirs at law. After 0. D. Rhode’s death, Julia E.
Rhode, his surviving wife aoquired five United States Savings
bonds by the use of proceeds from the sale of reel estate
beldnglng to the community Estate. She thereafter died with
these bonds In her possession. The bonds were made payable
to Julia E. Rohde and upon her death to Reta B. Edds. Un-
like the bonds Involved here they were made payable to a
aesignetea benefloiery upon the death of Mrs. Rohde. The
oontroversy as to these bonds was between Mrs. Edds end
the administrator of the estate of 0. D. Rohae and involved
only a one-half undivided interest therein. It was agreed
that there was no controversy as to the other one-half of
said bond.?sinaethey were purchased from the proceeds of
the sale of a portion of the community estate of 0. D. Rohde
and his wife, Julia E. Rohde.
The Supreme Court did not decide this case upon
the theory that the Treasury Regulations had the effect
of making R&e B. Edds the sole owner of the one-half
community, but upon the theory that a valid .oontract had
been made by the registered owner and the Ciovernmentfor
the benefit in part of a third party, the designated bene-
ficiary who acquired a vestea Interest though It was de-
feasible at the time the contract was made. There Is no
beneficiary involved es to the bonds here involved, as Is
true in the Edds aase. Moreover the law es to third
party contra=is not Involved In the bonds with which
we are here ooncerned.
The McFarland case does not actually Involve co-
ownership payment of bonds by the husband and wife es Is
the case here. Moreover, If this aase should be oonstrued
_..,-. -
Hon. Robert S. Calvert Page~7 Opinion No. WW-273
es confirming the right of the survivor husband or wife
to take full'title and ownershi~p,upon the death of
either, of Government Savings bonds purchased with community
funds, then it is in principal In conflict with the case
of McCleinv~Holder,~~ S.W. 2d 105 bv the Court of Civil
Appeals at Galveston (Writ refused, n.r.e.). It Is true that
government bonds were not involved in the McClaln case, but
the bonds involved were ao-payment bonds e-theory of
the survivor acquiring full title and ownership was in-
volved. The Court rejected the right of the survivor to
take full title and ownership of the bonds; and since
there was no will Involved, ordered a partltltlon of the
bonds according to the laws of descent and distribution
as contended by those who opposed the complete ownership
In the survivor. Where there is a conflict between de-
cisions of two Courtsof Civil Appeals which has not been
resolved by the Supreme Court, we are at liberty to choose
between the two decisions; and we prefer to follow the
McClaln v. Holder case In preference to McFarland v.
Phillips as being in accord with our concept of community
property laws of this state and based upon better reason
and justice.
It Is apparent from whet we have Bela that It Is
our opinion that the one-half community lntere'stin the
United States Savings bonds purchased with community funds
of Fannie E..Brumley and R.O.C. Brumley, husband and wife,
payable to them as co-owners, passed upon the death of
R. 0. C. Brumley to his two daughters, by his will, and
that they owe the inheritance tax on said one-half interest.
The surviving wife, Fannie E. Brumley, owes no tax.
To the extent that this opinion may be in conflict
with prior opinions of this office they are expressly over-
ruled.
S U M M,A R,Y
Upon the death of either husband or wife, the
community one-half interest of the deceased
spouse in United States Savings Bonds, which
are payable to husband and wife as co-owners.
passes to the devisees named in the will and
not to the surviving spouse.
Hon. Robert S. Calvert Page 8 Opinion No. W-273
To the extent that this opinion may be In
conflict with prior opinions of this office
they are expressly overruled.
Yours very truly
WILL WILSON
:y$p;;<+
LPL/fb A&Unt
APPROVED:
OPINION COMMITTEE
George P. Blackburn, Chairman
Joseph G. Rollins
J. Milton Richardson
B. H. Tlmmins, Jr.
Houghton Brownlee, Jr.
REVIEWED FOR THE ATTORNEY GENERAL
By: James N. Ludlum