United States v. Zazove

Citation92 L.Ed. 1601,334 U.S. 602,68 S.Ct. 1284
Decision Date14 June 1948
Docket NumberNo. 432,432
PartiesUNITED STATES v. ZAZOVE
CourtUnited States Supreme Court

See 69 S.Ct. 12.

[Syllabus from pages 602-604 intentionally omitted] Mr. Oscar H. Davis, of Washington, D.C., for petitioner.

Mr. Edward H. S. Martin, of Chicago, Ill., for respondent.

Mr. Chief Justice VINSON delivered the opinion of the Court.

We are called upon in this case to determine whether Regulation 3450 of the Veterans' Administration1 is in accord with a proper construction of § 602(h)(2) of the National Service Life Insurance Act of 1940.2

Respondent, Tillie Zazove, was designated beneficiary in a $5,000 contract of National Service Life Insurance. The insured died in 1943, and the named beneficiary filed her claim for the insurance in the Veterans' Administration. Upon denial of the claim, suit was instituted in the District Court for the Northern District of Illinois.3 The District Court ruled, on its view of the facts, that Mrs. Zazove did not stand in loco parentis to the soldier and hence was not one of the persons who could be made a beneficiary as provided by the statute.4 On appeal, the Circuit Court of Appeals for the Seventh Circuit ruled to the contrary and remanded for further proceedings. 156 F.2d 24.

The issue remaining for determination by the District Court upon remand was the validity of Regulation 3450. It sustained the regulation as properly issued pursuant to the National Service Life Insurance Act. On a second appeal, the Circuit Court of Appeals, one judge dissenting, reversed. 162 F.2d 443. We granted certiorari to review the important question of statutory construction involved.

The basic statutory provision involved is § 602(h) of the National Service Life Insurance Act of 1940, which provides that insurance issued under the Act 'shall be payable in the following manner:

'(1) if the beneficiary to whom payment is first made is under thirty years of age at the time of maturity, in two hundred and forty equal monthly installments: * * *

'(2) If the beneficiary to whom payment is first made is thirty or more years of age at the time of maturity, in equal monthly installments for one hundred and twenty months certain, with such payments continuing during the remaining lifetime of such beneficiary.'

The Administrator, acting under the general rule-making power given him by the Act,5 promulgated Regulation 3450 (set forth in the margin)6 shortly after the enactment of the statute, to put § 602(h) into operation. The regulation provides, for beneficiaries covered by clause (1), that 'payment shall be made in 240 equal monthly installments at the rate of $5.51 for each $1,000 of such insurance.' The amount of the monthly installment is so calculated that the sum of the 240 installments equals the face value of the insurance plus 3% intr est per annum.

It is the provision made by the regulation for first beneficiaries covered by clause (2) that is in issue, since the first beneficiary in this case, Mrs. Zazove, was more than thirty years old when the policy matured. For such beneficiaries, who are to receive payments for life with 120 payments certain, the regulation provides that the 'amount of the monthly installment for each $1,000 of insurance shall be determined by the age of the beneficiary as of last birthday at the time of the death of the insured, in accordance with a schedule based upon the American Experience Table of Mortality and interest at the rate of 3 percentum per annum. * * *' Accordingly, the size of the monthly installment varies not merely with the face value of the insurance policy but also with the age of the first beneficiary, the latter factor being used as the basis of an actuarial computation whereby the face value of the policy plus interest is equalized over the life expectancy of the beneficiary. Under this interpretation of § 602(h)(2), the respondent, who was 54 years of age at the death of the insured, is entitled to monthly installments of $29.50, at the rate of $5.90 for each $1,000 of insurance in which she had a beneficial interest. These installments are to be paid for 120 months certain,7 and to continue during her remaining lifetime if she lives beyond that 10-year period.

In reversing the District Court, the Circuit Court of Appeals held this method of calculation e t forth by Regulation 3450 to be inconsistent with the provisions of § 602(h)(2). It construed the latter provisions, in accord with the respondent's contention, as plainly requiring that the total of the equal monthly installments payable over a period of 120 months certain should equal the face value of the insurance, plus interest. Under this construction, Mrs. Zazove is entitled to receive $48.08, instead of $29.50, as her monthly installment, so that the total of the 120 payments certain will amount to $5,000 (plus interest), instead of $3,450 (plus interest) as determined by the Veterans' Administration, with the monthly installments due her if she survives the period of guaranteed payments continuing at the same rate. Taking into account Mrs. Zazove's life expectancy as estimated by the American Experience Table of Mortality, the actual cash value of this $5,000 insurance policy at the time of the insured's death would amount of $8,145 under respondent's construction, instead of $5,000 as determined by the regulation.8

In arriving at its decision, the majority of the Circuit Court of Appeals reasoned that the terms of § 602(h)(2) are clear and unambiguous; that nothing is said in the statute about equalizing the sum over the life expectancy of the beneficiary; and that Congress unmistakably prescribed payment of the face value plus interest in equal monthly installments over a period of 120 months certain. The major difficulty with this reasoning lies in the inadequate consideration that it gives to the full extent of the payment provided by § 602(h)(2). In effect, the Circuit Court of Appeals majority stopped short, in its reading of the terms for payment of the insurance in that subsection, at the end of the phrase 'in equal monthly installments for one hundred and twenty months certain.' By stopping short at that phrase, the court failed to consider the alternative possibility that Congress intended the immediately following phrase, 'with such payments continuing during the remaining lifetime of such beneficiary,' to provide an additional and equally essential component of the statutory equivalent for the face value of the insurance. Assuming that this alternative construction of the section is in fact what Congress intended, the only proper interpretative regulation would be one that computed the value of the monthly installments payable to any given first beneficiary in such a manner that the value of the payments to be made, giving due weight to the beneficiary's life expectancy at the death of the insured, would be equivalent to the face value of the policy, plus 3% interest. Regulation 3450 is based on that assumption. It was only because the Circuit Court of Appeals failed to regard the continuing payability of monthly installments, after the payment of the 120 installments certain, as possibly constituting a significant component of the insurance for which the serviceman had contracted, rather than a sheer gratuity conferred by Congress, that the court could view the subsection as plainly and without ambiguity requiring the face value of the insurance to be paid by the end of the 120 months certain.

Moreover, the very presence of the term 'certain' in the phrase 'equal monthly installments for one hundred and twenty months certain' suggests a view contrary to that reached by the court below. It will be noted that when Congress had in mind, as it clearly did in the case of § 602(h)(1), that a fixed number of installments provided for should equal the face value of the insurance, there was no occasion for the use of 'certain' in describing the installments to be made and, indeed, the term is not found in § 602(h)(1). While the inclusion of the term in describing the fixed number of installments to be paid under § 602(h)(2) might conceivably be a mere superfluity, its presence at least suggests the far greater probability that it was used in the specialized, technical sense in which it is generally employed in the insurance field—namely, to indicate a guaranty that a designated number of monthly payments shall be forthcoming, where a policy provides an option for equal monthly installments continuing throughout the lifetime of a payee, with the individual installment varying in amount depending on the age of the beneficiary when the policy matures.9

Hence, in our view, a reading of § 602(h)(2) in its entirety suffices to demonstrate that the language there used by Congress is far from being so clear and so free from ambiguity as to preclude the construction adopted by the Veterans' Administration in Regulation 3450. To this extent, we believe the reasoning of the Circuit Court of Appeals was in error. But that alone would not necessarily invalidate its holding since, as the Government appears to concede, the terms of § 602(h)(2) are not unambiguously in accord with the regulation. Indeed, if the ambiguity inherent in § 602(h)(2) were found in the terms of an ordinary commercial insurance policy, there might well be substantial ground for construing it in favor of the insured.10

There is, of course, a marked distinction between the criteria for judicial construction of an ordinary commercial insurance contract, and construction of the provisions of an act of Congress setting up a system of national life insurance for servicemen to be administered by a governmental agency. The statutory provisions, where ambiguous, are to be construed liberally to effectuate the beneficial purposes that Congress had in mind. In this respect, judicial construction of the statute may appear similar to...

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