369 U.S. 663 (1962), 205, Free v. Bland

Docket Nº:No. 205
Citation:369 U.S. 663, 82 S.Ct. 1089, 8 L.Ed.2d 180
Party Name:Free v. Bland
Case Date:May 21, 1962
Court:United States Supreme Court

Page 663

369 U.S. 663 (1962)

82 S.Ct. 1089, 8 L.Ed.2d 180




No. 205

United States Supreme Court

May 21, 1962

Argued March 21, 1962



By virtue of the Supremacy Clause of the Constitution, the Treasury Regulations creating a right of survivorship in United States Savings Bonds registered in co-ownership form preempt any inconsistent provision of the Texas community property law. Pp. 664-671.

(a) The Treasury Regulations which provide, inter alia, that, when a savings bond is registered in co-ownership form, i.e., payable to one person "or" another, a co-owner who survives the other co-owner "will be recognized as the sole and absolute owner" of the bond, and that "No judicial determination will be recognized which would . . . defeat or impair the rights of survivorship conferred by these regulations," constitute a valid federal law within the meaning and intent of the Supremacy Clause. Pp. 666-668.

(b) A provision of the Texas community property law which, in effect, prohibits a married couple from taking advantage of the survivorship provisions of these regulations merely because the purchase price of the savings bonds is paid out of community property conflicts with the federal regulations on this subject, and must fall under the Supremacy Clause. Pp. 667-671.

162 Tex. 72, 344 S.W.2d 435, reversed.

Page 664

WARREN, J., lead opinion

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court.

We are called upon to determine whether the Treasury Regulations creating a right of survivorship in United States Savings Bonds preempt any inconsistent Texas community property law by virtue of the Supremacy Clause, Article VI, Clause 2, of the Constitution.

The petitioner is the widower of Mrs. Mary Ida Free, and the respondent is her son by a previous marriage. Mr. and Mrs. Free were domiciled in Texas. That State follows the community property system; except in certain instances not here material, all property acquired by either spouse during marriage belongs to the community of the husband and wife.1 Property purchased with community property retains a community character. See Love v. Robertson, 7 Tex. 6. Although each spouse owns an undivided one-half interest in the community property, the husband is the sole authorized manager.2 During the years 1941 to 1945, petitioner Free, using community property, purchased several United States Savings Bonds, series "E" and "F". The bonds were all issued to "Mr. or Mrs." Free. Under the Treasury Regulations promulgated under 31 U.S.C. § 757c(a) which govern bonds issued in that form, when either co-owner

Page 665

dies, "the survivor will be recognized as the sole and absolute owner." 31 CFR § 315.61. After Mrs. Free passed away in 1958, this controversy arose between the husband, who claimed exclusive ownership by operation of the Treasury Regulations, and the son, who, as the principal beneficiary under his mother's will, claimed an interest in the bonds by virtue of the state community property laws. Respondent son demanded either one-half of the bonds or reimbursement for the loss of Mrs. Free's community half interest in the bonds which was converted into petitioner's separate property by operation of the federal regulations.

In order to resolve the controversy, petitioner Free filed suit in the District Court of Upshur County, Texas, against the respondent individually and as the executor of Mrs. Free's estate. Respondent Bland filed a counterclaim. On the petitioner's motion for summary judgment, the trial court awarded full title to the bonds to the petitioner by virtue of the federal regulations, but awarded reimbursement to the respondent by virtue of the state community property laws, making the bonds security for payment. The petitioner appealed to the Court of Civil Appeals. That court affirmed the trial court's award of full title to the petitioner, but reversed the award of reimbursement to the respondent,3 relying upon Smith v. Ricks, 159 Tex. 280, 318 S.W.2d 439, in which unconditional effect was given to the survivorship provisions of the federal regulations governing savings bonds.

While respondent's writ of error was pending in the Supreme Court of Texas, [82 S.Ct. 1092] that court overruled the Ricks case in Hilley v. Hilley, 161 Tex. 569, 342 S.W.2d 565. After holding that married couples in Texas would not be permitted to agree to any survivorship provision with

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regard to community property, the court dismissed the argument that the Supremacy Clause would compel recognition of the survivorship provisions in United States Savings Bonds with:

It is clear that the Federal regulations do not override our local laws in matters of purely private ownership where the interests of the United States are not involved. Bank of America National Trust & Savings Ass'n v. Parnell, 352 U.S. 29.

161 Tex. at 577, 342 S.W.2d at 570.

Subsequently, respondent Bland's writ of error was granted, and the Supreme Court of Texas, acting under the authority of the Hilley case, reversed the Court of Civil Appeals and reinstated the judgment of the trial court in a per curiam opinion. Bland v. Free, 162 Tex. 72, 344 S.W.2d 435. We granted certiorari. 368 U.S. 811.

The Supreme Court of Texas' interpretation of the Supremacy Clause is not in accord with controlling doctrine. The relative importance to the State of its own law is not material when there is a conflict with a valid federal law, for the Framers of our Constitution provided that the federal law must prevail. Article VI, Clause 2. This principle was made clear by Chief Justice Marshall when he stated for the Court that any state law, however clearly within a State's acknowledged power, which interferes with or is contrary to federal law must yield. Gibbons v. Ogden, 9 Wheat. 1, 210-211. See Franklin National Bank v. New York, 347 U.S. 373; Wissner v. Wissner, 338 U.S. 655; Sola Electric Co. v. Jefferson Electric Co., 317 U.S. 173. Thus, our inquiry is directed toward whether there is a valid federal law, and, if so, whether there is a conflict with state law.

Article I, Section 8, Clause 2 of the Constitution delegates to the Federal Government the power "[t]o borrow

Page 667

Money on the credit of the United States." Pursuant to this grant of power, the Congress authorized the Secretary of the Treasury, with the approval of the President, to issue savings bonds in such form and under such conditions as he may from time to time prescribe, subject to certain limitations not here material. 31 U.S.C. § 757c(a).4 Cf. United States v. Sacks, 257 U.S. 37. Exercising that authority, the Secretary of the Treasury issued savings bonds under regulations which provided, inter alia, that the co-owner of a savings bond issued in the "or" form who survives the other co-owner "will be recognized as the sole and absolute owner" of the bond, 31 CFR § 315.61,5 and that "[n]o judicial determination will be recognized which would . . . defeat or impair the rights of survivorship conferred by these regulations," 31 CFR § 315.20.6 The Treasury has consistently maintained

Page 668

that the purpose of these regulations is to establish the right of survivorship regardless of local state law,7 and a majority of the States which have considered the problem have recognized this right.8 The respondent, however, contends that the purpose of the regulations is simply to provide a convenient method of payment.9 This argument depends primarily on the distinction between...

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