Yiatchos v. Yiatchos

• Decision Date: 09 March 1964
• Docket Number: No. 48,48
• Citation: 376 U.S. 306,84 S.Ct. 742,11 L.Ed.2d 724
• Parties: Gust YIATCHOS, Petitioner, v. Pearle W. YIATCHOS, etc., et al
• Court: U.S. Supreme Court

376 U.S. 306

84 S.Ct. 742

11 L.Ed.2d 724

Gust YIATCHOS, Petitioner,

v Pearle W. YIATCHOS, etc., et al.

No. 48.

Argued Jan. 7, 1964.

Decided March 9, 1964.

Ernest R. Whitmore, Jr., Wenatchee, Wash., for petitioner.

Charles W. Cone, Wenatchee, Wash., for respondents.

Ernest R. Whitmore, Jr., Wenatchee, Wash., for petitioner.

Charles W. Cone, Wenatchee, Wash., for respondents.

Mr. Justice WHITE delivered the opinion of the Court.

Two Terms ago in Free v. Bland, 369 U.S. 663, 82 S.Ct. 1089, 8 L.Ed.2d 180, where federal savings bonds purchased with community funds were registered in a co-ownership form and the registered co-owners were husband and wife, the survivor was held entitled to the proceeds of the bonds without liability to account in any amount to the beneficiaries of the deceased co-owner, despite conflicting state law purporting to forbid a married couple to make survivorship arrangements with respect to community property and requiring such property to pass as part of the estate of the deceased in accordance with his will or the state intestacy laws. The success of the management of the national debt was deemed to depend upon the successful sale of the savings bonds, one of the inducements to purchasers being survivorship provisions which afforded 'a convenient method of avoiding complicated probate proceedings.' 369 U.S., at 669, 82 S.Ct., at 1093. State law interfered with a legitimate exercise of federal power and was required to give way under the Supremacy Clause of the Constitution.

The Court nevertheless recognized that the federal law was not to be used as a shield for fraud or to prevent relief 'where the circumstances manifest fraud or a breach of trust tantamount thereto on the part of a husband while acting in his capacity as manager of the general community property.' 369 U.S., at 670, 82 S.Ct., at 1094. The scope and application of the exception to the regulatory imperative—'the doctrine of fraud applicable under federal law in such a case,' 369 U.S., at 670—671, 82 S.Ct., at 1094—were left to decision in other cases.

This is one of those cases. Petitioner is the brother of Angel Yiatchos who die in 1958 and who in 1950—1951 purchased with community funds belonging to himself and his wife United States Savings Bonds in the face amount of $15,075. The deceased was the registered owner of the bonds and they were made payable on his death to his brother, the petitioner. The deceased left a will made in 1954, naming his wife as executrix and bequeathing all cash and bonds owned by him at the time of his death to his brother, four sisters and a nephew. Petitioner brought suit in the appropriate court in the State of Washington to establish his ownership of the bonds, relying upon the federal regulations providing for registration of the savings bonds in the beneficiary form and providing that in the case of the death of the registered owner 'the beneficiary will be recognized as the sole and absolute owner, and payment or reissue will be made as though the bond were registered in his name alone.' 31 CFR § 315.66. The trial court, on stipulated facts, sustained the claims of the wife and the other beneficiaries under the will who insisted that since the bonds were purchased with community funds and were community property at the death of the deceased they must be divided into two equal parts, one-half to go to the wife and the other half to be distributed in accordance with the will. The Supreme Court of Washington affirmed, holding that the deceased's 'purchase with community funds of bonds payable to him alone or, after his death, payable exclusively to his brother was in fraud of the rights of the respondent wife' and 'a void endeavor to divest the wife of any interest in her own property.' The deceased having been under a fiduciary duty to manage the community funds for the benefit of the community, '(a) breach of this duty (was) a constructive fraud.' Petitioner's claim to any part of the bonds as beneficiary named therein was rejected since '(r)espondent widow had a vested one-half interest in the bond proceeds' and since '(t)he descent of decedent's interest is controlled by RCW 11.04.050, and, therefore, must be distributed according to the terms of the will.' In re Yiatchos' Estate, 60 Wash.2d 179, 182, 373 P.2d 125, 127. We granted certiorari to consider an asserted conflict with Free v. Bland, supra, which was decided while this case was on appeal in the Washington Supreme Court and which that court considered in rendering its own judgment.

Under the federal regulations petitioner is entitled to the bonds unless his deceased brother committed fraud or breach of trust tantamount to fraud. Since the construction and application of a federal regulation having the force of law, Public Utilities Comm'n of California v. United States, 355 U.S. 534, 542—545, 78 S.Ct. 446, 451—453, 2 L.Ed.2d 470; Standard Oil Co. of California v. Johnson, 316 U.S. 481, 484, 62 S.Ct. 1168, 1169, 86 L.Ed. 1611, are involved, whether or not there is fraud which will bar the named beneficiary in a particular case must be determined as a matter of federal law, Free v. Bland, supra; Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838. But in applying the federal standard we shall be guided by state law insofar as the property interests of the widow created by state law are concerned. It would seem obvious that the bonds may not be used as a device to deprive the widow of property rights which she enjoys under Washington law and which would not be transferable by her husband but for the survivorship provisions of the federal bonds.

Proceeding on these premises, we note that under Washington law spouses may agree to change the status of community property either by an agreement to become effective on the death of either spouse, Rev.Code Wash. § 26.16.120; In re Yiatchos' Estate, 60 Wash.2d 179, 182, 373 P.2d 125, 127, or by gift during lifetime; Hanley v. Most, 9 Wash.2d 429, 458, 115 P.2d 933, 944. Thus the widow in this case could have consented to a gift of community property to her husband's brother or to the inclusion of the bonds in that portion of the estate which belonged to her husband and which he could dispose of at the time of his death. If she gave such consent, or if she ratified the purchase and registration of the bonds, the conduct of the husband was not, for federal purposes, fraud or breach of trust sufficient to avoid the command of the regulations, and petitioner would be entitled to all of the bonds.

So far petitioner apparently agrees, but he denies the need for further inquiry, claiming all of the bonds because the record is silent about the knowledge or consent of the wife, she having made no claim of fraud and produced no facts negativing her consent or knowledge. But we think the course suggested by the United States in its amicus curiae brief is preferable. The factual record was made by the stipulation of the parties prior to decision of Free v. Bland, supra. Before precluding the widow because of her own conduct, she should have an opportunity upon remand to prove the actual facts concerning her knowledge or participation in the purchase and registration of the bonds.

Petitioner, however, also objects to a remand because further...