In re Cross' Estate, 20963.

• Decision Date: 04 June 1929
• Docket Number: 20963.
• Citation: 152 Wash. 459,278 P. 414
• Court: Washington Supreme Court
• Parties: In re CROSS' ESTATE. v. STATE et al. CROSS

278 P. 414

152 Wash. 459

In re CROSS' ESTATE.

CROSS v. STATE et al.

No. 20963.

Supreme Court of Washington, En Banc.

June 4, 1929

Appeal from Superior Court, Spokane County; Joseph B. Lindsley Judge.

On rehearing. Former opinions (147 Wash. 699, 266 P. 712; 148 Wash. 422, 269 P. 339) reversed, and judgment of trial court affirmed.

See also, 147 Wash. 441, 266 P. 711.

Miller & Freese, of Ritzville, for appellant.

L. B Schwellenbach and George Mathieu, both of Seattle, amicus curiae, for American Legion.

G. W H. Davis and W. F. Van Ruff, both of Olympia, and F. B. Danskin, of Spokane, for respondents.

FRENCH J.

LeRoy W. Cross was killed in the World War on October 22, 1918, dying intestate and having never married. He left surviving him a father, mother, brothers, and sisters. At the time of his death he was carrying a $10,000 policy of war risk insurance issued by the federal government; his mother being designated as his beneficiary. After the death of the boy and while the mother was receiving monthly installments under the policy the father died testate, leaving all his estate to his wife. Thereafter and on April 29, 1926, the mother, Margaret Cross, died, leaving her estate to her sons and daughters, share and share alike . After the death of Margaret Cross and while her estate was being probated similar proceedings were commenced for the estate of LeRoy W. Cross, there being unpaid installments under his said policy of the then value of $6,983. In an opinion of one of the departments of this court ( In re LeRoy W. Cross' Estate, 147 Wash. 441, 266 P. 711) it was held that this residue should go to those who were the heirs of LeRoy W. Cross at the time of his death, and as the heirs were his father and mother, and as the father had died leaving his estate to his wife, this insurance should be distributed to the estate of Margaret Cross, deceased. The same conclusion was reached in the companion case of In re Estate of Margaret Cross, deceased, 147 Wash. 699, 266 P. 712. Later, in an opinion of the same department of this court, it was held ( In re Margaret Cross' Estate, 148 Wash. 422, 266 P. 339) that as the estate of Margaret Cross, by adding the proceeds of the war risk insurance policy, exceeded in value the sum of $10,000, the distributive shares of the beneficiaries of her estate were subject to the state inheritance tax, thus deciding that the proceeds of war risk insurance are not exempt from such tax.

Upon rehearing the correctness of these prior decisions involving the disposition of the proceeds of this insurance are very seriously questioned; it being contended that, upon the death of the designated beneficiary, Margaret Cross, the residue should go to the remaining survivors of LeRoy W. Cross, who are within 'the permitted class of beneficiaries' as provided by the war risk insurance act, and that such persons would take as beneficiaries under the policy and not as heirs at law, and that it necessarily follows from this that the state inheritance tax could not be imposed upon the benefits so accruing.

Going back to chapter 105 of the United States Statutes at Large (October 6, 1917), (40 Stat. 398) we find that the government undertook a colossal task. It created the Bureau of War Insurance, and appropriated $100,000 for its initial expenses. It appropriated $141,000,000 for monthly allotments to the ' family' of each enlisted man while in service. It appropriated $12,150,000 for monthly compensation for death or disability resulting from personal injury suffered, or disease contracted by one in such service, the compensation to be for the benefit of the man or his wife, children and/or dependent widowed mother. It appropriated $23,000,000 for war risk life insurance, stating (section 400 [40 Stat. 409]) that it was granted 'in order to give to every * * * enlisted man * * * when employed in active service * * * greater protection for themselves and their dependents.' By section 402 of the same act (40 Stat. 409) it was provided that this insurance 'shall not be assignable, and shall not be subject to the claims of creditors of the insured or of the beneficiary,' and further that the insurance 'shall be payable only to a spouse, child, grand-child, parent, brother or sister.' (This permitted class was added to by the subsequent Act of December 24, 1919 [41 Stat. 375, § 13]). It granted the right to the insured to select the beneficiary 'but only within the classes * * * provided.' Section 402 further provided: 'If no beneficiary within the permitted class be designated by the insured, * * * or if the designated beneficiary does not survive the insured, the insurance shall be payable to such person or persons, within the permitted class of beneficiaries as would under the laws of the state of the residence of the insured, be entitled to his personal property in case of intestacy. If no such person survive the insured, then there shall be paid to the estate of the insured an amount equal to the reserve value. * * *'

Section 14, c. 553, 43 Stat. 1310, March 4, 1925 (38 USCA § 514), amends section 303 of the World War Veterans' Act 1924 (43 Stat. 625), approved June 7, 1924, and provides as follows: 'If no person within the permitted class be designated as beneficiary for yearly renewable term insurance by the insured, * * * or if the designated beneficiary does not survive the insured or survives the insured and dies prior to receiving all of the two hundred and forty installments or all such as are payable and applicable, there shall be paid to the estate of the insured the present value of the monthly installments thereafter payable. * * * When any person to whom such insurance is now awarded dies * * * then there shall be paid to the estate of the insured the present value of the remaining unpaid monthly installments of the insurance so awarded to such person. * * * This section shall be deemed to be in effect as of October 6, 1917.'

A regulation (Bulletin No. 1) adopted by the federal bureau under date of October 15, 1917, under authority of the War Risk Insurance Act, reads as follows: 'If no beneficiary within the permitted class be designated by the insured, either in the insured's lifetime or by his last will and testament, or if any of the above designated beneficiaries is or becomes disqualified or does not survive the insured (or if any of the above designated beneficiaries shall survive the insured but shall not receive all the installments) then the remaining installments shall be payable to such person or persons within the permitted class of beneficiaries as would, under the laws of the insured's place of residence, be entitled to his personal property in case of intestacy.'

Even if we were to give no force whatever to the foregoing regulation of the bureau, we believe the whole intent and purpose of these acts is to exhaust the proceeds of this insurance for the benefit of those within the designated class, and that so long as there are such persons they must take, not as heirs at law, but as beneficiaries under the war risk insurance policy. It seems to us that any other reasoning would be contrary to the text and import of the entire act. If it be said that the proceeds of a policy shall be distributed to the heirs at law of the named beneficiaries when there exist persons 'within the permitted class,' then the act does not 'give to every * * * enlisted man * * * greater protection for themselves and their dependents.' It would also seem inconsistent for us to say that, although the act permits the insured to select the beneficiary, 'but only within the classes * * * provided,' still by the death of the designated beneficiary some person or persons outside or 'the permitted class,' probably a total stranger, shall receive the residue. We do not believe that is the intention of the act, and we do not believe that it so provides. Benefits under such a policy of insurance as we have here first accrue to the designated beneficiary, who has but a lifetime interest, subject to certain limitations, and then to all of the beneficiaries in the order of their priority 'within the permitted class.' All of these last-mentioned beneficiaries have an inchoate or prospective benefit, and, if finally they do realize from the insurance, it mush be as beneficiaries and not as heirs at law. The payment of the residue into the estate of the insured is only procedural, and is nevertheless to be distributed only to persons 'within the permitted class.'

This court now feels that the proceeds of the insurance policy should be distributed, in the estate of LeRoy W. Cross, to those living at the time of the...