Moore's Adm'R v. Marshall

• Decision Date: 11 October 1946
• Citation: 302 Ky. 729
• Parties: Moore's Adm'r v. Marshall.
• Court: United States State Supreme Court — District of Kentucky

302 Ky. 729

Moore's Adm'r v. Marshall.

Court of Appeals of Kentucky.

May 24, 1946.

Rehearing denied October 11, 1946.

1. United States. — United States savings bonds authorized by Second Liberty Bond Act and issued pursuant to specified Treasury Department circular and under regulations making such bonds non-transferable were not subject to gift inter vivos, so that, where owner attempted such gift, his administrator, after owner's death, was entitled to recover bonds from donee. Second Liberty Bond Act, sec. 1 et seq., 40 Stat. 288; 22, 31 U.S.C.A. sec. 757c.

2. United States. — Treasury Department regulations with reference to United States savings bonds are within authority conferred upon Secretary of Treasury by Congress, and have the force and effect of law and become a part of the contract between government and purchaser of bonds. Second Liberty Bond Act, sec. 1 et seq., 40 Stat. 288; 22, 31 U.S.C.A. sec. 757c.

3. United States. — The Second Liberty Bond Act was enacted for the dual purpose of obtaining money for the government and to encourage thrift and savings by small investors, the nontransferability feature being designed to accomplish the second objective. Second Liberty Bond Act, sec. 1 et seq., 40 Stat. 288; 22, 31 U.S.C.A. 757c.

4. United States. — The reference to gift taxes in Treasury regulation concerning United States savings bonds is intended to cover a case where purchaser of bonds has them registered in name of another and delivers them to such other, and such reference does not indicate that bonds once issued are to be made subject to a gift inter vivos. Second Liberty Bond Act, sec. 1 et seq., 40 Stat. 288; 22, 31 U.S.C.A. sec. 757c.

Appeal from Harlan Circuit Court.

R.L. Pope and C.D. Bell for appellant.

Astor Hogg and John Carter for appellee.

Before James S. Forester, Judge.

OPINION OF THE COURT BY CHIEF JUSTICE REES.

Reversing.

This appeal presents the novel question: Are United States Savings Bonds, Series D, transferable by gift inter vivos?

H.C. Moore died November 15, 1944, a resident of Harlan county, Kentucky. C.V. Owens qualified as administrator of Moore's estate, and on April 4, 1945, brought an action against Helen Marshall to recover possession of six $1,000 United States Savings Bonds which he alleged belonged to the estate of the decedent. In her answer the defendant admitted that the bonds were in her possession, but denied that she was wrongfully detaining them, and alleged that H.C. Moore, prior to his death, made an unqualified gift to her of the bonds and that she was the owner thereof. In his reply the plaintiff denied that his decedent had made gift of the bonds to the defendant, and in an amended reply alleged that they were nontransferable and were not such property as could be assigned, transferred or given away. On the trial the court submitted the case to the jury on the issue as to whether there had been a gift. The jury returned a verdict for the defendant, and plaintiff has appealed.

One of the grounds urged for reversal of the judgment is that the evidence failed to establish a gift inter vivos and was insufficient to take the case to the jury on that issue, but it is unnecessary to consider this ground in view of our conclusion that the bonds in question were not transferable by gift and that appellant's motion for a peremptory instruction to find for him should have been sustained.

The bonds in question are six United States Savings Bonds authorized by the Second Liberty Bond Act, approved September 24, 1917, 40 Stat. 288, and issued pursuant to Treasury Department Circular No. 596, dated December 15, 1938. They were purchased by H.C. Moore in March, 1940, were dated March 1, 1940, and mature ten years from issue date. The issue price of each bond is $750, and the maturity value is $1,000. On the face of each bond this appears:

"This bond is not transferable; and except as provided under said circular (Treasury Department Circular No. 596), it is payable, at maturity or on earlier redemption, only to the registered owner and upon the presentation and surrender of this bond with the request for payment duly executed on the back hereof, all in accordance with the provisions of said circular and the regulations prescribed from time to time thereunder."

Under the heading "Instructions to Owners" this appears:

"The request for payment must be signed in ink or indelible pencil by the registered owner in whose name the bond is inscribed or by such other person as may be entitled to payment under the regulations of the Treasury Department."

Paragraph 4 of Treasury Department Circular No. 596, dated December 15, 1938, reads:

"The savings bonds will not be transferable, and will be payable only to the owner named thereon, except in case of death or disability of the owner or as otherwise specifically provided in regulations prescribed from time to time by the Secretary of the Treasury (see paragraph 14), and in any event only in accordance with such regulations. Accordingly they may not be sold and may not be hypothecated as collateral for a loan. Savings bonds shall be valid only if inscribed with the owner's name and address, dated the first day of the month in which the issue price (or the application accompanied by remittance to cover the issue price) is received, and duly delivered by an authorized postmaster or other issuing agent; if issued by a postmaster they will bear the post-office dating (money-order) stamp, and if issued by another agent they will bear the dating stamp of the agent."

The pertinent part of Paragraph 5 of the same Circular reads:

"Each of the bonds issued hereunder will be entitled to such exemption from taxation as may be authorized by the law in effect on its issue date. Under the law in effect on the date of this circular (December 15, 1938) the bonds are exempt, both as to principal and interest, from all taxation now or hereafter imposed by the United States, any State, or any of the possessions of the United States or by any local taxing authority, except (a) estate or inheritance taxes, or gift taxes * * *."

We have not been referred to any decisions of a court of last resort, and we have found none in which the court considered the precise question presented by this appeal; namely, whether bonds of this type may be transferred by gift inter vivos. There are cases in which the courts have held that Postal Savings Certificates and other government obligations marked nontransferable may be the subject of a valid gift causa mortis. The appellee relies strongly on Dietzen v. American Trust & Banking Co., 175 Tenn. 49, 131 S.W. 2d 69, 72, where the court concluded that no Federal statute or regulation placed any prohibition upon the transfer by gift causa mortis of certain United States Savings Bonds and United States Postal Savings Certificates. The court pointed out the distinction between gifts causa mortis and gifts inter vivos, and based its decision on the ground that no Federal statute or regulation prohibited the transfer by gift causa mortis of the bonds and certificates there involved. In the course of the opinion, the court said:

"While donatio causa mortis is not testamentary in character, nevertheless it bears some resemblance thereto in that it is a disposition of property in contemplation of death. We think that under a fair interpretation of the regulation there...