Sehrt v. Sehrt

• Decision Date: 24 March 1960
• Citation: 3 Cal.Rptr. 555,179 Cal.App.2d 167
• Court: California Court of Appeals Court of Appeals
• Parties: Alice H. SEHRT, a minor, James W. Sehrt, a minor, by and through their Guardian ad litem, Maureen V. Guffey, and Maureen V. Guffey, an individual, Plaintiffs and Appellants, v. Lowell O. SEHRT and Alice G. Sehrt, Defendants and Respondents. Civ. 18654.

Page 555

3 Cal.Rptr. 555

179 Cal.App.2d 167

Alice H. SEHRT, a minor, James W. Sehrt, a minor, by and through their Guardian ad litem, Maureen V. Guffey, and Maureen V. Guffey, an individual, Plaintiffs and Appellants, v. Lowell O. SEHRT and Alice G. Sehrt, Defendants and Respondents.

Civ. 18654.

District Court of Appeal, First District, Division 2, California.

March 24, 1960.

Rehearing Denied April 22, 1960.

Marvin Stender, San Jose, William A. Struthers, Jr., Livermore, for appellants.

Broun, King & Peixoto, Marvin A. Peixoto, Fremont, for respondents.

KAUFMAN, Presiding Justice.

This is an appeal from a judgment in an action to impress a trust upon the proceeds of a National Service Life Insurance policy, and said action was filed by the plaintiffs, the daughter and son, respectively, of the deceased Winston James Sehrt, against their paternal grandparents, Lowell O. and Alice G. Sehrt, who were the beneficiaries named in the policy, and by plaintiff Maureen V. Guffey. The appeal is from a judgment entered on October 10, 1958, in favor of the defendants entered on an order sustaining a general demurrer to the plaintiffs' first cause of action, without leave to amend. The only issue on appeal is whether the plaintiffs' first cause of action is barred by the applicable provisions of Title 38 of the United States Code, then in effect. ¹

The plaintiffs alleged in their first cause of action that their mother and Winston James Sehrt were married on November 16, 1946, and that they were the lawful issue of this marriage; that on or about April 5, 1956, their parents entered into a written property settlement agreement whereby Winston James Sehrt promised to make and keep the plaintiffs as beneficiaries of a paid-up $10,000 National Service Life Insurance policy on his life; and that the purpose and intent of the property settlement agreement was to provide for the support and care of the minor plaintiffs in the event of the death of their father and also to take care of his concurrent duty to support them. This property settlement agreement was approved and confirmed and made part of an interlocutory decree of divorce between their parents, granted about May 11, 1956, and further approved and confirmed and made part of a final decree of divorce on or about May 15, 1957. On October 8, 1957, Winston James Sehrt died. At that time, the respondents were the designated beneficiaries of the $10,000 National Service Life Insurance policy and this amount was paid to them; and that at this time they did not give any consideration for their designation as beneficiaries and received the $10,000 with full knowledge of the rights of the plaintiffs therein.

The court's order sustaining the demurrer reads in part as follows:

'As to the first cause of action, the Court is of the opinion that under the Wissner case, and also Kauffman v. Kauffman, 93 C[al.]A[pp.]2d 808 , the general demurrer should be sustained, without leave to amend.

'Plaintiffs have now alleged three times the same matters in the first cause of action and therefore have indicated no disposition whatever to amend the first cause of action.

'The Court is of the opinion that there is no way that the minor plaintiffs can bring themselves within any exceptions to the provisions of Section 38 U.S.C.A., Section 3001. ^*

'The minor plaintiffs here are not seeking to enforce an obligation of support which the decedent owed them. His obligation to support the minor plaintiffs terminated with his death. He was not under any legal obligation to provide insurance for his minor children after his death. The property settlement agreement is in effect an assignment of the proceeds of the insurance policy, no more, no less; and as said in Kauffman v. Kauffman, supra [93 Cal.App.2d at] page 814 : 'and is therefore not enforceable against the defendant beneficiary'. The children acquired no vested rights whatever in the proceeds of the insurance policy.

'The Court is of the opinion that the general demurrer to the first cause of action should be sustained, without leave to amend.'

On appeal, the plaintiffs argue that the above interpretation is erroneous because: 1) The Kauffman case is distinguishable on its facts and was decided prior to Wissner v. Wissner, 338 U.S. 655, 70 S.Ct. 398, 94 L.Ed. 424; 2) Their claim to support falls within the 'higher duty' exception of former section 454a of Title 38 U.S.C.A. There is no merit in these arguments.

At the time relevant here, the applicable statutory provisions were sections 454a and 816 of Title 38 U.S.C.A. (1954 Ed.) [In the subsequent revision, these provisions were incorporated into sections 3101, 718 and 788 of Title 38 U.S.C.A. (1959 Ed.).] The provisions here pertinent are as follows:

Former section 454a of Title 38 U.S.C.A. (1954 Ed.) provided: 'Payments of benefits due or to become due shall not be assignable, and such payments made to, or on account of, a beneficiary under any of the laws relating to veterans * * * shall be exempt from the claims of creditors, and shall not be liable to attachment, levy, or seizure by or under any legal or equitable process whatever, either before or after receipt by the beneficiary * * *.' (Emphasis supplied.)

Former section 816 of Title 38 U.S.C.A. (1954 Ed.) provided as far as relevant:

'The provisions of sections 101-104, 131-134, 450, 454a, and 556a of this title, insofar as they are applicable, shall apply to the provisions of this subchapter: Provided, That assignments of all or any part of the beneficiary's interest may be made by a designated beneficiary to a widow, widower, child, father, mother, grandfather, grandmother, brother, or sister of in the insured, when the designated contingent beneficiary, if any, joins the beneficiary in the assignment, and if the assignment is delivered to the Veterans' Administration before any payments of the insurance shall have been made to the beneficiary * * *.'

Both sides here concede that the leading case in point in the interpretation of the above provisions in this state is Kauffman v. Kauffman, 93 Cal.App.2d 808, 210 P.2d 29, decided in 1949 in the Fourth Appellate District. In that case, the plaintiffs, the son and daughter of a deceased veteran sought to impress a trust on the proceeds of a U. S. War Risk Insurance Policy, ² which had been distributed to the named beneficiary, their stepmother and the second wife of the deceased. The trial court found that the deceased and his first wife had previously entered into a property settlement agreement which provided that the first wife should continue as the beneficiary of the policy until the final decree of divorce; after the final decree of divorce, the plaintiffs were to be entered as beneficiaries. A final decree of divorce was entered and the deceased (who had by that time married the second wife), changed the policy to provide that the second wife should be the sole beneficiary. On the death of the veteran, the government paid the proceeds of the policy to the second wife and the action was filed. In affirming the judgment in favor of the defendant-second wife, the court said at page 814 of 93 Cal.App.2d, at page 33 of 210 P.2d:

'We conclude that the property settlement agreement was an assignment of the proceeds of the policy in question, Chilwell v. Chilwell, 40 Cal.App.2d 550, 553, 105 P.2d 122; that such an assignment is prohibited by the terms of the federal statute, § 454a, supra, and is therefore not enforceable against the defendant beneficiary. Lewis v. United States, 3 Cir., 56 F.2d 563; Von Der Lippi-Lipski v. United States, 55 App.D.C. 202, 4 F.2d 168; Bradley v. United States, 10 Cir., 143 F.2d 573; Tompkins v. Tompkins, 132 N.J.L. 217, 38 A.2d 890; Yake v. Yake, 170 Md. 75, 183 A. 555; Robertson v. McSpadden, D.C., 46 F.2d 702; United States v. Williams, 302 U.S. 46, 50, 58 S.Ct. 81, 82 L.Ed. 39.

'The provision in § 454a that the payments and benefits due or to become due are exempt from taxation and the claims of creditors, and are not subject to legal or equitable process indicates that Congress intended to control the title to such payments and benefits both before and after payment. This control and the provisions of the section have been recognized and enforced. Barton v. United States, D.C., 75 F.Supp. 703, 705; Carrier v. Bryant, 306 U.S. 545, 548, 59 S.Ct. 707, 83 L.Ed. 976.'

Plaintiffs' first argument here in that the above is not controlling because it was decided before Wissner v. Wissner, 338 U.S. 655, 70 S.Ct. 398, 94 L.Ed. 424. In that case, the policyholder had named his mother as the beneficiary of his National Service Life Insurance policy. The accrued premiums were assumed to have been paid with community funds, and on the death of the insured, his widow sought to recover one-half of the proceeds of the policy. The California courts held (Wissner v. Wissner, 1949, 89 Cal.App.2d 759, 764-770, 201 P.2d 837) ³ that as the premiums were paid from community funds in which the widow had a vested one-half interest, the federal government had no power to provide by section 454a that payments made to a beneficiary of a National Service Life Insurance policy were to be exempt from the claims of the widow of the deceased insured to the right vested in her under the laws of this state after their receipt by the beneficiary and that such a provision would constitute the taking of private property without due process of law in violation of the U. S. Constitution.

In reversing the California court, the Supreme Court of the United States pointed out that the widow made no claims for premiums but sought the proceeds of the policy, and it was unnecessary to decide whether California was entitled to call army pay community property. The court further declared at pages 658 and 659 of 338 U.S., at page 399 of 70 S.Ct.:

'We are of the opinion that the decision below was incorrect. The National Service Life Insurance Act is the...