Tanner v. Ervin

• Decision Date: 02 July 1959
• Docket Number: No. 245,245
• Court: North Carolina Supreme Court
• Parties: Mrs. Mildred G. TANNER v. Paul R. ERVIN, Executor of the Estate of Ernest M. Tanner.

Page 460

109 S.E.2d 460

250 N.C. 602

Mrs. Mildred G. TANNER v. Paul R. ERVIN, Executor of the Estate of Ernest M. Tanner.

No. 245.

Supreme Court of North Carolina.

July 2, 1959.

David J. Craig, Jr. and Guy T. Carswell, Charlotte, for plaintiff, appellee.

W. Pinkney Herbert, Jr., and McDougle, Ervin, Horack & Snepp, Charlotte, for defendant, appellant.

PARKER, Justice.

Defendant has two assignments of error: one to the Judge's conclusion of law, and the other to the judgment.

All these U.S. Savings Bonds contain proper references to the Acts of Congress and to the Circulars and Treasury Regulations under which they are issued, which Regulations are made a part of the bonds by reference.

In the case sub judice four of these bonds each with a value at maturity of $1,000, were issued in February 1942, and four similar bonds were issued in December 1942. Two similar bonds were issued in July 1943, and one similar bond in September 1943. One similar bond was issued in July 1944, and another similar bond in December 1944. One similar bond was issued in June 1945, and two similar bonds in December 1945.

The Code of Federal Regulations, Cumulative Supplement, Book 6, 1944, Title 31, Chapter II, Part 315, Subpart K, § 315.32, specifies the manner in which these bonds registered in the names of "Mr. Ernest M. Tanner or Mrs. Mildred M. (sic) Tanner" as co-owners during the year 1942 shall be paid. § 315.32(a) provides payment will be made to either co-owner upon his individual request during the lifetime of both. § 315.32(b) provides, "if either co-owner dies without having presented and surrendered the bond for payment to a Federal Reserve Bank or the Treasury Department, the surviving co-owner will be recognized as the sole and absolute owner of the bond, and payment will be made only to him."

Identical provisions and Regulations apply to the two bonds issued in July 1943 and to the one bond issued in September 1943. Code of Federal Regulations, 1943 Supplement, Book 1, 1944, Title 31, Chapter II, Subchapter B, Part 315, Subpart K, § 315.32(a) and (b).

Identical provisions and Regulations apply to the two bonds issued in 1944. Code of Federal Regulations, 1944 Supplement, Book 2, 1945, Title 31, Chapter II, Sub-chapter B, Part 315, Subpart K, § 315.32(a) and (c).

Substantially identical provisions and Regulations apply to the three bonds issued in 1945. Code of Federal Regulations, 1945 Supplement, Book 3, 1946, Title 31, Chapter II, Subchapter B, Part 315, Subpart L, § 315.45(a) and (c).

The rule followed by a majority of the Courts, including North Carolina, frequently called the "majority rule," with respect to rights in United States Savings Bonds registered under Treasury Regulations in the names of two individual co-owners in the alternative, is that, upon the death of one of the co-owners, the surviving co-owner is vested with the sole ownership in such bonds, at least in the absence of fraud or other inequitable conduct on the part of the survivor. Ervin v. Conn, 225 N.C. 267, 34 S.E.2d 402; Watkins v. Shaw, 234 N.C. 96, 65 S.E.2d 881; Hubbard v. Wiggins, 240 N.C. 197, 206, 81 S.E.2d 630, 635-636; Annotation 37 A.L.R.2d, Rights upon death of co-owners of United States Savings Bonds, II, Right of surviving co-owner generally, § 3, Majority View, (a) Generally, pp. 1223-1225, where many cases are cited. See also Jones v. Callahan, 242 N.C. 566, 89 S.E.2d 111; Wright v. McMullan (Wright v. Wright), 249 N.C. 591, 107 S.E.2d 98, where the terms of the bonds fix the legal title to the bonds as between the government and the purchaser of the bonds, but these are not cases where the bonds were issued in the names of two individual co-owners in the alternative. There is a minority view, for which see the same A.L.R. annotation, § 5, Minority View, pp. 1233-1236.

The principal basis for the majority view is that solution of the question as to the property rights of the surviving co-owner in a United States Savings Bond is one of contract, and that the Treasury Regulations having the force and effect of federal law, become a part of the bond as a contract between the purchaser and the federal government, and fix legal title to the bond, and are determinative of the property rights of the parties to the bond. Ervin v. Conn, supra; Annotation 37 A.L.R.2d, § 4, pp. 1229-1233, where many cases are cited.

"The contract between the United States and a purchaser of government bonds fixes legal title to the bonds for the purpose of protecting the government against suits involving title, but does not and should not affect other legal rights of third parties or change settled rules of law not necessary to effectuate its purpose." 91 C.J.S. United States § 126, p. 318.

In the case of In re Hendricksen's Estate (Rohn v. Kelley), 156 Neb. 463, 56 N.W.2d 711, 719, certiorari denied Kelley v. Rohn, 346 U.S. 854, 74 S.Ct. 68, 98 L.Ed. 368, $10,000 Series G. United States Savings Bonds were issued in the names of Mrs. Florence Hendricksen (mother) or Ethel Kelley (daughter) as co-owners. Ethel Kelley, the surviving co-owner had, during her mother's lifetime and for a valuable consideration, sold, assigned and transferred to her mother any interest she may have or purport to have in these bonds. The instrument of assignment recites: "Ethel Kelley further states that she had no interest in these bonds at the time her name was placed thereon and agrees that she shall have only such interest in the bonds as may be given her under the will of Florence Hendricksen." The Court held that the executor of the mother's estate was entitled to the proceeds of the bonds to the exclusion of any interest in the surviving co-owner other than as provided in the will. In affirming the judgment below the Court said:

"From an examination of the cases cited by the defendant we are unable to find any case in which a conveyance by one co-owner of savings bonds to another was involved. For the most part the cases cited by the defendant refer to a situation where no positive act of the parties themselves, those who are co-owners of the bonds, intervenes between the time the bonds are issued and the time the dispute arises. The government would have no interest as to how the assets of Florence Hendricksen's estate would be distributed, or that by the last will of Florence Hendricksen, Ethel V. Kelley had no further rights in the estate so long as she retained the proceeds of the bonds. It seems clear that the federal laws and regulations are not intended to interfere with the positive act of two co-owners of bonds by which one conveys her interest in them to the other. In the instant case, as shown by the evidence, Ethel V. Kelley assigned all her right, title, and interest in the bonds to her mother during her mother's lifetime, and for a valuable consideration. The evidence also shows that she acknowledged that the proceeds of the bonds constituted part of the assets of her mother's estate, and her assignment of the bonds clearly indicates such to be true.

"The government's interest is a contractual one. Its obligation was to pay either of the co-owners the amount agreed upon as shown by the bonds upon their proper presentation, in compliance with the federal law. When the Treasurer of the United States satisfied the government's obligation by paying the proceeds of the bonds to Ethel V. Kelley, the government's interest in the matter ended. The government is in no sense a party to this litigation, and under the facts and circumstances could in no event have any interest in the result of this litigation.

"The court decreed that Ethel V. Kelley deliver the proceeds which she obtained from cashing the bonds to the executor in accordance with her assignment of the bonds for a consideration to her mother, whereby she agreed to take her share of the estate as provided for by her mother's will. There is nothing in this phase of the decree contrary to the laws of the United States or the regulations of the United States Treasury Department. Those laws and regulations do not prevent the declaration of a resulting trust in the proceeds of the bonds as shown under the facts in this case."

In District of Columbia v. Wilson, 94 U.S.App.D.C. 399, 216 F.2d 630, 631, the decedent John Randolph Bolling was the brother of Mrs. Wilson, and Mrs. Wilson, at various times, authorized her brother to purchase $93,000 at maturity value of U.S. Savings Bonds, Series G, to be issued in his name payable to her at his death. The District of Columbia contended there had been a taxable transfer within the District of Columbia inheritance tax statute, and that such a finding is dictated by the Treasury Regulations concerning U.S. Bonds. The Court affirmed a judgment of the District of Columbia Tax Court holding that Mrs. Wilson was entitled to a refund of inheritance tax paid with respect to the $93,000 of U.S. Bonds assessed under the District of Columbia Statute. In its opinion the Court said:

"Certainly the legal title to the bonds in question stood in the name of the decedent at the time of his death, and Mrs. Wilson acquired it on his death. If we may look only at legal title, excluding the actual, equitable, or true ownership, it follows that there was a taxable transfer. But the principle is firmly established that taxation is concerned with real ownership rather than with refinements of title. * * *

"It (District of Columbia) relies on 31 Code Fed.Regs. § 315.2 (Supp.1945), which provides: ' * * * The form of registration used must express the actual ownership of and interest in the bond and, except as otherwise specifically provided in the regulations in this part, will be considered as conclusive of such ownership and interest. * * *' We do not think, however, that this regulation is applicable as between the brother and sister here. Mrs. Wilson, and not decedent, had furnished the entire funds used to buy the bonds. And the terms of the letter...