United States v. Short

• Decision Date: 12 October 1956
• Docket Number: No. 14668.,14668.
• Citation: 240 F.2d 292
• Parties: UNITED STATES of America, Appellant, v. Margaret D. SHORT, as Administratrix of the Estate of Ethel Grace Short, deceased, Appellee. James Harvey SHORT, individually and as Administrator of the Estate of Irving Ritchie Short, deceased, Appellant, v. Margaret D. SHORT, as Administratrix of the Estate of Ethel Grace Short, deceased, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

240 F.2d 292 (1956)

UNITED STATES of America, Appellant, v. Margaret D. SHORT, as Administratrix of the Estate of Ethel Grace Short, deceased, Appellee.

James Harvey SHORT, individually and as Administrator of the Estate of Irving Ritchie Short, deceased, Appellant, v. Margaret D. SHORT, as Administratrix of the Estate of Ethel Grace Short, deceased, Appellee.

No. 14668.

United States Court of Appeals Ninth Circuit.

October 12, 1956.

COPYRIGHT MATERIAL OMITTED

Warren E. Burger, Asst. Atty. Gen., Melvin Richter, Julian H. Singman, Attys., Department of Justice, Washington, D. C., Lloyd H. Burke, U. S. Atty., Richard C. Nelson, Asst. U. S. Atty., San Francisco, Cal., for appellant the United States.

Frank V. Cornish, Francis T. Cornish, Cornish & Cornish, Berkeley, Cal., for appellant James Harvey Short.

George Clark, Clark & Morton, Berkeley, Cal., for appellee.

Before STEPHENS and FEE, Circuit Judges, and JAMES M. CARTER, District Judge.

JAMES M. CARTER, District Judge.

This case involves a contest over the proceeds of a National Service Life Insurance Policy, and raises the question as to whether Sec. 8.91(b) of the Regulations of the Veterans Administration, 13 F.R. 7108, 38 C.F.R. 8.91(b) (1949) is a valid regulation, is consistent with the statute concerning National Service Life Insurance, and is necessary or appropriate to carry out the purposes of such statute.

The facts are not in dispute and the case was tried below on a stipulated record. A memorandum opinion, Short v. United States, D.C.Cal.1954, 123 F.Supp. 414, 416, constituted the findings and conclusions, and judgment was entered thereon.

Irving Short, while in the United States Army in World War II, was issued a National Service Life Insurance policy for $10,000 effective January 1, 1943. On August 25, 1949, the insured changed the beneficiary of his policy so that thereafter his mother, Ethel G. Short, was the principal beneficiary and his brother James Harvey Short and the Berkshire Industrial Farm, a charitable institution, were the first contingent beneficiaries, each to the extent of $5000. However, at no time did the insured select any method of payment to be made to the beneficiaries, i. e., did not provide whether payment should be in a lump sum or installments.¹

Irving Short was honorably discharged from the Army with rank of Captain, and while attempting to re-enlist in connection with the war in Korea, he died of polio in an Army hospital in Tokyo, Japan, on August 30, 1950.

Ethel G. Short, his mother, filed a claim with the Veterans Administration in September, 1950, seeking payment of the policy. Delays occurred in securing an official report of death, which was finally received July 3, 1951. Meanwhile on June 14, 1951, Ethel G. Short died. She received nothing from the policy during her lifetime.

After Mrs. Short's death the Veterans Administration informed her attorneys that according to its regulations it had no choice but to pay the proceeds of the policy, including installments accruing after the insured's death and before Mrs. Short's death, to the designated co-contingent beneficiaries. On November 29, 1951, the Director of Dependents and Beneficiaries Claims Service made a ruling to the same effect. On May 2, 1952, that ruling was affirmed by Board of Veterans' Appeals.

Margaret D. Short was appointed Administratrix of the Estate of Ethel G. Short, deceased, and as such commenced this action against the United States, James Harvey Short, individually and as Administrator of the Estate of Irving Short, the insured, and Berkshire Industrial Farm, seeking declaratory relief. Answers were filed by all defendants. The answer of defendant James Harvey Short set forth his claim as an individual, to-wit, a contingent co-beneficiary and his claim as Administrator of the estate of the assured.

After trial on the stipulated facts, the district court entered judgment for Margaret D. Short as Administrator of the Estate of Ethel G. Short (the principal beneficiary) for the amount of the insurance benefits accrued but unpaid prior to the death of Ethel G. Short,² upon the ground that the Veterans Administration's regulation, Sec. 8.91(b) which the court said 123 F.Supp. 416 "specifically covers the case", was not supported by the statute or was otherwise invalid. The judgment further provided that the balance of the proceeds of the insurance policy be paid one-half each to the contingent co-beneficiaries, James Harvey Short and Berkshire Industrial Farm.

Only the United States appealed, although James Harvey Short individually and as Administrator of the estate of the insured is carried in the caption of the transcript of record and briefs as an appellant. He also filed a reply brief to that of the United States. He is a proper appellee.

Although the contest over the proceeds of the policy is actually between parties other than the United States, the United States being in reality a stake-holder, still the United States has a legitimate and proper interest in supporting lawfully promulgated regulations and in carrying out the will of Congress, United States v. Snyder, 1949, 85 U.S.App. D.C. 198, 177 F.2d 44, 49; United States v. Hoth, 9 Cir., 207 F.2d 386; and see: United States v. Leverett, 5 Cir., 1952, 197 F.2d 30 (where the United States, as appellant, secured a reversal).

Statute and Regulation Involved

Section 602(u) of the National Service Life Insurance Act of 1940, as added by § 9 of the Act of August 1, 1946, 60 Stat. 781, as amended by the Act of May 23, 1949, 63 Stat. 74, 38 U.S.C.A. § 802(u), provides:

"With respect to insurance maturing on or susequent to August 1, 1946, in any case in which the beneficiary is entitled to a lump-sum settlement but elects some other mode of settlement and dies before receiving all the benefits due and payable under such mode of settlement, the present value of the remaining unpaid amount shall be payable to the estate of the beneficiary; and in any case in which no beneficiary is designated by the insured, or the designated beneficiary does not survive the insured, or a designated beneficiary not entitled to a lump-sum settlement survives the insured, and dies before receiving all the benefits due and payable, the commuted value of the remaining unpaid insurance (whether accrued or not) shall be paid in one sum to the estate of the insured: Provided, That in no event shall there be any payment to the estate of the insured or of the beneficiary of any sums unless it is shown that any sums paid will not escheat."

Section 8.91(b) of the Regulations of the Veterans Administration, 13 F.R. 7108, 38 C.F.R. 8.91(b) (1949), provides:

"If the principal beneficiary of National Service life insurance maturing on or after August 1, 1946, does not survive the insured or if the principal beneficiary not entitled to a lump-sum settlement survives the insured but dies before payment has commenced, the insurance shall be paid to the contingent beneficiary in accordance with the provisions of § 8.77."

The Questions Presented

1. Whether § 8.91(b) of the Veterans Administration Regulations — providing that insurance installments accrued but unpaid to a deceased principal beneficiary not entitled to lump-sum settlement should be paid to the contingent beneficiary — is consistent with § 602(u) of the Act.

2. Whether § 8.91(b) of the Veterans Administration Regulations is necessary or appropriate to carry out the purposes of the Act.

3. Whether a regulation of the Veterans Administration must be given effect by the court if it is not inconsistent with the National Service Life Insurance Act and is necessary or appropriate to carry out its purposes, notwithstanding that the regulation may be "legislative" in nature.

4. Whether the delay of the Veterans Administration in securing the official record of death has any bearing on the case.

I.

Sec. 8.91(b) of the Regulations is not inconsistent with Sec. 602(u) of the Act, 38 U.S.C.A. § 802(u), and is in fact consistent therewith.

Sec. 602(u) of the Act, 38 U.S. C.A. § 802(u), provides that when "a designated beneficiary not entitled to a lump-sum settlement * * * dies before receiving all the benefits due and payable * * * the remaining unpaid insurance (whether accrued or not) shall be paid in one sum to the estate of the insured". The word "beneficiary" is used in the statute in the singular. We hold that the phrase "designated beneficiary" includes contingent as well as principal beneficiaries. This is the construction which has been followed by the Veterans Administration since the enactment of the statute, Regulations, Sec. 10:3489, 11 F.R. 9285, 38 C.F.R. 10:3489 (Supp.1946) 38 C.F.R. 8.89 (1949). The trial court herein also so held. Washburn v. United States, D.C.Mo.1945, 63 F.Supp. 224, gave the same construction to "beneficiary" used in Sec. 602(g) of the Act, 38 U.S.C.A. § 802(g).

Without reading the words "designated beneficiary" to include principal and contingent beneficiaries, Sec. 602(u) of the Act, 38 U.S.C.A. § 802(u), does not cover or provide for the factual situation where contingent beneficiaries were named. Therefore the Regulation, Sec. 8.91(b) which was issued to provide for this contingency, cannot be inconsistent with the Act.

In fact the regulation 8.91(b) is consistent with the Act and framed to carry out its intent, if the word "beneficiary" also includes "contingent beneficiaries."

Sec. 602(u) of the Act concerns situations involving both lump-sum settlements and installment payments. The material therein falls into two parts, but the results are different. In one instance the estate of the beneficiary is ultimately preferred, in the other the estate of the insured.

The first part of Sec. 602(u) concerns a "beneficiary (who) is entitled to a lump-sum settlement but elects some other mode of settlement and dies before receiving all the benefits due * * *". The remaining insurance then goes to the benefic...