10. States 4

A state escheat statute is based upon state sovereignty and is a direction for the devolution of property which cannot prevail over federal Constitution, or over a federal act which does not deprive one of property without due process of law. Probate Code, § 1027; World War Veterans' Act of 1924, § 21, as amended, 38 U. S. C. A. § 450; U. S. C. A. Const. Amend. 10.

Where the United States was entitled to the return of unexpended balance of war veteran's pension upon his death intestate without heirs, the funds could not revert to the United States until the five-year period fixed by state statute had elapsed. Probate Code, §§ 231, 1027; World War Veterans' Act of 1924, § 21, as amended, 38 U. S. C. A. § 450.

Appeal from Superior Court, San Francisco County; T. I. Fitzpatrick, Judge. Proceeding in the matter of the estate of Carl A. Lindquist, also called Carl Lindquist, deceased, between the United States of America and the State of California and another. From a decree adjudging that certain funds in the estate escheat to the State of California, the United States appeals.

Decree reversed and claim of the United States approved.

Francis M. Shea, Asst. Atty. Gen., Frank J. Hennessy, U. S. Atty., and W. F. Mathewson, Asst. U. S. Atty., both of San Francisco, Cal., and Leavenworth Colby, Atty. Department of Justice, of Washington, D. C., for appellant.

Robert W. Kenny, Atty. Gen., and Clarence A. Linn, Deputy Atty. Gen., for respondent State of California.

Henry F. Boyen, of San Francisco, for respondent Katz, Public Adm.
WARD, Justice.

Appeal from a decree of the superior court of the City and County of San Francisco adjudging that certain funds in the estate of Carl A. Lindquist, deceased, escheat to the State of California.

The facts appear as follows: Lindquist, a veteran of the United States Navy, was declared incompetent and the Pacific National Bank of San Francisco was appointed guardian of his estate. Shortly thereafter the Veterans' Administration awarded him a pension under the provisions of the Act of August 13, 1935, c. 521, 49 Stat. 614, 38 U. S. C. A. § 368, in the amount of $60 a month, and this was regularly paid to the guardian. At the time of the veteran's death his estate, consisting entirely of an unexpended balance of pension payments and amounting to the sum of $1,445.87, was turned over to the public administrator, and the superior court of the State of California in and for the City and County of San Francisco sitting in probate ordered distribution of the residue thereof to the State of California as escheated property. (California Probate Code, sec. 1027.)

The main question presented is the construction of section 450 (3) of Title 38 U. S. C., 38 U. S. C. A. § 450 (3). The respondents contend that the act purports to lay down a rule of succession to property-a matter in which the federal government is without authority. The act so far as pertinent here provides as follows:

"Where any payment of compensation, adjusted compensation, pension, emergency officers' retirement pay, or insurance under any Act administered by the Veterans' Administration is to be made *** to a person mentally incompetent, or under other legal disability adjudged by a court of competent jurisdiction, such payment may be made to the person who is constituted guardian, curator, or conservator by the laws of the State of residence of claimant, or is otherwise legally vested with the care of the claimant or his estate. **

"Authority is granted for the payment [from funds so derived] of any court or other expenses incident to any investigation or court proceeding for the appointment of any guardian, curator, conservator, or other person legally vested with the care of the claimant or his estate or the removal of such fiduciary and appointment of another, and of expenses in connection with the administration of such estates by such fiduciaries, or in connection with any other court proceeding hereby authorized, when such payment is authorized by the Administrator. * * *

"Provided further, That any funds in the hands of a guardian, curator, conservator, or person legally vested with the care of the beneficiary or his estate, derived from compensation, automatic or term insurance, emergency officers' retirement pay, or pension, payable under said Acts, which under the law of the State wherein the beneficiary had his last legal residence would escheat to

the State, shall escheat to the United States and shall be returned by such guardian, curator, conservator, or person legally vested with the care of the beneficiary or his estate, or by the personal representative of the deceased beneficiary, less legal expenses of any administration necessary to determine that an escheat is in order, to the Veterans' Administration, and shall be deposited to the credit of the current appropriations provided for payment of compensation, insurance, or pension."

The state contends that the pension was an outright, absolute and complete gift; that the statute above uses the term "escheat" in a technical sense to mean succession to property where there are no heirs; and that the statute constitutes an attempt by the Federal government to regulate the laws of succession of his state as to a particular type of property. It is admitted that the federal government has no power to pass laws regulating succession to property by citizens of the states, that being a power reserved by the Tenth Amendment to the states. The appellant contends that the word "escheat" as used in the statute does not have the technical, limited meaning urged by the respondents; that when the statute is read as a whole it has a broader meaning; that the obvious purpose, intent and meaning of the statute is that the federal government has not made the gift of a pension absolute and complete, but has retained in itself a contingent reversionary interest—that is, if the pensioner die possessed of any portion of the gift, and if he has not by will disposed of the interest, and if under the laws of the state the gift would otherwise escheat to the state, then the reversionary contingent interest of the federal government will vest.

[1] The word "escheat" under the old English feudal system relating to the lapsing or reversion of lands to the lord of the fee upon a failure of heirship has survived but outgrown its restricted meaning. The custom or practice was originally confined to land, but its scope has been enlarged to include personal property. 19 Am. Jur., p. 383, sec. 5. In the case of Inre Melrose Ave. in Borough of the Bronx, 234 N. Y. 48, 136 N. E. 235, 237, the court, in an opinion delivered by Justic Cardozo, said: "Escheat, as it survivies in the Constitution of New York, preserves the name but ignores the origin of its feudal prototype. In origin it was an incident, not of sovereignty, but of tenure. ***Escheat to-day is not the privilege of one, but the collective right of all when the individual right has failed."

In the United States, a state or some governmental agency is ordinarily the beneficiary of an escheat. In Canada, a province succeeds unless the Dominion by statute provides to the contrary. "As between the country or state of domicil and the country or state in which the property is located, real property escheats to the country in which the property is found, since every sovereign state has dominion over the land within its borders. In England it has been held that the personal property of an intestate dying without heirs, located in a foreign country, escheats to that country, and not to the country of domicil of the owner, the maxim 'mobilia Sequuntur personam' not applying, because the right claimed is not in the nature of a succession. However, in the United States it has been held that the state is not entitled by escheat to unclaimed property owned by non-residents within the state." 19 Am. Jur., p. 382, sec. 3. The United States government, in dealing with objects of its bounty, by statutory provision has applied the principle of escheat. In Tax Commission of Ohio v. Rife, 11 Ohio St. 83, 162 N. E. 390, 391, involving the question of exemption from taxation of insurance payable under an act of Congress known as the World War Veterans' Act, the following is set forth: ""That the compensation, insurance, and maintenance and support allowance payable under titles II, III, and IV, respectively, *** shall be exempt from all taxation. ***' 43 Stats. at L. 607, 613, c. 320, § 22, June 7, 1924 (38 U. S. C. A. § 454)." ***"that in cases when the estate of an insured would escheat under the laws of the place of his residence the insurance shall not be paid to the estate but shall escheat to the United States and be credited to the military and naval insurance appropriation. This section shall be deemed to be iin effect as of October 6, 1917.' 43 Stats. at L. 1302, 1310, c. 553, § 303, March 4, 1925 (38 U. S. C. A. § 514)." The court said, at pages 392, 393 of 162 N. E.:

"It is to be noted that there shall be no escheat to the state of Ohio, as would be the case in the event the state statutes controlled entirely; but by the Act of March 4, 1925, the insurance shall not be paid to the estate of the insured, but shall escheat to the United States and shall be credited to the United States government life insurance fund or the military and naval insurance appropriation, as may be appropriate. * * * This right to take this

property is by virtue of a contract between the United States government and the soldier, and does not arise by reason of the statutes of descent and distribution of this state, even though the government has seen fit to distribute such fund through the agency of an administrator acting under the statutes of descent and distribution of the state of Ohio.

"It is reasonable to assume that the purpose of Congress in making the payment to the administrator of the deceased soldier was for the benefit of the government, to relieve the government of the necessity of selecting and determining the next of kin of the deceased soldier to whom payment should be made, and to place this burden upon the administrator appointed in the state of the soldier's residence. The administrator becomes a mere trustee or conduit for the government to make the payments to the persons entitled to the same under the provisions of the federal law. The intestate laws do not operate upon the decedent's property, but are referred to in order to determine who shall take the proceeds of the insurance. Congress had a right to adopt the course of descent prevailing in the state of the residence of the soldier, and the proceeds of the insurance therefore pass under the federal act, the intestate laws of Ohio being adopted as a standard or guide for ascertaining the next of kin to whom payment shall be made."

[2] The deceased sailor herein had no vested right to a pension. In Abbott v. Morgenthau, 68 App. D. C. 83, 93 F. 2d 242, a case quite similar to the present, accumulated pension payments made to a guardian who had signed an application for his incompetent ward's admission to a veterans' home, were involved. At page 245 of 93 F. 2d, the court said: "It must be borne in mind that Felley had no vested interest or rights in the pension money. He had no vested legal right to a pension at all, for, as has been said time and time again, pensions are bounties which Congress has the right to give, to withhold, to distribute, or to recall, at its discretion. When, therefore, it is considered that Congress could annex whatever conditions it pleased whenever it pleased to the grant or the gratuity, it seems to us clear that it was competent for Congress to say, as it did say, that, if any one enjoyed the benefits of the home and was still a member of the home at the time of his death, his accumulated pension money should be distributed in a particular manner. Indeed, the provision in the act for distribution of the balance to certain limited relatives of the deceased pensioner was itself but another gratuity, and since, as we have pointed out, there is and can be no dissent to the proposition that Congress may give, withhold, distribute, or recall and change at will its gratuities, it seems beyond dispute that when it does so it is the duty of the courts to give effect to the congressional purpose." Writ of certiorari denied 303 U. S. 638, 58 S. Ct. 526, 82 L. Ed. 1098.

[3] The laws of the United States dealing with matters within its jurisdiction are supreme "and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." (U. S. Constitution, Art. VI, cl. 2.) Upon the state courts is often imposed the duty of enforcing federal laws, and in this connection they are likewise called upon to determine their constitutionality. If the terms of an act are constitutional, and due process is complied with, state agencies, judicial or otherwise, may with propriety and to the great convenience of the federal government lend their aid in their enforcement. Laws of the United States, when constitutional, are binding upon state courts (Tax Commission of Ohio v. Rife, supra), and should not be viewed as emanating from a foreign jurisdiction. The principle of cooperation, not competition, should be followed. Miller v. Municipal Court, 22 Cal. 2d. 142 P. 2d 297. Congress is required to establish adequate and exact standards for the practical administration and reasonable enforcement of an act, and Congress having done so, the state courts should assist and co-operate in any policy declared for all the states. Miller v. Municipal Court, supra.

That unexpended pension money, under the conditions enumerated in the statute, should be returned to its source and be used in further aid of veterans, is eminently just and equitable, and state agencies should accept the burden of aiding in the enforcement of the act unless the method of return is contrary to constitutional provision. In Beaver v. Short, D. C., 300 F. 113, the power to legislate relative to property constituting a gift from, or within the provisions of, the federal government is held to be exclusively within such government.

[4] If not prescribed by statute, a formal contract is not required to bind one in the disposition of his property upon his death. Keefe v. Keefe, 19 Cal. App. 310, 125 P. 929; Barr v. Ferris, 41 Cal. App. 2d 527, 107 P. 2d 269; Davis v.

Jacoby, 1 Cal. 2d 370, 34 P. 2d 1026; Wolf v. Donahue, 206 Cal. 213, 273 P. 547. [5] There is no doubt that if the pension statute requires the pensioner to contract that in certain contingencies the unused pension fund shall revert to the donor, that such contract is valid, and that no formal consent by the pensioner or his guardian is required, the statute itself plus acceptance of its benefits constituting the contract. United States v. Stevens, 302 U. S. 623, 58 S. Ct. 388, 82 L. Ed. 484, reversing Stevens v. United States, 1 Cir., 89 F. 2d 151, is similar to the present case except that in the Stevens case in his written application for admission to a national soldiers' home the applicant agreed that upon his death all of his personal property should pass to and vest in the Board of Managers of the home. (36 Stats. 736, 24 U. S. C. A. § 136.) Basing its decision primarily upon the Tenth Amendment to the Constitution the circuit court (89 F.2d 151) had held the act to be unconstitutional and void. In United States v. Stevens, 302 U. S. 623, at page 624, 58 S. Ct. 388, 82 L. Ed. 484, the question was concisely stated as follows: "Can the United States enforce a contract executed by an ex-soldier in order to obtain admission into the National Home for Disabled Volunteer Soldiers, which contract provides that upon the death of the veteran while a member of the Home, all his personal property shall pass to the Home subject to be reclaimed within five years by any legatee or person entitled to receive the property by inheritance?" The Supreme Court there said (302 U. S. at pages 626, 627, 58 S. Ct. at page 389, 82 L. Ed. 484): "The Court of Appeals was of the opinion that the act of Congress authorizing the contract was void as an interference with the reserved rights of the state of the veteran's legal domicile when he died (Massachusetts) in that 'it was at most but an attempt to make a future testamentary disposition of McGovern's property, when such a disposition could only be effected by will' " and held (302 U. S. at page 628, 58 S. Ct. at page 390, 82 L. Ed. 484): "Nothing in the record indicates that the agreement was not fairly and voluntarily entered into between the parties, or that it was inequitable, unjust, or not upon valuable consideration. Both parties were competent to make the contract. This contract is valid and enforceable." The statutory provision in the Stevens case specified "all personal property"; that in the present, applies to fund derived from "compensation, automatic or term insurance, emergency officers' requirement pay, or pension" only. (Italics added.) If the federal government simply by statute can lawfully create a contract that requires all the personal property of the pensioner to be paid over in certain circumstances, it can also provide that as to the particular fund that is the subject of the gift, the donor retains a contingent interest. That is all the statute here involved attempts to do.

[6] The statute herein makes no provision for consent by the veteran; the pension, if accepted, must be held in accordance with the statutory provisions applying to a gift, bounty or periodical allowance, the granting of such pension being sometimes referred to as part consideration of a contract of employment, or as additional payment for past meritorious service. While in California it has been held that upon the granting of a pension to an employee a vested right accrues to the recipient, this simply means that the vesting is subject to contingencies, which may cause a discontinuance of payment, such as conviction of a felony or an automatic decrease in amount (Douglas v. Pension Board, 75 Cal. App. 335, 242 P. 756; Klench v, Board of Pension Fd. Comm'rs. 79 Cal. App. 171, 249 P. 46; Jordan v. Retirement Board, 35 Cal. App. 2d 653, 96 P. 2d 973) if the pension statute so provides. Likewise, a legislative body may provide that an unexpended portion of an allowance may revert or escheat to a designated governmental body. United States v. Stevens, supra. This rule applies to pensions. Abbott v. Morgenthau, supra.

[7] The fact that the veteran herein had been declared an incompetent makes no difference in the determination of the issues involved. In the abbott case, the veteran was insane and, as regards the absence of a requirement of consent, the court declared that "It is a self-executing act." In the present case the incompetent was represented by a duly appointed and qualified guardian. The receipt of the pension, a benefit to the incompetent, was one of the elements in a quasi contractual transaction which, it may be assumed, was approved by the superior court in the guardianship proceeding. The decree of distribution sets forth the appointment of the guardian, the award of the pension, the period of payment to the guardian and that the entire estate consisted of money received from the Veterans' Administration.

[8] California has no right, by virtue of its sovereignty, to escheat the funds herein merely because they are found within the jurisdiction of the state. First Nat'l Bank v. California, 262 U. S. 366, 43 S. Ct. 602, 67 L. Ed. 1030. They

were derived from the United States government as an absolute gift only in the sense that the guardian might have expended the full amount had it been necessary. The gift was limited to the extent that if the veteran died intestate and without heirs, any unexpended balance reverted to the donor. There is nothing inequitable in this provision of the federal statute. As between state and federal governments, there can be no question of the justice of the federal claim. Had the veteran in this case not been declared an incompetent he could have confided his pension to the keeping of the treasurer of a veterans' home, reserving the right to withdraw and expend it as he desired, but with an agreement on his part that if unexpended at the time of his death it should be retained by the home. In Mauck v. United States, 9 Cir., 94 F. 2d 745, at page 746, using the Stevens case as authority, the court said:

"It was pointed out in the Stevens case that the statute requiring the contract did not operate to invade the reserved powers of the state over the course of intestate descent and distribution, inasmuch as the law of the veteran's domicile, Massachusetts, permitted and enforced contracts directing the distribution of the promisor's property after his death.

"Such is also the law in California. Nichols v. Emery, 109 Cal. 323, 331, 41 P. 1089, 50 Am. St. Rep. 43; Booth v. Oakland Bank, 122 Cal. 19, 54 P. 370; Treadway v. Board of Directors, 14 Cal. App. 75, 85, 86, 111 P. 111, hearing by Supreme Court denied; Monsen v. Monsen, 174 Cal. 97, 99, 162 P. 90; cf. Cal. Civ. Code, § 1624, subd. 6; Levi v. Murrell, 9 Cir., 63 F. 2d 670, 671."

[9] The entrusting of an incompetent pension's funds to the management of a guardian appointed by a state court has been recognized by the Congress of the United States as proper. Hines v. Stein, 298 U. S. 94, 56 S. Ct. 699, 80 L. Ed. 1063. The necessity of a guardian applying for a pension on behalf of an incompetent veteran is apparent. World War Veterans' Act, 1924, sec. 21, 43 U. S. Stats. pp. 607, 613, as amended, 38 U. S. C. A. § 450. Whatever terms of a contract the veteran would be compelled to make, expressly or impliedly, in order to obtain the pension, they bind the guardian with equal force.

The objection that the incompetent veteran cannot be considered as having consented to the condition of the gift is without merit. This conclusion is strengthened when the holding in Abbott v. Morgenthau, supra, is considered, namely, that the terms of the statute became operative upon the award and acceptance of the pension, and that formal consent to reversion of the unexpended funds was not necessary.

The word "escheat" has outgrown its restricted meaning under the old English feudal system and now includes personal property as well as land, and is now an incident of sovereignty, not of tenure.

See Words and Phrases, Permanent Edition, for all other definitions of "Escheat".

2. Constitutional law 103

A veteran had no vested right to a pension under the World War Veterans' Act, since "pensions" are bounties which Congress has the right to give, to withhold, to distribute, or to recall at its discretion. 38 U.S.C.A. § 368.

See Words and Phrases, Permanent Edition, for all other definitions of "Pensions". 3. States 4

The laws of the United States dealing with matters within its jurisdiction are supreme, and, if the terms of an act are constitutional and if due process is complied with, state courts and agencies may with propriety lend their aid in their enforcement. U.S.C.A. Const. art. 6, cl. 2.