Yiatchos v. Yiatchos

LOCATION: New York Times Office

DECIDED BY: Warren Court (1962-1965)

CITATION: 376 US 306 (1964)
ARGUED: Jan 07, 1964
DECIDED: Mar 09, 1964

Facts of the case


Media for Yiatchos v. Yiatchos

Audio Transcription for Oral Argument - January 07, 1964 in Yiatchos v. Yiatchos

Earl Warren:

Gust Yiatchos versus Pearle W. -- W. Yiatchos, Number 48. Mr. Whitmore.

Ernest R. Whitmore, Jr.:

Mr. Chief Justice, may it please the Court.

This case involves the question of the beneficial ownership of the United States Savings Bonds when there is encountered a conflict between the survivorship provisions of those bonds and the community property law, in this case of the State of Washington.

The case was heard in the trial court on stipulated facts which essentially are these.

Angel and Pearle Yiatchos were married in Washington in 1943 and resided there as man and wife until the death of Angel in 1958.

In 1950 and 1951, Angel Yiatchos, the husband, purchased the United States Series E Savings Bonds in question with community property.

He named on each of these bonds as the POD or the pay-on-death beneficiary, his brother Gust Yiatchos.

At the time of his death, Mr. Yiatchos left the will in which he bequeathed all of his bonds to six relatives including one -- among one of the six, his brother Gust who is also the petitioner here.

The bonds were of the total value of approximately $15,000 out of an entire community estate of approximately $36,500, and it is stipulated that the bonds are not required for the payment of creditors' claims.

There are three claimants to the bonds, the petitioner Gust Yiatchos who is the beneficiary named on the bonds, the -- the widow Pearle Yiatchos and the legatees under the last will and testament of Gust Yiatchos.

The contentions of the parties are best illustrated by considering the three possible results which were available to the Court in resolving the case.

If the survivorship provisions of the bonds were followed, the bonds would be awarded to Gust Yiatchos in their entirety.

If that should be construed to be a fraud on the widow, one half of the bonds could have been reserved or the equivalent in value could have been reserved to the widow by way of a trust.

If the purchasing of the bonds and the designate -- designation of the brother as beneficiary were held to be a complete fraud and void in its entirety, the widow would then receive her half interest in the bonds and the legatees under the will would take by a way of the will the remaining half interest.

The trial court held that under the stipulated facts, this was in effect an attempted gift of community property and therefore, it was void in its entirety and the beneficiary designated on the bonds took nothing.

The widow -- the bonds were held in trust for the estate which would give the widow her half interest and the other half interest would be distributed to the legatees named under the will.

The case was appealed to the Supreme Court of the State of Washington and after it had been submitted to the Supreme Court on written briefs and on oral argument but prior to the decision of the state court, this Court decided the case of Free versus Bland which also involved the question of beneficial ownership of U.S. Savings Bonds in a community property law state, it having a reason out of Texas and the question there presented to the Court was whether the Treasury regulations governing survivorship, determined the beneficial ownership of the bonds or whether they were merely for the convenience of the Government in making payment, with the Government having no interest in who ultimately receive the proceeds.

The Court held in Free versus Bland that the survivorship provisions and the Treasury regulations were a substantial feature of the bonds and intended to and which did make the bonds attractive to investors by virtue of the fact that it provided a very simple and efficient and quick way to transmit property on death and thus avoiding the -- and thus to avoid the complications and the delay and the expensive probate proceedings, that these features contributed substantially to the marketability of the bonds and consequently to the management of the National Death by the U.S. Treasury Department under the constitutional authority to borrow money on the credit of United States.

The Court pointed out that under the Supremacy Clause of the Constitution, the relative importance to estate of its own state law is not material if it is in conflict with a valid federal law and stated this holding in this language.

"We hold, therefore, that the state law which prohibits a married couple from taking advantage of the survivorship provisions of United States Savings Bonds merely because the purchased price is paid out of community property must fall under the Supremacy Clause.”

The Court also indicated that there was an exception implicit in the bonds in the Treasury regulations so that the bonds could not become a sanctuary for fraud and that relief would be available under circumstances where fraud was -- or breach of trust was manifest.

The Court indicated that the --


Ernest R. Whitmore, Jr.:

The Free versus Bland case?


Ernest R. Whitmore, Jr.:

Yes, I understand that the Supreme Court of Texas determined that there were no allegations of fraud and therefore the decision in the U.S. Supreme Court was dispositive of the case and entered judgment accordingly.

The Court also indicated that the doctrine of fraud which would be applicable in this situation was the doctrine of fraud under federal law and cited in the footnotes, the cases of Clearfield Trust Company versus United States and Holmberg versus Armbrecht.

Following this decision, the Washington Supreme Court which had the case pending before it, decided in the instant case that the purchase of the bonds by the husband designating the brother as beneficiary was an attempt to convert community property into separate property and therefore, it was an effect a fraud on the wife and the purchase with the designation of the beneficiary was void ab initio and affirmed the trial court in its judgment that the named beneficiary on the bonds took nothing and that the bonds reverted to the estate with half to go to the wife and the other half ultimately to go to the legatees.

Is that on the theory that there is no consent by the wife to the purchase of the bonds?

Ernest R. Whitmore, Jr.:

There is no statement and no -- no fact as to whether there was consent or not and the Court merely held in effect and it was a very brief opinion that in the absence of proof of consent that the mere purchase itself would constitute the constructive fraud as a matter of law.