Osterland v. Gates

400 So. 2d 653
CourtSupreme Court of Louisiana
DecidedJune 22, 1981
Docket81-C-0301 and 81-C-0309
StatusPublished
Cited by8 cases

This text of 400 So. 2d 653 (Osterland v. Gates) is published on Counsel Stack Legal Research, covering Supreme Court of Louisiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Osterland v. Gates, 400 So. 2d 653 (La. 1981).

Opinion

400 So.2d 653 (1981)

Succession of Mary Maude Greenlee OSTERLAND
v.
Mary O. GATES, et ux.

Nos. 81-C-0301 and 81-C-0309.

Supreme Court of Louisiana.

June 22, 1981.

*654 C. Jerre Lloyd, Camp, Carmouche, Palmer, Barsh & Hunter, Lake Charles, for plaintiff-applicant and plaintiff-respondent.

John G. McLure & Thomas C. McLure, of McLure & McLure, Alexandria, counsel for defendant-respondent and defendant-applicant.

MARCUS, Justice.

Mary Maude Greenlee Osterland died intestate[1] on February 2, 1973, leaving two daughters, Alma Osterland Fey and Mary *655 Osterland Gates. Her succession was opened and Alma Fey qualified as administratrix of the succession. Alma Fey, in her capacity as administratrix of the succession, filed an action in the succession proceeding against her sister and brother-in-law, Mary and Stanley Gates, seeking collation and repayment of debts owed to the succession. Defendants answered generally denying the allegations of the petition. The answer was subsequently amended to include a claim for collation of sums given by decedent to Alma Fey.

After trial, the judge ruled that Mary Gates was required to collate $49,890.91, and Alma Fey was required to collate $4,545.38. He further held that no collation was due from Stanley Gates. Although he did not address the issue of a $20,000 debt allegedly owed by Gates, Inc., a corporation owned by Stanley Gates, the judge observed that the debt seemed to have "long prescribed." U. S. Savings Bonds listing decedent and her daughters as co-owners were held not subject to collation. The administratrix appealed. Defendants answered the appeal.

The court of appeal affirmed the judgment of the district court except to rule that the claim to recover the $20,000 debt was properly before the court but had in fact prescribed and to order collation of the value of the U. S. Savings Bonds held by decedent's daughters.[2] The administratrix as well as Mary and Stanley Gates applied for writs to this court. We granted both applications primarily to consider whether the court of appeal was correct in ordering that the U. S. Savings Bonds were subject to collation.[3]

At trial, it was established that decedent purchased during her life a total of $56,000 in U. S. Savings Bonds listing her and Mary O. Gates as co-owners and a total of $25,000 of such bonds listing her and Mrs. Alma Osterland Fey as co-owners. The federal regulations governing bonds issued in the name of co-owners provide that when either co-owner dies, "the survivor will be recognized as the sole and absolute owner." 31 CFR § 315.62. Thus, when Mrs. Osterland died, her daughters became the sole and absolute owners of the bonds that each of them held in co-ownership with their deceased mother. The trial judge held that under the explicit holding in Free v. Bland, 369 U.S. 663, 82 S.Ct. 1089, 8 L.Ed.2d 180 (1962), these co-owner bonds were not subject to collation. The court of appeal recognized that under federal law the daughters were the sole owners of their bonds; however, it reversed the trial judge's denial of collation and held that "a parent cannot use survivor bonds to circumvent Louisiana's established law granting collation to their parent's succession." As this holding is contrary to Free v. Bland, supra, and Yiatchos v. Yiatchos, 376 U.S. 306, 84 S.Ct. 742, 11 L.Ed.2d 724 (1964), we must reverse that part of the judgment of the court of appeal.

In Free v. Bland, a husband used community funds to purchase U. S. Savings Bonds listing him and his wife as co-owners. Upon his wife's death, he claimed full ownership of the bonds by virtue of federal regulations. The Texas court recognized his sole ownership of the bonds but awarded reimbursement to his wife's estate by virtue of the state community property law. The Supreme Court reversed, holding that the survivorship provision under the federal regulations is a federal law that must prevail under the supremacy clause of the federal constitution if it conflicts with state law. If the state could frustrate the parties' attempt to use the bonds' survivorship provision through the simple equivalent of requiring the survivor to reimburse the estate of decedent co-owner as a matter of law, the state would have interfered directly with a legitimate exercise of the power of the federal government to borrow money. Therefore, the Court held that the state law that prohibits a married couple from taking advantage of the survivorship provisions of U. S. Savings Bonds merely because the purchase price was paid out of *656 community property must fall under the supremacy clause. However, the Court added that federal regulations were not intended to be a shield for fraud and relief would be available in case of fraud or breach of trust tantamount to fraud.

Yiatchos v. Yiatchos, supra, decided two years later, was such a case. The decedent husband purchased U. S. Savings Bonds with community funds registered in his name and made payable on his death to his brother. The Supreme Court stated that under federal regulations decedent's brother was entitled to the bonds unless decedent committed fraud or breach of trust tantamount to fraud. Fraud would be determined as a matter of federal law; however, state law would be used to determine property interests. The Court stated that bonds may not be used as a device to deprive the widow of property rights which she enjoys under state law and which would not be transferable by her husband but for the survivorship provisions of the federal bonds. The case was remanded to give the wife an opportunity to establish facts that might show fraud and to determine her community property rights under state law.

Under the survivorship provisions of the federal regulations governing co-owner bonds and the decisions in Free and Yiatchos, we conclude that both daughters are entitled to their respective co-owner bonds in full ownership without any obligation to collate unless decedent committed fraud or breach of trust tantamount to fraud. Such fraud will have taken place if it can be shown that the bonds were used to deprive the daughters of property rights which they enjoy under Louisiana law and which would not have been transferable by decedent but for the survivorship provisions of the federal regulations.

In reaching its conclusion that a parent cannot use co-owner bonds as a device to circumvent Louisiana's collation law, the court of appeal relied on Succession of Guerre, 197 So.2d 738 (La.App. 4th Cir.), writ denied, 250 La. 933, 199 So.2d 926 (1967). In Guerre, the decedent was survived by three children who, under Louisiana law, were forced heirs. A donor cannot deprive forced heirs of the portion of his estate reserved for them by law (legitime), except in cases where he has a just cause to disinherit them. La.Civ.Code art. 1495. During his life, decedent had acquired a number of federal bonds listing himself and persons other than his children as co-owners. At death, these bonds were valued at $42,779.60, whereas his other assets totaled only $8,941.35. Failure to include the bonds in the assets of his succession would have greatly reduced the legitime due his forced heirs.

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Bluebook (online)
400 So. 2d 653, Counsel Stack Legal Research, https://law.counselstack.com/opinion/osterland-v-gates-la-1981.