Opposition — Bowman v. Simpson

»

Cour, U.S. |

ILED

SEP 12 1977

a

IN THE

Supreme Court of the United States

NO. 77-207

DARLENE RUTH BOWMAN,

Petitioner

V.

PHYLLIS BOWMAN SIMPSON,

Respondent

RESPONDENT’S BRIEF IN OPPOSITION

TO PETITION FOR WRIT OF CERTIORARI

HANKS & WINCHESTER

STEPHEN W. HANKS

720 Houston Bar Center Building

723 Main Street

Houston, Texas 77002

(713) 237-9178

Attorney For Respondent

Alpha Law Briej Co., One Main Plasa, No. 1 Main St., Houston, Texas 77002

SUBJECT INDEX

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The Texas Supreme Court properly refused Petiti-

tioner’s Application for Writ of Error, and affirmed the

Judgments of the trial court and the Ninth Court of

Od eee as

A. Texas law prohibits the creation of a joint tenancy

with right of survivorship out of community prop-

B. The Federal Credit Union Act does not supersede

, ff Bo errr TTT Ty

LIST OF AUTHORITIES

CASES

Bank of America National Trust and Savings Association v.

Parnell, 352 U.S. 29, 77 S.Ct. 119, 1 L.Ed.2d 193 (1956)

DiPierro v. Dudley, 317 A.2d 824 (Me. 1974) ........

First National Bank of Logan v. Walker Bank and Trust

Company, 385 U.S. 252, 87 S.Ct. 492, 17 L.Ed.2d 343

CPD ctduekechhbesaness pecnancecss cnkagensbeces

First National Bank in Plant City, Florida v. Dickinson,

396 U.S. 122, 90 S.Ct. 337, 24 L.Ed.2d 512 (1969) ....

Free v. Bland, 369 U.S. 663, 82 S.Ct. 1089, 8 L.Ed.2d

Sy WEE GAGES k 046 660656 6bu bbb 606 coceceéeses

Hilley v. Hilley, 161 Tex. 569, 342 S.W.2d 565 (1961) ..

Hines v. Davidowitz, 312 U.S. 52, 61 S.Ct. 399, 85 L.Ed.

Pe WEE DditCh on ch b ens cae shabadses eesvasencese

Williams v. McKnight, 402 S.W.2d 505 (Tex. Sup. 1966)

UNITED STATES STATUTES

~ Ww

IN THE

Supreme Court of the United States

NO. 77-207

DARLENE RUTH BOWMAN,

Petitioner

Vv.

PHYLLIS BOWMAN SIMPSON,

Respondent

RESPONDENT’S BRIEF IN OPPOSITION

TO PETITION FOR WRIT OF CERTIORARI

This is a controversy between Phyllis Bowman Simp-

son, daughter of Fred E. Bowman, deceased, and her

step-mother, Darlene Ruth Bowman, over the character

of funds deposited by Fred and Darlene Bowman in a

federal credit union in Houston, Texas.

QUESTION PRESENTED

The question presented is whether the provision of

the Federal Credit Union Act which permits members

to hold shares as joint tenants with a right of survivorship

supersedes Texas Constitutional Law which prohibits

community property from being jointly held with a right

of survivorship.

2

ARGUMENT

THE TEXAS SUPREME COURT PROPERLY RE-

FUSED PETITIONER’S APPLICATION FOR WRIT

OF ERROR, AND AFFIRMED THE JUDGMENTS

OF THE TRIAL COURT AND THE NINTH COURT

OF CIVIL APPEALS.

A. Texas law prohibits the creation of a joint

tenancy with right of survivorship out of

community property.

It is clear and undisputed that in Texas, community

property cannot be the subject of joint ownership with a

right of survivorship. Williams v. McKnight, 402 S.W.2d

505 (Pex. Sup. 1966); Hilley v. Hilley, 161 Tex. 569,

342 S.W.2d 565 (1961).

This principle of Texas law is not merely legislative,

but constitutional. The character of property owned or

acquired during marriage is determined by the Texas

Constitution, and spouses cannot by mere agreement

change the character and nature of the rights and interests

in property owned or acquired by them from that pre-

scribed by law. Hilley, at 568. This is not just a footnote

to Texas community property law. It is an integral part

of the fabric of the community property system, and the

“mere agreement” of Fred and Darlene Bowman when

they deposited funds in the credit union should not be

permitted to emasculate the structure of community

property law in Texas. ¢

The agreement signed by Fred and Darlene Bowman

was virtually identical to survivorship agreements rou-

tinely executed in every bank, savings and loan, and

state chartered credit union in Texas. Petitioner agrees

ef

3

that in each of these other cases, the agreement would be

invalid. This tenet of Texas constitutional law is not

voided simply because the credit union, an association of

individuals, was organized pursuant to a federal statute.

B. The Federal Credit Union Act does not supersede

Texas Constitutional Law.

Petitioner argues that the constitutional law of Texas

should be disregarded in this case, because a Federal

Statute, 12 U.S.C.A. § 1759, permits federal credit union

accounts to be established in the form of a joint tenancy

with right of survivorship.

Respondent urges that this provision was not intended

to and does not supersede Texas law of community prop-

erty. In fact, the opposite result was intended; the pro-

vision was designed to place federal credit unions in a

position of equality with local banking institutions, equal-

ly subject to the state constitutional requirements of com-

munity property.

Petitioner’s only authority is the case of Free v. Bland,

369 U.S. 663, 82 S.Ct. 1089, 8 L.Ed.2d 180 (1962),

on which she relies to support her contention that the

constitutional requirements of Texas community property

law should be disregarded. In Free, a husband and wife

jointly held United States Savings Bonds. A Treasury

Regulation mandated that when bonds were so held, a

right of survivorship was created. This Honorable Court

held that the state law of community property must

yield to the mandate of the Treasury regulation.

The principle behind this Court’s decision in Free is

unique to the issuance and ownership of United States

Savings Bonds, and is not applicable to this case.

4

The power to borrow money is specifically delegated

to the Federal Government by the United States Consti-

tution:

Article I, Section 8, Clause 2, of the Constitution

delegated to the Federal Government the power “to

borrow money on the credit of the United States.”

Pursuant to this grant of power, the Congress au-

thorized the Secretary of Treasury with the approval

of the President, to issue savings bonds in such form

and under such conditions as he may from time to

time prescribe . . . Free, 369 U.S. at 666.

Pursuant to this power, the Treasury made the survivor-

ship clause an integral part of the borrowing system, as

an inducement for the purchase of savings bonds:

The success of the management of the national debt

depends to a significant measure upon the success

of the sales of the savings bonds. The Treasury is

authorized to make the bonds attractive to savers

and investors. One of the inducements selected by

the Treasury is the survivorship provision, a con-

venient method of avoding complicated probate pro-

ceedings. Free, 369 U.S. at 669.

The survivorship provision governing ownership of sav-

ings bonds prevails over State law because it is an integral

part of the exercise of federal power, and directly affects

the interests of the Federal Government, the borrower. In

our case, a joint deposit between two individuals in a federal

credit union is a purely private transaction between two

Texas residents, and in no way affects the interests of the

Federal Government. This critical distinction was recog-

nized by this Court in Bank of America National Trust

and Savings Association v. Parnell, 352 U.S. 29, 77 S.Ct.

5

119, 1 L.Ed.2d 193 (1956). In Parnell, the issue was

whether Federal or State law ought to apply in an action

between private persons for conversion of government

bonds. This Court held that State law applied:

The present litigation is purely between private

parties, and does not touch the rights and duties of

the United States. The only possible interest of the

United States in a situation like the one here, ex-

clusively involving the transfer of government paper

between private persons, is that the floating of

securities of the United States might somehow or

other be adversely affected by the local rule of a

particular state regarding the liability of a converter.

This is far too speculative, far too remote a possi-

bility to justify the application of Federal law to

transactions essentially of local concern. Parnell,

352 U.S. at 33. [Emphasis added]

This Court in Free distinguished Parnell, recognizing

that state law will control in cases where the litigation

is between two private parties and does not “intrude

upon the rights and duties of the United States.” Free,

369 U.S. at 669.

The present case is a controversy between two private

individuals, and in no way directly involves the rights,

duties, or interest of the United States. In this situation,

as this Court has held in Parnell and recognized in Free,

state law controls.

The Ninth Court of Civil Appeals and the Texas

Supreme Court recognized this distinction. Petitioner ig-

nores the significance of the distinction, asserting that

Free v. Bland and this case are “strikingly similar”.

(Petitioner’s Application, p. 5). Petitioner fails to under-

stand the distinction and its importance.

6

The transaction at issue in Free v. Bland was between

the Federal Government, the debtor, and Mr. and Mrs.

Free, the creditors. The survivorship provision of that

contract was a necessary element of the Government's

power and duty to manage its debt structure.

The transaction at issue in the instant case is between

two private individuals, both Texas residents, who simply

agreed between themselves to hold their community

property as joint tenants with a right of survivorship, an

agreement which is void under Texas law. Their decision

to place their property into an account in a federal credit

union does not change the result. The credit union is not

the federal government, but merely a group of private

individuals permitted by federal law to form a credit

association for the furtherance of their own interests. The

interests of the federal government are not involved, and

state law controls.

The question presented in this case has been previously

considered and decided by the Supreme Court of Maine,

in DiPierro v. Dudley, 317 A.2d 824 (Me. 1974). The

opinion in DiPierro contains an excellent discussion of

the origin of the survivorship provision in question, its

legislative history, its purpose, and its relation to state

law.

In DiPierro, funds had been held in a joint account

at a federal credit union by deceased and his niece. Upon

his death, the niece claimed the proceeds pursuant to

the survivorship provision in question. The executrix of

the estate of the deceased sued the niece to recover the

proceeds, relying on a Maine statute which prohibited

survivorship accounts between persons so related. The

question presented, as in the instant case, was whether

7

the local statute applied, rendering the survivorship

clause ineffective, or whether federal law prevailed.

The Court in DiPierro held that the Maine statute pre-

vailed and judgment was rendered for the executrix. The

Court’s reasoning was based in part on an analysis of

the congressional purpose in providing for survivorship

accounts in federal credit unions. After a review of the

Congressional Record, the Court concluded that:

It would thus appear that Congress was not thinking

in terms of superseding settled state law with refer-

ence to joint tenancies but, rather, in putting the

various federal credit unions on a status equivalent

to that of other competing financial institutions.

DiPierro, 317 A.2d at 827.

A further indication that Congress did not intend to

supersede state law is a provision in the Act which

permits easy conversion of a federal to a state credit

union, 12 U.S.C.A. § 1771. The credit union involved

in this case could be easily and simply converted to a

State credit union, and then back to a federal, and so on.

It is unthinkable that Congress intended for the property

rights of the members to radically change with each such

conversion, yet this would be the result if state law

is superseded in this case. Concerning this provision, the

Court in DiPierro stated:

It would be inconceivable that Congress would have

intended to create a special type of joint tenancy

and at the same time freely permit the conversion

of a federal credit union to a state credit union

where such a joint tenancy contravenes the laws of

that state. Congress clearly indicated its intent by the

enactment on October 19, 1970, of 12 U.S.C.A.

§ 1970 which states:

“It is not the purpose of this subchapter to

discriminate in any manner against state-char-

tered credit unions and in favor of federal

credit unions, but it is the purpose of this sub-

chapter to provide all credit unions with the

same opportunity to obtain and enjoy the

benefits of this subchapter.”

DiPierro, 317 A.2d at 827.

It is clear that the purpose of the survivorship provision

of the Federal Credit Union Act is not to supersede

state law, but to place federal credit unions in a position

of equality with local institutions. Therefore, local limi-

tations on survivorship accounts must apply equally

to the federal credit union accounts, or the very purpose

of the provision and the Act will be defeated.

The Court in DiPierro concluded that state law con-

cerning joint tenancy with right of survivorship prevails

over the survivorship provision of the federal credit

union Act:

We thus conclude that the amendment to Section

1759 in 1946 was not intended to create a type of

joint tenancy which would contravene state law but

only to place various federal credit unions in a

position of competitive equality with other banking

institutions serving the same geographical area.

DiPierro, 317 A.2d at 827.

The principal of equality is evident in other federal

acts governing national financial institutions. The Mc-

Fadden Act of 1927, 12 U.S.C.A. § 36, could be con-

strued to authorize branch banking in the entire federal

banking system. However this Court held in First Na-

tional Bank of Logan v. Walker Bank and Trust Com-

pany, 385 U.S. 252, 87 S.Ct. 492, 17 L.Ed.2d 343

9

(1966), and reiterated in First National Bank in Plant

City, Florida v. Dickinson, 396 U.S. 122, 90 S.Ct. 337,

24 L.Ed.2d 312 (1969), that the purpose was not to

supersede state law and permit branch banking in states

where it was otherwise prohibited. The purpose was to

place federal banks in a position of competitive equality

with state banks, equally subject to state laws:

The policy of competitive equality is therefore

firmly imbedded in the statutes governing the na-

tional banking system. First National Bank v. Dick-

inson, 396 U.S. at 133.

This policy cai only be served ‘n this case if the com-

munity property law of Texas applies to federal as well

as state-chartered credit unions.

As Petitioner recognizes (Petitioner’s Application,

p. 15), the test is not simply whether there is a conflict

between the federal and state law, but whether the “full

purposes and objectives of Congress” will be accom-

plished. Hines v. Davidowitz, 312 U.S. 52, 61 S.Ct. 399,

85 L.Ed. 581 (1941). The full objectives of Congress

in this case can only be served if Texas Community

property law prevails.

The Texas Constitutional restriction against the cre-

ation of a joint tenancy with right of survivorship out

of community funds applies equally to deposits in the

federal credit union account and the Texas Supreme

Court and Ninth Court of Civil Appeals correctly af-

firmed the judgment of the Probate Court which held

that one-half of the funds in the Continental Emsco ac-

count were included in the estate of the deceased.

10

Respondent therefore urges that Petitioner’s Applica-

tion for a Writ of Certiorari be DENIED, or in the al-

ternative the Judgment of the Texas Supreme Court be

affirmed, and all costs assessed against Petitioner.

Respectfully submitted,

HANKS & WINCHESTER

STEPHEN W. HANKS

Attorney For Respondent

Of Counsel:

HANKS & WINCHESTER

720 Houston Bar Center Building

723 Main Street

Houston, Texas 77002 ‘

(713) 237-9178

CERTIFICATE OF SERVICE

I certify that a true and correct copy of the foregoing

bref been forwarded to the attorney of record, via

return receipt requested, this —2_ day of

1977.

Main [ W. HAN