B-127602, AUG. 16, 1956

B-127602: Aug 16, 1956

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THE CHECKS WERE ISSUED TO THE DECEDENT AS THE BENEFICIARY OF A NATIONAL SERVICE LIFE INSURANCE POLICY WHICH HAD MATURED NOVEMBER 1942. THE CLAIM OF THE ADMINISTRATOR WAS PREVIOUSLY DISALLOWED BY A SETTLEMENT DATED DECEMBER 29. THE ADMINISTRATOR OF THE DECEDENT'S ESTATE IS NOT A HOLDER IN DUE COURSE OF THE CHECKS. IT IS THEREFORE PROPER TO LOOK BEYOND THE INSTRUMENTS UPON WHICH HE CLAIMS. THE INSURANCE HERE INVOLVED WAS GRANTED UNDER THE NATIONAL SERVICE LIFE INSURANCE ACT OF 1940. " IT FURTHER PROVIDES THAT "NO PERSON SHALL HAVE A VESTED RIGHT TO ANY INSTALLMENT * * * AND ANY INSTALLMENTS NOT PAID TO A BENEFICIARY DURING SUCH BENEFICIARY'S LIFETIME SHALL BE PAID TO THE BENEFICIARY OR BENEFICIARIES WITHIN THE PERMITTED CLASS NEXT ENTITLED TO PRIORITY.'.

B-127602, AUG. 16, 1956

TO W. A. WINTER, ESQUIRE:

PURSUANT TO YOUR REQUEST THERE HAS BEEN RECONSIDERED THE CLAIM OF JOHN ENGEBRETSON AS ADMINISTRATOR OF THE ESTATE OF CLARENCE W. HAGEN, DECEASED.

THE CLAIM INVOLVES TWO GOVERNMENT CHECKS DRAWN TO THE ORDER OF CLARENCE W. HAGEN, EACH FOR THE AMOUNT OF $31.65, DATED JULY 26, 1947 AND AUGUST 26, 1947, RESPECTIVELY. THE CHECKS WERE ISSUED TO THE DECEDENT AS THE BENEFICIARY OF A NATIONAL SERVICE LIFE INSURANCE POLICY WHICH HAD MATURED NOVEMBER 1942. THE DECEDENT, WHOSE DEATH OCCURRED MARCH 1955, DID NOT NEGOTIATE OR PRESENT THE CHECKS FOR PAYMENT, AND THEY CAME INTO THE POSSESSION OF THE ADMINISTRATOR OF HIS STATE. THE CLAIM OF THE ADMINISTRATOR WAS PREVIOUSLY DISALLOWED BY A SETTLEMENT DATED DECEMBER 29, 1955.

THE ADMINISTRATOR OF THE DECEDENT'S ESTATE IS NOT A HOLDER IN DUE COURSE OF THE CHECKS. IT IS THEREFORE PROPER TO LOOK BEYOND THE INSTRUMENTS UPON WHICH HE CLAIMS, TO INQUIRE WHETHER ENTITLEMENT TO THE POLICY PROCEEDS, REPRESENTED BY THE CHECKS, PASSED TO THE ESTATE.

THE INSURANCE HERE INVOLVED WAS GRANTED UNDER THE NATIONAL SERVICE LIFE INSURANCE ACT OF 1940, 38 U.S.C. 801 ET SEQ. SECTION 802 GOVERNS THE DISTRIBUTION OF PROCEEDS OF SUCH INSURANCE. SUBSECTION (I) CONDITIONS THE RIGHT OF ANY BENEFICIARY TO PAYMENT OF ANY INSTALLMENTS "UPON HIS OR HER BEING ALIVE TO RECEIVE SUCH PAYMENTS; " IT FURTHER PROVIDES THAT "NO PERSON SHALL HAVE A VESTED RIGHT TO ANY INSTALLMENT * * * AND ANY INSTALLMENTS NOT PAID TO A BENEFICIARY DURING SUCH BENEFICIARY'S LIFETIME SHALL BE PAID TO THE BENEFICIARY OR BENEFICIARIES WITHIN THE PERMITTED CLASS NEXT ENTITLED TO PRIORITY.' SUBSECTION (J) STATES THAT "NO INSTALLMENTS OF SUCH INSURANCE SHALL BE PAID TO THE HEIRS OR LEGAL REPRESENTATIVES AS SUCH OF THE INSURED OR OF ANY BENEFICIARY, AND IN THE EVENT THAT NO PERSON WITHIN THE PERMITTED CLASS SURVIVES TO RECEIVE THE INSURANCE OR ANY PART THEREOF NO PAYMENT OF THE UNPAID INSTALLMENTS SHALL BE MADE.'

IN UNITED STATES V. HENNING ET AL., DECIDED ON NOVEMBER 17, 1952, 344 U.S. 66, THE SUPREME COURT OF THE UNITED STATES HAD BEFORE IT A CASE INVOLVING THE ENTITLEMENT OF ESTATES OF DECEASED BENEFICIARIES,UNDER A NATIONAL SERVICE LIFE INSURANCE POLICY, TO INSTALLMENTS WHICH HAD ACCRUED BUT WERE NOT PAID DURING THE BENEFICIARY'S LIFETIME. SINCE SUBSECTION (I) CONDITIONS PAYMENT UPON THE BENEFICIARY'S BEING ALIVE, THE COURT HELD "THAT THE AWARD OF ACCRUED INSTALLMENTS TO THE ESTATES OF DECEASED BENEFICIARIES CANNOT STAND.' THUS A RIGHT TO ACCRUED INSTALLMENTS DID NOT SURVIVE THE BENEFICIARY'S DEATH TO PASS TO HIS ESTATE. COMPARE BEERS V. FEDERAL SECURITY ADMINISTRATION, ET AL., UNITED STATES COURT OF APPEALS, 2ND CIRCUIT, DECIDED JANUARY 27, 1949, 172 F.2D 34, AND EWING V. GARDNER, UNITED STATES COURT OF APPEALS, 6TH CIRCUIT, DECIDED DECEMBER 20, 1950, 185 F.2D 781, INVOLVING PRIMARY INSURANCE BENEFITS UNDER THE SOCIAL SECURITY ACT, 42 U.S.C. 401, ET SEQ.

THE PRESENT CASE DIFFERS FROM THE HENNING CASE IN THAT CHECKS WERE ISSUED DURING THE LIFETIME OF THE BENEFICIARY FOR THE ACCRUED INSTALLMENTS. HOWEVER, IN VIEW OF THAT PROVISION OF LAW THAT NO INSTALLMENTS OF INSURANCE SHALL BE PAID TO THE HEIRS OR LEGAL REPRESENTATIVES AS SUCH OF ANY BENEFICIARY, AND THE CONSISTENT RULINGS OF OUR OFFICE THAT THE ISSUANCE AND RECEIPT OF A GOVERNMENT CHECK DOES NOT CONSTITUTE PAYMENT UNTIL IT IS NEGOTIATED AND THE AMOUNT THEREOF COLLECTED BY THE PAYEE (9 COMP. GEN. 144; 19 ID. 811; 24 ID. 61; ID. 117, 119; 31 ID. 422, AND 33 ID. 99), THE CONCLUSION THAT THE ESTATE IS ENTITLED TO THE INSURANCE PROCEEDS BY VIRTUE OF THE ISSUANCE OF THE CHECKS IS NOT WARRANTED.