When Army Sergeant Ridgway and his first wife, April, were
granted a divorce by a Maine court, the decree,
inter
alia, ordered Ridgway to keep in force the insurance policies
on his life then outstanding for the benefit of the Ridgways' three
children. At the time of the divorce, the sergeant's life was
insured under a $20,000 policy issued by petitioner Prudential
Insurance Co. of America (Prudential) pursuant to the Servicemen's
Group Life Insurance Act of 1965 (SGLIA), and April was the
designated beneficiary. Subsequently, Ridgway married petitioner
Donna, and changed the policy's beneficiary designation to one
directing that the proceeds be paid as specified "by law," which
meant that, under the SGLIA, the proceeds would be paid to the
insured's "widow,"
i.e., his "lawful spouse . . . at the
time of his death." Thereafter, Ridgway died, survived by Donna as
his lawful wife. After April and Donna had both filed claims to the
policy proceeds, April instituted suit in Maine Superior Court
against Prudential, seeking to enjoin payment of the proceeds to
Donna and to obtain a declaratory judgment that the proceeds were
payable to the children under the divorce decree. Donna joined the
suit as a plaintiff, asserting a claim to the proceeds based on the
beneficiary designation and her status as Ridgway's widow. April
filed a cross-claim, praying for the imposition of a constructive
trust for the children's benefit on any proceeds paid to Donna. The
Superior Court rejected April's claims, taking the view that a
constructive trust would interfere with the operation of the SGLIA,
and thus would run afoul of the Supremacy Clause. The Maine Supreme
Judicial Court vacated the dismissal of April's cross-claim, and
remanded with directions to enter an order naming Donna as
constructive trustee of the policy proceeds.
Held: The insured's beneficiary designation under the
SGLIA policy prevails over the constructive trust imposed upon the
policy proceeds by the state court. Pp.
454 U. S.
533.
(a) As a consequence of the Supremacy Clause, a state divorce
decree, like other law governing the economic aspects of domestic
relations, must give way to clearly conflicting federal enactments.
Here, the provisions of the SGLIA according the insured service
member the right freely to designate the beneficiary and to alter
that choice at any time by
Page 454 U. S. 47
communicating the decision in writing to the proper office
prevail over and displace inconsistent state law.
Wissner v.
Wissner, 338 U. S. 665
controlling;
Yiatchos v. Yiatchos, 376 U.
S. 306, distinguished. Pp.
454 U. S.
53-60.
(b) The imposition of a constructive trust upon the insurance
proceeds is also inconistent with the provision of the SGLIA which,
in addition to exempting policy proceeds "from the claims of
creditors," prohibits any "attachment, levy, or seizure by or under
any legal or equitable process whatever," whether accomplished
"either before or after receipt by the beneficiary." Any diversion
of the proceeds of the policy by means of a court-imposed
constructive trust would operate as a forbidden "seizure" of those
proceeds. Pp.
454 U. S.
60-61.
419 A.2d
1030, reversed.
BLACKMUN, J., delivered the opinion of the Court, in which
BURGER C.J., and BRENNAN, WHITE, and MARSHALL, JJ., joined. POWELL,
J., filed a dissenting opinion, in which REHNQUIST, J., joined,
post, p.
454 U. S. 64.
STEVENS, J., filed a dissenting opinion,
post, p.
454 U. S. 71.
O'CONNOR, J., took no part in the consideration or decision of the
case.
JUSTICE BLACKMUN delivered the opinion of the Court.
This case presents the issue whether an insured serviceman's
beneficiary designation under a life policy issued pursuant to the
Servicemen's Group Life Insurance Act of 1965 (SGLIA), Pub.L.
89-214, 79 Stat. 880, prevails over a constructive trust imposed
upon the policy proceeds by a state court decree.
Page 454 U. S. 48
I
The Facts
Richard H. Ridgway was a career sergeant in the United States
Army. April D. Ridgway was his wife. Richard and April were the
parents of three children, Hayley, Laurie, and Brady, all minors.
The Ridgways' marriage, however, ended with a divorce granted by a
Maine court on December 7, 1977. The state divorce judgment,
entered on April's complaint and apparently following property
settlement negotiations, ordered Richard, among other things, to
pay specified amounts monthly for the support of the three
children. App. 13. It also ordered him
"to keep in force the life insurance policies on his life now
outstanding for the benefit of the parties' three children. If any
of such insurance policies should subsequently be terminated for
any reason, defendant shall immediately replace it with other life
insurance of equal amount for the benefit of the children."
Id. at 14.
Sergeant Ridgway's life was then insured under a $20,000 policy
issued by Prudential Insurance Company of America pursuant to a
group contract with the Administrator of Veterans' Affairs. At the
time of the Ridgways' divorce, April was the designated beneficiary
of that policy.
On March 28, 1978, less than four months after the divorce,
Ridgway married his second wife, Donna, the individual petitioner
here. Six days later, the sergeant, as insured, changed the
policy's beneficiary designation to one directing that its proceeds
be paid as specified "by law." This referred to the statutory order
of beneficiary precedence set forth in 38 U.S.C. § 770(a).
See also 38 CFR § 9.16(i) (1980). Under that
statutory prescription, the policy proceeds, in the event of
Ridgway's death, would be-paid to his
Page 454 U. S. 49
"widow," that is, his "lawful spouse . . . at the time of his
death." 38 U.S.C. § 765(7).
Sergeant Ridgway died on January 5, 1979. Donna survived him and
was his lawful wife at the time of his death. Both April and Donna
filed claims for the proceeds of the policy. April based her claim,
which was on behalf of the children, on the divorce decree. Donna's
claim rested on the beneficiary designation and her status as
Ridgway's widow.
April thereafter instituted the present suit in the Superior
Court for Androscoggin County, Me. As legal representative of the
three minor children, she sued Prudential, seeking both to enjoin
the payment of the policy proceeds to Donna and to obtain a
declaratory judgment that those proceeds were payable to the
children. Donna joined the litigation and was aligned as a
plaintiff asserting a claim to the proceeds. April then filed a
cross-claim against Donna, praying for the imposition of a
constructive trust, for the benefit of the children, on any policy
proceeds paid to Donna. Prudential supported Donna's position.
The Superior Court rejected April Ridgway's claims. It
acknowledged that the terms of the judgment of divorce and the
beneficiary designation were inconsistent. [
Footnote 1] But it felt that the imposition of a
constructive trust would interfere with the operation of the
federal SGLIA, and that such a disposition would therefore run
afoul of the Supremacy Clause, U.S.Const., Art. VI, cl. 2. App. 38
43.
On the ensuing appeal to the Supreme Judicial Court of Maine,
the parties stipulated, inasmuch as the policy proceeds by that
time had been deposited in court, that the sole
Page 454 U. S. 50
issue was
"[w]hether or not the presiding justice erred in ruling that, on
the basis of the facts found, he could not impose a constructive
trust on the proceeds of Sergeant Ridgway's insurance."
Id. at 48. That court, sympathetic to April, vacated
the Superior Court's dismissal of her cross-claim, and remanded the
case with directions to enter an order naming Donna as constructive
trustee of the policy proceeds. The Court Clerk, who held the
proceeds, was directed to pay them to April for and on behalf of
the three children.
Ridgway v. Prudential Ins. Co. of
America, 419 A.2d
1030, 1035 (1980).
We granted certiorari, 450 U.S. 979 (1981), to review the
important issue presented by the case.
II
The Statutory Background
In order to make life insurance coverage available to members of
the uniformed services on active duty, particularly in combat
zones, Congress in 1965 enacted the SGLIA.
See H.R.Rep.
No. 1003, 89th Cong., 1st Sess., 7 (1965). The impetus for the
legislation was the escalating level of hostilities and casualties
in the then ongoing Vietnam conflict; this had prompted private
commercial insurers to restrict coverage for service members.
[
Footnote 2]
See 111
Cong.Rec. 24339 (1965) (remarks of Rep. Teague, Chairman of the
House Committee on Veterans' Affairs);
see also S.Rep. No.
619, 89th Cong., 1st Sess., 3 (1965). The earlier program of
federally sponsored life insurance for service members,
see National Service Life Insurance Act of 1940, 54 Stat.
1008, and National Service Life Insurance Act of 1958, as amended,
38 U.S.C. 701
et seq. (NSLIA), placed in effect shortly
before the involvement of this country in World War II, had been
allowed
Page 454 U. S. 51
to lapse after the end of the Korean hostilities when commercial
insurance generally became available to service members. [
Footnote 3] Accordingly, NSLIA coverage
could not be obtained by many service members on active duty in
1965.
See 111 Cong.Rec. 24339 (1966) (remarks of Rep.
Teague).
Although its purposes and provisions resemble those of the NSLIA
in many respects, the SGLIA differs from the predecessor program in
that it directs the Administrator of Veterans' Affairs to purchase
coverage from one or more qualified commercial insurers instead of
offering coverage by the United States itself.
See 38
U.S.C. § 766. Thus, under the SGLIA, the Government is the
policyholder, rather than the insurer. The Administrator has
contracted with petitioner Prudential Insurance Company of America,
which now serves as the primary insurer under the SGLIA and which
operates, under Veterans' Administration supervision and pursuant
to 38 U.S.C. § 766(b), the Office of Servicemen's Group Life
Insurance in Newark, N.J.
The SGLIA initially provided insurance only for members serving
in specified services. 79 Stat. 880. The maximum coverage allowed
was then $10,000.
Id. at 881. Since 1965, however,
statutory changes have expanded both eligibility for coverage and
the amount of insurance available. [
Footnote 4] The program is operated on a presumptive
enrollment basis; coverage is provided automatically, and premiums
are withheld from the service member's pay, unless the insurance is
expressly declined or is terminated by written election. 38 U.S.C.
§§ 767(a) and 769. [
Footnote 5]
Page 454 U. S. 52
In order to make the insurance available through a commercial
carrier at a reasonable rate, notwithstanding the special mortality
risks that service members often must assume, Congress undertook to
subsidize the program.
See S.Rep. No. 91-398, p. 2 (1969).
A sum representing the extra premium for special mortality risks is
periodically deposited by the United States into a revolving fund
that is used to pay premiums on the master policy.
See 38
U.S.C. §§ 769(b) and (d)(1). The fund otherwise is
derived primarily from deductions withheld from service members'
pay. §§ 769(a)(1) and (d)(1). Accordingly, depending upon
the conditions faced by service members at any given time, the
program may be financed in part with federal funds.
See
S.Rep. No. 91-398, at 2.
The SGLIA establishes a specified "order of precedence," 38
U.S.C. § 770(a), for policy beneficiaries. By this statutory
provision, the proceeds of a policy are paid first to such
"beneficiary or beneficiaries as the member . . . may have
designated by [an appropriately filed] writing received prior to
death." If there be no such designated beneficiary, the proceeds go
to the widow or widower of the service member or, if there also be
no widow or widower, "to the child or children of such member . . .
and descendants of deceased children by representation." Parents,
and then the representative of the insured's estate (an obvious bow
at this point in the direction of state law), are next in order.
Ibid. See also 38 CFR § 9.16(i) (1980).
In 1970, by Pub.L. 91-291, § 5, 84 Stat. 330, Congress
added an anti-attachment provision. With certain exceptions not
applicable here, this provision shields payments made under §
770(a) "from taxation" and from "claims of creditors," and states
that the payments
"shall not be liable to attachment, levy, or seizure by or under
any legal or equitable
Page 454 U. S. 53
process whatever, either before or after receipt by the
beneficiary."
§ 770(g).
Pursuant to his general rulemaking authority over veterans'
programs, § 210(c)(1), the Administrator has promulgated
regulations implementing the SGLIA. These provide that the insured
"may designate any person, firm, corporation or legal entity" as a
policy beneficiary, and any such
"designation or change of beneficiary . . . will take effect
only if it is in writing, signed by the insured and received [by
the appropriate office] prior to the death of the insured."
38 CFR §§ 9.16(a) and (d) (1980). A change of
beneficiary "may be made at any time and without the knowledge or
consent of the previous beneficiary." § 9.16(e). And
"[n]o change or cancellation of beneficiary . . . in a last will
or testament, or in any other document shall have any force or
effect unless such change is received by the appropriate
office."
§ 9.16(f).
III
The foregoing description of the statutory plan adopted by
Congress, and implemented by the Administrator's regulations,
demonstrates the pervasive and detailed characteristics of the
congressional specifications. The obvious and stated concern of
Congress was to provide coverage for the member, no matter how
hazardous the duty, and thus protection for the member's designated
beneficiaries. The legislation itself says nothing about contrary
dictates of state law or state judgments.
The Supreme Judicial Court of Maine, however, concluded that the
order of beneficiary precedence set forth in 38 U.S.C. §
770(a)
"does not reflect any federal interest in permitting a
serviceman to evade the responsibility to provide for his minor
children imposed both by virtue of his voluntary agreement and by
the express provision of a valid state court decree."
419 A.2d at 1033. That court further concluded that the
anti-attachment provision, § 770(g), "has no application to
the instant case, since its purpose is to protect the proceeds
Page 454 U. S. 54
of the insurance from the claims of creditors." It pointed out
that it was concerned
"not with the claim of a creditor, but with the claims of minor
children who assert an equitable interest in the proceeds arising
from their deceased father's voluntary agreement and a valid
judicial decree."
Thus, it said, the accomplishment of the objectives of the
federal statute "is neither obstructed nor interfered with by
imposing a constructive trust on the insurance proceeds."
Ibid.
We forthwith acknowledge, of course, that this Court's "only
power over state judgments is to correct them to the extent that
they incorrectly adjudge federal rights."
Herb v.
Pitcairn, 324 U. S. 117,
324 U. S.
125-126 (1945). It follows that the decision of the
Supreme Judicial Court of Maine is subject to disturbance here only
to the extent that it fails to honor federal rights and duties.
Notwithstanding the limited application of federal law in the
field of domestic relations generally,
see McCarty v.
McCarty, 453 U. S. 210,
453 U. S. 220
(1981);
Hisquierdo v. Hisquierdo, 439 U.
S. 572,
439 U. S. 581
(1979);
In re Burrus, 136 U. S. 586,
136 U. S.
593-594 (1890), this Court, even in that area, has not
hesitated to protect, under the Supremacy Clause, rights and
expectancies established by federal law against the operation of
state law, or to prevent the frustration and erosion of the
congressional policy embodied in the federal rights.
See
McCarty v. McCarty, supra; Hisquierdo v. Hisquierdo, supra; Free v.
Bland, 369 U. S. 663
(1962);
Wissner v. Wissner, 338 U.
S. 655 (1950);
McCune v. Essig, 199 U.
S. 382 (1905).
Cf. Yiatchos v. Yiatchos,
376 U. S. 306,
376 U. S. 309
(1964). While
"[s]tate family and family property law must do 'major damage'
to 'clear and substantial' federal interests before the Supremacy
Clause will demand that state law be overridden,"
Hisquierdo, 439 U.S. at 581, with references to
United States v. Yazell, 382 U. S. 341,
382 U. S. 352
(1966),
"[t]he relative importance to the State of its own law is not
material when there is a conflict with a valid federal law, for
the
Page 454 U. S. 55
Framers of our Constitution provided that the federal law must
prevail."
Free v. Bland, 369 U.S. at
369 U. S. 666.
See also Gibbons v.
Ogden, 9 Wheat. 1,
22 U. S. 210-211
(1824). And, specifically, a state divorce decree, like other law
governing the economic aspects of domestic relations, must give way
to clearly conflicting federal enactments.
McCarty v. McCarty,
supra; Hisquierdo v. Hisquierdo, supra. That principle is but
the necessary consequence of the Supremacy Clause of our National
Constitution.
In
Wissner v. Wissner, supra, an insured under an NSLIA
policy named his parents as beneficiaries. Upon his death, the
serviceman's widow claimed community property rights in the policy
proceeds. The NSLIA specifically provided that the insured had the
right to designate and to change the beneficiary. It also had an
anti-attachment clause. Despite these provisions, a California
court held that the policy proceeds were community property, and it
ordered half the proceeds paid to the widow. This Court reversed,
noting that "Congress has spoken with force and clarity in
directing that the proceeds belong to the named beneficiary, and no
other." 338 U.S. at
338 U. S. 658.
Further, "the judgment below nullifies the soldier's choice, and
frustrates the deliberate purpose of Congress. It cannot stand."
Id. at
338 U. S. 659.
And the diversion, as directed by the state court, of future
payments to be received by the beneficiary would be a "seizure"
prohibited by the anti-attachment provision.
Ibid. These
are strong words and a positive ruling.
The same approach has been followed in later cases:
Free v.
Bland, supra, concerning the right of survivorship in United
States Savings Bonds issued in co-ownership form;
Hisquierdo v.
Hisquierdo, supra, involving the Railroad Retirement Act of
1974, 45 U.S.C. § 231
et seq.; and
McCarty v.
McCarty, supra, concerning military retired pay.
The present case, we feel, is controlled by
Wissner.
Under §§ 717(a) and 770(a) of the SGLIA, just as under
§ 602(g) of the predecessor NSLIA, 54 Stat. 1010, at issue
in
Page 454 U. S. 56
Wissner, the insured service member possesses the right
freely to designate the beneficiary and to alter that choice at any
time by communicating the decision in writing to the proper office.
338 U.S. at
338 U. S. 658.
Here, as there, it appropriately may be said: "Congress has spoken
with force and clarity in directing that the proceeds belong to the
named beneficiary, and no other."
There can be no doubt that Congress was aware of the breadth of
the freedom of choice accorded the service member under the SGLIA.
The pertinent House Report stated flatly: "The serviceman may
designate any person as a beneficiary," H R. Rep. No. 1003, 89th
Cong., 1st Sess., 7 (1965), and the point was emphasized on the
floor of the House by Representative Everett:
"This bill permits you to leave your insurance to your church,
to your college, to your best friend. The beneficiary provision is
wide open under this option."
111 Cong.Rec. 24341 (1965). Thus, the Maine court's analysis is
inconsistent both with the language of the Act and with its
legislative history. [
Footnote
6]
Neither respondents nor the Supreme Judicial Court of Maine has
questioned the authority of Congress to control payment of the
proceeds of SGLIA policies. Indeed, this Court observed in
Wissner:
"Possession of government insurance, payable to the relative of
his choice, might well directly enhance the morale of the
serviceman. The exemption provision is his
Page 454 U. S. 57
guarantee of the complete and full performance of the contract
to the exclusion of conflicting claims. The end is a legitimate one
within the congressional powers over national defense, and the
means are adapted to the chosen end."
338 U.S. at
338 U. S.
660-661. The federal interest is especially strong
because a substantial share of the proceeds of an SGLIA policy mar
be attributable to general tax revenues.
There are, to be sure, some small differences between the SGLIA
and the predecessor NSLIA. In the provision granting the service
member the right to designate the beneficiary, the words "at all
times" appear in the earlier Act, 38 U.S.C. § 717(a), but not
in the later one, 38 U.S.C. § 770(a), and the right to change
the beneficiary "without the consent" of the one presently named is
spelled out in § 717(a) but not in § 770(a). But the late
Act's unqualified directive to pay the proceeds to the properly
designated beneficiary clearly suggests that no different result
was intended by Congress. And any possible ambiguity was eliminated
by the Administrator's regulations that provide that a "change of
beneficiary may be made at any time and without the knowledge or
consent of the previous beneficiary." 38 CFR § 9.16(e) (1980).
There has been no suggestion that these regulations are
unreasonable, unauthorized, or inconsistent with the SGLIA, and
such a suggestion would not be supportable. [
Footnote 7]
See Whirlpool Corp. v.
Marshall, 445 U. S. 1,
445 U. S. 11-13
(1980);
Udall v. Tallman, 380 U. S.
1,
380 U. S. 16
(1965).
Page 454 U. S. 58
Yiatchos v. Yiatchos, 376 U. S. 306
(1964), relied on by the respondents, but not cited by the Maine
court, does not stand to the contrary. In
Yiatchos, the
Court considered a question left open in
Free v. Bland,
369 U.S. at
369 U. S.
670-671, namely, the "scope and application" of the
doctrine of fraud as an exception "to the regulatory imperative."
376 U.S. at
376 U. S. 307.
There, the decedent Yiatchos, a resident of a community property
State, purchased United States Savings Bonds with community funds
and had them issued in the name of the decedent, but payable on his
death to his brother. The state court held that this purchase "was
in fraud of the rights" of the surviving wife, as "a void endeavor
to divest the wife of any interest in her own property."
In re
Yiatchos' Estate, 60 Wash. 2d
179, 181-182,
373 P.2d
125, 127 (1962). This Court agreed that the bonds could "not be
used as a device to deprive the widow of property rights which she
enjoys under Washington law." 376 U.S. at
376 U. S. 309.
But because the named beneficiary was entitled to the bonds "unless
his deceased brother committed fraud or breach of trust tantamount
to fraud" by wrongfully disposing of the wife's property,
ibid., the case was remanded to give the widow an
opportunity to demonstrate that she had not consented to or
ratified the purchase and registration of the bonds. The remand was
also for the determination, under state law, whether the widow had
an interest in the community's specific assets, or only a half
interest in the estate generally.
Here, in contrast, Sergeant Ridgway's conduct did not amount to
breach of trust or conversion of another's property.
Page 454 U. S. 59
A careful reading of the complaint and the amended complaint,
App. 11 and 24, in this case reveals no allegation of fraud or
breach of trust. And we are not inclined to provide or infer such
an allegation when a case comes to us, as this one does, with the
record indicating nothing more than a breach of contract on the
part of the deceased service member. Indeed, to say that this type
of conduct constitutes constructive fraud would be to open the
policy proceeds to a suit by any commercial creditor, a result that
would render § 770(g) nugatory. As the trial court intimated,
respondents may have a claim against the insured's estate for that
breach; the record does not disclose whether a claim of that kind
would be collectible. [
Footnote
8]
There is, finally, a fundamental distinction between respondent'
asserted interests in the SGLIA policy proceeds and the community
property concepts at issue in
Yiatchos. Federal law and
federal regulations bestow upon the service member an absolute
right to designate the policy beneficiary.
Page 454 U. S. 60
That right is personal to the member alone. It is not a shared
asset subject to the interests of another, as is community
property. Yiatchos had imposed his will upon property in which his
wife had a distinct vested community interest. In contrast, only
Sergeant Ridgway had the power to create and change a beneficiary
interest in his SGLIA insurance. By exercising that power, he
hardly can be said to have committed fraud.
We conclude, therefore, that the controlling provisions of the
SGLIA prevail over and displace inconsistent state law. [
Footnote 9]
IV
The imposition of a constructive trust upon the insurance
proceeds is also inconsistent with the anti-attachment provision,
38 U.S.C. § 770(g), of the SGLIA. In
Wissner, 338
U.S. at
338 U. S. 659,
this Court invoked the identical anti-attachment provision of the
NSLIA as an independent ground for the result reached in that case.
The Court rejected, as it did so,
id. at
338 U. S.
663-664, the dissent's argument that "Congress was
interested in protecting [the fund], not the beneficiary," which
parallels respondents' argument here in favor of creating a
constructive trust after the proceeds have been received by the
beneficiary. Any diversion of the proceeds of Sergeant Ridgway's
SGLIA policy by means of a court-imposed constructive trust would
therefore operate as a forbidden "seizure" of those proceeds.
The Maine court attempted to limit the reach of § 770(g),
as has been noted above, on the theory that the purpose of the
anti-attachment provision was to protect the policy proceeds from
the claims of creditors, and that the provision has no
Page 454 U. S. 61
application to minor children asserting equitable interests. 419
A.2d at 1033. This contention, however, fails to give effect to the
unqualified sweep of the federal statute. Section 770(g), in
addition to exempting the policy proceeds "from the claims of
creditors," prohibits, in the broadest of terms, any "attachment,
levy, or seizure by or under any legal or equitable process
whatever," whether accomplished "either before or after receipt by
the beneficiary." The reading adopted by the Maine court renders
the bulk of the quoted statutory text extraneous. What was said of
the statute under consideration in
Hisquierdo, supra, is
applicable without qualification here:
"Like anti-attachment provisions generally [citing
Wissner], it ensures that the benefits actually reach the
beneficiary. It preempts all state law that stands in its way. It
protects the benefits from legal process '[n]otwithstanding any
other law . . . of any State.' . . . It prevents the vagaries of
state law from disrupting the national scheme, and guarantees a
national uniformity that enhances the effectiveness of
congressional policy."
439 U.S. at
439 U. S. 584.
[
Footnote 10] We find
nothing to indicate that Congress intended to exempt claims based
on property settlement agreements from the strong language of the
anti-attachment provision. [
Footnote 11]
Page 454 U. S. 62
V
We recognize that this unpalatable case suggests certain
"equities" in favor of the respondent minor children and their
mother. Sergeant Ridgway did have specific obligations to
Page 454 U. S. 63
the children that were imposed by the 1977 divorce judgment of
the Maine court. Those obligations not only concerned life
insurance "now outstanding" for the benefit of the children, but
also extended to their support, to clothing, to "medical, dental,
and optical expense," and to certain loans and other indebtedness.
App. 115. Ridgway, instead, chose to name his then new wife as
beneficiary of his SGLIA policy. [
Footnote 12]
A result of this kind, of course, may be avoided if Congress
chooses to avoid it. It is within Congress' power. Thus far,
however, Congress has insulated the proceeds of SGLIA insurance
from attack or seizure by any claimant other than the beneficiary
designated by the insured or the one first in line under the
statutory order of precedence. That is Congress' choice. It remains
effective until legislation providing otherwise is enacted.
The judgment of the Supreme Judicial Court of Maine is
Reversed.
JUSTICE O'CONNOR took no part in the consideration or decision
of this case.
Page 454 U. S. 64
[
Footnote 1]
The Superior Court observed that the "agreement embodied in the
divorce decree is valid," and it opined that the decree "would
appear to give [April] a cause of action, on behalf of her
children, against the estate of her former husband," App. 42,
citing
Stratton v. Servicemen's Group Life Ins. Co., 422
F. pp. 1119 (SD Iowa 1976).
See id. at 1122.
[
Footnote 2]
The very title of the Act recited that it was "to provide
special indemnity insurance for members of the Armed Forces serving
in combat zones, and for other purposes." 79 Stat. 880.
[
Footnote 3]
A similar and still earlier program of United States Government,
or War Risk, Insurance, was in effect for the World War I period.
War Risk Insurance Act of Oct. 6, 1917, 6400, 40 Stat. 409.
See
United States v. Williams, 302 U. S. 46
(1937).
[
Footnote 4]
See Pub.L. 91-291, 1 and 2, 84 Stat. 326-327; Pub.L.
92-315, 86 Stat. 227; Pub.L. 93-289, 88 Stat. 165, 166, 169.
[
Footnote 5]
The Solicitor General states that 99.6% of all active duty
personnel and 97.9% of the Ready Reservists are enrolled in the
program. Brief for United States as
Amicus Curiae 5.
See also S.Rep. No. 9198, p. 2 (1969).
[
Footnote 6]
In its consideration of the purpose of the SGLIA, the Supreme
Judicial Court of Maine,
Ridgway v. Prudential Ins. Co. of
America, 419 A.2d
1030, 1032-1033 (1980), relied upon a statement made in 1965 by
the then Administrator of Veterans' Affairs. The statement is
appended to H.R.Rep. No. 1003, 89th Cong., 1st Sess., 15-17 (1965).
In our view, however, the remarks cannot be used to read the
choice-of-beneficiary provision out of the Act. In context, it is
plain that the statement was not intended to serve as an exhaustive
list of congressional purposes; it merely identified some of the
problems in the existing law that were addressed by the pending
legislation.
[
Footnote 7]
JUSTICE STEVENS suggests that the "interest in permitting a
serviceman to designate the beneficiary of his insurance policy
[expressed in § 770(a)] is not compromised" by the Maine
court's decision.
Post at
454 U. S. 80.
While that may or may not be true as a matter of policy, the
statute expressly commands that SGLIA proceeds go to the
beneficiary or beneficiaries designated by the service member. And
the implementing regulations expressly command that a
"change of beneficiary . . . will take effect only if it is in
writing, signed by the insured and received [by the appropriate
office] prior to the death of the insured."
38 CFR § 9.16(d) (1980);
"[n]o change or cancellation of beneficiary . . . in a last will
or testament, or in any other document hall have any force or
effect unless such change is received by the appropriate
office."
§ 9.16(f). Yet JUSTICE STEVENS points to nothing in the
language or history of the statute and regulations which suggests
that Congress and the Administrator did not mean what they
said.
[
Footnote 8]
JUSTICE POWELL looks to
Yiatchos v. Yiatchos,
376 U. S. 306
(1964), and
Free v. Bland, 369 U.
S. 663 (1962), in concluding that "the principle of not
allowing federal preemption to shield fraud or breach of trust" is
applicable here.
Post at
454 U. S. 64, n.
1. Those cases, however, were concerned with a particular type of
fraudulent behavior: attempts "to divest the wife of any interest
in
her own property,"
In re Yiatchos'
Estate, 60 Wash. 2d
179, 181-182,
373 P.2d
125, 127 (1962) (emphasis added);
see Yiatchos, 376
U.S. at
376 U. S. 309,
which grew out of "fraud or a breach of trust tantamount thereto on
the part of a husband while acting in his capacity as manager of
the general community property."
Free v. Bland, 369 U.S.
at
369 U. S. 670.
In this case, by way of contrast, Sergeant Ridgway misdirected
property over which he had exclusive control. In doing so, of
course, he deprived the respondents of benefits to which they were
entitled under state law. But that is precisely what transpired in
Wissner v. Wissner, 338 U. S. 655
(1950). Indeed,
Free endorsed the
Wissner
holding, noting that
"[t]here the Congress made clear its intent to allow a
serviceman to select the beneficiary of his own government life
insurance policy regardless of state law, even when it was likely
that the husband intended to deprive his wife of a right to share
in his life insurance proceeds, a right guaranteed by state
law."
369 U.S. at
369 U. S. 670.
We are unable to distinguish the cases.
[
Footnote 9]
We need not presently address the legal aspects of extreme fact
situations or of instances where the beneficiary has obtained the
proceeds through fraudulent or illegal means, as, for example,
where the named beneficiary murders the insured service member.
See Shoemaker v. Shoemaker, 263 F.2d 931 (CA6 1959). Our
ruling on a situation of that kind is reserved for another day.
[
Footnote 10]
Burgess v. Murray, 194 F.2d 131 (CA5 1952), and
Voelkel v. Tohulka, 236 Ind. 588,
141 N.E.2d
344,
cert. denied, 355 U.S. 891 (1957), relied on by
the respondents but not cited by the Maine court, are not helpful.
To be sure, in each of those NSLIA cases, a constructive trust was
imposed on the policy proceeds. This, however, was done to further
the service member's dispositive intent. Here, Sergeant Ridgway
apparently intended to favor Donna as his surviving spouse. In any
event, the regulations implementing the SGLIA's beneficiary
designation requirements are stricter than the corresponding
regulations promulgated under the NSLIA.
Compare 38 CFR
§§ 8.46 and 8.47 (1980) (NSLIA)
with 38 CFR
§ 9.16(d) and 9.16(f) (1980) (SGLIA).
[
Footnote 11]
JUSTICE POWELL suggests, without supporting citation, that the
anti-attachment provision is inapplicable in this case because of
"the special nature of the parental legal duty," noting that
"[f]amilial obligations are not merely commercial."
Post
at
454 U. S. 70,
454 U. S. 68.
Again,
Wissner answers this objection. There, the claimant
was the decedent's widow, not a commercial creditor. Her action was
grounded in the law of community property; the Court explicitly
conceded that "[t]here are . . . support aspects to the community
property principle, and, in some cases, they may be of considerable
importance." 338 U.S. at
338 U. S. 660,
n. 4. The Court nevertheless struck down a state court judgment in
the widow's favor as being "in flat conflict" with the NSLIA's
anti-attachment provision.
Id. at
338 U. S. 659.
We see no significant difference between the community property
interest at issue in
Wissner and the property settlement
giving rise to the instant action.
JUSTICE STEVENS, meanwhile, argues that "it is most unlikely
that Congress intended § 770(g) to operate as a bar to claims
advanced by an insured's dependents for support,"
post at
454 U. S. 74; he
reasons that,
"[p]rior to the decision of this Court in
Wissner, a
number of courts had held that statutory 'spendthrift' provisions
did not bar a claim for alimony or support,"
ibid., and "there is nothing . . . that evidences an
intent by Congress to repudiate this distinction between commercial
and family obligations."
Post at
454 U. S. 78.
And he suggests that
"[t]he federal interest incorporated within exemption statutes
is an interest in preventing federally supported benefits from
satisfying claims of commercial creditors."
Post at
454 U. S.
78-79.
While these are attractive arguments, neither of them survives
close scrutiny. The more recent decisions, many involving facts
almost identical to those before us, are virtually unanimous in
concluding that the NSLIA anti-attachment provision overrides the
contrary dictates of state family law.
E.g., Hoffman v. United
States, 391 F.2d 195 (CA9 1968) (anti-attachment provision
overrides property settlement incorporated in divorce decree);
Kimball v. United States, 304 F.2d 864 (CA6 1962) (same);
Eldin v. United States, 157 F. Supp.
34 (SD Ill.1957) (same);
Williams v. Williams, 255
N.C. 315,
121 S.E.2d
536 (1961) (same);
Fleming v. Smith, 69 Wash. 2d
277, 284,
418 P.2d
147, 151 (1966) (same).
Cf. United States v. Donall,
466 F.2d 1246 (CA6 1972);
Taylor v. United States, 459
F.2d 1007 (CA9),
cert. denied, 409 U.S. 967 (1972);
Suydam v. United States, 131 U.S.App.D.C. 352, 404 F.2d
1329 (1968);
Fitzstephens v. United States, 189 F.
Supp. 919 (Wyo.1960);
Heifner v.
Soderstrom, 134 F.
Supp. 174 (ND Iowa 1955). And it was against the background of
these decisions that, in 1970, Congress enacted the SGLIA's
anti-attachment provision -- using language identical to that found
in the NSLIA. Presumably, then, Congress did not intend to write
into the statute the distinction made by JUSTICE STEVENS. And our
view, we believe, most closely accords with the purpose of
anti-attachment provisions like the one before us: they "ensur[e]
that the benefits actually reach the beneficiary."
Hisquierdo
v. Hisquierdo, 439 U. S. 572,
439 U. S. 584
(1979).
[
Footnote 12]
Respondents, in their brief and in oral argument, speak of the
"unjust enrichment" of Donna Ridgway. The suggestion is not
persuasive. The record discloses no wrong on Donna's part. She was,
after all, the insured's lawful wife at the time of his death, and
it is possible that depriving her of the proceeds would be as
inequitable as any other result. We intimate no view as to whether
wrongdoing by the named beneficiary would change the outcome.
See n 9,
supra.
JUSTICE POWELL, with whom JUSTICE REHNQUIST joins,
dissenting.
The Court holds that the Servicemen's Group Life Insurance Act
of 1965 (SGLIA or Act) broadly preempts state law. The Court also
finds, as it must in light of previous decisions, that the
preemptive power of this Act does not extend to cases of fraud or
breach of trust.
Ante at
454 U. S. 58,
citing
Yiatchos v. Yiatchos, 376 U.
S. 306,
376 U. S. 309
(1964). [
Footnote 2/1]
See also
Free v. Bland, 369 U. S. 663,
369 U. S. 670
(1962) (preemption may not be used to create a "sanctuary for a
wrongdoer's gains");
Hisquierdo v. Hisquierdo,
439 U. S. 572,
439 U. S. 582
(1979) (the "survivorship rules in federal savings bond and
military life insurance programs override community property law,
absent fraud or breach of trust by the decedent")
(emphasis added).
The Court concludes, however, that there is not even an
"allegation of fraud or breach of trust" in this case:
"Sergeant Ridgway's conduct did not amount to breach of trust or
conversion of another's property. A careful reading of the
complaint and the amended complaint, App. 11 and 24, in this case
reveals no allegation of fraud
Page 454 U. S. 65
or breach of trust. And we are not inclined to provide or infer
such an allegation when a case comes to us, as this one does, with
the record indicating nothing more than a breach of contract on the
part of the deceased service member."
Ante at
454 U. S.
58-59.
I
In reaching the conclusion that this case presents "nothing more
than a breach of contract," the Court's opinion does not linger
over the facts. [
Footnote 2/2] The
decree divorcing Richard from
Page 454 U. S. 66
his first wife April and incorporating the agreement of the
parties was entered on December 7, 1977. The agreement required
several months to negotiate, and it was negotiated in detail. April
received custody of the couple's three children. Richard was
entitled to claim one child as a tax exemption in 1977 and two in
1978. He was to make specified monthly support payments beginning
in 1978 and increasing in 1979. Although Richard was to pay for his
children's medical and dental expenses, April agreed to incur them,
to the extent possible, "so that they will be payable under
[Richard's] serviceman's insurance." App. 14. In addition to other
particular exchanges and responsibilities, the settlement specified
and the decree ordered:
"Defendant [Richard] is ordered to keep in force the life
insurance policies on his life now outstanding
for the benefit
of the parties' three children. If any of such insurance
policies should subsequently be terminated for any reason,
defendant shall immediately replace it with other life insurance of
equal amount
for the benefit of the children."
Ibid. (emphasis added). [
Footnote 2/3] Less than four months later, Richard
remarried and promptly changed the beneficiary clause of his
serviceman's
Page 454 U. S. 67
policy so that the entire insurance proceeds would go to his new
wife, Donna.
I return to the Court's view that the complaint makes "no
allegation of fraud or breach of trust," and that this is a simple
case involving "nothing more than a breach of contract" by Richard.
Ante at
454 U. S. 59.
Perhaps the complaint, as amended, is inartful. Yet it specifically
averred that a constructive trust existed under which Donna -- the
recipient of the insurance proceeds -- as the "constructive trustee
. . . for the benefit" of the children. App. 26. The Supreme
Judicial Court of Maine explicitly held that a constructive trust
existed and that Donna was the constructive trustee of the corpus
of this trust. [
Footnote 2/4] In a
technical sense, perhaps it can be argued there was "no allegation
of fraud or breach of trust," as these precise terms were not used.
But the complaint averred,
id. at 24, 25, and the
substance of this case is, that a constructive trust was created by
Richard's agreement and conduct.
In my view, the Court is plainly wrong in concluding that
Richard's conduct was "nothing more than a breach of contract," and
that his obligation was like that of "any commercial" debtor who
defaults on a judgment. [
Footnote
2/5]
Ante at
454 U. S.
59.
Page 454 U. S. 68
Familial obligations are not merely commercial. Few legal duties
are more universally acknowledged than the duty of a father to
support his children. This duty existed in this case by law before
the divorce. As a result of the divorce, it was recognized
explicitly by Richard's contract with his family and by the divorce
decree ordering him to discharge that duty by maintaining the
insurance at issue for the benefit of his children. Yet the Court
today analogizes a father's support duty to that of a commercial
debtor! This holding ignores the difference not only in character
of the duties but also in their consequences. A defaulting debtor
may be subjected to a judgment and an attachment lien. He may not
be sent to jail. But a father who defaults on his duty to support
his children or who violates a court decree enforcing that duty may
be imprisoned for contempt.
The Court responds to this dissent in its footnotes 8 and 11.
Yiatchos and
Free are said to involve "a
particular type of fraudulent behavior: attempts
to divest the
wife of any interest in her own property.'" Ante at
454 U. S. 59, n.
8 (emphasis deleted). The Court distinguishes, for the purpose of
determining the preemption issue, between fraud or breach of trust
that affects a wife's interest in community property and fraud or
breach of trust that affects minor children's interest in a fund
set aside for their support. I see no basis for such a distinction.
Yiatchos and Free recognize, without
qualification,
Page 454 U. S. 69
that "federal preemption [may not be allowed] to shield fraud or
breach of trust." I would not have thought, before today's
decision, that any court would suggest -- much less find -- that
minor children are less entitled to be "shielded" from this type of
conduct than an adult wife. Indeed, because of the difference
between the capacity of an adult and that of young children, our
law always has reflected a special solicitude for minors.
See,
e.g., Bellotti v. Baird, 443 U. S. 622,
443 U. S.
633-635 (1979).
The Court further argues, that "by way of contrast" with a
husband's "divest[ing]" his wife of her interest in community
property, "Sergeant Ridgway [merely]
misdirected property
over which he had exclusive control." (Emphasis added.)
Ante at
454 U. S. 59, n.
8. This is indeed a generous way to describe the Sergeant's
conduct. Moreover, the statement that he had "exclusive control"
over the property begs the very question before us: whether Richard
retained this control despite his conduct. He had divested himself
voluntarily of all interest in the insurance policies by the
agreement. The Maine court had approved the agreement, and ordered
Richard to comply with it. He had far less "control" over the fund
he had thereby created for his children's support than the husband
had in either
Yiatchos or
Free. He had no
interest whatever in the policies to "misdirect" to his new wife
unless -- contrary to those decisions -- the Act is now read to
allow fraud or breach of trust. [
Footnote 2/6]
Page 454 U. S. 70
I would hold that the special nature of the parental legal duty,
as expressly manifested in this case by both Richard's negotiated
bargain with his family and by the terms of his divorce decree,
imposes a constructive trust upon the proceeds of the insurance for
the benefit of Richard's children as a matter of federal law.
[
Footnote 2/7] As the Court
acknowledges,
ante at
454 U. S. 58,
the intention of Congress to supplant state law does not extend to
a breach of trust. Here the fund impressed with a trust should be
held for its agreed purpose in accordance with the law of Maine.
[
Footnote 2/8] I would affirm the
judgment of the Supreme Judicial Court of Maine.
II
Although I think the breach of trust issue is dispositive, I
would be willing -- in the interest of preventing what seems to me
a uniquely unjust decision -- to join an opinion remanding the case
to the Maine Supreme Judicial Court on the issue of fraud.
[
Footnote 2/9] There is no specific
allegation of fraud, and yet the admitted facts create the
strongest inference that Richard intended to evade his support
obligation by diverting to his
Page 454 U. S. 71
new wife the fund he had created for the benefit of his
children. The temporal sequence itself is persuasive. Following
several months of negotiation, the divorce was granted on December
7, 1977, but only on conditions that included the funding of the
support obligation. On March 28, 1978, less than four months
thereafter, Richard married Donna. Six days later, he stripped his
children of this fund by changing the beneficiary clause so that
Donna would receive the proceeds. This hardly was an inadvertent
act. It is unlikely that even the enchantment of a new wife caused
him to forget both his duty and his obligation to his children.
It would be appropriate, however, to afford the state courts an
opportunity to address the fraud issue. The Supreme Judicial Court
of Maine ruled in April's favor without considering this
alternative theory. This Court should not foreclose this
consideration, for whether April will be permitted to advance this
argument at this stage of the proceedings is a question of
state procedural law.
[
Footnote 2/1]
The Court discerns a "fundamental distinction,"
ante at
454 U. S. 59,
between this case and the application of the fraud exception to the
savings bond program in
Yiatchos. If there is a
distinction, the principle of not allowing federal preemption to
shield fraud or breach of trust is equally applicable.
Hisquierdo v. Hisquierdo, 439 U.
S. 572,
439 U. S. 582
(1979). As do the SGLIA provisions in this case, the savings bond
regulations in
Yiatchos bestowed upon the bond purchaser
-- irrespective of the source of his purchasing funds -- an
apparently absolute and preemptive federal right to designate who
would benefit from the federal program upon his death.
See Free
v. Bland, 369 U. S. 663,
369 U. S. 669
(1962). And as in this case, the party suffering from the exercise
of this preemptive right claimed, as a matter of state law, to have
a "shared" right to the asset in question. Indeed, in this case,
that state law claim is stronger than in
Yiatchos, since
April and her children assert (under the state property settlement
and divorce decree) an exclusive right to the entire SGLIA policy
-- not a "shared" right conferred by state community property
law.
[
Footnote 2/2]
April's cross-claim against Donna alleges:
"4. The terms of the divorce decree had been agreed upon in
advance by plaintiff April D. Ridgway and Richard H. Ridgway for
the benefit of themselves and their three minor children following
months of negotiations regarding questions of support for the
children, clothing allowances, assumption of responsibility for
payment of existing bills, maintenance of existing life insurance
and payment thereof, and attorney's fees."
"5. The terms of the decree concerning the property settlement
and continuing financial obligations of Richard H. and April D.
Ridgway represented compromises from the original positions taken
by the respective parties and were agreed to upon the understanding
that the terms of the parties' agreement setting forth their mutual
duties and obligations would be incorporated into the final divorce
decree for their mutual benefit and the benefit of their three
minor children."
"6. Paragraph 5 of the final divorce judgment required Richard
H. Ridgway to keep in force his existing life insurance and make it
payable to his three children."
"7. On or before April 3, 1978, in violation of the terms of the
aforesaid agreement between the parties to the divorce judgment and
of the divorce judgment itself, Richard H. Ridgway purported to
change the beneficiary designation on his life insurance policy by
writing the words 'at law' on a form provided for designating
beneficiaries of servicemen's life insurance."
"
* * * *"
"9. As a result of the facts recited above, Donna Ridgway stands
in the position of a constructive trustee of said insurance
proceeds for the benefit of the three minor children of Richard H.
and April D. Ridgway."
App. 25-26.
Donna admitted Paragraph 6, denied Paragraph 9, and claimed to
be without sufficient information to form a belief as to the truth
of Paragraphs 4, 5, and 7. She therefore denied these paragraphs.
Id. at 34.
The parties did stipulate to these facts:
"Prior to their divorce, April Ridgway and Richard Ridgway
carried on directly and through their attorneys, over a period of
many months, negotiations regarding a property settlement including
the disposition of Richard's existing life insurance. It was the
intention of the parties that any agreement reached as a result of
their negotiations would be incorporated into the divorce decree.
In the course of the negotiations, a number of compromises were
worked out between the parties regarding a division of the marital
property and Richard's continuing obligation to support his
children. The divorce decree dated December 7, 1977, did in fact
incorporate the property settlement ultimately agreed to by the
parties."
Id. at 33.
[
Footnote 2/3]
It is clear from the emphasized language that the couple and the
court were recognizing Richard's support obligation.
[
Footnote 2/4]
The Maine court stated:
"Courts have commonly imposed a constructive trust on the
proceeds of life insurance policies in the hands of a named
beneficiary when the deceased has failed, contrary to the
provisions of a property settlement agreement or a divorce decree,
to name his divorced wife or his children by his divorced wife as
the beneficiaries of the life insurance policies. . . ."
"
* * * *"
"We cannot see how imposing a constructive trust to enforce a
valid judicial decree implementing the serviceman's voluntary
agreement to name his minor children as the beneficiaries of his
SGLIA policy can in any way frustrate or impede the accomplishment
of any legitimate federal objective. Nor do we find anything in the
literal language of [SGLIA] or in its legislative history which
would prohibit such action.
Ridgway v. Prudential Ins. Co. of
America, 419 A.2d
1030, 1031, 1034-1035 (1980)."
[
Footnote 2/5]
The provisions of § 770(g) Of the Act so emphasized in the
Court's opinion, are explicitly designed to protect servicemen from
the "claims of creditors." They certainly were not designed to
allow a serviceman to misappropriate (in effect) a fund from
insurance proceeds lawfully set aside for his children. As the
Supreme Judicial Court of Maine correctly observed:
"[T]he statutory spendthrift provision found in Section 770(g)
has no application to the instant case, since its purpose is to
protect the proceeds of the insurance from the claims of creditors.
We are concerned here not with the claim of a creditor, but with
the claims of minor children who assert an equitable interest in
the proceeds arising from their deceased father's voluntary
agreement and a valid judicial decree."
419 A.2d at 1033.
[
Footnote 2/6]
The Court finds
Wissner v. Wissner, 338 U.
S. 655 (1950), to be controlling. In my view, its
authority -- though marginal -- is supportive of the claim of the
children in this case.
Wissner involved a community
property question arising when the serviceman assigned his
insurance to his mother, thereby divesting his wife's property
interest. The serviceman had made no independent commitment to his
wife comparable to that by the father to his children in this case.
Second,
Wissner justified applying the federal
anti-assignment provision to community property by referring to
"the
business relationship of man and wife for their
mutual monetary profit."
Id. at
338 U. S. 660
(emphasis added). This reasoning does not describe the parental
duty.
Wissner recognized this. It emphasized that
"specific judicial recognition" of the "moral obligation" to
"suppor[t] spouse and children" would have presented a different
case.
Ibid. Finally, both
Yiatchos and
Free were decided subsequently to
Wissner, and
each of these explicitly left room for an exception from preemption
where fraud or breach of trust existed.
[
Footnote 2/7]
See Yiatchos v. Yiatchos, 376 U.
S. 306,
376 U. S. 309
(1964);
Free v. Bland, 369 U.S. at
369 U. S.
670-671, and n. 14.
[
Footnote 2/8]
See, e.g., Board of County Comm'rs v. United States,
308 U. S. 343,
308 U. S.
349-350,
308 U. S.
351-352 (1939).
[
Footnote 2/9]
"[W]hether or not there is fraud which will bar the named
beneficiary in a particular case must be determined as a matter of
federal law. . . ."
Yiatchos v. Yiatchos, supra, at
376 U. S. 309.
Cf. Mishkin, The Variousness of "Federal Law": Competence
and Discretion in the Choice of National and State Rules for
Decision, 105 U.Pa.L.Rev. 797, 816-820 (1957) (national, rather
than state, definition of "competency" appropriate for the SGLIA's
predecessor) .
JUSTICE STEVENS, dissenting.
As a matter of state law, the Maine Supreme Judicial Court
imposed a constructive trust on the proceeds of Sergeant Ridgway's
life insurance. The trust effectuates a settlement agreement and an
express judicial decree that commanded Ridgway to maintain the
policy in effect for the benefit of his minor children. [
Footnote 3/1] The propriety of the
imposition
Page 454 U. S. 72
of a constructive trust under Maine law is, of course, not a
matter for us to review. [
Footnote
3/2] Unless the application of this well-established equitable
doctrine does "major damage" to "clear and substantial federal
interests," [
Footnote 3/3] we must
respect it.
Notwithstanding the absence of any such major damage, the Court
today decides that the Maine court's decision conflicts with two
provisions of the Servicemen's Group Life Insurance Act (SGLIA), 38
U.S.C. §§ 76776. [
Footnote
3/4] The Court finds a conflict with § 770(a) of the
statute, which gives the serviceman the right to designate his
beneficiary, and with § 770(g), which exempts the insurance
proceeds from taxation and from seizure by legal or equitable
process. Because the Court in
Wissner v. Wissner,
338 U. S. 655,
relied on similar provisions of the National Service Life Insurance
Act of 1940, 54 Stat. 1008, in rejecting a claim to insurance
proceeds paid under that statute, the Court today concludes that
Wissner is controlling, and that it must reach a similar
result.
Unquestionably, there is a strong federal interest in protecting
federally supported benefits from claims of the recipient's
commercial creditors. [
Footnote
3/5] There is also a federal interest, much less clearly
defined, in permitting a federal serviceman
Page 454 U. S. 73
to designate the beneficiary of his insurance policy. Both of
these federal interests supported the rejection of the estranged
wife's claim in
Wissner. A careful examination of this
case, however, demonstrates that neither of these interests is
compromised by the decision of the Maine Supreme Judicial
Court.
I
Since the alleged conflict with the exemption provision is more
obvious in this case, and concerns a more substantial federal
interest, I address it first. The statute provides:
"Payments of benefits due or to become due under Servicemen's
Group Life Insurance or Veterans' Group Life Insurance made to, or
on account of, a beneficiary shall be exempt from taxation, shall
be exempt from the claims of creditors, and shall not be liable to
attachment, levy, or seizure by or under any legal or equitable
process whatever, either before or after receipt by the
beneficiary."
38 U.S.C. § 770(g). This provision prohibits a commercial
creditor from securing insurance proceeds in the hands of the
beneficiary, regardless
Page 454 U. S. 74
of any contrary agreement made by the insured or any terms of
state law. Although the majority concludes that this provision also
prohibits the state court from recognizing respondents' claim in
this case,
ante at
454 U. S. 60, it
is most unlikely that Congress intended § 770(g) to operate as
a bar to claims advanced by an insured's dependents for
support.
The language used in the "anti-attachment" provision of the
SGLIA is comparable to that found in so-called "spendthrift
clauses" that have protected trust beneficiaries from the claims of
commercial creditors for centuries. [
Footnote 3/6] As stated by Dean Griswold,
"[i]t is widely held, however, that even where such trusts are
generally valid, the interest of the beneficiary may be reached for
the support of his wife or children, or for the payment of alimony
to his wife."
E. Griswold, Spendthrift Trusts 389 (2d ed.1947). [
Footnote 3/7] Prior to the decision of this
Court in
Wissner, a number of courts had held that
statutory "spendthrift" provisions did not bar a claim for alimony
or support. [
Footnote 3/8] Many of
these cases, in fact,
Page 454 U. S. 75
concerned exemption provisions applicable to veterans' benefits
programs. As summarized in one treatise:
"And claims for the support and care of minor children of an
incompetent veteran have been held not to be subject to the
exemption, as the obligation of a father to support his minor
children is not a debt within the meaning of the statute, but is an
obligation growing out of the parental status and public
policy."
R. Kimbrough & J. Glen, American Law of Veterans 32 (2d
ed.1954). [
Footnote 3/9]
A thoughtful and expansive opinion of Justice Rutledge, then a
member of the United States Court of Appeals for the District of
Columbia, best explains the rationale of these decisions. In
Schlaefer v. Schlaefer, 71 App.D.C. 350, 112 F.2d 177
(1940), the court considered a claim for arrears in alimony
payments. Plaintiff sought sequestration of her former husband's
property, including $100 per month that he received as disability
benefit payments under the Life Insurance Act for the District of
Columbia. Defendant responded that these payments were exempted
specifically from process under the express language of §
16(a) of that federal statute. [
Footnote 3/10]
Page 454 U. S. 76
The court in
Schlaefer stated that
"[t]he basic issue boils down to whether Congress intended to
relieve the disabled insured to the extent of his disability
payments from legally enforceable obligation to support his family
and those legally dependent upon him."
Id. at 358, 112 F.2d at 185. The court recognized:
"So far as general creditors are concerned, the purpose is
clear, with the exceptions stated, to make the disposition of these
funds a matter solely for his judgment. Congress regarded it as
better for the creditors to go unpaid than to deprive the debtor
and his dependents of this means of support when earning capacity
would be cut off. Hence it used broad language prohibiting recourse
to the fund by legal process."
Ibid. The court determined, however, that the insured's
legal dependents were not to be classified, for purposes of the
statute, "with strangers holding claims hostile to his interest."
Ibid. The court noted that
"the usual purpose of exemptions is to relieve the person
exempted from the pressure of claims hostile to his dependents'
essential needs, as well as his own personal ones, not to relieve
him of familial obligations and destroy what may be the family's
last and only security, short of public relief."
Ibid.
The court concluded that this construction was "not inconsistent
with giving full effect to the statute."
Id. at 359, 112
F.2d at 186. As explained by the court:
"The protection remaining is broad, applying both to 'debts' and
to 'liabilities.' Furthermore, it renders the
Page 454 U. S. 77
statute consistent with others which provide methods for
enforcement of the husband's and the father's duty of support. Any
other would nullify them in circumstances where the disability
payments constitute the sole source of livelihood, though they
might be adequate to support the insured and all his dependents in
luxury. We cannot believe that Congress intended to create an
exemption so broad and so inconsistent with the policy which it has
declared in other acts."
Ibid. (footnote omitted). The court further noted that
its construction of the exemption statute was consistent with other
authorities, which had held that a claim for support was not a
"debt" or a "liability" in the ordinary usages of those terms.
[
Footnote 3/11]
In
Wissner, the Court did not repudiate this
distinction between family and business obligations. Rather, in
ruling that the exemption statute was applicable in that case, the
Court expressly recognized this distinction and placed the
estranged wife's community property claim in the business category.
As stated by the Court,
"we must note that the community property principle rests upon
something more than the moral obligation of supporting spouse and
children: the business relationship of man and wife for their
mutual monetary profit."
338 U.S. at
338 U. S. 660.
[
Footnote 3/12] As a result, it
simply cannot
Page 454 U. S. 78
be said that
Wissner commands that an exemption statute
such as that present in this case stands as a bar to claims based
on familial obligations.
Although
Wissner left open the question presented in
this case, there is nothing in the language of the SGLIA or its
legislative history that evidences an intent by Congress to
repudiate this distinction between commercial and family
obligations. [
Footnote 3/13] The
federal interest incorporated within exemption statutes is an
interest in preventing federally supported benefits from satisfying
claims of commercial creditors.
Page 454 U. S. 79
Although such claims are certainly valid, they arise solely from
a personal obligation of the debtor,.and should not be borne by the
public through payment from general revenues. Claims based on
familial obligation, however, are of a different character, and
indeed may be precisely the type of claim for which the federal
benefit was intended. [
Footnote
3/14] Absent some indication that Congress intended the
standard exemption provision contained in the SGLIA to bar a minor
child's claim for support, I am unwilling to conclude that this
provision of the statute preempts the application of state law in
this case.
II
When the exemption provision is put to one side, the only
support for the Court's preemption holding is the statutory
provision giving the serviceman the right to designate the
beneficiary of his insurance policy. [
Footnote 3/15] In order to determine whether the
decision of the Maine court has done "major damage" to the federal
interests underlying this statutory provision, it is first
appropriate to identify those federal interests precisely.
The right to designate the beneficiary of an insurance policy is
a common feature in insurance contracts. It surely is not a right
that can be characterized as uniquely federal in any sense.
Moreover, the mere fact that the right has its
Page 454 U. S. 80
source in a federal statute does not require that it be given a
construction different from that given a comparable right created
by state law or by private contract. As stated by this Court in
Hisquierdo v. Hisquierdo, 439 U.
S. 572,
439 U. S. 583,
"[t]he federal nature of the benefits does not, by itself,
proscribe the entire field of state control."
To be sure, the Court in
Wissner speculated that
"[p]ossession of government insurance, payable to the relative of
his choice, might well directly enhance the morale of the
serviceman." 338 U.S. at
338 U. S. 660.
This interest in permitting a serviceman to designate the
beneficiary of his insurance policy is not compromised in this
case, however. It cannot be said that state law forces a
distribution of the insurance proceeds that is inconsistent with
the federal policy of permitting Sergeant Ridgway to choose his
beneficiary. In a freely negotiated child custody and support
settlement, Ridgway agreed to maintain his former wife as the
beneficiary of the policy for the benefit of his minor children.
Ridgway himself made that choice; the question presented in this
case, therefore, is whether any provision of the statute espouses a
federal interest in permitting him to change his beneficiary in
derogation of an accepted obligation to provide support for his
children. I can find no section of the statute that expresses such
an interest. The result reached by the Court today surely cannot be
justified by the need to maintain the "morale" of our Armed
Forces.
The history of the statutory provision defining the serviceman's
right to designate his beneficiary supports the conclusion that
§ 770(a) does not preempt state law in this case. Originally,
servicemen could name as beneficiaries only those persons who fell
within a limited, defined class. [
Footnote 3/16] At the
Page 454 U. S. 81
time
Wissner was decided, servicemen could designate
only a spouse, child, grandchild, parent, or sibling as a
beneficiary of a National Service Life Insurance policy. The
designation provision at issue in
Wissner thus added
support for the proposition that insurance proceeds were intended
to benefit only immediate family members and dependents of the
serviceman, and not any other party.
When Congress enacted the SGLIA in 1965, however, it removed all
limitations on eligible beneficiaries. 79 Stat. 883. Any person may
be named as beneficiary of the policy, including a commercial
creditor. Today, the Court gives priority to the claim of any such
designated beneficiary. Thus, as a result of its decision, a loan
shark, a camp follower, or a total stranger designated as
beneficiary would have priority over claims of dependent family
members, even though those claims were incorporated in a voluntary
settlement agreement and an express judicial decree. This result
simply was not possible at the time
Wissner was decided.
No federal interest justifies such an absolute and unqualified
priority for the designated beneficiary. [
Footnote 3/17]
Page 454 U. S. 82
It is ironic that today's decision may harm federal interests in
a more tangible way than that ascribed to the decision of the Maine
Supreme Judicial Court. As a result of the holding today, a
commitment to keep military insurance in effect for one's children
is not legally binding. In the future, a serviceman in divorce
negotiations may be forced to purchase new insurance from a private
insurer in order to provide fair assurance that his support
obligation will remain satisfied in the event of his death. For
many servicemen, such private insurance may not be easy to obtain.
Surely there is no federal interest in depreciating the value of
this insurance.
I respectfully dissent.
[
Footnote 3/1]
The imposition of a constructive trust on these facts is common
in the law, and has been recognized in cases in which no wrongdoing
could be imputed to the designated beneficiary.
Simonds v.
Simonds, 45 N.Y.2d 233, 380 N.E.2d 189 (1978);
McKissick
v. McKissick, 93 Nev. 139,
560 P.2d 1366
(1977);
Richards v. Richards, 58 Wis.2d 290,
206 N.W.2d
134 (1973);
see also G. Bogert, Trusts and Trustees
§ 475 (rev.2d ed.1978). As stated in
Simonds v. Simonds,
supra, at 242, 380 N.E.2d at 194 (citations omitted):
"Unjust enrichment, however, does not require the performance of
any wrongful act by the one enriched. Innocent parties may
frequently be unjustly enriched. What is required, generally, is
that a party hold property 'under such circumstances that, in
equity and good conscience, he ought not to retain it.' A bona fide
purchaser of property upon which a constructive trust would
otherwise be imposed takes free of the constructive trust, but a
gratuitous donee, however innocent, does not."
[
Footnote 3/2]
"The whole subject of the domestic relations of husband and
wife, parent and child, belongs to the laws of the States, and not
to the laws of the United States."
In re Burrus, 136 U. S. 586,
136 U. S.
593-594.
[
Footnote 3/3]
"State family and family property law must do 'major damage' to
'clear and substantial' federal interests before the Supremacy
Clause will demand that state law be overridden.
United States
v. Yazell, 382 U. S. 341,
382 U. S.
352 (1966)."
Hisquierdo v. Hisquierdo, 439 U.
S. 572,
439 U. S.
581.
[
Footnote 3/4]
The SGLIA was enacted in 1965. 79 Stat. 880. Relevant amendments
were made in 1970. 84 Stat. 326.
[
Footnote 3/5]
Federal benefit programs often provide that benefits are exempt
from legal process.
See, e.g., 5 U.S.C. § 8346(a)
(Civil Service Retirement benefits); 28 U.S.C. § 376(n)
(annuities for survivors of judicial officials); 42 U.S.C. §
3796(f) (1976 ed., Supp. III) (Public Safety Officers' Death
benefits); 45 U.S.C. § 231m (Railroad Retirement benefits). It
is interesting to note, however, that 42 U.S.C. § 659(a) (1976
ed., Supp. III) provides that,
"[n]otwithstanding any other provision of law, effective January
1, 1975, moneys (the entitlement to which is based upon
remuneration for employment) due from, or payable by, the United
States or the District of Columbia (including any agency,
subdivision, or instrumentality thereof) to an individual,
including members of the armed services, shall be subject, in like
manner and to the same extent as if the United States or the
District of Columbia were a private person, to legal process
brought for the enforcement, against such individual of his legal
obligations to provide child support or make alimony payments."
This statute removes the sovereign immunity of the Government in
an action brought to enforce a support obligation, and would appear
to express a clear federal interest in the enforcement of such
obligations.
[
Footnote 3/6]
See generally E. Griswold, Spendthrift Trusts (2d
ed.1947); Bogert,
supra, n. 1, §§ 221-230; 2 A.
Scott, Law of Trusts §§ 149-162 (3d ed.1967).
[
Footnote 3/7]
The Restatement (Second) of Trusts § 157(a) (1957) also
provides:
"Although a trust is a spendthrift trust or a trust for support,
the interest of the beneficiary can be reached in satisfaction of
an enforceable claim against the beneficiary,"
"(a) by the wife or child of the beneficiary for support, or by
the wife for alimony. . . ."
See also Bogert,
supra, 454 U.S.
46fn3/1|>n. 1, § 224; 2 Scott,
supra,
454 U.S.
46fn3/6|>n. 6, § 157.1, and cases cited.
[
Footnote 3/8]
See Schlaefer v. Schlaefer, 71 App.D.C. 350, 112 F.2d
177 (1940);
In re Flanagan, 31 F.
Supp. 402 (DC 1940);
Hannah v. Hannah, 191 Ga. 134, 11
S.E.2d 779 (1941);
Gaskins v. Security-First National
Bank, 30 Cal. App. 2d
409, 86 P.2d 681 (1939);
In re Gardner, 220 Wis. 493,
264 N.W. 643 (1936);
Stirgus v. Stirgus, 172 Miss. 337,
160 So. 285 (1935);
Stone v. Stone, 188 Ark. 622, 67
S.W.2d 189 (1934);
Hollis v. Bryan, 166 Miss. 874, 143 So.
687 (1932).
See also R. Kimbrough & J. Glen, American
Law of Veterans 28-33 (2d ed.1954);
Dillard v. Dillard,
341 S.W.2d 668 (Tex.Civ.App.1960).
But see Conaway v.
Conaway, 218 Cal. App.
2d 427, 32 Cal. Rptr. 890 (1963);
Riker v. Riker, 160
Misc. 117, 289 N.Y.S. 835 (1936);
Brewer v. Brewer, 19
Tenn.App. 209, 84 S.W.2d 1022 (1933).
[
Footnote 3/9]
See also Rogers, Enforcement of Claim for Alimony or
Support, or for Attorneys' Fees and Costs Incurred in Connection
Therewith, Against Exemptions, 54 A.L.R.2d 1422 (1957); Annot.,
Construction and Application of Provisions of Federal Statutes in
Relation to Exemption from Claims of Creditors of Amounts Paid as
Pensions, War Risk Insurance, Compensation, Bonus, or Other Relief
for Veterans, 109 A.L.R. 433 (1937).
[
Footnote 3/10]
The exemption statute provided
"No money or other benefit paid, provided, allowed, or agreed to
be paid by any company on account of the disability from injury or
sickness of any insured person shall be liable to execution,
attachment, garnishment, or other process, or to be seized, taken,
appropriated or applied by any legal or equitable process or
operation of law, to pay any debt or liability of such insured
person whether such debt or liability was incurred before or after
the commencement of such disability, but the provisions of this
section shall not affect the assignability of any such disability
benefit otherwise assignable, nor shall this section apply to any
money income disability benefit in an action to recover for
necessaries contracted for after the commencement of the disability
covered by the disability clause or contract allowing such money
income benefit."
Life Insurance Act for the District of Columbia, § 16(a),
48 Stat. 1175.
[
Footnote 3/11]
The force of Justice Rutledge's opinion has not diminished over
time. In
Cody v. Riecker, 454 F.
Supp. 22 (EDNY 1978),
aff'd, 594 F.2d 314 (CA2 1979),
the court relied extensively on Justice Rutledge's analysis in
concluding that the exemption provision contained in the Employee
Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §
1001
et seq., did not bar a divorced wife's attachment of
pension benefits to satisfy arrears in an obligation to provide
support.
[
Footnote 3/12]
The care with which Justice Clark preserved the basic
distinction presents a sharp contrast to the Court's blithe
reliance on
Wissner as controlling today. It is worth
quoting in full the Court's treatment of the issue:
"We recognize that some courts have ruled that this and similar
exemptions relating to pensions and veterans' relief do not apply
when alimony or the support of wife or children is in issue.
See Schlaefer v. Schlaefer, 71 App.D.C. 350, 112 F.2d 177
(1940);
Tully v. Tully, 159 Mass. 91, 34 N.E. 79 (1893); Hodson
v. New York City Employees' Retirement System, 243 App.Div.
480, 278 N.Y.S. 16 (1935);
In re Guardianship of Bagnall,
238 Iowa 905, 29 N.W.2d 597 (1947), and cases therein cited.
But cf. Brewer v. Brewer, 19 Tenn. App. 209, 239-241, 84
S.W.2d 1022, 1040 (1933). We shall not attempt to epitomize a legal
system at least as ancient as the customs of the Visigoths, but we
must note that the community property principle rests upon
something more than the moral obligation of supporting spouse and
children: the business relationship of man and wife for their
mutual monetary profit.
See de Funiak, Community Property,
§ 11 (1943). Venerable and worthy as this community is, it is
not, we think, as likely to justify an exception to the
congressional language as specific judicial recognition of
particular needs, in the alimony and support cases. Our view of
those cases, whatever it may be, is irrelevant here.[4]"
"-----"
"4. There are, of course, support aspects to the community
property principle, and in some cases they may be of considerable
importance. Likewise, alimony may not be limited to the amount
essential to support the divorced spouse. But we do not think the
Congress would have intended decision to turn on factual variations
in the spouse's need. If there is a distinction to be drawn, we
think it must be based upon a generalization as to the dominating
characteristics of a particular class of cases -- alimony cases,
support cases, community property cases. The alimony cases have
uniformly been decided on that basis."
338 U.S. at
338 U. S.
659-660, and n. 4.
[
Footnote 3/13]
Sergeant Ridgway's second wife, of course, has no obligation to
support Ridgway's children of a prior marriage. The state court
judgment in this case affects only the disposition of Sergeant
Ridgway's life insurance, however, "over which he had exclusive
control."
Ante at
454 U. S. 59, n. 8.
[
Footnote 3/14]
It is noteworthy that this Court has decided that "[war] risk
insurance was made available to those in active military service
for the greater protection of themselves and their dependents."
United States v. Williams, 302 U. S.
46,
302 U. S. 50.
See also n.
454 U.S.
46fn3/16|>16,
infra.
[
Footnote 3/15]
The statutory provision relied on by the Court simply
provides:
"(a) Any amount of insurance under this subchapter in force on
any member or former member on the date of his death shall be paid,
upon the establishment of a valid claim therefor, to the person or
persons surviving at the date of his death, in the following order
of preference:"
"First, to the beneficiary or beneficiaries as the member or
former member may have designated by a writing. . . ."
38 U.S.C. § 770(a).
[
Footnote 3/16]
In the War Risk Insurance Act of 1917, § 402, 40 Stat. 409,
insurance proceeds were payable only to a spouse, child,
grandchild, parent, brother, or sister. In 1919, the Act was
amended and the permitted class of beneficiaries was enlarged to
include uncles, aunts, nephews, nieces, brothers-in-law, and
sisters-in-law. 41 Stat. 371, 375. This class of eligible
beneficiaries was retained in the World War Veterans Act of 1924,
43 Stat. 607, 624. In the National Service Life Insurance Act of
1940, § 601(g), 54 Stat. 1010, Congress provided that
"[t]he insurance shall be payable only to a widow, widower,
child (including a stepchild or an illegitimate child if designated
as a beneficiary by the insured), parent (including person
in
loco parentis if designated as beneficiary by the insured),
brother or sister of the insured."
[
Footnote 3/17]
It is of interest that, in an early case involving a dispute
between a serviceman's mother, who had been designated as the sole
beneficiary of an insurance policy under the War Risk Insurance Act
of 1917, 40 Stat. 398, 409, and a serviceman's aunt, who had an
equitable claim to one-half of the policy proceeds, this Court
ordered an equitable distribution.
White v. United States,
270 U. S. 175. A
federal rule that the designated beneficiary should always prevail
against equitable claims would have required a contrary result.