Court Opinion

ID: 9428524
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:24:03.054893+00
Date Added: 2024-06-11T17:23:14.008650
License: Public Domain

*64Justice Powell,
with whom Justice Rehnquist joins,
dissenting.
The Court holds that the Servicemen’s Group Life Insurance Act of 1965 (SGLIA or Act) broadly pre-empts state law. The Court also finds, as it must in light of previous decisions, that the pre-emptive power of this Act does not extend to eases of fraud or breach of trust. Ante, at 58, citing Yiatchos v. Yiatchos, 376 U. S. 306, 309 (1964).1 See also Free v. Bland, 369 U. S. 663, 670 (1962) (pre-emption may not be used to create a “sanctuary for a wrongdoer’s gains”); Hisquierdo v. Hisquierdo, 439 U. S. 572, 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 *65or 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 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.2 The decree divorcing Richard from *66his 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/or 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).3
Less than four months later, Richard remarried and promptly changed the beneficiary clause of his serviceman’s *67policy 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 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 — was 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.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.5 Ante, at 59. *68Familial 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 59, n. 8 (emphasis deleted). The Court distinguishes, for the purpose of determining the pre-emption 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 qualifica*69tion, that “federal pre-emption [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, 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 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.6
*70I 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.7 As the Court acknowledges, ante, at 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.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.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 *71new 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.

 The Court discerns a “fundamental distinction,” ante, at 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 pre-emption to shield fraud or breach of trust is equally applicable. Hisquierdo v. Hisquierdo, 439 U. S. 572, 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 pre-emptive federal right to designate who would benefit from the federal program upon his death. See Free v. Bland, 369 U. S. 663, 669 (1962). And as in this case, the party suffering from the exercise of this pre-emptive 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.

 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.
*66The 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.

 It is clear from the emphasized language that the couple and the court were recognizing Richard’s support obligation.

 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 SGLI 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).

 The provisions of §770(g) of the Act, so emphasized in the Court’s *68opinion, 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.

 The Court finds Wissner v. Wissner, 338 U. S. 656 (1950), to be controlling. In nay view, its authority — though marginal — is supportive of the claim of the children in this ease. 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 660 (emphasis added). This reasoning does not describe the *70parental 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 pre-emption where fraud or breach of trust existed.

 See Yiatchos v. Yiatchos, 376 U. S. 306, 309 (1964); Free v. Bland, 369 U. S., at 670-671, and n. 14.

 See, e. g., Board of County Comm’rs v. United States, 308 U. S. 343, 349-350, 351-352 (1939).

 “[Wjhether 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 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).