Court Opinion

ID: 9428525
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:24:03.060144+00
Date Added: 2024-06-11T17:23:14.014785
License: Public Domain

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.1 The propriety of the imposi*72tion of a constructive trust under Maine law is, of course, not a matter for us to review.2 Unless the application of this well-established equitable doctrine does “major damage” to “clear and substantial federal interests,”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. §§765-776.4 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.6 There is also a federal interest, much less clearly defined, in permitting a federal serviceman *73to 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 *74of 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 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.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).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.8 Many of these cases in fact *75concerned 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).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.10
*76The 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 *77statute 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.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 660.12 As a result, it simply can*78not 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.13 The federal interest incorporated within exemption statutes is an interest in preventing federally supported benefits from satisfying claims of commercial credi*79tors. 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.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 pre-empts 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 pre-emption holding is the statutory provision giving the serviceman the right to designate the beneficiary of his insurance policy.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 *80source 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, 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 “[possession of government insurance, payable to the relative of his choice, might well directly enhance the morale of the serviceman.” 338 U. S., at 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 pre-empt state law in this case. Originally, servicemen could name as beneficiaries only those persons who fell within a limited, defined class.16 At the *81time 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.17
*82It 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.

 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 un*72justly 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.”

 “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, 593-594.

 “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, 352 (1966).” Hisquierdo v. Hisquierdo, 439 U. S. 572, 581.

 The SGLIA was enacted in 1965. 79 Stat. 880. Relevant amendments were made in 1970. 84 Stat. 326.

 Federal benefit programs often provide that benefits are exempt from legal process. See, e. g., 5 U. S. C. § 8346(a) (Civil Service Retirement *73benefits); 28 U. S. C. § 376(n) (annuities for survivors of judicial officials); 42 U. S. C. §3796(f) (1976 ed., Supp. Ill) (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. Ill) 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.

 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).

 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 n. 1, §224; 2 Scott, supra n. 6, § 157.1, and cases cited.

 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 *75Cal. 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).

 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).

 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 *76shall 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.

 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.

 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 exemp*78tions 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 659-660, and n. 4.

 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 59, n. 8.

 It is noteworthy that this Court has decided that “[w]ar 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, 50. See also n. 16, infra.

 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).

 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-*81law, 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.”

 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.