RIDGWAY v. RIDGWAY

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ORAL ARGUMENT OF STEPHEN P. BEALE, ESQ., ON BEHALF OF THE PETITIONERS

Chief Justice Burger: We will hear arguments next in Ridgway and Prudential Insurance Company v. Ridgway.

Mr. Beale, you may proceed whenever you're ready.

Mr. Beale: Mr. Chief Justice, and may it please the Court:

I have attempted a number of times to state the facts in this case as a pure proposition of law in a single sentence, and I find that whenever I do it the sentence necessarily has six or seven commas and an equal number of semi-colons, so I will attempt to do it by a brief reference to the facts and then develop the facts in more detail, followed by the argument.

At base, the question in this case is who to have the beneficial enjoyment of the proceeds of a Servicemen's Group Life Insurance policy.

The two claimants are, first, the beneficiary designated under the procedures provided for by the federal statute and regulations, and on the other hand, the serviceman's ex-wife who claims the policy proceeds for the benefit of her minor children under a state court divorce decree.

The facts are these: Richard Ridgway was a career sergeant in the Army ensured under the Servicemen's Group Life Insurance program, which I will refer to hereafter a the SGLI Insurance program, in the amount of $20,000.

He was married to April Ridgway.

They had three children, all of whom were minors at the time Sergeant Ridgway died.

The marriage deteriorated.

April and Richard Ridgway were divorced in 1977, and in the divorce decree Sergeant Ridgway was ordered to maintain in effect for the benefit of his minor children his life insurance policies.

The only life insurance policy he had at that time was his SGLI policy.

He did not do that, however.

He subsequently married Donna Ridgway, the Co-Petitioner in this action.

Shortly thereafter he changed the beneficiary designation in the manner provided for on the military form which embodied an order of precedent set forth in the applicable statute and regulations of 38 U.S.C. 770(g)--

Unidentified Justice: I'm not sure--

Mr. Beale: --770(a) rather.

Unidentified Justice: --I'm not sure, it's a little irrelevant, but was a copy of the decree, the divorce decree brought to the notice of the insurance decree before... as soon as it was entered, or soon after it was entered?

Mr. Beale: No, it was not, Your Honor, neither was it brought to the attention of the Uniformed Services, which would have been possibly a place to which it might have been directed, although the statute and regulations specifically provide that it is only a specific form of writing signed by the serviceman which is effective to create or to change a beneficiary designation.

Unidentified Justice: So that the... I suppose your answer to the next question would be that it wouldn't make any difference if a copy of the decree had been filed with the Armed Services and the insurance company.

Mr. Beale: That is correct.

Under a prior form of insurance, the former National Service Life Insurance program, such a document might possibly have been effective.

However, in enacting the statutes and the regulations under the Servicemen's Group Life, the SGLI program, the manner in which beneficiaries can be created and changed is very specifically set forth by the statute and the regulations, and that requires that the beneficiary designation be in writing, signed by the serviceman and received by the appropriate military unit before the insured's death.

Unidentified Justice: And that authority... that authority to change the beneficiary cannot be waived or diminished by the insured person?

Mr. Beale: That is correct.

He has the unalterable right, the unlimited right to change the designation at any time, not to inform the prior beneficiary, and he may change it as many times as he wishes.

Unidentified Justice: And the procedures and forms are fully complied with in this case.

Mr. Beale: They are, Your Honor.

Unidentified Justice: On the change.

Mr. Beale: Yes, they are.

The--

Unidentified Justice: Did the Sergeant leave an estate in the case?

Mr. Beale: --Pardon?

Unidentified Justice: Did the insured Sergeant leave an estate, a probate estate?

Mr. Beale: It is... I do not know the exact details of his probate estate, but it is my understanding that it was minimal if at all, if he left an estate at all.

Unidentified Justice: So that if there is an action for breach of contract against the estate, you don't know whether it would be enforceable or collectable.

Mr. Beale: It would be our position, Your Honor, that... it's an open question as to whether or not there is an action permissible against the estate for breach of contract, but if that were deemed to be appropriate, I cannot provide you with a definitive answer as to whether or not there would be a full recovery of the amount of the policy proceeds or not.

It's my understanding that there would not be, but I cannot absolutely say that.

Unidentified Justice: It's a matter of irrelevance to you, I suppose.

It would be of some concern to the other side.

Mr. Beale: We do not wish to be hard-hearted about it, but it would be the primary concern of the other side if they wished to pursue that potential remedy.

Unidentified Justice: Am I right in thinking that your client voluntarily agreed to assign the proceeds of the life insurance policy, or to have a trust imposed on them?

Mr. Beale: I am counsel for the Petitioners, Your Honor.

It is Mr. Webber's... the serviceman is not represented by any party here, per se, but the party who might have voluntarily agreed you're suggesting would have been Sergeant Ridgway.

Unidentified Justice: Yes.

Mr. Beale: He is not represented per se in this action.

The claimants are here, his ex-wife on behalf of the minor children, the designated beneficiary, who was his widow at the time of his death, and the insurance carrier, and I am counsel for the insurance carrier, arguing on behalf of the Co-Petitioner, the designated beneficiary and the carrier.

Unidentified Justice: I see what you mean about the commas and clauses.

Mr. Beale: If I could continue with the facts--

Unidentified Justice: You really represent Prudential then.

Mr. Beale: --That is correct.

But I'm arguing on behalf of Prudential and the designated beneficiary.

The... as the... after this divorce and the subsequent remarriage and the designation of the second wife, Sergeant Ridgway... and he executed this beneficiary designation in the manner provided for under the statute and regulations which provided that the benefits be paid by law, which under the order of precedence had the effect of paying his widow, if he had one when he died.

Donna Ridgway did continue to be married to Sergeant Ridgway when he died several months later.

She thereupon filed a proper claim for the benefits in the appropriate form.

Another claim was filed by April Ridgway on behalf of the minor children under the divorce decree.

Prudential stated its affirmative intention to pay the designated beneficiary, Donna, the second wife.

April thereupon sued Prudential seeking a declaratory judgment that she was entitled to the proceeds and seeking injunctive relief to prevent Prudential from paying Donna.

Unidentified Justice: I'm a little curious as to why Prudential is so involved and upset and concerned.

Why don't they pay the money into court?

Mr. Beale: Because... Prudential has taken an affirmative position in wanting to pay the designated beneficiary not because of the first wife-second wife issue, but because of the administrative uncertainty and terrible additional administrative burdens which will be occasioned if the result which April seeks were to come about.

Unidentified Justice: Well, that isn't a very uncommon situation in controversies over insurance policy proceeds, and insurers are always paying into court.

Mr. Beale: Well, I think that what is going to happen is that at a minimum it will involve the insurance carrier in a very substantial number of cases in which it, even if has to just interplead and pay the proceeds into court and attempt to get out of this, sir, is going to involve a substantial expense of time and energy and legal expense in doing that.

Further, there is a substantial chance that the claim for the--

Unidentified Justice: Well, that's a lot less time and energy and expense than your coming all the way here defending it.

Mr. Beale: --I--

Unidentified Justice: Go ahead.

I just--

Mr. Beale: --Your Honor, there are additional points.

If, for example--

Unidentified Justice: --Does the Maine interpleader statute provide for recovery of attorneys' fees on behalf of the interpleader?

Mr. Beale: --No.

To respond to an additional point, Justice Blackmun, it may well be that in many situations the carrier would pay the first claimant without being aware that there was a prior divorce decree outstanding, and one of the additional concerns is that the insurance company will certainly be sued in almost any event, whether before or after it pays the proceeds.

If it's... the first rule of plaintiff's counsel is usually to sue everybody in sight, and secondly--

Unidentified Justice: Mr. Beale, in this case, on the holding below, supposing you paid a couple of months of benefits to the wrong party, the theory of the court below wouldn't hold you responsible for paying the price, would it?

Mr. Beale: --No, I think not, but the--

Unidentified Justice: So if we stuck to the theory of the court below, you don't really have a risk of double exposure.

Mr. Beale: --I think... well, we might have.

I will--

Unidentified Justice: At least not--

Mr. Beale: --The theory of the court below is not clear on that point, Your Honor.

It might possibly be--

Unidentified Justice: --It is not discussed.

Mr. Beale: --that we would get sued again by the party who ultimately ended up being the correctly designated beneficiary and prior claimant.

Unidentified Justice: how could that party possibly recover against you for merely doing what the policy directed you to do?

Mr. Beale: Well, the--

Unidentified Justice: I don't understand that.

Mr. Beale: --I'm not saying that they would prevail in the action, Your Honor, but I'm saying--

Unidentified Justice: Well, I--

Mr. Beale: --they might initiate the action, and just the additional time and energy and expense that is consumed in trying to get out adds a burden.

Unidentified Justice: --Is this... I'm interested in Justice Blackmun's point.

Is this problem any different because it's a federal insurance, I mean, you know, the federal government's involved, than in any of the other countless situations in which insurance companies always have the risk of paying the wrong party?

Mr. Beale: Yes, it's completely different because here we're involved with a federal statute which not only provides affirmatively in order of precedence for beneficiary payment, but also contains a provision against attachment or--

Unidentified Justice: Well, I understand the arguments in favor of your position.

I'm not asking that.

Assuming you lost here and we said none of that really applied, then wouldn't you have precisely the same practical problems that you have in your regular insurance business?

Mr. Beale: --I think--

Unidentified Justice: You're asking us to construe the statute in the way that will save you a lot of administrative costs that you have in the rest of your business.

Mr. Beale: --I think that there is that and there is more.

The additional factor that is involved here is the fact that this is a military benefit.

It is a particularly unique form of benefit which is made available to servicemen, and that there are, as this Court has indicated in the Wissner decision which was reached some 30 years ago, Congress has set up a program of military benefits, a part of which was that military life insurance would be an attractive inducement to service.

Unidentified Justice: Well, I understand.

Those are reasons why you may be right, but what I'm saying is if you're wrong on the law--

Mr. Beale: Yes.

Unidentified Justice: --And I'm not suggesting you are... you would just end up having the same kind of practical problem you do with the rest of your business.

Mr. Beale: I think that that is true, but except that it would be magnified in degree if not in technical definition by virtue of the enormous number of these policies outstanding, the volatility of military existence, etcetera.

Unidentified Justice: Well, big insurance companies have an enormous number of policies outstanding normally.

Mr. Beale: This is one of the most enormous Your Honor.

Unidentified Justice: To put it in another way, Prudential has no financial stake in this except the litigation expense.

Mr. Beale: And it... well, it has an additional stake, Your Honor.

As any other party, if you are associated with a program, you like it to work well.

Prudential--

Unidentified Justice: Well, that has nothing to do with the $10,000.

Mr. Beale: --$20,000 Your Honor.

Unidentified Justice: The stake.

Mr. Beale: No, no, nothing whatsoever, but there are interests broader than that.

No one likes to be associated with a program which is going to constantly be subject to litigation, to challenges to the reliability of the beneficiary designation, to the retention of the proceeds in the hands of the designated beneficiary--

Unidentified Justice: Well, then, why go into the insurance business?

Mr. Beale: --That is an interesting question.

The military... the Congress has determined that this is a benefit that would be offered to the military.

In setting up this particular form of military insurance, in contrast to prior forms, Justice Rehnquist, the government is not the insurer.

The legislation specifically provided that a contract would be entered into between the Veterans Administrator and a private contract carrier to provide the coverage, and that is Prudential's role.

It reinsures a great deal of this insurance with other parties, but it is standing in lieu of the government for purposes of this particular insurance program.

So therefore, any ill effects of it reflect poorly on the carrier, poorly on the military, and may ultimately weaken the attractiveness of the life insurance as an inducement to military service.

Unidentified Justice: I still have great problem with your only right being administrative convenience.

Mr. Beale: Well--

Unidentified Justice: That's all, isn't it?

Mr. Beale: --No, I think it is... the right, Your Honor?

No, that the right is created by the federal statute.

The right in the designated beneficiary to... in the serviceman first to designate his beneficiary absolutely is provided by statute.

The right--

Unidentified Justice: But how many interpleader cases does Prudential file in a year?

Mr. Beale: --I cannot say, Your Honor.

Unidentified Justice: It would be thousands, wouldn't it?

Mr. Beale: Oh, I think not.

Unidentified Justice: And this would just be a drop in the bucket, wouldn't it?

Mr. Beale: No, we--

Unidentified Justice: Isn't the only purpose is you just don't want to go through the formality of an interpleader suit?

Mr. Beale: --No.

As I have expressed previously, there are other purposes in addition to those that are directed solely from the point of view of Prudential as an insurance carrier.

There are the aspects of the attractiveness of the benefit from the point of view of the military, from the point of view of the United States.

Unidentified Justice: Oh, you are here on behalf of the United States.

Mr. Beale: No, the United States is represented by a representative from the Solicitor General's Office, but--

Unidentified Justice: They're not quite in agreement with you, are they?

Mr. Beale: --There is an interconnection on--

Unidentified Justice: So how are you representing them and they don't agree with you?

Mr. Beale: --I do not speak for the United States, Your Honor.

There is an office which has been established--

Unidentified Justice: So it's your... it's a problem that Prudential just doesn't want to go through the ordinary interpleader suit.

Well, I ask, would the interpleader suit solve this?

Mr. Beale: --Prudential could potentially have removed itself from the action by interpleading, yes.

Unidentified Justice: It could have.

Mr. Beale: Yes.

Unidentified Justice: And been free and clear to do whatever it wanted to.

Mr. Beale: Yes, it could have, but it chose not to do so believing that it was in the better interests of the legislation and of the purpose and the entire program--

Unidentified Justice: This is out of the goodness of Prudential's heart.

Mr. Beale: --I think it felt, as I indicated previously, that any time you are associated with a program, if it doesn't work well, then that reflects poorly on you, so there is some self-interest there as well, admittedly.

Unidentified Justice: Yes, but you don't have to bother us with it.

Mr. Beale: Well, that is true, but in attempting to protect our self-interest we are defining here, or attempting to urge the Court to recognize a clearly established, federally created right which stands in substantial opposition to a state interest, and attempting to preserve the integrity of that federally created right, and we stand, argue for this position because of this contractual relationship between the government and the private insurance carrier in this particular case.

Unidentified Justice: Mr. Beale, what if you had a case in which there was a change of beneficiaries, and the first beneficiary alleged that the second beneficiary had caused the decedent to change the beneficiaries by use of duress or fraud or something of that character, and so there really wasn't a voluntary choice?

What would you do if you had that kind of a plight?

Would you say you must pay the allegedly... notwithstanding the allegedly... the alleged fraud?

Mr. Beale: I think so, Your Honor, yes, and the--

Unidentified Justice: There is no way of... say a man just, he changed the beneficiaries at the point of a gun or something like that was alleged, he still... the second beneficiary still gets the money?

Mr. Beale: --That would be the position we would take, Your Honor, yes, and if there is a cause of action over, it's against the party who caused the wrong in a separate action, or against the action of that party's estate as might have been the case here.

Their case was tried on stipulated facts.

The Superior Court ruled that it... that the Supremacy Clause did control the situation, that it could not make any award or order in favor of the minor children, that it was precluded from doing so by the federal statute and regulations.

The Maine Supreme Court interestingly, in reversing, held that there was no Supremacy Clause at issue here because there was no conflict between the stated federal purpose in enacting the military insurance program and the competing... and the state interest in enhancing its state court divorce decrees.

We find this inconceivable as a proposition of law.

I think that it's clear that when the money goes to one party under one program and would go to another under the state court's award, that that's clearly a conflict.

We urge the Court to consider the unique military character of this benefit.

The... we think that the Maine court was clearly wrong, and that this Court in its McCarty decision, in attempting to focus on a federal enactment which clearly set forth a federal order of precedence to which a state interest in the family law area did a substantial and meaningful harm has made it clear that in referring to the military beneficiary designation provisions at issue in Wissner, that that was a model for both the Court's opinion and the dissent on the federal statute in which the federal interest is enunciated with force and clarity to which the competing state interest did substantial harm, and it was resolved in favor of a determination of preemption.

That preemption issue was determined in favor of the federal interest by virtue of the Supremacy Clause.

Unidentified Justice: Do you suggest, Mr. Beale, that we can't decide against you without overruling Wissner?

Mr. Beale: Wissner was technically a community property case, Your Honor, and not one involving issues directly.

Unidentified Justice: Well, it was an NSLI, too, and not--

Mr. Beale: It was NSLI, but the beneficiary designation provisions and the spendthrift provisions, the anti-attachment provisions of the two statutes are virtually identical.

Unidentified Justice: --Well, I repeat my question: do you think we can decide against you without overruling Wissner?

Mr. Beale: I think it is possibly, Your Honor, by... simply by virtue of the fact that there is a distinction between a community property interest and another interest at issue here, but I would urge the Court to adopt the same rationale that is embodied in Wissner, Hisquierdo and McCarty.

Unidentified Justice: There's another difference, too, in that the policy holder there had not made any commitment not to designate anybody else as a beneficiary, but here he did.

Mr. Beale: That is true, but he subsequently made another, perfectly valid beneficiary designation.

Unidentified Justice: I understand, but that's a difference between the two cases.

Mr. Beale: But there is a difference in the two cases.

Unidentified Justice: Wissner, there was only one beneficiary designation.

The question was whether it was a good one.

Mr. Beale: That is right, and Wissner is not a divorce situation either.

I would reserve the balance of my time.

Chief Justice Burger: Mr. Schwartz?

ORAL ARGUMENT OF JOSHUA I. SCHWARTZ, ESQ., AMICUS CURIAE

Mr. Schwartz: Mr. Chief Justice, and may it please the Court:

The Servicemen's Group Life Insurance program, which is the subject of this case, is an important feature of the United States Military Personnel Policy, which was adopted with the intention that it alleviate a unique hardship of military service, which is the simple fact that meaningful commercial life insurance is not available to servicemen protecting them against the thing that their loved ones most need, that is, the extra hazards of military service in combat conditions or other war hazards.

The program was adopted to boost morale of service members by making available a safe, convenient, sure form of insurance protection for anyone that the service member might choose to favor with these benefits.

As of the moment, there are over 3 million Servicemen's Group Life Insurance policies in effect, and the insured service members live in all 50 states in the United States.

The United States has participated as amicus curiae in this case in this Court because it has substantial interest in ensuring that the proceeds of policies issued under this program are distributed in accordance with the intentions of the Congress, and it might be appropriate to suggest that in response to Mr. Justice Rehnquist's question early out to Mr. Beale, that while we do not, the Government is not here speaking particularly for Richard Ridgway, I suppose that we are closest to that status in the sense that the interest of the United States is essentially the interest of service members generally.

Unidentified Justice: When you say distributed with... in accordance with the intent of Congress, don't you actually mean with the intent, in accordance with the intent of the serviceman?

Mr. Schwartz: Yes.

We read the statute, and we think it is quite plain on its face that what Congress intended is that whatever the service member intended be followed through so that the two merge in this case, in the instance where the service member has designated a beneficiary.

In the government's view, the decision of the Supreme Judicial Court of Maine fails to accord proper scope and effect to two provisions of the Servicemen's Group Life Insurance Act which effectively grant each service member insured under this program the right to determine who should determine the proceeds of his, his or her insurance policy, and to insulate those proceeds from any form of collateral attack whatsoever.

The first provision of the Act which is in our view significant here is the provision which provides, as I was just discussing, that the service member has the prerogative to designate any person to take the proceeds of the insurance, and there can be no question that Congress understood quite clearly that this was a broad leave to the servicemen.

On the floor of the Congress, Represent Everett as quoted in our brief, stated, this bill permits you to leave your insurance to your church, your college, or to your best friend.

Clearly Congress had no illusions as to the scope of the license accorded the service member.

In so doing, Congress further went on to provide that if no designation were made, the proceeds be paid in the first instance to a widow or widower, in the second instance if no such widow or widower were available, to any surviving children or descendents of those children, then on to a parent, and finally, the last two options were to the executor or administrator of an estate or to any next of kin prescribed in accordance with state law.

Unidentified Justice: But wasn't his designation of willingness to continue the policy in force for the children in effect an expression of willingness to do that?

Mr. Schwartz: Well, that may well be, Justice Rehnquist, but it fails to accord with the statutory standard in several respects.

In the first instance, the statute provides that the designation, to be effective, must be received in writing in the service office.

Furthermore, the regulations which were adopted contemporaneously with the initial enactment of the statute, and which are due some deference, have been continuously in force for fifteen or so years now, provide that the right to change the beneficiary is retained at all times, and we believe this is consistent with the statutory language which expressly provides that the benefits be paid to whomsoever he designates, and that therefore he has the right to change his mind.

But whether or not that is true, the additional point which was raised earlier was the fact that this was not receiving in writing.

In fact, although the record is somewhat unclear on this point and the government obviously has no view on the matter, it appears that there was not in fact, likely was not a written separation agreement, so there is failure to comply with the requirements of designation of intent in that respect, and--

Unidentified Justice: Would the government's view be different if it had received the necessary writing required by the regulation?

Mr. Schwartz: --No.

The government's view would be the same, but we would think it a closer case.

For instance, it might be reasonable... and we would think it might be reasonably done by Congress, if Congress deems it appropriate... Congress could provide that in the event that a separation agreement is entered, particularly if it were embodied in a divorce decree, that a registered copy, certified by the clerk of the court, duly filed with the Servicemen's Group Life Insurance office in Newark, New Jersey, providing that there be an irrevocable designation might have that effect.

Now, obviously those aren't the facts here both because that is not what occurred and that Congress hasn't done so, and we would think it is Congress's prerogative to do that.

But in any event, there isn't a clear, written, unambiguous, final assertion of intent so that while we think the case is somewhat harder because of the oral separation agreement, we don't think that would be dispositive here.

Unidentified Justice: Well, that puzzles, that argument puzzles me a little because there was a clear, unambiguous designation of the first wife as the beneficiary.

Mr. Schwartz: Of--

Unidentified Justice: Of the first wife as the beneficiary, isn't that true?

Mr. Schwartz: --Prior to the--

Unidentified Justice: Prior to the divorce.

Mr. Schwartz: --Yes.

Unidentified Justice: So that what... I mean, I don't see how the case would be any different if you received an amendment saying, well, instead of going just to the wife, going to the wife for the benefit of the children, isn't it still the same case?

Mr. Schwartz: Well, clearly on the--

Unidentified Justice: Your view, as I understand it, is the statute gives the man the absolute right to change beneficiaries no matter how faithfully he has promised not to do so and how many courts have ordered him not to do so.

He has a federal right to change beneficiary in breach of a separation agreement.

Mr. Schwartz: --We would suggest that that is correct.

On the other hand, as an alternative argument, we would suggest that if... if the effect of a court order is to somehow limit that... and we would suggest that a state court doesn't have the power under the statute to so order... that may not be enforced against the proceeds of the policy, and obviously we have no information or view as to whether, whether there are other assets available here, but we think it is not a small point that a distinction be drawn between enforcement of his promise as opposed to imposition of a constructive trust on the proceeds.

It seems to us that one of the things that is essentially different about this military service policy from other life insurance situations, putting aside the convenience of the insurer or anything such as that, is that it is a program intended for mass application for people sometimes serving overseas.

It is intended to be simple.

Congress designed it so that one is presumptively enrolled unless one opts out.

In the discussion in the legislative history you find references to things such as the fact that that was intended to cover POWs in Vietnam.

It was all intended to be very simple, cut and dried so that the serviceman might know that when he signed on this form that is provided by the military, which is within... a copy of which is within the record, that he could rest assured that that beneficiary would receive those proceeds.

And we would submit that the Maine court, in supposing that by getting the insurance company off the hook as they purported to view, took a very restrictive view of what Congress intended.

We would suppose that, all other things being equal, Congress would be more content to have Prudential litigating this than to have Donna Ridgway or people in her position faced with the burden of litigating this.

We would suppose that part of what Congress meant was not only that there be financial security, but that this lawsuit not have occurred, and yet it obviously has, and therefore we share the view that a clear judgment of this Court having the effect that this insurance policy simply could not be an asset, could not be a chip in the bargaining in a separation agreement process would be beneficial.

The Respondents have suggested that that would be anomalous, make the insurance policy worthless and so on, but in many respects that would place this insurance on a similar basis... on a basis similar to other insurance.

Other insurance may be cancelled for nonpayment of premiums, it may be cancelled because one is no longer eligible for health reasons, and it is, I think most divorce lawyers know, a very risky asset to take in a separation agreement, and contrary to what Respondents suggested, it would probably be beneficial were that clear to all counsel.

And certainly a judgment of this Court to that effect would do so.

One other point I'd like to address is that there really can't be any question here that Congress was aware that it was superseding the application of state law in providing the right to designate the beneficiary by virtue of the fact that Congress did not simply ignore the existence of state law.

In the table of order of precedence, down at the bottom, when you get to No. 5 and No. 6, referring to the executor of the estate or next of kin controlled by state law, those effectively incorporate state law.

So Congress, aware of what it was doing, placed state law down at the bottom of the list.

The government's interest in this case is obviously not identical with Sergeant Ridgway's, and we don't particularly have a brief for the facts of this case.

Our brief is obviously for the program, and we suggest that in general it would be best if the sanctity of the serviceman's designation were upheld in all respects, and that if, as Congress may deem it appropriate to devise a system whereby effect may be given to a state judgment, that is best fashioned by Congress.

In this regard, it might be worthwhile to point out that subsequent to the filing of the briefs in this case, Congress has adopted legislation which alters the result in Hisquierdo, doesn't overturn the Court's decision nor suggest that it was wrong.

It creates a uniform federal solution under the Railroad Retirement Act which Congress deemed equitable.

It is national in application.

It does not turn on whether it's a community property state or not.

Obviously this is something the Court could not do, could not have done in Hisquierdo.

And the newspapers also tell us that Congress is considering uniform national solutions to introduce some kind of equity for divorced spouses which would alter the result in McCarty but not suggest that it be overruled directly.

These are matters which Congress is clearly addressing closely.

It is much more within the province of Congress to make the kind of fine adjustments which would be appropriate, perhaps.

The judgment is for Congress in certain circumstances, but there seems to no need to subject the beneficiaries of a Servicemen's Group Life Insurance policy to the kind of constructive trust which was imposed in this case.

The Court in its recent decisions in Hisquierdo and McCarty has outlined a two-step test for judging matters such as this which involve the question of preemption of state law relating to marital property when it is applied to a federal benefit program.

We would submit that on the facts of this case, both of those elements are satisfied because there is both a conflict between the state right based on state law which is asserted, and a clear impairment of the federal purpose sufficient to require that the state right not be recognized.

The purpose of the program as we understand it was to ensure that the serviceman's intent be enforced, and under the circumstances, we suggest that reversal of the judgment of the Maine court is appropriate.

Thank you, Mr. Chief Justice.

Chief Justice Burger: Very well.

Mr. Webber?

ORAL ARGUMENT OF CURTIS WEBBER, ESQ., ON BEHALF OF RESPONDENTS

Mr. Webber: Mr. Chief Justice, and may it please the Court:

I am sorry that I have to begin by apologizing for the numerous typographical errors in the brief which I discovered when I was preparing for this argument.

Rather than taking the Court's time with simply detailing some of those which may be confusing, I propose to submit something to the Clerk within the next few days indicating those areas where there may be some confusion because of the typographical mistakes that were made.

This was a case in which the serviceman made an agreement with his wife prior to a divorce, a fact which was not mentioned by Mr. Beale in his description of the facts, by which he committed himself to make his service life insurance payable to his children.

He accepted the benefits of that contract.

There were negotiations between the parties which presumably permitted him to perhaps make lower support payments, and then he subsequently refused to honor it.

He consented to the entry of a divorce decree which made his obligation to make these insurance proceeds payable to his children part of the court order, and he later ignored that.

I think that on these facts... well, I should add also that finally his second wife, Petitioners argue, is entitled to retain the proceeds even though they were certainly a windfall to her and a result of her husband's illegal act in defiance of the court decree and his own agreement.

Now, on these facts, I think we're entitled to ask what overriding policies are there which would compel this Court to reach the result which I would characterize as totally absurd and unfair.

Unidentified Justice: Would the Supremacy Clause help?

Mr. Webber: Well, Your Honor, I don't really believe that the Supremacy Clause is at issue here because I don't believe there's really a conflict between the state law in imposing constructive trust, and the federal statute.

Unidentified Justice: Are you resting that on some theory that the insured is not free to change the beneficiary under this statute, under this statutory scheme?

Is he or is he not free to change any time he wants to?

Mr. Webber: Well, we have taken the position that he is free and that a state court order to the contrary would be superseded by the Supremacy Clause.

It is conceivable, however, that Congress did not intend to carry the authorization to servicemen that far, and that the intention was solely to permit changes of beneficiaries where this would not be in contravention of state law.

However, the right to change the beneficiary is still subject to all of the common law doctrines which have clearly over the years made it clear that the beneficiary of a... of insurance policies such as this may not keep the proceeds where to do so would be to result in unjust enrichment.

Now, several of the Justices asked the attorney for Prudential a question which has been puzzling me, which is, why are they here?

The administrative inconvenience argument is difficult for me to follow since the Maine Supreme Court made it clear that the constructive trust theory applies only to the proceeds in the hands of the beneficiary, so that the insurance company may safely pay the beneficiary in every case unless they are subject to some court restraint directing them not to do so.

Unidentified Justice: Well, isn't one of the reasons they're here is because we granted their petition for certiorari?

Mr. Webber: That's a practical, certainly a practical reason they're here.

Unidentified Justice: One of the reasons they're here.

Mr. Webber: As several Justices indicated or implied in their questions, in any case where an insurance company in the position of Prudential has been faced with conflicting demands for policy proceeds and has been made subject to a court order not to pay, it can simply resolve the question by interpleading the parties.

This is certainly a nominal expense which would be justified by the object of preventing fraud and unjust enrichment as occurred here.

Now, I would also raise a question as to the interest of the United States in these proceedings.

The Solicitor General's brief begins with a section entitled Interest of the United States, and in that portion of his brief he indicates that the purpose of the servicemen's life insurance program is in part,

"designed to render military service more attractive."

and also,

"to maintain morale of service members."

Now, in examining the interest of the United States, we must keep in mind the fact that as the Court said in Hisquierdo, local law dealing with family law problems will be followed by this Court unless

"there is major damage to clear and substantial federal interest."

The Solicitor General's brief does not explain why there is any damage to federal interest as a result of the holding of the court below, and what objectives will be frustrated by that holding.

I find it hard to imagine that any prospective enlistee in the military services would be dissuaded from doing that if he were told by a recruiter that we offer a program of group life insurance at low cost, but I must warn you that if you intend to defraud your dependents at some later time, under the holding of the Maine Court and the Supreme Court of the United States you will not be able to do so.

That sounds like a ridiculous proposition, but it certainly--

Unidentified Justice: Maybe it would be more appropriate to put that in the affirmative, if they informed him that he was always free to change the beneficiary at any time he wanted under all conditions.

Anything wrong with that?

Mr. Webber: --Well, I--

Unidentified Justice: That's true.

That's true when you buy private life insurance, isn't it?

Mr. Webber: --But that masks the concern of the Solicitor General which is only in the case dealt with here, which is limited to those circumstances where there is unjust enrichment coupled with a fiduciary relationship or fraud.

Unidentified Justice: Suppose you add to the hypothetical that when the recruiter approaches him, his wife is with him?

Do you think that the statement that the Chief Justice suggested that the recruiter make would give her a brighter vision of military service?

Mr. Webber: Well, you are assuming his hypothetical rather than mine, where the recruiter--

Unidentified Justice: Yes.

I mean, wouldn't she be somewhat upset knowing that... and perhaps attempt to dissuade him from entering the military service if she knew that he could change the beneficiary on the policy regardless of any estate law policy or interest that she might otherwise accrue in the policy?

Mr. Webber: --I assume that is conceivable.

Unidentified Justice: When that statute was passed, weren't there draftees?

Weren't there?

Mr. Webber: That was during the Vietnam conflict.

I'm not sure whether there was a draft... yes, there was a draft then.

Unidentified Justice: Well, were you able to resist the draft on the grounds that you didn't like the life insurance policy?

[Laughter]

Was that a good ground?

Mr. Webber: No, but that's not the ground offered by the Solicitor General as supporting the interest of the United States, as an inducement--

Unidentified Justice: I'm not bound by his argument.

Mr. Webber: --There's nothing to interfere with the operation of the service life insurance program as it is outlined by Congress except in these rare cases where unjust enrichment and fraud would result.

In those cases it would be stopped.

And I ask what interest of the United States is adversely affected by that.

Now, I have research the legislative history insofar as it is available to us in Maine, and I can find nothing, not a hint that Congress intended to carry the rights of designated beneficiary in the Servicemen's Group Life Insurance Act this far, to this extreme.

In fact, we know from the 1974 amendments to the Social Security Act that Congress had lost patience with servicemen who were refusing to support their families, and I suggest it is unlikely that they would have been in favor of the kind of result which Petitioners here ask this Court to reach.

Perhaps it's a point so obvious that it doesn't need to be stated, but it does seem to me that the result which Petitioners request this Court to reach also encourages servicemen to disregard their legal and moral obligations, in this case, in addition, the serviceman's obligation under his own contract, as evidenced by the separation agreement with his wife.

Unidentified Justice: Mr. Webber, let me ask you, is there an estate of the decedent in existence?

Mr. Webber: The estate was insolvent as far as I understand, Your Honor.

Unidentified Justice: Well, as far as you understand.

Don't you know?

Mr. Webber: I... well, our information was not very good.

Mr. Ridgway died in Alabama, and that was some distance away, and communication was screened because of the fact that there was another marriage.

Unidentified Justice: And you came into this case only by our appointments at a fairly recent date, is that correct?

Mr. Webber: No.

Unidentified Justice: How long have you been in it?

Mr. Webber: I have been in it since the time of the divorce.

Unidentified Justice: I see.

We just confirmed an appointment that had been made before.

Mr. Webber: That's correct.

Unidentified Justice: Let me ask you one other question.

Suppose that the Sergeant was limited in his recognition of credit and to all of his creditors he indicated, oh, I have a national service life insurance policy and I have made it payable to my estate, and I shall not change that designation.

Does your theory of the case go so far as to protect creditors?

Mr. Webber: No, it doesn't, Your Honor.

We would say--

Unidentified Justice: Where do you draw the line?

Mr. Webber: --Pardon?

Unidentified Justice: Where do you draw the line as between a first wife, or children, rather, and creditors?

Mr. Webber: I draw the line at the same place that this Court drew it in the Wissner case, between those obligations which arise out of the marital or parental obligation, which are not commercial transactions, and those which are more commercial in nature.

In that case the Court, of course, held that a community property relationship was that kind of a quasi-commercial relationship.

Now, Justice Stevens asked a question earlier which is connected with the next point I'd like to address, that is, that although the Petitioners have emphasized the absolute right of a serviceman to change the beneficiary under his policy and also have insisted there must be strict compliance with that designation, the fact is that there are a number of examples which I assume that Petitioners would acknowledged in which equitable principles have been allowed to prevail over the strict language of a statute or a contract in which a particular person is designated as the beneficiary.

Unidentified Justice: Over a federal statute?

Mr. Webber: Yes.

Let me give you some examples.

What if, in our case, Donna Ridgway had... the second wife, had been advised by Richard that he was having second thoughts and decided he wanted to name the children after all and she killed him to prevent that from happening, hoping to get away with it but it was found out?

This Court... excuse me, the circuit courts have held, and I think perhaps this Court has held under somewhat similar circumstances that when a person who murders the insured is not entitled to the proceeds of the policy on equitable principles, and in the Sixth Circuit, held under language which was identical to that in the Servicemen's Group Life Insurance, this being language dealing with federal employees, which has the same language in it about the right to designate beneficiaries, that the murderer could not receive the proceeds of the policy.

Now, suppose in this case Donna had been told by Richard that he wanted to change the beneficiary back to the children and he gave her a form to send to New Jersey which would have accomplished that, but she surreptitiously destroyed it and did not do what he wished.

This is a case where unclean hands on the part of the claimant, Donna, would bar her under well recognized decisions from collecting the insurance proceeds.

And again, this is an example of a situation where equitable principles were allowed to prevail over language of the statute.

And we cited cases in our brief in which this was done.

These are cases, again, involving the federal employees life insurance program.

Now, suppose in our case that Donna had agreed with Richard, again supposing he had second thoughts about changing the beneficiary designation, that she would hold the proceeds for the benefit of his children and would make sure that they received them, and he died subsequently, believing that that would be the case.

We cited two cases in which exactly this was done and a constructive trust was imposed and the language of the statute involved was identical with that presented in the case of Bonner.

Unidentified Justice: But there you have evidence of conduct which interfered with the will and desire of the insured.

You don't have that here.

Mr. Webber: But, Your Honor, the point of the example is not that there is interference with carrying out the will of the insured, but the fact that despite Petitioners' contention that absolute compliance with the beneficiary designations must be insisted upon in all cases, that in fact there are numerous situations where courts have invoked equitable principles not to comply exactly with those policy designations.

Unidentified Justice: Can you give me a case where equitable principles ran up against the sovereignty clause, the Supremacy Clause?

Mr. Webber: Yes.

Unidentified Justice: That's the kind of case I'd be interested in.

Mr. Webber: All right.

I'd like to talk about two cases in particular that involved United States Savings Bonds.

One is Free v. Bland, which was decided by this Court in 1964, and the second is Yiatchos--

Unidentified Justice: Is that in your brief?

Is that in your brief?

Mr. Webber: --Yes, it is, Justice Marshall.

Unidentified Justice: Okay.

I missed it.

It's not the first one I missed.

Mr. Webber: Free v. Bland is cited on several pages in our brief.

The Yiatchos case is cited also at three different pages in--

Unidentified Justice: I just want one place.

Where is it cited one place in your brief?

Mr. Webber: --Well--

Unidentified Justice: What page?

Mr. Webber: --Yiatchos is cited on pages 3, 16 and 17.

Unidentified Justice: Three--

Mr. Webber: And Free is cited on 3, 16, 17, and 18.

The case of Free v. Bland, decided in 196--

Unidentified Justice: --You also cite Hisquierdo as saying that, too.

Mr. Webber: --Hisquierdo distinguished, distinguished those two cases.

Unidentified Justice: Oh, I see.

I missed it.

Mr. Webber: In Free v. Bland, Mr. Free bought a Savings Bond in the name of himself and his wife.

Mrs. Free died, and her heirs contested the fact that Mr. Free was to take, as a survivor, take the full amount of the bond.

This Court held that the community property principle would have to be subordinated to the Treasury regulation specifying that the survivor take the whole thing, but it pointed out and noted a concession by the Solicitor General who appeared as an amicus in that case that Federal bonds would not be

"a sanctuary for a wrongdoer's gains."

The Yiatchos case followed this, the case of Free v. Bland two years later.

In that case, Mr. Yiatchos bought a Savings Bond, but this time not in the name of himself and his wife.

He used community property, and this was a community property state.

The bonds were purchased in his own name and the name of his brother.

Upon Mr. Yiatchos' death, there was a contest between his heirs and his brother.

Unidentified Justice: And of course, the other side says that's different, a community state, property state is different from Maine.

Isn't that their position?

Mr. Webber: No, this case did not turn--

Unidentified Justice: Well, my question was isn't that their position, not that I agree with it.

Mr. Webber: --Yes, yes, it is their position.

I'd like to quote the Treasury regulations just very briefly which were in effect covering the bonds in that case.

They stated that when either co-owner dies,

"the survivor will be recognized as the sole and absolute owner."

and also,

"no judicial determination will be recognized which would defeat or impair the rights of survivorship conferred by these regulations."

And I would suggest that these are as definitive and positive expressions of federal intent as can be found in the cases brought under the Servicemen's Group Life Insurance.

Yet despite those regulations, this Court held in Yiatchos that because it was found by the court below that there had been a constructive fraud on the part of Mr. Yiatchos in using community property in light of his fiduciary relationship as a manager of that property, to the disadvantage of his wife, that it would not permit the federal rules regarding the disposition of property to become an instrument of fraud.

Unidentified Justice: Well, the difference is, is it not... and I'm not an authority on community property law... but is the difference that at the time that they are alive they owned the property jointly, which is not true in Maine.

Mr. Webber: That's correct.

Unidentified Justice: Isn't that the difference?

Mr. Webber: But there's a difference in the fact that Maine is not a community property state, but a difference which is not applicable to the principle which I am pressing upon the Court at this point, which is that this Court overrode the clear language of the Treasury regulations dealing with the disposition of the Savings Bonds when it found that to do so would be to permit a fraud.

Unidentified Justice: I guess you're suggesting that although normally the premiums are paid by withholding from the serviceman's pay, I guess these policies often continue after the man leaves service, and presumably he could pay the premiums, the wife might... made an agreement to have the wife pay the premiums, you have the same sort of facts you had in Yiatchos, the wife pay the premiums on the understanding he wouldn't change the beneficiary, then he go ahead and change it.

But the government says there's a federal interest in letting him change the beneficiary, even though the wife pays the premium, and he agrees that that's in the consideration he won't change it.

Mr. Webber: Is that a question?

Unidentified Justice: I'm just thinking out loud, I guess, but that's your analogy.

I think you're trying to make the analogy that even in a case... that in that case, because the wife contributed to the purchase of the bonds, it was a fraud on her to... for him to claim the full benefit, and the same kind of thing could happen with insurance.

That's your argument I guess.

Mr. Webber: Essentially.

The case indicated that the... I don't recall.

I think it might have been... well, I don't recall the name of the state, but the state court held... I think it was Washington.

Unidentified Justice: Washington.

Mr. Webber: That the husband is, under community property law, the manager of the community property has a fiduciary relationship to the spouse in that situation, and it was a breach of this fiduciary relationship which defrauded her of her interest in the community property which caused this Court to say we'll not permit the Treasury regulations to be used as an instrument of fraud in this instance.

In Hisquierdo, this Court characterized those two cases, distinguished those two cases, and Wissner, as being... excuse me, it distinguished that case from Wissner, those two, as being ones... one in which survivorship rules in federal insurance will prevail unless

"fraud or breach of trust occurs."

So in Hisquierdo, this Court recognized that thread of distinction that was running in those other three cases.

Now, I'd like to speak for a moment about something that Mr. Schwartz commented on in the close of his argument, that is, the practical consequences of the result which Petitioners seek in this case.

I would submit that if the decision of the Maine Supreme Court were overruled that insurance policies under the Servicemen's Group Life Insurance Act will continue to be a trap for unwary persons and lawyers such as myself who aren't aware of the pitfalls and difficulties of transferring federal insurance, and with all due respect to this Court, I don't believe that even a decision of this Court would necessarily be calculated to get the word out to all persons who are practicing divorce law of the dangers of dealing with federal life insurance.

I don't know how it is in other jurisdictions, but in Maine I know that there... a very small minority of the practitioners read Law Week and keep abreast of events, especially in such esoteric fields of the law as this.

Unidentified Justice: Of course, Wissner was decided in about 1949.

Mr. Webber: That's true, but Wissner really is not dispositive of this case.

Unidentified Justice: I agree, it's not dispositive, but it represents a trend in the laws.

Mr. Webber: But in that case the Court did distinguish the situation which would arise in a non... where the obligation of the husband arose out of a marital obligation, and also, there was no... as Justice Stevens mentioned earlier, there was no separation agreement, there was no fraud on the spouse in that situation.

So it really was quite different than the case of Bonner.

It seems to me that the Court should take account of the fact that ironically, if the result that the Petitioners seek is allowed, that Servicemen's Group Life Insurance policies will become assets that no one will know what to do with, assuming, for a moment, that lawyers practicing divorce around the country do become aware of the fact that there are problems in committing servicemen irrevocably to keep the beneficiaries as they agree to keep them in a divorce decree.

Unidentified Justice: Well, with four million or more veterans, most of whom have this insurance, and many of whom get divorces, I suppose it's filtered around rather widely.

Mr. Webber: All right, assume it... let's assume now that the word does get around, as you suggest.

Assume that there's a situation in which husband and wife and their attorneys are negotiating a settlement and a division of marital property, and one of the assets that is to be decided upon is the Servicemen's Group Life Insurance policy.

Let's assume he doesn't have any other life insurance.

He obligates himself to support the children, to provide for their medical care, perhaps, clothing allowance... these are all things that were part of the agreement in this case... and then the parties say, well, what will we do in case you die?

What will replace the money that you are now contributing to the children in these various ways?

Obviously you look to the life insurance.

Well, we can't look to the Servicemen's Group Life Insurance.

If you assume a knowledgeable attorney, he'll advise the wife, no, you can't accept those.

We'll have to insist before we can reach an agreement that the serviceman go out and buy private insurance so that you can be adequately protected.

Unidentified Justice: Sometimes that is done, is it not, as part of a divorce settlement?

Mr. Webber: I suppose it might be, but suppose the serviceman really can't afford to buy another, a second insurance policy, or suppose he has a medical condition.

The parties are left in an impossible situation.

This would be particularly frustrating to a serviceman who knew in good faith he wasn't going to cheat his dependents as Sergeant Ridgway did, and in good faith wanted to make the proceeds of his insurance policy available to them, and he is being told by his wife and her attorney, we can't let you do it because we can't trust you.

The constructive trust doctrine won't apply, no court order will apply, and there's nothing we can do to hold you to your agreement.

Unidentified Justice: Mr. Webber, we are speaking practicalities now.

With a private policy I think one can have a beneficiary designation made irrevocable, and get the policy turned over to the wife, then wife.

Is there anything comparable on the governmental side?

Is there a certificate that has to be turned in, do you know?

Mr. Webber: To change the beneficiary?

Unidentified Justice: Yes.

Mr. Webber: Yes.

You have to file a form in which you indicate--

Unidentified Justice: Well, you file a form, but is there also a certificate that has to go in, do you know?

Mr. Webber: --I'm not aware of any.

Unidentified Justice: So it isn't comparable to the private policy then.

Mr. Webber: Well, I can't say that my experience with private policies is large enough to be able to answer that question intelligently, Justice Blackmun, but I'm certainly not aware of any way that if the Maine court is reversed, a serviceman's obligation expressed in a separation agreement and a divorce decree to keep the policy in force for the dependents can be enforced, and I would suggest that this result, if it were to take place, would be totally at odds with the express purpose of Congress in the legislative history to make insurance of this sort available to protect the dependents of the servicemen in question.

As I indicated earlier, I could find no hint in the legislative history of any intention on the part of Congress to express the beneficiary the right of the... to protect, I should say, the right of the serviceman to change his beneficiary, even, even when it resulted in fraud and unjust enrichment.

But it is clear that Congress did intend these insurance proceeds to be available to protect the dependents of the serviceman, and this is a result which I would suggest would be frustrated if the Maine Supreme Court's decision is overruled.

Chief Justice Burger: Mr. Beale, I believe you have three minutes left.

ORAL ARGUMENT OF STEPHEN P. BEALE, ESQ., ON BEHALF OF PETITIONERS -- REBUTTAL

Mr. Beale: Thank you, Mr. Chief Justice.

May it please the Court:

In brief response to several points raised by Mr. Webber, first, as to the unjust enrichment item, the argument which Mr. Webber advances lose sight... loses sight of one very fundamental, important point, which is that Donna, the second wife and designated beneficiary, is simply not unjustly enriched here in that she has done nothing wrong.

She has committed no improper act herself.

She was Sergeant Ridgway's legitimate wife.

She remained his wife at the time of his death.

She--

Unidentified Justice: Isn't the question of unjust enrichment a question of state law?

Mr. Beale: --I think it probably would have been.

Unidentified Justice: Hasn't the Supreme Court of the State of Maine decided it?

Mr. Beale: On these particular facts, not to my knowledge, Your Honor.

Unidentified Justice: Didn't they hold that there was unjust enrichment here?

Mr. Beale: I understand your question now.

Yes, they did in effect, and they not only declared that the remedy of a constructive trust would potentially be available, which the Superior Court had decided was not even available for it to consider because of the Supremacy Clause issue, the Maine Court went beyond that and sua sponte imposed the constructive trust on the proceeds without even remanding to the Superior Court.

Unidentified Justice: Well, maybe they committed all sorts of errors of state law, but normally we don't review those.

Mr. Beale: True.

But the central point is that I think that in contradistinction to what the Maine Court held, that Donna Ridgway was not unjustly enriched, in short, that holding is wrong.

As to the Supremacy Clause--

Unidentified Justice: But again, is that relevant?

Would you agree with his example of say you've got a beneficiary who murders the policyholder?

What about that case?

Mr. Beale: --I think in that case, then, again, under this particular program, the proceeds ought to be paid absolutely to the--

Unidentified Justice: The murderer?

Mr. Beale: --designated beneficiary, and it is then incumbent upon the party whose interest has been damaged to proceed accordingly.

Unidentified Justice: But that's what you're asking us to hold, that in that case, as this, pay the murderer.

Mr. Beale: That is correct, Your Honor.

As to the Supremacy Clause question, that the real issue here is not whether the Supremacy Clause applies or not, and whether there's a preemption issue, but how far the preemption extends.

The Respondents' argument would have the Court hold that the preemption argument extends only to the mechanical payment of the proceeds to the designated beneficiary, and that the federal preemption then stops and a constructive trust may be imposed on the proceeds in the hands of the designated beneficiary.

Well, that's a hollow argument.

It's clear that the intent here has to be that the federal preemption must extend to the beneficial enjoyment of the proceeds.

That point is made in the Hisquierdo decision, it's made again in the McCarty decision, that what is really at issue is where the beneficial enjoyment of the proceeds ends up and not the mere mechanical payment.

Unidentified Justice: Well, it would solve the insurance company's problem if the trust didn't arise except in the hands of the named beneficiary.

Mr. Beale: Well, this gets us back--

Unidentified Justice: And that you would be off the hook if you paid the named beneficiary, but then the trust would pick up on the proceeds in her hands.

Mr. Beale: --That is nominally correct, Your Honor, but for the reasons we've discussed previously, we feel that it is to the greater benefit of the entire program because of the unique position that the insurance carrier holds in lieu of the government to ensure that that result does not obtain and that the proceeds are paid absolutely without restriction.

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.