On appeal from Superior Court, Chancery Division, Family Part, Monmouth County.
Approved for Publication November 8, 1995.
Before Judges Pressler, Keefe, and A.a. Rodriquez. The opinion of the court was delivered by Pressler, P.j.a.d.
The opinion of the court was delivered by: Pressler
The opinion of the court was delivered by PRESSLER, P.J.A.D.
N.J.S.A. 2A:34-25, as amended by L. 1988, c. 153, § 7, permits the Family Part to order an obligor spouse to maintain life insurance for the protection of a former spouse or, if the obligor spouse is uninsurable, to create a trust in lieu of life insurance. Jacobitti v. Jacobitti, 135 N.J. 571, 641 A.2d 535 (1994). The issue raised by this appeal is whether the proceeds of group life insurance provided to an obligor spouse under the Federal Employee Group Life Insurance Act (FEGLIA), 5 U.S.C.A. §§ 8701-8716, may be the subject of a state court order pursuant to N.J.S.A. 2A:34-25 or whether FEGLIA preempts any state court action. We hold that FEGLIA does not preempt the power of the state court to impose a constructive trust on the proceeds of the insurance after the death of the obligor spouse. Accordingly, we reverse the order appealed from.
The pertinent facts are not in dispute. Plaintiff Naguib Geo Sedarous and defendant Nahed S. Sedarous were married in 1974. They had no children. From 1982 until his death in 1993, Mr. Sedarous was a civilian employee of the United States Navy. As a result of that employment, he had both the minimum group life insurance afforded him under FEGLIA, about $40,000 in the face amount, plus additional life insurance he was able to purchase under FEGLIA. *fn1 The total life insurance benefits were about $240,000. Mr. Sedarous had designated his sister, third-party defendant Lydia Younan, as the sole beneficiary of this insurance.
Mr. Sedarous, who suffered from diabetes and other related ailments, instituted this action for divorce in August 1992. Mrs. Sedarous counterclaimed. The matter was tried over two days, and judgment dissolving the marriage was orally pronounced on October 14, 1993, the Judge reserving decision on the financial consequences of the divorce. On October 25, 1993, the Judge wrote to the attorneys advising them of his financial determinations. Among them was the equitable distribution of Mr. Sedarous's federal pension. The Judge accorded Mrs. Sedarous a stated fraction of the monthly pension payments Mr. Sedarous would eventually receive. The Judge also directed that at Mrs. Sedarous's election and at her cost, she could obtain federal survivor benefits if the pension plan so permitted, but if not, then Mr. Sedarous would have to maintain a $50,000 life insurance policy for Mrs. Sedarous's benefit. The determinations did not require Mr. Sedarous to maintain life insurance in order to assure the alimony payments that the Judge also ordered. Because of this omission, Mrs. Sedarous's attorney requested further argument. On November 19, 1993, before that argument could be entertained and before final judgment was entered, Mr. Sedarous died.
Shortly after Mr. Sedarous's death, Mrs. Sedarous was advised by the Navy not only of the survivor benefits to which she was entitled, amounting to $688 monthly, but also of the actual amount of the FEGLIA insurance. In February 1994, the judgment of divorce was finally entered incorporating, in the main, the provisions of the October 25, 1993, letter except that, because of Mr. Sedarous's intervening death, no alimony was awarded. On the same day the judgment was entered, Mrs. Sedarous, with leave of court, filed a third party complaint against Younan, seeking to impose a constructive trust on the proceeds of the FEGLIA insurance of which Younan was the designated beneficiary. The Judge entered an interim order placing $142,000 of the then total $242,000 in Younan's attorney's trust account.
Ultimately, however, the Judge granted Younan's motion for summary judgment dismissing the third party complaint. In so doing, the court made clear that had Mr. Sedarous survived at least until the entry of final judgment and had the court been advised of "the true status of the beneficiaries and the FEGLIA issue," it would undoubtedly have ordered Mr. Sedarous to "maintain some separate life insurance to guarantee the alimony." The court noted, however, that even had it done so, its order would have been "an exercise in futility" because of Mr. Sedarous's evident uninsurability. Thus, it concluded, Mrs. Sedarous's sole recourse was to impose a constructive trust on the FEGLIA proceeds, a proposition it would have considered but for the preemption by FEGLIA of state action affecting those proceeds. Mrs. Sedarous appeals the ensuing judgment dismissing her third party complaint.
The specific preemption question before us, while not yet addressed in this jurisdiction, has been considered both by federal and state courts, which have reached disparate results. The starting point of the analysis in these cases, irrespective of the Conclusion reached, is the opinion of the United States Supreme Court in Ridgway v. Ridgway, 454 U.S. 46, 102 S. Ct. 49, 70 L. Ed. 2d 39 (1981). Ridgway construed not FEGLIA but SGLIA, the Serviceman's Group Life Insurance Act of 1965, 38 U.S.C.A. §§ 1965, et seq. (formerly 38 U.S.C.A. §§ 765, et seq.), and concluded that it preempts state action.
In Ridgway, a career army sergeant, Richard Ridgway, was divorced from his first wife by a judgment entered by a Maine court which included the directive that Ridgway maintain all insurance policies on his life for the benefit of the three minor children of the marriage. At the time, the first Mrs. Ridgway was the designated beneficiary of the policy. Shortly after the divorce judgment was entered, Ridgway married the second Mrs. Ridgway and changed the beneficiary designation of his SGLIA insurance in her favor. Ridgway died nine months later. The first Mrs. Ridgway claimed the SGLIA proceeds for the children under the provisions of the divorce judgment, and the second Mrs. Ridgway claimed them as the named beneficiary. Following litigation in the trial court, the Supreme Judicial Court of Maine held that the Supremacy Clause, U.S. Const. art. VI, cl. 2, did not prevent it from imposing a constructive trust on the SGLIA proceeds and so ordered. Ridgway v. Prudential Ins. Co. of America, 419 A.2d 1030 (Me. 1980).
The United States Supreme Court disagreed and reversed. It relied, as a matter of legislative history, on the purpose of SGLIA. SGLIA was enacted in 1965 when the Vietnam hostilities were escalating in order to provide life insurance, partly at government expense, for military personnel on active duty. Previous government insurance programs for the military had expired after the Korean conflict and, as a result of the Vietnam war, the private insurance market was unwilling to make life insurance available to those on active duty. According to the Supreme Court, this fundamental purpose of SGLIA was advanced by (1) a provision mandating payment of the proceeds to the beneficiary designated by the service member and prescribing payment if no designation were made; (2) by an implementing regulation according the service member the unqualified right to designate the beneficiary; and (3) by an anti-attachment provision, adopted five years after original enactment, which unambiguously placed the proceeds that were paid to the beneficiary beyond the reach either of taxing authorities or creditors of the decedent. 454 U.S. at 52-53, 60-61, 102 S. Ct. at 53-54, 57-58, 70 L. Ed. 2d at 46, 51. The Court found "the strong language of the anti-attachment provision" dispositive, 454 U.S. at 61, 102 S. Ct. 58, 70 L. Ed. 2d at 52. It also concluded that however unpalatable as a matter of conscience and equity, the entire statutory complex, viewed in the light of the federal interest advanced by SGLIA and the extent of public financing of its costs, preempted an order by a state court directing Disposition of SGLIA insurance proceeds contrary to the terms of the beneficiary designation. In short, the Court declared that "Congress has spoken with force and clarity in directing that the proceeds belong to the named beneficiary and no other." 454 U.S. at 56, 102 S. Ct. at 55, 70 L. Ed. 2d at 48. The states were consequently not at liberty to contravene that directive.
The question, of course, is whether Ridgway controls the preemption question in respect of FEGLIA. In resolving this question, we note at the outset that FEGLIA and SGLIA are not cognate enactments. First, FEGLIA is not attended by the exigency that motivated SGLIA, namely the congressional intention to provide military personnel on active duty with insurance unavailable to them in the private market because of the hazardous nature of their work. FEGLIA provides insurance for all federal employees as an additional job benefit in much the same way as any large private employer provides group life insurance to its employees at shared cost. Second, FEGLIA, in § 8705, includes the same provisions respecting payment or proceeds as SGLIA, and while one of FEGLIA's implementing regulations, 5 C.F.R. § 870.902, accords the same absolute employee right of beneficiary designation, FEGLIA, unlike SGLIA, does not have any anti-attachment provision at all. Finally, FEGLIA, but not SGLIA, includes by 1980 amendment, an express preemption of conflicting state law, 5 U.S.C.A. § 8709 (d)(1), providing that
The provisions of any contract under this chapter which relate to the nature of extent of coverage of benefits (including payments with respect to benefits) shall supersede and preempt any law of any State or political subdivision thereof, or any regulation issued thereunder, which relates to group life insurance to the ...