Supreme Court of the United States · 1950 · Federal Courts
Federal CourtsFederal preemptionNational Service Life Insurance Actpreemptioncommunity propertyfederal supremacyNational Service Life Insurance Actbeneficiary designation
Facts
Major Leonard O. Wissner, while serving in the Army, purchased a $10,000 National Service Life Insurance policy and named his mother as principal beneficiary and his father as contingent beneficiary without his wife's knowledge or consent. The policy premiums were paid from his army pay, which the California courts treated as community property. After his death, the Veterans' Administration paid the mother the policy proceeds in monthly installments. The widow then sued under California community property law for one-half of the insurance proceeds, and the state court awarded her half of both past and future payments.
Issue
Does California community property law, as applied to award a serviceman's widow one-half of the proceeds of a National Service Life Insurance policy despite his designation of his mother as beneficiary, conflict with the National Service Life Insurance Act? If so, is the federal statute valid under the Fifth Amendment?
Rule
Under the National Service Life Insurance Act, the insured has the right to designate and change the beneficiary, and the proceeds belong to the named beneficiary and no other. State law cannot divert any part of those proceeds to someone else, and the Act's exemption provision bars attachment, levy, or seizure of the payments before or after receipt by the beneficiary.
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One of 10 multiple-choice questions for this case. Pick an answer to see why.
In San Diego, Army sergeant Daniel Mercer bought a National Service Life Insurance policy and named his sister, Alina Mercer, as beneficiary. After Daniel died, his husband, Owen Price, sued in California court for one-half of the policy proceeds, arguing that the premiums had been paid from earnings the couple treated as marital property under state law.
Who should prevail?
Explanation. The majority rule is that under the National Service Life Insurance Act, the insured has the right to designate and change the beneficiary, and the proceeds belong to the named beneficiary and no other. A state marital-property rule that awards part of those proceeds to a spouse would substitute someone else for the federally chosen beneficiary and therefore conflicts with federal law. The spouse's lack of notice is irrelevant.