              IN THE COURT OF APPEALS OF NORTH CAROLINA

                                   No. COA18-341

                               Filed: 18 December 2018

Cumberland County, No. 94 CVD 5230

RICHARD D. WATSON, Deceased, JANICE JOYNER-WATSON, Executrix,
Plaintiff,

             v.

LEOLA SANDERS WATSON, Defendant.


      Appeal by executrix from order entered 20 December 2017 by Judge Robert J.

Stiehl III in Cumberland County District Court. Heard in the Court of Appeals 19

September 2018.


      Lewis, Deese, Nance & Briggs, LLP, by Renny W. Deese, for executrix-appellant.

      Sharon A. Keyes for defendant-appellee.


      ELMORE, Judge.


      Janice Joyner-Watson (“executrix”), the second wife and executrix of the estate

of Richard D. Watson (“plaintiff” or “decedent”), appeals from an order in which the

trial court (1) concluded plaintiff was in contempt for failure to abide by the terms of

a 1999 equitable distribution order, and (2) directed the executrix “to take whatever

measures necessary to correct the military record and place the Defendant, Leola

Sanders Watson, as sole beneficiary” of plaintiff’s survivor benefit plan with the

military.
                                   WATSON V. WATSON

                                   Opinion of the Court



      For the reasons stated herein, we reverse the order of the trial court.

                                    I. Background

      Plaintiff and defendant are formerly husband and wife, having been married

in 1968 and divorced in 1994. In an equitable distribution order entered with the

parties’ consent in June 1999 (“ED order”), the trial court distributed to defendant

nonvested benefits earned as a result of plaintiff’s military service. The ED order

included the following language:

             [Plaintiff] agrees to place the Defendant as sole primary
             beneficiary of the Survivor Benefit Plan (SBP) and to
             provide a copy of said election to Defendant at the
             appropriate time. Plaintiff shall elect the spouse-only
             portion and shall select as the base amount the full amount
             of his monthly retired pay. If Plaintiff fails to make said
             election, an[ ] amount equal to the present value of SBP
             coverage for the Defendant shall, at the death of Plaintiff,
             become an obligation of his estate. In addition, the
             Defendant shall be entitled to such remedies for breach as
             are available to her in a court of law, and DFAS [Defense
             Finance and Accounting Services] shall treat this [or]der
             as the “deemed election” of the Plaintiff for SBP purposes.

      Plaintiff remarried in October 2002.        On 6 July 2017—approximately ten

months after plaintiff’s death—defendant filed a motion to hold plaintiff in contempt

for failure to comply with the ED order. In the motion, which defendant filed without

first substituting the executrix or the estate as party plaintiff and captioned by simply

adding the executrix and listing plaintiff as deceased, defendant alleged that plaintiff

had retired from the military in May 2010 and died in September 2016; that plaintiff



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                                  Opinion of the Court



was in contempt for failing to name defendant as the beneficiary of the SBP; and that

the executrix, as the personal representative of plaintiff’s estate, had previously

rejected defendant’s claim to the SBP benefits.

      In an order entered 20 December 2017, the trial court made the following

relevant findings of fact:

             4. The [ED] Order was not submitted to DFAS by Plaintiff
             or Defendant within the year it was entered . . . .

             5. Plaintiff retired from the military on May 31, 2010. The
             [ED] Order containing the deemed election wording was
             submitted to DFAS on or about August 15, 2009, prior to
             the Plaintiff’s retirement from the military.

             6. The [ED] Order was modified by this Court for correction
             of the military division of retirement formula and
             resubmitted to DFAS on or about July 8, 2010, containing
             the same deemed election wording.

             7. Upon his retirement, Plaintiff did not name Defendant
             as the sole primary beneficiary and instead placed Janice
             Joyner-Watson, the Executrix for his estate as the
             beneficiary of the SBP.

Based on its findings, the trial court concluded as a matter of law that it had

jurisdiction over the parties and the subject matter of the action, and that

             2. Plaintiff is in contempt of Court by failing to name
             Defendant as the SBP recipient pursuant to the previous
             Orders of this Court.

             3. DFAS was put on notice of the deemed election when
             served with the Orders on or about August 15, 2009 and
             July 8, 2010.



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                                  WATSON V. WATSON

                                   Opinion of the Court



             4. Defendant, Leola Sanders Watson is the rightful
             beneficiary of the SBP of Plaintiff.

In its decretal, the trial court provided only that

             1. The Defendant, Leola Sanders Watson shall be named
             as the Plaintiff’s sole SBP beneficiary[, and]

             2. The Executrix for Plaintiff is ordered to take whatever
             measures necessary to correct the military record and place
             the Defendant, Leola Sanders Watson, as sole beneficiary
             of the SBP.

      The executrix entered timely notice of appeal.

                                    II. Discussion

      On appeal, the executrix makes several arguments in support of her contention

that the trial court erred in holding her in contempt. However, because the trial court

did not in fact hold the executrix in contempt, we conclude that these arguments are

meritless. We thus limit our discussion to whether the trial court erred in ordering

the executrix to take whatever measures necessary to place defendant as the sole

beneficiary of the SBP. The standard of review applicable to an order entered after a

non-jury trial is “whether there is competent evidence to support the trial court’s

findings of fact and whether the findings support the conclusions of law and ensuing

judgment.” Sessler v. Marsh, 144 N.C. App. 623, 628, 551 S.E.2d 160, 163 (2001).

      The executrix contends 10 U.S.C. § 1448(a) “mandates that if a retiree is

married at the time they become eligible to participate in the [SBP], the spouse must

be designated as beneficiary of the Plan, unless the spouse concurs in a different


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                                  Opinion of the Court



designation.” Beneficiary status by “deemed election” is offered as an alternative to

the mandatory spousal designation, but the Code requires that the election be made

in writing and received by the secretary of the appropriate branch of the military

within one year after entry of the order directing the same. 10 U.S.C. § 1448(b). As

there is no North Carolina case addressing this issue, the executrix relies on case law

from Virginia, Georgia, and South Carolina to support her argument that the time

limitations of the Code must be strictly interpreted based on the doctrine of federal

preemption.

      In Dugan v. Childers, 261 Va. 3, 539 S.E.2d 723 (2001), the Supreme Court of

Virginia considered whether 10 U.S.C. § 1450 preempted state law “on the subject of

a former spouse’s entitlement to the survivor benefits of a military retiree[.]” Id. at

7, 539 S.E.2d at 724. The former spouse in Dugan sought to impose a constructive

trust on SBP annuities that a retiree’s surviving spouse had received on the basis

that, when the former spouse and the retiree divorced, the retiree had agreed to name

the former spouse as the beneficiary of his SBP.         When the retiree remarried,

however, he changed the SBP beneficiary to his new wife. The trial court in Dugan

found the retiree in contempt and directed him to reinstate the former spouse as the

beneficiary, but the retiree died before doing so. Id. at 5–6, 539 S.E.2d at 723–24.




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                                 WATSON V. WATSON

                                  Opinion of the Court



      In its preemption analysis, the Virginia Court in Dugan found persuasive the

following language from a Georgia Court of Appeals opinion addressing a similar

factual situation:

             “The right to the annuity asserted by [the former spouse]
             pursuant to the divorce decree clearly conflicts with the
             express provisions of the SBP under which [the military
             retiree’s] surviving spouse is the beneficiary of the annuity.
             In providing the means by which former spouses may
             become entitled to SBP annuity benefits, Congress enacted
             plain and precise statutory language placing conditions
             and limits on that right and made clear that any annuity
             benefits paid in compliance with the provisions of the SBP
             are not subject to legal process. Since the provisions of the
             SBP unambiguously preclude the rights asserted under the
             divorce decree, we further conclude that the consequences
             of enforcing the conflicting state law principles sufficiently
             injures the objectives of the SBP so that federal law
             preempts the authority of state law.”

Id. at 8, 529 S.E.2d at 725 (quoting King v. King, 225 Ga. App. 298, 301, 483 S.E.2d

379, 383 (1997)). The Virginia Court in Dugan then found, as did the Georgia Court

in King, that the provisions of federal law pertaining to the SBP made clear that

Congress intended “to occupy the field” under the circumstances. Dugan, 261 Va. at

9, 539 S.E.2d at 725 (quoting Silva v. Silva, 333 S.C. 387, 391, 509 S.E.2d 483, 485

(App. 1998)). Accordingly, the Virginia Court held that federal law preempted state

law as to a former spouse’s right to claim entitlement to an SBP annuity. See also

Silva, 333 S.C. at 391, 509 S.E.2d at 485 (holding that a South Carolina state court




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                                   Opinion of the Court



did not have the authority to preempt provisions of federal law pertaining to the SBP

under circumstances similar to those in Dugan).

      In response to the executrix’s argument, defendant concedes that the former

spouses in Dugan, King, and Silva “also did not make [their] deemed election[s]

within one year.” However, she asserts that the cases relied upon by the executrix

are distinguishable because the former spouse in each of those cases “was seeking an

order for a constructive trust on the SBP payments which could [ ] then be assigned

to the ex-spouse. . . . . Defendant-appellee is not requesting a constructive trust.”

We are not persuaded by defendant’s argument, which ignores the ultimate holding

of each case: that federal law preempts state law as to a former spouse’s right to claim

entitlement to an SBP annuity.

      Here, the trial court found as a fact that the ED order “was not submitted to

DFAS by Plaintiff or Defendant within the year it was entered” as required by the

U.S. Code in order to make a deemed election. Accordingly, because it lacked the

authority to preempt these time restrictions of the Code, we hold that the trial court

erred in ordering the executrix to nevertheless place defendant as the sole beneficiary

of the SBP.

                                   III. Conclusion

      Pursuant to the ED order, defendant is entitled to “an[ ] amount equal to the

present value of SBP coverage,” which is an obligation of plaintiff’s estate. However,



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                                  Opinion of the Court



because the trial court lacked authority to preempt the SBP provisions of the U.S.

Code, we reverse its order directing the executrix to take whatever measures

necessary to place defendant as the sole beneficiary of the SBP.

      REVERSED.

      Judges DILLON and DAVIS concur.




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