Anderson Nat. Bank v. Reeves

• Decision Date: 18 December 1942
• Parties: ANDERSON NAT. BANK et al. v. REEVES.
• Court: Kentucky Court of Appeals

170 S.W.2d 350

293 Ky. 735

ANDERSON NAT. BANK et al. v. REEVES.

Court of Appeals of Kentucky

December 18, 1942

Rehearing Denied May 7, 1943.

Appeal from Circuit Court, Franklin County; W. B. Ardery, Judge.

Action by the Anderson National Bank and others against H. Clyde Reeves, individually and as Commissioner of Revenue of Kentucky under the Declaratory Judgment Act, to test the validity of the act dealing with escheat and disposition of certain classes of abandoned property. From that part of the judgment holding the act valid in part, plaintiffs appeal and, from that part of the judgment holding the act invalid in part, defendant cross-appeals.

Chas W. Milner and Leo T. Wolford, both of Louisville, for appellants.

Hubert Meredith, Atty. Gen., and A. E. Funk, Earl Wilson, and Vincent Goodlett, Ass't. Attys. Gen., for appellee.

FULTON Justice.

This appeal brings in question the correctness of a judgment holding valid certain parts of Chap. 79 of the Acts of 1940 (K.R.S. 393.010 et seq.), as amended by Chap. 156 of the Acts of 1942, dealing with escheats and with the disposition of certain classes of property declared to be presumed abandoned. By the cross appeal it is sought to reverse the judgment in so far as it adjudged certain portions of the same Acts invalid.

By sections 3 to 6 of the Act inclusive (K.R.S. sections 393.020, 393.030, 393.040 and 393.050) certain classes of property are made subject to escheat and it is made the duty of the Commissioner of Revenue to institute proceedings to vest title to such property in the Commonwealth, the procedure to be in accordance with the Civil Code. Where title to such property is vested in the Commonwealth pursuant to such proceedings, any person claiming an interest therein and who was not actually served with notice and did not appear in the proceedings, may within five years after the judgment file his claim with the Department of Revenue. Appropriate procedure is provided for the prosecution of such claims and right of appeal is given to the Franklin Circuit Court and to this court. These portions of the Act are not in controversy although it is suggested by appellants that the entire Act should be declared invalid. They are mentioned however, for the purpose of giving a general idea as to the scope of the Act.

So far as material to this controversy, section 7 of the Act (K.R.S. 393.060 and 393.070) provides in substance:

(1) That where the owner of bank deposits payable on demand has not for ten successive years next preceding the date for making reports as required by the Act (a) negotiated in writing with the bank or trust company concerning it, or (b) been credited with interest on the pass book or certificate of deposit on his request, or (c) had a transfer, distribution of interest, or other transaction noted of record in the books or records of the bank or trust company, or (d) increased or decreased the amount of deposit, such deposits shall be presumed abandoned.

(2) The same presumption of abandonment arises with respect to deposits not payable on demand except that the period of time is twenty five years instead of ten.

Section 8 (K.R.S. 393.110) provides in substance that all persons holding property declared to be presumed abandoned must report same to the Department of Revenue annually as of July 1, the report being due on or before September 1 of each year. A copy of the report is required to be posted on the courthouse door or bulletin board on or before October 1 and it is provided that such publication "shall be constructive notice to all interested parties and shall be in addition to any other notice provided by statute or existing as a matter of law". The person reporting the property is required to turn it over to the Department of Revenue between November 1 and November 15 except that "if the person making the report or the owner of the property shall certify to the department by sworn statement that any or all of the statutory conditions necessary to create a presumption of abandonment no longer exists or never did exist, or shall certify the existence of any fact or circumstance which has a substantial tendency to rebut such presumption, then, the person reporting or holding the property shall not be required to turn the property over to the department except on order of court. *** The person reporting or holding the property or any claimant thereof shall always have the right to a judicial determination of his rights under this Act and nothing therein shall be construed otherwise; and the Commonwealth may institute an action to recover such property as is presumed abandoned whether it has been reported or not ***".

Section 17 (K.R.S. 393.250) provides that all monies received by the Department of Revenue under the provisions of the Act must be deposited with the State Treasurer and credited to the account of the General Expenditure Fund.

Section 11 (K.R.S. 393.140) provides that any person claiming an interest in any property turned over to the state on the ground that it was presumed abandoned (provided it was not subsequently adjudged to have been actually abandoned) may claim it "at any time after same was paid to this Commonwealth"; and, even where actual abandonment was adjudged subsequent to payment to the state, any person claiming an interest, who was not actually served with notice and who did not appear, and whose claim was not considered during the proceedings, may within five years after the judgment file his claim with the Department.

Section 12 (K.R.S. 393.150) provides that if a claimant established his right to property presumed abandoned the Commissioner of Revenue must authorize payment to him of a sum "equal to the amount [which was] paid in to the State Treasury in compliance with this Act".

The claimant is required to publish notice of his claim, within fifteen days after filing it, in a newspaper in the county in which the property was held before being transferred to the Commonwealth.

Section 10 (K.R.S. 393.130) provides: "Any person who transfers to the department property to which the state is entitled under this chapter shall be relieved of any liability to the owner arising from that transfer. The state shall reimburse any person who cannot be relieved of such liability by this section for all liability to the owner of the property or estate or damage incurred by reason of compliance with this chapter."

Section 16 (K.R.S. 393.230) provides that if any one refuses to pay or surrender property presumed abandoned to the Department as required by the Act, an equitable proceeding may be brought on relation of the Commissioner to force payment or surrender. It is further provided that if property is turned over to the Department on presumption of abandonment the Commissioner may at any subsequent time institute proceedings to establish conclusively that it was actually abandoned, or that the owner has died and there is no person entitled to it. It is also provided in this section that all actions mentioned under the Act shall be filed as equity actions and follow the procedure provided by the Civil Code of Practice, unless otherwise provided.

This action was filed under the Declaratory Judgment Act by the Anderson National Bank, suing on behalf of itself and all others similarly situated and on behalf of depositors in banks, to test the validity of the Act and an injunction was sought to prevent the appellees from enforcing it --the appellees do not question the right of appellants to challenge the validity of the Act in the representative status assumed.

The trial court adjudged that the part of the Act requiring a voluntary delivery of the property to the state was unconstitutional because of the absence of provision for adequate notice to the owners of the property. Accordingly, the appellees were enjoined from insisting on or accepting a delivery of property presumed abandoned without first filing a suit and procuring a judgment for delivery thereof. It was adjudged that the Act was valid in so far as it required reports of property presumed abandoned and in so far as it authorized the filing of actions to compel the surrender of property declared to be presumed abandoned. Accordingly, the trial court declined to enjoin appellees from requiring reports of property presumed abandoned and also declined to enjoin appellees from filing suits to recover property presumed abandoned, whether reported or not.

Appellants question the correctness of the judgment in holding the indicated portions of the Act valid and the appellees, by cross appeal, seek a reversal of the judgment in so far as it holds any part of the Act unconstitutional or enjoins enforcement thereof.

Appellants advance the propositions (1) that the provisions of the Act requiring delivery to the State of deposits declared to be presumed abandoned constitute, in effect, an attempted escheat of such deposits, which is invalid because of the absence of notice and judicial determination, 2) that even if valid as to deposits made subsequent to the Act such provisions are ineffective as to prior deposits because, when so applied, such provisions impair the obligation of the contract of deposit, and 3) that in any event such provisions, even though valid as to state banks, are invalid as to national banks. These propositions will be considered in the order named.

Appellants' brief contains an elaborate and scholarly treatise on the origin, history and purposes of prior escheat laws of this state as a basis for their argument that the Act is unconstitutional in so far as it requires a delivery to the state of deposits declared to be presumed abandoned without a judicial determination to that effect made after adequate notice....