Canel v. Topinka

• Decision Date: 30 June 2003
• Docket Number: No. 1-01-2069.,1-01-2069.
• Citation: 276 Ill.Dec. 86,342 Ill. App.3d 65,793 N.E.2d 845
• Court: United States Appellate Court of Illinois
• Parties: James H. CANEL, individually and on behalf of a class of all others similarly situated, Plaintiff-Appellant, v. Judy Barr TOPINKA, Treasurer of the State of Illinois, and Mitchell Property Division, Office of the Treasurer of the State of Illinois, Defendants-Appellees.

793 N.E.2d 845

342 Ill. App.3d 65

276 Ill.Dec. 86

James H. CANEL, individually and on behalf of a class of all others similarly situated, Plaintiff-Appellant, v. Judy Barr TOPINKA, Treasurer of the State of Illinois, and Mitchell Property Division, Office of the Treasurer of the State of Illinois, Defendants-Appellees.

No. 1-01-2069.

Appellate Court of Illinois, First District, Third Division.

June 30, 2003.

Arthur T. Susman, Charles R. Watkins, and John R. Wylie of Suman & Watkins; William J. Harte, William J. Harte Ltd., Chicago, for Appellant.

James E. Ryan & Brett E. Legener, of the Attorney General's Office with Joel D. Bertocchi, Solicitor General, Chicago, for Appellee.

Justice HALL delivered the opinion of the court:

The plaintiff, James H. Canel, appeals from an order of the circuit court of Cook County granting the motion of the defendants, Judy Barr Topinka, Treasurer of the State of Illinois, and Mitchell Murdock, Director of the Unclaimed Property Division of the office of the Treasurer of the State of Illinois, to dismiss his class action complaint.

On September 11, 2000, the plaintiff filed a class action lawsuit against the defendants on behalf of himself and all others similarly situated.

The complaint alleged that section 15 of the Uniform Disposition of Unclaimed Property Act (the Act) (765 ILCS 1025/15 (West 2000)) violated section 15 of the Illinois Constitution of 1970 (Ill. Const. 1970, art. I, § 15). The complaint also alleged that section 15 deprived the plaintiff of his Fifth and Fourteenth Amendment rights under the United States Constitution (U.S. Const.amends. V, XIV) and thus violated 42 U.S.C. § 1983 (42 U.S.C. § 1983 (1996)).

Specifically, the complaint alleged that, pursuant to section 15 of the Act, the defendants retained interest and dividends paid on stock, after the funds and the stock had been claimed by the owners. The complaint further alleged that such taking violated both the Illinois and the United States constitutional prohibition against the taking of private property without payment of just compensation.

On November 21, 2000, the defendants filed a motion to dismiss the complaint pursuant to both section 2-615 and section 2-619 of the Code of Civil Procedure (the Code) (735 ILCS 5/2-615, 2-619 (West 2000)).

In their memorandum of law in support of their motion to dismiss pursuant to section 2-615, the defendants contended that the complaint failed to state a cause of action in that the plaintiff failed to meet all the prerequisites for a class action suit, that the retention of dividends or interest on unclaimed property did not violate the plaintiff's constitutional rights and that the plaintiff failed to state a claim under section 1983.

In support of their motion to dismiss pursuant to section 2 619, the defendants contended that the plaintiff failed to establish the existence of an actual justiciable controversy and that the complaint was barred by sovereign immunity, and therefore, the circuit court lacked subject matter jurisdiction.

On May 30, 2001, the circuit court granted the defendants' motion to dismiss. The circuit court ruled that the plaintiff's remedies were under administrative review and the Court of Claims. The plaintiff filed a timely notice of appeal.

At oral argument in this case, the defendants conceded that the plaintiff was not required to exhaust his administrative remedies and was not required to seek relief in the Court of Claims.¹ The circuit court did not address the constitutionality of section 15 of the Act. However, on appeal, both parties have addressed the issue. Since the constitutionality of a statute is a question of law which this court considers de novo, we address the issue of the constitutionality of section 15 of the Act.

I. Standard of Review

This court reviews the granting of motions to dismiss pursuant to sections 2-615 and 2-619 de novo. See Nosbaum v. Martini, 312 Ill.App.3d 108, 244 Ill.Dec. 488, 726 N.E.2d 84 (2000); Carroll v. Faust, 311 Ill.App.3d 679, 244 Ill.Dec. 291, 725 N.E.2d 764 (2000).

The constitutionality of a statute is also reviewed de novo. Arangold Corp. v. Zehnder, 204 Ill.2d 142, 146, 272 Ill.Dec. 600, 787 N.E.2d 786 (2003)

. Statutes carry a strong presumption of constitutionality. Arangold Corp.,

204 Ill.2d at 146,

272 Ill. Dec. 600,

787 N.E.2d 786. The party challenging a statute carries the burden of rebutting that presumption and "`clearly' establishing its unconstitutionality. [Citation.]" Arangold Corp.,

204 Ill.2d at 146,

272 Ill.Dec. 600,

787 N.E.2d 786. The court has a duty to uphold the constitutionality of a statute when ever reasonably possible. Arangold Corp.,

204 Ill.2d at 146,

272 Ill. Dec. 600,

787 N.E.2d 786.

II. Unclaimed Property Act

The Act provides a procedure whereby certain personal property, presumed abandoned, is placed in the custody of the State for its eventual return to its rightful owner. See 765 ILCS 1025/1 et seq. (West 2000)

Under the Act, persons holding property, presumed to be abandoned under the Act, must remit the property to the State, together with certain specified information regarding the owner of the property and the efforts to contact the owner. 765 ILCS 1025/11 (West 2000). After the State receives the report and the property, the State then publishes a notice advising that the property has been turned over to the State, to whom all further claims to the property must be directed. 765 ILCS 1025/12 (West 2000). Upon payment and delivery of the property, the State "shall assume custody and shall be responsible for the safekeeping thereof." 765 ILCS 1025/14 (West 2000).

At issue in the present case is section 15 of the Act, which provides as follows:

"When property is paid or delivered to the State Treasurer under this Act, the owner is not entitled to receive income or other increments accruing thereafter, except that income accruing on unliquidated stock and mutual funds after July 1, 1993, may be paid to the owner." 765 ILCS 1025/15 (West 2000).

In order to obtain the return of property turned over to the State under the Act, an owner submits a claim on a form prescribed by the State Treasurer. 765 ILCS 1065/19 (West 2000). The State Treasurer is required to consider any claim filed but has the discretion whether or not to hold a hearing and receive evidence on the claim. 765 ILCS 1025/20 (West 2000). The final decision by the State Treasurer with respect to a claim "shall be subject to judicial review pursuant to the provisions of the Administrative Review Law and the rules adopted pursuant thereto." 765 ILCS 1025/21 (West 2000).

III. Whether Section 15 of the Act Is Unconstitutional

The parties' positions may be summarized as follows. The defendants contend that section 15 does not take the plaintiff's private property without just compensation because the plaintiff does not have any property rights in the dividends earned on abandoned property while in the State's custody. The defendants rely on the principles of escheat and bona vacantia. The plaintiff responds that the property was merely in the State's custody, a situation to which the above principles do not apply.

A. Whether Section 15 of the Act is an "Escheat" Law

Black's Law Dictionary defines bona vacantia as follows:

"Property not disposed of by a decedent's will and to which no relative is entitled under intestacy laws. See ESCHEAT[.]" and "Ownerless property; goods without an owner." Black's Law Dictionary 168 (7th ed.1999).

Escheat is defined as follows:

"Reversion of property (esp. real property) to the State upon the death of an owner who has neither a will nor any legal heirs." Black's Law Dictionary 564 (7th ed.1999).

"States as sovereigns may take custody of or assume title to abandoned personal property as bona vacantia, a process commonly (though somewhat erroneously) called escheat." Delaware v. New York, 507 U.S. 490, 497, 113 S.Ct. 1550, 1555, 123 L.Ed.2d 211, 219-20 (1993).²

The defendants argue that under Delaware, the State has the right to assume title to the whole of the abandoned property. The defendants reason that since the State has the power to require that both the abandoned principle and its subsequent earnings escheat to it, the State has the lesser power to require that only the earnings escheat to it for the period of abandonment.

It has been held that the Act is not an escheat statute, in that Illinois does not acquire title to abandoned property, but is merely the custodian, and the owner can reclaim the property at any time. Commonwealth Edison Co. v. Vega, 174 F.3d 870, 872 (7th Cir.1999); see also Insurance Co. of North America v. Knight, 8 Ill. App.3d 871, 876, 291 N.E.2d 40, 44 (1972) (the theory of the legislation is that it is custodial in nature and that the State takes custody for the owner).

In People ex rel. Callahan v. Marshall Field & Co., 83 Ill.App.3d 811, 38 Ill.Dec. 944, 404 N.E.2d 368 (1980), the court described the difference between the Act and an escheat statute as follows:

"The policy behind the Uniform Disposition of Unclaimed Property Act, upon which the Illinois Act is modeled, is described in the Commissioner's Prefatory Note as follows:

`The Uniform Act is custodial in nature—that is to say, it does not result in the loss of the owner's property rights. The state takes custody and remains the custodian in perpetuity. Although the actual possibility of his presenting a claim in the distant future is not great, the owner retains his right of presenting his claim at any time, no matter how remote. State records will have to be kept on a permanent basis. In this respect the measure differs from the escheat type of statute, pursuant to which the right of the owner is foreclosed and the title to the property passes to the state.

Not only does the custodial type of statute more adequately preserve the owner's interests, but, in addition, it makes possible a substantial simplification of procedure.' [Citat

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