Stahl v. First Pa. Banking & Trust Co.
| Decision Date | 04 June 1963 |
| Parties | David STAHL, Attorney General of the Commonwealth of Pennsylvania, Appellant, v. The FIRST PENNSYLVANIA BANKING AND TRUST COMPANY and All of the Owners and Beneficial Owners for whom it holds Unclaimed Funds. |
| Court | Pennsylvania Supreme Court |
John P. Walsh, Special Asst. Atty. Gen., Francis T Anderson, Philadelphia, for appellant.
Harry E. Sprogell, Philadelphia, for appellees.
Before BELL, C. J., and MUSMANNO, JONES, COHEN, EAGEN, and O'BRIEN, JJ.
David Stahl Attorney General of the Commonwealth, has appealed from a final Order of Court of Common Pleas No. 5 of Philadelphia County, which sustained preliminary objections and dismissed his petition for (1) discovery and an accounting, and (2) for an order upon the appellee First Pennsylvania Banking and Trust Company (hereinafter sometimes referred to as Pennsylvania) directing it to pay certain monies into the State treasury without escheat.
This petition was filed by the Attorney General pursuant to the Act of May 16, 1919, P.L. 177, as amended, 27 P.S. § 431 et seq. That Act provides that the Attorney General may petition the proper Court for an order on, inter alia, a person, bank or other corporation directing it to pay to the Commonwealth money or property (together with interest thereon) which is escheatable under any other Act. Under the Act of 1919, any property which is made the subject of such an order is paid into the treasury of the Commonwealth and is appropriated by it and used for its own purposes. This is a temporary appropriation, not an actual and permanent escheat since the rightful owner, i. e. any person legally entitled to such money (or the legal representatives thereof), can, at some future date, recover such property from the Commonwealth if he establishes his ownership or right thereto. Alpern v. Girard Trust Corn Exchange Bank, 403 Pa. 391, 170 A.2d 87.
In this petition the Attorney General sought possession of money or property (a) allegedly in the possession of Pennsylvania, and (b) allegedly escheatable under the Act of June 15, 1915, P.L. 878, as amended, 27 P.S. § 241 et seq. That Act provides for the escheat of certain property when, for the period of various fixed numbers of years, the rightful owner or his whereabouts are unknown, or when such rightful owner has not claimed the property sought to be escheated.
In his petition the Attorney General prayed that Pennsylvania pay into the State treasury without escheat a total sum of $4,693,797.26 and an order for a discovery and an accounting of other allegedly escheatable property from Pennsylvania for the years 1900 to 1933, and from the Bank of North America and Trust Company (hereinafter referred to as North America) from 1900 to 1929.
Pennsylvania was incorporated, sub nomine Pennsylvania Company for Insurances on Lives and Granting Annuities, by Special Act of Assembly of March 10, 1812, and its charter was amended, also by Special Act of Assembly, on February 26, 1836. Pennsylvania has merged many times with numerous other banks and banks and trust companies, in all of which mergers it was the surviving institution. One of these mergers was with North America on June 1, 1929. Under and after each of these mergers Pennsylvania took over the assets and assumed the liabilities of the merging institutions.
Petitioner alleges that Pennsylvania from 1900 to 1933, and North America between 1900 and 1929, deposited in their respective commercial departments or in accounts in their own names in other banks, so-called uninvested funds, viz., (a) those belonging to estates, trusts, guardianships, receiverships or individual accounts in which the banks acted as fiduciary or agent, and (b) those placed in the banks' possession by corporations (for which the bank acted as corporate trustee or agent) for the payment of the interest on bonds but not claimed by the bondholders when due. While appellant does not contend that such deposits were unlawful, he does contend that the interest and profits which were earned by the use of these deposits, over and above the interest which was paid out by the banks, (a) belongs to the rightful owners thereof, and (b) the banks should have paid or should have been surcharged therefor and (c) in the absence of such payments or surcharges the Commonwealth is entitled to escheat all these amounts.
It is a well recognized general rule that a trustee or fiduciary may not use trust property for his own benefit and if he does he is liable to a cestui que trust for profits made by him from the use of trust property. However, an exception to this general rule is recognized in the case of banks which under the decisional and statutory law of Pennsylvania are permitted to deposit trust funds as well as demand deposits in the commercial or savings department of their bank or in another bank, and while they may be liable for interest, they are not liable to the owner of such funds for profits made thereon by the bank. Moore's Estate (No. 3), 211 Pa. 348, 60 A. 991; Scott on Trusts, Vol. 2, Sec. 170.18, page 1249. See to the same effect, Dick's Estate, 183 Pa. 647, 39 A. 2; Reid v. Reid (No. 2), 237 Pa. 176, 85 A. 85; Jones' Estate, 400 Pa. 545, 559, 162 A.2d 408; Kaufmann's Estate, 137 Pa.Super. 88, 93-94, 8 A.2d 472.
The Attorney General states in his petition that he does not know and cannot aver the amount of money involved in any single transaction, nor can he supply the names of any trust or party involved in any particular transaction nor the pertinent dates relating to any such transaction, nor the names of the alleged creditors, but nevertheless avers that the funds which are escheatable from countless transactions amount (as above mentioned) to $4,693,797.26. He deduces this amount by deducting the total amount of interest paid by each bank on uninvested funds from the bank's total earnings on such deposits for the period covering approximately 30 years and claims that the difference was payable to each rightful owner and consequently was recoverable under this proceeding. Banks earn interest or profits by using the so-called uninvested funds in loans to bank customers and by investing these so-called univested funds in securities. The banks have always claimed that these profits or so-called excess interest belonged to them and they have never been held by any appellate Court in Pennsylvania to be escheatable. Nevertheless, the Attorney General, we repeat, contends that they were escheatable for the period from 1900 to 1933 and consequently could be recovered in the present action. The Attorney General therefore further petitioned and prayed for a discovery and an accounting by Pennsylvania as to all these innumerable transactions and an order directing Pennsylvania to pay into the State treasury this escheatable property and any additional escheatable funds that such accounting and discovery may disclose, plus interest and penalties.
The Court below determined that the petition of the Attorney General did not state a cause of action and for this reason dismissed it.
In considering appellant's petition in the light of appellee's preliminary objections, we apply, as did the Court below, the well established rule that preliminary objections (or pleadings in the nature thereof) admit as true all facts which are well and clearly pleaded, but not the pleader's conclusions or averments of law. Bogash v. Elkins, 405 Pa. 437, 176 A.2d 677; Ross v. Metropolitan Life Ins. Co., 403 Pa. 135, 169 A.2d 74; Dumont Television & Radio Corp. v. Franklin Electric Co., 397 Pa. 274, 154 A.2d 585; Erie v. Gulf Oil Corporation, 395 Pa. 383, 150 A.2d 351; Silver v. Korr, 392 Pa. 26, 139 A.2d 552.
A recitation of the above mentioned facts and contentions makes it clear that this is nothing but a very expensive onerous and harassing fishing expedition for a school of mythical fish which expert government fishermen (who have been examining banks for the Department of Banking since 1895) have been unable to discover. Moreover, this extremely burdensome and costly expedition is not to be paid for by the fishermen (nor even by the stockholders when the various transactions and alleged escheats occurred years ago); it is to be paid for by the present owners of the lake. It is very difficult to believe that any such fishing expedition which is so obviously unrealistic, unreasonable, oppressive and unjust, could ever have been intended by the Legislature, even though the language of the Act of 1915, supra, as to escheatable property and the provision for discovery is very broad.
While a corporation is not entitled to the same degree of protection against unlawful searches and seizures as is an individual, the law is clear that a corporation cannot be subjected to an unreasonable investigation. United States v. Morton Salt Co., 338 U.S. 632, 652, 70 S.Ct. 357, 94 L.Ed. 401; Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 208, 66 S.Ct. 494, 90 L.Ed. 614; Boyd v. United States, 116 U.S. 616, 6 S.Ct. 524, 29 L.Ed. 746. The Pennsylvania authorities are to the same effect. Pa.R.C.P. No. 4011, 12 P.S.Appendix provides: 'No discovery or inspection shall be permitted which * * * (b) causes unreasonable annoyance, embarrassment, expense or oppression to the deponent or any person or party; * * * (e) would require the making of an unreasonable investigation by the deponent or any party or witness.'
In Annenberg v. Roberts, 333 Pa. 203, 214, 2 A.2d 612 618, the Court said: ...
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