State, Dept. of Revenue v. Puget Sound Power & Light Co.

• Decision Date: 11 January 1985
• Docket Number: No. 50499-7,50499-7
• Court: Washington Supreme Court
• Parties: STATE of Washington, DEPARTMENT OF REVENUE, Appellant, v. PUGET SOUND POWER & LIGHT COMPANY, a corporation,

Page 501

103 Wn.2d 501

694 P.2d 7

STATE of Washington, DEPARTMENT OF REVENUE, Appellant, v. PUGET SOUND POWER & LIGHT COMPANY, a corporation,

No. 50499-7.

Supreme Court of Washington,

En Banc.

Jan. 11, 1985.

Ken Eikenberry, Atty. Gen., James R. Tuttle, Asst. Atty. Gen., Olympia, for appellant.

Perkins, Coie, Stone, Olsen & Williams, John H. Binns, Michael T. Reynvaan, Seattle, for respondent.

UTTER, Justice.

The State Department of Revenue appeals a decision by the trial court denying the Department's claim to abandoned utility deposits held by Puget Sound Power and Light Company. Puget appeals the trial court's decision requiring it to deliver abandoned dividends to the Department. The trial court held that Puget was entitled to abandoned utility deposits because the statute of limitations had run against the owners and therefore against the Department as well. The court also held that the Department was entitled to the abandoned dividends since Puget held the dividends as a trustee and the statute of limitations had not run against either the owners or the Department. We affirm the trial court's holding as to both issues.

The primary issue with regard to abandoned utility deposits is whether Puget may keep the deposits since it never filed a report notifying the Department that the deposits were abandoned and never informed the Department prior to this suit that it believed the statute of limitations had run against the owners and the Department. The Department claims that Puget's failure to file an abandoned property report and its failure to assert the statute of limitations defense in the report precludes it from doing so now. Puget argues that filing the report would have been a meaningless act since the Department's rights were the same as the owners and the statute of limitations had run against the owners.

From 1955-1979 Puget received deposits from its customers to secure their utility payments. The receiving, holding and return of deposits was governed by Washington Utilities and Transportation Commission Rules, WAC 480-100-051 et seq., and General Rules and Provisions, Schedule 80 (tariffs). The WACs, since 1965, have required that the deposits accrue interest. The tariffs filed by Puget pursuant to regulation provide that the deposits are placed in Puget's general account and become general corporate funds, and that the utility may transfer the deposits from one account to another when deemed necessary. The deposits are applied to the customers' current balances, if any, upon termination of service, and the remainder is refunded to the customers by check.

The procedure for cancelling overage drawn checks required that if Puget was unsuccessful at locating the payee, the check was "appropriated," i.e., cancelled. The amount was credited to income, debiting the liability account, resulting in an increase in cash as company income. Between 1967 and 1979 Puget received $87,579.08 from this procedure. There is no information about the amount received from 1955-1966, although the Department projected $53,330.53 for that period. Puget has from time to time honored stale or lost deposit refund checks.

The only factual issue in dispute at the trial was the amount Puget appropriated between 1955 and 1967. The parties stipulated to the remaining facts. The trial court held that from 1955 through 1979 RCW 63.28, ¹ the Uniform Disposition of Unclaimed Property Act (UPA), governed the deposits; that under the UPA the deposits were presumed abandoned after 7 years; that since the Department's rights were cut off at the same time as the owners, after 6 years, Puget's failure to report the property abandoned did not violate the UPA nor did it toll the running of the statute of limitations. Further, Puget's occasional honoring of stale checks did not prohibit it from raising the statute of limitations defense against the Department at the trial.

RCW 63.28.100 provided that utility deposits were presumed abandoned 7 years after termination of service. RCW 63.28.170 required holders of property presumed abandoned to report to the Department with respect to that property. RCW 63.28.190 required delivery of the reported property to the Department after the Department published notice and time for retrieval by the owner had passed. The parties agreed that the 6-year statute of limitations based on a written contract applied to the refund checks.

I

Although Puget did not expressly plead the statute of limitations as an affirmative defense, the Department was well aware that it was the central issue in the litigation. The Department made the statute of limitations the principal focus of its trial memorandum and stated therein "Puget Power, on the other hand, claims that it may assert a statute of limitations bar against the State ..." Additional Clerk's Papers, at 5. CR 15(b) permits amendment of pleadings when an issue is tried with the consent of the parties, and also provides that failure to amend does not affect the result of a trial on those issues. Affirmative defenses are within the scope of CR 15(b). Rainier Nat'l Bank v. Lewis, 30 Wash.App. 419, 423, 635 P.2d 153 (1981). Puget did not waive the limitations defense by failure to plead it.

Nor did Puget waive its right to assert the defense against the Department by occasionally paying on time-barred checks. "To constitute a waiver other than by express agreement, there must be unequivocal acts or conduct of the vendor evincing an intent to waive." Birkeland v. Corbett, 51 Wash.2d 554, 565, 320 P.2d 635 (1958). This court has also explicitly held that one against whom a waiver is claimed must have intended "to relinquish such right, advantage, or benefit; and his actions must be inconsistent with any other intention than to waive them." Bowman v. Webster, 44 Wash.2d 667, 669, 269 P.2d 960 (1954). Here there was no general written acknowledgment of time-barred debts communicated to creditors. The trial court recognized, and we agree, that Puget had the discretion to occasionally waive the statute of limitations without losing the right to assert it when it so chose.

The Department urges that even if Puget could have raised a limitations defense against the Department's claim to the deposits, failure to file a report and raise the defense in the report precludes raising it now. There is little support for this position. Puget did not file an abandoned property report but the statutory penalties for failure to file the report were for willful failure to file. Former RCW 63.28.310(1). The Department does not claim Puget's failure was "willful." Puget reasonably believed it need not file, reasoning that the property could not be claimed by the owner or by the Department a year prior to presumed abandonment under the statute. That conduct does not rise to the level of willful failure to file. The understandable conclusion Puget came to under the circumstances does not preclude Puget from now raising a limitations defense.

II

The Washington Legislature enacted the Uniform Disposition of Unclaimed Property Act in 1955. The measure is an almost exact duplicate of the model UPA. 8A U.L.A. 223 (1983). Significantly, the model UPA has a section which provides that periods of limitations shall not be a bar to the state's right to the property. UPA § 16, 8A U.L.A. 257 (1983). The Washington Legislature chose not to include that provision when it enacted Washington's UPA. The Department twice tried unsuccessfully to amend the UPA, first to provide access to certain abandoned property before the owner's statute of limitations had run, and then to add § 16 of the model UPA. Unable to convince the Legislature, the Department finally adopted its own rule in 1968 which closely paralleled UPA § 16. This court struck down the regulation as being beyond the rulemaking power of the agency. Pacific Northwest Bell Tel. Co. v. Department of Rev., 78 Wash.2d 961, 481 P.2d 556 (1971). Finally, in 1979 the Legislature enacted RCW 63.28.225 ² which is a codification of UPA § 16.

The Department urges the court to read Bell to require a holder of presumed abandoned property to report the abandonment and to assert a statute of limitations defense in the report or lose it. Bell does suggest such a course of action, but does not so require. Bell, at 967, 481 P.2d 556. The Bell court found that the Department's right to abandoned property is purely derivative and therefore RCW 4.16.160, which precludes a limitations defense against the state, is inapplicable. Bell, at 964, 481 P.2d 556. There, too, the court noted the legislative history of the UPA and found persuasive the Legislature's refusal to enact § 16 and subsequent Department bills. Bell, at 962-63, 481 P.2d 556.

The Department cites cases from other jurisdictions which have refused to permit statutes of limitations to preclude the state's right to abandoned property. However, reliance on those cases is mistaken. In Sennett v. Insurance Co. of North America, 432 Pa. 525, 247 A.2d 774 (1968), the court held that the state's right to escheat is separate and distinct from the owner's right to claim property. That analysis is contrary to our analysis in Bell wherein we found the state's right purely derivative and therefore no greater than the owner's. Consequently, Sennett is not persuasive. The Supreme Judicial Court of Massachusetts interpreted a provision of its abandoned property act to require reporting of abandoned property even after the owners' rights had ceased. Treasurer and Receiver General v. John Hancock Mut. Life Ins. Co., 388 Mass. 410, 446 N.E.2d 1376 (1983). However, there the court was interpreting a substantially different abandoned property scheme and specific statutory language which does not appear in our UPA. Although the sentiment the court expresses appears relevant, the factual differences in the cases make it unpersuasive in this situation.

The California legislature adopted an abandoned...