Turnacliff v. Westly

• Decision Date: 15 October 2008
• Docket Number: No. 07-15287.,07-15287.
• Citation: 546 F.3d 1113
• Parties: Michael M. TURNACLIFF, in his capacity as Administrator for the Estate of Kathleen M. Dodd, with will annexed, Plaintiff-Appellant, v. Steve WESTLY, in his individual & official capacity as State Controller of the State of California, and in his custodial capacity as Administrator of the Unclaimed Property Fund, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

546 F.3d 1113

Michael M. TURNACLIFF, in his capacity as Administrator for the Estate of Kathleen M. Dodd, with will annexed, Plaintiff-Appellant, v. Steve WESTLY, in his individual & official capacity as State Controller of the State of California, and in his custodial capacity as Administrator of the Unclaimed Property Fund, Defendant-Appellee.

No. 07-15287.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted August 12, 2008.

Filed October 15, 2008.

David B. Tillotson & John A. Lofton, San Francisco, CA, for the plaintiff-appellant.

Edmund G. Brown, Jr., Christopher E. Krueger, Douglas J. Woods, and Zackery P. Morazzini, Sacramento, CA, for the defendant-appellee.

Appeal from the United States District Court for the Northern District of California; Susan Yvonne Illston, District Judge, Presiding. D.C. No. CV-05-05303-SI.

Before: DAVID R. THOMPSON and KIM McLANE WARDLAW, Circuit Judges, and SUSAN R. BOLTON,^* District Judge.

Judge THOMPSON, Senior Circuit Judge:

Plaintiff-Appellant Michael M. Turnacliff (Turnacliff), in his capacity as administrator of the Estate of Kathleen M. Dodd (the Estate), appeals the district court's summary judgment in favor of defendant Steve Westly, in his individual and official capacity as State Controller of the State of California, and his custodial capacity as administrator of the Unclaimed Property Fund (Controller). Turnacliff alleged that the Controller improperly calculated the interest due to the Estate for the time that the State of California held the Estate's unclaimed property.

Turnacliff contends that, when the Controller returned the previously unclaimed property to the Estate, with interest, the Controller incorrectly construed California Code of Civil Procedure § 1540(c) (amended 2002) by applying a single, statutorily-defined interest rate to the principal for the years that California held the property. Turnacliff maintains that the Controller should have applied an average of various interest rates that California earned while holding the property. He also contends that, if the Controller's construction and application of § 1540(c) was correct, then the Controller's action ran afoul of the Takings Clause of the Fifth Amendment, because he did not pay to the Estate the actual interest that the unclaimed property earned while California held it.

Turnacliff further argues, for the first time on appeal, that the Controller violated the Takings Clause by failing to provide adequate notice to the Estate before acquiring the abandoned property. Exercising our discretion, we decline to consider this argument.

We have jurisdiction under 28 U.S.C. § 1291, and affirm the district court's summary judgment in favor of the Controller. The Controller correctly construed and applied § 1540(c).

And, even if the facts of this case were to implicate the Takings Clause, Turnacliff has failed to show that the Estate is entitled to additional compensation.

I. Statutory Framework

In Suever v. Connell, 439 F.3d 1142 (9th Cir.2006), we explained:

Title 10 of the California Code of Civil Procedure deals with unclaimed property located in California. Cal.Civ.Proc. Code § 1300, et seq. "It is the purpose of this title to provide for the receipt, custody, investment, management, disposal, escheat and permanent escheat of various classes of unclaimed property. ..." Id. § 1305. ... "`Escheat' ... means the vesting in the state of title to property the whereabouts of whose owner is unknown or whose owner is unknown, ... subject to the right of claimants to appear and claim the escheated property. ..." Id. § 1300(c). ...

Suever, 439 F.3d at 1144 (internal brackets and footnotes omitted).

At the time that the Controller received the Estate's claim for the property, and returned it, California Code of Civil Procedure § 1540(c) provided:¹

The Controller shall add interest at the rate of 5 percent or the bond equivalent rate of 13-week United States Treasury bills, whichever is lower, to the amount of any claim paid the owner under this section for the period the property was on deposit in the Unclaimed Property Fund. No interest shall be payable for any period prior to January 1, 1977. Any interest required to be paid by the state pursuant to this section shall be computed as simple interest, not compound interest. For purposes of this section, the bond equivalent rate of 13-week United States Treasury bills shall be defined in accordance with the following criteria:

(1) The bond equivalent rate of 13-week United States Treasury bills established at the first auction held during the month of January shall apply for the following July 1 to December 31, inclusive.

(2) The bond equivalent rate of 13-week United States Treasury bills established at the first auction held during the month of July shall apply for the following January 1 to June 30, inclusive.

Proceeds from the sale of escheated property are deposited in the Unclaimed Property Fund in an Abandoned Property Account. Id. § 1564(a). On at least a monthly basis, the Controller is required to transfer to California's General Fund all money in the Abandoned Property Account in excess of fifty thousand dollars. Id. § 1564(c).

Citing California Government Code §§ 16470 and 16480.1, Turnacliff contends that "surplus" money in the General Fund is placed in a Pooled Money Investment Account (PMIA), where it earns interest at the rate of the PMIA yield. The Controller does not dispute this assertion.

II. Background

On November 15, 1958, Kathleen M. Dodd died.

In January 1979, Echlin, Inc. sent a cash dividend of more than $3100 to Ms. Dodd. That dividend was returned to Echlin by the United States Postal Service. Over the next eleven years, Echlin sent Ms. Dodd at her address of record dozens of cash dividends, ranging from $3100 to $8000. None of the dividend checks were ever cashed, and most were returned by the Postal Service.

On June 29, 1990, the Controller received 57,600 shares of Echlin stock that had belonged to the late Ms. Dodd. While the shares were held by the Controller, they earned dividends in excess of $347,000. The Controller sold the stock on June 17, 1993, for more than $1,513,000. By June 1993, the Controller held property in excess of $1,860,000 belonging to the Estate. In May 2003, the Estate filed a claim with the Controller for the return of its property.

On June 24, 2003, the Controller issued a check to the Estate for roughly $1,983,000, which purportedly represented the principal plus simple interest at a rate of 1.69%. The figure of 1.69% was reached by referring to the interest rate of 13-week United States Treasury bills established at the first auction of July 2002.

The interest was incorrectly calculated, however, and on January 21, 2005, the Controller paid another $201,000 to the Estate. The parties agree that after this payment, the Controller had paid in full the 1.69% simple interest on the principal of the previously unclaimed property. But the Estate disagreed with the Controller that 1.69% was the correct interest rate that should have applied.

On December 21, 2005, Turnacliff filed this action alleging the Controller incorrectly applied California Code of Civil Procedure § 1540(c), violated the Takings Clause by paying to the Estate less than the amount of interest actually earned by the unclaimed property, violated the Estate's procedural due process by retroactively applying the 2002 version of § 1540(c) to the pre-2002 years that California held the unclaimed property, and breached its fiduciary duty to the Estate under the law of the State of California.

The district court granted the Controller's motion for summary judgment and denied Turnacliff's motion for summary judgment, holding that the Controller's interpretation of § 1540(c) — applying a single rate for the time that the principal of the unclaimed property was held by California — was correct, and that this interpretation raised no constitutional problems. This appeal followed.²

III. Discussion

A. California Code of Civil Procedure § 1540(c)

Turnacliff contends that California Code of Civil Procedure § 1540(c) required the Controller to add interest to the Estate's unclaimed property at a rate of the average of the 13-week bond equivalent rates of United States Treasury bills established — according to the statute — at the first auctions in January and July of each year over the time the Controller held the assets. This interpretation of the statute, Turnacliff maintains, results in a "reasonable approximation of interest actually earned." According to Turnacliff's calculations, the Controller should have paid interest at a rate of 4.5%.

The Controller argues that the plain language of § 1540(c) required him to apply a single interest rate. And, in this case, the applicable rate was 1.69%.

Because we are interpreting a California statute, we apply California's rules of statutory construction. See In re First T.D. & Inv., Inc., 253 F.3d 520, 527 (9th Cir.2001). In this regard, we have previously noted that "[t]he California Supreme Court has declared that the `ultimate task' in statutory interpretation `is to ascertain the legislature's intent.'" Id. (quoting People v. Massie, 19 Cal.4th 550, 569, 79 Cal.Rptr.2d 816, 967 P.2d 29, 41 (1998)). "`Ordinarily, the words of the statute provide the most reliable indication of legislative intent.'" In re First T.D. & Inv., 253 F.3d at 527 (quoting Pac. Gas & Elec. Co. v. County of Stanislaus, 16 Cal.4th 1143, 1152, 69 Cal.Rptr.2d 329, 947 P.2d 291, 297 (1997)). "Courts should give the language of the statute `its usual, ordinary import and accord significance, if possible, to every word, phrase and sentence in pursuance of the legislative purpose.'" In re First T.D. & Inv., 253 F.3d at 527 (quoting Dyna-Med, Inc. v. Fair Employment & Hous. Comm'n, 43 Cal.3d 1379, 1386-87, 241 Cal.Rptr. 67, 743 P.2d 1323, 1326 (1987)).

California Code of Civil...