January 23, 1970
Hon. Jesse James Opinion No. M-563
State Treasurer
Treasury Department Re: Application of Articles 3272a
Austin, Texas 78711 and 3272b, Vernon's Civil
Statutes, to escheat status
.. of dividends received by bank
trust department when owner-
ship of such dividends cannot
Dear Mr. James: be determined.
Your recent letter requesting the opinion of this
oFfice concerning the referenced matter states, In part, as
follows:
-.
‘We ask that you advise this office by
official opinion on the questions and circum-
stances related herein.
"The trust department of a bank chartered
under the laws of the State of Texas buys and
sells securities on behalf of Its trust accounts.
These securities are usually registered In the
name of a nominee who holds them for the trust
department of the bank. Due to the lapse of time
necessary for corporate stock transfer agents to
effectuate the transfer of record ownership of
securities that have been sold, on occasion the
nominee receives dividend checks for dividends
payable upon securities which have already been
sold by the nominee on behalf of the trust depart-
ment. The bank trust department is unable to al-
locate such dividends to any particular trust
account or to trace the ownership of the securities
upon which the dividends were paid.
'Under these circumstances, your opinion is
requested upon the following questions:
"1. Are the dividends held by the trust
department of the bank subject to being reported
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Hon. Jesse James,:page 2 (M-563)
as a dormant deposit or inactive account
under the provisions of Article 3272b, Ver-
non's Civil Statutes?
"2. Are the dividends held by the trust
department of the bank SubJect to being reported
as abandoned personal property under the provisions
of Article 3272a, Vernon's Civil Statutes?
“3. In the event question 1 or 2 is an-
swered in the affirmative, then would escheat
of such dividends be defeated by the defense
of limitations under the holding of Southern
Pacific Transport Co. v. State, 380 S.W.2d
12 ex.Civ.App. b4 error ref.) and Cen-
$&y'" ",;"htl:o;';;vSa;;;.410 s.wz?d-
Ci A lgbb n.r.e.)."
We are authorized to assume that the bare legal title
to the dividends when received was in the bank, with the equitable '
~~'
and beneficial ownership thereto being unknown.
.
-- Section 1 of Article 3272a, Vernon's Civil Statutes, pro-
Ides, in part, as follows:
"Every person holding personal property sub-
ject to escheat . e . at the time of the effective
date of this Act, shall, within sixty (60) days
thereafter, file a report thereof with the State
Treasurer I . .
"(a) 'jhE,term,'oerson' as used In this
Article means atiifnml%l,
-..-._.
---I co~??~~~n~%usiness
assoc.&Ton, partnership, governmental or political
subdivision or officer, public authority, estate,
trust, .trustee, officer of a court, liquidator,
two:(2) or more persons having a Qofnt or common
interest, or any other legal, commercial, govern-
mental or political entity, except banks, savings
and loan associations, banking organizations or
institutions,
"(b) The term 'personal property' includes,
out is not limited to, money, stocks, bonds and
o%her securities, bills of exchange, claims for
money 01' indebtedness and other written evidences
of Indebtedness, dividends, deposlts, accrued
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Hon. Jesse James, page 3 (~-563)
interest, purchase payments;sums payable on
certified, certificates of membership in a
corporation or association, amounts due and
payable under the terms of any insurance policy,
security deposits, unclaimed refunds and deposits
for utility or other services. funds to redeem
stocks and-bonds, undistributed profits, dividends,
or other interests, production and proceeds from
oil, gas and other mineral estates, and all
other personal property and increments thereto,
whether tangible or Intangible, and whether held
within this State, or without the State for a
person or beneficiary whose last known residence
was In this State." (Emphasis added.)
Section 1 of Article 3272b, Vernon's Civil Statutes,
provide?,as follows:
"Every depository holding dormant deposits
or inactive accounts of depositors or owners
. whose existence and whereabouts are unknown
to the depository, shall preserve intact the
deposits and a.ccounts so long as they remain
in a dormant or Inactive status.
"The term 'depository' as used in this
Article means any bank, savings and loan as-
sociation, banking institution or organization
which recel.ves_--.-
and holds for others deposits
EE+~*;~~!.~9!5!5~$~. g ggyay;;ce
--. --.
in other State-for resf=nts last known to
have resided In this State.
"b o The terms 'dormant deposits' and 'ln-
active accounts'
--_mean
- those demand, savings, or
-deposits of money or its equivalent in bank-
lng practice, Including but not limfted to sums
due on certfffed checks, dividends, notes, accrued
interest, or other evidences of Indebtedness, held
by a depository for repayment to the depositor or
creditor, or hfs order D . D 'Dormant deposits'
and 'inactive accounts' lose thefr status as such
when a dep0sl.tIs made by the depositor, or a
check is drawn or withdrawal Is made therefrom
by such depositor, either In person or through
an authorized agent other than the depository
Itself." (Emphasis added.)
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Hon. Jesse James, page 4 (M-563)
In view of thenfact that banks are specifically ex-
cepted from the provisions of Artlc'm'2a, and because
dividends held by a bank's trust departmznt can reasonably
be construed to be the equivalent of an inactive account
in banking practice, we are of the opinion that dividends
of the type described are subject to being reported under
the provisions of Article 3272b, su ra. See also Attorney
General's Opinion No. WW-1303 (1962P , which holds that in-
,vestment monies received by a building and loan association
representing payments made upon shares of stock or share
.'accounts are the functional equivalent of "deposits" and fall
within the provisions of Article 3272b, supra.
-. Accordingly, your first question is answered in the
affirmative, and your second question Is answered in the negative.
.-
Ycdr third question relates to the effect of the statutes
of limita+ions (Articles 5526 and 5527, Vernon's Civil Statutes)
on the escheat of such dividends.
,~...
-, _. :An action by the rightful owner against the bank trust
'Cl~erdrtmentto recover the dividends in the Instant situation
( c ,ld be an action for money had and received, soundin in
,sumpsit. Richter & Co. v. Light, 116 Atl. 600, 603 Corm.
sup. 1922), In most cases, the statute of limitations governing
an assumpsit situation Is Article 5526, Vernon's Civil Statutes;
which provides for a two-year limitation on debts not evidenced
by a written contract. 6 Tex.Jur.2d 556-57, Assumpsit, Sec. 10.
Notwithstanding the foregoing, we are of the opinion
that the Instant situation is governed by the Ranking Code of
1943, in particular Article 342-707, Vernon's Civil Statutes,
which, In part, provides that:
"The contract of deposit between a bank
and a depositor, whether evidenced by deposit
tickets or otherwise shall be deemed a contract
in writing within the purview of Article 5527
of the Revised Civil Statutes of Texas. The
cause of action on any such depository contract,
other than a time deposit, shall not accrue until
the bank has denied liability and given th d
positorFotice theKeg. . . . (Emphasisea&d.)
Thus, the four-year statute of limitations commences to run
after the bank has (a) denied Its
. .liability to pay the divi-
dends to the rightful owner and (b) given notice of same to
the rightful owner of,the dividends.
\ -2691-
Hon. Jesse James, page 5 (~-563)
Texas courts have held that a plea by the holder of
property subject to escheat that limitations has barred the
claim of the Derson for whom the property is held is a valid
defense to an‘escheat action by the State. Southern Pacific
Trnnnnnrt
---.--r--- Co.
--_ v.
._ State.
----~. 180
-- S.W.2d 121 (Tex.Civ.ADD. 19b4
error ref' )* State v. Williamson-Dickie‘Mfg. Co.,“399 S.W:2d
568 (Tex.&t.ADD. lqbb, error-state v. El Paso
Elec&ic~Co.. 462 S;W.2d 807 (Tex.Civ.ADD. F?5, error ref.
n.r.e.); Central Power & , 410 S.W.2d 18
(Tex.Civ.App. lgbb, error 1 Oil co. v.
State, 442-S.U.2d 457 (Tex.Civ.App. 1969, error ref. n.r.e.).
-also Attorney General's Opinion No. M-476 (1969: I.
.. Consequently, in answer to your third question, it is
our opinion that the bank may validly assert the bar of limita-
.- tions in an escheat action, provided the running of the bar of
limitatrons asserted has commenced pursuant to the provisions of
Article 342-707, supra.
. SUMMARY
-- (1) Under the facts presented, dividends held
by a bank trust department are subject to being re-
ported as an "inactive account" pursuant to the pro-
visions of Article 3272b, Vernon's Civil Statutes.
(2) A plea of the statute of limitations
(Article 5526, Vernon's Civil Statutes) by the
holder of such dividends would be a valid defense
to an escheat action by the State, provided the
running of the bar of limitations asserted has
commenced pursuant to the provisions of Article
342-707, supra.
Prepared by Austin C. Bray, Jr.
Assistant Attorney General
-2692-
Hon. Jesse James, page 6 (M-563)
APPROVED:
OPINION COMMITTEJZ
Kerns Taylor, Chairman
Alfred Walker, Co-Chal@man
Ralph Rash
John Reeves
Jack Goodman
Dyer Moore, Jr.
,MEADE F. GRIFFIN
-Staff Legal Assistant
NOLAWHITE
_,~First Assistant
_.
-. .,.,~
-.
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