Opinion
Petition for Rehearing Dismissed by Stipulation Sept. 13, 1915.
U.S. Webb, Atty. Gen., and John T. Nourse. Deputy Atty. Gen., for the State.
McCutchen, Olney & Willard, of San Francisco, for respondent. Francis J. Sullivan, of San Francisco, amicus curiae.
RICHARDS, J.
This is an original application for a writ of mandate, requiring the respondent, a savings bank corporation organized and doing business as such under the Constitution and laws of the state of California, and having its principal place of business in the city and county of San Francisco, to deposit with the state treasurer the sum of $7,425.16, the same being the aggregate of a number of deposits in various sums which have remained unclaimed in said bank for more than 20 years, according to the verified statement of its officials made to the superintendent of banks during the month of January, 1914, in accordance with section 15 of the Bank Act of the state of California, as amended in 1913. The respondent opposes the issuance of the writ upon the ground of the asserted unconstitutionality of this section of the Bank Act.
Section 15 of the act as amended in 1913 in substance provides that, within 15 days after the 1st of January of each year, the president or managing officer of every bank must make and return to the superintendent of banks a sworn statement, showing the names of depositors known to be dead, or who have not made any further deposits or withdrawn any moneys during the preceding 20 years, together with the last-known place of residence of such depositors, and the amount of their deposits with the accrued interest, if any, thereon; and further provides that such deposits for which no claimant is known, or the depositor cannot be found, shall, together with the increment thereof, be deposited with the state treasurer in the same manner and subject to the same distribution as is provided for in section 1234 of the Code of Civil Procedure. The section also provides for the release from further liability to such depositors of all such banks as shall have paid the said deposits into the state treasury pursuant to the requirements of the section.
The chief contention of the respondent is that, since by the provisions of said section of the Bank Act the state may require banking institutions of the quality of respondent to pay into the state treasury the money of depositors which has been unclaimed by them for more than 20 years, without notice of any kind having been first given to the bank or to such depositors, it by so doing deprives such banks of a property right which they have in such deposits, by divesting them of the opportunity to earn such profits from such deposits as their possession would imply, and also by taking from them that which the depositor might demand of them at any time, and to which demand they could interpose no defense for the reason that the deposit had been removed from their custody without any such notice to the depositor as would constitute due process of law; and in this regard the respondent contends that the provision of the section which assumes to declare that the bank shall be no longer liable to its depositors for such deposits after their transfer to the state treasury, does not accomplish its avowed object, because the depositor, not having been given any such notice of the change of possession of such funds as would amount to due process of law, cannot be bound by this provision of the act.
It may not be seriously disputed that the deposits which are the subjects of this proceeding, and to which the section of the act in question is intended to apply, are such as come within the designation of " unclaimed property," as that term is generally understood in law; neither can it be seriously contended, but on the contrary in this case it is freely conceded, that the state possesses the right and power to assume control of such property as shall have lain unclaimed for such a period of time as to raise the reasonable inference that it has been abandoned by its owner, and is either in danger of being entirely lost to such owner, or is the proper subject of escheat. In the exercise of this admitted and long-established right the Legislatures of most of our states have enacted laws embracing the procedure by which the state may assert its right of control over such property, and in so doing may not only terminate the right of its immediate possessor to the continued custody of such property, but may also put an end to its former ownership, and may even terminate the right of such absentee owner if perchance he should appear, before an escheat had been accomplished, to demand his property from the depositary to whom he had intrusted its possession. In construing and upholding enactments of this character courts have held with much uniformity that the depositary of such unclaimed property as is in question here is only entitled to insist that in the course of the procedure on the part of the estate for the escheat or other transfer of the ownership of unclaimed property such notice shall be given to the depositary and the absentee or unknown owner as shall constitute due process of law. A fair example of such legislation and judicial construction will be found in the cases of Nelson v. Blinn, 197 Mass. 279, 83 N.E. 889,15 L. R. A. (N. S.) 651,125 Am. St. Rep. 364,14 Ann. Cas. 147; Cunnius v. Reading School Dist., 198 U.S. 458, 25 S.Ct. 721, 49 L.Ed. 1125, 3 Ann. Cas. 1121; Malone v. Provident, etc., 201 Mass. 23, 86 N.E. 912; Provident, etc., v. Malone, 221 U.S. 660, 31 S.Ct. 661, 55 L.Ed. 899,34 L. R. A. (N. S.) 1129.
It is the contention of the respondent in the light of the foregoing course of legislation and of judicial construction in other states, that in each instance where the state has undertaken to lay hold upon the unclaimed property of absentees, and either administer upon it or work an escheat, the law has provided and the courts have required some sufficient form of notice to the depositary and the absentee owner as shall satisfy the constitutional requirement as to due process of law; and the respondent insists that in the section of the Bank Act under review in this proceeding no such notice, and in fact no notice whatever, is required to be given by the state prior to the exercise of its asserted right to the delivery of these unclaimed deposits into the possession of the state treasury, and hence that the section of the Bank Act is obnoxious to the constitutional requirement as to due process of law.
With respect to the rights of the respondent arising solely out of its interest as a depositary of these unclaimed deposits, we do not think that this contention can be sustained. By the terms of the section under review the right of the state to enforce payment into its treasury of the moneys which make up the sum of the present demand is predicated upon the verified statement and report of the respondent already made to the proper state official, that it is possessed of these several sums of money, and that they have taken on the quality of unclaimed deposits defined in the act. This being so, it is difficult to see what useful purpose any further notification on the part of the state to turn over these deposits to its treasurer would subserve than that which has already been given by the terms of the statute, and acted upon by the respondent in making its verified statement in accordance therewith. But in addition to this, it has been definitely determined that a bank as a mere depositary is not entitled to previous notice of the exercise on the part of the state of its right to lay hold of the funds of depositors in its hands whenever, in the interests of public policy, the state assumes to exercise control over such funds. The state of California has for years exercised that right; and in the recently, decided case of State Savings & Commercial Bank v. Anderson, 165 Cal. 437, 132 P. 755, L. R. A. 1915E, 675, the right and power of the state so to do in proper cases has been fully vindicated. In that case, involving the summary seizure by the superintendent of banks of the property and funds of a bank which had been found by such official to be in an unsafe or unsound condition, the same objection to the constitutionality of the section of the Bank Act in question there; was presented as is now urged against the section of the same act in question here. In deciding that question Mr. Justice Lorrigan very clearly and convincingly showed that under our modern methods of business banks have ceased to be merely private agencies for the accommodation of their customers, but that by virtue of their charters as well as of the public nature of the patronage which they invite and receive, the banks of the present have become in a just sense trustees of the fiscal affairs of the people and of the state; and this being so, the business and property of such banks may be subjected to such reasonable regulation and control as the state, in the exercise of its police power, may see fit to impose; and that in the course of such control the state may, without any such notice as might under other circumstances be held to constitute due process of law, lay hold of the funds of depositors in the possession of banking institutions, and take the same into its own possession whenever a reasonable consideration of the public interest requires such action. In the foregoing case the superintendent of banks had taken possession of the funds of a bank in failing circumstances under the express terms of section 136 of the Bank Act; in so doing he was assuming to act in the interest of the depositors of such bank who might be unable adequately to protect themselves in private actions against losses which might follow upon the failure of the bank. In the case at bar the state is essaying to exercise the same right in relation to the unclaimed deposits of those who, through misfortune or unexplained absence extending over a long period of years, or who, by reason of death, have been rendered unable to exert a personal control over their deposits. We can perceive no difference as to the rights of the state in either case where the right of ownership of the deposit is in any likelihood of being lost either through the threatened failure of the bank on the one hand, or through the prolonged absence or possible death of the depositor upon the other. We think, therefore, that the contention of the respondent, in so far as the same is predicated solely upon its property right as a depositary, cannot be sustained.
It is, however, further and more seriously contended on behalf of the respondent that the chief defect in this section of the Bank Act lies in the fact that it does not require such notice to be given to the depositors of the fund in question as would constitute as to each of them due process of law. The respondent does not go to the extent of seriously insisting that it is entitled to raise this objection on behalf of its absentee depositors; but its contention is that, since the depositors are, under this section of the act, required to be given no sort of notice prior to the change in the custodian of their deposit, they cannot be bound by the action of the state in that regard, and hence may at any time appear and demand their deposit from the bank and may sue it to recover the same; and that against such demands and suit the bank would have no defense, and might therefore be required to pay to the depositor the amount of his deposit which it had already been compelled to turn over to the state; and that in order to be placed in a position to defend against such demand or suit the respondent has a right to insist that the depositor shall have been given such notice of the contemplated transfer of his property as would constitute due process of law before the bank can be required to pay over the amount of such deposit to the state.
In the consideration of this question it is to be noted at the outset that the section of the Bank Act under review does not contemplate any change in the ownership of the funds in question. It purports to deal with possession only, and to leave the matter of their ultimate ownership to be determined by such subsequent proceedings as are provided through the reference in the section to the provisions of section 1234 of the Code of Civil Procedure. When that section of the Code is examined it will be found to provide a procedure for the disposition of deposits in savings banks in process of liquidation, which embraces such notice to the owners of such deposits as would clearly satisfy the constitutional requirements as to due process of law, and that the procedure therein provided is adjustable to the conditions created by section 15 of the Bank Act.Reading section 15 of the Bank Act. as a whole it must be evident that its only purpose and effect in providing for the summary taking over of unclaimed deposits by the state treasurer is to merely work a temporary change in their possession until such time as they may be claimed by their owners, or as the more ample procedure for their ultimate disposition outlined in section 1234, Code of Civil Procedure, can be set in motion; or, in other words, to place such unclaimed deposits in custodia legis until their ownership can be adjudicated by a proceeding taken upon such notice to all concerned as would amount to due process of law, and thus render the adjudication as to the ultimate control and ownership of the property in question binding upon all persons interested.
This view of the purpose and effect of section 15 of the Bank Act brings this case clearly within the principles laid down by the Supreme Court in the case of State Savings Bank v. Anderson, supra. When the state, from motives of public policy, enacts a law providing that private property may be summarily seized and temporarily sequestered to await the inception or determination of a more formal proceeding affecting the title and ownership of the property so taken, neither the immediate possessor nor the actual owner can be heard to urge the objection that the summary seizure of the property by properly constituted public authorities has been accomplished without such notice as would constitute due process of law. It for lows that as to any action instituted by the owner of such property against his depositary during the temporary period that such funds are in the custody of the state treasurer pending the formal proceeding to determine their ultimate disposition provided for in section 1234, Code of Civil Procedure, the depositor could not maintain such suit against the depositary for such property, for the reason that against such action the latter would have the right to interpose the defense that the property was in custodia legis. It is apparently this very defense which is contemplated by the terms of the section in question, which state:
" That any bank which shall make any deposit with the state treasurer in conformity with the provisions of this section shall not thereafter be liable to any person for the same; and any action which may be brought by any person against any bank for money so deposited with the state treasurer shall be defended by the Attorney General without cost to such bank."
If these views are to be taken as a correct interpretation of the scope and effect of this section of the Bank Act, it necessarily follows that neither the bank nor the depositor can assert that the summary transfer of unclaimed deposits to the possession of the state treasurer, in contemplation of proceedings to be presently taken for the purpose of determining their ultimate disposition, has been accomplished without due process of law.
The foregoing considerations also supply the answer to the suggestion of the respondent, that by the removal of these deposits from the possession of the bank the contractual right of the depositor to receive interest on his deposit has been impaired without due process of law. It does not appear that the depositors affected by this proceeding are entitled to receive any stated interest on their deposits; but, assuming that they are, the situation would not be changed, for if the bank is placed by the terms of this section relieving it from liability in a position to defend against the suit of the depositor for the amount of the deposit after the same has been paid over to the state, the defense would, of course, also extend to the incident of interest, and therefore the bank cannot, for the same reason, rely upon this possible detriment to the depositor as a defense to this proceeding. Malone v. Provident, etc., 201 Mass. 23, 86 N.E. 913.
Let a peremptory writ issue as prayed for.
We concur: LENNON, P. J.; KERRIGAN, J.