January 23, 1970

Hon. Jesse James OpinionNo. 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 receivedby bank

. . trust departmentwhen ownership of suchdividends cannot Dear Mr. James: be determined.

Your recent letterrequesting the opinion of this oFfice concerning the referenced matter states, Inpart, as follows:
-.

**‘ We**  ask thatyou advise this officeby

official opinion on the questions and circumstances related herein. "The trust department of a bank chartered under the laws of the State ofTexas 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 transferagents to effectuate the transfer of record ownership of securities that have been sold, on occasion the nominee receives dividend checks fordividends payable upon securitieswhich have already been sold by the nominee onbehalf of the trustdepartment. The bank trust department isunable to allocate such dividends to any particular trust account or to trace the ownership of the securities upon which the dividendswere paid. 'Under these circumstances,your opinion is requested upon the following questions: "1. Are the dividends held by the trust department of thebank subject tobeing reported
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as a dormant deposit or inactive account under the provisions of Article 3272b,Vernon's Civil Statutes? "2. Are the dividends held by the trust department of the bank SubJect to being reported as abandoned personal propertyunder the provisions of Article 3272a,Vernon's Civil Statutes? 

### “3

. In the event question 1 or 2 is answered in the affirmative, thenwould 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. $&y'" b4 error ref.) and Cen-

",;"htl:o;';;vSa;;;.410 s.wz?dCi A lgbb n.r.e.)."
We are authorized to assume that thebare legal title to the dividends when received was in the bank, with the equitable ' ~~' and beneficial ownership thereto being unknown.

.
-- Section 1 ofArticle 3272a,Vernon's Civil Statutes, proIdes, in part, as follows:

"Everyperson holding personal property subject 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 Articlemeans atiifnml%l, co~??~~~n~%usiness

-..-._. ---I assoc.&Ton, partnership, governmental or political subdivision or officer,public authority, estate, trust, .trustee,officer of a court, liquidator, two:(2) ormore personshaving a Qofnt or common interest, or any other legal, commercial,governmental or political entity, except banks, savings and loan associations,banking organizations or institutions, "(b) The term 'personalproperty' includes, out is not limited to,money, stocks, bonds and o%her securities,bills of exchange, claims for money 01'indebtednessand otherwrittenevidences of Indebtedness,dividends, deposlts, accrued

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### 3 (~-563)

interest, purchase payments;sums payable on certified, certificates ofmembership in a corporation or association, amounts due and payable under the terms of any insurancepolicy, 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 othermineral 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 lastknown residence was In this State." (Emphasisadded.) Section 1 of Article 3272b,Vernon's Civil provide?,as follows:

"Everydepository holding dormant deposits or inactive accounts ofdepositors or owners

. whose existence and whereabouts are unknown to the depository, shall preserve intact the deposits and a.ccountsso long as they remain in a dormant or Inactive status. Statutes,

"The term 'depository'as used in this Articlemeans any bank, savings and loan association, banking institution or organization which recel.vesand holds for othersdeposits

_--.- EE+~*;~~!.~9!5!5~$~. g ggyay;;ce

--. --. in other State-for resf=nts last known to have resided In this State. "bo The terms 'dormantdeposits' and 'lnactive accounts'mean those demand, savings, or

--_- -deposits ofmoney or its equivalent inbanklng 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 'Dormantdeposits' and 'inactiveaccounts' lose thefr status as such when a dep0sl.tIsmade by the depositor, or a check is drawn or withdrawal Ismade therefrom **by** suchdepositor, either In person or through an authorized agent other than thedepository Itself." (Emphasisadded.)
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In view of thenfact that banks are specifically excepted from the provisions of Artlc'm'2a, and because dividends held by a bank's trustdepartmznt 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. P See also Attorney General's Opinion No.WW-1303 (1962 ,which holds that in- ,vestmentmonies received by a building and loan association representing paymentsmade upon shares of stock or share .'accountsare 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.

_. ,~... -, :Anaction by the rightful owner against the bank trust 'Cl~erdrtment

to recover the dividends in the Instant situation (c,ldbe an action formoney had and received, soundin in ,sumpsit. Richter & Co. v. Light, 116 Atl. 600, 603 Corm. sup. 1922), Inmost 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 theRanking 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 thepurview of Article 5527 of the Revised Civil Statutes ofTexas. The cause of action on any suchdepository 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 after the bank has (a) denied Its liability to pay the

. . rundividends to the rightful owner and (b) given notice of same to the rightful owner of,the dividends.

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### 5 (~-563)

Texas courts have held that a plea by the holder of property subject to escheat that limitationshas barred the claim of the Derson for whom the property isheld is a valid defense to an‘escheat action by the State. Southern Pacific Trnnnnnrt Co. v. State. 180 S.W.2d 121 (Tex.Civ.ADD. ---.--r--- --_ ._ ----~. -- error ref')*State v.Williamson-Dickie‘Mfg. 19b4 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. n.r.e.); Central Power & (Tex.Civ.App. lgbb, error F?5,error ref.

,410 S.W.2d 

### 18 1 Oil co. v. ror ref. n.r.e.).

I. State, 442-S.U.2d 

### 457 (Tex.Civ.App. 1969, er -also Attorney General's Opinion No.

### M-476 (1969:

Consequently, in answer to your third question, it is

. . our opinion that the bank may validly assert thebar of limitations in an escheat action, provided the running of thebar 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 reported as an "inactiveaccount" pursuant to the provisions ofArticle 3272b,Vernon's Civil Statutes. (2) A plea of the statute of limitations (Article 

### 5526,Vernon's Civil Statutes)by the holder of suchdividendswould be a validdefense to an escheat action by the State, provided the running of thebar of limitationsassertedhas commenced pursuant to the provisions of Article 342-707, supra.

Prepared by Austin C. Bray, Jr. Assistant Attorney General

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APPROVED: OPINION COMMITTEJZ Kerns Taylor, Chairman Alfred Walker, Co-Chal@man Ralph Rash John Reeves Jack Goodman Dyer Moore, Jr. ,MEADEF. GRIFFIN -StaffLegal Assistant
NOLAWHITE _,~ First Assistant

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