Opinion ID: 803222
Heading Depth: 2
Heading Rank: 1

Heading: The United States Savings Bond Program

Text: 1 Throughout this opinion we refer to the plaintiffs in this action as “States” but to the 50 states as a whole as “states.” 5 Pursuant to its constitutional power “to borrow money on the credit of the United States,” Free v. Bland, 369 U.S. 663, 666-67, 82 S.Ct. 1089, 1092 (1962) (citing U.S. Const. art. I, § 8, cl. 2), Congress delegated authority to the Secretary of the Treasury (“the Secretary”), with the approval of the President, to issue savings bonds “for expenditures authorized by law.” 31 U.S.C. § 3105(a).2 The Government sold savings bonds, originally called liberty bonds, “[t]o obtain money for the United States Government . . . [and] to encourage thrift and savings by small investors.” Moore‟s Adm‟r v. Marshall, 196 S.W.2d 369, 372 (Ky. 1946). A United States savings bond is a contract between the United States and the bond‟s owner. Rotman v. United States, 31 Fed. Cl. 724, 725 (Fed. Cl. 1994). The Secretary may establish the terms and conditions that govern the savings bond program, a power that includes the authority to fix the bonds‟ investment yield, to promulgate terms and conditions providing that bondholders may keep the bonds beyond the date of their maturity, and to place conditions on transfer and redemption of the bonds and their sales prices. 31 U.S.C. § 3105(b)-(c). Most of the bonds that are the subject matter of this case are Series E bonds issued between 1941 and 1980. The Government sold the Series E bonds at a discount and paid interest on them only at maturity; according to the States, after maturity interest stopped accruing on the bonds.3 The last Series 2 This statute previously was codified at 31 U.S.C. § 757c(a). See Free, 369 U.S. at 666-67, 82 S.Ct. at 1092. 3 The plaintiff States‟ representation that interest ceased to accrue on Series E bonds after maturity may be somewhat misleading but we will accept it in adjudicating this appeal. The reason we think that this representation may be misleading is 6 E bonds matured in 2011. Pursuant to his statutory authority, the Secretary has promulgated various regulations governing the savings bond program that the Supreme Court has held preempt conflicting state law. See United States v. Chandler, 410 U.S. 257, 262, 93 S.Ct. 880, 883 (1973) (citing Free 369 U.S. at 668, 82 S.Ct. at 1093) (“[A]bsent fraud, the regulations creating a right of survivorship in United States Savings Bonds . . . pre-empt[] any inconsistent state property law.”). In contrast to many other types of securities, “[s]avings bonds are not transferable and are that 31 U.S.C. § 3105(b)(2)(A) indicates that the Secretary may prescribe regulations that provide for savings bonds to continue to earn interest during “a period beyond maturity.” Moreover, 31 C.F.R. § 315.30 provides that “[a]ll Series E bonds and savings notes have been extended and continue to earn interest until their final maturity dates, unless redeemed earlier.” The regulations allow for such an “extended maturity period,” a “period after the original maturity date during which the owner may retain a bond and continue to earn interest on the maturity value” of the bond. 31 C.F.R. § 315.2(c). We see little difference between a bond paying interest accrued beyond maturity and extending a bond‟s maturity date for a period during which the bond earns interest. Indeed, it appears that when this action was commenced in 2004 some Series E bonds had passed their original maturity dates but were continuing to earn interest as their maturity dates had been extended. See 31 C.F.R. § 316.8. Obviously, if interest runs after the bonds‟ original maturity dates, the States‟ case, if affected at all, only could be weaker. 7 payable only to the owners named on the bonds, except as specifically provided in [the federal] regulations and then only in the manner and to the extent so provided.” 31 C.F.R. §§ 315.15, 353.15. There are limited exceptions to the general rule precluding the transfer of savings bonds, including cases in which a third party attains an interest in a bond through valid judicial proceedings. 31 C.F.R. §§ 315.20(b), 353.20(b).4 As 4 31 C.F.R. § 315.39(a) and (b) provide for payment of series A, B, C, D, E, F, G, H, J, and K bonds, and 31 C.F.R. § 353.39(a) provides for payment of series EE bonds. The regulations contain identical language: The Department of the Treasury will recognize a claim against an owner of a savings bond and conflicting claims of ownership of, or interest in, a bond between coowners or between the registered owner and the beneficiary, if established by valid, judicial proceedings, but only as specifically provided in this Subpart. Section 315.23 [or section 353.23] specifies the evidence required to establish the validity of the judicial proceedings. 31 C.F.R. §§ 315.20(b), 353.20(b). 31 C.F.R. § 315.23 requires “that certified copies of the final judgment, decree, or court order, and of any necessary supplementary proceedings,” be submitted to establish the validity of judicial proceedings, and also makes provisions for payment to certain bankruptcy trustees 8 will be seen below, it is highly significant that the regulations do not impose any time limits for bond owners to redeem the savings bonds, at least with respect to the bonds that are the subject matter of this case. Consequently, their owners can present them for payment to an authorized agent of the United States at any time. See 31 U.S.C. § 3105(b)(2)(A) (authorizing the Secretary to promulgate regulations providing that “owners of savings bonds may keep the bonds after maturity”). Though it might be thought unlikely that an owner would present a longmatured savings bond for redemption, the record shows that the Treasury as of 1989 was receiving claims of $7,000 to $10,000 a day for payment on savings bonds that had matured many years earlier. App. at 169.5 As relevant here, a registered owner of a bond is presumed conclusively to be its owner absent errors in registration. 31 C.F.R. §§ 315.5, 353.5. The redemption process is not complex, as the owner of a bond seeking to redeem it need only present the bond to an authorized payment agent for redemption, 31 C.F.R. §§ 315.39(a), 353.39(a), establish his identity, sign the request for payment, and provide his address. The agent then may pay the bond with a check drawn against funds of the United States. and receivers. 5 We note that the States in their complaint assert that “[n]ot surprisingly, Treasury has not been approached by owners in significant numbers seeking long-matured savings bonds.” We cannot reconcile this allegation with the evidence in the record to which we have referred. 9 See 31 C.F.R. §§ 315.38, 353.38. Payment agents, ordinarily banks, are financial institutions qualified under Treasury regulations to pay sums due on savings bonds. See 31 C.F.R. §§ 315.2(j), 353.2(f). The relevant statutes and regulations do not contain provisions for locating owners of matured but unredeemed bonds. In 2000, the Treasury, however, created a “Treasury Hunt” Internet website, which provides information on matured but unredeemed Series E bonds issued after 1974 in a database searchable by Social Security Number.6