Cwik v. Giannoulias ( 2010 )

Docket No. 108313.
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
DAVID CWIK, Successor Independent Adm’r of the Estate of
Genowefa Bogdanowicz, et al., Appellants, v. ALEXI
GIANNOULIAS, Treasurer of the State of Illinois, et al., Appellees.
Opinion filed May 20, 2010.
JUSTICE KARMEIER delivered the judgment of the court, with
opinion.
Chief Justice Fitzgerald and Justices Freeman, Thomas, Kilbride,
Garman, and Burke concurred in the judgment and opinion.
OPINION
In this appeal, plaintiffs challenge the state’s retention of interest
earned on property held by the state pursuant to section 15 of the
Uniform Disposition of Unclaimed Property Act (765 ILCS 1025/15
(West 2004)). In proceedings below, the circuit court of Cook County
denied the defendants’ motion to dismiss plaintiffs’ amended
complaint, which sought recovery of interest on plaintiff’s property
(money) previously held by the state under the Act; however, the
circuit court certified dispositive questions to the appellate court
pursuant to Supreme Court Rule 308 (155 Ill. 2d R. 308). In the
course of answering those questions, the appellate court ultimately
determined that the retention of interest by the state “may” be a
“taking” under section 15 of the Illinois Constitution of 1970 (Ill.
Const. 1970, art. I, §15) and the fifth and fourteenth amendments to
the United States Constitution (U.S. Const., amends. V, XIV), but
given the allegations in this case, the court concluded it is not a taking
for which just compensation is due. 389 Ill. App. 3d 21. This appeal
followed. 210 Ill. 2d Rs. 315, 317. For the reasons set forth hereafter,
we affirm the judgment of the appellate court.
STATUTE INVOLVED
The Uniform Disposition of Unclaimed Property Act (the Act)
(765 ILCS 1025/1 et seq. (West 2004)) was enacted by our General
Assembly in 1961. The Act creates a “presumption of abandonment”
pertaining to various forms of neglected or unclaimed property held
for the owners by, inter alia, financial organizations (765 ILCS
1025/2 (West 2004)), business associations (765 ILCS 1025/2a (West
2004)), insurance companies (765 ILCS 1025/3 (West 2004)), utilities
(765 ILCS 1025/4 (West 2004)), and governmental entities or
authorities (765 ILCS 1025/8, 8.1 (West 2004)), where the owners
have failed to claim or otherwise indicate an interest in the property
through statutorily specified acts for a period of time generally ranging
from five to seven years, depending upon the applicable provision.
Pursuant to section 11(a) of the Act ((765 ILCS 1025/11(a) (West
2004)), a holder of “funds or other property, tangible or intangible,
presumed abandoned under this Act, shall report and remit all
abandoned property specified in the report to the State Treasurer.”
Section 11(b) specifies information that must be provided to the
Treasurer, information that might help to identify or locate the owner
and verify that the property does fall under the statutory presumption
of abandonment. See 765 ILCS 1025/11(b) (West 2004). With that
information, the state is required, by section 12 of the Act (765 ILCS
1025/12 (West 2004)), to attempt to notify the owner by publishing
a notice in a newspaper of general circulation. The notice must list the
last known addresses of persons listed in the report, describe the
property in question, provide contact information concerning the
holder of the property, and include a “statement that the abandoned
property has been placed in the custody of the State Treasurer to
whom all further claims must thereafter be directed.” 765 ILCS
1025/12 (West 2004).
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The Act provides that “[e]very person who has filed a report as
provided by Section 11 shall deliver to the State Treasurer all
abandoned property specified in the annual report on the same date
that the annual report is filed.” 765 ILCS 1025/13 (West 2004).
“Upon the payment or delivery of abandoned property to the State
Treasurer, the state shall assume custody and shall be responsible for
the safekeeping thereof.” 765 ILCS 1025/14 (West 2004).
Significantly, for purposes of this appeal, the Act states:
“When property is paid or delivered to the State Treasurer
under this Act, the owner is not entitled to receive income or
other increments accruing thereafter, except that income
accruing on unliquidated stock and mutual funds after July 1,
1993, may be paid to the owner.” 765 ILCS 1025/15 (West
2004).
As to disposition of the “abandoned property,” the Act, in its
applicable 2004 form, provided:
“All abandoned property, other than money and that
property exempted by paragraphs (1), (2), and (3) of this
subsection, delivered to the State Treasurer under this Act
shall be sold within a reasonable time to the highest bidder at
public sale ***. 765 ILCS 1025/17(a) (West 2004).
Section 18 of the Act stated that the “Treasurer shall retain all funds
received under this Act, including the proceeds from the sale of
abandoned property under section 17, in a trust fund ***.” 765 ILCS
1025/18 (West 2004). Under the 2004 version of the Act, amounts in
that trust fund in excess of $2.5 million were to be deposited in the
State Pension Fund on dates certain twice annually. 765 ILCS
1025/18 (West 2004). Payment for claims allowed under the Act was
to be paid out of the trust fund. 765 ILCS 1025/18 (West 2004).
BACKGROUND
The plaintiffs, David Cwik, successor independent administrator
of the estate of Genowefa Bodganowicz, and Anita White, filed a
lawsuit against the defendants, Judy Barr Topinka,1 Treasurer of the
1
Alexi Giannoulias succeeded Judy Barr Topinka as Treasurer.
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State of Illinois, and Alissa Camp,2 director of the Unclaimed Property
Division of the office of the Illinois Treasurer (collectively the
Treasurer), on behalf of themselves and all others similarly situated,
seeking payment of interest on their property–money in the case of
each of the representative plaintiffs–held by the State of Illinois under
the Act prior to their claims of reclamation. The plaintiffs also sought
certification of the suit as a class action.
The circuit court denied the Treasurer’s motion to dismiss the
amended complaint, but certified two questions to the appellate court
pursuant to Supreme Court Rule 308 (155 Ill. 2d R. 308). Pursuant to
Supreme Court Rule 306(a)(8) (210 Ill. 2d R. 306(a)(8)), the
Treasurer also sought review of the circuit court’s order certifying the
class. The appellate court granted review in both instances and
consolidated the appeals.
The questions certified for review were stated as follows:
“Whether the retention for state purposes of the interest
earned on property held pursuant to the Illinois Uniform
Disposition of Unclaimed Property Act during the time it was
in the possession of the State Treasurer's Office and/or the
State's Retirement Systems is a taking for which just
compensation is due under the Fifth and Fourteenth
Amendments to the United States Constitution or Article II,
[sic] § 15, of the Illinois Constitution[.]
If so, whether just compensation should be measured by
the interest earned by the State on the property taken[.]”
In addressing the certified questions, the appellate court observed
that the majority of courts in other jurisdictions, considering a
property owner’s entitlement to interest under virtually identical
statutes, have relied upon the United States Supreme Court’s decision
in Texaco, Inc. v. Short, 454 U.S. 516, 70 L. Ed. 2d 738, 102 S. Ct.
781 (1982), in concluding that “the retention of earned interest by a
state under an unclaimed property statute is not a ‘taking’ requiring
2
Joshua Joyce succeeded Alissa Camp as director of the Unclaimed
Property Division.
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the payment of compensation.” 389 Ill. App. 3d at 29. The appellate
court noted that the circumstances in Texaco were distinguishable
insofar as the property in that case was considered abandoned under
the applicable statute, whereas this court, in Canel v. Topinka, 212 Ill.
2d 311 (2004), adopted the view that, under Illinois’ Disposition of
Unclaimed Property Act, the state does not acquire title to the
property in question, but merely holds the neglected property for the
owner. 389 Ill. App. 3d at 28, citing Canel, 212 Ill. 2d at 331.
Following a brief discussion of Brown v. Legal Foundation, 538 U.S.
216, 155 L. Ed. 2d 376, 123 S. Ct. 1406 (2003)–a case initiated by
vigilant property owners who sought the interest on their funds held
in lawyers’ trust accounts–the appellate court concluded the initial
portion of its analysis with this ambivalent statement: “Thus, while the
retention of interest [in the case at bar] may be a ‘taking,’ the question
is whether the named plaintiffs here have lost anything of value.”
(Emphasis added.) 389 Ill. App. 3d at 30-31.
In addressing that question, the appellate court observed:
“Nowhere in the [plaintiffs’] allegations do the plaintiffs plead that
their respective funds were earning interest at the time the State took
custody of them. When questioned at oral argument, the attorneys for
the parties acknowledged that they were unaware whether the
plaintiffs’ funds had been earning interest prior to the time they were
placed in state custody.” 389 Ill. App. 3d at 31. Assuming there had
been a “taking” for purposes of our state and federal constitutions, the
appellate court found the dearth of said allegations or claims
dispositive on the question of just compensation:
“Unlike the stock in Canel, which continued to produce
dividends even though ‘neglected’ by the owner, there is no
evidence that the plaintiffs’ property in this case was
producing any interest until the Treasurer took possession of
it under the Act. While the State may have gained the interest
income, the plaintiffs failed to plead that they were receiving
interest or expected to receive interest on the funds remitted
to the State under the Act. Simply put, the State’s gain did not
establish a loss on the part of the plaintiffs. As such, the
plaintiffs have no claim for a taking for which compensation
is due.” 389 Ill. App. 3d at 31-32.
Applying that rationale, the appellate court answered both questions
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“in the negative as they apply to this particular case.” 389 Ill. App. 3d
at 32. The court concluded: “As we have determined that the named
plaintiffs do not have a claim for a taking for which compensation is
due, they have no cause of action and may not seek relief on behalf of
the other class members. [Citation.] Therefore, the circuit court's
order granting class certification is reversed, and the cause remanded
for further proceedings consistent with the views expressed in this
opinion.” 389 Ill. App. 3d at 32.
ANALYSIS
Plaintiffs raise numerous issues on appeal. We need address only
one: “whether the defendants’ retention of the interest accrued on
unclaimed property pursuant to §15 of the Act is an unconstitutional
taking of private property without compensation.”
Statutes are presumed constitutional, and we have the duty to
construe statutes so as to uphold their constitutionality if there is any
reasonable way to do so. O’Brien v. White, 219 Ill. 2d 86, 98 (2006).
The party challenging the validity of the statute has the burden of
rebutting the presumption of constitutionality by clearly demonstrating
a constitutional violation. Napleton v. Village of Hinsdale, 229 Ill. 2d
296, 306 (2008). The constitutionality of a statute is a question of law
that is reviewed de novo. O’Brien, 219 Ill. 2d at 98.
We note at the outset that no interpretation of the statute itself is
necessary. The language of the statute is plain; its meaning is clear.
With two exceptions not applicable here (for “unliquidated stock and
mutual funds”), the statute provides that the owner of property “paid
or delivered to the State Treasurer” pursuant to the provisions of the
Act “is not entitled to receive income” thereon. 765 ILCS 1025/15
(West 2004). Thus, the Act clearly divests the property owner of any
right to interest earned on property held by the state pursuant to the
authority of the Act. The question before us is whether the legislature
can, without running afoul of our state and federal constitutions, enact
a statute that divests neglectful proper owners of interest earned on
their property while it is committed to the custody of the state for
safekeeping. Applying the precedent and reasoning of the Supreme
Court in Texaco, we hold that it can.
At issue in Texaco was an Indiana statute that automatically
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divested the owner of a severed mineral interest of his or her right
thereto–returning it to the surface owner–where the subsurface owner,
for a period of 20 years, failed to use the interest or at least file a
statement of claim with the local recorder of deeds. After examining
its pertinent precedent, the Supreme Court rejected appellants’
contention that the State of Indiana lacked “the power to provide that
property rights of this character shall be extinguished if their owners
do not take the affirmative action required by the State.” Referring to
that precedent, the Supreme Court noted:
“In each case, the Court upheld the power of the State to
condition retention of a property right upon the performance
of an act within a limited period of time. In each instance, as
a result of the failure of the property owner to perform the
statutory condition, an interest in fee was deemed as a matter
of law to be abandoned and to lapse.” Texaco, 454 U.S. at
529, 70 L. Ed. 2d at 750-51, 102 S. Ct. at 792.
Having established that the states may enact statutes resulting in
the lapse or divestment of a neglectful owner’s rights in property, the
Court went on to hold that the state was not required to pay
compensation to such an owner:
“In ruling that private property may be deemed to be
abandoned and to lapse upon the failure of its owner to take
reasonable actions imposed by law, this Court has never
required the State to compensate the owner for the
consequences of his own neglect. *** It is the owner’s failure
to make any use of the property–and not the action of the
State–that causes the lapse of the property right; there is no
‘taking’ that requires compensation.” Texaco, 454 U.S. at
530, 70 L. Ed. 2d at 751-52, 102 S. Ct. at 792-93.
The Court went on to address appellants’ due process concerns,
observing, first, that appellants, like all other citizens, “may be
presumed to have had knowledge of the terms” of the Indiana statute.
Texaco, 454 U.S. at 533, 70 L. Ed. 2d at 753, 102 S. Ct. at 794. See
generally People v. Lander, 215 Ill. 2d 577, 588 (2005) (“It is well
settled that all citizens are charged with knowledge of the law”). The
Court pointed out that it was “essential to recognize the difference
between the self-executing feature of the statute and a subsequent
judicial determination that a particular lapse did in fact occur.”
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Texaco, 454 U.S. at 533, 70 L. Ed. 2d at 753-54, 102 S. Ct. at 794.
In that respect, the Supreme Court rejected appellants’ reliance upon
the seminal due process decision in Mullane v. Central Hanover Bank
& Trust Co., 339 U.S. 306, 94 L. Ed. 865, 70 S. Ct. 652 (1950)
(establishing requirements of notice and an opportunity to present
objections), concluding: “The reasoning in Mullane is applicable to a
judicial proceeding brought to determine whether a lapse of a mineral
estate did or did not occur, but not to the self-executing feature of the
Mineral Lapse Act. *** The Court in Mullane itself distinguished the
situation in which a State enacted a general rule of law governing the
abandonment of property.” Texaco, 454 U.S. at 535, 70 L. Ed. 2d at
754, 102 S. Ct. at 795.
We find the reasoning of Texaco dispositive in the matter before
us, for if a state legislature can constitutionally enact a statute that
divests a neglectful owner of all rights in certain property absent the
performance of specified activities evincing a continued and
possessory interest in the property over the prescribed statutory
period, then it logically follows that the legislature can,
constitutionally, take the less drastic measure of enacting a statute that
operates to divest those owners of only certain incidents of ownership,
without mandating divestiture of all rights in the property. That is
what the Illinois legislature has done here. As in Texaco, “[i]t is the
owner’s failure to make any use of the property–and not the action of
the State–that causes the lapse of the property right; there is no
‘taking’ that requires compensation.” Texaco, 454 U.S. at 530, 70 L.
Ed. 2d at 752, 102 S. Ct. at 792-93. The fact that the Illinois
legislature has taken a more benevolent attitude toward those who
neglect their property than it might have does not render its enactment
unconstitutional.
While the circumstances here might not qualify as “abandonment”
under a common law definition, there appears to be no question,
under Texaco, that the state could enact statutory provisions
mandating the status of abandonment in appropriate circumstances or
declaring the property interest lapsed in toto. Instead, using the phrase
“presumed abandoned” sparingly, more commonly simply
“abandoned,” the legislature has effectively declared only an incident
of ownership lapsed–the right to income earned–and has set up a
system that at least allows errant property owners a reasonable period
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of time in which to recover their tangible property, and an unlimited
period in which to recover its monetary equivalent. Pursuant to this
system–triggered at the outset by the owner’s neglect rather than
proactive state action aimed at seizing property from the vigilant–the
Treasurer is to receive custody of the neglected property and then is
required to assume, in apparent perpetuity, the responsibility of
safekeeping the property, or the proceeds from the sale thereof, for
any owners who may wish to reclaim their “abandoned” property. In
return for this seemingly advantageous, long-term reclamation service,
the state receives the benefit of retaining the interest earned from its
management of the property after it is placed in state custody.
Quoting in part from the Seventh Circuit Court of Appeals’
decision in Commonwealth Edison Co. v. Vega, 174 F.3d 870, 872
(7th Cir. 1999), this court, in Canel, described the state’s role and
attendant benefit under the Act as follows:
“ ‘[N]ot only does the state have free use of the property
unless and until the owner reclaims it; the state is not
required to (and Illinois does not) pay any interest to a
reclaiming owner. [Citations.] In effect, the property is an
interest-free loan to the state–in perpetuity if the owner
never shows up to claim it.’ Vega, 174 F.3d at 872.
See also Note, Virginia’s Acquisition of Unclaimed and
Abandoned Personal Property, 27 Wm. & Mary L. Rev. 409,
419-20 (1986) (noting three dual policies of the uniform law
including the protection of owners in order to reunite them
with their property while providing adopting states with a
method for raising revenue).” Canel, 212 Ill. 2d at 325.
In Canel, we held that the state did not have the right to dividends
issued on plaintiff’s shares of unliquidated stock while the stock was
in the possession of the state. We reached that result after a thorough
examination of the unique features of corporate ownership:
“The shares of a corporation are the units into which the
proprietary interests in a corporation are divided. 805 ILCS
5/1.80 (West 2000). The proprietary interests represented by
the shares of stock consist of management or control rights,
rights to earnings, and rights to assets. Stroh v. Blackhawk
Holding Corp., 48 Ill. 2d 471, 479 (1971); 11 Fletcher’s
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Cyclopedia of Private Corporations §5081 (rev. vol. 2003).
Once a dividend is declared, it becomes a corporate debt
owed to the shareholders in proportion to their shares in the
corporation, and, if the corporation refuses to pay, the
shareholders may sue to recover the unpaid dividend. 11
Fletcher’s Cyclopedia of Private Corporations §5322 (rev. vol.
2003). A lawfully declared dividend is the separate property
of the shareholders, wholly disconnected from their shares.
Ford v. Ford Manufacturing Co., 222 Ill. App. 76, 83 (1921).
Stated simply, a dividend belongs to the owner of the shares.
In this case that owner remained, at all times, the plaintiff,
James Canel.” Canel, 212 Ill. 2d at 323-24.
Given the attributes of stock ownership, and the circumstances of that
case, we held that the dividends issued to Canel by the corporation
while Canel’s stock was in the custody of the state remained Canel’s
separate property and the state had no right to retain it. The retention
thereof constituted a “taking” for which just compensation was due.
We thus remanded the cause to the circuit court for a determination
of just compensation. Canel, 212 Ill. 2d at 331-33.
However, we repeatedly and pointedly limited our analysis and
holding to the retention of dividends by the state:
“Because this case involves dividends accruing on unliquidated
stock, we confine our analysis of section 15 to only dividends
earned on shares of unliquidated stock held by the state
pursuant to the Act.” Canel, 212 Ill. 2d at 323.
“We stress that our opinion today is limited only to
dividends accruing on stock held by the state under the Act.”
Canel, 212 Ill. 2d at 333.
As our quotation of Vega suggested (see Canel, 212 Ill. 2d at 325),
and our cautionary comments on the reach of the decision portended,
we believe interest earned via state action on a corpus of money or
other forms of property in the custody of the state can and should be
treated differently from dividends automatically issued to the record
holder of stock while the latter is in the state’s possession prior to
liquidation.
First, section 15 of the Act specifies different treatment for
“income or other increments accruing *** on unliquidated stock and
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mutual funds.” 765 ILCS 1025/15 (West 2004). This legislative
distinction recognizes–as did the limitation of our holding in
Canel–the unique attributes and nature of those forms of corporate
ownership and investment. Second, as our analysis in Canel
acknowledges, dividends are separate property issued to the owner of
stock, as the owner, irrespective of any action on his or her part.
While stocks are in the Treasurer’s custody, prior to liquidation,
stocks remain the property of their owners, and any dividends issued
are issued to them as owners of record–automatically. No action is
required of either the owner or the state. The same is not true of
interest earned on sums of money coming into the Treasurer’s
possession pursuant to the provisions of the Act. Without state action,
the corpus earns nothing. Thus, there is a reasoned basis for treating
dividends and interest differently.
We reiterate, pursuant to the holding in Texaco, the Illinois
legislature has the authority–without violating our state or federal
constitutions–to declare property statutorily “abandoned” where the
owners have failed to show interest in the property through the
performance of specified acts over a prescribed period of time. By
such a declaration, our statute–self-executing as in Texaco–divests the
owner of only certain incidents of ownership–unlike the Indiana
statute at issue in Texaco–while the state provides safekeeping of the
corpus and reclamation services. Our statute effects what may be
described as limited lapse or divestment. There is no taking that would
require compensation.
We emphasize that this situation differs from those extant in cases
cited by plaintiffs in that this property was not wrested from a vigilant
and reluctant property owner, who was actively involved with its
oversight or management, and who disputed the appropriation at the
time of the alleged taking.
We also note in passing plaintiffs’ suggestion, in their reply brief,
that application of the principles accepted in Texaco might result in a
denial of due process in some case. Plaintiffs contend, “if the [third-
party] holder is later determined to have turned the property over to
the State by mistake” the Act “provides the owner with no mechanism
to challenge the loss of his property right, nor does it require the State
to prove the facts necessary to support the forfeiture.” Plaintiffs do
not argue that the third-party holders of their property turned it over
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to the state by mistake, or that the facts would not support limited
lapse of their property rights under the statute. Those observations,
considered in conjunction with the Texaco Court’s approval of the
“self-executing” feature of the Indiana statute there at issue, suggest
to us that plaintiffs lack standing to make that type of challenge to the
statute. See People v. Funches, 212 Ill. 2d 334, 346 (2004) (“A party
has standing to challenge the constitutionality of a statute only insofar
as it adversely impacts his or her own rights”). Even if this were not
the case, plaintiffs fail to address notification (765 ILCS 1025/12
(West 2004)), claims (765 ILCS 1025/19, 20 (West 2004)), and
review (765 ILCS 1025/21 (West 2004)) provisions of the Act itself,
and of the Code of Civil Procedure generally, to explain why those
provisions are inadequate to provide procedural due process to those
who fall within the purview of the Act. As our appellate court has
aptly observed, a court of review is entitled to have the issues on
appeal clearly defined with pertinent authority cited and reasoned,
cohesive legal argument. First National Bank of LaGrange v. Lowrey,
375 Ill. App. 3d 181, 208 (2007). An issue not clearly defined and
sufficiently presented fails to satisfy the requirements of Supreme
Court Rule 341(h)(7) (210 Ill. 2d R. 341(h)(7)).
For the foregoing reasons, given the facts of this case, we find that
no “taking” occurred when the state retained interest earned on
plaintiffs’ property held in its custody pursuant to the provisions of the
Act. In this respect, our holding is not entirely consistent with the
analysis of the appellate court, which was ambivalent on that point.
Nonetheless, we may affirm on any basis supported by the record
(People v. Durr, 215 Ill. 2d 283, 296 (2005)), and we agree with the
result reached by the appellate court. Thus, the judgment of the
appellate court is affirmed.
Affirmed.
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