Untitled Texas Attorney General Opinion ( 1962 )

AUSTIN ai.TEXAS
3VII.L WI-N
*TroRNrIcY OENERAL
January 2, 1962
Mr. Jesse James Opinion No. WW- 1232
State Treasurer
Austin, Texas Re: Whether the provisions of
Art. 3272a, V.C.S., re-
quire the reporting of
property In the form of
Indebtedness upon which
the statutes of limitations
Dear Mr. James: has run.
The subject upon which you seek our advice is whether
Article 3272a, V.C.S., originating in House Bill No. 5, Acts
57th Legislature, First Called Session, 1961, Chapter 21, page
25, requires the reporting of Indebtedness against which a
statute of limitations has run.
The question of the effect of statutes of limitation on
escheat is one of first impression in Texas. It has, however,'
produced a plethora of litigation In other jurisdictions. And,
these decisions reveal a wide divergency of opinion. Be that
as It may, our lodestar must be the law of Texas.
Article 3272a, V.C.S., requires the reporting of "personal
property subject to escheat" to the State Treasurer. Section 1
(b) of the statute defines "personal property" as follows:
"The term 'personal property' includes, but
Is not limited to money, stocks, bonds and
other securities, bills of exchange, claims
for money or indebtedness and other wm
evidences of Indebtedness, dividends, de-
posits, accrued interest, purchase payments,
sums payable on certified checks, certificates
of membership in a corporation or association,
amounts due and payable under the terms of any
insurance policy, security deposits, unclaim-
ed 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,
Mr. Jesse James, page 2 (WW-1232)
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 bene-
ficiary whose last known residence was
in this State". (Rnphasis Su,pplied).
Our statute makes no ex,pressreference to the effect
statutes of limitation shall have for purposes of reporting
or for purposes of declaring an escheat. This, incidentally,
is In contrast to the escheat statutes of a number of states
where It is provided that the statutes of limitation shall be'
inapplicable to the escheat process. See Cal. Code Civ. Proc.
Sec. 1515~; Del. Code Ann. tit. 12 Sec.
Mlch. State Ann. Sec. 26, 1053 (59) (1953
27, Sets. 261, 446, 473, 376, (Supp. 1953 see Uniform
Disposition of Unclaimed Property Act, Sec. 16.
A statute will be construed with reference to the entire
body of law existing at the time of its enactment. It will be
construed with reference to the general system of legislation of
which it forms a part. 39 Tex. Jur. 252, Statute, Sec. 134.
Therefore, in order to arrive at the legislative intent in this
instance, it is appropriate to take cognizance of the effect
statutes of limitation generally have on debts under the law of
this State. It is the settled law of Texas that:
(1) A statute of limitation does not extinguish
the debt but may extinguish the remedy: a moral obligation
remains although'the legal remedy is'barred ifttie statute Is
plead. Dallas v. EtheridgFi ;;',Tex. 9, 253 S.W. 2d 640'(1952);
Marathon Oil Co. v. Gulf 0 P. 130 S.W. 2d 365 (Clv. App. ~'
1939)modified:i. 2d 711; McDaniel v.'Willis,
157 S.W.2d 672 (Civ.App. 1941); Orndoff v. State, 108 S W 2d IO8
(Civ.App. 1937, error ref.); Central National Rank'v. Lath& &
Company, 22 S.W.2d 765 (Civ.App. 1929, error ref.).
(2) The defense of bar by limitations is not avail-
able unless it is properly, timely and affirmatively pleaded as
and is waived unless duly
Commissioners,
Mr. Jesse James, page 3 (W'W-1232)
Mlnneapolis'Moline Power Co., 86 S.W.2d'835 (Civ.App. 1935,
error ref.). Grayburg~Oil~Company v. Corpus Christi Gas Company,
69 S.W.2d 2i6 (Civ.App. 1934); 28 Tex. Jur. 285, Limitation of
Actions, Sec. 191.
(3) The defense of bar by limitations Is a personal
privilege of the debtor and cannot be asserted by one who does
not owe the debt, or Is not a successor to the right or title
of the property involved, or is not a lien holder, or who does'
not In some manner have a proprietary interest In the pro erty.
Kiel v. Staber, 116 S.W.2d 809 (Clv.App. 1938, error ref. ; In
Dallas Levee ImprovemeWn;dM;trict 63 F. Supp. 342 (1945P ; -
izhnson v Snsman, 76 S . B 4 (Clv.App. 1934, error ref.);
National Life & Accident Insurance Compan v. Hines, 50 S.W.2d
364 (1932) 28 Tex. Jur. 97, Limitation ofYActions, Sec. 20.
(4) The running of a statute of limitations is sus-
pended during the period the creditor is under certain disabilities,
such as absence from the state, Imprisonment, minority/death,
coverture, Insanity. Articles 5535, 5537, 5538, V.C.S.
(5) The debtor may be estopped from Invoking the
defense of bar by limitations where'such person has been guilty
of
-- fraud. misrepresentation,
-----> ----- duress, undue Influence or other
nduct which has prevented the filing of an action
tCiv.Abb. 1950);
In view of the foregoing principles of law, the leglsla-
ture would not in reason have Intended to exclude Indebtedness on
which the period of limitation has expired from the reporting re-
quirements of the statute. The mere statement of these rules
highlights in bold relief the mischief which would flow from a
ruling to the contrary. To say that such debts are not to be re-
ported would be to place the holder of such Indebtedness in the
position, not only of judge and jury, but of clairvoyant as well.
It would ignore the following lncontrovertable facts: (1) the
debtor, even If the holder and debtor be one and the same, might
Mr. Jesse James, page 4 (ww-1232)
or might not later waive the plea by agreement; (2) the debtor
might or might not later assert the plea In court; (3) the
debtor might or might not make the.plea in a timely-and proper
manner, if and when an action is ever commenced to collect the
debt by escheat; (4) the rightful owners of the pro,pertymight
or might not appear and claim the debt in answer to the notices
that are posted following the report; (5) there might or might
not be a plea of disability on the part of the creditor which
would remove the bar; (6) a court and/or jury might or might
not agree that the facts support the defense of bar by limitations.
The holder cannot possibly know to a certainty whether
the defense of limitations on a given debt will ever be made
and, if made, sustained by a court. In this State, the bar by
limitations is, In effect, non-existent unless and until made
In court. The defense amounts to no defense unlessit is made'
at the proper time and In the proper manner. 'It is, of course,
the function of the judge, and not the debtor, to pass on these
questions, and even the judge cannot do so until the matter comes
before him In an action on the debt In court. The debt remains
an Indebtedness for all purposes until, if ever, the plea by
limitations Is made and sustained In court. Until that time It
cannot be known whether the plea Is waived and, if not waived,
whether it Is overcome by other evidence of disability or fraud,
misrepresentation, duress or some other form of Inequitable con-
duct on the part of the debtor.
We cannot believe that the legislature was attempting
In Article 3272a, V.C.S., to award a debtor the benefit of the
defense of llmltatlons without requiring him to make and prove
such plea In accordance with the law as it has heretofore existed
In this State.
Further, If the statute be interpreted so as to confer
the defense of limitations on a debtor before he has claimed
and established It by the law as we have hitherto known It,
such fact would likely render Article 3272a unconstitutional
on the ground that it attempts to amend other statutes and
creates new legal rights and liabilities without giving due
notice thereof in the caption of the act, in violation of
Section 35, Article III of the Constitution of Texas. If an
act Is fairly susceptable of two constructions, under.one of
which It would be constitutional and under the other of which
It would be unconstitutional, the former must prevail. 39 Tex.
Jur. 207, Statutes, Sec. 3.
There Is yet another doctrine In this area of the law
of which we must take notice. In Texas, when a cause of action
Mr. Jesse James, page 5 (w-1232)
has become barred by a statute of limitations, the party in
whose favor the statute has run acquires a vested right to
rely on the defense of bar by limitations, a right which can:
not be divested by the legislature In subsequent legislation.
This right is protected from legislative impairment insection
19, Article I, of the Constitution of Texas. Wilson v. Work,
the act of reporting personal property subject to escheat and
on which the period of limitations has run, does not give the
state the property, nor in any manner force the debtor to waive
his defense of bar by limitations. His time to interpose the
defense will come If and when the property Is sought to be
declared escheated to the State.
We do not wish to be understood as ruling that the de-
fense of limitations Is or 1s not a defense In an action by
the State of Texas to have personal property declared escheated
to the State. That questlon'ls not before us. We make a
distinction between personal property which Is required to be
reported and personal property which is actually escheatable.
Viewing the statute In Its entirety, one cannot help
but see that the reporting of personal property to the State
ls'not the equivalent of escheatlng the property to the State.
Such property Is far from being Ipso facto escheated to the
State upon the filing of the report. The fact that the proper-
ty Is "personal property subject to escheat", as defined In our
statute, and, therefore, required to be reported, does not mean
that it will be declared escheated to the State.
Under Article 3272a, after the reports of debts and
other personal property "subject to escheat" are received by
the State Treasurer, notices are posted so that anyone who
wishes to make a claim to the property may appear and do so.
If no claim is made within a certain time the property Is then,
and only then, deemed abandoned and reported to the Attorney
General for the purpose of Instituting a suit to the end of
escheating and vesting title in the State of Texas. The State
does not become the owner of the property except by virtue Of
a judgment of a court in a suit for such purpose. Between the
time the property is reported and the time such suit Is commenced
Mr. Jesse James, page 6 (WW-1232)
the rightful owners may appear on the scene to assert a valid
claim which removes the necessity of a suit to escheat the
property. In short, the legislature obviously viewed the re-
porting of the property and the escheat of the property as
two different things. Therefore, the requiring of the reporting
of debts against which a period of limitations has run does not
repeal or amend the applicable statutes of limitations and does
not revive a cause of action which has been barred by the statute
of limitations. Neither can it be said that the reporting takes
property without due process of law. The ,propertydoes not
leave the possession of the holder by virtue of the reporting.
:; ;z,;; ever removed it Is in consequence of a later proceeding
.
It should be borne In mind that statutes such as the
one in question are not solely for the benefit of the state.
They are for the benefit of the unknown claimants of the
property as well. Their object Is to promote the discovery
of the rightful owners of such property and to protect such
property from deterioration and dissipation for the owner should
he eventually appear. 61 Col. Law Rev. 1330, Origins and Develop-
ment of Modern Escheat, (Nov. 1961). The emergency clause of
House Bill No. 5 recites that the "present laws providing for
the protection of abandoned property and the location of unknown
owners and missing helrs...are inadequate". The provisions of
the statute for posting of notices and service by publication
on the unknown claimants reflect a legislative Intention to
find the rightful owners. And the provisions for the maintenance
of a fund from which the rightful owners may later obtain relm-
bursement confirms this Intention. The statute, In brief, dls-
closes a design to get certain personal property out In the
open where those who might have a claim to It can make their
claim for whatever It may be worth. The view we take of this
statute is in harmony with this manifest legislative design
and, hence, is In consonance with the accepted rule of statutory
interpretation whereby enactments are construed, If possible,
so as to carry out their purpose.
The State Treasurer Is authorized by Section 12 of
Article 3272a to make necessary rules and regulations to carry
out the provisions of the statute. Pursuant to this power, he
may, of course, prescribe the forms and details of reporting
under the statute.
5438
Mr. Jesse James, page 7 (WW-1232)
SUMMARY
Article 3272a, V.C.S., requires the reporting
of indebtedness against which a statute of limitations
has run.
Very truly yours,
WILL WILSON
Attorney General of Texas
APPROVED:
OPINION COMMITTEE
W. V. Geppert, Chairman
Vernon Teofan
Bob Shannon
John Reeves
Linward Shivers
REVIEWED FOR THE ATTORNEY GENERAL
BY: Houghton Brownlee, Jr.