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In re Escheatment of Matured, Unredeemed, and Unclaimed United States Savings Bonds

Commonwealth Court of Pennsylvania

June 26, 2018

In Re: Escheatment of Matured, Unredeemed, and Unclaimed United States Savings Bonds with Purchasers' Addresses in the Commonwealth of Pennsylvania Petition of: Pennsylvania State Treasurer, Joseph M. Torsella

          Argued: April 10, 2018

          BEFORE: HONORABLE ANNE E. COVEY, Judge, HONORABLE MICHAEL H. WOJCIK, Judge, HONORABLE JAMES GARDNER COLINS, Senior Judge.

          OPINION

          ANNE E. COVEY, Judge.

         Before this Court is the Pennsylvania State Treasurer, Joseph M. Torsella's (Treasurer) Application for Leave to Effect Service by Publication (Application) of the Treasurer's Amended Complaint (Complaint).[1] The Treasurer filed the Complaint in this Court's original jurisdiction seeking to obtain legal title to certain matured, unredeemed and unclaimed United States (U.S.) savings bonds (Bonds) by way of a valid escheatment proceeding pursuant to Section 1301.10b of The Fiscal Code (Code).[2]

         FACTUAL BACKGROUND

         In the Complaint, the Treasurer avers that he is seeking to obtain legal title to the following matured, unredeemed and unclaimed Bonds pursuant to Section 1301.10b of the Code:

12.A vast majority of the matured, unredeemed [Bonds] are Series 'E' bonds, which were first sold in 1941. Nearly 4.6 billion Series E bonds were sold in this country between 1941 and 1980. Between 1941 and November 30, 1965, Series E bonds were sold with 40-year terms. Between December 1965 and June 30, 1980, they carried 30-year terms. The last Series E bond was issued in 1980, and all such bonds had reached maturity by June 30, 2010.
13. Series A-D bonds were sold from March 1, 1935, through April 30, 1941. Series A-D bonds were sold with 10-year terms. The last of these bonds was issued in 1941, and all such bonds had reached maturity by April 30, 1951.
14. Series F and G bonds were sold from May 1, 1941, through April 30, 1952. Series F and G bonds were sold with 12-year terms. The last of these bonds was issued in 1952, and all such bonds had reached maturity by April 30, 1964.
15. Series H bonds were sold from June 1, 1952, through December 31, 1979. Between June 1, 1952 and January 31, 1957, Series H bonds were sold with terms of 29 years and 8 months. Between February 1, 1957 and December 31, 1979, they carried 30-year terms. The last Series H bond was issued in 1979, and all such bonds had reached maturity by December 31, 2009.
16. Series J and K bonds were sold from May 1, 1952, through April 30, 1957. Series J and K bonds were sold with a term of 12 years. The last of these bonds was issued in 1957, and all such bonds had reached maturity by April 30, 1969.
17. Series EE bonds were first sold in January 1980 and continue to be sold through the present. Series EE bonds were originally sold with different terms but all Series EE bonds earn interest for up to 30 years. The first Series EE bond reached final maturity in January 2010.
18. Series HH bonds were sold from January 1, 1980, through August 31, 2004. Series HH bonds were sold with 20-year terms. The first Series HH bond reached final maturity and ceased earning interest in January 2000.

Complaint ¶¶ 12-18; see also Application ¶ 2.

         Further, the Treasurer stated in his Application that the Bond purchasers/owners had last known addresses in the Commonwealth 26 to 79 years ago. See Application ¶ 7.

The only information currently available to the Treasurer regarding the identities and addresses of the current owners of the [Bonds] delivered to the Treasurer's office consists of the names and last known addresses of safe deposit box owners and the information on the face of the [B]onds included among the safe deposit box contents delivered to the Treasurer's office pursuant to [Sections 1301.3(4) and 1301.13 of the Code, [3] 72 P.S. §§ 1301.3(4) and 1301.13 [(relating to delivery of abandoned or unclaimed property subject to the Commonwealth's custody and control)]. Each of the [Bonds], however, has remained unclaimed for at least six years after final maturity, and even the most recent of the [B]onds delivered to the Treasurer were issued in 1991. Accordingly, the information is outdated or generally no longer accurate. In many, if not most, cases, these [B]onds will likely have passed by inheritance or to persons other than the original owner.

Application ¶ 6.

         Despite the Treasurer's efforts to locate the Bonds' owners or their heirs, the age of the Bonds as well as the deaths and relocations of their owners have resulted in many of the Bonds and, consequently, approximately $840 million, remaining unclaimed. Some of the Bonds have been repossessed by the U.S. Treasury, which has not attempted to locate the Bonds' owners or their heirs and refuses to supply information it possesses that may assist the Treasurer in locating them. Accordingly, unless an owner or heir has reason to know that the Treasurer or the U.S. Treasury possesses the Bonds, they will remain unclaimed in perpetuity. The Treasurer's purpose in taking ownership of the Bonds is so the Treasurer has more than a mere custodial interest in them, with the ultimate goal of reuniting the Bonds' proceeds with their owners or their heirs.[4]

         LEGAL BACKGROUND

         Initially, Section 1301.2(a) of the Code[5] provides that "[a]ll abandoned and unclaimed property . . . is subject to the custody and control of the Commonwealth[.]" 72 P.S. § 1301.2(a). In 2016, the General Assembly enacted Section 1301.10b of the Code to specifically address U.S. savings bonds, therein declaring:

It is the intent of the General Assembly to allow the [Treasurer] to obtain possession of unredeemed and unclaimed [U.S.] savings bonds on behalf of residents of this Commonwealth but held by the [f]ederal [g]overnment to permit and facilitate the right of Pennsylvania bond holders to be reunited with the bond holders' [U.S.] savings bonds proceeds.

72 P.S. § 1301.10b(a). Section 1301.10b(c) of the Code states, in relevant part:

Notwithstanding any law to the contrary, [U.S.] savings bonds that are unclaimed property pursuant to [S]ection 1301.10[.1] [of the Code] shall escheat to the Commonwealth three (3) years after becoming unclaimed property by virtue of the provisions of [S]ection 1301.2 [of the Code]. All property rights and legal title to and ownership of [U.S.] savings bonds or proceeds from the bonds, including all rights, powers and privileges of survivorship of any owner, co-owner or beneficiary, shall vest solely in the Commonwealth according to procedures set forth in subsections (d) [(relating to civil action commencement)], (e) [(relating to service by publication)], (f) [(relating to escheatment judgment)], (g) [(relating to the Commonwealth's redemption process)] and (h) [(relating to the Commonwealth's duty to pay future claims)].

72 P.S. § 1301.10b(c). Despite that title to the U.S. savings bonds will be vested solely in the Commonwealth upon escheatment, Section 1301.10b(h) of the Code expressly preserves the owners/heirs' rights to claim their proceeds at any future time without limitation.[6] See Treasurer 2/22/18 Supp. Br. at 12.

         To undertake a U.S. savings bond escheatment action, Section 1301.10b(d) of the Code specifies:

Within one hundred eighty (180) days after becoming reportable as unclaimed property pursuant to [S]ection 1301.10[.1] [of the Code], if no claim has been filed in accordance with the provisions of [S]ection 1301.19 [of the Code] for a [U.S.] savings bond, the [Treasurer] may commence a civil action in Commonwealth Court for a determination that the [U.S.] savings bond shall escheat to the Commonwealth. . . .

72 P.S. § 1301.10b(d). Section 1301.10b(e) of the Code further directs:

The [Treasurer] shall make service by publication of the proceeding in accordance with [Pennsylvania Rule of Civil Procedure] No. [(Rule)] 430 (relating to Service Pursuant to Special Order of Court. Publication). In addition, the notice shall name any known owner, co-owner or beneficiary to be served and notify the person that:
1. the person has been sued in Commonwealth Court;
2. the person shall answer the petition or other pleading or otherwise defend, on or before a specified date, not less than forty-one (41) days after the date the notice is first published; [and]
3. if the person does not answer or otherwise respond, the petition or other pleading shall be taken as true, and judgment, the nature of which shall be stated, shall be rendered accordingly.

72 P.S. § 1301.10b(e) (emphasis added).

         Rule 430(a) mandates:

If service cannot be made under the applicable rule[, ] the plaintiff may move the court for a special order directing the method of service. The motion shall be accompanied by an affidavit stating the nature and extent of the investigation which has been made to determine the whereabouts of the defendant and the reasons why service cannot be made.

Pa.R.C.P. No. 430(a) (emphasis added). The Pennsylvania Superior Court has explained:

Due process of law requires an adequate investigation for interested parties. Courts have repeatedly expressed the importance of proper service of process. 'Service of process by publication is an extraordinary measure and great pains should be taken to ensure that the defendant will receive actual notice of the action against him.' Fusco v. Hill Fin. Sav. Ass'n, . . . 683 A.2d 677, 680 ([Pa. Super.] 1996). 'Due process, reduced to its most elemental component, requires notice.' PNC Bank, N.A. v. Unknown Heirs, 929 A.2d 219, 230 (Pa. Super. 2007). . . .
As our federal courts have observed: 'Service of process is not a mere technicality. Rather, constitutional due process requires that service of process be 'reasonably calculated, under all circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.'' Calabro v. Leiner, 464 F.Supp.2d 470, 471 (E.D. Pa. 2006) (quoting Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306 . . . (1950)). To this end, Rule 430(a) applies only where 'service cannot be made' in the normal fashion. Pa.R.C.P. No. 430(a) . . . .

Sisson v. Stanley, 109 A.3d 265, 270-71 (Pa. Super. 2015) (emphasis added and omitted).

         Rule 430(b) provides:

(1) If service of process by publication has been authorized by rule of civil procedure or order of court, the publication shall be by advertising a notice of the action once in the legal publication, if any, designated by the court for the publication of legal notices and in one newspaper of general circulation within the county. The publication shall contain the caption of the action and the names of the parties, state the nature of the action, and conclude with a notice substantially in the following form:[7]

         NOTICE

If you wish to defend, you must enter a written appearance personally or by attorney and file your defenses or objections in writing with the court. You are warned that if you fail to do so the case may proceed without you and a judgment may be entered against you without further notice for the relief requested by the plaintiff. You may lose money or property or other rights important to you.
YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW. THIS OFFICE CAN PROVIDE YOU WITH INFORMATION ABOUT HIRING A LAWYER.
IF YOU CANNOT AFFORD TO HIRE A LAWYER, THIS OFFICE MAY BE ABLE TO PROVIDE YOU WITH INFORMATION ABOUT AGENCIES THAT MAY OFFER LEGAL SERVICES TO ELIGIBLE PERSONS AT A REDUCED FEE OR NO FEE.
(NAME) (ADDRESS) (TELEPHONE NUMBER)
Note: The office shall be that designated by the court under Rule 1018.1(c) [(relating to the form notice to defend)].
(2) When service is made by publication upon the heirs and assigns of a named former owner or party in interest, the court may permit publication against the heirs or assigns generally if it is set forth in the complaint or an affidavit that they are unknown.

Pa.R.C.P. No. 430(b) (bold text emphasis added). Finally, Pennsylvania Rule of Appellate Procedure (Appellate Rule) 3709 mandates:

Whenever a matter . . . is brought before the Commonwealth Court within its original jurisdiction, the following names and related information shall be included in the notice to defend set forth in the complaint pursuant to [Rule] 1018.1:
MidPenn Legal Services 213-A North Front Street Harrisburg, Pennsylvania 17101 (717) 232-0581
and
Dauphin County Lawyer Referral Service Dauphin County Bar Association 213 North Front Street Harrisburg, ...

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