Opinion
No. 01 Civ. 3675
July 7, 2002
Michael M. Yi, Yi Tuan Brunstein, New York, NY, for Plaintiff.
Joseph A. Vogel, Kravet Vogel LLP, New York, NY, for Defendant.
OPINION AND ORDER
Plaintiff Soo Young Han commenced this action seeking a declaratory judgment under New York Abandoned Property Law that (1) the funds against which certain checks issued by Defendant Standard Chartered Bank constitute abandoned property, (2) Defendant was required to turn those funds over to the State of New York, and (3) the funds are to be paid by Defendant to Plaintiff. Defendant now moves for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, and seeks dismissal of the Complaint. Defendant's motion is granted.
Facts
Taking the allegations contained in the Complaint as true, Plaintiff is the owner of thirty bank checks that were issued by The Chartered Bank (predecessor to Defendant Standard Chartered Bank) in London, England, in 1967 and 1968. The checks, which total $250,000, were originally made payable to either a "Dennis Gilbert" or a "Paul Morgan" and were drawn upon The Chartered Bank's own account at a New York branch which is no longer in existence. The checks were subsequently assigned to Young Joon Park. In or about 1995, Park, Plaintiff's then father-in-law, caused these checks to be assigned to Plaintiff as part of a divorce settlement between Plaintiff and Park's son.
In February 1999, Plaintiff deposited one of the checks into her checking account in Boston. The check was returned to the bank unpaid by Defendant for the reason of "stale date." After contacting Defendant directly, Plaintiff was informed that because the checks were not presented within five years from the date of issue, the funds against which they were drawn would have been deemed abandoned property under New York law and escheated to the state. However, after filing a claim with the New York State Office of Unclaimed Funds, Plaintiff was informed that the state was not holding any of the said funds. Following unsuccessful attempts to resolve the matter with Defendant, Plaintiff commenced this action on April 17, 2001, seeking declaratory judgment in the Supreme Court of the State of New York. Defendant thereafter removed the case to this Court.
Discussion
As recognized by the Second Circuit:
"In deciding a Rule 12(c) motion, we apply the same standard as that applicable to a motion under Rule 12(b)(6), accepting the allegations contained in the complaint as true and drawing all reasonable inferences in favor of the nonmoving party." [Burnette v. Carothers, 192 F.3d 52, 56 (2d Cir. 1999)]; see also Sheppard v. Beerman, 94 F.3d 823, 827 (2d Cir. 1996). "We may dismiss the complaint only if 'it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Burnette, 192 F.3d at 56 (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).
D'Alessio v. New York Stock Exchange, Inc., 258 F.3d 93, 99 (2d Cir. 2001) Accordingly, judgment is appropriate if, based on the pleadings, the moving party is entitled to judgment as a matter of law. Burns Intern. Sec. Services, Inc. v. International Union, United Plant Guard Workers of America (UPGWA) and Its Local 537, 47 F.3d 14, 16 (2d Cir. 1995).
Plaintiff brings this case under New York Abandoned Property Law. That statute states that it is the policy of the state, "while protecting the interests of the owners thereof, to utilize escheated lands and unclaimed property for the benefit of all the people of the state." N.Y. Aband. Prop. L. § 102 (McKinney's 1943). This policy was declared in the 1943 modifications to the law and marked a shift from a policy of confiscation to one of custodial protection. In re Menschefrend's Estate, 128 N.Y.S.2d 738, 744 (1st Dep't 1954). The statute contains specific provisions for what constitutes abandoned property and how it should be managed. Article III of the statute contains rules for unclaimed property held or owing by banking organizations, and § 300(1)(c), upon which Plaintiff relies, states that abandoned property includes "any amount held or owing by a banking organization for the payment of a negotiable instrument under article three of the uniform commercial code. . . ." Assuming that Defendant is a "banking organization," see infra, the cashier's checks are negotiable instruments under Article 3 of the Uniform Commercial Code. See Kaiser-Georgetown Community Health Plan, Inc. v. Bankers Trust Co. of Albany, N. A., 442 N.Y.S.2d 48, 50 (N.Y.Sup.Ct. 1981).
Plaintiff's basic assertion is that Defendant should have treated the funds as abandoned property and turned them over to the state comptroller. Defendant argues that it should prevail as a matter of law because Plaintiff's claims are barred by the statute of limitations and, alternatively, because New York Abandoned Property Law is inapplicable to this case both because it does not create a private right of action and because Defendant was not a "banking organization" during the period in question.
I. Statute of Limitations
According to Defendant, the statute of limitations has expired because cases involving payment of cashier's checks must be brought within six years from the date of issuance (either under the limitation applicable to contractual obligations, N.Y. C.P.L.R. § 213(2), or the catch-all limitation, N.Y. C.P.L.R. § 213(1)). Plaintiff does not contest these specific conclusions. In fact, Plaintiff admits that "[i]f plaintiff had sued [Defendant] seeking solely to enforce the payment of the checks in issue, such claim would be barred by the applicable statute of limitations." (Pl.'s Response at 4, n. 4). Plaintiff does claim, however, that the statute of limitations is inapplicable because this is a declaratory judgment action under the New York Abandoned Property Law.
In order to facilitate the designation and management of certain funds or property as abandoned property, the law suspends applicable statutes of limitation. Section 1400 of the Abandoned Property Law states:
§ 1400. Statutes of limitations not a bar
The expiration of any period of time specified by law, during which an action or proceeding may be commenced or enforced to secure payment of a claim for money or recovery of property, shall not prevent any such money or property from being deemed abandoned property, nor affect any duty to file a report required by this chapter or to pay or deliver to the state comptroller any such abandoned property; and shall not serve as a defense in any action or proceeding by or on behalf of the state comptroller to compel the filing of any report or the payment or delivery of any abandoned property required by this chapter or to enforce or collect any penalty provided by this chapter.
N.Y. Aband. Prop. Law § 1400 (emphasis added).
Accordingly, Plaintiff argues that the statute of limitations is not a bar because the Complaint seeks a declaratory judgment regarding the status of the funds as opposed to enforcement of payment. Specifically, the Complaint seeks judgment "(a) declaring that the funds . . . were abandoned property" and "(b) declaring that [the law] required [Defendant] to escheat such funds to the State of New York." However, Plaintiff's argument fails to mention that the Complaint also seeks judgment "(c) declaring that such funds be decreed to be paid by [Defendant] to plaintiff, with interest to the time of payment." (See Complaint at 3.)
Plaintiff cannot benefit from the § 1400 bar with respect to "(c)", the third prayer for declaratory relief. As admitted by Plaintiff, "[i]f plaintiff had sued [Defendant] seeking solely to enforce the payment of the checks in issue, such claim would be barred by the applicable statute of limitations." (Pl.'s Response at 4, n. 4). The particular relief sought in (c), though couched in the language of a declaratory judgment action, is effectively an artfully pled request for enforcement of payment. Even if treated as declaratory relief, it falls outside of the scope of § 1400 because it goes beyond having the funds "deemed abandoned property." Accordingly, it would be barred by the same six-year statute of limitations applicable to an action for enforcement. See Town of Orangetown v. Gorsuch, 718 F.2d 29, 42 (2d Cir. 1983) ("New York law requires its courts to look to the substance of the claim to determine which statute of limitations applies. If this examination reveals that a claim for declaratory relief could have been resolved through another form of action which has a specific limitations period, the specific period of time will govern.").
Plaintiff similarly cannot benefit from the § 1400 bar with respect to "(a)" and "(b)." The § 1400 bar does not activate until the property escheats to the state. Until Defendant turns over the funds to the state, the relationship between Plaintiff and Defendant remains that of creditor and debtor and the ordinary statute of limitations applies. It is only when the funds escheat to the state that the bar of the statute of limitations is removed. See In Re Application of New York University, 63 N.Y.S.2d 556, 557-58 (3rd Dep't 1946). Accordingly, Plaintiff cannot avail herself of § 1400 because the funds have not been turned over to the state.
II. Private Right of Action
In addition to being barred by the statute of limitations, the Complaint must also be dismissed because the New York Abandoned Property Law does not create a private right of action for Plaintiff, either expressly or by implication. Where a statute does not make express provision for a particular type of claim, relief can be granted only if a private right of action may be fairly implied. Sheehy v. Bio Flats Community Day, Inc., 543 N.Y.S.2d 18, 20 (N.Y. 1989). Here, the statute does not expressly provide that a purported owner of funds may proceed with an action against a banking organization to have the funds deemed abandoned property. Accordingly, a private right of action will exist only if (1) "the plaintiff is one of the class for whose particular benefit the statute was enacted", (2) "a private right of action would promote the legislative purpose," and (3) the "creation of such a right would be consistent with the legislative scheme." Id.
The first two criteria have arguably been met. As stated above, it is the policy of the state to protect the interests of the owners of property. N.Y. Aband. Prop. L. § 102. Plaintiff is such an owner whose interests the state seeks to protect, and allowing Plaintiff a private right of action would aid in the protection of such interests. See id. at 21.
Finding that Plaintiff has a private right of action would not, however, be consistent with the legislative scheme. See id. at 21. To allow Plaintiff a private right of action would ignore the statute's procedural system for the treatment of abandoned property. In the case of funds held by banking organizations, banks are required to submit to the state comptroller an annual report of abandoned property (N.Y. Aband. Prop. L. § 301), publish a list of abandoned property (N.Y. Aband. Prop. L. § 302), and pay such abandoned property to the state comptroller (N.Y. Aband. Prop. L. § 302). If the bank has paid to the state comptroller abandoned property held or owing for the payment of negotiable instruments, and individuals holding such instruments later seek payment from the bank, the bank may pay the individuals and thereafter be reimbursed by the state for the amount previously paid to the comptroller. See N.Y. Aband. Prop. L. § 306. Where the bank has not reported on or delivered abandoned property to the comptroller, the statute instructs the state comptroller to request payment and certify the amount due as abandoned property. See N.Y. Aband. Prop. L. § 1412(3). Following this, the state comptroller may initiate a special court proceeding for a judgment directing payment to the state comptroller. See N.Y. Aband. Prop. L. § 1412(4). Once the state is in possession of the abandoned property, individuals seeking the return of such property may file claims with the state comptroller, who has "full and complete authority to determine all such claims." N.Y. Aband. Prop. L. § 1406(1)(a), (b). The final determination of such a claim by the state comptroller may be reviewed on application to the Supreme Court, Albany county. See N.Y. Aband. Prop. L. § 1406(1)(a).
To infer a private right of action for Plaintiff would be to disregard the specific procedures outlined by the state legislature and the authority given to the state comptroller. Not surprisingly, the Court has found no authority in which a non-state party has sued an entity for failing to treat funds as abandoned property. See Klein v. North Side Savings Bank, 264 N.Y.S.2d 131 (N.Y.App.Div. 1965) (action for damages against bank for treating funds in account as abandoned property and turning funds over to the state comptroller). In fact, in one case between two non-state parties over unclaimed ticket proceeds, the court, upon realizing that the funds in dispute may constitute abandoned property, instructed the parties to serve the state with pleadings and motion papers. See Presley v. County of Nassau, 560 N.Y.S.2d 173, 174 (N.Y.Sup.Ct. 1990), aff'd, 591 N.Y.S.2d 72 (2nd Dep't 1992). The state was added as a party pursuant to N.Y.C.P.L.R. § 1003 and the court ultimately determined that the funds should be paid to the state as abandoned property.
III. Inapplicability of Abandoned Property Law to Defendant
Lastly, even if the § 1400 exception did apply and a private right of action did exist, Defendant claims that it should prevail because the substantive requirement in § 300 to report and deliver abandoned property does not apply to Defendant because it was not a "banking organization" when the checks allegedly became abandoned property.
As noted, the requirement under Article III of the statute applies to funds held by "banking organizations." Prior to 1992, § 300(4) stated that "banking organizations" included "the New York agency or agencies of all foreign banking corporations." Defendant asserts that it was a "branch" and not an "agency" in 1972 and 1973. It was not until 1992 that the statute was amended so that the definition included "the New York branch or branches" of foreign banking organizations in addition to agencies. Defendant claims that because it was and is a branch of a foreign bank, it was not required to report and pay the funds to the state when they would have otherwise become abandoned property in 1972 and 1973.
While the Court need not reach this argument, it is noted that there is a presumption against retroactivity and there is no evidence of a legislative intent to apply the 1992 amendment retroactively. See Travelers Exp. Co., Inc. v. Regan, 498 N.Y.S.2d 569, 570 (3rd Dep't 1986) (applying a different provision of the Abandoned Property Law retroactively where the statute contains specific dates which predated the activity in question); Compare § 300(1)(a) (not containing specific dates) with § 300(1)(e) (dealing with security dividends received after June 13, 1940).
Conclusion
For the foregoing reasons, Defendant's motion is granted. The Complaint is dismissed with prejudice.
SO ORDERED.