Timothy Hall, Jr. v. State of Minnesota , 890 N.W.2d 728 ( 2017 )

STATE OF MINNESOTA
IN COURT OF APPEALS
A16-0874
Timothy Hall, Jr., et al.,
Respondents,
vs.
State of Minnesota, et al.,
Appellants
Filed January 23, 2017
Reversed and remanded
Worke, Judge
Ramsey County District Court
File No. 62-CV-15-2112
Daniel C. Hedlund, Daniel E. Gustafson, Joseph C. Bourne, Gustafson Gluek PLLC,
Minneapolis, Minnesota; and
Vildan A. Teske, Phillip M. Kitzer, Brian T. Rochel, Teske, Micko, Katz, Kitzer & Rochel,
PLLP, Minneapolis, Minnesota; and
J. Gordon Rudd, Jr., David Cialkowski, Zimmerman Reed, PLLP, Minneapolis,
Minnesota; and
Patrick Michenfelder, Throndset Michenfelder, LLC, St. Michael, Minnesota; and
Garrett D. Blanchfield, Brant D. Penney, Reinhardt, Wendorf & Blanchfield, St. Paul,
Minnesota (attorneys for respondents)
Lori Swanson, Attorney General, Sarah L. Krans, Assistant Attorney General, St. Paul,
Minnesota (for appellants)
Considered and decided by Worke, Presiding Judge; Stauber, Judge; and Bratvold,
Judge.
SYLLABUS
The Minnesota Uniform Disposition of Unclaimed Property Act (MUPA), Minn.
Stat. §§ 345.31-.60 (2016), does not create an unconstitutional taking and satisfies
procedural due-process requirements.
OPINION
WORKE, Judge
This certified-question appeal under Minn. R. Civ. App. P. 103.03(i) arises from a
constitutional challenge to MUPA. Appellants, the State of Minnesota and its
commissioner of commerce, urge us to answer the district court’s certified question as to
whether MUPA creates an unconstitutional taking in the negative, and answer the district
court’s certified question as to whether MUPA meets procedural due-process requirements
in the affirmative. We agree with appellants and reverse and remand.
FACTS
In 2011, respondent Timothy Hall Jr. did not receive his final paycheck from his
employer. In 2015, Hall learned from his father that his paycheck had been remitted to
appellant Michael Rothman, Commissioner of the Minnesota Department of Commerce
(commissioner), and was being held by appellant State of Minnesota (state).
In June 2015, respondent Michael Undlin learned from his attorneys that the state
was holding two pieces of his property remitted by an insurance company. Undlin began
the process of reclaiming his property.
In 2011, respondent Mary Wingfield opened an interest-bearing savings account.
In 2014, Wingfield received a letter from the bank asking her to contact the bank regarding
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the account. Wingfield ignored the bank’s request. Wingfield’s property was remitted to
the commissioner and held by the state.
Respondent Beverly Herron learned from her daughter that the state was holding
her property. Herron’s daughter made the discovery after searching for Herron’s name on
www.missingmoney.com. Wingfield and Herron submitted claims for the return of their
property, and each received a check for the amount of the property that did not include
interest accrued during the time the state held the property.
All respondents claimed that they did not receive notice from the original holder of
the property or from the state that their property had been remitted by the property holder
to the state.
On April 8, 2015, respondents filed a proposed class-action complaint against
appellants, claiming that MUPA, with its intended purpose of protecting consumers by
placing unclaimed property in the state’s custody pending return to the rightful owners,
was being used by the state to seize private property and use it for the state’s benefit without
any meaningful effort to locate the rightful owners. Respondents claimed that the state
failed to provide adequate notice of its takings, which violated the Due Process Clauses of
the United States and Minnesota Constitutions, and that the state’s refusal to return interest
that accrued on the property while in the state’s custody violated the Takings Clauses of
the United States and Minnesota Constitutions.
Appellants moved to dismiss pursuant to Minn. R. Civ. P. 12.02 (a), (e), for lack of
subject-matter jurisdiction and failure to state a claim upon which relief may be granted.
The matter came before the district court on August 12, 2015.
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On December 10, 2015, the district court denied the motion to dismiss with respect
to the above-referenced claims. The district court determined that respondents sufficiently
alleged a due-process claim, because they alleged that notice is not reasonably certain to
inform those affected. The district court determined that respondents also sufficiently
alleged a takings claim because appellants took respondents’ property and put it in a fund
for public use, for which respondents are entitled to just compensation. Appellants
petitioned this court for discretionary review. We denied the petition.
On January 14, 2016, appellants moved the district court for an order certifying three
questions as important and doubtful for appellate review pursuant to Minn. R. Civ. App. P.
103.03(i). The first questioned whether MUPA created “an unconstitutional taking by not
entitling owners to interest on abandoned property after it is delivered to the
[c]ommissioner.” The second asked whether delivery of property to the commissioner
under MUPA violated owners’ procedural due-process rights. Finally, the state questioned
whether it was a proper party to the action.
The district court granted appellants’ request to certify the first two questions. The
district court asks us to answer the following certified questions:
1. When presumptively abandoned property has
been delivered to the Minnesota Commissioner of Commerce
pursuant to the Minnesota Uniform Disposition of Unclaimed
Property Act . . . and thereafter placed into the general fund for
use by the State, has the State effected an unconstitutional
taking by failing to compensate owners for the loss of use of
that property, including the ability to earn interest on the seized
property?
2. Under the Minnesota Uniform Disposition of
Unclaimed Property Act, is lack of pre-seizure notice (other
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than the statute itself) and the Commissioner’s post­seizure
method of providing notice to the owners of presumptively
abandoned property (i.e., use of the website
missingmoney.com and sporadic public events), sufficient to
satisfy owners’ procedural due process rights?
ISSUES
I. Are the certified questions important and doubtful?
II. Does MUPA create an unconstitutional taking?
III. Should the district court’s certified question regarding due process be rephrased?
IV. Does MUPA satisfy procedural due-process requirements?
ANALYSIS
A party may appeal an order denying a motion to dismiss a complaint for failure to
state a claim upon which relief can be granted if “the [district] court certifies that the
question presented is important and doubtful.” Minn. R. Civ. App. P. 103.03(i). An
appellate court reviews de novo the denial of a motion to dismiss for failure to state a claim.
Hauschildt v. Beckingham, 686 N.W.2d 829, 836 (Minn. 2004). Certified questions present
issues of law that an appellate court reviews de novo. Fedziuk v. Comm’r of Pub. Safety,
696 N.W.2d 340, 344 (Minn. 2005).
Are the certified questions important and doubtful?
This court makes an independent determination of whether the questions certified
are important and doubtful. Nat’l City Bank of Minneapolis v. Lundgren, 435 N.W.2d 588,
590 (Minn. App. 1989), review denied (Minn. Mar. 29, 1989). We may decline to reach
the merits if we conclude that the questions are not important and doubtful. Proprietors
Ins. Co. v. Cohen, 451 N.W.2d 904, 906 (Minn. App. 1990).
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A question is important if it “(1) has statewide impact, (2) is likely to be reversed,
(3) is dispositive of potentially lengthy proceedings, and (4) will impose substantial harm
on the parties if it is wrongly decided.” Persigehl v. Ridgebrook Invs. Ltd. P’ship, 858
N.W.2d 824, 830 (Minn. App. 2015). Courts “give special consideration to whether
reversal would terminate potentially lengthy proceedings.” Id. (quotation omitted).
“A question is doubtful only if there is no controlling precedent.” In re Welfare of
Child of L.M.L., 730 N.W.2d 316, 319 (Minn. App. 2007) (quotation omitted). But the fact
that the question is one of first impression itself is insufficient to justify certification. Id.
The question must “be one on which there is substantial ground for a difference of opinion.”
Id. (quotation omitted).
The district court’s certified questions are important and doubtful. The questions
will have a statewide impact. A decision may impact every citizen of this state who has
property held by a financial or other institution that has been overlooked or forgotten and
could potentially be remitted to the commissioner or has already been remitted to the
commissioner. Respondents alleged in the complaint that the state holds approximately
$606,000,000 in abandoned property that could be affected by a decision and that the
proposed class would “likely include at least tens of thousands of members.” Additionally,
with a class this numerous, the proceedings will be lengthy. Finally, there is no precedent
in Minnesota; these are constitutional questions of first impression, and the parties cite
several cases from other jurisdictions that appear to have divergent opinions. Because the
questions presented are important and doubtful constitutional questions of statewide
impact, they are appropriately before this court.
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MUPA
MUPA covers certain property, including, but not limited to:
(a) unclaimed worker’s compensation; (b) deposits or
payments for repair or purchase of goods or services; (c) credit
checks or memos, or customer overpayments; (d) unidentified
remittances, unrefunded overcharges; (e) unpaid claims,
unpaid accounts payable or unpaid commissions; (f) unpaid
mineral proceeds, royalties or vendor checks; and (g) credit
balances, accounts receivable and miscellaneous outstanding
checks.
Minn. Stat. § 345.39, subd. 1. If this property has been held in the ordinary course of
business and remained unclaimed by the owner for more than three years it is “presumed
abandoned.” Id. Any wages owing in the ordinary course of the business that an owner
fails to claim for more than one year are “presumed abandoned.” Id., subd. 3.
Every holder of property that is presumed abandoned must submit an annual report
to the commissioner, including the owner’s name and last known address. Minn. Stat.
§ 345.41(a), (b). Before reporting to the commissioner, the property holder is required to
provide notice to the owner advising the owner that the holder is in possession of the
property and the necessary steps to prevent abandonment. Id.(e). The holder is required
to provide this notice when it has the owner’s address, the owner’s claim is not barred by
the statute of limitations, and the property’s value is $100 or more. Id. Within the next
calendar year after the year the abandoned property is remitted to the commissioner, the
commissioner must provide notice “in the manner and frequency the commissioner
determines to be most effective and efficient in communicating to the persons appearing to
be owners of this property.” Minn. Stat. § 345.42, subd. 1.
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The commissioner and state assume custody and safekeeping of the remitted
abandoned property. Minn. Stat. § 345.44. All property received is deposited in the state’s
general fund. Minn. Stat. § 345.48, subd. 1. The commissioner maintains a record
available for public inspection of each owner’s name and last known address. Id.
An owner may make a claim to the abandoned property at any time. Minn. Stat.
§ 345.49, subd. 1. The commissioner can either pay the claim or hold a hearing on the
claim. Minn. Stat. § 345.50. “When property is paid or delivered to the
commissioner . . . the owner is not entitled to receive income or other increments accruing
thereafter.” Minn. Stat. § 345.45.
Respondents alleged that appellants seized their property from the holders of the
property, held their property in the general fund, used their property for public use, and
failed to give them sufficient notice that the state was using their property. Respondents
alleged that MUPA constitutes an unconstitutional taking and that its notice requirements
are insufficient and violate their procedural due-process rights.
Taking
Certified question:
When presumptively abandoned property has been
delivered to the [commissioner] pursuant to [MUPA] and
thereafter placed into the general fund for use by the State, has
the State effected an unconstitutional taking by failing to
compensate owners for the loss of use of that property,
including the ability to earn interest on the seized property?
The Minnesota Constitution provides that “[p]rivate property shall not be
taken . . . for public use without just compensation.” Minn. Const. art. I, § 13. Whether
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governmental action constitutes a taking is a question of law that an appellate court reviews
de novo. Wensmann Realty, Inc. v. City of Eagan, 734 N.W.2d 623, 631 (Minn. 2007).
Appellants argue that the takings claim fails because of United States Supreme
Court precedent. In Texaco, Inc. v. Short, the Supreme Court examined an Indiana statute
regarding the automatic lapse of a mineral interest unused for twenty years, which reverts
to the surface owner of the property. 454 U.S. 516, 518, 102 S. Ct. 781, 786 (1982). The
statute provided that the unused interest was “extinguished.” Id. The statute did not require
any specific notice to be given prior to the lapse of the interest. Id. at 520, 102 S. Ct. at
787. In addressing the claim that the act was a taking of private property without just
compensation, the Supreme Court stated that “private property may be deemed to be
abandoned and to lapse upon failure of its owner to take reasonable actions imposed by
law, [and] this Court has never required the State to compensate the owner for the
consequences of his own neglect.” Id. at 530, 102 S. Ct. at 792.
Respondents claim that appellants’ “heavy reliance on Texaco . . . is gravely
misplaced” because in that case, the Court approved Indiana’s “use-it-or-lose-it mineral
rights statute[], which [is] nothing like unclaimed property laws, intended to protect true
owners and preserve their property rights.” But the Oklahoma Supreme Court relied on
Texaco in considering the constitutionality of its Uniform Unclaimed Property Act
(UUPA). Dani v. Miller, 374 P.3d 779 (Okla. 2016), cert. denied, 2016 WL 5632195 (U.S.
Nov. 14, 2016).
As analyzed in Dani, UUPA is similar to MUPA in that the property is presumed
abandoned after a period of time in the absence of any action by or contact with the owner.
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Id. at 786-87. UUPA requires the holders of abandoned property to file a report with the
state treasurer and remit the property to the treasurer. Id. at 787. The state then assumes
custody of the property and deposits it in the unclaimed property fund. Id. The owners of
unclaimed property argued that UUPA effectuated a taking of private property without just
compensation. Id. at 793. The court in Dani stated that “the Supreme Court of the United
States conclusively rejected the notion that legal termination of ownership rights in
abandoned property constitutes a taking entitled to just compensation.” Id.
The court recognized that UUPA was different than the statute in Texaco because,
unlike the Indiana statute, UUPA does not extinguish the rights of the owners of abandoned
property. Id. at 794. But the court further stated: “Here, as in Texaco . . . the intake and
custody of abandoned property is attributable to the inattention or abandonment of the
owners. The rationale of Texaco . . . is thus applicable. No taking occurs.” Id.
Texaco and Dani are applicable here. Respondents argue, however, that the
touchstone of the takings claim is the governmental use of the property for the benefit of
the public, rather than its possession. Respondents concede: “If the [s]tate truly acted
solely as custodian of the funds, salting the property away in a vault until returned, the
obligation to pay just compensation may not arise.” Respondents allege that because the
state uses the property, the owners essentially become lenders and the state a borrower and
as such the owners are entitled to the equitable interest the state did not have to pay to
borrow from another source. But the interest that they claim they are now due for “lending”
their property to the state was not raised in the complaint. The complaint alleged that the
state’s failure to return earnings or constructive interest that accrued on the property while
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in the state’s custody constituted a taking.1 Under MUPA, when property is delivered to
the commissioner, the “owner is not entitled to receive income or other increments accruing
thereafter.” Minn. Stat. § 345.45.
Based on United States Supreme Court precedent, MUPA does not result in an
unconstitutional taking. We answer the first certified question in the negative.
Due process
Certified question:
Under [MUPA] is lack of pre-seizure notice (other than
the statute itself) and the [c]ommissioner’s post­seizure
method of providing notice to the owners of presumptively
abandoned property (i.e., use of the website
missingmoney.com and sporadic public events), sufficient to
satisfy owners’ procedural due process rights?
Rephrasing certified question
Appellants first argue that this certified question should be rephrased. An appellate
court “has the authority to clarify the question certified.” State v. Larivee, 656 N.W.2d 226,
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Respondents, citing Cerajeski v. Zoeller, 735 F.3d 577 (7th Cir. 2013), claim that “the
Seventh Circuit recently held that failing to pay interest on unclaimed property constitutes
a taking that requires just compensation.” Cerajeski involved an interest-bearing account.
735 F.3d at 579. The court stated that the owner was owed the principal and interest
because “if you own a deposit account that pays interest, you own the interest, whether or
not state law calls interest property.” Id. at 580. Here, we have only one respondent with
an interest-bearing account. This was a proposed class-action lawsuit; thus, we consider
only respondents’ common claims. See Minn. R. Civ. P. 23.01(b), (c) (stating that
members of a class may sue as representative parties only if there are questions of law or
fact common to the class, and the claims and defenses of the representative parties are
typical of the claims or defenses of the class); Lewy 1990 Trust ex rel. Lewy v. Investment
Advisors, Inc., 650 N.W.2d 445, 453 (Minn. App. 2002) (stating that class certification
requires claims arising from the same event or based on the same legal theory), review
denied (Minn. Nov. 19, 2002).
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228 (Minn. 2003). “The certification should be carefully and precisely framed so as to
present distinctly and clearly the question of law involved.” State v. Knoch, 781 N.W.2d
170, 175 (Minn. App. 2010) (quotation omitted), review denied (Minn. June 29, 2010).
We are persuaded by appellants’ request. First, MUPA does not use the word
“seizure.” Thus, because the question should be precisely framed, it should closely match
the language in the law involved. Also, under MUPA, a holder of certain property is
required to give certain owners notice prior to delivery of the property to the commissioner.
Minn. Stat. § 345.41(e). Finally, the commissioner is required to provide notice after the
property is in the state’s custody “in the manner and frequency the commissioner
determines to be most effective and efficient in communicating to the persons appearing to
be owners of this property.” Minn. Stat. § 345.42, subd. 1. The certified question states
that the commissioner uses only the website and sporadic public events to provide notice.
The commissioner also, at least, maintains a record of owners of abandoned property for
public inspection during business hours. See Minn. Stat. § 345.48, subd. 1.
Respondents suggest that rephrasing is improper because it misleadingly implies
that they are challenging only the text of MUPA when they are also challenging the
commissioner’s actual inadequate attempts to provide notice. But, although respondents
claim that the commissioner’s actual attempts to provide notice are inadequate, each
respondent received notice that the state held their property.
For due process to be satisfied, there must be “notice reasonably calculated, under
all the circumstances, to apprise interested parties of the pendency of the action and afford
them an opportunity to present their objections.” Mullane v. Cent. Hanover Bank & Tr.
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Co., 339 U.S. 306, 314, 70 S. Ct. 652, 657 (1950). Hall was informed by his father that his
name and address were on the state list of individuals whose property it was holding.
Undlin learned from his attorneys that his name and address were on the state’s list.
Wingfield received a letter from her bank, but ignored it. Herron’s daughter discovered
Herron’s name on www.missingmoney.com. Mullane does not require actual notice of a
proceeding or action, but rather notice “reasonably calculated” to inform parties of their
opportunity to be heard. Notice was reasonably calculated here to inform the parties.
Therefore, the commissioner’s actual efforts were not inadequate.
Appellants suggest that the certified question should be phrased: “Is the notice and
process provided under [MUPA] sufficient to satisfy owners’ procedural due process
rights?” We agree and conduct the following analysis for an answer.
Due-process challenge
This court conducts a “two-step analysis to determine whether the government has
violated an individual’s procedural due-process rights.” Sawh v. City of Lino Lakes, 823
N.W.2d 627, 632 (Minn. 2012). First, this court “must identify whether the government
has deprived the individual of a protected life, liberty, or property interest.” Id. If the
government’s action has not deprived the individual of such an interest, no process is due.
Id. If the government’s action has deprived the individual of a protected interest, then this
court must determine whether the procedures used by the government were constitutionally
sufficient. Id. “The procedures afforded by the government must provide an individual
with notice and an opportunity to be heard at a meaningful time and in a meaningful
manner.” Id. (quotation omitted).
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Appellants argue that MUPA does not deprive owners of a protected property
interest because it merely results in the substitution of the commissioner as the holder of
the property. Appellants cite Anderson Nat’l Bank v. Luckett, in which Kentucky law
required every bank to turn over to the state deposits that remained inactive and unclaimed
for specified periods. 321 U.S. 233, 236, 64 S. Ct. 599, 601 (1944). The United States
Supreme Court had to determine whether Kentucky’s statute afforded due process of law,
even though the depositors may not receive personal notice of the pending transfer. Id.
The Supreme Court concluded that “prior to a judicial decree of actual abandonment, the
depositors will not be deprived of their property by the surrender of their bank accounts to
the state.” Id. at 241, 64 S. Ct. at 604. Because the statute merely compelled the “summary
substitution of the state for the bank,” it deprived the depositors of “none of their rights as
creditors, preserving their right to demand from the state payment of the deposits and their
right to resort to the courts if payment is refused.” Id. at 241-42, 64 S. Ct. at 604.
Based on Anderson, respondents fail to show that the government’s action deprived
them of a protected property interest because they remained the owners of the
presumptively abandoned property; the property was just transferred from one holder to
another (the state).
But even if respondents were deprived of a protected property interest, MUPA
provides adequate notice. The Supreme Court in Texaco concluded that Indiana’s mineral
interests act, which extinguished an unused interest, did not violate procedural due process.
454 U.S. at 517, 102 S. Ct. at 785. In Texaco, the statute did not require that any specific
notice be given to a mineral owner prior to the statutory lapse of a mineral interest. Id. at
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520, 102 S. Ct. at 787. The Court stated that, “[g]enerally, a legislature need do nothing
more than enact and publish the law, and afford the citizenry a reasonable opportunity to
familiarize itself with its terms and to comply.” Id. at 532, 102 S. Ct. at 793. Citing
Mullane, the Court distinguished the due-process requirements applicable to an
“adjudication” from the due-process requirements for a general law governing the
abandonment of property. Id. at 535, 102 S. Ct. at 795. The Court stated that a claim
regarding lack of specific notice prior to the lapse of property rights has “no greater force
than a claim that a self-executing statute of limitations is unconstitutional.” Id. at 536, S.
Ct. at 796.
The Oklahoma Supreme Court in Dani relied on Texaco in holding that UUPA
provided constitutionally sufficient notice. 374 P.3d at 796-98. The court stated that
Texaco illustrated that due process requirements “do not apply to automatic termination of
a property right through operation of statute based on an owner’s failure to fulfill certain
conditions. Rather, the requirements of due process would apply only to a proceeding
brought to adjudicate if that right did in fact terminate.” Id. at 796. The court determined
that “due process is not offended by the automatic transfer of abandoned property into the
custody of the [s]tate.” Id. The court held: “The very nature of the UUPA as a custodial
taking statute for property that is presumed abandoned means that communicating notice
to potential owners may be difficult. Accordingly, the statute requires mailed notice,
publication, and posting on the internet.” Id. at 798.
If the holder of unclaimed property has an address for the presumed owner, the
owner’s claim is not barred by the statute of limitations, and the property has a value of at
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least $100, then MUPA requires the holder to send written notice to the owner at the
owner’s last known address to inform the owner that the holder possesses the property and
to advise the owner of the necessary steps to prevent abandonment. Minn. Stat.
§ 345.41(e). MUPA also requires the commissioner to “[w]ithin the calendar year next
following the year in which abandoned property has been . . . delivered . . . provide public
notice of the abandoned property in the manner and frequency the commissioner
determines to be most effective and efficient in communicating to the persons appearing to
be owners of this property.” Minn. Stat. § 345.42, subd. 1. The commissioner must
“expend 15 percent of the funds allocated by the legislature to the operations of the
unclaimed property division, to comply with the public notice requirements of this
subdivision.” Id. MUPA requires the commissioner to keep a record of the name and last
known address of each person appearing to be entitled to the abandoned property available
for public inspection. Minn. Stat. § 345.48, subd. 1. The site www.missingmoney.com is
also available, requiring only that a person type in a name.
Respondents claim that having to search with a name to see if an individual has
property held by the state is somehow burdensome, but if the commissioner provided a
website with a list of names, an individual would still have to exert some effort to scroll to
a particular name. Respondents admit that a “due process notice requirement is judged
with reference to the modern world and practicability.” In the modern world, it is not
uncommon or burdensome to conduct internet searches. MUPA does not violate
procedural due process. This seems especially true when respondents concede that
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MUPA’s statutory scheme provides that “title to personal property always remains with
the original owner.” We answer the rephrased certified question in the affirmative.
DECISION
Because MUPA does not create an unconstitutional taking, we have answered the
first certified question in the negative. Because MUPA satisfies procedural due process,
we have answered the second certified question in the affirmative. Accordingly, we reverse
the district court’s denial of appellants’ motion to dismiss for failure to state a claim upon
which relief may be granted and remand for proceedings consistent with the manner in
which we have answered the certified questions.
Reversed and remanded.
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