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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us) STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 6578 April 25, 1989 BOTTLES AND BOTTLING: Ownership of unreturned containers of beer and soft drinks Ownership of deposits on returnable containers of beer and soft drinks ESCHEATS: Unclaimed cash deposits on returnable containers of beer and soft drinks Returnable containers of beer and soft drinks subject to 1976 PA Initiated Law are not the property of the industry which manufactures, distributes or sells them during the time the containers are in the possession of consumers or other persons prior to the time of return to a dealer for a refund of the deposit thereon. The deposits collected on returnable containers of beer and soft drinks subject to 1976 PA Initiated Law belong to the persons collecting them. Unclaimed deposits on returnable containers mandated under 1976 PA Initiated Law are not subject to escheat under current law, but the Legislature may, by enactment of appropriate legislation, make them subject to escheat. David F. Hales Director Department of Natural Resources Stevens T. Mason Building Lansing, MI 48909 My opinion has been requested on two questions relating to deposits on returnable beverage containers sold in Michigan. The first question is whether the deposits or the beverage containers belong to the industry which manufactures, distributes, and sells them. The second question is whether the state may escheat the deposits under current law or as may be authorized by amendment. In addressing these questions, I will first review the state law mandating deposits on returnable beverage containers, and then discuss the state escheat law. 1976 PA Initiated Law, MCL 445.571 et seq; MSA 18.1206(11) et seq, mandates a system of deposits and refunds on the containers of soft drinks and beer sold in this state for off-premises consumption. The ballot for the election at which 1976 PA Initiated Law was approved by the People stated that the proposed law would: "(a) Prohibit the use of non-returnable bottles and cans for the sale of soft drinks and beer for off-premises consumption; [and] "(b) Set up a requirement for cash deposits and repayment of deposits for soft drink and beer containers...." See OAG, 1985-1986, No 6370, p 310, 311 (June 10, 1986). Thus, Sec. 2(1) of 1976 PA Initiated Law provides that a dealer (one who sells beer and soft drinks to customers in airtight beverage containers) shall not sell soft drinks or beer in a nonreturnable container. (1) 1976 PA Initiated Law requires a deposit for any returnable container of at least 10 cents for most containers and at least 5 cents for certain certified reusable containers. At the time of sale, this deposit must be paid by the customer or a third party, such as a distributor. OAG, 1981-1982, No 5970, p 348 (September 1, 1981). Pursuant to Sec. 2(4) of 1976 PA Initiated Law, a dealer must accept empty returnable containers (2) of any kind, size, and brand sold by the dealer. Section 2(4) also states that a dealer shall not refuse to pay a person returning an empty returnable container "its full refund value in cash." (3) The statutory plan is that dealers will have a source for repayment of deposits which they refund on all empty returnable containers presented to them because Sec. 2(6) of 1976 PA Initiated Law requires distributors (those selling soft drinks and beer to dealers) to accept all returnable containers from dealers and to pay to each dealer the full refund value in cash: "A distributor shall not refuse to accept from a dealer an empty returnable container of any kind, size, and brand sold by that distributor, nor refuse to pay to the dealer its full refund value in cash, except as provided in subsection (7) [where the container is not marked as required by 1976 PA Initiated Law]." Since a distributor is required by Sec. 2(6) to pay a refund on all returnable containers, it is recognized that distributors will generally charge a deposit on those containers which they sell. OAG, 1977-1978, No 5343, p 540 (July 14, 1978). In the cycle of deposits and refunds for a beverage in a returnable container, the dealer acquiring the beverage for resale in that container pays a deposit to the distributor. When the dealer sells the container to the consumer, the dealer collects a deposit and is thereby reimbursed for the deposit previously paid to the distributor. When an empty container is returned to the dealer, the dealer pays the person returning it a cash refund in an amount equal to that of the deposit pursuant to Sec. 2(2) and (4) of 1976 PA Initiated Law. The dealer is, in turn, reimbursed for its payment of such a refund by the distributor to whom it returns the empty container. Since a dealer is charged a deposit when acquiring a beverage in a returnable container for resale and is required to pay a refund in an amount equal to the deposit on an empty container returned to it, the dealer accumulates no additional funds when some of the returnable containers sold in Michigan are not returned. By contrast, the distributor acquires as additional funds those deposits which are not refunded to the extent that a distributor is tendered fewer returnable containers than it has sold to dealers and collected deposits thereon. 1976 PA Initiated Law assumes, but does not mandate, the payment of deposits to distributors by dealers on the beer and soft drinks in returnable containers sold to them for resale. As such, it makes no express provision for the ownership of such deposits. Since the payment of a deposit by the dealer to the distributor is a matter of private agreement, and barring any stipulation of the parties to the contrary, the ownership of the deposits paid to a distributor by the dealers is in the distributor. As to the ownership of the returnable containers themselves, a reading of 1976 PA Initiated Law makes clear that those containers are "sold" to customers. For example, Sec. 2(4) of 1976 PA Initiated Law states: "A dealer shall not refuse to accept from a person an empty returnable container of any kind, size, and brand sold by that dealer...." (Emphasis added.) In general terms, a "sale" is a parting of one's interest in something for valuable consideration. See Steadman v. Clemens, 321 Mich 54, 59; 32 NW2d 45 (1948). Given the unconditional language describing these transactions as sales, there is no indication that the People contemplated, much less mandated, that sellers of returnable beverage containers would continue to own those containers after selling them. This analysis is consistent with existing case law regarding the nature of bottle deposits. In Goebel Brewing Co v. State Bd of Tax Admin, 306 Mich 222, 224, 226, 228; 10 NW2d 835 (1942), the court rejected the argument that a brewing company owns beer bottles which it has sold to wholesale distributors and retailers for resale and on which it has required a deposit: "During the time covered by the [use tax] assessments, all but a small percentage of the bottled beer was sold to wholesale distributors or retailers for resale. When a carton of beer was sold, a charge was made for the beer and a deposit was required for the cartons and bottles. The return of the bottles and cartons was optional upon the part of the purchaser, but when returned the purchaser was entitled to and did receive his deposit." 306 Mich at 224. "In cases which involve containers for which a deposit is taken, the general rule is that there is a sale thereof." 306 Mich at 226. "The facts in the case at bar show that after the sale was made, the seller (Goebel Brewing Company) had no control over the bottles and cartons. The purchaser could return them and claim his deposit or he could keep them and forfeit his deposit. We are in accord with the finding of the trial court that: 'There is undoubtedly a second contract between the brewery and the purchasers of its beer. By that contract the purchaser has the option to resell the bottles or cases to the brewery for the amount which he paid for them, and the brewery commits itself to repurchase them. But the compulsion implicit in such agreement is unilateral. The purchaser, as has been stated, is under no obligation to exercise his option to resell, even though the brewery is under obligation to repurchase upon demand.' " 306 Mich at 228. See also Consol Paper Co v Dept of Revenue, 306 Mich 216, 220; 10 NW2d 833 (1943). (4) Under 1976 PA Initiated Law and prior Michigan law involving the nature of bottle deposits, there is no basis for concluding that the bottle deposits are owned by the customers who have not returned the bottles and cans on which they paid deposits at the time of purchase. Nor is there any basis for concluding, under 1976 PA Initiated Law and prior case law, that the returnable bottles and cans of soft drinks and beer on which deposits were paid continue to belong to the manufacturers, distributors, or dealers who sold them after the time of sale and prior to their return. Turning to the area of Michigan escheat law, it should be noted that the Legislature is directed by Const 1963, art 10, Sec. 4, to prescribe the applicable requirements: "Procedures relating to escheats and to the custody and disposition of escheated property shall be prescribed by law." The Michigan code of escheats is set forth in MCL 567.11 et seq; MSA 26.1053(1) et seq, which states its purpose in the title, as follows: "AN ACT to create a state board of escheats; to prescribe its powers and duties; to provide for the descent and devolution of escheated and abandoned property; to provide for the discovery, marshalling, protection, conservation and disposition of escheatable, abandoned and escheated property; to prescribe the procedure to declare escheatable and abandoned property escheated; to protect the rights and interests of owners and holders of escheatable, abandoned and escheated property in and to such property; to prescribe the procedure for the administration of this act and to prescribe penalties for violations of certain of its provisions; and to remove the bar of general statutes of limitation as a defense to proceedings instituted under this act in certain cases." Section 4 of the code of escheats provides that all property, as defined in the code of escheats, the title to which has failed and the power of alienation suspended by reason of, inter alia, having been abandoned by the owner thereof, shall descend to the state as an escheat. "Escheat" is defined by Sec. 5(g) of the code of escheats to mean "the descent or devolution of property to the state under and by virtue of the constitution of the state, the provisions of the general laws of this state, or the provisions of this ... [code]." "Property" is broadly defined by Sec. 5(b) of the code of escheats as personal property, of every kind, in the possession or under the control of the holder (as opposed to the owner), including money, deposits, howsoever evidenced, including accrued interest and increments thereon, and security deposits. The key provision which is relevant to the issue of bottle deposits appears to be Sec. 13 of the code of escheats which provides as follows: "Except as otherwise expressly provided in this act, all property, as that term is defined herein, in the possession or under the control of a holder and for which the holder is accountable to the owner thereof, which is unpaid to, uncashed by, unclaimed, uncalled for or abandoned by such owner and against which the full period of dormancy has run, shall be subject to descent and devolution to the state under the provisions of this act and the same shall be duly reported by the holder thereof at the time and in the manner prescribed herein." (Emphasis added.) While the definition of property in the code of escheats is sufficiently expansive (money, deposits, and security deposits) to encompass bottle deposits, the distributor holding bottle deposits is not "accountable to the owner thereof" as that phrase is used in Sec. 13 of the code of escheats because: (1) The distributor, as discussed above regarding 1976 PA Initiated Law and existing Michigan law on bottle deposits, is the owner of the bottle deposits. (2) The distributor is accountable only to dealers for the return of deposits, and dealers are not the owners of these beverage containers after sale and before their return. If 1976 PA Initiated Law or the code of escheats were amended to specify that the owner of each deposit amount held by a distributor is the person possessing the returnable container, and the code of escheats were modified to specify that escheatable property includes such unclaimed deposits, those legislative actions would be consistent with the power of the Legislature to define procedures for the escheat of property pursuant to Const 1963, art 10, Sec. 4. It is my opinion, in answer to your first question, that the unreturned beverage containers of beer and soft drinks subject to 1976 PA Initiated Law, MCL 445.571 et seq; MSA 18.1206(11) et seq, are not the property of the industry which manufactures, distributes, and sells them during the time those containers are in the hands of consumers or anyone else who comes into possession of them prior to their being returned to a dealer for a refund of the deposit thereon. It is further my opinion that, under current law, deposits on returnable containers belong to those collecting them. It is my opinion, in answer to your second question, that while statutorily-mandated bottle deposits are not subject to escheat by the state under current law, 1976 PA Initiated Law and the code of escheats may be amended by the Legislature pursuant to Const 1963, art 10, Sec. 4, to provide for the escheat to the state of unclaimed deposits paid after the effective date of those amendments. Frank J. Kelley Attorney General (1 A nonreturnable container is defined in Sec)
"a beverage container upon which no deposit or a deposit of less than 10 cents has been paid, or is required to be paid upon the removal of the container from the sale or consumption area, or for which no cash refund or a refund of less than 10 cents is payable by a dealer or distributor in this state of that beverage in beverage containers, as further provided in section 2."
(2 A returnable container is defined by Sec)
1(d) of 1976 PA Initiated Law as"a beverage container upon which a deposit of at least 10 cents has been paid, or is required to be paid upon the removal of the container from the sale or consumption area, and for which a refund of at least 10 cents in cash is payable by every dealer or distributor in this state of that beverage in beverage containers, as further provided in section 2. A beverage container certified as provided in section 3 shall also be deemed a returnable container if the deposit is at least 5 cents, and the requirements of the preceding sentence are met in all other respects."
(3 There are two exceptions and one limitation in Sec)
2 of 1976 PA Initiated Law on a dealer's responsibility to accept returnable containers and pay refunds thereon:"(5) A dealer who does not require a deposit on a returnable container when the contents are consumed in the dealer's sale or consumption area shall not be required to pay a refund for accepting that empty container."
"(7) Every beverage container sold or offered for sale by a dealer within this state shall clearly indicate by embossing or by a stamp, a label, or other method securely affixed to the beverage container, the refund value of the container and the name of this state. A dealer or distributor may, but is not required to, refuse to accept from a person an empty returnable container which does not state on the container the refund value of the container and the name of this state. This subsection shall not apply to a refillable container having a refund value of not less than 10 cents which has a brand name permanently marked on it. Each container of this type produced after December 3, 1978, shall clearly indicate, by a method securely affixed to the container, that the container is returnable for deposit."
"(10) A dealer may accept, but is not required to accept, from a person, empty returnable containers for a refund in excess of $25.00 on any given day."
(4 It should be noted that Sec)
2(11) of 1976 PA Initiated Law prohibits certain manufacturers from requiring a deposit:"A manufacturer licensed by the [liquor control] commission shall not require a distributor licensed by the commission to pay a deposit to the manufacturer on a nonrefillable container. However, a manufacturer licensed by the commission and a distributor licensed by the commission may enter into an agreement providing that either or both may originate a deposit or any portion of a deposit on a nonrefillable container if the agreement is entered into freely and without coercion."
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