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
JENNIFER M. GRANHOLM, ATTORNEY GENERAL
BONDS:
ESCHEATED ESTATES:
STATE:
STATE TREASURER:
STATUTES:
Escheat of unclaimed Mackinac Bridge Authority bond redemption funds
Application of repealed statute imposing penalty, forfeiture or liability
Unclaimed funds held to pay principal and interest on Mackinac Bridge Authority bonds are not the property of the Authority. Instead, the funds revert by escheat to the State of Michigan.
Opinion No. 7047
March 10, 2000
Mr. Murray D. Wikol, Chairman
Mackinac Bridge Authority
333 I-75
St. Ignace, MI 49781
You have asked if unclaimed funds held to pay principal and interest on Mackinac Bridge Authority bonds are the property of the Authority or revert by escheat to the State of Michigan.
Information supplied with your request indicates that in 1954 the Mackinac Bridge Authority issued bonds to fund the construction of the Mackinac Bridge. On July 1, 1986, when the bonds were called for redemption, the Authority transferred funds from its trustee bank to the paying agent bank to pay off the bonds plus accrued interest as of the redemption date. The paying agent bank has recently transferred to the trustee bank the sum of $166,023.76, which represents unclaimed funds in the Authority's bond redemption account. The trustee bank is holding this money pending instructions from the Authority.
The Authority issued the bonds pursuant to 1952 PA 214, MCL 254.311 et seq; MSA 9.1361(1) et seq (Act). Section 5 of the Act authorizes the Authority to issue revenue bonds to pay for the cost of a bridge. Section 6 of the Act authorizes the bonds to be secured by a trust indenture1 between the Authority and a corporate trustee. The Act, however, contains no provision governing the disposition of unclaimed funds.
The Authority did execute a trust indenture between itself and the trustee, which indenture addresses the disposition of unclaimed bond redemption funds as follows:
Section 513. All moneys which the Trustee shall have withdrawn from the Sinking Fund or shall have received from any other source and set aside, or deposited with the Paying Agents, for the purpose of paying any of the bonds hereby secured, either at the maturity thereof or upon call for redemption, or for the purpose of paying any maturing coupons appertaining to any of the coupon bonds hereby secured, shall be held in trust for the respective holders of such bonds or coupons. But any moneys which shall be so set aside or deposited by the Trustee and which shall remain unclaimed by the holders of such bonds or of such coupons for the period of seven years after the date on which such bonds or such coupons shall have become payable shall be paid to such officer, board or body as may then be entitled by law to receive the same, and thereafter the holders of such bonds or coupons shall look only to such officer, board or body, as the case may be, for payment and then only to the extent of the amounts so received without any interest thereon, and the Trustee and the Paying Agents shall have no responsibility with respect to such moneys.
(Emphasis added.)
Consistent with the express language of the trust indenture, it is necessary to examine the law that was in effect on July 1, 1993, the date seven years after the date on which the bonds were called for redemption. On July 1, 1993, the Michigan Code of Escheats (Code), 1947 PA 329, MCL 567.11 et seq; MSA 26.1053(1) et seq, was in effect. Under the Code, control of abandoned property, including unclaimed money, passes to the State of Michigan. The property owners, however, have the right to the return of the property, or the net proceeds from the sale of the property, upon presentation of proof of ownership. See section 53 of the Code, and Schoener v Continental Motors Corp, 362 Mich 303, 310; 106 NW2d 774 (1961).
In the trust indenture governing this transaction, the period of dormancy for claiming bond redemption funds is seven years, the same dormancy period set forth in section 5(f) of the Code. The Code defines the term property to include "[f]unds to redeem . . . bonds." Section 5(1)(b)(xi). The Code also defines and distinguishes between owners and holders of property. An owner of property "means any person having the legal or equitable title or right to make demand to property that is subject to this act." Section 5(1)(c). A holder of property "means any person having possession, custody, or control of the property of another person." Section 5(1)(d). The bondholders are the owners of the funds and the trustee bank is the holder of the funds. In the instant case, the unclaimed bond redemption funds constitute property as defined by the Code. The unclaimed funds in the Authority's bond redemption account are, therefore, subject to the Michigan Code of Escheats.
Responding to a similar question, 1 OAG, 1957, No 2282, p 30 (January 21, 1957), concluded that moneys held in a sinking fund to pay principal and interest on state highway bonds that were unclaimed by bondholders for over seven years escheated to the State of Michigan under the Michigan Code of Escheats.
The Uniform Unclaimed Property Act, 1995 PA 29, MCL 567.221 et seq; MSA 26.1055(1) et seq, repealed the Michigan Code of Escheats. Section 44. In MCL 8.4a; MSA 2.214, however, the Legislature enacted a general savings statute that preserves penalties, forfeitures and liabilities under repealed statutes.
The repeal of any statute or part thereof shall not have the effect to release or relinquish any penalty, forfeiture, or liability incurred under such statute or any part thereof, unless the repealing act shall so expressly provide, and such statute and part thereof shall be treated as still remaining in force for the purpose of instituting or sustaining any proper action or prosecution for the enforcement of such penalty, forfeiture or liability.
A review of the Uniform Unclaimed Property Act discloses no express provisions which relinquish any penalties, forfeitures or liabilities incurred under the Michigan Code of Escheats. Accordingly, the now repealed Michigan Code of Escheats still applies to the Authority's unclaimed bond redemption funds. Thus, the trustee bank's liability to pay the unclaimed bond redemption funds to the State of Michigan under the Michigan Code of Escheats remains in effect. In both MATRAS v Amoco Oil Co, 424 Mich 675, 697, n 33; 385 NW2d 586 (1986), and Krohn v Bd of Medicine, 98 Mich App 129, 133; 296 NW2d 57 lv den 409 Mich 934 (1980), the courts, based on MCL 8.4a; MSA 2.214, applied repealed legislation that was in effect at the time of the transaction in question.
It is my opinion, therefore, that unclaimed funds held to pay principal and interest on Mackinac Bridge Authority bonds are not the property of the Authority. Instead, the funds revert by escheat to the State of Michigan.
JENNIFER M. GRANHOLM
Attorney General
1 A trust indenture is an agreement between a bond issuer and a trustee by which the trustee acts on behalf of the bondholders and which contains the terms of the bonds, protective covenants, and other provisions, including the right to call and redeem bonds prior to maturity.