Stanford Law School - Robert Crown Law Library

Filed 7/16/09
IN THE SUPREME COURT OF CALIFORNIA

AZURE LIMITED,
Plaintiff and Appellant,
S164884
v.
Ct.App. 4/3 G038167
I-FLOW CORPORATION,
Orange County
Defendant and Respondent.
Super. Ct. No. 06CC07434

The Unclaimed Property Law (UPL) (Code Civ. Proc., § 1500 et seq.)1
requires corporations to deliver to the state Controller a duplicate certificate of
unclaimed corporate stock in specified circumstances. Section 1532, subdivision
(d), provides that any “holder” of that unclaimed stock “shall be relieved from all
liability of every kind to any person . . . for any losses or damages resulting to that
person by the issuance and delivery to the Controller of the duplicate
certificate . . . .” We granted review to determine the nature and scope of this
immunity. We conclude that a corporation is entitled to section 1532‟s immunity
only if it complies with other provisions of the UPL. We affirm the judgment of
the Court of Appeal, which reached a similar conclusion, and disapprove Harris v.
Verizon Communications (2006) 141 Cal.App.4th 573 (Verizon), which reached a
contrary conclusion.

1
All further statutory references are to the Code of Civil Procedure unless
otherwise indicated.
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I. PROCEDURAL HISTORY
Plaintiff Azure Limited (Azure) sued defendant I-Flow Corporation (I-
Flow) for breach of fiduciary duty. The complaint alleged the following: Azure
acquired nearly 95,000 shares of I-Flow stock in 1990 and exchanged those shares
in 1993 for nearly 19,000 shares in a reverse stock split. In 2003, Azure learned
that I-Flow had transferred these shares to the state as escheated property. In
October 2003, Azure requested the state to return its stock. The state responded
that Azure might not be able to receive the stock itself, and that it might instead
receive proceeds from the sale of the stock. In November 2004, when I-Flow‟s
common stock was selling for $17.72 per share, Azure learned that the state had
sold the stock in June 2003 for $4.62 per share.
The complaint alleged that I-Flow breached its fiduciary duty to Azure by
treating Azure‟s stock as abandoned property even though it knew Azure‟s
location at all relevant times, by transferring the stock to the state without legal
justification, and by failing to give Azure notice of the transfer. It sought to
recover as damages the difference between the proceeds from the June 2003 sale
and the value of the stock as of November 2004.
The superior court granted judgment on the pleadings in favor of I-Flow,
finding that section 1532 immunized I-Flow‟s actions, and entered judgment
accordingly. Azure appealed. The Court of Appeal reversed the judgment. It
held that the “UPL immunizes corporations from civil liability only when they
transfer escheated shares to the state in compliance with the provisions of the
UPL. The UPL does not immunize corporations like [I-Flow] who allegedly
transfer nonescheated shares to the state without giving the required notice.” It
remanded the matter to the trial court with directions to vacate its order granting
judgment on the pleadings and instead deny the motion.
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We granted review to resolve the conflict between the Court of Appeal
opinion in this case and Verizon, supra, 141 Cal.App.4th 573.
II. DISCUSSION
A. The Statutory Scheme
“The UPL establishes the conditions under which certain unclaimed
personal property escheats to the state. The UPL is not a permanent or „true‟
escheat statute. Instead, it gives the state custody and use of unclaimed property
until such time as the owner claims it. Its dual objectives are „to protect unknown
owners by locating them and restoring their property to them and to give the state
rather than the holders of unclaimed property the benefit of the use of it, most of
which experience shows will never be claimed.‟ ” (Harris v. Westly (2004) 116
Cal.App.4th 214, 219, fn. omitted, quoting Douglas Aircraft Co. v. Cranston
(1962) 58 Cal.2d 462, 463.)
This case involves shares of stock. Section 1516 governs intangible
interests in a business association, such as corporate stock. Stock will escheat to
the state if (1) its owner has neither claimed a dividend nor corresponded in
writing or otherwise indicated an interest in the stock for over three years, and (2)
the corporation does not know the owner‟s location at the end of the three-year
period. (§ 1516, subd. (b).) With respect to this stock, the statute provides that the
corporation “shall be deemed the holder.” (Ibid.)2 A corporation holding stock

2
In its entirety, section 1516, subdivision (b), provides: “Subject to Section
1510, any intangible interest in a business association, as evidenced by the stock
records or membership records of the association, escheats to this state if (1) the
interest in the association is owned by a person who for more than three years has
neither claimed a dividend or other sum referred to in subdivision (a) nor
corresponded in writing with the association or otherwise indicated an interest as
evidenced by a memorandum or other record on file with the association, and (2)
the association does not know the location of the owner at the end of the three-
year period. With respect to the interest, the business association shall be deemed
the holder.”
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that has escheated under this provision must include the stock in a report filed
yearly with the Controller. (§ 1530.) Before it can report any stock that “may
escheat,” the corporation must make reasonable efforts to notify the stock‟s owner
of the impending escheat. (§ 1516, subd. (d).) The corporation must give this
notice between six and 12 months before the stock becomes reportable to the
Controller. (Ibid.) The notice must include a form by which the owner may
confirm its current address. “If that form is filled out, signed by the owner, and
returned to the holder, it shall be deemed that the business association knows the
location of the owner.” (Ibid.) Otherwise, the corporation must include the stock
in its yearly report to the Controller. (§ 1530.)
Section 1532 is critical to the issue before us. Subdivision (a) of that
section requires a corporation that has filed the report under section 1530 to
deliver to the Controller “all escheated property specified in the report” between
seven months and seven months and 15 days after the report is due. Subdivision
(b) of that section qualifies this requirement by providing that if, in the interim
between the report and delivery, the owner of the stock establishes its right to the
property “to the satisfaction of the holder” or it otherwise appears that the stock is
not subject to escheat, the corporation must not deliver the property to the
Controller; instead, the corporation must file a different report “containing
information pertaining to the property not subject to escheat.” (§ 1532, subd. (b).)
Subdivision (d) of section 1532 concerns what to do with escheated stock.
The first sentence of that subdivision provides: “The holder of any interest under
subdivision (b) of Section 1516 shall deliver a duplicate certificate to the
Controller or shall register the securities in uncertificated form in the name of the
Controller.” The second (and final) sentence of that subdivision presents the
precise issue before us: “Upon delivering a duplicate certificate or providing
evidence of registration of the securities in uncertificated form to the Controller,
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the holder, any transfer agent, registrar, or other person acting for or on behalf of
the holder in executing or delivering the duplicate certificate or registering the
uncertificated securities, shall be relieved from all liability of every kind to any
person including, but not limited to, any person acquiring the original certificate or
the duplicate of the certificate issued to the Controller for any losses or damages
resulting to that person by the issuance and delivery to the Controller of the
duplicate certificate or the registration of the uncertificated securities to the
Controller.” (§ 1532, subd. (d), italics added.)
The Controller assumes custody of escheated property it has received and,
if it has commercial value, eventually sells it. (§§ 1560, subd. (a), 1563.)
“Securities listed on an established stock exchange shall be sold at the prevailing
prices on that exchange.” (§ 1563, subd. (b).) A person who claims an interest in
the property “may file a claim to the property or to the net proceeds from its sale.”
(§ 1540, subd. (a).) “If the Controller grants the claim, the Controller returns the
property or the proceeds from its sale to the claimant . . . .” (Fong v. Westly
(2004) 117 Cal.App.4th 841, 845.) Additionally, “Any holder who has delivered
personal property, including a certificate of any interest in a business association,
to the State Controller pursuant to this chapter may reclaim such personal property
if still in the possession of the State Controller without payment of any fee or other
charges upon filing proof that the owner thereof has claimed such personal
property from such holder.” (§ 1560, subd. (d).) Although subdivision (c) of
section 1540 formerly provided for the payment of interest (Fong v. Westly, supra,
at p. 845), in 2003, that subdivision was amended to provide, as it does today, “No
interest shall be payable on any claim paid under this chapter.” (See Stats. 2003,
ch. 228, § 8.)
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B. Interpretation of Section 1532, subdivision (d)
Azure alleges that I-Flow should not have delivered its stock to the
Controller for two reasons: (1) The stock was not subject to escheat under section
1516, subdivision (b), because I-Flow knew Azure‟s location at all relevant times;
and (2) I-Flow did not provide the notice that section 1516, subdivision (d),
requires. It also alleges that, even though it received the proceeds from the
Controller‟s sale of the stock, it was damaged because the Controller had
previously sold the stock at a price much lower than its value when Azure
reclaimed the property. I-Flow denies these allegations but recognizes that they
have not yet been litigated. When reviewing a judgment on the pleadings, we
must accept as true the material facts alleged in the complaint. (Foundation for
Taxpayer & Consumer Rights v. Nextel Communications, Inc. (2006) 143
Cal.App.4th 131, 135.) Thus, the legal issue before us is whether section 1532
immunizes I-Flow from liability even if we assume that, when it delivered the
stock to the Controller, it knew Azure‟s address and failed to provide notice under
section 1516, subdivision (d).
The court in Verizon, supra, 141 Cal.App.4th 573, interpreted section 1532
as providing immunity to a corporation that issues and delivers to the Controller a
duplicate certificate, whether or not the delivery complies with the UPL‟s
requirements. Justice Mallano dissented, arguing that “the UPL‟s immunity
provisions cannot reasonably be interpreted to apply to the circumstances here,
where plaintiffs allege that [the defendant] breached a fiduciary duty to give them
a fair opportunity to prevent the operation of the UPL in the first instance.”
(Verizon, supra, at p. 580.) The Court of Appeal here disagreed with the Verizon
majority. It concluded that the “UPL does not immunize corporations like
defendant who allegedly transfer nonescheated shares to the state without giving
the required notice.” We agree with this conclusion.
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I-Flow argues and the Verizon court found that “the immunity conferred by
the UPL is absolute.” (Verizon, supra, 141 Cal.App.4th at p. 577.) In one sense,
this may be so. But the question is who receives this immunity. Is it any
corporation that transfers a duplicate certificate to the Controller, or only one that
does so in compliance with the UPL?
Section 1532, subdivision (d), states that “[t]he holder of any interest under
subdivision (b) of Section 1516” must take certain action, and then it immunizes
that holder for that action. We must determine when a corporation becomes a
“holder” entitled to immunity under this provision. Escheated stock differs from
other escheated property in a crucial respect. Usually, whoever delivers escheated
property to the Controller possesses that property. But the stockholder, not the
corporation, normally possesses the certificate representing an intangible interest in
the corporation. Thus, section 1532, subdivision (d), requires the corporation to
deliver a duplicate certificate of escheated stock to the Controller. Section 1516,
subdivision (b), states that, with respect to escheated stock, the corporation “shall be
deemed the holder.” This is so despite the fact the corporation might never actually
possess the original certificate of escheated stock. What this means is that, although
the corporation does not possess the original certificate, the UPL deems the
corporation to be the “holder” of the interest when the criteria of abandoned
property is satisfied. Until those criteria are satisfied, the corporation is not a
“holder,” and therefore is not entitled to the immunity afforded a “holder” under
section 1532. Thus, section 1532, subdivision (d), immunizes only the holder of
stock that is actually subject to escheat under section 1516, subdivision (b).
Section 1501, which defines various terms used in the UPL, is consistent
with this conclusion. As relevant, section 1501 provides: “As used in [the UPL],
unless the context otherwise requires: [¶] . . . [¶] (e) „Holder‟ means any person
in possession of property subject to this chapter belonging to another . . . .”
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(Italics added.) I-Flow argues that the UPL does not always refer to property that
is actually subject to escheat but occasionally contains broader references. For
example, section 1516, subdivision (d), imposes notice requirements on
corporations possessing property that “may escheat pursuant to subdivision
(b) . . . .” Thus, I-Flow argues, a “holder” includes “corporations in possession of
escheated and potentially escheatable property.” We disagree. Even assuming the
definition in section 1501, subdivision (e), by itself, would support a broad
interpretation of “holder” under section 1532, subdivision (d), “the context
otherwise requires” a narrower interpretation. (§ 1501.) As we have explained, in
context, the “holder” that section 1532, subdivision (d), immunizes is “[t]he holder
of any interest under subdivision (b) of Section 1516 . . . .” Section 1516,
subdivision (b), deems the corporation to be the holder only of stock actually
subject to escheat.3

3
The dissent asserts that “[n]owhere in the statutory scheme does the
Legislature declare that a person does not become a holder of stock until the
criteria of abandoned property is satisfied . . . .” (Dis. opn., post, at p. 2.) On the
contrary, as we have explained, section 1532, subdivision (d), the immunity
provision at issue here, grants the immunity to the “holder of any interest under
subdivision (b) of Section 1516.” In turn, the last sentence of section 1516,
subdivision (b), specifically “deem[s]” the corporation to be the holder “[w]ith
respect to the interest,” which can only refer to the “interest” defined in the first
sentence of that subdivision, that is, an “interest in a business association” that has
met the criteria for escheat. (See fn. 2 for the entire text of § 1516, subd. (b).)

Section 1516, subdivision (d), also states that if, after the corporation
provides the required notice, the “form is filled out, signed by the owner, and
returned to the holder, it shall be deemed that the business association knows the
location of the owner.” (Italics added.) Contrary to the view of the dissent, this
use of the word “holder” is consistent with our interpretation. A corporation that
has provided the required notice regarding stock subject to escheat under section
1516, subdivision (b), is considered the holder of the stock. Section 1532,
subdivision (b), another statute the dissent cites, is similar in this regard.
Moreover, even if the word “holder” is used slightly differently in some other

(footnote continued on next page)
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This interpretation means that only a corporation delivering a duplicate
certificate of stock actually subject to escheat under section 1516, subdivision (b),
receives section 1532, subdivision (d)‟s immunity. If the corporation delivers to
the Controller stock that does not meet the requirements of section 1516,
subdivision (b), it is not entitled to the statutory immunity. We believe the same is
also true of a corporation that delivers the stock without complying with the notice
requirements of section 1516, subdivision (d). The obvious purpose of such notice
is to prevent the unauthorized delivery of stock to the Controller. Although
section 1532, subdivision (d), does not specifically refer to the notice requirement
of section 1516, subdivision (d), the UPL, as a whole, makes clear that the
corporation must not actually deliver stock to the Controller without first
complying with the notice requirements. This means the stock is not actually
escheatable until the notice requirements are satisfied. Indeed, the notice
provision would be meaningless if corporations could ignore it and still receive
immunity for their actions.

(footnote continued from previous page)

contexts, such differences cannot negate the specific language of sections 1516,
subdivision (b), and 1532, subdivision (d), the precise statutes at issue here.

The dissent also cites the first sentence of section 1560, subdivision (d)
(quoted on p. 5, ante). (Dis. opn., post, at pp. 3-4.) That sentence has nothing to
do with the issue before us. We agree with the dissent that no reason exists why
the Legislature would want to bar a corporation that had mistakenly delivered
stock from correcting its mistake and returning the property to its rightful owner.
But the Legislature has not done so. Section 1560, subdivision (d), merely
provides that if the property‟s owner is later found, the holder that delivered the
property to the Controller may reclaim it (if still in the Controller‟s possession)
“without payment of any fee or other charges.” Prohibiting the Controller from
charging a fee is logical given that the corporation was required to deliver the
property in the first instance. Whether the Controller could charge a fee to a
corporation that should not have delivered the property is a question far beyond
the scope of review in this case.
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I-Flow argues that section 1532‟s immunity cannot be conditioned on
satisfying the notice requirements of section 1516, subdivision (d), because the
Legislature did not add those notice requirements until 1993 and, when it did so, it
did not change section 1532‟s already-existing immunity provision to require
compliance with the new notice requirements as a condition of immunity. (See
Stats. 1993, ch. 692, § 4, p. 3991.) I-Flow argues that “[i]f the Legislature
intended to make compliance with section 1516, subdivision (d) a condition of
immunity, it would have done so explicitly.” But we think the fact that section
1532‟s immunity provision predated section 1516, subdivision (d)‟s notice
requirement explains why the former does not reference the latter. This
circumstance does not negate the fact that section 1532, subdivision (d), only
governs the “holder of any interest under” section 1516, subdivision (b), i.e.,
property actually subject to escheat. As Azure argues, it is unlikely the
Legislature intended to immunize a delivery that violated section 1516‟s notice
requirements.
I-Flow argues, and Verizon concluded, that interpreting section 1532‟s
immunity as conditioned on compliance with the UPL‟s other requirements
“would render the immunity meaningless because immunity comes into play
when, and only when, the defendant is charged with wrongdoing.” (Verizon,
supra, 141 Cal.App.4th at p. 578.) If a corporation acts in compliance with, and
under compulsion of, the UPL, the argument goes, there could be no liability even
absent section 1532‟s immunity. Thus, to be meaningful, and not mere
surplusage, the immunity must be interpreted as covering wrongdoing, that is,
covering actions where liability might otherwise exist. The argument is facially
appealing, but we find it unpersuasive. First, it proves too much. As we explain
below, the UPL contains other immunity provisions that even I-Flow recognizes
are conditioned on compliance with the UPL. (§§ 1560, 1561.) If conditioning
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section 1532‟s immunity on compliance with the UPL would render it
meaningless surplusage, then the same would seem to be true of the immunity of
sections 1560 and 1561. In fact, good reason exists for the Legislature to provide
for this immunity expressly even if it is conditioned on compliance with the UPL.
As noted above, because the corporation does not possess the escheated
stock, it cannot, under ordinary circumstances, transfer the stock without the
participation of the owner. To deal with the absence of possession, the Legislature
has directed the holders of escheated stock to deliver a duplicate certificate to the
Controller or register the security in the Controller‟s name. (§ 1532, subd. (d).)
As amicus curiae Controller stated at oral argument, issuing a duplicate stock
certificate would be “a very unorthodox act.” This procedure is inconsistent with
statutes governing the transfer of certificated and uncertificated securities. (See
Cal. U. Com. Code, § 8301 et seq.) Absent section 1532‟s immunity provision, a
corporation might be faced with conflicting demands to recognize a share of stock,
and with potential liability to two owners of the same share. (See Cal. U. Com.
Code, §§ 8401, 8405, subd. (b).) That section 1532 is concerned with this
particular potential liability is reflected in the provision‟s language and context.
The statute refers to liability “resulting . . . by the issuance and delivery to the
Controller of the duplicate certificate or the registration of the uncertificated
securities to the Controller” (§ 1532, subd. (d)), rather than more generally to
liability resulting from the transfer of intangible property to the Controller. In
addition, the statute‟s specific reference to claims by “any person acquiring the
original certificate or the duplicate of the certificate issued to the Controller”
(ibid.) focuses on liabilities related to the existence of both certificates. It is not
meaningless for the Legislature to assure corporations issuing duplicate stock
certificates in compliance with the UPL that they will incur no liability for doing
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so. The fact the Legislature provided such assurance expressly does not mean the
grant of immunity extends to actions that do not comply with the UPL.
Certainly, if section 1532 had not expressly immunized the delivery of
duplicate stock certificates in compliance with the UPL, it is likely the courts
would have read the UPL as implying such immunity. But this circumstance does
not make the express grant of immunity meaningless or permit the courts to
interpret the immunity as broader than the language otherwise permits.
Sometimes the Legislature may choose to state expressly what would otherwise be
implied to make the statute‟s meaning entirely clear, avoid unnecessary litigation,
and reassure entities that must comply with the statute. Moreover, as the Court of
Appeal explained in this case, “Corporations that comply with the UPL are
immunized from claims that the corporations breached contractual or fiduciary
duties over and above the UPL — they are immunized from claims that they
should have done more than the UPL requires. The value of this immunity is not
lessened by maintaining the liability of corporations that do less than the UPL
demands.”
I-Flow cites other immunity provisions in the UPL in support of its
position. Section 1560, subdivision (a), gives immunity to any person who “pays
or delivers escheated property to the State Controller under this chapter . . . .”
Section 1561, subdivision (a), requires the Controller to defend and indemnify a
holder who “pays or delivers escheated property to the State Controller in
accordance with this chapter . . . .” I-Flow agrees that these grants of immunity
are limited to actions that comply with the UPL and do not extend to mistaken
deliveries. Indeed, the Law Revision Commission comment to section 1561 states
that section 1561, subdivision (a), “like Section 1560, applies only in cases in
which escheated property has been paid or delivered to the Controller. If the
holder mistakenly delivers to the Controller property that has not escheated, this
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section does not require the Controller to defend the claim of the owner or
indemnify the holder.” (Cal. Law Revision Com. com., 20 West‟s Ann. Code Civ.
Proc. (2007 ed.) foll. § 1561, pp. 308-309.)
I-Flow argues that the immunity provisions of sections 1560 and 1561
support its position in two respects. First, it argues that because these statutes
immunize the delivery of property in compliance with the UPL, section 1532 must
be interpreted as providing absolute immunity to prevent it from simply
duplicating sections 1560 and 1561. Second, it argues that these statutes show
“that the Legislature knew how to condition immunity on full compliance with
certain conditions when it wanted to do so.” Neither argument supports I-Flow‟s
position. Section 1532 does not duplicate sections 1560 and 1561. Sections 1560
and 1560 govern the delivery of escheated property. Section 1532 governs the
issuance and delivery of duplicate stock certificates. These are two different
actions. The Legislature could logically decide to have separate immunity
provisions for these varying actions. We also agree that the Legislature knows
how to condition immunity on compliance with the UPL, but it did so regarding
section 1532 by giving immunity only to holders of property actually subject to
escheat under section 1516, subdivision (b).
Indeed, the circumstance that the immunity of sections 1560 and 1561 is
conditioned on compliance with the UPL supports a similar interpretation of
section 1532. We see no reason the Legislature would condition immunity for
delivering property on the property‟s being actually subject to escheat (§§ 1560
and 1561) but grant absolute immunity for issuing and delivering a duplicate stock
certificate even if the stock is not subject to escheat (§ 1532). Instead, the
Legislature likely intended parallel grants of immunity.
I-Flow argues, and the Verizon court concluded, that “the Legislature‟s
adoption of a rule of absolute immunity is consistent with the purpose of the UPL,
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which is to give the state rather than the holders of unclaimed property the benefit
of its use. [Citation.] Without this protection, holders of unclaimed property
concerned about lawsuits . . . would likely err on the side of retaining rather than
delivering unclaimed property to the Controller, thereby depriving the state of the
benefit of its use.” (Verizon, supra, 141 Cal.App.4th at p. 579.) On the contrary,
conditioning immunity on compliance with the UPL furthers its purposes —
which are to protect unknown owners and to give the state the benefit of the use of
unclaimed property. (See Harris v. Westly, supra, 116 Cal.App.4th at p. 219.)
Requiring compliance with the UPL — i.e., ensuring that the owners are in fact
unknown and the property is in fact unclaimed — furthers the purpose of
protecting unknown owners. Moreover, the state has no legitimate interest in
receiving and using property that is not unclaimed. As the Controller points out in
an amicus curiae brief supporting Azure on this issue, the state has no way of
determining whether stock delivered to it is in fact subject to escheat under section
1516, subdivision (b). As the Controller further states, “Only the corporation has
access to the information needed to know whether property meets the UPL‟s
conditions for escheat.” Thus, it makes sense for the Legislature to immunize a
corporation‟s delivery of unclaimed stock, but to condition the immunity on the
stock‟s being actually subject to escheat.
I-Flow also argues that recent legislation shows the Legislature impliedly
ratified the interpretation of section 1532 given in Verizon, supra, 141 Cal.App.4th
573. As the Court of Appeal explained, “[i]n 2007, after Verizon was decided, the
Legislature amended subdivision (a) of section 1532, added new subdivisions, and
redesignated subdivision (b) — the immunity provision — as subdivision (d)
without change. (Stats. 2007, ch. 179, § 4.)” We agree with the Court of Appeal
that this change does not ineluctably indicate legislative agreement with Verizon‟s
interpretation: “We do not see how a nonsubstantive renumbering of the
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subdivision containing the immunity provision constitutes a legislative
endorsement of Verizon, or anything other than an attempt to make room for new
subdivisions.” Under these circumstances we find little significance in the
Legislature‟s failure to amend the immunity provision when it amended the UPL
in other respects. (See Cel-Tech Communications, Inc. v. Los Angeles Cellular
Telephone Co. (1999) 20 Cal.4th 163, 178.)
For all of these reasons, we conclude that section 1532, subdivision (d),
immunizes only corporations that deliver stock in compliance with the UPL. We
disapprove Harris v. Verizon Communications, supra, 141 Cal.App.4th 573.
III. CONCLUSION
We affirm the judgment of the Court of Appeal.
CHIN, J.
WE CONCUR:

GEORGE, C.J.
BAXTER, J.
WERDEGAR, J.
CORRIGAN, J.
PERREN, J.*

_____________________________

* Associate Justice of the Court of Appeal, Second Appellate District, Division
Six, assigned by the Chief Justice pursuant to article VI, section 6 of the California
Constitution.
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DISSENTING OPINION BY MORENO, J.

Code of Civil Procedure section 1516, subdivision (b), 1 which is part of the
Unclaimed Property Law (UPL), provides that “any intangible interest in a
business association, as evidenced by the stock records or membership records of
the association, escheats to this state if (1) the interest in the association is owned
by a person who for more than three years has neither claimed a dividend or other
sum . . . nor corresponded in writing with the association . . . and (2) the
association does not know the location of the owner at the end of the three-year
period. With respect to the interest, the business association shall be deemed the
holder.”
Section 1532, subdivision (d), requires the “holder of any interest under
subdivision (b) of Section 1516” to “deliver a duplicate certificate to the
Controller.” The statute provides a broadly worded immunity to the holder:
“Upon delivering a duplicate certificate . . . the holder . . . shall be relieved from
all liability of every kind to any person . . . for any losses or damages resulting to
that person by the issuance and delivery to the Controller of the duplicate
certificate . . . .” (§ 1532, subd. (d).)
The majority holds that this immunity is quite limited and applies only if
the holder has complied with all of the provisions of the UPL. I disagree. By its

1
All further statutory references are to the Code of Civil Procedure.
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terms, the immunity applies once the holder delivers a copy of the duplicate
certificate. The apparent purpose of the immunity is to protect the holder from
claims that in doing so, the holder has not complied with the UPL. In most
instances, someone who has complied with all aspects of the UPL is in no need of
immunity. The majority‟s holding largely defeats the apparent purpose of the
Legislature‟s broad grant of immunity.
The majority reaches its conclusion by relying upon a limited definition of
the term “holder” as used in the UPL. According to the majority, a person or
entity that delivers a duplicate stock certificate to the Controller is not a “holder”
within the meaning of the UPL until “the criteria of abandoned property is
satisfied.” (Maj. opn., ante, at p. 7.) The majority concludes: “Thus, section
1532, subdivision (d), immunizes only the holder of stock that is actually subject
to escheat under section 1516, subdivision (b).” (Ibid.)
Nowhere in the statutory scheme does the Legislature declare that a person
does not become a holder of stock until the criteria of abandoned property is
satisfied or that only holders of stock that is actually subject to escheat are entitled
to the broad immunity provided in section 1532, subdivision (d). Rather, the term
“holder” is defined broadly: “ „Holder‟ means any person in possession of
property subject to this chapter . . . .” (§ 1501, subd. (e).) The term “holder”
appears throughout the UPL and often is used to refer to a person in possession of
property that has not actually escheated.
For example, section 1513.5, subdivision (a) requires a “holder” that is a
“banking or financial organization” that “has in its records an address for the
apparent owner” to notify the apparent owner by mail that its property “will
escheat.” Thus, the term “holder” includes a person that has not yet satisfied all of
the requirements of the UPL and possesses property that may escheat, but is not
yet actually subject to escheat. (See also § 1520, subd. (b).)
2

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Section 1516, subdivision (d) similarly requires a business association to
“make reasonable efforts to notify the owner” that its interest may escheat to the
state by mailing a form to confirm the owner‟s current address. “If that form is
filled out, signed by the owner, and returned to the holder, it shall be deemed that
the business association knows the location of the owner.” The statute thus uses
the term “holder” to refer to someone who possesses property that is not actually
subject to escheat.
Limiting the definition of holder to apply only to property that is actually
subject to escheat is inconsistent with the language of section 1561, subdivision
(b), which states: “If any holder, because of mistake of law or fact, pays or
delivers any property to the State Controller that has not escheated under this
chapter and thereafter claims the property from the State Controller, the State
Controller shall, if he has not disposed of the property in accordance with this
chapter, refund or redeliver the property to the holder without deduction for any
fee or other charge.” Thus, a person who mistakenly delivers to the Controller
property that has not escheated is still referred to as a “holder” by the UPL.
The same is true of section 1560, subdivision (d), which provides in part:
“Any holder who has delivered personal property, including a certificate of any
interest in a business association, to the State Controller pursuant to this chapter
may reclaim such personal property if still in the possession of the State Controller
without payment of any fee or other charges upon filing proof that the owner
thereof has claimed such personal property from such holder.” This provision
permits a “holder” that has delivered apparently escheated stock to the Controller
to reclaim the stock when the owner of the stock later appears. Limiting the
definition of the term “holder” to apply only to stock that has actually escheated
would mean that the Controller would be permitted to return, without a fee, only
stock that actually had escheated, but would not be authorized to return stock that
3

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had been wrongly delivered and had not escheated. I can imagine no reason why
the Legislature would want to bar a holder that had mistakenly escheated stock to
the state, and then discovered its error, to correct its mistake and return the stock
to its rightful owner.
Another example is section 1532, subdivision (b), which states that if a
holder has included apparently escheated property in the required report, and the
owner thereafter “establishes his or her right to receive any property specified in
the report to the satisfaction of the holder before that property has been delivered
to the Controller, or it appears that, for any other reason, the property may not be
subject to escheat under this chapter, the holder shall not pay or deliver the
property to the Controller . . . .” This statute thus also uses the term “holder” to
refer to someone who possesses property that is not actually subject to escheat.
The Legislature has not used the term “holder” in the limited sense
described by the majority. Rather, it has used the term broadly to refer to property
that may be subject to escheat. I conclude, therefore, that the Legislature intended
the immunity provided in section 1532, subdivision (d), to apply broadly to protect
those that deliver to the Controller property that may be subject to escheat.
MORENO, J.
4

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See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Azure Limited v. I-Flow Corporation
__________________________________________________________________________________

Unpublished Opinion

Original Appeal
Original Proceeding
Review Granted XXX 163 Cal.App.4th 303
Rehearing Granted

__________________________________________________________________________________

Opinion No.

S164884
Date Filed: July 16, 2009
__________________________________________________________________________________

Court:

Superior
County: Orange
Judge: W. Michael Hayes

__________________________________________________________________________________

Attorneys for Appellant:

Shapiro, Rodarte & Forman, Carl W. Shapiro, Theresa Z. Youhanaie, Leora D. Freedman and Thomas W.
Foote for Plaintiff and Appellant.

Law Office of William W. Palmer and William W. Palmer for Bank of Stockton, Alexander Vondjidis,
Agnes W. Suever, Madonna Suever, Steve Tucker, Richard W. Seitzinger, Jo-Ann S. Seitzinger, Seitzinger
Family Trust, Johnstone Whitley, Lynn Keith, Richard Valdez, Tony Lee, Chris Lusby Taylor, Nancy A.
Pepple-Gonsalves, Gary Kesselman, Susan Swinton, Dawn E. Struck, William J. Palmer, Leslie Saul-
Gershenz, Carla Ruff and Emilio G. Milian as Amici Curiae on behalf of Plaintiff and Appellant.

__________________________________________________________________________________

Attorneys for Respondent:

Gibson, Dunn & Crutcher, Jeffrey H. Reeves, J. Scot Kennedy, John N. Carter and Julian W. Poon for
Defendant and Respondent.

Remcho, Johansen & Purcell, Robin B. Johansen, James C. Harrison and Margaret R. Prinzing for
California State Controller John Chiang as Amicus Curiae.

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Counsel who argued in Supreme Court (not intended for publication with opinion):

Carl W. Shapiro
Shapiro, Rodarte & Forman
233 Wilshire Boulevard, Suite 700
Santa Monica, CA 90401-1220
(310) 319-5400

Robin B. Johansen
Remcho, Johansen & Purcell
201 Dolores Avenue
San Leandro, CA 94577
(510) 346-6200

Julian W. Poon
Gibson, Dunn & Crutcher
3161 Michelson Drive
Irvine, CA 92612-4412
(949) 451-3800

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Petition for review after the Court of Appeal reversed the judgment in a civil action. This case presents the following issue: Is the statutory immunity accorded a corporation that transfers escheated shares of stock to the state (Code Civ. Proc. section 1532, subd. (d)) absolute or conditional?

Opinion Information

Date:	Citation:	Docket Number:	Category:	Status:	Cross Referenced Cases:
Thu, 07/16/2009	46 Cal. 4th 1323, 210 P.3d 1110, 96 Cal. Rptr. 3d 501	S164884	Review - Civil Appeal	closed; remittitur issued	VONDJIDIS v. HEWLETT PACKARD (S169532)

Opinion Authors
Opinion	Justice Ming W. Chin
Dissent	Justice Carlos R. Moreno

Disposition
Jul 16 2009	Opinion: Affirmed

Dockets
Jul 3 2008	Petition for review filed I-FLOW CORPORATION, Defendant and Respondent J. Scot Kennedy, Attorney
Jul 7 2008	Record requested
Jul 10 2008	Received Court of Appeal record one file folder/briefs
Jul 21 2008	Request for depublication (petition for review pending) Boeing Corp., non-party Barrett Green, counsel
Jul 23 2008	Answer to petition for review filed Azure Limited, appellant Leora D. Freedman, counsel
Jul 23 2008	Received Court of Appeal record Azure Limited, appellant Leora D. Freedman, counsel
Aug 27 2008	Petition for review granted (civil case) Votes: George, C.J., Kennard, Baxter, Werdegar, Chin, Moreno, and Corrigan, JJ.
Sep 3 2008	Received additional record transcripts
Sep 4 2008	Certification of interested entities or persons filed Leora D. Freedman Esq., for appellant
Sep 11 2008	Certification of interested entities or persons filed John Scott Kennedy, for respondent
Sep 29 2008	Opening brief on the merits filed I-Flow Corp., defendant and respondent Jeffrey Reeves, counsel timely per CRC 8.25b
Oct 16 2008	Request for extension of time filed answer brief/merits to 11-26-08 Appellant Azure Limited ~Attorney Thomas W. Foote
Oct 21 2008	Extension of time granted On application of appellant and good cause appearing, it is ordered that the time to serve and file the answer brief on the merits is extended to and including November 26, 2008.
Nov 26 2008	Answer brief on the merits filed Azure Limited, Appellant
Dec 15 2008	Received: Letter from counsel for appellant citing court of appeal opinion
Dec 22 2008	Received: Reply Brief on the Merits (LATE) / submitted with application for relief from default / respondent, I-Flow
Dec 30 2008	Reply brief filed (case fully briefed) I-Flow Corporation, respondent J. Scot Kennedy, counsel Filed with permission
Jan 27 2009	Application to file amicus curiae brief filed State Controller John Chiang Robin Johansen, counsel
Jan 28 2009	Application to file amicus curiae brief filed Alexander Vondjidis, Bank of Stockton, et al. William Palmer, counsel
Jan 28 2009	Request for judicial notice received (pre-grant) Bank of Stockton, et al. William Palmer, counsel
Feb 5 2009	Filed: Notice of change of Firm name The Firm of Shapiro, Rodarte & Forman LLP attorneys for appellant Azure Limited
Feb 5 2009	Permission to file amicus curiae brief granted The application of Bank of Stockton, et al., for permission to file an amicus curiae brief in support of appellant is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief.
Feb 5 2009	Amicus curiae brief filed Bank of Stockton, et al., in support of Azure Limited, appellant, by William W. Palmer, Counsel
Feb 5 2009	Request for judicial notice filed (granted case) Bank of Stockton, et al., amicus curiae party, by William W. Palmer, Counsel
Feb 6 2009	Permission to file amicus curiae brief granted The application of State Controller John Chiang for permission to file an amicus curiae brief in partial support of respondent and partial support of appellant is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief.
Feb 6 2009	Amicus curiae brief filed State Controller John Chiang in partial support of respondent and partial support of appellant, by Robin B. Johansen, Counsel
Feb 9 2009	Request for extension of time filed and application for permission to file 'Joint' consolidated answer to all amicus briefs respondents I-Flow Corporation and Azure LTD., [extension request is to 3-25-09]
Feb 20 2009	Extension of time granted On joint application of appellant and respondent and good cause appearing, it is ordered that the time to serve and file the parties' consolidated answers to the amicus curiae briefs is extended to and including March 25, 2009.
Mar 24 2009	Response to amicus curiae brief filed Appellant Azure Limited responding to the A.C. Brief of The State Controller's
Mar 25 2009	Received: respondent I-FLOW Corp.'s objection to Request for Judicial notice submitted by amici curiae "Bank of Stockton" .
Mar 25 2009	Response to amicus curiae brief filed respondent I-FLOW Corp consolidated Response to the two Amicus Briefs filed in this matter.
Apr 1 2009	Case ordered on calendar to be argued Tuesday, May 5, 2009, at 9:00 a.m., in San Francisco
Apr 3 2009	Justice pro tempore assigned Justice Steven Perren (2/6) (Kennard, J., recused)
Apr 14 2009	Application filed Application to divide oral argument time, filed by Carl Shapiro, counsel for appellant Azure Limited, asking to share 10 minutes with amicus curiae State Controller John Chiang.
Apr 16 2009	Order filed The request of counsel for appellant in the above-referenced cause to allow two counsel to argue on behalf of appellant at oral argument is hereby granted. The request of appellant to allocate to amicus curiae State Controller John Chiang ten minutes of appellant's 30-minute allotted time for oral argument is granted.
Apr 21 2009	Filed: Letter from Carl W. Shapiro, counsel for appellant Azure, Ltd., advising the court that a new factual issue has come to appellant's attention. The letter asks the court to determine whether this circumstance should be considered by the Supreme Court on this appeal or alternatively via remand to the trial court.
Apr 21 2009	Filed: Response of Julian Poon, counsel for respondent I-Flow, to letter from counsel for appellant.
Apr 23 2009	Filed: Letter from Carl W. Shapiro, counsel for appellant Azure, Ltd., replying to 4/21/2009 letter from respondent I-Flow Corporation.
Apr 24 2009	Request for judicial notice denied The request for judicial notice, filed on February 5, 2009, is denied. Kennard, J., was recused and did not participate.
May 5 2009	Cause argued and submitted
Jul 15 2009	Notice of forthcoming opinion posted
Jul 16 2009	Opinion filed: Judgment affirmed in full Majority opinion by Chin, J. -----joined by George, C.J., Baxter, Werdegar, Corrigan and Perren*, JJ. Dissent by Moreno, J. *Assigned
Aug 24 2009	Remittitur issued

Briefs
Sep 29 2008	Opening brief on the merits filed I-Flow Corp., defendant and respondent Jeffrey Reeves, counsel timely per CRC 8.25b
Nov 26 2008	Answer brief on the merits filed Azure Limited, Appellant
Dec 30 2008	Reply brief filed (case fully briefed) I-Flow Corporation, respondent J. Scot Kennedy, counsel Filed with permission
Feb 5 2009	Amicus curiae brief filed Bank of Stockton, et al., in support of Azure Limited, appellant, by William W. Palmer, Counsel
Feb 6 2009	Amicus curiae brief filed State Controller John Chiang in partial support of respondent and partial support of appellant, by Robin B. Johansen, Counsel
Mar 24 2009	Response to amicus curiae brief filed Appellant Azure Limited responding to the A.C. Brief of The State Controller's
Mar 25 2009	Response to amicus curiae brief filed respondent I-FLOW Corp consolidated Response to the two Amicus Briefs filed in this matter.

Brief Downloads
I-Flow's Opening Brief.PDF (1508654 bytes) - OPENING BRIEF ON THE MERITS
I-Flow's reply.PDF (9383583 bytes) - REPLY BRIEF ON THE MERITS
State Controller's Amicus.PDF (12918927 bytes) - AMICUS CURIAE BRIEF OF STATE CONTROLLER JOHN CHIANG
Azure's Answer to Amicus.PDF (516310 bytes) - APPELLANT AZURE LIMITED'S ANSWER BRIEF TO THE STATE CONTROLLER'S AMICUS CURIAE BRIEF
I-Flow's answer to amici.PDF (734924 bytes) - DEFENDANT RESPONDENT I-FLOW CORPORATION'S CONSOLIDATED ANSWER BRIEF ON THE MERITS TO AMICUS CURIAE BRIEFS
Small Azure's Answer Brief.pdf (13279832 bytes) - Appellant Answer Brief on the Merits
Small W.Palmer's Amicus.pdf (10952716 bytes) - Amicus Curiae in Support of Azure

If you'd like to submit a brief document to be included for this opinion, please submit an e-mail to the SCOCAL website

Nov 11, 2009 Annotated by Matthew Kellogg

In Azure Ltd. v. I-Flow Corp., the Court held that the immunity offered by Code of Civil Procedure § 1532 applies only when a corporation has fully complied with the requirements of the Unclaimed Property Law (UPL). Before transferring unclaimed stock to the state as escheated property, the law requires both that (1) the corporation does not know the location of the owner who has failed to claim the stock and (2) the corporation gives the owner at least six months' notice. Azure sued I-Flow because I-Flow knew Azure's location at all times during the relevant period and I-Flow failed to give Azure adequate notice to allow it to claim its stock in time. I-Flow, however, claimed that the immunity provisions of § 1532 sheltered it from "all liability . . . for any losses or damages resulting" from its transfer of Azure's stock to the state. The key question thus became whether § 1532 immunity is contingent on compliance with the rest of the UPL. The Court concluded that it is. After a careful examination of the statutory language and structure, the Court found that § 1532 promises immunity to a "holder" of the unclaimed stock. For a corporation to become a "holder," the UPL requires that the stock meet the requirements of official abandonment, therefore subjecting it to transfer to the state. Accordingly, the law reserves immunity for only those corporations that have complied with the UPL. In reaching its conclusion, the Court rejected the arguments of I-Flow and Justice Moreno's dissent, both of which asserted that § 1532 immunity must be broader because, as the dissent put it, "[i]n most instances, someone who has complied with all aspects of the UPL is in no need of immunity." The Court found that the purpose of the immunity is limited to liability that a corporation might face for providing the state with a duplicate certificate of the unclaimed stock; in other words, "they are immunized from claims that they should have done more than the UPL requires." By requiring compliance with the UPL, the law furthers its goal of protecting the unknown owners of the unclaimed property. As a result of this ruling, the Court explicitly disapproved the earlier California Court of Appeal decision Harris v. Verizon Communications, 141 Cal. App. 4th 573 (2006).

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