LASSITER (MARY) VS. AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC. , ET AL.Annotate this Case
RENDERED: OCTOBER 3, 2008; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
MARY LASSITER, IN HER OFFICIAL
CAPACITY AS STATE BUDGET
APPEAL AND CROSS-APPEAL FROM FRANKLIN CIRCUIT COURT
HONORABLE THOMAS D. WINGATE, JUDGE
ACTION NO. 06-CI-01151
AMERICAN EXPRESS TRAVEL
OPINION AND ORDER
** ** ** ** **
BEFORE: MOORE AND THOMPSON, JUDGES; HENRY,1 SENIOR JUDGE.
Senior Judge Michael L. Henry sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5)(b) of the Kentucky Constitution and Kentucky Revised Statute (KRS)
HENRY, SENIOR JUDGE: Mary Lassiter, in her official capacity as the State
Budget Director, appeals from a judgment of the Franklin Circuit Court which
granted declarative and injunctive relief to American Express Travel Related
Services Company, Inc. (AmEx), after determining that a section of the state
budget that shortened the period after which a traveler’s check is presumed
abandoned was unconstitutional. AmEx has cross-appealed, arguing that the
circuit court erred in ruling that the Budget Director was a necessary party to the
Kentucky’s Unclaimed Property Act, found at Kentucky Revised
Statutes (KRS) Chapter 393, governs the custody and disposition of unclaimed or
abandoned property, including traveler’s checks. KRS 393.060 provides that
traveler’s checks are presumed abandoned if they have been outstanding for more
than fifteen years.
The following property held or owing by a banking or
financial organization is presumed abandoned:
(2) Any sum payable on checks certified in this state or
on written instruments issued in this state on which a
banking or financial organization or business association
is directly liable, including, by way of illustration but not
of limitation, certificates of deposit, drafts, money orders,
and traveler's checks, that with the exception of traveler's
checks has been outstanding for more than seven (7)
years from the date it was payable, or from the date of its
issuance if payable on demand, or, in the case of
traveler's checks that has been outstanding for more than
fifteen (15) years from the date of its issuance unless the
owner has within seven (7) years or within fifteen (15)
years in the case of traveler's checks corresponded in
writing with the banking or financial organization
concerning it, or otherwise indicated an interest as
evidenced by a memorandum on file with the banking or
Property that is presumed to be abandoned is taken into custody by the
Treasurer, although ownership of the property does not vest in the state at that
If any intangible property is turned over to the
department on presumption of abandonment, in
accordance with KRS 393.060 to 393.120, the State
Treasurer may at any subsequent time institute
proceedings to establish conclusively that it was actually
abandoned, or that the owner has died and there is no
person entitled to it.
[T]he scheme of KRS Chapter 393 seems to be that the
appellant [the state] is to have the custody of property . . .
when a presumption of abandonment takes place. Until
the property has been adjudged by a court of competent
jurisdiction to be actually abandoned, the property does
not escheat to the state, and until that time the owner still
is entitled to regain its possession from the appellant.
Commonwealth by Geary v. Johnson, 668 S.W.2d 569, 570 (Ky.App. 1984).
The Executive Branch biennial budget for 2006-2008, which became
effective on April 25, 2006, contained the following provision:
Abandonment of Traveler’s Checks: Notwithstanding
KRS 393.060, traveler’s checks held or owing by a
banking or financial organization shall be presumed
abandoned when the period of time the traveler’s checks
have been outstanding exceeds seven years . . .
HB 380, Part III, Section 39 (see 2006 Ky. Acts Ch. 252, pp. 261-262). Section 39
thus shortened by eight years the period after which a traveler’s check is presumed
to be abandoned, and thereby accelerated the deadline by which the state was
entitled to take custody of the proceeds and begin collecting interest income. The
Legislature reduced the statutory period as a revenue-raising measure. The change
was projected to raise $2.4 million in the fiscal year 2006-2007, and another
$400,000 in fiscal year 2007-2008. As an issuer of traveler’s checks, AmEx was
adversely affected because it shortened by eight years the period during which
AmEx could collect interest income on the proceeds of the unredeemed checks.
AmEx filed suit against the Department of Treasury and the Treasurer
in his official capacity on August 17, 2006. The Complaint sought injunctive relief
prohibiting the defendants from enforcing Section 39 and to have Section 39
declared unconstitutional. On October 19, 2006, the trial court entered an order
staying enforcement of Section 39. This order was extended by an additional sixty
days on November 16, 2006.
On October 12, 2006, the Treasurer filed a Motion to Join Persons
Needed for Just Adjudication, seeking to join the State Budget Director and the
Director of the Legislative Research Commission as defendants. The trial court
granted the motion as to the State Budget Director, and denied it as to the Director
of the LRC.
AmEx moved for summary judgment on September 22, 2006. The
defendants filed separate responses. On January 31, 2007, the circuit court entered
an order granting the motion and permanently enjoining the enforcement of
Section 39, reasoning that the section violates Section 51 of the Kentucky
Constitution because it revises a statute in order to raise revenue rather than merely
to suspend an appropriation as occurred in Armstrong v. Collins, 709 S.W.2d 437
(Ky. 1986). By its order dated April 3, 2007, the circuit court denied the Budget
Director’s motion to alter or amend the circuit court’s judgment.
On May 3, 2007, the Budget Director filed a notice of appeal of the
judgment. The body of the notice stated that the Treasurer was not a party against
whom the appeal was taken. The Treasurer did not file a notice of appeal. On
May 10, 2007, AmEx filed a cross-appeal of the circuit court’s decision to join the
Budget Director as a defendant. On July 10, 2007, AmEx filed a motion to dismiss
the Budget Director’s appeal for failure to join an indispensable party, the
Treasurer. On February 26, 2008, the Kentucky Department of Treasury notified
the court that one of their counsel had withdrawn his representation, but that the
Department continued to be represented by an Assistant Attorney General. AmEx
responded with a motion to strike the notice of withdrawal and substitution on the
ground that the Treasurer was not a party to the appeal. This motion, as well as the
AmEx’s earlier motion to dismiss the appeal, was passed to this panel for
We address first AmEx’s motion to dismiss. AmEx argues that the
Budget Director failed to name an indispensable party to the appeal – one of the
defendants in the action before the circuit court, the Treasurer.
It is well-established that failure to name an
indispensable party in the notice of appeal results in
dismissal of the appeal. Ky. R. Civ. P. 19.02; City of
Devondale v. Stallings, 795 S.W.2d 954 (Ky.1990). The
failure to name an indispensable party in the notice of
appeal is considered a jurisdictional defect. Id.
Slone v. Casey, 194 S.W.3d 336, 337 (Ky.App. 2006).
Kentucky Rules of Civil Procedure (CR) 73.03(1) provides that
The notice of appeal shall specify by name all appellants
and all appellees (“et al.” and “etc.” are not proper
designation of parties) and shall identify the judgment,
order or part thereof appealed from. It shall contain a
certificate that a copy of the notice has been served upon
all opposing counsel, or parties, if unrepresented, at their
last known address.
The caption of the Budget Director’s notice of appeal named as
plaintiff “American Express Travel Related Services Company, Inc.” It named as
defendant “Commonwealth of Kentucky, Kentucky Department of Treasury, et al.”
The body of the notice stated as follows:
Pursuant to CR 73.03, notice is given that the Defendant,
Bradford L. Cowgill, in his official capacity as State
Budget Director, hereby appeals to the Kentucky Court
of Appeals from the Judgment entered by this Court on
January 31, 2007 . . . .
Appellant is Bradford L. Cowgill in his official capacity
as State Budget Director. The name of the Appellee
against whom this appeal is taken is American Express
Travel Related Services Company, Inc., the plaintiff in
The Commonwealth of Kentucky, Kentucky Department
of Treasury, Jonathan Miller, Treasurer, was also a
defendant in this proceeding, but is not a party against
whom this appeal is taken.
The Budget Director argues that the fact that Miller’s name is
contained in the body of the notice is sufficient for him to be deemed a party to the
appeal under Morris v. Cabinet for Families and Children, 69 S.W.3d 73 (Ky.
2002) and Blackburn v. Blackburn, 810 S.W.2d 55 (Ky. 1991). In Morris, it was
held that naming a child solely in the caption of the notice was sufficient to make
the child an appellee. The court explained its reasoning as follows:
In Blackburn v. Blackburn, Ky., 810 S.W.2d 55 (1991),
this Court held that a notice of appeal was adequate
under CR 73.03 if it contained a listing of parties
sufficient to give the opposing party notice of the
identities of the parties against whom the appeal was
filed. The principal objective of a pleading is to give fair
notice to the opposing party. Id. at 56, citing Lee v.
Stamper, Ky., 300 S.W.2d 251 (1957).
Morris v. Cabinet for Families and Children, 69 S.W.3d 73, 74 (Ky. 2002).
Here, however, the Treasurer was not specifically named in the caption, nor did the
notice of appeal give the opposing party notice of the identities against whom the
appeal was filed. Indeed, the Treasurer was specifically excluded as an opposing
party by the terms of the body of the notice, which positively informed the Court
that the Treasurer was not a party against whom the appeal was being taken. This
Court has held that naming an indispensable party in an incorrect legal capacity is
fatal to the appeal. Slone, 194 S.W.3d at 337. The same principle applies here.
Failure to name a party “is not grounds for dismissing the appeal
unless the omitted party is an indispensable party to the appeal.” Schulz v.
Chadwell, 548 S.W.2d 181, 184 (Ky.App. 1977). “Whoever is a party to the
record in the court below, and would be a necessary party to any further
proceedings after the reversal of the judgment, must be a party to the appeal.”
Land v. Salem Bank, 279 Ky. 449, 130 S.W.2d 818, 821 (1939) (citation omitted).
“Failure to specify any party whose absence prevents the appellate court from
granting complete relief among those already parties would be fatal to the appeal.”
Braden v. Republic-Vanguard Life Ins. Co., 657 S.W.2d 241, 243 (Ky. 1983) citing
Levin v. Ferrer, 535 S.W.2d 79 (Ky. 1975).
AmEx has argued that the Treasurer is a necessary party to this appeal
because he is the only state official with the power to enforce KRS 393.060, and is
therefore the sole entity bound by the trial court’s injunction, which was not
directed at any specific party. KRS 393.230(1) provides that
[i]f any person or the agent of any court refuses to pay or
surrender intangible property to the department as
provided in KRS 393.060 to 393.110, an equitable
proceeding may be brought on the relation of the State
Treasurer to force payment or surrender. All property
subject to KRS 393.060 to 393.110 may be listed and
included in a single action.
KRS 393.240(1) further provides that
[i]f any person has property coming within the purview
of KRS 393.020 to 393.050, and also of KRS 393.060 to
393.110, the actions required to be brought by the county
attorney and the State Treasurer may be joined, but
joinder is not required, and if separate actions are
brought, they shall not be considered as coming within
the rule against splitting a cause of action. The county
attorney is not charged with the duty of enforcing
sections KRS 393.060 to 393.120, 393.150, or 393.160.
AmEx argues that the Treasurer’s failure to appeal the circuit court’s
ruling has rendered the injunction final and binding against the only officer
authorized to enforce the statute against AmEx. Even if the judgment was reversed
on appeal, AmEx asserts, the outcome as to AmEx could not be changed. “Only
the parties to an appeal are bound by the appellate court's disposition of the
proceeding.” Levin v. Ferrer, 535 S.W.2d 79, 82 (Ky. 1976).
AmEx further argues that the Treasurer’s absence means that there is
no “actual controversy” remaining between the parties to this appeal since the
Treasurer is the only individual with any enforcement powers and hence the only
entity bound by the injunction. Consequently, AmEx asserts, this appeal is moot.
The Budget Director contends that because the statutory scheme in
question is self-effectuating, i.e., the statute requires AmEx to turn over the
proceeds from the presumptively abandoned traveler’s checks to the Treasury
without any action on the part of the Treasurer, an enforcement action by the
Treasurer is not a necessary precondition to compliance by AmEx. Only an
unlawful refusal on AmEx’s part to comply with the statute would trigger the
provisions of KRS 393.230(1). He contends that “[t]he statute that requires action
is KRS 393.110, and it requires action by AmEx . . . not by the Treasurer.”
KRS 393.110 provides as follows:
The [Treasury] department shall promulgate
administrative regulations prescribing the reports which
shall be filed with the department by persons holding
property presumed abandoned, including the date for
filing reports, the contents of the reports, the coverage
period of the reports, identifying information concerning
the property and presumptive owner if known, the
manner in which property shall be transferred from the
person holding it to the department, requirements for
providing notice to a person who may be the owner of
property presumed abandoned, legal actions that may be
taken to claim property presumed abandoned, and any
other necessary and relevant information needed by the
department to carry out the responsibilities concerning
unclaimed property prescribed in this chapter. The
department shall, notwithstanding KRS 424.180 and
424.190, provide on an annual basis notice or published
advertisement of property transferred to it. Any
procedures prescribed by the department in accordance
with this section shall employ the most cost-effective
methods available for the submission of reports to the
department and the notice or advertisement of property
transferred to the department.
Under the terms of this statute, the Treasurer is bound to promulgate
regulations in order to enforce the terms of KRS 393.060, or Section 39. In
Monticello Electric Plant Bd. v. Board of Ed. of Wayne County, 310 S.W.2d 272
(Ky. 1958), a dispute arose between the plant board (a city agency) and a light
company with whom the board had contracted to purchase some properties. The
dispute centered on which of the parties should pay taxes for the year in which the
properties were sold. The court held that the plant board could not prevail on
appeal, in part because “the board has not named the Kentucky Tax Commission as
an appellee. The commission is the party whose action is sought to be controlled
by the judgment, and it appears to us to be an essential party to the appeal.” Id. at
273. In this case, although AmEx is bound to follow the law and turn over the
proceeds from the traveler’s checks, much as the parties in Monticello were bound
to pay state income tax, action must be taken by the Treasurer to promulgate
regulations to govern this process. Should Section 39 be deemed constitutional,
action would be required on the Treasurer’s part to revise the existing regulations
to reflect the shortened period of abandonment. Similarly, in Hammond v.
Department for Human Resources, 652 S.W.2d 91 (Ky.App. 1983), this Court held
that the State Personnel Board was a necessary party to an appeal in a case
involving an employee dismissed by the Department for Human Resources. The
Board was required by statute to be a party in the appeal to the circuit court and it
was deemed illogical not to require the Board also to be a party in the appeal to this
Court, “[f]or not only will such Board be bound by the final opinion and decision
of the appellate Court, but, in addition, it may well be instructed or directed to take
some further action.” Id. at 92.
Finally, in Boyd & Usher Transport v. Southern Tank Lines, Inc., 320
S.W.2d 120 (Ky. 1959), it was held that the Department of Motor Transportation
was a indispensable party to an appeal concerning tariffs imposed on trucking
companies, even though it was not an adversary in the proceedings, because its
“functions and duties . . . will be directly affected” by the decision on appeal. Id.
at 123-124. Similarly, in this case, the Treasurer is not strictly speaking an
“adversary” in the proceedings because he is bound to enforce whatever version of
the statute is deemed constitutional, but his functions and duties as they are set
forth in KRS 393.110 would be directly affected by our decision on appeal.
Even more significant, however, is the fact that the Treasurer remains
bound by the lower court’s injunction. Without the Treasurer’s presence as a
party, the Budget Director is effectively seeking an advisory opinion.
The party responsible for enforcement of the allegedly
unconstitutional statute must be the defendant against
whom suit for declaratory relief is brought . . . . In the
absence of that party, the petitioner merely requests an
City of Longview v. Head, 33 S.W.3d 47, 54 (Tex.App. 2000).
A restraining order granting injunctive relief against the
enforcement of a statute or ordinance is to be directed
against the acts of those specific public officials charged
with enforcing the statute to enjoin their threatened
enforcement. Akers v. Floyd County Fiscal Court, Ky.,
556 S.W.2d 146 (1977) (citing 42 Am.Jur.2d § 186).
Commonwealth v. Mountain Truckers Ass'n, Inc., 683 S.W.2d 260, 263 (Ky.App.
We are persuaded by the reasoning in a factually similar case from the
Court of Appeals for the Seventh Circuit, Kendall-Jackson Winery, Ltd. v.
Branson, 212 F.3d 995 (7th Cir. 2000). In that case, a group of suppliers of wine
and spirits brought suit alleging that the Illinois Wine and Spirits Industry Fair
Dealing Act was unconstitutional for interfering with their agreements with
distributors. The federal district court granted a preliminary injunction enjoining
the enforcement of the Act by the Illinois Liquor Control Commission. The
suppliers then dropped their old distributors, who appealed. The Commission did
not appeal, however. The appellate court concluded that
[b]ecause the Commission has not appealed, it remains
bound by the injunctions no matter what happens on the
distributors' appeals, so it is not clear what point the
distributors' appeals can serve. Penda Corp. v. United
States, 44 F.3d 967, 971 (Fed.Cir.1994).
[T]he distributors miss the real problem: redressability.
Sure the injunction injures them, but how can their
appeal redress that injury given that the injunction will
continue to bind the Commission?
Kendall-Jackson, 212 F.3d at 997-998.
The party whose conduct is being enjoined is an indispensable party
to the appeal. To paraphrase the opinion of the Seventh Circuit Court of Appeals,
because the Treasurer has not appealed, he remains bound by the injunction no
matter what happens on the Budget Director’s appeal, so it is not clear what point
the Director’s appeal can serve. The Budget Director has addressed this point by
arguing that even if the Treasurer’s failure to appeal resulted in claim preclusion
between AmEx and the Treasurer, the Budget Director could still obtain complete
relief as to AmEx through a mandatory injunction compelling AmEx to comply
with the statute. Apart from the fact that this would not solve the problem of the
advisory appeal, “[a]n indispensable party is one whose absence prevents the Court
from granting complete relief among those already parties.” Milligan v. Schenley
Distillers, Inc., 584 S.W.2d 751, 753 (Ky.App. 1979). The need to seek such an
injunction after the appeal confirms that complete relief could not be granted to the
Budget Director by this Court.
For the foregoing reasons, the motion of the appellee/cross-appellant
to dismiss the appeal for failure to join the Treasurer, a necessary party, is granted,
and the appeal is hereby dismissed.
MOORE, JUDGE, CONCURS.
THOMPSON, JUDGE, DISSENTS AND FILES SEPARATE
ENTERED: October 3, 2008
/s/ Michael L. Henry
SENIOR JUDGE, COURT OF APPEALS
THOMPSON, JUDGE, DISSENTING: I respectfully dissent from
the majority’s order dismissing this appeal. Based on what it perceives as a
technical flaw in the notice of appeal, it has left undecided a significant
constitutional issue. I believe that no indispensable party was left unnamed and,
therefore, the merits of the appeal should be addressed.
This case presents a unique situation in that the Treasurer, for reasons
that are perhaps politically motivated, chose not to pursue an appeal. Yet, the
majority concludes that the Treasurer is an indispensable party to this appeal
because he was designated as a defendant in the circuit court action and, pursuant
to KRS 393.230, has the power to enforce the statutory provision in issue. Thus,
essentially the majority requires that a party be named as an appellant despite the
expressed intent not to pursue the appeal. In this case, the Treasurer must be
named as an appellant but presumably would not retain counsel, file a brief, or
otherwise participate in the proceedings. The futility in such a purely technical
requirement is certain where, as here, the named appellant and the omitted party
represent identical interest, the Commonwealth of Kentucky.
The majority is persuaded that the permissive language in KRS
393.060 that the Treasurer “may” enforce the statute in question confers such
authority exclusively within his purview and, as a result, the Treasurer has the sole
interest in the outcome of this appeal. I conclude that the majority’s initial
proposition is faulty and, as consequence, its conclusion equally flawed.
On numerous grounds, I cannot agree that the Treasurer is necessary
to properly adjudicate this appeal. Had the General Assembly intended that the
Treasurer be the sole enforcer of the statute, it would have used the mandatory
term “shall.” It remains that the Governor retains the power to direct that the
statute be enforced by other representatives of the Executive Branch such as the
Attorney General or the Department of Revenue. Moreover, the Budget Director
and the Treasurer both represent the Commonwealth. Thus, it cannot be said that
either was without notice of the appeal or their interest left unrepresented. Finally,
the issue in this case is whether the statute is constitutional. If it is not, the
Treasurer cannot enforce its provisions. This is true whether he is, or is not, a
party to this appeal.
I believe that this case requires that we follow the view taken in
Commonwealth of Kentucky, Department of Revenue v. Schmid, 404 S.W.2d 458
(Ky. 1966), where the Court concluded that, although the Department of Revenue
was an indispensable party, a taxpayer’s appeal was not fatally flawed when only
the Attorney General had been named as a party. The Court’s reasoning was sound
when it stated that by naming the Attorney General as a party, the state
government, including any of its involved agencies were likewise parties to the
appeal. The Court further emphasized that since the Department of Revenue was
aware of the litigation, it had suffered no harm by the failure to formally be
designated as a party. Id. at 458.
I firmly believe that this Court should follow the common sense view
taken in Schmid and review the merits of this case which present a legitimate
constitutional challenge. The legislation at issue was not a suspension and is a
revenue-raising statute hidden within a 666-page budget bill that was forwarded to
the General Assembly shortly before the vote. It is a substantive change that I
believe deserves Section 51 scrutiny. Prior to a vote, such legislation must be
published as a separate measure with notice to the members of the General
Assembly and the public, who have the ability to argue and contemplate its
For the reasons stated, I would not dismiss the appeal on the technical
ground advanced by the majority and instead decide the merits of this significant
constitutional challenge. As to the merits, I would affirm the trial court that this
legislation is unconstitutional.
BRIEFS FOR APPELLANT/
BRIEFS FOR APPELLEE/CROSSAPPELLANT:
Sheryl G. Snyder
M. Holliday Hopkins
J. Morgan McGarvey
Walter L. Sales
Timothy J. Eifler
Kathryn V. Eberle
ORAL ARGUMENT FOR
Sheryl G. Snyder
Paul C. Harnice
ORAL ARGUMENT FOR
Walter L. Sales