MINUTES OF THE SENATE COMMITTEE ON JUDICIARY Sixty-eighth Session February 24, 1995 The Senate Committee on Judiciary was called to order by Vice Chairman Jon C. Porter, at 8:30 a.m., on Friday, February 24, 1995, in Room 224 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Jon C. Porter, Vice Chairman Senator Maurice Washington Senator Mike McGinness Senator Ernest E. Adler Senator Dina Titus Senator O. C. Lee COMMITTEE MEMBERS ABSENT: Senator Mark A. James, Chairman (Excused) GUEST LEGISLATORS PRESENT: Senator Kathy Augustine Senator Dean A. Rhoads STAFF MEMBERS PRESENT: Allison Combs, Senior Research Analyst Lori M. Story, Committee Secretary Maddie Fisher, Primary Secretary OTHERS PRESENT: John P. Sande III, General Counsel and Lobbyist, Nevada Bankers Association Constance (Coni) Longero, Administrator, Division of Unclaimed Property, Department of Business and Industry Merritt (Ike) Yokum, Representative, Independent American Party Andie Engleman, Lobbyist, Nevada Press Association Lucille Lusk, Legislative Liaison, Nevada Concerned Citizens Doug Walther, Deputy, Nevada State Attorney General Jerry Lusk, Las Vegas Ken Scruggs, Government Relations Director, Household Financial Group Robert van Straten, State Records Manager, Nevada State Library and Archives Stephanie Tyler, Lobbyist, Regional Transportation Commission of Washoe County Leo Puchinelli, Attorney, Elko, Nevada John P. Sande III, General Counsel and Lobbyist, Nevada Bankers Association, asked the committee for a bill draft request regarding joint accounts (Exhibit C). He described a court decision, Starr v. Rousselet (Exhibit D) issued by the supreme court on a three to two decision (dissenting opinions from Young and Rose). He stated the decision dealt with joint bank accounts. The question before the court was whether, upon the death of one party, the property passes by right of survivorship to the other party to the account or "joint tenant." Mr. Sande noted this has been the law for years regardless of whether the bank statement has language "right of survivorship." He told the committee if it is designated a joint account, previous supreme court decisions and the way the banks interpreted the statute, was the money would pass to the survivor. A demonstration of this, he stated, would be if a husband and wife had a joint account, if the wife died," the account would automatically pass to the husband and it would not have to be probated." Mr. Sande described the circumstances surrounding the case of Starr v. Rousselet, where a widower was befriended by a woman and, as a matter of convenience in bill paying, her name was added to the widower's bank accounts. When the man died, the woman took all the money in the account and other assets as well. Mr. Sande explained this was not the type of relationship where the widower would have wanted to leave property to the woman, as though she was a spouse. Unfortunately, the court ruled if the language in the deposit does not mention survivorship, it will be deemed to be not a joint account. Mr. Sande pointed out this puts the bank and the consumer in a horrible situation because now it is not clear if joint accounts are held by tenants in common or if they will have to be probated. Under this decision, the witness told, parties will need to have right of survivorship language in the deposit agreement. Mr. Sande stated the Nevada Bankers Association would like to have the law clarified to agree with a previous supreme court case which said, if there is language stating an account is a joint account, it is intended as a joint account with right of survivorship. This will remove any question regarding whether the property automatically passes to the surviving party if one of the parties dies, he said, adding, this clarification would make it easier for the banks to administer the accounts and it will prevent having to probate joint accounts. Senator Washington asked Mr. Sande if this law is just for married couples or could it be for divorced couples. Mr. Sande explained typically when there is a divorce, the property is split, but this law would apply to all joint accounts, between spouses, between parent and child, or between any parties who might hold such accounts. There is always the opportunity to come to court and attempt to show it was not the intent of the parties to allow rights of survivorship. Continuing, he offered the example of an elderly person who will put one child on their account with them in order to avoid probate in the event of the parent's death, and to ensure the money passes to the surviving child. Mr. Sande stated this is normally the intent of such joint accounts. Senator Washington gave the committee an example of his own account which is held jointly with his wife. He stated he automatically assumed if he passed away, the money would go to his wife. Mr. Sande stated until July, 1994, that is the way the bankers interpreted the law, that upon death of one party, the surviving party could go and take the money out of the account. Mr. Sande stated because of the Starr vs. Rousselet, the law needs to be clarified. Senator Washington asked if this bill draft request became law, would that mean specific survivorship language had to be in the account. Mr. Sande replied no, adding he believes most people think this is the way it works. He said he does a lot of estate planning and people come to him and put their property in joint tenancy with the intent that everything will go to the surviving spouse. He stated this is their reason for such joint holdings. The vice chair called for a motion. SENATOR LEE MOVED TO SUBMIT A REQUEST FOR A BILL DRAFT. SENATOR ADLER SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR JAMES WAS ABSENT FOR THE VOTE.) ***** SENATE BILL (S.B.) 155: Revises certain provisions governing unclaimed property. Coni Longero, Administrator, Division of Unclaimed Property, Department of Business and Industry, offered a copy of her prepared testimony to the committee (Exhibit E) and offered to summarize its main points. She explained to the committee her division takes in unclaimed property in the form of cash, utility deposits, stocks, bonds, insurance refunds, etc., as well as some tangible property from safety deposit boxes from hospitals and nursing homes. She stated custody of the property is maintained with the intent to find the owner of the property, as this is the division's sole responsibility. Ms. Longero, referring to Exhibit E, said the first request is to eliminate the required mailing by her division, which is, in effect, a duplicate mailing. She stated it is the requirement of the holders, the businesses or banks or such, to attempt to locate the owner of the property before it is relinquished to the Division of Unclaimed Property. As a result, the division is duplicating the work already done by the businesses with their attempts to locate property owners, she stated, and they would like to delete this duplicate mailing and save money for the division. Senator McGinness asked Ms. Longero if the division intends to use the money saved to publish more notices in the newspapers. Ms. Longero stated that is a possibility; however, another possibility is to purchase software listing social security numbers which, when used in conjunction with assistance from the Department of Motor Vehicles and Public Safety (DMV& PS) or Equifax, a private company, would help them to locate more people. While DMV&PS does not charge for the services, the private company does. It is the belief of the division, Ms. Longero noted, they will be able to find a lot more people via the social security numbers and they would like to spend money now expended on mailings in this way. The system works, Ms. Longero revealed, and when the division had their budget presentation before the Senate Committee on Finance, she was able to tell the committee members if the division was holding money for them. At this point the vice chairman called for testimony in opposition to this change. Merritt Yochim, Representative, Independent American Party, testified against S.B. 155. Mr. Yochim said is he opposed to the bill because the time limitations have been reduced from 5 years to 3 years, and the notification requirements will have a bad effect on locating the actual owners of the property. Continuing her presentation, Ms. Longero addressed the desire to eliminate the requirement of publishing missing owners' names for 2 consecutive weeks. She said usually, the missing parties are notified on the first publishing in smaller newspapers and there is not much response from the second publishing. She stated the division is using "pull out" type of notification in southern Nevada, which people can take from the paper and read at their leisure. Ms. Longero added, as soon as enough names are available in the north to make it feasible, the division will publish in a similar pull out notice, but it is very expensive to publish for 2 weeks in a paper. The witness referred the committee to the last page of her prepared testimony (Exhibit E) which lists the actual cost of a 2 week publication in various newspapers in the state. She added, it is felt by the division they could publish once effectively, but they would get a better response by doing other things. Senator Porter asked if the division produced the pull-out notification or if it was produced by a newspaper. Ms. Longero stated it was produced by the newspaper. Senator Porter inquired if this is now used in southern Nevada. Ms. Longero replied, "yes." Senator Washington asked if the division is paying the cost of publication and printing of the pull out notification. Ms. Longero answered affirmatively. Senator Washington wondered if it would be more cost effective to have one paper do the actual printing and then pass it on to the rest of the papers. Ms. Longero stated the rural areas do not always have access to the larger papers. Senator Washington stated he is aware of two other agencies who have a mass printing done similar to this and have it shipped to other newspapers in outlying areas. Ms. Longero stated, the division looked into publishing one very large list and distributing it as Senator Washington explained, but it is very, very expensive. Referring to the cost list in her testimony (Exhibit E) Senator Porter inquired what happened in August, 1994 to cause such a large increase. Ms. Longero replied there are two separate mailings each year. She said one mailing is primarily for insurance companies and it is a small mailing, the second mailing covers everyone else and is a large mailing. This is why the figures from August, 1994 are different from the figures in February, 1994, she explained. Andie Engleman, Lobbyist, Nevada Press Association, explained the publications' format is set out by Nevada Revised Statutes (NRS) 238, which governs legal notices and advertisements such as these. She stated the "pull outs" which Ms. Longero spoke of are not technically legal since the ads are required by law to be run "r.o.p." which means "within the newspaper itself." This is required so the public, while reading the news, will see the ads, she stated, noting the concern with a special pull-out notification is that it may become stuck in the middle of the paper with advertising circulars and, as a result, it would not be seen at all. She said Senator Washington's idea of printing one list and distributing it to all the state's newspapers would require everyone's name from every county to be included on that list, making it more difficult for people to find their name. Moving to the third area of change sought through the bill, Ms. Longero testified it would require the payment of abandoned funds be made concurrently with the filing of the Abandoned Property Report. Currently, she stated, the division sends out forms to businesses so they can report what they are holding. The forms are returned to the division and 90 days after receiving them, the division sends out another notice that the property or money is due. This is a lot of unnecessary paperwork for the division and for the businesses to handle, and unnecessarily deals with the forms and the property separately, she opined. Additionally, she said, sometimes the businesses do not send in the property or money and the division has problems tracking this. This change would eliminate one step in the process Ms. Longero concluded. Point four in S.B. 155 would shorten the time period after which certain categories of unclaimed property can legally be presumed abandoned, the witness told the committee. She noted under present law, most of the categories of property are presumed abandoned after 5 years. This change would allow property to be considered abandoned after 3 years, she stated, the rationale for this change being it is be easier to find people if the search started after 3 years rather than 5 years, if they are to be found at all. In addition, she pointed out, some of the holders do not want to keep this property for 5 years because they do not have room for it, it requires too much paperwork, and puts a burden on the businesses. Ms. Longero stated some other states are moving to the 3-year time period for abandoned property. Senator Porter asked how a shorter time period would facilitate a search. Ms. Longero replied the division feels perhaps in 3 years the owners would not have left the state, but they might have in 5 years, and the shorter waiting period might provide a better chance of finding the property owners. Senator McGinness asked if this means the process to find the owners would begin sooner. Ms. Longero replied affirmatively. Senator McGinness inquired if this meant the division did not start looking for the owner until 5 years had passed, and with this change they would begin looking for the owner after only 3 years. Again Ms. Longero concurred. Finally, Senator McGinness wondered if Ms. Longero has statistics from other states showing rate of finding owners when the time had been reduced. Ms. Longero replied she does not have this information. Ms. Longero asked to make one correction to her testimony, so that it will agree with the content of the bill. This correction is to increase the penalty to non- compliant holders to 2 percent of the property or $1000, whichever is greater, in order to partially offset attorney's fees and costs incurred when the division is forced to file suit to enforce the regulations dealing with unclaimed property. Senator Titus asked to take a moment to commend the division for their diligent and effective efforts. She noted her sister and she had benefitted when the division located a stock dividend that belonged to them. Mr. Sande took the floor once more to offer the Nevada Bankers' Association's support of the bill and to make a suggestion as to changing section 9 of the bill. This section allows an administrator of an estate to refuse to accept property that is valued at less than the cost of holding a sale. He noted it is much more reasonable for the administrator to be required to accept custody of such property than to require a financial institution to open a safe deposit box to store it. Therefore, he asked the section be amended to exempt financial institutions from holding such property, unless the property poses a harm to human health, in which case it should go directly to the division to be destroyed. Ms. Longero said she feels there would be no objection to exempting financial institutions from the section, but she feels it unwise to delete the entire section. Next to address the committee was Lucille Lusk, Representative, Nevada Concerned Citizens, who spoke in opposition to the bill. She stated the group has "grave concerns about S.B. 155 and oppose it in the strongest terms." Specifically, the group opposes the reduction in time allowed before property is declared abandoned, and also to the removal of the requirement that the state send a mailed notification to a known address. She called abandoned property "escheat accounts" and stated her belief that most citizens are unaware the government has "the power to take your bank account simply because you choose to let it sit and gather interest...." She told the committee the origins of the escheat account lies in English Feudal law, noting U.S. law is generally not based on feudal law. She said she feels the fewer requirements placed upon the government before they can take property "the closer we become to treating the state as sovereign rather than the citizen as sovereign." Ms. Lusk pointed out that Senator Titus might not have had her property returned to her had the requirement to send a letter to a known address not been in existence. Ms. Lusk took a moment to offer a portrayal of the typical person who might let a bank account sit inactive for a period of time. This individual, she said, is probably someone who doesn't have much money, but who might have received a monetary gift for one of his or her children. This money would be placed in a bank and allowed to sit inactive and drawing interest, without additional money being added, she continued, as a possible college fund for the child. Another individual might start such an account for a retirement fund, with no intention of touching the money until it is really needed, she explained. Ms. Lusk implied that special efforts are made to locate property belonging to legislators, but the same effort is not made for the "common folk." Senator Titus took extreme exception to this implication, emphasizing her sister had also been contacted and with the difference in their names, no connection could possibly have been made between Titus and Hudson. Ms. Lusk responded Ms. Longero had made a point of listing legislators the division had been able to help. Senator Adler asked to add his objection to the remark because he was also contacted in a search for someone other than himself, with a similar last name. Ms. Lusk stated while Senator Adler's experience showed diligence on the part of the division, she felt the point should not have been made in the first place. Ms. Lusk continued her testimony telling of an individual who had almost lost an account except for the mail notification, and as this points out, the mailing notification should not be eliminated. Next, Ms. Lusk told of her son's experience with his bank making changes in the rules for his account. These changes were set out in very small print, which her son took the time to read, she said. The point Ms. Lusk hoped to make is that banks should be required to set out, in bold print at the top of the forms, that accounts are subject to becoming an escheat account. Senator Washington, in response to Ms. Lusk suggesting banks should be required to advise their customers plainly of the possibility of the account becoming an escheat account, noted that he agrees with her in principle as he does not feel it is the state's responsibility to take care of a person's bank accounts. He opined that the bank should contact the account owner and the owner, once notified, should take the responsibility upon themselves to at least contact the bank and advise them what the intention of the owner is in regard to the account. Ms. Lusk replied the state has taken this responsibility with the unclaimed property division. Senator Washington questioned Ms. Longero, confirming his understanding of the request to eliminate the mailing of a notification. He said it is his understanding that a mailed notice is sent out once already. Ms. Longero concurred, stating that before the division ever receives the property the holder of the account or property sends a letter to the last known address of the owner, in an attempt to notify them of its existence. Senator Washington confirmed all the division wants to do is eliminate one of several mailings that are made in the attempt to locate the property owner. Ms. Longero restated the division's desire to spend their funds on what they consider to be more worthwhile and effective methods of locating the owners. Ms. Longero also took the floor to tell the committee that Nevada does not have escheatment, as described by Ms. Lusk, because "these heirs and owners to the property have lifetime claiming rights. They can be claimed from the day we get them to the day we find them. The property is always there." Senator Porter pointed out with today's more mobile society, it is important to find means, other than through the mails, to locate individuals. He asked Ms. Longero what other ways the division expects to use. She replied, with the funds left from the proposed changes, the division hopes to use Equifax's services more extensively, as well as continuing to work with DMV&PS. Ms. Lusk continued her testimony, saying the bill only asks to eliminate requirements without enumerating any specific things that will be required instead. She suggested a requirement be placed in the law for some other method of contact to replace the mailing. She reiterated her feeling that, because most of the unclaimed accounts or property the state comes to hold, belongs to the regular, common folk, it is the state's obligation to make "that very first effort to contact a person at a known address." Senator McGinness asked if the division would send notice to the same address the holder of the property had already tried. Ms. Longero answered agreement. Ms. Lusk noted the problem, in her opinion, is not when the letter is returned, but when no one responds to the letter. If the letter is returned, she pointed out, it is no longer an known address. She reiterated her concern that any removed requirement should be replaced with some other requirement for attempts to contact the owners. Senator Titus asked how difficult it would be to separate out of the mailing list those that had been returned from those that simply did not respond. Ms. Longero noted the state only sends out a single mailed notice. Senator Titus wondered if the account holders notified the state that a mailed notice had been returned unopened or there had simply not been any response. Ms. Longero answered the information is not provided, and she opined it would be an overburdensome task for the holders, especially those that are not banks. She continued by stating she has no objection to placing language in the bill to outline a requirement for a replacement procedure for the mailing or second newspaper publication. However, she stated her preference that the language not be so specific as to tie the hands of the division because of the rapid development of new technologies and data bases that might be useful. It is the goal of the bill to make the division more efficient and more effective. Ms. Lusk suggested the concept of including a statement "that every effort shall be made to notify the owner of the account of any inheritors," and then include examples of what procedures might be substituted. Senator Porter asked Doug Walther, Deputy, Nevada State Attorney General, to give his testimony. He stated he is the deputy assigned to the Division of Unclaimed Property and he had only one thing to clarify the talk about escheat. He said: Strictly speaking, escheat is when title of the property passes to the state. We have escheat laws in the cases of heirs that cannot be found and in some cases in very limited circumstances title of the property does escheat to the state. It is the state's property and it can do with it what it wants. The Unclaimed Property Law, by contrast, is not an escheat law, it is a custodial taking law. The policy reflected in the law is that the state will take custody of this money in perpetuity, and hold it in perpetuity, in trust for the owner. The owner has the right to make a claim to recover that property forever. The state gets the beneficial use of the money, in the meantime, but it never obtains title to the property. The ability to reclaim that property is always there. Jerry Lusk, Las Vegas, next took the floor to confirm that Senator Titus has received a notice regarding her unclaimed property from the state. She confirmed this. He noted that had the state already changed the law, she still would not have been notified of the property's existence. There were no further witnesses and the vice chairman asked the bill drafters to come up with some language to identify replacement procedures the department might implement. He then closed the hearing. SENATE BILL 90: Makes various changes to provisions governing the destruction and admissibility into evidence of certain business records. Senator Kathy Augustine sponsored S.B. 90 and she addressed the committee. She referred to an amendment to the bill (Exhibit E) which is suggested by the state librarian. Ken Scruggs, Government Relations Director, Household Financial Group, addressed the committee. He told them the bill is taken from a model bill from the commissioners on uniform state laws. The intent of the bill is to reflect changes in technology that apply to record keeping, he noted, and much of its contents have already been adopted into the federal rules of evidence. With the pervasive increase in technology, the need for paper records is considerably diminished, he explained, and the bill will allow businesses or other types of organizations to transfer their paper records into an electronic medium after meeting two criteria: 1) the records are transferred in the normal course of business, 2) the medium used to receive the records has been proven to be accurate and reliable. Ms. Scruggs added, that if the two criteria are met and the transfer is made, the organization would then be able to destroy the paper records, using the transferred copies as an original. He offered to answer questions. Senator Adler asked the reason for the deletion of governmental agencies in the bill. Robert van Straten, State Records Manager, Nevada State Library and Archives, answered the senator's question by noting that leaving the wording in would result in confusion with NRS 239.010 through NRS 239.125. The noted statutes deal specifically with the destruction of governmental records, he explained, and defining a government agency as a business will "cause confusion galore among government agencies." Senator Augustine also commented on the deletion, she said she submitted the amendment (Exhibit F) at the request of the state library, however, she expects the committee will hear testimony from other governmental entities that will request the original wording be retained. This conflict will have to be resolved by the committee, she noted. Senator Adler offered an example of a criminal case where the judgment of conviction is entered in Clark County, the defendant is on trial in Washoe County, and the court will not allow the admission of a facsimile copy of the judgment. He noted it would be very useful to be able to admit a facsimile copy, "...in fact, it might save the whole case." This is why he is hesitant to delete the wording, he added. Mr. van Straten stated he agrees with the senator, and referred to the handout he gave the committee (Exhibits G). NRS 281.380 (Exhibit G) allows public officers and employees to receive reproductions of business records for examination and other purposes, he said, noting this allows businesses to submit records in forms other than paper records. To address Senator Adler's concern, Mr. van Straten suggested the adoption of the Uniform Photographic Copies of Business and Public Records as Evidence Act (Exhibit H). This act has been adopted by many states and the federal government, he noted, and this would overcome the problem in the court scenario the senator had offered. Mr. van Straten emphasized the state archive's objection is the wording will cause confusion with the Public Records Act. Senator Adler noted a solution might be to indicate a government is a business "for the purposes of this act only." Mr. van Straten did not feel this would be a good solution. Senator Adler persisted because he believes there would be a lot of cost saving to courts, counties, and law enforcement. Senator Washington stated his understanding of the bill to mean, not a license to destroy records, but as a means to transfer records to other media in order to save money and storage space. Mr. Scruggs agreed with that interpretation, adding what Senator Augustine had submitted to the bill drafters is the Uniform Photographic Copies of Business and Public Records as Evidence Act. He felt that amending subsection 1 of section 1 of the bill to outline a required adherence to NRS 239.010 to NRS 239.125 might be effective. Mr. van Straten agreed, noting that "state agencies have a tendency to confuse law" and he feared governmental agencies would fail to adhere to the proper records retention schedule. Senator Adler voiced his support for the bill noting government seems to do things unnecessarily. Stephanie Tyler, Lobbyist, Regional Transportation Commission of Washoe County, addressed the committee, noting strong support of the legislation and for the retention of its applicability to government. This legislation would be very helpful from a cost saving standpoint, Ms. Tyler stated, and asked to be included in the amendment process, if it is necessary. Ms. Engleman addressed the committee stating support for the amendment to the bill. She admitted concerns similar to those of the state library and archives, adding Nevada's public records law is antiquated and does not address electronic records, and until that law is updated, she opined governmental agencies should be exempted. There was no further testimony and the hearing on S.B. 90 was closed. SENATE BILL 91: Makes various changes to provisions governing admissibility and maintenance of duplicates and copies of certain records. Senator Augustine also sponsored S.B. 91 and she introduced it to the committee. She noted there is an amendment to this bill as well, (Exhibit I) which addresses concerns brought by the Clark County District Attorney's Office. Mr. Scruggs noted S.B. 91 simply adds to the intent of S.B. 90. He stated optical disk is the technology most prevalent today, and it is the desire to add this to the Mortgage Company Act. He pointed out there are a number of things in the mortgage industry, "such as securitization, FHA [Federal Housing Authority], and all kinds of organization that require paper records to be kept." Because of these, for the present, there will still be a lot of paper records maintained in the mortgage business, he stated, and this bill is only an enabling mechanism. SENATE BILL 171: Authorizes courts to award as costs to prevailing party costs of certain computerized services. Senator Dean Rhoads sponsored this bill. Senator Adler stated he is not "real big" on this bill because he feels computerized legal research is cheaper than going through a book. Senator Rhoads took the floor and explained a constituent, who is the president of the Elko County Bar Association, had requested this legislation because a recent ruling by the Nevada Supreme Court in Bergman v. Boyce, places rural lawyers at a disadvantage (Exhibit J). This ruling said an attorney could not get recoverable costs for computer research in a legal setting. This bill, the senator noted, would allow these kinds of charges as recoverable costs. Leo Puchinelli, Attorney, Elko, Nevada, added his testimony, noting in Elko there are not extensive libraries and when research is necessary, it must be done by way of computerized research services. He opined it is unfair that such costs could not be assessed, because other attorneys, with law libraries available t them, can charge for the time spent doing the research. Senator Porter asked if this legislation should not apply to "any and all attorneys." Senator Rhoads replied he had discussed the bill with Senator James and it is his understanding Senator James supports the bill to include all attorneys. Senator Adler asked if there should be a limit on how much could be charged. Senator Rhoads said that point is something "you lawyers" will have to work out. There were no further questions. There being no further business before the committee, the meeting was adjourned at 10:00 a.m. RESPECTFULLY SUBMITTED: Lori M. Story, Committee Secretary APPROVED BY: Senator Jon C. Porter, Vice Chairman DATE: Senate Committee on Judiciary February 24, 1995 Page