When an heir refused to accept his share of a probate estate in the 1930s, the share was placed in a bank trustee administered by the circuit court, and the trustee bank thereafter sent annual interest cashier's checks made out to the refusing heir which the clerk of courts could not deposit or process, how should the clerk and county treasurer handle the accumulated checks?
Plain-English summary
A 1930s Haakon County probate produced one of the more unusual fact patterns to come before the South Dakota AG. The decedent's estate was probated, the decree of distribution ran to several heirs, but one of those heirs, "X" (a Haakon County resident), refused to accept his distributive share. The estate could not be closed with money still owed but undistributable. The probate court placed the refused share under the administration of the circuit court (a trust administration under SDC ch. 33.26), and a South Dakota bank was appointed trustee.
For the next thirty years the trustee bank annually rendered an accounting to the circuit court, served notice on X, and wrote a cashier's check for X's annual interest income, payable to X. Without any court order requiring it, the trustee bank then forwarded each check to the Haakon County Clerk of Courts. By 1968 the clerk's office had received 28 cashier's checks (the earliest from January 22, 1968, which suggests the practice had started later than the original 1930s distribution; the dates in the opinion are slightly confusing). Total face value: $1,100.
The clerk had been depositing each check with the County Treasurer under SDC 1960 Supp. 12.1404-1, which governs deposit of funds held by the clerk. But the checks were payable to X, not to a bearer. The Treasurer could not endorse X's name. The checks were piling up unprocessed, and the clerk and treasurer wanted a clean answer.
The clerk asked three questions:
- Does SDC 1960 Supp. 12.1404-1 apply to the annual cashier's checks so that they must be deposited?
- If yes, can the clerk endorse X's name on the checks to convert them to currency for deposit?
- If no, would it be proper to petition the trust-administering circuit court for direction?
The AG answered the third question YES and treated that answer as essentially mooting the first two. The reasoning: the trust was being administered by the circuit court. Circuit courts have inherent equitable jurisdiction. SDC ch. 33.26 had specifically vested the trust administration in the circuit court. When equitable issues arise in trust administration, the supervising court has both jurisdiction and authority to direct how to handle the issues.
The proper response, the AG said, was a joint petition by the clerk and treasurer to the circuit court explaining the situation, the accumulated checks, and the open question of how future interest payments should flow. The court would then direct whether the trustee bank should keep the interest with the principal, whether the clerk should somehow process the checks, whether the treasurer should hold them, or some other arrangement.
The AG also noted that the underlying refusal-to-accept scenario was unusual enough that the case law was thin. He cited Ben v. Wilson, 159 Cal. 57, 112 P 1100, for the proposition that the personal representative of an estate is right to seek some procedure for removing a refused distributive share, because until properly distributed it remains an asset of the estate and the representative cannot get a final discharge. The AG also flagged that statutes in Arizona, California, and Idaho (Sec. 15-1330 Idaho) had expanded their analogous handling-of-shares statutes to specifically cover refusal cases, suggesting South Dakota might want to do the same.
Currency note
This opinion was issued in 1968 (approximate, based on a check date of January 22, 1968, in the underlying facts). Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. South Dakota's modern probate code is in SDCL Title 29A (Uniform Probate Code), and modern unclaimed property law in SDCL ch. 43-41B; both significantly post-date this opinion and would govern any current refused-distribution scenario.
What the opinion meant at the time
For the Haakon County clerk of courts and county treasurer, the opinion gave a clean procedural answer: stop trying to process the cashier's checks under the deposit statute, file a joint petition with the circuit court administering the trust, and let the court direct the handling. That stopped the monthly nuisance and put the burden of decision back where it belonged, on the court that had originally created the trust administration.
For trustee banks holding similar refused-distribution funds, the opinion was a reminder that they should obtain court direction before adopting policies (like sending annual interest checks to a third-party clerk) that the original court order had not authorized. The trustee bank in this case had been acting on its own initiative, which had created the procedural snarl in the first place.
For probate attorneys handling estates with refusing heirs, the opinion suggested petitioning the probate court early to direct the disposition of the refused share. Letting the share sit indefinitely or transferring it to a trust without explicit handling provisions for accumulated interest invited the kind of pile-up Haakon County experienced.
For the South Dakota Legislature, the opinion's reference to Arizona, California, and Idaho statutes that had expanded the analogous statutes to cover refusal cases was a hint that South Dakota's framework was incomplete. The AG did not directly call for legislation, but the citation suggested he thought reform would help.
Common questions
Q: Is this opinion still good law?
A: Not directly. The cited statutes (SDC 1960 Supp. 12.1404-1, SDC 35.1722, SDC ch. 33.26) have been recodified, and South Dakota adopted the Uniform Probate Code (SDCL Title 29A) in modern times. The general principle, that the court administering a trust has equitable authority to direct handling of disputes arising under the trust, has been carried forward, but specific procedures should be checked against current SDCL provisions.
Q: Why couldn't the clerk just endorse X's name on the checks?
A: That would have been forgery. Cashier's checks payable to a named payee can be cashed only by that payee or his authorized representative. The clerk had no authority to act as X's agent, and even if he did, he could not endorse without X's actual authorization. The AG implicitly recognized this by routing the question to the circuit court rather than approving endorsement.
Q: What was special about SDC ch. 33.26 trust administration?
A: Section 33.26 was the framework for circuit-court-supervised trust administration. Trust funds in such administration came under the direct supervision of the circuit court, which received annual accountings and had authority to direct trustee actions. That equitable supervisory role gave the court inherent power to resolve administrative disputes about the trust, including disputes about handling annual income payable to a refusing beneficiary.
Q: Why didn't the AG just answer the deposit question?
A: Because answering the deposit question would not have solved the underlying problem. Even if the clerk had to deposit the checks under SDC 1960 Supp. 12.1404-1, the checks were uncashable as long as they were payable to X. The clerk would end up with deposited but unprocessable checks, which is worse than the original situation. The trust court could change the underlying flow (have the trustee bank retain the interest rather than write checks to X), which actually solved the problem.
Q: What would the modern equivalent be?
A: A combination of (a) the Uniform Probate Code's provisions on renunciation of inheritance, which allow an heir to formally renounce his share with binding effect on subsequent distribution; (b) the Uniform Unclaimed Property Act, which provides for state custodial holding of unclaimed funds after a statutory dormancy period; and (c) general trust-administration provisions allowing court direction. The combination would likely move the refused share to the next heir under the will or by intestacy, then escheat to the state if no one accepted.
Background and statutory framework
Three statutory frameworks intersect in the opinion:
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Probate distribution: A decree of distribution from the probate court adjudicated the heirs and their shares. The personal representative was responsible for actual distribution. If an heir refused, the personal representative could not get a final discharge (and the sureties on his bond could not be released) until the issue was resolved.
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Refused-share handling: SDC 35.1722 authorized an agent to be appointed for a nonresident heir, or for money to be deposited with the Clerk of Courts without an agent. But the statute did not specifically address a resident heir who refused to accept. The AG noted that Arizona (14 Sec. 707), California (Probate Code Sec. 1060), and Idaho (Sec. 15-1330) had statutes that did address the refusal scenario, suggesting South Dakota's framework was incomplete.
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Trust administration: SDC ch. 33.26 governed trust administration through the circuit court. The court received annual accountings and had supervisory authority over the trustee. That equitable supervisory role gave the court power to direct the trustee on contested or ambiguous administrative questions.
The Haakon County situation had used the trust administration mechanism to remove the refused share from the estate (allowing the personal representative to close the estate and get his discharge) and place it in long-term custody under the circuit court. The mechanism worked for the principal balance but left the recurring income unhandled. The trustee bank's solution, sending interest checks to the clerk of courts, just shifted the problem.
The AG's path forward, joint petition by the clerk and treasurer to the trust-administering circuit court, used the existing equitable supervisory role to fix the recurring problem. It did not require statutory amendment, although the AG hinted that amendment was probably needed.
Citations and references
Statutes (as cited in the opinion):
- SDC 1960 Supp. 12.1404-1 (clerk of courts deposit with county treasurer)
- SDC 35.1722 (handling of distributive shares; nonresident heirs)
- SDC ch. 33.26 (trust administration)
Cases (as cited in the opinion):
- Ben v. Wilson, 159 Cal. 57, 112 P 1100 (1910)
- In Re Paddock's Estate, 68 SD 179, 299 NW 865 (1941)
Comparative statutes referenced:
- Arizona 14 Sec. 707
- California Probate Code Sec. 1060
- Idaho Sec. 15-1330
Source
Original opinion text
Estates. Method of handling moneys distributed from estate when distributive heir refuses to accept the same.
You have requested an official opinion based upon this factual situation:
"In the late 1930's an estate was probated in Haakon County, and in the Devree of Distribution one X, residing in Haakon County, refused to accept his distributive share of the estate. The money to be so distributed was thereupon placed under the administration of the Circuit Court and a South Dakota bank appointed trustee thereof.
"Annually since then such trustee bank has rendered a report as to such account to the Circuit Court and served notice of such learning on such accounting on X. At the same time the trustee bank has executed a cashier's check made payable to X, representing the annual interest on such trustee account and forwarded the same to the Clerk of Courts of Haakon County. There is no court order requiring this forwarding of such interest payment, but the trustee bank has so acted on its own initiative.
"At this time in pursuance to SDC 1960 Supp. 12.1404-1, the Clerk of Courts has deposited the cashier's checks with the County Treasurer, who at this time, due to X's being named payee, is in possession of twenty-eight cashier's checks (the earliest dater January 22, 1968) in the amount of $1,100.00. You can appreciate that the annual receipt of such check is a nuisance to the Clerk of Courts and Treasurer."
Based upon this factual situation, you have submitted these questions:
"1. Does SDC 1960 Supp. 12.1404-1 apply to the receipt of such cashier's check annually so that such must be deposited by the Clerk with the County Treasurer?
"2. If the answer to question No. 1 is YES is the Clerk authorized to endorse X's name thereto, so that such checks may be reduced to currency and such currency deposited with the Treasurer?
"3. If the answer to question No. 1 is NO would it be proper for the Clerk and Treasurer, either alone or jointly, to petition the Court supervising such trust to the end that the Court shall
direct the method of handling such annual interest earned on such trust?
This factual situation is unique. While the law books are full of actions to compel a personal representative to make distribution in an estate, I have been unable to find a case where the proper procedure is set forth as to how to proceed when a known resident distributive heir refuses to accept distribution from an estate.
From the standpoint of the executor or administrator, such distributive share, although refused, is not his money. Until distributed it is an asset of the estate. Until properly distributed from the estate, such personal representative can receive no final discharge, which discharges him from his trust and releases the sureties on his bond. It is proper for him to seek some procedure to remove such distributive share from the estate. (See Ben v. Wilson (1910) 159 cal. 57, 112 P 1100 on this proposition.)
In probate, there can be no question that the County Court has certain inherent powers, as such court, as to probate proceedings is a court of general jurisdiction (In Re Paddock's Estate (1941) 68 SD 179, 299 NW 865.) While SDC 35.1722 authorizes the appointment of an agent to take the distributive share of a nonresident heir who has no agent in the state, or in case of money, a deposit of such funds with the Clerk of Courts without the appointment of an agent, is not applicable to the factual situation given, it may very well be that this statute would, under the inherent powers of the court, authorize the appointment of either an agent or deposit with the Clerk of Courts at the direction of the Probate Court. (It is interesting to note that Arizona (14 Sec. 707), Calif. Probate Code Sec. 1060) and Idaho (Sec. 15-1330) have expanded statutes similar to SDC 35.1722 to cover those cases where either a distributee cannot be found, or a distributee refuses to accept the same, which gives statutory support to the theory herein advanced.)
However, as the County Court seemingly did not act, it is mere speculation as to what the County Court may do in this situation. The factual situation reveals that a trust administration in Circuit Court, as provided by SDC 33.26, was pursued.
Tn view of the peculiar factual situation and the fact that the trust is being administered at the direction of a Circuit Court, it is my opinion that If Question 3 is answered in the affirmative, that the Court administering such trust estate can itself give answer to Questions 1 and 2, so that it would be academic for me to answer the same.
Trusts are peculiarly equitable in nature. As our Circuit Courts are courts inherently exercising equitable jurisdiction, such Court may have had jurisdiction in the matter, irrespective of statute. There is no question that such jurisdiction has been invested by statute.
The factual situation presented and the dilemma presented the Clerk of Courts and County Treasurer, who are furnished cashier's checks, made payable to "X", certainly present a question peculiarly adaptable to the Courts of Chancery.
My answer to Question No. 3 is YES. I would recommend that a petition, setting forth the peculiar factual situation be presented to the Circuit Court administering such trust estate, with a petition that the Court direct whether the Clerk of Courts, the County Treasurer, either alone or jointly, should handle such annual interest payments, or whether the trustee bank should keep such along with the principal trust estate, with directions as to the method of handling the past issued cashier's checks, and the future method of handling the trust estate, and increments thereto by way of interest, until the time the trust estate may be distributed to the person entitled thereto.