Request By:
Mr. Harold P. Hamilton
Assistant State Treasurer
Treasury Department
Capitol Annex
Frankfort, Kentucky
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
The problem you have arises from a recurring situation involving newly divorced couples who filed a joint state income tax return, prior to or after their disunification, and who, after the divorce becomes final, receive a refund check made payable to both parties. KRS 141.180(6) permits a husband and wife living together to make a joint return or file separate returns. The marital status is determined as of December 31, 1978 [as to the 1978 tax year] .
Invariably one of the two will cash the check, forging the other's name, and keep the entire sum for himself or herself, as the case may be. Then the party who claim a part or all of the check's proceeds and who did not cash the check wants your department to do something to correct it. In other words, the party wronged by the irresponsible and unconscionable conduct of the former spouse wants the state treasurer to produce the money he (or she) claims. Assuming that the joint payee who receives nothing from the cashing of the check has a legal interest in all or a part of the proceeds, you ask how the department should treat such cases. In preparing a joint payee refund check, there is nothing in KRS Chapter 141 or KRS 134.580 which suggests that the Department of Revenue determine precisely and with Solomonic wisdom what portion of the refund check belongs to the former husband and wife individually. KRS 134.580(2) requires tax refunds to be make in the same manner as other claims against the state treasury are paid. See KRS 41.160.
Any unauthorized signature is wholly inoperative as that of the person whose name is signed unless he ratifies it or is precluded from denying it. KRS 355.3-404. Here we have no facts supporting either defense. An unauthorized signature includes a forgery. KRS 355.1-201(43). Further, an instrument is converted when it is paid on a forged indorsement, and the drawee bank is liable for the face amount of the instrument. And since these refund checks are not made payable to the taxpayers in the alternative [Mary Roe or Henry Roe], the check must be construed as payable to both payees, and may be negotiated only by both of them. KRS 355.3-116(1)(b).
However, we believe KRS 355.3-419 was designed to cover a situation in which the forger of the indorsement has no legal interest in the proceeds of the check.
Here the check arises because of a joint filing of the state income tax return. The parties voluntarily and deliberately chose this method of reporting. The Department of Revenue assumes, when a man and woman files jointly a state income tax return as being married, that the parties were married as of December 31, 1978 [for purposes of the 1978 tax year] . Once that joint payee check is issued to the man and woman, even though subsequent to December 31, 1978, their divorce is obtained, the negotiation of the check and appropriate division of the proceeds, if any is due, is a joint responsibility of the two taxpayers.
It is our opinion, in this joint payee situation, that when the check is mailed to the proper address of one or both payees, and is actually received by one of the payees, the refund or payment by the state has become effective. At that stage the state has done all it is required to do. Payment has been made. Gibony v. Commonwealth, Ky., 91 S.W. 732 (1906) 733.
It is further our opinion that KRS 355.3-419 has no application to the state treasurer since it was not designed to cover a joint payee situation of this kind. Thus the spouse not receiving any proceeds of the cashed check in question cannot procure another check from the state treasurer by making an affidavit of no receipt of money.
In summary, in this situation, there is nothing further to be done by the state treasurer once the joint payee check is properly mailed and received by at least one of the payees.