Jurisdiction to escheat abandoned intangible personal property lies in the State of the creditor's last known address on the debtor's books and records or, absent such address or an escheat law, in the State of corporate domicile - but subject to later escheat to the former State if it proves such an address to be within its borders and provides for escheat of such property.
Black, joined by Warren, Douglas, Clark, Harlan, Brennan, White, Goldberg
Dissent
Stewart
Texas v. New Jersey, 380 U.S. 518 (1965), is a United States Supreme Court decision handed down on February 1, 1965. Concerning the authority of the state to escheat, or take title to, unclaimed personal property, the Court was petitioned, under its power of original jurisdiction, to adjudicate a disagreement between three states, Texas, New Jersey, and the Commonwealth of Pennsylvania, over which state had the jurisdiction to escheat intangible personal property, such as uncashed checks. Recognizing the lack of any extant constitutional or statutory formula to decide jurisdiction, the Warren Court accepted the case, assigning a Special Master to compile evidence and recommend a solution that the states could use for similar cases in the future. Adopting the Special Master's suggestions, the Court, in a decision authored by Justice Hugo Black, ruled that the authority to escheat intangible personal property lay with the state of the creditor's last known address, rather than the state of the debtor's incorporation or headquarters, a formula used in previous cases.
The case for the plaintiff was argued before the court by W. O. Shultz II, the Assistant Attorney General of Texas. He was joined by Waggoner Carr, Attorney General of Texas. The three defendants, the state of New Jersey, the Commonwealth of Pennsylvania, and the Sun Oil Company, were represented by Charles J. Kehoe, Deputy Attorney General of New Jersey, joined by Arthur J. Sills, Attorney General of New Jersey, and Theodore I. Botter, First Assistant Attorney General of New Jersey, Joseph H. Resnick, Assistant Attorney General of Pennsylvania, and Augustus S. Ballard, representing the Sun Oil Company.
Fred M. Burns, Assistant Attorney General of Florida, represented the state as an intervenor, joined by James W. Kynes, Attorney General of Florida, and Jack W. Harnett, Assistant Attorney General. Ralph W. Oman, represented the Life Insurance Association of America as an amicus curiae.
To gather evidence and present a report and recommendations to all parties, the Court appointed the Honorable Walter A. Huxman, former Kansas Governor and U.S. Federal Judge, as Special Master for the case.
Background
The case revolved around the question of what state had the right to escheat, or take title to, unclaimed intangible personal property, and on what grounds. While common law had for years recognized that tangible property, real or personal, could only be claimed by the state in which the property was located, there had never been a set rule for the escheat of intangible personal property, such as debts. By 1964, the Sun Oil Co. had on the books of its Texas offices intangible personal property, mainly checks unclaimed or uncashed by creditors, worth $26,461.65. These payments, which included unclaimed checks for wages and expenses, payments to suppliers or vendors, royalty checks for oil-and-gas producing lands, and payment for fractional mineral interests, dated from 7 to 40 years before the case was presented, and were owed to “approximately 1,730 small creditors” whose last known address was in Texas.
Case history
While the state of Texas argued that “this intangible property should be treated as situated in Texas, so as to permit that State to escheat,” two other areas, the state of New Jersey, where Sun Oil Co. was incorporated, and the Commonwealth of Pennsylvania, where their corporate offices were located, argued for their own right to escheat. Since the Supreme Court had ruled three years previously, in Western Union Co. v Pennsylvania (1961), that one state had “no power to render a judgment of escheat which would bar...any other State from escheating the same property”, the state of Texas petitioned the court, under Art. III, 2, of the Constitution, which gave the Court original jurisdiction over cases between states, for a definitive declaration of rights on the subject. Noting that “since the States separately are without constitutional power to provide a rule to settle this interstate controversy and since there is no applicable federal statute,” the Court accepted the case, arguing that it was their responsibility “in the exercise of our original jurisdiction to adopt a rule which will settle the question of which State will be allowed to escheat this intangible property.”
The arguments
The plaintiff, the state of Texas, argued that the State with “the most significant ‘contacts’ with the debt should be allowed exclusive jurisdiction to escheat it,” and that under this test the state of Texas had the best claim to jurisdiction over the unclaimed property. The plaintiffs also argued that Texas had a superior claim to escheat on the grounds that at least the part of the intangible obligations were “royalties, rents, and mineral proceeds derived from land located in Texas.” The state of New Jersey countered with the argument that the State with power to escheat was the state that was the domicile of the debtor, in this case New Jersey, where Sun Oil Co. was incorporated. Pennsylvania, in a similar vein to New Jersey, argued that it was the location of the debtor's “principal offices,” rather than state of incorporation, that had jurisdiction to escheat the property.
The state of Florida, given leave to act as an intervenor due to its claim on intangible property Sun Oil Co. owed to creditors whose last known address was in Florida, argued that the debt was the property of the creditor, not the debtor, and that “fairness among the States requires that the right and power to escheat the debt should be accorded to the State of the creditor's last known address as shown by the debtor's books and records.”
The decision
In a decision authored by Justice Hugo Black, the Court adopted the finding of the Special Master assigned to the case, whose report agreed with the argument put forward by the state of Florida, namely that the power to escheat should reside in the state of the creditor's last known address, rather than any physical address associated with the debtor. Addressing the position of the state of Texas, the Court categorically rejected the “contacts” argument, declaring that “it is simply a phrase suggesting that this Court should examine the circumstances surrounding each particular item of escheatable property on its own peculiar facts and then try to make a difficult, often quite subjective, decision as to which State's claim to those pennies or dollars seems stronger than another's.” The adoption of such a standard Black wrote “might in the end create so much uncertainty and threaten so much expensive litigation that the States might find that they would lose more in litigation expenses than they might gain in escheats.”
While noting that the plan offered by the state of New Jersey, that power to escheat should reside in the debtor's state of incorporation, had the “obvious virtues of clarity and ease of application,” the Court concluded “that in deciding a question which should be determined primarily on principles of fairness, it would too greatly exalt a minor factor to permit escheat of obligations incurred all over the country by the State in which the debtor happened to incorporate itself.” Addressing Pennsylvania's argument that jurisdiction resided in the state of the debtor's “principal offices,” Black's decision noted the inherently subjective nature of terms such as “main offices”. “principal offices,” and “principal place of business.” Arguing that the determination of this locale would require case-by-case examination, the Court rejected the Commonwealth's argument, declaring that “any rule leaving so much for decision on a case-by-case basis should not be adopted unless none is available which is more certain and yet still fair.”
Accepting the logic that the debt in question was the property of the creditor rather than the debtor, the Court adopted the plan offered by the state of Florida, that power to escheat should reside in the state of the creditor's last known address. “Adoption of such a rule,” Black wrote, “involves a factual issue simple and easy to resolve, and leaves no legal issue to be decided.” “By using a standard of last known address,” the Court concluded, “rather than technical legal concepts of residence and domicile, administration and application of escheat laws should be simplified.”
To address situations in which there is no last address for the creditor, the Court decided that the property was “subject to escheat by the State of corporate domicile, provided that another State could later escheat upon proof that the last known address of the creditor was within its borders.” In instances where the state of the creditor's last known address did not provide for escheat by the state, the Court declared that intangible personal property was “subject to the right of the State of the last known address to recover it if and when its law made provision for escheat of such property,” with the provision that the state could retain “the property for itself only until some other State comes forward with proof that it has a superior right to escheat.”
Dissent
In a dissenting opinion Justice Potter Stewart adhered to the rule established in previous cases that the power to escheat lay with the state of the debtor's incorporation. Noting three previous cases in which this rule had been used, Standard Oil Co. v. New Jersey, 341 U.S. 428; Anderson Nat. Bank v. Luckett, 321 U.S. 233; Security Savings Bank v. California, 263 U.S. 282. Stewart refused to overturn these precedents, noting that “adherence to settled precedent seems to me far better than giving the property to the State within which is located the one place where we know the creditor is not.”
Related Research Articles
Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor.
Escheat is a common law doctrine that transfers the real property of a person who has died without heirs to the crown or state. It serves to ensure that property is not left in "limbo" without recognized ownership. It originally applied to a number of situations where a legal interest in land was destroyed by operation of law, so that the ownership of the land reverted to the immediately superior feudal lord.
A lien is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. The owner of the property, who grants the lien, is referred to as the lienee and the person who has the benefit of the lien is referred to as the lienor or lien holder.
In the United States, bankruptcy is largely governed by federal law, commonly referred to as the "Bankruptcy Code" ("Code"). The United States Constitution authorizes Congress to enact "uniform Laws on the subject of Bankruptcies throughout the United States". Congress has exercised this authority several times since 1801, including through adoption of the Bankruptcy Reform Act of 1978, as amended, codified in Title 11 of the United States Code and the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) is a legislative act that made several significant changes to the United States Bankruptcy Code.
Confession of judgment is a legal term that refers to a type of contract in which a party agrees to let the other party enter a judgment against them. Such contracts are highly controversial and may be invalidated as a violation of due process by courts, since the obligor is essentially contracting away his right to raise any legitimate defenses.
Unowned property includes tangible, physical things that are capable of being reduced to being property owned by a person but are not owned by anyone. Bona vacantia is a legal concept associated with the unowned property, which exists in various jurisdictions, with a consequently varying application, but with origins mostly in English law.
Lost, mislaid, and abandoned property are categories of the common law of property which deals with personal property or chattel which has left the possession of its rightful owner without having directly entered the possession of another person. Property can be considered lost, mislaid, or abandoned depending on the circumstances under which it is found by the next party who obtains its possession.
In finance, a security interest is a legal right granted by a debtor to a creditor over the debtor's property which enables the creditor to have recourse to the property if the debtor defaults in making payment or otherwise performing the secured obligations. One of the most common examples of a security interest is a mortgage: a person borrows money from the bank to buy a house, and they grant a mortgage over the house so that if they default in repaying the loan, the bank can sell the house and apply the proceeds to the outstanding loan.
A charging order, in English law, is an order obtained from a court or judge by a judgment creditor, by which the property of the judgment debtor in any stocks or funds or shares in a limited liability company or land stands charged with the payment of the amount for which judgment shall have been recovered, with interest and costs.
Secured transactions in the United States are an important part of the law and economy of the country. By enabling lenders to take a security interest in collateral, the law of secured transactions provides lenders with assurance of legal relief in case of default by the borrower. The availability of such remedies encourages lenders to lend capital at lower interest rates, which in turn facilitates the free flow of credit and stimulates economic growth.
Pennsylvania v. New York, was a case which were heard in 1972 before the U.S. Supreme Court. The initial filing was allowed at 407 U.S. 206 and the final decision was ordered at 407 U.S. 223 (1972).
The collection of judgments in Virginia may be accomplished under a number of routes provided under Virginia law, depending on the amount of the judgment and the particular assets that the judgment creditor wishes to pursue.
The history of bankruptcy law in the United States refers primarily to a series of acts of Congress regarding the nature of bankruptcy. As the legal regime for bankruptcy in the United States developed, it moved from a system which viewed bankruptcy as a quasi-criminal act, to one focused on solving and repaying debts for people and businesses suffering heavy losses.
Bankruptcy in Irish Law is a legal process, supervised by the High Court whereby the assets of a personal debtor are realised and distributed amongst his or her creditors in cases where the debtor is unable or unwilling to pay his debts.
Stern v. Marshall, 564 U.S. 462 (2011), was a United States Supreme Court case in which the Court held that a bankruptcy court, as a non-Article III court lacked constitutional authority under Article III of the United States Constitution to enter a final judgment on a state law counterclaim that is not resolved in the process of ruling on a creditor's proof of claim, even though Congress purported to grant such statutory authority under 28 U.S.C. § 157(b)2(C). The case drew an unusual amount of interest because the petitioner was the estate of former Playboy Playmate and celebrity Anna Nicole Smith. Smith died in 2007, before the Court decided the case, which her estate lost.
Civil procedure in South Africa is the formal rules and standards that courts follow in that country when adjudicating civil suits. The legal realm is divided broadly into substantive and procedural law. Substantive law is that law which defines the contents of rights and obligations between legal subjects; procedural law regulates how those rights and obligations are enforced. These rules govern how a lawsuit or case may be commenced, and what kind of service of process is required, along with the types of pleadings or statements of case, motions or applications, and orders allowed in civil cases, the timing and manner of depositions and discovery or disclosure, the conduct of trials, the process for judgment, various available remedies, and how the courts and clerks are to function.
Insolvency in South African law refers to a status of diminished legal capacity imposed by the courts on persons who are unable to pay their debts, or whose liabilities exceed their assets. The insolvent's diminished legal capacity entails deprivation of certain of his important legal capacities and rights, in the interests of protecting other persons, primarily the general body of existing creditors, but also prospective creditors. Insolvency is also of benefit to the insolvent, in that it grants him relief in certain respects.
Bankruptcy in Florida is made under title 11 of the United States Code, which is referred to as the Bankruptcy Code. Although bankruptcy is a federal procedure, in certain regards, it looks to state law, such as to exemptions and to define property rights. The Bankruptcy Code provides that each state has the choice whether to "opt in" and use the federal exemptions or to "opt out" and to apply the state law exemptions. Florida is an "opt out" state in regard to exemptions. Bankruptcy in the United States is provided for under federal law as provided in the United States Constitution. Under the federal constitution, there are no state bankruptcy courts. The bankruptcy laws are primarily contained in 11 U.S.C. 101, et seq. The Bankruptcy Code underwent a substantial amendment in 2005 with the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005", often referred to as "BAPCPA". The Bankruptcy Code provides for a set of federal bankruptcy exemptions, but each states is allowed is choose whether it will "opt in" or "opt out" of the federal exemptions. In the event that a state opts out of the federal exemptions, the exemptions are provided for the particular exemption laws of the state with the application with certain federal exemptions.
Delaware v. Pennsylvania, 598 U.S. 115 (2023), was a United States Supreme Court case related to unclaimed money and the escheatment of checks. This case was Justice Ketanji Brown Jackson's first opinion on the Supreme Court. It is also the first case the Supreme Court has taken on unclaimed property in over 30 years.
This page is based on this Wikipedia article Text is available under the CC BY-SA 4.0 license; additional terms may apply. Images, videos and audio are available under their respective licenses.
