Escheat - Property Subject to Escheat - Right to Escheat a Debt Accorded to State of Creditor's Last Known Address

Chicago-Kent Law Review Volume 43 | Issue 1 Article 17 April 1966 Escheat - Property Subject to Escheat - Right to Escheat a Debt Accorded to State of Creditor's Last Known Address Paul C. Komada Follow this and additional works at: https://scholarship.kentlaw.iit.edu/cklawreview Part of the Law Commons Recommended Citation Paul C. Komada, Escheat - Property Subject to Escheat - Right to Escheat a Debt Accorded to State of Creditor's Last Known Address, 43 Chi.-Kent L. Rev. 114 (1966). Available at: https://scholarship.kentlaw.iit.edu/cklawreview/vol43/iss1/17 This Notes is brought to you for free and open access by Scholarly Commons @ IIT Chicago-Kent College of Law. It has been accepted for inclusion in Chicago-Kent Law Review by an authorized editor of Scholarly Commons @ IIT Chicago-Kent College of Law. For more information, please contact . CHICAGO-KENT LAW REVIEW case has established another limitation on the power of the courts to interfere with the individual's choice between life and death-a limitation which will undoubtedly be strictly and narrowly construed. JEFFREY C. DANEK ESCHEAT-PROPERTY SUBJECT TO E CHEAT-RIGHT TO ESCHEAT A DEBT ACCORDED TO STATE OF CREDITOR'S LAST KNOWN ADDRESS.-In the recent case of Texas v. New Jersey, 379 U.S. 674, 85 Sup. Ct. 626 (1965), the United States Supreme Court was confronted with the problem of whether the right to escheat a debt should be accorded to the state having the most "contacts" with the debt, the state of the debtor's incorporation, the state where the debtor's principal offices were located, or the state of the creditor's last known address. In the case under discussion, the plaintiff, Texas, brought an action against New Jersey, Pennsylvania, and the Sun Oil Company seeking an injunction and declaration of rights for the purpose of determining which state could acquire title to certain abandoned personal property through escheat. The property in question consisted of various small debts' amounting to about $26,000 which had accumulated on Sun's books over a period of seven to forty years prior to the institution of this action. The debts resulted from the failure of creditors to claim or cash checks and were recorded on the books in Sun's two Texas offices. The case was brought directly before the United States Supreme Court under Art. III, § 2 of the United States Constitution which grants the Supreme Court original jurisdiction in cases "in which a state shall be a party...." Previous suits had been brought by debtors who sought a declaratory judgment when certain property was escheated by a particular state and they feared other states might later assert a right to escheat the same property. 2 But this was the first time that more than one state had been made a party to the action. Another state, Florida, was allowed to intervene when it asserted a right to escheat that portion of the property owing to persons whose last known address was in Florida. 3 The Court assigned a master to hear the case and to make appropriate reports. 4 1 Ely, Escheats: Perils & Precautions, 15 Bus. Law 791, 793-4 (1960), illustrates the extent to which intangible personal property is today subject to escheat. 2 Security Savings Bank v. California, 263 U.S. 282, 44 Sup. Ct. 108 (1923); Anderson National Bank v. Luckett, 321 U.S. 233, 64 Sup. Ct. 599 (1943); Standard Oil Co. v. New Jersey, 341 U.S. 428, 71 Sup. Ct. 822 (1950). 3 373 U.S. 948, 83 Sup. Ct. 1677 (1962). Illinois, which claimed no property involved in this case, also sought to intervene to urge that the right to escheat a debt should depend upon the laws of the state in which the debt was located. Leave to intervene was denied. 372 U.S. 926, 83 Sup. Ct. 1108 (1962). 4 372 U.S. 926, 83 Sup. Ct. 869 (1962). DISCUSSION OF RECENT DECISIONS Historically, escheat first developed as an incident to feudal law, whereby a fee reverted to the lord when a tenant died without leaving a successor qualified to inherit under the original grant. The doctrine was limited to real property and it was an incident of tenure which related back to the right of the lord to take for want of a tenant. In this country escheat in the feudal sense existed in only a few of the original colonies. Since the revolution it has ceased to exist in the feudal sense and is now largely regulated by statute. Escheat is an attribute of sovereignty and rests on the principle of ultimate ownership by the state of all property within 5 its jurisdiction. At common law, personal property was not subject to escheat, but the doctrine of bona vacantia applied to abandoned personal property, and gave the sovereign the right to appropriate. Today, however, the word escheat has overcome its meaning under the English feudal system and now includes personal property as well as land, and is regarded as an 7 incident of sovereignty not tenure. A problem often arises as to the situs of intangible personal property. Previous Supreme Court decisions have established that an escheat proceeding is an action in rem.8 Any state could claim that the situs of certain intangible personal property was in its jurisdiction, thereby giving itself the authority to adjudicate the rights to the property. Judge Cardozo, in Severnoe Sec. Corp. v. London & Lancashire Ins. Co.,9 stated the problem: The situs of intangibles is in truth a legal fiction, but there are times when justice or convenience requires that a legal situs be ascribed to them. The locality ascribed to them is for some purposes, the domicile of the creditor; for others, the domicile or place of business of the debtor, the place, that is to say, where the obligation was created or meant to be discharged; for others, any place where the debtor can be found [cases omitted]. At the root of the selection is generally a common sense appraisal of the requirements of justice and convenience in particular conditions. In the principal case, Texas claimed that it had the most "contacts" with the debt, and therefore the debt should be considered as situated in Texas. New Jersey claimed the same property on the basis of Sun's incorporation within her jurisdiction. Because the company's principal business offices were located within her borders, Pennsylvania also claimed that it had a right to escheat the property. Florida intervened claiming it had a right to escheat that portion of the property owing to persons whose last known address was in Florida. 5 30 C.J.S., Escheat § 1 (1942). 6 Vacant, unclaimed or stray goods were the property of the king. 7 In re Lindquist's Estate, 25 Cal. 2d 697, 154 P.2d 879 (1944). S Anderson National Bank v. Luckett, 321 U.S. 233, 64 Sup. Ct. 599 (1943); Standard Oil Co. v. New Jersey, 341 U.S. 428, 71 Sup. Ct. 822 (1950). 9 255 N.Y. 120, 123, 174 N.E. 299, 300 (1931). 116 CHICAGO-KENT LAW REVIEW The Court accepted Florida's contention and the master's recommendation and held that since a debt is the property of the creditor and not t (...truncated)