Legal Challenges
Introduction:
State statutes have met with challenges for one hundred years, beginning with a savings bank's claim that the 1907 Massachusetts legislation was (1) an unconstitutional impairment of contract and (2) a violation of due process. (The U.S. Supreme Court upheld the statute in a 1911 decision.)
While the constitutional challenges have been considered by the U.S. Supreme Court, other legal challenges have played out in state court. While the state court decisions constitute precedent within that particular state, those decisions also have persuasive value when another state's judiciary reviews a challenge to escheat.
Nonetheless, the constitutional issues have the broadest application. Therefore only those decisions will be discussed in this section. Please contact us to discuss the precedent in your state.
Unclaimed property legislation has survived numerous challenges to its constitutionality.
1. Such legislation is not an improper infringement upon a national bank, Anderson Nat'l Bank v. Luckett, 321 U.S. 233 (1944); State v. Northwestern Nat'l Bank of Minneapolis, 18 N.W.2d 569 (Minn. 1945).
2. Such legislation does not impair an existing contract, Connecticut Mutual Life Ins. Co. v. Moore, 333 U.S. 541 (1948).
3. Such legislation does not deprive the owners of their property without due process of law, Provident Inst. For Savings v. Malone, 221 U.S. 660 (1911).
4. Such legislation does not violate equal protection, Provident, supra (the 1907 Massachusetts law only applied to savings banks)
The United States Supreme Court has established priority rules when more than one state attempts to "escheat" the same property.
1. Property is reported to the state of the apparent owner's last known address as such address is reflected on the holder's books and records, Texas v. New Jersey, 379 U.S. 674 (1965).
2. If there is no such address, the property is reported to the holder's state of incorporation, Texas, supra.
3. If there is an address but that state's law does not cover that category of intangible personal property, the property is reported to the holder's state of incorporation, Texas, supra.
4. These priority rules have been upheld, despite the concern that a large amount of "no address" property might create a windfall to the holder's state of incorporation, Pennsylvania v. New York, 407 U.S. 206 (1972), Delaware v. New York, 113 S.Ct. 1550 (1993).
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