Each year billions of dollars'
worth of property is abandoned all over the U.S. When that property is
something as tangible as buildings or land, there is no question about
who takes it over.The state in which it is located gets it through “escheat,” a feudal
doctrine by which the land of a man who died without heirs reverted to
the original grantor, or lord of the manor. But escheat raises prickly problems with such abandoned
intangible property as unclaimed checks because the debts involved
have no one physical location. Which state is entitled to escheat a
debt owed by a company incorporated in New Jersey, with main offices in
Pennsylvania, to a person who once lived in Texas but whose last known
address was in Florida? 4
Problem. Last week, in a Texas suit involving three other states,*the Supreme Court
issued a milestone escheat rule that finally made sense out of chaos. At issue was
$26,461.65, mainly in unclaimed checks , that Sun
Oil Co. has owed to 1,730 small creditors for as long as 40 years. The
decision will ultimately affect the country's $15 billion of abandoned
intangibles, which are growing at the rate of $1 billion a year.Texas claimed the Sun Oil money because the debts are either on the
books of Sun's two Texas offices, or are owed to persons whose last
known addresses were in Texas. New Jersey claimed it because Sun is
incorporated in that state. Pennsylvania claimed it because Sun's main
offices are in that state.Florida said it should get whatever was owed to debtors whose last known
addresses were in Florida. As for Sun, all it wanted was freedom from
double liability, assurance that it would not have to pay the same debt
to more than one state.Fair Formula. Speaking for the court, Justice Hugo Black rejected Texas'
claim as the state having the most “contacts” with the debt. To follow
that rule would saddle the court with endless case-by-case litigation,
said Black. New Jersey's claim as the debtor's domicile would “too
greatly exalt a minor factor,” while Pennsylvania's main-office
argument might force the court to tot up the space or staff in one
branch office after another.Black adopted Florida's suggestion that “since a debt is property of the
creditor, not of the debtor, 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.” All this takes is a look at the
company books. Though “not entirely one of logic,” said Black,
Florida's escheat rule is easiest to apply and will save countless
court fights in the future.*The Constitution's Article III gives the court “original”
jurisdiction over all cases between states. Only last week,
the court permitted Nebraska to sue Iowa over 15,000 acres that
Nebraska claimed Iowa stole along their mutual boundary, the Missouri
River.
