Document ID: ./input/supremecourt_opinions/opinions/boundvolumes/524bv.pdf
Page Number: 202.0

524US1

Unit: $U81

[09-06-00 20:27:25] PAGES PGT: OPIN

Cite as: 524 U. S. 156 (1998)

157

Syllabus

Webb’s does not control because examples such as income-only trusts
and marital community property rules demonstrate that Texas does not,
in fact, adhere to the general rule is rejected. These examples miss the
point of Webb’s. Their exception by Texas from the “interest follows
principal” rule has a ﬁrm basis in traditional property law principles,
whereas petitioners point to no such principles allowing the owner of
funds temporarily deposited in an attorney trust account to be deprived
of the interest the funds generate. Petitioners’ further contention that
“interest follows principal” in Texas only if it is allowed by law does
not assist their cause. They do not argue that Texas law prohibits the
payment of interest on IOLTA funds, but, rather, that interest actually
“earned” by such funds is not the private property of the principal’s
owner. Regardless of whether that owner has a constitutionally cog-
nizable interest in the anticipated generation of interest by his funds,
any interest that does accrue attaches as a property right incident to
the ownership of the underlying principal. Petitioners’ ﬁnal argument
that the money transferred to the TEAJF is not “private property”
because IOLTA funds cannot reasonably be expected to generate in-
terest income on their own is plainly incorrect under Texas’ require-
ment that client funds be deposited in an IOLTA account “if the in-
terest which might be earned” is insufﬁcient to offset account costs and
service charges that would be incurred in obtaining it.
It is not that
the funds to be placed in IOLTA accounts cannot generate interest, but
that they cannot generate net interest. This Court has indicated that
a physical item does not lack “property” status simply because it does
not have a positive economic or market value. See, e. g., Loretto v. Tele-
prompter Manhattan CATV Corp., 458 U. S. 419, 435, 437, n. 15. While
IOLTA interest income may have no economically realizable value to
its owner, its possession, control, and disposition are nonetheless val-
uable rights. See Hodel v. Irving, 481 U. S. 704, 715. The United
States’ argument that “private property” is not implicated here because
IOLTA interest income is “government-created value” is factually erro-
neous: The State does nothing to create value; the value is created by
respondents’ funds. The Federal Government, through its banking and
taxation regulations, imposes costs on this value if private citizens at-
tempt to exercise control over it. Waiver of these costs if the property
is remitted to the State hardly constitutes “government-created value.”
In any event, this Court rejected a similar argument in Webb’s, supra,
at 162. Pp. 163–171.

2. This Court leaves for consideration on remand the question
whether IOLTA funds have been “taken” by the State, as well as the
amount of “just compensation,” if any, due respondents. P. 172.

94 F. 3d 996, afﬁrmed.