Court Opinion

ID: 4135749
Source: CourtListenerOpinion
Date Created: 2017-02-18 02:05:48.265219+00
Date Added: 2024-06-11T14:37:41.986679
License: Public Domain

.   .

                          E
                               OF   -XAS

                              December 29, 1961

        Mr. Jesse James                Opinion No. ~~-1230
        State Treasurer
        Austin, Texas                  Re:   Whether Article 3272a,
                                             V.C.S. applies to money
                                             on deposit in custody of
        Dear Mr. James:                      a Federal Court.
                  You have requested our advice on the question of
        whether Article 3272a, V.C.S. applies to monies on deposit
        in the custody of a Federal Court.
                  Article 3272a, after providing "every person hold-
        ing personal property subject to escheat under Article 3272
        . . . shall .     file a report thereof with the State
        Treasurer . . 1"; defines "person", in part, as follows:
                       "(a) The term 'person' as used in
                  this article means any . , , governmental
                  or political subdivision or officer, public
                  authority . . . officer of a court, liqui-
                  dator . . . or any other legal, commercial
                  or governmental or political entity . . .'
                  Thus, the plain language of the statute dictates
        that officers of courts holding personal property subject to
        escheat shall report such property. The word "court" is
        clearly used here in the generic sense and it would be pure
        legislation on our part to attempt to restrict the meaning
        of this term to anything less than every court of every juris-
        diction sitting in this state.
                   The word "court" without further identification
        in the statute as to whethir the term embraces federal as
        well as state courts, has been held to include federal courts.
        Dickson v. Chesapeake & Ohio Ry Co., 7 W.Va. 390 (1874); In
        re Kittson's Estate, 45 Minn. 197, 48 N.W. 419 (1891 ;    -
                                                             27 (C.C.A.
        Plymouth County Trust Company v. MacDonald, 53 F.2d ii
        Mass. 1931); Look v. Alaska S.S. Co., tlF.2d 207 (D.C. Wash.
        1925).
                                                                .   .

Mr. Jesse James, page 2 (WW-1230)

           In our judgment Section 11 of Article 3272a, which
is quoted hereafter, does not reveal that the Legislature
intended to exclude federal courts from the provisions of
the statute requiring the reporting of property which is
subject to escheat.
               "Unclaimed property held by the
          federal government. In the event of
          the enactment by the federal government
          of laws providing for the discovery of
          unclaimed property held by the federal
          government, and for the furnishing or
          availability of such information to the
          States, the State Treasurer is hereby
          authorized to compensate the Federal
          government for the proportionate share
          of the actual and necessary cost of
          examining records, and the State of
          Texas shall hold the Federal Government
          harmless from later claims of owners
          of unclaimed property delivered to the
          State Treasurer by the Federal government.
          Such compensation shall be paid from the
          Escheat Expense and Reimbursement Fund."
          It is our view that the purpose of Section 11 is
to encourage the Federal Government to assist the State in
discovering unclaimed property by giving assurances of reim-
bursement for the cost to the Federal Government of obtaining
such information and by advising the Federal Government that
it will not be liable for subsequent claims from owners where
the State has received unclaimed property from the Federal
Government. This does not indicate that the State does not
also assert the right, at least to monies on deposit in
federal courts, to require reporting and the escheat of such
property under its own statute. In short, it welcomes help
from the Federal Government in locating escheatable personal
property held by the Federal Government generally but does
not exclude self-help on the part of the State as to monies
in the custody of federal courts sitting in this State.
          We are persuaded that if the Legislature had intended
to exclude federal courts it would not have left the matter to
be ascertained by implication from Section 11.
.   .

        Mr. Jesse James, page 3 (NW-1230)

                  Section 1 (b) of Article 3272a defines "personal
        property" in part, as follows:
                       "money . e I claims for money or
                  indebtedness and . e 0 deposits."
                  Hence, monies on deposit in the custody of a
        court, being "money" and "deposits", are manifestly personal
        property within the meaning of Article 3272a.
                  The question emanating from our foregoing construc-
        tion of the statute is whether the statute violates the
        Constitution of the United States by requiring the reporting
        of monies in the custody of federal officers and providing
        for the escheat of such property to the State.
                  Section 2042 of 11 U.S.C.A. provides as follows:
                       "No money deposited shall be with-
                  drawn except by order of court. In
                  every case in which the right to withdraw
                  money deposited in court has been adjudi-
                  cated or is not in dispute and such money
                  has remained so deposited.for at least
                  five years unclaimed by the person entitled
                  thereto, such court shall cause such money
                  to be deposited in the Treasury in the name
                  and to the credit of the United States.
                  Any claimant entitled to any such money may,
                  on petition to the court and upon notice to
                  the United States attorney and full proof
                  of the right thereto, obtain an order direct-
                  ing payment to him."
                  It is clear that a State,proceeding under its powers
        of escheat, can establish itself as a "claimant entitled to
        any such money" within the meaning of the above quoted pro-
        vision. In United States v. Klein, 303 U.S. 276, 58 S. Ct.
536 (1938), the State of Pennsylvania, proceeding under the
        escheat statute of that state, obtained a judgment in a
        state court declaring the escheat of funds in the custody
        of a federal district court sitting in the State and autho-
        rizing the State to apply to the Federal District Court for
        the monies. The United States opposed the State in the trial
        court and appealed from an adverse judgment to the State
        Supreme Court, where the judgment of the trial court was
        affirmed, and thence to the United States Supreme Court,
        where the judgment was again affirmed.
                                                           I   .

Mr. Jesse James, page 4 (WW-1230)

         Speaking for the court, Mr. Justice Stone said:
               "The question for decision is
         whether statutes of the Commonwealth
         of Pennsylvania, Purdon's Penn. Stat-
         utes,  Tit. 27, Sec. 41, 45, 282, 334,
         are unconstitutional because they
         authorize interference with a federal
         court and an invasion of the sover-
         eignty of the United States, in so far
         as they purport to confer jurisdiction
         on a state tribunal to declare the
         escheat of moneys deposited in the
         registry of the federal court and later
         covered into the Treasury of the United
         States."
                "While a federal court which has
         taken possession of property in the
         exercise of the judicial power conferred
         upon it by the Constitution and laws of
         the United States is said to acquire ex-
         clusive   jurisdiction, the jurisdiction is
         exclusive   only in so far as restriction
         of the power of other courts is necessary
         for the federal court’s appropriate con-
         trol and disposition of the property.
         Penn General Casualty    Co. V. Pennsylvania
         ex rel. Schnader, 294 U.S 189; see
         Leadville Coal Co. vs. McCreery 141 U.S.
475, 477. Other courts having iuris-
         diction to adjudicate rights in the prop-
         erty do not, because the property is
         possessed by a federal court, lose power
         to render any judgment not in conflict
         with that court's authority to decide
         questions within its jurisdiction and to
         make effective such decisions by its con-
         trol of the property. Penn General &
         Casualty Co. vs. Pennsylvania ex rel.
         Schnader, supra; see Heidritter v. Elizabeth
         Oil-Cloth Company      2    s 294 304     f
         Buck v. Colbath    5 :~ll"'334,  342; Rie&e v
                       19 6.S. 218: Similarly a federal
         =%--
         tour may make a like adjudication with
Mr. Jesse James, page 5 (WW-1230)

         respect to property in the possession
         of a state court. Yonley v. Lavender,
         21 Wall. 27b; Byers v. McAulr3yY 149
         u.S, 608, 620; Security Trust; co. v.
         Black River National Bank, lt37 U.S. 211.
         227; Waterman v. Canal-Louisiana Bank &-
         T Co., 215 U.S. 33 4 4b. Commonwealth
         m     Co. v. Bradf&d?-29?' U.S. 613, 619;
         General Baking C:ompany v.~Iiarr,3OO~U.S.

               "In this case jurisdiction was
          acquired by the district court, by reason
          of diversity of citizenship, to adjudi-
          cate the rights of the parties. That
          function performed, it now retains juris-
          aiction for the sole purpose of making
          disposition of the fund under its control,
          by ordering payment of it to the persons
          entitled as directed bs the federal stat-

          Subsequently Pennsylvania successfully petitioned
the Federal District Court for the escheated monies and on
aooeal the .iudmnentof court directing
                                     -_payment
                                         _     of the monies
'co-theState was affirmed. United States v. Klein, 106 F.2d
213 (1939) cert. denied. 308 U.S. 618, b0 S.Ct. 295 (1939).
In the opinion of the Third Circuit Court of Appeals it was
said:
               "United States v. Klein, supra,
          settled that Pennsvlvania under its act,
          57 P.S. Pa. sec. 4i, 45, 282, 334, may -
          constitutionally escheat unclaimed money
          deposited in the registry of a United
          States District Court in Pennsylvania and
          later covered into the united States
          Treasury under Sectiion996, Revised
          Sta,tutes.
                   "
Mr. Jesse James, page 6 (WW-1230)

          The fact that the particular funds in the custody
of a federal court have been transferred beyond the state's
territorial jurisdiction does not prevent the State from
escheating the funds. United States v. Klein, supra;
Application of People of New York,138 F.Supp. 661 (S.D.N.Y.
1956).
          While Texas' new statute on escheat, Article 3272a,
does not expressly provide for petitioning and receiving the
approval of a federal court after monies on deposit in such
court have been reported and declared escheated to the state
there is, in our opinion, nothing in the statute which would
conflict with such procedure. For the purpose of reflecting
this fact the pertinent portion of Section 4 (g) of our stat-
ute is quoted hereafter:
               "If it appears to the Court that
          the property described in the petition
          has been actually abandoned, and that
          there is no person entitled to it, judg-
          ment shall be rendered declaring such
          property escheated and vesting the title
          thereto in the State of Texas. The judg-
          ment shall also direct the holder of the
          property so described, which has been
          actually abandoned and escheated and the
          title thereto vested in the State, to
          deliver such property immediately to the
          State Treasurer." (Emphasis Supplied.)
          The relevant portion of Section 4 (h) provides:
               "After the judgment of the Court
          vesting th tit1 to such property in
          th State Ef TexEs has become final, the
          AtEorney General shall so certif t
          State Treasurer." (Emphasis Sup$.i~dt~e
          We construe the phrase "after the judgment of the
court vesting the title to such property in the State of
Texas has become final" to mean after the judgment has become
final in the sense that it is valid and enforceable.
          We construe the phrase "the judgment shall also
direct the holders .     to deliver such property immediately
to the State Treasurer"'to mean as soon as legally possible.
.   .

        Mr. Jesse James, page 7 (W-1230)

        Where an act is fairly susceptable of two constructions, one
        of which will impair the constitutionality of the act and
        the other of which will make the act of certain constitu-
        tionality the latter, according to well established rules of
        construction, will be adopted. 39 Tex.Jur. 206, Statutes,
        Sec. 3.
                  In Application of the People of New York, 138 F.
        Supp. 661 (S.D.N.Y. 1956) it was held that the fact that
        money is in the possession of a federal court does not in
        itself operate as a jurisdictional bar to the state's
        escheat proceeding. It was further held that as to moneys
        deposited in a federal court in bankruptcy proceedings, the
        federal bankruptcy law has not pre-empted the field so as to
        put such monies beyond the reach of the state for purposes
        of escheat. In that case an application of the State of New
        York for an order directing payment to it of funds deposited
        in bankruptcy proceedings in the federal court was denied on
        the ground that the State had not first obtained a decree of
        escheat in the State courts in conformity with the consti-
        tutional requirements of due notice. The conclusion which
        logically follows is that the federal court would have granted
        the application on a valid decree of escheat from the state
        court.

                  The following exerpt from the opinion in A plica-
        tion of the People of New York, supra, is worthy of--SEE
                                                            no
                       !I . . this is not the first
                  time a state has sought a court order
                  directing the withdrawal of such bank-
                  ruptcy funds pursuant to its rights
                  under judgment of escheat; this is,
                  however, the first time the United
                  States has contested such a withdrawal
                  in this District. Granted that courts
                  often overlook points not raised before
                  them, but the cold fact is that federal
                  judges have been granting such applica-
                  tions without indicating doubt as the
                  states' jurisdiction to proceed in
                  escheat."
                  Since the State has authority to escheat funds in
        the custody of a federal court; it follows that it has autho-
        rity to require that such property be reported by officers
                                                                 I   .

Mr. Jesse James, page 8 (WW-1230)

of such courts. The reporting constitutes considerably less
interference with the property In the custody of the court
than does the escheat thereof. The federal court does not
abdicate its jurisdiction over the property by the act of
reporting,it. The state Is in this respect, again, only
exercising its "power over persons and property within its
territory".
          There is a special problem in regard to unclaimed
moneys paid into Court in bankruptcy proceedings. Section
106 of Title 11 U.S.C.A. was amended in 1956 so as to pro-
vide that such moneys "shall not be subject to escheat under
the laws of any state": Matter of Moneys Deposited In and
Now Under the Control of the United States District Court
for th Western District of Pennsylvania, 243 F.2d 443 (1957),
pointseout that a serious question is presented as to the
constitutional validity of this ban upon the escheat by
States of unclaimed bankruptcy funds.
          We do not in this opinion attempt to say whether
or not in our judgment the Congress can permanently prohibit
the States from escheating such funds where the owner thereof
is unknown. We do hold that such funds must be reported.
The report of unclaimed monies paid into the court in bank-
ruptcy proceedings is patently not the escheat of such monies
and does not unduly Interfere with the custody and control of
such funds by the Federal District Court.

                           SUMMARY

               Article 3272a applies to monies on
          deposit in the custody of Federal Courts
          and the statute is not unconstitutional
          by virtue of such fact.
                               Very truly yours,
                               WILL WILSON
                               Attorney General of Texas

HGB:afg
                               By4!-ZE-%:;
                                     4
                                    Assistant Attorney General
Mr. Jesse James, page 9 (Ww-1230)

APPROVED:
OPINION COMMITTEE
W. V. Geppert, Chairman
Verion Teofan
Coleman Gay
Jo'hi-i
     Reeves
Morgan Nesbitt
REVIEWED FOR THE ATTORNEY GENERAL
BY: Houghton Brownlee, Jr.