Untitled Texas Attorney General Opinion ( 1961 )

. .
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.