BILL ANALYSIS �
AB 1275
Page 1
ASSEMBLY THIRD READING
AB 1275 (Chau)
As Introduced February 22, 2013
Majority vote
JUDICIARY 10-0
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|Ayes:|Wieckowski, Wagner, | | |
| |Alejo, Chau, Dickinson, | | |
| |Garcia, Gorell, | | |
| |Maienschein, Muratsuchi, | | |
| |Stone | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Revises the definition of "owner" under the Unclaimed
Property Law (UPL), and permits only owners meeting this
definition to file a claim for recovery of property.
Specifically, this bill :
1)Provides that, notwithstanding Code of Civil Procedure of
Section 1501(g), for purposes of filing a claim for property
escheated to the state, the term "owner" means the person who
had legal right to the property prior to its escheat, his or
her heirs or estate representative, his or her guardian or
conservator, or a public administrator acting pursuant to the
authority granted in Probate Code Sections 7660 and 7661.
2)Provides that only an owner, as defined above, may file a
claim with the State Controller pursuant to the UPL.
3)Clarifies that a person who claims to have been the owner (as
defined above) of property may file a claim with the
Controller seeking recovery, and that the Controller shall
consider each claim within 180 days to determine if the
claimant is the owner of the property.
EXISTING LAW :
1)Authorizes any person, excluding another state, who claims an
interest in property paid or delivered to the Controller under
the UPL to file a claim to the property or to the net proceeds
from its sale. (Code of Civil Procedure (CCP) Section
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1540(a). Unless otherwise noted, all further references are
to this code.)
2)Requires the Controller to consider each claim within 180 days
after it is filed and allows the Controller to hold a hearing
and receive evidence. Further requires the Controller to give
written notice to the claimant if he or she denies the claim
in whole or in part, and specifies rules for mailing of the
notice. (Section 1540(b).)
3)Defines "owner," for the purpose of filing a claim to recover
unclaimed property, to mean the person who had legal right to
the property prior to its escheat, his or her heirs, his or
her legal representative, or a public administrator acting
pursuant to the authority granted in Probate Code Sections
7660 and 7661. (Section 1540(c).)
4)Defines "owner" to mean a depositor in case of a deposit, a
beneficiary in case of a trust, or creditor, claimant, or
payee in case of other choses in action, or any person having
a legal or equitable interest in property subject to this
chapter, or his or her legal representative. (Section
1501(g).)
FISCAL EFFECT : None
COMMENTS : According to the author, this bill is needed to
address consequences arising from a recent California Court of
Appeal decision interpreting the definition of the term "owner"
under the UPL. The author states:
The Fourth Circuit Court of Appeals in December 2012
ruled that the language in CCP Section 1540(a) permits
any person with an interest in the unclaimed property
to claim it, regardless of how "owner" is defined in
CCP Section 1540(d). The court's interpretation means
that there is no legislative guidance governing which
claims the Controller should pay, and that any party
that has an interest in the property can file a claim
regardless of the potential invalidity of the claim.
AB 1275 would remedy this problem by clearly defining
the term "owner" for purposes of filing an unclaimed
property claim, and specifying that only an owner may
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file a claim for unclaimed property with the State
Controller. AB 1275 will provide for consistent
application of the UPL, fair and equitable payment of
claims to owners, and reduce potential litigation
associated with the interpretation of the current UPL
statute while helping reduce frivolous lawsuits filed
by parties that are not eligible to file a claim.
The UPL, enacted in 1958, establishes procedures for the escheat
of unclaimed personal property. Property escheated to the state
means the state has custody of the property in perpetuity, until
the owner claims the property. The UPL establishes procedures
to be followed when property goes unclaimed, generally for a
period of three years, and escheats to the state. Under
existing law, the holder must annually report on unclaimed
property and turn the property over to the Controller. In turn,
the Controller is required to mail a notice to each person who
appears to be entitled to unclaimed property according to the
report filed by a holder, in addition to the requirement of
publication of unclaimed property owners in a newspaper of
general circulation. A person "who claims an interest in"
escheated property may file a claim to recover the property from
the state. The Controller maintains a Web site
( http://www.sco.ca.gov ) where members of the public may search a
database to discover if the state is holding any of their
property, and may submit claims to recover the funds or
property.
In Weingarten Realty Investors v. Chiang (Cal. App. 4th,
December 19, 2012), a California court of appeal considered
whether under the UPL a judgment creditor may claim property
escheated to the state on behalf of the party owing a debt to
the creditor. The UPL alternatively defines "owner" to include
"any person having a legal or equitable interest" in the
property at issue (Section 1501(g)), but also provides that for
the purpose of Section 1540, the term "owner" means "the person
who had legal right to the property prior to its escheat"
(Section 1540(d)). Under subdivisions (a) and (b) of Section
1540, however, existing law specifically authorizes "any person
who claims an interest in property paid or delivered to the
Controller" to file a claim for return of the property, and
makes further references to "the claimant" rather than "the
owner." The court of appeal analyzed the statute and concluded
that the Legislature did not intend to limit use of the claims
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procedure to "owners" as defined by Section 1540(d), but meant
to allow all parties with any interest, including creditors, the
right to submit claims for escheated property, consistent with
the wording of Section 1501(g) and Section 1540(a).
According to the Controller, this interpretation of the statute
is problematic because it "increases the likelihood of competing
claims as well as litigation filed by parties over such
property." The Controller also states: "If a creditor is
allowed to file a claim, the Unclaimed Property Program may have
to validate the present existence of a third-party debt. . .
Moreover, the court's interpretation introduces uncertainty into
the law regarding which claims the Controller should approve for
payment, and in which order." Finally, the Controller notes
that since the Program's inception in 1959, the legislative
direction the Controller has used to interpret the UPL required
the Controller to pay the claim to the property owner at the
time of escheatment.
The Controller's contention that the court's interpretation in
Weingarten creates new responsibilities for the Controller's
office, such as validating third party debt and resolving
competing claims, which are beyond the scope of the Controller's
duties under existing law, appears meritorious.
This bill would revise Section 1540 to make it clear that an
owner is the person who had legal right to the property prior to
its escheat, and that only those persons (owners) or their heirs
or authorized representatives may file a claim for the recovery
of unclaimed property. The changes proposed by this bill seek
to restore authority to the Controller to resume implementing
the UPL in the way that the Controller's office reportedly has
for over the past 50 years, prior to Weingarten, as well as
eliminate other sources of ambiguity that could lead to
litigation.
This bill is opposed by United Asset Recovery (UAR), a
Carlsbad-based company that, according to its Web site,
specializes in the recovery of abandoned and unclaimed funds for
a fee. In its letter of opposition, UAR urges the Legislature
not to approve legislation that would reverse the holding of
Weingarten.
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Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334
FN: 0000393