BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2013-2014 Regular Session
AB 1275 (Chau)
As Introduced
Hearing Date: June 11, 2013
Fiscal: No
Urgency: No
TMW
SUBJECT
Unclaimed Property: Filing of Claims
DESCRIPTION
This bill would revise the Unclaimed Property Law to only allow
an owner of, instead of a person with an interest in, property
to file a claim with the State Controller's Office for recovery
of property that has escheated to the state. This bill would
also revise the definition of "owner" to remove a personal
representative and include an estate representative,
conservator, or guardian.
BACKGROUND
The Unclaimed Property Law (UPL), as revised in 1968, provides
for the "escheat" of unclaimed personal property. Escheat is
the reversion of property to the state by reason of the failure
of the owner to inherit or claim it.
The UPL establishes procedures to be followed when property goes
unclaimed, generally for a period of three years, and reverts to
the state. Under existing law, the holder must annually report
on unclaimed property and turn the property over to the
Controller. (Code Civ. Proc. Secs. 1530 and 1532.) The UPL
also sets forth the procedure for any person who claims an
interest in the property to file a claim to recover the property
from the state. (Code Civ. Proc. Secs. 1540-1542.)
There are three significant players under the UPL: the owner,
the holder, and the state. The "owner" is the person to whom
the property actually belongs. The "holder" is the person who
(more)
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has possession of but no interest in the unclaimed property. A
holder is simply a trustee of the property while the property is
in the possession of the holder, and might be a bank (holds
deposits of owner's money), or a business that has issued a
check to an individual or other business.
The UPL has dual objectives: (1) to reunite owners with
unclaimed funds or property, and (2) to give the state, rather
than the holder, the benefit of the use of unclaimed funds or
property. (Bank of America v. Cory (1985) 164 Cal.App.3d 66,
74; Douglas Aircraft Co. v. Cranston (1962) 58 Cal.2d 462, 463.)
The state, through the Controller, acts as the protector of the
rights of the true owner. (Bank of America, supra, 164
Cal.App.3d at p. 74.)
This bill, sponsored by the California State Controller, would
remove the ability of a person with an interest in the escheated
property to file a claim with the California State Controller
and only allow the owner to file the claim. This bill would
also revise the definition of "owner" and make other technical
and conforming changes.
CHANGES TO EXISTING LAW
Existing law , the Unclaimed Property Law (UPL), requires holders
of personal property unclaimed for more than three years, as
specified, to file a report and turn over that property to the
state. (Code Civ. Proc. Secs. 1520, 1530.)
Existing law authorizes the Controller to bring an action to
enforce provisions of the UPL and provides for the imposition of
penalties and interest against holders who willfully fail to
comply with the UPL. (Code Civ. Proc. Sec. 1576.)
Existing law authorizes any person, except another state, who
claims an interest in property paid or delivered to the
Controller to file a claim to the property. (Code Civ. Proc.
Sec. 1540(a).)
Existing law requires the Controller to consider each claim
within 180 days after it is filed and authorizes the Controller
to hold a hearing and receive evidence on the claim. (Code Civ.
Proc. Sec. 1540(b).)
Existing law defines "owner" to mean the person who had a legal
right to the property prior to its escheat, his or her heirs,
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his or her legal representative, or a public administrator.
(Code Civ. Proc. Sec. 1540(d).)
This bill would remove the ability of a person with an interest
in the property to file a claim for the property, and instead,
provide that any person, who claims to be the owner of the
property, may file the claim.
This bill would clarify that the Controller must consider the
claim for escheated property within 180 days after the claim is
filed in order to determine if the claimant is the owner.
This bill , in the definition of "owner," would remove "personal
representative" and add estate representative, guardian, and
conservator.
This bill would declare that only an owner may file a claim with
the Controller to recover the escheated property.
This bill would make other technical and conforming revisions.
COMMENT
1. Stated need for the bill
The author writes:
[Code of Civil Procedure (CCP)] Section 1540(d) defines an
"owner" as "the person who had legal right to the property
prior to its escheat, his or her heirs, his or her legal
representative, or public administrator acting pursuant to the
authority granted in Sections 7660 and 7661 of the Probate
Code." This is the definition of owner that has always been
applied in the Unclaimed Property Program. However, in
Weingarten Realty Investors v. Chiang (Cal. App. 4th, December
19, 2012), a California court of appeal considered whether a
judgment creditor could claim property escheated to the state
on behalf of the party owing a debt to the creditor and ruled
that the language in CCP [S]ection 1540(a) permits any person
with an interest in the property to claim it, regardless of
how "owner" is defined in CCP Section 1540(d).
Under the court's interpretation of CCP [S]ection 1540, anyone
who has an interest in the property even if they did not own
the property prior to escheat can file a claim regardless of
the potential invalidity of the claim and no matter how
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contingent the interest. 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.
Should the Weingarten decision stand, all parties with any
potential interest, including creditors, will have the right
to submit claims for property escheated to the state,
increasing the likelihood of competing claims as well as
litigation filed by parties over such property. 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.
This is well beyond the focus and scope of the UPL. Moreover,
the court's interpretation introduces uncertainty into the law
regarding which claims the Controller should approve for
payment, and in which order.
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 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.
2. Removing ability of interested person to claim owner's
unclaimed property
Existing law, the Unclaimed Property Law, provides procedures
regarding property that has gone unclaimed by the owner and is
subsequently transferred by the holder of the property to the
state (escheat). Existing law provides that a person with an
interest in the property may file a claim with the State
Controller's Office to recover the property.
This bill would clarify that only an owner (as opposed to an
"interested person" under existing law) may file a claim with
the State Controller's Office to recover property that has
escheated to the state. This bill would also revise the
definition of "owner" under the Unclaimed Property Law to
include an estate representative and remove and replace
"personal representative" with conservator or guardian.
The author asserts that this bill would address several issues
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raised in a recent court decision, Weingarten Realty Investors
v. Chiang (2012) 212 Cal.App.4th 163, which held that a judgment
creditor could claim, as an interested party, the judgment
debtor's escheated property. Proponents of this bill assert
that this decision creates confusion and uncertainty because it
allows for the possibility of multiple parties with an interest
in the property to submit competing claims. The State
Controller's Office would have to approve the first claim
submitted, without any guidance as to which claims to the
property should be approved and in what order.
This bill would remedy these issues by removing the ability of
an interested party to claim the escheated property and instead
would only allow the owner, or the estate representative,
conservator, or guardian of the owner, to claim the property.
3. Opposition concerns
United Asset Recovery (UAR) is opposed to this bill because they
claim that assignees and creditors are parties that hold a legal
interest, title, and right in property. UAR asserts that
although anyone can claim against the property, only persons
with legal rights to the property can recover it. Furthermore,
UAR states that the Weingarten court properly recognized that
the judgment creditor had a valid legal right to the property.
UAR further asserts that this bill and several court cases call
into question the motives of the State Controller, who they
claim has wrongfully denied several property claims.
In response to these arguments, the author asserts that "the
[UPL] was created in 1959 to ensure 'property owners [are]
reunited with their property' (Code of Civil Procedure [Section]
1501.5(c)). The original intent of the [UPL] was that the State
would act as a 'protector' to safeguard the citizens' lost
properties. This intent is laid out in Code of Civil Procedure
[Section] 1501.5(c) and reinforced in Bank of America v. Cory
(1985) 164 Cal. App .3d 66, 74. The unclaimed property program
is not set up as a clearinghouse for creditors. AB 1275 will
help ensure that the purpose of the UPL is carried out,
reuniting owners, not creditors, with their property.
Creditors who never had a legal right to property prior to
escheat cannot be 'reunited' with property in which they never
had title. Under this bill, only persons who had the legal
right to the property, before title vested in the State, will be
reunited with their property. Furthermore, creditors already
have other remedies available to pursue debts owed to them
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outside of going after unclaimed property. For instance, they
can garnish a person's wages or get a lien placed on the
property of the person who owes them money. Finally, it is
within the authority of the legislature to change or clarify the
laws, even in response to a court decision."
Support : Consumer Federation of California; Professional
Fiduciary Association of California
Opposition : United Asset Recovery
HISTORY
Source : California State Controller
Related Pending Legislation : AB 1011 (Salas) would require the
Controller to add interest, at specified rates, to the amount of
any claim paid by the Controller to an owner under the Unclaimed
Property Law. AB 1011 is currently in the Assembly Committee on
Appropriations.
Prior Legislation :
AB 2117 (Niello, 2010) would have eliminated the regular
transfer of unclaimed property funds from the Abandoned Property
Fund to the General Fund, would have required the Controller to
add an interest payment to any claim for unclaimed property that
the Controller pays to an owner, and would have extended the
escheatment period for most types of unclaimed property from
three years to five years. AB 2117 failed passage in the
Assembly Committee on Judiciary.
AB 1291 (Niello, Ch. 522, Stats. 2009) made various reforms to
the Unclaimed Property Law (UPL) to strengthen property owners'
rights and ensure that property holders reasonably inform
customers about risks associated with leaving accounts dormant
and potential for escheatment of property after a period of
inactivity.
SB 1319 (Machado, 2008) would have relieved a holder of
escheated property of liability if the holder complied with
notification requirements, would have increased civil penalties
for non-compliance with the UPL, and would have revised
notification requirements for holders of unclaimed property. SB
1319 was vetoed by Governor Schwarzenegger.
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AB 378 (Steinberg, Ch. 304, Stats. 2003) reduced the escheatment
period from five years to three years for bank checks and
deposit accounts, and from three years to one year for wages and
salaries.
AB 1772 (Harman, Ch. 813, Stats. 2002) prescribed the notice and
information that a bank or financial institution must give to
owners of financial accounts that are about to escheat to the
state, and required the same notice by other holders of tangible
and intangible property subject to the UPL.
SB 673 (Speier, 2001) would have provided for notices to be sent
by mail from the Controller to apparent owners of unclaimed
property, and for the Controller to take further steps,
including searches of other governmental records and outreach to
the general public, to alert owners that their unclaimed
property had escheated to the state. SB 673 was held in
Assembly Committee on Appropriations.
Prior Vote :
Assembly Committee on Judiciary (Ayes 10, Noes 0)
Assembly Floor (Ayes 75, Noes 0)
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