X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Click here for the full text of this decision FACTS:Appellants Charles H. Clark and Elizabeth Hajek filed suit in Travis County alleging that the comptroller’s failure to pay interest when returning unclaimed property was an unconstitutional taking. Clark moved to certify a class including all persons who had received payment for a claim exceeding $100 under the unclaimed property act. After a hearing on certification and the viability of Clark’s claims, the district court denied the motion to certify the class and dismissed the suit. Clark appeals. HOLDING:Affirmed. The court holds that the unclaimed property act does not require the state to hold unclaimed property in trust or otherwise require payment of interest to owners. Moreover, the state’s use of unclaimed property and retention of any interest earned before the owner asserts a claim is not an unconstitutional taking. The court holds that there is no unconstitutional taking of interest on property that is presumed abandoned. Viewed as a whole, the statute does not establish a trust relationship between the comptroller and the original owner of unclaimed property. Rather, the unclaimed property act creates a mechanism for individuals to reclaim their lost property but empowers the comptroller to use abandoned property for the benefit of the state until a claim of ownership has been asserted. The court holds that Taylor v. Westley, 402 F.3d 924 (9th Cir. 2005), relying as it does on the statutory creation of a separate trust fund for owners, does not control the interpretation of the Texas act, which has no such provision for a custodial trust. Viewing the statute as a whole, the court holds that it does not create a trust relationship that would require the comptroller to pay interest to owners. The court addresses Clark’s claim that payment of interest is required by the constitution. Once the property is presumed abandoned, the state’s lawful use of that property for its own benefit cannot be an unconstitutional taking. The U.S. Supreme Court has held that interest earned by IOLTA accounts is the private property of the owner of the principal. Phillips v. Washington Legal Foundation, 524 U.S. 156 (1998). The court emphasized the common law notion that “interest follows principal.” There is an important distinction between the interpleader and IOLTA cases and the issue of interest earned on unclaimed property. Interpleaded funds and funds deposited in an IOLTA account are held in trust for the owner, unclaimed property funds are not. There is also no question as to who has asserted ownership of the interpleaded or IOLTA funds. By contrast, property delivered to the comptroller as unclaimed is presumed abandoned. Until a missing owner asserts a claim, it is wholly appropriate for the comptroller to use unclaimed property for the benefit of the state instead of allowing a windfall to a private holder or permitting the funds to lie fallow. OPINION:Smith, J.; Smith, Pemberton and Waldrop, JJ.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 1 article* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.