Texas v. New Jersey

PETITIONER:Texas
RESPONDENT:New Jersey
LOCATION:Criminal District Court, Parish of New Orleans

DOCKET NO.: 13 ORIG
DECIDED BY: Warren Court (1962-1965)
LOWER COURT:

CITATION: 379 US 674 (1965)
ARGUED: Nov 09, 1964
DECIDED: Feb 01, 1965

Facts of the case

Question

Audio Transcription for Oral Argument – November 09, 1964 in Texas v. New Jersey

Earl Warren:

Number 13 Original, State of Texas, plaintiff, versus the State of the New Jersey et al.

Mr. Shultz.

W. O. Shultz II:

Mr. Chief Justice and May it please the Court.

This case is before the Court as a controversy between Texas, New Jersey, Pennsylvania, and Florida over certain intangible obligations which were incurred in the course of business of Sun Oil Company, which of course is a state which is involved in operations throughout all the states or rather, they have permit to do business in all the states and do business in many of them.

The particular obligations which we are concerned with in this case arose out of the operations of two district offices located in Texas and —

Earl Warren:

To what?

W. O. Shultz II:

District or division offices.

Their home office is in Philadelphia but they maintain throughout the United States certain division offices and the record, according to the stipulation, shows that the two offices in Texas were more or less, autonomous in the scope of their operations there in Texas.

They conducted placing agreements, drilling.

They operated for oil and gas in Texas as well as neighboring states.

They contracted for their own labor hiring and firing, and handled their own payroll, and so on.

New Jersey is claiming that, as a domiciliary state of the corporation, that it is entitled to take all of these obligations.

Florida contends that, as the state of the last known address, contend for a theory that the last known address should govern as to which state has the power to take possession of these unclaimed obligations.

We, as an alternative to the position which was adopted by the special master which concluded that all of these obligations had a status with the creditor, therefore, only the state wherein the last known address, they had the power to deal with these obligations, well, it seemed to us, in taking this approach, that you ignore many of the equities concerning the transaction out of which these obligations arose.

And, that you take a rather arbitrary single factor surrounding a particular obligation when you know other circumstances surrounding the same obligation which might enact with the injustice, in fairness to everyone, give some other state a better claim to these intangibles under their state actions.

We, in addition, feel very strongly about the fact that such a roué would allow the accretion, so to speak, of the oil in — proceeds from oil and gas of the State of Texas and allow them to be trickled out a piece of meal to other states when, under the law of Texas, oil and gas in place is a real estate and, also, that the rights to delay rentals have been considered as a real property right in Texas.

Now, we admit that, under Texas law, once these minerals have been produced and once the delay rentals are due that they’re considered to be personal realty.

But, there are cases which recognize, and I think it’s an established principle in the law, that even though you may have personal realty that it may be so connected with the real estate or real property interest that it may be considered immovable by the state within which the property from which is located was derived.

And, we have approached the problem as to oil and gas proceeds and the delay rentals in Texas from that stand point.

We cited in our brief, in that respect, the Toledo Society for Crippled Children versus Hickok which does not directly reach that point but, to me, it gives an indication that the Texas Courts would be and are very reluctant to allow the laws of another state to determine title to anything which is very closely related to the realty in Texas.

Now, in that case, there was oil and gas property involved, and the testator residing in Ohio, at his death, by his will, set up trust for his property, the residual part of his property, whereby part of it would go to — the proceeds from it would go income to his wife and children for 20 years and, thereafter, that the corpus would be divided up among certain charitable organizations.

Under Ohio law, such a bequest was invalid and it was so held by the Ohio Supreme Court.

Well, the Society came down to Texas and filed a suit in Texas to declare their interest in the real property in Texas valid under that will.

If we look a little at the operations of Mr. Hickok, he was in partnership with a Texas oil operator here and they had agreed, shortly before his death, that they would transfer all of their partnership assets which consisted of certain Oil and Gas properties to a corporation and, in turn, receive stock in this corporations for the assets which they transferred the real property they transferred.

The corporation has been formed at the death of Mr. Hickok, but the actual transfer had not been carried out and his will specifically directed that his executors and administrators go ahead and carry out that provision, which they did.

And, actually, the case went off on the theory of whether or not equitable conversion applied in a situation such as this where you have a conflict of laws question determining the validity of title to real estate or the proceeds from real estate.

The Texas Court held that even though this realty had been directed by the will to be converted into personal realty that, in determining which law, whether Ohio or Texas, applied to determine whether these charitable organizations were to receive the benefits of the trust that the testator intended, the Court held that — the Texas Supreme Court held that the Doctrine of Equitable Conversion had no place in the rules pertaining to conflicts of law in saying which law of which state applied.

And, they applied the law of Texas and upheld the validity of this bequest in the will.

In the course of that opinion, the Court stated that the interest in question were personal realty for distribution purposes.

They were yet immovable for purposes of determining whether the laws of England or Hungry applied.

W. O. Shultz II:

They were talking about a case that they were discussing in there which also determined a question of — conflict of law question over which law would apply either England where a land had been converted into personal realty and bequeath to some Hungarian persons, or whether the law of Hungary would apply.

We’d like to take the position that the proceeds of these estates in Texas are so closely connected with the estate.

As a matter of fact, they are the full enjoinment of these estates.

An interest in oil and gas, in place, has no value other than the probability or possibility that it will produce and bring income and then becomes valuable, and the enjoinment accrues to the owner when, in fact, there is that deduction.

It is a piece meal sale, so to speak, or a continuing sale of the real property interest.

And, we take the position that injustice and inequity and a controversy between states to see whose law shall apply to take possession of these proceeds from this deduction when it has been abandoned or, so to speak, unclaimed by the rightful owner for a period of time should be determined under Texas law because these things are too closely related to the title to Texas land to be determined by the law of another state because it’s well recognized that the law of no other state can determine the title to the realty itself.

And, for that reason, we urge the Court to declare that the Texas law should apply to all proceeds from the oil and gas production and the delay rentals, even though accrued and even though they are, under Texas law, personal realty.

But, that they are personal realty of such a nature and so-related to the realty that they have, if you please, presence in the State of Texas only for purposes of determining title.

The same question was touched upon in Commissioner versus Skaggs in which Mr. Skaggs, being a resident of Texas, he and his wife own real property in California and a question arose over whether the income from this real property in California would be immunity or separate, whether they could return a joint return or whether he had violated his separate property.

Well, the Court, in that case, even though the marital residence was in Texas, looked to the law of California which characterized those rentals as his separate property and they discussed the problem and (Inaudible) into crops that grow on the land and admit that even thought once the crops are severed they are personal realty but, even so, the title to them should be determined by the law of the state where the land is located rather than to allow the Texas law to characterize them as something else.

In this sense, statutes of that nature operate as statutes real not in the sense they are operating on real property but that they are operating on the thing itself rather than the person.

And in fact of the presence of the thing itself give this importance.

In addition to this phase of our argument in the case, we look upon all of these obligations, of course they are intangible obligations, and the Courts — various Courts through the years have held that intangibles have a status here and they have a status there for various purposes and, for taxation purposes, generally at the residence of the person to whom they are owned, the creditor.

But, I don’t think that this is an inflexible determination that the courts made.

Considering all the facts, the facts that the land — there, you know the man actually is living in a certain state and he is there carrying on business operations, and this is part of his capital with which he works.

And, that state gives him the protection of its laws in the operation of his business.

So, I don’t think the sole consideration in those cases, even though they say that the status is with his residence, I think they take in the other factors into consideration in reaching this conclusion, and this —

Earl Warren:

Shouldn’t our Solicitor generally be before the true owner of this property, the creditor, and not the debtor state or debtor company in the state?

W. O. Shultz II:

I think that the interest of the creditor should always be primary and I think —

Earl Warren:

I’m just wondering if it wouldn’t be more likely to be served then if we did follow the Master in saying that the last known address of the creditor is one who should determine the state in which this escheat could be had because in each one of the states there must be a procedure.

It might not be more likely to know if the escheat procedure in the state of his last known address than in some other state that might not come in and here is the heirs come in and claim the property rather than to have this escheat to the state or to — to the state, yes.

W. O. Shultz II:

To another state which may have had more contact with the transaction out of which it arose.

Earl Warren:

Well, again, when you talk about contacts, it’s your Solicitor for the state, rather than with the creditor.

W. O. Shultz II:

Well, as between — this is a controversy between the states and, as between the states, I think the Solicitor should be to the state with the most significant context with the transaction out of which it arose.

Earl Warren:

But wouldn’t — well, I’m just inquiring.

I made up my own mind but I’m just wondering if the vital contact shouldn’t be the one where a man’s last residence is because when it comes to escheating of a property of a state he might have a better opportunity there where he’s more likely to be than in the state from which he moved or never was.

W. O. Shultz II:

Well, I think that is that the fact of his last known address is one of the factors to be considered and weighed with all others, but I don’t think it should outweigh all of it because in the mobility of our population today, and it’s becoming more mobile every day, persons are within one state for today and they’re across the continent the next day and they have moved there because of a better job opportunity.

We have become a very mobile civilization and this is completely outside of the record and the briefs and our experience in Texas.

People have claimed a property which we have taken under our law and they come from even though their last address may have been in Texas.

We get their claim forms from all over California, Florida and in most of those instances, presumably, it’s people who had gone there to retire or something.

W. O. Shultz II:

And yet, here, they come back and they ask us for their money and they are not anywhere near their last known address.

Now, if the last known address is the only thing you know about the transaction then, certainly, that should bear a prime consideration.

But, where you know these other factors, for instance, back to our Texas situation again, I’ll make this as an alternative argument to our prior argument, that, there, all of the transactions concerning production in Texas of oil and gas certainly took place in Texas.

These local offices went out and negotiated the leases.

They directed the drilling, the production, the distribution of the proceeds, by way of the orders which were signed, among the owners, splitting up the proceeds.

The drilling took place there.

It’s a daily production from the real estate there in Texas.

Suppose that your (Inaudible) in another state?

W. O. Shultz II:

In another state?

(Inaudible)

W. O. Shultz II:

It is, to the extent — to a certain extent, but I think the only controversy here is between these four states.

Now, if some other state in which this person’s last known address was, even though he was hired by the Texas local offices and worked in Louisiana state and he was directed out of the Texas offices, still, in the absence of some claim by Louisiana as between these states, before the Court today, Texas should be entitled to take custody of that.

Now, if Louisiana later wants to assert a claim, there’s nothing under this Court’s previous language in Standard Oil case and which was quoted in Western Union case which said what some other state may claim from New Jersey may be — is not before us and — we don’t foreclose their coming before this Court to make that determination.

Earl Warren:

I don’t know how you divided your time.

I see the —

W. O. Shultz II:

The red light says it’s time for recess.

Earl Warren:

It’s time for adjournment.

Yes, indeed, we’ll do that.

Mr. Shultz, you may continue your argument.

W. O. Shultz II:

Thank you, sir.

Mr. Chief Justice and May it please the Court.

I might direct myself back to Mr. Justice Goldberg’s question concerning the wages which may have been earned in various others states outside of Texas but under the direction and through contract through the Sun Oil Company division offices.

Now, as I was saying that it seems to me that the context of the State of Texas would be significant with such transaction, much more so than the domiciliary state of the corporation or even the last known address of such an employee.

Also, in that line, I might ask the question, parenthetically, of where would this person look for his wages if he indeed suddenly woke up and decided “well, I didn’t collect all my wages when I worked for the Beaumont office of Sun Oil Company” and if he was living at that time in Louisiana, he certainly wouldn’t go back to his last address in Louisiana.

He’d look then he’d contact Sun Oil Company in Texas and the wages would be with the treasurer’s office there in the State of Texas being unclaimed.

And, this same consideration certainly holds true as to the mineral proceeds and production of oil and gas.

Now, a person living in any of the other states, it makes no difference which one, he is not going to look to his last known address when he suddenly realizes “well, way back there, I saw an advertisement for a small realty interest in the paper in Texas and I sent my $10 in and I wonder whatever happened to that.”

Arthur J. Goldberg:

It seems to me it does apply to a person residing there or a he has to be a California person?

W. O. Shultz II:

As between these states here, I would say so.

But, now, as to what some other state may have as a claim to it or basis of a claim that has to come up when that state makes a claim to it.

W. O. Shultz II:

And, there’s nothing to preclude such another state from coming to the state that takes under this decision and saying before this Court again “we have a better claim to it than the state that took it.”

It’s a problem to me that, in the absence of a compact between the states are completely uniform statute enacted by all the states which uses as a basis the last known address, that you can’t solve on the last known address basis and, that is, having a built-in reciprocity clause in these statutes too, whereby if one state takes and, later or at the same time, the state of last known address where you know this last known address state and they have a lack of statute with a reciprocity clause and then, of course, one state will refer to the one with the last known address.

Earl Warren:

Which would be more likely to produce the most litigation, the last known address or the more context?

W. O. Shultz II:

Well, that would be hard for me to say.

Probably, under the contact theory, you might, unless — in some instances, it seems to me that the context would be so significant that there wouldn’t be any questions about it, and you will always have those closer questions in any of that.

But, the fact that the person is no longer at his last known address, to me, speaks against the justice and equity of such a roué when you, in fact, know some other concrete facts about the transactions, where it took place and what occurred.

Now, there’s also the problem that supposedly is up in the area from my view point of the Master’s report of those instances where there is no last known address.

Now, the Master said that New Jersey, having a custodial law, could of course take these.

Well, Texas law is custodial in effect and, from my reading of the Florida statute, it is, too, and so is Pennsylvania.

Do you distinguish custodial from escheat in that?

W. O. Shultz II:

Do I?

No, I really think it makes no difference.

(Inaudible)

W. O. Shultz II:

Well, one theory is that the — I mean, the difference in the two, of course, being that the custodial keeps the money for the person to come claim it and the other takes it away from him.

It just depends upon the benevolent attitude of the state legislature when they enact such statute, but there’s no question, it seems to me, in this case of jurisdictional requirements for either type of statute.

At the Middle East, Sun Oil Company is subject to the jurisdiction law, the states have before the Court and the pronouncements of this Court here before and other Courts proceed upon the theory that an intangible, if you can get personal jurisdiction of a debtor, then you’ve got jurisdiction — and cite the creditor by publication or some other method of reasonable notice, then you’ve got jurisdiction to deal with that debt or obligation.

And, we’ve got just that situation here.

But, I just fail to see the fairness in the last known address solely as a basis.

As I say, where it’s the only thing you know, perhaps that should be the governing basis, but then we’re up in the air about the unknown address situations.

What do you do then?

Then, do you revert to the points of contact theory for those transactions?

It seems to me that would lead to a more diverse series of situations than would the points of contact theory.

And, for those reasons, I fail to see the justification of the Master statement that the State of New Jersey, simply because it had a custodial statute, could take the unknown proceeds.

Hugo L. Black:

Have you thought of any simple rule the Court could adopt to bring about payments to all the parties in these things?

W. O. Shultz II:

Mr. Justice Black, I’ve been thinking with this problem for a little over two years now and I’ve arrived at no simple solution.

I don’t believe there is a simple solution.

As I said, the most equitable and fair solution to me would be for all the states to get together and enter into a compact arrangement or adopt uniform statutes which — with reciprocity clause and work it out in that way.

Hugo L. Black:

You don’t expect them to do that, do you?

W. O. Shultz II:

I certainly don’t.

That was tentatively tried and we reached no concrete result and nothing ever came of it.

W. O. Shultz II:

The only way it may occur is that if this Court should so-right on the subject that it might become necessary for him to do that to realize anything or realize anything substantial, especially in this case of unknown last address.

We are at a quandary there under the Master’s report, it seems to me.

Now, I think that the solution that we have presented is an equitable and fair solution.

It tries to weigh all the considerations and gives the Court a chance to weigh considerations and arrive at a just and equitable results which, it’s my understanding, is what we’re supposed to try to do under our jurisprudence.

Hugo L. Black:

On the basis of what?

W. O. Shultz II:

The context with the transaction out of which —

Hugo L. Black:

Do you have to do that in each case?

W. O. Shultz II:

Is the obligation to rule.

Hugo L. Black:

Do you have to do that in each case?

W. O. Shultz II:

I think you would, where there is a conflict between two states, an actual conflicting claim, a controversy.

Hugo L. Black:

There’s bound to be a great many of them.

W. O. Shultz II:

They are potentially a great many, but whether they develop or not is another question.

Just as in this case, some of the people’s last known addresses are states like Illinois and other states which have escheat statutes but none of them had been asserting a claim to this particular property and they’re not before the Court.

Hugo L. Black:

Well, the Court states here something like the same propositions, is it not, that Congress would be, if it goes on to enact a legislation in its deal, call a conflicting claims of their estate?

They’d try to do something if it’d bring about some kind of stability and some kind of rule that can be understood and would work most equitably on an approximately equitable basis.

W. O. Shultz II:

That’s right.

Hugo L. Black:

Provided, you cannot achieve exact equity.

W. O. Shultz II:

That’s correct.

I think the best you can do is come as near to it as you can.

Hugo L. Black:

But there should be something better, shouldn’t there, than saying every time a conflict comes up between two or three or four states Courts got to test it out under the circumstances of each case and decide which one has the most context making it the most reasonable and fair, for it to get it far?

W. O. Shultz II:

Well, sir —

Hugo L. Black:

There should be a better way than that, shouldn’t there?

W. O. Shultz II:

There should be, but if that’s all we have to work with —

Hugo L. Black:

If that’s what?

W. O. Shultz II:

If that’s what we have to work with in order to achieve a just and equitable result, it seems to me that that’s what we should do.

Now, this theory we —

Hugo L. Black:

Well, you don’t think, it would always achieved a just and equitable result, do you?

W. O. Shultz II:

Always?

Hugo L. Black:

Yes.

W. O. Shultz II:

I don’t think we can deal in certainties to that extent and say always, no but I think, in the majority of the situations, it would.

Hugo L. Black:

That’d be satisfactory to one of the states if it’s contesting in each particular lawsuit.

W. O. Shultz II:

There will always be one state —

Hugo L. Black:

Other states litigating was —

W. O. Shultz II:

Any rule of the Court shows you there will always be one state that’s going to be satisfied with it and the others are going to be dissatisfied.

As in all litigation, there’s the winner and the loser.

Hugo L. Black:

When you leave too much to be decided according to each particular case, it would be advisable, would it not, if we can, to find some kind of a general — the Court should just merely recant a general rule that would fit so that the Courts didn’t have to engage in the multitudinous task that was involved?

W. O. Shultz II:

I think that’s correct.

I certainly will agree with you.

Hugo L. Black:

But, after your study, you have come — I’m asking you because I’m interested.

After your study and reflection on it, you come out with a conclusion that the nearest to a fair — general result that we could expect to be, as fair as we can achieve, would be to decided in each case according to the context each state had — litigating state had at the time.

W. O. Shultz II:

That is my conclusion and my best studied theory on the situation because it seems to me that, arbitrarily saying, something is here because the man’s last known address was here is false when, in fact, the man isn’t there and hasn’t been there for some time, obviously.

Hugo L. Black:

Something like you call arbitrary has to be behind almost all laws that are created to meet difficult situations, doesn’t it?

W. O. Shultz II:

Well, I think they should —

Hugo L. Black:

You have to reach a kind of a — what if someone says “well, it’s arbitrary because if you decided over here and look at these men, they may lose because I know, here, these definitely may lose.”

W. O. Shultz II:

I don’t think that’s arbitrary.

I think it only becomes arbitrary when there’s no reasonable or sound basis for the result or the decision that you reached.

Hugo L. Black:

Well, there are some — certainly some reasonable — I don’t know if it’s right but there are certainly some reasonable grounds that can be offered to support the idea that, considering — what was the last known address as a man who would’ve owned the money if he’d been litigated.

W. O. Shultz II:

But he obviously isn’t there anymore.

Hugo L. Black:

Well, that’s right but there’s some reasonable — that supports some argument, doesn’t it?

W. O. Shultz II:

There is some, but I think the other argument outweighs that because the man is not going back to his last known address to look for that money.

Hugo L. Black:

But that may be where he — that was where he was.

The state – he was there in Texas, probably another state at the time he was there.

W. O. Shultz II:

That’s correct.

Hugo L. Black:

Owed an obligation to them.

W. O. Shultz II:

But I think, certainly, in these mineral and oil and gas proceeds he’s going to look to the place where the land is that it’s flowing from and inquire about his property in those instances.

Hugo L. Black:

Some of the claims in field are rather evanescent there, aren’t they?

W. O. Shultz II:

That’s true, Your Honor.

Thank you very much.

Earl Warren:

Thank you, Mr. Shultz.

Mr. Kehoe.

Charles J. Kehoe:

Mr. Chief Justice and May it please the Court.

In this action, this Court is being called upon for the first time to decide what rule of law should be adopted where there is a conflict between states who seek to take intangibles which have been unclaimed from a corporation incorporated in one state and doing business in many other states.

New Jersey commenced an action against the Sun Oil Company in September of 1961 under the New Jersey Custodial Escheat Law and, while that action was pending, in November, Texas enacted an escheat statute and then commenced an action in this Court to restrain the taking by New Jersey of the intangibles from the Sun.

This brought before the Court the question of which state should take so that the holder of the intangibles will properly be protected in his constitutional rights.

The history of the activity of the states in this field commenced, so far as litigation is concerned, to some degree back in 1923 with the Security Savings Bank versus California where the right of the State of California to take unclaimed bank deposits was sustained.

And then, we went on into Connecticut Mutual Life versus Moore where unclaimed life insurance funds were held to be taken — to be subject to custodial taking by the State of New York where the policies had been delivered in New York on the lives of residents of New York.

And then, we went on to the Standard Oil case where it was held that the state of incorporation could escheat the shares of stock and the dividends payable there under.

In all of these cases, the question before the Court was the power of the state to take from the holder.

The state reserved the question expressly in at least two of the cases where a claim would be made by another state, and then we had Western Union versus Pennsylvania, which was decided by this Court in 1961, where Pennsylvania sought to escheat unclaimed intangibles held by Western Union, a New York corporation doing business in the State of Pennsylvania.

And, there, the Court held that the State of Pennsylvania could not take unless it could protect the holder from double liability, and we look at this case as that is the question before the Court.

How can this Court best protect a holder from double liability?

The Master, in his report, suggested a standard of last known address with a right to the state of incorporation to take under a custodial statute where there were not any last known addresses.

In the hearing before the Master, New Jersey urged that the Master adopt a standard of state of corporate domicile.

Now, the reason we urged that was because, in this area which New Jersey has had considerable experience, we find that when you commence an action against the corporation they are compelled to go into their rather ancient records and the facts which might be available to help on a context theory were not readily available.

For example, in this case, some of the claims are 40 years old.

Some of the claims in value vary from one penny to several hundred dollars.

The only facts which we could prepare for presentation to the Master were a stipulation of very general facts.

We stipulated that there were claims payable by the corporation.

We stipulated that the Southwest division in Texas does have some autonomy in its activities.

Of course, we couldn’t stipulate that any one of those particular claims resulted from a man who was hired in Texas on such and such a day who worked in Louisiana on such and such a day because those facts are not available.

And, that is interesting only because it shows the general picture which a state is confronted with or a holder is confronted with or a Court is confronted with in passing on a question of this nature.

And if you adopt a standard of state of incorporation for taking from the holder, I think that would be the simplest and the most certain and the easiest rule for both the corporation of the states.

We concede that there may be situations where equity would require that a claim should go to a state other than the state of incorporation.

Well, if that is so, the state making such a claim would have to press its claim against the state of incorporation and, if they present a case — a factual case which comes within the standard which would permit a second state to take from the state of incorporation, then the state of incorporation would have to pay them.

But, at least so far as the holder was concerned, he would be protected from being sued by any other state and we feel that a precedent has been established for this holding in the Standard Oil case.

In the —

Arthur J. Goldberg:

(Inaudible) in Pennsylvania, isn’t that right?

Charles J. Kehoe:

Well, the Chief Executive Office presently exists in Pennsylvania.

Arthur J. Goldberg:

(Inaudible)

Charles J. Kehoe:

It is true.

Charles J. Kehoe:

I didn’t — the only point I wanted to make there, Justice Goldberg, was the fact that the exact facts are not available, no place.

It was available in Texas.

They are not available in Pennsylvania.

Arthur J. Goldberg:

So, this is not available to realty?

Charles J. Kehoe:

They’re not available.

That’s what creates the problem, that they’re not available.

So, how can we say that if this happened in Texas, this happened in Pennsylvania?

We don’t know where it happened.

Arthur J. Goldberg:

(Inaudible)

Charles J. Kehoe:

Now, that —

Arthur J. Goldberg:

(Inaudible)

Charles J. Kehoe:

Well, that was the — what the Master reported.

We never had that in the trial of the case and I disagree with that because while there’s $15 Billion available, incidentally the source of that is an article in the Wall Street Journal and how the man in the Wall Street Journal got his news, he calls up to various states because he called me up and, he — from that, he writes this article.

And, of course, he’s got a lot of news value when he says 15 Billion and $1 Billion a year, but I can tell you that, from our experience, the tenor of a trend is downward and not upward.

And, you will see, once the problems that now exist in this field are resolved, there’s going to be a considerable decrease in the amount of unclaimed funds.

And, I question seriously whether we’re dealing with $15 Billion.

I don’t think we are.

As a matter of fact, the Master, in his report, I think he was persuaded very much by that factor because he said it would be inequitable for certain states that incorporate to take this huge sum of money and, certainly, it would be inequitable when you’re dealing with what you’re dealing with in this case.

You start off at $30,000 with wages of about $26,000.

We’ve got 1,700 claims.

I mean you’ve got a claim for 5 cents, what are you going to do?

See where this fellow bought the material.

Maybe he bought a lead pencil some place.

Where did he buy it, Louisiana or Texas?

I mean, you get to a point where you’ve got to, we think, adopt some rule which, at least initially, will set a standard for taking from the holder.

Now, if you want to go beyond that and you want to say that if a man was hired in Texas and he earned his wages in Texas and he was last heard of in Texas, and Texas should get that money, well, then it would seem, after it’s taken from the holder, Texas would present its claim.

And, of course, if that standard was once set, we would pay or the state of incorporation, whichever –- it’s just that we only argue for the state of incorporation because of the fact that it’s a simple rule today and New Jersey may benefit in dollars and cents, but the —

Arthur J. Goldberg:

(Inaudible)

Charles J. Kehoe:

That’s right.

Arthur J. Goldberg:

To the state.

Charles J. Kehoe:

Right, except of course, there, we know he’s not in that state anymore.

I think the facts of this case show very clearly —

Byron R. White:

We know — we just know he’s out of the state.

Charles J. Kehoe:

That’s right.

We know he’s out of a state.

Byron R. White:

We don’t know he’s not in the state.

Charles J. Kehoe:

We don’t know he’s not at that state.

That’s right.

That’s correct.

And, if you want to say — if you want to find, of course the Master didn’t make a finding of that, that a person moves, changes address, he’s still in the state, of course I can’t argue with you on that but I don’t think that’s been developed by this record.

Byron R. White:

(Inaudible)

Charles J. Kehoe:

Well, there is a last known address but we don’t know where he is now.

Byron R. White:

But he isn’t there.

Charles J. Kehoe:

That’s right, but we talk about —

Byron R. White:

Do you know his actual address?

Charles J. Kehoe:

We don’t know his actual address, but we do know his last —

Byron R. White:

(Inaudible)

Charles J. Kehoe:

That’s right.

Byron R. White:

And, we don’t have his address –

Charles J. Kehoe:

That’s right.

That’s correct.

Byron R. White:

(Inaudible)

Charles J. Kehoe:

Well, you don’t have an address because he’s not there, right?

That’s why you don’t have an address.

But — and, of course, the underlying theory of this taking property is the fact that it’s not wanted.

Historically, under the Common Law Doctrine of Bona Vacantia, it’s ownerless property and of course property, once being ownerless, can be taken by the sovereign for the benefit of all of the citizens.

I mean, that’s a very proper standard.

The only question here is where is the property?

Which sovereign is going to take?

Byron R. White:

Could you tell me, under the statute of his last known address, how do you determine the owner’s address?

Charles J. Kehoe:

From the records of the corporation.

Byron R. White:

From the records.

Charles J. Kehoe:

That’s right.

Byron R. White:

(Inaudible)?

Charles J. Kehoe:

Well, I —

Byron R. White:

Like in certain things, (Inaudible)

Charles J. Kehoe:

That’s right.

Byron R. White:

So, where do you think we could go?

Charles J. Kehoe:

We — the only way we could go by it is the reports of the corporation.

We just — we sue a corporation, they report to us “we owe XYZ, 22 Smith Street, Jamaica and New York 25 cents, $1, whatever it may be.”

And, we take that as a report.

Byron R. White:

The address of the creditor is at a certain address on some street in some city and the letter goes there and then it’s returned because he isn’t there, although the landlady at that rooming house knows exactly where he is.

Nevertheless, it goes by the books of the company.

Charles J. Kehoe:

That’s right.

It’s all we’ve got.

William J. Brennan, Jr.:

But, Mr. Kehoe, moving on with my memory of the New Jersey statute is that, even under that statute, a good deal of hunting is done — before there is finally an escheat, and that hunting does indeed turn up people at other addresses than on the books of the company and that we come down to a residue as a practical matter in those cases.

Charles J. Kehoe:

That’s correct, sir.

William J. Brennan, Jr.:

Where the hunting has been unsuccessful.

Charles J. Kehoe:

That’s correct.

William J. Brennan, Jr.:

And, I suppose, when you said earlier that you thought that the amounts are decreasing, I expect that must deflect procedures that these companies are adopting to do a better job of hunting up owners before you get around to them.

Charles J. Kehoe:

No question about it.

But just —

William J. Brennan, Jr.:

Yes.

But I gathered, is it the company’s effort or is it the escheating state that goes to the procedure if the Court is the final entity?

Charles J. Kehoe:

It depends on the statute.

In New Jersey, what we do, we take custody of a claim if it’s unclaimed for five successive years.

Then we hold it for — we take custody of it then we send them a notice by mail to the last known address and, also, to the Attorney General of the state if the address is outside New Jersey.

And then, after that notice is sent, we wait for a period of two years to give them an opportunity to claim.

And, after that two-year-period, we then proceed to escheat the funds which the state treasurer still holds.

Byron R. White:

But sheer notice to the creditor is no more than credit corporation did.

Charles J. Kehoe:

Well, we —

Byron R. White:

The Corporation probably sends the check at the same address.

Charles J. Kehoe:

We don’t know.

Byron R. White:

It came back.

Charles J. Kehoe:

We don’t know what the facts on —

Byron R. White:

You don’t go — you don’t write a letter to the — to anybody.

You just put it in a sealed envelope and you never find — you never try to trace the fellow

Charles J. Kehoe:

We send a letter or we do pay out about 15 to 20% —

William J. Brennan, Jr.:

Somehow the company sends that, doesn’t it?

Charles J. Kehoe:

15 to 20% we pay just when we send our letter out.

The corporation —

Byron R. White:

The letter doesn’t — if the letter returns —

Charles J. Kehoe:

If the letter returns to us —

Byron R. White:

If it’s unknown — if the state mark is unknown.

Charles J. Kehoe:

We can’t do anything, Mr. Justice Clark.

Byron R. White:

You don’t try to — you don’t try to send it to the District Attorney?

Charles J. Kehoe:

No, we don’t.

We do send a notice to the state — to the Attorney General of the state if the address is outside the state, for example, these claims in Texas.

If New Jersey comes there to take custody, we will send a complete list to the Attorney General of the State of Texas when we mail a notice to those people whose last known address is in Texas.

Now, if he wants to, and we have some Attorney Generals that do, the Attorney General of Ohio for example, he does it as a public relations angle.

He tries to appeal –rallies people up.

If he rallies them up and he comes in with them, we pay them.

We’re happy to pay them.

So, under the statutory program procedure in New Jersey, we do make a reasonable effort to locate these people.

It’s not simply a question of a state of incorporation taking the money and holding on to it.

Byron R. White:

But maybe every other state is — maybe the state of the last known address might go through the equal procedure or even a better one.

Charles J. Kehoe:

They might very well, but we say the state of last known address, it’s got no substance like the state of incorporation.

We know the state where he’s incorporated.

We know that he’s there.

The state of last known address, I think, you can presume he severed his connection at least with the address and maybe with the state.

Charles J. Kehoe:

I mean, it’s just not a supporting standard in this type of claim, you may get into another type of claim which last known address maybe a satisfactory standard.

Now, the reason that I say that and I’m trying to admit to the Court that in New Jersey, with unclaimed life insurance funds, we use the last known address there.

Byron R. White:

Well, you — that the least of the last known address got enough substance to it, that’s the Attorney General of that state or (Inaudible)

Charles J. Kehoe:

That’s right.

Byron R. White:

Well, he did that but he had the terms of the creditors.

Charles J. Kehoe:

That’s right.

What else are we going to do?

I mean this — You get into a program like this —

Byron R. White:

I get — I agree, but if there’s some relevance to the statement of that state of the last known address, I think, might have substance.

Charles J. Kehoe:

Well, it’s got some substance.

I don’t disagree with that, Justice White, but I think when you have to choose between the two, and especially keeping in mind that you want to protect the corporation from double liability, you would be better off, we think, despite the state of corpus domicile.

Of course another problem with the last known address, suppose the corporation isn’t in the state.

Take public service.

New Jersey got a stockholder in Texas.

How is Texas ever going to get that unclaimed dividend from the public service of New Jersey?

They do business only in New Jersey.

Surely, the Texas law is not going to be applicable, I don’t think, to the corporation exclusively within New Jersey.

So, you’ve got a situation there where you can’t say that this is the stand — we don’t think that this the standard in this case which must be —

Byron R. White:

I would assume though that if — I would assume that if the Court decided to say that the last known address is to have it — then the State of New Jersey would take the right.

Charles J. Kehoe:

I don’t even question on that.

Byron R. White:

And if — well, now, I just —

Charles J. Kehoe:

I mean, would it be that if you — that you — if you, gentlemen, decide the last known address, it’s the last known address.

We’d be satisfied to have a workable rule, but what we are trying to say is that we think there’s more substance to the state of corporate domicile than there is to the last known address.

Hugo L. Black:

I thought you were saying that the corporation might not accept withholding the money?

Charles J. Kehoe:

The last known a — well, they probably wouldn’t pay to the State of Texas, I would imagine.

Hugo L. Black:

Even Texas wouldn’t pay.

Charles J. Kehoe:

That’s right, but I think maybe we might take event from the state of corporation because this problem only comes because — before this Court because there’s a conflict.

I mean absent the conflict, all the states were taking from the corporations with the contact that they might have had but, now, we’ve got the conflict and it was inevitable.

I remember, I argued a case before Justice Brennan in the New Jersey Supreme Court and he asked that question 11 years ago, 12 years ago.

What are we going to do with two states?

Charles J. Kehoe:

Enforcing, I said it would be an original action in the Supreme Courts.

I was at least right on that point.

Hugo L. Black:

You tell me in 11 years.

You tell me in short and that extends to so many things involved.

What is your reason for believing that it’s fairer for the state corporate domicile to have this on than any other state?

Charles J. Kehoe:

Well, when you get into why it’s fairer, it’s a very broad, broad question but we think it’s fairer because it’s easier for the corporation.

It’s easier for the corporation.

The corporation can report to one state.

It’s subjected only to a limited amount of activity and it’s fairer because we feel that it’s a rule under the New Jersey law which permits the State of New Jersey to notify these people if they can be found at the last known address that they had some money and if they don’t have any money — I mean, if they don’t have any claim or they can’t be found at that address then, of course, you eliminate the last known address state.

So, in a question of fairness, we think that that is as good a rule as any.

Now, of course when you get into fairer, the other states are going to say it’s —

Hugo L. Black:

Why is that the same argument — fairer way for New Jersey to do or the others?

It could be left to the company to keep it since you’re going to keep it from getting charged a trial and so forth.

Charles J. Kehoe:

Well —

Hugo L. Black:

It’s not — not preceded at all.

Charles J. Kehoe:

Well, the company has, we feel, no moral or legal right to it and we think that’s —

Hugo L. Black:

It has no legal or moral right to it.

Does the state have any greater moral or legal right –?

Charles J. Kehoe:

It sure does.

Hugo L. Black:

To it than the corporation —

Charles J. Kehoe:

No, question about it.

Hugo L. Black:

Is it fair to keep there as against other states —

Charles J. Kehoe:

Sure.

Hugo L. Black:

Than the corporations there have?

Charles J. Kehoe:

As between the corporation and a state, any state, we think, has a paramount of right because, while it’s holding it, it’s using it for the benefit of the citizens.

In other words, they keep a fund. Most of these programs, they take 75% of the general treasury and 25% to repay claims.

So, they’re using the money for the benefit of the citizens and that, historically, is the doctrine of Bona Vacantia where the ownerless property is used by the sovereign for the benefit of the citizens.

That’s the theory.

Hugo L. Black:

That’s for who?

Who is it –?

Charles J. Kehoe:

The citizens of the sovereign that takes.

Hugo L. Black:

The city of the — well, the corporation didn’t own it and never did.

As I understand it, it never can.

It has no moral or legal claims there.

Charles J. Kehoe:

Well, I wouldn’t say —

Hugo L. Black:

Who does have a moral or legal claim to it?

Forget the sovereign.

Charles J. Kehoe:

Forgetting the sovereign?

Hugo L. Black:

Yes, who does have a moral or legal claim to it?

Charles J. Kehoe:

Well, under our theory that it’s ownerless property, nobody.

Hugo L. Black:

Well, but if it’s an owner, the owner would have it.

Charles J. Kehoe:

If there’s an owner, no question about that.

Hugo L. Black:

So, if you are going to trace it, you’re going to trace it as a moral and legal right of somebody, couldn’t you necessarily try to trace it to the — where the owner lives?

Charles J. Kehoe:

That’s right and if you have a simple plan for tracing the owner, then you’ve got the answer but there is no simple plan.

Hugo L. Black:

But can you suggest any better plan than to say his last known address that it’d come more nearly, in all instances, taking a moral position to come more nearly for that letting the state get the benefit of it where the owner lives.

Charles J. Kehoe:

Yes, but I think we’re confusing two things, paying him back and the —

Hugo L. Black:

I’m not talking about paying him back. That’s where he lives.

Charles J. Kehoe:

He live — well, we don’t know where he lives.

Hugo L. Black:

Is there any other — you would attribute the right of this — you would say that the state had the most moral and equitable right to it by the — by its owner who left it on there.

Charles J. Kehoe:

Well, if we know that, yes, if we know that but we don’t know that.

Hugo L. Black:

Alright, now, you don’t know it and you never can find him at that address but you do know that?

I looked at this a lot of these people never did live in New Jersey.

Charles J. Kehoe:

That’s right.

Well, we don’t know that.

We know that when they —

Hugo L. Black:

Well, they didn’t and they were —

Charles J. Kehoe:

Well, I think it would be safe to assume that.

Hugo L. Black:

They never lived in the place.

Charles J. Kehoe:

That’s right, but they might have moved to New Jersey.

Hugo L. Black:

And, frequently, with reference to insurance claims for instance, they may be policy on the — would — California with a policy in New Jersey or Connecticut or those other places.

Charles J. Kehoe:

Well, of course, insurance claims we don’t have involved in this.

Hugo L. Black:

I know you don’t have it, but then that’s a part of our big problem.

Charles J. Kehoe:

Well, it is, but not particularly in this case, at least that’s our position.

Hugo L. Black:

It’s not that particular point.

The basic idea is to saying who can escheat that property.

Charles J. Kehoe:

Well —

Hugo L. Black:

That he left owning it.

And, in many instances, it would be people who never did live in the state where the corporation was domiciled.

Charles J. Kehoe:

Well, that, of course —

Hugo L. Black:

I was just – there are so many arguments to be maybe played out but I’m staying that’s the best argument.

Charles J. Kehoe:

That’s right, but that’s what eggs to the pot that we’ve got boiling.

We’ve got all of these going. What standard are we going to adopt which is supported as a legal principle, not only because we provide a — what might be an equitable distribution today, but what is supported by law?

Hugo L. Black:

And we have no legal — we have no statute covering it, do we?

Charles J. Kehoe:

You mean federal statute?

Hugo L. Black:

Yes.

Charles J. Kehoe:

No, there is no federal.

Hugo L. Black:

So, whatever we say is not based on a federal statute, is it?

Just the situation where there’s a conflict among the states.

Charles J. Kehoe:

That’s right.

Hugo L. Black:

And, it falls to us because you can’t have him going anywhere else out of the federal.

Charles J. Kehoe:

That’s right and the question is what — you’re going to protect the constitutional rights of the holder.

That’s really how this question came before the Court.

Hugo L. Black:

The rights of — that’s one of them.

Charles J. Kehoe:

The holder.

Hugo L. Black:

That’s one of them.

Charles J. Kehoe:

Well, I —

Hugo L. Black:

Constitutional rights of the holder.

Charles J. Kehoe:

That’s right.

Hugo L. Black:

Of course that could be done, couldn’t it, by saying “you never shall own it.

You will just be a custodian”?

Charles J. Kehoe:

Well, I suppose you could do it that way but I certainly wouldn’t.

Even out of, say, Texas or Florida or somebody else got it before you come to that conclusion.

Hugo L. Black:

Yes, but they’re going to keep it.

Charles J. Kehoe:

That’s right.

Hugo L. Black:

When you get down basically to it, it’s the question of who keeps this money and gets the benefit of that money by the owner’s law.

Charles J. Kehoe:

That’s correct.

Hugo L. Black:

If we may along the same line, I wonder the affinities of a practical stand point where most of the escheat is in the hands of just a few states like Delaware, New Jersey, New York?

Charles J. Kehoe:

Well, that might be, but not in the — the number of corporations, of course, are expanding and, simply, Delaware is the highest and I think New York is the second, New Jersey third, Illinois, California, Florida, Nevada, they’re all coming along.

Hugo L. Black:

Does Maine come in there somewhere?

I thought Maine was up pretty high.

Charles J. Kehoe:

Maine?

Hugo L. Black:

Isn’t it?

Charles J. Kehoe:

I don’t think Maine was on the list, not with the big ones anyway.

Hugo L. Black:

It’s pretty high then if it’s not in that.

Charles J. Kehoe:

That’s right.

The law of — Now, there’s only one other question that I would like to treat before I conclude and that is the procedural question we offered in evidence before the Master listed the report.

He didn’t think it was necessary for the case.

We think it is and we ask the Court to permit that evidence.

We — in summary, we feel that when you look at the type of a problem we have here and when you consider the standards which are available for adoption, we think that by the process of elimination — we think the contacts theory is the least desirable.

We agree with the Master in that respect because I don’t see how you can, for a (Inaudible), assemble all of the contacts and decide that the question should be passed on, on contacts.

We disagree with the last known address because we say that the last known address in claims of this nature shows that he’s not — no longer present at that address.

Mr. Chief Justice — excuse me?

Earl Warren:

(Inaudible)

Charles J. Kehoe:

The copy of the report — when this case was brought before the — we also offered some judgments of the State of New Jersey.

We’ve sent them on to the Court in the Court’s to list it.

Mr. Chief Justice, I’d like to reserve about three or four minutes to answer the amicus in case he raises something out of it.

Earl Warren:

Mr. Burns.

Fred M. Burns:

Mr. Chief Justice and may it please the Court.

Florida contends for the theory that the state of the last known address should — is the one that’s entitled to these properties.

Now, whether we proceed on a theory of escheat or proceed on the theory of custodial laws, in either case, more than one state very likely will be laying plain to the identical properties.

Fred M. Burns:

In this case, the State of Texas, the State of Pennsylvania, the State of New Jersey are laying claim to the same properties and Florida is laying claim to the intangibles belonging to people whose last known address was in Florida.

Hugo L. Black:

Is that the extent of your claim?

Fred M. Burns:

That’s the extent of our claim.

It’s the last known address.

Hugo L. Black:

People known who lives in Florida you find in the record.

Fred M. Burns:

People whose last known address was in Florida.

Hugo L. Black:

On the books of the company?

Fred M. Burns:

On the books of the company.

But — a primary evidence, I guess you have of the last known address would be on the books of the company.

Now, we think —

Potter Stewart:

What is the view of Florida as to people who didn’t have any last known address?

Fred M. Burns:

Well —

Potter Stewart:

Just unknown.

Fred M. Burns:

I am kindly inclined to the view that the better rule there might be to follow the presumption that the people who had no address on the books lived at the place where the obligation accrued.

Potter Stewart:

That is the domicile of the debtor?

Fred M. Burns:

Domicile of the debtor or, if the record shows, that the contract was entered into in a particular state than in that state.

Now that would raise as a presumptive last known address, but I see a difficulty in trying to arrive at a definite rule after that because you’ve got no last known address anywhere, not even on the books of the company.

So, I think we might indulge in the presumption that the creditor lived in the neighborhood where the claim accrued.

Now, that seems to be the best instruction I could put on that.

Potter Stewart:

Of course some of these claims, going back great many years, it may not — there may not — nobody may know where the claim accrued.

Fred M. Burns:

Well, I don’t know if anybody would probably know at the present time, but I believe we have a rule of law that a person’s address is at one place, it’s presumed to be there until some evidence is shown that it’s been moved.

Potter Stewart:

Well, I’m still talking though not about cases where you have no address and where you don’t know where the claim accrued because of the antiquity of the claim.

Fred M. Burns:

Well, then I guess you’re going to have to go back to New Jersey’s claim of the —

Potter Stewart:

Domicile of the debtor.

Fred M. Burns:

Domicile of the owner.

Potter Stewart:

Yes.

Fred M. Burns:

Because I think it would be presumed that if you had no other evidence of a place where the claim accrued, it would be at the domicile of the person who —

Potter Stewart:

Owed the money.

Fred M. Burns:

Yes.

Potter Stewart:

The Court, as I read the briefs, some of these claims are to interest that, under Texas law, are real estate.

Fred M. Burns:

That —

What do you say to that?

Fred M. Burns:

I think —

Oil and gas interests?

Fred M. Burns:

I think those gas interests, my view on that is, as long as the interest of the amount to be paid has not accrued, I think it is probably an interest in real estate.

But, when that money has accrued on the obligations, then I think it becomes then an intangible and not a part of the real estate.

By Texas law?

Fred M. Burns:

Well, I don’t know about Texas law.

Earl Warren:

You mean when it’s severed from its oil.

Fred M. Burns:

When it’s severed from its oil, free from the drill.

When the oil —

Is that a Texas rule or is that your rule or you want us to adopt that rule?

Fred M. Burns:

Well, that would seem to me, we have a better rule on or you’ve got conflicts of laws between states and where this money becomes new.

If it was an acre of ground, for example, that was involved in this in Texas, you would agree that it would escheat the Texas I suppose —

Fred M. Burns:

If — If you’ve got a lease on an acre of ground in Texas, an oil lease, and oil is discovered on that lease, on that one acre of ground, then I think the oil interest or the interests are real estate until the oil and gas has been separated and taken from the ground.

Byron R. White:

And sold.

Fred M. Burns:

Sir?

Byron R. White:

And sold.

Fred M. Burns:

And sold, yes.

It’s taken from the ground and sold, and then it becomes an obligation — an intangible obligation.

But, it seems to me, well, that, that would be the better rule to follow in the matters of that kind because we’ve — in most cases they, like oil and gas and coal and so forth, are considered as part of the real estate until severed.

So, I believe that that would be the better rule to follow as to those.

Earl Warren:

I suppose the question of the escheat of realty that way would not arise very often, would it?

Because if it was realty, it would be taxable in the state and if the owner didn’t pay the tax, they’d sell it for Texas to — the state will sell it for Texas, would it not?

Fred M. Burns:

Well, I’m inclined to think that probably a great deal of difficulty between the states and that because, in some states, as in Florida, the taxes are on the property itself irrespective of the interest in the properties.

Although, we do have two or three instances where at least a whole interest can be assessed, but that has only been in recent years.

Now, I don’t know what type of a rule we may have in other states.

And, in Florida, up until within recent years, the tax is, well, assessed against the real estate and not against the owner but the real estate itself.

And, that was true irrespective of the number of least a whole interest in it.

So, in that state, and I don’t believe he’s in the — there may be a rule now on recent law but, in that state, the owner of the real estate would have to pay the taxes to protect his real estate.

Fred M. Burns:

Now, the owner of a least whole interest might’ve had to pay to keep somebody else from getting it, but we did not have separate assessments for the oil interest and the remainder until — in recent years.

So that, in Texas, a Judge, from his argument, that has not — amend the rule out there.

Hugo L. Black:

Suppose Florida should enact a law and you’re after all debts pointing to people shall be considered as real estate, should we act on the assumption in deciding a rule here that we were governed by that law?

Fred M. Burns:

Well, if you’re going to consider debts being an intangible that follows the owner of the debt, then we may run into some interstate trouble on that.

And, it’s —

Hugo L. Black:

Well, the problem I had in mind was, suppose they could very easily settle to which state would get it if they, suppose these are all debts, they simply passed a law that, assuming that’s right, that all debts are to be treated as real estate in the state and that if we were to hold that all real estates could be of this kind, we’d be governed by the fact that the thing real estate then there wouldn’t be much problem left.

The states would adopt the law saying that’s a real estate, wouldn’t it?

Fred M. Burns:

Well, a lot —

Hugo L. Black:

And, we’d be governed by the state’s declaration or decision or label of debts if they have such, I don’t know if they have, that debts are real estate.

Fred M. Burns:

Well, I don’t know that you could say that debts would always be real estate even if we’re out of real estate because —

Hugo L. Black:

Well, the state could, for its purposes, couldn’t it?

Fred M. Burns:

I think maybe —

Hugo L. Black:

But what did — would we have to accept it in determining a rule as to a heap of intangibles including debts?

Fred M. Burns:

I don’t think so.

If the rule is as if there maybe — that intangibles have their status not at the place where they owed, that in the place where the person lives that they owed to.

Hugo L. Black:

I tried to ask you a question but I’m getting mixed up in that old statement.

It kind of disturbed me, I am try to decide a new problem by names and labels that were given old situations.

Fred M. Burns:

Now, I think very properly that a state might have the authority to rule that all debts — pass a law that all debts drawn out of an oil lease in that state should be considered real estate as to all debts drawn out of oil interest after the passage of the Act itself.

But, that gave me considerable trouble as to this. What the status of those interests are?

Hugo L. Black:

What difference would it make? They said debts are going out of one thing, a real estate.

They can say debts is going out everything out of real estate, couldn’t they?

Fred M. Burns:

Well, the trouble is that debts are, in some instances, debts arising in Florida are debts owing to somebody else in another state and may not even arise altogether in Florida that this corporation is doing business between a number of states.

Well, part of the transaction arose in Florida and the balance of it arose in Texas.

So, I don’t know just how much trouble you would have working out a uniform law that could applicable in all instances.

Hugo L. Black:

You don’t think we can do that?

Fred M. Burns:

I’m very doubtful about it.

It might be done but, at the present time, I’m doubtful that you can work out a law in Texas that would be binding on 49 other states.

Hugo L. Black:

You mean with reference to debts who can escheat them?

Fred M. Burns:

Yes, because these —

Hugo L. Black:

But, then, we can adopt no rules, can we?

Fred M. Burns:

Well, the only rule that I can see that you might possibly adopt with a reasonable certainty would be the rule of the — that an intangible like a debt has its status in the state where the person it owed to lived.

Now, that’s what you were trying to stay away from.

That’s about the only one that I could think of that —

Hugo L. Black:

Our problem is not whether that old definition of status and so forth, following the owner’s direct, but what we’re going to do in this situation when debts are owed in and the owner doesn’t claim on it, which state can escheat them?

Fred M. Burns:

Well, that’s the problem.

Hugo L. Black:

Well, that’s what —

Fred M. Burns:

That’s serious problem.

Hugo L. Black:

That’s a practical problem.

Fred M. Burns:

That’s a practical problem, too.

But, being and considering how you can treat it, we get back to the status —

Hugo L. Black:

Well, do we have —

Fred M. Burns:

Which is —

Hugo L. Black:

Do we have to consider what its status is?

Fred M. Burns:

You might have —

Hugo L. Black:

Or do we have to consider, in this case, what kind of rule we get at that would bring about some kind of a fair and equitable solution of a problem calling for a solution here at our doors with reference to who can escheat debt?

Fred M. Burns:

Well —

Hugo L. Black:

Can’t we do it?

Can we do that?

Are we compelled to decide that according to the old ancient writings on whether the intangible follows the owner?

Fred M. Burns:

Well, you would have to make some new laws.

Hugo L. Black:

Well, I assume — I have assumed that it had to be viewed all —

Fred M. Burns:

I think it’d have to be viewed —

Hugo L. Black:

Because it’s not in the government now.

Fred M. Burns:

I think it’d have to be a new law.

Some of the states had a conference here a few years ago to try to work out something on this and indeed we go forward with.

I thought that you were working on the basis of Florida’s claim is justified on the theory that the intangible followed these people — missing people to Florida.

Fred M. Burns:

Now, that’s — it followed it to Florida.

And left it there when they disappeared.

Fred M. Burns:

And left it there when they disappeared.

In other words, when the debt accrued —

Whether they went to Texas — back to Texas or whether they went to New Mexico or wherever they went.

Fred M. Burns:

They may still be in Florida, for all we know.

Byron R. White:

What’s Florida doing (Inaudible)

Fred M. Burns:

Well, they usually publish a list in the newspapers, I believe, where it’s being done under the new law.

Byron R. White:

Is that all?

Is that all, just the publication?

Fred M. Burns:

Well, the controller is administering that.

I’m not fully acquainted as to what else is done.

Byron R. White:

Your claim — Florida’s claim might be best stated as a state most likely designed to be creditor.

Fred M. Burns:

Well, I think —

Byron R. White:

Because the address — the lack of address is there.

Fred M. Burns:

Yes, I think that would be true.

Byron R. White:

But only if you really do something about trying to find it.

Fred M. Burns:

If that’s —

Byron R. White:

The money is really his not the State of Florida.

Fred M. Burns:

It’s — it belongs to a creditor.

Byron R. White:

Well, you’re incentive would be not to find him.

Fred M. Burns:

Your what?

Byron R. White:

What do you think?

Fred M. Burns:

I didn’t understand.

Byron R. White:

I say your incentive would be not to find him —

Fred M. Burns:

Yes.

Byron R. White:

Because if you did, he’d get it.

Fred M. Burns:

It might be.

Byron R. White:

Yes, but that’s distinguished between the states.

Fred M. Burns:

No.

That’s distinguished between the states.

Hugo L. Black:

Do you think some of the other states might have a life intended?

Fred M. Burns:

They might.

I wish to surrender the balance of my time to Mr. Oman to discuss the —

Earl Warren:

You may.

Ralph M. Oman:

Mr. Chief Justice and —

Earl Warren:

Mr. Oman.

Ralph M. Oman:

May it please the Court.

My time is short and I’ll try not to use it all, but I’d like to start with a statement that I believe Mr. Shultz in Texas made to the effect that ruling out one or two of the three choices, we seem to have as to the adoption of a standard would give some other state or might not give some other state a better right to take, and my next cue is a statement by Mr. Chief Justice Warren where he inquired to the gentleman as to where the Solicitor should lie.

And, I would like to suggest to Your Honors that, as I view the opinion of this Court in Western Union, the purpose of this constitutionally embodied tribunal under its constitutional rights to determine controversy between states is to set up a standard or a test of some kind by which competing states may be gotten, and whether you call it arbitrary or not.

As Mr. Justice Black said, most all rules of law are arbitrary but they’re also non-arbitrary in the sense that they’re founded on something early, not granted.

The three tests proposed here and claimed by the various states may not be the best, may not produce the finest results, but I think it’s the best we can do.

The Master’s report — I might — I’m getting little ahead of myself.

We were given permission to file a brief amicus here.

I represent the Life Insurance Association of America which is composed of 126 life insurance companies writing about 84% of the legal business and the life insurance industry has a tremendous stake in this very problem and it has paid for years on the basis of the last known address.

It’s member companies have paid millions of dollars and also — to the states and have paid hundreds of thousands of dollars on the basis of the last known address where it used that as a starting point to locate people who had unclaimed funds.

Hugo L. Black:

Do I understand you have an amicus brief?

Ralph M. Oman:

Yes, sir.

Tom C. Clark:

Did you — did that practice of yours be challenged in any Court?

Ralph M. Oman:

That, I cannot tell you, Your Honor.

I think there’s some history of litigation for some of the states but I’d rather not try to give you answer on that.

William J. Brennan, Jr.:

As I understand, the companies do indeed make efforts to locate.

Ralph M. Oman:

They do.

William J. Brennan, Jr.:

And, it’s only after these things fail, these efforts fail, that they get into these boxes or what?

Ralph M. Oman:

They make an effort to locate even after they had made reports to the state.

They are first required to make reports to the states of money that they hold.

William J. Brennan, Jr.:

Is this largely by advertisements and such?

Ralph M. Oman:

Yes, and starting at the most natural starting point in the world which is the last known address.

And, I’d like to submit to Your Honors this question.

Whenever property is lost or unclaimed, I don’t want to say abandoned and I don’t want to say ownerless, but whenever a property is sought to be taken by someone who may claim to be a finder or might, even in the case of states, claim to be entitled to it, although I don’t know where their right comes except from the merit, right, and privilege of their sovereignty.

The first thing that comes to a person’s mind who wants to make a bonafide effort to find the owner and it’s the owner’s property, it always — is always the orders about it.

Where was he last?

Where was he known to have lived?

Where was he known to have resided?

Ralph M. Oman:

Where did he have an address?

Because that would be the place where at least the Master had furnished adequate proof of the location of the property an intangible within the state where he was last known to have resided.

In this very lawsuit, which only involved some $30,000 or $40,000 held or paid into Court by Sun Oil, there has been over $11,000 paid out of these funds to persons who have been located, who have been tracked down and found by going first to the most natural starting point that you can think of, and that’s where was he last known to have been before he abandoned the property.

We agree wholeheartedly with the Master that the so-called contacts principle, contacts with the transaction, is the least desirable.

It — in my opinion, is not a standard at all.

William J. Brennan, Jr.:

Well —

Arthur J. Goldberg:

Does it involve this debt in this because debt is a likely problem?

Ralph M. Oman:

It has.

Arthur J. Goldberg:

Then it’s probably that he would likely have been to place, that is the last known address?

Ralph M. Oman:

That is correct, Your Honor, and I’d like to say at this point —

William J. Brennan, Jr.:

Well, the last known address is clear and simple contact isn’t it?

Ralph M. Oman:

I — well, it’s not the — I don’t quite understand Your Honor’s question.

William J. Brennan, Jr.:

The last known address is the place where the man, the claimant, stayed —

Ralph M. Oman:

If used in that sense, it is the finest type of contact.

William J. Brennan, Jr.:

Yes.

Ralph M. Oman:

But, the contacts theory, principle contacts with the transaction, which New Jersey claims under, principle —

Tom C. Clark:

Does any state have a test other than — on my concerns other than the last known address?

Ralph M. Oman:

I cannot give you an answer on that, Your Honor.

I know that there are 23 States.

Tom C. Clark:

I understand, you have that in your brief.

Ralph M. Oman:

And there has been one added, the State of New York, since this law suit was commenced.

It amended its statute to come under the last known address.

Tom C. Clark:

I thought perhaps there might be some state that has another statute.

Ralph M. Oman:

I’m sorry, but I do not know and I cannot give you that answer.

Hugo L. Black:

There’s another clause there that presents that if she remanded by some brief, that is, according to the books of the company.

Ralph M. Oman:

According to the records and books of the company, I think that’s the way the statute reads.

Hugo L. Black:

Well, is that what you’re arguing upon?

Ralph M. Oman:

Yes, sir.

Hugo L. Black:

What was it — certainly, the company just didn’t put it down.

It hasn’t put one down for 40 years.

Hugo L. Black:

Does the last known address, according to the books of the company, have to be taken even with those which —

Ralph M. Oman:

I think that would provide a starting —

Hugo L. Black:

Is flagrantly — flagrant or long?

Ralph M. Oman:

I think that would provide a starting point.

Hugo L. Black:

But, what — is that the final point?

Ralph M. Oman:

I don’t understand Your Honor’s question.

Hugo L. Black:

Well, what was the insurance company in Connecticut and, even then, does the — somewhere, it was hold over United States and they never did change my address, never did have a last known address at all.

Ralph M. Oman:

Well, it’s the last one that the company knew about.

It was the last known to them.

Hugo L. Black:

The merits of the matter wouldn’t have been on the last known address the company knew about, would it?

Ralph M. Oman:

It would be the last —

Hugo L. Black:

If there’d be merit to giving it to the state where he last lived, the fact that they didn’t put the interest in that shouldn’t — couldn’t derive they don’t have merit.

Ralph M. Oman:

No.

Hugo L. Black:

Maybe that’s the only test we could use.

Ralph M. Oman:

I think we’ll have to —

Hugo L. Black:

What I was pointing out is that that holds up to the problem itself.

Ralph M. Oman:

I don’t think we need to let any more in, if Your Honors please.

Hugo L. Black:

But, it’s there.

Ralph M. Oman:

Yes, I know —

Hugo L. Black:

It’s according to the books of the company.

Ralph M. Oman:

And, I don’t know the answer, frankly.

I’m inclined to — I’m not saying I’m inclining to agree.

I do agree with Judge Huxman of the Court.

I think he has ruled out, and rightly so, the so-called sufficient contacts theory because that is not, in itself, a standard.

It would take a standard to determine that there’s a standard.

What is sufficient to one state might be insufficient to another, and vice versa.

And, you would have a multitude of litigations over that because —

William J. Brennan, Jr.:

I take it, that —

Ralph M. Oman:

He said it was just fact.

William J. Brennan, Jr.:

That test, in any event, would emphasize the contacts of the debtor wouldn’t it?

Ralph M. Oman:

Right.

William J. Brennan, Jr.:

And what —

Ralph M. Oman:

Not the creditor.

The debtor has no property rights into this.

William J. Brennan, Jr.:

And what we all primarily be concerned with is the owner who is the chap who’s owed the money.

Ralph M. Oman:

Absolutely and it’s the owner that’s entitled to any solicitude as far as selecting an arbitrary standard or a standard or a guide, if one can be selected.

I think the owner is entitled to much more consideration than either of the claiming states are prone to giving because the states have no right to this property per se.

It isn’t their property.

It’s a windfall for them.

It’s a method of enriching their treasury, and I don’t say that they’re not entitled to escheat property but I don’t think they’re entitled to make claim to it under the so-called sufficiency of the contacts theory nor the domiciliary theory, which of course only takes into account property of the debtor.

And, the debtor has no proprietary interest and no property right in an intangible.

It belongs to the creditor.

I want to thank Mr. Burns and to share to the Court of my appreciation is being submitted to.

Earl Warren:

Thank you, Mr. Oman.

Mr. Resnick.

Joseph H. Resnick:

Mr. Chief Justice and May it please the Court.

The Commonwealth of Pennsylvania wishes to state its position as being in accord with the opinion rendered by the Special Master and, consequently, no exemptions were filed.

Originally, Pennsylvania is here to the sufficient contact theory based on the fact that the Sun Oil Company had its principal office and place of business in Pennsylvania.

But after further consideration of the issues and in the light of the Master’s report, we’ve changed our position and we now advocate that — the last known residence theory and we join Mr. Oman in his arguments.

We believe that the last known residence theory is the most practical solution of the three theories advanced because, first, it is a simple, fair, and adequate solution to a complex problem that involves the least amount of litigation.

Secondly, it considers the owner’s right in the property as well as that of the sovereign and by advertising in the jurisdiction where the owner was last seen or lived or was known.

And, this is our position.

We cannot add anymore than the arguments already before this Court.

Earl Warren:

Have you filed a brief?

Joseph H. Resnick:

No, sir, I did not file a brief.

Earl Warren:

Mr. Ballard.

Augustus S. Ballard:

Mr. Chief Justice and May it please the Court, we come at last to the custodian of the fund.

At the outset of this litigation, in which we are a named defendant but have no real interest other than to see a real solution to this problem, we took the position that we could neither admit nor deny the status of the property here sought in Texas or in any other state which was then a party to the proceeding or subsequently became one, but that we would act in accordance with the disposition of the matter as dictated by this Court.

The thing that has concerned us, as the case has progressed, is that in considering the complex theory as advanced by the various states we, as the custodian of the property, may become confused as to what we are supposed to do.

It is for this reason that we are somewhat concerned about the theory advanced by the State of Texas because we have visions of our comptroller or treasurer, whoever he may be confronted with hundreds of these transactions every year, having to become an expert in the conflict of laws in order to fill out the various reports.

Augustus S. Ballard:

The theory adopted by the Master has the virtue, from our standpoint, of being understandable and easy to follow even though, I must say, that it is not, from our standpoint, the easiest theory which could be adopted.

If we — if the Court were to adhere to Mr. Kehoe’s theory, that means we’ve got only one state to worry about or if the Court were to adopt the position originally taken by Pennsylvania, and now abandoned, and that is that the state where the principal office of the debtor is concerned, that would also be an easy rule to follow.

However, except for the caveat of making constitutional lawyers out of companies — the officials of companies who are in charge of filing out these escheat reports, we reiterate our position that we have no axe to grind.

William J. Brennan, Jr.:

May I ask, Mr. Ballard.

Augustus S. Ballard:

Yes, sir.

William J. Brennan, Jr.:

I noticed $11,000 were — at least representing that number of owners have turned up and they’ve been paid and they’re out of this case.

Is that the new part of the cost of anything that Sun did to find them?

Augustus S. Ballard:

Yes, sir.

Most, I think that it might be well to clear up one point, a doubt that has arisen here.

I think Sun Oil Company is not alone in preferring to pay its debts to the people it owes them to and not to any of the states, however, fond we may be of them.

The Texas law was passed and we filed a report in complete compliance with it.

And, actually, it turned out that we were able to find, within the period allowed by the Texas statute, various people, the actual owners of the property.

The —

Byron R. White:

(Inaudible)

Augustus S. Ballard:

Yes, sir.

That is quite true.

Byron R. White:

Are your procedures just to — how placid are you when you try to trace him?

Augustus S. Ballard:

It depends on the amount and the type of obligation.

If you can’t find the stockholder, you’re extremely worried and you would follow — you would go to the postmaster in his hometown or whatever might be an appropriate procedure.

If you owe a fellow 35 cents for a bag of nails in a hardware store and you send him a check and he doesn’t cash it, I think you just let him go at that.

You’re not going to waste your time pursuing it.

But, as a general rule, like any other company, it’s – you run the risk, if you pay over to a state of the true owner turning up and wanting his money.

You say “I’m sorry.

We’ve paid it to Texas or New Jersey.”

It doesn’t make him happy.

William O. Douglas:

What do you do with royalty?

Augustus S. Ballard:

What, sir?

William O. Douglas:

What’s your position on royalty payments in which it –?

Augustus S. Ballard:

Royalty payments?

The royalty payments, again, we treat with special care because they touch upon realty which has a degree of formality which one does not associate with personal realty.

Augustus S. Ballard:

And, it’s the life blood, of course — of an oil company that its arrangements in the State of Texas and elsewhere where it has oil interests must be right up to the mark, and we avoid, if possible, finding the situation which has occurred.

We cannot find the person who owns a fractional mineral interest.

So, I —

Potter Stewart:

Mr. Ballard, how many states have escheat laws?

Augustus S. Ballard:

I would think it would be fair to say that all states have escheat laws of one kind or another, but that the number of the states having these omnibus statutes would be in the order of 15 to 20.

When I say omnibus statutes, I mean those reaching wages, business debts of all kinds and that kind of thing and not merely a person’s dying intestate without heir.

Potter Stewart:

Yes, I was wondering about the case of — where a person’s last known address is in North Dakota, and let’s assume North Dakota doesn’t have one of these omnibus escheat law, then what happens?

Augustus S. Ballard:

Then we are enriched.

I admit it.

We would then be enriched.

Conversely, if we’re a New Jersey corporation and you’ve gathered from Mr. Kehoe that they have a very active escheat program, but if you adopt a state of incorporation rule, I don’t believe Delaware has an omnibus escheat statute and, of course, there are more corporations incorporated in Delaware than any other state.

I think that whatever formula you come out with, in some cases, the debtor, the holder, is going to benefit but I also think that that is what is motivating us.

We are looking a role —

Potter Stewart:

I understand.

I’m just making one thing —

William J. Brennan, Jr.:

Mr. Ballard, these states do have statutes.

Is the common feature that they had some kind of a holding period before, so that owners may have an opportunity?

Augustus S. Ballard:

Most of them do have — some of them have, actually, as I recall it, a perpetual holding period that there is no bar that the true owner coming.

I might mention that, since this action began and although it’s been general knowledge that it’s pending, Sun Oil Company has been asked by 15 states to file reports and we have filed those reports.

We have denied — we have refused to pay anybody because we don’t know who to pay, but it gives you an idea of the complexity of this problem just taking one company alone.

William J. Brennan, Jr.:

It might be cheaper to find the actual owner.

Augustus S. Ballard:

Well, I repeat, Your Honor, we’re looking for —

William J. Brennan, Jr.:

Even for 35 cents and they’ll file a report for 15 cents.

Augustus S. Ballard:

Well that might well be.

Certainly, we are doing our best to find them.

Hugo L. Black:

Mr. Ballard, I was — did I understand you to say that any formula a roué with that would give advantage to the debtor?

Augustus S. Ballard:

In taking debtors generally, if you take a last known address rule such as the Master has here, and we’ve got a creditor whose last known address is North Dakota and let’s assume for the moment, and I think this is true, that North Dakota has no omnibus escheat Act which would reach unclaimed wages.

As I understand, the workings of the Master’s rule, we don’t have to report that to anyone unless or until the State of North Dakota adopts an omnibus escheat bill.

Not all the states have the same kind or as broad as the states actually concerned in this case all have far-reaching escheat statute.

Potter Stewart:

And, on the other hand, if you had a rule of the thing that the domicile of the corporation is the only state which could escheat and the corporation where — incorporated in North Dakota, it’s about the same way.

Augustus S. Ballard:

That Corporation would make out well.

Hugo L. Black:

Is it your belief that, for that reason, we should not adopt the former law and that we should adopt a different one than that one which has been suggested by the Master?

Augustus S. Ballard:

I’m not suggest — I’m not presuming to interject our feelings on it, other than to say —

Hugo L. Black:

I wanted your judgment.

You’ve been studying it.

Augustus S. Ballard:

Well, I think, actually —

Hugo L. Black:

You didn’t object to stating it, do you?

Augustus S. Ballard:

The fair — from a standpoint of fairness, I think Judge Huxman has found the fairest rule, assuming again that you can’t be absolutely sure of fairness.

While it is true that the last known address on our books may indicate he’s not there anymore and it may not even have been his residence, it is nevertheless the address which the creditor gave to Sun Oil Company in transacting whatever particular piece of business it happened to be, stock ownership, wages, sale of supplies, whatever it happened to be.

And, I think that it — this really, It makes better sense for that state where his last known address was to claim the money, then the state of incorporation which may have had very little or no connection with the transaction whatsoever.

Hugo L. Black:

Assuming that he’s right, it’s the fairest method, consider the last known address, can you say the same thing for saying the last known address according to the books of the company or can you suggest anything else that would be better?

Augustus S. Ballard:

I think the last known address according to the books of the company will do for the reason that there is no impetus on the company to hide it and, on the other hand, there is an impetus to keep it current because, as I say, the company will want to pay the creditor.

It’s not going to sit there and let the last known address become a stale one and I venture to suggest that, at least as far as my plan is —

Hugo L. Black:

Can we assume that that will always be fair and —

Augustus S. Ballard:

I suppose any assumptions are dangerous but, generally speaking, the escheatable abandoned property is so little in amount that you — there is no — the game wouldn’t be worth it.

The company would rather discharge its debts in the course of its regular business and keep its address list up to date.

Byron R. White:

Mr. Ballard, I suppose the books of the company, is rather an expensive concept anyway and it might mean the records of the company, any of the records.

Augustus S. Ballard:

Yes, sir.

Byron R. White:

You might have on your books, your formal books of account, there might be an address for a fellow but you’ve kept up and you found out that, well, he moved to so and so in the course of your investigation.

And — but, you go to that address and he isn’t there either.

That would be his last known address, I take it.

Augustus S. Ballard:

That’s right and, as I say, depending upon the nature of the debt, the efforts to keep that current will vary and —

Byron R. White:

Now, on the Texas matter, you’re in the oil business.

I know you say have — the company doesn’t have a stake in this, but what do you think about the — I mean, why shouldn’t Texas be correct in saying that “look, this is real estate under our law and only the state of — where the real estate is located may escheat real estate”?

Augustus S. Ballard:

Well, without expressing an expert opinion on the mineral oil law of Texas, I venture this.

That the time — by the time it comes to where we consider it abandoned.

It’s reduced to a sum of money — a specific sum of money.

Byron R. White:

It’s a debt.

Augustus S. Ballard:

It’s a debt and that’s — that would be our view.

Byron R. White:

It’s not real estate —

Augustus S. Ballard:

It’s not real estate.

Byron R. White:

Anymore, yes.

Augustus S. Ballard:

Thank you.

Earl Warren:

Thank you, Mr. Ballard.

Charles J. Kehoe:

Yes, Chief Justice, may I — I think I reserved a couple of minutes.

Earl Warren:

Mr. Burns, yes.

Charles J. Kehoe:

I’m Mr. Kehoe.

If — we just like to say —

Earl Warren:

Mr. Kehoe.

Charles J. Kehoe:

Yes.

On the last known address standard, that one question which we don’t want to lose sight of, and all this property is, if this Court adopts that rule and a state escheats it on the basis of last known address and, later on, the creditor should come and sue the company, the company is not going to be protected from double liability which, of course, is the objective of this Court, we think, in this action.

Byron R. White:

What happens in life insurance companies?

Charles J. Kehoe:

In life insurance companies, the statute that I am aware of are all strictly custodial in nature and he can get it back at anytime.

Even if the — if he sued the life insurance company and he got a judgment against another New Jersey statute, New Jersey would pay the life insurance company back.

That’s just custodial, not escheat.

But, under our general escheat statute of course, that does not follow and, in other states, it doesn’t follow either.

In the case of stocks, shares of stock and dividends —

Potter Stewart:

Before you get to that, Mr. Kehoe, I’m afraid, I didn’t follow you.

If we adopted the last known address, you suggest it might still be the right rule?

Charles J. Kehoe:

Sure.

Suppose you adopt the last known address and New Jersey proceeds under its 14-year-statute to escheat it.

We perfect our right by title.

We say that title is vested in the state as to this claim.

Now, four years later, the creditor comes in and he sues Sun Oil Company in Illinois.

They cannot — they would have to pay the claim because he said “well, you gave my property away on my last known address.

I wasn’t even there.”

That’s the fallacy in the last known address rule.

Byron R. White:

But why shouldn’t that follow no matter what escheat rule you call?

Charles J. Kehoe:

Because we know —

Byron R. White:

This is just an argument against escheat rather than —

Charles J. Kehoe:

No, we know where the state of incorporation is.

If you say the state of incorporation, then we have an absolute, certain, definite standard.

That’s it.

It can’t be any other place.

But, if you say last known address, it may be someplace else.

He may be someplace else.

William J. Brennan, Jr.:

But — I know, but if we say last known address, why isn’t that to exclude the state of incorporation?

Byron R. White:

It’s on the book that says that it’s the last known address on the book of the company.

Charles J. Kehoe:

It’s to the exclusion of the state of — no question about that, but not to the creditor.

William J. Brennan, Jr.:

Well, after this Court handed down a decision, if we dealt about that as a rule, it would be a defense that might actually let you, wouldn’t it?

Charles J. Kehoe:

I think so.

William J. Brennan, Jr.:

The Company could tell you, “You can’t have it.

It’s the last known address.”

Charles J. Kehoe:

Well, I suppose the Court may be — it would be — that might not necessarily follow.

I don’t know what the result would be because I think this Court would certainly be very liberal, if we plan to come in and wanted his money back as to saying that he was barred, but it’s just another element in the problem.

And, as to stocks and dividends of a corporation, we vigorously urge that they certainly should be controlled by the state of corporate domicile because, there, that state is the only state with power to recognize the change in ownership of the stock.

The corporate charter includes the laws of the state within the charter, and we feel that, as to stocks and dividends, the state of incorporation should be the controlling standard rather than the last known address which, from the very facts, we concede does not now exist.

Hugo L. Black:

It seems to me, if I may be — I’m going to ask you the connection with this question.

You’re arguing against the escheat and for a custodial statute, unless we adopt your plan.

Charles J. Kehoe:

I can only say, in respect to that, Mr. Justice Black, that if this Court was to decide that states could only proceed in a certain manner, I think all the states would fall into line.

If they were to say that you proceed better or you obtain more by a custodial statute, I’m sure that they would limit themselves to custodial statutes.

If you say that it makes no difference, custodial or escheat, then they would continue the way we’re going now.

Hugo L. Black:

Some of the state statutes, as I recall, I may be wrong, provide that in any time the owner comes back to the company or anybody else he can sue the state and get it back.

Charles J. Kehoe:

That’s right.

Hugo L. Black:

Does your state provide that?

Charles J. Kehoe:

Our state does not provide that, no.

After a period of 14 years, and it’s escheated and it’s not claimed, four to five unclaimed, taken by the state, two for notice, and then escheat.

Seven years thereafter, he can come in and get his money with 2% interest.

If he doesn’t come in then, the money is escheated and, like in many other things of law, there must be an end someplace and that’d be —

Hugo L. Black:

After 14 years?

Charles J. Kehoe:

That’s right — well, it’s a little more than that because, administratively, we can’t do it in 14 years, maybe 14 or 16 years.

And, the only other comment, I would like to make would be that we’re dealing here with real — with cash claims and not with real property.

Mr. Ballard, from Sun Oil, said the point is reached where we are dealing only with cash claims and it’s not to be confused with real property because when you deal with real property, we’re satisfied.

There’s no question, but it’s the state where the property is situated that can escheat.

Byron R. White:

Mr. Kehoe, what — could you tell me what the — do you have any idea what the average size of the claim is in this case?

Charles J. Kehoe:

Well, we ran it down.

The average I think comes about $16.

Byron R. White:

And what’s the largest?

Charles J. Kehoe:

The largest, I wouldn’t know off hand but it’s at least, I’d say, a couple of hundred dollars.

Byron R. White:

Do you know of any instances in your experience in New Jersey which has been long and you had other connections with this problem?

What’s the largest escheatable claim you ever heard of?

Charles J. Kehoe:

Well, I’ve heard of them in the thousands of dollars.

Byron R. White:

Well, didn’t Standard Oil — didn’t that run in the millions?

Charles J. Kehoe:

Well, the —

Byron R. White:

A single claim.

Charles J. Kehoe:

A single claim, I’d say $4,500 — I know and they probably might even be higher.

William J. Brennan, Jr.:

Wasn’t the aggregate from the Standard Oil case to a million?

Charles J. Kehoe:

When we finally came to this Court, it wasn’t.

At the beginning, it was, but we lost on wages and general claims on the statute of limitations.

Potter Stewart:

Yes, but that was the total of the whole bunch.

Charles J. Kehoe:

That’s right and we got to this, yes.

Potter Stewart:

Just a single claim, $4,500 is about the largest.

Charles J. Kehoe:

That’s right, but you couldn’t really — it might be any amount.

We looked into a claim with Standard Oil Company that involved an old share of stock, way back many, many years.

And, if we approved our claim on that, it would’ve run into, I guess, $100,000 by the splits and everything else that occurred.

Hugo L. Black:

How did you lose by statute of limitations?

You mean, the statute of limitations to your right to escheat cover the money held by a company?

Charles J. Kehoe:

Our state held that if the claim was barred at the time we enacted the escheat law by the statute of limitations, then there was no longer any property to escheat.

Hugo L. Black:

If the owner’s claim was barred.

Charles J. Kehoe:

That’s correct.

Charles J. Kehoe:

That’s right.

Earl Warren:

Mr. Shultz, do you have something further?

W. O. Shultz II:

The only thing I had further I might, in answer to Justice Black’s question, I was just skimming through here and here’s one claim in this report for $1,292.38.

That’s just one I read from here and, as to the largest, the largest I know of is one, we have standing in Texas now which is in one claim in the neighborhood of about two and three-quarters of $1 million.

Byron R. White:

This is an oil thing?

W. O. Shultz II:

It involves a land trusted debt in the old Texas Septic Land Trust which was an offshoot of the Texas Septic Railroad.

And, over the years, it has —

Byron R. White:

The run of the meal claim, you suppose that it averaged $10 or $20?

W. O. Shultz II:

That would be, in our experience there, the only — I don’t think, no.