Texas v. New Jersey

1965-03-29

Headline: Adopted rule lets the creditor’s last known address decide which state can claim unclaimed debts, simplifying interstate claims to small abandoned balances and reducing uncertainty for states and companies.

Holding: The Court held that each unclaimed intangible debt may be claimed only by the state shown as the creditor’s last known address on the debtor’s books; the state of incorporation may hold funds when no address or law exists.

Real World Impact:

States claim unclaimed debts based on creditor’s last known address in debtor records.
Simplifies administration and reduces interstate litigation over small abandoned balances.
Allows a corporation’s state of incorporation to hold funds when addresses are unknown.

Topics: unclaimed debts, state claims to unclaimed property, interstate disputes, corporate incorporation

Summary

Background

Texas sued New Jersey, Pennsylvania, and the Sun Oil Company to decide which State could take title to various small unpaid debts totaling $26,461.65 owed to about 1,730 creditors who never appeared to collect. The unpaid amounts were recorded on Sun’s books in Texas or were owed to people whose last known addresses were in Texas. New Jersey claimed the right because Sun was incorporated there; Pennsylvania claimed part or all because Sun’s principal offices were there. Florida intervened claiming some claims based on Florida addresses.

Reasoning

The Court confronted the question of which State should be allowed to claim (escheat) intangible debts when the creditor cannot be found. It rejected a subjective “most significant contacts” test and refused to give exclusive priority to the debtor’s state of incorporation or the company’s principal place of business. Instead, the Court adopted the Special Master’s favored rule: the State shown by the debtor’s books and records as the creditor’s last known address has the exclusive right to claim the debt. If there is no last known address or that State lacks an escheat law, the state of corporate domicile may temporarily escheat the funds, subject to a later superior claim by the State of the creditor’s last known address.

Real world impact

The decision creates a clear, administrable rule for unclaimed debts. Companies will look to their own records to determine which State can claim unclaimed obligations. States will generally receive escheats in proportion to where creditors appear to live on debtor records. The rule reduces litigation over which State may take small abandoned balances and provides a fallback where addresses are missing.

Dissents or concurrances

Justice Stewart dissented, arguing the Court should have left control to the debtor’s state of incorporation and should have followed earlier cases allowing that rule.