Estates, Succession, Abandoned Property.

The Due Pro-cess Clause does not prohibit a state from varying the rights of those receiving benefits under intestate laws. Thus, the Court held that the rights of an estate were not impaired where a New York Decedent Estate Law granted a surviving spouse the right to take as in intestacy, despite the fact that the spouse had waived any right to her husband’s estate before the enactment of the law. Because rights of succession to property are of statutory creation, the Court explained, New York could have conditioned any further exercise of testamentary power upon the giving of right of election to the surviving spouse regardless of any waiver, however formally executed.331

Even after the creation of a testamentary trust, a state retains the power to devise new and reasonable directions to the trustee to meet new conditions arising during its administration. For instance, the Great Depression resulted in the default of numerous mortgages which were held by trusts, which had the affect of putting an unexpected accumulation of real property into those trusts. Under these circumstance, the Court upheld the retroactive application of a statute reallocating distribution within these trusts, even where the administration of the estate had already begun, and the new statute had the effect of taking away a remainderman’s right to judicial review of the trustee’s computation of income.332

The states have significant discretion to regulate abandoned property. For instance, states have several jurisdictional bases to allow for the lawful application of escheat and abandoned property laws to out-of-state corporations. Thus, application of New York’s Abandoned Property Law to New York residents’ life insurance policies, even when issued by foreign corporations, did not deprive such companies of property without due process, where the insured persons had continued to be New York residents and the beneficiaries were resident at the maturity date of the policies. The relationship between New York and its residents who abandon claims against foreign insurance companies, and between New York and foreign insurance companies doing business therein, is sufficiently close to give New York jurisdiction.333 Or, in Standard Oil Co. v. New Jersey,334 a divided Court held that due process is not violated by a state statute escheating shares of stock in a domestic corporation, including unpaid dividends, even though the last known owners were nonresidents and the stock was issued and the dividends held in another state. The state’s power over the debtor corporation gives it power to seize the debts or demands represented by the stock and dividends.

A state’s wide discretion to define abandoned property and dispose of abandoned property can be seen in Texaco v. Short,335 which upheld an Indiana statute that terminated interests in coal, oil, gas, or other minerals that had not been used in twenty years, and that provided for reversion to the owner of the interest out of which the mining interests had been carved. The “use” of a mineral interest that could prevent its extinction included the actual or attempted extraction of minerals, the payment of rents or royalties, and any payment of taxes. Indeed, merely filing a claim with the local recorder would preserve the interest.336 The statute provided no notice to owners of interests, however, save for its own publication; nor did it require surface owners to notify owners of mineral interests that the interests were about to expire.337 By a narrow margin, the Court sustained the statute, holding that the state’s interest in encouraging production, securing timely notices of property ownership, and settling property titles provided a basis for enactment, and finding that due process did not require any actual notice to holders of unused mineral interests.338 The state “may impose on an owner of a mineral interest the burden of using that interest or filing a current statement of interests” and it may similarly “impose on him the lesser burden of keeping informed of the use or nonuse of his own property.”339

Footnotes

331
Irving Trust Co. v. Day, 314 U.S. 556, 564 (1942). [Back to text]
332
Demorest v. City Bank Co., 321 U.S. 36, 47–48 (1944). Under the peculiar facts of the case, however, the remainderman’s right had been created by judicial rules promulgated after the death of the decedent, so the case is not precedent for a broad rule of retroactivity. [Back to text]
333
Connecticut Ins. Co. v. Moore, 333 U.S. 541 (1948). Justices Jackson and Douglas dissented on the ground that New York was attempting to escheat unclaimed funds not actually or constructively located in New York, and which were the property of beneficiaries who may never have been citizens or residents of New York. [Back to text]
334
341 U.S. 428 (1951). [Back to text]
335
454 U.S. 516 (1982). [Back to text]
336
With respect to interests existing at the time of enactment, the statute provided a two-year grace period in which owners of mineral interests that were then unused and subject to lapse could preserve those interests by filing a claim in the recorder’s office. [Back to text]
337
The act provided a grace period and specified several actions which were sufficient to avoid extinguishment. With respect to interests existing at the time of enactment, the statute provided a two-year grace period in which owners of mineral interests that were then unused and subject to lapse could preserve those interests by filing a claim in the recorder’s office. [Back to text]
338
Generally, property owners are charged with maintaining knowledge of the legal conditions of property ownership. [Back to text]
339
454 U.S. at 538. The four dissenters thought that some specific notice was required for persons holding before enactment. Id. at 540. [Back to text]