Assignee Judgment Creditor May Apply For And Receive Property Held By The State Controller Pursuant To The Unclaimed Property Law

In Weingarten Realty Investors v. Chiang (Cal. App. 4th, December 19, 2012), a California court of appeal considered whether a judgment creditor could claim property being held by the State Controller’s office on behalf of the party owing a debt to the creditor.  The court ruled that the language of the law permits any person with an interest in the property to apply for it, a definition that permits an assignee judgment creditor to do so.

Facts

Weingarten Realty Investors (“Weingarten”) was a judgment creditor of Novadyne Computer Systems, Inc. (“Novadyne”).  Property belonging to Novadyne, including cash in various accounts and stock holdings, was being held by the State Controller’s Office pursuant to the state’s Unclaimed Property Law.  The Superior Court assigned the property to Weingarten and ordered the Controller to deliver it to Weingarten.  The Controller declined, asserting that the law permits him to deliver the money only to an “owner,” not to an assignment creditor. Weingarten filed a lawsuit against State Controller John Chiang, and the Superior Court granted summary judgment in Weingarten’s favor.  The Controller appealed. 

Decision

Under the state’s Unclaimed Property Law, the State Controller’s office takes possession of funds or properties held by entities such as banks or brokerage firms, if the owners of the property have not acknowledged or claimed their interest in it for a period of several years. The law permits the owners of the property to later demonstrate their ownership and claim their property.

In Code of Civil Procedure Section 1540, subsection (a), the law reads: “Any person, excluding another state, who claims an interest in property paid or delivered to the controller under this chapter may file a claim to the property or to the net proceeds from its sale.”  Subsection (d) reads: “Owner means . . . any person having a legal or equitable interest in property subject to the (Unclaimed Property Law) prior to its escheat.

The language of subsections (a) and (d) allow for conflicting interpretations, the court said, because (a) allows anyone with an interest in the property, which Weingarten is, to apply for them; while (d) defines “owner” as the person who had legal right to the property prior to the escheat, which Weingarten did not. 

It seems nonsensical, the court said, that the Legislature would have expressly permitted a person to apply for unclaimed funds but then not have permitted the Controller to pay that person. Because the Legislature, in subsection (a) specified that “any person . . . who claims an interest in the property” may apply for it, the Legislature must not have intended to limit collection to an “owner” as defined in subsection (d), the court added.  

“In our view, this suggests that the Legislature deliberately chose to permit any persons who claim an interest in unclaimed property, such as an assignee, to recover under section 1540,” the court concluded.  The summary judgment for Weingarten was affirmed. 

Questions

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Linda M. Monje | 661.864.3800

June D. Coleman | 916.321.4500