It did not take long for the United States Supreme Court to take another original jurisdiction case, where the Court affirms the priority rules for unclaimed property.
At issue was how to escheat money orders and similar financial instruments in an amount in excess of $1,500,000 held by Western Union.
Following just a handful of years after Texas v. New Jersey, Pennsylvania asked the Court to make an exception from the priority rules for money orders.
Court Rejects Request to Carve Exceptions to Priority Rules
Pennsylvania contended that the records of Western Union did not identify anyone as the creditor and do not have an an address for either the sender or the payee of the money order. Strict application of the priority rules from Texas v. New Jersey, Pennsylvania said, would result in almost all of the funds being escheated to the state of incorporation. In this case, New York would get a windfall.
Pennsylvania proposed that a new priority rule should apply to money orders: that the state of purchase should be presumed to be the state of the sender’s residence and thus the creditor in the debtor-creditor relationship.
However, the Court rejected this request for an exception to the unclaimed property priority rules as previously established.
The Court said that they do not know the percentage of the transactions lack an address or that is was high enough to justify an exception. The continued application of the Texas rule avoids unnecessary judicial involvement to decide each case on the basis of its particular facts.
Aftermath of Pennsylvania v. New York
Following the U.S. Supreme Court decision in Pennsylvania v. New York, Congress took action on the issue of unclaimed money orders, traveler’s checks, and similar written instruments in 1974. Senator Hugh Scott of Pennsylvania introduced Senate bill 1895.
Congress found that as a matter of business practice, companies do not regularly retain the last known address of purchasers of these instruments and this results in a windfall to the holder’s state of incorporation. A memorandum by Senator Scott was introduced into the record detailing how the state of incorporation would receive a windfall as a result of the Pennsylvania decision.
Thus, Congress specifically overruled the result in Pennsylvania v. New York, as it applied to money orders and traveler’s checks.
Now, money orders and traveler’s checks are reportable to:
- First, the state of purchase, as indicated by the books and records of the holder.
- If the books and records do not indicate the state of purchase, then the property is reportable to the holder’s state of principal place of business.
The definition of “similar written instruments” has become the subject of the MoneyGram official checks case, currently ongoing with the U.S. Supreme Court.
Full Case Available on Justia: Pennsylvania v. New York, 407 U.S. 206 (1972)
Text from US Code: Disposition of Abandoned Money Orders and Traveler’s Checks
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