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California Civil Procedure
California Appellate Court
Case of The Day-
April 20, 2004

California Unclaimed Property  and Escheat Law

PROCEDURAL HISTORY

1.  Plaintiffs’ complaints.

All plaintiffs filed separate complaints against the Controller.  Fong’s fourth amended complaint, filed on May 31, 2001, alleged his shares at the time of filing would have been worth roughly $70,000 per share (down from a 24-month high of $90,000 per share).  He alleged the Controller had sold other blocks of the escheated shares at other times for between $31,000 and $33,000 per share.  He asserted the Controller’s taking possession of, and sale of his shares (at approximately $7,000 per share) without notice to him or obtaining his consent, and before knowing the identity of the owners of those shares, violated:  (1) his due process rights of notice and compensation for property under the state and federal constitutions; (2) undesignated state and federal securities laws; and (3) notice and qualifying provisions of the Unclaimed Property Law. 

He sought declaratory and injunctive relief on those grounds and also a declaration that he was entitled to the return of either his stock investment or the reasonable value thereof, an accounting and imposition of a constructive trust, and attorney fees and the creation of a common fund consisting of all monies received by the Controller from the improper acquisition and sale of stock without due process to be refunded to all similarly injured shareholders. 

Quiroz and the Terracinas filed first amended complaints seeking recovery of compensatory damages from the Controller.  They alleged the Controller improperly reimbursed them the value of their shares based on the sales price in 1990 when the Controller did not at that time know the rightful owners of the shares sold.  They sought to be paid the sale price earned by the Controller when the Controller allegedly sold another block of the escheated Berkshire Hathaway shares in 1995 at a significantly higher price. 

The trial court subsequently consolidated the three actions.  It also denied motions by plaintiffs to amend their complaints to include class action allegations. 
 

The Court:

Here, the state did not take title to plaintiffs’ shares, but only held them as custodian.  Moreover, the Nebraska state treasurer notified plaintiffs by mail to their last known address of record of the escheat, and the Unclaimed Property Law notified them their property would escheat automatically without a court hearing and would be sold without further notice.  Standard Oil does not address these circumstances.

Plaintiffs argue the Controller’s alleged violations of the Unclaimed Property Law’s noticing requirements also violated their due process rights.  We have already determined what process was due.  That the Legislature imposed additional noticing requirements on the Controller beyond the requirements of due process does not alter our due process analysis.  (See Jones v. United States (9th Cir. 1997) 121 F.3d 1327, 1332.)The judgment is affirmed. Fong v. Westly March 11, 2004-Opinion filed-CA3 C042007-Order publishedApr 12 2004
 

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