Katherine Cerajeski v. Greg Zoeller
2013 U.S. App. LEXIS 22227
7th Cir.2013Background
- Indiana Unclaimed Property Act authorizes state to take custody of unclaimed property; ownership in a bank account is treated as property under the Act and subject to a 3-year/25-year escheat framework.
- Plaintiff challenges the Act as taking property without just compensation by confiscating interest earned on a bank account after transfer to the state.
- Cerajeski’s guardian learned of the bank account years after transfer; the account was small and value did not trigger individualized notice for larger accounts.
- The Act allows the state to depute custody, attempt notice, publish, and eventually escheat after 25 years if unclaimed, with owners able to reclaim up to 25 years after filing a claim.
- Court concluded the state’s confiscation of interest constitutes a taking; it reversed and remanded for determination of just compensation and other relief.
- Court emphasizes the need for abandonment vs. unclaimed property distinction and finds no basis in escheat for interest prior to 25 years; solidifies that ownership of interest follows ownership of principal
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can the state confiscate interest from unclaimed property as a taking without compensation? | Cerajeski owner entitled to interest; confiscation violates Takings Clause | Act permits custodian fees; interest not protected owner’s property | Yes, taking; requires just compensation on claim |
| Is the Act’s abandonment/ownership framework constitutionally valid as escheat? | Property not abandoned; no escheat without compensation | Abandoned/unclaimed property can be escheated after due process | Not valid here; insufficient basis for escheat of interest before 25 years |
| May the state escheat principal and interest on a bank account on different timelines (25 years vs 3 years) without due process issues? | Disparate periods undermine due process and takings protections | Statute distinguishes principal vs interest as unclaimed property | Problematical; conflict with due process; needs resolution on remand |
| Is there a need for judicial/administrative determination that property has been abandoned before escheat? | Abandonment requires explicit relinquishment, not present here | Unclaimed property can be escheated without abandonment | Yes, problem; no basis for taking without abandonment or compensation |
Key Cases Cited
- Brown v. Legal Foundation of Washington, 538 U.S. 216 (U.S. 2003) (interest follows principal; taking of interest is a taking)
- Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586 (S. Ct. 2013) (takings analysis for confiscations akin to taxes)
- Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155 (U.S. 1981) (government cannot take money for private use without compensation)
- Phillips v. Washington Legal Found., 524 U.S. 156 (U.S. 1998) (interest follows principal; due process considerations in takings)
- Texaco, Inc. v. Short, 454 U.S. 516 (U.S. 1982) (escheat conditioned on reasonable retention; state may require conditions for retention)
- Commonwealth Edison Co. v. Vega, 174 F.3d 870 (7th Cir. 1999) (unclaimed-prop acts not escheat statutes; custodian model)