Narrative Opinion Summary
This case concerns a dispute between Blue Cross, a nonprofit hospital service corporation, and the State Controller regarding unclaimed funds represented by uncashed checks under California's Unclaimed Property Law (UPL). Blue Cross had issued checks to subscribers that were not cashed or returned, recording them as miscellaneous income rather than reporting them as unclaimed property. The Controller asserted that funds from these checks, unpaid for over seven years, escheated to the state. Blue Cross sought a declaratory judgment claiming that the UPL did not apply to these funds, leading to litigation. The trial court found in favor of the Controller, ruling that the funds had escheated and ordering Blue Cross to remit $676,028, including prejudgment interest. Both parties appealed, with Blue Cross challenging the escheatment and the Controller contesting the interest calculation. The appellate court upheld that the funds represented a 'chose in action' subject to escheatment and confirmed the validity of the Controller’s claim. The court also ruled that Blue Cross's private escheat law provision was void and clarified that statutory limitations did not bar the Controller’s recovery. Prejudgment interest was awarded at differing rates due to statutory amendments. The case was remanded for recalculation of interest, affirming the Controller's entitlement to recover costs.
Legal Issues Addressed
Chose in Action as Intangible Propertysubscribe to see similar legal issues
Application: The court clarified that the right to payment, or 'chose in action,' constituted the intangible personal property subject to escheat, not the checks themselves.
Reasoning: The analysis clarifies that a check itself is not 'intangible personal property' held by Blue Cross until it is negotiated. The right to payment, referred to as a 'thing in action' or 'chose in action,' is what constitutes the intangible personal property.
Escheatment under the Unclaimed Property Law (UPL)subscribe to see similar legal issues
Application: The court ruled that Blue Cross's uncashed checks constituted unclaimed property that had escheated to the state under the UPL.
Reasoning: The Court of Appeals of California upheld the superior court's determination that these funds had escheated to the State under the Unclaimed Property Law (UPL).
Invalidation of Private Escheat Provisionssubscribe to see similar legal issues
Application: The trial court found Blue Cross's 'claims withdrawal provision,' which attempted to limit claim negotiation periods, to be contrary to public policy and the UPL.
Reasoning: The trial court found this provision to be null and void, declaring it a private escheat law contrary to UPL public policy.
Prejudgment Interest on Escheated Fundssubscribe to see similar legal issues
Application: The court awarded prejudgment interest on escheated funds, initially at 7 percent per annum, later adjusted to 12 percent following statutory amendments.
Reasoning: The court awarded the Controller prejudgment interest at 7 percent per annum on the amounts from their respective May 1 dates to July 31, 1979.
Statute of Limitations Defensesubscribe to see similar legal issues
Application: Blue Cross's assertion of a statute of limitations defense under section 338 was found ineffective due to the nature of the Controller's claim.
Reasoning: Section 338, subdivision 1, serves as a potential legal defense for Blue Cross against the Controller's cross-complaint, but it is ineffective in practice.
Statutory Obligation to Report Unclaimed Propertysubscribe to see similar legal issues
Application: Blue Cross was required to report and remit unclaimed funds from checks unpaid for seven years to the state, as mandated by the UPL.
Reasoning: The Controller asserted that funds from checks unpaid for seven years were unclaimed property and thus required to be reported and remitted to the state.