John V. Orth
37 Campbell L. Rev. 321 (2015)
“[I]nterest shall follow the principal, as the shadow the body . . . .”
Lord Chancellor Hardwicke (1749)
INTRODUCTION. If the owner of a fee simple estate in land dies without a valid will or qualified heirs, the estate ends and the real property escheats to the state. The situation with respect to personal property is different. Unclaimed personal property is also taken by the state, but unlike escheated real property, the state does not necessarily take title. Under the North Carolina Unclaimed Property Act, personal property that is “unclaimed” is “presumed abandoned.” In that case, the state treasurer takes “custody” of the unclaimed property and holds it until the owner reclaims the property. Although the treasurer will return the property to the owner upon proof of title, the state retains the interest that accrued while the property was in the treasurer’s custody.
In 2008, the North Carolina Court of Appeals held in Rowlette v. State that the state’s retention of interest pursuant to the Unclaimed Property Act is not an unconstitutional taking. The court reasoned that the proximate cause of the owners’ loss is not the state’s action, but rather, it is a result of the owners’ “neglect.” In 2013, in Cerajeski v. Zoeller, the United States Court of Appeals for the Seventh Circuit, in a thoughtful opinion by Judge Richard Posner, rejected that argument and held that a similar provision in Indiana’s unclaimed-property act was unconstitutional.
This Article reviews the North Carolina Unclaimed Property Act, compares the reasoning in the Rowlette and Cerajeski cases, and concludes that it is time for North Carolina to recognize that the state should account for interest earned by unclaimed personal property.