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State can’t keep interest earned on unclaimed property

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The 7th Circuit Court of Appeals agreed Thursday with an Indiana woman acting as guardian for a relative that the state can’t retain the interest earned on unclaimed property once the owner files a valid claim to the property. Katherine Cerajeski argued that action by the state is a taking that violates the takings clause in the Constitution because the owner is paid nothing for his lost interest.

Cerajeski’s ward had a small, interest-bearing bank account, of which the value is considered property in Indiana. She learned about the bank account in 2011; it had been considered abandoned in 2006. She filed this lawsuit, seeking a declaration that she is entitled on behalf of her ward to the interest. The District Court dismissed her lawsuit, Katherine Cerajeski, guardian for Walter Cerajeski v. Greg Zoeller, Attorney General of the State of Indiana, et al., 12-3766, that challenged part of the Indiana Unclaimed Property Act.

Under Indiana statute, property owners have 25 years to claim property.

Judge Richard Posner, writing for the court, held that interest on interest-bearing unclaimed property is unclaimed property too, so the owner can claim it upon proving title.

“There is no basis for the state’s confiscating the interest in Cerajeski’s account. There is no articulated basis for fixing a 25-year term for escheat of principal and only 3 years for escheat of interest—a period so short as to present a serious question whether it is consistent with the requirement in the Fourteenth Amendment that property not be taken without due process of law, implying adequate notice and opportunity to contest.”

“And so if before then the state takes either principal or interest it must render just compensation to the owner if as in this case the owner’s identity is known. The state can charge a fee for custodianship and for searching for the owner, but the interest on the principal in a bank account is not a fee for those services.”

The case is remanded for further proceedings, including a determination of the compensation to Cerajeski when she files her claim.

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  4. Law school is social control the goal to produce a social product. As such it began after the Revolution and has nearly ruined us to this day: "“Scarcely any political question arises in the United States which is not resolved, sooner or later, into a judicial question. Hence all parties are obliged to borrow, in their daily controversies, the ideas, and even the language, peculiar to judicial proceedings. As most public men [i.e., politicians] are, or have been, legal practitioners, they introduce the customs and technicalities of their profession into the management of public affairs. The jury extends this habitude to all classes. The language of the law thus becomes, in some measure, a vulgar tongue; the spirit of the law, which is produced in the schools and courts of justice, gradually penetrates beyond their walls into the bosom of society, where it descends to the lowest classes, so that at last the whole people contract the habits and the tastes of the judicial magistrate.” ? Alexis de Tocqueville, Democracy in America

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