Court: Supreme Court of Alabama; July 15, 1988; Alabama; State Supreme Court
Carlis Hilton Andrews, as Executor and Trustee of John Frank Andress's estate, appealed a trial court decision that awarded ownership of 80 shares of stock in Troy Bank and Trust Company to Lessie Dyess Andress, the deceased's wife. The trial court found that John Andress intended to create a joint tenancy with right of survivorship in favor of his wife. The stock certificates were initially in John Andress's name, except for one that included Mamie Andress, his first wife. Prior to his death, John Andress took the certificates to Troy Bank, where an employee testified that a vice president instructed her to modify the certificates to add "Mr. or Mrs." to the names and to remove Mamie Andress's name, resulting in the certificates being registered as "Mr. or Mrs. John F. Andress." After John Andress's death, Lessie Andress had the shares reissued in her name, which led Andrews to file a complaint asserting that she had no rightful claim to the stock. The trial court ruled in favor of the defendants, emphasizing the controlling intent behind the ownership transfer despite any technical errors made by the bank. The appeal primarily questions whether the actions taken by John Andress and Troy Bank effectively transferred ownership of the stock to Lessie Andress.
The core issue presented is whether Mrs. Andress acquired an interest in certain stock and if parol evidence is admissible to clarify that interest. The plaintiff argues that she did not obtain title to the stock, claiming the trial court's decision contravenes Alabama's statutory laws regarding corporate stock transfers. Conversely, the defendants assert that a valid transfer occurred despite Mr. Andress not indorsing or surrendering the old stock certificates and no new certificate being issued.
Defendants reference Alabama Code 1975, sections 10-2A-1 and 10-2A-40(d), to support their position that the Alabama Business Corporation Act permits corporations to outline their stock transfer procedures in their bylaws. While section 10-2A-40(d) states that shares in corporations are personal property transferable according to legal stipulations, it does not resolve whether Mrs. Andress acquired any interest in the stock.
The governing law for stock title transfers is established, tracing back to the Uniform Stock Transfer Act (USTA) prior to the adoption of the Uniform Commercial Code (UCC) in Alabama. The UCC, effective January 1, 1967, repealed the USTA, and now the transfer of stock title is governed by Article 8 of the UCC, which includes provisions for securities, defining what constitutes a security and the requirements for registered securities.
Shares of stock qualify as 'securities' under UCC § 7-8-102, thus their title issues are subject to UCC Article 8 concerning investment securities. According to UCC § 7-8-309, transferring an investment security requires both indorsement and delivery. An indorsement alone does not effectuate transfer until the security is delivered, which is defined as the voluntary transfer of possession (UCC § 7-1-201(14)). In this case, Mr. Andress did not indorse the stock certificates, and Mrs. Andress did not obtain actual possession of them. Typically, actual possession is necessary for a valid transfer; however, since Mr. Andress intended to make Mrs. Andress a co-owner, the requirement for physical delivery may not apply, as joint tenants cannot possess stock certificates simultaneously. The court supported this view, noting that possession by one co-owner constitutes possession for all. The actions of Mr. Andress in surrendering stock certificates to Troy Bank and the bank's steps to record the transfer fulfilled the delivery requirements under UCC § 8-309, granting Mrs. Andress an interest in the stock. Additionally, the argument that Mrs. Andress acquired an interest through equitable assignment is considered valid, even post-UCC adoption, supported by precedent in Johnson v. Johnson, which involved joint ownership of corporate stock.
The Court concluded that the transfer of corporate stock at issue did not involve a strict or technical transfer, and the Uniform Stock Transfer Act (USTA) did not exert controlling influence over equitable ownership. The key question was the equitable ownership or title to the stock. The Court reaffirmed that the adoption of UCC Article 8, which pertains to Investment Securities, did not eliminate previously established equitable principles, allowing for ownership transfers based on the owner's intent, despite any technical transfer defects. The Court cited prior cases, emphasizing that no specific form is necessary for an equitable assignment, as long as there is an intentional transfer conferring rights to the assignee. Mr. Andress's actions were deemed a valid equitable assignment of stock interest to Mrs. Andress, despite the lack of formal endorsement or physical delivery of stock certificates. The trial court's finding supported that Mr. Andress intended to make Mrs. Andress a co-owner, and there was at least constructive delivery of the stock. Consequently, Mrs. Andress obtained an equitable interest as co-owner of 80 shares, with the next question being the nature of her interest—whether as a tenant in common or joint tenant with rights of survivorship.
Alabama Code 1975, 35-4-7 states that when a joint tenant dies, their interest does not automatically transfer to the surviving joint tenants unless the creating instrument explicitly expresses an intent for survivorship. In the case at hand, the stock certificates do not indicate that Mr. and Mrs. Andress held the stock as joint tenants with right of survivorship. Mrs. Andress and Troy Bank argue parol evidence should be admissible to demonstrate Mr. Andress's intent to create a survivorship estate in her favor, referencing Parr v. Godwin, where parol evidence clarified ownership due to ambiguity in a joint account. However, unlike the ambiguous account in Parr, the stock certificates clearly state ownership as "Mr. or Mrs. John F. Andress" without any indication of joint tenancy or survivorship. Consequently, the court maintains that under § 35-4-7, the absence of a clear indication of survivorship in the stock certificates results in a tenancy in common, not joint tenancy with right of survivorship. The legal precedent consistently requires that any intent to create joint tenancy with survivorship must be explicitly stated in the instrument.
The court determined that the stock certificates in question did not indicate an intent to create a survivorship estate, leading to the reversal of the trial court's admission of parol evidence suggesting Mr. Andress intended to create a joint tenancy with right of survivorship for himself and Mrs. Andress. Consequently, Mrs. Andress is not entitled to all shares of stock, as one-half of the shares passed into Mr. Andress's estate upon his death. The decision was unanimous among the concurring justices. Additionally, the record reflects that Mrs. Andress came into possession of the stock certificates after Mr. Andress's death, but it remains unclear how the certificates were altered or their handling prior to her possession. Alabama law recognizes that possession by one co-owner is considered possession by all. The excerpt also references several Alabama Code provisions regarding the transfer of ownership and the conditions under which stock certificates may be transferred, emphasizing relevant legal precedents and definitions.
