Morson v. Second National Bank
131 A.L.R. 189, 29 N.E.2d 19, 306 Mass. 588 (1940)
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Rule of Law:
The validity of a transfer of corporate stock is governed by the law of the state of incorporation, not the law of the jurisdiction where the stock certificate is physically delivered, particularly when the state of incorporation has adopted the Uniform Stock Transfer Act.
Facts:
- Herbert B. Turner owned 150 shares of stock in the Massachusetts Mohair Plush Company, a Massachusetts corporation.
- Around September 20, 1937, while traveling in Italy, Turner handed a sealed envelope marked 'Property of Mildred Turner Copperman' to Mildred Turner Copperman, stating, 'These are yours.'
- The envelope contained the stock certificate, and Turner informed Copperman that he needed to sign the back of it.
- Two days later, still in Italy, Turner signed his name on the back of the certificate, filled in Copperman's name and address as the transferee, and delivered the endorsed certificate to her.
- Copperman accepted the certificate from Turner, whose intent was to make an immediate and absolute gift.
- After Turner's death, Copperman presented the certificate to the company's transfer agent to have the shares officially transferred to her name.
Procedural Posture:
- The administrator of Herbert B. Turner's estate filed a bill in equity in a Massachusetts trial court against Mildred Turner Copperman, the corporation, and its transfer agent.
- The suit sought to enjoin the transfer of stock to Copperman and to recover the stock certificate for the estate.
- The trial court judge found that the facts did not constitute a completed gift under the law.
- The trial court entered a decree in favor of the plaintiff administrator.
- The defendant, Mildred Turner Copperman, appealed the trial court's decision to the Supreme Judicial Court of Massachusetts.
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Issue:
Does the law of the state of incorporation, which has adopted the Uniform Stock Transfer Act, govern the validity of a stock transfer that occurs in a foreign jurisdiction where different formalities for gifts are required?
Opinions:
Majority - Qua, J.
Yes, the law of the state of incorporation governs the validity of a stock transfer that occurs in a foreign jurisdiction. While the transfer of ordinary tangible chattels is governed by the law of their physical location (situs), shares of stock are distinct. Shares are creations of the law of the state of incorporation, and that state's law dictates their nature and attributes, including the method of transfer. Massachusetts, the state of incorporation, adopted the Uniform Stock Transfer Act, which provides that title to shares is transferred by the delivery of an endorsed certificate. This statutory method of transfer is an intrinsic attribute of the shares themselves and is effective regardless of where the physical delivery of the certificate occurs. Applying this rule promotes convenience, certainty, and uniformity in the transfer of stock, as it provides a single, predictable legal framework.
Analysis:
This decision establishes a significant choice-of-law principle for corporate securities, clarifying that the 'situs' of shares is the state of incorporation for transfer purposes, not the physical location of the certificate. It prioritizes the Uniform Stock Transfer Act's goal of promoting negotiability and uniformity over traditional conflict-of-law rules for tangible property. By treating the method of transfer as an inherent characteristic of the share created by the incorporating state's law, the court ensures that stock transactions are governed by a single, predictable set of rules, thereby facilitating commerce and reducing legal uncertainty for transactions that cross jurisdictional lines.
