The opinion of the court was delivered by: Julius J. Hoffman, District Judge.
The plaintiff, Martha M. Petri, Administratrix with the Will
Annexed of the Estate of Leo F. Petri, deceased, has brought
this action for a declaratory judgment as to the ownership of
certain shares of corporate stock currently in the possession
of the defendant, Minnie Rhein.
The three corporations which issued the stock involved in this
suit — Union Carbide and Carbon Corporation, Fitz-Simons &
Connell Dredge & Dock Company and Great Lakes Dredge and Dock
Company — as well as The Northern Trust Company, which held
some of the stock involved as collateral for loans, were also
named as defendants in this action. However, on a motion to
dismiss agreed to by all parties, an order of dismissal was
entered at the commencement of the trial with respect to these
Jurisdiction is based upon diversity of citizenship. The
plaintiff is, and the decedent was, a resident of the State of
Wisconsin. The defendant, Minnie Rhein, is a resident of the
State of Illinois. The amount in controversy exceeds, exclusive
of interest and costs, the sum of $3,000. The case was tried to
the court without a jury.
The plaintiff claims the stock in question as a part of the
estate of Leo Petri. The defendant, on the other hand, alleges
that she and the decedent held the stock during the latter's
lifetime as joint tenants with right of survivorship and that
upon the death of the decedent she became the sole owner of the
In resolving the questions raised in this action, the stock
with which the case deals has been separated into two groups:
(1) The first block consists of the following shares which were
originally owned by Leo Petri but which were subsequently
transferred by him to Minnie Rhein and himself as joint tenants
with right of survivorship.
Corporation Shares Date of Transfer
----------- ------ ----------------
Union Carbide and Carbon Corporation
(hereinafter called Union Carbide) 400 July 31, 1948
Union Carbide 150 March 17, 1950
Fitz Simons & Connell Dredge & Dock
Company (hereinafter called Fitz
Simons & Connell) 305 March 17, 1950
(2) The second block consists of 340 shares in the Great Lakes
Dredge and Dock Company. The certificates for these shares were
issued on December 21, 1949, in the names of Leo Petri and
Minnie Rhein as joint tenants with right of survivorship and
were never in the name of Leo Petri alone.
Union Carbide and Fitz Simons & Connell Stock
The plaintiff challenges the validity of the transfers of the
Union Carbide and Fitz Simons & Connell stock by Leo Petri to
Minnie Rhein and himself as joint tenants, contending (a) that
the common law unities of time and title required for the
creation of joint tenancies were not satisfied and (b) that the
donative intent and surrender of dominion and control required
for a valid gift of personal property were lacking.
Inasmuch as the plaintiff's contentions concern the validity of
stock transfers, an initial question is presented with respect
to the Union Carbide shares as to whether these issues should
be resolved in accordance with the law of the place of the
transfers involved (Illinois) or the law of the corporation's
domicile (New York). In regard to the Fitz Simons & Connell
stock, no such question arises, since Illinois is both the
place of transfer and the state of incorporation.
On the basis of cases decided under the doctrine of Erie R. Co.
v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188,
the question regarding the Union Carbide stock is to be decided
in accordance with applicable Illinois rules on conflict of
laws, Klaxon Co. v. Stentor Elec. Mfg. Co., 1941, 313 U.S. 487,
61 S.Ct. 1020, 85 L.Ed. 1477; Griffin v. McCoach, 1941,
313 U.S. 498, 61 S.Ct. 1023, 85 L.Ed. 1481, or, in the absence of
such rules, from an independent determination based upon an
examination of other authorities, Linkenhoger v. Owens, 5 Cir.,
1950, 181 F.2d 97, McClaskey v. Harbison-Walker Refractories, 3
Cir., 1943, 138 F.2d 493.
An examination of Illinois authorities has failed to disclose
any relevant decisions on the choice of laws question here
presented. However, cases decided elsewhere on this point
uniformly draw a distinction between the transfer of stock
certificates and the transfer of the shares represented
thereby: The validity of transfers of title to certificates is
held to be governed by the law of the place where the
certificates are transferred, Direction der
Disconto-Gesellschaft v. United States Steel Co., 1925,
267 U.S. 22, 45 S.Ct. 207, 69 L.Ed. 495; Warner v. Florida Bank &
Trust Co., 5 Cir., 1947, 160 F.2d 766; Pennsylvania Co. etc. v.
United Rys., D.C.S.D.Me. 1939, 26 F. Supp. 379; but the validity
transfers of title to the shares themselves is held to be
controlled by the law of the place of incorporation, United
Cigarette Mach. Co. v. Canadian Pac. Ry, 2 Cir., 1926,
12 F.2d 634; Morson v. Second Nat'l Bank, 1940, 306 Mass. 588,
29 N.E.2d 19, 131 A.L.R. 189. The law of the place where a
certificate is transferred will also govern the transfer of the
shares themselves, if the law of the corporate domicile
provides that transfer of the certificate also accomplishes
transfer of the shares. Direction der DiscontoGesellschaft v.
United States Steel Co., supra; Strout v. Burgess, 1949,
144 Me. 263, 68 A.2d 241, 12 A.L.R.2d 939; Beale, 2 Conflict of
Laws § 192.4 (1935); Restatement, Conflict of Laws §§ 53, 104.
Applying these rules to the facts of this case, Illinois law
governs not only the transfer of the Union Carbide
certificates, but also the transfer of the shares themselves.
This conclusion is based upon the fact that the Uniform Stock
Transfer Act, in effect in New York, the place of Union
Carbide's incorporation, and the cases decided thereunder,
provide that delivery anywhere of a stock certificate of a New
York corporation, accompanied by a written endorsement,
transfers title to the shares represented by the certificates,
as well as to the certificates themselves. McKinney's
Consol.Laws, c. 41, Personal Property Law, §§ 162-185; Morson v.
Second Nat'l Bank, supra; see also Direction der
Disconto-Gesellschaft v. United States Steel Co., supra.
Having concluded that Illinois law governs the disposition of
the questions here presented, we now turn to the plaintiff's
first contention, that the transfers failed because of lack of
the unities of time and title.
A general requirement of Illinois at the time of the transfers
in question was that in order to create a valid joint tenancy,
there had to be present the common law unities of time, title,
interest and possession, that is, the several tenants were
required to "have one and the same interest accruing by one and
the same conveyance commencing at one and the same time and
held by one and the same undivided possession." Hood v.
Commonwealth Trust & Savings Bank, 1941, 376 Ill. 413, 423,
34 N.E.2d 414, 420. Under the unities rule, it was held that the
unities of time and title, the unities here in question, were
lacking where a grantor transferred property to himself and
another as joint tenants, for the reason that the grantor
traced his title in the property to the original conveyance to
himself, while the other tenant traced his title to the
purported transfer into joint tenancy.*fn1 Deslauriers v.
Senesac, 1928, 331 Ill. 437, 163 N.E. 327, 62 A.L.R. 511.
Turning then to the question as to whether the unities of time
and title have been satisfied by the transfers in question, it
is clear that these requirements have been met. See Hood v.
Commonwealth Trust & Savings Bank, supra. In the Hood case, an
action was brought to enforce the superadded liabilities of a
bank's shareholders. One of the defendant shareholders, Otto E.
Lucius, had acquired shares of the bank's stock in February,
1930, which he transferred in March, 1930, to Belle M. Lucius
and himself as joint tenants with right of survivorship. The
stock certificate originally acquired by Lucius was surrendered
to the corporation, and a new certificate was issued in the
joint names of Otto and Belle Lucius. In fixing the liability
of the defendant, it was held that the transfer by Lucius to
his wife and himself started a new period of stock ownership.
The court stated:
"To create an estate in joint tenancy it is necessary that
there be unity of interest, unity of title, unity of time and
unity of possession. * * * [W]hen Otto E. Lucius surrendered
the first certificate and caused the second to issue to him
and his wife as joint tenants, he thereby terminated all
title in the stock evidenced by the first certificate and
thereafter held as a joint tenant with his wife. To create
the joint estate it was essential that his interest as a
joint tenant be created at the same time as that of his