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In Re Estate of Hill

APRIL 4, 1961.




Appeal from the Probate Court of Cook county; the Hon. BERT J. RATHJE, Judge, presiding. Order reversed, and cause remanded for a new trial with directions.


Harris Trust and Savings Bank, executor of the estate of Christopher J. Hill, deceased, filed a petition in the Probate Court for a citation against the decedent's widow, alleging that she had possession of and asserted ownership to 2000 shares of the common stock of Lake Front Realty Corporation. The petition requested a hearing and determination by the court that the executor was the sole legal and equitable owner of the certificate and shares, and that at the conclusion of the hearing the court require respondent to surrender the certificate to the executor. Respondent appeared in court in response to the citation and produced the certificate. The executor then offered an affidavit of the assistant secretary of the corporation showing that the certificate was issued in the name of Christopher J. Hill, the decedent, and had so remained on the books of the corporation. The executor offered no further evidence and rested its case. Respondent then moved for dismissal of the citation proceeding on the ground that the executor had not sustained its burden of proof. The motion was denied. The respondent widow was then offered as a witness to be examined by the court in response to the citation. Counsel for the executor objected to her testimony on the basis of her incompetency as a witness under section 2 of the Evidence Act (Ill. Rev. Stat. 1959, ch. 51). Respondent's counsel then made an offer of proof, to which the executor's attorney objected. The objection was sustained, and an order was entered finding that respondent had no legal or equitable interest in the certificate or the shares represented thereby, and she was ordered to forthwith surrender the certificate to the executor.

Respondent, appealing, claims the certificate and shares as a gift inter vivos, and contends that the court (1) should have granted her motion for dismissal at the close of petitioner's case on the ground that the executor failed to make a prima facie case, or, in any event, (2) should have permitted her to testify.

For an understanding of the circumstances under which she claims to have received the certificate and shares, we quote the salient portions of the offer of proof:

"It's our position [i.e., the position of respondent's counsel] that we wish to offer the respondent who is responding here to the citation, bringing in the stock certificate, for examination which I will either carry on, Mr. Kelly [counsel representing the executor] can carry on, or the Court may carry on as you please to the transaction by which she gained possession of this stock certificate, and I will make this if the Court wishes me to in the nature of an offer.

"There is an offer of proof by Mrs. Hill, the widow of the deceased C.J. Hill, that on July 14, 1958, I believe it is, Mr. and Mrs. Hill went to the safety deposit box in the Lake Shore Bank where they had a joint box; . . . .

"That in going over the matters contained in their joint box, he took out all of the C.J. Hill Company stock and put that in his briefcase; that he took out the Lowell Lumber Company stock that was in there and the Lake Shore [Lake Front] Realty stock that was in there and gave both of them to her saying at the time he made the gift — or he made delivery to her, `These are yours.'

"She subsequently has had possession of the Lake Shore [Lake Front] Realty stock until this time; that subsequent to that time and before his death — he incidentally died the end of August that same year — he stated to her that he had decided to leave the Lowell Lumber Company stock to some relatives. Now, I say `some relatives.' Those weren't his words. He called them by name to her, but I don't offhand remember them at the moment. And he asked her for that particular certificate of stock of Lowell Lumber Company which she gave him; that during this entire period of time from July 14 to the time of his death he was extremely ill and out of the apartment very seldom. She has had the stock ever since that time and she produces it in Court.

". . . . I offer to further prove that the certificate of stock or certificates of stock of Lowell Lumber Company were thereafter specifically given [bequeathed by will subsequently made] by the decedent, C.J. Hill, to the parties whom he had discussed in the conversation which I have related in the earlier part of the offer, to the relatives that were in that conversation named, and further prove by that will which is the will admitted in Probate in this case or in this estate that no disposition was made by the will of the Lake Shore [Lake Front] Realty Company stock."

The executor concedes that it had the burden of proving ownership of the stock certificate, and contends that it met this burden and established a prima facie case by showing that the stock was registered on its face and on the books of the corporation in the name of decedent, and was not endorsed. Its counsel rely on section 21 of the Uniform Stock Transfer Act (Ill. Rev. Stat. 1959, ch. 32, § 436) in support of their position. Possession of the stock certificate was clearly in the widow. The fact that it remained on the books of the corporation in the name of decedent, the claimed donor, does not defeat the gift nor affect title of the donee. In re Estates of Antkowski, 286 Ill. App. 184, 3 N.E.2d 132 (1936), a case of first impression in this state, was factually and procedurally similar to the case at bar. There (p. 195) the court followed the reasoning of In re Connell's Estate, 282 Pa. 555, 128 A. 503, 38 A.L.R. 1362 (1925), that the object of the Uniform Stock Transfer Act was merely to regulate the mode of transfer upon the books of the corporation and to furnish a rule for deciding between claimants contesting over the ownership of the stock, and that the provision was inserted for the protection of the corporation in the payment of dividends or otherwise but was not intended to control the rights of the parties in matters as between themselves. As early as 1925 Professor Mechem, discussing the Uniform Stock Transfer Act in 20 ILL. L. REV. 9 (1925-1926), expressed the opinion (p. 29) that sections 1 and 9, construed together, would appear to provide that "the delivery of a certificate, unendorsed, would be effectual to pass an equitable title, enforcible by the donee," and said "that such a conclusion is correct has been held or intimated in at least two cases," citing Herbert v. Simson, 220 Mass. 480, 108 N.E. 65 (1915), and Reinhard v. Sidney B. Roby Co., 110 Misc. Rep. 152, 179 N.Y.S. 781 (Sup. Ct. 1920), both of which involved the validity of a gift of stock certificates. In 12A Fletcher Cyclopedia Corporations § 5684 (1957 rev. vol.), the same conclusion is reached; a footnote cites four supporting federal cases, and decisions in some fifteen states, including Illinois, California, Massachusetts, New York, Ohio, Pennsylvania, and Rhode Island, to the effect that a certificate of stock may, without formal transfer, be given by delivery. The Antkowski case enunciates the rule in Illinois and is frequently cited; see In re Estate of Waggoner, 5 Ill. App.2d 130, 141, 125 N.E.2d 154 (1955), Home for Destitute Crippled Children v. Boomer, 308 Ill. App. 170, 188, 31 N.E.2d 812 (1941), Annot., 152 A.L.R. 427, 436 (1944).

In the situation here involved, the introduction of the unendorsed certificate and the showing that it remained in the name of decedent on the books of the corporation, did not, of themselves, constitute sufficient evidence to show ownership in the estate. As against this scant proof is another fact of evidentiary value — possession of the certificate by the widow. The law never presumes a gift (Bolton v. Bolton, 306 Ill. 473, 486, 138 N.E. 158 (1923), Rothwell v. Taylor, 303 Ill. 226, 230-232, 135 N.E. 419 (1922)), but unless respondent be allowed to testify, she is deprived of the opportunity to establish that "clear and convincing proof" required by the law.

The issue on which this case turned in the trial court was whether respondent should have been permitted to testify to the circumstances under which the stock, as she claimed, was given to her by decedent. In refusing to examine her or to permit her to testify, the court evidently overlooked section 185 of the Probate Act (Ill. Rev. Stat. 1959, ch. 3, § 337) and excluded her proffered testimony, solely under the provisions of section 2 of the Evidence Act. This clearly appears from the colloquy between court and counsel immediately following the offer of proof. The court expressed doubt as to whether respondent "can testify as to the conversations," and then following a conference in chambers, wherein respondent's counsel presented citations of authority, the court concluded by saying, "I think the essence of it is whether this lady is competent to testify," and "I am just asking you about whether she can testify." Apparently no effect was given to the discovery provisions of section 185 of the Probate Act which clearly impart to the court the right to examine a respondent in a citation proceeding and are calculated to determine claims of adverse title and the right of property.

The applicable portion of the Probate Act reads as follows: "At the hearing the court may examine the respondent on oath whether or not the petitioner has proved the matters alleged in the petition, may hear the evidence offered by any party, may determine all questions of title, claims of adverse title, and the right of property, and may enter such orders and judgment as the case requires." In such a situation the court must inquire into facts and circumstances affecting the ownership of assets. The executor, for the first time on appeal, stresses the point that the word "may," as employed in the Probate Act, does not impose a duty upon the court to examine the respondent, but merely gives the court discretion to do so, and argues that it was not an abuse of discretion to exclude the proffered evidence. Two early decisions are cited by the executor to support this view: Mahoney v. People ex rel. Patteson, 98 Ill. App. 241 (1901), and Rinard v. Lasley, 143 Ill. App. 450 (1908).

The Mahoney case was a citation proceeding brought by petitioner in the county court in which decedent's estate was being administered. The petition alleged that Mahoney had in his possession, and refused to surrender to the administrator, two notes for $500.00 each, payable to the deceased and not endorsed, as well as other personal property. Respondent was called, sworn, and examined upon his own behalf and over the objection of the petitioner. Subsequently his testimony was stricken, and the case decided against him. On appeal it was urged that the testimony should be considered by the reviewing court, but this contention was rejected on the ground (p. 244) that there was "no assignment of error upon which we can review the action of the trial court in striking appellant's testimony from the record. But if the question was properly before us we are of the opinion that it would be unavailing to appellant. The statute leaves it discretionary with the court to examine or not to examine the appellant. The statute says the court may, not shall, examine the appellant. The statute is not mandatory. Where the court does not exercise discretion to examine the party he is not a competent witness in his own behalf." In the later Rinard case the court (p. 452) made the same interpretation. However, ...

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