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Estate of Sacks

NOVEMBER 8, 1967.

ESTATE OF JOSEPH E. SACKS, DECEASED. JO ANN WHITLOCK, ET AL., PETITIONERS-APPELLANTS,

v.

ETHEL SACKS, AS ADMINISTRATOR OF THE ESTATE OF JOSEPH E. SACKS, DECEASED, AND RUTH FISCHER AND MILDRED SOROSKY, RESPONDENTS-APPELLEES.



Appeal from the Circuit Court of Cook County, County Department, Probate Division; the Hon. JOHN E. PAVLIK, Judge, presiding. Judgment affirmed.

MORAN, P.J.

Jo Ann Whitlock, Judith Nay, Joseph Sacks and John Sacks, the children of Joseph E. Sacks by a prior marriage, appeal from the denial of their petition filed in the Probate Division of the Circuit Court of Cook County against his widow, Ethel Sacks, as the administratrix of the estate of Joseph Sacks, seeking an order that she be compelled to list in the inventory of his estate some 19,000 shares of stock which she had claimed as the survivor of an alleged joint tenancy with said Joseph E. Sacks, and from the denial of their petition against Ruth Fischer and Mildred Sorosky, sisters of the decedent seeking an order to compel them to surrender to the administratrix, as an asset of the estate, the payments due on the sale of an apartment house through a Bond for Deed. This property had been the subject matter of a land trust and appellants contend that the sale terminated the trust and thereby destroyed the sisters' beneficial interest.

We first discuss the issues concerning the shares of stock. In April, 1957, Joseph E. Sacks and Ethel Griffin (now Ethel Sacks) signed an agreement with the brokerage firm of Bear, Stearns & Co., entitled "Joint Account with Right of Survivorship" which gave each of them the power to buy and sell securities on margin or otherwise, and which also provided that:

In the event of the death of either or any of the undersigned, the entire interest of the joint account shall be vested in the survivor or survivors on the same terms and conditions heretofore held. . . . The undersigned request that the said Joint Account be carried under the following designation: Joe E. Sacks and Mrs. Ethel Griffin as Joint Tenants with the Right of Survivorship and not as Tenants in Common.

In June, 1960, the same parties entered into a similar agreement with the brokerage firm of H. Hentz & Company. Paragraph 2 of this agreement reads:

We hereby state that we are: (a) joint tenants with right of survivorship and not tenants in common. In the event of the death of either or any of us, the entire interest in the account shall be vested in the survivor, or survivors . . . and the estate of the decedent shall have no interest in the assets at the date of death or its operation thereafter.

At the time of the death of Joseph E. Sacks, the shares of stock in the accounts with the two brokerage firms exceeded 20,000 in number, with a net value in excess of $115,000. Except for 1537 shares issued directly by certain corporations in the names of Joseph E. Sacks and Ethel Sacks as joint tenants, the remainder of the shares were carried in the name of the brokerage firm. Such stock is referred to as being in the street name; a common practice when the parties are buying on margin, as the Sackses were.

The petitioners concede that the 1537 shares issued in the names of Joseph E. Sacks and Ethel Sacks as joint tenants belong to Ethel Sacks and are not part of the estate. They contend, however, that the remainder of the shares, issued in the two brokerage firms' names, belong to the estate of Joseph E. Sacks on the ground that the parties did not create a valid joint tenancy under the general provisions of the statute governing joint tenancy (c 76, § 2, Ill Rev Stats 1965) or subsection (b) of section 2 of said statute which concerns stock issued by corporations or other entities.

The general provisions of section 2 of the aforementioned statute state that joint tenancy with right of survivorship is abolished except as to executors, trustees, or where by will or by other instrument in writing there is expressed an intention to create a right of survivorship in personal property. The appellants contend that the signed agreements do not come within the exceptions and rely primarily on In re Estate of Wilson, 404 Ill. 207, 88 N.E.2d 662 (1949), and Illinois Public Aid Commission v. Stille, 14 Ill.2d 344, 153 N.E.2d 59, arguing that under the authority of these cases, in order to create a right of survivorship within the exceptions of the general provisions of the statute, there must be an actual transfer of personal property to the joint tenants by a written agreement; that the parties failed to effectuate such transfer and therefore Ethel Sacks did not meet the burden of establishing the existence of a joint tenancy in personal property with the right of survivorship.

The general rule is that title to stock passes directly to the customer on a purchase by his broker for the customer's account, and this is true even though the broker retains possession of the stock. Murphy v. Sincere, 299 Ill. App. 580, 582, 20 N.E.2d 610 (1939).

According to most of the cases, the title to securities purchased by a stockbroker vests immediately in the customer whether the purchase is on margin or otherwise, and even though the broker retains possession of the stock certificate or the customer has paid nothing on the purchase price. Under this rule, the customer for whom a broker purchases stock is the owner thereof from the time of purchase, whether purchased in his name or not. There is some authority, however, that upon receiving the stock, title is in the broker with beneficial ownership in the customer. 12 Am Jur2d, § 131.

In either event there is a transfer which vests at least an equitable title in the customer. There is a transfer from the last owner to the customer with the title vesting in the broker in his fiduciary relationship. The transfer in the present case is recorded on the brokerage firms' accounts for the Sackses and these accounts are listed as accounts with right of survivorship.

The appellants' comparison of the agreement in this case with the application for a safety deposit box in In re Estate of Wilson, supra, and Illinois Public Aid Commission v. Stille, supra, is not valid. In those cases the parties signed a card which was stamped with the words "Joint Tenancy with Right of Survivorship." Such joint tenancy was held to be a mere joint tenacy for access to the box. There was not sufficient evidence to show that there had been a delivery of the contents into joint possession. In the present case each time a purchase was made the brokerage firm made an entry crediting the Sackses' account with the number of shares purchased. The agreements signed by the Sackses could be considered as an agreement between them on the one side and the brokerage firm on the other. However, they may also be considered as an agreement between them — an agreement spelling out that they desire that a joint tenancy with right of survivorship be established. The agreements state that upon the death of one, the entire interest shall vest in the survivor and, in addition, the agreement with H. Hentz & Co., further specifies that the decedent's estate shall have no interest in the assets of the account.

The transfer of the stock from the seller to the broker and the subsequent credit entry in the account of the Sackses together with the signed agreements, clearly expressing the parties' intentions, is ample evidence of a written instrument ...


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