Siblings Dispute Ownership of Corporation Created by Dad:
Was Stock Certificate to Son a Gift or Forgery?
It is not unusual for intra-family exchanges, gifts and transactions to be implemented without the formalities required by law. But, as a recent case illustrates, the Court may have to sort out intentions and consequences where the facts are in dispute, the acts or documents are not clearly dispositive, and conflicting outcomes are suggested.
In 1989, Abraham Lurie incorporated Lurie Management Corp., naming himself as sole owner and shareholder. In 2018, Neil Lurie, Abraham's son, received a letter from Abraham's attorney stating that Abraham had transferred his ownership of the stock of LMC to three trusts: 49% to Neil Lurie Trust (which was created by Abraham for the benefit of Neil), 25.5% to Susan Lurie Trust (which was created by Abraham for the benefit of his daughter Susan Lurie) and 25.5% to Leila Lurie Trust (which was created by Abraham for the benefit of his daughter Leila Lurie).
But Neil and LMC sued for a judgment declaring that Neil was the sole owner and shareholder of LMC, having been gifted ownership by a stock certificate executed by Abraham in 1998. Susan and Leila answered and counterclaimed for a judgment declaring that the sole shareholders of LMC were the three trusts and for an accounting. Following discovery, Susan and Leila moved for summary judgment on their counterclaims for a judgment declaring that the sole shareholders of LMC were the Neil Lurie Trust, Susan Lurie Trust, and Leila Lurie Trust and an accounting-- arguing that the signature on the stock certificate was a forgery; no gift was intended; and Abraham continued to exert dominion and control over LMC after 1998. Supreme Court denied the motion. Susan and Leila appealed.
The elements necessary for a valid inter vivos gift are: intent of the donor to make an irrevocable present transfer of ownership; physical or constructive delivery, sufficient to divest the donor of dominion and control over the property; and acceptance of the gift by the donee. The proponent of a gift has the burden of proving each of these elements by clear and convincing evidence.
Here, the Court found that Susan and Leila established prima facie a lack of donative intent for Abraham's alleged inter vivos gift of ownership of LMC to Neil in 1998. Neil raised triable issues of fact as to whether Abraham had the requisite donative intent to make an irrevocable present transfer of the stock and whether that transfer was actually effectuated. And the testimony of Neil and LMC's accountant about the stock certificate for LMC, which those witnesses testified was lost in a fire in 2006 and came to be found by the accountant in January 2020, only raised an issue of credibility that could not be determined on a motion for summary judgment.
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