Innes v. Potter

Brief Fact Summary.

Plaintiff’s estate sued to regain possession of a stock certificate of 1000 shares, which he devised to his daughter. The trial court found that Plaintiff had made a valid gift of the stock to Defendant. Plaintiff’s estate appealed.

Synopsis of Rule of Law.

A donor can make a valid gift by delivering the subject of the gift to a third-party trustee who will deliver the gift to the donee after the donor’s death.

Facts.

Warren Potter owned 1370 shares of stock. After he made a will, he indorsed to his daughter Marcia Potter (Defendant) a certificate of 1000 shares of stock. He put the certificate in a sealed envelope with written instructions that it should be delivered to his daughter after his death, and gave the envelope to a business associate. After Warren died in 1914, the envelope was delivered to Defendant. Thereafter Innes (Plaintiff), the administrator of Warren’s will, sued for his estate to regain possession of the stock certificate. The trial court found that Warren had made a valid gift of the stock to Defendant. Plaintiff appealed.

Issue.

Whether a donor can make a valid gift by delivering the subject of the gift to a third-party trustee who will deliver the gift to the donee after the donor’s death.

Held.

Yes. The trial court’s ruling is affirmed. A donor can make a valid gift by delivering the subject of the gift to a third-party trustee who will deliver the gift to the donee after the donor’s death.

Discussion.

A donor can make a valid gift by delivering the subject of the gift to a third-party trustee who will deliver the gift to the donee after the donor’s death. The law is well-settled that this arrangement can be a valid gift of real property: the grantor delivers the deed to a third-party trustee and relinquishes all rights to the property, and the trustee delivers the deed to the grantee at the donor’s death. At the time the gift is made, the grantee gets an expectant estate in the real property. Traditionally this rule was not extended to gifts of personal property, because personal property is perishable, movable, and generally less valuable than real property. Thus gifts of personal property could be made only by delivering the property to the recipient of the property (the donee). The restrictions on gifts of personal property have gradually been cast aside. Today, transfers of personal property are generally treated the same as transfers of real property, and expectant interests in personal property are recognized. There is no reason to treat personal property differently from real property in this context. Because a gift of real property could be made by delivering the deed to a trustee for delivery to the grantee at the grantor’s death, a gift of personal property can be made by delivering the property to a trustee for delivery to the donee at the donor’s death. The donor must relinquish all control over the property, reserve no right to recall it, and intend to make the gift irrevocable. In this case, Warren made a valid gift of the stocks to Defendant. It was a gift, not a testamentary transfer, because he intended for the transfer to have immediate effect and to be irrevocable.