KIRSHTEIN, MURRAY J.S. v. AMERICU CREDIT UNION ( 2011 )

SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
338
CA 10-01313
PRESENT: CENTRA, J.P., PERADOTTO, LINDLEY, SCONIERS, AND MARTOCHE, JJ.
MURRAY J.S. KIRSHTEIN, AS GUARDIAN AND AS
ADMINISTRATOR OF THE ESTATE OF GEORGE J.
TAPPER, DECEASED, PLAINTIFF-RESPONDENT,
V OPINION AND ORDER
AMERICU CREDIT UNION (FORMERLY UP STATE FEDERAL
CREDIT UNION), DEFENDANT-APPELLANT,
ET AL., DEFENDANT.
(AND A THIRD-PARTY ACTION.)
(ACTION NO. 1.)
-----------------------------------------------
MURRAY J.S. KIRSHTEIN, AS ADMINISTRATOR OF THE
OF THE ESTATE OF GEORGE J. TAPPER, DECEASED,
PLAINTIFF-RESPONDENT,
V
GENERAL ELECTRIC COMPANY, LOEWS CORPORATION,
WACHOVIA CORPORATION, DEFENDANTS-APPELLANTS,
ET AL., DEFENDANTS.
(AND A THIRD-PARTY ACTION.)
(ACTION NO. 2.)
(APPEAL NO. 1.)
NASTO LAW FIRM, YORKVILLE (JOHN A. NASTO, JR., OF COUNSEL), FOR
DEFENDANTS-APPELLANTS.
ROSSI AND MURNANE, NEW YORK MILLS (VINCENT J. ROSSI, JR., OF COUNSEL),
FOR PLAINTIFF-RESPONDENT.
Appeal from a partial order and judgment (one paper) of the
Supreme Court, Oneida County (Samuel D. Hester, J.), entered January
20, 2010. The partial order and judgment, insofar as appealed from,
awarded plaintiff shares of stock as well as accrued dividends and
interest on those dividends.
It is hereby ORDERED that the partial order and judgment so
appealed from is unanimously affirmed without costs.
Opinion by CENTRA, J.P.:
I
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CA 10-01313
In appeal No. 1, defendants AmeriCU Credit Union (formerly Up
State Federal Credit Union) (AmeriCu), General Electric Company (GE),
Loews Corporation (Loews), and Wachovia Corporation (Wachovia) appeal
from a “Partial Order and Judgment” awarding plaintiff various shares
of stock of GE, Loews, and Wachovia, plus accrued dividends and
interest, upon a jury verdict in favor of plaintiff on a cause of
action for wrongful registration pursuant to UCC 8-404. In appeal No.
2, defendant Toys-“R”-Us, Inc. (Toys) appeals from a judgment ordering
Toys to pay plaintiff the sum of $263,017.80 with interest until the
date of payment. This appeal raises issues regarding a jury
instruction and the remedy to which a plaintiff is entitled upon
prevailing on a cause of action for wrongful registration.
II
The procedural background of this case is set forth in our prior
decision in an appeal from an order denying the motion of the
corporate defendants mentioned above, as well as AmeriCu
(collectively, defendants), for summary judgment dismissing the
complaint in the consolidated actions against them, which at that time
had only one cause of action remaining, for wrongful registration
(Kirshtein v AmeriCU Credit Union, 65 AD3d 147). Following the
issuance of our decision, a jury trial was held on that sole cause of
action under UCC 8-404. The evidence presented at trial established
that plaintiff’s decedent died on December 2, 2001 when he was 95
years old. Four years prior to his death, i.e., between December 1997
and September 1998, decedent transferred shares of stock of GE, Loews,
Wachovia, and Toys worth over $300,000 to his caregiver, who had been
caring for him since June 1997. Although no evidence was submitted
regarding decedent’s mental incapacity at the precise time that the
transfers were made, plaintiff submitted evidence establishing that
decedent was mentally incompetent both before and after the times in
which those transfers were made. Plaintiff submitted evidence that
decedent was hospitalized for four days in July 1996 after a police
officer found decedent sitting in his car on the shoulder of a road,
disoriented. Decedent showed signs of dementia during that hospital
stay, which was documented by hospital personnel. An attorney
testified that he met with decedent in 1996 for the execution of his
will, but the attorney determined that decedent did not have the
mental capacity to execute a will. Plaintiff also submitted evidence
that, although decedent was taken to the emergency room in May 1997
for a broken arm, decedent did not know how he had sustained that
injury.
Plaintiff also called an expert psychiatric witness, who
testified that decedent’s July 1996 hospitalization and May 1997
emergency room treatment showed that decedent was delusional and
confused, and that he was not mentally competent. The expert
testified that the dementia was not a transitory condition, inasmuch
as decedent exhibited the dementia throughout the four-day
hospitalization, and it persisted in May 1997. When decedent was
moved into a nursing home in 1999, the admitting physician noted on
decedent’s chart that decedent had “known dementia, probably secondary
to Alzheimer’s Disease.” The expert opined that decedent was not able
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CA 10-01313
to understand the nature of the stock transfers.
Defendants in turn called an expert witness in geriatric medicine
to testify at trial. She agreed that the hospital records indicated
that decedent had dementia in July 1996, but she could not “make a
statement about his competence.” She suggested that decedent’s
dementia could have been caused by agitation or stress from being in
the hospital, and that it possibly was merely a temporary condition.
The jury found that, on the dates that decedent executed
documents that transferred shares of stock to someone else, i.e., the
caregiver, he lacked the mental capacity to enter into a contract.
Supreme Court thereupon ordered GE, Loews, and Wachovia to issue
specified shares of stock to plaintiff, dividends that had accrued on
the stock, and interest on those dividends. Because Toys no longer
had stock to issue, the court ordered it to pay plaintiff the value of
the shares that were wrongfully registered, plus interest.
III
Defendants first contend that the court erred in its instruction
to the jury. The court instructed the jury that plaintiff had the
burden to prove by clear and convincing evidence that, at the time of
the stock transfers, decedent lacked the mental capacity to enter into
a contract. Upon plaintiff’s request, the court further instructed
the jury on the presumption of continuance pursuant to PJI 7:50. That
is, the court instructed the jury that, if it found “by clear and
convincing evidence . . . that [decedent] lacked mental capacity at a
time prior to his entering the transactions in question, the law
presumes that such mental incapacity continue[d] at the time he
executed those documents.”
The presumption of continuance provides that “[p]roof of the
existence of a person, an object, a condition or a tendency at a given
time raises a presumption that it continued for as long as is usual
with things of that nature” (Prince, Richardson on Evidence § 3-122
[Farrell 11th ed]; see Cummins v County of Onondaga, 84 NY2d 322,
326). “There is a legal presumption of continuance. A partnership
once established is presumed to continue. Life is presumed to exist.
Possession is presumed to continue. The fact that a man was a gambler
twenty months since, justifies the presumption that he continues to be
one. An adulterous intercourse is presumed to continue. So of
ownership and non-residence” (Wilkins v Earle, 44 NY 172, 192).
Although the New York Pattern Jury Instructions include an
instruction for the presumption of continuance only with respect to
will contests (see PJI 7:50), the presumption of continuance is not
limited to issues of a person’s capacity (see e.g. People v
Scandore, 3 NY2d 681, 684 and Pollock v Rapid Indus. Plastics Co., 113
AD2d 520 [presumption of continuance of ownership]; MacRae v Chelsea
Fibre Mills, 145 App Div 588, 589-591 [lights were out in a storeroom,
presumption that unlit condition continued]; see also McDermott v City
of New York, 201 AD2d 339, lv denied 83 NY2d 761 [despite allegation
that a contractor did not properly barricade an opening, presumption
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CA 10-01313
of continuance charge not given to the jury because no proof that the
opening had been barricaded on the last business day prior to the
accident]).
We reject defendants’ initial contention that the instruction
should not have been given because there was no prior “adjudication”
of incompetency. There is no requirement that there be an
adjudication of incompetency to warrant the instruction. Rather, mere
evidence of incompetency is sufficient, and such evidence was
presented here (see generally 2 NY PJI2d 7:50, at 1420 [2011]).
Defendants next contend that, while the presumption of continuance is
appropriate in will contests, it is not appropriate here because it
reverses the burden of proof from establishing incapacity, as
contended by plaintiff, to establishing capacity, as contended by
defendants. We note that defendants failed to preserve that
contention for our review (see Fitzpatrick & Weller, Inc. v Miller, 21
AD3d 1374, 1375), but we conclude that it is without merit in any
event.
We agree with defendants that the burden of proof in will
contests is different from the burden of proof in this case.
Specifically, in an action to probate a will, the proponent of the
will must establish the decedent’s testamentary capacity once that
capacity has been challenged (see e.g. Matter of Paigo, 53 AD3d 836,
838-839), while here plaintiff has the burden of establishing
decedent’s incapacity. The presumption of continuance of incapacity
set forth in PJI 7:50 favors the opponent in a case involving a will
contest, but in this case it favors plaintiff. In Cummins (84 NY2d at
324), the issue was whether the evidence was sufficient to support the
jury’s damage verdict for conscious pain and suffering where the
decedent drowned after she lost control of her car and it flipped over
and landed in a pond. The Court of Appeals agreed with this Court
that there was no evidence presented by the plaintiff from which the
jury could infer that the decedent was conscious for any period of
time following the accident (see id.). The plaintiff argued that the
presumption of continuance doctrine should be applied to establish the
decedent’s conscious pain and suffering because she was conscious and
driving just before the accident (see id. at 326). We had held that
the presumption of continuance was not applicable because “it cannot
be said that it would be usual for a driver of a car to remain
conscious after the car had spun off the shoulder of the road and had
turned over while dropping down an embankment, especially where the
medical examiner could not say, in view of the bruises he found on the
scalp of the body, whether [the] decedent was conscious before the car
entered the water” (Cummins, 198 AD2d 875, 876-877). On appeal, the
Court of Appeals rejected the plaintiff’s argument on the ground that
it was not preserved for its review (see Cummins, 84 NY2d at 326).
The Court noted, however, that the “proposed extension and application
of the so-called presumption of continuance into this conscious pain
and suffering area of the law . . . would have to be weighed carefully
in an appropriate case, because availability and application of the
rule would affect long-standing and delicate burdens of proof and
major risk and damage policy allocations” (id.).
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CA 10-01313
In our view, it was proper for the court to issue the instruction
to which defendants object in this case. The jurors here were
instructed, in accordance with well-settled law, that plaintiff had
the burden to prove by clear and convincing evidence that, at the time
decedent executed the transfers, he lacked the mental capacity to
enter into a contract (see Sears v First Pioneer Farm Credit, ACA, 46
AD3d 1282, 1284-1285; Matter of Mildred M.J., 43 AD3d 1391; Feiden v
Feiden, 151 AD2d 889, 890). We conclude that the presumption of
continuance instruction did not shift the burden of proof to
defendants. Despite the instruction, plaintiff retained the burden to
convince the jury that decedent lacked mental capacity. Indeed, as is
properly the gist of the charge, it is usual that a person’s capacity
or incapacity at a given time continues in the future (cf. Cummins,
198 AD2d at 876-877).
IV
Defendants next contend that the court erred in awarding interest
on the dividends issued by GE, Loews, and Wachovia. Pursuant to UCC
8-404 (b), “an issuer that is liable for wrongful registration . . .
shall provide the person entitled to the security with a like
certificated or uncertificated security, and any payments or
distributions that the person did not receive as a result of the
wrongful registration.” Defendants do not dispute that the court
properly awarded to plaintiff shares of stock of GE, Loews, and
Wachovia, plus the dividends that had accrued, and in fact those
defendants stipulated that they would provide such stock and
dividends. Defendants contend, however, that plaintiff is not
entitled to interest on the dividends. We reject that contention.
CPLR 5001 (a) provides that “[i]nterest shall be recovered upon a
sum awarded . . . because of an act or omission depriving or otherwise
interfering with title to, or possession or enjoyment of, property . .
. .” There is no provision in UCC 8-404 (b) prohibiting a court from
awarding interest on the accrued dividends. In fact, that section
broadly states that the person who is the victim of the wrongful
registration is entitled to “any payments or distributions that the
person did not receive,” and we agree with the court that interest is
to be included as a component of such a payment. Pursuant to UCC 1-
103, “[u]nless displaced by the particular provisions of this Act, the
principles of law and equity . . . shall supplement its provisions”
and, pursuant to the common law, courts have awarded interest on
dividends (see Scovenna v American Tel. & Tel. Co., 54 Misc 2d 74, 80-
82; Hill v American Tel. & Tel. Co., 37 NYS2d 957, 959). We thus
conclude that plaintiff is entitled to interest on the award of
dividends herein, under UCC 8-404 (b) (see generally First Natl. Bank
of Boston v Hovey, 10 Mass App Ct 715, 724-725, 412 NE2d 889, 895).
V
Finally, defendants contend that the court erred in awarding
plaintiff a monetary sum against Toys. It is undisputed that Toys was
unable to issue shares of stock to plaintiff, inasmuch as Toys was
acquired by an investment group as the result of a merger transaction
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CA 10-01313
in July 2005 and all outstanding shares of Toys’ stock were at that
time converted into a specified monetary amount per share. The
holders of Toys’ stock prior to the merger were divested of corporate
ownership and received the monetary amount of their shares, and post-
merger Toys’ stock is not traded on a public market or exchange.
As set forth above, UCC 8-404 (b) provides that an entity liable
for wrongful registration must issue to the person entitled to the
security, inter alia, “a like certificated or uncertificated security”
to the person making the demand. That section further provides that,
“[i]f an overissue would result, the issuer’s liability to provide the
person with a like security is governed by [s]ection 8-210” (id.).
Section 8-210 (a) in turn defines an “overissue” as “the issue of
securities in excess of the amount the issuer has corporate power to
issue” and, significantly, section 8-210 (d) provides that, “[i]f a
security is not reasonably available for purchase, a person entitled
to issue or validation may recover from the issuer the price the
person or the last purchaser for value paid for it with interest from
the date of the person’s demand.”
Toys contended at trial and continues to contend on appeal that
there was no “overissue” here and thus that plaintiff is not entitled
to the remedy set forth in section 8-210 (d). Toys, however, also
correctly contends that it cannot issue stock to plaintiff. Thus,
according to Toys’ contentions, plaintiff is thereby left with no
remedy for the wrongful registration by Toys. We cannot condone that
unconscionable result. Rather, under such circumstances, we are
compelled to conclude that the court properly issued a monetary award
to plaintiff in accordance with UCC 8-210 (d). We note that, under
the common law, an entity with no shares of stock to transfer was
required to pay the person who would have been entitled to such shares
the monetary value of the shares (see Pollock v National Bank, 7 NY
274, 279) and, as we previously noted, the Uniform Commercial Code
provides that, “[u]nless displaced by the particular provisions of
this Act, the principles of law and equity . . . shall supplement its
provisions” (UCC 1-103). While it is perhaps unfortunate that UCC 8-
404 (b) identifies only an “overissue” as an exception to the rule
that stock must be transferred, we nevertheless conclude that a case
such as this, in which there are no longer any shares of stock to
transfer to the person entitled to receive them, is similar to the
case of an overissue. Indeed, in the event of an overissue, the
entity does not have the “corporate power to issue” the security (UCC
8-210 [a]) and, similarly, Toys no longer has the authority to issue
any stock to plaintiff in view of the aforementioned merger
transaction. Moreover, like the trial court, we agree that it is
appropriate to rely on UCC 1-106 (1), in which the Legislature made
clear that “[t]he remedies provided by [the Uniform Commercial Code]
shall be liberally administered to the end that the aggrieved party
may be put in as good a position as if the other party had fully
performed . . . .” Thus, in light thereof, we conclude that plaintiff
is entitled to receive the monetary value of the shares to which he is
entitled because he otherwise is left with no remedy against Toys.
VI
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CA 10-01313
Accordingly, the partial order and judgment in appeal No. 1 and
the judgment in appeal No. 2 should be affirmed.
Entered: March 25, 2011 Patricia L. Morgan
Clerk of the Court