Gim v. Jan Chin, Inc.Gim v. Jan Chin, Inc.
This is а civil action heard in the Superior Court without a jury to set aside certain transfers of stock and declare a corporate election null and void. A judgment was entered for the plaintiff and the case is before this court on appeal from that judgment.
On February 1, 1965, defendant, Chin Chak Ping, president of the corporation, called a meeting for the purpose of electing new directors. He and Toy See Chin signed a wаiver of notice, but Delahunt was neither notified nor present. At the meeting, Toy See Chin and Chin Chak Ping elected themselves directors and in turn elected Chin Chak Ping to all the corporate offices. In 1966, the corporation then issued a certificate for 167 shares to Toy See Chin. From 1966 tо 1970, Toy See Chin endorsed a total of 145 shares back to the corporation and in turn the corporation issued the certificates fоr the stock in the name of Chin Chak Ping and his wife and children. Delahunt never attended or was notified of any of the meetings during this period of time, did not surrender title to the shares he held as executor, or sign the certificate issued to Toy See Chin in 1966.
Toy See Chin died in 1971. Delahunt assigned his interest in the stock to the executor of Toy See Chin’s estate, who now brings this action to cancel the 145 shares, have the 1965 election declared null and void, and compel a new election of directors.
The trial justice found that Delahunt retained legal title to the 167 shares until the 1971 assignment. He noted that there were claims outstanding against the estate until 1969, that Delahunt as executor never in fact distributed the shares, and that Toy See Chin nеver attempted to compel distribution of the assets. The trial justice concluded as a matter of law that Toy See Chin could not votе the stock or waive notice of the meeting as merely the beneficial owner and, therefore, that the meeting, the election, and the issuance of the 167 shares to Toy See Chin were invalid. The trial justice also found that Toy See Chin had not transferred the beneficial interest in the stock. He noted that there was evidence that she lacked understanding of business matters, that she had specifically instructed Delahunt tо retain legal title to the stock in order to prevent herself from making mistakes^ and that she had made all previous transfers through Delahunt. The triаl justice concluded that she did not understand the meaning of the purported transfers and thus lacked donative intent. The trial justice then ordered that the stock issued to Chin Chak Ping and his family between 1966 and 1970 be cancelled, that a new corporate election be held on August 1, 1974, and that Chin Chаk Ping return all corporate records and property in his control.
I.
The defendants’ first contention is that the trial justice erred in finding that the corporate meeting of February 1, 1965, was invalid. They concede that Donald Delahunt as executor held legal title to the stock. They argue, however, that Toy See Chin as beneficial owner of the stock in question had full power to waive notice of the meeting and to vote the stock for election of directors. We do not agree.
It is well established that the power to vote follows the legal title to thе stock. In the absence of an agreement or statute, the beneficial or equitable owner is not entitled to vote the stock directly. If the beneficial owner objects to the manner -in which the legal owner votes the stock, his remedy is limited to whatever action he may have to have legal title transferred, obtain a proxy, sue for damages, etc.
Tracy
v.
Brentwood Village Corp.,
The defendants rely heavily on the decision of this court in American Nat’l Bank v. Oriental Mills, 17 R. I. 551, 23 A.795 (1891). In thаt case, creditors of an insolvent corporation to whom all the corporate property had been assigned brought a petition for the appointment of a receiver, contending that the holders of the legal title of the stock had not been notified оf the meeting at which the vote was held to authorize the assignment of the property. The by-laws of the corporation provided that all transfers of stock must be made in person on the transfer books of ■the corporation. The practice of the company hаd been to acknowledge stock transfers on the corporate books by writing “cancelled” on the stubs corresponding to the transfеrred certificates and issuing new certificates to the transferee. The creditors argued that under the by-laws legal ■title could be passеd only if the transferor personally made an entry on the corporate books assigning the stock. The court held that the company рractice was sufficient to transfer full title. The court also stated that even if there had not been a transfer of full legal title, the transferors need not be notified.
“The holders of the legal title were mere naked trustees for their benefit, having a bare legal title not coupled with an interest, and therefore, if they had been notified and had attended the meeting, they would have been bound to vote in ■accordance with the wishes of the holders of the beneficial interest.” Id. at 560,23 A. at 799 .
We believe Oriental Mills is a very unusual case and is easily distinguished from the case before us. The transferors in thаt case bad done everything they could, given, the practice of the corporation, to pass full title. The transferees even became the record owners of the stock. The flaw, if any, was the barest technicality. Here, however, there has been no attemрt to transfer title and Toy See Chin was not the record owner. Furthermore Delahunt is not a mere “naked trustee” as the court in Oriental Mills describes the trаnsferors. Until the estate is closed, he has significant duties, not only to the beneficiaries, but also to the creditors of the estate.
II.
The defеndants also claim that the trial justice erred in finding that Toy See Chin did not intend to make a transfer of the beneficial interest in her stock when she еndorsed the certificates in question here. Whether she had the donative intent necessary to create a gift is a question of fact, and this court will not upset the findings of the trial justice unless it is shown that he misconceived or overlooked material evidence or that he was сlearly wrong.
Chase
v.
Blackstone Dist. Co.,
110 R. I. 537,
The defendants’ appeal is denied and dismissed, and the judgment appealed from is affirmed.