Kirshtein v. Americu Credit UnionKirshtein v. Americu Credit Union
Nasto Law Firm, Yorkville (John A. Nasto, Jr., of counsel), for appellant.
Rossi and Murnane, New York Mills (Vincent J. Rossi, Jr., of counsel), for respondent.
OPINION OF THE COURT
Centra, J.
Plaintiff, as guardian and administrator of the estate of George J. Tapper (decedent), commenced two actions to recover damages for the allegedly improper transfers of securities owned by decedent. In 1998 decedent transferred certain shares of stock of several corporations to a third party, and his signatures on the transfers were allegedly guaranteed by AmeriCU Credit Union, formerly Up State Federal Credit Union (AmeriCU), a defendant and third-party plaintiff in action No. 1 and the third-party defendant in action No. 2. At the time of the transfers, decedent had not been adjudicated an incompetent person and no guardian had been appointed for him, but plaintiff alleged that decedent was mentally incapacitated due to Alzheimer‘s disease and the infirmities of old age. Plaintiff was appointed guardian of decedent’s property in May 2000, and decedent died on December 2, 2001.
Plaintiff commenced action No. 1 against AmeriCU and its vice-president in April 2002, and he commenced action No. 2 in
An issuer of securities has a duty to register a transfer of securities (see
An indorsement is effective if it is made by an “appropriate person” (
“(1) with respect to an indorsement, the person specified by a security certificate or by an effective special indorsement to be entitled to the security;
“(2) with respect to an instruction, the registered owner of an uncertificated security;
“(3) with respect to an entitlement order, the entitlement holder;
“(4) if the person designated in paragraph (1), (2), or (3) is deceased, the designated person’s successor taking under other law or the designated person’s personal representative acting for the estate of the decedent; or
(5) if the person designated in paragraph (1), (2), or (3) lacks capacity, the designated person‘s guardian, conservator, or other similar representative who has power under other law to transfer the security or financial asset.”
The sole issue before us on this appeal concerns the definition of the term “capacity” within the meaning of
Defendants contend that the indorsements were effective because decedent was an “appropriate person” to make the indorsements inasmuch as he was the person specified by the security certificates to be entitled to the securities (see
The term “capacity” is not defined by the UCC, but we note that, pursuant to
Defendants essentially contend that the term “capacity” must be construed to mean either legal capacity or mental capacity, not both, and that it would not make sense to define the term as encompassing mental capacity because that would mean, e.g., that a mentally capable 16 year old would be an appropriate person to indorse a certificate. We cannot adopt such a narrow construction of the statute. If the Legislature had meant to limit the term “capacity” to mean “legal capacity” or to require a person to be adjudicated incompetent before it could be concluded that he or she lacked capacity, the Legislature easily
“[a] payor or collecting bank’s authority to accept, pay or collect an item or to account for proceeds of its collection if otherwise effective is not rendered ineffective by incompetence of a customer of either bank existing at the time the item is issued or its collection is undertaken if the bank does not know of an adjudication of incompetence” (emphasis added).
In addition, we reject defendants’ contention that, because the Legislature used the term “legal capacity” in
“[a] person who guarantees a signature of an indorser of a security certificate warrants that at the time of signing:
“(1) the signature was genuine;
“(2) the signer was an appropriate person to indorse . . . ; and
“(3) the signer had legal capacity to sign.”
As noted previously, the UCC provides that the law concerning capacity to contract supplements the UCC provisions (see
“The Legislature in enacting statutes is presumed to have been acquainted with the common law, and generally, statutes in derogation or in contravention thereof, are strictly construed, to the end that the common law system be changed only so far as required by the words of the act and the mischief to be remedied” (
McKinney‘s Cons Laws of NY, Book 1, Statutes § 301 [a] , Comment).
Here, had the Legislature meant what defendants contend it meant, which is in derogation of the common law, the Legislature “needed to use specific and clear language to accomplish [that] goal” (Vucetovic v Epsom Downs, Inc., 10 NY3d 517, 522 [2008]), and it did not do so.
Our conclusion that the term “capacity” includes “mental capacity” is buttressed by the practice of the securities industry. Plaintiff submitted the deposition transcripts of two individuals who practice in that industry, specifically that part of the industry that concerns guaranteeing signatures. Those individuals testified that the practice of requiring signature guarantors is intended to ensure that indorsers are of legal age and sound mind. Defendants have made no showing that the Legislature intended to alter that industry practice (see generally American Tr. Ins. Co. v Sartor, 3 NY3d 71, 76 [2004]).
We therefore conclude that, if a person lacks mental capacity but has not been adjudicated an incompetent person and does not have a designated guardian, conservator, or other similar representative, then the person nevertheless is not an appropriate person to make an indorsement and the indorsement is therefore not effective. As Supreme Court determined in this case, the issue whether decedent lacked mental capacity at the time of the transfers is an issue to be decided by a trier of fact. Accordingly, we conclude that the order should be affirmed.
It is hereby ordered that the order so appealed from is unanimously affirmed, without costs.