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Whether or not there is a completed gift of an ordinary tangible chattel is to be determined by the law of the situs of the chattel. Shares of stock, however, are not ordinary tangible chattels. A distinction has been taken between the shares and the certificate, regarded as a piece of paper which can be seen and felt, the former being said to be subject to the jurisdiction of the state of incorporation and the latter subject to the jurisdiction of the state in which it is located. The shares are part of the structure of the corporation, all of which was erected and stands by virtue of the law of the state of incorporation. The law of that state determines the nature and attributes of the shares. If by the law of that state the shares devolve upon one who obtains ownership of the certificate it may be that the law of the state of a purported transfer of the certificate will indirectly determine share ownership.
The husband and wife were travelling in Italy. The husband gave the wife an envelope containing a certificate for 150 shares of stock in the corporation, which was incorporated in Massachusetts. The husband signed the certificate and gave it to the wife. The wife then delivered the certificate to the bank. The husband died and the wife alleged that the certificate was hers based upon the husband's gift. The estate initiated an action for injunctive relief against the defendants - corporation, bank, and the wife to enjoin the transfer of the stock and for recovery of the certificate. The trial court entered judgment for the estate, finding that there was no completed gift of stock.
Was there a valid transfer of shares of stock from the husband to the wife?
On appeal, the court reversed the decision and dismissed the action. The court found that the transfer was improperly judged by the laws of Italy. The court held that shares of stock were subject to the jurisdiction of the state of incorporation and the husband's actions were sufficient in Massachusetts to effect legal transfer of the shares.