Lynch v. Lynch
| Decision Date | 31 July 1942 |
| Docket Number | 15448. |
| Parties | LYNCH et al. v. LYNCH et al. |
| Court | South Carolina Supreme Court |
Appeal from Common Pleas Circuit Court of Florence County; L. D. Lide, Judge.
Suit by W. S Lynch, Jr., as administrator of the estate of Essie B. Lynch and another, against W. S. Lynch and another, to subject corporate stock to named defendant's debts. From a decree of dismissal, plaintiffs appeal.
Before the issuance of any capital stock of a corporation, the owner may, by written instrument containing proper words of conveyance irrevocably transfer by gift to another, in whole or in part his right to issuance of the stock, and, upon execution and delivery of the instrument, the "gift" would be complete, but the mere written order to the officers of the corporation to issue the stock, unless it has been acted upon, cannot be considered an "assignment" of the stock to the person mentioned in the order.
The order of Judge Lide follows:
The subject matter of this suit is 200 shares of the capital stock of J. C. Lynch Realty Company, a South Carolina corporation. There are three causes of action set up in the (amended) complaint, all arising out of the same alleged state of facts, to-wit: That on or about the 14th day of April, 1932, J. C. Lynch, late of the County and State aforesaid, owning considerable real estate and personal property, conveyed all of the same to the corporation above mentioned, which had been organized for that purpose, and that he gave the capital stock therein to his five children in certain proportions, the defendant W. S. Lynch being one of his children; and that on or about the 28th day of April, 1932, W. S. Lynch caused to be organized a South Carolina corporation known as the Lynch Real Estate Company, unto which in accordance with the "design and purpose and direction of the said defendant W. S. Lynch" 200 shares of the capital stock of J. C. Lynch Realty Company were issued; and it is further alleged on information and belief that the stock issued to the former corporation was in fact the sole property of W. S. Lynch and that its attempted transfer to this corporation was planned and effected by W. S. Lynch to hinder, delay and defraud his creditors. And it is further alleged that before and at that time, and thereafter, the plaintiff, who is the wife of W. S. Lynch, held judgments against him, entered from time to time, amounting in the aggregate to a large amount, upon which executions had been issued and returned nulla bona. These allegations in the first cause of action, as above indicated, purport to allege a violation of the Statute of Elizabeth (Section 8696, Code 1932).
The other two causes of action contain substantially the same factual allegations and also allege that the issuance of the stock to the defendant corporation amounted to a preferential transfer by W. S.
Lynch in violation of the Assignment Act (Section 9106, Code 1932). And the prayer of the complaint in substance is that the stock in question be adjudged to be the property of W. S. Lynch and hence subject to his debts.
The answers deny the allegations of the complaint which are material to the controversy. And issue having been joined the cause was by order of the Court dated November 9, 1939, referred to C. W. Muldrow, Esq., Master, to take the testimony and report the same to the Court, which in due course he did. The cause was argued before me at chambers by counsel for the respective parties on May 30, 1941, and thereafter helpful briefs were filed, and the matter has had my very careful consideration.
As alleged in the complaint, J. C. Lynch, late of the County and State aforesaid, owned considerable property, principally real estate, containing, according to the testimony, about 10,000 acres. About two years before his death he determined, for reasons satisfactory to himself, and evidently acting upon the advice of counsel, to convey all his property to a corporation to be formed; and on April 14, 1932, this corporation, named J. C. Lynch Realty Company, was chartered under the laws of the State of South Carolina with an authorized capital stock of $150,000, the five children of J. C. Lynch, including his son W. S. Lynch, being named as directors thereof; and pursuant to the plan decided upon J. C. Lynch conveyed all his property to this corporation. It was a part of his plan to give the stock in the corporation, all of which was owned by him, to those whom he wished to have his property; and it appears that on April 14, 1932, an instrument in writing was signed by his five children, including the defendant W. S. Lynch (hereinafter sometimes called Dr. Lynch). The original of this instrument appears to have been lost, but I think the testimony establishes that it was in fact executed by the five children, and it is in the following form:
This instrument was not signed by J. C. Lynch, and cannot be said to impose any legal obligation on him. It appears to be merely a written statement that the signers agreed to accept such number of shares of the capital stock of the corporation "as the said J. C. Lynch shall designate."
Four days after the execution of this instrument, to-wit: On April 18, 1932, J. C. Lynch executed the following instrument:
The present controversy centers around the instrument just quoted. If the effect of this instrument was to make a complete and irrevocable gift to W. S. Lynch of 202 shares of the capital stock of J. C. Lynch Realty Company, then the evidence is sufficient, in my opinion, to warrant the Court in granting plaintiff the relief for which she prays. On the other hand, if this did not constitute a complete and irrevocable gift, I am of opinion that the plaintiff would not be entitled to recover. Hence before discussing the other facts in the case we may pause to consider the law relating to a gift inter vivos.
It will be borne in mind in the consideration of this case that J. C. Lynch, the father, owned all the property, real and personal, which he conveyed to the corporation in question, and therefore upon the conveyance of the same he was the absolute owner of all the capital stock of that corporation. Obviously he was under no legal obligation to give this stock, or any of it, to his son W. S. Lynch, nor was he under any legal obligation to make any provision for the indebtedness due by W. S. Lynch to his wife, the plaintiff Essie B. Lynch.
The following, which is quoted with approval in the case of Ott v. Ott, 182 S.C. 135, 188 S.E. 789, 792, is an accurate statement of the essential elements of a gift inter vivos:
"
As will appear from the foregoing quotation, a gift to be operative must be executed and must take effect immediately and irrevocably, for the obvious reason that if anything remains to be done the title to the property does not pass, and an executory agreement to make a gift could not be enforced, for the same is gratuitous and without any valuable consideration. As is said in 24 American Jurisprudence 741:
If the instrument signed by J. C. Lynch, dated April 18, 1932, had been acted upon and the stock issued and delivered as therein directed, it is true that W. S. Lynch would then have irrevocably acquired 202 shares of the capital stock of J. C Lynch Realty Company, which includes the 200 shares involved in the instant suit. But this order or request on the part of J. C. Lynch was never acted upon, and the capital stock was not issued in accordance therewith; and as will appear from the foregoing quotation from 24 American Jurisprudence...
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