McKinnon v. Rhode Island Hosp. Trust Nat. Bank

• Court: Rhode Island Supreme Court
• Writing for the Court: Before WEISBERGER; LEDERBERG
• Citation: McKinnon v. Rhode Island Hosp. Trust Nat. Bank, 713 A.2d 245 (R.I. 1998)
• Decision Date: 15 June 1998
• Docket Number: No. 96-485-A,96-485-A
• Parties: 35 UCC Rep.Serv.2d 1329 Michelle McKINNON v. RHODE ISLAND HOSPITAL TRUST NATIONAL BANK et al. ppeal.

Page 245

713 A.2d 245

35 UCC Rep.Serv.2d 1329

Michelle McKINNON v. RHODE ISLAND HOSPITAL TRUST NATIONAL BANK et al.

No. 96-485-Appeal.

Supreme Court of Rhode Island.

June 15, 1998.

Amelia E. Edwards, Gary Yesser, Providence, for Plaintiff.

Deming E. Sherman, Providence, for Defendant.

Before WEISBERGER, C.J., and LEDERBERG, BOURCIER, FLANDERS and GOLDBERG, JJ.

OPINION

LEDERBERG, Justice.

This case came before the Supreme Court following the entry of a summary judgment in favor of the plaintiff, Michelle McKinnon (McKinnon). McKinnon filed a complaint in Superior Court, alleging that the defendants, Rhode Island Hospital Trust National Bank (Hospital Trust or bank) and its agent Shawn Buckless (Buckless), had wrongfully transferred two state agency bonds held in a Hospital Trust funds management account in the names of McKinnon and her father. The defendants and McKinnon filed motions for summary judgment on one count of McKinnon's eight-count complaint, contending that this count could be decided as a matter of law under Article 8 of the Uniform Commercial Code (UCC). The Superior Court denied the bank's motion and granted summary judgment in favor of McKinnon on that count. Having concluded that count was dispositive of McKinnon's case, the trial justice entered a final judgment in McKinnon's favor. We reverse.

Facts and Procedural History

McKinnon's father, John R. Cioci (Cioci), was a client of the Private Bank, a subsidiary of Hospital Trust. Buckless, an administrative account officer in the Private Bank, serviced Cioci's accounts. In 1988, Cioci purchased two bonds (bonds) issued by the Rhode Island Public Building Authority. Each bond had a face value of $100,000 and paid interest on a semiannual basis at the rate of 8.2 percent per annum. Cioci initially held the bonds in a funds management account at the bank, and the interest from the bonds was deposited to Cioci's personal checking account. According to the bank's records, the ownership of the bonds was recorded as "John R. Cioci or Michelle McKinnon Jt Ten WROS." ¹

In 1988, Cioci named Hospital Trust as the trustee of a revocable living trust (1988 revocable trust) executed for the benefit of certain of his grandchildren. Apparently having been advised that the 1988 revocable trust was an improper vehicle for estate tax planning purposes, Cioci executed an irrevocable trust in 1989 (1989 irrevocable trust), again for the benefit of certain of his grandchildren and with Hospital Trust as the trustee. Buckless served as trust officer for the trusts.

On April 13, 1990, Cioci directed Hospital Trust to transfer the bonds from the funds management account into the 1988 revocable trust. Cioci explained to Buckless that he was planning to be out of the country for an extended period and that he did not want the interest from the bonds accruing in his checking account without further investment. Buckless prepared an "interoffice message" to one Barbara Green of the funds management group, which read, "Mr. John R. Cioci wishes to transfer all his assets from his Funds Management Account Numbers 125330 and 125335 into his trust u/agr./o John R. Cioci, # 3-2504-00-3." The interoffice message was signed by both Cioci and Buckless, and the bonds were subsequently transferred into the 1988 revocable trust in accordance with the instructions in the interoffice message.

Cioci died on September 30, 1990, at which point the bonds were still held by the 1988 revocable trust. After her father's death, McKinnon discovered that the bonds had been transferred into the trust, and when Hospital Trust refused to restore the funds to her, she brought suit in the Superior Court on March 1, 1994.

Both McKinnon and the bank filed motions for summary judgment on count 6 of McKinnon's complaint, arguing that there were no material facts in dispute and that the count could be decided under Article 8 of the Uniform Commercial Code. Count 6 charged:

"The transactions [the transfer of the bonds] as described are controlled by the Uniform Commercial Code, so called, under the laws of the State of Rhode Island. * * * Pursuant to Article 8 of said statute the defendants were required to obtain the endorsement of the plaintiff prior to any sale or transfer of the bonds. The defendants failed to obtain the endorsement of the plaintiff as an owner of the securities, thereby rendering defendants liable to the plaintiff for her losses resulting from the wrongful transfer."

The motions were heard on February 13, 1996, at which time a justice of the Superior Court granted McKinnon's motion and denied Hospital Trust's motion. On February 29, 1996, the Superior Court entered an order and judgment in favor of McKinnon in the sum of $209,270, ² plus interest from September 30, 1990, and costs. Hospital Trust appealed the final judgment and also petitioned this Court for issuance of a writ of certiorari to address the Superior Court's denial of Hospital Trust's motion for summary judgment. We issued the writ on March 24, 1997, and consolidated the petition with the bank's appeal for briefing and oral argument.

Standard of Review

This Court's standard for reviewing a grant of summary judgment is well established. Upon review, we apply the same standard as the trial court. Boucher v. McGovern, 639 A.2d 1369, 1373 (R.I.1994). Specifically, "we will affirm a summary judgment if, after reviewing the admissible evidence in the light most favorable to the nonmoving party, we conclude that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law." Rotelli v. Catanzaro, 686 A.2d 91, 93 (R.I.1996). Because an order denying a motion for summary judgment is an interlocutory determination and is not entitled to an appeal of right, we do not generally review such a denial. Boucher, 639 A.2d at 1373. In the event we do undertake such review by certiorari, we apply the same standard of review as that applicable to the granting of a motion for summary judgment. Id.

Ownership of the Bonds

In opposing McKinnon's motion for summary judgment, Hospital Trust argued that McKinnon had "no present ownership interest in the bonds" at the time they were transferred into the 1988 revocable trust; therefore, she had no standing to object to the transfer. Hospital Trust contended that McKinnon could not claim an ownership interest in the bonds unless she met the test of Walther v. McOsker, 87 R.I. 386, 142 A.2d 128 (1958). Under that test, one seeking to claim a gift of a present interest in a security must show "that the donor intended, in praesenti, to divest herself of the exclusive ownership and control over the subject matter of the alleged gift and to vest such ownership and control jointly in the alleged donee." Id. at 393, 142 A.2d 128, 142 A.2d at 131 (citing Tabor v. Tabor, 73 R.I. 491, 493, 57 A.2d 735, 736 (1948)).

At oral argument before this Court, Hospital Trust distinguished the instant case from Robinson v. Delfino, 710 A.2d 154. (1998), in which we concluded that "the opening of a joint bank account wherein survivorship rights are specifically provided for is conclusive evidence of the intention to transfer to the survivor an immediate in praesenti joint beneficial possessory ownership right in the balance of the account remaining after the death of the depositor, absent evidence of fraud, undue influence, duress, or lack of mental capacity." Id., 710 A.2d at 161. Hospital Trust urged that the application of Robinson be limited to bank accounts such as the one at issue in Robinson, in which both joint owners had signed signature cards at the bank. Additionally, the bank suggested that Robinson, even if applied in the present case, would not afford any assistance to McKinnon's cause, because the bonds had been transferred to the 1988 revocable trust before Cioci died. Hospital Trust suggested that this occurrence rendered this case analogous to an account that has a zero balance at the time the depositor dies.

McKinnon, in contrast, argued that the UCC, specifically G.L.1956 § 6A-8-313, establishes the applicable test for proving her then-present ownership interest in the investment securities, and she maintained that inquiry into other areas of law was unnecessary because she met the test prescribed by the UCC. Section 6A-8-313(1) provides in pertinent part that "[t]ransfer of a security or a limited interest * * * therein to a purchaser occurs * * * (b) [a]t the time the transfer, pledge, or release of an uncertificated security is registered to him or her or a person designated by him or her." According to McKinnon, this test was met when Hospital Trust listed her as an owner of the bonds in its records.

Our construction of the pertinent UCC provisions does not require us to decide whether McKinnon had an ownership interest in the bonds at the time Cioci transferred them into the trust. Therefore, we shall assume, without deciding, that McKinnon did have an ownership interest at all times relevant to the events in this case.

Article 8 of the Uniform Commercial Code

Both parties have referred this Court to authorities from other jurisdictions. McKinnon argued that the Supreme Court of Idaho had decided a case "on all fours" with the one before us. In Ogilvie v. Idaho Bank & Trust Co., 99 Idaho 361, 582 P.2d 215 (1978), a mother and her son held stock certificates as joint tenants. The instruments for the stock showed that they were owned by "L. Katharine Ogilvie & Richard R. Ogilvie." Richard Ogilvie (Richard) later pledged the stock to a third party and forged his mother's signature on the indorsement. After Richard died, Katharine Ogilvie successfully sued to recover the stock. The Supreme Court of Idaho concluded that under the facts of that case, the indorsements of both owners were required in order to effectuate a valid transfer. Id. at 219. McKinnon cited similar cases from other jurisdictions for this same proposition, ...