441 F. 2d 192 - Estate Maxcy v. Commissioner of Internal Revenue

At issue in this case is the ownership, for estate tax purposes, of 79 shares of stock in Maxcy Securities, Inc., a closely-held corporation once controlled by Gregg Maxcy, (hereinafter, the decedent). The sole question for our determination is whether Gregg Maxcy executed a valid gift of the 79 shares to his wife. We think that he did and reverse the Tax Court's determination to the contrary.

The Commissioner concluded that these shares should have been included in the decedent's estate and assessed a deficiency.1 Appellants petitioned the Tax Court for a redetermination of the deficiency, alleging that the seventy-nine shares had passed by gift to the decedent's widow, Jessie L. Maxcy, in 1933. The Tax Court found that there had been no gift valid under Florida law and assessed the deficiency in Gregg Maxcy's estate at $229,827.02.2

There is no substantial dispute as to the facts involved in this case because a number of facts were stipulated and other pertinent facts were found by the Tax Court. In 1933, Gregg Maxcy endorsed a stock certificate representing 245 shares of Maxcy Securities, Inc., and instructed the corporation's secretary, Mrs. Charlotte Varena, to issue four certificates of stock in varying numbers of shares totaling 245. The certificates were to be issued to himself; to Jessie Maxcy, his wife;3 to Hugh Maxcy, his son; and to Mrs. Varena, the secretary. Each of these certificates was properly executed by Gregg Maxcy as president and by Mrs. Varena as secretary, and the corporate seal was correctly affixed; each was ultimately deposited in the vault at the offices of Maxcy Securities, Inc., where they were found subsequent to Gregg Maxcy's death. Testimony in the Tax Court shows that the certificates were physically delivered to all except Mrs. Maxcy prior to their being deposited in the vault. All recipients except Mrs. Maxcy knew the combination of the safe and had ready access to it.

It is a well established principle of Florida law that the existence vel non of a gift is a question of law to be determined after an examination of the facts and circumstances surrounding the transaction.4 To constitute a valid gift, there must occur simultaneously an intention by the donor to relinquish dominion over the property and a delivery thereof to the donee.5 The delivery may be actual or constructive.6

In the instant case, there are ample and well supported manifestations of Gregg Maxcy's intent to effect a gift to his wife. Uncontroverted testimony in the Tax Court established that the decedent stated repeatedly to his wife, to the corporate secretary, and to his accountant, that he considered the gift complete. A representation of his wife's ownership of a substantial interest in the corporation is repeatedly reflected in the corporate minutes and income tax returns.7 The 79 shares were transferred on the corporate books to reflect her ownership. Except for the absence of actual physical delivery, Mrs. Maxcy's shares were accorded treatment identical to the other three certificates for which a gift was in fact consummated. Nevertheless, the government has offered no explanation for its theory that the decedent intended a different result as to his wife. In sum, our examination of the record on appeal reflects no statement or conduct by Gregg Maxcy which would be inconsistent with an intention to make a valid gift to his wife. Even his failure to hand the certificate to her before placing it with their personal papers can be seen as an act of convenience in no way inconsistent with an intent to consummate the gift.

The crux of the government's position is that the circumstances of the delivery of the shares of stock at issue are not sufficient under Florida law to establish that the decedent intended to part with dominion over the certificate, particularly since the decedent's widow never had her hands on the stock certificate at issue. We decline to adopt such a narrow view of the applicable Florida law because we are convinced that in these circumstances Florida courts would hold that the decedent effected a sufficient delivery.

It is of significance that title to the stock at issue was transferred without consideration from a husband to his wife. Such a transfer is presumed in Florida to be a gift; to establish the contrary requires clear and concise proof.8 Moreover, the decedent formally transferred ownership of the 79 shares to his wife by causing a new certificate to be issued and instructing that his wife's ownership be reflected in the corporate books. Coupled with proof of an intent to convey ownership rights, such a transfer has been held sufficient to effect a delivery or to complete a gift.9

The government attaches great significance to the finding by the Tax Court that Mrs. Maxcy never had actual physical possession of the stock; they argue that since she did not know the combination to the corporate vault, she could not have gained access to it. Accordingly, they say, since Gregg Maxcy never put the stock within her reach, he could not have intended to relinquish dominion over it and in fact never delivered it to her.10

On the contrary, we are convinced from the facts and circumstances of this case that Mrs. Maxcy indeed had a legally cognizable right of access to the contents of the vault. From the very inception of the corporation its records and books consistently show Mrs. Maxcy as holder of well over 10% of the corporate stock, a director, and an officer of the corporation. The law of Florida applicable in 1933 unquestionably would have accorded her access to the property of the corporation.11

Moreover, we note, there is no evidence whatsoever in the record which remotely suggests that she was ever denied access to the vault. In addition, the record reflects that the contents of the vault were not limited to business records of Maxcy Securities, Inc. On oral argument, counsel were asked to supply the court with clarifying affidavits specifying the contents of the vault and reflecting the true facts as to the right of access to it by Mrs. Maxcy.12 Appellants have responded by filing affidavits executed by Mrs. Charlotte Varena, the corporate secretary, and Mrs. Maxcy.13 These affidavits clearly show that Mrs. Maxcy did in fact have access to the vault through Mrs. Varena and that she indeed used it for safekeeping of numerous of her own personal belongings, including deeds, family jewelry, and silver.

Giving full consideration to the factual evidence disclosed by the record, we are inclined to believe that the rights of access to the vault accorded in fact and in law to Mrs. Maxcy were substantial enough that the decedent's act of placing the stock certificate in the vault was an actual delivery. We are convinced, however, and unhesitatingly hold, that there was a constructive delivery which completed the inter vivos gift of the 79 shares of stock in question by Mr. Maxcy to his wife. In Barber v. Barber14 the Supreme Court of Florida recognized the doctrine of constructive delivery, saying:

The question of delivery is determined largely by the nature and locality of the article or articles given.15

To require the momentary physical transfer of possession to Mrs. Maxcy of a stock certificate issued and recorded in her name and stored in the vault of a corporation in which she was continually a shareholder, officer, and director would be a form of tokenism in which we do not think the courts of Florida would indulge. The judgment is reversed both as to the Estate of Gregg Maxcy and the Estate of Hugh Maxcy. Both causes are remanded for determination of additional attorneys' fees and expenses allowable as deductions; applicable gift taxes, if any, and for other adjustments in both estates recognized by all parties to be necessary.

Reversed and remanded.