Gratuitous Transfer Of Ownership - Property

Rules

1. Standard (“inter vivos”) gifts. To give away an interest in personal property, the donor (D) must (1) deliver the interest and transfer possession to the donee/receiver (R) in the most appropriate manner for the circumstances, with (2) an intention to make a present and irrevocable gift to the donee. (3) The donee must then accept. Delivery may be (A) actual, (B) constructive, or (C) symbolic.

   1. Actual delivery. Requires an objective transfer of the gift from D to R.

   2. Constructive delivery. If physical transfer is impractical, D may hand over a key that will open the gift (e.g. a car or safe).

      1. Containers. D may give a box to R by delivering key, but this does not necessarily include everything in the box. Depends on intent of D and whether item inside is of type generally expected to be found in container. Hocks; Newman.

   3. Symbolic delivery. “When conditions are so adverse to actual delivery as to make symbolic delivery as perfect as possible,” Cohn, D may hand over a symbol of the gift, such as a written note stating “I give my piano to R.”

      1. Present transfer requirement. All delivery must be a present transfer; a note saying “I will give my piano to R” is an unenforceable promise (lacking consideration), and a note saying “I give my piano to R when I die” is testamentary (like a will) and is unenforceable unless it satisfies the Statute of Wills (SOW).

      2. Constructive v. symbolic. The distinction is eroding. See Scherer. If D, while wearing watch, writes, “I give this watch to R,” Restatement calls this gift, even though D could have handed watch to R and if D had written “I will give this watch,” this would be unenforceable promise. Restatement (Third) of Property, §6.2.

      3. Stocks. Delivery may be made with change to corporate books plus other tangible expressions of interest, e.g. dividends. Elyachar.

   4. Intention. Requires desire to divest himself absolutely and irrevocably of title. Cohn. D may retain possessory interest after delivery, Gruen, or hold onto gift (after delivery) as bailee. Garrison.

   5. Acceptance. This is generally implied. Gruen.

2. Gifts of partial interests. As property is a “bundle of rights,” D may presently deliver a future interest in property while reserving a life estate for himself; this is common with stocks/bonds. D may also give title without giving possession. Gruen.

   1. Gifts v. bailments. Gifts of future interests with delivery to a third party may be confused with bailments accompanied by an expression of intent to make a gift at some future time. See Martin Luther King in-class example.

3. Special gifts.

   1. Engagement rings.

      1. Traditional. Whoever is not at fault receives the engagement ring.

      2. Modern. Regardless of who breaks an engagement, ring must be returned to donor. Lindh v. Surman (Pa. 1999).

   2. Checks.

      1. Not gift. A check is not a gift until it is cashed, as D may revoke. Woo v. Smart (Va. 1994). But see Scherer.

      2. Gift. If D dies before check is cashed, gift. In re Smith (Pa. 1997).

4. Gifts causa mortis. When D is about to die, may make gift as substitute for will. The rules for intent and delivery differ from inter vivos (“among the living”) gifts in that intent may be implied but delivery must be objective. Newman.

   1. Revocability. GCMs are automatically revocable if, inter alia, D recovers.

   2. Redelivery. If R is holding an item D intends to give, R must first hand the gift back to D in order for D to deliver. This is not required of inter vivos gifts.

   3. Suicide notes. These count as gifts causa mortis. Smith.

   4. Holographic wills. In emergency situation (e.g. wounded soldier), D may write out a will and sign and date it without meeting SOW.

Analysis

1. Historical background. These requirements come from the feudal ceremony of “livery of seisen,” in which a donor of real property transferred a stick from his land to the new owner. In 1677, this was replaced by the Statute of Frauds, which allowed (symbolic) transfer via deed. Gifts of personal property, however, still require objective delivery, perhaps to ensure that D feels the “wrench” of irrevocability.

2. Delivery requirement. The purpose is to prevent mistake or fraud; for this reason, when D is in front of witnesses and there is clear evidence of intent, delivery may be relaxed. Cohn. “Best possible delivery” is analogous to possession, supra.

3. Intention requirement. As purpose of SOW is also to prevent fraud, D must presently intend to give gift or risk running into SOW’s requirements.

4. Gifts of partial interests. Common with securities or abstractions such as royalties; D may give future royalties in play, which have a present interest.

5. Gifts causa mortis. These are interpreted very narrowly, as they are will substitutes and thus liable to be fraudulent.

Major Cases

1. In re Cohn (N.Y. 1919) (Supp. II, 1)

   1. (Shearn, J.) D gave wife note saying “I give you 500 shares of company.” D said he could not deliver actual shares because they were in company; died six days later. Since obviously not mistake or fraud, and gift was not revocable, valid gift.

   2. (Page, J., dissenting) D was only holding onto gift to control directors. He therefore had not divested himself of title or control, so no irrevocable gift.

2. Newman v. Bost (N.C. 1898) (167)

   1. (Furches, J.) As D died, gave GCM of virtually everything in home to lover, R. Also handed R keys, which unlocked bureau that contained life insurance policy. As GCMs are interpreted narrowly, and D could have opened bureau or delivered various items to R, granting everything would defeat SOW. Since D did not specify insurance policy in “lady’s” bureau, R does not get it either.

3. Gruen v. Gruen (N.Y. 1986) (174)

   1. (Simons, J.) D wrote letters to son, R, giving him painting for birthday, but reserving life estate in painting for himself. D kept until death. Since D gave remainder interest while reserving possessory interest, this was valid gift.

Squib Cases

1. Scherer v. Hyland (N.J. 1977)

   1. D wrote suicide note to R giving R a check. This was constructive delivery of money, not symbolic, as D’s intent was concrete, D intended to transfer subject-matter of the gift (money), and D must have intended steps taken for transfer to be sufficient.

2. Hocks v. Jerimiah (Or. App. 1988)

   1. D gave four bonds to R, who put them in a safe deposit box they shared. D collected interest on bonds and added more to box. D left note saying box belongs to R on death. D died. Note was testamentary, so violates SOW. Collecting interest shows lack of intent. So, R only keeps the first four bonds.

3. Garrison v. Union Trust Co. (Mich. 1910)

   1. D gave ring to R, but held onto it for her. D then died. Valid gift (D is bailee).

Rules

1. Wills and probate.

   1. Wills. A will is a revocable, written promise to transfer property upon death. It does not “speak” until the author dies. It must follow a number of formalities prescribed by the jurisdiction’s Statute of Wills (SOW), including (1) witnesses, (2) a ceremony, (3) a declaration that “this is a will,” etc.

      1. Administration. A will is typically filed, then 6–9 months pass where creditors are allowed to bring claims against the estate, managed by an appointed executor. The executor pays debts, distributes assets, and collects the decedent’s assets.

   2. Probate. If a decedent dies without a will, a probate court will sponsor intestate succession. Most property goes to the spouse and children; if spouse is dead, court will appoint a guardian for minor children.

2. Will substitutes. Many devices avoid probate, most commonly pension plans, life insurance, bank accounts, and revocable trusts. Also include, supra, (1) present gifts of future interests, (2) gifts causa mortis, and (3) holographic wills.

3. Bank accounts. Bank accounts may be (1) payable-on-death accounts (A, payable on death to B), (2) savings account trusts (“Totten trusts”; A, in trust for B), or (3) joint accounts (A & B).

   1. Payable-on-death accounts. These are usually allowed by statute; otherwise courts will void via standard rules for gifts, supra, in that D must intend to presently and irrevocably pass title and possession to R. Tygard.

   2. Totten trusts. D may create a bank account in R’s name, and serve as “trustee.” If legal in jurisdiction, this creates a revocable, “tentative” or “Totten” trust. If D dies or makes unequivocal act of gift to R (e.g. gives R trust’s checkbook), court will presume that a trust was created re: the balance at the time of death/transfer. In re Totten.

   3. Joint accounts. There are three possible intentions for a joint account: (1) D intends A to have gift of sum deposited and survivorship rights to whole (“true joint tenancy”); (2) D intends to give A only survivorship rights (“payable-on-death” accounts); or (3) D intends for A to pay D’s bills, w/o survivorship (“convenience” account). (Page 335–336.)

      1. Presumption. If D & A are still alive, courts presume that ownership is proportional to what each deposited. So if D deposits $5000, presumption is D intended A have survivorship rights only, not $2500. Presumptions favor gifts between spouses; if H tells W he intends to provide for her, difficult to show H intended revocable will substitute.

      2. Joint accounts as payable-on-death substitutes. In states without statutory POD accounts, courts may consider joint accounts valid gifts of a future interest with reservations on rights to withdraw funds or revoke joint tenancy or exclusivity; the bank contract substitutes for delivery. Malone. But see Tygard.

      3. Stocks / securities. These may also be treated like joint...