Family Corporations, Missing Records, and the Battle Over Stock Ownership

By: Jeffrey M. Haber

Disputes over closely held family corporations frequently arise when ownership of corporate stock is transferred informally within a family. While a parent may intend to make a lifetime, or inter vivos, gift of corporate shares to a child, courts generally require more than evidence of donative intent alone. The transfer must also be accompanied by proof that the gift was completed in accordance with governing corporate law and the corporation’s own stock-transfer requirements. When the transfer does not have the appropriate proof, the consequences of failing to properly document the transaction can be significant, often leading to litigation among heirs, beneficiaries, and surviving family members.

Stock ownership in a corporation is not transferred merely because a shareholder expresses an intention to give the stock to another person. Depending upon the circumstances, a valid transfer may require endorsement and delivery of the stock certificate, surrender of the certificate for reissuance, entries on the corporation’s stock ledger, corporate resolutions memorializing the transaction, stock powers, gift documents, or other records demonstrating both the donor’s intent and completion of the transfer. Where a corporation has issued stock certificates containing transfer restrictions, compliance with those provisions is often critical to establishing ownership.

The failure to observe these formalities can create substantial uncertainty after the shareholder’s death. In many cases, family members claiming ownership through an alleged inter vivos gift are unable to produce endorsed stock certificates, corporate records, shareholder resolutions, or other contemporaneous proof that the transfer was completed. Courts are then called upon to determine whether ownership passed during the decedent’s lifetime or whether the shares remained part of the decedent’s estate or trust and must be distributed pursuant to the governing estate-planning documents.

The Appellate Division, Second Department’s recent decision in Perkins v. Small, 2026 N.Y. Slip Op. 04216 (2d Dept. July 1, 2026), illustrates the complexity of these issues in the context of a family-owned real estate corporation. The case involved a dispute among siblings over ownership of a closely held corporation that held title to real estate in Queens, New York. One sibling claimed that their father had transferred ownership of the corporation to him through an inter vivos gift, while another contended that no valid stock transfer had occurred and that the corporation remained part of the father’s trust estate. As discussed below, the Court found issues of fact with respect to the ownership of the disputed corporate shares because of the lack of evidentiary proof.

Applicable Principles

An inter vivos gift is a voluntary transfer of property or assets made by a donor to a recipient while the donor is still alive. It “requires that the donor intend to make an irrevocable present transfer of ownership.”[1] If the donor intends “to make a testamentary disposition effective only after death, the gift is invalid unless made by will.”[2] 

Moreover, an inter vivos gift requires delivery to the beneficiary, either by a physical delivery of the subject of the gift or a constructive or symbolic delivery.[3] “The requirement of delivery is not rigid or inflexible but is to be applied in light of its purpose to avoid mistakes by donors and fraudulent claims by donees.”[4] Whether the gift has been delivered is a fact-intensive inquiry, based on the totality of the evidence.[5] Notably, “mere possession of a gift after the donee’s death creates a presumption of delivery to the donee during the donor’s lifetime.”[6] “Unsupported, conclusory allegations” that the gift had not been delivered are “insufficient to overcome the presumption of delivery and raise a triable issue of fact.”[7] 

Real Property and stock are recognized as valid inter vivos gifts.[8] When stock certificates are being given as a gift, symbolic delivery is enough if no other practical method of delivery is available. However, even symbolic delivery must be irrevocable. That point is reached only when ownership is officially transferred on the company’s stock records.[9] Although a will cannot be used to prove that the transferor intended to make an inter vivos gift, it may be considered as evidence of the parties’ relationship, their status, and the transferor’s affection for the recipient of the gift.[10] 

Perkins v. Small

Perkins concerned the ownership of Dayton Small Realty Co., Inc. (the “Corporation”) and, ultimately, the ownership of real property located in Flushing, New York (the “subject premises”). Plaintiff and Defendant are siblings. Plaintiff is the stepdaughter of the parties’ late father, and defendant is his son.

The subject property was originally owned by the parties’ father pursuant to a deed dated July 8, 1980. On March 22, 1993, the father formed the Corporation under a certificate of incorporation authorizing the issuance of 200 shares of no-par-value stock. Defendant later contended that his father gifted the Corporation to him during the father’s lifetime and that he became its sole owner by inter vivos gift.

On May 1, 2000, the father executed a living trust as settlor.[11] Through that trust, he transferred various real estate holdings and established a comprehensive estate plan for the benefit of his children.

The trust specifically directed the distribution of certain properties to the parties and their siblings. The trust further provided that the trustee was to distribute “all the rest, residue and remainder of the residuary trust estate” equally among the settlor’s children, per stirpes.[12]

In 2009, during an attempted mortgage refinance of the subject premises, it was discovered that the Corporation was not listed as the owner of record, despite an earlier conveyance. Following that discovery, a corrective deed dated July 30, 2009, was executed. The corrective deed stated that its purpose was “to correct the grantee’s name in the recorded deed” and identified the Corporation as the corrected grantee.

Plaintiff challenged the validity of the corrective deed, asserting that the signature appearing on the instrument was forged and that the deed was therefore void ab initio. Plaintiff also alleged that defendant had previously been named executor under an earlier will executed by their father, a document that allegedly distributed the father’s real property among plaintiff’s brothers while excluding her. According to plaintiff, she did not learn of the superseding trust arrangement, which provided benefits to all of the children, until proceedings relating to her late brother’s estate. Plaintiff further claimed that defendant concealed or refused to disclose the Corporation’s ownership of various real estate holdings.

Defendant, in turn, maintained that he was the sole owner of the Corporation by virtue of an inter vivos gift from his father. Based on that assertion, he argued that the Corporation and its assets were not part of the father’s trust estate and were therefore not subject to distribution under the trust agreement.

Plaintiff commenced the action in 2019 against defendant and the Corporation seeking, among other things, a judgment declaring that she was entitled to an interest in the property by way of her interest in the father’s residuary trust estate. Defendants interposed an answer and asserted counterclaims alleging the father made an inter vivos gift of his shares in the Corporation to his son, such that defendant was entitled to a judgment declaring that he was the sole owner of the Corporation.

Plaintiff moved for summary judgment seeking, among other relief, a declaration that she owned a 25% interest in the Corporation. Defendant cross-moved for summary judgment, asserting that he was the Corporation’s sole owner based upon the alleged inter vivos gift from his father.

The motion court rejected defendant’s position and granted plaintiff’s motion. The motion court declared that plaintiff held a 25% ownership interest in the Corporation and further held that the Corporation’s shares were subject to distribution in accordance with the terms of the father’s trust agreement.

Central to the motion court’s ruling was defendants’ failure to produce evidence demonstrating that the father had completed a valid transfer of the corporation’s stock to defendant during his lifetime. Although defendant claimed that his father had gifted him the corporation, the motion court found no documentary proof establishing a legally effective transfer of ownership. In particular, defendants failed to produce endorsed stock certificates, corporate resolutions, stock transfer documents, or other contemporaneous records evidencing both donative intent and delivery of the shares.

The motion court also relied upon the corporation’s original 1993 stock certificate, which identified the father as the owner of the corporation’s shares. Significantly, the certificate expressly provided that the shares were transferable only upon the corporation’s books and only after surrender of the certificate properly endorsed by the shareholder. Despite defendant’s claim that the shares had been gifted to him, no evidence was produced showing that the father endorsed the certificate, surrendered it for transfer, authorized the issuance of replacement shares, or otherwise complied with the requirements governing the transfer of corporate stock.

Nor was there evidence that the father, as the sole shareholder of the Corporation, executed a corporate resolution approving a transfer of the 200 authorized shares or took any other formal steps demonstrating completion of the alleged gift. Absent such proof, the motion court found that defendant could not establish the essential elements of a valid inter vivos transfer of the Corporation’s stock.

Accordingly, the motion court concluded that defendants failed to raise a triable issue of fact regarding the alleged lifetime transfer. Because the evidence showed that the father remained the owner of the corporation’s shares, those shares became part of his trust estate and were required to be distributed pursuant to the trust’s terms. As a result, plaintiff was entitled to a 25% ownership interest in the Corporation as one of the trust beneficiaries.

On appeal, the Appellate Division, Second Department, modified the order with respect to the ownership interest in the Corporation.

The Court held that “plaintiff failed to establish her entitlement to judgment as a matter of law.”[13] The Court noted that even though “plaintiff’s submissions established that the father owned all of the Corporation’s stock at some point after its formation, she failed to eliminate triable issues of fact as to whether the Corporation remained a part of the father’s residuary estate at the time of his death.”[14] Therefore, concluded the Court, the motion court “should have denied that branch of the plaintiff’s motion which was for summary judgment declaring that she has a 25% ownership interest in the Corporation, as she failed to establish, as a matter of law, that she was entitled to receive any ownership interest in the Corporation through the father’s residuary trust estate.”[15]

Moreover, the Court held that “defendants failed to demonstrate, prima facie, that the father transferred ownership of the Corporation to [defendant] before the father’s death.”[16] The Court explained that “defendants’ submissions, purportedly demonstrating the father’s donative intent and delivery of the corporate kit, were insufficient to establish transfer of ownership in the absence of a written record as required by the Corporation’s stock certificate.”[17] 

“Accordingly,” concluded the Court, “neither party was entitled to judgment as a matter of law, as triable issues of fact existed regarding ownership of the Corporation, and the Supreme Court should have denied that branch of the plaintiff’s motion which was for summary judgment declaring that she has a 25% ownership interest in the Corporation, and properly denied the defendants’ motion for summary judgment dismissing the complaint and on their counterclaims.”[18]

Takeaway

The Second Department’s decision in Perkins underscores an important principle in disputes involving closely held corporations: proving ownership of corporate stock requires more than testimony about a decedent’s intentions. A party claiming ownership through an inter vivos gift must demonstrate that the donor effected the transfer in accordance with the corporation’s governing documents and applicable legal requirements. In Perkins, defendant’s assertion that his father gave him the Corporation during his lifetime was not enough, standing alone, to establish ownership as a matter of law.

At the same time, the decision illustrates that the absence of proof supporting a claimed stock transfer does not automatically entitle an opposing party to summary judgment. Although plaintiff pointed to the lack of endorsed stock certificates, corporate resolutions, transfer records, and other documentation necessary to establish a completed gift, the Second Department concluded that she nevertheless failed to eliminate all triable issues of fact regarding whether the corporation remained part of her father’s residuary trust estate at the time of his death. As a result, she could not obtain a declaration of a 25% ownership interest as a matter of law.

Perkins also highlights the significance of corporate formalities in determining ownership of closely held corporations. The corporation’s stock certificate expressly provided that shares were transferable only on the corporation’s books and upon surrender of a properly endorsed stock certificate. Yet neither side was able to produce conclusive evidence demonstrating compliance with, or the legal effect of noncompliance with, those transfer requirements. The Court viewed the absence of a written record of transfer as a substantial obstacle to defendant’s claim that ownership had passed to him during his father’s lifetime.

Perhaps most importantly, the decision serves as a reminder that ownership of a corporation and ownership of the corporation’s assets are distinct concepts. Because the Corporation held valuable real estate, the determination of who owned the stock effectively controlled who would benefit from those assets. Consequently, the dispute turned not on the real property’s title alone, but on whether the father’s shares had ever been validly transferred before his death.

__________________________________

Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice.

Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm. ___________________________________

[1] Gruen v. Gruen, 68 N.Y.2d 48, 53 (1986).

[2] Id.

[3] Id. at 56.

[4] Id.

[5] Id.

[6] Mirvish v. Mott, 17 N.Y.3d 510, 518 (2012).

[7] Id. at 519, quoting Sofsky v. Rosenberg, 76 N.Y.2d 927, 930 (1990).

[8] Gruen, 68 N.Y.2d at 53.

[9] Matter of Szabo, 10 N.Y.2d 94, 98 (1961). See also Estate of Wooters v. Goujjane, 305 F. Supp. 2d 280, 285 (S.D.N.Y. 2003).

[10] Matter of Varrone, 146 N.Y.S.3d 921 (Surr. Ct., Queens County 2021).

[11] A settlor (also called a grantor, trustor, or donor) is the person who creates a trust by transferring property into it and establishing the terms under which the trust will be managed and distributed.

[12] Per stirpes means “equal shares by family branch,” not necessarily equal shares to each individual recipient.

[13] Slip Op. at *2.

[14] Id.

[15] Id.

[16] Id.

[17] Id., citing Celauro v. 4C Foods Corp., 88 A.D.3d 846, 846-847 (2d Dept. 2011); see also Hong Qin Jiang v. Li Wan Wu, 179 A.D.3d 1035, 1038 (2d Dept. 2020). 

[18] Id.