Neuschafer v. McHale

Eulalia Neuschafer (plaintiff) and her daughter, Eulalia James (plaintiff), worked for American Telephone and Telegraph Company (AT&T). Through their employment with AT&T and through their purchases, both Neuschafer and James owned AT&T stock, and each also owned an AT&T stock-dividend-reinvestment account. James had a son, James McHale (defendant). In 1961, in an attempt to avoid probate when passing the stock and the reinvestment accounts to McHale upon their deaths, both Neuschafer and James named McHale as joint tenant with survivorship on blocks of their stocks and their accounts. New stock certificates were issued, but Neuschafer and James continued to receive the notices and proxies, vote the shares, and receive the dividends. Neuschafer and James did not file gift-tax returns, and they reported the dividends as their income. Neither Neuschafer nor James intended McHale to have any right to the stock or the accounts during their lifetimes. In 1981 McHale claimed the cash dividends from some of Neuschafer’s stock while Neuschafer was in the hospital. Neuschafer needed the cash dividends for her expenses due to her health. McHale asked Neuschafer to transfer the stock to him, and Neuschafer refused. Neuschafer and James then filed a declaratory-judgment action seeking to quiet title to the stock and reinvestment accounts. The trial court held that the 1961 creation of joint tenancies with survivorship were valid gifts of future interests to McHale. Neuschafer and James appealed.