64 Ill. App. 3d 46, 380 N.E. 2d 1012 (1978)



WILSON, J. This is an appeal from an order striking one of three counts of a complaint and dismissing the defendant named in the stricken count. The broad issue before us is whether the trial court properly struck the count and dismissed the defendant named therein, C. E. Thompson Company (hereinafter "C.E.T."), for failure to sufficiently plead ultimate facts stating a cause of action.


On October 21, 1976, plaintiff, Richard E. Wanland, filed a multi-count complaint in the court below. Count one was directed against a stockbrokerage, Shearson, Hayden, Stone, Inc. (hereinafter "Shearson"); count two, against Shearson and one of its stockbrokers, George E. Thompson; count three. against C.E.T. In count three, Wanland alleged in part that on June 18, 1973, Thompson executed an assignment of a stock certificate representing 60 shares of 41/2 percent, preferred C.E.T. stock and gave the certificate to Wanland. On February 21, 1976, Thompson told Wanland that the stock certificate had to be exchanged for 60 shares of 61/2 percent, preferred C.E.T. stock. Wanland gave Thompson the stock certificate in reliance upon this representation and was given a receipt in return. The 60 shares of 4 1/2 percent C.E.T. stock were never delivered to Wanland and Thompson has refused to return the stock certificate representing 60 shares of 41/2 percent stock.


Count three also alleges that Wanland has been a shareholder of C.E.T. since June 18, 1973, and consequently is entitled to receive dividends, notices of annual meetings and financial statements and reports. Nevertheless, C.E.T. has not delivered these items.


Wanland prayed for: (1) a declaratory judgment declaring him the owner of 60 shares of C.E.T. stock; (2) an order directing C.E.T. to enter Wanland's name in its stock transfer records as owner of said shares; and (3) an injunction prohibiting the transfer of the shares represented by the stock certificate to any other person.


C.E.T. responded, in part, with a motion to strike count three on the ground that it was substantially insufficient in law. In support of its motion,' C.E.T. pointed to Wanland's failure to allege a condition precedent to registration of the transfer of the certificate to his name. C.E.T. explained that the transfer is governed by a Delaware statute which requires an endorsement on the certificate and presentation of the certificate for registration of a change in ownership. Wanland did not allege that he presented a properly endorsed certificate to C.E.T. for transfer of registration. Thus Wanland failed to state the conditions precedent to both his right to a transfer of a certificate, and C.E.T.'s duty to transfer it. C.E.T. went on to explain that it is required to treat Thompson, the registered owner, as such until plaintiff presents the certificate, properly endorsed, for registration of the transfer. As a result, C.E.T. moved to have count three stricken for failure to state a cause of action.


Under 58-401 of the Delaware Uniform Commercial Code-Investment Securities, C.E.T. has a duty to register

a transfer of ownership of a security in registered form only upon satisfaction of several conditions including presentation of the security to C.E.T. with a request to register transfer. Not only did Wanland fail to allege that he presented the certificate in question to C.E.T., but he also admitted at oral argument that he never presented the certificate to C.E.T. during the period he held it. Thus, notwithstanding any question of proper endorsement, one condition precedent to C.E.T.'s obligation to transfer ownership of the shares represented by the certificate was not satisfied. Furthermore, under 58-207 of the Delaware Code, C.E.T. has the right to treat the registered owner as the person exclusively entitled to vote, receive notifications and otherwise exercise the rights and powers of an owner prior to due presentment of a security in registered form for registration of transfer.


In his complaint, Wanland alleges that Thompson has refused to return the certificate in question. As long as Thompson continues to possess the certificate, plaintiff will be unable to comply with the presentation requirement of 58-401 of the Delaware Code.