A man executed his will in 1998, leaving his wife their home, his vehicles, and some cash. He left the remainder of his estate—including stock in AFLAC, Regions Financial, and Southern Company—to two adult children from his first marriage, who were also his executors. In June, 2003, the man, already suffering from dementia, had a stroke. In August, his wife took him to an AFLAC office and had him sign a form assigning the stock to her at his death. An AFLAC employee signed the stock assignment form as a Medallion guarantee of the man’s signature. On the same day, the wife took him to Wachovia Bank and directed that his Southern Company stock be put into a joint account in their names. A Wachovia employee signed the transfer request as a Medallion guarantee of the man’s signature. Similarly, in November, a Regions Bank employee signed a stock transfer request as a Medallion guarantee of the man’s signature when his wife arranged for Regions Financial stock to be put into a joint account.

After the man died, the executors claimed that he did not have legal capacity at the time he signed the stock transfer requests, and they brought an action against the corporate entities that guaranteed his signature. The Court of Appeals ruled1 that the Commercial Code in Georgia makes a signature guarantor liable only to persons taking or dealing with a security for losses due to the breach of warranty; it does not allow recovery by the stock owner himself (or his legal representatives after his death). Thus, Wachovia and Regions Bank were not liable to the executors.

However, AFLAC, Regions Financial, and Southern Company had a different role, since they issued the stock that was the subject of the transfers and signature guarantees. The court ruled that a stock issuer is liable for wrongful registration of a stock, and a signature guarantee does not absolve the issuer from the liability, though it shifts the financial risk to the guarantor. In making their case, the corporate defendants had argued that the man was not harmed by the change in ownership status, since he owned the stock until his death. The court disagreed, ruling that the issuer’s conduct deprived the man of the right to decide who should have his property after his death.