71 A. 583 | Conn. | 1909
Mary F. Bishop, as the life beneficiary of one of the trusts created by her mother's will in a one fifth share of the latter's estate, claims to be entitled to receive in her own right one fifth of both the Adams Express Company bonds and the Westinghouse Air Brake Company stock which came into the hands of the executors as original issues, whether or not they are to be regarded as income of the testatrix's estate in that sense which would entitle her as life tenant to share in their division. William D. Bishop, the life beneficiary of the trust similarly created in another one fifth, asserts a like claim. These two join with the cestuisque trust under the third trust created by the will, in asserting that the Express Company bonds are to be regarded as income of the testatrix's estate in which they are entitled to share pursuant to the trust provisions of the will regulating the appropriation of income.
The first of these two claims rests solely upon the language of the will, which, in the case of the two life beneficiaries first mentioned, provides that the trustee in the one pay over to the life tenant "the net amount of the increase, income, profits and interest" of the share, and in the other "the net increase, income, profit and interest." An examination of the will shows that the testatrix, in seven different places in it, used language descriptive of the interest of life tenants, and that five different forms of expression were employed by her for that purpose. Twice it is simply "income"; twice "net income and profits"; once "net income, profits and interest"; and once each the phrases already recited. In the directions to the executors as trustees, they are directed to collect "the income, profits and interest" of the fund in their hands; in those to the Knickerbocker Trust Company, it is directed to collect "the increase, income, *525
profits and interest." In the case of each of the two trusts in question, in respect to which the more extended phraseology is used, the testatrix describes that which is given to the life tenants as "the life use" of the trust fund. The testatrix's general scheme for the bestowment of her bounty evidences a distinct purpose to treat her five children and their children with equality, except so far as she was led to create ordinary trusts with respect to two of them and a spendthrift trust with respect to a third, with the natural incidents of such trusts. Wolfe v. Hatheway,
The second claim resolves itself into two propositions, to wit: (1) that the life beneficiaries under each trust are entitled to the benefit of one fifth of the net income of the testatrix's estate from the time of her decease, and (2) that the Express Company distribution partook of the character of what is called a cash dividend, and is therefore to be regarded as income.
"It is well settled in this State, as it is in many other jurisdictions, that `where there is a bequest of the whole, or of an aliquot part, of the residue of an estate to a legatee for life, remainder over, and no time is fixed by the will for the commencement of such life use, the legatee is entitled to the use or income of the clear residue so bequeathed, as the same may at last be ascertained, to be computed from *526
the death of testator.'" Webb v. Lines,
Preliminary to the question involved in the second proposition, is one as to the character of the Express Company. It was organized in 1854 under the statute laws of New York as a joint-stock association. It is an association of individuals in the nature of a partnership and possessing the element of personal liability. The courts of New York have apparently had difficulty in defining the exact status and character of associations similarly organized. They have, however, said that almost the full measure of corporate attributes has been bestowed upon them until the difference, if there be one, is obscure, elusive, and difficult to see and describe. People ex rel. Winchester v. Coleman,
The general rule, subject, perhaps, to possible exceptions, is that persons having a right to the income of trust funds invested in stocks are entitled to the enjoyment of those dividends declared by the directors of the respective corporations which partake of the character of cash dividends, not including, however, those which may be so declared in the process of liquidation or reduction of capital, and that their rights are limited to such dividends. Smith v. Dana,
In the present case what the stockholders received in hand was the bonds of the corporation — its obligations, therefore, and not its assets. A money dividend declared creates a debt. Beers v. BridgeportSpring Co.,
But the life tenants contend that the bonds are only one feature of a larger transaction, which must be looked at and judged as a whole. And they say that when the action of the Company which involved the issue of the bonds as one of its incidents is examined in its entirety and with a correct appreciation of the interrelation of the bonds and their collateral, and of the rights of the parties created by the trust indenture, it will be found that it presents all the essential characteristics of a distribution of surplus assets such as satisfies the requirements of a cash dividend. Certain of the provisions of the trust instrument are pointed out in support of this position. The remaindermen, on the other hand, indicate several of its features as affording a demonstration that no asset of the Company has been set out to become the property of shareholders, and so aparted from its general assets as to pass out of its dominion and control into that of the shareholders. They insist that under the agreement there is no item of the Company's assets concerning which it can be affirmed that shareholders now have or ever will have any control over it or property in it, or now have or ever will have a right to the proceeds of its sale either directly or indirectly. It requires no very careful examination of the trust deed to appreciate the force of this contention. But there is no occasion to pursue the line of inquiry thus suggested and thus cumulate reasons, since it is clear that there is nothing in the deed which serves to qualify or limit that provision of the bonds already noticed which makes them payable, in case of need, out of *530 any of the Company's assets and thus a contingent charge upon all such assets down to the last penny of them. This condition being present, it cannot be said that the Company's action which brought the bonds into the hands of the stockholders was one in the nature of the declaration of a cash dividend.
Counsel for the remaindermen have attempted to fix the character of the transaction. It is suggested that it constituted either a reduction of capital and a return of a part thereof to the stockholders, or a capitalization of certain of the Company's assets by the virtual creation of preferred stock. Another pertinent query would be whether or not it was anything more than it purported to be upon its face, to wit, an issue of the obligations of the Company secured by collateral, with certain unusual provisions as to rights in respect to the collateral and its appropriation reserved to the assignor or granted to the trustee or the bondholders. We, however, have no occasion to enter upon any of the lines of inquiry thus indicated. It is immaterial to the claim of these life tenants what the essential character of the transaction was, provided it was not the declaration of a cash dividend.
As the life beneficiaries are entitled to share in the net income of the testatrix's estate from the time of her decease, the administration account filed October 14th, 1907, in which there was no separation of principal from income items, is inadequate for all purposes. It serves to disclose the total amount of the estate and income funds in the hands of the executors, but does not reveal what of that total is to be regarded as principal and what net income. A correct adjustment of the rights of the parties requires the ascertainment of these two factors of the total funds in hand, the first for the purpose of the division and distribution under article two of the will, and the second for the disposition of net income. To this end a separate accounting as to principal and income is necessary. In such *531 an accounting the Connecticut succession tax and New York State tax are properly chargeable to the principal account. The item for taxes paid to the city of Bridgeport is chargeable to the income account.
As the one hundred and six shares of the Air Brake Company stock form a part of the principal of Mrs. Bishop's estate, it is apparent that the division made of that stock proceeded upon a mistaken theory and resulted unjustly to the Russell T. Bishop share, and too favorably to the other shares.
The partial distribution of personal estate filed January 28th, 1908, is to be interpreted as setting out to the Connecticut Trust and Safe Deposit Company, as trustee of the two shares of which Mary F. and William D. were the respective life beneficiaries, the items of property enumerated in the schedule of property assigned to each of these shares, including the Adams Express Company bonds, subject only to the condition attached to these bonds, that they be not judicially declared to be income. As that condition must fail, the transfer of the title to these bonds is to be regarded as having been equitably complete, carrying with it the right of the life tenants to enjoy the income thereof which has accrued since the date of the distribution.
The Superior Court is advised to render its judgment of advice that both the one hundred and six shares, new issue, of the capital stock of the Westinghouse Air Brake Company, and the $40,000, par value, of Adams Express Company bonds, form a part of the principal of Mrs. Bishop's estate; that the language of the trust provisions of her will whereby income is disposed of in favor of life beneficiaries comprehends the just proportion of the net income of her estate from the date of her decease; that the distribution of January 28th, 1908, was effective to set out to the Connecticut Trust and Safe Deposit Company, as trustee, the Adams Express Company bonds therein alloted to the two shares of which Mary F. Bishop and William D. *532 Bishop are the respective life beneficiaries; that these beneficiaries are entitled to the income which has accrued thereon since said distribution was made; and that the sum of $1,405.37 paid by the executors to the city of Bridgeport for taxes is to be charged by them against income, while the sums of $3,722.22 and $1,281.27 paid to the States of Connecticut and New York, respectively, are to be charged against principal.
No costs in this court will be taxed in favor of any party.
In this opinion the other judges concurred.