111 N.J. Eq. 191 | N.J. Ct. of Ch. | 1932
The complainant, trustee, seeks the aid of the court in the discharge of its duties under the last will and testament of Chester A. Braman, deceased.
The testator died November 29th, 1928. After legacies of nearly two million dollars, he gave the rest of his estate to the complainant in trust to divide it into equal shares, a share for his widow and one for each of his four children surviving, to pay each the net income of the share for life, remainder over to their appointees by will, and in default of appointment to their next of kin. *192
The residuary estate consists, in part, of ten thousand shares of the Alwyn Corporation, all the capital stock of that company. The two individual executors of the will, with another, as directors, took over the management of the company. The company's business was the buying and selling of securities. The corporation declared a dividend of twenty per cent. out of earnings during the eleven months next following the testator's death; one-half represented income from securities it owned, the other half came from profits on the sales of securities. The profits came mostly from the sales of securities, purchased by the company in the testator's lifetime, but during the eleven months there were purchases upon the sales of which substantial profits were realized. All securities were carried on the company's books at cost. The gross profit for the period on sales, over costs, was $248,184.46. The gross profit over the market value of the securities at the testator's death was $106,254.18; hardly enough out of which to declare the $100,000 dividend, for there were apportionable operating expenses of over $30,000. But that is only of subordinate interest.
The trustee allocated the entire dividend to income. The guardian ad litem for the infants, contingent remaindermen, grandchildren of the testator, objects, contending that so much of one-half of the dividend which represent profits from the company's business after the testator's death, derived from the sale of securities owned by it at the time of his death, should be allotted to corpus, his argument being that, inasmuch as the testator owned all the capital stock of the Alwyn Corporation, the company's tangible assets at his death should, in order to effectuate the testator's intention in respect of income andcorpus of the residuary estate, be treated as assets of the estate, and the profit thereon, part of the profits from the operation of the company by the executors, should be regarded as profit on the sales of assets of the estate; in fine, that the corporate entity should be disregarded.
While we feel that it was the guardian's duty, in safeguarding his wards, to present the question for judicial determination, we do not agree with his conception of the testator's intention. *193
It may well be that had the testator given the assets of the corporation in trust for the beneficiaries of his residuary estate, we might look through the corporate form to carry out the intention, and to reach the conclusion which he urges, that the profits of the post mortem operations of the company were mere increments of the gift of the corpus. It was in such situations that the courts, in the cases he cites, disregarded corporate entity to fulfill testamentary intention. Matter of Bush,
Life tenants are entitled to dividends declared by a corporation from the profit of its business. That is the settled law of our courts from Lang v. Lang's Ex'r,
There is to be no apportionment between corpus and income except in the minor item above noted. The trustee is advised to allocate the dividend to income, modified as indicated.
Decree accordingly.