181 Ga. 116 | Ga. | 1935
The corporation first referred to in the -headnotes is Southern States Phosphate and Fertilizer Company. The second is Pope & Fleming Incorporated. There is no controversy as to the second check for regular periodic dividend
The principal question presented turns on a construction of the will of Porter Fleming, who died on February 13, 1926. After his death his estate was appraised at $793,292.64, and his holdings in the fertilizer company and in Pope & Fleming Inc. amounted to more than half the total value of the estate. The first-named stock was appraised at $175 per share, and the latter at $200. The disbursements now in question reduced these values to $150 and $100 respectively. Porter Fleming’s will bequeathed his entire estate to the plaintiffs as executors and trustees, who were directed “to distribute the net income of my estate during the lifetime of my wife, Daisy Berry Fleming, as follows: 60 per cent, to my said wife; 20 per cent, to my son, Berry Fleming; and 20 per cent, to my daughter, Elizabeth Berry Boardman.” At the death of the wife the trustees were directed to convey in fee simple to the son one half “of niy estate remaining at that time,” and to hold the other half in further trust for the daughter during her life, with remainder at her death to any child or children she might have. The will created no life-estate in the property itself. The full legal title was conveyed to the executor-trustees. Mrs. Fleming’s beneficial interest was in 60 per cent, of the income, and during her life the beneficial interests of Berry Fleming and Mrs. Boardman also were in income only. The distributions here involved occurred after the death of Porter Fleming and before the death of his widow. The questions therefore are, were these distributions “income,” or were they not? What did the testator mean to include in the word “income” when he used it in his
After careful consideration of the terms of the will and of the unusual nature of the payments by the companies, we think the latter supposition as to the testator’s intent must be adopted. The will as a whole shows a preference, for the testator’s own blood line, a desire for adequate protection of his wife and children during the widow’s life, and then a distribution, without serious or abnormal depletion of the capital value of the estate as it existed at the testator’s death. It is obvious at once that should any other view be adopted, a heavy inroad would be made in the value of the corpus of his estate, and a serious diminution, during the wife’s life, in what at her death would be left for his children. 'We do not believe he intended that. Illustrating what we have in mind, suppose these stocks, by reason of accumulated profits and conservative dividend policy, had been worth $1000 a share at the time of his death, and suppose that shortly thereafter the companies, through some fear of a threat of a heavy-tax on undivided profits, or for other reason, had directed a disbursement of $900 per share out of surplus. Suppose the testator’s estate had consisted of no investments other than these stocks. By such corporate action and the disbursement of the money under the income clause of the will, the corpus value of the estate would be cut to one tenth of its value at death, and that would be all the children could receive at termination of the widow’s life. And the widow would have taken, without restriction, 60 per cent, of this corpus reduction. We can not believe the testator had in mind any serious diminution of asset value when he used the word “income.” In considering the meaning of the word “income” as used in the will, we deem it unprofitable to look up the term in Words & Phrases or in law dictionaries. We think it unlikely that the testator so investigated judicial applications of the term before he used it. We think it most probable that he employed it in its common, ordinary meaning, and that his use of it did not contemplate such an extraordinary disbursement of surplus assets as
In any case where a life-estate and remainder exist, and a dividend is declared on stock held by the estate, the question arises as to whether the dividend belongs to the life-tenant or should be regarded as corpus to be finally distributed to the remainderman. On the general subject the courts of the United States are in conflict. Two rules have arisen, one of them being usually referred to as the “Massachusetts rule,” and the other the “Pennsylvania rule.” For an interesting discussion of the two, see'14 C. J. 839-834. It is generally considered that Georgia has committed itself to the Massachusetts rule, and it has been stated that that is the substance of § 85-605 of the Code of 1933. This is an old section, and it appears in the first Code of Georgia in language in all essentials identical with that of the present Code. “The natural increase of the property shall belong to the tenant for life. Any extraordinary accumulation of the corpus — such as an issue of new stock upon the share of an incorporated company — shall attach to the corpus and go with it to the remainderman.” But whatever be the divergent views of the several courts as to the general rules to be observed, it has been noted (14 C. J. 839) that they all agree on one proposition; they all expressly or impliedly recognize that the question whether a distribution made by a corporation during the existence of a life-estate is to be regarded as income or as cápital is primarily one of construction, a question of the intention of the creator of the trust. And we may add that a consideration of this primary question must always be had in the light of the particular nature of the distribution in question and the circumstances under which it was made. We do not deem it necessary here to enter on an extended discussion of the Massachusetts and Pennsylvania rules. They have been before the courts in scores of eases, and have been elaborately treated in all the text-books on corporations. Our own court has on several occasions considered and contrasted them. See, as instances, Jackson v. Maddox, 136 Ga. 31 (70 S. E. 865, Ann. Cas. 1912B, 1216), and McHenry v. McHenry, 152 Ga. 105 (108 S. E. 522). We may grant that Georgia has pursued the policy of applying the Massachusetts rule to all cases which clearly presented the situation
It has often been said that as all wills differ, each is a law unto itself and must be construed according to its own terms. See Cook v. Weaver, 12 Ga. 47, 50; Sumpter v. Carter, 115 Ga. 893, 896 (42 S. E. 324, 60 L. R. A. 274); Smith v. Bell, 6 Peters, 68, 80 (8 L. ed. 322). Decisions in other cases are therefore rarely of controlling or even great .importance. In any given case the question is not so much whether a rule adopted by one State is better than that adopted by another State, but rather what, under the terms of the particular will before us, would be the true intent of the testator as to the particular state of facts which has arisen? What are the facts here presented, and what are the terms of the will before us? It is clear that neither the distribution by the fertilizer company nor that of Pope & Fleming was a “dividend” as that term is ordinarily used. The payment from the fertilizer company was not even called a dividend, but was definitely stated as “a partial distribution of the surplus now in the treasury of the company, . . and heretofore treated as a part of the capital stock of the company.” It was, then, a payment out of capital. Is it not clear that it should be classed as a stock dividend, even though paid in cash? The distribution by Pope & Fleming occupies the same legal status as that of the fertilizer company. There also the payment was to be as “a partial distribution of the surplus now in the treasury of the company, accumulated in‘years prior to the first day of March, 1926, and heretofore treated as a part of capital stock of the company.” And the resolution added that it “was entirely independent of the usual annual dividend and separate from any dividend that may be declared out of earnings for the year” March, 1926-March, 1927. As the testator died on February 13, 1926, all the disbursement by the fertilizer company, and all except part of one month of that of Pope & Fleming, had been accumulated before his death. Is it not true, therefore, that at the date of his death he.considered that his share of the accumulated and undivided profits of these concerns were parts of the corpus of his estate? And when in his will he directed the trustees “to distribute the net income of my estate,” did he not clearly mean to include only the income, and not any part of the corpus, of these corporate assets which at the time of his death had not been given to the stockholders but which were represented
Stress is laid by counsel for defendants on Millen v. Guerrard, 67 Ga. 284 (44 Am. R. 720). In that case the will left certain railroad stock in trust, the income to be paid to a life-tenant. It was held that dividends, whether in cash or in certificates of indebtedness, Were a part of the income and went to the life-tenant. Headnote 2: “Dividends, whether in cash or bonds or certificates of indebtedness, are the natural increase of stock, and not an accumulation of the corpus; nor is this affected by the fact that no dividends are declared on the stock for some time, and when they are declared the amount is unusually large. Therefore such dividends belong to the life-tenant and not to the remaindermen.” The dividends involved in that case were declared on June 1, 1881. They consisted of a certificate of indebtedness for $40 a share by the Central Eailroad and $32 by the Southwestern Eailroad. In the decision they were treated as cash. It appears that during the general depression of 1873-1877 the Central had found it necessary to withhold all dividends, but as prosperity returned it was considered that these disbursements were justified. This court said: “These dividends could not be so used as to increase the corpus, and hence the directors declared the dividends, and gave them to the stockholders as dividends, and not as corpus.” In the ease at bar the resolution passed by the fertilizer company expressly stated that it was “a partial distribution of the surplus,
While it is of interest to note that here all the disbursement made by the fertilizer company had been earned and accumulated prior to Porter Fleming’s death, as was also all the disbursement of Pope & Fleming Inc., except possibly for a few days, we are not now concerning ourselves with either the so-called Pennsylvania rule or the Massachusetts rule. Paraphrasing the language of the court just quoted from Millen v. Guerrard, we may say, that, no matter what may be the law in respect to other cases, in this case and under this will these corporate disbursements were corpus and not income. In our opinion the cash here involved is in the same legal position as were the new shares of stock involved in Jackson v.
We have carefully considered every point made by defendants in their briefs and all the authorities cited. We find no decision which requires a conclusion other than the one we have reached. We do not deem further detailed discussion necessary.
What is said above disposes of the main question, and leaves only a few minor points to be considered. Several grounds of the demurrers of defendants were sustained. To the rulings on some of the points the plaintiffs filed exceptions pendente lite. One point sustained attacked the bill as multifarious. The exception to this ruling is well taken. The court erred in sustaining this ground. There was a common nexus. Equity seeks to do full justice; and having all the parties before it, the court should have decided all questions presented, and thus avoid a multiplicity of
In the bill of exceptions we find a motion to strike certain portions of the answers, and an amendment to this motion. The order on this motion contains no ruling adverse to the plaintiffs, and the bill of exceptions presents nothing in this connection for the reviewing court to pass on.
The court below should, in the light of what is said above, now inquire into and determine all questions made by the pleadings which have not thus far been decided. Among other items the amount of fees to be allowed counsel for the plaintiffs in this litigation should be fixed, and it should be determined what interests should bear these expenses.
Judgment reversed, with direction.