185 A. 778 | Pa. | 1936
Argued April 9, 1936; reargued April 27, 1936. The testator, Thomas Hartley Given, died June 19, 1919. His will of October, 1918, gave his estate in trust to his executors, directing that "They shall pay the net income derived therefrom, after the payment and deduction of all taxes, premiums of insurance, expenses and other charges of every nature, to my Sister, Annie Given Kerr, quarterly, during her life, without being subject to her debts, engagements or liabilities, but freed and discharged therefrom, and without the right of anticipation, and upon her death, my executors shall convert said estate into cash, at such times, for such prices and upon such terms as to them shall seem proper, and divide the proceeds derived from the conversion thereof, and the income which may accrue upon said trust estate from the time of her decease, as follows: (a) To the payment of all charges and expenses incurred by them in the execution of this trust." Six-tenths of the remainder was then given to Arthur E. Braun and four-tenths to George C. Moore. The gross estate was over $7,000,000. Mrs. Kerr, the life tenant, died December 6, 1934, and in her will named the Union Trust Company and James R. Sterrett of Pittsburgh executors. After her death the following semiannual dividends were declared on stocks held by the estate: A dividend of $1,250 was declared on December 27, 1934, to the Monongahela Light Power Company stockholders of record on December 20, 1934; a dividend of $11,250 was declared payable to the Monongahela Street Railway Company stockholders of record on the same dates and terms as the foregoing dividend; a dividend of $1,000 was declared *459 on January 4, 1935, to stockholders of the Suburban Rapid Transit Street Railway Company, payable on the same date. There was another dividend in the amount of $216,562.50 on the "A" preferred stock of the Radio Corporation of America, consisting of cumulative and unpaid dividends, payable quarterly, for the period April 1, 1932, to December 31, 1934, which was declared on January 18, 1935, payable on February 19, 1935.
The executors of Mrs. Kerr claimed these dividends under section 22 of the Fiduciaries Act of June 7, 1917, P. L. 447, which provides: ". . . all payments of . . . income, . . . ordividends . . . directed by any will to be made during thelifetime of the beneficiary . . . shall like interest on moneylent, be considered as accruing from day to day and shall beapportioned to the date of the death of such beneficiary." The court below denied the claim, holding that the testator's will controlled the disposition of the income, and that the act of assembly did not apply, since the terms of the will indicated he did not intend Mrs. Kerr's estate to receive any dividends declared after her death.
The question presented by this case is whether the undistributed earnings of the corporations declared as dividends after the life tenant's death are income or dividends during life tenancy within the meaning of the Fiduciaries Act, so that they are to be considered as accruing from day to day like interest on money lent and apportionable as such. The well established principle with respect to dividends is: "It is the declaration of the dividend which creates both the dividend itself and the right of the stockholder to demand and receive it": Fletcher on Private Corporations (Permanent edition), section 5321; Opperman's Est.,
At common law dividends regularly declared were not apportionable: McKeen's App.,
In Waterhouse's Est.,
It is conceded that the act sets up a rule of construction of wills and is not the statement of a rule of law. If the intention of the testator is clear from the will, then no rules of construction are necessary to determine what should be done with the income: Bumm's Est.,
It will be observed here that testator, by his will, did not direct the payment of dividends as such. He directed the trustees to pay the "net income derived therefrom," that is, the earnings from the trust estate as a whole. The income was to be paid as it came in, not before. Income has been defined "as the gain derived from capital, from labor or from both combined": Eisner v. Macomber,
Appellants urge that the dividends accrued in part as income during the life tenancy; that is, undistributed earnings during the life tenancy may be regarded as dividends; and further they may be considered as net income accruing from the estate which is due the life tenant regardless of time of declaration or payment. The will provides otherwise and directs such income or dividends to be paid the remaindermen. It stipulates that upon the death of the life tenant the estate shall be converted into cash, and the proceeds "derived" therefrom and "the income thatmay accrue upon said trust estate from the time of her decease" shall be divided among the *463 remaindermen. It is argued that the court below awarded to the remaindermen not only the portion of this income that accrued from the time of the life-tenant's death as the will directs, but also that portion that accrued up to that time, notwithstanding the statute says "all payments" shall be considered as accruing from day to day and shall be apportioned as "interest on money lent."
The argument does not take into consideration what testator directed to be done. He gave to life tenant all income "derived" from the estate during her life, and to the remaindermen the income accruing after her death. Once the income was paid into the estate, the gross amount was then subject to the payment of all charges and expenses incurred in the administration of the trust. Certainly no income could be "derived" from the estate until received by the trustees, nor could income accrue to the remainder until it was due and payable or received. The words "derived" and "accrued" are used in the will in the same sense — they both apply only where the dividends have actually been paid or declared. He knew what the words "derived therefrom" meant. He used them in disposing of the estate after his sister's death when he directed his estate to be reduced to cash and the proceeds "derived" (received) to be divided. The word "accrue" in the will was used in connection with the remaindermen. The testator was not interested in Mrs. Kerr's heirs or legatees, for he provides that on her death the executors shall convert the estate into cash and divide the proceeds "and the income which may accrue upon said trust estate from the time of her decease" between the remaindermen named. Having provided for Mrs. Kerr for life, he wanted the remaindermen to have all the trust estate, both principal and income, as of the date of her death. Mrs. Kerr's rights and those of her estate ended when she died. The testator said that the "income derived" from the estate during her life should be paid to her, and that "upon her *464
death" the executors should convert the estate and divide the proceeds together with "the income which may accrue upon said trust estate from the time of her decease" between the remaindermen. The testator did not use the word "accrue" in connection with income prior to Mrs. Kerr's death. He did not say that accrued income "earned during her lifetime" was to be paid to her. He used the word "derived," which means received or in a position to be received. To hold otherwise would ignore his purpose. We have defined the word "accrue" to mean to become due and payable. A tax accrues when it becomes due:U.S. v. Woodward,
The case cited by appellants, Gross v. Partenheimer,
Decree affirmed at cost of appellants.