137 A. 20 | Conn. | 1927
Phineas C. Lounsbury died on June 22d 1925, at Ridgefield, in the State of Connecticut, his last place of residence. He left a will executed on February 8th, 1921, and a codicil thereto executed on December 4th, 1924. By his will and codicil he bequeathed to certain of the defendants, exclusive of the residuary bequests, legacies totalling two hundred and ten shares of the capital stock, in the Preferred Accident Insurance Company out of five hundred; in the Worcester Salt Company ninety out of two hundred; in the West Virginia Pulp and Paper Company twenty-nine hundred and twenty-five of the common stock out of thirty-two hundred and about seven hundred and thirty-one shares of the preferred stock out of eight hundred, owned by him at his decease. He had been for a long time, and continued to be until his decease, a director and vice-president of the Preferred Accident Insurance Company and owned two hundred and seventy-five of the seven thousand shares of its capital stock. On April 18th, 1922, the company *22 declared a dividend payable in stock of the Atwood Fire Insurance Company which it owned, and Mr. Lounsbury received as his share one hundred and thirty-seven and one-half shares of the par value of $50 each, which he continued to own at his decease. On December 13th, 1922, the company increased its capital stock and declared a stock dividend payable in the increased stock, Mr. Lounsbury receiving as his share two hundred and seventy-five shares, making at this time his total holdings, five hundred and fifty shares, of which he owned five hundred shares at his decease; he had prior to his decease made a gift of forty shares to William H. Griffith, one of the residuary legatees. At the date of his will the market quotations of this stock ranged from the bid price, $475, to the asking price, $525. After the stock dividend, the bid price for the stock fell, in January, 1923, to $250 a share; the bid price shortly began advancing until, at Mr. Lounsbury's decease, it had risen to $600 a share. At the date of the codicil, December 4th, 1924, the market quotations ranged from $530 to $575 a share. Dividends of twenty-five per cent upon this stock were paid from 1916 to 1923, and in addition, in 1922, the stock dividend in the shares of the Atwood Fire Insurance Company; in 1923 and 1924, the dividend was eighteen per cent. The market quotation of the Atwood Company stock was on April 25th, 1923, at the time the testator received the one hundred and thirty-seven and one-half shares as a stock dividend, $98 a share; on December 4th, 1924, the date of the execution of the codicil, and at the date of the decease of the testator, it was $100 a share. On February 8th, 1921, Mr. Lounsbury was, and until his decease so continued, a director and the treasurer of the Worcester Salt Company and the owner of one hundred shares of its stock. On December 31st, 1922, through a stock *23 dividend, he received one hundred additional shares, making his holdings two hundred shares; these he owned at the time of his decease. The market value of the stock at this time was $95 a share. At the date of the execution of the will it was $100 bid, $105 asked; at the date of the execution of the codicil it was $94 bid, $100 asked; and at the date of the stock dividend it was $140 bid, $148 asked. On all of the dates we have referred to, Mr. Lounsbury had knowledge of the corporate action in relation to the declarations and payments of all of these stock dividends and possessed a general knowledge of the financial condition of both the Preferred Accident Insurance Company and the Worcester Salt Company, and was acquainted with the approximate prices in the market of their stock. The West Virginia Company increased its capital stock by the creation of six per cent cumulative preferred stock of the par value of $100 a share, and through its directors caused to be distributed to their common share stockholders a portion of this increase as a stock dividend, which gave Mr. Lounsbury eight hundred shares of the preferred stock which he held at his decease.
The clauses of the will comprising the several bequests of these stocks are in their terms mere bequests of stated numbers of shares of stock of these corporations and, if their terms are regarded apart from the other provisions of the will and codicil, must be held to be general legacies. Fidelity Title Trust Co. v.Young,
The owner of stock in a corporation has an interest in the assets of the corporation in the proportion his share of the capital stock bears to the entire capital stock. When an amount of cash or property equal *25
to the par value of the stock, has been taken from the surplus of the company and added to the capital, a stock dividend may be legally declared and paid to stockholders proportionately to their stock holdings. "The profits . . . until separated from the stock by declaring a dividend, are mere increment and augmentation of the stock." Phelps v. Farmers MechanicsBank, supra. The beneficial interest in the surplus as a part of the assets of the company belongs proportionately to the stockholders subject to the payment of its debts, and their proportional share vests in the specific legatees of the stock. When the whole or any part of it is distributed to the stockholders by way of a cash dividend, they are given their proportional share of the distributed surplus. When it is distributed to them as a stock dividend, it merely increases the number of their shares without augmenting their interest in the assets of the company. Boardman v.Mansfield,
Then the specific legatees point to the inequality of the testator's bounty, if the claims of the residuary legatees should prevail, favoring, they assert, in overwhelming manner one niece and her husband above his other nephews and nieces and two worthy charities. The will itself, read in connection with the inventory of Mr. Lounsbury's estate, shows that he did regard these residuary legatees with higher favor than the specific legatees who make this claim. If all of their contention were upheld, it would still be true that the residuary legatees were given by the testator a far larger amount of the testator's estate than any other legatees, and in the codicil he inserted a provision to carry his bounty to them to their children in the event of their predeceasing the testator. Whatever weight these may have in the ascertainment of the testator's intention, they would appear to support the conclusion *29 which favored rather than disadvantaged the residuary legatees.
The specific legatees have failed to show that the testator intended these specific legacies to carry with them stock dividends distributed to the testator between the date of his will and his decease. The ascertainment of the testator's intention upon the points in controversy need not be rested upon presumption. Standing by itself, we should be unable to hold that the will expresses any clear intention on the part of the testator as to what disposition should be made of a stock dividend distributed between the date of the will and the decease of the testator. The codicil, executed nearly four years after the execution of the will, removes, as we think, any possible doubt as to the testator's intention. To each of the specific legatees the testator had bequeathed certain shares of stock of the West Virginia Pulp and Paper Company. The board of directors of this company, on November 25th, 1924, adopted resolutions recommending to the stockholders an issue of six per cent cumulative preferred stock and that a stock dividend be declared payable in the preferred stock at the rate of one share of preferred to each four shares of the common. The notice was duly sent the stockholders. The testator was a director and had personal knowledge of this proposed plan; after the action of the directors and before that of the stockholders, he caused to be drawn a codicil to his will which he executed nine days after the action of the directors. The first section of the codicil is as follows: "FIRST. In said will I have made certain bequests of the capital stock of West Virginia Pulp Paper Company, a Delaware Corporation, hereinafter referred to as `West Virginia Company.' The directors of said Company have recommended that a stock dividend of six per cent preferred stock to be paid to *30 holders of common stock in the ratio of one share of said six per cent preferred stock for each four shares of common stock held. In the event that said preferred stock dividend shall have been paid and received by me prior to my death, or by my executors after my death and prior to the distribution of my estate, then and in that event I wish and direct that all the legacies of common stock of said West Virginia Company given and bequeathed in my said will be increased so as to carry with them the corresponding amount of said new preferred stock that may be received as a stock dividend; and the respective quotas of such preferred stock dividend I give and bequeath to the several legatees respectively who receive the common stock. In the event that the quota of any legatee should include a fractional part of a share of such preferred stock received as a dividend, I hereby authorize, empower and direct my executors to increase each of such legatees' bequest to a whole share."
The testator's share of the proposed preferred stock issue would be eight hundred shares, sufficient to make their disposition of immediate concern to him as well as to the specific legatees. He was a man of very considerable business experience and familiar, by daily usage, with corporate finance. The phraseology indicates, unquestionably, that it was drawn by a competent legal adviser. It specifically provides for the distribution of the preferred stock proportionately among the legatees, exclusive of the shares bequeathed in the residuary clause, to whom his will had made bequests of twenty-nine hundred and fifteen shares of the thirty-two hundred shares of common stock owned by him. Undoubtedly this reflected his belief that his will did not provide for such a distribution. His solicitude is manifest in his making the codicil in advance of the action of the stockholders in declaring *31 the stock dividend. It evidences that both the testator and draftsman had before them the will at or about the time the draft of the codicil was made. The specific legatees of the Preferred Company and the Salt Company were also legatees of stock in the West Virginia Company. The testator held official position in these companies and was a large stockholder in the first and a substantial stockholder in the second. The stock dividends in these companies were declared before the execution of the codicil. The fact that the testator executed this codicil signifies his belief that it was required in order to give to these legatees a proportional part of the proposed stock dividend of the preferred stock of the West Virginia Company. It also signifies that he did not intend by the specific legacies in his will of shares of stock of this company to include the shares of preferred stock which might subsequently be declared. The inference is also inescapable that the testator believed that the specific legacies of the shares of the Preferred and Salt companies stocks would not carry stock dividends subsequently declared by these companies. Had he believed otherwise he would in the codicil have made the will to conform to his intention. The fact that he did not so provide is an almost certain indication that he did not intend that any of these specific legatees should share in stock dividends declared subsequent to the execution of his will. The codicil discloses the intention of the testator at the time of its execution; it also discloses, as a necessary inference, that he did not intend to express in his will a contrary intention. The terms of the will too show that he did not do so.
The specific legatees attempt to avoid the inevitable inference of the testator's intention in the making of the codicil by pressing the proposition that there is a distinction between a stock dividend of common shares *32
and one of preferred shares, that is, the specific legacy of common shares would carry shares in a stock dividend of common stock, but not in one of preferred stock. If this distinction were sound it would follow, in the absence of the codicil, that the legatees of the shares of the West Virginia Company would receive no part of the stock dividend in the preferred shares, while the legatees of the stocks of the other two companies would share in these subsequently declared stock dividends and thus have had their holdings in these companies doubled. The argument as to the common stock which we earlier developed is equally applicable to the preferred stock. A rule of law which sustained the distinction these legatees advance would conflict with the ordinary business experience and business judgment. We know of no instance where such a distinction has been adopted and we think it intrinsically unsound. The codicil concludes: "THIRD. Except as herein specifically modified, I hereby confirm, republish and redeclare my said will of February 8, 1921." In law this was a republication of the will. Codicil and will then became "expressions of a single testamentary act" as of the date of the codicil. The republication was as though the will had been "rewritten, re-executed, and republished at the date of the codicil." Shey's Appeal,
Since the only modification of the will in the codicil was as to shares of stock of the West Virginia Company, it follows that the republication of the will subsequent to the distribution of the stock dividends in the Preferred and Salt companies stocks is a declaration of the testator's intention that the specific legatees of the stocks of these companies are to receive the *33 number of shares specified in the will and in the possession of the testator at his decease. Since the intention of the testator to give the specific legatees any share in subsequently declared dividends cannot be found in the will, its republication reaffirms the intention expressed in it; it does not indicate a contrary intention. The testator continued to hold substantially the entire stock dividends declared in the stock of these two companies until his decease and in all that time left his will unchanged as to the specific legacies of stock in these companies. The fact that he had the opportunity to change his will in this particular and did not, is persuasive evidence that he did not intend such an end. Whatever inference might be drawn from an inequality in the value of the legacies at the date of the will and the date of the testator's decease, redounds in this case to the advantage of the residuary legatees; the shares of the Preferred Company were in excess, while those of the Salt Company were somewhat lower, in value at the decease of the testator than at the making of the will.
The remaining question, as to whether the specific legatees are entitled to their proportional share of the shares of stock of the Atwood Fire Insurance Company which were received by the testator as a dividend upon his stock in the Preferred Accident Insurance Company, is determined by the principle earlier stated. Dividends paid in shares of stock of other corporations taken from the surplus are in legal contemplation precisely the same as cash dividends.Union New Haven Trust Co. v. Taintor,
The Superior Court is advised that we answer question one, no; question two, that the defendants are entitled to receive the number of shares of the Preferred Accident Insurance Company stated in said will and *34 codicil, and no more; question three, that the defendants are entitled to receive the number of shares of the Worcester Salt Company stated in said will and codicil, and no more.
No costs in this court will be taxed in favor of any of the parties.
In this opinion the other judges concurred.