*1
op
SUPREME
Court
Missouri, Yol. 317. [April Term,
procedure adopted
to the
ant as
complained
and here
on the second
of
point
against
This
trial.
is ruled
appellant.
As we view the
case
trial court committed no reversible error
in ruling upon the declarations of
law asked
defendant.
Inasmuch
appeal may
this second
have arisen from appellant’s misconception
meaning
and
of
effect
our mandate, we
not
inclined to
statutory
enforce the
penalty appeal
urged
vexatious
re-
spondent.
judgment
of the trial
hereby
court should be and is
affirmed.
All concur, except Gantt, J.,
sitting.
not
Joseph
Magnor Hayes
Adele
Sarah
Hayes,
Jerome Hayes, Robert
and Sarah
Hayes,
McCalmont
Hayes,
Ruth O.
O.
Ruth
Hayes, Administratrix
George
of
of
Hayes,
Estate
v. St. Louis
Company
Agnes Hayes
and Florence
Union Trust
Wheeler
Ag
as Trustees
Joseph
under Last Will
Hayes,
M.
Florence
Hayes
Hayes
nes
Wheeler, Marie A.
Rush
Sturges, Thomas
Hayes Sturges
Knight
Appellants.
Sturges,
Sturges,
Division L WILL: Construction: Trust Estate: Intention. In de- Stock Dividends: termining whether upon bequeathed stock dividends to trustees for the beneficiaries, estate to controlling question use benefit of testator’s children are income over to the to be turned merely corpus accretions to of the trust distribution, period be held the trustees until final intention, is the discerned from testator’s actual to be done, the will itself if luminated language that can be will il- but from the by competent concerning and material extrinsic the sub- evidence jects objects bequests, ambiguity may lurk insofar as behind'the provisions written of the will. Capital 2. STOCK Income: Under DIVIDENDS: Collection: Increment. income, provision declaring a will trustees shall collect “said rents, estate, dispose the net income issues and the trust children, everything property” nature a in the from said return collected from the to testator’s the income ac- be credited to trust estate should return, simply capital count, incre- it must to be so credited but ment, and it must be collected. Spend- -: Net Income: Preference for Children: Advancements: trust, residuary placed estate in will thrift the net income therefrom Where the testator’s Trust. equal children and shares to his to be child, surviving stirpes, descendants, per of his last until the death their should then income principal and undistributed directed that and divided descendants living- among grandchildren then and the equally, per stirpes, among might.be deceased, assets were the trust such as company, which later a tobacco shares of two hundred declared the amount thereof to stock to large and issued stock dividend is whether such 'stock trustees, question for decision and the ruled principal, it cannot be that the increments income or constitutes íIayjs« UNIONTRu«t Co. 1!)27] greater testator 'entertained grand- affection for his children than £or his children or remaindermen and that therefore the dividend stock constitutes income, repayment where the will exacted out of of advance- children, exempted ments made to his the final beneficiaries from such payments out of the and threatened with disinheritance any beneficiary provision obviously who resisted the will—a directed at his *2 grandchildren children rather than the three minor the created trust —and spendthrift is a meaning trust. Under such circumstances no can be attached the to aided when words “net give income” other than the law itself them un- would applied to stock dividends. Payment 4. the will ascertain the Money Specie. Ascertained: Where or -;-:-: gives life estate, to beneficiaries the net income a trust to of solido, net income the estate must be looked into and the ex- penses gross receipts; substraeted from the but where the financial condi- preclude tion of the estate does not the distribution of dividend stock ás income, testamentary net and there is no clear direction that installments money, of income shall be a suit based on a contention that the involving dividend stock constitutes income should be treated a case as the specie. title to the stock Corpus: 5. -: Income or Trust Estate: Value. If the trust estate corporate stock, corpus principal consists of the or of of the consists corporate itself, time; given the corporate stock and not value at and if the its through stock held in in value accumulation trust increases the corporate earnings beginning trust, of after the the and if of no declared, corpus, belongs upon are the increase the even a sale whole to the stock. -: -: -: and Beneficiaries. 6. As Between Life Tenants by premium, corporate a a and it realizes Where the stock is sold corporate capital, profit regarded and as the is as an increment to rights to income, measuring the and remaindermen life the beneficiaries corporation. the from stock corpo- Earnings: profits of a The and Consent. 7.-:-: ration assets ration’s corporate from property until severed of the remain the corpo- They to the be transferred as dividends. and distributed thereby declared, the en- but capital dividend and a stock fixed corporation’s au- limit of the exceeds the largement stock of the require the consent capitalization of this State the laws thorized obtained. dividend be to the stock the stockholders outstanding shares New Shares. of Interest: -:-: Units 8. of stock by corporation, conducted as simply interest in the units of are aggregate matters) (in directors, shareholders. some and officers in the cor- represent interest his fractional stockholdings a shareholder money. gives a shareholder The law poration, a investment and not mere being en- issued, that he is the reason right stock for new to subscribe the corporation, the and proportionate interest his maintain titled to rule offsetting net dividend as a stock is issued applies stock where the original by stock represented and therefore previously profits at its earned value. enhanced in no true sense A dividend stock -: Severance. Dividend: 0. dividend. assets the corporate division, from implies a severance A dividend »mong dividend, thereof a distribution and amount of to increasing fixed capital, A stock stockholders. nothing gives corporation; nothing from corporation; it takes the to corpo- in the remains corporate property shareholder; all title to continues the stockholder proportional interest of before, and the ration the same. [A,pril Term, Supreme MISSOURI, OK Vol. COURT giving cor- Estate. Under a will Income: Trust 10. STOCK DIVIDENOS: beneficiaries, porate the income to lifetime stock trustees and therefrom to income, have not severed from are not been stock dividends stock, simply enlargement corporate assets, are an of the corporation, but proportional cannot in interest and without increase beneficiaries, belong claimed to trustees. such but Corpus: Under -: Income or Trust Estate: Massachusetts Rule. required gave them certain to a will which testator the assets trustees income, rents, and dis- of the trust estate issues to collect tribute principal lives, during or children their net income surviving child, corpus descendants, estate, upon their the last the death of trust estate consisted of two hundred shares of and the company de- company, after his death the capital clared stock a tobacco seventy-five per issued to and thereafter stock dividend cent stock, fifty shares of the one stock certificates for trustees the' and hundred itself, corpus principal trust estate is the lifetime beneficiaries cannot distributed to the stock dividend they represent money income, porate from the cor- no severed because assets, an accretion trustees, period final belong distribution until the bequeathed corpus, just original This will. as does the rule, exposes worse hazards income to no the Massachusetts rule, Pennsylvania mismanagement corporate and does does the and mischance than *3 unjust seem more or unworkable. otherwise 384, Corporations, 506, p. J., Corpus-Juris-Cye. 14 C. References: Section 1207, 394, 37; 68; 46; 522, 730, p. 495, p. n. n. Section n. Section Section 47; 1208, 799, 50; 1234, 812, 80; 798, p. p. p. n. Section n. n. Section Section 81; 829, 54; 1260, 831, 76; 1261, p. 832, 1257, p. p. n. Section n. Section n. Estates, 1262, J., 1873, 108, p. 834, 90; p. n. n. 14a C. Section 23. Section 21 68; 40 Trusts, 81, 946, 246, 1041, J., p. p. 48. 39 n. Section C. Section n. 31; Cyc., Wills, 85; 30, p. Cyc., p. p. n. n. 19. n. p. 1790, n. 36. Appeal City Circuit Court of St. Louis.—Mon. Moses Mart- Judge. man, directions). REMANDED (with
REVERSED AND Bryan, appellants. & Williams Gave (1) given special Since the testator “has no upon direction question as what shall he income, to be considered and what presumed power must be to had cor have view the lawful of the earnings poration apportionment over the use and of its to have depend question upon intended that the determination should corporation regard regular action of the with to all shares.” 559; 12 Mahon, Sproule, R., 136 v. S. Bouch v. L. Gibbons IT. 558; 110 397; D’Ooge Leeds, Lehman, 176 Mass. Lamb v. App. Cas. v. corporation (2) right 59. in a The which a shareholder Ohio St. ownership right participate, ac has reason of his of shares is to surplus cording stock, profits to of his of the cor the amount poration dissolution, assets ultimately, on a division and on its remaining Banking payment Bros. Co. after the of its debts. Armour 189; 12; Macomber, 252 Bank, v. National 113 v. U. S. Mo. Eisner 549; Assessors, 3 Wall. Mahon, Gibbons v. 136 Van Allen v. IT. S. 1927] TIay.es v. UNION Trust 1031 573; Plimpton 592; 93 Bigelow, .Fowler, v. N. Y. Tubb v. 118 Tenn. 325; Corporations (8 Ed.). 66; 1 12, p. Cook on sec. Fisher v. Essex Gray, (a) 5 Bank, has stockholder no inchoate legal right earnings profits company of the until the divi legal dends declared. In no have been sense are the individual stock holders the owners of the company. Gib 549; 2 Mahon, bons v. 136 S. U. Beach Private Corporations, sec. 202; Maeomber, 189; v. 252 S. Eisner U. Lamb v. 110 Lehman, Ohio '(b) property St. 59. of a and the shares of stock separate property belong therein are and distinct dif kinds owners, being ferent the first artificial property person —the latter, namely, stock, being prop the shares of —the erty Assessors, of the individual owners thereof. Yan Allen v. Wall. 549; 573; Mahon, 136 S. Bank S. Tennessee, Gibbons v. U. U. v. Shelby County 149; Bank, v. 161 U. Bank S. Illinois National Kinsella, Review, Ill. Greenleaf v. Board of Ill. 660; Fletcher, Mason, Cyc. C. sec. Corp., Trust Co. N. Purdy’s pp.
p.
Corp.,
14 C.
Priv.
sec.
J.
Beach on
p.
799, 801;
(2 Ed.)
(c'i
Morawetz,
Corp.
Priv.
see.
‘‘
capital
Certainly the interest of a stockholder is a
interest and his
They
certificates of stock are but
evidence of it.
show that he
or his
assignors,
remote,
immediate or
contributed
pro
enterprise
corresponding
and that
interest
he is entitled to
whole,
portionate
to have
and business
to the
entitled
at
company devoted, during
corporate existence,
objects,
tainment of
common
to vote at stockholders’
entitled
corporation’s profits if and
meetings,
to receive dividends out
pro
liquidation,
declared, and, in
event of a
to receive
when
paying
assets,
any, remaining after
portionate
share
the net
declared,
has
he
liquidation
or until
creditors. Short
profits from
capital-or
right
any part
no
of either
to withdraw
not to
pertains
contrary, his interest
On the
enterprise.
common
*4
assets, business
indivisible,
to the entire
any
divisible
but
part,
owner
of an
company. Nor
it the interest
and affairs of
legal and
title,
full
corporation has
themselves,
since
assets
’’
189; Gibbons
Maeomber, 252 U. S.
Eisner v.
equitable, to
whole.
Rammelsberg, 82 W.
549; Security
Trust
v.
Mahon,
v.
136 U. S.
at
essence,
a dividend
is,
(d) A
Ya. 701.
company is
part
No
of the assets
all,
opposite.
rather the
but
except paper
fund, nothing distributed
from the
separated
common
value
increase
antecedent
an
certificates that evidence
the accumulation
resulting interest
stockholder’s
in the business
profits
far absorbed
company, withdrawal
for
separate them
impracticable as to render
Lehman,
189;
v.
Lamb
S.
Maeomber, 252 II.
v.
distribution. Eisner
Co.,. 93
Mills
Woolen
v. Charlottesville
59;
110 Ohio St.
Kaufman
Supr&me
oj?
(Joujrt
1032
317. [April
Missouei,
Term.
You
673;
Ya.
Trust Co. v. Mason,
(e)
William J.
*5
Hayes y. UnioN
Tbust
1033
1927]
(1)
language of
the will directs
charge
the trustees to “take
possession
of said rest
my
and residue
collect the in-
(cid:127)
come, rents,
issues and
thereof and therefrom, and after de-
ducting all proper
legal
charges
expenses
incident
management of
said
and the execution of the trusts herein
hereby
dispose
created,
of the net
prop-
income from said trust
erty”
surviving
to the testator’s
children and the descendants of
language
comprehensive
deceased child. This
clearly
a
evinces
intention on
part
of the testator that whatever
inwas
the nature
of profits upon,
of,
fund,
enjoyed
the trust
should
fully
by
Lowry
Co.,
life
v.
beneficiaries.
Farmers L. & T.
172 N. Y.
137; U. S.
224
ITeye,
242;
Trust Co. v.
N. Y.
Robertson v. DuBrule-
tour,
(2)
1034 Term, 317. [April Missouri, Court of Yod. 275; 354; Estate, Foster, Payne, 157 Iowa Miller v. 150 Pa. Sloan’s 176; Brown, 19 Olden, Eq. 258 Pa. Van Brown 368; Doren N. J. v. v. 667; Walker, 407; 72 v. Hol- Eq. N. v. ED. Holbrook J. Walker 68 N. brook, 201; 748; Estate, 180 240 Duffill, 74 N. H. Re Cal. Stokes’ 277; Young, 70; v. 79 N. Atlantic Line Div. Pa. Ballantine J. Coast Cases,.102 (6) question Md. 73. The stock dividends are whether And in Missouri. impression to be treated as is one of income first any not rulings is bound in the cases decided court Supreme by any supreme courts. United States court or the State highest The courts of various considered the States which have question adopted which are at variance have rules construction a:qd other, help. Hite hopeless with and in are of little conflict, each 257; Hite, Ky. Hunt, 179; v. v. N. Y. v. 93 McLouth 154 Soehnlein 330; Lanning'v. 247 Commissioner, 146 Wis. Tax Mass. Soehnlein, right to (7) legal 496, 498. as the has no Inasmuch stockholder have been earnings company until the dividends of the did own necessarily testator declared, it follows earnings Company part of American Tobacco the accumulated earnings at the such did not and do not of his death and that time by appellants part form a cases estate. See cited Brown, 667; Walker, Eq. v. 72 N. Walker v. under Brown J. 3b. 201; Duffill, 407; Holbrook, 68 N. 74 H. Re 180 H. Holbrook v. N. Young, 79 N. J. 748; 277; 240 Pa. Ballantine v. Estate, Cal. Stokes’ 70; Cases, is, 73. stockholder Atlantic Coast Div. 102 Md. The Line And stock- respect, mercy in that at the when the of the directors. any- life receive holder is a mere tenant of that stock he never thing. larger present portion of the testator’s estate ease the dependent stocks, invested the life tenants power therefrom, in their income but.the directors refusing divi- to declare beggar neglecting life tenants these- will, in all the courts follows, justice, dends. It a matter directors every hold that when the cases, opportunity to such seize of the- have declared a dividend out (8) sim- plain, go to The dividend shall the life tenant as income. earnings of logical paid out of ple, dividend, is that rule a stock particularly so corporation, to the shareholder’—-and Hite v. a mere tenant the stock. when that shareholder is life Aiken, 446; Hite, 257; Bryan Cox v. Ky. 86 Atl. Del. v. (9) v. 78 Md. The Ky. 407; Gregg, Thomas Gaulburt, easy and it Kentucky just, application, rule is reasonable intention testator only carry will rule that out evident Ky. Ky. 257; Gaulburt, v. Hite, in this Hite v. Cox case. 446; Hunt, v. N. 407; 154 Y. Bryan Aiken, Del. Ch. McLouth v. Co., v. De 172 N. Yl L'owry v. Trust Robertson Farmers Kernahan, 104 N. Y. Clarkson N. Y. In re Brolatour, Clarkson, Y.) Riggs Crágg, 89 N. (N. Y. 18 Barb. Hayes v. Union Trust 1927] ELLISON, C. This is a suit to construe declared M1,. Joseph will Hayes, who died a citizen and resident of St. Louis on January 14, 1919. plaintiffs children, are three of his to gether with the divorced wife and the widow-administratrix of an other child who died after the institution of the suit. defend ants testamentary remaining living are the trustees and the testator’s grandchildren children and his all latter minors children of —the living daughter. joined praying The answers of all of them construction will. placed
The will residuary trust, the testator’s the net in- equal come therefrom be shares to his children and their per descendants, stirpes, surviving child, until the death of the last *7 when the principal then and undistributed income were directed per living equally, stirpes, among grandchildren divided his then and might the descendants of such as deceased. The trust assets included 200 the Ameri- shares of the common Company. can Tobacco Hayes’s death, May,
About fifteen Mr. months after payable Company per Tobacco a 75 stock dividend Au- declared cent gust Capital B,” out Stock which had all of its “Common non-voting. rights except that ordinary common stock it was Pursuant of the stock were thereto stock certificates for shares September issued and to the trustees. On and Decem- delivered 1, 1920, Company declared respectively, ber and March 1,1923, in per cent, payable three further March dividends of three scrip same Stock B at cer- par, and to the trustees or dividend issued maturity of therefor, tificates At $1050. each the face value of thereby. The certificates the stock called for the trustees received point in controversy scrip and is whether these stock go within life meaning “income” will and as such plaintiffs beneficiaries—as the contend—or whether constitute merely principal accretions to of the trust estate—-as the defendants maintain. It learned chancellor be- was decreed b3>- low charge that with divi- the trustees should themselves the four income, dends as should trust and that stock realized thereon ap- among be distributed the life tenants. The defendants impression first pealed. puzzling question presented is oiie of in this State. counsel, argued and leave ease has been able twice here nine court curiae. There are briefs have filed three a/mici been hun- citing than three
briefs, leading of more to the examination length, which re- authorities, dred some in addition to a record of Company since views the American Tobacco history financial pertaining and thereto. sets out data much statistical Supreme op You. Term, [April Missouri, Court At the it is question outset to be nothing- remembered that more less than one intention, testator’s if discernible actual from by competent the will—illuminated and extrinsic material evi- concerning subjects objects dence and bequests, if and ambiguity insofar respect with lurk thereto behind the written provisions of This inexorably the instrument. rule of construction is State, country in this in all jurisdictions followed and in this- first, far as A proper we know. consideration of the matter leads therefore, scrutiny will itself.
The will is September codicils, dated 1915. There are two 2, 19.17, first November and dated the second December just day month to a providing one before the testator’s death. After making payment debts, etc., 1 for the and in clause clause specific bequest, a small residuary clause leaves the estate to trus- tees, charge “said shall and continues as follows: trustees take and possession income, my said collect rest and residue deducting- rents, and therefrom, after issues and thereof expenses legal charges management proper all incident hereby of created, property said execution of the trusts herein follows, dispose of the net income said requiring .” “said net provisions . . follow a division of Then per stirpes among until his children and their descendants income” surviving directing past and child, last death of the charged against in- “said his children be future advancements to them, provided It is on the death respectively. come” due then surviving un- and accumulated and child “the last *8 equal be trust estate” shall divided income from said distributed among living de- and their grandchildren shares scendants, then the testator’s following stirpes, proviso that in the
per appears charged against shall to child final no advancement distribution child, together respecting directions of with that the descendants distributees, principal or “net of to minor either disbursements be. payments of income” shall that “all this added income.” To nearly equal nearly practicable and as monthly installments as day on convenient. the first of the month as be found by any distributee anticipation will forbids the Clause of net income of or “the principal the trust estate of his share way sale, hy- of bv any of such income” or therefrom installment thereof, pothecation distributive disposal declares such or other subject until ac- distributees the debts of the not be shares shall any them; bequest fe- or tually and that no devise paid over to any or control of subject, any right, interest male lesratee shall husband of hers. 2, 1917, specifies per cent of that-five The codicil of November living to his by children aggregate made testator advancements against annual charged “the annually oi- issue shall be survived iLvyj&S V. W27\ UNION TRUST
net payable income” to such children their descendants, or respec- tively; provides any and further that if child or descendant resist probate of any the will or thereof, codicil same, contest the bequests for such child or thereby descendant shall be annulled. 14-, The codicil of provision December 1918, makes for the wife one of his sons out of bequeathed the “net income” son, during said her lifetime, specified on Except conditions. as modified this and preceding codicil, original will is ratified and confirmed. foregoing summary
From the apparent it is the face the will fails specifically to declare the testator’s intention with reference to regarded whether stock dividends should be or income. will, Dehors the was admitted showing evidence that the testator con- incorporated ducted in St. Louis an wholesale business in woolens, year spending each three four months the East. In 1913 he retired from business. He widower, was a and at the time death two his daughters, .both lived unmarried, with him. Another daughter was married and lived in (then) Boston. His three sons away one, were all business from home, apparently, married single. eight the two Two others children mentioned in will death, died childless before the testator’s and one afterwards. self-supporting; None of children least, gave were at the father monthly each a allowance. He loved all his children. When he realty excluded, appraised nearly died his $630,000, of which seventy per over cent was invested stocks. The estimated value $400,000. personalty in the trust was about The assessed value realtj' slightly $120,000. the trust was over The actual net income year ending August entire trust estate for was $4.1,000 in round numbers. The executors made final settlement and, 15, 1920, apparently, June the trust assets were surrendered to date, gross about trustees neither the income nor éxpenses any given period of the trust estate were in evidence. acquired original when the The record does reveal testator of common stock from which the in controversy shares dividends derived, therefor, or he-paid what the market were value stock at time. large part,
A the record devoted and financial Company from the history American Tobacco time year organization September, 1904, .up Much to'the giving earnings, surplus of tables consists *9 passed year, by' and of each resolutions board of directors obviously impossible go It is the stockholders. into these say it to figures respondents facts in detail. Suffice that lay first, they claim to the whole of two the four advance theories: will, of (b) their'construction (a) stock dividends under “Kentucky rule;” and, designated law as the also a rule of under they contention, their second, part first claim a unsustained Supreme Vol. Term, 1038 [April Missouri, OK OouRT of known as “Pennsylvania under a rule law dividends .the ’1 rule. support was of theory It this second that the statistical evidence gist was introduced. The thereof that when the testator died on January Company surplus 14, 1919, American Tobacco had a surplus that the testator’s death $44,584,333.10; after had in-' August $13,000,000 about on creased from when per was 75 cent stock dividend declared. Inasmuch as this in- the death of the respondents was earned after testator the crease proportion should allotted maintain the shares of com- on stock B received mon four several stock portion surplus dividends, representing earned after the surplus. compared with whole death, as testator’s acquired testator show As the fails to 200 evidence when.the disputed upon (ex which the dividends w^ereearned shares way telling 1918), is no what there in before cept that it wras earning capacity concerning the stock, had formation he making influenced have him far that consideration how may give, incidental information as will; sake but for the n we the stock from the dividends time a table append in 1915: wrote the will he Dividends
Year 1915 cash 20%
1916 cash 20% cash 20% scrip convertible cash 20% B into Stock B, scrip, Stock (10% option.
( cash no (10% cash (10% cash B, Stock dividend of (75% stock B, Stock
( 6% 3, 1, 23 payable B, Stock ( 3% 3, 1, ( payable ( cash, 9% of another ( 4.75% ( cash. 12% full, too statement sufficient, perhaps is a foregoing facts. the wall conclusion our already indicated (a) We testator intention declare specifically does face *10 Hayes v. UNION Teust J with to whether the stock reference controversy are to regarded corpus But respondents income. inasmuch as earnestly urge contrary point view, a the calls for further Profits. They provision discussion. stress that of the will which says: “Said trustees shall . . . the income, rents, collect issues -profits estate) (of deducting proper the trust all after legal charges management expenses incident prop- to the said erty hereby dispose and the of the trusts created, execution herein and property” ours) (italics of the net income from said distribu- the Respondents meaning provision tees. assert is broadened language signifies “profits;” the use of the word and that trust everything way advantage profit accruing to the citing 253-4, Heye, U. S. Trust Co. v. N. Y. They may be E. 645. maintain that trust clause N. therefore profits=gross epitomized equations: in two issues and income, rents, gross dividends; every kind, including income income—ex- penses income. —net (b) may readily admitted, purpose discussion, It for the everything in the trust estate that the nature of a return collected thereof —but it must be should be credited to the income account This return, and it must be collected. simply increment, not question con- answer, not ultimate under raises, but does Income. represent some- stock dividends si¿eration, as to whether merely (the estate), thing actually going to the shareholder thereby swelling only going itself and something except adding to its trust, without corpus augmented yield on from an increased indirectly result thereafter corpus. that the life bene- made, also, on the circumstance
(c) point A children, whereas the remainder- testator’s ficiaries of the trust descendents unborn. perhaps lineal only grandchildren men are greater had, .presumably, is suggested testator It Preference former, an inference and from this for the affection Children, stock dividends. them to receive intended he drawn that light argument, either with this impressed areWe showing the relations evidence will, the extrinsic provisions contrary, itself. On the nature human parties, or between from the repayment of advancements will exacted that fact income, exempted out descendants their children corpus; the payments out fact beneficiaries the final fact that the testator trust; and the spendthrift is a the trust with disinheritance threatened by codicil his death month before obviously di provision will—a who resisted beneficiary grandchildren— minor three than the rather children, at rected the testa to the conclusion point rather considerations all these Supremk op You [April Term, Court Missouri, tor desired the of'the be held inviolate and intact. proof that the improvident children were does not weaken this up conclusion. To sum the matter, whole we are any unable to see thing in will or the extrinsic evidence warrants us in at taching’ to the words “net income” used the trust clauses *11 meaning than give other that- which the law would them unaided applied when subject-matter to in litigation the dividends. —stock inquiry To an point we now direct ourselves. 2. gives The will the beneficiaries life income of the trust net estate. To ascertain income, the net must be to looked (Tuckerman solido Currier, 54 Colo. Ann Pac. Cas- 1914 C, 607) expenses gross receipts-^ subtracted from ^ -^s s*nce admitted the financial condition Money or preclude when suit was did the estate "filed not Specie. income,” of the dividend stock as disbursement “net in direction that testamentary is no clear installments of there since paid money, in we can and shall treat the as shall be case come specie, stock in did the trial court. volving title to the as right stock (a) 3. When the to income lodged holder of a or term separately in the life estate —whether proper intermediary application of through an trust —the or particular estate and reversion dividends between perplexed question which “has the courts of: presents a remainder century,” country England p. for a R. C. L. both this [7 leg’al problem it has been said: “Few Concerning the sec. 266.] greater difficulties, or have called forth intrinsic questions present practical contrariety opinions, as well as of greater of views and ” (N. S.) L. R. A. For . . results . 769.] [Annotation: advanced many and formulas have been survey of theories following: pp. 829-34, 14 C. J. secs. will suffice to refer to p. 17 R. C. L. sec. 1255-63; 289-92, L. sec. pp. C.R. 633, 118 A. S. 14 A. S. R. R. Rep. 264, 54 Am. Annotations: A. 16 L. R. 1218, 35 Ann. Gas. 650, 23 Ann. Cas. 12 Ann. Cas. S.) A. (N. 563, 50 L. R. A. (N. S.) 35 L. R. 12 L. R. A. L. R. 9,R. A. D, 211; 24 A. L. S.) 448.] (N. 510, L. R. A. we shall use term discussion, for convenience subsequent word beneficiaries, and the term referring the life or to “income” or, remaindermen, in this reversioners, representing the “corpus” as reversionary case, interest for the which holds the trust estate ultimate beneficiaries. stock dividends (b) to confined to opinion seems conflict of cap based on wings say, dividends is to
representing eat —that to presumptively traceable actually surplus net italized “wasting” engaged in a earnings. corporations In the case Hayjes V. UNION Tbust Co. \ business, mining 'such as or timber cutting, etc., capital sometimes con regular sumed in operation course of is treated earnings. With exception appears practical there to unanimity proposi on the go tion that stock dividends attributable not to capital through distribution .available unearned —made enhancement assets, liquidation, value reduction .in capital or the p. 291; like. R. L. C. 17 R. L. p. C. J. [7 p. 829; 24 A. L. R. attempting We are now merely to state 92.] general prevailing rules jurisdictions, and are not specific concerned with their soundness or application. regards As stock dividends earnings, based on grown three rules have up, Pennsylvania so-called rule, Massachusetts and Kentucky rule rule. There another called the rule, American but it is little more than classification all opposed doctrine loose Massachusetts rule; combining Pennsylvania parts of Kentucky rules. rule, broadly Under the Massachusetts stated, property cash or belong corpus. stock dividends to R. [17 theory C. L. is that in the case of cash and div 630.] subject
idends there an actual severance of the dividend *12 corporate assets, from the whereas stock dividends involve re only adjustments corporate structure, the the assets remain ing fully the the were before. leading Paine, case is v. 99 103, The Minot Mass. 96 Am. 705, Dec. applying rule, in 1868. In the permit while the courts the decided corporate declaring action in dividend to div characterize is, yet they idend—that whether cash or it be look to the stock— act, form, determining than in substance rather ques jurisdictions: in tion. The rule is followed these United States Connecticut, Georgia, Illinois, Court, Maine, Massachusetts, New Carolina, Virginia Work, Ohio, Virginia, North West and Ehode Island; by raised as to with serious doubt the latter State a com Hospital Island paratively case. Trust Co. v. Peck recent [Rhode 365, 42 107 Atl. ham, R. I. 209.] Pennsylvania distinction cash div 5. rule makes no between The presumption Tt raises set- idends an'd stock dividends. covering corporate stock intended the stock to tlor of a trust only corpus principal to the extent of its book or in ór of the (cid:127) beginning trust. at the The rule therefore al trinsic value any extraordinary earnings, during dividend from declared locates estate, by determining term running of the life or whether the began; former, if or after the trust earnings accrued before basic latter, income; both, corpus; if the to the dividend is it- awarded 37 accordingly. 832, J. R. L. 7 631, C. C. R. C. apportioned is [14 Appeal, 28 leading Earp’s 368, Pa. in L. case decided The 290.] money effect of rule is to make 1857. will seen that the It- Sup. 317 Mo. —66.
1042 [April üuPRifiMRCOURToí' Von. Term, Missouri, dividend-producing beginning value stock at principal estate —rather than the stock itself. Starting premise, disregards from this form of the div tlie rule giving idend and action it that form. The doctrine California, effect in Iowa, Maryland, Minnesota, Mississippi, Hampshire, Carolina, New New Jersey, Pennsylvania, South Ten nessee, Vermont and Wisconsin. states are not com Some of these apportionment mitted to the feature of the rule. Kentucky rule,
6. The likewise, makes no distinction between cash and stock dividends. The time when is declared the dividend stock, is the Any earnings, criterion. cash or or- dinary during extraordinary, declared term the belong regard earning’s to income—without whether prior subsequent beginning accrued C. J. estate. [14 leading Ky. 24 834, Hite, 257, A. L. R. The case Hite 38.] 189, 173, 778, S. W. A. S. R. L. R. A. decided in 1892. The Kentucky doctrine is followed in and Delaware. The Massachusetts rule been courts oth- has criticised some and annotators. It has been char- jurisdictions, text-writers
er
justice.
acterized as a
rule
convenience
not of
On the other
Pennsylvania
hand the
has been
and said
rule
commended
to be
growing
observation,
in favor. This latter
however, seems not
ac-
developments.
Supreme
cord with recent
Court of Ohio in Lamb
437,
Lehmann,
59,
276,
Ohio St.
N. E.
A. L. R.
decided
in 1924, adopted
rule,
the Massachusetts
and in New York the rule
appears
put
1926,
been
into effect
a statute in
both as re-
gards
(Laws
York 1926,
1, p.
chap.
taxation
vol.
New
543)
general personal property
(Laws
law
New York
vol.
p.
chap. 843).
Kentucky
rule was followed New York
(N. S.)
prior
fact;
p.
In
that time.
L. R. A.
to 1913.
until
775.]
[12
year
Osborne,
209 N. Y.
103 N. E.
50 L. R.
Re
(N. S.)
Pennsylvania
adopted.
A.
Ann. Cas.
rule was
Pennsylvania
Speaking
legislative change from
rule to
*13
recently
Appeals
rule,
New York Court of
the Massachusetts
the
39,
243 N. Y.
153 N. E.
41: “The
People Gilchrist,
173,
said in
many complications
in so
and
previously applied
rule
had resulted
practice.
States
obscurities
be almost unworkable
as to
[United
645;
Bourne,
Heye,
120 N. E.
Bourne v.
Trust Co. v.
N. Y.
accountings
elaborate
for
It involved
240 N. Y.
(b) When a issues new stock Another illustration: par—not dividend, above .-asa stock the market value of right subscription purchase—the appurtenant legal of its for par right, the same at valuable stockholders to subscribe for at a or sell the profit, take the stock and sell it can Increment. yet right generally held privilege; 0pft0IL surplus or belong corpus, though premium even due p. C. beginning the trust. R. L. after the profits net earned [17 p. In the same p. 84, 24 A. A. L. R. 632; Annotations, L. R. 458.] realizes corporation and it new stock is' sold way, where the accretion to the regarded as an profit is premium, the rights of life tenants measuring capital and not as income corporation. stock to the income remaindermen [Dickin- holdings can be 132 Atl. These 449, 453, 285 Pa. Estate, son’s 352.] stock, yielding theory than that on justified no capital of the began, is the the trust its value when trust estate. trust, capital of the being true (a) corporate stock funda- can be thereon stock dividends to allocate attempting rule no a cor- relation between peculiar mentally it consults unless sound nature stockholders, and the essential poration and its these, Considering .be dividends. Earnings. (for cases are authority citation witR0ut point) harmony entire *14 SumusiMis or Missomar, Corin’ 317. [April, Von. Term, property remain tlie oí the until severed
from corporate assets and distributed as dividends. Until that time property stockholders have no interest therein. Control of the cor- poration is entrusted to its board of directors, and, necessity they must be left free to deal with the prudent as management exigencies enterprise and the may suggest—so long good as profits may act faith. Net out as div- idends, against rainy day, floating held capital treated as invested in property, or, additional if permanent expansion is desired, profits may corporation’s transferred fixed declared, capital and a stock dividend event, this last if the extension capitalization already exceed the limit of authorized fixed by stockholders, necessary their consent to enlargement of change usually required (14 is 495), certainly O. J. in this State. 10159, 1919; R. 9740, 1923, 362; 1925, S. pp. 315, Laws Laws I"Secs. p. 168; p. Laws In this sense be said a stock 388.] divi- appropriation dend thereto have the sanction of stockholders, themselves, previously contempora- consent, neously given. -Such of the stockholders of the American Company was obtained in Tobacco the instant case.
(b) outstanding shares simply units of interest corporation, its directors, conducted (in officers and matters) some They intangible shareholders. evidence an right participate according to the amount of stock held, the immunities corporation. and benefits of the Banking Bros. [Armour Units of Bank, St. Louis Nat. 690; Mo. 20. S. W. Interest. v. Busch, Richardson Mo. S. W. 7 Words Phrases, & p. (2nd Series) Words & Phrases p. 566.] aggregate words, stockholdings of a represent shareholder his interest corporation, fractional not mere investment money. true, of much That is is illustrated the rule of law to) (already giving right referred a shareholder the to subscribe proportion holdings. new stock to his then One of the reasons assigned therefor that the stockholder is entitled to maintain his propoidional corporation. interest in C. J. 7 R. [14 C. L. Co., Stokes Continental Trust 186 N. Y. 78 N. E. (N. S.) 969; in 12 annotations L. R. A. Knapp v. Publishers Co., Knapp & Geo. 127 Mo. Maynard S. W. v. Doe Co., 356, 370, Run Lead 305 Mo. 265 S. W. The rule applies 97.] great alike whether interest be or small. Where the new stock voting right paramount stock the importance. Where the capitalized stock is issued a stock dividend offsetting net previously earned, already represented and therefore original right value, stock at its enhanced is substantial and of material value. IIayes
1027] v. UhioN Teust Co. *15 (c) A true, stock dividend is not in any sense dividend at all. The latter implies a division, a severance corporate from the assets of the subject of the dividend, and a distribution among thereof the stockholders. v. Crescent Mill Planing Co., 117 App. [McLaran Mo. 40, 93 S. 819;W. p. 798; C. J. 5 Thompson Corpo- Stock (2 Ed.) rations p. 84, see. The issuance of a stock 5270.] Dividend. is, in dividend its analysis, last nothing more than an in- corporation in process cident or bookkeeping. important step The is increasing of corporation. the fixed The out- standing balance, shares of stock are increased to by adding either raising par number their their value. When the stock has par no value, unnecessary. this Nothing seems even is taken from the corporation. Nothing given to the con- stockholders—rather the trary, corporate profits for available theretofore for distribution in permanently appropriated dividends are fixed capital. to its The corporate property title to all in corporation remains as before. same; proportional interest of each stockholder continues the only change is in the corporation evidence his interest in the —(cid:127) is, that the number of his shares of stock is increased and book decreased, correspondingly value share or the face value each toward what his shares of stock is raised to or their intrinsic value was before.’
(d) preceding paragraphs What has in the three been stated recapitulation in such but a what has been better said cases Mahon, Rep. Sup. v. 136 U. S. L. Ed. Ct. Gibbons Eisner, Rep. Sup. L. Ct. 245 U. S. 62 Ed. Towne v. D, Macomber, 252 U. S. 158, L. R. A. 1918 Eisner Income. Rep. 189, L. R. 9 A. Sup. L. Ed Ct. L. 437. 143 N. E. A. R. St. Lehmann, 110 Ohio Lamb in cited same effect are authorities Many well-reasoned integrity is that inescapable conclusion briefs. preserved unless cannot be estate trust capital of the principal trustees, this in corporate stockholders are the who appellant stock rights individual legal that same case, be accorded say stock dis To hesitation. without conceded be would holder away from them and taken shall be dividends in stock tributed trust estate deprive the is to beneficiaries to the life turned over of which disaster interest proportionate —the were this case stock if. the 51% apparent, would had stock voting aof stock will, his provided have so might The testator rights. similar income” “net direction mere but, unless the. not he construed, did be so can life beneficiaries construe forbid law analogies logic do :.and SupRbme [April Term, Court Missouri, oe Vol.
tion. The nothing “income,” has come in corporation. to the trust being the sense of severed from the (a) briefly,- Glancing, at the criticisms of so-called Mas- sachusetts rule, raised in a number of cases. It has been said that application corporations rule allows the directors jurisdiction usurp corporate courts, permitting action judicial investigation instead of to determine what Massachusetts go shall to income and what to Rule. unjust convenience, corpus; that an the rule is rule of making courts shrink a just enforced because the labor of earnings; directors, by and that boards of allotment declaring “starve” the life persistence dividends, bene- ficiaries trusts such as the one here. *16 justified. If
(b) opinion In our these criticisms are not cor- corporate porate property, the status of action does fact determine ought by They bound the fact. courts to be are mat- simplicity. for A long to be condemned The rule is not ters. legibus Sim/plicitas arnica, ago it est et nimia subtilitas while was said accounting reproba!,ur. Coke, 5 The intricacies of met jure b.] [4 Pennsylvania rule a source embar- in the enforcement expense uncertainty it, rassment to that-follow and of and the courts themselves, litigants, investigations are, as Such often well. inac- hardly dare arbitrary, proceed and but without curate trustees re- injustice, see, sorting Finally, is no so far as we can them. there regarding capital stock, its income, a life or term estate as ownership advantages disadvantages full with like and section being. might deprived have the time The testator been cash only stock dividends his had declared income and lifetime; fit and stock leave yet purchase saw to hold he the. stock, sold it progeny. in trust for could have his He says true, capital, down his and he but have whittled that would could done the not be done. He same in the will this must original A thing by fragments his own shares. refer- selling off preceding page out on to the table of dividends set ence of cash has followed opinion no diminishment will show that subjects case; rule but, regardless that, the Massachusetts in this Pennsylvania no than those to which income to hazards worse mismanagement corpus and mischance. exposes rule ruling is that the stock dividends 12. The of our in this case basis corpus, an accretion to the were not income of the money represent no because their nature and because ruling capital The converse of severed from assets. w°ul¿l is severed from money property be that Application govern appropriate action by assets of Rule. dividends, ing body rule, income; application further would but as to this 1927] Kidd V. BREWER.
its relation to tlie capital distribution of assets, and earnings, express opinion, adjudication no an we questions being un necessary ato decision of this case. judgment and are, decree accordingly, reversed, and the cause with
remanded directions to enter requiring a decree appellant trustees to account for the stock dividend of 150 shares of common B capital American Company Tobacco received them August 2, 1920, or about three dividend certificates issued corporation dated, respectively, September said 1, 1920, December 1920 and March said shares of common B them on certificates, received said of the trust TAmdsay,G., concurs; G., estate. Seddopi, sitting.
PER foregoing opinion by Ellison, CURIAM: The C., adopted opinion judges as the of the court. All of the concur.
Peyton
Joseph
Appellant,
E.
A.
Kidd,
Brewer
et al.
Division Misdescription: 1. CONVEYANCE: Mutual Mistake: Reformation. Where grantor west, convey agreed owned a 255 feet wide lot east and ¡125 side, except grantee all of it supposed feet on the east and both he and the *17 feet, deed, conveying the width was 250 instead of all the conveyed feet, except lot the east described metes began feet, bounds and ting at the northwest corner ran east 125 thus omit- agreed strip grantor convey, five feet wide which the had and the mutual, deed, rights purchasers mistake was where the of innocent do intervene, agreement, should be reformed to conform to the and to strip. include said five-foot Quitclaim grantee -: -: Innocent Purchaser: Deed. A quitclaim deed takes with notice that the land should been included grantor’s prior grantee, posi- in the tion than the deed to another stands in no better grantor himself, prior and if the deed be reformed toas grantee the reformed as to named therein so as to include the omitted tract it can grantee quitclaim later deed. -: Reformation: As to Parties and Later Grantees: Prior Notice. conveyance tract, grantee warranty an omitted a later in a to has a the deed carry right to have the deed reformed so as to out the intention of description boundary parties thereto to make the extend to the made; line remedy them when the deed was and the understood only original parties, claiming those available not but to under them heirs, personal representatives, judgment privity, creditors and facts; purchasers had with notice' of the one who notice of a fact inquiry, might ought put to have him on and which he have dis- diligence, by using purchaser without due cannot claim to be covered notice.