12 Misc. 2d 744 | N.Y. Sur. Ct. | 1958
In this trustee’s intermediate accounting proceeding, one of three special guardians has interposed objections to the allocation of stock of Chase Manhattan Bank, which resulted from the merger of Chase National Bank with Bank of the Manhattan Company, and the stock of Sperry Band Corporation, which resulted from the consolidation of Bemington Band, Inc. with Sperry Corporation, between income and principal. The objectant contends that no portion of the newly-issued stock of such corporations constitutes a dividend and that therefore all of the stock should be retained by the trustees as principal, rather than allocated between principal and income as proposed by the trustees.
The testator died a resident of Westchester County on July 16, 1949 and his will dated October 20, 1947 was duly admitted to probate and letters testamentary and letters of trusteeship were issued to the petitioners on July 25,1949.
Under article “ninth” of his will, the testator expressly directed that a “ stock dividend” or “an extraordinary dividend” received by the trustees “ shall be deemed income within the meaning of the provisions of this my will and be so distributed ”. Section 17-a of the Personal Property Law provides in substance that in the absence of any expression of contrary intent, all stock dividends are to be allocated to principal rather than to income. However, the testator clearly manifested his intention that all stock dividends or extraordinary dividends are to be treated as income and therefore, the provisions of section 17-a of the Personal Property Law are not controlling in this case. (Matter of Matthews, 280 App. Div. 23.) A dividend has been defined as a corporate profit set aside, declared and ordered by the directors to be paid to the stockholders upon demand, or at a fixed time. (People ex rel. Pullman v. Glynn, 130 App. Div. 332.) In Matter of Osborne (209 N. Y. 450, 476) the court in a decision by Chase, J. drew the following distinction between an ordinary and an extraordinary dividend: “ The dividends usually declared by corporations are the ordinary
The court determines that the exchange of stock which took place upon the merger of the Chase National Bank with the Bank of Manhattan Company and the exchange of stock which took place upon the consolidation of Sperry Corporation with Remington Rand, Inc. did not result in a stock dividend. The effect of such exchange is analagous to a situation where the trustees had sold a portion of the trust assets and reinvested the proceeds of the sale in different securities. Under those circumstances, no one could or would reasonably contend that any portion of the substituted stock should be apportioned between principal and income merely because the new stock represented ownership in a corporation having a different capital structure than that of the former corporation. The court, therefore, determines that where a corporation in which a trustee holds stock merges or consolidates with another corporation, as in the instant case, the new shares of stock received by the trustee must be retained by them as trust principal. Accordingly, the objection of the special guardian with respect to the allocation of any portion of the stock of Sperry Rand Corporation and Chase Manhattan Bank Corporation to income is sustained and the trustees are directed to revise their account in accordance with the determination hereinabove made.
Settle decree.