221 N.W. 275 | Mich. | 1928
The capital stock of West Michigan Savings Bank of Bangor was 250 shares of $100 each, $25,000. This with surplus, $34,000, and some undivided profits, made the book value $266.41 per share. John E. Sebring was president of the bank and owned 65 shares. He died in May, 1919, leaving a will, of which the bill seeks construction. We quote:
"Six. I give, devise and bequeath to my dear beloved wife, Clara J. Sebring, the use and income from the sixty-five (65) shares of stock of the West Michigan Savings Bank, of Bangor, Michigan, for the term of her natural life, it being understood that she shall receive all dividends which may be declared and distributed upon said shares of stock.
"Seven. I will and direct that upon the death of my beloved wife, Clara J. Sebring, that the said *172 sixty-five (65) shares of the capital stock of the West Michigan Savings Bank, of Bangor, Michigan, shall be divided equally between my dear niece, Euna Belle Morrison, of Paw Paw, Michigan, and my dear great-niece, Dorothy Mackellar, of Portland, Oregon."
In July, 1919, the stockholders decided to increase the capital stock to $50,000, to capitalize $25,000 of the surplus, to declare a stock dividend of 100 per cent., which was done. By agreement of stockholders a part of the new issue was sold at a fixed price of $160 per share, and accordingly Mrs. Sebring received 39 shares of the new issue, and $4,160 proceeds of the sale of the remaining 26 shares. Mrs. Sebring died in 1926 leaving a will by which she sought to dispose of her estate including specifically the 39 shares.
This is a contest between plaintiffs, those who take under the quoted seventh paragraph of Mr. Sebring's will, and defendants, those who take under the will of Mrs. Sebring. And the question is: Must it be held that the stock dividend is a part of the corpus of Mr. Sebring's estate and therefore belonging to those who take the remainder under the seventh paragraph of his will, or a mere dividend or income belonging to the life beneficiary under the sixth paragraph of the will. Plaintiffs had decree. Defendants have appealed.
If testator has expressed, without ambiguity, an intention to give his wife, the life beneficiary, dividends, both ordinary and extraordinary, both cash and stock, there is nothing to construe.
Such words as "income," "dividends," and "profits" have been held in cases such as this to be open to and to require construction. See 24 A.L.R. 9, and 42 A.L.R. 448. Appellants argue that as *173 testator here said "all dividends" rather than merely "dividends," the will is certain and admits of no construction. "Dividends" and "all dividends" are equally inclusive. Neither indicates an exception. Had the testator said "the dividends" or "dividends" instead of "all dividends" the meaning would be practically the same. The case calls for construction under the rules.
The stock dividend here was earned before the commencement of the life interest. The rules, cases, and conflict in decisions are fully reviewed and considered in 24 A.L.R. 9; 42 A.L.R. 448; 14 C.J. p. 829. The two leading rules, each supported by much respectable authority, are known as Pennsylvania rule and Massachusetts rule.
It is said in a note (24 A.L.R. 42) that the former rule —
"inquires as to the time, relatively to the commencement of the life estate, covered by the accumulation of earnings from which the extraordinary dividend, whether stock or cash, was made; and, if it ascertains that the entire dividend was earned before the commencement of the life interest, awards the entire dividend, whether stock or cash, to the corpus; and, if it ascertains that the entire dividend was earned (i. e., earned in the sense that its payment would not impair the book value of the stock as of the date of the commencement of the life interest) after the commencement and during the continuance of the life interest, awards the entire dividend to income; and, if it ascertains that the fund accumulated partly before and partly after the commencement of the life interest, undertakes to apportion the dividend, whether stock or cash, between the life tenant and the remainderman."
The latter rule is thus stated in 24 A.L.R. 29, quoting from Minot v. Paine,
" 'A simple rule is to regard cash dividends, however large, as income, and stock dividends, however made, as capital.' "
We have difference in opinion of the comparative soundness of these rules, but as this case may be decided without adopting either rule, it is unnecessary to provoke dissent.
The stock dividend was earned before the commencement of the life interest and therefore, under the Pennsylvania rule, should be awarded to the corpus of the estate. And it being a stock dividend, a like award is required under the Massachusetts rule.
It follows that the decree is affirmed, with costs to plaintiffs.
FEAD, C.J., and NORTH, FELLOWS, WIEST, McDONALD, POTTER, and SHARPE, JJ., concurred.