263 Pa. 78 | Pa. | 1919
Opinion by
By the will of Sara McKeown, her residuary estate is given to her trustee with directions to appraise it within one year, “his valuation for the purposes of this will and trust and the distribution thereunder” to be “final and conclusive.” Testatrix then gave one-fourth thereof, at that valuation, to her daughter Anna Braden, should she survive testatrix, which she did; and as to the other three-fourths directed it to be held by the trustee, upon an active trust, “to pay annually one-third of the net income from the said remaining three-fourths to each of my sons, William King McKeown, James B. McKeown and Scott A. McKeown, during their natural lives,” with certain remainders over, not necessary to be considered at this time. She further provided that “when
The trustee appraised the estate, in accordance with the first of the foregoing directions in regard thereto, gave Anna Braden her one-fourth thereof, and set apart the other three-fourths for the purposes of the continuing trust .above provided for. William King McKeown, one of the sons, having died, an account was filed, and Anna* Braden, the daughter of testatrix, claimed that the will violated the rule against perpetuities, and also provided for an illegal accumulation.' The court below decided against her, and this court affirmed: McKeown’s Est., 259 Pa. 216. . . .
When the present account was filed, it was referred to an auditor, to make distribution of the balance in the hands of accountant, and to report to the court. Scott A. McKeown, one of the sons and the appellant here, proved before the auditor that certain of the funds appearing in the account were the proceeds of sales of stocks and bonds which had belonged to testatrix; that their sale had realized more than the appraisemént made when the one-fourth was given to Anna Braden; and claimed that he and his brothers were entitled to that excess, under the provisions of the will above quoted. Both the auditor and court below found against him, holding that all that excess belonged to the corpus of the trust estate, and from the decree excluding him from participation therein he prosecutes the present appeal.
Testatrix also left 7,316 shares of the common stock of the Pure Oil Company, one-fourth of which, or 1,829 shares, were turned over to Anna Braden, and the balance, 5,487 shares, were held in the trust. There were also 52 shares of the Pure Oil Producing Company, 13 of which were turned over to Anna Braden, and the balance exchanged for 273 shares of the common stock of the Pure Oil Company, making the trust’s total holdings of said stock 5,760 shares. On April 22,1913, the trustee sold 1,760 of those shares for $14.87% per share, an aggregate of $26,180, and an advance of $17,380 over the appraisement; and on July 27,1917, sold the other 4,000 shares for $24.50 per share, an aggregate of $98,000, and an advance of $78,000 over the appraisement.
This latter sale, the auditor finds, as a fact, was made, in conjunction with all the other outstanding shares of stock, to the Ohio Cities Gas Company, which thereby
The testimony also showed, and the auditor found as a fact, that at the time of testatrix’ death the book value of the common stock was $12.22 per share; its book value when the 1,760 shares were sold was $12.29 per share; and its book value at the time of the final sale and liquidation of the Pure Oil Company was $15.18 per share.
All of the above findings were founded upon the uncontradicted testimony of the treasurer of the Pure Oil Company, who also testified, without contradiction, that in every instance the figures had been arrived at after charging off the depreciation of the properties, and in no instance had anything been added for appreciation thereof. It is clear, therefore, that the assets of the company, at the time of the sale of the 1,760 shares, had increased, after testatrix’ death, to the extent of seven cents per share, owing to an accumulation of income ; and that at the time of the sale of the other 4,000 shares, and the liquidation of the company, the assets had increased, after testatrix’ death, to the extent of $2.96 per share, owing to an accumulation of income. It is also clear that the difference between the book value of $15.18 per share, at thfe time of the final sale and liquidation of the company, and the $24.50 per share, realized at that time, is not income. - For this latter reason the claim of appellant that that difference should be considered as income, and divided among the sons, must be overruled, and the decision of the court below in regard thereto must be affirmed.
The court below, however, went further than that. It held that the sons were not entitled to the accumulated income actually included in the sales, because the money received arose from a sale of stock which formed part of
Whether or not the seven cents increase per share in the book value of the stock, at the time the 1,760 shares were sold, ought to be applied to principal or income, raises a different question. Usually income is not apportionable, and for that reason if an ordinary dividend is declared after the death of a testator, the whole of that dividend is income. One of the reasons for so holding is that it would be impracticable to determine what part of that dividend was earned during the time the testator was alive, and what part of it after he was dead. Profits are not earned de die in diem. The income of to-day may be the result of the labor of a year ago and the labor of to-day may not find its way into income on hand until a year hence. For the same reason if an ordinary dividend is declared after a life estate ceases, it belongs to the remainderman. It is obvious, too, that a life tenant who gets the benefit of the dividend which partially accrued during a testator’s life, and which in strict equity would partially belong to principal were it practicable to apportion the payment when made, ought not also to get a dividend not declared when the stock was sold, even though the fact that the dividend period was approaching had enhanced the price realized by the sale. It is for this reason that the law, recognizing the fact that those matters balance themselves in the long run, in ordinary cases adopts the act of the corporation in declaring the dividend as the only practical test in such
In Earp’s App., 28 Pa. 368, we stated the underlying principle to be applied in this class of cases; and perhaps our latest case on the subject is Sloan’s Est., 258 Pa. 368. It is said by the auditor that the intermediate cases have not always been consistent with the two cases cited, or with each other. Inasmuch, however, as the differences are only in the application of the rule, we are far less concerned in knowing where and why they exist, than we are in deciding this case correctly and in pointing out a way, which, being the right way, will in course of time become the antiqua via along which the law delights to travel.
To epitomize:
(1) An ordinary corporate dividend is usually payable in its entirety to the party entitled to the income at the time the dividend was declared.
(2) An extraordinary corporate dividend is presumptively payable to the party entitled to the income at the time the dividend was declared; but this presumption must yield to proof of the fact, and if it appears that by such dividend the corporate assets are reduced below their value at the time the trust began, the principal must be made good before anything is awarded to income.
(3) If stock is sold which belongs to the principal, ordinarily all the proceeds thereof also belong to the principal.
(4) When a corporation is liquidated, those entitled to the income of the trust are to be awarded so much of the sums received for the stock as they show was income accruing after their right to income began, and the bas*
The decree of the court below is modified so far as relates to the sum of $11,840, being the sum of $2.96 per share on the 4,000 shares of stock, and that sum is directed to be distributed as income. As thus modified the decree below is affirmed; the costs of this appeal to-be paid by the estate.