Myers' Estate, 238 Pa. 195

Myers' Estate

238 Pa. 195 | Pa. | 1913

Opinion by

Mr. Justice Elkin,

A brief statement of material and undisputed facts is necessary to an intelligent understanding of the questions raised by this appeal. At the time of the death of Henry M. Myers, whose estate is the subject matter of this distribution, he was the owner of 1,190 shares of the capital stock of the H. M. Myers Company, a corporation with 1,500 shares issued and outstanding. The remaining shares, not belonging to the estate of the decedent, were owned as follows: Charles H. Myers, 210 shares; Anna Amanda Wheaton, 50 shares, and Caroline Myers Hamilton, 50 shares. In the year prior to his death decedent made his last will and testament disposing of all his property, including his holdings in the corporation hereinbefore mentioned. Under the scheme of his will the manufacturing business of the H. M. Myers Company was to be maintained and continued under the management of his son, Charles Henry Myers, until the youngest child should arrive at the age of twenty-one years unless all the legatees by unanimous consent in writing should otherwise agree. The testator appointed his wife, Ella D. Myers, and his son, Charles Henry Myers, guardians of his minor children and executors of his will, thus showing the confidence reposed in them. The executors proceeded with the administration of the estate in such manner as to carry out the wishes of the testator. At the time of making his will Henry M. Myers was indebted to the Economy Saving Institution on notes amounting to $87,000.00, to the payment of which the 1,190 shares of the capital stock of the H. M. Myers Company were pledged as col*207lateral. He was also indebted to tbe same institution in tbe sum of $25,000.00, secured by a mortgage on his mansion house. It was tbe duty of tbe executors to provide for tbe payment of these obligations and other items of indebtedness in order to relieve tbe estate from serious embarrassment. Tbe testator contemplated tbe payment of his debts out of tbe proceeds of bis life insurance, but it was found that only about $7,000.00 of insurance under tbe terms of tbe policies was payable to bis estate, while about $93,000.00 was payable to tbe widow and heirs. In this situation, and in order to protect tbe estate, tbe widow, legatees and guardians entered into tbe agreement of October 21, 1898. This agreement undertook to and did make arrangements for the payment of tbe indebtedness and tbe adjustment of several other matters relating to tbe interests of the widow and legatees in the estate of tbe decedent. Tbe widow and legatees agreed to turn over tbe proceeds of tbe insurance policies in which they were named as beneficiaries to tbe executors for tbe use and benefit of tbe estate. All this was done to tbe end that tbe estate might be protected and administered according to the wishes of tbe testator as expressed in bis will. Tbe most valuable asset of tbe testator was tbe stock held by him in tbe H. M. Myers Company, all of which was pledged as collateral on these loans. In order to redeem tbe collateral it was necessary to pay tbe loans, and this was done with tbe proceeds of tbe insurance policies turned over to tbe executors. With tbe indebtedness out of tbe way and tbe 1,190 shares of stock redeemed, tbe executors were in position to continue tbe manufacturing business of H. M. Myers Company in connection with dbe other shareholders, and this was done. Tbe situation then was that tbe estate owned and absolutely controlled 1,190 shares of tbe capital stock of tbe manufacturing company, and tbe remaining 310 shares were held by tbe individuals above named. Charles Henry Myers, not only represented himself as a stockholder, *208but by the express provisions of the will of the testator was made general manager of the business of the corporation. Under Ms management the business prospered, which, of course, resulted to the benefit of all the stockholders in proportion to their respective holdings in the company. The estate of the decedent was most largely benefited by the successful conduct of the Business because it was the largest owner of the capital stock. This was the situation in 1901 when negotiations began for the consolidation of the H. M. Myers Company with several othea* companies engaged in the same kind of manufacturing business. These negotiations ripened into a contract, the terms of which are set forth in the agreement of September 6,1901, upon the proper construction of which the solution of the questions involved in this controversy depends. In order to consummate the proposed consolidation it was necessary for the widow, legatees, executors and guardians to give their consent in writing in accordance with the provisions of the will and this was done by the agreement in question. It was an important transaction to the widow and legatees as well as to all others concerned, and hence the necessity of embodying in the contract the terms and conditions upon which the consent was given and the contract agreed to. All this was done, the sale was made, the property turned over, and the deal consummated. It is contended for appellees that the agreement of 1901 included not only the interest of the testator in the H. M. Myers Company, but also the interests of the other individual shareholders, and that the division of the entire amount of preferred and common stock of the Ames Company taken in exchange, should be made exclusively among the widow and legatées of the testator without permitting Charles Henry Myers, Anna Amanda Wheaton and Caroline Myers Hamilton to participate in the distribution in proportion-to their individual holdings in the Myers Company. Appellant, on the other hand, strongly urges that such an inter*209pretation of the agreement of 1901 is not warranted by its language and that it does violence to the rights of the individual shareholders. The agreement of 1901 does not contain a single phrase or sentence relating to the shares owned by the individual holders of the stock. The spirit and purpose of the agreement appears in the recitals, conditions, covenants and undertakings of that instrument. That it was intended, primarily, as an agreement affecting the interest of the testator .in the H. M. Myers Company cannot be seriously questioned. It was executed by the legatees named in the will and by the executors of the estate and the guardians of the minor children. Ten clauses of the recitals, covering several pages of the paper book, refer to the different provisions of the will, and the whole purpose of the agreement seems to have been to provide for the disposition of the interest held by the estate in accordance with the wish of the testator. There is not a suggestion in the agreement that the individual shareholders should surrender their stock to the estate, nor in our opinion does such a result follow by implication. The theory relied on by appellees is that the distribution of the preferred and common stock of the Ames Company taken in exchange for the property of the Myers Company is absolutely controlled by clauses (a), (b), (c) of the second paragraph of the agreement, and that when so understood the individual shareholders are excluded. This would be an easy solution of the vexed questions here involved, but it would have the effect of sweeping away valuable property rights without giving anything in return, and this should never be done by implication unless the facts clearly warrant such a conclusion. It cannot be said that the agreement in question viewed in the light of the facts and circumstances under which it was made and the purpose of its execution clearly warrants such an implication. The more reasonable and rational construction of the second paragraph of the agreement is that the distribution therein provided for *210refers to such part of the stock of the Ames Company as the estate of the testator was entitled to receive in exchange for the 1,190 shares of the capital stock of the Myers Company, which the decedent owned. This construction gives force and effect to the will of the'testator and the agreement of the parties without doing violence to the rights of the individual shareholders. It should not be overlooked that the testator could only dispose of his own property. It was not within his power to make disposition of the shares held by individuals in the stock of the Myers Company. It is conceded that at the time of his death the testator only owned 1,190 of these shares and his power of disposition was thus limited. It necessarily follows that the provisions of the will relate to the shares owned by the testator over which he had the power of disposition. The widow and legatees likewise could only take what the testator had to give, which as to the stock of the Myers Company was 1,190 shares. All of the subsequent agreements entered into between the widow, legatees, executors and guardians relating to the interest of the testator in the stock of the Myers Company must be understood as referring to the 1,190 shares held by him at the time of his death. It is argued on the part of appellees that the agreement of 1901 is plain and unambiguous and that its construction is for the court. That its construction is for the court may be conceded, but that it is plain and unambiguous is, to say the least, doubtful. It can scarcely be said that the meaning of an instrument is plain about which counsel, courts and interested parties disagree. The present is such a case and it is because the parties cannot agree as to the meaning of the agreement in question that we have this appeal. As we read the agreement, taking into consideration all of its provisions, considering the subject matter to which it relates and the circumstances under which it was made, the conclusion seems irresistible that the division of the stock provided therein referred to the

*211interest held by the estate of the testator in the H. M. Myers Company. Every contract should be construed so as to give effect to the intention of the parties. In ascertaining that intention, it is proper to consider all the negotiations leading to the formation of the contract, its subject matter, and the end to be accomplished: McMillin v. Titus, 222 Pa. 500. Every agreement should be interpreted with reference to the circumstances under which the parties contract and in the light of the objects to be accomplished: Callen v. Hilty, 14 Pa. 286; Richardson v. Clements, 89 Pa. 503; McKeesport Machine Co. v. Insurance Co., 173 Pa. 53. Applying these rules to the present case there is no escape from the conclusion that the division of the stock mentioned in the agreement of 1901 was only intended to affect those interested as legatees under the will of the testator and that the subject matter of the division was the interest of the testator in the Myers Company, or its equivalent in the shares of stock in the Ames Company taken in exchange therefor. When a contract is capable of two interpretations, that which the parties themselves placed upon it, and acted upon for a series of years, will, as a rule, be accepted by courts as the proper interpretation of the true intent and meaning of the parties: Gass’s App., 73 Pa. 39; People’s Nat. Gas Co. v. Braddock Wire Co., 155 Pa. 22; Gillespie v. Iseman, 210 Pa. 1. In the case at bar the parties to the agreement on the very day of its execution at a meeting of the stockholders of the Myers Company ratified a resolution of the board of directors of said company authorizing a distribution of the stock of the Ames Company to be made upon the basis for which appellant contends. The stock was in fact so distributed, certificates were issued to each of the parties upon this basis, and dividends have been paid directly to the holders of this stock for a long period of years. Certainly, this is a case of the parties themselves placing a construction upon their own contract and it is not for the courts *212to say that it means something else. In addition, it might be added that the only jurisdiction which the Orphans’ Court had was over the estate of the testator, and since that estate only owned 1,190 shares of stock in the Myers Company, its jurisdiction was limited to the inquiry whether there had been an accounting by the executors for this amount of stock. The Orphans’ Court has no jurisdiction in auditing the account of the executors of a shareholder, to ascertain and distribute the profits, or property, or stock of the. corporation in which decedent was a shareholder: Goetz’s Estate, 236 Pa. 630. The Orphans’ Court had no jurisdiction over the stock of the individual shareholders which did not belong to the estate of the testator. These individual shareholders had the right to make their own contracts and to demand in their own right such a share of the stock of the Ames Company as they were entitled to receive. The executors were only required to account for the 1,190 shares belonging to the estate of the testator, and the jurisdiction of the Orphans’ Court was limited to the inquiry whether they had properly accounted for these shares. These were the only shares included in the inventory, and so far as is disclosed by this record, the only shares which belonged to the testator at the time of his death. On the question of the jurisdiction of the Orphans’ Court in such matters, see: Cutler’s Estate, 225 Pa. 167; Williams’ Estate, 236 Pa. 259.

We cannot agree with the learned court below as to the basis adopted for making a division of the stock among the persons entitled thereto. The division was made upon the basis of the appraised value of the property, real and personal, which the Myers Company turned over to the Ames Company at the time of the consolidation. This appraisement, made by an expert representing the parties to the consolidation, was only intended as a basis for fixing the relative portions of the preferred and common stock the merged companies *213were entitled to receive out of the total issue of the consolidated company. It had no controlling effect as to the amount of stock each individual shareholder of the Myers Company was entitled to receive. The property and assets of a corporation represent the value of its capital stock and when property is sold, the proceeds go to the treasurer for the benefit of the stockholders. When dividends are paid in cash, or otherwise, each stockholder is entitled to his pro rata share according to his stock holdings. In the present case, if the property and assets of the Myers Company had been sold for |600,000.00 in cash, no one would question the right of each shareholder to participate in the distribution in proportion to the number of shares held by him. This principle is not affected by the mere fact that the consideration paid for the transfer of the property was the preferred and common stock of the Ames Company and not cash. Each stockholder was entitled to his proportionate share of the consideration either in dividends declared or in the division of the preferred and common stock if this method was adopted. This principle was entirely ignored in the distribution directed to be made by the learned court below. This was error.

The only doubt we have about any of the matters brought to our attention is as to how the contribution by the widow of the proceeds of the insurance policies made payable to her should be treated. The evidence leaves this question in doubt as to whether it was intended as a voluntary gift, or as a loan to the estate. There does not seem to be any reason why the widow should have contributed twice as much as the other legatees when her ultimate interest in the estate was not so great as theirs. It, however, is difficult for courts to determine what the parties meant when they have failed or neglected to say what was intended. In the light of the division of the Ames stock by the parties themselves immediately following the consolidation, it is apparent that the widow did not assert any right as an individual *214to participate in that distribution. On the other hand, she acquiesced in it for a long period of years, and even in the present proceeding has not on her own account asserted any claim to a share of the stock which was divided many years ago, nor has she made any claim to be reimbursed out of the estate of the testator. In this situation we are not in position to finally determine what rights, if any, she may have, and this is, therefore, left as an open question. The adjudication before us only relates to a partial account so that this question may be considered at a future accounting. That the widow is entitled to equitable consideration at least to the amount she contributed in excess of the other legatees is very apparent, but this is a matter calling for amicable adjustment by the interested parties themselves before the final settlement of the estate.

Decree reversed, exceptions filed to the account dismissed and account confirmed. Costs to be paid out of the estate.