78 A. 1009 | R.I. | 1911
This is a bill in equity brought by the Newport Trust Company, as trustee under the will of Frances M. Hoyt, deceased, to determine whether certain money should be paid to the life-tenant or remainderman, and is certified to *232 the Supreme Court, on the ground that it involves the construction of a will and is ready for final decree.
The will of Frances M. Hoyt, which was probated December 4, 1905, at Newport, R.I., provided as follows:
"Whereas there are certain securities belonging to me now in the hands of William A. Duer the income from which he has collected and paid over to Mrs. John K. Van Rennselaer, I do hereby bequeath the said securities to said William A. Duer, in trust, with full power to continue or change the investments from time to time and to pay the net income therefrom to Mrs. John K. Van Rennselaer for and during her life, and upon her death to pay over the principal of said trust fund to her son John A. Van Rensselaer, absolutely free and clear of any trust."
William A. Duer, predeceased testator, and the Newport Trust Company was by a decree of the Superior Court, entered April 9th, 1906, appointed trustee in his stead. Part of the trust has consisted of 100 shares of the Delaware Lackawanna Western Railroad Company. That company, in order to comply with a decision of the United States Supreme Court under the provisions of the "Hepburn Act," was instrumental in organizing a coal company, and declared a dividend of fifty per cent. on the capital stock payable July 20, 1909, to stockholders of record on July 1st, 1909, as appears by the following circular:
"To the Stockholders of the
"Delaware, Lackawanna and Western Railroad Company.
"An extra dividend of fifty per cent. has been declared by the Board of Managers on the capital stock of the company, payable on July 20th, 1909, to stockholders of record at the close of business on July 1st, 1909.
"In conformance with the decision recently rendered by the United States Supreme Court, declaring that this Company cannot lawfully transport in interstate commerce coal owned by it, a coal selling company has been organized under the Laws of the State of New Jersey, under the name of the Delaware, Lackawanna Western Coal Company, the capital stock *233 of which will be $6,800,000.00, divided into 136,000 shares of $50.00 each par value.
"It is proposed that the Delaware, Lackawanna Western Railroad Company, as the Seller, shall contract with said Coal Company as the Buyer, to sell and deliver the coal mined and purchased by the Railroad Company to the Coal Company at the mines.
"The stockholders of the Railroad Company are hereby invited to subscribe to the capital stock of the Coal Company at the rate of one share of the latter for each four shares of the capital stock of the Railroad Company held by the several stockholders as shown by the books of the Company at the close of business July 1st, 1909.
"As it is deemed undesirable to issue part shares as scrip, or otherwise, any stockholder whose pro rata Coal Company subscription may entitle him to a part share, may, on payment in cash of the additional amount necessary, acquire a full share instead of the part share alloted to him.
"Herewith subscription blank which each stockholder should sign and have duly witnessed in the event he desires to subscribe for the stock of the Coal Company on the basis set forth herein. Such blank contains an order on the Treasurer of the Company authorizing and directing that one-half of the dividend of fifty per cent. due and payable on July 20th, 1909, be paid to the Coal Company in satisfaction of the subscription of such stockholder to the capital stock of the Coal company. The other half of such dividend will, of course, be paid in cash. Certificate for the number of shares of stock so paid will be issued in the name of and delivered to the stockholders as the latter may direct.
"It is urged by the Company's legal advisors that the proposed selling contract be made operative as early as possible.
"It is therefore respectfully requested that the stockholders of the Company take prompt action on the several matters submitted to them hereby."
The trustee took half the dividend in stock in the new company, and elected to take the other half in cash. The cash *234 amounted to $1,250, and the question is whether this latter sum should be paid over to the life tenant as income, or added to the principal of the fund. The beneficiary for life, Mrs. John K. Van Rensselaer, contends that it should be paid to her.
By the circular above quoted, it appears that the dividend declared is on the capital stock, and that at least 25 per cent. was to be paid in cash and the whole might be; that it is clearly optional with the stockholders to take the whole dividend in cash, or to take one-half in cash, and subscribe the other one-half for the stock in the new coal company, as they see fit; that the stockholders were not obliged to subscribe for the stock in the new company; that the first half of the dividend was paid to the complainant in cash, and is now held by it and is the fund in dispute in this cause.
Although the dividend here in question is called an "extra" dividend, there is nothing to show that it was not a dividend of profits earned in the regular course of business, and during the term of the life-estate, and we find nothing in the facts appearing in this case to take it out of the general rule that cash dividends go to life tenant. This rule is set forth in 2d Thompson on Corporations, 1st ed., section 2201, as follows: "Keeping in mind the foregoing principles there is a strong presumption that cash dividends, declared while the corporation is a going concern are dividends of profits or earnings merely; for a corporation has no power to declare a dividend of its capital except in liquidation, or to reduce the capital where it is authorized to do so by its governing statute. There is no difficulty in holding, then, that an ordinary cash dividend of a going corporation, goes to the life tenant, and not to the remainderman, if he is the beneficial holder of the stock at the time it is declared." And further, the author quotes Mr. Justice Peters, in Richardson v. Richardson,
A case not unlike the present in principle, is Davis v.Jackson,
There is no decision in Rhode Island on the exact point in issue, but the several cases, while they decide in favor of the remainderman in the particular case, nevertheless recognize the principles stated above. In Parker v. Mason,
In Brown and Larned, Petitioners,
A similar case was Greene v. Smith,
These cases are entirely consistent with the principles above set forth; namely, that cash dividends go to the life tenant and stock dividends go to the remainderman.
In accordance with the authorities cited above, this court holds that the amount of $1,250 received by the trustee, complainant, is a cash dividend, and is income which belongs to the life tenant, Mrs. John K. Van Rensselaer, and is to be paid to her.
The parties may submit a decree, in accordance herewith, for the approval of the court.