163 Wis. 275 | Wis. | 1916
The following opinion was filed January 11, 1916:
This suit is by the executrix of a life beneficiary of the “income and increase,” against trustees, to recover items which it is claimed should have been paid over to the life beneficiary. Edwin R. Barron died March 23, 1897, testate. After some bequests he devised the residue of his estate to-two of his executors in trust to pay the rents, income, and increase thereof to testator’s brother, the third executor, during the life of the latter, and at the demise of his said brother to other designated beneficiaries during life, the trust to be closed and the property distributed at the death of two of the latter. The trustees had power of sale, investment.
Item 1. $3,663.52.- Forty sixty-fifths of the total profits ■of the E. R. Barron Co. for the year 1897 were $12,974.47. The executors in and by their final account which was allowed, computed or estimated that of the total profits of that corporation for that year $3,663.52 accrued prior to the death of the testator, and after deducting this last sum the corporation declared and paid a dividend of the remainder of the profits. This dividend went to income and was paid over to the beneficiary. At the end of the next fiscal year of the corporation it declared and paid one dividend out of the profits of the last mentioned year, the trustees’ share of which went to income, and another dividend including all the surplus and undivided profits which were accumulated prior to the death of the testator, including the item above mentioned of $3,663.52. The trustees’ share of this last dividend was added by them to corpus. This division for the year T897 of profits before, and those made after, testator’s death was agreed upon. The adult beneficiary as one of the executors-agreed to this, reported it to the county court, and acquiesced in that agreement for more than twelve years, and, acting with the other executors, procured an order of the county court discharging the executors and turning this item with the corpus over to the trustees. This item was properly disallowed by the circuit court. The surplus of a corporation not declared as a dividend cannot be treated as income until it is declared as a dividend, for the obvious reason that what is surplus one year may be swept away by losses the next year. It is a fluctuating quantity. Surplus and undivided profits of a corporation, existing at the time of the death of the testator who is a stockholder, go into the corpus of the trust estate. This division of the profits of the year 1897 and the payment
Items 2, 3, and 4^ $4,500, $10,125, and $666.11 = $15,291.11. Certain real property occupied as a store and part of the corpus of the trust estate at the death of the testator was appraised for the trustees at $40,000 and thereafter sold by them for $44,500. Eifty shares of the capital stock of the E. R. Barron Co., part of the original corpus, were sold by the trustees at an advance of $10 per share over the appraised value, and 350 like shares at an advance of $27.50 'per share, making a profit of $10,125. The store building aforesaid was during the administration of the trustees damaged by fire and the amount of insurance received exceeded the amount which they expended for repairs on account of said fire by $666.11. The unearned increment so called, or ■ 'the increase in value of the property constituting the corpus of the trust estate, and the insurance received as indemnity against loss of part of that corpus, all belong to the latter, and these items were properly disallowed.
Items 5, 6, 7a, 8, and 9. $999.50, $825, $880, $315, $26.66, and $14,137.50 = $17,183.66. The trustees bought $10,000 of United States bonds and thereafter resold them at a profit of $999.50. They also bought fifteen shares of the capital stock of the Batavia National Bank and resold them at a profit of $825. This bank was organized in 1904 with a capital stock of $400,000 and a surplus of $100,000. The stock was sold during the year 1909. The only evidence affecting this question which we find is that it had in 1909 undivided profits of $14,000 and in 1910 of $22,000. About October 16, 1900, the trustees purchased forty-four shares of
Of this group of items the circuit court allowed to the plaintiff, as representative of the deceased entitled to the income for life, only the item of $880. above mentioned. That item was clearly a cash dividend and belonged to the income notwithstanding the trustees added $120 to it and applied it on the purchase of additional shares of stock in the same bank. It was properly allowed. Miller v. Payne, supra; Holbrook v. Holbrook, supra. The item received for sale of rights in the Chicago bank must be presumed to represent good will or other increment to the original capital of the bank, increasing the value of the shares above the amount at which they were sold to this extent. That would be the presumption in the absence of evidence. It therefore belongs to the corpus.
Where the trustees have a power of sale and reinvestment the corpus of the trust estate at any given time consists of (1) the identical property which was put into the corpus by the creator of the trust and still remains on hand, plus (2), to balance any money which originally went into the corpus, a like amount of money or property of value equal to such original amount of money, .plus (3), if any of the property which originally went to make the corpus has been sold, money 'in amount, or property in value, equal to that part of the original corpus sold plus the net amount of natural or unearned increment up to that time actually realized upon the property sold which was originally part of the corpus. This keeps the corpus plus its unearned increment intact except in cases of unavoidable loss of corpus. Profits realized on pur
Value of original corpus. $122,960 62
Unearned increment actually realized on real property sold . 4,500, 00
Insurance money aforesaid.•. 666 11
Same on shares in E. R. Barron Co. 10,125 00
Same on sale of rights. 26 66
Total corpus at death of beneficiary. $138,278 39
Total value of property on hand at death of beneficiary.. $140,171 66 Less item of income above mentioned included. 880 00
Total... $139,291 66
Total amount of profits made on their investments by trustees . $16,303 66
Of this $15,597.62 will be taken to keep the corpus with its lawful increment intact, and $706.04 will be carried to income. Therefore the recovery permitted by the circuit court should be increased by $706.04.
Items 10 and 11. $9,324 and $209.23. After the death of the beneficiary, Charles H. Barron, and on January 1, 1911, the directors of the E. R. Barron Co. declared a dividend, which was received by the trustees on January 10, 1911. The amount of this dividend which came to the stock of that company then in the hands of the trustees amounted to $9,324, and the dividend represented earnings for the year from January 1, 1910, to December 31, 1910. It will be remembered that the beneficiary died August 4th of that year. This dividend belonged to the next life beneficiary and' not to Charles H. Barron, because, not having been declared a dividend during his life, it was not income of the trust estate received during his life and it was not apportionable. Divi-'
By the Court. — Judgment modified on plaintiff’s appeal by adding to tbe recovery therein allowed plaintiff tbe sum of $706.04, with interest at sis per cent, from tbe commencement of this action, and as so modified affirmed, and on defendants’ appeal judgment affirmed, without costs in either case, except that tbe defendants must pay tbe clerk’s fees.
A motion for a rehearing was denied, with $25 costs, on May 23, 1916.