Opinion ID: 1717482
Heading Depth: 1
Heading Rank: 2

Heading: intention of the testatrix

Text: We are required in this appeal to determine what the testatrix intended in her will when she divided the shares she presently own[ed] in specific numbers between her two step-daughters and her natural daughter. The plaintiffs contend that Item V of the testatrix's will clearly indicates that the testatrix intended to give away her entire interest in R.J. Reynolds Industries in proportionate shares. The defendant, on the other hand, contends that the testatrix knew about the possibility of a future stock split and that Item V shows the testatrix intended to divide only the shares she presently owned between the daughters. The defendant contends that this case is controlled by Davis v. Price, 189 Tenn. (25 Beeler) 555, 226 S.W.2d 290 (1949). In Davis , the testator executed a will in 1943, that contained a bequest to his granddaughter for five hundred (500) shares of common stock in The Southern Chemical Cotton Company. In October of 1948, almost a month prior to the testator's death, Southern Chemical Cotton Company declared a two for one stock split. As a result, the question presented in Davis was whether, the granddaughter takes five hundred (500) shares of stock in the Southern Chemical Cotton Company as they were at the time of the death of the testator, or whether she takes one thousand, five hundred (1500) shares of stock, which includes the one thousand (1000) shares of the stock dividend resulting from the stock split made in October 1948. The Court held that the question was controlled by Code Section 8133, currently Tenn. Code Ann. § 32-3-101 (1984), which provides: Operation of will.  A will shall be construed, in reference to the real and personal estate comprised in it, to speak and take effect as if it had been executed immediately before the death of the testator, and shall convey all the real estate belonging to him, or in which he had any interest at his decease, unless a contrary intention appears by its words in context. In construing the will as if it had been written immediately prior to the testator's death (and after the stock split), the Court found that the extra shares resulting from the stock split did not follow the specifically listed shares, but instead passed to the residuary legatee. The Court found no evidence that the testator wanted to give the granddaughter fractional ownership of the corporation. The plaintiffs contend that the Court of Appeals correctly held that Davis is not applicable to this case because it involved a general bequest, whereas this case involves a specific bequest. The rule of construction applied by the Court of Appeals where there is a specific bequest, is that additional shares of stock acquired by a testator as a result of a stock split, after the execution of a will and before the date of his death, pass proportionately under a specific bequest of the original shares. Warner v. Baylor, 204 Va. 867, 876, 134 S.E.2d 263, 267 (1964) (emphasis in original). The rationale of this rule of construction is that a specific bequest, as opposed to a general bequest, shows an intent to bequeath the proportional interests owned in the corporations at the time of execution of the will. Id. As the Virginia Supreme Court explained in Warner : The rationale of the line of cases which rely on the specific or general nature of the bequest to ascertain testatrix's intent is based upon § 24 of the English Will Act of 1837, 4 & 1 Vict.C. 26, which codified the common law rule that a will speaks as of the date of the death of the testator unless a contrary intention appears in the will. Under this statute, ... the English cases have held that a bequest of a stated number of shares of stock, which was later split and resulted in the testator receiving additional shares after the execution of his will and before his death, was a general bequest, and the legatee was not entitled to the additional shares. In re Gillins (1909), 1 Ch. 345; In re McAfee (1909), 1 Ir.R. 124. The courts reasoned that a will refers to the estate of the testator as it existed at the time of his death. But under this statute the English courts have also held that where a bequest is specific it shows an intention contrary to the statutory rule, and a will is construed as referring to the interests represented by shares of stock held at the date of execution and the legatees take the additional shares in the new form. Id., 134 S.E.2d at 269 (citations omitted) (emphasis in original). Courts have used different approaches in arriving at a testator's intent when confronted with the issue of who takes additional shares of stock resulting from a stock split occurring after the will was executed, but before the testator's death. Many courts in the past have utilized the more traditional formalistic view the Court of Appeals adopted in this case, which is based upon the specific or general nature of the bequest, while other courts regard the general or specific classification as immaterial, looking instead to other indicia of the testator's intent. See J.R. Kemper, Annotation, Change in Stock or Corporate Structure, or Split or Substitution of Stock of Corporation, as Affecting Bequest of Stock, 46 A.L.R.3d 7, 19 (1972); Warner v. Baylor, 204 Va. 867, 134 S.E.2d 263 (1964). Since Warner was decided, [a]n increasing number of courts ... have departed from the older `specific-general' bequest approach, and instead base their holdings on the perceived intention of the testator with respect to the split shares. Rosenfeld v. Frank, 208 Conn. 562, 572, 546 A.2d 236, 241, n. 4 (1988) (citations omitted). One example of this trend is Bostwick v. Hurstel, 364 Mass. 282, 304 N.E.2d 186 (1973), a case in which the Supreme Judicial Court of Massachusetts determined that the problems created by the use of the distinction between general and specific legacies in the stock split situation far outweigh any advantages it might have. Id., 364 Mass. at 287, 304 N.E.2d at 189. The court reasoned that the approach of first labeling a gift as specific or general and then applying automatic consequences based upon the labels fails to consider the testator's intent with specific reference to the additional shares created by a stock split and ... it also fails to recognize the basic nature of a stock split. Id. The Bostwick court went on to adopt the rule of construction `that it is presumed that the prime intent of the testator is that the legatee is to benefit from any increased shares coming by way of a stock split provided no contrary intent is evident in the will.' Id., 364 Mass. at 289, 304 N.E.2d at 190 (quoting Egavian v. Egavian, 102 R.I. 740, 747-48, 232 A.2d 789, 794 (1967)). The rationale behind such a rule of construction is that the additional shares created by a stock split merely indicate a change in form rather than a change of the shareholder's proportionate interest in the corporation, and it is doubtful that the testator intended to subject his bequest to change by subsequent corporate actions over which he had probably little or no control. Id., 364 Mass. at 291-92, 304 N.E.2d at 191. We find the reasoning of Bostwick persuasive that a court should seek to ascertain the intention of the testator, rather than merely label a bequest and automatically reach a result based upon the label, because [t]he cardinal and basic rule in the construction of wills is that the court shall seek to discover the intention of the testator, and will give effect to it unless it contravenes some rule of law or public policy. Bell v. Shannon, 212 Tenn. (16 McCanless) 28, 40, 367 S.W.2d 761, 766 (1963). We therefore adopt the rule of construction followed by the Bostwick court that, in the absence of anything manifesting a contrary intent, a legatee of a bequest of stock is entitled to the additional shares received by a testator as a result of a stock split occurring in the interval between the execution of his will and his death. Id., 364 Mass. at 292, 304 N.E.2d at 192. In applying this rule and ascertaining the testator's intent, it is necessary to look to the entire will and codicil, if any, and not to isolated parts, and the testator's intention must be determined from what he has written and not from what it is supposed he intended. Martin v. Taylor, 521 S.W.2d 581, 584 (Tenn. 1975) (citing Burdick v. Gilpin, 205 Tenn. (9 McCanless) 94, 325 S.W.2d 547 (1959)). In addition, the testator's intention is to be ascertained from the particular words used, from the context, and from the general scope and purpose of the will, read in light of the surrounding and attending circumstances. Moore v. Neely, 212 Tenn. 496, 502-03, 370 S.W.2d 537, 540 (1963). On remand, the evidence introduced at the first trial by the plaintiffs of the surrounding circumstances was stipulated. The defendant then introduced evidence of the testatrix's intent after the execution of the will, which the trial court considered and rejected on the theory that the specific bequest rule construction controlled, and that parol evidence is not admissible to contradict the language in the will or to change its meaning and effect. Parol evidence is generally inadmissible to add to, vary, or contradict language used in a will, although it is admissible to explain a latent ambiguity. See Fariss v. Bry-Block Co., Inc., 208 Tenn. (12 McCanless) 482, 346 S.W.2d 705 (1961); Treanor v. Treanor, 25 Tenn. App. 133, 152 S.W.2d 1038 (1941). Since we have determined here that the testatrix's intent may be determined from the will and the surrounding circumstances, the will is not ambiguous, and the defendant's parol evidence is not admissible. Applying the above rules of construction, we conclude that Jessie Worthington intended for the additional shares of stock created by the stock split to pass to all the daughters in the same proportion as the shares listed in the will. She bequeathed all the shares she owned at the time the will was executed. This evidences an intent to give the three daughters proportionate interests in R.J. Reynolds Industries, and there is nothing in the will to indicate a contrary intention on her part. Because we have found that the testatrix intended for the extra shares to pass to the three named legatees in the same proportion as the original shares listed in Item V of the will, the rule of construction of Tenn. Code Ann. § 32-3-101 (1984) does not apply. Accordingly, we hold that the plaintiffs and the defendant, as named legatees, are entitled to the extra shares of R.J. Reynolds stock created by the stock split in the same proportion as the shares listed under Item V of the will. We accordingly affirm the judgment of the Court of Appeals, based on the separate grounds set out herein. The costs of this appeal are taxed to the defendant. REID, C.J., and DROWOTA, O'BRIEN and DAUGHTREY, JJ., concur.