Court Opinion

ID: 5458762
Source: CourtListenerOpinion
Date Created: 2022-01-09 19:27:24.569319+00
Date Added: 2024-06-11T08:32:47.070658
License: Public Domain

By the Court, James, J.
This case was submitted undér § 372-of the code, without points and without argument; a practice which I cannot recommend, as cases thus submitted are not likely to receive that careful and thorough investigation, so essential to a correct decision, which they might, if the points ■were'properly prepared and presented by counsel. The members of this court have sufficient employment in the discharge of their legitimate duties, without superadding that of attorney and counsel.
*651In this case the only question submitted for consideration is, to whom do the extra dividend of stock and the bonds or certificates of stock belong, by the provisions of the will? Or, in other words, shall the trustees deliver these stocks and bonds and certificates over to the cestuis que trust, as proceeds and dividends arising from the investment of their shares of the testator’s estate; or, shall the same be added to the principal and accumulated, and the interest and dividends arising from such accumulations only be paid over to the cestuis que trust, with the ordinary dividends of the original fund? “In the construction of wills, it is a cardinal rule, that the intention of the testator is to govern, if consistent with the rules of law,” and that intention should be ascertained from the whole will taken together, rather than from the language of any particular provision or clause taken by-itself. In this case the court are only intrusted with a single clause of the will. It does, however, appear that the testator had, by his will, previous to the insertion of the clause in question, made provision for his widow, and had also made several specific bequests, and then, by this clause, he disposed of all the rest and residue of his estate, by dividing the same into five equal portions, corresponding to the number of his children, giving to each of his sons one share absolutely, and to each of his daughters one share in trust, for life, remainder over, &c.; said two shares in trust are by the trustees “ to be put at interest in their own names, as trustees, in one entire sum, or in parcels, on real propertyor “ to be invested in the purchase of stocks, or in the purchase of real estate, at their discretion, with the right to call in and place out again, as often as they shall think fit; to pay the interest, dividends and proceeds, arising from the said two shares, from time to time as they shall be received, to the said two daughters, during their lives,” ¡fee. There is nothing in this clause of the will expressly requiring the capital of these two shares to be increased by accumulations arising from the proceeds of the shares themselves; neither is there any thing from which such an intention can be inferred, while there is much tending to the conclusion, that the testator intended that all the profits and income *652of every kind and nature whatsoever, arising from those two shares, however invested, should go to the use and benefit of his two daughters, for their maintenance and support, during their natural lives.
The will vested in the trustees the control of the said two shares, and discretionary power either to put the same at interest on real security, or to invest the same in certain stocks, or in real estate. With the proper exercise of that discretion, the cestui que trust could not interfere. If it was piit at interest on bond and mortgage, they were entitled to the interest; if it was invested in stocks, they were entitled to the dividends; if invested in real estate, they were entitled to the proceeds or profits arising from the investment. This latter might b'e determined by the sale of the land for an advance, and a reinvest^ ment of the principal as provided by the will.
There are several cases in England in which it has been held that any extraordinary bonus or addition to the usual annual income of stock, which is settled in trust on one for life, with remainder over, must be treated as capital and added to the principal fund, and the income arising from it only paid to the cestuis que trust. But this question does not seem to be fully settled there, as is asserted in Hill on Trustees, p. 386. The contrary doctrine has been held in two recent cases, Price v. Anderson, (15 Simons, 473,) and Johnson v. Johnson, (5 Law and Eq. Rep. 164.) In the case of Price v. Anderson, certain insurance stock had been placed in the hands of trustees, for the benefit of a tenant for life, remainder over, &c. The company had for several years declared yearly dividends of 2¿ per cent, but in 1846 it declared a dividend of 12|- per cent; it was held that the tenant for life of the stock was entitled to the whole amount. So in Johnson v. Johnson, the testator had by will bequeathed the whole of his estate to trustees, upon a trust to pay the income to his widow for life,- and afterwards divide the capital among his children. Part of the property consisted of a number of shares in an insurance company. In 1848- the company declared a bonus or increased dividend of £10 per share to be added to the usual dividend of £3 per share, making to*653gether £13 per share; held that this bonus was income, and that the cestui que trust of the shares was entitled thereto. The leading case, holding a contrary doctrine, is that of Brander v. Brander, (4 Ves. 800,) decided in 1799. In that dase the language of the will is not given. It appears that the plaintiff was entitled, under the will, to the residue of the testator’s personal estate for life. A part of that estate consisted of £10,000 Bank of England stock. After the death of the testator, the bank, by means of an operation with the government, transferred, as the profits thereof, to the shares of stock held by the estate, £1000 in five per cent annuities. The tenant for life applied to the court, to have those annuities transferred to him. The lord chancellor denied the motion, holding that the said annuities should be considered as capital, and that the tenant for life was only entitled to the dividend arising from the same. The ruling in this case was followed by the house of lords in 1802, in the case of Irvine v. Houston, which arose upon an extraordinary division of stock by the Bank of Scotland.
Although the principle upon which these cases were decided, was doubted and the reasoning considered unsatisfactory by both« Lords Eldon and Erskine, yet they felt bound by the decision of the house of lords in Irvine v. Houston, and followed that case, the former in the case of Paris v. Paris, and the latter in that of Witts v. Steere. In Paris v. Paris, (10 Vesey, 185,) the testator gave to his wife the dividend of £4000, bank stock, during her life, &c. About six years after the testator’s death, the bank made its usual half-yearly dividend of 3$ per cent, and in fifteen days after made an extraordinary dividend of 5 per cent. The widow claimed this last dividend as belonging to her. Lord Eldon said, “ I confess I do not think I can safely rest upon any distinction between this case and those that have been determined; I hake had great difficulty in stating the principle that led to them.” But, feeling bound by the decision of the house of lords, he held that the five per cent extraordinary dividend must be treated as capital, the sum invested as principal, and the interest paid to the tenant for life.
Witts v. Steere, (15 Vesey, 363,) was of a similar character. *654In that case the testator bequeathed to trustees his bank stock, with authority from time to time, as the same should become due, to receive all the dividends and profits and pay the same and every part thereof unto his daughter during her life, and after her death, remainder to his grandchild. The bank declared an extraordinary dividend of five per cent, in addition to their half-yearly dividend of 8-| per cent, and paid the two at once as so much interest and profits for the half year. The daughter claimed the whole of this dividend. The court, however, under the authorities above cited, held that the 5 per cent extraordinary dividend must be treated as capital. The attorney general, on the argument, insisted that the prior decisions were not supported by law; and the lord chancellor intimated that, were the question an open one, he should hold differently. In this last case the question of the testator’s intention was not made a point or discussed.
If the doctrine of these and several other English cases is to be adopted and followed in this country, then the trustees in this case should add all the extra interest, over 7 per cent, and the extra dividends, to the principal, and invest the same as capital; the interest, or dividends, of which (not to exceed 7 per cent, I suppose,) to be paid to the cestuis que trust.
But I am not satisfied with those decisions ; and there is no sound principle upon which they can be upheld. In the very nature of things, the dividends arising from stock investments, must be fluctuating in amount, depending upon a variety of contingencies, which no wisdom could 'foresee, or financial skill control.
I am satisfied that these decisions will never be followed in this country, and will be repudiated, if they are not already, in England. In fact, as early as 1807, the force of these decisions was considerably shaken by Lord Eldon in his decision in the case of Barclay v. Wainewright, (14 Vesey, 66.) The case was this. Latham Arnold, by his will, directed the sum of £10,000 to be invested in bank stock in the name of his executors, for his daughter, she to receive the dividends and interest thereof during life, remainder to her children, <fcc. The investment was made *655accordingly. When the investment was first made, the half yearly dividends were 2-g per cent: they were afterwards increased, first to 3, then to 3-J, and in 1806, an additional dividend of 5 per cent was made, and in 1807 a half yearly dividend of 5 per cent was declared.
The daughter filed her bill to be allowed the whole of this last dividend. It was resisted, on the authority of Brander v. Brunder, and the subsequent authorities above cited, but the lord chancellor, after taking time for consideration, held the cestui que trust entitled to the whole 5 per cent. He remarked, “ The cases that have been decided, appear to me to differ from this. It would be improper in me to intimate any opinion whether those cases are rightly decided, but I will say that I do not think this court can, without the authority of the house of lords, alter the determination that has been acted upon, in cases to which that determination clearly applies.” It would be pretty difficult to point out any distinction between the case of Barclay v. Wainewright and Witts v. Steere, except the difference between a dividend of 5 per cent and that of 8-§ per cent. It would seem, however, that the courts of chancery, in 1849 and 1850, without the authority of the house of lords, did come to a different determination from that acted upon before the case of Barclay v. Wainewright, as appears by the cases of Price v. Anderson and Johnson v. Johnson, (supra.) Our courts are not bound by these precedents; but are at liberty to adopt them or not, as they shall seem to be founded upon sound principle. Our judges seem to have so acted in the few cases which have arisen, wherein this principle was in any respect involved. There is no case in which this precise question has been presented. In Cogswell v. Cogswell, (2 Edwards, 240,) the vice chancellor remarked that, “ whatever advantage results from an increase in the annual value of the property, in consequence of the lots becoming more valuable as sites for warehouses, the tenants for life are entitled to. On this point there is no doubt.” And in a case which arose in Virginia, where “ a testator bequeathed one fourth of the residuum of his estate, in trust for his daughter for life, remainder over, &c., it was held that the daughter during *656her life was entitled to the whole of the profits of the estate bequeathed, and that no part of the profits should be carried to the principal fund, but that the whole profits should be paid to her. ( Ware v. McCandlish, 11 Leigh, 595.) From the foregoing I conclude that the decisions of Brander v. Brander, and kindred authorities, are not" now regarded as sound law in England ; but however that may be, they have never been adopted or recognized as law in this country. In fact trusts for the accumulation of profits, except for the benefit of infants, are prohibited in this state,
We are therefore at liberty in the disposition of these extraordinary dividends, and it is our duty, to ascertain the intention of the testator, and to decide the case in accordance with that intention, if it is not inconsistent with the well established rules of law. Uncontrolled by precedent, and considered upon principle only, the case seems very plain.
The testator gave to each of his five children, onedifth of the residuum of his estate; to his sons absolutely, to his daughters in trust, for life, with discretion to the trustees to invest and pay over the proceeds to his daughters. Uo specific fund was mentioned, in which the investment should be made, nor was any specific sum directed to be paid to them annually. The place where to be invested, and the amount to be received, were left indefinite; the latter depending entirely upon the success of the investment. If it was unfortunate, no dividend would be received; if fortunate, an extraordinary dividend might be realized. 'In the former case, no one would pretend that 7 per cent interest should be made up from the principal. If fortunate, why then take all above -7 per cent, and add to the capital? Gould the testator have contemplated either of the suppositions ? Clearly not. It should be borne in mind, also, that this railroad stock was not stock left by the testatop at his death, having a fixed rate of dividend, and by him devised, in trust, the dividends alone to be paid to the cestnis que trust; but stock in which the property devised had been invested by the trustees ; and here I think, a distinction may be drawn between this case and that of Brander v. Brander. The language used by the *657will is extremely broad. The cestuis que trust were to have the interest, dividends and proceeds of the two shares, after they should be put at interest, or invested by the trustees.
The stock payment of 60 per cent made upon this investment, was properly dividends extraordinary in amounts, not in manner of payment; that being a matter of policy with the company. “ Dividends,” as used in the will, is unqualified; it includes, in its technical sense, as well as in its ordinary and common acceptation,-all distributions to corporators, of the profits of the corporation, whether such distributions are large or small; or whether made at long or short intervals ; and without any regard to the manner or place of their declaration, or mode of payment. The testator is presumed to have used words in their natural and primary sense; and from the terms used, in his will, it is clear that he intended that all the gains, profits, income and proceeds of the two shares of his estate, of whatsoever kind, name or nature, should go to his daughters, as tenants for life; and that intention should not be defeated. If the payment of extraordinary dividends has impaired the capital, such capital should be restored by additions from such dividends. The sixty per cent stock dividend, made Dec. 30, 1850, belonged to the tenants for life, and the trustees must be decreed to deliver over to them the said stock or its substitute, and all income, dividend or increase received thereon, or pay the value thereof.
But the case is different with respect to the bonds or certificates of the Central Railroad Company received by the trustees on the 17th of May, 1853. Those bonds were not paid to the trustees, either as interest, dividend or proceeds; but as the difference between the value of the stock of the old railroad corporations and the new, and are therefore to be regarded as .capital, the same as though no consolidation transfer had taken place, except that those bonds received as difference for the sixty shares will follow their principal and go the cestuis que trust.
Unless the parties otherwise agree, a referee must be appointed, to ascertain the present value of the remaining one hundred and sixty shares of the Central Railroad stock held by the said trustees, and the value of the remaining bonds or certificates, *658and report the same to one of the justices of this court. Upon the coming in of that report, should the value of such stock and bonds and certificates be equal to the capital invested, or if deficient, upon the tenants for life making up such deficiency, a decree -will be entered, directing said trustees to deliver over to the cestuis que trust the sixty shares of stock dividend, the bonds and certificates received on the same, and all dividends thereon received by said trustees.
[Washington General Term,
January 1, 1855.
Hand, J., dissented.
Hand, Cady, C. L. Allen and James, Justices.]