Court Opinion

ID: 3878312
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:10:37.8048+00
Date Added: 2024-06-11T13:51:37.703731
License: Public Domain

Upon consideration of the several petitions for a rehearing in this case, it is ordered that the opinion *Page 424 
heretofore filed be withdrawn, by reason of certain errors and omissions which the petitions have convinced the Court do exist therein, and that the accompanying opinion be substituted therefor as the judgment of this Court.
The revised opinion will be filed and the remittitur stayed for the usual period, with leave to any of the parties to file such petitions for a rehearing as they may be advised.
This is an action by the executors of the will of Mrs. Dorcas L. Rice, who was formerly Mrs. L.S. Douglass, against the defendants, who are legatees and devisees under her will and also under the will of Dr. L.S. Douglass, and the administrator de bonis non, cum testamento annexo, of the estate of Dr. Douglass, for the purpose of having the rights of the parties under both wills adjudicated. The case was tried upon an agreed statement of facts and certain testimony, by his Honor, Judge Bonham, who filed a decree dated March 18, 1925, and a supplemental decree dated May 26, 1925. Let his decrees be reported. The many and interesting questions at issue will appear as the facts are developed herein.
Dr. Douglass died in 1897, leaving of force a will in which Mrs. Douglass was appointed executrix. After providing for practically nominal legacies, he devised and bequeathed his entire estate to Mrs. Douglass for life, and at her death, after providing for certain devises and legacies which do not concern the present inquiry, he directed that the residue of his estate be divided equally among S.D. Craig, Lawrence Craig, and Sylvester Harrison. Sylvester Harrison has died leaving as his sole heirs-at-law the defendants, his daughters, Mrs. Helms and Mrs. Gamble.
At the time of his death Dr. Douglass owned 15 shares of the capital stock of the Winnsboro Bank, par value $100, which at that time was worth $102 per share. Mrs. Douglass took possession of this stock, and as long as she lived *Page 425 
(up to the time of her death January 2, 1924) received the dividends declared upon it. In 1905, the bank retired two of the shares at $175 per share, and paid the amount, $350, to Mrs. Douglass. It is agreed that the remaining 13 shares have a present value of $240 per share, arising from surplus and undivided profits. Mrs. Douglass, after the death of Dr. Douglass, inter-married with J.G. Rice of Union County. At the time of her death on January 2, 1924, there remained of the estate of Dr. Douglass a tract of land, with which this proceeding is not concerned, and the 13 shares of bank stock. She had never been discharged as executrix, and the defendant, J.L. Glenn, was duly appointed administrator, as aforesaid, of the estate of Dr. Douglass.
As stated, Mrs. Douglass, then Rice, died on January 2, 1924, leaving of force a will, in which the plaintiffs, J.H. Glenn and W.H. Gist, were appointed executors. By item 2 of her will she provided as follows: "I give, devise and bequeath to Sylvester Douglass Craig, all of my shares in the Winnsboro Bank, Winnsboro, S.C." As a matter of fact she had, under the will of Dr. Douglass, only a life estate in the bank stock; at her death it went to S.D. Craig, L.R. Craig, and the two daughters of Sylvester Harrison, Mrs. Helms and Mrs. Gamble; and here the judicial saw strikes the first knot in the "stock log."
The defendant, S.D. Craig, contends that the remaindermen under the will of Dr. Douglass (himself, L.R. Craig, and the two daughters of Sylvester Harrison) are entitled to the remaining 13 shares of the bank stock, but that he, as legatee under the will of Mrs. Rice, is entitled to the difference between $175 per share, the price at which two shares were retired, and $102, the value at the time of Dr. Douglass' death, $73 per share, $146, and to the increment which the 13 shares earned during her lifetime, the difference between $240, the present value per share, and $102, the value *Page 426 
at the time of Dr. Douglass' death, $138 per share, $1,794. The executors of Mrs. Rice do not contest the right of the remaindermen under the will of Dr. Douglass to the 13 shares of stock, but insist that both the $350 and the $1,794 belong to her estate. The coremaindermen with S.D. Craig, under the will of Dr. Douglass, contend that both of these funds are attached to the stock, and belong to them, with S. D. Craig, as remaindermen.
I. It is conceded that at the time of the death of Dr. Douglass in 1897, the bank stock was worth $102 per share, par value $100; when Mrs. Rice in 1905 received from the bank in cash $350 for the retirement of the two shares, she received $204, which may be considered the corpus of that fund, and $146, a distributed earning upon the stock. Under the authorities hereinafter considered in reference to the $1,794 item, the $146 should be considered as earnings distributed by the bank to the life tenant, and became her absolute property. She, however, became accountable to the remaindermen for the corpus of that fund, $204, but, being entitled to the income from the whole 15 shares during her lifetime, she was entitled to the interest which the $204 may have earned as long as she lived, and her accountability for interest began only at her death, January 2, 1924. S.D. Craig as legatee under the will of Mrs. Rice, is not entitled to either the $146 item or to the $204 item; as a coremaindermen under the will of Dr. Douglass, he is entitled to one-third of $204, with interest from January 2, 1924, for which as for similar amounts to the other remaindermen the estate of Mrs. Rice must respond.
II. It is conceded that:
The present value of the remaining 13 shares of bank stock is $240 per share $ 3,120.00 *Page 427 

The value at the time of the death of Dr. Douglass
   was $102 per share . . . . . . . . . . . . .      1,326.00
                                                   __________
Increased value . . . . . . . . . . . . . .        $ 1,794.00
__ or 240 __ 102 = 138 x 13 = 1794.

This item is in the bank, included in its surplus and undivided profits; it has never been distributed, allotted, or even declared. The question is, who is entitled to it, the estate of Mrs. Rice, S.D. Craig, or S.D. Craig and his coremaindermen.
His Honor, Judge Bonham, decreed that, under the decisions of this Court, notably Cobb v. Fant, 36 S.C. 1;14 S.E., 959, and Wallace v. Wallace, 90 S.C. 61; 72 S.E., 553:
"Mrs. Rice had the power to dispose of the earnings and dividends, undeclared or undivided, on the stock of the Winnsboro Bank, and these with the amount of the two retired shares which is in excess of $102 per share, the value at the time of the death of Dr. Douglass, pass to Sylvester Douglass Craig under item 2 of her will."
From this portion of the decree which will be first discussed, the remaindermen above named have appealed.
In the case of Cobb v. Fant, 36 S.C. 1; 14 S.E., 959, it is difficult to see how the Court could have reached any other conclusion than it did. The deed conveyed certain bank stock to a trustee, and provided that the creator of the trust should receive during her life "the dividends, income, issues, and profits thereof," and at her death the income and profits should be divided between her two daughters upon certain conditions and ulterior limitations. During the life of the creator of the trust, the corporation decided to liquidate and divide its net assets among the stockholders. The Bank had prospered enormously, and at the time of liquidation the stock was worth $400 per share, par value $100. Dividends in the meantime had been paid; *Page 428 
the increment being due to surplus and undivided profits.
His Honor, Judge Kershaw, on circuit, held:
"The accumulated dividends are certainly profits of the stock, and the general rule in such cases is that the profits enure to the life tenant, and to the same purpose are the termsof this trust."
It was not necessary for him to state his conception of the general rule; it was sufficient to declare, as he declared,that the terms of this trust settled the question, as doubtless it did. In the opinion Justice McGowan states this:
"He [the trustee] insists that in such case the rule is, that the enhanced price of stock, by reason of dividends earned, but not declared, will be considered as capital and must be reinvested for the benefit of the remaindermen, and cites authorities for the doctrine. Upon general principles there may be some force in this view; but here the trust deed isthe law of the case. The plaintiff had the right to make or not to make the deed, as she thought best, and making it, she had the right to frame the terms as she pleased; and she made them so strong that we do not feel authorized to disregard them in favor of any supposed general rule of practice upon the subject. The words are, `In trust for my own use, that is, to pay the dividends, income, issues, and profits thereof, as they may accrue [italics by the Court], to me during the term of my natural life,' etc., * * *we must construe the deed according to its express terms."
— conclusive proof that the Court did not adopt the circuit Judge's dictum as to what was the "uniformly held" rule, but decided the case upon the express terms of the deed.
So in the case of Wallace v. Wallace, 90 S.C. 61;72 S.E., 553, the will directed the trustees to whom the stock was bequeathed in trust, "to pay over to my said daughters, respectively, during their respective lives, the annual income, interest or profits of their respective shares." The increment in the value of the stock was due to the accumulation *Page 429 
in the bank of surplus and undivided profits. The Circuit Judge declared: "In my view, therefore, the inquiry resolves itself into whether or not the increment upon the shares in question should be regarded as income or profits, or as corpus
of the trust estate" — and very properly held that the increment was profits, although not declared as dividends by the Bank. In the opinion of the Court, comparing the Cobbcase with the Wallace case, it is said: "The words in thatcase [the Cobb case], which were construed to include the enhanced value of the shares of stock, are similar to those in the present case, and there is no difference in principle between the two cases" — showing that both cases were decided upon a construction of the terms of the instrument involved, rather than upon a supposed general principle that the devise or trust covering a life estate in stock, without specific terms entitling the beneficiary to the increment, carried, in addition to the right to dividends, the right to an increment due to surplus and undivided profits. It will be observed that in the case at bar the will of Dr. Douglass gave Mrs. Douglass only an interest in the stock for life, and it is only by implication that she became entitled to the dividends even: upon the theory that if she should not be allowed the dividends, a life estate in the stock would be worthless. Clearly, then, if she could rightly claim more than was simply impliedly given to her, an express provision would appear to be necessary. In the absence then of a provision in the gift that the life tenant shall be entitled to the increment due to surplus and undivided profits, under the practically unanimous rule, the remaindermen, and not the life tenant, gets it.
Several situations are presented in the decided cases, in which the conflicting interests of the life beneficiary and the remaindermen, under a bequest of corporate stock, as affecting accretions in the value of the stock, the result of accumulated surplus or undivided profits, are considered. *Page 430 
It is conceded of course that the life beneficiary is entitled to all dividends declared while his immediate estate continues, the undisputed income of the corpus of the fund. It is also conceded that if the terms of the trust or bequest provide that he shall also receive the accretions, the intention of the benefactor will control any general rule to the contrary. Where, then, the terms of the trust or bequest do not give the life beneficiary specifically a right to the accretions, and where no question arises as to the right of the life beneficiary to dividends, the situation referred to may be thus classified (as a matter of convenience the word "accretions" will be used as covering all that may enhance the value of the stock, by way of surplus, reserve, undivided profits, or otherwise):
(1) Where the accretions are converted into a stock dividend, actually declared and issued, or ready to be issued, by the corporation.
(2) Where the corporation is engaged in the liquidation of its affairs and a distribution of its assets among the stockholders.
(3) Where the trustee, or the life beneficiary in cooperation with the remaindermen, has actually by sale converted the stock into cash.
(4) Where the corporation has not converted its accretions into a stock dividend, or declared a dividend representing them, in cash, or is not in the process of liquidation, but is a going concern, holding among its assets such surplus and undivided profits, and where there has been no sale of the stock by the trustee or the life beneficiary and the remaindermen.
It is manifest that the facts of the case at bar place it within the fourth class above described; there has been no declaration of a stock dividend, no declaration of a cash dividend; the corporation is not undergoing a process of liquidation; it is still a going concern holding the accretions *Page 431 
as a part of its assets; the life beneficiary and the remainderman have made no sale of the stock. The question is whether under a will which does not expressly give the life beneficiary the right even to the dividends, and under the circumstances above detailed, the entirely contingent interest of the life beneficiary can be considered income of the corpus
of the fund. (We do not, of course, question the right of the beneficiary, impliedly conferred, to the dividends actually declared while she lived, and which have been regularly paid to her.)
We may concede (though not to be understood as doing so) that under the first three classes, the life beneficiary would be entitled to the benefit of the accretions, without in the slightest degree affecting our position in reference to his rights under the fourth class. We have not been able to justify a repudiation of the doctrine so clearly enunciated in the case of Gibbons v. Mahon, 136 U.S. 549;10 S.Ct., 1057; 34 L.Ed., 525, reaffirmed in several cases by that illustrious Court, that where the accretions are converted into a stock dividend, declared and issued by the corporation, the stock dividend remains a part of the corpus
of the fund.
We would not consider it necessary to even refer to that proposition, for the reason that no such condition confronts the Court in this case, but for the apparent conception that the Cobb and Wallace cases declare a different rule, not only applicable but controlling, under entirely different conditions. As we have endeavored to show, both of the cases were determined upon the express terms of the trust deed or will, and specifically stated to be independent of any general rule upon the subject.
The Cobb case is not applicable for the reasons: (1) Under the terms of the trust the life beneficiary was entitled to "dividends, income, issues and profits thereof as they mayaccrue," the Court held that accretions in value of the stock *Page 432 
due to earnings constituted "profits." (2) The bank was in process of liquidation and the assets being distributed.
The Wallace case is not applicable for the reasons: (1) Under the terms of the trust the life beneficiaries were entitled to "the annual interest, income or profits of their respective shares," which is held in the Cobb case to have carried accretions. (2) The shares of stock had been sold by the trustees and the proceeds of sale were actually in their hands and out of the bank's protection or interest.
There has been much discussion as to the divergence of what are denominated the Massachusetts rule, the Pennsylvania rule, and the Kentucky rule. His Honor, the Circuit Judge, assumes that because the Cobb v. Fant case and theWallace v. Wallace case, in his opinion, adopt the Pennsylvania rule, the question is no longer an open one in South Carolina. I do not think that any of the named rules have any application to the facts of the case at bar. They all have reference to an actual distribution of the undivided earning of the corporation and not, as in the case at bar, to the undistributed earnings.
The Massachusetts rule regards all cash dividends, however large, as income, and all stock dividends, however made, as capital, manifestly referring to cases where the earnings have been actually distributed either in the form of dividends or of new stock, representing the earnings.
The Pennsylvania rule is that the earnings when declared as dividends, whether in cash or stock, belong to the life tenant, provided the earnings have accumulated since the stock was held as a part of the trust estate. This, too, manifestly has reference to cases where the earnings have been actually declared either in the form of dividends or of new stock representing the earnings.
The Kentucky rule is like the Pennsylvania rule in that it makes no distinction between cash and stock dividends declared out of the surplus earnings, but differs from that *Page 433 
rule in holding that dividends, whether stock or cash, are nonapportionable, and are considered as accruing in their entirety as of the date when they are declared. This, too, manifestly has reference to cases where the earnings have been actually declared, either in the form of dividends or of new stock.
On the other hand, the case at bar is one where there has been no liquidation, no declaration of dividends from the accumulated earnings, and no stock dividends representing such earnings. It is not necessary, therefore, to make a choice from among the three rules referred to, for they all are applicable to a different state of facts.
We do not deem it necessary to waste any energy upon the second and third classes above referred to, as those conditions do not confront the Court. The Cobb case might be cited as sustaining the right of the life beneficiary to the accretions where the corporation is in process of liquidation; and the Wallace case, where the stock has actually, by sale, been converted into cash, though both cases, as heretofore shown, were decided upon the express terms of the deed of trust in the one case and of the will in the other.
Now, coming to the fourth class, precisely this case, where the corporation has not converted its accretions into a stock dividend, or declared a dividend representing them in cash, or is not in the process of liquidation, but is a going concern, holding among its assets such surplus and undivided profits, and where there has been no sale of the stock by the trustee or the life beneficiary and the remainderman: We think that the logic of Justice Gray in the Gibbons v.Mahon case, 136 U.S. 549; 10 S.Ct., 1057;34 L.Ed., 525, is unanswerable, as applied to this phase of the question, even if the decision may not meet this Court's approval upon the matter of stock dividend, with which the Court in this case is not at all concerned. An extended extract from that opinion is justified. The Court says: *Page 434 
"The distinction between the title of a corporation, and the interest of its members or stockholders, in the property of the corporation, is familiar and well settled. The ownership of that property is in the corporation, and not in the holders of shares of its stock. The interest of each stockholder consists in the right to a proportionate part of the profits whenever dividends are declared by the corporation, during its existence under its charter, and to a like proportion of the property remaining, upon the termination or dissolution of the corporation, after payment of its debts.Van Allen v. Assessors, 3 Wall., 573, 584 [18 L.Ed., 229].Delaware Railroad Tax, 18 Wall., 206, 230 [21 L.Ed., 888]. Tennessee v. Whitworth, 117 U.S. 129, 136
[6 S. Ct., 645; 29 L.Ed., 830]. New Orleans v. Houston,119 U.S. 265, 277 [7 S.Ct., 198; 30 L.Ed., 411].
"Money earned by a corporation remains the property of the corporation, and does not become the property of the stockholders, unless and until it is distributed among themby the corporation. The corporation may treat it and deal with it either as profits of its business, or as an addition to its capital. Acting in good faith and for the best interests of all concerned, the corporation may distribute its earnings at once to the stockholders as income; or it may reserve part of the earnings of a prosperous year to make up for a possible lack of profits in future years; or it may retain portions of its earnings and allow them to accumulate, and then invest them in its own works and plant, so as to secure and increase the permanent value of its property.
"Which of these courses shall be pursued is to be determined by the directors, with due regard to the condition of the company's property and affairs as a whole; and, unless in case of fraud or bad faith on their part, their discretion in this respect cannot be controlled by the Courts, even at the suit of owners of preferred stock, entitled by express agreement with the corporation to dividends at a *Page 435 
certain yearly rate, `in preference to the payment of any dividend on the common stock, but dependent on the profits of each particular year, as declared by the board of directors.'New York Lake Erie  Western Railroad v. Nickals,119 U.S. 296, 304, 307 [7 S.Ct., 209, 213;30 L.Ed., 363].
"Reserved and accumulated earnings, so long as they are held and invested by the corporation, being part of its corporate property, it follows that the interest therein, represented by each share, is capital, and not income, of that share, as between the tenant for life and the remainderman, legal or equitable, thereof.
"Whether the gains and profits of a corporation should be so invested and apportioned as to increase the value of each share of stock, for the benefit of all persons interested in it, either for a term of life or of years, or by way of remainder in fee; or should be distributed and paid out as income, to the tenant for life or for years, excluding the remainderman from any participation therein; is a question to be determined by the action of the corporation itself, at such times and in such manner as the fair and honest administration of its whole property and business may require or permit, and by a rule applicable to all holders of like shares of its stock; and cannot, without producing great embarrassment and inconvenience, be left open to be tried and determined by the Courts, as often as it may be litigated between persons claiming successive interests under a trust created by the will of a single shareholder, and by a distinct and separate investigation, through a Master in Chancery or otherwise, of the affairs and accounts of the corporation, as of the dates when the provisions of the will of that shareholder take effect, and with regard to his shares only.
"In ascertaining the rights of such persons, the intention of the testator, so far as manifested by him, must of course *Page 436 
control; but when he has given no special direction upon the question as to what shall be considered principal and what income, he must be presumed to have had in view the lawful power of the corporation over the use and apportionment of its earnings, and to have intended that the determination of that question should depend upon the regular action of the corporation with regard to all its shares."
"* * * The stockholders have no right to the dividends until they are declared, which may never be if the directors see fit to convert earnings into capital." Bankv. Loewe, 242 U.S. 357; 37 S.Ct., 172; 61 L.Ed., 360.
In Towne v. Eisner, 245 U.S. 418; 38 S.Ct., 158;62 L.Ed., 372; L.R.A., 1918-D, 254, it is held that a stock dividend, representing undistributed earnings, is capital and not income.
The same ruling is made in Eisner v. Macomber,252 U.S. 189; 40 S.Ct., 189; 64 L.Ed., 521; 9 A.L.R., 1570, where the Court says:
"Short of liquidation or until dividend declared, he has no right to withdraw any part of either capital or profits from the common enterprise; on the contrary, his interest pertains not to any part, divisible or indivisible, but to the entire assets, business, and affairs of the company. Nor is it the interest of an owner in the assets themselves, since the corporation has full title, legal and equitable, to the whole. The stockholder has the right to have the assets employed in the enterprise, with the incidental rights mentioned; but, as stockholder, he has no right to withdraw, only the right to persist, subject to the risks of the enterprise, and looking only to dividends for his return. If he desires to dissociate himself from the company he can do so only by disposing of his stock."
"In the present case there was no winding up or liquidation of the * * * company, nor any surrender of * * * (the stockholder's) stock. He was but one of many stockholders, *Page 437 
and had but the ordinary stockholder's interest in the capital and surplus of the company, that is a right to have them devoted to the proper business of the corporation and to receive from the current earnings or accumulated surplus such dividends as the directors in their discretion might declare." Lynch v. Hornby, 247 U.S. 339;38 S.Ct., 543; 62 L.Ed., 1149.
In 10 Cyc., 563, it is said:
"Another result of this view is that undivided earnings of a corporation are likewise regarded as capital; and hence as between the life tenant and the remaindermen the interest of such earnings represented by each certificate of stock, is an interest in the capital and not an interest in the income."
A stockholder in a corporation has no legal title to profits of the business until dividends have been declared, since profits, until division is made by the directors, are assets of the corporation and not income due to stockholders.Waterman v. Alden, 42 Ill. App. 294.
A stockholder has no title to the net earnings until a division is declared. Minot v. Paine, 99 Mass. 101; 96 Am. Dec., 705.
"A shareholder in a corporation has no legal title to the property or profits * * * until a division is made." Hyattv. Allen, 56 N.Y., 553; 15 Am. Rep., 449.
"In the absence of any restraining statute, the corporation may treat * * * and deal with" the money earned by it, "either as an increase of its property or as profits of its business. So long as the corporation holds it as a part of the corporate property, it is capital of the corporation, and the interest therein, represented by each share," of stock "is capital and not income of that share, as between the tenant for life and remaindermen, legal or equitable, thereof." Rand v. Hubbell, 115 Mass. 461; 15 Am.Rep., 121. *Page 438 
"Dividends are properly payable out or earnings, but it does not necessarily follow from the fact that earnings have been made that a dividend will be declared; the corporate officers may for some reason conclude not to declare a dividend. It is apparent that the failure of the corporate officers to declare dividends where there are earnings properly applicable thereto will result in an increased value to the corporate stock. It is apparent, also, that this increase is at the expense of the life tenant, from whom is withheld what is properly income." Note, 13 A.L.R., 1011.
"The fundamental principle involved in these questions is whether there has been a distribution or division of the earnings, profits, or accumulations of the corporation. Until there has been such division, the life tenant is not entitled to any increase in the value of the * * * trust fund, or the capital and assets of the corporation, shares of which constitute the trust fund." U.S. Trust Co. v.Heye, 224 N.Y., 242; 120 N.E., 645.
(Aligned against the Massachusetts rule.)
In Lauman v. Foster, 157 Iowa, 275; 135 N.W., 14; 50 L.R.A. (N.S.), 531, it is held (obiter) that any enhancement in the value of the stock by reason of withholding the earnings of the corporation inures entirely to the benefit of the corpus, and the life tenant derives no advantage therefrom.
In Connolly's Estate, 198 Pa., 137; 47 A., 1125, it is held (quoting from note to 13 A.L.R., 1011):
"The increase in value of stock belonging to an estate, due in part to surplus earnings retained by the corporation to give it financial standing and meet losses, and in part to the enhancement of the original value of such stocks, belongs to the remainderman, and not to the tenant for life as income." (This Court aligned against the Massachusetts rule.) *Page 439 
In the case of In re Cutler, 23 Misc. Rep., 508; 52 N. Y.S., 842, it is held (quoting from note to 13 A.L.R., 1014):
"Under a will bequeathing stocks to a life tenant `for her sole use and benefit, and subject to her control during her natural life,' an increase in the value of stock during the life tenancy belongs to the remainder estate.'
To the same effect is Brewster v. Walsh (D.C.), 268 F., 207, which quotes from the Macomber case:
"Enrichment throughout increase in value of capital investment is not income in any proper meaning of the term."
And from Gray v. Darlington, 15 Wall., 63;21 L.Ed., 45:
"The mere fact that property has advanced in value between the date of its acquisition and sale does not authorize the imposition of the tax on the amount of the advance. Mere advance in value in no sense constitutes the gains, profits, or income specified by the statute. It constitutes and can be treated merely as increase of capital."
The Court further says:
"It has been held repeatedly that gains realized from the sale of capital assets held in trust are not income, but are principal, exactly as the securities were before they were sold; and that where a tenant for life is entitled to the entire net income of a fund, and the trustee realizes an advance in value by the sale of an investment, the life tenant is not entitled to the gain which is uniformly treated by the Courts as an increment to principal and a part of the corpus of the trust" — citing Boardman v. Mansfield,79 Conn., 634; 66 A., 169; 12 L.R.A. (N.S.), 793; 118 Am. St. Rep., 178. Carpenter v. Perkins, 83 Conn., 11;74 A., 1062. Parker v. Johnson, 37 N.J. Eq., 366. Outcaultv. Appleby, 36 N.J. Eq., 74. Matter of Gerry,103 N Y, 445; 9 N.E., 235. Thayer v. Burr,201 N.Y., 155; 94 N.E., 604. Graham's Estate, 198 Pa., 216; *Page 440 47 A., 1108. Neel's Estate, 207 Pa., 446; 56 A., 950. Laumanv. Foster, 157 Iowa, 275; 135 N.W., 14; 50 L.R.A. (N.S.), 531. Slocum v. Ames, 19 R.I. 401;36 A., 1127. Jordan v. Jordan, 192 Mass. 337; 78 N.E., 459.Mercer v. Buchanan (C.C.), 132 F., 501.
After citing a great array of authorities the West Virginia Court holds in the case of Trust Company v. Rammelsburg,82 W. Va., 701; 97 S.E., 122:
"The theory of these decisions is that, until actually severed from its corporate assets, the earnings of a corporation cannot be deemed or held to be in any sense an income accruing to the holders of its shares. As profits or income, they legally belong to the corporation. It has full and complete title to them and dominion over them and right to treat them as its capital and use them as such in its business. In point of fact, they are generally so used, although sometimes carried on the books as surplus. They are not the property of the shareholder until divided and paid or delivered to him in such manner and to such an extent as to effect a transfer of the title and possession from the corporation to him. While they remain the property of the corporation, they enhance the value of the shares; but that does not make them the property of the shareholders nor an accrual to them as income any more than the enhancement of the value of real estate or personal property owned by an individual constitutes income." "Until there has been such division, the life tenant is not entitled to any increase in the value of the principal of the trust fund, or the capital and assets of the corporation, shares of which constitute the trust fund." U.S. Trust Co. v. Heye,224 N.Y., 242; 120 N.E., 645.
In the case in In re Loewer's Estate, 263 Pa., 517;106 A., 789, the life tenant of corporate stock which had increased in value during the lifetime of the life tenant was *Page 441 
not entitled to such increase, which properly belonged to the remainderman.
"In absence of indication of testator's intention as to whether stock dividend, from earnings, be distributed as income among life tenants or held as part of corpus of trust estate for remaindermen, it must be held for remaindermen, and not distributed, as dividends may be, as income among surviving life tenants." Harris v. Moses,117 Me., 391; 104 A., 703.
(Against the Massachusetts rule.)
"The value of stock may be increased by good management, prospects of business, and the like, but such increase is not income. It may also be increased by an accumulation of surplus; but so long as that surplus is retained by the corporation, either as surplus or increased stock, it can, in no proper sense, be called income. * * * Surplus and accumulated reserve funds, until set apart and appropriated by the corporation for the payment of dividends, are capital, and, whatever their magnitude may be, they are not, as between life tenant and remainderman, treated as income until they are distributed." Smith v. Hooper,95 Md., 16; 51 A., 844.
"Accretions to trust fund from increase in value of securities composing its corpus are part of corpus and not `income, revenues and profits of trust estate,' payable to life beneficiary." In re Gartenlaub's Estate, 198 Cal., 204;244 P., 348; 48 A.L.R., 677.
(Against the Massachusetts rule.)
Justice Taylor of the Supreme Court of Vermont has written an extremely able and interesting opinion in the case of Heaton's Estate, 89 Vt., 550; 96 A., 21; L.R.A., 1916-D, 201, in which he disapproves of the Gibbons v.Mahon Case in 136 U.S. 549; 10 S.Ct., 1057;34 L.Ed., 525, and the Massachusetts rule, holding that where a stock dividend has been declared out of accumulated earnings *Page 442 
since the creation of the trust, the stock dividend goes to the life tenant and not to the remainderman, in line with the Kentucky rule; but the fact that the dividend has been declared, either in cash or new stock, is the controlling element in the decision, which fact does not appear in the case at bar. His statement that the Gibbons Case "has never been reviewed by the Supreme Court * * * and so has only the weight of a single decision," was inadvertently made, as it has been recognized in Bank v. Loewe, 242 U.S. 359;37 S.Ct., 172; 61 L.Ed., 360. Railroad Co. v.Lowe, 247 U.S. 338; 38 S.Ct., 540; 62 L.Ed., 1142.Lynch v. Hornby, 247 U.S. 341; 38 S.Ct., 543;62 L.Ed., 1149. Eisner v. Macomber, 252 U.S. 202;40 S. Ct., 189; 64 L.Ed., 521; 9 A.L.R., 1570. Towne v.Eisner, 245 U.S. 426; 38 S.Ct., 158; 62 L.Ed., 372; L.R.A., 1918-D, 254.
Even the Kentucky Court, which has gone the limit in protecting the life tenant, in opposition to the Massachusetts rule, holds:
"Until a dividend has been declared by the directors of a corporation acting in good faith, the shareholder has no legal claim upon its accumulated earnings, which will support an action against the corporation." "The accumulated earnings of a corporation before the declaration of a dividend are not income, as between the life tenant and the remaindermen in trust, for whom shares in such corporation are held, so long as the shares remain a part of the trust estate."
The above is quoted from the syllabus of the case.
The Court declares in its opinion:
"To entitle the life tenant to any part of the accumulated earnings of a corporation, it is essential that a dividend be declared by the corporation while the shares are held in the trust." Guthrie v. Akers, 157 Ky., 649; 163 S.W. 1117.
The Court cites a number of Kentucky cases which sustain *Page 443 
the above conclusion; demonstrating that its extreme position as to the rights of the life beneficiary applies only where a dividend, cash or stock, has actually been declared.
See, also, Letcher v. Bank, 134 Ky. 24; 119 S.W. 236; 20 Ann. Cas., 815. Bank v. Lee (Ky.), 66 S.W. 413.
In the Court of Tennessee, which is aligned with other Courts which repudiate the Massachusetts rule, it is held, quoting syllabus in Tubb v. Fowler, 118 Tenn., 325;99 S.W., 988;
"Where a widow was entitled under her husband's will to the income of bank stock, the portion of surplus and undivided profits * * * apportionable to the shares could not be regarded as `income'."
The Court said:
"Upon authority, we are satisfied that they form no part of the income of these Banks. As is said * * * in Phelpsv. Farmers', etc., Bank, 26 Conn., 269, in speaking of undivided profits: `Nothing can be income to the stockholder that has not been made so by the act of the corporation. The profits of a bank no matter when made, until separated from the stock by declaring a dividend, are mere increment and augmentation of the stock. They are properly stock themselves, composing a part of the stock of the bank, and will pass with the stock under that name, either by contract or by levy of execution.' And this is equally true as to undivided surplus. * * * Until the directors or shareholders, acting as a body, have determined otherwise, the title and control of these funds are absolutely in and with the corporation. [Citing 1 Cook Corp., § 11; 2 Clark Marshall, § 517; Marawetz, § 344; 2 Beach, § 620]. * * * It is upon [this] basis * * * that the Courts have uniformly held that a shareholder has no legal title to any of its property until the corporation sees proper to part with its dominion over it, by making a division * * * in the form of a dividend." *Page 444 
The Mississippi case, Simpson v. Millsaps,80 Miss., 239;31 So., 912, so strongly relied upon to sustain the respondent's position, is not applicable for two reasons: (1) Under the Court's construction of the will, "all accretions
to the corpus," "all the profits it produced," were annually devoted to the support, maintenance, and education of the life beneficiaries. (2) The bank stock shares, the corpus of the trust, were actually sold by the trustees at a price largely advanced from the time of the inception of the trust, and the proceeds which represented in part said accretions and profits were in the hands of the trustees, not in the undistributed mass of assets of the bank.
Wonderfully illuminating notes upon the subject are found in 13 A.L.R., 1009, and 24 A.L.R., 9.
The rationale of these decisions strongly appeals. The corporation is the legal owner of all of its assets, including, of course, the money set aside for surplus, reserve, or undivided profits. To create such a reserve fund is a policy of good business everywhere, in personal as well as corporate affairs. It stabilizes the financial credit of the corporation; it secures stockholders from statutory assessments; it provides a fund for needed improvements, repairs or expansion. The fact that a stockholder cannot go into Court and demand, as a matter of right, the application of earnings to dividends, without showing fraudulent conduct on the part of the managing directors, is conclusive that under normal conditions, honest administration, the disposition of the earnings is a corporate function. So long as it may be under the control of the corporation, it is impossible to conceive that it is income to the stockholder. If the Court should hold that such accretions are income to which the life beneficiary is entitled, how is it to enforce its decree? It certainly cannot levy an assessment against the remainderman to make up the interest which the life beneficiary has. It certainly cannot order the remainderman to sell his *Page 445 
stock; he may want to hold onto it for better prices or for better control of the corporation. He has the legal title to the stock subject to the life interest. How is the Court to compel a man to part with his prospective interest for the benefit of the life beneficiary to whom he owes nothing? The corporation certainly cannot be compelled to pay the difference. Who, then, is to pay it?
It appears therefore indisputable that the $1,794 item has become attached to and is a part of the 13 shares of stock and goes to the remainderman under the will of Dr. Douglass.
III. The next matter for consideration is the contention of Mrs. Helms that she is entitled to the money which Mrs. Rice had on deposit in the Bank of Carlisle, in the Columbia Bank, and in the Winnsboro Bank, at the time of her death, and other property hereinafter referred to, under item 1 of Mrs. Rice's will.
It appears that at the time of her death Mrs. Rice had to the credit of her ordinary checking account in the Bank of Carlisle $4,445.73, and under similar conditions in the National Exchange Bank $197.60, and in the Winnsboro Bank $767. She also had in her possession at the time two time certificates of deposit issued by the Bank of Carlisle, one for $5,693.35 and the other for $2,076.49, a total of $13,180.17, practically in cash, Liberty bonds of the value of $2,500.00, 9 shares American Products Export  Import Corporation of the value of $35 and 4 bales of cotton appraised at $570.00; a grand total of $16,285.17.
Item 1 of Mrs. Rice's will provides:
"I give, devise and bequeath to Louise Douglass Harrison sixteen shares of the National Loan  Exchange Bank Stock in Columbia, S.C. my gold watch, all of my silver, household furniture, automobile and all personal property owned by me not mentioned herein." *Page 446 
Louise Douglass Harrison is Mrs. Helms. This is the item under which she claims the above sum aggregating $16,285.17.
His Honor, the Circuit Judge, held, in reference to the items other than the certificates of deposit, aggregating $8,515.33:
"In no other item of the will is disposition made of personal property not otherwise disposed of save in Item (1). Money, Liberty bonds, stock, cotton are personal property, and I hold the words `All of my personal property owned by me not mentioned herein' are sufficiently comprehensive to include the articles of personal property in dispute."
It does not appear when these items were acquired or from what source. They may have existed at the time the will was executed or they may have been acquired thereafter. It is more than probable that they were acquired afterward; else these would most likely have been referred to specifically in the will. It is not improbable that their source was proceeds of collections from notes and mortgages, but, as this has not been shown, they fall under the general rule of ademption, having been mingled in unidentified form with her other property.
The question is whether they are covered by Item 1 of Mrs. Rice's will. That item gives to Mrs. Helms 16 shares of bank stock, gold watch, all silver, household furniture, automobile, "and all personal property owned by me notmentioned herein." Inasmuch as Items 2, 3, 4 and 5 of the will cover land, shares of stock and money, and not articles which, while technically "personal property," in the common acceptation of the terms cover articles more directly associated with the person, and as the inventory shows that Mrs. Helms received such articles as pictures, books, sewing machine, umbrellas, etc., under Item 1, I think that the expression "all personal property owned by me not mentioned herein," has reference to Item 1, and not to the *Page 447 
will generally, and was intended to cover articles which the testatrix owned for her personal use and enjoyment, articles of a personal nature similar in character to those enumerated, and did not cover any of the items making up the aggregate of $8,515.33, which consists mainly of choses in action. It seems unreasonable to suppose that the testatrix intended, while bequeathing property to Mrs. Helms, worth about $3,500, she should in addition, under a questionable provision, receive $8,500.
In Gardner, Wills, 401, 402, it is said:
"The effect of any general word in a will may be affected by the rule, of universal application in the construction of statutes or documents of any description, that where certain things are enumerated, and a more general description is coupled with the enumeration, that description is commonly to be understood to cover only things of a like kind with those enumerated. Thus where a bequest was made `of all my housekeeping articles including household furniture, beds, bedding, * * * books, pictures, all my wardrobe, and all other articles of personal property in the house at the time of my death belonging to me.' It was held not to cover certain promissory notes in the house belonging to the deceased.
"But it is a sound rule of interpretation, that when an author makes use * * * of terms, * * * evidently confined and limited to a particular class of a known species of things, and then, after such specific enumeration, subjoins a term of very extensive signification, this term, however general and comprehensive in its possible import, yet, when thus used, embraces only things `ejusdem generis,'
i. e., of the same kind or species, with those comprehended by the preceding limited and confined terms." Ex parteLeland, 1 Nott  McC., 460.
"There is no question that general and unlimited terms are restrained and limited by particular recitals when used *Page 448 
in connection with them, whether they are found in the recital of a bond or covenant, or any other writing, or used in ordinary conversation, for the obvious reason that they convey a more definite idea, and are therefore less liable to misconception." Treasurers v. Lang, 2 Bail. 430.
To the same effect are 36 Cyc., 1120; 25 A  E. Enc. L., 1012. Alabama v. Montague, 117 U.S. 602;6 S.Ct., 911; 29 L.Ed., 1000. 3 Words and Phrases, First Series, p. 2328. 8 Words and Phrases, First Series, p. 7647. 2Words and Phrases, Second Series, p. 225. State v. Williams, 2 Strob., 474. Commissioners of Public Accountsv. Greenwood, 1 Desaus., 450. U.S. v. Fisher, 2 Cranch, 358; 2 L.Ed., 304. U.S. v. Baumgartner (D.C.), 259 F. 722. U.S. v. R. Co. (C.C.A.), 222 F., 33. Hills v. Joseph
(C.C.A.), 229 F. 865. 2 Lewis' Sutherland, Stat. Const., 814, cited by his Honor, Judge Watkins, in the case of Southern Railroad Co. v. Columbia Compress Co. (C. C.A.), 280 F., 344. Also Andrews v. Schoppe,84 Me., 170; 24 A., 805. In re Reynolds, 124 N.Y., 388;26 N.E., 954. Tallman v. Tallman, 23 N.Y.S., 734; 40 Cyc., 1541, 1542. Misch v. Russell, 136 Ill., 22; 26 N.E., 528; 12 L.R.A., 125.
In Bond v. Martin (Ky.), 76 S.W. 326, the will devised and bequeathed her residence with all its contents "furniture, bedding, silver, everything in or about the premises,all personal property wherever it may be." The Court held that the words italicized were only intended to apply to the property described and other like personal property and did not cover bank stock held by her. The case of Andrewsv. Schoppe, 84 Me., 170; 24 A., 805, is particularly instructive.
The items aggregating $8,515.33 under discussion did not pass to Mrs. Helms under Item 1 of Mrs. Rice's will; They did not pass to the orphanage under the unnumbered *Page 449 
clause; they are intestate property to be administered as such.
IV. As to the contention of the Epworth Orphanage that it is entitled to the whole of the $16,285.17, above referred to, under Mrs. Rice's will:
The unnumbered paragraph of the will which follows immediately Item 5, is as follows:
"All the rest and residue of my estate real and mixed, I order to be converted into money as soon as can conveniently be done after my decease, and for that purpose I do hereby authorize and empower my executors hereinafter named and the survivors of them, to sell all of my real estate either by public or private sale for the best price that can be gotten for same and grant, convey and assure to the purchaser or purchasers thereof in fee simple, collect allnotes and mortgages due me and when all of my real estate has been sold and all notes and mortgages collected, I will and direct that all monies received from said sales and collections be paid to the Epworth Orphanage at Columbia, S.C. by my Executors hereinafter named."
The orphanage claims the $16,285.17 under this item. His Honor, the Circuit Judge permitted the introduction of testimony to the effect that the two certificates of deposit issued by the Bank of Carlisle, for $5,693.35 and $2,076.49, represented the proceeds of two mortgages, collected by Mrs. Rice after the execution of her will in 1916, and held that the orphanage was entitled to the two certificates of deposit, total $7,769.84, and that Mrs. Helms was entitled to the deposits in the three banks, $4,445.73, $767 and $197.60, and the Liberty bonds, $2,500, American Products Export  Import Stock, $35, and the 4 bales of cotton, $570; a total $8,515.33.
From this part of the decree both the orphanage and Mrs. Helms have appealed, each claiming all of the $16,285.17. *Page 450 
The claim of the orphanage to the above items aggregating $8,515.33, which he held Mrs. Helms entitled to, is properly disposed of by his Honor, the Circuit Judge, in the following extract from his decree:
"It appears plain to me that she intended to limit her benefactions to Epworth Orphanage to the proceeds of the sale of her real estate not otherwise thereinbefore disposed of by her, and to the collections from her notes and mortgages. She says so in so many words: `When all of my real estate has been sold and all notes and mortgages collected, I will and direct that all moneys received from said sales and collections be paid to the Epworth Orphanage.' It is true that the usual effect of a residuary clause is to dispose of all property not otherwise disposed of by testator, even if it be not named, but in this instance I am satisfied that Mrs. Rice thought she had disposed of all the property except certain real estate and her notes and mortgages, and the proceeds of these she gave to Epworth Orphanage."
The apparent comprehensiveness of the unnumbered clause of the will, which is considered by the Circuit Judge as a residuary clause, is specifically limited to what the testatrix apprehended the residuum to be, the tract of land and the notes and mortgages. As to the two certificates of deposit aggregating $7,769.84, the Circuit Judge held that they represented the proceeds of two mortgages collected by Mrs. Rice after the execution of her will; that as to these mortgages Mrs. Rice did in her lifetime what she directed her executors to do after her death, with the notes and mortgage which she anticipated would be on hand at that time, and that she kept these funds separate from other moneys not in these certificates of deposit which have been fully identified. He accordingly held that the orphanage was entitled to the two certificates of deposit. *Page 451 
Two questions arise in the consideration of the main question as to this contention of the orphanage: (1) Is the legacy of the proceeds of the notes and mortgages referred to in the unnumbered clause a specific legacy? (2) If a specific legacy, has ademption of the legacy followed the collection of two of the notes and mortgages referred to?
There can be no doubt but that the legacy is a specific legacy, under the principles announced in Rogers v. Rogers,67 S.C. 171; 45 S.E., 176; 100 Am. St. Rep., 721, where the testator bequeathed to a legatee all the claims held by the testator against his father and all interest in the father's estate, and in which the Court held:
"The legacy in question is specific, because the debts or claims given, whether considered with reference to the evidences thereof, or with reference to the money that may be received thereon, are particularly distinguished and separate from all other property of the testator. The claims are designated as those which the testator holds against the estate of his father, things easily identifiable and, in fact, particularly described in the complaint."
In that case the doctrine declared in Crawford v. McCarthy,159 N.Y., 519; 54 N.E., 278, appears to be approved: "A bequest to an individual of the proceeds of a bond or mortgage particularly describing it, is a specific legacy."
But the other question, whether, assuming the legacy to be specific, it has been adeemed by the collection of the two mortgages by Mrs. Rice after the execution of her will, is a difficult one. The general rule, conceded, is that:
"If the identical thing bequeathed is not in existence, or has been disposed of so that it does not form a part of the testator's estate, at the time of his death, the legacy is extinguished or adeemed, and the legatee's rights are gone." *Page 452 
Counsel for the orphanage seek to ingraft upon this rule an exception, to the effect that if the testator during his lifetime, has conveyed the property bequeathed, or collected the debt the proceeds of which were directed by the will to be paid to the legatee, and the proceeds can be traced and identified in cash, property, or securities, the legacy has not been adeemed, but may be recovered out of the altered from in which it has been traced and identified. In this effort they should succeed.
In the case of In re Black's Estate, 223 Pa., 382;72 A., 631, the testator bequeathed the proceeds of two bonds to two legatees. The bonds were paid off during the lifetime of the testator and the proceeds invested in a mortgage. After his death the mortgage was paid. It was held that the legatees of the bonds were entitled to the proceeds and that a claim that the legacies had been adeemed could not be sustained. The Court said:
"The testator bequeathed, not the bonds, but the proceeds; and the learned Court below has found as a fact, upon sufficient testimony, that the proceeds of these bonds, identified and ear-marked, are intact, ready for distribution to the parties entitled thereto. This finding of fact relieves the whole situation from difficulty. The very thing bequeathed by the testator — that is, the proceeds of two certain bonds — being in existence and belonging to him at the time of his decease, there is no rule of law which would deny the legatees the right to demand and receive what the will in terms gave them. The learned Judge who delivered the opinion of the Court en banc very properly and pertinently said: `Ademption of a specific legacy arises by the alienation or destruction of the object. It is now clear that the thing devised has neither been alienated or destroyed. The proceeds being traced out and identified at the time of testator's death, the legacy will take effect.'Nooe v. Vannoy, 59 N.C. 185. The proceeds of these *Page 453 
bonds, being the thing devised, were in fact kept apart from the testator's estate by the mortgage investment. Therefore the argument in favor of extinction and ademption falls."
"The general rule is, that where a testator, after making his will, sells the property given, the legacy is adeemed. But where the proceeds of the sale of property are given to children, and the will intimates that the sale is to be made by the testator himself who does make it, and no substitution or equivalent is made for such legacy, and the proceeds are re-invested, and are traceable, it was held not to be a case of the ademption of the legacy by a sale of the property." Nooe v. Vannoy, 59 N.C. 185.
See, also, Connecticut Company v. Chase, 75 Conn., 683;55 A., 171.
"In the case under consideration the bequest to the Durham children was the proceeds of the sale of certain real estate; that is, a money bequest. Were these bequests adeemed by a sale of this property by the testatrix in her lifetime, and the investment of the proceeds of such sale in other real estate, mortgage notes, etc.? Applying the rule above announced, if this property has been kept in specie and can be traced and identified, then it would seem that the legacy is not adeemed; otherwise, it is." Durham v.Clay, 142 Ky., 96; 134 S.W. 153.
In Miller v. Malone, 109 Ky., 133; 58 S.W. 708; 95 Am. St. Rep., 338, the syllabus is:
"A will devising land to the executor in trust to sell same and divide the proceeds among certain persons operated merely as a bequest of the proceeds of the land, and therefore a sale by the testator in his lifetime was not an ademption of the legacy, though the legatees were not the heirs of the testator."
The Court said: *Page 454 
"At the death of the testatrix there was no trouble to identify the remaining part of the proceeds of the house and lot. The substance of the bequest remains, and her act simply facilitated the testator [executor?] in carrying out the provisions of the will."
I think that the syllabus should have included the element of identification.
In 1 Roper, Legacies, § 246, it is said:
"Where the terms of the bequest are so comprehensive as to include within their compass the fund specifically bequested, altho' it has undergone considerable alteration since the date of the will. For since the substance of the thing given, viz., the debt or money, remains, and the subsequent alteration of security does not prevent it from answering the description in the will, the principles upon which the ademption of the specific legacies is founded do not apply."
In the case at bar, the money, the proceeds of the mortgages having been traced to the certificates of deposit, identified, is in all fairness as much the proceeds of the collection, as if they had been made by the executors as directed in the will.
In Cornwell v. Church, 73 W. Va., 96; 80 S.E., 148, a fund out of which a legacy was provided, described as "coal money," was invested by the testatrix in her lifetime in two interest-bearing municipal bonds. Upon the question of ademption, the Court said:
"After the bonds had been purchased, they were left in the bank, marked as the property of the testatrix. Thus the form of the fund was changed from a deposit in the bank to an investment in bonds, and, on this change of form, there is based a claim of ademption, or destruction of the legacy, but the authorities do not sustain this position. The fund had not ceased to exist, nor in any way been destroyed or lost at the date of the death of the testatrix. It remained in an altered form, and the legacy had not been satisfied by *Page 455 
any advancement in her lifetime. That such a change does not work an ademption of the legacy is well settled by authority. Page on Wills, §§ 779, 781."
In Prendergast v. Walsh, 58 N.J. Eq., 149; 42 A., 1049, the legacy was of "whatever of my money now on deposit," in four banks in New York City, naming them, "which may be on hand and not otherwise disposed of." During her life the testatrix drew her money out of the four banks and deposited it in another bank where it remained until her death. The Court held that the legacy was specific and that it had not been adeemed.
In Georgia Infirmary v. Jones (C.C.), 37 F., 750, the Court said:
"So far as the authorities which are cited for the complainants declare that bequests by which the collections or proceeds, or the amount to be received from a particular claim or fund, are given to legatees, are not defeated when the proceeds are received by the testator in his lifetime, and have been kept by him so as to be distinguishable from the rest of his estate, they are acceded to as undoubtedly correct. They proceed upon the distinction between the gift of a debtqua debt, and the gift of a sum of money to arise when the debt shall have been recovered and ceased to exist as a debt. In a gift of the latter class it may be inferred that the testator contemplated the recovery of the debt in his own lifetime, and intended to give, not the debt itself, but the amount to be received in respect of it. When the bequests are of this character, the fund received by the testator in his lifetime may be followed through its transmutations, and reached, if capable of identification."
See, also, Merrill v. Winchester, 120 Me., 203;113 A., 261.
A distinction is drawn in many of the cases above cited, between a devise or legacy of specific property and a legacy of the proceeds from the sale of the *Page 456 
property. The rule of ademption is applied more stringently to the first class.
His Honor the Circuit Judge, was entirely right in sustaining the claim of the orphanage to the certificates of deposit issued by the Bank of Carlisle.
V. It is conceded that the estate of Mrs. Rice owes the estate of Dr. Douglass $6,832.76, with interest from the date of her death January 2, 1924, and under the foregoing conclusion $204, with similar interest. The question is presented, Out of what assets of her estate shall these debts and other expenses connected with the administration of her estate be paid? At the time of the hearing of this appeal, it appeared that there would be no question but that the intestate property, consisting of bank deposits and personal property, would be amply sufficient to take care of these debts. Since that time, however, the Bank of Carlisle, in which there was a deposit of $4,445.73, about 50 per cent. of the fund constituting the intestate property, has gone into liquidation, making it inevitable that other assets than this must be drawn from for the payment of the debts, and the question is what shall they be?
His Honor, the Circuit Judge, held that recourse must first be had to the proceeds of the sale of the real estate and the collection of notes and mortgages covered by the unnumbered clause bequeathing these assets to the Epworth Orphanage, upon the ground that this clause constituted the residuary clause, and must respond before resorting to the specific legacies. We have held that this legacy to the Epworth Orphanage was a specific legacy, and as a consequence the foregoing conclusion of the Circuit Judge must be reversed.
We think that his Honor, the Circuit Judge, correctly held that the legacy to Mrs. Helms in Item 1 of Mrs. Rice's will was a specific legacy, for the reasons stated by him. *Page 457 
Of course the intestate property must first be applied to the payment of the debts. Should there be a deficiency after such application, the same shall be made up out of the legacies to Mrs. Helms, Sylvester D. Craig, Wm. H. Gist, and the Epworth Orphanage pro rata, and, as a last resort, out of the real estate devised to W.H. Gist, Jr. No reference is made to the pecuniary legacy to the church, as it is apprehended that no contribution from it would be considered.
Upon the subject of the application of assets to debts, seeWarley v. Warley, Bailey, Eq., 397. Pinckney v. Pinckney, 2 Rich. Eq., 218. Hull v. Hull, 3 Rich. Eq., 65. Farmerv. Spell, 11 Rich. Eq., 541. Moore v. Davidson, 22 S.C. 93.Frasier v. Littleton, 100 Va., 9; 40 S.E., 108.
The judgment of this Court is that the judgment and decrees of the Circuit Court be modified as hereinbefore indicated and that the case be remanded to that Court for further proceedings consistent herewith.
MR. CHIEF JUSTICE WATTS, and MESSRS. JUSTICES BLEASE, STABLER, and CARTER, concur.