Court Opinion

ID: 5191212
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:36:23.286271+00
Date Added: 2024-06-11T08:26:55.166194
License: Public Domain

Hiscock, J.:
The principal question involved upon this appeal is whether 300 shares of capital stock issued by the defendant car company in January, 1893, against an accumulated surplus, is to be regarded as a dividend and belonging to the life tenant under a will, or whether it *446is to be regarded as part óf the prinMpál of the estate and belonging to the remaindermen. There are other questions, but they are minor and incidental' to this one."
The learned trial justice has found Upon the issue above suggested in" favor of the life tenant and plaintiff "as her legatee and against the remaindermen. We are unable^ however, to agree with the result thus reached by him. We think the facts found in much detaildonot warrant such conclusion, and that under the features of this case it leads to results which are unnatural and inequitable. We think that the stock was not a dividend and income belonging to the life tenant, also that plaintiff is prevented from asserting such claim by reason" of certain settlements and surrogate’s decrees to which he was a party. "
Thomas Chester, the administration of whose estate presents this controversy, died February 18, 1884, leaving him surviving his widow, Mary P. Chester, and his children, the plaintiff, and the individual defendants. He left a last will and testament "which was duly admitted to probate, and which, so far as important here, after certain specific legacies not affecting the stock in issue, contained this clause: “T give, devise and bequeath all and singular the rest,, residue and remainder of my property and estate, both real and personal, unto my beloved wife, Mary P. Chester, "for her use and benefit during the full term of her natural life but no longer.”
Then followed remainder in said property to his said four children, to be divided ánd distributed to and among • them equally,, share and share alike, upon the death of his wife.
The will appointed the plaintiff and James F. Chard, husband of the defendant Elizabeth Chard, executors thereof. .
The widow, Mary P. Chester, died February 16, 1897. She left a will which was admitted- to probate September' 25, 1897, whereby she appointed plaintiff sole executor, and devised and bequeathed tollina the greater part of her property and estate, and expressly" including all of- her interest in the stock of the Buffalo Car Manufacturing Company.
At the time of his death Thomas Chester was the owner of sixty shares of -the capital stock of the defendant car company, each share being of the par value of $100, and the total capita! stock being $40,000. Said companyhad only declared one dividend *447while testator was alive and the holder of its stock, but, as expressly found by the trial court, “ a large, surplus of earnings had been allowed to accumulate in the operation of said corporation.” Its statement or inventory of January 5, 1884 (just before testator’s death), showed an accumulated surplus above the original capital stock of $289,341.88. - After the testator’s death,, and. down to the death of his widow, the life tenant, it at frequent intervals declared large cash dividends, at first upon the original 60 shares held by testator and subsequently upon the 360 shares which included the stock issue in dispute. These dividends were all paid or conceded to belong to the widow, although, as matter of fact, she did make provision whereby a large portion of them were ultimately paid to and enjoyed by her four children. These dividends, during the period in' question, amounted to $93,450. Notwithstanding their payment, it appears that at the time the stock issue in question was made, the accumulated surplus of the car company was $443,030,57,. or $153,688.69 more than, at the date of death of the testator. Such amount of increase, however, was subsequently and during the life of Mrs. Chester largely distributed and reduced by cash dividends of which she.had the benefit.
Said testator left' other valuable property, the income of which his-widow Was entitled to, and consideration of which we do not regal’d as of importance here.
Shortly after his death the certificate for the original 60 shares of stock standing in his name was surrendered by the executor Chard and canceled, and a new certificate for said shares issued in form to the estate of Thomas Chester, and when the additional 300-shares Were issued it was by a certificate running to the estate of Thomas Chester and delivered to said executor. •
Prior to and as authority for the increase in the capital stock of said car company, upon January 7, 1893, the stockholders therein-signed an agreement which recited that they “hereby mutually agree one with another to increase the capital stock of the said company from forty thousand dollars ($40,000.00), consisting of four-hundred shares of one - hundred ($100.00) par ¡value each, to two-hundred fifty thousand dollars ($250,000.00), consisting of twenty-five hundred shares of one hundred dollars ($100.00) par value each,, one hundred shares of which said stock shall be held in the treasury *448of said company and be sold by the trustees as they may decide to some railroad party, which shall be for the best interests of the company, the balance of the increased stock to be dividedyro rata among the stockholders of the said company according .to their present holdings.” This action was followed up by a .meeting of the trustees of said car. company held January 14,1893, at which, as specifically found by the trial judge, “the capital stock of the Buffalo Car Manufacturing Company was increased from .$40,000.-00, consisting of four hundred (400) shares of the par value of ,$100.00 each, to $•250,000.00, consisting of twenty-five hundred ,(2,500.) shares of the •par value of $100.00 each. * * * .That npnew:money;,or.propj erty Was contributed hy any stockholder .at. the time of-"said increase of ..stock” Thereafter the certificate for the 300 shares in .question was issued, . -
There havebeen .various disagreements .and controversies between plaintiff and his sisters, the defendants, over the estate of their father. We do not deem it material to go into the. details of any of them except the ones 'which specially.relate to the disposition and division of this stock. ■. '
While the will of Thomas Chester did not specifically-name and-appoint Iiis executors also trustees,-they were still .treated as such. A fair construction of the will and the administration of the .property as between the life tenant and the. remaindermen properly called upon.them to act as such. In addition,to this, by .the specific request of the widow, the conduct of ¡the other parties and .the decrees of the Surrogate’s Court they.were upon all sides treated and regarded as trustees as well as executors. The .plaintiff at some time transferred all of his interest ip his father’s estate to his wife, Helen R. Chester. In September, 1897, .the executor Chard .wrote plaintiff a letter commencing “ You will remember that ,the estate of Thomas-Chester owns three hundred and.sixty shares of the capital stock of .the Buffalo Car Manufacturing Company,” .and then stating that for the purpose of securing .ap adjustment and settlement of ..matters as executor .and trustee of Thomas Chester hé should offer said stock for sale at public auction.at a given date.
Thereupon plaintiff’s wife, as his assignee, instituted .proceedings in the Surrogate’s Court of Erie county setting-forth various facts in regard to the death of Thomas Chester, the administration of his *449estate, the provisions of his will, the assignment to her of plaintiff’s interest in said estate and that one of the items of property in the hands of the executors was said 360 shares of the capital stock of the Buffalo Car Manufacturing Company. Her petition then further referred to the receipt of the letter just mentioned from the executor Chard alleging “ that as the assignee of the interest of the said George T. Chester in the estate of his said father Thomas Chester, deceased, she became and is now the owner of ninety (90) shares of the said three hundred and sixty (360) shares of the Buffalo Car Manufacturing Company’s stock. That she does not desire to have her said ninety shares (90) shares sold but wishes to keep same as an investment.” Upon her petition she requested that the executors of the will of Thomas Chester be compelled to show cause why they should not deliver over to her “ her aforesaid ninety (90) shares of the capital stock of the Buffalo Car Manufacturing Company,” .and that in the meantime they might be enjoined. George T. Chester, although having assigned his interest in said estate and stock, joined in his wife’s petition, saying “ that he has read the foregoing petition of his wife Helen Reid Chester, and that the same is true. That he desires that the prayer of the said petitioner be granted.” Upon this petition an order to show cause was granted and Chard was restrained from selling, disposing "of or incumbering the said ninety shares of stock until the further order of the court. Ho further proceedings in Surrogate’s Court appear to have been had. An arrangement, however, was made by the parties amongst themselves which resulted in the certificates for the three hundred and sixty shares of stock being delivered to the company for cancellation, and upon September 30, 1897, four new certificates of ninety shares each were issued in place thereof to plaintiff’s wife and the individual defendants herein respectively.
After such arrangement and division of said stock amongst said four people, and in Hovember, 1898, upon an acknowledgment signed by thé three defendant heirs and also by plaintiff and his wife, that James F. Chard and George T. Chester, “ as the Executors and Trustees of the Will of Thomas Chester * * * have
fully and satisfactorily accounted to us as the heirs and next of kin of said deceased for all moneys and property held by them as *450such Executors and Trustees ; ” and, upon the express consent that said Chard and Chester might have a decree made and entered discharging them of and from any and all liability or accountability to his heirs without- further accounting, a decree. was duly entered in the Surrogate’s Court of Erie county upon the petition of said executors,, ordering and decreeing that said Chard and Chester should be and thereby were “ finally released, exonerated and discharged as the executors and trustees of and from any and all liability and accountability to said interested persons.”
The trial court found that the plaintiff “ had no knowledge of the declaration of said stock dividend, nor of the increase of stock, nor of the issuing of said certificate for three hundred (300) shares * * * and did not know of the increase of said stock until after the death of the said Mary P. Chester.”
Sometime before the commencement of this action the car company, having disposed of a part of its business and assets, entered upon a course of liquidation.
Upon these and many other facts which it is impossible to recapitulate in detail, the learned trial court found that said 300 shares of the new stock “ represented and was a payment and distribution of income upon and from the sixty (60) shares of stock of which the said Thomas Chester died possessed and owning at the time of his death.” In accordance with such finding of fact lie reached the conclusion of law that plaintiff was entitled to recover from his three sisters the 225 shares of stock delivered to them under the arrangement-hereinbefore referred to and was entitled to have- them and also the car company account, and be held liable for all dividends paid to such sisters, respectively, on such portion of said 300 shares so delivered to them.
As we indicated in the beginning, we do not come to the decision of this appeal with the feeling that there is any strong and predominating equity inherent in plaintiff’s claim and theory. And in saying this, we overlook entirely its incidental surroundings. We disregard the fact that plaintiff comes as the legatee of the life .tenant, whose death has terminated any use or need by her for-this property viewed as income, seeking through the intervention of her will to procure, as against his sisters, an unequal distribution of his father’s estate. Upon the other hand, we hold ourselves subject *451to the same equitable consideration which should prevail if the life tenant herself were here seeking for a full admeasurement of the provisions made and intended by her husband for her support during her life. Being so guided, we still think that during her life without the stock in dispute, there was worked out a liberal fulfillment of the bequest to her of the income upon her husband's stock in this company. Estimated from the dividends declared upon the Chester stock and the other figures found, the company made earnings and profits during the life tenancy of Mrs. Chester amounting to the neighborhood of $700,000. "With her husband’s death it apparently entered upon a new policy of distributing in cash dividends amongst its stockholders substantially all of its profits. "We thus find that its surplus between his and her death had only increased $72,000. All of the remainder of these tremendous earning and profits had been distributed in cash and she had received as her share during the period of twelve years $93,450. That she did not receive still more was due'to the accident of her death between two dividend periods, for soon after her decease the company made another cash dividend of forty per cent.
Using round figures, at the time the new stock was issued the surplus of the company was $443,000, of which $153,000 had accumulated after the death of the testator. Assuming for the sake of the argument that the new stock is to be deemed issued as against this total surplus, practically two-thirds of it, or 200 shares, would be against that which had accumulated before the death of the testator. If plaintiff’s contention prevails, and in addition to the cash dividends above referred to, the accumulated capital and surplus existing when testator died, is distributed in the proportion of 200 shares to the life tenant as against only 60 shares going to the remaindermen, we believe it must impress the judgment at once, as at least an unusual division.
"While it is subject to modification and variation, the natural and fundamental idea of life income payable under a will is of that current income which accrues and becomes payable from time to .time during the life tenancy upon a principal fixed as of the time when the trust took effect and remaining substantially unchanged. Sometimes the amount of this principal is fixed by directions for the investment of a definite sum, and at other times by the appropria*452tion of specified securities as bonds or stocks. In the case of the latter, while it may happen that by means of an extraordinary dividend there will be allotted to the life tenant a certain per cent of profits which accrued before his estate commenced, that is the unusual course rather than otherwise. We certainly do not expect or readily accept such a solution between the life tenant and remaindermen through the medium of dividends as will divide a testator’s estate as it existed at his death between the former and the latter in the proportion of three or four, shares to the former for one to the latter.
It is, however, insisted that unacceptable as such result may be in this case, this court is compelled by controlling decisions to adopt and affirm it. We do not think tliis is so.
This question, whether additional capital stock issued by a corporation against accumulated earnings and profits shall belong to the life tenant or remainderman, has naturally been a prolific source of dispute and controversy. In trying to deal fairly and equitably with it, the courts have been led by different theories and varying phases under which the issue was presented, into irreconcilably conflicting opinions."
Turning to those. decisions which are controlling or at least authoritative,"there seem to be, reasonably well defined, two. rules which we may utilize in measuring the rights of the parties here.
First.' A corporation with a surplus of accumulated profits, within the limits of good faith, has the power either to distribute it as dividends, or to retain it and convert it into capital.
Second. The substance and intent of the action of the company as evidenced by its treatment of the surplus' and its resolutions in issuing new stock against it, will be.considered by, if not control, the courts in deciding whether such issue is dividend and' hence income belonging to the life tenant or not. If the company pays money or issues stock as a distribution of profits, it will ordinarily go to the life tenant. If it issues, stock as capital and appropriates its surplus as an increase of the capital stock of the concern, such issue will be held to inure to the benefit of the. remainderman. (Matter of Kernochan, 104 N. Y. 618, 629, 630; Gibbons v. Mahon, 136 U. S. 549.; McLouth v. Hunt, 154 N. Y. 179, 194; Matter of Rogers, 161 id. 108.)
*453There is the other general rule always applicable to construction, under a will, that we must ascertain, if possible, the meaning and intention of the testator, to be derived from the language employed in the creation of the trust, from the relations of the parties to each other, their condition and all the surrounding facts and circumstances. (McLouth v. Hunt, supra, 190.)
We shall endeavor to apply these principles and rules to the facts of this case. So far as the last one is concerned, it appears that for years before the testator’s death the policy had been pursued by the defendant company of accumulating its profits, only one dividend having been paid to him. The surplus at the time of his death was more than seven times greater than its capital stock. While there is no definite finding upon that subject, we 'may assume from what incidentally appears that the testator and his wife were elderly people. The wife’s demands for income were apparently not extravagant or large. This appears from the fact that most of the income which she did receive or become entitled to receive from this stock during her life was passed over to her children. It is difficult' for us to believe that when the testator left the income of this property to his widow he believed or anticipated that the long-continued policy of the corporation would be immediately reversed, and by a stock dividend several shares of the property which it had at his death, would pass to the life tenant, as against one which would then be left for his children. As was said in Matter of Rogers (supra, 113), in accordance with a well-settled policy then long pursued of retaining accumulated earnings for working capital, it must “ have been within the contemplation of the testator that a reasonable amount would- be retained by the directors for this purpose.”
The first of the other two rules is too well established to require discussion. It must be admitted at once that if, in the exercise of an honest judgment, the defendant corporation saw fit to permanently capitalize its profits, instead of distributing them in dividends, the life tenant could not force a change of policy. She could not compel dividends if the company saw fit to accumulate surplus.
The second rule seems to flow logically from the first. As long as the corporation has power to decide for the purposes of its own management whether it will capitalize or distribute earnings, it is proper that the courts should consider such decision in settling *454between them the rights of those —: remainderman and life tenant — who are interested in its stock.
It perhaps may be granted for the sake of the argument rather than held, the question not being here, that this company in 1893 had the power to distribute amongst its stockholders its surplus and so make it a dividend that this court would have felt constrained to treat such dividend as income payable to the life tenant.
Upon the other hand, we think it undoubtedly had the power to so capitalize its surplus and then issue new stock against it, so clearly and explicitly declaring the latter to represent and be an increase of its actual permanent working capital, that no court could fairly say the new shares were a distribution of profits or income. It will be seen that the question addressed to the court in a given case, whether new shares are dividend and income or increase of capital, must almost necessarily be governed largely by the purpose and attitude and condition of the corporation. This must he so unless every issue of stock against surplus is to be indiscriminately called a dividend and treated as income.
What was the nature of the stock issued in. this case? The learned trial court has said, in substance, that it was issued as a stock dividend and was a distribution of income upon the original sixty shares. Such finding, however, is a conclusion dependent upon and governed by many facts.
If, as we think, the detailed facts and circumstances otherwise found do not sustain it, it must yield to them. (Phelps v. Vischer, 50 N. Y. 69, 72; Bonnell v. Griswold, 89 id. 122, 127; Rochester Lantern Co. v. S. & P. P. Co., 135 id. 209, 212.)
It is perfectly manifest from its statement and otherwise that the profits accumulated by this corporation down to the testator’s death and dovyi to the issue of this stock were treated as an accretion to capital and permanently invested in plant and other assets necessary for the conduct of business. Substantially none of them were carried in the form of cash. The real estate and machinery alone upon January 5, 1884, inventoried at. $119,832.11, or 'practically three times the amount of the authorized capital. It is perfectly evident also that this company could not have done its business upon a capital of $40,000, but that it was' necessary to accumulate and use a large amount besides. The men who were in charge of *455its affairs in 1893 and knew its needs realized this and did not divide up a large portion of this surplus by a cash dividend, the equivalent in legal principle of a stock dividend. In fact, a very forcible argument as to what the directors did not intend to do in the way of distributing the surplus in dividends is to be drawn from what they did do in that respect. They appreciated that the stockholders were entitled to liberal dividends from the large earnings, and they declared those in cash. A few days before this new scrip was issued they paid to the stockholders $80,000 in cash.. That was a dividend and so intended and declared. Then they issued stock for $210,000 of surplus, and denominated it, not a dividend, but an increase of capital. If they had intended to distribute'that amount of surplus, and not keep it for permanent capital, there was no necessity for taking the two different steps.
Read in the light of these facts and considerations, we think the consent of the stockholders and the action of the directors show that they had no intention to make a dividend, but that they intended by an issue of new shares to so add to and increase their paper capital that it would represent and correspond with their actual woi’king capital. We think the predominating purpose was to permanently increase capital rather than to. divide up profits. The stockholders’ agreement recites that they “ mutually agree one with another to increase the capital stock of the said company,” etc. W e do not see how they could well express more plainly the idea of enlarging their capital. It is true, as was said by the court in the McLouth Case [supra, 195), that no money was paid for this stock and nothing added to the actual property of the company. But that is always so when stock is issued as this was against a surplus. If money or property is paid for new stock upon a subscription it could not possibly be called a dividend. Yet it cannot be doubted that stock maybe issued against a surplus as permanent capital instead of a dividend if the corporation so elects. If the words used, “ increase the capital stock,” are themselves ambiguous, they cease to be so when we again recall that such increase was against an accumulation of assets already in use as working capital and which could not be actually distributed as dividend amongst the stockholders without disrupting its business.
It may be suggested that a stock dividend would not really *456divide the assets amongst the stockholders, but would leave them still in the possession of "the company. This, however, is not an answer, if we are right that one of the tests by which to determine the question here presented is whether the company intended by this stock issue to make an addition to its permanent principal or capital rather than distribution of income by cash or stock.
We think the construction of the words of the agreement which we have adopted as sustaining the former view is upheld in the Gibbons Case (supra, pp. 551, 569), and in which respect we do not understand that case to be overruled- or questioned by the MoLouth case." Moreover, the agreement- and resolution referred to are significant for what they omit to say in plaintiff’s favor.
In the Kernochan case, relied upon by him, there was- a resolution which expressly provided for a dividend at a certain rate per share (p. 627). In the McLouth case the parties actually stipulated that the corporation “ by a capitalization of accumulated earnings made and retained * * * increased its capital stock * * * and predicated thereon made a stock- dividend of ten per cent,” etc.
Thus in both of these leading cases the corporation having the power to do so, explicitly ■ declared the disputed issue to be a dividend, and that being done the court gave it to the life tenant who was entitled to dividends as income.
In Lowry v. Farmers' Loan & Trust Co. (56 App. Div. 408) the court manifestly intended to follow the McLouth and Rogers cases. There again the stock in controversy was issued under a resolution which expressly authorized and directed it as a stock dividend.
Further, we think the McLouth case fairly outlines the doctrine that in -each case the court will look into the surroundings and nature of the transaction which produces the stock issue and adjust the rights of the contending parties according to justice and equity. We do not think that it was intended to hold that every issue of stock against a surplus was income going to the life tenant. There is a manifest difference between a distribution of 10 per cent upon upon the capital and an issue of 500 per cent of stock.
We are thus led to conclude that the 300 shares in question were intended to be and were issued to represent an accretion to the permanent working capital long used and recognized as such, and that *457they were not a dividend from income or profits belonging to the life tenant.
We believe that a defense to this action is also found in the proceedings had in Surrogate’s Court for the settlement of the testator’s estate, and in the agreements made and executed between plaintiff and his sisters for the division of the stock in dispute, which were connected with and in whole or part served as a basis for such proceedings in Surrogate’s Court.
■ Plaintiff, in seeking here to enforce his claims, assumes the threefold role of assignee of his wife, who in turn was his own assignee, of any interest in his father’s estate; executor of his mother’s estate; specific legatee under her will of this stock.
He has no standing in the first character. If this stock belonged to his father’s estate it has concededly been distributed in proper proportions. Measuring his demands by their derivation through his mother’s estate, we think that, "for the purposes of the discussion to follow of the agreements and proceedings above referred to, he must be regarded at the time of their occurrence as having been entitled to this stock as an individual rather than as executor, if entitled to it at all.
He was specific legatee of it. His mother died February 16,1897, and her will was duly admitted to probate September 25, 1897, before any of the important steps hereinafter recounted occurred. It very clearly appears that no other legatees or distributees had any interest .in this stock. It does not appear that any creditors had any such interest. In fact, it is a very permissible inference from all the facts found in regard to Mrs. Chester that there were no creditors to interfere with plaintiff’s specific legacy in the stock.
Under such circumstances his qualified title as executor became merged in his beneficial interest as devisee and, legatee and as such latter, individually, he became vested with the legal title to the stock if it belonged to his mother’s estate. (Blood v. Kane, 130 N. Y. 514.)
All doubt upon this point is removed by plaintiff’s own attitude in this case. He alleges in his complaint that his mother, by her will, devised and bequeathed all her property and estate to him, and that he “ thereby became the owner of the said three hundred shares of stock and entitled to receive the same.”
*458Having thus defined the character and capacity through which plaintiff must urge his demands, we come immediately to the question whether he could take part as he did in the various agreements and decrees which treated of, and related to, this stock as part of his father’s estate, and then many years afterwards, when these proceedings had long been executed and the stock divided in accordance with them, obtain an entirely new adjustment upon the ground that the stock did not belong to his father’s estate at all,- but was-part of his mother’s. We say very frankly we do not believe he can, or ought to. We revert first to the occurrence of September, 1897, when the other executor, Mr. Chard, gave notice in effect that he treated this stock as all belonging to Thomas Chester’s estate and proposed to sell it' as such, and plaintiff’s wife and then assignee took the position in effect that such stock did not belong to the father’s estate and that as representative of her husband she was entitled to one-quarter of it, and requested that such proportion and interest be allotted to her, expressing her willingness that the other heirs, defendants here, should have their similar respective shares.
Plaintiff joined in the verification of her petition and requested “ that the prayer of the said petitioner be granted.” It was granted by the acts of the parties without further proceedings in- court. The stock was divided as belonging to the father’s estate, under the terms of his will, and plaintiff’s wife and assignee, by his request and desire, received, and she or he still holds, ninety shares upon that theory belonging to her. The defendants hold their respective portions which plaintiff now seeks by virtue of the same division which gave hers.
W e think it clear, if this arrangement and division by the parties between themselves was otherwise binding and, when executed, irrevocable, that plaintiff, who was a party, to, and requested it cannot now be allowed to disrupt and overturn it by a claim through his mother’s estate, which he then possessed- as-fully as now, and which he did not then mention or assert.
It is said, however, plaintiff was ignorant of the facts which attended the issue of the 30G shares of stock; also that his sisters parted with no rights upon this division,.and that, therefore, there is nothing to now prevent taking the stock away from them by virtue of a different theory of ownership. We shall consider the first *459proposition later, saying and assuming for the present that it is •not sustained.
■ So far as the second one is concerned, it may be said that such an adjustment as was made may be sustained against a ¡oarty as well by virtue of gain to him as by loss to those with whom he deals. The executor claimed then as now that all of this stock belonged to the estate of Thomas Chester and was about to sell it. Plaintiff and his wife evidently felt that they might be put to a disadvantage by such sale and, therefore, said, “ Give up the sale and let us have our share of this stock and the others can have theirs.” This was done, and we think a sufficient consideration is found in the substitution and mutuality of the transaction to uphold it. We may, however, look at it in another light. If we should assume that the three sisters, defendants here, had absolutely no right to this stock, yet if plaintiff and his wife voluntarily consented, as a matter of pure gift and gratuity, that they should have each a quarter thereof, and such consent and gift was executed and the stock delivered, we fail to see how plaintiff, except for some legal reason, as fraud or mistake, could thereafter get the stock back from them.
After this division was made, plaintiff and his coexecutor Chard petitioned to have their accounts as executors and trustees-finally settled and themselves discharged. Their petition recited that they had fully accounted for all the property which had come into their possession. An instrument was executed by all the parties interested, including this plaintiff and his wife, which acknowledged distribution to and receipt by the parties of all property “ held by them as such executors and trustees,” and consented that they be discharged. Upon this a decree was made by Surrogate’s Court discharging them, the surrogate “ being satisfied that the said executors have duly accounted to all the interested parties for their interest in said estate.” The scrip for this 300 shares of stock had been issued to and held and claimed by the estate of Thomas Chester. This had been made patent to the plaintiff at least by the letter and attitude of the executor Chard at the time of its proposed sale. The only way it had ever been distributed was as belonging to his estate and amongst his four children. Therefore, when this decree, founded upon the release and consent of the parties, held that the executors were entitled to be discharged *460because they had distributed to the persons entitled all the property which had come into their hands, it necessarily adjudicated that the division in question was a proper distribution for which they should receive credit. If that stock, which indisputably had been issued to this estate and came into the control of its executors at the time of this decree, belonged to plaintiff as legatee of his mother, no proper distribution of it had been made and the decree was improper. We do not doubt,that the Surrogate’s Court had jurisdiction to’ determine where this personal property belonged, as between the different legatees and. their representatives and successors, whether it went to the life tenant or remaindermen. We also feel equally clear that that was one of the questions necessarily involved in this accounting, and that upon it, unless reversed or annulled in some way, the surrogate’s decree was a binding adjudication.
Plaintiff was a party to that accounting and decree. He was not only a party to it as an executor .and petitioner, but he was named and made a party as one of the persons interested in the estate. He was then vested with just as. much right and title as now by virtue of his mother’s will to all of this stock. If his claim is just now it was then, and he was entitled to a very different decree from that which was entered. We do not deem it necessary to indulge in any extended reasoning to show that the decree if binding in favor of the executors is also a binding adjudication in favor of the different heirs who took the stock from them and were parties to the decree.
It is, however, strenuously urged in behalf of plaintiff, for the purpose of relieving him from the conclusions which we have drawn from the proceedings above detailed that he was not cognizánt of the facts surrounding the issue of the disputed stock; that he did not know his rights and was laboring under ignorance; that, therefore, he is not bound by • what took place. The trial court in a qualified manner has found for this claim. We are, however, unable to reconcile such conclusion with .the detailed facts found and upon which it would have to rest.
• Plaintiff knew that Thomas Chester’s estate at his death held only sixty shares of this stock. He knew by the letter of his coexecutor, if not otherwise, before any of the steps or proceedings now invoked against him were taken, that this holding had increased to three hundred and sixty shares, and that the estate of Thomas Chester *461held and claimed them. As an executor he must be charged with knowledge that the estate had not expended a large sum of money-in buying- these additional shares. He knew that a corporation could not at will multiply the number of its capital shares, but that it must have some assets against which they were issued. He knew that when the corporation issued these additional shares without receiving money for them, it must necessarily have issued them against an accumulated surplus of profits over and above the amount of its original capital. The fact that he had taken part in inventorying the original sixty shares at $850 per share instead of par, at least ought to have suggested to a person of average experience that the company was putting its surplus into an increase of its shares. When he knew all these things he was charged with sufficient knowledge to suggest the legal inquiry whether such new stock was income and belonged to him as his mother’s legatee. He may not have thought about this question, or if he did he may have thought differently than he does now. But that is not sufficient to relieve him from the consequences of what was done, if he was fairly apprised of the facts. There is no evidence that any effort was made to keep him in ignorance or mislead him. There is noth, ing in the record of the litigation presented to us which makes us believe that these parties were led astray through too much mutual confidence or that plaintiff was slow to see or assert his rights in this estate. In April, 1898, and thus many months before the surrogate’s decree, plaintiff’s wife called upon the defendant corporation under the statute for a detailed, verified statement of its affairs, which was furnished to her. We have no idea that plaintiff was a stranger to this step or that with his attorneys to guide him he felt unable to secure more information upon this subject if he desired it.
We are impressed upon' all of the facts as they are unfolded in the findings, that the difference between plaintiff’s attitude in 1898 and now is not due to his having been then disabled by ignorance of the essential facts. It is more probably due to the conclusion which has come to him since, that upon those facts known then as now, it might have been possible for him to have obtained more stock.
The conclusions reached upon the main proposition carry with them a decision of the other minor and incidental questions involved in the case.
*462The judgment appealed from should be reversed, with costs to the appellant to abide event.
Adams, P., J., McLennan and Spring, JJ., concurred; Williams, J., dissented.