Court Opinion

ID: 9442408
Source: CourtListenerOpinion
Date Created: 2023-08-03 18:46:08.6456+00
Date Added: 2024-06-11T17:29:05.273378
License: Public Domain

GOODRICH, Circuit Judge.
The object of this appeal is to determine who is to get $570,000. The District Court said it was to go to the owners of publicly held shares of North American Light & Power Company. That company and the North American Company object.
This litigation is, it is to be hoped, the epilogue in the liquidation proceedings dealt with by this Court under the title In re North American Light and Power Company, 3 Cir., 1948, 170 F.2d 924. In that case we upheld as fair and equitable a -plan submitted by the North American Company for the liquidation of its subsidiary, North American Light & Power Company, pursuant to the Public Utility Holding Company Act of 1935, 15 U.S.C.A. § 79. By that plan the owners of publicly held shares of the Light & Power Company were to re*976ceive, for each. Light & Power share held, three-tenths of a share of Illinois Power Company common stock.1
The plan was the 'fruition -of a long series of negotiations, compromises -and the like. It will -be found described in detail in our opinion cited above. During the period between approval -by the Securities and Exchange -Commission, District Court approval' and our approval there was inevitably some delay. The dates are as follows: Commission approval was Juné 25, 1947 ;2 District Court approval was October 27, 1947 ;3 our opinion approving the plan was filed on December 5, 1948. The effective date of the amended plan was January 14, 1949.
In this interval between the approval of the plan by the -Commission and its final going i-ntp effect by the -distribution of .the shares, of Illinois Power, that company declared a -series of dividends. The question in this case is, who gets those dividends? The plan, every one agrees, does not specifically allocate the dividends to any one. The claim by the owners- -o-f the publicly -held shares is -f or the dividends which were distributed in the period from December 18, 1947 (note that this is subsequent t-o the District -Court -order enforcing the plan) to January 14, 1949, which was the date for the plan’s becoming effective, following the approval -of the various -courts as outlined above.
The litigants agree upon one point. A District -Court may not rewrite or modify a plan as approved by the Securities and Exchange Commission. S.E.C. v. Chenery Corp., 1943, 318 U.S. 80, 91, 63 S.Ct. 454, 87 L.Ed. 626; In re Engineers Public Service Co., 3 Cir., 1948, 168 F.2d 722, 739, reversed sub nom. S.E.C. v. Central-Illinois Securities Corp., 1949, 338 U.S. 96, 69 S.Ct. 1377. Likewise, they all agree that under Section 11(e) of the Act, 15 U.S.C.A. § 79k(e), the District -Court may make orders appropriate to the -carrying out o-f -a plan. Appellants s-ay that the District Judge in allocating the dividends described -above to the publicly held common shares modified the plan which the -Commission, the District -Court and this Court -had approved. The appellees say he did no such thing, that what he did was to make an -order within the -framework of the plan to carry out what the Commission had -approved. The Commission, -itself, seems not to -care who gets the dividends. It takes the position that the plan is fair and equitable either way and that i-n its opinion the District Court’s order Was not a modification of the plan.
In spite of the unusually able argument f-or the appellants our consideration of the problem -convinces us beyond doubt that the District Judge was correct. It is true that the Commission made no order specifically referring to the dividends, but we have no dou'bt that the matter was in the minds of -its members when the plan was approved. Illinois Power had not paid dividends on the common stock -for a considerable period of time. It had a -good sized issue of preferred stock upon which dividends were 'long in arrears. Part of the plan of liquidation, which is not before us, got rid o-f the preferred stock and o-f all its arrearages. It also -got rid of claims and counterclaims asserted -among North American, North American Light & Power and Illinois Power. The -Commission, in approving the plan, pointed out in considering why the plan was -a good thing for the shareholders -of North American Light & Power that Illinois Power was now in a position to pay dividends and, therefore, of course, its stock would be attractive to- the persons who received it in distribution in this liquidation proceeding. Also, it is -i-n the record that, one dividend- had been declared on the common shares during the time the plan was in *977the hands of the Commission and before it was approved. We feel little doubt that in the Commission’s looking over this plan and considering its fairness to the people who were to give up their North American Light & Power shares, it considered Illinois Power’s dividend prospects as part of that which made the plan a fair one.4
Dividends .from when ? It is to be noted that the appellee shareholders were to get a specific thing, that is, shares in Illinois Power. North American was to get everything else for itself. Dividends since the plan became effective, of course, go to the people to whom the distribution was made, or their successors in title. The narrow question here has to do with those dividends which were declared between District Court approval of the plan and its subsequent going into operation. It is to be borne in mind, too, that the group of shareholders who appealed to this Court, attacking the fairness of the plan, were but exercising a legal right given them by the statute. Nor do we see, although argument intimated to the contrary, that appellants were somehow in default in not putting the plan into effective operation pending the appeal, since no stay order was asked for or entered. We do not agree with that argument and find nothing in any charge made against either North American or North American Light & Power which would indicate lack of good faith in carrying out the plan.
Nevertheless, we have no doubt that the appellees are entitled'to these dividends. We think that the shares and their ability to produce dividends were in the minds of both the Commission and the courts in approving the plan. The shares were specifically allocated, under the plan, to these shareholders and we think they are entitled to the fruit as well as the tree. To change the figure into another rustic analogy, the tail goes with the hide.
The analogy of the situation in probate law was talked between Court and counsel at the argument and appears in appellants’ brief. We think the analogy excellent, although we do not find that the application of it comes out the way the appellants say it should. We think the plan, in this case, is ■comparable to a testator’s will. The testator makes a specific legacy of a cow to one friend and his residuary estate to another friend. In the period between the death of the testator and the final order of distribution by the probate court there is, of course, some delay for the collection of assets, presentation and payment of claims, etc. During this period the cow bears a calf. Whose calf is it? The authorities are clear that the calf belongs to the specific legatee, not the residuary legatee.5 And, of course, *978it is equally well settled that a wil'l, when admitted to proibate, speaks from the time of the testator’s death.6 We do not have to get into as -fine a question as that in this litigation. The testator’s death might be comparable to the approval of the plan by the Commission, in which case the admission to probate would be comparable to the approval of the plan as fair and equitable by the District Judge. But here the shareholders are only claiming dividends declared subsequent to the approval of the plan by the District Court. Therefore, we do not have to face the question of dividends which accrued between Commission approval and Court approval of the plan. As indicated above, we think the probate analogy is a sound .one. We think that dividends naturally go/with the specific allocation of a given asset to a given group of shareholders. ■ We do not think a testator would find it necessary to add “with increase” when he left a cow as a specific legacy to his friend. Nor do we think the Commission had to say “with dividends” when it approved the allocation of Illinois Power shares to a certain group of Light & Power shareholders.
This, we think, disposes of the case. There are no authorities directly on the point to cite because evidently the question has not come up in litigation. We think the order of the District Court was strictly within the framework of the plan. All it did was to write an order making effective what we think was the necessary interpretation of the allocation of the Illinois Power stock to the owners of the publicly -held shares of North American Light & Power.
The order of the District Court will be affirmed.

. In the plan, also, there was a 'provision whereby shareholders who did- not wish to take the Illinois Rower Company stock could receive $7.50 per share for common stock of North American Light .& Power Company. We are not concerned here with any phase of this alternative provi- ■ sion.

. Holding Company Act Release No. 7514. The Commission’s approval was conditioned upon North American’s amending its plan to meet the suggestions of the Commission. This condition was met.

. In re Illinois Power Co., D.Del.1947, 74 F.Supp. 317.

. In approving the plan, the Commission said that “The record suggests that Illinois Power possesses inchoate elements of value which the management anticipates will mature as a consequence of the settlement. The revision of the power contract benefits Illinois Power by permitting it to obtain the status of a generating as well as a distributing company. Furthermore, for the first time in many years the Illinois Power common stockholders can look forward, to the payment of dividends on their stoek [emphasis added].” Holding Company Act Release No. 7514. After the District Court had approved the plan and issued an enforcement order, some owners of publicly held North American Light & Power common shares petitioned the Commission for a determination of who was to get the Illinois Power dividends. The Commission refused to pass on the question, holding that it was a question of interpreting tho District Court’s order which should have been addressed to that Court. We are aware of language in the Commission’s memorandum opinion and order that “Amended Pían I does not include any provision that dividends received by [North American] Light & Power on the Illinois Power common stock which is to be distributed under the plan are to accompany such a stock. * * * We think it proper to say that our Findings and Opinion were written without any contemplation of the question of the dividends and that we did not have the question then in mind.” Holding Company Act Release No. 8763, December 29, 1948. But it is nevertheless true that the Commission anticipated the declaration of dividends by Illinois Power.

. Cf. Nelson v. Nelson, 1849, 41 N.C. *409. In the Nelson case, there was a specific bequest of a female slave, who gave birth to four children between the time of the *978testator’s death and the daté of distribution. It was held that the children as well as the mother belonged to the legatee. Graybill v. Warren, 1848, 4 Ga. 528, also involved a specific bequest of a slave, with the legatee not to take possession until he reached 21 years of age. The court held that the legatee was entitled to proceeds from the hire of the slave from the date of the testator’s death until the legatee’s twenty-first birthday. The same rule ápplies to specific devises of real estate; profits go to the specific devisee rather than to the residuary legatees. In re De Bernal’s Estate, 1913, 165 Cal. 223, 131 P. 375, Ann.Cas.1914D, 26 (rents accruing after the testator’s death); In re Pope’s Estate, 1909, 83 Neb. 723, 120 N.W. 191 (crops standing upon the ground pass to the specific devisee). There are many eases holding that a specific legatee of corporate stock takes dividends declared thereon after the testator’s death, no matter when earned. In re McDougald’s Estate, 1942, 149 Fla. 468, 6 So.2d 274; Thayer v. Paulding, 1908, 200 Mass. 98, 85 N.E. 868; Allen v. Allen, 1909, 76 N.J.Eq. 245, 74 A. 274, 139 Am.St.Rep. 758; Matter of Security Trust Co., 1917, 221 N.Y. 213, 116 N.E. 1006; Sherman v. Riley, 1920, 43 R.I. 202, 110 A. 629.
See, in general, 4 Page on Wills § 1599 (3d Ed. 1941); Note, 1938, 116 A.L.R. 1129.

. 2 Page on Wills, § 938 (3d Ed. 1941).