Court Opinion

ID: 6375286
Source: CourtListenerOpinion
Date Created: 2022-06-24 23:54:30.426287+00
Date Added: 2024-06-11T15:50:09.122657
License: Public Domain

Gest, J.,
The auditing judge disposed of this case on the theory that the shares of stock in the three companies, which owned the coal mines and leased the same upon royalties, were wasting investments, to which the rule of Howe v. Earl of Dartmouth, 7 Ves. 137, would apply, except for the power given in the will to the trustee to retain investments existing at the date of the death of the testatrix. After attentive consideration, we are satisfied that the auditing judge was correct in awarding the dividends as income to the life-tenants.
*672We are, however, of the further opinion that the same result may be reached along another line of reasoning. The corporations, whose shares were owned by the testatrix and which she empowered her trustee to retain, were each the owner of a single mine already open in the lifetime of the testatrix. Her first stocks were acquired by her in 1858, and she increased her holdings at various times until 1898. She made her will in 1909 and died in 1916, so that for many years prior to the execution of her will and up to the date of her death she had received dividends upon these stocks precisely similar to those in question. In fact, as we are informed, these coal companies were close corporations, organized for the very purpose of leasing the coal properties belonging to the family of the testatrix.
Now, it is clear that if the testatrix had been herself the owner of these coal mines, and had devised them to certain persons for life, with remainder to others, the life-tenants would have been entitled to the entire income derived from royalties on the coal mined, even if the leases ran to the exhaustion of the coal. This is settled in Pennsylvania, and, as it has been frequently said, has become a rule of property established by a long series of decisions from Neel v. Neel, 19 Pa. 328, and Irwin v. Covode, 24 Pa. 162, to Blodgett’s Estate, 254 Pa. 210. The same result should follow if the testator, instead of being the sole owner of the mines, was a tenant in common with others, and it is immaterial that the gift was made in the form of a trust, as in Eley’s Appeal, 103 Pa. 300, and Shoemaker’s Appeal, 106 Pa. 392. This being so, the fact that her interest was represented by shares of stock in the mine-owning companies is really immaterial, especially in view of the fact that she empowered her trustee to retain the investment. Equity regards the substance and not the form, or, to use a homely metaphor, will crack the shell to get at the kernel, and the fact that the owners of these coal properties put them in corporate form is merely a matter of administrative detail. Indeed, dividends of corporate stock belong, prima facie, to the life-tenant, but when any question arises as to the relative rights of the life-tenant and the remain-derman, the court will always ascertain the derivation of the moneys from which the dividends were declared. This is done without question, both in England and in this country, in the frequent cases of extraordinary dividends, where the money has been earned partly before the death of the testator and partly afterwards, under the familiar doctrine of Earp’s Appeal, 28 Pa. 368, and also with like frequency in cases of wasting assets, as indeeed the auditing judge has done in this present instance. There is no reason apparent to us why we should not determine here that these dividends, being derived exclusively from royalties on coal taken from mines open at the death of the testatrix, belonged, as such, to the life-tenants, under the doctrine of Neel v. Neel.
We are of opinion, moreover, that this accords with the intention of the testatrix. For fifty years before she made her will, she had been receiving these royalty dividends, and when she directed her trustee to pay to her nephews and nieces “the interest, income and profits” of her residuary estate, to be retained in specie at the discretion of her trustee, of which these stocks constituted a considerable part, it seems to us that she intended the life-tenants to receive as income the dividends, which she herself had regularly received for so many years: Reed v. Head (Mass.), 6 Allen, 174. No reason is apparent to us why she should be presumed to favor the children (some of them, perhaps, not now in esse) of nephews and nieces, rather than the nephews and nieces themselves. Nor do we think that the provision in the will for the maintenance of minor remaindermen, during their minority, after the death of the life-tenants, is of any importance in determining the question at bar, *673which relates to the quantum of their estate, not how it shall be used. They will have enough to maintain them.
We may add that the case was argued with signal ability by the guardian ad litem, who filed the exceptions, and also by the learned counsel for the life-tenants.
The exceptions are dismissed and the adjudication is confirmed absolutely.