Chester v. Buffalo Car Mfg. Co.

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 is to be regarded as part of the principal of the estate, and belonging to the remainder-men. 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 remainder-men. We are unable, however, to agree with the result thus reached by him. We think'the facts found in much detail do not warrant such conclusion,

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 is important here, after certain specific legacies not affecting the stock in issue, contained this clause:

“I 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 and distributed to and among them equally, share and share alike, upon the death of his wife. And said 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 to him 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 60 shares of the capital stock of the defendant car company, each share being of the par value of $100, and the total capital stock being $40,000. Said company had only declared one dividend while 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 regard as of importance here. Shortly after his

There have been 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 his 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 remainder-men 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 in 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 an adjustment and settlement of matters as executor and trustee of Thomas Chester, he 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 estate, the provisions of his will,.

Upon these and many other facts, which it is impossible to recapit

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 to 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 in 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 earnings and profits had been distributed in cash, and she had received as her share during the period of 12 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 40 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 remainder-men, 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 in

Wé" 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

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 between them the rights of those—remainder-man 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, and 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 be 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 60 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,

It may be suggested that a stock dividend would not really divide

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.

Having 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 those 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 occurrences 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 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 petition 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, 90 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. We 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

It is said, however, plaintiff was ignorant of the facts which attended the issue of the 300 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 proposition 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 party 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 absoluteljr 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 dis-charged. 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 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 because 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

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 cognizant 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 6o 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 360 shares, and that the estate of Thomas Chester held 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 60 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 nothing in the record of the litigation presented to us which makes us believe that these parties were led astray through too much mutual

The conclusions reached upon the main proposition carry with them a decision of the other minor and incidental questions involved in the case. The judgment appealed from should be reversed, with costs to the appellants to abide event.

Judgment reversed, and new trial ordered, with costs to appellants to abide event. All concur, except WILLIAMS, J., who dissents in opinion.

The interlocutory judgment appealed from should be modified as hereinafter stated, and, as modified, affirmed, with costs to respondent against appellants other than the corporation, and with costs to the corporation appellant against respondent. The action was brought to determine the ownership of 225 shares of the capital stock of the defendant corporation, and for equitable relief incidental to such ownership. The questions involved may be stated generally to be (1) whether the stock was at any time owned by the plaintiff or the widow, his mother; and (2) whether anything has occurred since to deprive them of such ownership, or to prevent plaintiff’s recovery thereof. The facts are somewhat complicated, and should be clearly understood. There was no case, or case and exceptions, made or inserted in the record, and I must therefore be controlled by the decision of the trial court as to the facts upon which the conclusions of law were based.

One Thomas Chester died February 18, 1884. At the time of his death, and for some time prior thereto, he was the owner of 60 shares of the capital stock of the defendant corporation. The capital stock was then $40,000, divided into 400 shares, of $100 each. He left, him surviving, his widow, Mary P. Chester, and four children,—the plaintiff, George T. Chester, and Elizabeth Chard, Kate C. Miller, and Cora C. Tripp. He left a will whereby he gave to each of his three daughters $20,000, and to his son a bond and mortgage for $40,000, made by the son, and held by the father, and then gave his widow all the residue of his estate, real and personal, for her use and benefit during life, and after her death in fee to his four children, to be divided equally between them, and made his son and son-in-law James F. Chard executors. The will was admitted to probate April 18, 1884, and letters testamentary were issued to the' executors named, who qualified and entered upon the discharge of their duties. On the 29th

Before proceeding further with the statement of facts, let us understand the claims made by the parties as to the first question involved herein,—the original ownership of the stock, old and new. There is no dispute but that the 60 shares held by the father at ¡the time of his ■death was a part of the .corpus of his estate, and at the death of the widow belonged to all .the children,—one-fourth to each. The controversy arises over the 300 shares of newly issued stock. The plaintiff claims these shares never belonged to the corpus of the estate, but were income from the estate, and as such belonged to the widow absolutely, and passed under her will to the plaintiff absolutely. Of the 360 shares of stock, the plaintiff was concededly the owner -of .15 shares of the old stock and 75 shares of the new stock. The question is whether he was the -owner of the remaining 225 shares of the new stock, and this involves the question whether the 300 shares of new stock, when issued, belonged wholly to the widow, as income, or to the corpus of the estate, to the income from which alone she was entitled during her life. The further facts bearing upon the determination of this question are as follows: The only dividend received by Thomas Chester upon the 60 shares of stock during his lifetime was February 7, 1882,—$1,500. A large surplus of earnings was allowed to accumulate, which at the time of his death amounted to $289,341.88. The value of the stock at the time of his death was $850 per share,— in all, $51,000,—as appraised in the inventory of the estate, based upon the last yearly statement made by the defendant corporation. The dividends .received by the widow, Mary P. Chester, upon the-6o shares of stock from the time of her husband’s death until the increase of the capital stock, in January, 1893, were: April 15, 1884, $1,500-; October 9, 1884, $3,000; October 3, 1885, $3,000; November 1, 1886, $6,000; 'December 5, 1887, $1,500; August 20, 1888, $6,000; August 22, 1888, $6,000; August 31, 1888, $6,000; December 30, 1888, $7,050; September 16, 1889, $1,500; January 27, 1891, $1,500; January 30, 1892, $6,000; January 11, 1893, $12,000; making in all, 'for

The plaintiff, George T. Chester, knew nothing of the increase of the stock and the issue of the 300 new shares until after the death of the widow, his mother, Mary P. Chester. Whether she knew of it, does not appear. In August, 1886, the widow and the plaintiff and Mrs. Chard and Mrs. Miller, by a writing executed by them, directed the executors of the estate to divide all moneys received by them from the defendant corporation from the date of such writing to January 1, 1889, belonging to the estate, equally between the four heirs,—Mrs. Chard, Mrs. Miller, Mrs. Tripp, and George T. Chester, the plaintiff. All the dividends received from the defendant corporation upon the 60 shares of stock from the time of the death of Thomas Chester until the increase of the capital stock were, with one exception, divided among the four children, by the direction of the widow; and all the dividends received upon the 360 shares of stock after the increase, and up to the time of the widow’s death, were also divided among the four children, by direction of the widow. Whether the writing above referred to was relied upon as such direction, or whether there was other direction, does not appear. It does appear that by a writing made by the widow February 27, 1888, she stated that she had always regarded the executors named in the will as trustees of her husband’s estate, for her benefit, and that she had always dealt with

I think it is now well settled in this state, as a general rule, that, as between a tenant for life and remainder-men, stock dividends belong to the life tenant, if made during the life tenancy, though from earnings accumulated wholly or in part before such tenancy commenced. In Riggs v. Cragg, 89 N. Y. 487 , it was said that this question had not then been considered by the court of last resort in this state, and it was not passed upon in that case. The question seems first to have been considered by the court of appeals in the case of In re ICernochan,

“That when a fund is given for life to one beneficiary, and remainder over, the first shall have its earnings after the life tenancy begins, and the remainder-men the balance.”

Judge Danforth, however, said:

“I find nothing in the will which indicates that the testator intended any such investigation or division, or that any other than the ordinary rule which gives cash dividends from accumulated earnings or profits to the life tenant should be applied. The direction to his executors is to receive the rents, interest, and income of his estate, and apply the net amount of such rents or other income * * * to the use of his wife. From the shares in question no income could accrue, no profits arise, to the holder, until ascertained and declared by the company, and allotted to the stockholders; and that fact should be deemed to have been in the mind of the testator, and not the earnings or profits, as ascertained by a third person, or a court upon investigation of the business and affairs of the company, either upon an inspection of their books or otherwise.”

In McLouth v. Hunt, 154 N. Y. 179 , 48 N. E. 548 , 39 L. R. A. 230 , the residuary estate was, by a will, given to his executors in trust, to “take, hold, care for, preserve, maintain, invest, reinvest, convert, sell, lease, and collect the same,” and pay over a portion of such income to the use and benefit of his grandsons, respectively, during their minority, and after arriving at the age of 21 years to pay over to them the full income, and upon their arriving at the age of 35 years the full amount of principal, with any accumulations thereon, remaining; and, in case of death before arriving at the age of 35 years,- the fund was given to other persons in fee. The testator died September 18, 1888. There were included in the trust estate 254 shares- of Western Union Telegraph Company stock, upon which a stock dividend of 10 per cent, was declared November 10, 1892, upon the surplus earnings of the telegraph company accumulated during the 10 years prior thereto. The court, among other things, was asked to determine whether this stock dividend belonged to the life tenants, so called, or to the remaindermen,—whether it was income, or part of the corpus of the estate. The trial court held the dividends belonged to the life tenants, and they were entitled to the same as earnings or income, and the court of appeals affirmed that decision. Judge O’Brien, writing for the court, considered all the cases in this state

“The resolution recites that the earnings of the corporation had been withheld from the shareholders for almost ten years, and that they had accumulated, and that it was the intention of the directors, in taking such, action, and the shareholders, in consenting to it, to distribute such accumulated earnings to the shareholders in the form of stock certificates, instead of money.”

In Re Rogers, 161 N. Y. 108 , 55 N. E. 393 ; Id., 22 App. Div. 428 , 48 N. Y. Supp. 175 ,—the will created trusts for the benefit of testator’s children during their lives, with remainder to their issue. In the trust fund were shares of stock in a corporation. The testator died August 25, 1888. The corporation continued in business until 1893, paying yearly dividends,—at first of 10 per cent., and later of 20 per cent. Then it sold its plant, with raw material and that in process of manufacture, for $2,750,000, to be paid for in the stock of a new corporation. The stock of the new company was divided among the stockholders of the old company in the proportion of 10 shares of the new stock for x of the old. The old corporation had still other property, of the value of $3,000,000, and the corporation sold this property, and distributed the proceeds among its stockholders. The question was as to the rights of the life tenants and remainder-men in the new stock and proceeds of the other property sold. The referee before' whom the case was first heard held that the whole fund was to be treated as capital, or part of the corpus of the trust estate, and that the life tenants were entitled to no share in it. The surrogate modified the report of the referee, holding that 100 per cent, of the cash dividend and the dividends of the new stock were capital, and that the remainder were profits or income, to which the life tenants were entitled. The decision of the surrogate was affirmed in the appellate division, and in the court of appeals. The case was decided in the appellate division in November, 1897,—the next month after the decision of the court of appeals in McLouth v. Hunt, above, which was in October, 1897.' No reference was made by the appellate division to the McLouthHunt Case, and we assume, therefore, the latter case was not brought to the attention of the appellate division in the Rogers Case. Justice Cullen did, however, say in the Rogers Case:

“While the corporation continues to do business,—as is sometimes said, is a going concern,—the law is settled in this state thát a cash dividend" is income, and, goes to the life tenants, no matter at what time the profits from which the dividend was declared may have accrued or have been accumulated.” Citing the ICemochan Case, 104 N. Y. 618 , 11 N. E. 149 , above.

In view of the McRouth-Hunt Case, I must add that the same is true of a stock dividend, as of a cash dividend. The appellate division, however, held that the rule stated had no application to the Rogers Case, where there was no dividend by a going corporation,

“Had the company, before transferring its plant to the new corporation, distributed this whole surplus or reserve fund among its stockholders, it would have gone to the life tenant, and no well-founded complaint could have been made that such a distribution was either illegal or inequitable.”

It further appears from the opinion of the appellate division that the life tenants took no exceptions and made no objection to the decision of the surrogate, so far as it held a portion of the fund was capital and belonged to the remainder-men. The case cannot, therefore, be regarded as an authority, so far as the appellate division or court of appeals is concerned, for the proposition that any part of the fund was capital, and belonged to the remainder-men. No authorities were cited by the court of appeals in its opinion, the only reference thereto being the statement that the cases to which their attention had been called furnished but little aid in the determination of the question presented under the peculiar facts of the case. The appeal to the court of appeals was by the remainder-men alone. The life tenants did not appeal. This case, therefore, cannot be said in any way to have modified or overruled the former decision of the court in the McLouth-Hunt Case. It may be further noted that the appellate division in the First department in December, 1900, followed the law as laid down in the McLouth-Hunt Case in Lowry v. Trust Co., 56 App. Div. 408 , 67 N. Y. Supp. 759 , and held that a stock dividend declared out of undivided profits or surplus, a portion of which' was earned before the testator’s death, upon stock of a corporation set apart by a trustee of a trust fund created by a will, belonged to the life beneficiary of the trust, and not to the remainder-men. In the case we are considering it does not appear when the surplus earnings were accumulated from which the stock dividend was made,—whether before or after, or both before and after, the death of the testator. There was a surplus at the death of $289,341.88, and at the time this dividend was made this surplus had increased to $443,030.57. The dividend was $210,000. The whole of it may have been made from the surplus accumulated before the death. The whole of it could not have been made from the surplus accumulated after the death, because the surplus so accumulated was only $153,688.69. It was made from the whole surplus accumulated up to the time it was made, without any limitation to that accumulated during any particular time. In any event, under the authorities we have referred to> the 300 shares of new stock issued upon the 60 shares of old stock owned by the estate belonged to the widow, and the children had no interest therein.

I have very carefully considered the suggestions of counsel for the appellants, and I find no justification for any different result growing out of the language of the will in question, or the facts found by the trial court. It is suggested that in the McLouth-Hunt Case the language of the will was peculiar, in that it provided that the executors should pay the life tenants “the full income”; but this language was-used because it had already been provided that, prior to the life tenants coming of age, only portions of the income were to be paid to them, and then followed the provision that from the age of 21 to 35,

My conclusion is that the 300 shares of new stock belonged to the widow from the time they were issued until her death, and the children had no interest therein. At her death the stock, under her will, passed to her son, the plaintiff, George T. Chester. The remaining question is whether anything has occurred since the death of the widow which deprives the plaintiff of the present ownership of the stock, or prevents his recovery of the same.

As already stated, the widow died February 16, 1897, but her will was not admitted to probate until September 15, 1897. At some time prior to September 30, 1897 (just when does not appear), the plaintiff assigned and transferred to his wife, Helen R. Chester, all his interest in his father’s estate, and this assignment Covered and included whatever interest he had in the 360 shares of stock as residuary legatee under that will. It did not cover or include whatever interest he acquired in the 300 shares of stock by his mother’s will. September 6, 1897, James F. Chard, plaintiff’s coexecutor under the father’s will, wrote the plaintiff that the estate owned 360 shares of stock in the defendant corporation, and that, as all parties desired the estate matters settled and adjusted, he, as executor and trustee, would offer all the interest of the estate in such stock for sale, to the highest bidder, on the 4th day of October, 1897. Thereafter, and September 14, 1897, Helen R. Chester presented to the surrogate a petition wherein she stated the facts necessary to enable her to secure the relief asked for, which already appear, and need not be again repeated here, and, among other things, stated that the executors held the 360 shares of stock, and that she, as her husband’s assignee, was entitled to 90 shares thereof; and she asked that the stock belonging to her might be delivered to her, and not sold. As a result of this application, with the assent of all the parties, the certificate for the 300 shares and the certificate for the 60 shares of stock were surrendered up to the corporation and canceled; and September 30, 1897, four new certificates, of 90 shares each, were issued,—one to Helen R. Chester, and one to each of the three daughters of Thomas Chester,—and the proceeding before the surrogate was discontinued. The plaintiff assented to this division of the stock. It was while Helen R. Chester held this stock that the 40 per cent, dividend was paid; February 4, 1898, she receiving on the 90 shares $3,600. On the 20th day of January, 1899, she

Much litigation was had between the parties to this action, other than the defendant corporation, as to matters growing out of their interests in the residuary estate of Thomas Chester, and the business of the old firm of Thornton & Chester, of which Thomas Chester was a member at the time of his death, and which was continued during the lifetime of the widow; and there was also a contest of the will of the widow and mother, Mary P. Chester. None of these litigations, however, in any way related to or involved the interests of the parties in the stock in question, unless it was the contest over the will of Mary P. Chester, and the parties did not evidently regard that contest as in any way affecting their rights in the stock. Finally, November 14, 1898, there were papers and writings executed between the parties settling their differences and litigations, except one action that was particularly specified; and then it was provided that it was expressly understood and agreed that none of the papers, nor all of them together, should be construed to release any claims between the parties, except those expressly enumerated. No claim had then been made or suggested as to this stock in question, and no such claim was enumerated in the writings and agreements constituting the settlement thus made between the parties. The controversy in this action was not, therefore, settled by any express agreement made at that time. It was not in the minds or within the contemplation of the parties.

The corporation whose capital stock is in litigation is also a party to the action. It was a necessary party for various reasons. The court, however, erroneously directed judgment in favor of the plaintiff and against the corporation itself for $9,000,—the dividends upon the stock of plaintiff paid to the three daughters after the certificates of stock had been issued to them, and before the corporation had gone into liquidation, or had any notice of plaintiff’s claims to the stock,-—• and also for costs of the action. This relief was granted upon the theory that the dividends were wrongfully paid to the daughters. It is said-that the corporation, knowing all the facts, was bound to know the law, and therefore knew that this 300 shares of stock belonged to the plaintiff, and the daughters had no interest therein. The stock, however, stood upon the corporation’s books in the name of the three daughters, and they held their certificates with the assent, and, it may be said, by the procurement of, the plaintiff and his wife. She commenced the proceeding to procure the division of the stock, and the plaintiff added his affidavit to' his wife’s petition, swearing to the truth thereof, and stating his desire that the petition be granted. Thereupon the daughters and plaintiff’s coexecutor acceded to the desire of plaintiff and his wife, the proceeding was dismissed, and the division was made, upon consent of all the parties. How could the corporation do otherwise than pay the dividends as it did ? It was not a wrongful payment. No matter who were the legal owners of the stock, all the parties directed its division as it was divided, and-assented to the payment of the dividends in accordance with such division, and such payment relieved the corporation from all’ liability to respond again for such dividends. The payment of the dividends to the daughters was not wrongful, and the judgment, so far as it pro

My conclusion is, therefore, that the judgment appealed from should be modified by striking therefrom all provisions to the effect that the defendant corporation wrongfully issued certificates of stock to the other defendants, and wrongfully paid dividends thereon to such other defendants, and that plaintiff have personal judgment and execution against such defendant corporation therefor, with interest and costs, or for any other amount, and, as so modified, affirmed, with costs to the respondent against the appellants other than the corporation, and with costs to such corporation appellants against the respondent.