Bishop v. Bishop

• Decision Date: 07 January 1909
• Citation: 71 A. 583,81 Conn. 509
• Parties: BISHOP et al. v. BISHOP et al.
• Court: Connecticut Supreme Court

71 A. 583

81 Conn. 509

BISHOP et al.

v. BISHOP et al.

Supreme Court of Errors of Connecticut.

Jan. 7, 1909.

Case Reserved from Superior Court, Fairfield County; Joel H. Reed, Judge.

Action by Nathaniel W. Bishop and others against William D. Bishop and others. Reservation from superior court Judgment advised.

Julia Ann Bishop died October 9, 1906, leaving a will, five children, and an estate, which included 100 shares of the Adams Express Company and 426 shares of the Westinghottse Air Brake Company. Her will directed the payment of her just debts and funeral expenses by the executors, and then provided as follows: "Article 2. As soon after my decease as may be conveniently and lawfully done, I direct my executors to divide my entire estate into five equal portions." One of these portions she then gave to the executors in trust to expend out of "the net income, profits and interest thereof" such sums at their discretion as they should deem best calculated to insure the suitable maintenance, and support of her son Russell T. during his life, and for the suitable maintenance, support, and education of his son Julian T. for the same period, and with further provisions for the distribution of "net income and profits" and the final disposition of the corpus of the fund, which are without importance in the consideration of the questions presented. Two of the equal portions were given to the Knickerbocker Trust Company of New York in trust, to keep each as a separate fund and pay over in semiannual payments "the net amount of the increase, income, profits and interest" of one of them to her daughter, Mary F., during her life, with remainder over to others at her decease, and "the net increase, income, profit and interest" of the other in semiannual payments to her son William D. during his life, with remainder over to others at his death. The remaining two-fifths were given absolutely to her sons Henry A. and Nathaniel W., one to each. The two sons last named were made executors, and they are now acting in that capacity and as trustees of the one-fifth of which Russell is a life beneficiary. The Connecticut Trust & Safe Deposit Company of Hartford has succeeded to the trust which the Knickerbocker Trust Company originally exercised. All of the five children now survive, as does the grandchild Julian.

The Adams Express Company is a joint-stock association formed and existing under the laws of New York, and having its principal place of business in New York City. Its shares of stock, of which there are 120,000 outstanding, have no face or par value, but are quoted, bought, and sold in the open market as if they had a face value of $100 each. Prior to June 14, 1907, neither the company nor its board of managers had ever made any designation or separation of any part of its assets and property as capital, surplus, or reserved fund, but all bad been kept and administered as a whole. June 14, 1907, the board of managers voted "that the capital and reserved fund of the association be reduced by transferring and assigning bonds and stocks belonging to the association of the par value of $24,000,000 to a trustee to hold for the pro rata use and benefit of the shareholders of the association and their assigns, and by issuing and distributing among shareholders distribution bonds to represent their distributive share of said reduction and their respective interests in the stocks and bonds so transferred and assigned." It was further voted that the president, secretary, and trustees, "in order to carry out said reduction and distribution of capital and reserved fund," execute and deliver to the Standard Trust Company of New York a certain deed of trust, and deliver the stocks and bonds thereby transferred and assigned to it, and that the president or vice president and secretary execute "the; distribution bonds of the association" to the amount of $24,000,000 face value in the form prescribed in the trust deed, and issue and deliver to each stockholder of record on the closing of the books of the association at 3 p. m. Thursday, June 27, 1907, $200 face value of said distribution bonds for each share standing in his name. The directions of this vote were complied with by the execution and delivery to said trust company of a certain deed of trust, the delivery to it of the stocks, bonds, and evidence of indebtedness thereby transferred to it and the issue and distribution as provided of the amount of bonds therein named. These bonds were promises to pay to the bearer or holder the amount specified therein in the ordinary form of such instruments, excepting that they contained the provision that they should not create a personal liability on any shareholder, officer, manager, or trustee of the company as a partner or otherwise, and the further provision that they should be payable solely out of the securities and property assigned and transferred to the trust company under the deed of trust, or, if they should prove insufficient, out of the assets of the Adams Express Company. Reference was therein made to this deed for the statement of the securities and property assigned and transferred to the trustee and the nature and extent of the security and rights of the holders of the bonds.

By the terms of the deed of trust, which recited the authority of the board of managers, its votes in the premises, and the form of the bond determined upon by it, the express company assigns, transfers, and conveys to the trust company as trustee certain stocks, bonds, and evidences of indebtedness fully described and set out. It is stated that this is done and the instrument executed in order to secure payment of the principal and interest of all outstanding bonds to be issued as provided and the performance and observance of all the covenants and conditions contained in the deed, and to declare the terms and conditions upon which the bonds are issued and received. The trust is declared to be one for the equal and proportionate benefit and security of all holders of the bonds and their coupons, for the enforcement of the payment thereof according to their tenor, and to secure the performance and observance of and compliance with the covenants and conditions of the instrument without preference, priority, or distinction in favor of any bond or bonds over others. Then follow numerous provisions fixing the terms and tenor of the bonds to be issued, the manner of their issue and transfer, and the aggregate amount of the outstanding issue, defining the nature and terms of the trust created, and the rights and powers of the parties in interest and regulating the management of the trust. Of these only those which might be conceived to have significance in relation to the questions here presented need be noticed. By article second of this part of the deed the express company "covenants and agrees that it will duly pay or cause to be paid to every holder of any bond issued hereunder and secured hereby the principal and interest accruing thereon in gold coin of the United States of America of or equal to the present standard of weight and fineness at the dates and rate and in the manner mentioned in said bonds or in the coupons thereto appertaining according to the true intent and meaning thereof."

Articles fourth, fifth, sixth, and seventh embody the following provisions:

"Article Fourth. The trustee shall receive and collect any and all interest, income, dividends, and profits which may accrue or be declared or in any manner become due and payable on said securities and property conveyed and transferred to it as aforesaid, and shall hold and apply the same for the payment of any interest then due or accrued, or accruing up to the next succeeding date upon which the semiannual interest shall be payable on the bonds secured hereby, and any and all excess of such interest, income, dividends and profits so collected after providing for the payment of said interest on all the bonds issued and outstanding hereunder, shall be paid to the company or as it may direct; but if said interest, income dividends and profits be insufficient to pay any accrued interest, the company shall forthwith on demand pay the deficiency to the trustee for account of the holders of bonds or coupons. The trustee shall be entitled to do all acts and take all steps and proceedings which in its opinion may be necessary or proper for the purpose of obtaining the payment or collection of said interest, income, dividend and profits, and shall have full power and authority to give all necessary receipts and acquittances therefor; but in case the trustee shall not take such action as is in the opinion of the managers or trustees of the company necessary to obtain or enforce the payment or collection of said interest, income, dividends and profits with all reasonable speed, the company shall be entitled, at its own cost and expense, to take such action in the name of the trustee, provided it shall give to the trustee reasonable indemnity against any liability thereby incurred.

"Article Fifth. The legal title to the securities and property now or hereafter assigned and transferred hereunder shall vest in the trustee for the benefit of the holders of bonds issued hereunder, subject to the following conditions: When the principal of said bonds becomes due and payable, the trustee shall sell and dispose of all and singular the said securities and property, in the manner herein provided, and distribute all the proceeds, including any surplus realized over the amount due for principal and interest of said bonds, as provided in article sixth hereof, after first reimbursing the company any amount paid by it on account of the principal of any said bonds or coupons. The trustee shall invest and reinvest the securities and property or proceeds thereof held hereunder as the trustees of the company shall from time to time direct in writing, and said trustees may at any time require the sale...