Bostwick v. Hurstel

• Decision Date: 13 November 1973
• Parties: James BOSTWICK, Individually and as executor, v. Joseph Leon HURSTEL et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 186

304 N.E.2d 186

364 Mass. 282

James BOSTWICK, Individually and as executor, v. Joseph Leon HURSTEL et al.

Supreme Judicial Court of Massachusetts, Worcester.

Argued Feb. 7, 1973.

Decided Nov. 13, 1973.

Edward D. Simsarian, Worcester (Arthur L. Beaudette, North Brookfield, with him) for petitioner.

C. A. Peairs, Worcester (George K. Black, Boston, with him), for respondents.

Before TAURO, C.J., and QUIRICO, BRAUCHER, KAPLAN and WILKINS, JJ.

QUIRICO, Justice.

This is an appeal by James Bostwick (Bostwick), executor and legatee under the will of Cecile Bostwick (the testatrix), from a decree of the Probate Court to the effect that a bequest in the testatrix's will of twenty-five shares of American Telephone and Telegraph Company (A.T. & T.) common stock to Bostwick was general and not specific, and disallowing a distribution to him of 125 additional shares of A.T. & T. stock resulting from two stock splits. The respondents are two nephews and a niece of the testatrix to whom she bequeathed all her remaining shares of the A.T. & T. stock not included in the bequest to Bostwick.

The will was executed on April 13, 1957. Clause First bequeathed to Bostwick 'twenty-five (25) shares of stock in . . . (A.T. & T.) and also all household furniture and furnishings owned by me at at the time of my death.' Clause Second bequeathed to the respondent nephews and niece 'all remaining shares of stock in . . . (A.T. & T.), which I may own at the time of my decease and which is not hereinbefore bequeathed under the First Paragraph of this Will.' Clause Nineteenth of the will provides that if assets of the estate which have not been specifically bequeathed or devised under the will are insufficient to pay the debts, expenses of administration and taxes, a bank account specifically bequeathed may first be used, and if that is insufficient then the executors may sell as many shares of A.T. & T. stock as may be necessary, 'but such sale of stock shall not affect the specific legacy contained in the First Clause of this Will.'

The testatrix died on November 25, 1965, and Bostwick was appointed executor of her will on January 18, 1966. In February, 1966, Bostwick transferred 150 shares of A.T. & T. stock to himself individually, and 1,135 shares to himself as executor.

This case came before this court on Bostwick's appeal from decrees of the Probate Court. By our order of April 28, 1971, we vacated the decrees of the Probate Court and remanded the case to that court for the purpose of receiving further evidence and making findings with reference to the number of shares of A.T. & T. stock owned by the testatrix when she executed her will, the number of such shares represented by each certificate of stock held by her on that date, all acquisitions, sales and transfers by her between that date and her death, and all dividends received by Bostwick on the disputed 125 shares. ¹

Pursuant to our order the parties filed a stipulation of facts which shows the following: When the testatrix executed her will on April 13, 1957, she owned 412 shares of A.T. & T. stock. On September 10, 1957, she acquired forty-five additional shares of A.T. & T. stock and she sold all 457 shares by October 24, 1957. Mr. Ralph W. Igoe was appointed temporary conservator for her on May 15, 1958, and was appointed conservator on June 28, 1958. On May 19, 1958, Mr. Igoe, acting as temporary conservator, repurchased 320 shares of A.T. & T. stock. The stock was split three for one on April 24, 1959, increasing the number of A.T. & T. shares held by the conservator to 960. Mr. Igoe sold twenty shares of the stock on March 21, 1962. He died May 16, 1962. The successor conservator sold fifty-five shares of the stock in December, 1962, and another fifty shares in September, 1963, leaving a balance of 835 shares. The stock was split two for one on June 1, 1964, as a result of which the successor conservator received 835 additional shares. He sold 385 shares in 1964 and in 1965, leaving a total of 1,285 shares of A.T. & T. stock in the testatrix's estate when she died in November, 1965.

The primary question raised in this case is whether Bostwick is entitled to the 125 shares of A.T. & T. stock he transferred to himself over and above the twenty-five shares bequeathed to him in the will. In our April 28, 1971, order to the Probate Court, we stated that: 'The important question presented to us is whether the bequest of twenty-five shares of stock to the executor was a specific bequest which would entitle him to the resulting 150 shares as of the date of the death of the testatrix, under the rule applied in Igoe v. Darby, 343 Mass. 145 (177 N.E.2d 676) (1961); or whether it was a general bequest of shares which would entitle him to only twenty-five shares after the two splits, under the rule applied in McGuinness v. Bates, 345 Mass. 632 (189 N.E.2d 212) (1963).'

The manner in which we framed the issue and the two cases cited are indicative of the way this court has traditionally approached the question whether legatees should benefit from stock splits: we have first determined whether the testamentary gift (hereinafter called 'legacy' or 'bequest') in the will was general or specific, and then applied the result thought to follow automatically from the chosen label. If the bequest was found to be general, indicating that the testator did not have in mind particular property of his own at the time he executed his will, the legatee has only received the exact number of shares specified in the will; if, on the other hand, it was found that the testator intended to separate out and bequeath particular shares then in his possession, the bequest was termed specific and the legatee received the specified shares as well as the accretions created by the stock split.

In Igoe v. Darby, supra, the testatrix owned seventy-six shares of A.T. & T. stock at a par value of $100 a share when she executed her will, but a subsequent stock split increased the number she held to 228 by the time of her death, with the same total par value of $7,600. The Probate Court decided that the three legatees of the original seventy-six shares were not entitled to a proportionate number of the additional shares resulting from the stock split. On appeal, this court stated that although ordinarily a gift of stock is held to be general, an intent to make the gift specific may be shown, and we concluded that the entire will did show an intent to make a specific legacy. Given this conclusion, we then held that the legatees were entitled to the additional shares. 343 Mass. at 149, 177 N.E.2d 676. Although the case was primarily decided by the traditional means of classifying the bequest as general or specific, it is worth noting that the court did observe that '(f) ollowing the stock split the interest of the testatrix in American (A.T. & T.) remained precisely the same; the change was one of form rather than substance. In receiving all of the shares the legatees are getting no more than they would have received had there been no split. It would be manifestly unjust to hold that they were not entitled to the additional shares resulting from the split.' 343 Mass. at 149, 177 N.E.2d at 678.

McGuinness v. Bates, supra, decided less than two years after the Igoe case, also involved the disposition of shares of stock which had increased in number as the result of a stock split; in that case, this court again relied on the distinction between specific and general legacies. The testator owned 127 shares of A.T. & T. stock when he executed his will and had bequeathed a total of forty-five shares to ten legatees. At the time of his death he held a total of 381 shares, as a result of a three for one stock split occurring after he executed his will. The Probate Court ruled that these were general legacies, and that therefore the legatees were not entitled to any of the additional shares. On appeal, this court affirmed the Probate Court's decree. We first distinguished Igoe v. Darby, supra, on its facts and then concluded that upon reading the will in the McGuinness case in the light of all the circumstances known to the testator at the time of its execution, there was sufficient indication that he intended to make general rather than specific legacies. There is no discussion as there was in the Igoe case of the effect of the stock split on the subsequent value of the legacies.

The approach used in these two cases of first labeling the gift as general or specific and then applying the seemingly automatic consequences is the one we have used in all our prior and subsequent cases concerned with shares created by stock splits. See First Nat. Bank v. Union Hosp. of Fall River, 281 Mass. 64, 68, 183 N.E. 247 (1932); First Nat. Bank v. Charlton, 281 Mass. 72, 183 N.E. 250 (1932); Lavin v. LeRoe, 349 Mass. 773, 211 N.E.2d 340 (1965). It is an approach used frequently in other situations involving the disposition of stock, such as where the ademption of a legacy is involved, Harvard Unitarian Soc. v. Tufts, 151 Mass. 76, 23 N.E. 1006 (1890); Desoe v. Desoe, 304 Mass. 231, 234--236, 23 N.E.2d 82 (1939), or where the court has considered the problem of contribution among legatees to satisfy bequests, Tomlinson v. Bury, 145 Mass. 346, 14 N.E. 137 (1887), or the question of the proper distribution of income earned on bequeathed property during administration, Thayer v. Paulding, 200 Mass. 98, 85 N.E. 868 (1908). However, we feel that the problems created by the use of the distinction between general and specific legacies in the stock split situation far outweigh any advantages it might have.

The two principal difficulties with the general versus specific classification approach are that it fails to consider the testator's intent with specific reference to the additional shares created by a stock split and that it also fails to recognize the basic nature of a stock split. As was stated by the Supreme...