Griffith v. Adams

• Decision Date: 11 April 1927
• Citation: 137 A. 20,106 Conn. 19
• Court: Connecticut Supreme Court
• Parties: GRIFFITH ET AL. v. ADAMS ET AL.

137 A. 20

106 Conn. 19

GRIFFITH ET AL. v. ADAMS ET AL.

Supreme Court of Errors of Connecticut.

April 11, 1927

Case Reserved from Superior Court, Fairfield County; Waldo L. P. Marvin, Judge.

Suit by William H. Griffith and others, executors, against Helen Rockwell Adams and others, to determine the validity and construction of the will of Phineas T. Lounsbury, late of Ridgefield. Reserved by the Superior Court on an agreed statement of facts for the advice of the Supreme Court of Errors. Questions answered.

David S. Day, of Bridgeport, for plaintiffs.

Charles D. Lockwood and Walter N. Maguire, both of Stamford for defendants Boyer and others.

William H. Comley, of Bridgeport, for defendants William H. and Sarah E. Griffith.

Martin J. Cunningham, of Danbury, for defendants Adams and others.

Argued before WHEELER, C.J., and CURTIS, MALTBIE, HAINES and HINMAN, JJ.

WHEELER, C.J.

Phineas T. Lounsbury died on June 22, 1925, at Ridgefield, in the state of Connecticut, his last place of residence. He left a will executed on February 8, 1921, and a codicil thereto executed on December 4, 1924. By his will and codicil he bequeathed to certain of the defendants, exclusive of the residuary bequests, legacies totaling 210 shares of the capital stock in the Preferred Accident Insurance Company out of 500; in Worcester Salt Company 90 out of 200; in West Virginia Pulp & Paper Company 2,925 of the common stock out of 3,200 and about 731 shares of the preferred stock out of 800, owned by him at his decease. He had been for a long time, and continued to be until his decease, a director and vice president of the Preferred Accident Insurance Company and owned 275 of the 7,000 shares of its capital stock. On April 18, 1922, the company declared a dividend payable in stock of the Atwood Fire Insurance Company, which it owned, and Mr. Lounsbury received as his share 137 1/2 shares of the par value of $50 each, which he continued to own at his decease. On December 13, 1922, the company increased its capital stock and declared a stock dividend payable in the increased stock, Mr. Lounsbury receiving as his share 275 shares, making at this time his total holdings 550 shares, of which he owned 500 shares at his decease; he had prior to his decease made a gift of 40 shares to William H. Griffith, one of the residuary legatees. At the date of his will the market quotations of this stock ranged from the bid price, $475, to the asking price, $525. After the stock dividend the bid price for the stock fell in January, 1923, to $250 a share; the bid price shortly began advancing until at Mr. Lounsbury's decease it had risen to $600 a share. At the date of the codicil, December 4, 1924, the market quotations ranged from 530 to 575 a share. dividends of 25 per cent. upon this stock were paid from 1916 to 1923, and, in addition, in 1922, the stock dividend in the shares of the Atwood Fire Insurance Company; in 1923 and 1924, the dividend was 18 per cent. The market quotation of the Atwood Company stock was on April 25, 1923, at the time the testator received the 134 1/2 shares as a stock dividend, $98 a share; on December 4, 1924, the date of the execution of the codicil, and at the date of the decease of the testator it was $100 a share. On February 8, 1921, Mr. Lounsbury was, and until his decease so continued, a director and the treasurer of Worcester Salt Company and the owner of 100 shares of its stock. On December 31, 1922, through a stock dividend, he received 100 additional shares, making his holdings 200 shares; these he owned at the time of his decease. The market value of the stock at this time was $95 a share. At the date of the execution of the will it was $100 bid, $105 asked; at the date of the execution of the codicil it was $94 bid, $148 asked; and at the date of the stock dividend it was $140 bid, $148 asked. On all of the dates we have referred to, Mr. Lounsbury had knowledge of the corporate action in relation to the declarations and payments of all of these stock dividends, and possessed a general knowledge of the financial condition of both the Preferred Accident Insurance Company and the Worcester Salt Company, and was acquainted with the approximate prices in the market of their stock. The West Virginia Company increased its capital stock by the creation of 6 per cent. cumulative preferred stock of the par value of $100 a share, and through its directors caused to be distributed to their common shareholders a portion of this increase as a stock dividend, which gave Mr. Lounsbury 800 shares of the preferred stock, which he held at his decease.

The clauses of the will comprising the several bequests of these stocks are in their terms mere bequests of stated numbers of shares of stock of these corporations, and, if their terms are regarded apart from the other provisions of the will and codicil, must be held to be general legacies. Fidelity Title & Trust Co. v. Young, 101 Conn. 359, 363, 125 A. 871; Schouler on Wills (6th Ed.) § 3059; 28 R. C. L. § 268. Yet these clauses, when read, as they must be, in connection with the other portions of the will and codicil, clearly overcome the generally applied presumption that legacies are general rather than specific, and reflect the intention of the testator to separate these stocks from his other property in such way that they can be identified, and to give the several legatees the identical shares of stocks so bequeathed. Fidelity Title & Trust Co. v. Young, supra; Brainerd v. Cowdrey, 16 Conn. 1; note to 6 A.L.R. 1386; Ferreck's Estate, 241 Pa. 340, 88 A. 505.

We are required to determine two questions: Are the beneficiaries of the specific legacies of a specified number of shares of the Preferred Accident Insurance Company and Worcester Salt Company entitled to the stock dividends declared by these companies after the execution of the testator's will and prior to his decease? And are they entitled to the preferred shares of stock of the Atwood Fire Insurance Company received by the testator after the execution of his will and prior to his decease as a stock dividend upon the shares of stock owned by him in the Preferred Accident Insurance Company? These specific legacies vested at the testator's death, since no contrary intention appears in will or codicil. Conn. Trust & S.D. Co. v. Hollister, 74 Conn. 228, 231, 50 A. 750. Specific legacies may only be satisfied by the very article bequeathed, in this case the shares of stock. Out of this legal fact, coupled with the further fact that the shares vest at the decease of the testator, has developed the principle that the specific legacy carries with it, unless the will shows a contrary intention, all of the income or increment which may have accrued upon it after the testator's decease. Phelps v. Farmers' & Merchanics' Bank, 26 Conn. 269, 272; Loring v. Woodward, 41 N.H. 391, 394; Schouler on Wills (6th Ed.) § 3086; Coon on Corporations (7th Ed.) § 300.

The owner of stock in a corporation has an interest in the assets of the corporation in the proportion his share of the capital stock bears to the entire capital stock. When an amount of cash or property equal to the par value of the stock has been taken from the surplus of the company and added to the capital, a stock dividend may be legally declared and paid to stockholders proportionately to their stock holdings. " The profits * * * until separated from the stock by declaring a dividend, are mere increment and augmentation of the stock." Phelps v. Farmers' & Mechanics' Bank, supra. The beneficial interest in the surplus as a part of the assets of the company belongs proportionately to the stockholders, subject to the payment of its debts, and their proportional share vests in the specific legatees of the stock. When the whole or any part of it is distributed to the stockholders by way of a cash dividend, they are given their proportional share of the distributed surplus. When it is distributed to them as a stock dividend it merely increases the number of their shares without augmenting their interest in the assets of the company. Boardman v. Mansfield, 79 Conn. 640, 66 A. 169, 12 L.R.A. (N. S.) 793, 118 Am.St.Rep. 178. Since the accumulated profits or surplus are but the increment and augmentation of the stock, the stockholder while he lives has his proportional interest in the surplus and all dividends of whatever character; cash, property, or stock dividends, belong to him. A legatee to whom he has bequeathed a part of his stock is not entitled to the proportional part of the stock which his specific stock legacy bears to the entire capital stock, since he has no vested interest in the specific legacy until the decease of the testator.

The rule is general that income and dividends, whether in cash property, or a stock dividend which accrues prior to the decease of the testator, belong to him, and do not either become a part of the specific legacy or belong to the specific legatee, unless a contrary intention is manifest in will or codicil. Hicks v. Kerr, 132 Md. 693, 104 A. 426, 10 A.L.R. 1323; Matter of Brann, 219 N.Y. 263, 114 N.E. 404, L.R.A. 1918B, 663; 40 Cyc. 1549; Cook on Corporations (8th Ed.) § 301. The specific legatees reverse the presumption and argue that " in the absence of an unmistakably clear expression of the testator to the contrary," these specific legatees are entitled after the stock dividends in these companies to two shares for every share of stock referred to in the bequests of stock in these companies. Because the shares of stock of the capital stock of a company are increased by the distribution of the surplus in the form of a stock dividend and the original shares of stock bore the same relation to the assets that the increased shares bear,...