In re Estate of Oliver

• Decision Date: 06 October 1890
• Docket Number: 418
• Citation: 20 A. 527,136 Pa. 43
• Parties: ESTATE OF GEORGE L. OLIVER, DECEASED
• Court: Pennsylvania Supreme Court

20 A. 527

136 Pa. 43

ESTATE OF GEORGE L. OLIVER, DECEASED

No. 418

Supreme Court of Pennsylvania

October 6, 1890

Argued January 10, 1890

APPEAL BY MERCHANTS' FUND ASS'N FROM THE ORPHANS' COURT OF PHILADELPHIA COUNTY.

No. 418 January Term 1889, Sup. Ct.; court below, No. 532 April Term 1887, O.C.

On December 5, 1888, the first account of James B. Chandler and Catherine M. Richardson, as trustees under the will of George L. Oliver, deceased, ^[*] wherein the accountants charged themselves with principal amounting to $612,822.21, and with income amounting to $151,139.02, was called for audit before HANNA, P.J., who afterwards filed an adjudication, finding the following facts:

The account was conceded to be correct, except in the single particular hereinafter referred to, and the assets, being securities and investments of the estate, in the custody of the trustees, and belonging to the corpus of the trust estate, were found to be in their possession and custody, as set forth in the account.

The annexed is the first account of the trustees, their account as executors having been heretofore filed, audited and confirmed by the court, and the balance of principal of the estate was awarded to them as trustees under the will of testator.

Among the securities and investments thus awarded to the accountants, and which were the property of testator in his lifetime, are 5,582 shares of stock in the Metalline Land Company, appraised for the purposes of the inventory and appraisement at the sum of $5; not $5 per share, but $5 for the whole number of shares. The single question now for determination arises from this investment by testator. And it should here be stated that the entire number of shares is still in the hands of the trustees.

On November 3, 1883, the trustees received from the Metalline Land Company, a dividend of $19.50 per share, amounting to the large sum of $108,849, and with which they charge themselves in their annexed "Income Account."

At the hearing before the auditing judge, Messrs. Henry and Junkin for the Merchants' Fund Association, claimed that said sum of $108,849 was improperly included by the trustees in their account as income, and that it should be stricken therefrom and transferred to the principal account, for the reason that it did not represent income, but principal of the estate. This was objected to by Messrs. Dale and Olmsted, who contended that said sum was strictly dividends and profits and therefore properly included in the income account. Thus the single question in dispute is presented.

In order to arrive at a correct determination, it is necessary to refer to certain facts appearing from the evidence before the auditing judge.

George L. Oliver, the testator, died June 3, 1886. On December 15, 1862, he with three other persons entered into articles of agreement bearing that date, whereby they "agreed to associate themselves together under the name of the Metalline Land Company of Lake Superior, for the purpose of purchasing lands, and developing mines of copper and other valuable minerals and disposing of the same." "And in order more effectually and advantageously to manage the property and improve and make sales thereof, and to prosecute the business of said company, the parties hereto severally and individually . . . agree each with the other that the following shall be the articles of mutual agreement and association forever binding upon each of the said parties . . . while they are stockholders in the company."

By article 2 of this agreement, it was provided that, "the property of the company shall be divided into twenty thousand shares of five dollars each, each of which shall entitle the proprietor to one undivided twenty thousandth part of all property which now belongs to or may hereafter be acquired by the company, or which may hereafter be in any way held by the trustees hereafter named, or their successors in said trust, for the use and benefit of the said company." Of the 20,000 shares, into which the capital stock of the company was divided, Mr. Oliver subscribed for 3,900 shares, but afterwards became the owner of additional shares, so that at his death he owned, as stated, 5,582 shares.

The articles of association also provided that "the shares of the company shall be issued to the proprietors of the lands, in proportion to their respective interests in said lands, liable to no more than five dollars per share assessment, and the board of trustees shall have authority to make a requisition upon their several stockholders for the payment of such instalments upon the shares held by them, whenever they may deem it necessary or expedient," etc. And by article 5, it is provided that, "the funds and property of this association shall be vested in three trustees, to be held by them as joint tenants, . . . and no person shall be a trustee who is not a stockholder in the company." By article 6, it is, inter alia, provided that an annual meeting of the company shall be held, other meetings shall be called, and each stockholder shall be entitled to one vote for every share held by him, etc. By article 8, it is provided that the trustees "shall have the entire control and disposal of the property of the company, both real estate and personal; make such purchases, conveyances, sales or contracts, and expend all moneys, and dispose of all other property in such way as they may deem for the interest of the company," etc. They are also authorized "to execute and deliver warranty, mortgage, or other deeds . . . of all or any portion of the property held by the company, in such ways . . . as they shall judge best calculated to promote the objects of the company and advance the interests of the stockholders. They shall make such improvements and explorations of the lands of the company as they may deem expedient, in order to develop their value and facilitate their sale," etc. By article 9, the trustees are authorized "from time to time (to) declare and pay out dividends of profits to the several stockholders." Article 10 prescribes the form of certificate to which every stockholder is entitled, certifying his property in the shares expressed by the certificate. And, by article 11, it is provided that "this company may at any time become incorporated, whenever it shall be so determined by a vote at a regular meeting of the stockholders, at which a majority in interest are present," etc.

The company, however, never was incorporated, and still continues to transact its business through trustees, as provided in said articles of association. It also appeared that the individuals who became party to said articles of association and agreed to form said company, did not pay or contribute the sum of $5 per share for each share of stock subscribed by them, but only the sum of $1.90 per share. This was paid in six instalments or assessments called in between March 22, 1864, and May 24, 1881, and the sum of $38,000 thus realized constituted the entire working capital of the company.

The first purchase of land by the trustees was early in 1864, when they purchased 1,200 acres of land in Michigan, which were valued at $25,000, and the first instalment of $1.25 per share was then called in. They soon began to sell land and make other purchases, and acquired in all between ten and eleven thousand acres. Between 1864 and 1882 they sold nearly 10,000 acres, and had remaining 600 acres. It appeared that the sales were made partly for cash, and partly in stock of the mining companies purchasing the lands; so that when the trustees declared the first dividend on March 22, 1864, it was $1.25 in cash and five shares of the Reliance Mining Company's stock to each ten shares of the Metalline Land Company's stock, and six shares of the Vulcan Mining Company's stock to each ten shares of the Metalline Land Company's stock. The next dividend was on May 1, 1865, of fifty cents in cash per share. The trustees, however, continued to make sales of the lands of the company, but declared no further dividends.

At the death of testator in June, 1886, the trustees still held unsold, as stated, 600 acres of land. By reason of developments upon the lands adjoining those held by the trustees and which formerly belonged to them, it became the opinion of mining experts that the lands still held by the trustees contained deposits of copper ore of immense value. A great excitement ensued, and producers of copper, and investors, and speculators in copper-mining stocks, became convinced of the existence of mines of untold wealth buried in the lands of the Metalline Land Company. These lands immediately appreciated in value beyond the most sanguine expectations of the trustees, and in October, 1888, they sold to the Calumet and Hecla Mining Company 40 acres, for the sum of $500,000 in cash, or $12,500 per acre. And they still have on hand 560 acres, whose value is unknown and cannot be determined except by actual sales.

On November 2, 1888, the trustees held a meeting, and, by advice of counsel, declared a dividend of $19.50 per share to the holders of the stock of the Metalline Land Company. And thus the present accountants received the sum of $108,849, with which they charge themselves as income belonging to the trust estate.

In pursuance of the will of testator, and by reason of the death of her husband, Mrs. Catherine M. Richardson, daughter of testator, is entitled during life to "all the net rents issues, profits, and income of the remainder and residue of my estate, real, personal, and mixed, of which I may die seised." And by the succeeding item of his will, testator gave, devised, and bequeathed "the principal of the said residue and remainder of my estate," after the deaths of his daughter and her husband, to...