Nashville Trust Co. v. Tyne

• Decision Date: 15 August 1952
• Citation: Nashville Trust Co. v. Tyne, 194 Tenn. 435, 250 S.W.2d 937, 30 Beeler 435 (Tenn. 1952)
• Parties: , 194 Tenn. 435 NASHVILLE TRUST CO. v. TYNE et al.
• Court: Tennessee Supreme Court

Page 937

250 S.W.2d 937

30 Beeler 435, 194 Tenn. 435

NASHVILLE TRUST CO. v.TYNE et al.

Supreme Court of Tennessee.

Aug. 15, 1952.

E. J. Walsh, Nashville, for complainant.

William F. Barry, G. Henry Tyne and W. E. Norvell, Jr., Nashville, for defendants.

Laurence B. Howard, Edwin A. Price, Jr., Nashville, Guardians Ad Litem.

GAILOR, Justice.

The original bill was filed in the Chancery Court of Davidson County by the Trust Company, as Trustee of the will of Jane R. Tyne, deceased, against all her living issue, for a declaration and construction of her will as to certain stock dividends of the National Life & Accident Insurance Company, which had been declared and paid to the ComplainantTrustee after the death of Mrs. Tyne and the commencement of the administration of the trust created by her will.The specific question presented for the Chancellor's decision was whether the stock dividends should legally be applied to increase the corpus of the trust estate, or whether they should be distributed as income under the provisions of the trust.

Guardians ad litem were appointed for the minor Defendants, who are grandchildren and great grandchildren of the testatrix, and answers were filed by the guardians for them, and by decree the guardians were authorized to enter into a stipulation.The adult Defendants filed answers.The facts necessary to a decision were incorporated in a formal stipulation, which was signed and filed, and on that record, after a full hearing, and after delivering a studied, careful and well-reasoned opinion, the Chancellor decreed:

(1) That the Statutes of Limitation pleaded by the guardians ad litem in their answers for the minors, were 'not maintainable under the facts of this case.'

(2) That the testatrix had no provision for the application of stock dividends in her will.

(3) That since the Massachusetts rule for the application of stock dividends was not the law in Tennessee, that the stock dividends should be distributed in accordance with the Pennsylvania rule and the stipulation, which provided that of the total of 35,908 shares of National Life stock, in the hands of the trustee when the bill was filed, 18,668 shares should be applied to corpus, and 17,240 shares be distributed as income.

From the decree, the guardians ad litem only have perfected this appeal.We consider the assignments of error in the course of the opinion.

Mrs. Jane R. Tyne, the widow of Thomas J. Tyne, a founder and the General Counsel of the National Life & Accident Insurance Company who had died in November 1936, herself died testate, December 16, 1939.By her will, she appointed the Nashville Trust Company her executor and trustee, and upon the residue of her estate, imposed a trust, the parts of which pertinent to the present controversy, are as follows:

'1.The Trustee shall collect, and during their respective lives, pay over to my husband, Thomas J. Tyne, and my children, Elleanore Tyne Barry, Thomas J. Tyne, Jr., William J. Tyne, G. Henry Tyne and Catherine Jane Tyne, in equal portions, the entire net income from said estate, said payments to be made as soon as practicable after such income is received by my said Trustee.

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'5.This trust shall continue during the respective lives of my said husband and children and until the death of the last survivor thereof.'(Our emphasis.)

The principal asset of the trust estate was stock in the National Life & Accident Insurance Company, represented by voting trust certificates of a voting trust set up by the founders of the Insurance Company, to maintain voting control of that corporation.This voting trust was set up December 20, 1928, and expired December 20, 1949, after which latter date, the trustee received certificates for shares of corporate stock in exchange for the voting trust certificates theretofore in the possession of the trustee.

After Mrs. Tyne's death in 1939, her shares of stock had been increased by three stock dividends:--In 1940, by a stock dividend of 25%; in 1943, by a stock dividend of 100%; and in 1947, by a stock dividend of 50%.It is stipulated that the total number of shares representing stock dividends which are involved in the present controversy, is 17,240 shares.

In considering pleas of the Statutes of Limitation of three and six years, made by the guardians ad litem, it is first necessary to remember the nature of the action against which the pleas are directed.The Complainant, as trustee of 'a direct express and continuing trust,' filed this bill for a construction of the will and declaration by the Chancellor, of the legal duty of Complainant as such trustee, in the administration of the trust.The Complainant's bill is in the nature of an interpleader and seeks no relief from either the Appellants or the Appellees.The trust is still in process of administration.At this stage, and against this cause of action, neither the three nor the six year Statutes of Limitation, both of which are pleaded by the guardians, can be maintained.Jackson v. Dobbs, 154 Tenn. 602, 609, 290 S.W. 402;Church of Christ Home for Aged, Inc. v. Nashville Trust Co., 184 Tenn. 629, 639, 202 S.W.2d 178;Third Nat. Bank v. Nashville Trust Co., 191 Tenn. 123, 132-133, 232 S.W.2d 7, and cases there cited.Furthermore, since the certificates of stock in controversy, are still in possession and control of the ComplainantTrustee, there is no right nor equity in any one which could forestall a decree by the Chancellor directing the Complainant to administer the trust according to law.

There are three rules which have been announced by various Courts, to control the distribution of stock dividends between life tenants and remaindermen:

(1) By the Massachusetts rule, the medium of payment controls and if the dividend is paid in stock, it is corpus, and if in cash, it is income.

(2) By the Kentucky rule, the fact that the payment is a dividend, is controlling, and as such, it is declared to be income, whether payable in cash or stock.

(3) By the Pennsylvania rule, the continuing integrity and preservation of the corpus of the trust estate is the controlling factor, and if the payment of the dividend, whether cash or stock, impairs the corpus, by so much as the corpus is impaired, the dividend is corpus, and the rest is income.

There is a lengthy and complete annotation of the three rules with analysis of many cases in 130 A.L.R., at pages...