Rees' Estate, In re

• Decision Date: 22 May 1957
• Citation: 210 Or. 429,311 P.2d 438
• Parties: In the Matter of the ESTATE of Almona B. REES, Deceased. William A. FISHER, Jr., Appellant, v. Wilma Dudman PAINE and Ruth I. Beebe, Executrices of the Estate of Almona B. Rees, Deceased, Respondents.
• Court: Oregon Supreme Court

Page 438

311 P.2d 438

210 Or. 429

In the Matter of the ESTATE of Almona B. REES, Deceased.

William A. FISHER, Jr., Appellant, v. Wilma Dudman PAINE and Ruth I. Beebe, Executrices of the

Estate of Almona B. Rees, Deceased, Respondents.

Supreme Court of Oregon, Department 2.

Argued April 18, 1957.

Decided May 22, 1957.

Allan Hart, Portland, argued the cause for appellant. With him on the briefs was Alfred C. Veazie, Portland.

F. A. Fredrickson, Portland, argued the cause for respondents. With him on the brief were Gray & Lister, Portland.

Before PERRY, C. J., and LUSK, WARNER and KESTER, JJ.

WARNER, Justice.

This is an appeal from the Probate Department of the Circuit Court of Multnomah County directing the distribution of 50 shares of corporate stock and, as an incident thereto, construing the will of Almona B. Rees, deceased. The order related solely to the specific bequest to the appellant, William A. Fisher, Jr., of 25 shares of United States Steel Corporation stock and held that this gift did not include 50 additional shares of the same stock which Almona B. Rees acquired before her death, but after she had executed her will on the first day of May, 1946.

The third paragraph of Mrs. Rees' will provided for a gift to her grandson, the appellant, and reads as follows:

'Third: I bequeath to my grandson, William A. Fisher, Jr., the twenty-five shares of the United States Steel stock which I possess.'

At the time Mrs. Rees made her will, she owned certificate No. P 468311 (hereinafter called 'certificate P') for 25 shares of no-par common stock of United States Steel. It was the only stock of the corporation then owned by her.

Three years later, on May 12, 1949, the defendant received 50 more shares of United States Steel of the same type of stock. These additional shares were evidenced by one certificate numbered X 118843 (hereinafter called 'certificate X'). Thus, Mrs. Rees became the owner of 75 shares (represented by certificates P and X) and which she still had when she died. They were duly inventoried and together appraised at $2,690.40.

Decedent's will of May 1, 1946, was not changed prior to her demise in Multnomah County, Oregon, on September 4, 1953. Upon probate of the will, the executrices nominated by the decedent were appointed by the court and now appear in their official capacity as the respondents in this appeal. They were sisters of the decedent and with other beneficiaries were residuary legatees under the will.

The probate of Mrs. Rees' estate proceeded in due course without delay or incident to and including the order approving the final account and report of the respondents on June 9, 1954. That order authorized and directed the executrices to pay over and deliver decedent's estate to those entitled to receive it under her will but without attempting to specifically allocate any particular items of property to anyone named therein.

After the order of June ninth was entered directing the respondents to make distribution, but before distribution was begun or completed, the respondents, in their capacity as executrices, apparently realized for the first time that there was a unique legal relationship between stock certificates P and X that had some impact upon the third provision of the will favoring Mrs. Rees' grandson. Being uncertain as to the legal character of certificate X, in October, 1954, the respondents, therefore, petitioned the court for a direction as to the proper disposition of certificate X, that is, whether it should be distributed to William A. Fisher, Jr., under the third paragraph of the will or, under the sixth paragraph, be included as an item of the residuary estate. In their petition the respondents describe certificate X as one which 'was issued to Almona B. Rees by reason of a stock dividend or split effective May 12, 1949.' (Emphasis ours.) Shortly thereafter, appellant filed his 'petition,' which, in a sense, is an answer to the petition of the executrices for advice. In his petition appellant alleges that certificate X for 50 shares is a 'split,' or, in effect, a division of the 25 shares represented by certificate P into three times as many as there were of the original 25 shares, each of the 75 shares having a value equal to one third of the value represented by a single share of the original stock. He prayed for an order directing the executrices to turn over to him both certificates P and X as his proper distributive bequest under the third paragraph of the will.

A hearing was had on the issue raised by the respective petitions and the circuit court, on December 29, 1954, ordered that certificate X be treated as an item of the residuary estate, reduced to cash and distributed as provided by the residuary clause of the Rees will. It is from this order Mr. Fisher appeals.

A circuit court sitting in probate has a limited jurisdiction to construe wills. With respect to personal property, when a question arises as to the distribution of an estate, the probate court has power to direct by its decree the manner of such distribution, and also the power to construe a will incidental to such distribution if that is necessary. Arnold v. Arnold, 193 Or. 490, 497, 237 P.2d 963, 239 P.2d 595; Woodburn Lodge, etc. v. Wilson, 148 Or. 150, 160, 34 P.2d 611; In re McGinnis' Estate, 91 Or. 407, 179 P. 254; In re Wilson's Estate, 85 Or. 604, 167 P. 580; In re John's Will, 30 Or. 494, 47 P. 341, 50 P. 226, 36 L.R.A. 242. Predicated upon the foregoing rule, the Probate Department of the Circuit Court of Multnomah County had jurisdiction to consider and dispose of the question presented by the presence of certificate X under its power to direct by decree the manner of its distribution, and also the power to construe Mrs. Rees' will as incidental to that direction.

It is important to note the provision of the will under which Mr. Fisher claims the stock of the United States Steel Corporation is a specific bequest. In re Noon's Estate, 49 Or. 286, 293, 88 P. 673, 90 P. 673; In re Banfield's Estate, 137 Or. 256, 284, 299 P. 323, 3 P.2d 116; In re Preston's Estate, 157 Or. 631, 635, 73 P.2d 369; Fidelity Title & Trust Co. v. Young, 1924, 101 Conn. 359, 125 A. 871; Chase National Bank v. Deichmiller, 1930, 107 N.J.Eq. 379, 152 A. 697, 699; 57 Am.Jur. 942, Wills § 1409. On that point the parties are in accord.

The question of major interest projected by this appeal is: When a person executes a will making a specific bequest of corporate stock and thereafter the testator during his lifetime receives from the issuing corporation additional shares of the same stock as a result of a 'stock split' or 'split up' and the testator dies while continuing to hold both the original stock shares and the additional shares which were given to implement 'the split,' and does so without altering his will, are all the additional shares which came to him as an incident of the split to be treated as a part of the specific bequest, to be distributed to the specific legatee, or are they to be considered as a part of the residuary bequest and be distributed to the beneficiaries of the residuary estate?

As indicated by the cases later referred to, the question propounded is always to be resolved in terms of testamentary intent. The query in each case is whether or not the testator intended that the additional shares (in this matter, those represented by certificate X) issued to and received by him after the execution of the will should be treated as a part of the specific bequest of 25 shares (represented by certificate P) or become a part of the residuary estate.

When stock is issued as the result of a 'stock split' and not as a stock dividend to a testator and received by him under the circumstances present here, the courts are virtually unanimous, as we shall later see, in holding that the testator intended the additional stock received by reason of the split to remain and be a part of the specific bequest, unless, of course, there is language in the will which would negative the intent to be derived from a reading of the provision for the specific bequest.

Mrs. Rees' will is relatively short, simple and direct and we find nothing therein to alter the pattern of the bequest for Mr. Fisher or deny to him the opportunity to receive the 50 shares represented by certificate X, unless the law itself mandates the additional shares resulting from the stock split be added to the residuary estate.

This is the first time that this court has had occasion to consider any matter relating to a 'split' or 'split up' of corporate stock. Notwithstanding, the subject is not new to the law of this country or that of England. See Walton v. Walton, infra, an opinion of Chancellor Kent, written in 1823, and wherein his conclusions are buttressed by earlier English decisions. Even though a 'stock split' had long enjoyed favorable recognition in corporate law, it was a device seldom employed by corporations in this country until the postwar decade following World War I when it reached almost flood proportions. Harvard Business Review, Vol. XI, No. 3, p. 316 (Apr. 1933) and was again revived during the years following World War II. Graham & Dodd, Security Analysis (3d ed. 1951), p. 442. This relative newness or late revival in the use of this corporate stock device, no doubt, accounts in this country for the relative recency and paucity of judicial expression treating with any phase thereof, at least in comparison with the abundance of judicial holdings in the area of 'stock dividends.' We note, too, that most of the legal literature dealing with the subject of 'split stock' springs from cases involving the construction of wills and in most every instance raising questions directly connected with specific bequests and similar to the one presented here. This observation will be confirmed by a reading of those cases later cited as authority for the rule upon which our decision in this matter rests.

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