Smith v. Hooper
| Decision Date | 02 April 1902 |
| Citation | 51 A. 844,95 Md. 16 |
| Parties | SMITH v. HOOPER et al. HOOPER et al. v. SMITH. |
| Court | Maryland Court of Appeals |
Appeal from circuit court of Baltimore City; Pere L. Wickes, Judge.
Suit between Mary E. Smith and William J. Hooper and others, as trustees under the will of William E. Hooper, deceased. From the decree both parties appeal. Affirmed.
Argued before McSHERRY, C.J., and BRISCOE, JONES, PEARCE, PAGE BOYD, and SCHMUCKER, JJ.
Charles E. Hill, for appellant.
Thos M. Lanahan and Frank Gosnell, for appellees.
This record contains cross appeals. Each appeal presents one question. Both questions grow out of the same facts, and but one opinion will be needed to dispose of the whole controversy. The facts are not disputed in any way. They are as follows: By the seventh clause of the will of the late William E. Hooper, who died in 1885, there was bequeathed to his four sons, and the survivors and survivor of them, the sum of $10,000, "upon trust, to invest the same and pay to [his] daughter, Mary Elizabeth Smith, during her lifetime for her sole and separate use, the dividends and income thereof, as the same shall accrue, without power to her to anticipate the payment of such income and dividends, or to charge or incumber the trust estate," with remainder over, after the death of the daughter, to her children and the descendants of any deceased child, with a power of appointment by the daughter if no child or descendants of a deceased child survived her, and in the event of there being no child or descendant of a deceased child surviving the daughter, and upon failure to make an appointment, there is an absolute bequest of "this portion of" the testator's estate to all his grandchildren then living and the surviving issue of any deceased grandchild. The fund was paid over to the trustees. By the nineteenth clause of the will the trustees were empowered "to invest the moneys that shall come into their or his hands *** in such property, real or personal, stocks, bonds, or securities, as in their or his judgment may be advisable, and all such investments from time to time to change or vary in their or his discretion; as also to sell any property other than money coming to hand as parcel of the trust estate, and the proceeds reinvest in their or his discretion," etc. R Tynes Smith, the husband of the cestui que trust, was engaged in the manufacture of cans. Associated with him was William A. Weeks, and the firm name was Smith & Weeks. In the latter part of the year 1887 the property, buildings, letters patent, machinery, and tools of the firm were sold at public auction, and, by the request of the cestui que trust, were purchased by the trustees, who paid therefor the sum of $7,744.93, out of the $10,000 trust fund held by them under the seventh clause of the will. After paying for the property so purchased, the trustees still had in hand the sum of $2,255.07, the residue of the $10,000 trust fund. The trustees then transferred the property thus purchased by them to a corporation formed under the general corporation laws of this state, which company was known as the "R. Tynes Smith Can Company." In payment for the property so transferred, the trustees received from the company 300 shares of its capital stock, at its par value of $100 per share. Subsequently, the trustees sold 50 shares of this stock for $5,000. The $5,000, added to the $2,255.07, part of the original $10,000 trust fund, gave them $7,255.07 in cash, in addition to the remaining 250 shares of the capital stock of the R. Tynes Smith Can Company still retained by them. At or about that time, as the seventh paragraph of the bill of complaint charges, the cestui que trust, Mary Elizabeth Smith, "paid over and delivered to" the trustees "the sum of two thousand seven hundred and forty-four dollars and ninety-three cents, in cash, for no other reason or purpose *** than that they might still have in their possession and hold intact, without any abatement whatever, cash amounting to $10,000; in other words, that the cash in their hands might be restored to the original sum of $10,000, being the sum bequeathed to them in trust under the said seventh clause of the last will and testament of William E. Hooper, deceased." This sum of $2,744.93 has relation to the question raised on the second appeal, but is alluded to now merely to preserve the continuity of the narrative. In 1889 Mr. Smith organized another corporation for the manufacture of cans. It was located at Keokuk, in the state of Iowa, and was called the "Tristate Can Company." The trustees subscribed for $10,000 of the capital stock of this company. They received 350 shares, and paid for them with the $2,255.07 of the original $10,000 trust fund in their hands, as heretofore stated, the $5,000 received by them from the sale of the 50 shares of the R. Tynes Smith Can Company's stock, and the $2,744.93 turned over to them by Mrs. Smith, as just above indicated. At that time the trustees held 250 shares of the stock of the R. Tynes Smith Can Company and 360 shares of the stock of the Tristate Can Company. Up to February, 1901, they had collected in dividends, on the 250 shares, the sum of $27,500, and in interest on the $10,000, or portions of it before its investment, the sum of $2,270.07, all of which had been paid over to the cestui que trust. In May, 1901, the American Can Company, a New Jersey corporation, with a capital of $88,000,000, was formed. Its whole capital stock was divided into an equal number of common and preferred shares, of the par value of $100 each. That corporation was organized for the purpose of acquiring the business of all other companies engaged in the manufacture of cans. It accordingly purchased the assets of both the R. Tynes Smith Can Company and the Tristate Can Company. As a result of this absorption, the trustees received, in lieu of the 250 shares of the R. Tynes Smith Can Company then owned by them, 962 shares of the preferred, and 962 shares of the common, stock of the American Can Company, 62 shares of the stock of another concern, and $37,500 in cash. They afterwards sold the 962 shares of common stock for $25,150.95. The final result of their investment of the $7,744.93 in the purchase of the property of Smith and Weeks is that they now have, in place of that sum, through the medium of the exchanges and sales alluded to, the $37,500 cash received from the American Can Company, the $25,150.95 just mentioned, as the proceeds of the sale of the 962 shares of common stock, these items of cash aggregating $62,650.95, and the 962 shares of the preferred stock of the American Can Company, together with 62 shares of the Johnson Company. The trustees received from the American Can Company, in exchange for the 360 shares of the Tristate Can Company held by them, 180 shares of the preferred, and 180 shares of the common, stock of the American Can Company, and $16,500 in cash. They sold the 180 shares of the common stock for $4,705.89, and still retain the preferred. The final result of their investment in the Tristate Can Company is this: In place of the $2,255.07 part of the original trust fund, the $5,000 realized by the sale of 50 shares of the R. Tynes Smith Can Company's stock, and the $2,744.93 turned over to the trustees by Mrs. Smith, they now have the $16,500 cash received from the American Can Company, the $4,705.89 realized by the sale of the 180 shares of common stock,--or an aggregate of $21,205.80 in cash,--and 180 shares of preferred stock. The total result of the investment and reinvestment of the original trust fund augmented by the $2,744.93 contributed by Mrs. Smith is this: The trustees now hold 1,142 shares of the preferred stock of the American Can Company, worth, when the bill was filed, sixty-five dollars a share, or $74,230; $83,856.31 in cash, and 62 shares of the Johnson Company, of no present value; altogether aggregating $158,086.31, apart from the $29,770.07 of the dividends and interest heretofore paid to the cestui que trust. Mrs. Smith, the cestui que trust, insists that all of this enormous increase in the fund in excess of the original $10,000 belongs to her, and should be paid to her as income from the fund, and should not be held by the trustees as part of the corpus of the trust estate. The trustees deny this. She also claims, alternatively, that she is not only entitled to a return of the $2,744.93 handed over by her to the trustees, but to a ratable proportion of the gain made by the investment of that sum and the $7,755.07 in the 360 shares of the capital stock of the Tristate Can Company. These are the questions which the record presents. The first is the one raised on the appeal of Mrs. Smith; the second is the one brought up on the appeal of the trustees.
The circuit court decided the first adversely to her, and it decided the second in her favor.
If this increase of $148,086.31 over and above the $10,000 originally received by the trustees is income or dividends, within the meaning of the seventh clause of the will, then Mrs. Smith the cestui que trust for life, is entitled to that increase, and the trustees can claim no part or parcel of it as capital. If, on the other hand, that increase, created in the way hereinbefore minutely pointed out, is not income from or dividends upon the original trust fund, in the sense in which the words income and dividends are used...
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