Waterman's Estate

When Isaac G. Waterman, grandson of Isaac S. Waterman, made his will Dec. 30, 1919, he knew that the one remaining asset of the estate of his grandfather, then held in trust, was the 7100 shares of The Kingston Coal Company, valued at $190,000. He knew this because these shares of stock, comprising that entire estate, were awarded to the trustees under his grandfather’s will on the fifteenth accounting, adjudication thereon being had on or about Nov. 27, 1918. He knew it because he was in the receipt of two-twelfths of the income from this asset.

The trust, so far as this stock is concerned, is found in the twentieth item of the will of Isaac S. Waterman, wherein he directs that his interest in The Kingston Colliery or mines shall be held by the trustees under his will and managed by them until one year after the death of his last surviving grandchild living at the time of his death. This trust continues because there are to-day living grandchildren within the meaning of the will.

Therefore, when, in and by the sixth paragraph of his will, Isaac G. Waterman directed that the principal; that is to say, his share of the principal of the fund held by E. W. Dwight and Fidelity Trust Company for the benefit of the heirs of his late grandfather, Isaac S. Waterman, be divided into three equal parts, he necessarily referred to his interest in these 7100 shares of stock (a corporation having been formed which took over the Kingston *447mines), and to nothing else. It would seem to follow that when he directed that the trustee named by him should collect the issues and profits thereof, and pay the same monthly to his wife, Daisy Green Waterman, he realized that issues and profits from a mine or from the shares of stock, where trustees, in the exercise of their discretion, had incorporated the business, referred to all issues and all profits, no matter what they should represent. He never used the word “income.” His was a gift in specie, and, being a gift in specie, the issues and profits covered every and any return from the stock.

A majority of the court are of opinion that the auditing judge was correct in his rulings, and as he has so thoroughly considered the question under discussion, it is deemed inadvisable to do more than emphasize the facts above recited.

All exceptions are accordingly dismissed and the adjudication is confirmed absolutely.

dissenting. — The question before the court arises under the will of the testator’s grandson, Isaac G. Waterman, who died Sept. 7, 1920, and who, at the time of his death, had a vested interest in two-sixteenths of 7100 shares of the Kingston Coal Company, which form the corpus of the trust here accounted for; in accordance with the provisions of the will of the grandfather, Isaac S. Waterman, the trust will not terminate until one year after the death of his last surviving grandchild who shall have been living at the time of his death. (See the twentieth paragraph of the will, which, so far as it relates to the share of Isaac G. Waterman, must be read in conjunction with the fifth and sixth paragraphs of the will. Reference may also be made to the adjudication filed Feb. 16, 1922, at the audit of the trustee’s sixteenth account.)

On Nov. 9, 1922, that is, after the death of Isaac G. Waterman, the Kingston Coal Company declared an extraordinary dividend of $1,000,000 out of profits earned by the company during the lifetime of Isaac G. Waterman, the dividend being payable in Liberty Bonds in which the company had previously invested a part of its surplus, the dividend thus passing to the trustees by virtue of their holdings of the company’s stock, amounting to $355,000 of Liberty Bonds at par. The share of this dividend held for the benefit of the estate of Isaac G. Waterman, deceased, amounts to $57,376.20, and as he left a will in which he created estates for life with directions to pay the “issues and profits” to certain life-tenants, it became necessary for the auditing judge to determine whether this sum should be distributed as principal or income.

The finding of the auditing judge was to the effect that the declaration of the extraordinary dividend depleted the corporation’s surplus to the extent of the dividend, and that this depletion was necessarily reflected in the value of the stock; and while recognizing the general rule that under such circumstances the dividends should be awarded as principal (see Sloan’s Estate, 258 Pa. 368; McKeown’s Estate, 263 Pa. 78), the auditing judge took the view that Waterman’s will showed an intention to bequeath the stock in kind to the trustees, and the issues and profits thereof in kind to the life-tenants, and that, therefore, the case was ruled by Roberts’s Estate, 2 D. & C. 667, in which we held that corporate dividends declared out of royalties received for mining coal from mines which were open and in operation at the time of the testator’s death belonged to the life-tenant.

I am of the opinion, however, that the facts in Roberts’s Estate differentiate it from the case at bar. In Roberts’s Estate the dividends there discussed were not declared as extraordinary dividends, but, on the contrary, as *448to the particular corporation declaring them, were the usual and ordinary ones; they represented royalties from mines being worked to exhaustion, and were similar to dividends which, for fifty years before she made her will, testatrix had been in the habit of receiving herself, so that when she directed her trustees to pay to her nephews and nieces “the interest, income and profits” of her residuary estate, coupled with a direction to her trustees to retain investments, we believed it to have been her intention that her nephews and nieces, as life-tenants, should receive all dividends of the same character as those which she had been in the habit of receiving during her lifetime; but in the case now under discussion, the dividends which Isaac G. Waterman had been in the habit of receiving during his lifetime were ordinary dividends in the usual acceptation of that term, declared out of earnings, and did not impair the capital or surplus of the corporation, and to hold that because he directed “that if practical the same (i. e., the stock held as principal) be not converted into money or sold,” and gave the “issues and profits” to the life-tenants, he thereby anticipated and intended to give to the life-tenants an extraordinary dividend which materially lessens the value of the estate in remainder, would, in my opinion, give these expressions a more comprehensive scope than the testator intended. “Issues and profits” ordinarily relate to earnings, and are interchangeable terms with “income,” although, of course, these terms are not necessarily coextensive or identical (In re Stevens, 95 N. Y. Supp. 297, 305; Boyer’s Appeal, 224 Pa. 144, 153) ; the general rule that “profits” should not be distributed as income to the extent of impairing capital was distinctly recognized in Boyer’s Appeal, 224 Pa. 144 (explained in Stokes’s Estate, 240 Pa. 277, 282), where it is said, at page 153: “It is to be presumed that the settlor meant to indicate by the use of those three words, ‘dividends,’ ‘income’ and ‘profits,’ pretty much everything in the way of advantage or benefit which might accrue from the stock without decreasing the original value of the capital which it represented.”

I would, therefore, distribute the dividend represented by the sum of ¥57,376.20 to the trustee under the will of Isaac G. Waterman, deceased, as principal.