of shares of stock before held by the | exercise of its power is binding on all persons estate, if accepted, operated as a change interested under him (the testator or settlor) in in the manner of investment of so much the shares, and, consequently what is paid by of the estate; and the value belonged the company as dividend goes to the tenant for to the estate and not to the life tenant. life; and what is paid by the company to the 5. Where the testator had held the prin- shareholder as capital, or appropriated as an cipal moneys in hand for the purpose of increase of the capital stock of the concern, investment and reinvestment, but inures to the benefit of all who are interested mingled them with his own funds, it in the capital. In a word, what the company was not improper in settling with the says is income shall be income; and what it life tenant whose funds were so held, to says is capital shall be capital." charge the testator with interest upon interest, as he forebore investment and used the moneys for his own convenience.

Bates v. Mackinley, 31 Beav. 280; Re Hopkins' Trusts, L. R. 18 Eq. 696.

The contention of Mrs. Marshall's executors: that the value of the options to subscribe for The dividend declared April 14, 1881, pay- other stock was properly classed by the execuable May 2, 1881, should have been treated as tors as income, and that the learned surrogate income and credited to the income account. erred in allotting this sum to principal, is untenThe dividend was payable, and was paid able. The fact that options to subscribe for after testator's death, and belonged to Mrs. | stock at par have any value shows of itself that Marshall. the corporate property must have advanced in value. The giving, by the corporation, of a privilege to each of its stockholders to subscribe for stock at less than its market price is, after all, only another way of making a new issue of stock to represent increased value of the corporate property.

Cogswell v. Cogswell, 2 Edw. Ch. 231; Clive v. Clive, Kay, 600.

It makes no difference when the dividend was earned.

Woodruff's Est. 1 Tucker, 59; Riggs v. Cragg, 26 Hun, 89-102; Bates v. Mackinley, 31 Beav. 280: Re Hopkins' Trusts, L. R. 18 Eq. 696.

The allowance of commissions to the executrix was proper.

Code Civ. Proc. § 2736. See also Re Van Nest, 1 Tucker, 130: Eager v. Roberts, 2 Redf. 247; Re Pike, 2 Redf. 255.

Atkins v. Albree, 94 Mass. 359; Boardman v. Lake Shore etc. R. Co. 84 N. Y. 157; Moss' App. 83 Pa. 364; Minot v. Paine, 99 Mass. 101; Re Barton's Trust, L. R. 5 Eq. 238; Brinley v. Grou, 50 Conn. 66.

The rule upon the best settled authorities seems to be as follows: 1, a stockholder has no Mr. Edward S. Dakin, as special guardian claim to the surplus until divided by the direcfor Marshall R. Kernochan, an infant, grand-tors: 2, every dividend which increases the capson of John R. Marshall, appellant and respon-itol stock of a corporation, whether in stock, dent:

I. Compound interest should never be calculated, except by special agreement made on consideration after the simple interest has become due.

Young v. Hill, 67 N. Y. 162; Connecticut v. Jackson, 1 Johns. Ch. 13.

The statute providing for the award of commissions by the surrogate, on the settlement of an executor's accounts, is not mandatory; it only furnishes a definite rule as to amount when any such rule is to be applied. It does not restrict a testator from fixing a compensation to the exclusion of statutory commissions, nor from forbidding any compensation whatever. Secor v. Sentis, 5 Redf. 570; Re Gerard, 1 Demarest, 244.

II. The day when a dividend is declared determines its ownership, without reference to the day of payment.

scrip, or stock purchasing checks, is capital. This last rule seems to be followed by the latest English cases, and also in Massachusetts, Connecticut, New Hampshire, Pennsylvania and New Jersey.

The interest paid to Mrs. Marshall on her money in the testator's hands is excessive, in that interest is calculated upon interest; whereas, if the estate of the testator is liable for interest at all, simple interest only can be recovered.

Connecticut v. Jackson, 1 Johns. Ch. 13; Young v. Hill, 67 N. Y. 162, and cases cited; Ackerman v. Emott, 4 Barb. 626; Lansing v. Lansing, 45 Barb. 182; Smith v. Velie, 60 N. Y. 106.

Mr. J. Frederic Kernochan, for accounting executors of John R. Marshall, respondents: Until a dividend is declared, the earnings pass with the transfer of the stock as a portion of the capital of the company.

Boardman v. Lake Shore etc. R. Co. 84 N. Y.

177.

Hyatt v. Allen, 56 N. Y. 553; Hall v. Newichawanick Co. 8 Hun, 459; affirmed in 71 N. Y. 593. The amount which was admitted to be the value of the options and privileges, which the decree adjudged must be paid back by Eveline G. Marshall to the estate, was properly so adjudged to be paid back. The value of all such options and privileges were in all cases, capital. Riggs v. Cragg, 89 N. Y. 479; Hill v. Newich-awanick Co. 8 Hun, 459; 71 N. Y. 593. awanick Co. 8 Hun, 459; affd. 71 N. Y. 593. Sproule v. Bouch, 52 L. T. N. S. 366; S. C. L. R. 29 Ch. Div. 653; Minot v. Paine, 99 Mass. 108; Daland v. Williams, 191 Mass. 571; Leland v. Hayden, 102 Mass. 542; Brinley v. Grou, 50 Conn. 66; Van Doren v. Olden, 19 N. J. Eq. 176; Atkins v. Albree, 12 Allen, 359.

When, however, a dividend is declared the amount represented by the dividend becomes entirely severed from the stock and will not pass to a purchaser of the stock, even though it is not payable until a subsequent date. Hyatt v. Allen, 56 N. Y. 553; Hill v. Newich

Mr. William Jay, as special guardian for Marie Marshall, daughter of John R. Marshall, appellant and respondent:

The ownership of a dividend is determined on the day when it is declared, without reference to the day when it is actually paid.

Hyatt v. Allen, 56 N. Y. 553; Hall v. Newichawanick Co. 8 Hun, 459; affirmed in 71 N. Y. 593; Goldsmith v. Swift, 25 Hun, 201.

By the custom of the street, dividends remain attached to the ownership of the stock until the books of transfer are closed. In this case the books closed before the testator died.

Every dividend which proceeds from a sale of corporate property is prima facie capital, no matter what form it takes. Every dividend which increases the capital stock of a corporation, whether in stock, scrip, or stock purchasing checks, is prima facie capital. Every div idend of cash, which neither directly nor indirectly (as in the case of checks empowered to purchase new stock) increases the capital stock of the corporation, is prima facie income. In every case evidence should be received to show when the dividend (whether in stock or cash) was earned, and the allottment must be made on this basis, the burden of proof, however, being always on the one claiming against the above rules. The principle of such apportionment is recognized.

In Pa. Earp's App. 28 Pa. 368; N. J. Van Doren v. Olaen, 19 N. J. Eq. 176; Conn. Brinley v. Grou, 50 Conn. 66; N. H. Lord v. Brooks,

Had the shares been retained by the execu- | tator; and so doing applied a rule which may tors, the money in question would not have be founded on general equity, viz.: that when been received by them. It is true that the sale a fund is given for life to one beneficiary, and in effect carried with it the interest which each remainder over, the first shall have its earnings shareholder as a member of the company had after his life tenancy begins, and the remainin the sinking fund, so that as to that the new derman the balance. shareholder was substituted for the old. The fund was the accumulation of profits and may properly be regarded as part of the capital of the company. But it still remained pledged for the bonds for the payment of which it was created, and its possible value only enhanced the value of the shares.

I find nothing in the will which indicates that the testator intended any such investigation or division, or that any other than the ordinary rule, which gives cash dividends declared from accumulated earnings or profits to the life tenant, should be applied. His direction to his executors is to receive the rents, in

The price paid for the shares, although interest and income of his estate and apply the creased by this prospective advantage, belonged altogether to the remaindermen, and was properly carried to principal and not income.

net amount of such rents or other income (with certain exceptions not now material) to the use of his wife.

Third. It was also provided, in the same From the shares in question no income could agreement of June 10, that all earnings of the accrue, no profits arise to the holder, until asRailroad Company to and including June, 1881, certained and declared by the company and aland all moneys and other effects not by that lotted to the shareholder; and that act should agreement to be left with the Railroad Com- be deemed to have been in the mind of the tespany, should be transferred by the Railroad tator, and not the earnings or profits as ascerCompany to a trustee "for the benefit of all the tained by a third person, or a court upon an inexisting stockholders," and belong to, and be vestigation of the business and affairs of the divided among the shareholders "who are such company, either upon an inspection of their at the time of the declaration of such dividend" books or otherwise. This was held in Clapp v. or transfer of the Railroad Company. This Astor, 2 Edw. Ch. 379, in construing a contract was not carried out; but before June 30 the as- relating to "net profits or dividends," and by sets so referred to were sold and transferred by this court in Hyatt v. Allen, 56 N. Y. 553; and the Railroad Company to a syndicate for the the principle stated was said to be founded in sum of $1,698,200, and this was paid to the good sense and applied in construing an agreeRailroad Company June 30, 1881. It amount- ment made August 11, 1871, which provided ed to $24.26 on each share of the capital stock that "All profits and dividends of and upon" of the Railroad Company, and on the same day certain "stock," up to the first of January, the Railroad Company on the report of its treas- 1872, should be paid to defendant. No diviurer that the amount of funds on hand " sub- dends were declared or distribution of profits ject to distribution was sufficient to authorize a made prior to that time, but in April, 1872, a dividend of $24.26 upon each share of the cap-dividend of $15 per share was declared and was ital stock of the company, adopted the follow-received by defendant. Plaintiff sued to reing resolution:

Resolved, That a dividend of $24.26 on each share of the capital stock of this company be, and the same is, hereby declared payable on and after Monday, the first day of August next, to the stockholders of record or their legal representatives. That the books of transfer be closed on the afternoon of the 30th instant, and be reopened on the morning of the second of August, 1881."

This dividend was numbered "91" in regular order, and was payable and paid at the time the usual quarterly dividends were paid. It appeared also that the assets, which formed the consideration of the payment by the syndicate, were accumulated net earnings, represented by cash or securities calling for cash.

The executors credited to income the above amount of $24.26 per share, making $121,300. It was objected, in behalf of the remaindermen, that the above credit to income was wrong, and that the sum of $121,300 should have gone into the principal of the estate.

The referee finds and reports that of this sum only $22,442.85 should be regarded as income . belonging to the life tenant, and the residue, $98,857.15 should be regarded as a portion of the corpus of the estate. To so much of this finding as apportions any part to principal, exception was taken in behalf of the life tenant. The referee made the apportionment in question by ascertaining how much was earned before and how much after the death of the tes

cover it, and a referee found that $250 of this dividend was earned between August 11, 1871, and July 1, 1872, and gave judgment for that amount. This court reversed the judgment, saying that there were profits earned by the corporation up to January 1, 1872, but they were not the profits of the stockholders in any legitimate sense. "There were no profits accruing to the stockholders until they were set apart by the corporation for their use."

The same principle is to be applied in determining the relative rights of a tenant for life and a remainderman. Payments in respect of profits accruing, and properly divisible as such are income and belong to the tenant for life, if the sum payable is ascertained and declared after the testator's death.

In Re Hopkins' Trust, L. R. 18 Eq. 696, a holder of shares bequeathed his personal estate to trustees in trust, to permit his wife to receive the dividends, interest and income thereof for her life, remainder over. He died in December, 1870. In January, 1873, an extraordinary dividend was declared on part of the shares for five years previously; and in July, 1873, a special dividend was declared on others for the half year previous. It was held that the life tenant was entitled to both; that although the company might have capitalized the earnings, they by resolution treated the money as dividends and not capital; and their decision was conclusive.

The same effect was given to the determina

tion of the company in characterizing its earnings in Re Barton's Trust, L. R. 5 Eq. 238, 245; and the rule is a reasonable and proper one, which limits the right of a stockholder to profits by the action of the managers of a corporation or company. It is their sole and exclusive duty to divide profits and declare dividends, whenever in their judgment the condition of the affairs of the corporation renders it expedient; and it would lead to great embarrassment and confusion if a court should undertake to interfere with their discretion so long as they do not go beyond the scope of their powers and authority.

In this case no portion of the earnings which entered into the dividend had been capitalized by the company, and therefore the inquiry when the profits were earned out of which it was to be paid was immaterial. It is not claimed that the declaration of the dividend as dividend from profits was ultra vires, and whenever earned, they were not profits until the directors so declared.

In Hyatt v. Allen, supra, it was thought by the learned judge who spoke for the court that "A gift of the profits and dividends of stock for life, would not be held to carry dividends declared after the death of the beneficiary although made from profits accrued during his life," making the act of the company conclusive and giving the earnings to the time of the declaration of the dividend.

capital or change its manner of investment, and if not accepted the life tenant could neither complain of the choice of the trustees nor in any way control their discretion. We think the value did not belong to her and that the decisions of the referee and surrogate in regard thereto were correct.

Fifth. The guardian of Marie Marshall (a person of unsound mind)' and the guardians for Kernochan (an infant) also appeal against: 1, allowance of compound interest on moneys found due to Mrs. Marshall from the testator; 2, commissions to Mrs. Marshall.

1. Both referee and surrogate were against the objectors as to the first. As to the second the referee sustained the objection, but the surrogate overruled it and allowed $15,000 to Mrs. Marshall, as commissions. As to the first: The testator had the principal moneys in hand for the purpose of investment and reinvestment, but mingled them with his own funds. It was not improper, therefore, under the circumstances of this case, to charge him with interest upon interest, as if received in the usual manner, for he forebore investment and used the moneys for his own convenience.

As to commissions: The referee found that Mrs. Marshall "duly qualified as executrix of the last will and testament of John R. Marshall, deceased, on the 8th day of October, 1881, and has been at all times since that date, ready and willing to take part, and has taken part in the management of the estate."

The objection raised in behalf of the remaindermen hangs upon the request of the testator contained in the will in these words:

Sproule v. Bouch, L. R. 29 Ch. Div. 635, 653, sustains this view. "The general principle applicable to these inquiries may in our opinion," says the court in that case, "be thus stated: When a testator or settlor directs or permits "It is also my request that all persons herein the subject of his disposition to remain as named as executors will consent to act as such shares or stock in a company which has the executors and trustees, and that each executor power either of distributing its profits as divi- and trustee other than my wife, do also redend, or of converting them into capital, and ceive and take the full rate of commissions prothe company validly exercised this power, such vided by law for each executor, intending thus exercise of its power is binding on all per- to provide suitable compensation for their servsons interested under him (the testator orices in and attention to the duties herein desettlor) in the shares, and consequently what volved upon them." is paid by the company as dividend goes to the tenant for life; and what is paid by the company to the shareholder as capital, or appropriated as an increase of the capital stock in the concern, inures to the benefit of all who are interested in the capital. In a word what the company says is income, shall be income, and what it says is capital, shall be capital."

I think therefore the executors properly carried the whole of this dividend, 91, to income; that the referee and surrogate erred in making an apportionment, and, therefore, that the exception of the life tenant should prevail.

Fourth. The executors classed as income certain options or privileges given by the various companies in 1881, to subscribe for stocks and bonds, in all of the value of $44,478. This was objected to by the remaindermen and the objection sustained by the referee and surrogate.

We think the intention of the testator was to exclude his wife from compensation. Substantially the whole income of the estate, the result of the management of the executors of whom she was one, is given to her, and it cannot be supposed that he intended she should also be paid for caring for it.

The decree of the Surrogate and judgment of the Supreme Court should be modified according to the above opinion and, as so modified, affirmed, without costs in this court to either party.

Ruger, Ch. J., Rapallo and Finch, JJ., concur; Earl, J., concurs except as to allowance of compound interest, and as to that item he dissents; Andrews, J., dissents as to the $24.26 a share, on the ground that it was in substance a closing out of the sale of the stock and a distribution of capital.

v.

John J. SPOWERS, Jr., Respt.

The privilege or option was to subscribe for and take at par one or more bonds or shares of De Lancey NICOLL, Receiver, etc., Appt., stock for a certain number of shares of stock already held by the estate. The right to subscribe belonged to the trust estate and accrued upon condition that the estate chose to pay for or purchase the bonds or stock. If the option was accepted, the purchase operated to increase the

1.

Under the Assignment Act of 1877, a general assignment for the benefit of creditors takes effect from the time of