Opinion,
Me. Justice Williams:
The contest in this case is between the life-tenant and the remainderman, and the question is whether the fund in the hands of the trustees is income or principal. It appears that George L. Oliver was one of the persons who organized the Metalline Land Company of Lake Superior, and that he remained a member of the company until his death in 1886. This company was organized on the joint-stock plan, with a capital divided into twenty thousand shares having a nominal or face value of five dollars each. At the time of his death Oliver held five thousand five hundred and eighty-two shares. By his will he made some specific gifts, and placed the residue of his large estate in the hands of trustees with directions to pay the net income derived therefrom to his daughter, during her life, and the principal, after her decease, to the Merchants’ Fund Association for certain charitable uses. The Metalline [58]*58Land Company owned about six hundred acres of land when Oliver died, and two years later sold forty acres of it for a half million dollars. The larger part of this price has been divided by the company among its stockholders, and the dividend accruing to the Oliver stock is over one hundred thousand dollars. The daughter claims it as income; the appellant claims it as principal. To which of them should it be awarded ?
Before determining this question it will be best to consider some preliminary ones that lead up naturally to it. These are, first, what is the legal status of the company ? Second, what is the relation of the stockholders to the company? Third, what is the interest of a stockholder in the company property ?
The company is unincorporated and is a partnership organized on the joint-stock plan by the contract entered into by its members. This contract designates and describes the business to be done, the capital to be used, and how it is to be paid in by the members, and limits the number of persons by whom the affairs of the company are to be conducted. It provides that the interest of each member, in the joint fund, is to be measured by his shares of stock, which he may sell and transfer without consultation with his associates and without impairing the power of the trustees or the existence of the company. The partnership thus formed, whatever the liability of its members to third persons may be, is an artificial juridical person capable of acquiring, holding, and selling property. Ordinarily, a partnership can convey its real estate only by the deed of all its members, but this company gave to its trustees power to buy, encumber, and sell land for it in their own names. It was a dealer in land as a commodity, using the names of its trustees in all its transactions. The principle that an unincorporated company or firm may deal in land, and that where it does so it holds the title, and may encumber or convey it, was settled in Brady v. Colhoun, 1 P. & W. 140. The relation of the stockholders to the company is also settled largely by the articles of agreement. They contribute the capital, select the trustees who are to use and invest it, and are entitled to a distributive share of the profits made in the business. As between themselves, however it maj1' be as to others, they are liable for losses in proportion to their stock. They have, however, no power to use the name of the company, to interfere [59]*59-with its business, or to bind it in any manner. This power they have voluntarily surrendered, and have committed it to the trustees selected by them as the agents and representatives of che company; so that the firm or company speaks, not through its members as such, but through its trustees. These are liable for their fidelity to the trust, and for all profits made in the business, in substantially the same manner that a board of directors is liable to the stockholders in an incorporated company. In partnerships of the ordinary character, each partner is the agent of his firm, has personal contact with and control over its affairs, and the right to possession in common with his copartners of the firm property; but, under the agreement organizing the Metalline Land Company, the relation of the individual member to the firm was changed, and his rights reduced so that the stockholder had only a right to participate in the election of trustees, and to receive his share of the money made.
The interest of the stockholder in the company property is controlled by his relation to the company under his agreement and by the nature of the business done. The object in buying was not to mine or operate in any other manner, but to sell again so as to make gain by the purchase and sale of land, and the articles provided for the division of the profits made by such purchase and sale among the stockholders. The interest of each member was therefore an interest in the profits made. He had no title to the land bought by the trustees for the company, as a tenant in common or otherwise, and could neither convey nor encumber it. His interest in it was personal estate and the extent of that interest was shown by his certificates of stock: Kramer v. Arthurs, 7 Pa. 165; Brady v. Colhoun, supra. The company was the real owner of the land, and the trustees acting for it could alone encumber or convey it. The stockholder had, as a partner has, a resulting interest in the business and assets of the company, which can be legally ascertained only by an account: Meily v. Wood, 71 Pa. 488. The purchase of real estate by a firm or company dealing in it, is, as between itself and its members, a conversion of it into personalty, and the levy and sale of the land upon a judgment against an individual member of the firm passes no interest or estate in it to the purchaser. The creditor of one partner can acquire by levy and sale of his debtor’s interest no greater right than his [60]*60debtor held, viz., the right to an account and to a distributive share of what may remain after the payment of the firm debts on final settlement: Ebbert’s App., 70 Pa. 79 ; West Hickory M. Ass’n v. Reed, 80 Pa. 88; Meily v. Wood, 71 Pa. 488. The interest of Oliver as a stockholder in the land company was, therefore, not that of a tenant in common of its lands, but that of one entitled to share in the profits of its business. The trustees under his will succeed him as holders of his shares, and their interest as such holders is neither greater nor less than his interest was while he was living.
The company was not dissolved by Oliver’s death, and has not yet been dissolved. It has done but little business for several years, but it has paid the taxes on its lands and kept up its own organization, and still holds undisposed of nearly six hundred acres in the names of its trustees. The relation between it and the holders of its stock is, therefore, the same since Oliver’s death as before. He had no title to the lands of the company while he lived, and none could pass from him to the trustees under his will by reason of his death. His interest as a stockholder was personal estate in his hands, and it is personal estate now in the hands of his representatives. The dividend made by the company out of the proceeds of the forty acres has the same character, and is governed by the same rules as though it had been made in his lifetime. It represents part of the difference between the cost of the land sold, including taxes and expenses, and the price received for it. That difference is the profit made by means of the purchase and sale of the land, which it is the duty of the trustees to divide among the stockholders.
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Opinion,
Me. Justice Williams:
The contest in this case is between the life-tenant and the remainderman, and the question is whether the fund in the hands of the trustees is income or principal. It appears that George L. Oliver was one of the persons who organized the Metalline Land Company of Lake Superior, and that he remained a member of the company until his death in 1886. This company was organized on the joint-stock plan, with a capital divided into twenty thousand shares having a nominal or face value of five dollars each. At the time of his death Oliver held five thousand five hundred and eighty-two shares. By his will he made some specific gifts, and placed the residue of his large estate in the hands of trustees with directions to pay the net income derived therefrom to his daughter, during her life, and the principal, after her decease, to the Merchants’ Fund Association for certain charitable uses. The Metalline [58]*58Land Company owned about six hundred acres of land when Oliver died, and two years later sold forty acres of it for a half million dollars. The larger part of this price has been divided by the company among its stockholders, and the dividend accruing to the Oliver stock is over one hundred thousand dollars. The daughter claims it as income; the appellant claims it as principal. To which of them should it be awarded ?
Before determining this question it will be best to consider some preliminary ones that lead up naturally to it. These are, first, what is the legal status of the company ? Second, what is the relation of the stockholders to the company? Third, what is the interest of a stockholder in the company property ?
The company is unincorporated and is a partnership organized on the joint-stock plan by the contract entered into by its members. This contract designates and describes the business to be done, the capital to be used, and how it is to be paid in by the members, and limits the number of persons by whom the affairs of the company are to be conducted. It provides that the interest of each member, in the joint fund, is to be measured by his shares of stock, which he may sell and transfer without consultation with his associates and without impairing the power of the trustees or the existence of the company. The partnership thus formed, whatever the liability of its members to third persons may be, is an artificial juridical person capable of acquiring, holding, and selling property. Ordinarily, a partnership can convey its real estate only by the deed of all its members, but this company gave to its trustees power to buy, encumber, and sell land for it in their own names. It was a dealer in land as a commodity, using the names of its trustees in all its transactions. The principle that an unincorporated company or firm may deal in land, and that where it does so it holds the title, and may encumber or convey it, was settled in Brady v. Colhoun, 1 P. & W. 140. The relation of the stockholders to the company is also settled largely by the articles of agreement. They contribute the capital, select the trustees who are to use and invest it, and are entitled to a distributive share of the profits made in the business. As between themselves, however it maj1' be as to others, they are liable for losses in proportion to their stock. They have, however, no power to use the name of the company, to interfere [59]*59-with its business, or to bind it in any manner. This power they have voluntarily surrendered, and have committed it to the trustees selected by them as the agents and representatives of che company; so that the firm or company speaks, not through its members as such, but through its trustees. These are liable for their fidelity to the trust, and for all profits made in the business, in substantially the same manner that a board of directors is liable to the stockholders in an incorporated company. In partnerships of the ordinary character, each partner is the agent of his firm, has personal contact with and control over its affairs, and the right to possession in common with his copartners of the firm property; but, under the agreement organizing the Metalline Land Company, the relation of the individual member to the firm was changed, and his rights reduced so that the stockholder had only a right to participate in the election of trustees, and to receive his share of the money made.
The interest of the stockholder in the company property is controlled by his relation to the company under his agreement and by the nature of the business done. The object in buying was not to mine or operate in any other manner, but to sell again so as to make gain by the purchase and sale of land, and the articles provided for the division of the profits made by such purchase and sale among the stockholders. The interest of each member was therefore an interest in the profits made. He had no title to the land bought by the trustees for the company, as a tenant in common or otherwise, and could neither convey nor encumber it. His interest in it was personal estate and the extent of that interest was shown by his certificates of stock: Kramer v. Arthurs, 7 Pa. 165; Brady v. Colhoun, supra. The company was the real owner of the land, and the trustees acting for it could alone encumber or convey it. The stockholder had, as a partner has, a resulting interest in the business and assets of the company, which can be legally ascertained only by an account: Meily v. Wood, 71 Pa. 488. The purchase of real estate by a firm or company dealing in it, is, as between itself and its members, a conversion of it into personalty, and the levy and sale of the land upon a judgment against an individual member of the firm passes no interest or estate in it to the purchaser. The creditor of one partner can acquire by levy and sale of his debtor’s interest no greater right than his [60]*60debtor held, viz., the right to an account and to a distributive share of what may remain after the payment of the firm debts on final settlement: Ebbert’s App., 70 Pa. 79 ; West Hickory M. Ass’n v. Reed, 80 Pa. 88; Meily v. Wood, 71 Pa. 488. The interest of Oliver as a stockholder in the land company was, therefore, not that of a tenant in common of its lands, but that of one entitled to share in the profits of its business. The trustees under his will succeed him as holders of his shares, and their interest as such holders is neither greater nor less than his interest was while he was living.
The company was not dissolved by Oliver’s death, and has not yet been dissolved. It has done but little business for several years, but it has paid the taxes on its lands and kept up its own organization, and still holds undisposed of nearly six hundred acres in the names of its trustees. The relation between it and the holders of its stock is, therefore, the same since Oliver’s death as before. He had no title to the lands of the company while he lived, and none could pass from him to the trustees under his will by reason of his death. His interest as a stockholder was personal estate in his hands, and it is personal estate now in the hands of his representatives. The dividend made by the company out of the proceeds of the forty acres has the same character, and is governed by the same rules as though it had been made in his lifetime. It represents part of the difference between the cost of the land sold, including taxes and expenses, and the price received for it. That difference is the profit made by means of the purchase and sale of the land, which it is the duty of the trustees to divide among the stockholders. It is clear, therefore, that this dividend is personal estate, and represents gain or profit made in the proper business of the land company, that of buying land for purposes of sale, and selling it with a view to make gain for the stockholders. The will directs the payment of the net income from his estate, real and personal, to his daughter, and as this dividend represents income, it goes to the daughter and not to the remainderman. The shares are part of the residuary estate and belong to appellant. The profit accruing from the sale of lands is income from the investment in the stock of the land company, and if made since the death of Oliver, is not to be distinguished from income derived from any other source.
[61]*61This leads us to the only other question, which is, When was the profit out of which this dividend is declared earned? It is urged that it has not been earned since Oliver’s death, and that for that reason, admitting it to represent profits, it belongs to the remainderman under the rule in Earp’s App., 28 Pa. 368. The argument is that the phenomenal advance in the price of this piece of land is not due to anything done by the land company, by way of development or otherwise, but to the presence of a rich deposit of copper ore which was in place when Oliver died. For this reason, it is said, the real value of the land has not changed; nothing, therefore, has been gained by reason of anything done by the company.
The reply to this is that the object of forming the company was to buy lands in advance of any general knowledge of their mineral value, and, by means of openings or borings, develop their true value and then sell. Whether the work which demonstrated the existence of the deposit of copper on the forty acres was the work done by it or by its neighbors, is unimportant. The mineral value was made apparent in either case, and a sale at a greatly -increased price made possible. The increased price came, not from a change in the actual value, but from a correct knowledge of that value which increased the market price. This knowledge was acquired, and the price advanced in consequence of it, after Oliver’s death. When he died the stock was thought to be of little value, and the lands could not have been sold at a profit. There were, therefore, no accrued or undivided profits to pass to the remainderman, and the wonderful advance made since his death has been earned, within the meaning of the rule in Earp’s Appeal, by means of developments made in the neighborhood since the title was vested in the trustees named in his will. Earp’s Appeal is, therefore, in harmony with our holding in this case. The same is true of Wiltbank’s App., 64 Pa. 256, and Moss’s App., 83 Pa. 264. In the latter case, the question was over the character of the option to subscribe for new shares of stock, belonging to existing stockholders by virtue of their ownership; and this court held that the option did not represent profits earned, but the right of the holder to increase his investment with a view to enlarged operations and greater profits.to be earned thereby in the future. It belonged, therefore, to the owner of the stock and not to the owner of the income.
[62]*62The circumstance that the entire block of shares in the land company was appraised at five dollars, is without significance. It is now clear that the shares are worth all that has been invested in them, and that the remainderman is many thousands of dollars better off than was supposed when the inventory was taken, but the net income is not his; that goes to the daughter.
The decree of the court below is affirmed, and the costs of this appeal are to be paid by the appellant.