Gray, C. J.
Money earned by a corporation is corporate prop erty, and not the separate property of the stockholders, unless and until distributed among them by the corporation. In the absence of any restraining statute, the corporation may treat it and deal with it, either as an increase of its property or as profits of its business. So long as the corporation holds it as part of the corporate property, it is capital of the corporation, and the interest therein, represented by each share, is capital and not income of that share, as between the tenant for life and remainderman, legal or equitable, thereof. When a distribution of such earnings is made by the corporation among its shareholders, the question whether such distribution is an apportionment of additional stock, or a division of profits, depends upon the substance and intent of the action of the corporation, as shown by its votes. It would be impracticable for the courts, in determining the comparative rights of different persons in a particular share of stock, to go behind the votes of the corporation and its directors, and investigate the accounts and affairs of the corporation, in order to ascertain how the corporation acquired the funds out of which the dividend was declared. Minot v. Paine, 99 Mass. 101.
The English judges, though varying in opinion upon the effect of particular votes declaring extraordinary dividends, have all agreed that the determination of each case must turn upon the legal construction of the vote of the corporation. In the earliest cases on the subject, Lord Loughborough and Lord Eldon, each sitting as chancellor, as well as the House of Lords acting upon their joint advice, declined to enter upon an inquiry to ascertain when each part of the profits had arisen, or, in the words of Lord Loughborough, “ hunt it back.” Brander v. Brander, 4 Ves. 800, 801. Irving v. Houstoun, 4 Paton’s House of Lords Cases, 521, 531. Paris v. Paris, 10 Ves. 185, 190. Barclay v. Wainewright, 14 Ves. 66, 78. In Price v. Anderson, 15 Sim. 473, 477, Vice Chancellor Shadwell said : “ The question must be determined by the mode in which the company have dealt with their profits.” And in one of the latest cases, Vice Chancellor Wood (since Lord Chancellor Hatherley) expressed the same rule more fully, as follows : “ As long as the com paay have the profit of the half year in their hands, it is foi [475]*475them to say what they wiB do with it, subject, of course, to the rules and regulations of the company." “ The dividend to which a tenant for life is entitled is the dividend which the company chooses to declare.” “Where the company, by a majority of their votes, have said that they wiB not divide this money, but turn it aB into capital, capital it must be from that time." In re Barton's Trust, L. R. 5 Eq. 238, 243-245.
By the law of this Commonwealth, as declared by this court, a dividend made in new stock is ordinarily to be deemed capital. Thus when the vote of the corporation is to distribute to each stockholder a certain number of additional shares in the corporation in proportion to the amount of shares already held by him, the shares so distributed are received by the stockholder as capital and not as income, although the means of making the dividend are derived from the net earnings of the corporation. Minot v. Paine, 99 Mass. 101. And when a corporation votes to increase its capital stock and to aRow the holders of the old shares to subscribe for the new ones pro rata, and that any new shares not so taken shall be sold by the directors and the premiums realized by the sale paid over to the parties entitled to the right of subscribing for the shares, the sum received by the directors upon such a sale is capital to the stockholder. Atkins v. Albree, 12 Allen, 359.
Even when, at the time of the creation of new shares to be distributed among the old stockholders, a dividend is declared in cash to the same amount, the thing received by each stockholder, whether in stock or in cash, is to be deemed capital and not income, if such appears upon a view of the whole action of the corporation to be the real character of the transaction. Thus, if a corporation votes to create new shares, and at the same time declares a dividend payable in cash to the stockholders, and authorizes its treasurer to receive this dividend in payment for such shares, and to issue certificates of stock in return, the dividend is, as between the owners of successive interests in the shares, capital, and not income, although the corporation is not allowed, by the law of the state in which it is established, to make stock dividends. Daland v. Williams, 101 Mass. 571. So where a corporation voted to create new shares, to be issued and disposed of as the directors should deem proper; and the directors [476]*476voted to offer to eacn stockholder the right to take at par twenty per cent, of a new share for each old share held by him, and that if any one should not avail himself of his right, it should be at the disposal of the directors ; and the directors on the same day declared a dividend of twenty per cent, in cash derivable from the shares which the stockholders should respectively pay for the new shares taken by them under the preceding vote; it was adj udged that a trustee holding stock in the corporation, whether he received the amount of his dividend in stock, or suffered the stock to which he was entitled to be sold by the directors and received the dividend in cash, took it, in either alternative, as capital and not as income. Leland v. Hayden, 102 Mass. 542.
On the other hand, dividends which appear to have been intended by the corporation as dividends of profits, and not as a distribution of capital stock, are to be deemed income of the shares on which they are paid. Thus dividends made in cash by a manufacturing corporation, though made out of money received from the sale of patent rights and a large amount of castings, are income and not capital. Harvard College v. Amory, 9 Pick. 446. So cash dividends made by a land company, whose business is to sell lands, out of sales of land which is the corporate property, have been held, in the absence of any controlling facts, to be income and not capital of a trust fund created by the will of a stockholder. Balch v. Hallet, 10 Gray, 402. Reed v. Head, 6 Allen, 174. And where a dividend, declared to be made out of the earnings of the corporation, is not made in the form of cash, but in old shares of the corporation .itself, in which it has invested the amount, it is income of the shares previously held by the stockholders.' Leland v. Hayden, 102 Mass. 542.
In the case at bar, the material facts, by the application to which of the rules already stated the decision must be governed, are as follows: On April 14,1878, the corporation voted that its capital stock be increased by one half, that each stockholder of that date be entitled to one new share for every two old shares, that the new stock be taken and paid, for on or before May 15, and that the directors should do whatever was required by law for this purpose. On the day on which this vote was passed, the directors voted “ that an extra and special dividend of fifty dollars a share be paid or or before May 15, 1878, to holders of the old stock as it stood [477]*477April 14, 1873, the dividend to be applied by the stockholders in payment for the new stock created; ” and that the treasurer should not issue the new stock to other than the old stockholders without further action of the directors.
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Gray, C. J.
Money earned by a corporation is corporate prop erty, and not the separate property of the stockholders, unless and until distributed among them by the corporation. In the absence of any restraining statute, the corporation may treat it and deal with it, either as an increase of its property or as profits of its business. So long as the corporation holds it as part of the corporate property, it is capital of the corporation, and the interest therein, represented by each share, is capital and not income of that share, as between the tenant for life and remainderman, legal or equitable, thereof. When a distribution of such earnings is made by the corporation among its shareholders, the question whether such distribution is an apportionment of additional stock, or a division of profits, depends upon the substance and intent of the action of the corporation, as shown by its votes. It would be impracticable for the courts, in determining the comparative rights of different persons in a particular share of stock, to go behind the votes of the corporation and its directors, and investigate the accounts and affairs of the corporation, in order to ascertain how the corporation acquired the funds out of which the dividend was declared. Minot v. Paine, 99 Mass. 101.
The English judges, though varying in opinion upon the effect of particular votes declaring extraordinary dividends, have all agreed that the determination of each case must turn upon the legal construction of the vote of the corporation. In the earliest cases on the subject, Lord Loughborough and Lord Eldon, each sitting as chancellor, as well as the House of Lords acting upon their joint advice, declined to enter upon an inquiry to ascertain when each part of the profits had arisen, or, in the words of Lord Loughborough, “ hunt it back.” Brander v. Brander, 4 Ves. 800, 801. Irving v. Houstoun, 4 Paton’s House of Lords Cases, 521, 531. Paris v. Paris, 10 Ves. 185, 190. Barclay v. Wainewright, 14 Ves. 66, 78. In Price v. Anderson, 15 Sim. 473, 477, Vice Chancellor Shadwell said : “ The question must be determined by the mode in which the company have dealt with their profits.” And in one of the latest cases, Vice Chancellor Wood (since Lord Chancellor Hatherley) expressed the same rule more fully, as follows : “ As long as the com paay have the profit of the half year in their hands, it is foi [475]*475them to say what they wiB do with it, subject, of course, to the rules and regulations of the company." “ The dividend to which a tenant for life is entitled is the dividend which the company chooses to declare.” “Where the company, by a majority of their votes, have said that they wiB not divide this money, but turn it aB into capital, capital it must be from that time." In re Barton's Trust, L. R. 5 Eq. 238, 243-245.
By the law of this Commonwealth, as declared by this court, a dividend made in new stock is ordinarily to be deemed capital. Thus when the vote of the corporation is to distribute to each stockholder a certain number of additional shares in the corporation in proportion to the amount of shares already held by him, the shares so distributed are received by the stockholder as capital and not as income, although the means of making the dividend are derived from the net earnings of the corporation. Minot v. Paine, 99 Mass. 101. And when a corporation votes to increase its capital stock and to aRow the holders of the old shares to subscribe for the new ones pro rata, and that any new shares not so taken shall be sold by the directors and the premiums realized by the sale paid over to the parties entitled to the right of subscribing for the shares, the sum received by the directors upon such a sale is capital to the stockholder. Atkins v. Albree, 12 Allen, 359.
Even when, at the time of the creation of new shares to be distributed among the old stockholders, a dividend is declared in cash to the same amount, the thing received by each stockholder, whether in stock or in cash, is to be deemed capital and not income, if such appears upon a view of the whole action of the corporation to be the real character of the transaction. Thus, if a corporation votes to create new shares, and at the same time declares a dividend payable in cash to the stockholders, and authorizes its treasurer to receive this dividend in payment for such shares, and to issue certificates of stock in return, the dividend is, as between the owners of successive interests in the shares, capital, and not income, although the corporation is not allowed, by the law of the state in which it is established, to make stock dividends. Daland v. Williams, 101 Mass. 571. So where a corporation voted to create new shares, to be issued and disposed of as the directors should deem proper; and the directors [476]*476voted to offer to eacn stockholder the right to take at par twenty per cent, of a new share for each old share held by him, and that if any one should not avail himself of his right, it should be at the disposal of the directors ; and the directors on the same day declared a dividend of twenty per cent, in cash derivable from the shares which the stockholders should respectively pay for the new shares taken by them under the preceding vote; it was adj udged that a trustee holding stock in the corporation, whether he received the amount of his dividend in stock, or suffered the stock to which he was entitled to be sold by the directors and received the dividend in cash, took it, in either alternative, as capital and not as income. Leland v. Hayden, 102 Mass. 542.
On the other hand, dividends which appear to have been intended by the corporation as dividends of profits, and not as a distribution of capital stock, are to be deemed income of the shares on which they are paid. Thus dividends made in cash by a manufacturing corporation, though made out of money received from the sale of patent rights and a large amount of castings, are income and not capital. Harvard College v. Amory, 9 Pick. 446. So cash dividends made by a land company, whose business is to sell lands, out of sales of land which is the corporate property, have been held, in the absence of any controlling facts, to be income and not capital of a trust fund created by the will of a stockholder. Balch v. Hallet, 10 Gray, 402. Reed v. Head, 6 Allen, 174. And where a dividend, declared to be made out of the earnings of the corporation, is not made in the form of cash, but in old shares of the corporation .itself, in which it has invested the amount, it is income of the shares previously held by the stockholders.' Leland v. Hayden, 102 Mass. 542.
In the case at bar, the material facts, by the application to which of the rules already stated the decision must be governed, are as follows: On April 14,1878, the corporation voted that its capital stock be increased by one half, that each stockholder of that date be entitled to one new share for every two old shares, that the new stock be taken and paid, for on or before May 15, and that the directors should do whatever was required by law for this purpose. On the day on which this vote was passed, the directors voted “ that an extra and special dividend of fifty dollars a share be paid or or before May 15, 1878, to holders of the old stock as it stood [477]*477April 14, 1873, the dividend to be applied by the stockholders in payment for the new stock created; ” and that the treasurer should not issue the new stock to other than the old stockholders without further action of the directors. On the same day, the treasurer issued a notice to each stockholder, stating that the corporation had increased its capital stock; that each stockholder was entitled to one share of the new stock for every two of the old; and that an extra dividend had been ordered of fifty per cent, on the old stock, which was to be taken in payment of the new stock , and ending thus : “ Please call, take the stock and dividend, and pay for the same.” Every stockholder received from the officers of the corporation a check for the amount of his dividend, signed a receipt therefor, and immediately exchanged the check for a certificate of the shares apportioned to the stock held by him. After this use had been made of the checks, they were all destroyed and none of them ever presented at the bank. Mrs. Hubbell, who held shares as the executrix of her husband’s will, and was entitled by that will to the income thereof during her life, being absent in Europe, the acts in her behalf were done by her attorney, communicated by him to her upon her return, and silently acquiesced in by her.
Upon these facts, it is clear that the intention of the corporation and of its directors and officers was to make a stock dividend, and a stock dividend only. The vote of the corporation was to increase the whole number of shares, and to allow each stockholder to increase the number of shares held by him, by one half; and commanded the directors to do whatever was required by law for this purpose. The vote of the directors, passed on the same day. declared that a dividend in cash should be payable to each stockholder at the time within which he was allowed by the vote of the corporation to take his new shares, and should be applied by him in payment for those shares; and directed the treasurer to issue such shares to old stockholders only. The notice issued by the treasurer to the stockholders, and the subsequent dealings between each stockholder and the officers of the corporation, proceeded upon the same theory, and are inconsistent with any other. No money was ever paid, or intended to be paid, by the corporation to any stockholder. The declaring of the dividend in cash, and the giving of checks therefor, were mere forms [478]*478adopted to carry out the scheme of creating new stock and distributing it among the stockholders.
The St. of 1870, c. 179, appears to us to have no bearing upon this case, except as affording an explanation of the circuitous corase followed by the corporation to attain its end. If the issue of new shares was void, because of non-compliance with the provisions of the statute, the vote to pay a dividend in cash to each stockholder for the sole purpose of being applied to take up such shares would fall with it; for it could not be held that a separate dividend of profits was made, against the manifest intent and purpose of the whole transaction.
It follows that neither the proportion nor the nature of each stockholder’s interest in the corporate, property is affected by the question of the validity or invalidity of the new issue; and that in either alternative the new shares are not to be deemed income of the old shares left by Mr. Hubbell at his death, and as such belonging under his will to his widow. The case falls within the decision in Daland v. Williams, 101 Mass. 571, already cited.
Decree accordingly.