The opinion of the Court was delivered by
Mr. Justice Gary.
This action involves the construction of the late Col. Andrew Wallace’s will, and was brought by the plaintiff, as trustee of Miss Eliza Wallace, for the purpose of determining the persons to whom her estate descended, and the manner in which it is to be distributed.
'.The facts are fully stated in the decree of his Honor, the Circuit Judge, which will be set out, in the report of the case.
1
The first question that will be considered is, whether there was error, on the part of his Honor, the Circuit Judge, in his ruling, that the accretion of the bank stock, as shown by the difference in value of the stock at the time of its acquisition by the trust estate, and the value at the time of. the death of the life tenant, due to accumulations in the interval of earnings, represented in part by extra shares declared as stock dividends and in part by increase in book value of the shares, from the retention of earnings undistributed, passed to the devisees of the life tenant and not to the remaindermen.
Where property is given in trust, the interest, income, or profits of which, is to be paid to one for life, and the principal paid to another, after the death of the Life tenant, questions of difficulty frequently arise in determining whether certain receipts and profits are to be regarded as income, which is to go to the life tenant, or as
corpus
'belonging to the remainderman.
As a rule the life tenant takes the interest on a trust fund from the death of a testator, but, of course, it is subject to testamentary provisions.
In the case of
Cobb
v.
Fant,
36 S. C. 1, 14 S. E. 959, a mother transferred bank stock to a trustee “to pay the dividend, income, issues, and profits thereof, as they may accrue, to me for and during the term of my natural life, and at my death to continue the collection of the same, and divide them, that is, the income and profits equally between my said daughters, for and during the terms of their natural lives,” with directions for sale and division of the stock among the issue of the daughters in remainder. At the time of the transfer, undivided profits had already accrued, and while dividends were declared, and received by the mother every year, other profits were made- and accumulated, until the bank closed its business and distributed its assets, when the accumulated profits amounted to 400 per cent, in all. It was held that the
cestui que trust
for
life, was entitled to all the profits which accumulated after the date of the deed, but that profits already accrued at that time, were a part of the
corpus
of the trust estate.
In that case 'his Honor, the 'Circuit Judge, decided, “that the accumulated dividends are certainly profits of the stocks, and the general rule in such case is, that the profits inure to the life tenant, and to the same purport are the terms of this trust. Although there is some conflict in the authorities upon the question, it appears to me, that upon principle and sound reason, plaintiff is entitled to the relief demanded.”
In reviewing this ruling the Supreme Court said: “It is admitted that the Circuit Judge announced the correct rule, as to all dividends declared, ordinary or extraordinary; but the trustee suggests that it does not apply to a case like this, where the extra profits have never been declared as dividends at all, so that they could not be paid over ‘as they accrued,’ but were retained in the bank, which, now closing-out, proposes to pay these accumulated profits to the stock holders, along with the original stock. He insists that in such case the rule is, that the enhanced price of stock, by reason of dividends earned, but not declared, will be considered as capital, and must be reinvested for the 'benefit of the remaindermen, and cites authorities for the doctrine. Upon general principles there may be some force in this view; 'but here the trust deed is the law of the case.
“The plaintiff had the right to make or not to make the deed as she thought best, and making it she had the right to frame the terms as she pleased; and she made them so strong that we do not feel authorized to disregard them, in favor of any supposed general rule of practice upon the subject. * * * We hold that all the issues and profits which accrued after the deed' was executed, belong to the plaintiff the
cestui que trust
for life.” The words in that case, which were construed to include the enhanced value of the shares of stock, are similar to those in the present case, and there is no difference in principle between the two cases.
But even if this was an open question, the authorities cited in the argument of the respondent’s attorneys show, that this rule is just and reasonable and should be followed.
The exceptions assigning error in this respect, are therefore overruled.
The next assignment of error on the part of the Circuit Judge, which will be considered, is as follows:
“That he erred in holding under the facts and circumstances of this case, that the life tenant was not estopped 'and has not waived any rights she may have had', to claim the accretions upon said bank stock; whereas, he should have held, that her action in placing these shares in the hands of her trustee, the plaintiff, as part of the trust estate, her silence, and the failure to claim the same during her lifetime, coupled with the facts disclosed by the letters and exhibits of the trustee to her, were sufficient to show knowledge, acquiescence, and waiver on her part, and prevents her from devising the same.”
For the reasons stated by the Circuit Judge this exception is overruled.
2
The last assignment of error is as follows: “That his Honor erred in holding and adjudging, that from the proceeds of sale under the Chandler mortgage, held by H. B. Wallace, trustee, the original sum loaned to the Chandlers, should be made good to the remain-dermen, before any part of the proceeds of such sale should go to the representatives of the estate of the life tenant; whereas, it is submitted, he should have found and adjudged, that the Chandler bond and mortgage for two thousand ($2,000) dollars was given to H. B. Wallace, trustee, to Secure twelve hundred and eighty-six ($1,2&6) dollars belonging to the trust estate, and seven hundred and fourteen ($714) dollars 'belonging to the individual estate of Miss Eliza Wallace, and so holding, should have adjudged that the said bond and mortgage were owned by the trust estate, and the individual estate of Miss Eliza Wallace, in
proportion to those amounts, respectively, and that the representatives of the estate of Miss Eliza Wallace, the life tenant, were entitled to share in all proceeds of sale of the mortgaged property, in proportion to the individual interest and ownership of Miss Eliza Wallace, in said bond and mortgage.”
In the case of
Hagan
v. Platt, 48 N. J. Eq. 206, 21 Atl. Rep.
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The opinion of the Court was delivered by
Mr. Justice Gary.
This action involves the construction of the late Col. Andrew Wallace’s will, and was brought by the plaintiff, as trustee of Miss Eliza Wallace, for the purpose of determining the persons to whom her estate descended, and the manner in which it is to be distributed.
'.The facts are fully stated in the decree of his Honor, the Circuit Judge, which will be set out, in the report of the case.
1
The first question that will be considered is, whether there was error, on the part of his Honor, the Circuit Judge, in his ruling, that the accretion of the bank stock, as shown by the difference in value of the stock at the time of its acquisition by the trust estate, and the value at the time of. the death of the life tenant, due to accumulations in the interval of earnings, represented in part by extra shares declared as stock dividends and in part by increase in book value of the shares, from the retention of earnings undistributed, passed to the devisees of the life tenant and not to the remaindermen.
Where property is given in trust, the interest, income, or profits of which, is to be paid to one for life, and the principal paid to another, after the death of the Life tenant, questions of difficulty frequently arise in determining whether certain receipts and profits are to be regarded as income, which is to go to the life tenant, or as
corpus
'belonging to the remainderman.
As a rule the life tenant takes the interest on a trust fund from the death of a testator, but, of course, it is subject to testamentary provisions.
In the case of
Cobb
v.
Fant,
36 S. C. 1, 14 S. E. 959, a mother transferred bank stock to a trustee “to pay the dividend, income, issues, and profits thereof, as they may accrue, to me for and during the term of my natural life, and at my death to continue the collection of the same, and divide them, that is, the income and profits equally between my said daughters, for and during the terms of their natural lives,” with directions for sale and division of the stock among the issue of the daughters in remainder. At the time of the transfer, undivided profits had already accrued, and while dividends were declared, and received by the mother every year, other profits were made- and accumulated, until the bank closed its business and distributed its assets, when the accumulated profits amounted to 400 per cent, in all. It was held that the
cestui que trust
for
life, was entitled to all the profits which accumulated after the date of the deed, but that profits already accrued at that time, were a part of the
corpus
of the trust estate.
In that case 'his Honor, the 'Circuit Judge, decided, “that the accumulated dividends are certainly profits of the stocks, and the general rule in such case is, that the profits inure to the life tenant, and to the same purport are the terms of this trust. Although there is some conflict in the authorities upon the question, it appears to me, that upon principle and sound reason, plaintiff is entitled to the relief demanded.”
In reviewing this ruling the Supreme Court said: “It is admitted that the Circuit Judge announced the correct rule, as to all dividends declared, ordinary or extraordinary; but the trustee suggests that it does not apply to a case like this, where the extra profits have never been declared as dividends at all, so that they could not be paid over ‘as they accrued,’ but were retained in the bank, which, now closing-out, proposes to pay these accumulated profits to the stock holders, along with the original stock. He insists that in such case the rule is, that the enhanced price of stock, by reason of dividends earned, but not declared, will be considered as capital, and must be reinvested for the 'benefit of the remaindermen, and cites authorities for the doctrine. Upon general principles there may be some force in this view; 'but here the trust deed is the law of the case.
“The plaintiff had the right to make or not to make the deed as she thought best, and making it she had the right to frame the terms as she pleased; and she made them so strong that we do not feel authorized to disregard them, in favor of any supposed general rule of practice upon the subject. * * * We hold that all the issues and profits which accrued after the deed' was executed, belong to the plaintiff the
cestui que trust
for life.” The words in that case, which were construed to include the enhanced value of the shares of stock, are similar to those in the present case, and there is no difference in principle between the two cases.
But even if this was an open question, the authorities cited in the argument of the respondent’s attorneys show, that this rule is just and reasonable and should be followed.
The exceptions assigning error in this respect, are therefore overruled.
The next assignment of error on the part of the Circuit Judge, which will be considered, is as follows:
“That he erred in holding under the facts and circumstances of this case, that the life tenant was not estopped 'and has not waived any rights she may have had', to claim the accretions upon said bank stock; whereas, he should have held, that her action in placing these shares in the hands of her trustee, the plaintiff, as part of the trust estate, her silence, and the failure to claim the same during her lifetime, coupled with the facts disclosed by the letters and exhibits of the trustee to her, were sufficient to show knowledge, acquiescence, and waiver on her part, and prevents her from devising the same.”
For the reasons stated by the Circuit Judge this exception is overruled.
2
The last assignment of error is as follows: “That his Honor erred in holding and adjudging, that from the proceeds of sale under the Chandler mortgage, held by H. B. Wallace, trustee, the original sum loaned to the Chandlers, should be made good to the remain-dermen, before any part of the proceeds of such sale should go to the representatives of the estate of the life tenant; whereas, it is submitted, he should have found and adjudged, that the Chandler bond and mortgage for two thousand ($2,000) dollars was given to H. B. Wallace, trustee, to Secure twelve hundred and eighty-six ($1,2&6) dollars belonging to the trust estate, and seven hundred and fourteen ($714) dollars 'belonging to the individual estate of Miss Eliza Wallace, and so holding, should have adjudged that the said bond and mortgage were owned by the trust estate, and the individual estate of Miss Eliza Wallace, in
proportion to those amounts, respectively, and that the representatives of the estate of Miss Eliza Wallace, the life tenant, were entitled to share in all proceeds of sale of the mortgaged property, in proportion to the individual interest and ownership of Miss Eliza Wallace, in said bond and mortgage.”
In the case of
Hagan
v. Platt, 48 N. J. Eq. 206, 21 Atl. Rep. 860, the rule is thus correctly stated, in the syllabus of the case by the Court: “When a fund is held in trust, for the benefit of one person for life, and to go to another in remainder, and a loss of a part of the fund occurs, arising out of insufficient security of a particular investment, such loss is to be apportioned between the tenant for life and remainderman, in the proportion which the principal sum involved in the insufficient security, bears to the interest due upon it at the time when the security is realized upon, and the amount of the loss determined.”
In the case of
In re Tuttle,
49 N. J. Eq., 259, 24 Atl. 1, the principle is thus stated: “The remaindermen claim that as it is less than the principal invested1, it all belongs to them, that the responsibility for all loss to the fund must be charged to the life tenant. This insistment throws the responsibility for the management of the trust upon the life tenant, and that is not right. If the trustee can be charged with negligence or bad faith, he should be held responsible, but, if he be not so chargeable, and a loss happens from causes over which neither he nor the life tenant nor the remaindermen had control, it should not fall upon the life tenant alone. The trust does not exempt the remaindermen from possible perils through failure of investments, and throw these perils entirely upon the life tenant.
“The trust is instituted, so that a person impartial between the life tenant and remaindermen, may put the fund in a situation where it will not only yield income, but also be safe. If that situation fails, the loss should be equally
apportioned, between the innocent life tenant and remain-dermen, according to their respective rights, at the time the loss is ascertained, and the apportionment of it is made.”
This rule was also followed in the case of
Parker
v.
Seeley,
56 N. J. 110, 38 Atl. 280.
In
Cox
v.
Cox,
L. R. 8 Eq. 343, where a similar question was involved, Sir William M. James, V. C., said: “The true principle in all these cases is, that neither the tenant for life nor the remainderman, is to gain an advantage over the other, neither is to suffer more damage in proportion to his estate and interest than the other suffers, from the default of the obligor. The two must share the loss in the same way as the)'’ would have shared it, had it occurred when they first became entitled in possession to the fund.”
Furthermore, in considering the first question presented by the exceptions, we announced the conclusion that the life tenant was entitled to the income, interest and profits on the shares of stock, even when they arose from the enhanced value of the corpus, for the reason that such was the intention of the testator, as shown by the language of the will. Therefore, the income, interest, and profits cannot be taken from the estate of the life tenant, and used for the benefit of the remaindermen, without violating the provisions of the will.
This exception is sustained.
It is the judgment of this Court that the judgment of the Circuit Court be modified, in accordance with the principles herein announced, and-, that in all other respects it be affirmed.