, The question hero is whether certain corporate-stocks belong t© the life tenant or to the remaindermen! under thé following • clause of; the wifi of Eugene La Grove,; deceased
*313“ Fourth. All the rest, residue and remainder of my property and estate, real, personal and mixed of every description and wheresoever situated, of which I may die seized or possessed or to which I may be entitled at the time of my decease, including all lapsed legacies and any part of my estate which may not have been effectually devised or bequeathed, I give, devise and bequeath to my Executor and Trustee hereinafter named in trust, to hold said property and estate and invest and re-invest the same and to collect the rents, issues, income and profits therefrom, and to pay the net rents, issues, income, and profits therefrom, quarterly to my wife, Ivy Lee La Grove from the time of my death during the term of her natural life, and, upon her death, to divide the principal into as many shares as my wife shall leave children by our marriage her surviving, and to hold one of such shares to the use of each such child during the time of the natural life of the youngest of such children of our marriage who may be living at the time of my death, appropriating so much of the income thereof as such Trustee may deem desirable, to the support and maintenance and education of the several children respectively, and accumulating any surplus for his or her benefit during his or her minority, if this Trust shall so long exist, and on his or her arriving at majority to pay all accumulations of income to such child. On the death of the youngest child of our marriage who shall then be living at the time of my death, the principal of such funds shall be paid over to the child for whose use', the same shall be held respectively, but in the event that my said wife shall die leaving no issue her surviving, then at her death, the principal so set apart for her benefit, shall be paid to such person or persons as would be entitled to share in her estate were she to die intestate under the statute of distribution in force at the time of her death in the State of New York.”
The testator died October 4, 1908, without issue, and the owner of 3,000 shares of stock in the Singer Manufacturing Company, a corporation under the laws of the State of New Jersey. ;
The 5th clause of the will requests that none of this stock be sold, unless the remainder of his property should be insufficient to pay debts,, etc..,, or the executor should elect to sell it and *314.invest the proceeds in other specified security. The executor sold 80 shares March 31, 1910, and 50 February 1, 1912, in the course of administering the estate, thus leaving 2,870 shares of the original stock in his hands.
On June 2, 1910, the company adopted the following resolution:
“Whereas, this corporation now has a capital stock of thirty millions of dollars issued and outstanding, and a surplus of thirty millions of dollars and upwards, and whereas, it is desirable that said surplus to the extent of at least thirty millions of dollars, should be retained by the corporation as working capital, and to that end that its capital stock should be increased to sixty millions of dollars, and a stock dividend of thirty millions of dollars be declared out of such increase, therefore be it resolved:
“ First. That it is advisable to increase the capital stock of this corporation to sixty millions of dollars, and
“ Second. That it is advisable to declare and-pay to the stockholders of the corporation, a stock dividend of thirty millions of dollars out of such increase of stock.
“And the board does hereby call a special meeting of the stockholders to be held at the company’s office, at the Singer factory, in the city of Elizabeth on the sixteenth day of June, A. D., 1910, at three o’clock in the afternoon to take action upon the above resolution and decide: whether or not such increase, of stock shall be made.”
This was followed by other resolutions of the directors and stockholders to the end that on June 17, 1910, the company issued to the executor 2,920 additional shares of its stock. This is the stock in dispute, the question being whether it represents income on the-original stock, and, therefore, belongs to the fife tenant; or whether it is principal or corpus of the trust estate, and, therefore, belongs to the remaindermen, whoever they may be.
This surplus of the company arose alone from the earnings or profits of its business, $37,604,206 before, and the remaining $13,956,551 after, the death of the testator.
' It may be noted that, in the meantime, between his .death October 4, 1908, and the date of the decree appealed from, *315May 3, 1912, the executor had received from the company and paid to the life tenant cash dividends amounting to $242,564.18 on the original stock.
That stock was valued at $360 a share at the time of the testator’s decease, and the 2,920 shares in dispute at $290 a share as of February 29, 1912, the date of taking the testimony.
This controversy arose on an accounting by the executor in the Surrogate’s Court, county of Kings. There is no dispute as to the facts. The referee in the case reported, as matter of law, and the surrogate confirmed the report, that the disputed stock represents income and belongs to the life tenant.
If this were an open question I should be inclined to hold that the interest of the testator in so much of the surplus earnings as had accrued up to the time of his death constitutes, as between the life tenant and the remaindermen, not income or profits, but a part of the principal or trust estate itself; that a corresponding interest in the surplus earnings which thereafter accrued is income or profits; and that the 2,920 shares, issued Upon the combined surplus, represent both principal and income, and, after payment of the expenses of administration, should be apportioned between these two classes of claimants.
This would seem to be a fair and equitable disposition of the matter upon principle.
It is apparent that the residue of the testator’s property, and, therefore, the trust estate, consists principally, if not altogether, of the remaining 2,870 of the 3,000 shares of stock belonging to him at his decease.
Using' the word “estate” as comprising personal property, he created, we may say, by his will a new estate of this stock, and divided it into two parts, namely, income from that estate, to be paid to one person during her life, from the time of his death, and remainder, to be paid to other persons. These two, income and remainder, constitute the trust estate.
What part is remainder, principal, or corpus, and what part income therefrom, or the line dividing these two parts, is the matter in dispute.
It is certain that the former, or corpus of the trust estate, consists of all the rest, residue and remainder, after payment of debts, etc., of the testator’s property and estate, real, per*316sonal ’.and mixed, of which he died possessed or to which he was entitled at the time of his decease, for the will expressly , says so. And that the other part consists of the income from thait'property, for the will so provides as to this also.
' This stock,, as already stated, constitutes'the residuary estate and, therefore, the trust estate. Such stock is defined as “the right which a shareholder in a corporation has by reason of his. ownership of shares, is a right to participate according to the amount of his stock in the surplus profits of the corporation on a division, and ultimately on its dissolution, in the assets remaining after payment of its debts.” (Plimpton v, Bigelow, 93 N. Y. 592, 599.)
In other words, the specific residuary property and estate of which the testator was possessed and to which he was entitled at the time of his decease, was this incorporeal, intangible thing called a right; nevertheless, personal property (Matter of Jones, 172 N. Y. 575, 582), of which there is no dispute. And it was this right of participation in these two classes of assets of the corporation that the testator created the corpus of the trust estate, as distinguished from income therefrom.
The testator had only one such right, and it had but one source — his ownership of the same stock. The right was as clearly, directly and immediately attached to, and composed in part, of the testator’s interests in the surplus profits of the corporation, existing at the time of his death, as in its ultimate assets, if any, on a future dissolution.
The value of this right, and, therefore, of the residuary estate, was due in a large measure to this enormous surplus'of over $37,000,000 in actual existence at the timé of the testator’s decease and the creation of the trust estate.
Of these matters there can be, as it seems to me, no dispute. And the perplexing question is, how this right can be so divided as to make the right of participation in the surplus income from the right of participation in the other assets; or why the one is to be treated as income, and the other as corpus of the trust estate. It is not because there had been no division of the surplus at the time of his death; for the same is equally true of the other assets.
Looking at the matter from another point of view, income is *317some thing, gain or profit which proceeds from labor, business, property or capital. And it is so treated by the testator himself; for, having created the trust estate, he expressly provided, by his will, that the income “ therefrom ” should be paid to his widow, “from the time of ” his death, during her life.
There was no trust, or trust estate, until his death, and no income therefrom until after that time. The so-called income (or the testator’s right or interest in the surplus.at the time,of his death, and from which, in part, the disputed stock issued) had already accrued, not from the trust estate, but before its creation, and on a precedent estate, investment or capital. That income, if income at all, did not and. could not accrue upon or proceed from the trust estate, any more than an effect may precede its cause. ; -
No doubt the right of the testator in this surplus was, or would have been when distributed, income as to him, upon his investment. But it was also a part of his personal property and residuary estate. And when he created this new or trust estate of that right, and. gave it to other persons, .that which waSj or might have been, income as to him became principal or corpus as to them. , , ...
Besides, it is not apparent how the 2,920 shares of new stock in dispute is to be regarded as income in any sense, from anything, or to anybody . The idea of income in such case is payment or distribution of something of value by. the company, and gain or profit therefrom by the stockholders,, but nothing of the kind took place. The company merely doubled its nominal capital, resolved to retain the surplus earnings on hand, and issued to each stockholder as many additional shares as he then held, The surplus already belonged to the company; it received nothing in addition to what it then had, and parted with nothing, ¡:
Neither did the stockholder gain anything. . He was no better off after than before the new issue. The number of his shares was increased, it is true, but not their value. The intrinsic value of his two shares was no greater after than that of one share before this transaction. Where, then, was his gain, profit or income ? , ¡
This executor, then holding 2,92.0 shares, in trust, received *318another block of a like number, but the 5,840 shares were worth no more than the original 2,920.
Again, it is not the nature or effect of income or profit to take from or lessen the principal or capital on which it accrues. The original stock of this company derived its entire value from the assets of the company, including this over $51,000,000 of surplus earnings, and when, the company merely doubled the amount of stock on the same assets it halved the value of the stock. The new stock was not profit or income from the old, but the half of its body or substance.
Likewise the 2,920 shares in the hands of this executor at the time of the new issue derived their entire value from a corresponding share of the assets of the company, and.the 2,920 additional shares issued to him derived their entire value solely from the same share of assets and, therefore, from the value of the original shares. This does not partake in any sense of the nature or effect of income upon the original stock. On the contrary, the apparent effect of treating that portion of the new stock which issued on account of the surplus in existence at the time of the testator’s decease as income is to transfer so much of the corpus or remainder of the trust estate itself to the life tenant.
However, I see no substantial difference between this and the cases decided in McLouth v. Hunt (154 N. Y. 179), Lowry v. Farmers’ Loan & Trust Co. (172 id. 137) and Robertson v. De Brulatour (188 id. 301).
The rule established by those decisions is regarded conclusive of this one and that the 2,920 shares of stock in question here are to be treated as income from the trust estate, to which the life tenant is entitled, subject to the payment of commissions, as specified in the decree appealed from.
The order and decree in so far as appealed from should be affirmed, with costs to respondent payable out of the trust estate.
Hirschberg, Thomas, Oarr and High, JJ., concurred.
Order and decree of the Surrogate’s Court of Kings county in so far as appealed from affirmed, with costs to respondent payable out of the trust estate. ,■