I concur with the opinion of Mr. Justice Dowling except where he refers to maintaining the original book value of the 675 shares. That original book value was $646.62 per share. When the stock was increased July 3, 1916, by 450 shares on the payment of only $100 per share, the book value of the 675 shares was reduced to $425.1758 per share and the 450 shares were added to the principal to make up that reduction, so that thereafter for a time the stock holding consisted of 1,125 shares at a book value of $425.1758 per share. This maintained the original book value of the total holding of shares consisting of the 675 shares of the book value of $286,993.66 and 450 shares of the book value of $191,329.11. When the 450 shares were sold whatever the profit was on that sale not attributable to earnings belonged to the principal as has been properly held. The original book value of the 675 shares having been made good by the addition to principal of the 450 shares, it is not right to hold that the original book value of the *182675 shares should again be made good. When the stock dividend of 567 shares was declared, the book value of the 675 shares was not reduced from $646.62 per share to $236.02, but from $425.1758 per share to $236.02.
In order, therefore, properly to state what should be done with the 567 shares stock dividend, we must take the book value of 675 shares before the stock dividend, and the book value of the combined 675 shares and 567 shares, or 1,242 shares, after the stock dividend: 675 shares before stock dividend, viz., on July 3, 1916, at $425.1758, equal $286,993.66; 1,242 shares at $236.02, after stock dividend on June 18, 1916, equal $293,136.84; showing that the stock after the dividend had a book value of $6,143.18 in excess of the book value of the 675 shares before. This was caused by earnings which had not been distributed; but on July 1, 1918, two weeks later, there was distributed in dividends the sum of $6,831. So that the life beneficiaries duly received the above excess, and the whole 567 shares should be apportioned to principal. But there should be no deficit found, as the value of the trust fund, in so far as originally represented by the 675 shares, has been fully maintained. The loss on the 675 shares occasioned by the 450 share transaction having been made good, we are thereafter only interested in the new book value of the 675 shares as above. The principal of the trust fund is maintained by the 450 shares and, when they were sold, by the proceeds of the sale. We are thereafter no longer affected by the original book value of the 675 shares.
The error is more apparent when we consider the result of holding that the original book value must be maintained. That result is an apparent deficit in the trust fund of “ about $125,000,” as set out in Mr. Justice Dowling’s opinion (at p. 181), and this “ apparent deficit ” would be increased if the $18,042.86 were eliminated. That sum had already been used to adjust the trust fund and cannot serve that purpose again. How can any such “ apparent deficit ” be made good? The life beneficiaries have not caused such a deficit. They have not received anything they should not receive.
The cause of the mistaken result above mentioned, as I view it, is the position taken that the book value of the shares of stock must be maintained at the original figure when all that is required is that the trust fund itself should be maintained. The trust fund has been fully maintained and more while the elements that go to make up that trust fund have been changed.
Decree so far as appealed from reversed and matter remitted to the Surrogate’s Court for further action in accordance with opinion. Settle order on notice.