delivered the opinion of the court, January 23d 1882.
This contention is between the tenant for life and the residuary legatee, under the will of Mary Condy, who died on the 29th June 1880. She gave and bequeathed all her estate *282to the appellant, in trust, to collect and receive the income thereof for her own use during her life, and at her death, the testatrix gave one-half the residue to the appellee. The property bequeathed was stock of the Insurance Company of North America. At a meeting of the stockholders of the company, held on the 15th November of the same year, it was resolved to increase the capital stock from $2,000,000 to $3,000,000 by issuing 100,000 shares at $10 per share, in the proportion of one share to each two shares held by the stockholders — they t° .pay $10 per share for each share of the new stock and also $Í0 per share for the privilege of' subscribing, the proceeds of which privilege to be added to the surplus fund of the company. Instead of subscribing for the new stock, the executor sold the privilege of subscribing therefor. The question is, whether the sum thus realized should be awarded to the appellant as income, or whether it belongs to the principal of the estate ? • .
The entire value of the stock, with all its incidents, at the death of the testatrix, constituted the principal of the estate. On this principal, the appellant Avas entitled to the income. Whatever value beyond par, the stock then had, by reason of the large surplus fund of the company or otherAvise, attached to the stock and formed a part of the principal. The appellant was not given any part of this aggregated value of the stock. The income therefrom Avas all she was entitled to receive. Whatever was capital, must remain capital. The executor could not take therefrom and give to the life-tenant, to the injury of the residuary legatee. The surplus of the company Avas large. This greatly increased the value of the stock. It is not shown that the stock was of greater value on the 15th November than on the day of the death of the testatrix, nor that the surplus fund had been increased in the mean time.
The right of a stockholder to subscribe for new stock, was a right to change the form of the investment; but that which existed as principal did not, by the exercise or sale of that right, become income. The appellant became entitled to the income on that principal in its changed from; but not to the principal itself.
The distinction between the surplus fund, existing at the time of the death of the testator, and a fund accumulated after-wards, is distinctly recognized in Earp’s Appeal, 4 Casey 368. That Avhich had accumulated before the death of the testator, was held to be part of the principal of the fund, and that which accumulated after his death, to be income. The correctness of the principle there ruled, is expressly affirmed in Wiltbank’s Appeal, 14 P. F. Smith 256, although, under the facts of the case, the profit on a sale of the newly subscribed stock was held *283to be income. Moss’s Appeal, 2 Norris 264, is in entire harmony with the conclusion at which we have arrived. There the trust fund consisted of stock, and each of the stockholders was given the privilege of subscribing, and paying, for as many shares of the new stock, as he held of the old. , The estate of the testator was entitled to subscribe for one hundred shares of the new stock. The executors, not having funds sufficient to pay the sum required for so much stock, sold the option to subscribe for sixty shares thereof, and with the money realized therefrom, subscribed, and paid, for the remaining forty shares. The life-tenant claimed these shares, thus acquired, to be income: but it was held, they formed a portion of the capital of the residuary estate. It was there said by our brother Paxson, there is no doubt about the law. The difficulty is in applying the law to the facts of the particular case. It is true, one reason given for the ruling was, that after the increase of stock, the value of each share decreased. Such must be the natural effect of an increase produced in part by putting an existing surplus fund into certificates of new stock. The additional sum paid in for each share being less than the actual value of a share of the old stock, necessarily lessens the value of the latter. In the present ease, the diminution in the value of the stock and in its market price is shown to be small. That, however, we think is not the only evidence of what constitutes principal or capital. In so far as the fund, which was a part of the residuary estate, was used to acquire the new stock, the latter took the place of the former. It was not income, but capital in a changed form. The appellant is not entitled to the corpus of the new stock, but to its income.
Decree affirmed, and appeal dismissed at the costs of the appellant.
Sharswood, C. J., and Teunkey, J., dissented.