I am not able to agree with the portion of the opinion which determines the disposition of the income earned upon the residue. As I read the opinion, it rests its conclusion upon two propositions, that the life tenants are entitled to the income from the death of the testatrix upon the principal sum which forms the trust fund established for their benefit, and that the income of the other one half of the residue, being undisposed of by the terms of the will, falls into the principal of the residue, to be divided as such between Alix W. Stanley and the trustees. As to the first proposition, the rule of law embodied in it is of course not disputable, but the difficulty is in the application which the opinion makes of it. It is obvious that when the life tenants are given one half the income earned by the residue, and then the one half of the residue which goes to the trustees is increased by the addition of a quarter of the income, the life tenants are not given the income from the death of the testatrix upon the sum forming the principal of the trust but upon a sum less than that by one quarter of the income. The difference in dollars and cents is not great, but it indicates pretty clearly a flaw in the reasoning of the opinion.
The second proposition, that the income earned by the residue, except for the portion going to the life beneficiaries, is to be treated as a part of the principal, I regard as the source of that error. The residuary legatees take any income earned by the residue not otherwise disposed of because it has nowhere else to go and there is ordinarily no need to consider whether they take it as a part of the principal of the residue or as an increment to it by way of income. Wherever, so far as I can find, there is need to make the distinction, it is treated as income and not as principal. Take the first proposition I have discussed: It is an application *Page 113 to a gift of a part of the residue in trust for life beneficiaries, of the principle that where a testator makes a gift for the benefit of life beneficiaries, he is presumed to intend that they have the income from the death of the testator; but it can only apply to such a gift of part of the residue by regarding the amount earned by it as income and not as principal. Of the application of this principal to such a gift we said: "When, however, it is sought to extend its application to gifts in trust to pay income only, to one during life or a term, so that the period of enjoyment shall be cut down one year, a radically different situation is encountered. Such bequests are in their essence, in so far as the life or term beneficiaries are concerned, bequests of income only. When income earned is paid over, nothing goes out of the corpus of the estate. What is paid can by no possibility be a charge upon the estate as the testator left it, or serve to diminish it to the prejudice of anybody." Webb v. Lines, 77 Conn. 51,54, 58 A. 227. Another situation which has occurred not infrequently is where there is a general residuary bequest contingent in its terms and the question arises as to the disposition of income earned pending the determination of the contingency. While it seems to be established law that the income accumulates for the benefit of the party ultimately entitled to the residue, that result is not reached by the simple process of saying that income earned falls into the principal of the residue and passes as a part of it; Hurford v.Haines, 67 Md. 240, 244, 9 A. 540; and of such a gift Chancellor Westbury said that the income "follows the principal as an accessory." Bective v. Hodgson, 10 H.L. Cas. 656, 665. It boots nothing, as regards a residuary gift, to invoke the rule that a general bequest does not ordinarily carry income earned, because *Page 114 in fact the residuary legatees do from the necessity of the case get the income earned upon the residue.
The true solution of this case lies in the consideration of the fact that the beneficial ownership of the property of a deceased person vests at his death in those who by will or the statute of distributions ultimately are to receive it, subject to the right of the executor or administrator to hold and use it for the purposes of administration and the further fact that, as in the case of any property held in a trust relationship, income earned, so far as the testator has not specifically disposed of it and the law does not presume an intent on his part, belongs to those having the beneficial interest. In the instant case, the beneficial ownership of one half of the residue vested in Alix W. Stanley and of the other one half in the group of beneficiaries represented by the trustees. Income earned upon it should go one half to Alix W. Stanley and one half to the trustees, the latter half to be paid over by them forthwith to the life beneficiaries. By such a solution the rule which gives the life beneficiaries the income upon the principal of the fund held in trust for them from the death of the testatrix would be kept intact and her evident desire for equality would be effectuated, in that the same amount would go to Alix W. Stanley on the one hand and to the group of beneficiaries represented by the trustees upon the other.
I accept the tacit assertion of the majority opinion that we have no case in this State which assists materially in the solution of this problem, although inBlackstone's Appeal, 64 Conn. 414, 30 A. 48, there was a division of income earned upon the residue in consonance with the principle I am advocating. Nor is there need to follow counsel for Alix W. Stanley in the series of implications they draw from our decision in Bridgeport Trust Co. v. Fowler, 102 Conn. 318, 329, *Page 115 128 A. 719. We were there concerned with the way in which income earned by personal property sold or used to pay debts and administration expenses should be accounted for, and, as appears clearly if the opinion is read in connection with the cases cited, we merely held that, where justice requires, the sums paid to satisfy legacies, debts and charges should not be accounted for as coming entirely from principal, but were to be regarded as paid by the use of so much of the principal as would, together with an amount of earned income thereon determined by applying the average rate of earnings of the whole estate, equal the amount paid. The rule there laid down, when applicable, does have the effect of exhausting the income earned by that part of the principal of the estate which is used to pay debts, legacies and like charges, leaving in the residue only such income as is earned by it. Applied in the instant case, it would increase somewhat the principal in the residue and decrease the amount of income to be distributed. The case of In re Benson, 96 N.Y. 499, does support the conclusion reached in the majority opinion, but the opinion in that case does not bear analysis in the light of the results it attains.
In this opinion BANKS, J., concurred.