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A bequest of a specific sum to be paid from the proceeds of the sale of the stock is not a bequest of the stock itself, and in such case dividends declared before the sale takes place belong to the estate and not to the legatee.94

In states where the title to the personal property of one who dies testate passes to his executor, the executor of course takes title to stock owned by the decedent at the time of his death, 95 and hence is entitled to dividends on such stock subsequently declared, and may sue to recover the same, until the stock is regularly assigned to the distributees by a decree of distribution. The pendency of an appeal from a decree of distribution suspends its efficacy, and the efficacy of an indorsement and delivery of the stock to the distributee in pursuance thereof, and until the appeal is determined the company has no right to transfer the stock on its books to the distributee nor to his assignees, and can derive no rights from so doing. If the decree is reversed, the right of the executor to the stock is restored and the matter stands as though no such decree had ever been made. And he may recover from the corporation dividends subsequently declared and paid by it to the distributee and his assignees where it had notice of the pendency of the appeal and of the reversal of the decree before such payments were made. And in code states he may maintain an action for that purpose regardless of whether his title to the stock is to be regarded as a legal or an equitable one. 96

The right to dividends as between a person entitled to the income and profits of stock and the remainderman is considered in a subsequent section. 97

8 3706. Rights of trustees. A person holding stock as trustee is entitled to have the dividends paid to him as against the corporation, and such payment relieves the corporation from liability therefor to the cestui que trust. 98 But the cestui que trust may have the right to say how the dividends are to be disposed of.99

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94 Missouri Bapt. Sanitarium they might have intervened had they McCune, 112 Mo. App. 332, 87 S. W. desired to do so. Ashton v. Zeila 93.

Min. Co., 134 Cal. 408, 66 Pac. 494. 95 See $ 3429 et seq., supra.

97 See 8 3711 et seq., infra. 96 Ashton v. Zeila Min. Co., 134 Cal. 98 People's Nat. Bank v. Cleveland, 408, 66 Pac. 494.

117 Ga. 908, 44 S. E. 20; Consolidated The objection that the assignees of Fruit Jar Co. v. Wisner, 110 V. Y. the distributee were not made parties App. Div. 99, 97 N. Y. Supp. 52, aff's to such an action is waived if not 188 N. Y. 624, 81 N. E. 1162. taken advantage of by demurrer or 99 Farquhar v. Canada-Atlantic & answer. Nor are the assignees injured Plant S. S. Co., 212 Mass. 278, 98 N. by failure ke them parties where E. 1036.

8 3707. Rights as between husband and wife. At common law, shares of stock owned by a married woman, and the right to dividends thereon, belong to the husband if he reduces them to possession, and dividends are reduced to possession by the husband if he receives them. 1 In most jurisdictions, however, the married woman's acts have changed the common law, and given married women their property free from the control of the husband; and where this is the case, a corporation has no right to pay a husband dividends on shares owned by his wife, unless she authorizes the payment. In states where the community property doctrine obtains, dividends declared on stock which is the separate property of either spouse are community property.

The right of a husband to dividends on his wife's stock is governed, in so far as the right of the corporation to pay the same is concerned, not by the law of the state in which they reside, but by the law of the domicile of the corporation.4

8 3708. Attaching creditors. Where stock is attached, dividends subsequently accruing thereon are impounded equally with the stock itself, regardless of the time when the acquisitions out of which they are declared may have accrued, and pass to the purchaser of the stock at the execution sale.? The right of the purchaser to them,

1 See in this connection:

3 Bryan v. Sturgis, 40 Tex. Civ. California. Dow v. Gould & Curry App. 307, 90 S. W. 704. Silver Min. Co., 31 Cal. 629.

4 Graham v. First Nat. Bank of NorMaryland. Brown v. Bokee, 53 Ma. folk, 20 Hun (N. Y.) 326, aff'd 84 N. 155.

Y. 393, 38 Am. Rep. 528. New Hampshire. Wells v. Tyler,

5 United States. Jacobus v. Mo5 Fost. 340.

nongahela Nat. Bank, 35 Fed. 395. See New York. Graham v. First Nat. also Loewe v. Savings Bank, 236 Fed. Bank of Norfolk, 20 Hun 326, aff'd 444, L. R. A. 1917 B 938. 84 N. Y. 393, 38 Am. Rep. 528; Burr California. Cates v. Consolidated v. Sherwood, 3 Bradf. Surr. 85; Sear- Realty Co., 25 Cal. App. 531, 144 Pac. ing v. Searing, 9 Paige 283.

301; McCarthy v. Boothe, 2 Cal. App. Pennsylvania. Slaymaker v. Bank 170, 83 Pac. 175. of Gettysburg, 10 Pa. St. 373.

Maine. Hagar v. Union Nat. Bank, Virginia. Harcum's Adm'r v. Hud- 63 Me. 509, nall, 14 Gratt. 369.

Nebraska. Farmers' & Merchants' A husband's receipt of dividends Nat. Bank v. Mosher, 68 Neb. 713, on his wife's stock is not a reduce 724, 100 N. W. 133, 94 N. W. 1003. tion of the stock to his possession. Tennessee. Moore v. Gennett, 2 Burr v. Sherwood, 3 Bradf. Surr. (N. Tenn. Ch. 375. Y.) 85.

6 Hagar v. Union Nat. Bank, 63 Me. 2 2 Clark & Marshall on Corpora- 509. tions, 1614,

7 Jacobus V. Monongahela Nat.

however, retains its character as a right to the benefit of declared dividends, and remains separate from the stock,8 and hence, in accordance with the general rule, 9 will not pass under an assignment of the stock by the purchaser, unless specifically included in the assignment.10

8 3709. Interpleader. In case conflicting claims are made to dividends by the transferrer and the transferee of shares, or by the pledgor and pledgee, the corporation may file a bill of interpleader, 11 and if it fails to do so it will act at its peril in making payment to either claimant.12 Making the corporation a party to a suit to set aside a transfer of shares of its stock is a demand and notice to it that the dividends on such stock are claimed by the plaintiff, especially where the petition seeks to have the corporation enjoined from paying them to the defendant, and if it does pay them to the defendant it will be liable therefor to the plaintiff in the event that he is ultimately successful in the suit.13

$ 3710. Assignment or transfer of dividends. The bona fide holder of a certificate of stock has the right to dispose of his dividends. 14

Bank, 35 Fed. 395; Cates v. Consoli- 12 McCord v. Nabours, 101 Tex. 494,
dated Realty Co., 25 Cal. App. 531, 111 S. W. 144, 109 S. W. 913, aff'g
144 Pac. 301; Hagar v. Union Nat. (Tex. Civ. App.), 103 S. W. 469, 82
Bank, 63 Me. 509. See Farmers' & S. W. 153.
Merchants’ Nat. Bank v. Mosher, 63 13 McCord v. Nabours, 101 Tex. 494,
Neb. 130, 88 N. W. 552. See also 111 S. W. 144, 109 S. W. 913, aff'g
Loewe v. Savings Bank, 236 Fed. 444, (Tex. Civ. App.), 103 S. W. 469, 82 S.
L. R. A. 1917 B 938.

W. 153. 8 Cates v. Consolidated Realty Co., 14 Willis v. Lauridson, 161 Cal. 106, 25 Cal. App. 531, 144 Pac. 301.

118 Pac. 530; Cogswell v. Second Nat. 9 See $ 3700, supra.

Bank, 78 Conn, 75, 60 Atl. 1059, aff'd 10 Cates v. Consolidated Realty Co., 204 U. S. 1, 51 L. Ed. 343. See also 25 Cal. App. 531, 144 Pac. 301. New Jersey Car Spring & Rubber Co.

11 Cross v. Eureka Lake & Y. Canal v. Fields, 85 N. J. L. 217, 88 Atl. 1031. Co., 73 Cal. 302, 2 Am. St. Rep. 808, In Farquhar v. Canada-Atlantic & 14 Pac. 885; Salisbury Mills v. Towns- Plant S. S. Co., 212 Mass. 278, 98 N. end, 109 Mass. 115; Merchants' Nat. E. 1036, it was held that an agreeBank v. Richards, 6 Mo. App. 454, ment between the promoters of the aff'd 74 Mo. 77; McCord v. Nabours, corporation and a person who pur101 Tex. 494, 111 S. W. 144, 109 S. W. chased in their interest the entire 913, aff'g (Tex. Civ. App.), 103 S. W. stock of the company operated as an 469, 82 8. W. 153. See also People's assignment and appropriation of their Nat. Bank v. Cleveland, 117 Ga. 908, interest in the net earnings of the 44 S. E. 20. Compare Hinckley v. company to the reduction of their inPfister, 83 Wis. 64, 53 N. W. 21. debtedness to him, that such agree

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The fact that authority from the holder of a certificate to another to collect dividends is not on file with the corporation does not necessarily or inferentially imply that no such authority was given.16

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8 3711. Right to dividends as between life tenant and remainderman—Dividends declared before creation of the trust. Under a bequest or gift of the income and profits of shares of stock for life or years, the beneficiary is not entitled to dividends declared before, although not payable until after, the testator's death or the time of the gift. Such a dividend is a debt due from the corporation, and passes to the executor as a part of the estate. “As soon as the profits on shares of stock are ascertained and declared," said the New York court in such a case, “they cease to be the property of the company, and the owner of the shares becomes entitled to the dividend. It at once forms part of his estate. The fact that they are made payable at a future time is immaterial. The dividend to which the life tenant may be entitled as income, can only be that which the company declares after that relation is acquired. In this case the dividend represented profits or income, but had become a debt before the will took effect.” 16


8 3712. — Ordinary cash dividends earned after creation of trust. When the owner of shares of stock makes a bequest or gift of the income and profits to a person for life, there can be no doubt that all ordinary cash dividends declared after creation of the trust will belong to the life tenant as income or profits, if they are declared out of profits earned by the corporation since the testator's death.17

ment was valid as between the par- 17 Davis v. Jackson, 152 Mass. 58,
ties though not formally assented to 23 Am. St. Rep. 801, 25 N. E. 21;
by the company, and that after pay- Holbrook v. Holbrook, 74 N. H. 201,
ment had been made by the company 12 L. R. A. (N. S.) 768, 66 Atl. 124;
to such person in accordance with the Van Doren v. Olden, 19 N. J. Eq. 176,
terms of the agreement and without 97 Am. Dec. 650; Estate f Smith, 140
objection, it was too late for one of Pa. St. 344, 23 Am. St. Rep. 237, 21
the promoters or a person claiming Atl. 438; Earp's Appeal, 28 Pa. St.
under him to contend that the latter 368.
was entitled to the dividend.

An extra cash dividend will go to 19 Willis v. Lauridson, 161 Cal. 106, the life tenant where there is noth: 118 Pac. 530.

ing to show that it was not a dividend 16 In re Kernochan, 104 N. Y. 618, of profits earned in the regular course 11 N. E. 149.

of business, and during the term of That dividends declared before the the life estate. Newport Trust Co. v. death of the testator go to the ex- Van Rensselaer, 32 R. I. 231, 35 L. R. ecutor and not to a legatee, see $ 3705, A. (N. S.) 930, 78 Atl. 342. supra.

The apportionment of dividends declared out of profits earned partly before and partly after the creation of the trust will be considered in subsequent sections.18

§ 3713. — Rule that all cash dividends go to life tenant. In a number of jurisdictions it is held that all cash dividends out of profits, declared after the testator's death, go to the life tenant, although they are payable out of profits earned by the corporation before his death, and although it may be, not an ordinary dividend, but an extraordinary or unusual dividend, payable out of profits which had been allowed to accumulate for a number of years before the testator's death. This is sometimes known as the Massachusetts rule, and prevails in that state,19 and in Connecticut, 20 Delaware,21 Georgia,22 Illinois, 28


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18 See $8 3717, 3718, 3719, infra. Rep. 51, 60

Atl. 117; Mills 19 Talbot v. Milliken, 221 Mass. 367, Britton, 64 Conn. 4, 24 L. R. A. 108 N. E. 1060; Boston Safe eposit 536, 29 Atl. 231. & Trust Co. V. Adams, 219 Mass. 175, 21 Bryan v. Aiken, Del. 86 106 N. E. 590; Gray v. Hemmenway, Atl. 674, rev'g — Del. Ch. 82 Atl. 206 Vass. 126, 138 Am. St. Rep. 377, 817. 92 N. E. 31; D'Ooge v. Leeds, 176 22 Millen v. Guerrard, 67 Ga. 284, Vass. 558, 57 N. E. 1025; Reed v. 44 Am. Rep. 720. Head, 6 Allen (Mass.) 174. See also In Jackson v. Maddox, 136 Ga. 31, Trefry V. Putnam, Mass. 116 Ann. Cas. 1912 B 1216, 70 S. E. 865, it N. E. 904.

is said: “The idea, which has been A cash dividend on cumulative pre- sometimes advanced, of making an apferred stock goes to the life tenant portionment between a life-tenant and though it includes the entire amount remainderman according to the of past accumulated dividends which time when a fund was earned, rather might have been declared thereon, than the time when a dividend was since a preferred stockholder is not declared, has been repudiated by this entitled to dividends as such until the court in Mann v. Anderson, 106 Ga. same have been declared. Boston 818, 32 S. E. 870." The question inSafe Deposit & Trust Co. v. Adams, volved in the latter case was as to 219 Mass. 175, 106 N. E. 590.

an apportionment of a dividend de20 Union & N. H. Trust Co. v. Tain- clared after the death of the life tor, 85 Conn. 452, 83 Atl. 697; Bishop tenant between his estate and the rev. Bishop, 81 Conn. 509, 71 Atl. 583; mainderman. Green v. Bissell, 79 Conn. 547, 8 L. R. 23 De Koven v. Alsop, 205 Ill. 309, A. (N. S.) 1011, 118 Am. St. Rep. 156, 63 L. R. A. 587, 68 N. E. 930, aff'g 9 Ann. Cas. 287, 65 Atl. 1056; Bulke- 107 Ill. App. 190. ley v. Worthington Ecclesiastical So. The holding to this effect in Waterciety, 78 Conn. 526, 12 L. R. A. (N. S.) man v. Alden, 42 Ill. App. 294, was 785, 63 Atl. 351; Boardman v. Board- approved by the Supreme Court on apman, 78 Conn. 451, 12 L. R. A. (N. S.) peal (144 Ill. 90, 30 N. E. 972), al779, 62 Atl. 339; Smith v. Dana, 77 though the judgment of the Appellate Conn. 543, 69 L. R. A. 76, 107 Am. St. Court was reversed on other grounds.

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