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 § 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 94 Missouri Bapt. Sanitarium V. McCune, 112 Mo. App. 332, 87 S. W. 93. 95 See 3429 et seq., supra. 96 Ashton v. Zeila Min. Co., 134 Cal. 408, 66 Pac. 494. The objection that the assignees of the distributee were not made parties to such an action is waived if not taken advantage of by demurrer or answer. Nor are the assignees injured by failure to make them parties where they might have intervened had they desired to do so. Ashton v. Zeila Min. Co., 134 Cal. 408, 66 Pac. 494. 97 See § 3711 et seq., infra. 98 People's Nat. Bank v. Cleveland, 117 Ga. 908, 44 S. E. 20; Consolidated Fruit Jar Co. v. Wisner, 110 N. Y. App. Div. 99, 97 N. Y. Supp. 52, aff'd 188 N. Y. 624, 81 N. E. 1162. 99 Farquhar v. Canada-Atlantic & Plant S. S. Co., 212 Mass. 278, 98 N. E. 1036. § 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.3 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. § 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.7 The right of the purchaser to them, New York. Graham v. First Nat. Bank of Norfolk, 20 Hun 326, aff'd 84 N. Y. 393, 38 Am. Rep. 528; Burr v. Sherwood, 3 Bradf. Surr. 85; Searing v. Searing, 9 Paige 283. Pennsylvania. Slaymaker v. Bank of Gettysburg, 10 Pa. St. 373. Virginia. Harcum's Adm'r v. Hudnall, 14 Gratt. 369. A husband's receipt of dividends on his wife's stock is not a reduction of the stock to his possession. Burr v. Sherwood, 3 Bradf. Surr. (N. Y.) 85. 22 Clark & Marshall on Corporations, 1614. 3 Bryan v. Sturgis, 40 Tex. Civ. App. 307, 90 S. W. 704. 4 Graham v. First Nat. Bank of Norfolk, 20 Hun (N. Y.) 326, aff'd 84 N. Y. 393, 38 Am. Rep. 528. 5 United States. Jacobus v. Monongahela Nat. Bank, 35 Fed. 395. See also Loewe v. Savings Bank, 236 Fed. 444, L. R. A. 1917 B 938. California. Cates v. Consolidated Realty Co., 25 Cal. App. 531, 144 Pac. 301; McCarthy v. Boothe, 2 Cal. App. 170, 83 Pac. 175. Maine. Hagar v. Union Nat. Bank, 63 Me. 509. however, retains its character as a right to the benefit of declared. dividends, and remains separate from the stock, and hence, in accordance with the general rule, will not pass under an assignment of the stock by the purchaser, unless specifically included in the assignment.10 § 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- 8 Cates v. Consolidated Realty Co., 10 Cates v. Consolidated Realty Co., 25 Cal. App. 531, 144 Pac. 301. 11 Cross v. Eureka Lake & Y. Canal Co., 73 Cal. 302, 2 Am. St. Rep. 808, 14 Pac. 885; Salisbury Mills v. Townsend, 109 Mass. 115; Merchants' Nat. Bank v. Richards, 6 Mo. App. 454, aff'd 74 Mo. 77; McCord v. Nabours, 101 Tex. 494, 111 S. W. 144, 109 S. W. 913, aff'g (Tex. Civ. App.), 103 S. W. 469, 82 S. W. 153. See also People's Nat. Bank v. Cleveland, 117 Ga. 908, 44 S. E. 20. Compare Hinckley v. Pfister, 83 Wis. 64, 53 N. W. 21. 12 McCord v. Nabours, 101 Tex. 494, 111 S. W. 144, 109 S. W. 913, aff'g (Tex. Civ. App.), 103 S. W. 469, 82 S. W. 153. 13 McCord v. Nabours, 101 Tex. 494, 111 S. W. 144, 109 S. W. 913, aff'g (Tex. Civ. App.), 103 S. W. 469, 82 S. W. 153. 14 Willis v. Lauridson, 161 Cal. 106, 118 Pac. 530; Cogswell v. Second Nat. Bank, 78 Conn. 75, 60 Atl. 1059, aff'd 204 U. S. 1, 51 L. Ed. 343. See also New Jersey Car Spring & Rubber Co. v. Fields, 85 N. J. L. 217, 88 Atl. 1031. In Farquhar v. Canada-Atlantic & Plant S. S. Co., 212 Mass. 278, 98 N. E. 1036, it was held that an agreement between the promoters of the corporation and a person who purchased in their interest the entire stock of the company operated as an assignment and appropriation of their interest in the net earnings of the company to the reduction of their indebtedness to him, that such agree 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.15 § 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 - §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 parties though not formally assented to by the company, and that after payment had been made by the company to such person in accordance with the terms of the agreement and without objection, it was too late for one of the promoters or a person claiming under him to contend that the latter was entitled to the dividend. 19 Willis v. Lauridson, 161 Cal. 106, 118 Pac. 530. 16 In re Kernochan, 104 N. Y. 618, 11 N. E. 149. That dividends declared before the death of the testator go to the executor and not to a legatee, see § 3705, supra. 17 Davis v. Jackson, 152 Mass. 58, 23 Am. St. Rep. 801, 25 N. E. 21; Holbrook v. Holbrook, 74 N. H. 201, 12 L. R. A. (N. S.) 768, 66 Atl. 124; Van Doren v. Olden, 19 N. J. Eq. 176, 97 Am. Dec. 650; Estate f Smith, 140 Pa. St. 344, 23 Am. St. Rep. 237, 21 Atl. 438; Earp's Appeal, 28 Pa. St. 368. An extra cash dividend will go to the life tenant where there is nothing to show that it was not a dividend of profits earned in the regular course of business, and during the term of the life estate. Newport Trust Co. v. Van Rensselaer, 32 R. I. 231, 35 L. R. A. (N. S.) 930, 78 Atl. 342. 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,23 18 See §§ 3717, 3718, 3719, infra 19 Talbot v. Milliken, 221 Mass. 367, 108 N. E. 1060; Boston Safe Deposit & Trust Co. v. Adams, 219 Mass. 175, 106 N. E. 590; Gray v. Hemmenway, 206 Mass. 126, 138 Am. St. Rep. 377, 92 N. E. 31; D'Ooge v. Leeds, 176 Mass. 558, 57 N. E. 1025; Reed v. Head, 6 Allen (Mass.) 174. See also Trefry v. Putnam, Mass. 116 N. E. 904. A cash dividend on cumulative preferred stock goes to the life tenant though it includes the entire amount of past accumulated dividends which might have been declared thereon, since a preferred stockholder is not entitled to dividends as such until the same have been declared. Boston Safe Deposit & Trust Co. v. Adams, 219 Mass. 175, 106 N. E. 590. 20 Union & N. H. Trust Co. v. Taintor, 85 Conn. 452, 83 Atl. 697; Bishop v. Bishop, 81 Conn. 509, 71 Atl. 583; Green v. Bissell, 79 Conn. 547, 8 L. R. A. (N. S.) 1011, 118 Am. St. Rep. 156, 9 Ann. Cas. 287, 65 Atl. 1056; Bulkeley v. Worthington Ecclesiastical Society, 78 Conn. 526, 12 L. R. A. (N. S.) 785, 63 Atl. 351; Boardman v. Boardman, 78 Conn. 451, 12 L. R. A. (N. S.) 779, 62 Atl. 339; Smith v. Dana, 77 Conn. 543, 69 L. R. A. 76, 107 Am. St. a In Jackson v. Maddox, 136 Ga. 31, Ann. Cas. 1912 B 1216, 70 S. E. 865, it is said: "The idea, which has been sometimes advanced, of making an apportionment between a life-tenant and remainderman according to the time when a fund was earned, rather than the time when a dividend was declared, has been repudiated by this court in Mann v. Anderson, 106 Ga. 818, 32 S. E. 870." The question involved in the latter case was as to an apportionment of a dividend declared after the death of the life tenant between his estate and the remainderman. 23 De Koven v. Alsop, 205 Ill. 309, 63 L. R. A. 587, 68 N. E. 930, aff'g 107 Ill. App. 190. The holding to this effect in Waterman v. Alden, 42 Ill. App. 294, was approved by the Supreme Court on appeal (144 Ill. 90, 30 N. E. 972), although the judgment of the Appellate Court was reversed on other grounds. |