Crocker-Anglo National Bank v. Rowe

BRAY, P. J. Appellant, trustee under the trusts created by the will of George William Starr, deceased, appeals from an order instructing said trustee, and from that portion of an order approving the eighth account and report of said trustee which disapproves of the trustee’s action in treating certain stock dividends as income and orders the trustee to allocate to principal such stock dividends (or their market value, if sold).

Question Presented

Does the clause of the will dealing with distribution of “all increase in value of corpus” clearly indicate the intent of the testator, or is the distribution of the stock split or dividend to be determined by the “Pennsylvania” or “Massachusetts” rule?

Record

In 1944 the will of George William Starr was admitted to probate. The will created residuary trusts, “Trust A” for the benefit of his wife for life, “Trust B” for the benefit of his daughter for life and “Trust C” for the benefit of his grandchildren for life with remainder to his great-grandchildren. Trust A provides that 80 per cent of income should be paid monthly to his wife, in no event less than $500, and in the event less than $500 per month is available the balance is to come from the rest of the net income and corpus. Trust B provides the same terms for the daughter. Both trusts provide that upon the death of the first to die of the wife and daughter, the share held by that decedent should be added to the corpus established for the survivor. (The wife died recently.) After death of the survivor of the wife and daughter and after payment of a specific bequest, Trust C takes effect.

In Trusts A and B, but not in Trust C, there is a clause 2 “Except as otherwise required by law, all increase in value of corpus from whatever cause arising and all profits resulting from the sale of any part of said trust property shall be and constitute principal or corpus of said trust estateIt is the italicized portion of the clause with which we are concerned. It is conceded, also, that “otherwise required by law” is not applicable to our problem.

Pursuant to its investment powers the trustee bought for each of Trusts A and B 100 shares of stock in American Home [584]Products Corporation, an additional 10 shares for each in December 1944, and an additional 15 shares for each in August 1946. In November 1946, the corporation issued three shares of its stock for every one held, making 375 shares held in each of Trusts A and B, and the trustee allocated these additional shares to corpus rather than income. This allocation was thereafter approved by the probate court. In April 1951, the trustee exercised stock subscription rights and purchased 25 additional shares.