Atlantic Coast Line Dividend Cases

Briscoe, J., delivered the opinion of the Court. The single question presented on this appeal, is whether a 20 per cent stock dividend, declared by a resolution of the directors of the Atlantic Coast Line Railroad Company, a Virginia corporation, and payable in the coftimon capital stock of the company, on the 20th day of January, 1905, shall be treated as “income,” payable to the life tenants, or as principal, belonging to the appellant, as trustee under a deed from Moses H. Powder of Baltimore City, deceased. The facts upon which the decision must rest are practically undisputed, and are set out in an agreed statement of facts contained in the record. The trust created by the deed, under which the stock of ⁷⁸ the railroad company was held, and upon which the dividend was declared, is as follows: “In trust so that Moses Hindes Powder, trustee herein named, shall, and will receive, take and collect all the rents, issues, income, profits and interest of said property hereby conveyed, and from all investments or changes of investments of the same, made or to be made, as hereinafter provided for, and apply the same to the support and maintenance of Moses Hines Powder, and his wife and children during the lives of Moses Hindes Powder and his wife, and after the death of both of them the principal of said estate and all increase thereof to become the absolute property of their children, share and share alike, the children of any deceased child to take only their parents’ share, that is, that share thereof to which, if living, the parents would be entitled.” Mr. Powder died in October, 1894, and the appellant, as substituted trustee, holds fifty-six shares of the stock of the Atlantic Coast Line Railroad Company, of the par value of one hundred dollars per share,.belonging to the trust estate.

On the 20th of April, 1899, Mrs. Powder conveyed all her interest under the trust to one Sarah A. Danskin and she subsequently conveyed it to the appellees, Beryl D. Powder and Margaret D. White, who are the only life tenants of the trust property. At a meeting of the board of directors of the company, held in Richmond, on November 15th, 1904, the following resolution was passed : “It is the opinion of thé board that the surplus net earnings of this company are sufficient to justify the payment to the holders of the common capital stock o.f this company of a dividend of 20 per cent, payable in the common capital stock of this company, and to that end it is requested that the stockholders increase the capital stock of the company so that the same shall be $50,000,000, out of which the said dividend may be declared and paid.” Subsequently the stockholders of the company recommended the declaring of the dividend, and the board of directors of the company passed these resolutions. ⁷⁹ “Resolved, That an extra dividend of 20 per cent, be and hereby is declared payable to the holders of the common capital stock of this company, of record January 2nd, 1905, and payable in the common capital stock of this company on and after the 20th day of January, A. D. 1905.” “Resolved, That an extra dividend of 5 per cent be, and the same is hereby, declared payable out of the surplus net earnings of this company to the holders of the common capital stock of this company, of record at the close of business on December 31st, 1904, and that this dividend shall be paid to the holders of said stock in the 4 per cent certificates of indebtedness of the Atlantic Coast Line Company' held and owned by this company, which said surplus net earnings have been invested and shall be payable on and after the 20th day of January, A. D. 1905 ; said certificates of indebtedness shall be issued in the names of the holders of said common stock of this company of record at the close of business on .December 31st, 1904.” It is admitted that the extra dividend of 5 per cent payable in certificates of indebtedness of the company, is income, and there is no appeal from that part of the decree directing them to be transferred to the life tenants. It is also conceded, that the trust covers the period of the operations of the railroad company and “that since June 30th, 1900, no change has taken place in the persons, entitled to receive the income from the shares of stock, mentioned herein.” These are the undisputed facts in the case and are fully stated in the record. Whatever may be the rule established by the Courts in other jurisdictions, and they are by no means in accord, it is well settled in this State, since the adjudication in Thomas v. Gregg, 78 Md. 54s , and Quinn v. Safe Deposit and Trust Company, 93 Md. 285 , that there are cases where stock dividends, such as the one now under consideration, should be held