Gibbons v. Mahon - 136 U.S. 549 (1890)
U.S. Supreme Court
Gibbons v. Mahon, 136 U.S. 549 (1890)
Gibbons v. Mahon
Argued December 19-20, 1888
Decided May 19, 1890
136 U.S. 549
Under a will bequeathing stock in a corporation and government bonds in trust to pay "the dividends of said stock and the interest of said bonds as they accrue" to a daughter of the testator "during her lifetime, without percentage of commission or diminution of principal," and directing that upon her death, "the said stocks, bonds and income shall revert to the estate" of the trustee, "without encumbrance or impeachment of waste," a stock dividend declared by a corporation which from time to time, before and after the death of the testator, has invested accumulated earnings in its permanent works and plant, and which, since his death, has been authorized by statute to increase its capital stock, is an accretion to capital, and the income thereof only is payable to the tenant for life.
This was a bill in equity by Mary Ann Gibbons against Jane Owen Mahon to compel the transfer to the plaintiff of shares in the Washington Gaslight Company held by the defendant as trustee under the will of Ann W. Smith. The case was heard upon bill and answer by which, and by thee acts of Congress concerning that company, the facts appeared to be as follows.
Mrs. Smith, a widow and the mother of both parties to this suit, died March 26, 1865, owning two hundred and eighty shares in that company, and leaving a last will, dated February 11, 1865, and admitted to probate April 8, 1865, containing the following bequest:
"I hereby give, devise and bequeath to my daughter, Jane Owen Mahon, wife of David W. Mahon, of the City of Washington aforesaid, and to her heirs and assigns, two hundred and eighty shares of stock of the Washington Gaslight Company, also forty-five shares of stock of the Franklin Insurance Company, both in the City of Washington aforesaid; also eight thousand five hundred dollars in government bonds of the government of the United States of America; said stock and bonds or any portion of them remaining at my death a
part of my said estate, to have and to hold the same in and upon the trusts and provisions following, that is to say, in trust for the advantage and behoof of my said daughter, Mary Ann Gibbons, and that after my decease the said Jane Owen Mahon, her heirs and assigns, shall cause the dividends of said stock and the interest of said bonds as they accrue to be paid to my said daughter, Mary Ann Gibbons, during her lifetime, without percentage of commission or diminution of principal, and in case of the death of the said Mary Ann Gibbons, then the said stocks, bonds and income shall revert to the estate of my said daughter, Jane Owen Mahon, without encumbrance or impeachment of waste."
The Washington Gaslight Company was incorporated by the Act of Congress of July 8, 1848, c. 96, with a capital of $50,000, divided into shares of $20 each. 9 Stat. 722. It was authorized to increase its capital stock to $350,000 by the Act of August 2, 1852, c. 79, and to $500,000 by the Act of January 3, 1855, c. 22, 10 Stat. 734, 835. At the death of the testatrix, the capital stock amounted to $500,000, consisting of 25,000 shares of $20 each. By the Act of May 24, 1866, c. 97, the capital stock was increased to $1,000,000. 14 Stat. 53.
The company from time to time declared and paid dividends in money upon its stock, and such dividends were paid by the defendant to the plaintiff.
Before and after the death of Mrs. Smith, and before and after the passage of the act of 1866, and before November 1, 1868, the company from time to time invested portions of its net earnings, income, and profits in the enlargement and extension of its permanent works and plant employed in its legitimate business under its charter, and the actual cost of its works and plant, as shown by its construction account, amounted on January 1, 1865, to $842,623.02; on January 1, 1866, to $892,224.08; on January 1, 1867, to $935,039.55; on January 1, 1868, to $963,803.37; on July 1, 1868, to $988,914.84, and on January 1, 1869, to $1,039,287.17, and amounted in fact at the time of the passage of the act of 1866, to not less than $900,000, and on October 1, 1868, to more than $1,000,000.
On November 1, 1868, the board of directors of the company adopted the following resolution:
"Whereas the construction account of this company exceeds one million of dollars, and as the capital of the company has been increased by an act of Congress to one million of dollars, therefore be it resolved that the increased stock be awarded among the stockholders, share for share, as they stood on the first of October, 1868."
On September 29, 1868, the defendant surrendered to the company the certificate for the two hundred and eighty shares mentioned in Mrs. Smith's will, and those shares were transferred on the books of the company to the name of the defendant, as trustee, and on November 17, 1868, the company made out and delivered to the defendant, as trustee, a certificate for the five hundred and sixty shares.
The defendant paid to the plaintiff from time to time the dividends afterwards declared on the five hundred and sixty shares, but never transferred to her the two hundred and eighty new shares.
The court dismissed the bill, and delivered an opinion reported in 4 Mackey 130, and the plaintiff appealed to this Court.