1. A decision of the Supreme Court of the District of Columbia,
in Probate, allowing a commission to executors in the approval of
their yearly account, is reviewable by appeal without bill of
exceptions where an issue of law only was involved, raised by
exceptions of the beneficiaries to the account. P. 274 U. S.
Page 274 U. S. 92
2. Stock dividends on corporate shares in a decedent's estate in
process of administration do not in themselves represent an
increase of value upon which the executor is entitled to have a
commission. Gibbons v. Mahon, 136 U.
. P. 274 U. S.
3. Judgment entered nunc pro tunc,
as of the day on
which the cause was argued and submitted, in view of the death of
one of the respondents since occurring. P. 274 U. S. 99
6 F.2d 678 reversed.
Certiorari (269 U.S. 542) to a judgment of the Court of Appeals
of the District of Columbia which affirmed a judgment allowing
commissions to the respondent executors, over exceptions exhibited
on behalf of the beneficiaries.
MR. JUSTICE SANFORD delivered the opinion of the Court.
In the course of a proceeding that had been pending for many
years in the Supreme Court of the District of Columbia, sitting as
a probate court, for the administration of the estate of James
McDonald, deceased, under his last will and testament, the
executors were allowed certain commissions for the one-year period
covered by their ninth account. On an appeal by the beneficiaries
under the will, two of whom are minors represented by a guardian
the District Court of Appeals, being of opinion
that there was "nothing on the face of the record to indicate
error," affirmed the judgment allowing
Page 274 U. S. 93
these commissions, 6 F.2d 678, and this writ of certiorari was
thereupon granted. 269 U.S. 542.
A motion by the executors to dismiss the writ and affirm the
judgment, on the ground, in effect, that the record presents no
substantial question for review, was postponed to the hearing, and
the case has been heard on this motion and on the merits.
The record, aside from formal and undisputed matters, consists
of the account filed by the executors, a report and exception by
the guardian ad litem,
an exception by the adult
beneficiary, and the order of the court allowing the commissions.
From these it appears that the executors, in August, 1923, filed
their ninth account, covering the period. from July 11, 1922, to
July 12, 1923, hereinafter referred to as the accounting period. In
this account they stated, under the heading of "Receipts Principal
Account," that, in addition to the balance of principal in their
hands on July 11, 1922, shown by their eighth account, they had
charged themselves with the profits received during the accounting
period from the sales of certain inventoried items, aggregating
$1,604.32, and with certain shares of stock which they had received
during the accounting period as stock dividends, "at the face or
par value thereof," aggregating $1,570,325, making a total of
$1,571,929.32, and that they
"claim and hereby retain for their services a commission of 5
percent upon profits realized on proceeds of inventoried items, and
the par or face value of stocks received as dividend,
$1,571,929.32 . . . . . . $78,596.47."
They further stated, under the heading "Income Account," that,
in addition to the balance of income shown by their eighth account,
they had charged themselves with income received during the
accounting period on the property owned by the estate, aggregating
$247,814.39, and that they
"also claim and hereby retain for their services a commission of
5 percent upon the
Page 274 U. S. 94
annual income and profit on income investments received . . . .
. . . . $12,390.72."
The guardian ad litem,
pursuant to a former order of
the court, filed a report concerning the matters involved in this
account, in which, after pointing out that the executors on their
previous accounts had been allowed commissions of more than
$200,000 upon the principal of the estate and $50,000 upon on the
income, he insisted that the sum of $12,390.72, claimed as
commission on the income received, was a sufficient compensation
for their services during the accounting period, and that, as to
the additional commission of $78,596.47, claimed on an "increase in
principal" of $1,571,929.32, the stock dividends of $1,570,325, of
which this mainly consisted, were "not a proper basis upon which to
charge a commission," and he specifically "except[ed] to the
requested allowance of $78,596.47 for commission on principal."
The adult beneficiary also filed an exception to the account,
upon the ground that
"the commissions claimed, in large part, are based upon an
alleged increase in the capital assets of said estate, . . .
consisting in the issuance to said estate, as the holder of stock
in a large number of corporations, of stock dividends, when, as a
matter of law and of fact, the issuance of said stock dividends
added nothing to the interest of said estate as a shareholder in
said corporations, but merely changed the evidence of said
interest, in the shape of stock certificates,"
and "the issuance of stock dividends to said estate cannot be
considered as an increase of either capital or income."
Thereafter, the court, without handing down an opinion, entered
an order reciting that, the ninth account of the executors,
"being now presented for approval, the same is, after
examination by the court, approved and passed; the executors being
allowed $12,390.72 commission on income, as claimed, but being
Page 274 U. S. 95
$50,000 commission on increase in principal, instead of
It thus is apparent that the court allowed the commission of
$50,000 "upon profits realized on proceeds of inventoried items,
and the par or face value of stocks received as dividend,
$1,571,929.32," for which the executors had claimed
a commission of $78,596.47, on the ground that these profits and
the par or face value of the stock dividends constituted an
"increase in principal" upon which a commission could be
The beneficiaries do not challenge here so much of this
allowance as was based on the $1,604.32 of profits realized from
inventoried items, on which the executors claimed a commission of 5
percent, or $80.22. And the sole question presented is whether the
remainder of the $50,000 allowed as a "commission on increase in
principal," that is, at least $49,019.78, which was based solely on
the $1,570,325 of stock dividends-was properly allowed.
The court of appeals, after stating that the orders in a
proceeding in the district probate court are reviewable only in
accordance with the practice at common law by which the evidence
must be brought up in a bill of exceptions, and that the record did
not contain any bill of exceptions or purport to show the substance
of the testimony, said:
"The court below, evidently after a hearing in which all
pertinent facts and circumstances were considered, reached the
conclusion that the executors were entitled to $50,000 commission
on increase in principal, and made that allowance. The facts and
circumstances upon which this allowance was based are not before
us, and, there being nothing on the face of the record to indicate
error, it is apparent that the judgment must be affirmed. . .
We think this was error.
This proceeding is not like one for the probate of a will
involving an issue as to the competency of the testator, in
Page 274 U. S. 96
which the parties have a right to a trial by jury and to bills
of exception covering the rulings of the court during the progress
of the trial, and a review may he had upon writ of error,
Ormsby v. Webb, 134 U. S. 47
134 U. S. 64
but one in which the District Supreme Court, sitting in probate, is
clothed as an orphans' court with power to proceed with the
settlement and distribution of the estate in accordance with
equitable principles and procedure, and a controversy in matter of
law raised by the exceptions of the beneficiaries to the executors'
account, and apparent on the record, is reviewable on appeal.
Kenaday v. Sinnott, 179 U. S. 606
179 U. S.
Here, the exceptions raised no issue as to matters of fact
stated in the executors' account, but a question of law merely.
There is no recital in the record that the order was based upon any
evidence submitted, no reference to the hearing of any evidence,
and nothing, we think, from which any inference can be rightly
drawn that the court made an investigation of any matters not shown
by the executors' account, or allowed the commission on the stock
dividends on any ground other than that, as matter of law, the
receipt of the stock dividends constituted an "increase in
principal" of the estate.
And, as to this, we think the ruling was erroneous. There was,
it is to be noted, no statement in the executors' account that the
aggregate value of the dividend shares received and the original
shares on hand at the commencement of the accounting period was any
greater than the value of the original shares alone before the
dividend shares were issued, or that the value of the principal of
the estate had increased in any manner during the accounting
period. They made no claim for the allowance of an additional
commission on the ground that there had been such an increase,
their sole claim being, as shown by their account, that they were
Page 274 U. S. 97
to the additional commission by reason of the fact that they had
received stock dividends of the par value stated. And, for aught
that appeared from their account, the combined value of the
original shares and the dividend shares was precisely the same at
the end of the accounting period as the value of the original
shares alone at its commencement.
Assuming, but not deciding, that if the executors' account had
shown an increase in the value of the principal of the estate
during the accounting period, this, if claimed, would have been a
proper basis for the allowance of an additional commission, it is
clear that the mere fact that the executors had received the stock
dividends during the accounting period did not show any increase in
the principal of the estate.
In Gibbons v. Mahon, 136 U. S. 549
136 U. S. 559
136 U. S. 565
in determining whether a stock dividend accrued to the tenant for
life under a trust estate, this Court said:
"A stock dividend really takes nothing from the property of the
corporation, and adds nothing to the interests of the shareholders.
Its property is not diminished, and their interests are not
increased. After such a dividend, as before, the corporation has
the title in all the corporate property; the aggregate interests
therein of all the shareholders are represented by the whole number
of shares, and the proportional interest of each shareholder
remains the same. The only change is in the evidence which
represents that interest; the new shares and the original shares
together representing the same proportional interest that the
original shares represented before the issue of new ones."
And the court quoted with approval the statement in Williams
v. Western Union Telegraph Co.,
93 N.Y. 162, 189, that:
"After such a dividend, the aggregate of the stockholders own no
more interest in the corporation than before. The whole number of
Page 274 U. S. 98
before the stock dividend represented the whole property of the
corporation, and after the dividend they represent that and no
more. A stock dividend does not distribute property, but simply
dilutes the shares as they existed before."
So, in Eisner v. Macomber, 252 U.
, 252 U. S. 211
in which it was held that stock dividends were not taxable as
income, the Court said:
"The essential and controlling fact is that the stockholder has
received nothing out of the company's assets for his separate use
and benefit; on the contrary, every dollar of his original
investment, together with whatever accretions and accumulations
have resulted from employment of his money and that of the other
stockholders in the business of the company, still remains the
property of the company, and subject to business risks which may
result in wiping out the entire investment. Having regard to the
very truth of the matter, to substance and not to form, he has
received nothing that answers the definition of income within the
meaning of the Sixteenth Amendment."
It is apparent, in the light of these decisions, that the stock
dividends received by the executors represented no real increase in
the principal of the estate during the accounting period. They
merely changed the form of the estate's investment in the corporate
stocks by increasing the number of its shares, but left the
aggregate value of all its shares the same as that before the
dividend shares were issued. After their issuance, which
necessarily "diluted" the value of the original shares, the
dividend shares and the original shares together represented the
same proportional interest in the corporate properties that had
previously been represented by the original shares alone; no more
and no less. Clearly, therefore, the dividend shares themselves
represented no increase in the value of the estate, and they could
not properly be taken as the basis for the allowance of a
commission to the
Page 274 U. S. 99
executors on the theory that their receipt, in and of itself,
constituted an increase in its capital.
The executors' motion to dismiss and affirm must accordingly be
denied, and the judgment reversed. But, the Court being advised
that the respondent Maxwell, one of the executors, has died since
January 20, 1927, the day on which this case was argued and
submitted, the judgment here will be entered nunc pro tunc
as of that day. Quon Quon Poy v. Johnson, 273 U.
, and cases cited.
Judgment reversed nunc pro tunc.