This case comes before the court on the complaint of Arthur C. Heller, Rupert B. Lowe and the Fidelity Union Trust Company, executors of the last will and testament of Paul E. Heller, deceased, for settlement of an intermediate account of the said decedent's estate. Some of the questions this court has been asked to pass upon, inter alia , arise on objections made to the executors' account by William H. Corbin, guardian ad litem of certain infants, namely Ellen Lee, John Fenlin, Carol Fenlin, Rupert B. Lowe, Jr., Frances A. Lowe and Martha Ellen Henry, children of named legatees under testator's will whose interest in this proceeding is not questioned.
The guardian ad litem makes the following objections:
(1) He objects to the apportionment made by the executors of the dividend paid to them on June 1, 1948, on certain shares of stock (7% cum. pfd., $100 par) owned by the testator in Heller Brothers Company of Ohio. It is his contention that since the dividend was declared prior to the testator's death it constitutes a part of the corpus of the estate and should not have been apportioned between corpus and income.
(2) He objects to the distribution of the testator's household and personal belongings under paragraph fifth of the will as set forth on pages 7 and 8 of the executors' account, on the ground that since the gift was to testator's nieces and nephew by name it was presumptively a gift to individuals and not to a class, so that as to the one niece who predeceased the testator, her one-seventh share lapsed and fell into the residue.
A stipulation of facts as agreed upon by the parties involved shows that Paul E. Heller died on February 26, 1948, owning 542 shares of Heller Brothers stock, represented by two certificates, one for 467 shares and the other for 75 shares. On November 18, 1947, the board of directors of the company declared the regular preferred dividends payable on December 1, 1947, and June 1, 1948, and these dividends were paid on said dates. All of the dividends due and payable on said stock prior to November 18, 1947, have been paid. As shown on page 160 and Schedule III of their first intermediate account, the executors have apportioned the dividend paid on June 1, 1948, in the same light as interest on corporate bonds or mortgages. The amount of the dividends as declared on November 18, 1947, and made payable on June 1, 1948, was $1,890. In apportioning this sum between income and corpus there was error.
A dividend, whether it be ordinary or extraordinary, becomes a debt due from the corporation to the individual stockholder from the time of its declaration and a vested right of the stockholder at such time. Martindell v. Fiduciary Counsel, Inc. , 133 N.J. Eq. 408 (E. & A. 1942); Beattie v. Gedney , 99 N.J. Eq. 207 (Ch. 1926); King v. Paterson and Hudson River R.R. Co. , 29 N.J.L. 504 (E. & A. 1861). See also R.S. 14:8-19 and R.S. 14:8-20.
In Scott on Trusts, section 236.2, the following appears:
"The general rule is that a dividend belongs to those who are owners of the shares at the time when it is declared and not to those who are owners of the shares at the time when it is payable. It is held that by the declaration of the dividend by the corporation the dividend is separated from the assets of the corporation and a debt to those who are stockholders at the time of the declaration is created, although payment of the debt is postponed."
More particularly, Professor Scott says in this same section:
"When a dividend is declared prior to the creation of the trust and no date is specified by the ...