*560 manifested by him, must of course control; but when he has given no special direction upon the question as to what shall be considered principal and what income, he must be presumed to have had in view the lawful power of the corporation over the use and apportionment of its earnings, and to have intended that the determination of that question should depend upon the regular action of the corporation with regard to all its shares. Therefore, when a distribution of earnings is made by a corporation among its stockholders, the question whether such distribution is an apportionment of additional stock representing capital, or a division of profits and income, depends upon the substance and intent of the action of the corporation, as manifested by its vote or resolution; and ordinarily a dividend declared in stock is to be deemed capital, and a dividend in money is to be deemed income, of each share. 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. 99 66 In Bailey v. Railroad Co., 22 Wall. 604, cited for the plaintiff, the point decided was that certificates, issued by a railroad corporation to its stockholders, as representing earnings which had been used in the construction and equipment of its road, and payable, at the option of the company, with dividends like those paid on the stock, were within that provision of the internal revenue laws, which enacted that any railroad company "that may have declared any dividend in scrip or money due or payable to its stockholders, 'as part of the earnings, profits, income, or gains of such company, and all profits of such company carried to the account of any fund, or used for construction, shall be subject to and pay a tax of five per centum on the amount of all such” “dividends or profits, whenever and wherever the same shall be payable, and to whatsoever party or person the same may be payable. Acts June 30, 1864, c. 173, § 122, (13 St. 284;) July 13, 1866, c. 184, § 9, (14 St. 138, 139.) The question at issue was not between the owners of successive interests in particular shares, but between the corporation and the government, and depended upon the terms of a statute carefully framed to prevent corporations from evading payment of the tax upon their earnings. The opinion delivered by Mr. Justice CLIFFORD, though containing some general expressions which, taken by themselves, might seem to ignore the settled distinction (affirmed by this court in earlier and later cases above cited) between the property of the corporation and the interests of the shareholders, yet explicitly recognized that "net earnings of such a company may be expended in constructing or equipping the railroad, or in the purchase of real estate or other properties, and "may be distributed in dividends of stock or of scrip or of money;" that "purchasers of stock have a right to claim and receive all dividends subsequently declared, no matter when the fund appropriated for the pur-, pose was earned; that, "as a general rule, stock dividends, even when they represent net earnings, become at once a part of the capital of the company;" and that "such a dividend, if earned and declared, necessarily increases the value of the old stock, if new stock is not issued, and in that mode reaches substantially the same result." 22 Wall. 635-637. In Great Britain it is well settled that where a corporation, whether authorized or unauthorized by law to increase its capital stock, accumulates and invests part of its earnings, and afterwards apportions them among its shareholders as capital, the amount so apportioned must be deemed an accretion to the capital of each share, the income of which only is payable to a tenant for life. From the beginning of this century it has been established, by decisions of the court of chancery in England, and of the house of lords on appeal from Scotland, that where a bank, having no power by law to increase its capital stock, has used its accumulated profits as floating capital, and invested them in securities which can be turned into cash at pleasure, an extraordinary dividend or bonus declared out of such profits is capital, and not income, of each share, as between owners of the life-interest and of the interest in remainder therein, without inquiring into the time when the profits were actually earned. Brander v. Brander, 4 Ves. 800; Irving v. Houstoun, 4 Paton, 521; Cuming v. Boswell, 2 Jur. (N. S.) 1005, 1008, 28 Law. T. 344, and 1 Paters. Scotch, 652. In Irving v. Houstoun, Lord ELDON (Lord RossLYN and Lord ALVANLEY Concurring) said that if an owner of bank stock "gives the lifeinterest of bis estate to any one, it can scarcely be his meaning that the life-renter should run away with a bonus that may have been accumulating on the floating capital for half a century;" and that to take an account of the precise amount of profits which had accumulated before and after the commencement of the life-interest in particular shares would lead to inconveniences which would be intolerable. 4 Paton, 530, 531. In Cuming v. Boswell, above cited, and relied on by the present plaintiff, the person held entitled to bonuses declared on bank stock was, as stated in the judgment delivered by Lord | Cranworth,*“ not a life-renter, but an absolute fiar;" in other words, not a mere tenant for life, but an owner in fee, although his estate was determinable by his death without issue. It is unnecessary, for the purposes of this case, to consider how far the English decisions upon the question whether a dividend in money, not declared to be made out of accumulated earnings, should be considered as *563 capital or as Income, can be reconciled crued before his death, made a bonus diviwith each other, or with sound principle. dend, and an allotment of new shares, But there are two recent cases of great with liberty to each shareholder to apply authority, concerning stock dividends, the bonus dividend in payment for the new which directly bear upon the question be- shares. Bouch's executor took the new fore us. In one of those cases, shares in a shares, and applied the bonus dividend in steam navigation company were settled payment therefor. The house of lords, by their owner upon trust to pay "the in- | reversing the judgment of the court of apterest, dividends, shares of profits, or an- peal, and restoring an order of Mr. Justice nual proceeds" to a woman during her KAY, held that the corporation did not life, and after her death in trust for her pay or intend to pay any sum as a divichildren. The directors, acting within the dend, but intended to and did appropriate scope of their authority, retained part of the undivided profits as an increase of the a half year's profits, and applied it to pay capital stock; that the bonus dividend for new boats, and the company passed a was therefore capital of the testator's esresolution to issue to existing sharehold- tate, and the widow was not entitled ers new shares representing the money so either to the bonus or to the new shares. applied. It was argued that "the com- The difference of opinion was not as to pany had no power to compel the tenant the general principle which should govfor life to risk any more in the venture ern, but only as to its application to the than the shares originally held, and could action of the corporation in the particular not be allowed for themselves, by declar- case. The house of lords fully approved ing or withholding a dividend out of the the statements of the general principle by profits, to alter the rights as between ten- Vice-Chancellor WooD in Barton's Trust, ant for life and remainder-man." But Vice- above cited, and by Lord Justice FRY, in Chancellor WOOD (afterwards Lord Chan- delivering the judgment of the court of cellor HATHERLEY) held otherwise, and appeal, as follows: "When a testator or said: "As long as the company have the settlor directs or permits the subject of profit of the half year in their hands, it is his disposition to remain as shares or for them to say what they will do with it, stock in a company, which has the power subject, of course, to the rules and regula- either of distributing its profits as divitions of the company. * The dividend or of converting them into capital, dend to which a tenant for life is entitled and the company validly exercises this is the dividend which the company chooses to declare. And when the company meeting on all persons interested under him, and say that they will not declare a dividend, but will carry over some portion of the half year's earnings to the capital account, and turn it into capital, it is competent for them, I apprehend, to do so; and when this is done, everybody is bound by it, and the tenant for life of those shares cannot complain. The only mode in which a tenant for life could act would be to use his influence with his trustees as to their votes with reference to the proposed arrangement. If a man has his shares placed in settlement, he gives his trustees, in whose names they stand, a power of voting, and he must use his influence to get them to vote as he wishes. But where the company, by a majority of their votes, have said that they will not di- | vide this money, but turn it all into capital, capital it must be from that time. I think that is the true principle, and I must hold that these additional shares formed part of the capital fund under the settlement, and went to the children, and not to the tenant for life (their mother.)" Barton's Trust, L. R. 5 Eq. 238, 243–245. In the most recent English case on the subject William Bouch bequeathed to his executor, in trust for his widow for life, and after her death to the executor, his personal estate, including shares in an iron company, whose directors had power, before recommending a dividend, to set apart out of the profits such sums as they thought proper as a reserved fund, for meeting contingencies, equalizing dividends, or repairing or maintaining the works. Four years after the testator's death, the company, upon the recommendation of the directors, and out of a fund so reserved in the testator's life-time, and of undivided profits, about half of which ac power, such exercise of its power is bind the testator or settlor, in the shares; and consequently what is paid by the company as dividend goes to the tenant for life, and what is paid by the company to the shareholder as capital, or appropriated as an increase of the capital stock in the concern, inures to the benefit of all who are interested in the capital. In a word, what the company says is income shall be income, and what it says is capital shall be capital. "In most if not in all cases, the inquiry as to the time when the profits were earned by the company is an immaterial one as between the tenant for life and remainder-man. Their rights have been made dependent on the legitimate action of the company, and " (subject to any rights arising from the law of apportionment, which was not in question) "are determined by the time, not at which the profits are earned by the company, but at [by] the time at which they are by the action of the company made divisible amongst its members. Sproule v. Bouch, 29 Ch. Div. 635, 653, 658, 659; Bouch v. Sproule, 12 App. Cas. 385, 397, 402, 407, 408. The same principle was established in Massachusetts before the case of Sproule v. Bouch had come before the courts of England. Atkins v. Albree, 12 Ailen, 359; Minot v. Paine, 99 Mass. 101; Daland v. Williams, 101 Mass. 571; Leland v. Hayden, 102 Mass. 542; Rand v. Hubbell, 115 Mass. 461; Gifford v. Thompson, Id. 478. And in Connecticut, Rhode Island, and Maine a dividend of new shares, representing accumulated earnings, is held to be capital, and not income. Brinley v. Grou, 50 Conn. 66; In re Brown, 14 R. I. 371; Richardson v. Richardson, 75 Me. 570, 574. In New York, the recent judgments of *565 the court of appeals appear to have practically overruled the decisions of the lower courts in Clarkson v. Clarkson, 18 Barb. 646; Simpson v.*Moore, 30 Barb. 637; Woodruff's Estate, Tuck. 58; and In re Pollock, 3 Redf. Sur. 100,-cited in behalf of the plaintiff, and to have settled the law of that state in accordance with that of England and of Massachusetts. In Hyatt v. Allen, 56 N. Y. 553, the defendant, by a contract made August 11, 1871, under which he transferred to the plaintiffs certain stock in a manufacturing corporation, agreed to pay them "all profits and dividends of and upon the stock up to the 1st day of January, 1872." In April, 1872, the corporation declared a dividend of $15 a share, five-sixteenths of which were found by a referee to have been derived from the increase in value of its property between August 11, 1871, and January 1, 1872; and the court below gave judgment for the plaintiff for that proportion of the dividend. But the court of appeals reversed the judgment, and said: A shareholder in a corporation has no legal title to the property or profits of the corporation until a division is made. When, therefore, a contract is made in relation to dividends or profits, it must be deemed to have reference to dividends or profits to be ascertained and declared by the particular company, and not to growing profits from day to day, or month to month, to be ascertained upon an investigation by third persons, or courts of justice, into the accounts and transactions of the company." 56 N. Y. 557, 558. In Williams v. Telegraph Co., 93 N. Y. 162, the court of appeals, in the course of an elaborate discussion of the right of a corporation, when unrestrained by statute, to make a stock dividend, said: "When a corporation has a surplus, whether a dividend shall be made, and, if made, how much it shall be, and when and where it shall be payable, rest in the fair and honest discretion of the directors, uncontrollable by the courts. * * * Whether they shall be made in cash or property must also rest in the discretion of the directors. 66 dividend should be deemed principal and what part income by ascertaining how much was earned before and how much after the death of the testator; approved the general principle laid down in the cases of Barton's Trust, L. R. 5 Eq. 238, 245, and Sproule v. Bouch, 29 Ch. Div. 635, 653, above cited; and said: "From the shares in question no income could accrue, no profits arise to the holder, until ascertained and declared by the company and allotted to the shareholder; and that act should be deemed to have been in the mind of the testator, and not the earnings or profits as ascertained by a third person, or a court, upon an investigation of the business and affairs of the company, either upon an inspection of their books or otherwise." "The rule is a reasonable and proper one, which limits the rights of a stockholder to profits by the action of the managers of a corporation or company. It is their sole and exclusive duty to divide profits and declare dividends whenever, in their judgment, the condition of the affairs of the corporation renders it expedient; and it would lead to great embarrassment and confusion if a court should undertake to interfere with their discretion so long as they do not go beyond the scope of their powers and authority." 104 N. Y. 628, 629, 11 N. E. Rep. 153. In Earp's Appeal, 28 Pa. St. 368, on the other hand, the supreme court of Pennsylvania declined to follow the early English cases, and adopted the rule that, where a corporation, *after having accumulated large surplus profits for many years before and since the death of the testator, increased its capital stock, and issued additional shares to the stockholders, so much of the surplus profits as had accumulated in the life-time of the testator should be deemed capital, and so much as had accumulated since his death should be deemed income; and in Wiltbank's Appeal, 64 Pa. St. 256, where a corporation voted to increase its capital stock by an issue of new shares to be subscribed and paid for by the stockholders, and a trustee holding shares sold the right to take some new shares, and took others and sold them at an advance, that rule was carried so far as to hold that the sums so received by the trustee were income of the old shares, for the reason that the right to subscribe to new shares, the court thought, "was not a part of the capital of the old stock, but a mere product of an advantage belonging to it, a right incidental to the stock, and therefore income." The rule upon which those two cases proceeded has since been treated as settled in Pennsylvania, although there has been some difficulty, if not inconsistency, in applying it; and in one case Mr. Justice PAXSON, now Desiring to use the surplus and add it to the permanent capital of the company, and having lawfully created shares of stock, they could issue to the stockholders such shares to represent their respective interests in such surplus." "After a stock dividend a corporation has just as much property as it had before. It is just as solvent, and just as capable | of meeting all demands upon it. After such a dividend, the aggregate of the stockholders own no more interest in the corporation than before. The whole number of shares before the stock dividend represented the whole property of the corporation, and after the dividend they rep-chief justice of Pennsylvania, spoke of both resent that and no more. A stock dividend does not distribute property, but simply dilutes the shares as they existed before." 93 N. Y. 189, 192. Finally, in Kernochan's Case, 104 N. Y. 618, 11 N. E. Rep. 149, the court of appeals applied the same rules as between the remainder-man and the person entitled for life to the income of shares bequeathed in trust; rejected the test of determining what part of a cash those cases as exceptional and depending on peculiar circumstances. Moss' Appeal, 83 Pa. St. 264, 269, 270; Biddle's Appeal, 99 Pa. St. 278; Vinton's Appeal, Id. 434. The only other states, so far as we are informed, in which the Pennsylvania rule prevails, are New Jersey and New Hampshire. Van Doren v. Olden, 19 N. J. Eq. 176; Ashhurst v. Field's Adm'r, 26 N. J. Eq. 1; Van Blarcom v. Dager, 31 N.J. Eq.783,793; 989. Lord v. Brooks, 52 N. H. 72; Peirce v. Burroughs, 58 N. H. 302, 303. Upon the grounds already stated, that rule appears to us to be open to grave objections, both in principle and in application, as well as opposed to the weight of authority. In the case at bar, the testatrix bequeathed to her daughter, Jane Owen Mahon, 280 shares of stock in the Washington Gas-Light Company, as well as some shares in an insurance company, and bonds of the United States, "in trust for the advantage and behoof of" her daughter, Mary Ann Gibbons; and directed that after the decease of the testatrix the trustee should "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 stock, bonds, and income shall revert to the estate of my said daughter, Jane Owen Mahon, without incumbrance or impeachment of waste." Upon the face of the will, it is manifest that the testatrix used the word “dividends" as having the same scope and meaning as "income" and "interest," and nothing more; and intended that the plaintiff, as equitable legatee for life, should take the income, and the income only, of the shares owned by the testatrix at the time of her death; and that the whole capital of those shares, unimpaired, should go to the defendant, as legatee in remain der. The admitted facts present the following state of things: The accumulated earnings of the company were kept undivided, and actually added to the capital of the corporation, by investing them from time to time in its permanent works and plant, until the value of the works and plant amounted to $1,000,000; no owner of particular shares, or of any interest therein, had the right to compel the company to divide or apportion those earnings; and while they remained so undivided and invested the capital stock of the company was increased to the same amount by the act of congress of May 24, 1866. The greater part of the earnings in question had been so invested before the making of the will and the death of the testatrix in 1865, a still larger proportion before the passage of the act of congress of 1866, and the whole before the resolution of the directors of November 1, 1868, under which the new shares were issued to the defendant, and in which it was recited, in accordance with the truth, that the construction account of the company exceeded $1,000,000, and that its capital had been increased by act of congress to that amount, and it was therefore "resolved, that the increased stock be awarded among the stockholders, share for share, as they stood on the 1st of October, 1868.". To hold the plaintiff to be entitled to the whole of the new shares issued to the defendant would be to allow the plaintiff the exclusive benefit of earnings, the greater part of which had accrued and had been invested by the company as capital before her interest began, and would be contrary to all the author As ities. To award to her a proportion of those shares, based upon an account of how much of those earnings actually accrued after the death of the testatrix, would be to substitute the estimate of the court for the discretion of the corporation, lawfully exercised through its directors, and would be open to the practical inconveniences already stated. The resolution is clearly an apportionment of the new shares as representing capital, and not a distribution or division of income. well observed by Mr. Justice JAMES, delivering the opinion of the court below: "Certificates of stock are simply the representative of the interest which the stockholder has in the capital of the corporation. Before the issue of these two hundred and eighty new shares, this trustee held precisely the same interest in this increased plant in the capital of the corporation that she held afterwards. She merely had a new representative of an interest that she already owned, and which was not increased by the issue of the new shares. A dividend is something with which the corporation parts, but it parted with nothing in issuing this new stock. It simply gave a new evidence of ownership which already existed. They were not in any sense, therefore, dividends for which this trustee had to account to the cestui que trust. She stood, after the issue of the new shares, just as she had stood before; and the trustee was obliged to treat them just as she did, namely, as a part of the original, and to pay the dividends to the cestui que trust. 4 Mackey, 136. Decree affirmed. BREWER, J., not having been a member of the court when this case was argued, took no part in the decision. (136 U. S. 581) MASON et al. v. UNITED STATES. WRIT OF ERROR-PARTIES. Where, to a joint judgment against several defendants, two of them sue out a writ of error without joining the others, or without a severance, a motion for leave to amend by joining the other defendants, or by a severance, will be denied. Error to the circuit court of the United States for the northern district of Illinois. Judgment was recovered against a principal and his five sureties in a bond given by a postmaster. Two of the sureties sued out a writ of error to this judgment without joining the other parties, and without a summons and severance. When the case was reached on the docket a motion was made for leave to amend by joining the other defendants, as plaintiffs in error, or, if that could not be allowed, that an order and judgment of severance be entered so that the writ of error could be prosecuted by the two who had sued it out. W. C. Goudy, for plaintiffs in error. The Solicitor General, for defendant in error. PER CURIAM. The motion for leave to amend the writ of error, citation, and bond in this cause is denied, and the writ of error is dismissed. (136 U. S. 570) SHERMAN v. ROBERTSON. (December 2, 1889.) CUSTOMS DUTIES-CONSTRUCTION OF LAW-GOODS IN BOND AND ON SHIP. * * * • Under Act Cong. March 3, 1883, (22 St. 489, 525,) which took effect July 1, 1883, and provided that "all imported goods which may be in public stores or bonded warehouses on the day when this act shall go into effect *shall be subject to no other duty upon entry for consumption than if the same were imported after that day," goods on a vessel entered at port June 30, 1883, and remaining thereon in charge of a customs officer preliminary to their removal, are dutiable only under such act, although not entered at the custom-house until July 2, 1883. Following Hartranft v. Oliver, 8 Sup. Ct. Rep. 958. Error to the circuit court of the United States for the southern district of New York. This case was submitted on a stipulation reciting, among other things: "Now it is conceded by the attorney general, in behalf of the defendant in error, that the facts in this cause as shown by the plaintiffs' bill of exceptions contained within the record on this appeal, duly filed in the office of the clerk of this court, are, in all substantial respects, the same as the facts upon which judgment was rendered for the plaintiffs in the court below in the cause of Hartranft v. Oliver, which was argued in this court March 22, 1888, and is reported in 125 U. S. 525, 8 Sup. Ct. Rep. 958; that is to say: (1) The plaintiffs herein imported white cotton goods into the port of New York. The vessel carrying the goods arrived at that port on the 30th day of June, 1883, and was immediately boarded by customs officers of the United States, who took into their custody all goods on board. (2) The plaintiffs could not have obtained possession of their said goods from the said customs officers without a certain 'permit,' to be issued by the defendant after the goods were 'entered' by the plaintiffs at the custom-house of the said port, and the goods could not be so entered there until after the vessel itself was entered or reported there. (3) The plaintiffs had a clerk waiting at the said custom-house for the purpose of entering their said goods as soon as the vessel should be so entered or reported there on the said 30th day of June, 1883, but that the vessel was not so entered or reported there until at or about 2 o'clock, P. M., of that day, and that it was then too late to enter the said goods in the usual course of business within that day in the said custom-house. (4) The first day of July, 1883, was a Sunday. The said goods were duly entered at the said custom-house on the second day of July, 1883, having remained meantime solely in the custody of the said customs officers on board the said vessel. (5) The said goods were not in any public store-house or bonded warehouse on the first day of July, 1883, otherwise than as herein above appears. The defendant, as collector of said port, levied customs duties upon plaintiffs' said goods, at the rates provided for by section 2504 of the Revised Statutes of the United States, amounting to $2,754.41. The plaintiffs objected and protested against such levy upon the ground that the levy should have been made under the act of congress entitled 'An act to reduce internal revenue taxation, and for other purposes,' approved March 3, 1883, under which lastmentioned act the duties upon the said goods would have amounted to $2,179.59, but they paid the amount of the said levy of the defendant, and duly brought this action to recover the difference or excess so paid, to-wit, to recover $574.82. And hereupon the counsel for both parties deem it not necessary to print the record on this appeal, or to argue the appeal before the court, and the attorney general, in behalf of the defendant, submits to the direction of the court upon the motion of plaintiffs' counsel for judgment." Waldo Hutchins and William Torse Scott, for plaintiffs in error. The Solicitor General, for defendant in error. PER CURIAM. The judgment of the court below is reversed with costs, on the authority of the decision of this court in the case of Hartranft v. Oliver, 125 U. S. 525, Sup. Ct. Rep. 958, (No. 190 of October term, 1887,) and the cause is remanded with directions to enter judgment for the plaintiffs. (136 U. S. 572) INLAND & S. COASTING Co. v. TOLSON. (January 6, 1890.) WRIT OF ERROR-PARTIES JOINT JUDGMENT— AMENDMENT. On appeal from the special to the general term of the supreme court of the District of Columbia the judgment of the special term against defendant was affirmed; and it was further adjudged that paintiff recover on his judgment against defendant and its sureties (naming them) on the appeal, and have execution against them, and each of them. The writ of error to the judgment of the general term recited the judgment as against defendant, and in the citation defendant was described as plaintiff in error, no mention being made of the sureties in the citation or supersedeas bond. The writ was dismissed because the sureties were not joined therein with defendant. Held, that a motion to rescind the judgment of dismissal, to restore the cause, and to amend the writ by inserting therein the names of the sureties, as plaintiffs in error, would be granted. Error to the supreme court of the Dis. trict of Columbia. Judgment was rendered against defend. ant at the special term of the supreme court of the District of Columbia. He appealed to the general term, where the judgment of the special term was affirmed; and it was further adjudged that plaintiff recover on his judgment against defendant, and against Henry A. Willard, John W. Thompson, Samuel Norment, and J. H. Baxter, defendant's sureties on the appeal, and have execution against them and each of them. The writ of error to the judgment of the general term recited the judgment as against the defendant, and in the citation defendant was described as plaintiff in error. Neither the citation nor the supersedeas bond made any mention of the sureties. The writ was dismissed because the sureties were not joined therein with defendant. Thereafter defendant moved that the judgment of dismissal be rescinded, that the cause be restored, and that he have leave to amend 571 |