JEANNETTE ROBINSON BELYEA Vs. SAMUEL A MCBRIDE

JUDGEMENT

(1.) This appeal raises a question of very considerable difficulty as to the true construction and effect of the testamentary dispositions of a testatrix (one Maria Famicha Ganong) in relation to certain shares of $100 each owned by her in the common and preferred stock of a company called Ganong Brothers Limited. The relevant facts are as follows : The company was formed in the year 1916 under the laws of the Dominion, and purchased as a going concern, a business which was being carried on by a company incorporated under the laws of the Province of New Brunswick. The testatrix made her will on 25 September 1924. At that time she owned 1100 preferred shares and 436 common shares in the capital stock of the company. In addition she had by a trust indenture of 15 March 1918, assigned to trustees 3790 preferred shares and 3600 common shares (which had been bequeathed to her by her deceased husband) upon certain trusts for her own benefit during her life and after her death for the benefit of certain named relatives of her husband.

(2.) This trust indenture was in certain events revocable, and it was in fact revoked by the testatrix with the result that at her death her estate included 4890 preferred shares and 4036 common shares. The rights of the preferred shares are declared by bye-law No. 54 of the company. They "shall have a fixed cumulative preferential dividend of seven per cent. per annum payable as may be convenient half yearly." On a winding- up the holders "shall be entitled to payment of their stock in full at par (together with any dividends in arrear) and no more ..... in preference and priority to any payments to holders of the common stock." The bye-law continues thus: The said fixed dividend of seven per cent. shall be payable only out of the net profits of the company, but they shall be cumulative dividends, that is to say, if not earned fully and paid in each year, the amount of such dividend or any portion thereof remaining unpaid from time to time shall be paid out of the first net profits of the company accumulated or earned thereafter; and no dividends shall be declared or paid on the common stock of the company until after payment in full of all such dividends at the rate of seven per cent. per annum then payable on the preference stock, but in case any dividend on such preference stock or any part thereof is not paid when due and payable as aforesaid, owing to lack of profits sufficient therefor, the amount so payable and not paid shall bear no interest.

(3.) The said dividends shall begin to run from the 1 day of July 1916. The certificates of the preferred shares state their rights in the following terms: CONDITIONS OF PREFERENCE SHARES. 1. The holders of preference shares shall be entitled out of the net profits whenever ascertained, to a fixed cumulative preference dividend at the rate of seven per cent, per annum on the amount paid up thereon in priority to any payment of dividend upon the common stock, such dividend to be paid at such times as the Directors may determine but to be payable only out of the profits, and the holders shall not be entitled to participate in further dividends or profits. 2. The holders of preference shares, in case the company shall be wound-up or its assets otherwise distributed shall have the right to have the surplus assets, applicable for distribution among the shareholders, applied first in payment of the capital paid up on the said preference shares with all cumulative dividends thereon before any proportion of such surplus assets is distributed among holders of shares not entitled to such preference, but the holders of the said preference shares shall not be entitled to participate in any surplus remaining after the whole amount of capital paid up on such preference shares has, with cumulative dividends, been returned to the holders thereof. The testatrix by her will appointed her brother and sister (the appellants) and one Samuel McBride to be executors and trustees. She ratified and confirmed the trust indenture of 15 March, 1918; as to the rest of her shares in the company she bequeathed the bulk of her preferred shares to or in trust for the children of her brother, the remainder she bequeathed to charitable institutions and to other persons. She made no specific bequest of her common shares, which accordingly would form part of the residuary estate, which she devised and bequeathed to the appellants. Paragraphs 17 and 20 of her will ran thus: 17. I do hereby will and declare that my Executors shall pay out of my personal estate all Succession Duties which at my death may become payable upon the bequests hereby made, it being clearly understood that my estate shall not be liable and nothing herein shall make my estate liable for any Succession Duties or other dues, duties, taxes or other charges or expenses of any kind payable or which may be or become payable upon or in respect of any moneys, stocks, shares of stock, gifts or other benefits which have passed or which may hereafter pass under the provisions of the said Trust Agreement dated 15 day of March A.D. 1918 mentioned in said paragraph fifteen (15) of this my will . 20. I hereby further will and declare that it is my intention and purpose that any and all of the shares, of Ganong Bros. Limited, so hereby bequeathed as aforesaid, shall be and remain the property of my estate and be held by my Executors and Trustees as part of my estate until after the first annual meeting of Ganong Bros. Limited shall have been held subsequent to my decease and until all dividends accruing on said shares of stock from the business of the year in which my decease may occur shall have been paid to my estate for the benefit of my estate intending by this section of my Will to show that both semi-annual dividends on the preferred shares that will be paid during the fiscal year subsequent to my decease but which will have been earned during the fiscal year [in which] my decease may occur must be paid to my estate before making any transfers of the stock, shares devised and bequeathed as aforesaid. The company failed to maintain payment of the dividend on the preferred shares, the last such dividend being declared and paid in July 1933. The dividend was again passed in January a July, 1934, nor has any dividend been subsequently paid. It was this default that entitled the testatrix to put an end to the trusts of the indenture of 15 March 1918, and to have, the shares comprised therein to be retransferred into her name; and on or about 29 September 1934, she exercised her rights in this respect. On 13 October 1934, she executed a second codicil to her will, a first codicil dated 21 August 1926, being immaterial for the purposes of this appeal. By the second codicil she revoked the paragraph of her will by which she had confirmed the trust indenture of 15 March 1918; she made specific bequests of the said 3790 preferred shares. She also made specific bequests of common shares amounting to 3644 shares, declaring that she realized that the common shares had, at that time, no monetary value, but that she hoped that eventually they might become of worth and value. She made no alteration of importance in regard to the preferred shares specifically bequeathed by her will. Clauses 20 and 21 of the second codicil are in the following terms: 20. I hereby revoke and make void para. 17 of my said last will and testament dated 25 September, 1924. and in lieu thereof and in substitution therefor I will and declare that my executors and trustees shall pay out of my personal estate any and all succession duties which may at my death become payable upon any of the bequests made in my said last will and testament or in any codicil thereto, including this codicil, it being my intention that all gifts and bequests, including gifts of shares in the Capital Stock of Ganong Bros. Limited, either preferred or common, to any nephew or niece of my late husband, shall be free from succession duty. But while I make the aforegoing provision with respect to succession duty it is my express will and intention and I hereby direct that notwithstanding anything hereinbefore contained any and all of the shares of the Capital Stock of Ganong Bros. Limited, in and by my said last will and testament and in and by this second codicil to my said last will and testament bequeathed by me, shall be and remain the property of my estate and be held by my executors and trustees as part of my estate until all dividends on the preferred shares accrued to the date of my death have been paid in full and also until the two half yearly dividends which shall accrue immediately subsequent to the date of my death shall have been paid in full to my estate for the benefit thereof, it being my intention by this paragraph of this second codicil to my will that all dividends on said preferred shares accrued due to the date of my death, whether earned or declared or not, together with a full year's dividends accruing due after my death, whether earned or declared or not, shall be paid to my executors and trustees for the benefit of my estate before making any transfers of the stock or shares of Ganong Bros. Limited, common or preferred, devised and bequeathed under my said last will and testament and under this second codicil thereto. 21. In all other respects I do hereby ratify and confirm my said last will and testament save in so far as any part thereof shall be revoked or altered by this codicil thereto or any previous codicil. The testatrix died on 30 November 1934; and her will and codicil appear to have been proved by Samuel A. McBride alone. Being, not unnaturally, in doubt as to the meaning and effect of clause 20 of the second codicil, he issued an originating summons, in his capacity of sole executor and trustee, in the Supreme Court of New Brunswick (Chancery Division), joining the residuary legatees and others interested as defendants, for the determination of the following questions, viz.: (1) Who are entitled to the shares in the capital stock of Ganong Brothers Ltd., either common or preferred bequeathed under any clauses of either the last will and testament of Maria Famicha Ganong or the second codicil thereto? (2) When are the beneficiaries of the said shares entitled to delivery thereof? To these questions a third was subsequently added, viz.: (3) Under the circumstances of the present case are any dividends and, if so, what, apportionable. The summons was heard by Baxter C. J, who by his judgment of 15 January 1940, answered the questions thus: (1) The persons and institutions named therein. (2) Immediately. (3) No question of apportionment arises. On appeal, the Appeal Division of the Supreme Court, by a majority, took a different view, and by order of 19 April 1940, returned the following answers to the questions: (1) The persons and institutions named therein subject to a charge upon the shares bequeathed by the will and second codicil in favour of the executors and trustees to the amount of two years dividends on the preferred shares so bequeathed, viz., $68,460. (2) When the amount of the said charge has been paid to the estate or the said charge released. (3) No question of apportionment arises.