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now in your crew? By the word "crew" I mean sailors. I do not mean men in the steward's department, or men in the steerage department, or men in the fireroom. I mean crew-sailor men.
Mr. Denman: I object to the question as incompetent, irrelevant, and immaterial, and in no way referring to the City of Rio de Janeiro, the ship in issue.
Mr. McAllister: Q. Thirty-two men? 1. Yes, sir.
Q. Can any of those men speak English? Mr. Denman : The same objection. 4. All of them can speak English. Some cannot speak quite so well as others, but all of them can understand when you give them an order about the ship.
Mr. McAllister: Q. Can you give to a majority of that crew yourself an order in English to haul this rope, or do this or that, whatever you saw fit?
4. Yes, sir.
Q. And would they understand you? 4. Yes, sir.
But how about Chinese sailors, or sailors of any other class or race, who cannot understand the orders that become neces
sary in the course of their duties because of a lack of knowledge of the language in which they have to be given? That is the
question we have to consider and determine here.* It is declared by § 4463 of the same
statutes [U. S. Comp. Stat. 1901 p. 3045] that "no steamer carrying passengers shall depart from any port unless she shall have in her service a full complement of licensed officers and full crew, sufficient at all times
to manage the vessel, including the proper number of watchmen. But if any such vesel... is deprived of the services of any licensed officer, without the consent, fault, or collusion of the master, owner, or any person interested in the vessel, the deficiency may be temporarily supplied, until
others licensed can be obtained."
the exigencies of the intended route;" not merely competent for the ordinary duties of an uneventful voyage, but for any exigency that is likely to happen, such, for example, as unfortunately did happen in the present case, the striking of the ship on a reef of rocks,—and the consequent imperative necessity for instant action to save the lives of passengers and crew. The duty rested upon the petitioner to be prepared for such an emergency, not only by reason of the statute cited, but by the general maritime law. In the case of The Gentleman, Olcott, 115, Fed. Cas. No. 5,324, it was held that the owners were liable for furnishing an inadequate crew, which they shipped at the Gambia river, West Africa, large enough in numbers, but sick with fever. In Tait v. Levi, 14 East, 482, it was held that, where the captain did not know the coast, and entered the enemy's port, and was captured, the vessel was "incompetently fitted out," because there was no proper master for the purpose of the voyage. In Parsons v. Empire Transp. Co. 49 C. C. A. 302, 111 Fed. 202, 208, we held that, where the owners appointed an incompetent superintendent to
anage ships in Alaskan waters, they were loss arising from sending out a barge in not entitled to a limitation of liability for wintry and stormy weather. There can, in our opinion, be no doubt that the crew of a ship must be not only sufficient in numbers, called upon to perform. The case shows but also competent for the duties it may be that the City of Rio de Janerio left the port of Honolulu, on the voyage under consideration, with a crew of 84 Chinamen. officered by white men. The officers could not speak the language of the Chinese, and
but two of the latter-the boatswain and
chief fireman-could understand that of the officers. Consequently, the orders of the of ficers had to be communicated either
through the boatswain or chief fireman, or by signs and signals. So far as appears, that seems to have worked well enough on the voyage in question, until the ship came to grief, and there arose the necessity for
quick and energetic action in the darkness.
In that emergency the crew was wholly inefficient and incompetent, as the sad results proved. The boats were in separate places on the ship. The sailors could not understand the language in which the orders of the officers in command of the respective boats had to be given. It was too dark for them to see signs (if signs could have been intelligibly given), and only one of the two Chinese who spoke English appears to have known anything about the lowering of a boat; and there had been no drill of the crew in the matter of lowering them. Under such circumstances it is not
surprising that but three of the boats were lowered, one of which was successfully launched by the efforts of Officer Coghlan and the ship's carpenter, another of which was swamped by one of the Chinese crew letting the after fall down with a run, and the third of which was lowered so slowly that it was swamped as the ship went down. We have no hesitation in holding that the ship was insufficiently manned, for the reason that the sailors were unable to understand and execute the orders made imperative by the exigency that unhappily arose, and resulted so disastrously to life, as well as to property. It results from what has been said that the court below also erred in denying the appellant Clara Barwick's claim made on her own behalf and that of her minor children, for damages for the death of her husband, on the ground that he was a fellow servant of the master and pilot of the ship.
The action of the court in respect to the vember 7, 1904.
Samuel D. SMITH, Trustee, etc., of Alfred
CONNECTICUT SUPREME COURT OF ERRORS.
C. Bates DANA et al.
1. Investment of the profits of a poration in permanent works does not capitalize them, so that upon the sale of the works the directors cannot distribute them as a cash dividend, which will belong to life tenants, and not to remaindermen, of the stock.
2. Cash dividends upon corporate stock belong to the life tenants notwithstanding they were derived from the sale of permanent property in which profits had been
claim of Ruth Miller, executrix of the etate of Sarah Wakefield, deceased, was, in our opinion, correct.
3. The rule that cash dividends on cor-
NOTE. AS to rights of life tenants and remaindermen with respect to stock dividends, see also, in this series, Spooner v. Phillips, 16 L. R. A. 461; and note; Hite v. Hite, 19 L. R. A. 173; Mills v. Britton, 24 L. R. A. 536;
The judgment is reversed, and the cause remanded, with directions to the court below to enter judgment against the petitioner denying its application for a limitation of liability, and in favor of the respective claimants for the full amount of damages it has heretofore awarded them, with interest and costs, and in favor of the claimant Clara Barwick for such amount of damages as the court shall find from the evidence already taken, or that may be taken, she is entitled to by reason of the death of her husband, and by reason of the loss of his personal effects; and against the claim of Ruth Miller, as executrix of the estate of Sarah Wakefield, deceased, in so far as it is based upon her death.
Petition for writ of certiorari denied No
capital stock is not impaired, and its value remains above par, and practically the same after the dividends as before.
(March 9, 1905.)
CROSS-APPEALS by the respective de
fendants from a judgment of the Superior Court for Hartford County in an interpleader proceeding to determine the rights of life tenants and remaindermen to certain corporate dividends. Reversed on
the appeal of the life tenants.
The facts are stated in the opinion.
Mr. Charles E. Gross, for I. C. Bates Dana, life tenant, appellant:
Cash dividends are income, and go to the life tenant, and stock dividends are capital, and go to the remaindernian.
2 Thomp. Corp. chap. 35, art. 5, §§ 2193, 2199, 2201, 2207, 2208, 2211, 2212, 2222.
The law of Connecticut follows the general rule.
Mills v. Britton, 64 Conn. 12, 24 L. R. A. 536, 29 Atl. 231; Terry v. Eagle Lock Co. 47 Conn. 141; Brinley v. Grou, 50 Conn. 66, 47 Am. Rep. 617; Hotchkiss v. Brainerd Quarry Co. 58 Conn. 120, 19 Atl. 521: Spooner v. Phillips, 62 Conn. 62, 16 L. R. A. 461, 24 Atl. 524.
This rule is based upon the absolute necessities of the case.
Pritchett v. Nashville Trust Co. 33 L. R. A. 856: McLouth v. Hunt, 39 L. R. A. 230; Quinn v. Safe Deposit & T. Co. 53 L. R. A. 169; and De Koven v. Alsop, 63 L. R. A. 587.
Brinley v. Grou, 50 Conn. 76, 47 Am. Rep. | ed. 525, 10 Sup. Ct. Rep. 1057; Bouch v. 617; Spooner v. Phillips, 62 Conn. 74, 16 L. R. A. 461, 24 Atl. 524; Gibbons v. Mahon, 136 U. S. 549, 34 L. ed. 525, 10 Sup. Ct. Rep. 1057; Hotchkiss v. Brainerd Quarry Co. 58 Conn. 137, 19 Atl. 521.
Sproule, L. R. 12 App. Cas. 385; Hemenway v. Hemenway, 181 Mass. 406, 63 N. E. 919.
The law presumes that a dividend made by a going concern is made from profits.
2 Thomp. Corp. § 2193.
The stockholders of the Holyoke Water Power Company never had any title to, or interest in, the earnings, property, or surplus (as such) of the incidental plants.
Gibbons v. Mahon, 136 U. S. 549, 34 L. ed. 525, 10 Sup. Ct. Rep. 1057.
They were the sole property of the water power company, when received were merged with its other asse and whether they were spent or set aside, invested or paid out in cash dividends, it is impossible, as well as immaterial, to decide.
Mr. Edward I. Baker, for John M. Steele, Gertrude D. Steele, and C. Bates Dana, remaindermen, appellants:
The gas plant was a part of the original capital of the corporation. When the corin-poration invested its money in the construction of the electric-light plant, and later in its purchase, the corporation permanently capitalized that money, and the plant became a part of the permanent capital of the corporation just as the gas plant had always been; and a distribution of that permanent capital was not a dividend of earn
2 Thomp. Corp. § 2207.
The fact that these plants have been come producing does not make the proceeds thereof, when sold, capital. The capital of the company must be increased to take up such invested accumulations.
Messrs. Grosvenor Calkins and Robert M. Washburn, for life tenants, appellants:
Cash dividends are income, and belong to ings. the life tenant.
Minot v. Paine, 99 Mass. 101, 96 Am. Dec. 705; Brinley v. Grou, 50 Conn. 66, 47 Am. Rep. 617; Mills v. Britton, 64 Conn. 4, 24 L. R. A. 536, 29 Atl. 231; Bouch v. Sproule, L. R. 12 App. Cas. 385; Gibbons v. Mahon, 136 U. S. 549, 34 L. ed. 525, 10 Sup. Ct. Rep. 1057; Re Brown, 14 R. I. 371, 51 Am. Rep. 397; Richardson v. Richardson, 75 Me. 570, 46 Am. Rep. 428; Lord v. Brooks, 52 N. H. 72; Re Kernochan, 104 N. Y. 618, 11 N. E. 149.
This dividend of 65 per cent is not a dividend in liquidation, but is income, and should be paid to the life tenants.
Harvard College v. Amory, 9 Pick. 446; Balch v. Hallet, 10 Gray, 402; Reed v. Head, 6 Allen, 174; Gifford v. Thompson, 115 Mass. 478; Hemenway v. Hemenway, 181 Mass. 406, 63 Atl. 919; Second Universalist Church v. Colegrove, 74 Conn. 79, 49 Atl. 902; Davis v. Jackson, 152 Mass. 58, 23 Am. St. Rep. 801, 25 N. E. 21.
Mr. Charles Welles Gross for plain
It is the well-settled policy of all courts to interfere as little as possible with the management of corporate affairs, an' to establish plain and uniform rules to guide persons in fiduciary positions in the management of their trusts.
Bouch v. Sproule, L. R. 12 App. Cas. 385; Minot v. Paine, 99 Mass. 101, 96 Am. Dec. 705; Richardson v. Richardson, 75 Me. 570, 46 Am. Rep. 428; Lyman v. Pratt, 183 Mass. 58, 66 N. E. 423.
The only exception to the rule is that cash dividends declared in liquidation are principal, and belong, not to the life tenant, but to the remaindermen.
The rule that ordinary cash dividends are income, and stock dividends are principal, does not apply to a distribution of capital.
Hotchkiss v. Brainerd Quarry Co. 58 Conn. 120, 19 Atl. 521; Spooner v. Phillips, 62 Conn. 62, 16 L. R. A. 461, 24 Atl. 524; Heard v. Eldredge, 109 Mass. 258, 12 Am. Rep. 687; Gifford v. Thompson, 115 Mass. 478; Hemenway v. Hemenway, 181 Mass. 406, 63 N. E. 919; D'Ooge v. Leeds, 176 Mass. 558, 57 N. E. 1025; Wheeler v. Perry, 18 N. H. 307; Walker v. Walker, 68 N. H. 407, 39 Atl. 432; Re Skillman, 2 Connoly, 161, 29 N. Y. S. R. 217, 9 N. Y. Supp. 469; Vinton's Appeal, 99 Pa. 434, 44 Am. Rep. 116; Bouch v. Sproule, L. R. 12 App. Cas. 385.
Prentice, J., delivered the opinion of the court:
The will of Alfred Smith, who died in Hartford, the place of his residence, on August 12, 1868, was on August 16th following admitted to probate in the court of probate for the district of Hartford. By the will the testator gave to trustees the sum of $100,000. By the terms of the trust the trustees were required to pay over the income to certain persons designated during the lives of three grandchildren and the survivor of them, and upon the death of the last survivor to divide and distribute the
Gifford v. Thompson, 115 Mass. 478. The courts are willing to be guided by a clear expression of intention in the form of a vote of the directors of a corporation in declaring a dividend.
Gibbons v. Mahon, 136 U. S. 549, 34 L. corpus in the manner provided. Each of
the three grandchildren was made the beneficiary of a share of said income during his life. The defendant I. C. Bates Dana is the only one of them surviving. Certain of the other defendants are his children and the husband of one of them. The remaining defendants are the children of Alfred F. Dana, another of said grandchildren. The third died childless. It is assumed and conceded by all parties that these defendants embrace all who, under the provisions of the will, are, or can become, entitled to share in the income of the trust estate, and all who are, or can become, entitled to participate in the division of the corpus upon the termination of the trust to pay over income, unless it be persons representing them or hereafter born children of said Bates Dana. The children of Alfred occupy the position of both life tenants and remaindermen. The claim which they here assert is made in the former capacity.
tion a statement of some of the facts which enter into the history of the corporation in question, and which serve to indicate the source and character of the corporate assets which formed the basis of the 65 per cent dividend. Previous to 1859 the Hadley Falls Company, a Massachusetts corporation, had acquired a large tract of land where the city of Holyoke is now located, and had constructed a dam across the Connecticut river, extending from South Hadley, on the northeasterly shore, to Holyoke, on the southwesterly shore, of the Connecticut river, and had built locks and canals at Holyoke, and had laid out streets, sites for manufactories, tenements, and residences; and several factories, residences, and other buildings had been erected. Among other buildings, said Hadley Falls Company had constructed a small gas plant, which it operated. Subsequently said company went into a receiver's hands, and the Holyoke Water Power Company, hereinafter referred to as the Holyoke company, was, in 1859, organized with a capital stock of $350,000 to purchase and take over said property of said Hadley Falls Company. The purchase was made, the entire capital of the Holyoke company being paid as the consideration therefor. The purpose of the Holyoke company, as defined in the act creating it, was "of upholding and maintaining the dam across the Connecticut river heretofore constructed by the Hadley Falls Company and one or more locks and canals in connection with the said dam, and of creating and maintaining a water power to be used by said corporation for manufacturing and mechanical purposes, and to be sold or leased to other persons or corporations to be used for like purposes." The charter gave the corporation "full power and authority to purchase, take, hold, receive, sell, lease, and dispose of all or any part of the estate, real, personal, or mixed, with all the water power, water courses, water privileges, dams, canals, rights, easements, and appurtenances thereto pertaining or belonging, or therewith connected, or which have at any time heretofore belonged unto, or been the property of, the said Hadley Falls Company, and any other real estate that may be required for the use of said corporation for the purposes contemplated by this act." The Holyoke company continued the manufac ture, sale, and distribution of gas by the usual means and methods, to supply the needs of the growing community which came into existence upon the site of its property, and which in time became the city of Holyoke, without other authority therefor than was contained in those portions of the charter recited until 1873, when special legis lative authority was obtained. In 1880 the
The will provided that, in setting apart said trust fund of $100,000, there should be included therein 300 shares of the stock of the Holyoke Water Power Company, which the testator owned; the same to be taken for that purpose at their par value. That was done. The capital stock of said corporation was then $350,000. July, 1877, said capital was increased to $600,000 by the issue of new stock subscribed and paid for at par. The right to subscribe for this new issue was accorded to existing stockholders pro rata. The trustees sold the rights attaching to said 300 shares. In 1893 the capital stock was again increased to $1,200,000, in the same manner as before. At this time the trustees subscribed for and took 200 shares, making their trust holdings 500 shares, and sold the remaining rights. December 20, 1902, the directors declared a cash dividend of 65 per cent payable December 24th to stockholders of record December 20th. The plaintiff, who is the only survivor of the trustees, received the sum of $32,500 as the amount of said dividend upon said 500 shares. This sum he now holds. The defendants Bates Dana and the children of Alfred Dana claim the whole thereof as income to which they are entitled. The children of Bates Dana claim that the whole, or at least the bulk, of said sum belongs to the corpus of the trust estate, and should be held by the trustee as an accretion thereto. The trial court sustained this claim with respect to approximately two thirds of the dividend, and adjudged that the balance be divided as income. This conclusion, and the reasons which the court gave in support of it, as well as those which counsel for said children of Bates Dana urge in support of their broader contention, require for their understanding and examina
company was, as required by law of all per- relations to participate in the benefits of sons engaged in the generation and sale of a distribution to stockholders of the assets, electricity, duly authorized to engage in or some portion of the assets, of the corpothat business by an order of the board of ration. In the present case a solvent and gas commissioners. From that date down going corporation, whose capital was unto December, 1902, it generated electricity dergoing no reduction in amount, declared for sale and distribution, erecting and main- a dividend payable and paid in cash. Life taining a plant for that purpose. As the re- tenants of stock held in trust claim to be sult of proceedings instituted under the pro- entitled to the dividend payment as income. visions of chapter 370, p. 949, of the acts Remaindermen claim that it should go to of the legislature of Massachusetts of the augment the capital account of the trust year 1891, which are in the main similar to estate. In Minot v. Paine, 99 Mass. 101, those in force in this state regulating the 96 Am. Dec. 705, the necessity of some establishment of gas and electric plants by plain and simple rule which in situations municipalities within which there are ex- like the present, frequently arising, should isting public service plants of that character serve to guide trustees in the discharge of owned by private corporations, the city of their duties, and cestuis que trust in the Holyoke on December 15, 1902, acquired both | determination of their rights, without a the gas and electric plants of the Holyoke resort to harassing and expensive litigation, company; paying therefor the sum fixed by was expressed, and such a rule formulated. the commission appointed for that purpose This rule made the character of the diviby the court under the provisions of said dend the test. Cash dividends, it was said, act. Upon such acquisition the right of the should be regarded as income, and stock Holyoke company to engage in the business dividends as capital. It was not pretended of manufacturing and distributing gas or that this rule, which has been commonly electricity ceased by virtue of the provisions known as the Massachusetts rule, was the of said act. The amount so paid by said ideal rule of reason; nor have the courts city to said company was $721,043. By the of high authority which have given their use of said sum and other moneys of the cor- approval of it ever claimed it to be such, poration on hand, which at the time did not or one which would accomplish exact justice exceed $150,000 in amount, the dividend in under all circumstances. What has been question, requiring the disbursement of claimed for it is that its general appli$780,000, was paid. The actual cost to the cation-at least if due regard be had for the company of the electric-light plant was substance and intent of the transaction— $243,776.34. Previous to the declaration of would prove more beneficent in its consesaid dividend of 65 per cent the market quences, and, on the whole, lead to results value of the shares of said company was more closely approximating to what was from $380 to $385 per share. At the time just and equitable, than would the appliof its declaration the company held real cation of any other rule, or any attempt to and personal property amounting in value go behind the declaration of the dividend to more than $4,000,000 over and above all to search out and discover the equities of of its obligations. At the date of the com- each case according to some theoretical mencement of this action the market value ideal. Gibbons v. Mahon, 136 U. S. 549, 34 of the shares of the company, as evidenced L. ed. 525, 10 Sup. Ct. Rep. 1057; Richardby the sale of a few shares of said stock, ap- son v. Richardson, 75 Me. 570, 46 Am. Rep. peared to be from $315 to $325 per share. 428; Rand v. Hubbell, 115 Mass. 461, 15 All sums derived from the issue of stock Am. Rep. 121; D'Ooge v. Leeds, 176 Mass. have gone into the general treasury, and 558, 57 N. E. 1025; Lyman v. Pratt, 183 there become mingled with the other funds Mass. 61, 66 N. E. 423. The necessity for a of the company. No separation of funds rule which should serve as a guide and prohas been made, and it is impossible to trace tection to trustees in the performance of the funds derived from any one source so their duties is apparent. The advantages of as to follow them into any distinct invest- one which would make ceaseless litigation, ments. For many years the company has with its attendant harassment and expense, paid regular dividends of 10 per cent per unnecessary, are no less so. The uncertainty annum. Between February 1, 1899, and and difficulties attending any attempt at arJanuary 15, 1901, it paid extra dividends riving at the true equities between parties amounting to 90 per cent of the capital respectively asserting income and capital stock. interests in the proceeds of a dividend declared are not so readily appreciated. requires, however, but slight reflection to discover the magnitude of the obstacles to be surmounted, and the impossibility which must oftentimes be met, whereby the ju
The present contention between those who stand in the relation of life tenants and remaindermen to trust funds invested in stocks presents the oft-recurring question as to the rights of persons occupying those