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. A. Thirty-two. Mr. McAllister: Q. Thirty-two men? Q. Can any of those men speak English? A. 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? 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 vessel . . . 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." It is, as was said by Judge Hawley in Re Meyer, 74 Fed. 885, "the duty of the own ers of a steamer carrying goods and passengers, not only to provide a seaworthy vessel, but they must also provide the vessel with a crew adequate in number, and competent for their duty with reference to all *Section 4493 of the Revised Statutes of the United States (U. S. Comp. Stat. 1901, p. 3058), provides that "whenever damage is sustained by any passenger or his baggage from explosion, tire, collision, or other cause, the master and the owner of such vessel, or either of them, and the vessel, shall be liable to each and every person so injured, to the full amount of damage if it happens through any neglect or failure to comply with the provisions of this title, or through known defects or imperfections of the steaming apparatus or of the hull." 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 manage ships in Alaskan waters, they were not entitled to a limitation of liability for loss arising from sending out a barge in wintry and stormy weather. There can, in our opinion, be no doubt that the crew of a but also competent for the duties it may be ship must be not only sufficient in numbers, called upon to perform. The case shows 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 claim of Ruth Miller, executrix of the estate of Sarah Wakefield, deceased, was, in our opinion, correct. 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. surprising that but three of the boats were Petition for writ of certiorari denied No CONNECTICUT SUPREME COURT OF ERRORS. Samuel D. SMITH, Trustee, etc., of Alfred 0. C. Bates DANA et al. 3. The rule that cash dividends on cor- not make the distribution of the money in- 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; capital stock is not impaired, and its value remains above par, and practically the same after the dividends as before. CROSS (March 9, 1905.) ROSS-APPEALS by the respective defendants 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 Sproule, L. R. 12 App. Cas. 385; HemenL. R. A. 461, 24 Atl. 524; Gibbons v. Mahon, way v. Hemenway, 181 Mass. 406, 63 N. E. 136 U. S. 549, 34 L. ed. 525, 10 Sup. Ct. 919. Rep. 1057; Hotchkiss v. Brainerd Quarry Co. 58 Conn. 137, 19 Atl. 521. 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 assets, and whether they were spent or set aside, invested or paid out in cash dividends, it is impossible, as well as immaterial, to decide. 2 Thomp. Corp. § 2207. 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 plaintiff. 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 cor The fact that these plants have been in-poration invested its money in the construccome 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: tion 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 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. 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. 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. 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 Gibbons v. Mahon, 136 U. S. 549, 34 L. corpus in the manner provided. Each of the three grandchildren was made the bene- tion a statement of some of the facts which ficiary of a share of said income during his | enter into the history of the corporation in life. The defendant I. C. Bates Dana is the question, and which serve to indicate the only one of them surviving. Certain of source and character of the corporate assets the other defendants are his children and which formed the basis of the 65 per cent the husband of one of them. The remain- dividend. Previous to 1859 the Hadley ing defendants are the children of Alfred Falls Company, a Massachusetts corporaF. Dana, another of said grandchildren. The tion, had acquired a large tract of land third died childless. It is assumed and con- where the city of Holyoke is now located, ceded by all parties that these defendants and had constructed a dam across the Conembrace all who, under the provisions of necticut river, extending from South Hadthe will, are, or can become, entitled to share ley, on the northeasterly shore, to Holyoke, in the income of the trust estate, and all on the southwesterly shore, of the Connectiwho are, or can become, entitled to partici- cut river, and had built locks and canals at pate in the division of the corpus upon the Holyoke, and had laid out streets, sites for termination of the trust to pay over income, manufactories, tenements, and residences; unless it be persons representing them or and several factories, residences, and other hereafter born children of said Bates Dana. buildings had been erected. Among other The children of Alfred occupy the position buildings, said Hadley Falls Company had of both life tenants and remaindermen. The constructed a small gas plant, which it claim which they here assert is made in the operated. Subsequently said company went former capacity. 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 manufacture, 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 persons engaged in the generation and sale of electricity, duly authorized to engage in that business by an order of the board of gas commissioners. From that date down to December, 1902, it generated electricity for sale and distribution, erecting and maintaining a plant for that purpose. As the result of proceedings instituted under the provisions of chapter 370, p. 949, of the acts of the legislature of Massachusetts of the year 1891, which are in the main similar to those in force in this state regulating the establishment of gas and electric plants by municipalities within which there are existing public service plants of that character owned by private corporations, the city of Holyoke on December 15, 1902, acquired both the gas and electric plants of the Holyoke company; paying therefor the sum fixed by the commission appointed for that purpose by the court under the provisions of said act. Upon such acquisition the right of the Holyoke company to engage in the business of manufacturing and distributing gas or electricity ceased by virtue of the provisions of said act. The amount so paid by said city to said company was $721,043. By the use of said sum and other moneys of the corporation on hand, which at the time did not exceed $150,000 in amount, the dividend in question, requiring the disbursement of $780,000, was paid. The actual cost to the company of the electric-light plant was $243,776.34. Previous to the declaration of said dividend of 65 per cent the market value of the shares of said company was from $380 to $385 per share. At the time of its declaration the company held real and personal property amounting in value to more than $4,000,000 over and above all of its obligations. At the date of the commencement of this action the market value of the shares of the company, as evidenced by the sale of a few shares of said stock, appeared to be from $315 to $325 per share. All sums derived from the issue of stock have gone into the general treasury, and there become mingled with the other funds of the company. No separation of funds has been made, and it is impossible to trace the funds derived from any one source so as to follow them into any distinct investments. For many years the company has paid regular dividends of 10 per cent per annum. Between February 1, 1899, and January 15, 1901, it paid extra dividends amounting to 90 per cent of the capital stock. 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 relations to participate in the benefits of a distribution to stockholders of the assets, or some portion of the assets, of the corporation. In the present case a solvent and going corporation, whose capital was undergoing no reduction in amount, declared a dividend payable and paid in cash. Life tenants of stock held in trust claim to be entitled to the dividend payment as income. Remaindermen claim that it should go to augment the capital account of the trust estate. In Minot v. Paine, 99 Mass. 101, 96 Am. Dec. 705, the necessity of some plain and simple rule which in situations like the present, frequently arising, should serve to guide trustees in the discharge of their duties, and cestuis que trust in the determination of their rights, without a resort to harassing and expensive litigation, was expressed, and such a rule formulated. This rule made the character of the dividend the test. Cash dividends, it was said, should be regarded as income, and stock dividends as capital. It was not pretended that this rule, which has been commonly known as the Massachusetts rule, was the ideal rule of reason; nor have the courts of high authority which have given their approval of it ever claimed it to be such, or one which would accomplish exact justice under all circumstances. What has been claimed for it is that its general application-at least if due regard be had for the substance and intent of the transactionwould prove more beneficent in its consequences, and, on the whole, lead to results more closely approximating to what was just and equitable, than would the application of any other rule, or any attempt to go behind the declaration of the dividend to search out and discover the equities of each case according to some theoretical ideal. Gibbons v. Mahon, 136 U. S. 549, 34 L. ed. 525, 10 Sup. Ct. Rep. 1057; Richardson v. Richardson, 75 Me. 570, 46 Am. Rep. 428; Rand v. Hubbell, 115 Mass. 461, 15 Am. Rep. 121; D'Ooge v. Leeds, 176 Mass. 558, 57 N. E. 1025; Lyman v. Pratt, 183 Mass. 61, 66 N. E. 423. The necessity for a rule which should serve as a guide and protection to trustees in the performance of their duties is apparent. The advantages of one which would make ceaseless litigation, with its attendant harassment and expense, unnecessary, are no less so. The uncertainty and difficulties attending any attempt at arriving at the true equities between parties respectively asserting income and capital interests in the proceeds of a dividend declared are not so readily appreciated. It 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 |