Co-Executrices of the Estate of Frank Cirigliano,
Defendants Below, Appellees
John T. Law, Marino Paletti, and Teresa Calabrese,
Defendants Below, Appellants
W. T. Weber, Jr.
Weston, West Virginia
Attorney for the Appellees
James C. Turner
Waters, Warner & Harris
Clarksburg, West Virginia
Attorney for the Defendants Below, Appellees
James C. West, Jr.
Norman T. Farley
West & Jones
Clarksburg, West Virginia
Attorney for the Defendants Below, Appellants
JUSTICE NEELY delivered the Opinion of the Court.
SYLLABUS BY THE COURT
1. "The paramount principle in construing or giving
effect to a will is that the intention of the testator prevails,
unless it is contrary to some positive rule of law or principle of
public policy." Syl. pt. 1, Farmers and Merchants Bank v. Farmers
and Merchants Bank, 158 W. Va. 1012, 216 S.E.2d 764 (1975).
2. A stock split does not alter the pre-existing
proportionate interest of any stockholder or increase the intrinsic
value of his holding or of the aggregate holdings of the other
stockholders as they stood before.
3. The distinction between a "specific" bequest and a
"general" bequest is not applicable to a stock split.
4. In the absence of anything manifesting a contrary intent, a legatee of stock is entitled to any additional shares received by a testator as the result of a stock split occurring in the interval between the execution of a will and the testator's death.
The question before us is what happens when a stock
splits immediately before the death of a testator, and the testator
has left a specific number of shares to his heirs. Traditionally,
we viewed such a question as turning on whether the bequest was
"specific" or "general" and then applied the result thought to
follow automatically from the chosen label. However, the problems
created by the use of the distinction between "general" and
"specific" legacies in the stock split situation far outweigh any
advantages to be gained by relying on those classifications.
Instead we adopt today the rule that, in the absence of anything
manifesting a contrary intent, a legatee of stock is entitled to
any additional shares received by a testator as the result of a
stock split occurring in the interval between the execution of a
will and the testator's death. Accordingly, we reverse the
decision of the Circuit Court of Lewis County.
The facts are not disputed. Frank Cirigliano (testator)
died testate on 15 May 1990. The testator's will, dated 30 June
1988, as modified by two codicils executed in February 1990, was
admitted to probate on 21 May 1990. The appellants are John T.
Law, Marino Paletti and Teresa Calabrese, each the legatee of 100
shares of stock in Citizens Bancshares, Inc. The appellees,
plaintiffs below, Geraldine C. Watson and Virginia Paletti, are the
co-executrices of the estate and the beneficiaries under the
residuary clause of the testator's will.
On 30 June 1988, (as well on 27 February 1990 when the
most recent codicil to the will was executed) the testator owned
2,000 shares of the capital stock of Citizens Bancshares, Inc. The
following provisions are relevant to this case:
"FOURTH: I give and bequeath unto John T. Law 100 shares of the capital stock of Citizens Bancshares, Inc.
FIFTH: I give and bequeath unto Marino
Paletti 100 shares of the capital stock of
Citizens Bancshares, Inc.
SIXTH: I give and bequeath unto Teresa
Calabrese 100 shares of the capital stock of
Citizens Bancshares, Inc.
* * *
NINTH: I hereby authorize, empower and
direct the personal representatives of this,
my Will, as soon after my death as my said
personal representatives may consider it
advantageous, to sell, convey and otherwise
transfer and convert to money all my property
and estate, real, personal and mixed,
wheresoever situate, which at my death may not
already be in the form of cash, except for and
subject always to the provisions of Items
'Second' through 'Eighth', above, and any and
all sales by my personal representatives,
pursuant to the authority vested in said
personal representatives by this item, may be
made by my said personal representatives at
private or public sale, at such time or times,
at such place, or places, at such price or
prices, and upon such terms and conditions as
to cash or credit as may be fixed by my said
* * *
TWENTY-SEVENTH: I give and bequeath all
of the rest, residue and remainder of my
estate unto the following persons in the
Pasquale Cirigliano, my nephew,
Maria Cirigliano Covelli, my niece,
Angiolina Cirigliano, my niece,
Antonio Santalucia, my nephew,
Francesca Santalucia Petrocelli, my niece,
Teresina Santalucia, my niece,
Rosa Santalucia, my niece,
Pasquale Santalucia, my nephew,
one-ninth (1/9th); and
The children of Giuseppe Santalucia, my
nephew, who are living at the time of my
death, one-ninth (1/9th)."
On 21 April 1990, the shareholders of Citizens
Bancshares, Inc., at its regular annual meeting, caused a four-for-one split of the shares of the corporation. The par value of the
stock was commensurately reduced from one dollar a share to twenty-five cents per share. This stock split became effective on 1 May
1990. On 15 May 1990, after a protracted illness that confined him
to his home, Mr. Cirigliano died; at that time his 2,000 shares of
stock in Citizens Bancshares, Inc., had become 8,000 shares as a
result of the stock split.
On 11 December 1991, the Circuit Court of Lewis County entered its order that Mr. Law, Mr. Paletti and Ms. Calabrese are entitled only to the 100 shares mentioned in the will, as opposed to the same proportional interest in the bank, now represented by four hundred shares each, that they would have had if the testator had died fifteen days earlier. Mr. Law, Mr. Paletti and Ms. Calabrese appeal from that decision.
"The paramount principle in construing or giving effect
to a will is that the intention of the testator prevails, unless it
is contrary to some positive rule of law or principle of public
policy." Syl. pt. 1 Farmers & Merchants Bank v. Farmers &
Merchants Bank, 158 W.Va. 1012, 216 S.E.2d 769 (1975). However, in
reaching his decision, the circuit court relied to a large extent
on W.Va. Code 41-3-1 , which states, in full:
A will shall be construed, with reference to the estate comprised in it, to speak and take effect as if it had been executed immediately before the death of the testator, unless a contrary intention shall appear by the will. [Emphasis added]
Code 41-3-1  is a codification of a common law
rule. In construing similar statutes or the common law rule, most
jurisdictions have concluded that this rule "relates to the effect
and operation of the instrument, not to its construction." Egavian
v. Egavian, 102 R.I. 740, 745, 232 A.2d 789, 792 (1967); Lee v.
Foley, 224 Miss. 684, 689, 80 So.2d 765, 767 (1955). Indeed, a
common sense reading of the "unless a contrary intention shall
appear by will" exception to W.Va. Code 41-3-1  means that we
need to determine the intent of the testator before this statute
has any meaning. Weiss v. Soto, 142 W. Va. 783, 98 S.E.2d 727
(1957). Indeed, reference to W. Va. Code 41-3-1  in this
situation merely serves to confuse the issue, not to clarify. Our
mission is to follow our cardinal rule of will construction: We
must determine the testator's intent.
Traditionally, most courts (including this Court) relied
on the distinction between a "general" bequest and a "specific"
bequest to determine to whom the shares of stock acquired in a
split after the will was executed, but before the death of the
testator, belonged: the named legatee or the residuary legatee.
However, the general/specific distinction was not initially
designed for use in this area, but only for purposes of ademption,
abatement, or disposition of income earned on the principal of the
bequest during administration of the estate.See footnote 1 Furthermore, most
courts have found that relying on such a standard does not comport
with the notion of effecting the testator's intent:
The two principal difficulties with the general versus specific classification approach are that it fails to consider the testator's intent with specific reference to the additional shares created by a stock split and that it also fails to recognize the basic nature of a stock split.
Bostwick v. Hurstel, 364 Mass. 282, 287, 304 N.E.2d 186 (1973). We agree with the reasoning of the Bostwick court and adopt the rule that the distinction between a "specific" bequest and a "general" bequest is not applicable to a stock split.See footnote 2 A stock split is merely a bookkeeping adjustment on the part of the corporation; "it does not alter the pre-existing proportionate interest of any stockholder or increase the intrinsic value of his holding or of the aggregate holdings of the other stockholders as they stood before. The new certificates simply increase the number of shares, with consequent dilution of the value of each share." Eisner v. Macomber, 252 U.S. 189, 211, 40 S.Ct. 189, 194 (1920). Furthermore, a stock split is an event over which a testator rarely has control or advance knowledge. Therefore, our question becomes: When the testator bequeathed 100 shares of stock in Citizens Bancshares, Inc., did he intend to give the control over the corporation that 100 shares provided at the time of execution, or did he intend to give exactly 100 shares, no matter what percentage of the corporation those shares represented at the time of his death?
In Cuppett v. Neilly, 143 W.Va. 845, 105 S.E.2d 548
(1958) (the only West Virginia case on point), this Court was
presented with a situation where a woman left 100 shares of General
Motors common stock to a legatee. General Motors then split its
stock three-for-one two years after the testatrix executed her
will, but two-and-a-half years before the testatrix died. After
the split, the testatrix sold fifty of the shares and died owning
250 shares of General Motors common stock. The dispute was over
whether the 150 shares of General Motors common stock that remained
from the split would pass to the beneficiary of the stock bequest
or to the residuary estate.
Although this Court could have relied on the intent of
the testator to reach its decision, this Court instead relied on
the general/specific bequest distinction. As we have seen above,
however, reliance on this distinction is misplaced in the stock
split situation. Evigan v. Evigan, supra; In re Estate of Parker,
supra; Bostwick v. Hurstel, supra. See also, In re Doonan Estate,
110 N.H. 157, 262 A.2d 281 (1970) ("We consider that the issues
presented are not to be decided merely by applying the rubric of
'specific' or 'general' to the Clow [named legatees] legacies and
by attaching consequences thought to follow automatically from that
determination"); Change in Stock Bequeathed--Effect, 46 A.L.R.3d 7,
§§ 5-6 (1972). Therefore, to the extent that the Cuppett decision
relied upon the general/specific bequest distinction to decide the
distribution of the additional shares as a result of the stock
split, it is overruled.
Without the general/specific fiction to rely on, we must
now determine what this testator would have wanted done with the
shares that accrued as a result of the stock split. A stock split
is an occurrence that a testator has little reason to anticipate at
the time he executes his will and one over which he has little or
no control. Moreover, the intent of a testator in bequeathing
stock rather than cash seems to imply that the testator intends to
give a certain share of a corporation rather than a specific dollar
value. The best way to effect the testator's intent, then, is to
behave as if the stock split had never happened and to award to
beneficiaries of specific stock bequests accretions as a result of
stock splits between execution of the will and the death of the
testator. Therefore, in the absence of anything manifesting a
contrary intent, a legatee of stock is entitled to any additional
shares received by a testator as the result of a stock split
occurring in the interval between the execution of a will and the
death of the testator. The result of this rule is that the
interests are divided in the same manner as the testator intended;
they are apportioned as if the split had never occurred.
In this case, we apply our presumption that the testator
would intend that the same interests be given to the legatees of
stock shares as if the split had never occurred. John T. Law,
Marino Paletti and Teresa Calabrese, the legatees of 100 shares of
stock in Citizens Bancshares, Inc. (each) in the will are to
receive 400 shares each, with the balance of the stock passing, as
per the will, to the residuary legatees.
Accordingly, the decision of the Circuit Court of Lewis
County is reversed, and the case is remanded for further
proceedings consistent with this opinion.
Reversed and remanded.
Footnote: 1An excellent summary of the appropriate use of the general/specific legacy distinction is found in Re Estate of Parker, 110 So.2d 498, 500-501 (Fla. App. 1959), cert. denied, 114 So.2d 3 (Fla. 1959):
A specific legacy is a gift by will of property which is particularly designated and which is to be satisfied only by the receipt of the particular property described. Income received during administration on property specifically devised shall become property of the specific devisee. A general legacy or devise is one which does not direct the delivery of any particular property; is not limited to any particular asset; and may be satisfied out of the general assets belonging to the estate of the testator and not otherwise disposed of in the will. Income received on the property which is the subject of a general bequest passes to the residue of the estate.
It was held at common law that if the
particular property described in a specific
bequest is disposed of by the testator during
his life, or cannot be located, the bequest
must fail or adeem. It was also the rule at
common law that if the subject of a bequest
was described in general terms, it was
considered to be a general bequest and
disposition by testator during his life of all
or a part of the property so bequeathed did
not create an ademption. In such case the
personal representative was required to obtain
and deliver to the legatee property satisfying
the general description of the bequest. If,
however, the property designated in the will
for payment of charges against the estate was
insufficient for that purpose, general
bequests would abate prior to specific
The technical distinction between general and specific bequests becomes important only when considering situations involving ademption, abatement or disposition of income earned on the subject of the bequest during administration.
Footnote: 2We express no opinion today on the applicability of the "specific"/"general" distinction to other events that may occur between the execution of a will and the death of the testator, such as dividend reinvestments or stock dividends; the issue is not before us.