delivered the opinion of the Court.
The question presented by this appeal is whether the sum of $22,200.00 paid to -the estate of Edward W. Mealey, as dividends, on stock held by him in his life time in two West Virginia Lumber Companies is to be treated as corpus and paid to the appellants the legatees in remainder under Mr. Mealey’s will, or as income payable to the appellee, who is the administrator c. t. a. of Mrs. Adelaide Savage Mealey, the life tenant under her husband’s will.
Mr. Mealey died on the 28th day of April, 1911. The seventh, or residuary clause of his will, which was dated on the twelfth day of May, 1908, and admitted to probate by the Orphans’ Court for Washington County on May 12, 1911, is as follows:
*3“All the rest, residue and remainder of my estate, real, personal and mixed, and wheresoever situate, I give, devise and bequeath to the Hagerstown Trust Company of Hagerstown, Maryland, Trustee, to hold the same and collect the income therefrom, and pay over the net amount thereof, to my wife, Adelaide Savage Mealey, in semi-annual instalments, and upon her death I direct that the whole corpus or principal of the trust estate held under this clause of my will be passed over and delivered by my said Trustee, as follows: Two-thirds thereof to the Washington County Hospital Association, a body corporate, duly incorporated under the laws of the State of Maryland; and the remaining one-third thereof to The Washington Comity Free Library, a body corporate, duly incorporated under, the laws of the State of Maryland.”
Mrs. Mealey, the widow of the testator, died on the 28th of Mai*ch, 1912, and the dividends, over which the controversy in this case arose, were declared and paid over between the date of the death of Mr. Mealey and that of his wife.
The Washington County Hospital and the Washington County Free Library, the two corporations to which the estate was devised and bequeathed in remainder, claim these dividends as a part of the corpus of the estate. This claim is resisted by the appellee who insists that, since the dividends were declared in the ordinary course of business of the companies, and distributed in the time intervening between the date of Mr. Mealey’s death and that of his wife they are income and not corpus and belonged to her, and are payable to her estate.
The lower Court sustained the appellee’s contention, and further allowed him as interest, the sum of $047.50,—that being the amount of interest received by the trustee upon the amount of the dividends. In a carefully prepared opinion Judge Keedy reviewed fully the facts and law applicable to the case, and signed a decree giving effect to the conclusion *4that he had reached, and from the decree this appeal was taken.
The facts that need be stated are these:
The two corporations in which Mr. Mealey held stock at the time of his death and which paid the dividends involved in this case were:
First—The Taggarts River Lumber Company, incorporated in April, 1902; and
Secondly—The Glady Fork Lumber Company, incorporated in February, 1906.
The objects and purposes of the first named company, as stated in its charter were: “To acquire (by purchase or otherwise), hold, transfer, assign, lease, sell and convey lands, timber-rights, timber, lumber, railroads, tramroads, logging-roads and other real and personal property, whether located in Randolph County, or elsewhere in the State of West Virginia; to construct, maintain, operate and remove saw-mills,. tramroads, railroads, logging-roads, telephone, telegraph and electric light plants., roads, lines and appliances, camps, dwelling houses, and any other buildings, yards, equipments and appliances which may be necessary or convenient for the purposes of its incorporation; to cut, haul, manufacture, sell, transport and remove all sorts of timber, and to deliver the same to points within or without the State of West Virginia; to cut, peel, haul, load and deliver, to points within or without the State of West Virginia, bark, pulp^wood and any and all other timber by-products, and to sell the same; and generally to' exercise such other functions and to enjoy such other privileges as usually appertain and rightfully belong to corporations organized for similar purposes.”
The powers and purposes of the second company were:
“To buy and sell timber lands; to manufacture timber into lumber; to buy and sell lumber and lumber products; to manufacture lumber into lumber products of all kinds; to build houses; to purchase, erect and equip saw mill or saw mills, *5and to manufacture thereon lumber into lumber products of all kinds; to build and equip in connection with said saw mill or saw mills, electric plant or plants to light said mill or mills; to build tram or logging railroads in connection with said lumber operation; and to do any and all other things necessary or convenient to carry on a general lumber business, and to manufacture the same into lumber products, and to sell the same at either wholesale or retail, and to carry on and operate in connection therewith a general store.”
The property of the Taggarts Pi ver Lumber Company, in which its capital stock has been invested, consisted, as stated by Mr. If. M. Allen, “of a saw mill plant and the necessary equipment, consisting of houses, store buildings and things of that sort which the company owned in fee and the land on which they were situated, and my recollection is we owned about 1,500 acres in fee in mountain land upon which there was some timber, and probably 15,000 acres upon which ive had timber rights * * The 1,500 acres tract was bought for a right of way for the railroad; there was very little timber on that.”
The capital of the company was used to pay for the timber, for building a railroad, a mill, and was put in by the company for the manufacture of lumber. The company owned only the timber rights of the greater part of the timber. Practically the same situation existed with reference to the Glady Fork Lmnber Company.
The business carried on by both companies was the cutting of the timber from the lands, hauling it to the mill, sawing it, or manufacturing the lumber into timber, beams, boards, and selling the lumber, collecting the money and dividing it among the stockholders as it was earned. This was the usual and ordinary course of the business and methods of the companies, and were the objects for which they were organized.
Nineteen thousand dollars in dividends upon the stock held by Mr. Mealey in the Taggarts Piver Lumber Company were paid in the period intervening between his death and *6that of his widow. Testifying as to the source from which that money was derived, Mr. J. A. G. Allen said, it was derived from the products of the company, from the manufacture and sale of lumber.
In the same period three thousand two hundred dollars in dividends were paid upon the stock held hy the testator in the Glady Fork Lumber Company. These dividends were derived from the manufacture and sale of lumber taken between April 28, 1911 (the date of Mr. Mealey’s death), and March 8, 1912- (the date of Mrs. Mealey’s death), from tracts in which the company owned the timber rights.
It is clear from the evidence that the money from which the dividends were paid was derived from the conversion, of the standing timber, in which the capital of the companies had been invested, into lumber and the sale of the manufactured lumber, and it was, therefore, derived from the prosecution of the very business the companies were organized to carry on. It is obvious that' the prosecution of the companies’ business necessarily resulted in the cutting, manufacturing, and selling the property in which the capital was invested, and that was the only possible way hy which the stockholders could hope to' realize on their investment. While it might be that a portion of the lumber from which the dividends on the stock of the Glady Lumber Company were derived was “sawed, cut out,” as stated by Mr. J. A. G. .Allen, the lumber had not been sold, and the proceeds received hy the company at the time of Mr. Mealey’s death, and, therefore, it cannot he held that the proceeds of siieh lumber, if any there was, were earned in the life time of Mr. Mealey.
This Court had before it the residuary clause of Mr. Mealey’s will and the question of the proper distribution of these dividends in the case of The Hagerstown Trust Company, Executor of Mealey, 119 Md. 224; hut in the condition of the record in that case the Court found it impossible to -say whether those sums of money constituted a portion of *7the corpus of the estate or should have heen treated as income.
Judge Stocicbbtdge, speaking for the Court, said: “The principles for the determination of this question have been frequently laid down by this Court; see the cases of Thomas v. Gregg, 78 Md. 556; Smith v. Hooper, 95 Md. 16; Robinson v. Bonaparte, 102 Md. 63; Atlantic Coast Line Case, 102 Md. 72; Ex Parte Humbird, 114 Md. 627.
.But there are no facts before this Court by which it can say definitely whether that portion of the order of the Orphans’ Court appealed from was correct or incorrect. * * *” “Under the 7th clause of Mr. Moaley’s will his widow was to receive in semi-annual instalments the net income from his estate, but as no dates appear in the account to show when this item of income was received, whether before or after her death, it is impossible for this Court to say from the condition of the record, whether the allowance so asked for by the executor was correct or not. Mrs. Mealev was entitled under her husband’s will to' receive the net income, as in the will provided, and if there was income due her which had not been paid at the time of her death, it was manifestly a part of her estate and would pass to. her personal representatives.”
The question of the apportionment of dividends between a life tenant and a remainderman was considered in the recent case of Virginia Lee Foard v. The Safe Deposit and Trust Company of Baltimore, Trustee, 122 Md. 476, in which it was said: “* * * the modem English rule corresponds closely with what is now known as the Massachusetts mle, by which if the dividend be in cash it is allotted to the life tenant, but if in stock it is added to the corpus. This is a simple but an arbitrary rule and calculated to work injustice in many cases. As opposed to this is what is generally known as the Pennsylvania rule, or as designated by Mr. Cook in his work on Stock and Stockholders, sec. 554, as the American rule. It is also sometimes designated as *8the apportionment rule, and is thus stated in Smith’s Estate, 140 Pa. 344: ‘It is well settled in this State that, when the stock of a corporation is by the will of a decedent given in trust, and the income thereof for the use of a beneficiary for life, with remainder over, the surplus dividends, which have accumulated in the life time of the testator but which are not divided until after his death, belong to the corpus of his estate, whilst the dividends of earnings made after his death are income, and payable to the life tenant no matter whether the dividends be in cash, or script, or stock.’
“This statement of the rule is the substance of the doctrine as laid down in Earp’s Appeal, 28 Pa. 368, one of the earliest and leading cases upon the subject in this country. It was argued that the doctrine of Earp’s Appeal had been shaken if not modified by the decision in Boyer’s Appeal, 224 Pa. 144i, but any such idea is effectually dispelled by the very recent case, In re Stolces’ Estate, 87 Atlantic, 974, in which the rule adopted in Earp’s Appeal is distinctly reaffirmed. Tbe cases in this State are in full accord with the Pennsylvania rule.”
In Ex Parte Humbird, 114 Md. 627, it appeared that Jacob Humbird by his will provided that the residue of his estate should be held by trustees who were directed to- manage, control, invest and re-invest said property in a careful and prudent manner, and pay over or distribute annually to each of his children “the interest and earnings” of the estate so devised. The will further provided that the trust should “last during the life time of each of said children, and after their respective deaths said bequests should go to their heirs.”
The trustees in that case held an undivided one-sixth equitable interest in twenty thousand acres of land in which $29,-039.35' of the corpus of the estate had been invested. Ho income had ever been derived from this property. This undivided interest was sold for $85,549.69.
*9Another investment of the corpus of the trust which came into the hands of the trustees were certain shares of stock •of a lumber and manufacturing company, upon which the testator had paid $111,14,9.91. The trustees held the stock, and made certain payments on it out of the corpus of the trust, amounting, with those made .by the testator to $195,-999.91. Prior to 1910 the company had paid only three •dividends on its stock. In February, 1910, a dividend of $15.00 per share was declared, and in July following a further dividend of $276 per share. These, dividends were paid out of funds realized from the sale of fifty-two thousand acres of the company/s Umber land. The amount of the dividend involved in that case on the shares of the trust was $676,000. This was claimed by the life tenants as income, while the remainderman asserted that it should be treated as corpus. Upon these facts two questions were presented for decision:
Fi?st—Did the whole of the proceeds realized from the sale of the undivided one-sixth equitable interest in the twenty thousand acres of land held directly by the trustees belong to the corpus of the trust, or should the difference between the purchase and the selling price of the land be treated as income?
Second—Was the dividend declared out of the proceeds of the sale of the corporate real estate corpus or incom,e?
The lower Court decided that the money received by the trustees from both sources, constituted a part of the corpus of the trust, and this Court affirmed the decree upon the general principle stated in Taylor on Private Oorporations (4th Ed.), sec. 799, and other cases cited in the opinion: “When after the testator’s death the company sells a portion of its property or franchises and distributes, the proceeds in the shape of a cash dividend, that, too, is a part of the principal and is not income to be paid over to. the life tenant.”
After holding that the facts of that case brought it within the general rule, Judge Urneb in his opinion proceeds to *10state the principle which, in our opinion, should be applied to this case: “The exceptions to the general rule we have thus stated and illustrated are confined, as indicated in the note in Holbrook v. Holbrook, 12 L. R. A. (N. S.) 769, from which we have quoted, to cases in which the earnings of the company necessarily involve the conversion of its capital.” In Taylor on Private Corporations (4th Ed.) 899, the exception is thus defined: “Monies arising from the sale of corporate prop-
erty, and distributed as a cash dividend, are income if they arise from the sale of property made by the corporation m the. ordinary course of its business when it sells only such property as its regular business is to sell.” In 2 Clark and Marshall on Private Corporations 623, the rule is said not to apply: “Where the nature of the corporation is such that its ordinary business is to sell property in which its capital is invested, and distribute the proceeds among its stockholders.”
The facts of this case bring it clearly within the exception to the general rule, and requires us to hold that the dividends in controversy are income and are payable to the appellee as decided by the lower Court.
We do not agree with the contention made by the appellants that it was the duty of the trustee to have sold the stocks and invested the proceeds in other securities, and that since this was not in fact done, the Court of Equity will now treat them as1^ converted from the date of Mr. Mealey’s death, “and will allow the life tenant such a sum as will represent a fair interest upon the value of the securities at the time at which they are to be considered as converted.” There is certainly no rule of Maryland law to support this contention.
It is not supported by Evans v. Iglehart, 6 G. & J. 171, and Wootten v. Burch, 2 Md. Ch. 200, cited to sustain it, and is contrary to the doctrine announced in Heighe v. Littig, 63 Md. 301.
The decree appealed from will be affirmed.
Decree affirmed, the costs to be paid out of the trust estate.