When we considered this cause at last term we concluded that under the terms of the contract of sale of the stock in the Durham Cotton Manufacturing Company the reservation of the “January dividend” by plaintiff entitled it not only to the regular 4 per cent and extra 6 per cent- cash dividend declared and payable then, but also to the value of the so-called 50 per cent stock dividend which was declared at same time as the regular and extra cash dividends.
Upon a careful review of the correspondence between the parties and a further consideration of the case we are led to the conclusion that the words, “allowing the January dividend to *661us,” used in plaintiff’s letter of 23 December, 1901, was intended to' refer to dividends payable in casb only, and do not embrace the so-called stock dividend of 50 per cent.
That was not strictly or in the usual sense of the word a dividend. It was simply an increase in the capital stock by dividing the capital of the corporation into a larger number of shares and allotting them*- to each stockholder in proportion to the number of shares he owned before the increase. This is not infrequent in these days when “watering stock” is no uncommon occurrence; not that we mean to intimate that such has been the case here. Therefore it has been held that where the word dividend is used without qualification or explanation it signifies dividends payable in money. 14' Cyc., .554, and cases cited; Black Law Diet., 3 Words and Phrases, pp. 2143 and 2144; Smith v. Hooper, 95 Md., 16.
This appears to us to be more consistent with the relationship which exists between the stockholders and the corporation.
The distinction between the title of a corporation and the interest of its stockholders in the corporate property is familiar and well settled. Van Allen v. Assessors, 3 Wall., 573; Pullen v. Corporation Commission, ante, 548. The ownership of that "'property is in the corporation and not in the holders of shares of stock. The certificates of shares of stock denote the interest of each stockholder, which consists in the right to his proportionate part of the profits when declared as dividends, and to a like proportion upon its dissolution, after its debts are paid. Therefore the value of the shares of stock are dependent upon the value of the property retained by the corporation. A cash dividend depletes the treasury of the corporation and detracts from its assets, but a stock dividend neither takes from nor adds to the corporate wealth. The interest of each stockholder remains the same when he receives his stock dividendos it was before. He is neither richer nor poorer. By it nothing is taken from the property of the corporation and nothing added to the interests of the shareholders. Its property is not diminished and their interests are not increased.
Upon this principle it is held that accumulated earnings (upon which stock dividends are supposed to be based), so long as they are held by the corporation, being a part of the corporate property, the interest therein represented by each share is capital, and not the income of that share, as between tenant for life and the remainderman, legal or equitable, thereof.' Gibbons v. Mahon, 136 U. S., 558. In this case it is said that “ordinarily a dividend declared in stock is to be deemed capital, and a dividend in money is to be deemed income of each share.”
*662This view is taken by tbe Court of Appeals of Virginia: “A stock dividend, is merely an increase in tbe number of shares; tbe increased number representing tbe same property tbat was represented by tbe smaller number of shares. One who sells stock, reserving tbe dividend tbat may be declared by a certain date, cannot claim tbe stock dividend thus declared, but only tbe cash dividend.” Kaufman v. Charlottesville Woolen Mills, 93 Va., 673, 25 S. E., 1003.
It is held by tbe Illinois Court tbat, “A stock dividend gives tbe stockholder merely an evidence of tbe additions made by tbe corporation to its own capital. It adds nothing to tbe capital of tbe corporation nor to tbe capital of tbe shareholder.” DeKoven v. Alsop, 205 Ill., 309, 63 L. R. A., 587: “A stock dividend is not in tbe ordinary sense a dividend; tbe latter being tbe distribution of profits to stockholders as tbe income from their investments. A stock dividend is merely an increase in tbe number of shares; tbe increased number representing exactly tbe same property tbat was represented by tbe smaller number of shares.” 7 Words and Phrases, p. 6664, and cases cited.
As it is admitted tbe plaintiff did not know of any stock dividend, it is manifest tbat it intended to sell and transfer to tbe. defendant the entire interest in the corporate property, represented by tbe four shares of stock it held prior to any increase in tbe capital stock.
As tbe defendant testifies tbat be bad no knowledge of such increase, and as be paid $675 per share for each share of tbe par value of $500, we think it equally evident tbat be intended to purchase tbe entire interest of plaintiff in tbe corporate property.
Therefore we now think tbat, upon reason and authority, tbe proper construction of tbe contract is tbat tbe plaintiff sold its entire interest in the corporate property, retaining whatever cash dividend tbat should be declared as the fruit of tbe investment tbat it was parting with. Tbe so-called stock dividend of 50 per cent represented part of tbe corporate property sold to defendant, in which plaintiff reserved no interest and is therefore not entitled to tbe whole or any part of it.
Tbe former opinion is modified so as to bold tbat plaintiff is entitled to recover tbe extra cash dividend, but not tbe value of tbe stock dividend or any part of it.
Tbe judgment of tbe Superior Court is reversed and nonsuit set aside and a new trial ordered.
Tbe costs of tbe appeal are taxed against tbe defendant. Tbe costs of this rehearing are taxed against plaintiff.
Petition allowed.