Harkness's Estate

5 Pa. D. & C. 351, 1924 Pa. Dist. & Cnty. Dec. LEXIS 122

• Court: Pennsylvania Orphans' Court, Philadelphia County
• Decided: November 21, 1924
• Docket: No. 335
• Status: Published

Opinion

Van Dusen, J.,

This account was filed by the trustees for the purpose of getting an adjudication apportioning stock dividends between principal and income. From an examination of the stipulation, testimony and other facts in the record, the auditing judge divided the stock under the Pennsylvania rule established by Earp’s Appeal, 28 Pa. 368, so as to preserve the value of the stock at the time of the decedent’s death for principal and to give all the rest to income.

The guardian ad litem, for the remaindermen has excepted to this action and has made the following points:

1. It is asserted that these stock dividends are all “oil stocks” and represent accumulated receipts from oil wells and pipe-lines, which are wasting investments; and that, therefore, they are all principal, following the Pennsylvania law with respect to royalties from oil wells received directly by individuals. If the facts were so and were fully developed, the result might follow in whole or in part. There is, however, no evidence that these stocks represent accumulated receipts from oil wells, and we are asked to take judicial notice thereof. We can take judicial notice of the nature of an oil well, but we cannot take judicial notice of the character of the assets and of the operation of fourteen different companies scattered all over the United States, some of which do not even have the word “oil” in their title. The burden of proof is on the remainderman: Boyer’s Appeal, 224 Pa. 144; Stokes’ Estate (No. 1), 240 Pa. 277.

2. The exceptant also attacks the Pennsylvania rule as applied to dividends declared in stock and not in cash. It is earnestly argued that the rule is sound only as to extraordinary cash dividends, and that stock dividends are entirely different.

The Supreme Court of the United States in Towne v. Eisner, 245 U. S. 418, and Eisner v. Macomber, 252 U. S. 189, with respect to income tax, and in the earlier case of Gibbons v. Mahon, 136 U. S. 549, with respect to the rights of life-tenant and remainderman, have decided that a stock dividend is not really a distribution of anything at all, but is a mere rearrangement of the muniments of title. On the other hand, four judges dissented in Eisner v. Macomber, and were of the opinion that a stock dividend is a real distribution of profits.

This difference of opinion indicates that a real question exists which it would be interesting to examine if we were at liberty to do so. The Pennsylvania rule relates to extraordinary dividends, and assumes that there is no difference between stock dividends and cash dividends. But the leading case of Earp’s Appeal concerned stock dividends, and so did the cases of Philadelphia Trust, Safe Deposit and Insurance Company’s Appeal, 1 Monaghan, 230; Sloan’s Estate, 258 Pa. 368, and Willcox’s Estate, 66 Pa. Superior Ct. 182; and such cases are of constant occurrence in the business of this court. While no such discussion of the question appears in our reported cases as that by which we are enlightened in Eisner v. Macomber, we believe that, in view of our settled law, the Supreme Court would also feel themselves bound by authority as intimated in Stokes’ Estate (No. 1), 240 Pa. 277. Though that was a case of cash dividend, the court referred in their opinion to the Massachusetts rule which assigns all stock dividends to principal, and said: “If such a rule is desired in Pennsylvania, we think the change should be made by the legislature rather than by the courts.”

3. It is also argued that, in view of the decisions of the Supreme Court of the United States referred to, a decision by a state court, based on a contrary principle in matters not concerning income tax, but concerning division between life-tenant and remainderman, is a deprivation of property without due process of law and violative of the 14th Amendment of the Constitution of the United States, and that state courts, in matters which are solely within their own jurisdiction, must, nevertheless, follow those decisions. We are unable to follow this argument. Within its sphere the State law is supreme. The State courts have jurisdiction to-administer this trust. That they do not see the law as other high authority sees it, is not a failure of due process of law. Otherwise, any difference of opinion on any point of law with the Supreme Court of the United States would violate the 14th Amendment. What due process of law requires is an orderly proceeding before a competent tribunal after due notice. It does not require all courts to think alike.

The exceptions are dismissed and the adjudication is confirmed absolutely.