Catherwood Trust

CONCURRING AND DISSENTING OPINION BY

Mr. JUSTICE Bell :

I enthusiastically agree with that part of the majority Opinion which holds that small stock dividends which do not exceed 6% in that particular year belong to the life tenant and are not subject to apportionment. However, I would not restrict stock dividends to that of the issuing corporation or require them to be of the same class. I said in Cunningham Estate, 395 Pa. 1, 149 A. 2d 72 (page 34) and I repeat: “‘[a] Ordinary cash or scrip [or stock] dividends coming to [the trustee] belong to life tenants regardless of how soon after testator’s death they are declared by the company whose stock is held in the corpus. . . .’

“In order to avoid costly, vexation, ‘de minimis’ litigation, and to eliminate conflict and confusion, and *79to comply with the requests of Bench and Bar to make clear and definite the rules with respect to .various situations that frequently arise, I would add: An ordinary cash dividend and an ordinary stock dividend belong to the life tenant, irrespective ,of when earned and irrespective of whether the intact value is or is not thereby impaired. Ordinary cash dividends include small extra cash dividends which are paid currently or irregularly (usually at year’s end). Ordinary, stock dividends would include stock dividends [of any class] which are paid quarterly, semi-annually or annually, currently or irregularly, and do not exceed 6% in any one year.”

Not .once in over 100 years has this Court ever heretofore declared or required a small stock dividend— irrespective of what kind or class is issued — to be apportioned. The reasons, are obvious and cogent. In the first place the primary object of testator’s bounty is his widow or occasionally his children, in preference to his often unknown or unseen or unborn issue. To require that small stock dividends of another class or another corporation belong to principal vitiates testator’s dominant intent. To hold that these and all small stock dividends should be apportioned between the life tenant and the remainderman (as appellee urges) is ridiculous. They have a market value (sometimes) of $2 or $5 or $19 a share. Such an apportionment rule would multiply litigation; it would be so costly, vexatious and wasteful that it would deplete large estates and virtually ruin small estates; and to express it mildly, it would be obviously impractical, unrealistic and unwise!

The majority opinion declares that an extraordinary stock dividend of 50% is not an apportionable event and therefore the dividend belongs to principal, even though 62% of the dividend represented earnings which had accumulated since the acquisition of the *80stock by the trustee. In this conclusion the majority is supported by their majority opinion in the very recent case of Cunningham Estate, 395 Pa. 1, 149 A. 2d 72 (1959). However, they have now repudiated ■ and impliedly overruled Cunningham Estate. I pointed out in great detail in my concurring and dissenting opinion in Cunningham Estate (pages 15 to 62) that where, as here, an extraordinary stock dividend is paid out of accumulated applicable earnings which were earned and accumulated since the acquisition of the stock (in the instant case 62% of the stock dividend was legally authorized and issued by virtue of a transfer from earned surplus to the capital stock account and only ■38% of the capital surplus was applied to support the stock dividend), that part which represents accumulated and paid out earnings (viz., 62% of the dividend) belongs to the life tenant. I cited therein a myriad of cases which supported this proposition. I am convinced that this was and should be the law and since Cunningham Estate has been overruled, I would award 62% of the stock dividend to the life tenant.

The majority further affirms that the life tenant is not entitled to any portion of the proceeds of sale of the stock of the American Gas Company which was sold at a market value loss, even though part of the proceeds included in the sale price were due to and represented accumulated capitalized applicable earnings.*

*81The majority reach their conclusion in re the 50% stock dividend and the proceeds of sale, by expressly overruling Crawford Estate, 362 Pa. 458, 67 A. 2d 124; Pew Estate, 362 Pa. 468, 67 A. 2d 129; and Warden Trust, 382 Pa. 311, 115 A. 2d 159; and impliedly and necessarily their most recent opinion in Cunningham Estate, 395 Pa., supra (1959). The rationale of the majority decision — “convenience”—is something I cannot appreciate or approve. The majority not only repudiate the 100 year old Pennsylvania rule of appor*82tionment which was unanimously reaffirmed approximately one year ago, but they further declare that what this Court repeatedly said was unconstitutional, was constitutional and vice versa. The Pennsylvania rule of apportionment which often is difficult to work out or apply practically, has always been an equitable rule intended to favor the life tenant (widow or children) who are almost always the primary objects of the testator’s bounty. The rule says, in substance, that when an extraordinary stock dividend is paid or a sale is made which represents, in part, earnings which had accumulated from the time the stock was acquired— the earnings, no matter in what form they are giveu by a corporation or are hidden in a sale, belong to the life tenant. Every year, since Crawford Estate was decided in 362 Pa. (1949) the Supreme Court has been asked to overrule it, and every year the Supreme Court has rejected all such pleas, arguments.and contentions. It rejected it in Steele Estate, 377 Pa. 250, 103 A. 2d 409; it rejected it in Warden Trust, 382 Pa. 311, 115 A. 2d 159; it rejected it in Jones Estate, 377 Pa. 473, 105 A. 2d 353; and within the last two years it again rejected it in Cunningham Estate, 395 Pa., supra. Each of these cases, as well as many others which were cited or quoted in my Cunningham Opinion, reaffirmed the equitable rule of apportionment which, I repeat, has been the law of Pennsylvania for over 100 years. Every member of the present Court (except the recently elected Justice Eagen) who is now voting to repudiate Cunningham Estate, voted in that recent case in favor of the Pennsylvania rule of- apportionment and rejected all pleas to' change the rule and overrule the prior decisions of this Court. Justice Benjamin. R. Jones, speaking.for the majority, and on this.point for the entire Court, decreed that there should be an apportionment between principal and income in the following four situations:

*83“. . . ‘(1) the distribution ¡by the corporation of an extraordinary* cash or stock dividend, or (2) the liquidation of the corporation, or (3) a sale of the stock by the trustees, or (4) the issuance of stock rights [citing cases]’: Jones Estate, 377 Pa. 473, 476, 105 A. 2d 353, 354.”

Since Crawford Estate in 1949, and certainly in the last two years since Cunningham Estate in 1959, there has been no change of circumstances; not even a change of personnel in the Court; nothing, absolutely nothing, has occurred except a change of mind. Once again I plaintively ask: Stare Decisis — “Quo Vadis?”**

Mr. Justice Musmanno joins in this concurring and dissenting opinion.

Although it is a waste of time, I desire to keep the record clear and straight. When stock is sold, as here, at a loss in its carried (market) value, the life tenant is entitled to the earnings which he can prove have.accumulated.since acquisition .and are applicable and includable in the sale price, i.e., the'difference between the book value (called intact value) at date of acquisition ($11.76 per share), and at date of sale. In determining earnings it is ridiculous to compare book value on the one hand with market value on the other hand. With one exception, i.e., Arrott Estate, *81383 Pa. 228, 118 A. 2d 187, which everyone agrees was a hasty error and should be overruled, all authorities for countless years .have agreed that market value is not the correct test for or the equivalent of intact value. The fact that the stock was sold at a loss in its market value does not and should not affect the equitable rule of apportionment which, as above stated, has no connection with market value; nor should it deprive the life tenant of the accumulated earnings to which, all cases agree, he is entitled. For example, in a salvage operation where a mortgage is foreclosed and the real estate is bought in by the trustee and the land is subsequently sold at a loss, the life tenant is entitled out of the proceeds of the sale to the income which has been received or accrued. It is ridiculous to attempt to deduct an orange from an apple or a banana, you deduct an orange from two oranges, etc., but if you attempt to deduct an orange from a banana all you get is a squash. The true rule in determining whether and what a life tenant is entitled to out of the proceeds of sale is that he is entitled to what he can prove are the earnings which had accumulated since the acquisition of the stock and are applicable and includable in the sale price, namely, the difference between the book value (called intact value) at date of acquisition and the (adjusted) book value at date qf sale. See Cunningham Estate, at page 40. Unfortunately, the latter is not disclosed in the instant case.

The parties agreed to the following stipulation: “If gain is determined to be the difference between intact value and proceeds of sale, $2,322.80 will be apportioned to income; [but if] the carrying (market) value is used- no part of the proceeds go to income.” Since its meaning is neither clear nor sufficient with respect to the question in issue, I believe the case should be remanded for further proof on this point.

Italics throughout, ours.

A brief history of what has happened to Stare Decisis in Pennsylvania in the last few years will be found in my concurring opinion in Michael v. Hahnemann Medical College and Hospital of Philadelphia, 404 Pa. 424, 428, 172 A. 2d 769.