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DUNHAM TRUST (01/24/69)

decided: January 24, 1969.

DUNHAM TRUST


Appeal from decree of Orphans' Court of Lackawanna County, No. 672 of 1965, in re estate of James H. Dunham, Jr., settlor of inter vivos trust.

COUNSEL

Bennet N. Hollander, with him Lee A. Jackson and Crombie J. D. Garrett, Mitchell Rogovin, Assistant Attorneys General, Carlon M. O'Malley, Jr., Assistant United States Attorney, and Bernard J. Brown, United States Attorney, for United States, appellant.

Sidney Z. Levy, Special Assistant Attorney General, Francis J. Gafford, Deputy Attorney General, and William C. Sennett, Attorney General, for Commonwealth, appellant.

Bernard G. Segal, with him Richard S. Seltzer, Thomas P. Glassmoyer, Samuel D. Slade, James K. Peck, James K. Peck, Jr., and Schnader, Harrison, Segal & lewis, for trustee, appellee.

Paul E. Pendel, guardian and trustee ad litem, appellee, in propria persona.

Bell, C. J., Jones, Cohen, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Roberts. Mr. Chief Justice Bell and Mr. Justice Cohen dissent.

Author: Roberts

[ 433 Pa. Page 276]

On December 24, 1941, James H. Dunham, Jr. received 1250 shares of the Eureka Specialty Printing Company from each of his parents. Six days later Dunham executed a Trust Agreement creating an inter vivos trust, the corpus of which was the 2500 shares of Eureka stock. The agreement provided, inter alia, that "The Grantor . . . irrevocably and absolutely assigned, transferred and set over unto Margaret G. Dunham, mother of the grantor, during her lifetime any and all income paid or to be paid or arising from the aforesaid stock. . . ." (Emphasis supplied). It also recited that ". . . this Agreement of Trust shall be absolutely and irrevocably binding upon all parties herein concerned and that it shall not be changed, modified, or altered in its terms, conditions or provisions unless the same shall be made in writing and signed by all the parties concerned." (Emphasis supplied). At the same time the Trust Agreement was executed, James H. Dunham, Jr. also executed an assignment to his mother and father of "all my right, title and interest in and to all of the dividends, including cash or stock dividends income. . . from [the Eureka Specialty Printing Company stock] . . . . Said assignment is made subject to and governed by the terms, conditions, covenants,

[ 433 Pa. Page 277]

    stipulations and provisions as contained in that certain Trust Agreement . . . ." (Emphasis supplied).

Subsequent to the date of the Trust Agreement, the Eureka Specialty Printing Company made three separate distributions of additional shares of stock, all of which are at issue in the present litigation. The first took place in 1950, when the capital of the corporation was increased from $250,000 to $1,350,000 and the authorized shares were increased from 15,000 to 50,000. At this time the corporation distributed 15,000 of the newly-authorized shares to its stockholders and transferred $450,000 from earned surplus to the capital account. The result of this transaction was to double the number of shares held by the Dunham trust to 5000. The next distribution occurred on July 1, 1956 and included an increase in capital to $1,750,000 and a conversion of the existing stock into two new classes, Class A voting and Class B nonvoting. Transfer was made at the same time from the corporation's earned surplus account into its capital account in the amount of $750,000. This procedure resulted in the trustees holding in the trust corpus 5000 shares of Class A and 5000 shares of Class B stock.

Finally, on December 31, 1956 the last distribution was made, with one share of Class B stock being distributed for each fifty shares of Class A and each fifty shares of Class B held by individual stockholders. This transaction was accompanied by a transfer of $29,625 from earned surplus to the capital account of the corporation and resulted in the trust receiving an additional 200 shares of Class B stock. The net result of these three transactions was a trust corpus which contained 5000 shares of Class A and 5200 shares of Class B stock in the Eureka Specialty Printing Corporation, ...


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