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ESTATE SIDNEY F. TYLER (08/26/77)

decided: August 26, 1977.

ESTATE OF SIDNEY F. TYLER, SETTLOR. APPEAL OF HARRY F. WEST, EXECUTOR OF THE ESTATE OF MOLLY TYLER WEST, DECEASED


COUNSEL

John L. Harrison, Jr., Philadelphia, for appellant.

Arthur M. Cooper, Asst. Atty. Gen., for appellee, Commonwealth of Pennsylvania as Parens Patriae for Charities.

Duane, Morris & Heckscher, Maurice Heckscher, William S. Ayres, Philadelphia, for appellee, The Fidelity Bank.

Philip A. Bregy, Philadelphia, for appellee, Philip A. Bregy, Esq., Guardian & Trustee ad Litem.

Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Eagen, C. J., and Roberts, J., concur in the result. Jones, former C. J., did not participate in the consideration or decision of this case.

Author: Pomeroy

[ 474 Pa. Page 149]

OPINION

At issue in this appeal is the proper distribution as between income and principal of certain small stock dividends received during the period May 3, 1945 through September 30, 1963 by the trustee of an inter vivos trust created by Sidney F. Tyler in 1919. The Court of Common Pleas of Philadelphia County, Orphans' Court Division, followed our decision in Tyler Trusts, 447 Pa. 40, 289 A.2d 441 (1972), and held such small stock dividends to be allocable to principal.*fn1 The executor of the estate of a deceased income beneficiary has appealed, relying on this Court's decision in Pew Trust, 411 Pa. 96, 191 A.2d 399 (1963).*fn2 We thus have before us the relationship between our decisions in Tyler Trusts, supra, and in Pew Trust, supra.

I.

Much, perhaps too much, has already been written of the historical events which gave rise to the controversy typified

[ 474 Pa. Page 150]

    by this appeal.*fn3 No more than a brief summary is therefore in order:

Prior to May 3, 1945, allocation of trust receipts in the form of stock dividends as between principal and income was accomplished through application of what was known as the "Pennsylvania Rule." Where the trust received an "extraordinary" stock dividend, it was incumbent upon the trustee to determine what portion of that dividend represented a distribution of current earnings of the issuing corporation (and hence was allocable to income) and what portion represented a distribution or dilution of the capital of the corporation (and hence should be allocated to principal to avoid diminution of the trust corpus.)*fn4 While this task of allocation involved no little difficulty, given the increasing complexity of corporate economics and structure in the first half of this century, the Pennsylvania apportionment rule was never applied to stock dividends which constituted less than 6% of the number of ...


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