The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1885-1921, 1900-03-06

ritz - have the weight Of authority it. side, this Is by
mean. apparent authors- are at most pretty evenly
matched and 80 nearly that feel we must decide principally
~ III reason. ~ they appeal It may be remarked how.
the decision the Supreme Court Of the United State
@ -r1 Lv Mr. Justice Gray who had previously hcd the
same way a member Of the Supreme Judicial Court Of Maa
chu-ct and that the coDta in Kentucky, tennessee
MARYLAND and the latest New York all decided after
and Notwithstanding the decision 10y the Supreme Court Of the
United States and the writers still adhere to the latter rule
notwithstanding the weight Of that high authority.
In considering the relative merits Of these rule, must be
borne they have nothing do with stock issued
merely a. water issued to represent natural increase
in the value of the company property business irrespective OF
earnings The question stock issued to represent earn
mos and only in 20 far as represent earnings Whether
the stock does represent earnings not IS another question
Many courts hold the presumption be that 1t does represent
earnings But assuming the presumption to be the other way
and that the stock should be treated capital unless be
shown with reasonable certainty that it issued to represent
earnings still in the present that fact does clearly appear
from action Of the corporation For the corporation set on
800 600 Of it, earnings representing the value Of
the stock issued.
The courts OH both sides agree that the earnings Of corpora
ton are not income stakeholder until dividend Is de-
care great accumulation Of earnings there may be-
that corporation may its earnings a reasonable
extent which generally held to be very great extent,
for capital called temporary floating actual or de taco
capital Of paying them in dividends; that may pay
out such accumulated earnings from time time div
dends in other property, permanently capitalize
them v issuing stock therefor in the shape OF stock div
dends that in any transaction the substance rather than the
form is to be regarded and that between the life tenant and
remaneman of the creator OF the trust to pre-
vail as against of the corporation They differ as
to the application of these last propositions namely as to
what ia form and what substance and what the intention
Of the creator of the trust
Take first the question substance On both sides
it held that the words used for instance dividend or
capital in declaring distribution matter of form and
cd b-r
bv what Is said Then the which make distinction be
tween and stock dividends that the intention
solely stock though representing earnings and not
to give stockholders the privilege receiving cash instead OF
stock they DESIRE the transaction does not amount in sub
stance payment cash dividend and purchase of the
stock by means of the dividend but that it merely
change the form of the evidence of title what already
by the shareholders because they the earnings
until declared dividend belong the corporation part of
property like the capital represented by all the shares
and hence number of shares increased pro rata the
property still owned by the persons and in the
portions and nohr paid out; in fact that the earnings
already de actO floating capital and that the issue of stock
to represent merely of what has already
substantially These look the the dv
the benefit of the remanderman but for the benefit
of life tenant; they hold that if there merely distribution
of stock though representing earnings goes the
ainderman but if there distribution of capital though
in cash under the of dividend does go
life tenant
On other side it urged soundy, believe
got through the form when they merely
certaned whether the corporation contemplated paying anything
alternative giving the stock the option of the
shareholders but that they should further and look the
of the property which the stock represent
and benefit of the life well the remander1nan
and that if it represent what already capital capital
and is represent earnings is dividend that
while accumulated earnings dividends until
and capital because they SUCH still they
not technically either capital dividends but profits
equitaby belong those entitled the dividends though the
time of payment be left the management of corpora
ton; and that whe the payment of stock dividend not an
actual distribution of profits does materially the rights
of the shareholders in respect of the accumulated profits The
effect of stock dividend capitalize the accumulated profits
permanently The profits of which stock dividend
declared afterwards be distributed among the share
boIda s.anda the