Title: Stipe v. First National Bank
Citation: 208 Or. 251, 301 P.2d 175
Docket Number: N/A
State: Oregon
Issuer: Oregon Supreme Court
Date: September 6, 1956

Modified and remanded September 6, 1956.
*255 P.A. Schwabe, Portland, argued the cause for appellants. On the brief were Maurice D. Sussman and Haas &amp; Schwabe for First National Bank of Portland, and DeArmond, Goodrich, Foley &amp; Gray for A.C. Goodrich, guardian ad litem for appellants Harry Pierce Beach, Sharon Olsen, Allen Stipe, Patricia Stipe, and James R. Stipe.
Owen M. Panner, Bend, argued the cause for respondents. On the brief were McKay &amp; Panner.
Before WARNER, Chief Justice, and TOOZE, LUSK, BRAND and PERRY, Justices.
MODIFIED AND REMANDED.
WARNER, C.J.
This is a suit brought to compel the First National Bank of Portland, as Executor of the Estate of Arthur Stipe, deceased, to deliver to plaintiffs certain shares of the capital stock of the Bend Furniture Company, an Oregon corporation, hereinafter referred to as the "Company", and for a further decree declaring plaintiffs to be equal owners of said stock free and clear of any interest of the defendants herein. From a judgment in favor of plaintiffs in accordance with the prayer of their complaint, the bank and other defendants appeal.
*256 The plaintiffs, Arthur C. (Bud) Stipe, Maxine Jean Fisher and Phyllis Mary Olsen, are the children of the late Arthur Stipe and of his former wife, Nettie Stipe. Because of the similarity of the father's name with that of his son, we shall hereafter refer to Mr. Stipe, deceased, as "Arthur" and to his son when necessary as "Bud", a name by which he was commonly known.
Arthur died testate November 22, 1953, leaving a substantial estate. He nominated the defendant First National Bank of Portland, hereinafter called the "Bank", as executor of his estate. In this capacity the the Bank is now in possession of the shares of company stock which are the subject matter of this litigation.
The five minor defendants, Harry Pierce Beach, Sharon Olsen, Allen Stipe, Patricia Stipe and James R. Stipe, are children of one or the other of the plaintiffs and hence grandchildren of Arthur Stipe and Nettie Stipe and legatees and devisees under their grandfather's last will and testament.
The defendants Evelyn M. Mackey, Ella Russell and Nettie Stipe, all of whom defaulted below, are likewise beneficiaries under Arthur's will.
It is the contention of plaintiffs that in 1934 Arthur and Nettie Stipe entered into a property settlement agreement as an incident to their then pending suit for divorce; that as a part of this settlement, Arthur then and there executed a trust declaration whereby he transferred to Frank S. McGarvey, President of the Lumbermen's National Bank of Bend, Oregon, 105 shares of the capital stock of the Bend Furniture Company, in trust, for the use and benefit of his three children, who are the plaintiffs herein.
The plaintiffs represent that their Exhibit No. 2 is an exact copy of the original trust declaration executed *257 by their father in 1934. The exhibit tendered and admitted is a typewritten copy upon which Arthur's attorney, Jay H. Upton, now deceased, had inserted in pencil the signatures and all other matter appearing in longhand on the original document and is as follows:
Plaintiffs further claim that since 1934 the original trust res of 105 shares has been increased by 674.94 shares because of certain stock dividends declared thereon. They argue that as beneficiaries of the trust, they are the owners in equal amounts of the 779.94 shares now held by the Bank and ever since their father's death have been entitled to the possession of said shares.
At all times subsequent to June 27, 1934, to Arthur's death, he was a dominant figure in the Company's business.
The Company's stock certificate books show that two days after the alleged trust agreement was made, i.e., June 29, 1934, Arthur transferred 105 shares of Company stock to "F.S. McGarvey, President, Lumbermen's National Bank, Trustee". This transfer was evidenced by stock certificate No. 20. The same record further shows that on December 30, 1936, Certificate No. 20 was transferred by McGarvey, as said trustee, to "A. Stipe". Stipe in turn had certificate No. 22 issued to himself for the 105 shares. Certificate No. 22 was in Arthur's possession at the time of his death as were certificates evidencing ownership of 674.94 additional shares which had been issued by the *260 Company at various times as stock and optional dividends on the original 105 shares.
If Arthur did in fact create a trust in 1934 as is claimed by plaintiffs, then it is obvious that in order to legally effectuate a return of the 105 shares to himself in December, 1936, the decedent had to revoke the trust agreement, if it was in fact revocable. On the other hand, if it was not revocable, then the trust corpus and all accruals thereon are still impressed with the terms of the trust and must be delivered by the Bank to the plaintiffs.
The appealing defendants contend:
From this diversity of contentions on the part of the respective parties we derive two principal questions requiring answer: First, did Arthur Stipe during his lifetime execute an irrevocable trust for the benefit of plaintiffs and thereafter transfer to the nominated trustees 105 shares of the Company stock as the trust res, and, second, are the 674.94 shares received by the trustor during his lifetime as stock and optional dividends accruing on the 105 shares an addition to the trust res, or do they properly belong to Arthur's estate?
1. At the commencement of the trial plaintiffs offered into evidence the document which was subsequently received as Exhibit A. Defendants objected to the admission of this conformed copy of the trust agreement, relying on Jones v. Teller, 65 Or 328, 333, 133 P2d 354, where we said:
2-6. All parties agree that the foregoing is a correct statement of the controlling rule, but plaintiffs argue, and we think correctly, that their position is to be measured and determined by what constitutes reasonable effort to produce the original, as declared in Wiseman v. N.P.R.R. Co., 20 Or 425, 26 P 272, 23 Am St Rep 135. There we find, at page 428:
7. We find ourselves in accord with Professor Wigmore, who not only echoes the position of this court as stated in Wiseman, supra, but also contends that the ultimate determination of the sufficiency of the search should be left entirely to the trial court's discretion.
A summary of the evidence which the respondents depend upon to warrant the admission of Exhibit No. 2 as such secondary evidence is as follows:
The provision for the benefit of the plaintiffs reflected by the trust agreement executed the same date as the decree was a part of the property settlement made by their parents in the divorce suit. The copy here employed as Exhibit No. 2 was presented to Mrs. *264 Stipe by Judge Wallace, now deceased, her attorney in that suit, during the course of that proceeding. He then informed her that it was handed to him by her husband's attorney, Mr. Upton. Mrs. Stipe identified the handwritten inserts in the conformed carbon copy as being in the handwriting of Mr. Upton. The copy introduced here has been in Mrs. Stipe's possession ever since she received it in court from her attorney. It is also the testimony of Mrs. Stipe and her daughter, the plaintiff Phyllis Stipe Fisher, that they both saw the original of the document at the time of the divorce trial. So far as plaintiffs are concerned, nothing was known about the whereabouts of the original until 1942. At that time Mrs. Fisher shared a safety deposit box with her father in one of the local banks, and it was then that she again saw the original of the trust declaration. Her last view of it was in 1944 when she removed her possessions from the box previously maintained for the joint use of the father and daughter.
The plaintiff, Bud Stipe, testified that he had no knowledge of the existence of a trust agreement prior to his father's demise. He stated that his first awareness of the existence of the trust came at least a month or so after his father's death when his mother sent him the conformed copy of the trust declaration.
According to the testimony, Arthur was the last known person to have possession of the original instrument when it reposed in his safety deposit box. If he continued to retain possession up to the time of his death, the presumption is that it passed to the defendant Bank in its capacity as Arthur's executor.
But the appealing defendants themselves exonerate the plaintiffs from the necessity for a further *265 search for the missing original trust agreement when they say, as they do in their brief:
This is precisely in accord with the position taken by plaintiffs during the course of the trial, i.e., that the trustor Arthur Stipe sought to revoke the trust when he reacquired stock certificate No. 20 from Mr. McGarvey, the trustee.
Notwithstanding the foregoing admission, counsel for appellants indulge in affectations of surprise because plaintiffs made no demand upon the executor Bank to produce the original agreement last accounted for in possession of the executor's decedent. Such would, indeed, seem a vain gesture on the part of plaintiffs, not alone because of the foregoing concession made by the appealing defendants, but also because of the status of the pleadings which in and of themselves exonerate the plaintiffs from pressing such inquiry.
8. A copy of the trust agreement was attachd to plaintiffs' complaint as Exhibit A. We have held that when it is apparent from the face of the pleadings that a writing in the custody of one party will be required at the trial of a cause by the other party, the pleadings themselves are sufficient notice to the adverse party to produce the document at the trial, and, if he fails to do so, secondary evidence as to its contents is admissible. Peters v. Queen City Ins. Co., 63 Or 382, 390, 126 P 1005; Michelin Tire Co. v. Williams, 135 Or 158, 159, 293 P 938; 32 CJS 778, Evidence § 844; 1 Jones, *266 Evidence (4th ed) 437, § 224. The defendants here by their answer disclaimed any knowledge or information of the trust agreement pleaded as Exhibit A by the plaintiffs. That circumstance alone afforded an additional reason relieving the plaintiffs from the necessity of a demand on defendants for the original. Michelin Tire Co. v. Williams, supra, at p. 159.
9. Under the circumstances outlined above, we are of the opinion that the trial judge did not abuse his discretion when he determined that plaintiffs might introduce Exhibit No. 2 in lieu of the original and as a sufficient compliance with ORS 41.640(1)(b).
10. The briefs of appellants and respondents are replete with extended discussions concerning the presence or absence of consideration for the trust agreement. We deem their respective representations as irrelevant to the issues presented for the reason that an owner of property can create a trust of property by transferring it to another person in trust although there is no consideration other than the transfer of the property. 1 Restatement 98, Trusts § 29; 1 Scott, Trusts, 178, § 29; Newman, Trust, 59; 89 CJS 747, Trusts § 28; 54 Am Jur 51, Trusts § 41; Bogert, Trusts, 254 § 202.
11. This court has long been committed to the rule that in order to establish a voluntary trust with a third person there must be a delivery of the trust property to the trustee or a document of transfer. Winters v. Winters, 165 Or 659, 665, 109 P2d 857; Windle, Adm., v. Flinn, 196 Or 654, 678, 251 P2d 136.
We are satisfied that such a delivery was made and that McGarvey took possession of the trust res as trustee. We note again that two days after signing the trust agreement Arthur caused a new certificate *267 No. 20 to be issued to "F.S. McGarvey, President, Lumbermen's National Bank, Trustee", for the 105 contested shares. The trustee's acceptance is attested by the fact that McGarvey, on December 30, 1936, endorsed his interest in stock certificate No. 20 to "A. Stipe" by employing the same description of trusteeship appearing on the certificate as issued. Thus the transfer of the settlor's interest to the trustee is evident.
The appealing defendants urge that, assuming that a valid trust was created, "the same was revocable at will". This appears to be predicated on the specious argument that because the trust was voluntary and without support of consideration, there was ipso facto reserved to the trustor the right to revoke it at will. Appellants' argument in support of this position is exceedingly vague and nebulous. No authorities are marshalled to give credence to appellants' theory of revocability. That the argument is based on the absence of consideration we garner piecemeal from the employment of such suggestive phrases as: "The above quoted testimony [of Mrs. Stipe on the divorce trial relating to the property settlement agreement] shows that the provision in respect to the 105 shares was a purely voluntary act on Arthur's part, there was no quid pro quo, it was in no way connected with Nettie's [Mrs. Stipe] divorce settlement with Arthur." (Emphasis ours.)
But whatever appellants' theory of revocability may be, it cannot successfully rest upon the absence of consideration.
12. We have already observed that consideration is not necessary to a fully executed trust. The situation now presented by appellants finds complete answer in *268 1 Scott, Trusts, 179, § 29. That distinguished author says:
The rule enunciated by Scott to the effect that a trust is irrevocable unless the settlor reserves the power of revocation is the majority rule. See also 3 Scott, Trusts, 1795, § 330; 2 Restatement, Trusts, § 330(2); 54 Am Jur 79, Trusts § 77; 89 CJS 898-901, Trusts § 88.
This court has only once before addressed itself to the subject of the power to revoke trusts. Allen v. Hendrick, 104 Or 202, 224, 206 P 733. But we have not heretofore passed directly or indirectly upon the proposition here raised: whether a trustor can revoke a trust without the consent of the beneficiaries in the absence of a reserved power authorizing such action. We therefore adopt with approval the statement found in 4 Bogert, Trusts and Trustees, 429, § 993, as our concept of the true rule:
For an interesting discussion of the right of a settlor to revoke or procure cancellation of a voluntary trust, see ALR annotations following: Fidelity &amp; Columbia Trust Co. v. Gwynn, 206 Ky 923, 268 SW 537, 38 ALR 937, 941; Garneau v. Garneau, 63 RI 416, 9 A2d 15, 131 ALR 450, 457.
13. Nowhere in the record before us do we find anything which inclines us to believe that the plaintiffs in any way relinquished their rights under this trust agreement. Nowhere do we find any testimony or evidence that Nettie Stipe attempted to surrender the benefits of the trust to Arthur Stipe, if in fact she had any right to do so, and, of course, the declaration itself is silent on the subject of revocation. We are therefore of the opinion that the trust created by Arthur Stipe in 1934 was not terminated or revoked, either with the consent of the cestui que trust or for any other cause, and therefore continued in force and effect until the date of his death.
Our conclusions respecting the subsistence of the trust declaration disposes of 105 shares of the Company's stock in controversy, by our holding that it constitutes the corpus of the trust estate as originally constituted. Thus we are left to discover the ownership of the balance of the stock in issue, aggregating 674.94 shares, and all paid as stock dividends (optional and nonoptional) on the original 105 shares, during the period from June 29, 1934 (the date of the *270 beginning of the trust), to November 22, 1953 (the date of Arthur's death and the termination of the trust and Arthur's life estate in the income).
The Company records disclose the following history in summary of actions with reference to dividends declared during years subsequent to the execution of the trust agreement (June 29, 1934):
*271 It will be observed from the foregoing tabulation that five different kinds of dividends have been distributed by the Company since the date of the trust agreement: (1) dividends payable in cash; (2) dividends payable in notes; (3) dividends payable in kind, i.e., in stock of other corporations; (4) dividends payable in stock on an optional basis; and (5) dividends payable in stock on a nonoptional basis. As we shall later discover, the distinction between items (4) and (5) as to the dividends paid on an "optional" or "nonoptional" basis becomes one of real importance in arriving at our final conclusion.
No issue arises between the parties as to Arthur's right as life tenant of the trust to the first three classes of dividends. But, as to the last two classes numbered (4) and (5) above, each group of adversaries claim to be entitled to all the shares so issued as dividends, i.e., as computed by them, to all of 674.94 shares (which is the total of 779.94 shares in controversy less the original trust res of 105 shares).
We conclude, for the reasons which follow, that plaintiffs are entitled to receive only 560 shares of the stock and the Bank, as Arthur Stipe's executor, the balance of the stock dividends in the amount of 219.94 shares.
The conflicting contentions of the parties project this question: Do stock dividends under the trust declaration of June 29, 1934, accrue as income for the benefit of the life tenant (here the late Arthur Stipe) or as principal, thus expanding the value of the trust corpus and the beneficial interests of the remaindermen (the plaintiffs herein).
The appealing defendants argue that by the express terms of the trust declaration Arthur reserved unto himself during his lifetime "any and all dividends *272 that may accrue or be declared upon the same, and that said beneficiaries shall have no right to receive any dividends from the earnings of said stock during the life of the said Arthur Stipe." They claim, therefore, that the stock dividends of 1945, 1946 and 1952 were distributions of income, earnings and profits to which Arthur had a right by the express provisions of the declaration. Plaintiffs answer this with the contention that the word "dividend", as employed in the trust declaration of June 29, 1934, means nothing more than "income", and that a "stock dividend" does not constitute income. See 33 Am Jur 904, Life Estates, Remainders, Etc. § 378, where it is said:
See also: Gibbons v. Mahon, 136 US 549, 568, 34 L ed 525, 10 S Ct 1057; Lauman v. Foster, 157 Iowa 275, 135 NW 14, 16; Hayes v. St. Louis Union Trust Co., 317 Mo 1028, 298 SW 91, 98, 56 ALR 1276; Selleck v. Hawley, 331 Mo 1038, 56 SW2d 387, 394; In re Heaton, 89 Vt 550, 96 A 21, 30 LRA 1916D 201.
14. Upon the authority of the foregoing cases we are satisfied that the phrase of the trust declaration upon which the appellants rely to vest title in Arthur to all stock dividends whether or not they were optional or nonoptional, has no force nor effect for that purpose. Had the donor of the trust estate desired to achieve that result, it was incumbent upon him, by explicit directions, to indicate his intention and desire to retain all stock dividends.
*273 The problem of determining the right to stock dividends has been frequently litigated, and the courts have not always been in accord. Three principal rules, each expressing a different approach to the problem, have been advanced in times past. They are commonly known as the Massachusetts Rule, the Pennsylvania Rule, and the Kentucky Rule.
These rules became a source of endless confusion. For this reason many states have enacted the Uniform Principal and Income Act, a constructive attempt to resolve the conflicts presented by their varying conclusions. Oregon adopted a modified version of the Uniform Act in 1931 (1931 Chap 371, Oregon Laws). It is now codified as Chapter 129 (ORS 129.010 to 129.140, incl.). As stated in ORS 129.020, one of the avowed objectives of this legislation was to "govern the ascertainment of income and principal, * * * between tenants and remaindermen, in all cases where a principal has been established with or, * * * without the interposition of a trust; provided, however, that the creator of the principal, or any person thereto legally empowered, may make any provision he desires touching matters covered by this chapter and may himself direct the manner of ascertainment of income, principal or expenses or grant discretion to the trustee or other persons so to do, and such provision and discretion, where not otherwise contrary to law, shall control, notwithstanding this chapter." (Emphasis ours.)
Thus, we find the Uniform Principal and Income Act made applicable to the precise situation we have here. The creator of the instant trust did not include a provision directing the manner of ascertaining the principal and income in any way at odds with the provisions of the Uniform Act, as he had a right to do if *274 he so desired. Having failed in that respect, the definitions of principal and income found in the act must prevail  that is, dividends of a kind treated by the act as principal must be accounted for as principal and dividends of a kind declared by the act as income must be treated as income (ORS 129.050, supra).
15. Generally speaking, stock dividends are treated as principal accretions rather than as income. Such is also the clear purport of ORS 129.050(1) except when a trustee has the option of receiving a dividend either in cash or in shares of stock in the declaring corporation. Such a right of choice gives to such a stock dividend the character of an "optional stock dividend" and when received is considered as a cash dividend and treated in law as income, irrespective of the choice made by the trustee.
16. In treating stock dividends as principal the Uniform Act (ORS 129.050 (1)) follows what is generally accepted accounting and tax practice and is consonant with reason. A stock dividend takes nothing from the property of the corporation and adds nothing to the interests of the shareholders. The property of the corporation is not diminished. The stockholders' interests are not increased. Their proportional interests remain the same. The only change is in the evidence which represents a given stockholder's interest, that is, the new shares representing the same proportional interest that the original shares represented before the issue of the stock dividend. In short, the corporation is no poorer and the stockholder is no richer than they were before. A stock dividend is, therefore, not in any true sense a dividend at all. Its issuance is, in the last analysis nothing more than an incident or process in corporation bookkeeping. Such is the holding of Eisner v. Macomber, 252 US 189, 202, 64 Fed 521, *275 40 S Ct 189; Hayes v. St. Louis Union Trust Co., 317 Mo 1028, 298 SW 91, 98; Rutherforl Nat. Bank v. Black, (1943) 133 NJ Eq 306, 32 A2d 86, 89; Millar v. Mountcastle (1954) 161 Ohio St 409, 119 NE2d 626, 633; City Bank Farmers Trust Co. v. Ernst (1934) 263 NY 342, 189 NE 241, 242; First Nat. Bank of Tuskaloosa v. Hill (1941) 241 Ala 606, 4 S2d 170, 175.
The conclusions there reached are written into ORS 129.050(1) of the Uniform Principal and Income Act in so far as it declares that a stock dividend "shall be deemed principal".
ORS 129.050(1) which controls our decision in this matter reads as follows:
ORS 129.050(1) is substantially similar to section 5(1) of the Uniform Act, but travels further than the cases last cited as to the character of stock dividends generally. Under the last part of that section a different determination is made when the stock dividend is made an "optional" offering by the corporation, that is when the shareholder is given a choice between accepting a stock dividend or accepting cash. When the corporation's declaration tenders a dividend in such optional form, the dividend received by the trustee *276 "is deemed income irrespective of the choice made by the trustee."
17. In view of the foregoing we are bound to hold that in the absence of explicit terms to the contrary in the trust instrument, the Uniform Principal and Income Act applies with the result that all stock dividends declared by the Company on the original res of 105 shares and not tendered on an optional basis, that is, with a choice between stock or cash, are principal and should be added to and become a part of the trust res.
Referring again to the above summary tabulation of dividends declared by the Company during the existence of the trust, we find that in the years 1945, 1946 and 1952 the Company declared stock dividends without cash or other options. These, therefore, are "principal" and became a part of the trust corpus with the following results:
The foregoing determination concerning the disposition of 560 shares leaves for our further consideration *277 the question of title to the remaining stock dividend shares, being 219.94 in number. It will be recalled that in both of those years the corporation issued two dividends, or rather two different types of dividends. The first, as shown in the earlier chronological tabulation, was a dividend payable in notes, the second, or additional dividend, was an "optional stock or cash" dividend. No issue is presented by the dividends of those years payable in notes. Here we are concerned only with the "optional stock or cash" dividends declared in 1936 and 1937, and which were ultimately evidenced in the stock dividends, title to which is now in issue. Unless successfully challenged by plaintiffs, the aggregate dividend shares for the years 1936 and 1937, under the rule laid down by the last sentence of ORS 129.050(1) as to the transmutation of an optional stock dividend from principal to income, is concurred in by the plaintiffs-respondents, who in their brief say: "The effect of this provision [ORS 129.050(1), supra] is that if there was a true option on the part of the stockholders to receive cash or stock, then plaintiffs as remaindermen would not be entitled to 779.94 shares but would only be entitled to 560 shares." (Emphasis ours.)
But, say the plaintiffs, as their sole reason in opposition, there were no "true options", because in each of those years previous to the declaration of the dividends for 1936 and 1937, the stockholders had indicated their intention to take stock instead of cash if an optional dividend was offered by the directors. No authorities are brought to our attention in support of this proposition.
18. At the outset, the plaintiffs in order to support the claim against the regularity or sufficiency of the Company's action in declaring "optional" stock dividends *278 in 1936 and 1937, must first hurdle and overcome the presumption "omnia rite acta praesumuntur", which casts upon those who would deny the regularity of corporate proceeding the burden of establishing such irregularity by clear and convincing proof. This doctrine is embodied in subsections (19) and (20) of ORS 41.360 as a part of the statute of disputable presumptions, reading: "(19) Private transactions have been fair and regular. (20) The ordinary course of business has been followed."
19, 20. A corporation commonly speaks through its records. Kelly v. Galloway, 156 Or 301, 330, 66 P2d 272, 68 P2d 474. The minutes of the meetings of a corporation's board of directors are a part of such corporate records (Teiser v. Swirsky, 137 Or 595, 604, 2 P2d 920, 4 P2d 322), and are prima facie evidence of the facts stated. 32 CJS 687, Evidence § 767. Also see First Nat. Bank v. Frazer (1933), 143 Or 662, 19 P2d 1091, 22 P2d 325.
21. Unless otherwise provided by statute, the corporate charter, or other governing instrument, the authority to declare dividends is in the board of directors, and not in the stockholders or the corporate officers. 18 CJS 1104, Corporation § 474. Under the Oregon statute prevailing in the years 1936 and 1937 (OC 1930 § 25-213) the powers vested in a corporation are exercised by the directors, including the right to declare dividends, Baillie v. Columbia Gold Mining Company, 86 Or 1, 16, 166 P 965, and not by the stockholders. Harvey et al. v. Campbell et al., 107 Or 373, 437, 209 P 107, 214 P 348.
22, 23. The question whether a dividend shall be declared is ordinarily one of internal management with which courts will not interfere. Ostlind v. Ostlind Valve Company, Inc., 178 Or 161, 165 P2d 779; Baillie v. *279 Columbia Gold Mining Company, supra. The same rule applies as to the kind of dividends declared if it does not offend the law or the provisions of the corporate charter or by-laws. See Annotations, 55 ALR, pp 70-147 and cases there cited.
The plaintiffs make no claim of fraud or coercion. There is no showing that the charter or by-laws of the Company reserved to the stockholders any rights with respect to the declaration of dividends or kind of dividends to be distributed. No irregularity in the directors' action is alleged, no consideration for the elections to take stock is asserted, nor is there any showing that the directors acted solely in reliance upon the stockholders previously given assurances that they would take their dividends in stock instead of cash or that the directors would have done otherwise in the absence of the stockholders' declarations respecting their choice.
The statements of the stockholders as to what they preferred and what they intended to do if given a dividend choice was wholly gratuitous advice and an unnecessary assurance to the directors that whatever they did would be well received by the stockholders. This, no doubt, the directors were glad to have but, so far as here revealed, it was not the controlling cause for the exercise of their judgment in the manner reflected by the language of the resolutions declaring the "optional stock or cash" dividends of 1936 and 1937.
John T. Flynn, a certified public accountant and an attorney, who had been employed as an auditor of the Bend Furniture Company books since 1944, was called as a witness in plaintiffs' behalf. He was familiar with and in possession of its essential corporate records at time of trial. We deem his testimony as particularly pertinent. When asked by plaintiffs' counsel if the *280 1936 dividend was "a true option of the stockholders according to the books and records of the corporation", he made an affirmative reply. He later testified that the corporate minutes concerning the 1937 dividend were substantially the same.
24. Mr. Flynn also informed the court that the reason for the Company's action in declaring an optional "cash or stock" dividend was a tax advantage accruing to the corporation under the 1936 Internal Revenue Code thereby permitting it to take a surtax credit. This was a legitimate demonstration of good management and warranted the "optional" dividends no matter what may have been the stockholders' desire in the premises.
We have examined the minutes of the directors' meetings in 1936 and 1937 wherein are recorded the resolutions of those years directing distribution of the "optional" dividends here assailed. These corporate records on their face appear regular in every respect. We conclude that the waiver of right to elect to take cash given before the resolutions of distribution granting an optional right to take cash or stock, cannot be successfully employed here to discredit the regularity or effectiveness of the declared "optional" dividend in controversy.
No one, we are sure, would have the temerity to contend that under the circumstances any stockholder could have successfully complained if the directors had refused to declare an optional "stock or cash" dividend in the year 1936 or 1937 or that the directors could have refused to pay cash dividends after their dividend declarations if any stockholder had reconsidered his choice and demanded cash instead of stock.
25. We, therefore, find that the stock dividends aggregating 114.94 shares taken by Arthur in 1936 and *281 1937 were regularly distributed and having been offered by the Company with a right of election, constituted "income" to which he was entitled and not "principal" as claimed by the plaintiffs.
26. We turn to appellants' last assignment of error, which represents that the trial court erred in not finding that the trust agreement was void because it was an attempted testamentary disposition but not executed in the manner and form required by the statute on wills.
Neither upon oral argument nor in their brief do the appellants make any serious attempt to sustain that proposition. That it is palpably tenuous in reason and manifestly wanting in merit, is convincingly revealed by an examination of the instrument itself (spread in toto at the forepart of this opinion). We, therefore, give no more attention to this assignment than it received from those who fathered that strained idea and then virtually abandoned it.
27. We note that the plaintiffs' complaint makes no specific request for a decree as to dividends, if any, accruing since their father's death. Mr. Flynn, the accountant, testified that, as of the date of the trial, there were none. If, however, any have been declared since then we believe that the court should retain jurisdiction for the purpose of making such determination and include in its decree a judgment in favor of plaintiffs for such dividends, if any, as the Company may have declared on the 560 shares owned by them. Fouchek v. Janicek, 190 Or 251, 275, 225 P2d 783.
The decree of the lower court will be modified as hereinabove directed and the cause remanded for the purpose of determining what, if any, dividends have been distributed by the Company since Arthur's death.
Parties to pay their own costs.