Opinion ID: 2605808
Heading Depth: 1
Heading Rank: 4

Heading: holding claim to standard oil of new jersey stock

Text: Currently, § 34-18-106, W.S. 1977, [4] is the controlling statute for deciding whether the distribution of corporate stock is principal or income. As part of the Uniform Principal and Income Act (1962 version), the statute was passed in 1963. Therefore, it is not controlling unless it can be applied retroactively to the transactions occurring in this case between 1948 and 1963. A quick check of Wyoming case law concerning the requirements for retroactive application of a statute indicates that it would be improper to apply the statute to the situation here since the legislation evinces a legislative intent that it not apply to receipts obtained before the effective date of the act. [5] Vigil v. Tafoya, Wyo. 1979, 600 P.2d 721; Johnson v. Safeway Stores, Inc., Wyo. 1977, 568 P.2d 908. Therefore, we are constrained to try and reconstruct what the law would have been before the passage of the statute. The only Wyoming case which bears on the subject is Allith-Prouty Co. v. Wallace, 1925, 32 Wyo. 392, 233 P. 144, reh. den. 234 P. 504. There in dictum Justice Blume hinted that Wyoming would follow the Massachusetts rule. This rule was to the effect that dividends paid in stock of the declaring corporation were principal while dividends paid in either cash or in stock of another corporation were income unless they amounted to a partial liquidation of the corporate assets. The Massachusetts rule has long since the Allith-Prouty Co. decision become the majority rule and been embodied in the Restatement, Trust 2nd § 236: Except as otherwise provided by the terms of the trust, if shares of stock of a corporation are held in trust to pay the income to a beneficiary for a designated period and thereafter to pay the principal to another beneficiary, the following rules are applicable: (a) Except as stated in Clauses (e) and (f), dividends payable in cash or in property other than in shares of the declaring corporation, including ordinary and extraordinary dividends, are income, if payable to shareholders of record on a designated date which is within the period; or, if no such date is designated, if declared at a date within the period.       (e) Upon the total or partial liquidation of the corporation during the period, amounts paid as cash dividends declared before such liquidation occurred or as arrears of preferred or guaranteed dividends are income; all other amounts paid upon corporate shares on distribution of the corporate assets to the shareholders are principal. (f) A distribution by a corporation which is a return of capital and not a distribution of earnings is principal. We believe that the Restatement is consistent with Allith-Prouty Co. and also reflects the majority view of the country during the time in question. It is the law to be applied to the dividends paid in this case. Turning to the facts in this case, since the dividends were distributed in stock of another corporation, the ultimate question for us to resolve is whether the payment of these dividends amounted to a partial liquidation of Standard Oil of Indiana. The district court granted a summary judgment on the issue; therefore, in order to affirm we must find insufficient evidence for partial liquidation to even raise a question of fact. Standard Oil of Indiana had received the shares of Standard Oil of New Jersey along with cash in 1932 when it transferred certain foreign property to Standard Oil of New Jersey. Sixteen years later Standard Oil began paying out the shares of stock as dividends. The dividends were charged against the earned surplus of Standard Oil of Indiana. There is no evidence that the capital of the corporation was impinged upon in any way. In light of the facts adduced before the district court, we must conclude that the payment of Standard Oil of New Jersey stock as dividends by Standard Oil of Indiana did not amount to a partial liquidation; therefore, the dividends were properly treated as income.