Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/806

 § 800.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XV. proceeds in the shape of a cash dividend, that too is a part of the principal, and is not income to be paid over to the life- tenant. 1 Of a similar status is money paid to a corporation for property taken by a city, and distributed as a cash divi- dend. 2 But moneys arising from the sale of corporate property and distributed as a cash dividend, are income if they arise from a sale of property made by the corporation in the ordinary course of its business, when it sells only such property as its regular business is to sell. 3 In Lang v. Lang's Executor 4 the following proposition was held to be the rule as stated by Col- lins, J., giving the opinion of the New Jersey Court of Errors and Appeals : " The underlying principle applicable in this case is that no corporate dividend declared after the right to the income has become severed from the ultimate ownership of the stock upon which such dividend is declared, belongs in equit}' - to the person entitled to income except so far as it is derived from the earnings of the stock after such severance. The general trend of judicial opinion in this country is toward the adoption of that principle, and we adopt it without qualifi- cation." § 800. In regard to the status of dividends not payable in cash, the authorities are more conflicting. The rule has indeed been stated in Massachusetts, that cash dividends are income and stock dividends are principal. 5 But, even accord- ing to the Massachusetts decisions, that which may be dis- the time (i. e., the life- tenant), with- out regard to the time when the profits were earned or their source, and regardless of the size of the dividend; provided it is not a dis- tribution of the company's assets, as on winding-up. i Vinton's Appeal, 99 Pa. St. 434; Eisner's Appeal, 175 Pa. St. 143; Wheeler v. Perry, 18 N. H. 307; Gif- ford v. Thompson, 115 Mass. 478. See Clarkson v. Clarkson, 18 Barb. 646. But see Balch v. Hallet, 10 Gray, 402. 2 Heard v. Eldredge, 109 Mass. 258. 8 Reed v. Head, 6 Allen, 174. 786 4 57 N. J. Eq. 325. 5 Minot v. Paine, 99 Mass. 101. See Leland v. Hayden, 102 Mass. 542; Daland v. Williams, 101 Mass. 571; Davis v. Jackson, 152 Mass. 58; In re Hopkins's Trusts, L. R. 18 Eq. 696. And see Richardson v. Richardson, 75 Me. 570, 574. In D'Ooge v. Leeds, 176 Mass. 558, it was held that certain bonds repre- senting the surplus of the company, distributed among the stockholders by vote of the managers, amounted to an issue of preferred stock, and as between tenant for life and re- mainder-men were capital and not income.