[16 NJSuper Page 218] This matter is submitted on the pleadings, depositions and briefs. The plaintiffs are the trustees under the will of Martin Maloney, late of Spring Lake. By these proceedings they seek the instructions of the court as to their rights and duties pursuant to the terms of the will and the recent legislative enactment of the "Prudent Man Act." The basic issues are whether or not the trustees are authorized to retain as trust investments: (a) securities derived from investments held by the decedent at the time of his decease; (b) securities acquired by the trustees by the
exercise of rights to subscribe thereto appurtenant to stocks held by decedent at the time of his death; (c) securities received from the Scranton-Lackawanna Trust Company under the terms of certain deeds of trust between the decedent and that institution, and (d) the effect of chapter 47, Laws of 1951 in relation to securities held or which may be purchased as assets for the estate.
The pertinent paragraph of the will reads:
"I hereby authorize my executors and trustees to retain unconverted so long as they shall see fit any and all securities owned by me at the time of my decease it being my desire that my investments shall not be changed unless my executors and trustees deem it prudent to do so. I also authorize and empower my said executors and trustees to make subscriptions for bond privileges and allotments and for syndicate interest, to such extent as they shall see fit, in companies in which my estate may have an interest at the time of my decease and to surrender or deposit shares of stocks and bonds belonging to my estate at any time for the purpose of taking part in any foreclosure or reorganization proceedings and in their discretion to pay assessments in connection therewith, and generally to take such steps in the premises as they may deem proper and advantageous to my estate. But I direct however that my said executors and trustees shall make no original investments in any securities other than those permitted by law to be made by executors and testamentary trustees.
I direct that all stock dividends, stock allotments and rights to subscribe to additional stocks and bonds and to take part in any refinancing of any corporation in which my estate already has an interest shall be treated as principal and not as income."
"It is axiomatic that in the judicial construction of a will and a determination of the rights and duties of persons thereunder, one of the primary considerations is to ascertain the intention of the testator. Such intent is to be gathered from the will in the light of the circumstances surrounding the testator at the time of the will's execution. This principle stands forth in our cases extending over the years." Also, "consideration should be given to the pecuniary and family situation of the testator." Blauvelt v. Citizens Trust Co. , 3 N.J. 545 (1950), and cases there cited.
Mr. Maloney was extensively interested in public utilities during the period of their greatest development, and acquired substantial holdings in utility companies, both gas and electric, which he owned at the time of his death. By his will he directed that his investments should be continued and designated members of his family who had been associated with him in the conduct of his business affairs, and the bank where he had done business, as trustees of his estate. These facts and the instructions Mr. Maloney gave in his will clearly indicate that he intended that the affairs of his estate should be handled as his business activities had been during his lifetime, except as to original investments to be made for the estate. His practice was to take advantage of the benefits that accrued through stock holdings in various corporations in which he was interested. These advantages consisted of stock dividends, stock allotments, rights to subscribe to additional stocks and bonds and to participate in corporation reorganizations and refinancing. It is obvious that it was his purpose to clothe his trustees with all the discretion and judgment which he had exercised in such matters as they pertained to the securities constituting his estate.
Among the securities owned by Mr. Maloney were 4,094 shares of common stock of United Gas Improvement Company, par $50, and 327 shares of common stock of American Light and Traction Company, par $100. After his death, the United Gas Improvement Company issued in exchange for said shares 511 6/8 shares of its no par $5 preferred stock and 20,470 shares of its no par common stock, and the American Light and Traction Company issued, in exchange for said shares of its stock owned by him, 1,308 shares of its common stock, par $25. Subsequently by mandate of the Securities and Exchange Commission, pursuant to the Federal Public Utility Holding Company Act of 1935, the United Gas Improvement Company and the American Light
and Traction Company were dissolved and in the course of reorganization there were issued to the plaintiffs, in exchange for their then holdings in these corporations, 17,500 shares of United Gas Improvement Company no par common stock and 1,308 shares of American Light and Traction Company $25 common stock. These stocks the plaintiffs now hold. Other securities since sold, and some cash were also received as a part of the distribution in the exchange.
"It is settled law in this State that where stock is retained under a testator's authorization permitting the retention of property owned by him, or where stock is retained under the authority of R.S. 3:16-2, new stock into which such investment may be converted as a result of merger, reorganization or other cause may be retained if the new stock is the equivalent or substantially the ...