[32 NJSuper Page 263] Plaintiff-trustee has filed a suit asking this court to construe decedent's will. Two main questions are presented:
Do the provisions of decedent's will, particularly "Article Twenty-sixth: Section 1," limit the powers of investment granted to a trustee under the Prudent Man Investment Statute, N.J.S. 3 A:15-18 et seq. ?
Under "Article Eighteenth" of decedent's will is the life beneficiary of the trust created under said article entitled to be paid all of the income of said trust, or are the payments to her limited to $2,000 per year?
1. WHAT ARE THE INVESTMENT POWERS AND DUTIES OF THE TRUSTEE?
As to this first question, the problem arises because of the Prudent Man Investment Statute of the State, N.J.S. 3 A:15-18 et seq. , which permits a fiduciary to invest up to 40% of the principal of a trust in any type of investment subject only to the prudent man standard as set forth in N.J.S. 3 A:15-19. The statute, however, further says in section 3 A:15-25 that "If a trust instrument prescribes, defines, limits or otherwise regulates" a trustee's powers and duties of investment, "the trust instrument shall control notwithstanding this article." To put it another way, the statute does not nor was it ever intended to countermand a trustor's instructions to his trustee as expressed in the trust instrument. Fidelity Union Trust Co. v. Price , 11 N.J. 90 (1952). In the case at hand the trustee is doubtful as to whether Article Twenty-sixth, Section 1, of decedent's will prescribes, defines, limits or otherwise regulates the trustee's powers and duties of investment within the meaning of N.J.S. 3 A:15-25, supra. If it does, then the trustee may not avail itself of the liberal powers of investment under the Prudent Man Investment Statute.
Article Twenty-sixth, section 1, reads as follows:
"Section 1. It is my desire that all of the trusts herein provided for shall be set up within two years after this will shall have been admitted to probate and that the principal of each trust shall be and remain invested to the extent of at least two-thirds thereof in such securities as shall be legal investments for trust funds under
the laws of the State of New Jersey and/or the State of New York, and to the extent of not to exceed one-third thereof in first and/or senior preferred stocks listed on the New York Stock Exchange upon which there shall have been no default in the payment of any regular dividend when due within five years immediately preceding their acquisition."
This article definitely contains specific provisions instructing and limiting the trustee in its investment policy and particularly with regard to any deviation from "legal investments for trust funds." If there were no provision indicating the extent to which a trustee might invest in securities other than "legal investments for trust funds," it might well be that the Prudent Man Investment Statute would apply. Where, however, the decedent has in effect drafted a Prudent Man Investment Statute of his own and included it in his will, specifying in what manner and to what extent his trustee may deviate from "legal investments for trust funds" as he knew and understood that provision to mean, the provisions of the will must prevail over the statute. In the first place, decedent wanted at least two-thirds of the corpus of each of the trusts invested "in such securities as shall be legal investments for trust funds under the laws of the State of New Jersey and/or the State of New York." He further provided that not more than one-third of corpus could be invested in certain preferred stocks. The fact that decedent made a distinction between "legal investments for trust funds" and other investments, and then specified the percentage of each that the trustee was to invest in, shows that he considered one class to be "legals" and the other "non-legals." It further shows that he was fully aware of the technical meaning of the phrase "legal investments for trust funds" and used it in exactly that sense. Likewise, in authorizing some liberalization of investment holdings by his trustee, he specified in what manner and to what extent. The provisions of N.J.S. 3 A:15-26, therefore, do not apply to this situation because there are express provisions to the contrary contained in the trust instrument. No one can dispute the fact that today, generally speaking, it is legal for
a trustee to invest in any kind of securities, and to that extent the term "legal investments" includes non-legals. Decedent, however, never understood that term to have such a broad meaning, and to try and read this latter construction into decedent's will would result in a conclusion that is almost the opposite of what decedent wrote and obviously intended. The will does anticipate that from time to time the laws relating to legal investments for trust funds may be changed, hence the use by decedent of the word "shall," which clearly indicates that the legality of investments is to be measured by the law at the time of the investment. Fidelity Union Trust Co. v. Price, supra. Likewise, it ...