For affirmance in part and reversal in part -- Chief Justice Weintraub and Justices Jacobs, Francis, Proctor, Hall and Schettino. Opposed -- None. The opinion of the Court was delivered by Proctor, J.
The First National State Bank of New Jersey, as trustee for the estates of William F. Conway and his wife Isabelle E. Conway, instituted actions in the Essex County Court seeking approval of its accountings and requesting instructions regarding the disposition of stocks held in the William F. Conway estate. Several instructions by the trial court are challenged on this appeal and the cross-appeals. James Conway, income beneficiary and testator's son, appeals from that part of the trial court's judgment which allocates six of eight stock distributions to corpus and from that part which allocates to corpus the share of trust income designated to Mary Rogers, testator's daughter, which has accrued since her death. Three of the remaindermen under the trust,*fn1 St. James Hospital of Newark, St. Joseph's Home for the Blind -- Sisters of St. Joseph of Newark, and the Home for the Aged of the Little Sisters of the Poor, cross-appeal from that part of the trial court's judgment which allocated two of the eight stock distributions to income. Prior to argument in the Appellate Division we granted the motions of all parties for certification. R. 2:12-2(a); R. 2:2-1(b).
The testator, William F. Conway, died on October 2, 1950, and his will was admitted to probate on November 10 of that year. After making several specific bequests, the will left one-half of testator's estate to his wife, Isabelle. Under paragraph Sixth of testator's will the residuary was placed in a trust with Isabelle and the Federal Trust
Company (predecessor to the present corporate trustee) as trustees. The sum of $500.00 was to be paid quarter-annually out of the "net interest and income" of the trust to each of his two children, Mary Rogers and James Conway. Isabelle was empowered in her discretion "to increase the amount or amounts of such quarter-annual payments to either or both of my said children at any time or times." The trust was to terminate "[u]pon the death of both of my said children" and the corpus of the trust would then pass to Isabelle, together with undistributed net interest and income if she were living. In the event testator's wife predeceased the children, "the corpus of said trust, together with all undistributed net interest and income therefrom shall go * * * to such person or persons, corporation or corporations, and in such amounts as my wife shall, by her last will and testament, designate."
In paragraph Eighth of his will, decedent provided:
EIGHTH: I further direct that all dividends of money which may be received by my executor and trustees, whether ordinary or extraordinary, shall be considered as income and treated as such as herein provided; and all dividends of stock or other things of value, including all proceeds from the sale of "rights" shall be treated as income, notwithstanding any legal rule to the contrary.
After testator died, his wife exercised her power to increase payments out of the trust to her children by directing the corporate trustee to pay out one-half to each of them of all the net interest and income from said trust. Later she made this order retroactive to include all interest and income undistributed since her husband's death.
On August 1, 1953, Isabelle Conway died; her will was admitted to probate two weeks later. In her will she exercised her power of appointment over her husband's trust by naming the seven charities previously mentioned as remaindermen equally entitled to share in the corpus upon termination of the William F. Conway trust. As to her own estate, she made several specific bequests, including gifts
of $25,000 each to her children, and left the residue in trust, directing the trustees to pay $8,000 annually from the trust income and corpus, if necessary, to each of the two children. The trust was to terminate at the death of the last surviving child and the corpus was to be divided among the same seven charities which she designated as remaindermen to her husband's trust except that $25,000 was to be divided among the children of her daughter, if any, and the same amount to be divided among the children of her son, if any.
The first question before us is whether eight distributions of stock to the William F. Conway trust are allocable to income or corpus. William Conway's will directed only that "dividends of stock or other things of value * * * shall be treated as income, notwithstanding any legal rule to the contrary." No mention was made of stock splits. Six of the eight distributions in question were true stock splits, and the trial court held that they were allocable to corpus. The court reasoned that, in the absence of any evidence of a contrary intent by the testator, the allocation is governed by the provisions of the Principal and Income Act, N.J.S.A. 3A:14A-1 et seq. We agree with this reasoning and affirm the allocation to principal of the stock distributions by American Home Products, American Telephone & Telegraph Co., Public Service Electric & Gas Co., Consolidated Edison Co. of New York, International Telephone & Telegraph Co., and Square D Co. See In re Arens, 41 N.J. 364, 375 (1964).
The trial court further held that the remaining two stock distributions by Chase Manhattan Bank and Consolidated Foods Corporation constituted stock dividends within paragraph Eighth of the will and should be allocated to income. We also agree with this determination. These stock distributions are similar to those which we held should be allocated to income in In re Conway, 50 N.J. 525 (1967), where we considered this same will and concluded that the will ...