In re Trust Created Under the Will of Samuel M. Damon , 140 Haw. 56 ( 2017 )

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Electronically Filed
Supreme Court
SCWC-12-0000731
15-JUN-2017
09:08 AM
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
---oOo---
________________________________________________________________
TRUST CREATED UNDER THE WILL OF SAMUEL M. DAMON, Deceased
________________________________________________________________
SCWC-12-0000731
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-12-0000731; P. NO. 6664; EQUITY NO. 2816-A)
JUNE 15, 2017
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, WILSON, JJ.
OPINION OF THE COURT BY McKENNA, J.
I. Introduction
This case concerns the objections of two beneficiaries,
Christopher Damon Haig (“Christopher”) and Myrna B. Murdoch
(“Myrna”), of a testamentary trust created under the will of
Samuel M. Damon (“Damon Trust” or “Trust”), to the decisions
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made by the Probate Court of the First Circuit (“Probate Court”)1
that underpinned its August 2, 2012 Judgment, specifically the
approval of the Trust’s accounts from 1999 to 2003. The
Intermediate Court of Appeals (“ICA”) affirmed the Probate
Court’s August 2, 2012 Judgment. See In re Estate of Samuel M.
Damon & Trust Created under the Will of Samuel M. Damon (In re
Trust of Damon), No. CAAP-12-0000731 (App. June 2, 2016) (mem.).
Separately, Christopher and Myrna each timely applied for a
writ of certiorari from the July 11, 2016 Judgment on Appeal
entered by the ICA pursuant to its June 2, 2016 Memorandum
Opinion (“Mem. Op.”). Among other things, both Christopher and
Myrna assert that the Trustees violated their duty to inform
beneficiaries pursuant to trust law and Hawaiʻi Revised Statutes
§ 560:7-303 (2006), that their due process rights were violated
when they were not granted access to documents disclosed to the
court-appointed Master by the Trustees of the Damon Trust
(“Trustees”) thereby preventing them from making informed
objections to the Master’s Report regarding the Trust’s accounts
from 1999-2003, and that the Trustees breached their fiduciary
duty to keep full, accurate, and orderly records of the status
1
The Honorable Derrick H.M. Chan presided.
2
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of the Trust’s administration when certain documents went
inexplicably missing.2
2
Christopher’s Application presents four questions:
1. Whether the ICA made grave errors of law in denying a
beneficiary the right to review trust records at the time
of account approval necessary to submit proper objections,
where such denial is obviously inconsistent with Hawaii
Supreme Court and federal court decisions.
2. Whether the ICA made grave errors of law by denying a
beneficiary’s rights to constitutional procedural due
process in holding secret, ex parte proceedings between the
Master and Trustees, and whether this denial is obviously
inconsistent with Hawaii Supreme Court and federal court
decisions stating that it is unconstitutional to prejudge a
case before giving a party reasonable access to the
information and an opportunity to present his case.
3. Whether the ICA made grave errors of law when it
ignored a beneficiary’s claim for breach of fiduciary
duties relating to the trustees’ loss of books and records
for the Trust.
4. Whether the ICA made grave errors of law in holding
that a beneficiary waived all objections to the sale of
Trust assets without a hearing where the Trustees failed
to: (1) obtain prior court approval of the sale in
violation of [HRS] § 554A-5; (2) disclose their personal
self-interest in the transaction; and (3) follow their own
conflicts of interest policy.
Myrna’s Application presents three questions:
[1]. Whether the ICA erred in affirming the probate
court’s decision that improperly rubber-stamped the
Master’s Report, refused to compel the Trustees to produce
documents, and violated [Myrna’s] constitutional right to
due process.
[2]. Whether the ICA erred by misapplying the presumption
afforded to trustees under Campbell because the Trustees
had no discretion whether to apply the statutory and common
law duty to keep Myrna reasonably informed.
[3]. Whether the CA [sic] erred in applying too
restrictive a threshold to the claim that the Trustees
committed spoliation, erred in applying the Campbell
presumption to the issue of spoliation, and erred in
affirming the probate court’s decision in light of the
spoliation.
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For the reasons discussed, the ICA erred in affirming the
Probate Court’s approval and adoption of the Master’s Report
without first granting Christopher’s and Myrna’s requests to
access Trust administration documents, contrary to the
requirements of HRS § 560:7-303.
II. Background
This probate case was previously heard by this court
regarding a separate issue. See In re Estate of Damon, 119
Hawaiʻi 500, 199 P.3d 89 (2008) (holding that the court-appointed
master was disqualified due to a conflict of interest and that
objector-beneficiary’s challenge to master’s appointment was
timely). Accordingly, some of the following factual and
procedural background is repeated from that opinion.
A. Factual Background
On November 10, 1914, a testamentary trust was
created by the Last Will and Testament of Samuel M. Damon
(“Trust”). Samuel M. Damon died on July 1, 1924.
During the 1999–2003 accounting period, the Trustees
managed the Trust’s assets with roughly half of its value
in publicly traded securities and the other half in real
estate. The securities portion of the Trust’s assets
consisted mostly of a 13% interest in BancWest Corporation
common stock. The real estate portion of the Trust’s
assets consisted primarily of prime industrial and
commercial lands in Honolulu under long-term leases, a
sizeable cattle ranch on the island of Hawaiʻi, two walnut
ranches located in California, and an industrial property
located in California.
In 2001, the Trust sold its entire 13% interest in
BancWest Corporation common stock. In 2003, the Trust sold
its prime industrial and commercial land in Honolulu, two
walnut ranches, and a significant portion of real estate
located on the island of Hawaiʻi. The net proceeds from
these transactions has [sic] been reinvested into a
diversified securities portfolio that is being advised and
managed by Goldman, Sachs & Company.
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In re Estate of Damon, 119 Hawaiʻi at 501–02, 199 P.3d at 90–91.
The Trust terminated on November 9, 2004 when the last
measuring life, Samuel M. Damon’s granddaughter, Joan Damon
Haig, passed away. On termination, the Trust’s estate was
valued at $836 million. There is no dispute that Christopher
and Myrna were beneficiaries of the Trust from 1999 to 2003.3
According to counsel for the Trustees, Christopher’s and Myrna’s
interests in the Trust total “slightly over three percent [3%].”
Three percent of $836 million is approximately $25 million.
B. Procedural Background
On April 30, 2004, the Trustees filed a “Petition for
Approval of 1999, 2000, 2001, 2002 and 2003 Income and Principal
Accounts” (“Petition”) in Equity No. 2816-A and Probate No.
6664. The Petition represented that the Trustees
sent annually to all adult beneficiaries who are entitled
to income by the terms of the Will copies of their annual
accounts for the calendar years 1999, 2000, 2001, 2002 and
2003, showing detailed expenditures of [sic] receipts and
income and principal for these years, together with
inventories as of the end of each year, and copies of
Consolidated Financial Statements and Schedules of the
Estate of S.M. Damon, and the Independent Auditor’s Reports
prepared by KPMG LLP, for each year.
(footnote omitted).
After the Probate Court’s initially appointed master for
the Petition was disqualified upon Christopher’s objections, see
In re Estate of Damon, 119 Hawaiʻi 500, 199 P.3d 89, the Trustees
3
Christopher is a son of Joan Damon Haig and the brother of one of the
Trustees, David Haig (“David”). Myrna was previously married to David.
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petitioned for another court-appointed master to examine the
Estate’s accounts. Christopher objected to the Trustee’s
petition for the appointment of another master, and instead
filed a “Petition for Assignment to Civil Trials Calendar of the
First Circuit Court” (“First Assignment Petition”) on February
11, 2010, asserting the following issues regarding the Trust’s
1999-2003 accounts:
1. Whether the trustees adequately managed the estates’
[sic] securities portfolio[.]
2. Whether the trustees obtained a satisfactory premium
for the First Hawaiian Bank stock.
3. Whether the trustees obtained fair market value for the
real estate portfolio of the trust.
4. Whether the trustees had conflicts of interest in the
foregoing matters.
Myrna, pro se, appeared to join in Christopher’s concern
regarding the appointment of a new master and his request for
the assignment of the case to the civil trials calendar. The
hearing for the First Assignment Petition was set for April 1,
2010, which fell after the date set for the court’s hearing on
the appointment of a new master.
At a hearing on February 18, 2010, the Probate Court
granted the Trustee’s petition for the appointment of a new
master (“Master”), who was appointed by Order of Reference filed
March 22, 2011. In accord with Hawaiʻi Probate Rules (“HPR”)
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Rule 29,4 that Order stated that “[t]he [Trustees] shall . . .
make all books and records of the Damon Estate available to the
Master.”
The court held a hearing on the First Assignment Petition
on April 1, 2010. After hearing argument from the parties, the
court decided to continue the matter until the court had an
opportunity to review the Master’s Report.5
On October 7, 2011, the Probate Court received
Christopher’s “Petition to Renew Request for Assignment of Case
to Circuit Court Pursuant to Probate Rule 20 or in the
Alternative, for Appointment of a Discovery Master”
(“Christopher’s Renewed Assignment Petition”). On October 10,
2011, through counsel, Myrna similarly filed a “Petition for
Assignment of Case to Circuit Court Pursuant to Probate Rule
20(a) through 20(c) or in the Alternative, for an Order Pursuant
to Probate Rule 20(d) Compelling Discovery and Appointing a
Discovery Master” (“Myrna’s Assignment Petition”). Both
Christopher’s Renewed Assignment Petition and Myrna’s Assignment
Petition asserted that each had requested information from the
Trustees regarding Trust administration, those requests were
denied or ignored, and that when assistance was sought from the
4
“The master shall have unlimited access to the books and records of the
fiduciary with respect to the trust or estate that are not protected by
privilege . . . .” HPR Rule 29.
5
Court minutes reflect that “by agreement of counsel, [the First Assignment
Petition] [wa]s continued until moved on in both [probate and equity] cases.”
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Master, the Master stated that she did not have the power to
compel the Trustees to provide discovery and advised Myrna and
Christopher to take up the issue with the Probate Court.
A hearing on Christopher’s Renewed Assignment Petition and
Myrna’s Assignment Petition was held on December 1, 2011. At
the hearing, the Master indicated that the Report would not be
completed until sometime in mid-February 2012 because deadlines
for submissions were suspended pending the outcome of
Christopher’s and Myrna’s petitions. The Probate Court judge
reminded the parties that the First Assignment Petition had been
continued so that the Master’s Report could be completed. The
court also indicated the parties would be better able to focus
on discrete issues of concern after the Master’s Report issued,
which would limit the scope of any potential discovery.
Christopher explained that he filed the Renewed Assignment
Petition because “[al]though the trustees provided information
in the past, they have now refused.” Christopher and Myrna
argued that they had a right as beneficiaries to the requested
information, or, at the very least, information that was
disclosed to the Master, and that they had already narrowed
their objections. In their memoranda, Christopher and Myrna
each cited to HRS § 560:7-303, Bogert’s on Trusts § 962 (“Duty
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to Respond to Beneficiaries’ Requests for Information”),6 and the
Restatement (Second) of Trusts § 173 (“Duty to Furnish
Information”),7 to show that the Trustees had a duty to provide
them with the requested Trust documents and information.
Moreover, because the Master’s document review was in part based
on the general objections already noted by Christopher and
Myrna, they explained they would be unable to “submit . . . more
meaningful objection[s]” to the Master if they did not get
access to those very documents provided to the Master by the
Trustees. As an example, Christopher’s memorandum cited his
securities and real estate experts, who indicated “they cannot
[issue] a report unless they have more information.” The
Trustees countered that “[t]he Order of Reference by definition
6
The Duty to Respond to Beneficiaries’ Requests for
Information
Generally, if a beneficiary of a trust requests
information about the trust from the trustee, the trustee
must promptly furnish it. The duty to provide information
about the trust property and its administration in response
to a request from a beneficiary has long been recognized by
the common law and has been codified in most jurisdictions.
Although the duty is fundamental and widely if not
universally recognized, it is subject to several
limitations. First, the duty extends only to information
requests that are reasonable. . . .
Bogert’s on Trusts § 962 (3d ed. 2010) (footnotes omitted).
7
Duty to Furnish Information
The trustee is under a duty to the beneficiary to give him
upon his request at reasonable times complete and accurate
information as to the nature and amount of the trust
property, and to permit him or a person duly authorized by
him to inspect the subject matter of the trust and the
accounts and vouchers and other documents relating to the
trust.
Restatement (Second) of Trusts § 173 (1959).
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is an ex parte process. We are required to meet with the
Master, again, as the eyes and ears of the Court and provide her
with access to the books and records. We’re doing that.”
The Probate Court concluded that Christopher and Myrna
failed to show that discovery was necessary prior to the
completion of the Master’s Report. The court emphasized that
Christopher’s and Myrna’s issues were preserved, and that they
would be given an opportunity to respond to the Master’s Report.
Accordingly, the court denied their petitions.8
The Master’s Report, concluding the Trust’s 1999–2003
income and principal accounts should be approved, was filed on
March 9, 2012. In it, among other things, the Master noted the
following:
Your Master verified the accuracy and reliability of
the Trust’s financial accounts by examining the statements
of assets and liabilities, income and expenses, and random
examination of the 2003 receipts and invoices. The 1999-
2002 receipts and invoices were unlocatable and, according
to Controller Mizuno, were probably destroyed as part of
the Trust’s regular document culling process. Controller
Mizuno assured the Master that he has seen and audited most
of the 1999-2002 receipts and invoices when he was part of
the KPMG LLP (hereinafter KPMG) audit team and approved
some of the 2002 receipts and invoices when he was hired as
the Estate’s Controller in October 2002. The 1999-2003
annual statements, which were mailed annually to all
Beneficiaries, were created from the receipts and invoices.
He also confirmed that the Trust’s internal controls
requiring at least three levels of approval, including
those of the Trustees, were uniformly followed in all of
the years in the 1999-2003 Accounts Period.
The Damon Trust accounts are annually audited by KPMG
who issued annual “Independent Auditors’ Report” of its
findings. The audits process included, inter alia, random
reviews of the receipts and invoices to confirm that
8
The record does not reflect whether the court ruled on the First Assignment
Petition.
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internal controls, such as the approval process for all
invoices, were in place and properly followed. KPMG’s
audits are attached to the 1999-2003 Accounts Petition.
Based on the examination of the financial statements,
receipts, and KPMG’s annual audits, your Master is
satisfied that the Trust’s 1999 - 2003 financial accounts
as presented to the Probate Court are fair and accurate.
At a status conference on March 20, 2012, the court set the
following deadlines: April 25, 2012 for responses or objections
to the Master’s Report; May 25, 2012 for any reply; June 21,
2012 for the hearing on the Trustee’s Petition.
On April 17, 2012, Christopher submitted to the Probate
Court a “Petition to Compel Production of Documents and Continue
Deadline to Respond to Master’s Report” (“Petition to Compel”),
which was joined by Myrna. The Trustees objected to the
Petition to Compel on numerous grounds, including that Myrna’s
requested documents were irrelevant to the Trustee’s Petition,
or were ones she already received from the Trustees or could
have received from other sources. The Petition to Compel was
set for a May 31, 2012 hearing.
Concurrent to submitting briefing on the Petition to
Compel, both Myrna and Christopher timely submitted their
objections to the Master’s Report on April 25, 2012.
Christopher maintained that although he submitted general
objections to the Master’s Report, he was unable to adequately
and completely respond to the Master’s Report because he was not
provided with the documents he requested of the Trustees. On
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May 25, 2012, the Master and Trustees filed their responses to
these objections.9
At the May 31, 2012 hearing on the Petition to Compel, the
Probate Court listened to the parties’ arguments but made no
additional inquiries or comments. The Probate Court ruled on
the Petition to Compel by way of a minute order issued on June
19, 2012:
After review of the record and pleadings herein,
review of the Master’s Report filed on March 9, 2012 and
objections and responses thereto, and having considered the
representations, arguments and objections made, the court
hereby denies the Petition [to Compel].
The court finds that there is no basis to compel the
trustees to produce all the documents reviewed by the
Master. The court also denies the Petitioner’s request to
transfer the matter to the civil trials calendar.
Based on the foregoing, the court denies the request
to continue the deadline for the beneficiaries to respond
to the Master’s Report.
(some capitalization omitted). The ruling was formalized in the
Probate Court’s July 6, 2012 “Order Denying Beneficiary
Christopher Damon Haig’s Petition to Compel Production of
Documents and Continue Deadline to Respond to Master’s Report,
Filed April 18, 2012.”
At the June 21, 2012 hearing regarding the Petition and the
Master’s Report, Christopher and Myrna primarily argued that the
Petition should not be granted because they were not given an
opportunity to review the underlying Trust documents examined by
9
Past the court-imposed deadline of May 25, 2012, the parties continued to
file briefs. On June 8, 2012, Christopher filed supplemental objections, and
Myrna filed a reply with the Master. On June 18, 2012, the Trustees
responded to Christopher’s and Myrna’s June 8, 2012 filing.
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the Master in her preparation of the Report so that they may
better articulate objections. They also requested an
evidentiary hearing. The Probate Court entered a minute order
on July 3, 2012, stating:
After review of the record and pleadings herein,
review of the Master’s Report filed on March 9, 2012 and
objections and responses thereto, and having considered the
representations, arguments and objections made, the court
hereby grants the Petition, subject to the recommendations
of the Master, which are approved and adopted. The
Master’s fees are approved.
(some capitalization omitted). The “Order Granting Petition for
Approval of 1999, 2000, 2001, 2002 and 2003 Income and Principal
Accounts” was filed on August 2, 2012. Judgment was entered on
August 2, 2012 as to that order in addition to the orders
denying Christopher’s Renewed Assignment Petition, Myrna’s
Assignment Petition, and Christopher’s Petition to Compel to
which Myrna had joined.10
C. Appeal to the ICA
Myrna and Christopher each timely filed a Notice of Appeal
with the ICA indicating that they appealed the August 2, 2012
Judgment “and all orders, findings of fact, rulings and
conclusions of law, either stated or subsumed therein which the
10
The judgment did not address any order that may have issued with respect
to the First Assignment Petition.
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Judgment made final.”11 The ICA summarized Christopher’s and
Myrna’s combined points of error as:
[Christopher and Myrna contend] the probate court erred
when it: (1) did not compel trustees David M. Haig, Paul
Mullin Ganley, and Walter A. Dods, Jr. . . . to respond to
requests for information or make documents available to
Appellants; (2) adopted the “Petition for Approval of 1999,
2000, 2001, 2002 and 2003 Income and Principal Accounts” .
. . without an independent review; (3) approved the
Trustees’ 1999-2003 Accounts Petition despite evidence of
spoliation; (4) did not assign the case to the trial court
docket; (5) denied [Christopher’s] conflict of interest
objections to the sale of BancWest Corporation . . . stock;
and (6) denied [Christopher’s objections to the sale of
real estate assets.
In re Trust of Damon, mem. op. at 1–2 (footnote omitted).
The ICA began its analysis with “the well-settled principle
that trustees benefit from a presumption of regularity and good
faith.” In re Trust of Damon, mem. op. at 6 (citing In re
Estate of Campbell, 42 Haw. 586, 607 (Haw. Terr. 1958))
(quotation omitted). Hawaiʻi law “imposes upon the person
questioning the trustee’s action the burden of overcoming the
presumption, but which requires the trustee ultimately to
justify his action if sufficient evidence is produced to
overcome the presumption.” Id. (citing In re Estate of
Campbell, 42 Haw. at 607).
With respect to the first point of error, the ICA focused
11
As Christopher was the second party to file a “notice of appeal,” he re-
titled his Notice of Appeal as a Notice of Cross-Appeal, and subsequently re-
filed it. Myrna also filed a “Notice of Cross Appeal” on September 7, 2012,
although it is unclear why she did so.
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on the portion of HRS § 560:7-30312 that states, “The trustee
shall keep the beneficiaries of the trust reasonably informed of
the trust and its administration . . . .” The ICA noted that
Christopher and Myrna received annual accounts and audited
financial statements for each year of the 1999-2003 accounting
period, did not object to those documents at the time of
receipt, and therefore were kept “reasonably informed,” as noted
in the Master’s Report. In re Trust of Damon, mem. op. at 8–9.
Moreover, the ICA noted that Christopher’s and Myrna’s
repeated requests for a “large swath of information” from the
Trustees did not point to specific reasons for the requested
documents. In re Trust of Damon, mem. op. at 9. The ICA
therefore concluded that Christopher and Myrna failed to meet
their burden of overcoming the presumption of regularity and
12
The statute states in relevant part:
Duty to inform and account to beneficiaries. The trustee
shall keep the beneficiaries of the trust reasonably
informed of the trust and its administration . . . . In
addition:
. . . .
(2) Upon reasonable request, the trustee shall
provide the beneficiary with a copy of the terms of the
trust which describe or affect the beneficiary’s interest
and with information about the assets of the trust and the
particulars relating to the administration.
(3) Upon reasonable request, a beneficiary is
entitled to a statement of the accounts of the trust
annually and on termination of the trust or change of the
trustee.
HRS § 560:7-303.
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good faith of the Trustees because they did not show what they
would gain from the documents. See id. As such, the ICA
concluded the Probate Court did not err when it denied
Christopher’s and Myrna’s petitions to appoint a discovery
master. The ICA also appeared to have concluded that for these
same reasons, the Probate Court did not err when it denied the
Petition to Compel, nor were Christopher and Myrna deprived of
their due process rights when they were not granted access to
the same information made available to the Master. See id.
Relatedly, as to the fourth point of error, the ICA
concluded that the Probate Court did not err when it retained
the case on the probate calendar and denied the Petition to
Compel. Pursuant to HPR Rule 2013 and HRS § 560:1-302 (2006),14
the ICA determined that the Probate Court had wide discretion to
decline transferring the matter to the civil trials calendar or
to permit discovery. See In re Trust of Damon, mem. op. at 13.
13
“The court by written order may retain a contested matter on the regular
probate calendar or may assign the contested matter to the civil trials
calendar of the circuit court.” HPR Rule 20(a).
14
(a) To the full extent permitted by the Constitution and
except as otherwise provided by law, the court has
jurisdiction over all subject matter relating to:
(1) Estates of decedents . . . ;
. . .
(3) Trusts.
(b) The court has full power to make orders, judgments and
decrees and take all other action necessary and proper to
administer justice in the matters which come before it.
HRS § 560:1-302.
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Regarding the second point of error, Christopher and Myrna
had relied upon Mauna Kea Anaina Hou v. Board of Land & Natural
Resources, 136 Hawaiʻi 376, 363 P.3d 224 (2015), for their due
process arguments. However, the ICA observed the record shows
the Probate Court did not pre-judge the matter and carefully
reviewed the Master’s Report, see In re Trust of Damon, mem. op.
at 10–11, in contrast to the facts presented in Mauna Kea. The
ICA thus concluded this case was distinguishable from Mauna Kea.
Furthermore, because Christopher and Myrna were granted the same
access to the Master as the Trustees, and because the Master
addressed their objections in her Report, their due process
rights were not violated. In sum, the ICA concluded
Christopher’s and Myrna’s due process arguments lacked merit.
See In re Trust of Damon, mem. op. at 11.
As to the third point of error, the ICA summarized
Christopher’s and Myrna’s arguments as follows: “Appellants
contend that the Trustees committed spoliation because the
Trustees either destroyed or lost the 1999-2002 receipts and
invoices. Appellants argue that this destruction of evidence
necessitates the presumption that the 1999-2003 Accounts
Petition cannot be approved.” In re Trust of Damon, mem. op. at
13. The ICA noted that the Master had extensively reviewed
documents to ensure that the information contained in the
Trust’s accounting period was supported by other available
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documents, and that there was no evidence of intentional
document destruction. See id. at 15–16. Therefore, the ICA
concluded that given Christopher’s and Myrna’s failure to
overcome the presumption of good faith and regularity in favor
of the Trustees, their spoliation argument lacked merit. See
id. at 16.
With respect to the fifth and sixth points of error
concerning Christopher’s objections to the sale of the BancWest
stock and various parcels of real estate, the ICA determined
that the Probate Court did not err in affirming the Master’s
determination that Christopher’s objections to those sales were
barred by waiver and the doctrine of laches. See id. at 19.
The Master had found that Christopher approved the stock sale,
and the ICA noted that Christopher did not provide evidence to
the contrary. See id. at 17. As to the real estate
transactions, the ICA concluded that because Christopher did not
object to them until over seven years later, the doctrine of
laches applied, and therefore, Christopher’s argument that the
Probate Court erred by approving the Master’s Report as to these
transactions without first allowing him to review Trust records
lacked merit. See id. at 17, 19.
D. Applications for Writ of Certiorari
Christopher and Myrna each timely applied for a writ of
certiorari from the July 11, 2016 Judgment entered by the ICA
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pursuant to its June 2, 2016 Memorandum Opinion.15 Briefly
stated, both Christopher and Myrna assert that the ICA gravely
erred when it affirmed the Probate Court’s adoption of the
Master’s Report. They argue that the Master’s Report should not
have been adopted as they were not first granted access to Trust
documents as they requested, or at a minimum, to the same Trust
documents that were made available to the Master. Without such
access, they were unable to raise meaningful, specific
objections to the Master’s Report by way of their own experts’
analyses or otherwise. For example, Christopher argues that
without access to Trust documents, he was unable to contest the
Master’s conclusion that he had waived any objections to the
sale of BancWest stock. Without the ability to raise meaningful
objections for the Probate Court’s consideration, Myrna
additionally argues that the Probate Court “rubber stamped” the
Master’s Report.
According to both Christopher and Myrna, as beneficiaries,
they have a right by way of statutory law, common law, and due
process to obtain trust administration documents or information
from the Trustees. Myrna argues that any presumption of
“regularity and good faith” afforded the Trustees does not
abrogate the Trustees’ duty to provide information related to
15
The questions presented by Christopher and Myrna are quoted at supra note
2.
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the administration of the Trust when requested by a beneficiary,
because such a duty: (1) is not discretionary, (2) is not
“limit[ed] to time periods prior to the Petition being filed,”
(3) “does not end at the Probate Court door,” and (4) is not
curtailed by the appointment of a master. Christopher also
asserts that the ICA erred when it stated he needed to justify
his request for Trust documents before being granted access to
them.
Christopher and Myrna also take issue with the Master’s
observation that certain Trust documents relating to the 1999-
2003 accounting period were destroyed or missing. Christopher
argues that this fact alone demonstrates a breach of fiduciary
duty that requires the Probate Court to resolve “doubts or
discrepancies” against the Trustees; Myrna argues that the
Master’s Report should not have been adopted by the Probate
Court without a determination as to whether spoliation occurred.
In either case, it appears that Christopher and Myrna assert
that the Master’s Report should not have been adopted because,
at a minimum, they should have been granted access to the same
documents as the Master in order to determine whether the Master
was correct in stating that she could nevertheless verify the
Trust accounts without the missing receipts or other documents,
thus permitting them to raise appropriate objections to the
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Probate Court if necessary. Myrna also appears to ask that this
court clarify trust law and standards on spoliation.
Although Christopher had taken issue with the ex parte
meetings held by the Master, at oral argument, counsel for both
Christopher and Myrna indicated that the remedy they now seek is
access to the Trust documents previously requested, including
those reviewed by the Master, and for the case to be remanded.
With respect to Christopher’s and Myrna’s requests for
documents, the Trustees do not dispute they have a duty to keep
beneficiaries reasonably informed pursuant to HRS § 560:7-303.
However, they assert that the duty is not unlimited, but rather
extends only to requests that are reasonable. The Trustees
emphasize that Christopher’s and Myrna’s requests for copies of
documents reviewed by the Master were not reasonable because
they were “very overbroad” “fishing expedition-type request[s]”
and that the Hawaiʻi Probate Rules require that only the Master
be granted unlimited access to Trust documents.
Moreover, the Trustees assert that they more than satisfied
the disclosure requirements of HRS § 560:7-303 as they had
provided annual voluminous records to beneficiaries and had an
“‘open door’ policy [until the Estate office closed in 2007]
where Beneficiaries could meet with the Trustees and Estate
staff, review Estate records and documents, and ask questions on
trust-related matters.” According to the Trustees, both Myrna
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and Christopher used that opportunity multiple times during the
1999–2003 accounting period.16 The Trustees acknowledged,
however, that at no point in time were Christopher and Myrna
granted access to each of the documents reviewed by the Master.
III. Standard of Review
“Interpretation of a statute is a question of law which
[is] review[ed] de novo.” Kikuchi v. Brown, 110 Hawaiʻi 204,
207, 130 P.3d 1069, 1072 (App. 2006) (internal quotation marks
and citation omitted).
IV. Discussion
The multiple issues raised by Christopher and Myrna
fundamentally turn on the interpretation of HRS § 560:7-303,
which grants beneficiaries the right to request of trustees
“particulars relating to the administration” of the Trust,
including access to documents. Both Christopher and Myrna
submitted requests for Trust documents to the Trustees. When
the Trustees declined to address their requests, Christopher and
Myrna sought assistance from the Master. When that route
provided no relief,17 they filed petitions with the Probate Court
16
The Trustees also point out that after the first master was disqualified
due to a conflict of interest, see In re Estate of Damon, 119 Hawaiʻi 500, 199
P.3d 89, that Myrna attempted to raise additional objections before the
subsequent master that were not initially raised before the first. This does
not appear to address Myrna’s subsequent request for Trust documents,
however.
17
The Master was correct in declining to resolve Christopher’s and Myrna’s
requests for discovery and instead directing them to the Probate Court.
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to compel the Trustees to provide the requested documents, to
appoint a discovery master, or to transfer the case to the civil
trials calendar so that discovery may proceed under the Hawaiʻi
Rules of Civil Procedure. The Probate Court denied the motions,
stating that with respect to the Petition to Compel, Christopher
and Myrna had “no basis to compel the trustees to produce all
the documents reviewed by the Master.” Thus, at the core of
Christopher’s and Myrna’s petitions and their appeals to this
court are their requests for Trust administration documents
pursuant to HRS § 560:7-303.
As conceded by the Trustees, a trustee’s duty to inform
beneficiaries under HRS § 560:7-303 does not cease when an
accounting is filed in probate court or a master is appointed.
For the following reasons, after considering the statute’s plain
language, its legislative history, and established treatises, we
conclude that the ICA erred in affirming the Probate Court’s
denial of the Petition to Compel, and therefore also erred in
affirming the Probate Court’s “Order Granting Petition for
Approval of 1999, 2000, 2001, 2002 and 2003 Income and Principal
Accounts.”
A. The Plain Language of HRS § 560:7-303 Does Not Require a
Beneficiary to Overcome the Presumption of Good Faith
Afforded Trustees
According to the ICA, Christopher’s and Myrna’s requests
for Trust administration documents were not reasonable primarily
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because Trustees had routinely provided beneficiaries with
annual financial statements and accounts, and Christopher and
Myrna failed to provide specific reasons why they needed
documents beyond these statements. In particular, the ICA
pointed out that because Christopher and Myrna were unable to
articulate what they hoped to gain from the requested documents,
they had “fail[ed] to meet their burden of overcoming the
presumption of regularity and good faith of the Trustees.” In
re Trust of Damon, mem. op. at 8–9.
We now consider whether the factors considered by the ICA
were appropriate in light of the plain language of HRS § 560:7-
303, which states in relevant part:
Duty to inform and account to beneficiaries. The trustee
shall keep the beneficiaries of the trust reasonably
informed of the trust and its administration . . . . In
addition:
. . . .
(2) Upon reasonable request, the trustee shall
provide the beneficiary with a copy of the terms of the
trust which describe or affect the beneficiary’s interest
and with information about the assets of the trust and the
particulars relating to the administration.
(3) Upon reasonable request, a beneficiary is
entitled to a statement of the accounts of the trust
annually and on termination of the trust or change of the
trustee.
The relevant portion of the statute clearly imposes three
separate duties on trustees. The first is an affirmative duty18
18
See Eugene F. Scoles, “Administration of Trusts,” in 2 Uniform Probate
Code Practice Manual 588, 595 (Richard V. Wellman ed., 2d ed. Am. Law Inst.
1977) (“Scoles on Trusts”) (characterizing the initial duty to inform
(continued . . .)
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to “keep the beneficiaries . . . reasonably informed of the
trust and its administration.” The second and third duties
outlined in parts (2) and (3), respectively, spring to life
“upon reasonable request” of a beneficiary. Because these
duties are distinct, a trustee’s compliance with, for example,
two of the three duties, does not abrogate responsibility for
the third.
Accordingly, although trustees may fulfill their
affirmative duty by supplying annual accountings to a
beneficiary, trustees must still provide “information about the
assets of the trust and the particulars relating to the
administration” upon the beneficiary’s “reasonable request.”
HRS § 560:7-303(2). Put another way, by a plain reading of the
statute, the distribution of annual accountings that may provide
information similar to that requested does not alter the
analysis of a request’s “reasonableness” — it neither heightens
the standard of “reasonableness” applied to beneficiary
requests, nor does it undermine the degree of “reasonableness”
(. . . continued)
beneficiaries in [Uniform Probate Code] [s]ection 7-303 as an “affirmative”
one).
The 1976 House Testimony Folder for S.B. 79 (later enacted and codified
at HRS § 560:7-303) contained a copy of UPC Notes, July 1972. For an
analysis of the trust provisions in the UPC, that publication referred to an
essay by Eugene F. Scoles, “Administration of Trusts,” contained in the first
edition of the Uniform Probate Code Practice Manual. Although the first
edition is not readily available, the second edition notes that Scoles’ essay
is “identical to that contained in the original Manual.” Scoles on Trusts,
at 588.
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of the requests. The ICA therefore erred when it concluded that
because the Trustees already provided beneficiaries with annual
financial statements and accounts, Christopher and Myrna were
required to provide additional reasons to overcome the
presumption of regularity and good faith of the Trustees.
That Christopher’s and Myrna’s requests “covered a large
swath of information” also does not bear on whether their
requests were “reasonable.” HRS § 560:7-303(2) does not
condition a trustee’s duty on the complexity or numerosity of a
trust’s transactions. Unlike the legions of documents that
might result from requests for unlimited access to trust
records, which courts have denied, see, e.g., Bogert’s on Trusts
§ 962 n.8 (3d ed. 2010) (cases cited), here, Christopher and
Myrna requested the documents reviewed by the Master, who
focused on discrete issues during a discrete period. Thus, the
volume of those documents relates more to the nature of the
administrative activity of the Trust rather than to any
unwieldly scope of the request, and therefore does not weigh
against the “reasonableness” of Christopher’s and Myrna’s
requests. See, e.g., Strauss v. Superior Court, 224 P.2d 726,
731 (Cal. 1950) (“The fact that the [trustee] may find it
inconvenient or troublesome to produce voluminous records will
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not defeat petitioner’s right of inspection.” (citations and
internal quotation marks omitted)).19
The Trustees also argue that Christopher’s and Myrna’s
requests were not “reasonable” because “open door” access had
previously been granted to them. However, nothing in HRS §
560:7-303 restricts a beneficiary from obtaining access to trust
administration documents because the beneficiary was previously
granted access but did not take advantage of it at that time.
Indeed, the Trustees fail to explain why Christopher’s and
Myrna’s April 2012 requests in the Petition to Compel (filed
consequent to the March 2012 Master’s Report) were rendered
unreasonable because of “open door” access that ended in 2007.
For these reasons, the ICA erred in concluding that
Christopher’s and Myrna’s requests were not “reasonable.” The
plain language of the statute does not support consideration
here of the factors applied by the ICA.
B. Based on the Legislative History of HRS § 560:7-303 and
Established Treatises, “Reasonable” Refers to the Time and
Place at Which a Request Is Made, and Does Not Refer to the
Scope of the Request
The statute’s legislative history and established trust
treatises also do not support the ICA’s conclusion that
Christopher’s and Myrna’s requests for trust documents were not
19
We observe that HRS § 560:7-303(2) does not require trustees to provide
copies of all requested trust administration documents. Trustees may fulfill
their duties by providing a sufficient or adequate opportunity to review and
inspect these requested documents.
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“reasonable.” Rather, these sources indicate that “reasonable”
in HRS § 560:7-303 refers to the time and place at which a
request is made, and is not directed at the scope of the
request.
Aside from a change of gendered terms, the relevant
portions of HRS § 560:7-303 remain unchanged since the statute’s
inception in 1976. See 1976 Haw. Sess. Laws Act 200, § 1 at
466–67 (enacting S.B. 79). Additionally, the 1976 statute is
nearly identical to the 1969 Official Text of the Uniform
Probate Code (“UPC”), with the sole exceptions that parts (2)
and (3) were instead denoted by (b) and (c) in the UPC, and that
the UPC contained the word “relevant” prior to “information” in
part (b). See Uniform Probate Code § 7-303 (1969). In sum, HRS
§ 560:7-303 (2006) is substantially the same as HRS § 560:7-303
(1976) and the 1969 UPC upon which the law was based. Because
of this continuity, the legislative history of HRS § 560:7-303
(1976) is probative of the legislature’s ongoing intent
regarding a trustee’s duty to inform.
That history, including the documents and testimony
considered by the legislature, demonstrates a clear recognition
that trustees have a duty to supply trust information to
requesting beneficiaries. For example, the House Research
Office’s November 7, 1975 Comparison and Analysis of the Uniform
Probate Code, included as part of the 1976 House Testimony
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Folder for S.B. 79, specified, “The UPC imposes on the trustee
the duty to account to beneficiaries rather than the court. In
addition, the trustee must supply the beneficiary with
information concerning the terms and assets of the trust if
requested.” House Research Office, Comparison & Analysis of the
Uniform Probate Code (Nov. 7, 1975) (unpaginated; under the
header for “Sec. 7-303. Duty to Inform and Account to
Beneficiaries”) (emphases added). This House commentary echoes
the careful analysis of the Judicial Council of Hawaii’s 1972
Hawaii Probate Code Revision Project, which was chaired by Chief
Justice William S. Richardson. See William S. Richardson,
“Letter on behalf of the Judicial Council of Hawaii to the Hon.
David C. McClung, President of the Senate,” Feb. 27, 1973
(submitting the Judicial Council’s report to the legislature “in
response to Act 128 of the 1970 Session,” which appropriated
funds “to study and review the probate laws of the State of
Hawaii and to prepare for enactment in Hawaii, with appropriate
conforming amendments, the Uniform Probate Code”); Judicial
Council of Hawaii, Hawaii Probate Code Revision Project, The
Uniform Probate Code (Hawaii) 384 (1972) (“[Section 7-303 of]
[t]he U.P.C. imposes on the trustee the duty to account to
beneficiaries rather than the court. In addition, the trustee
must supply the beneficiary with information concerning the
terms and assets of the trust if requested.” (emphases added)).
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See also Judicial Council of Hawaii, Hawaii Probate Code
Revision Project, at 383 (observing the UPC comment on section
7-303 states that “further information may be obtained by the
beneficiary upon request”).
In sum, neither the UPC commentary, the Judicial Council of
Hawaii’s analysis, nor the House Research Office’s observations
support an interpretation of the phrase, “upon reasonable
request,” as one that limits a beneficiary’s access to only
certain trust documents. Nothing in the legislative history of
S.B. 79 states to the contrary. See, e.g., Conf. Comm. Rep. No.
24-76, in 1976 Senate Journal, at 872 (commenting on section 7-
303 only insofar that part (1) was changed from the initial
draft to “clarify who is entitled to receive notice of
registration”).20
This is in accord with the fundamental tenet that, “[f]or
the reason that only the beneficiary has the right and power to
enforce the trust and to require the trustee to carry out the
trust for the sole benefit of the beneficiary, the trustee’s
denial of the beneficiary’s right to information constitutes a
breach of trust.” Bogert’s on Trusts § 961, at 3–4 (2d rev. ed.
20
Indeed, section 813 of the 2010 Uniform Trust Code, “Duty to Inform and
Report,” which is derived from the 1969 UPC, “allows the beneficiary to
determine what information is relevant to protect the beneficiary’s interest”
by requiring “a trustee [to] promptly respond to a beneficiary’s request for
information related to the administration to the trust,” without any
qualification that the request be “reasonable.” Uniform Trust Code § 813(a)
& cmt. (2010). Instead, a trustee’s “[p]erformance is excused only if
compliance is unreasonable under the circumstances.” Id. (emphasis added).
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1983). Accordingly, so long as documents requested of a trustee
pertain to “information about the assets of the trust and the
particulars relating to the administration,” any limitation on a
beneficiary’s access to trust administration documents imposed
by the phrase,” “upon reasonable request,” is not based on the
type or volume of the documents requested.
Although the UPC and the legislative history behind Act 200
do not expressly define the term, “upon reasonable request,” at
the time of the statute’s implementation, the Restatement
(Second) of Trusts illustrated what constituted a “reasonable
request”:
Duty to Furnish Information
The trustee is under a duty to the beneficiary to give him
upon his request at reasonable times complete and accurate
information as to the nature and amount of the trust
property, and to permit him or a person duly authorized by
him to inspect the subject matter of the trust and the
accounts and vouchers and other documents relating to the
trust.
Restatement (Second) of Trusts § 173 (1959) (emphasis added).
Although “at reasonable times” can be interpreted to modify
either when the request must be made by the beneficiary, or by
when the trustee must give information, commentary in the
Restatement (Third) of Trusts points to the former:
(2) Except as provided in § 74 or as permissibly modified
by the terms of the trust, a trustee also ordinarily has a
duty promptly to respond to the request of any beneficiary
for information concerning the trust and its
administration, and to permit beneficiaries on a reasonable
basis to inspect trust documents, records, and property
holdings.
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Restatement (Third) of Trusts § 82(2) (2007) (emphasis added);
see also Restatement (Third) of Trusts § 82 cmt. a (clarifying
that “on a reasonable basis” refers to a beneficiary’s inquiries
being made at “reasonable hours and intervals”). As such,
whether a beneficiary’s request for trust administration
documents pursuant to HRS § 560:7-303 is “reasonable” depends on
the time and place the request is made.
Bogert’s on Trusts elaborates on the reasonableness of the
time and place of a request:
If the beneficiary asks for relevant information
about the terms of the trust, its present status, past acts
of management, the intent of the trustee as to future
administration, or other incidents of the administration of
the trust, and these requests are made at a reasonable time
and place and not merely vexatiously, it is the duty of the
trustee to give the beneficiary the information which he
has asked.
Bogert’s on Trusts § 961, at 4 (2d rev. ed. 1983) (emphasis
added).
Thus, if a beneficiary’s request for trust administration
documents21 is made at a reasonable time and place and not
vexatiously or at unreasonable intervals, it should be
21
Unless ordered by a court, “trust administration documents” do not include
sensitive personal information about other beneficiaries, such as the
diagnosis of a serious illness, that may be in the possession of trustees.
See Restatement (Third) of Trusts § 82 cmt. f (“When a beneficiary’s request
for information may encompass sensitive, private information acquired by the
trustee about other beneficiaries, the extent of the trustee’s duties may
require a balancing of competing interests. While recognizing the requesting
beneficiary’s ‘need to know’ . . . , a trustee — and ultimately a court — may
need to provide some response that offers a compromise between the
confidentiality or privacy concerns of some and the interest-protection needs
of others.”).
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considered a “reasonable request” for the purposes of HRS §
560:7-303.
The record here shows that the requests were neither
vexatious nor made at unreasonable times. Rather, in multiple
hearings on the issue prior to the issuance of the Master’s
Report, the Probate Court explained that Christopher’s and
Myrna’s requests for documents would be considered after the
filing of the Master’s Report. Although a probate court has the
discretion to decide whether a probate matter is transferred to
the civil trials calendar, or whether to retain the matter and
permit discovery, a probate court’s discretion as to a
beneficiary’s request for trust administration documents under
HRS § 560:7-303 is limited to determining whether the request
falls within the scope of the statute, i.e., was made at a
reasonable time and place and not vexatiously.22
Accordingly, the ICA erred in affirming the Probate Court’s
approval and adoption of the Master’s Report without first
granting Christopher’s and Myrna’s requests to access Trust
administration documents. The ICA too narrowly construed the
scope of HRS § 560:7-303 and inappropriately determined that the
statute was trumped by the presumption of regularity and good
22
The probate court retains broad discretion to consider all the
circumstances of a case, including the volume of documents requested, in
determining whether a request was made vexatiously. As noted in Part IV.A.,
however, the potential burden on trustees due to a large volume of requested
documents, alone, does not render a request unreasonable or vexatious.
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faith typically afforded trustees.23 Rather, pursuant to HRS §
560:7-303, Christopher’s and Myrna’s requests for access to
Trust administration documents that were reviewed by the Master
should have been granted. Any other requests for Trust
documents pursuant to HRS § 560:7-303 by Christopher and Myrna
should be evaluated on remand as to whether they were made at a
reasonable time and place and not merely vexatiously.
V. Conclusion
For the foregoing reasons, we vacate the Probate Court’s
August 2, 2012 Judgment and the ICA’s July 11, 2016 Judgment on
Appeal filed pursuant to its June 2, 2016 Memorandum Opinion as
to the Probate Court’s “Order Denying Beneficiary Christopher
Damon Haig’s Petition to Compel Production of Documents and
Continue Deadline to Respond to Master’s Report, Filed April 18,
2012” and “Order Granting Petition for Approval of 1999, 2000,
2001, 2002 and 2003 Income and Principal Accounts.” The Probate
Court’s August 2, 2012 Judgment and the ICA’s July 11, 2016
Judgment on Appeal are otherwise affirmed. This matter is
23
The court need not reach the issue of spoliation. As Christopher and
Myrna have not yet been granted access to Trust documents to determine if the
Master’s conclusions regarding the loss of trust documents was indeed
unproblematic or harmless to the approval of the accounts, it would be
premature for this court to clarify the law of spoliation at this time.
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remanded to the Probate Court for proceedings consistent with
this opinion.
A. Bernard Bays and Michael /s/ Mark E. Recktenwald
C. Carroll for petitioner
Christopher Damon Haig /s/ Paula A. Nakayama
Rebecca A. Copeland, Peter /s/ Sabrina S. McKenna
Van Name Esser, and Thomas
R. Sylvester for petitioner /s/ Richard W. Pollack
Myrna B. Murdoch
/s/ Michael D. Wilson
J. Thomas Van Winkle, Duane
R. Miyashiro, and Melissa
H. Lambert for respondent
Trustees under the Will and
of the Estate of Samuel M.
Damon
George W. Van Buren for
respondents Brendan Damon
Ethington and John Philip
Damon
35