Opinion ID: 4542527
Heading Depth: 2
Heading Rank: 2

Heading: Probate Court Petition

Text: On August 16, 2015, FHB, as the trustee of Elaine’s Trust, filed a Petition for Instructions Regarding Distribution and Termination, and for Modification of Trust (petition) in the Circuit Court of the First Circuit (probate court) that requested in relevant part that the probate court (1) instruct the trustee that David’s subtrust created under Amended Article V.B.(a) of Elaine’s Trust terminate upon the death of David; (2) instruct the trustee that discretionary distributions of principal may be made from David’s subtrust; and (3) modify Elaine’s Trust to provide for a termination date and the discretionary distribution of principal, by amending Article V.B(a);7 and (4) allow payment of FHB’s attorneys’ fees and (. . . continued) shall be held by the Successor Trustee of the separate trust established for the other of the Settlor’s said sons; and if neither of the Settlor’s said sons is living at the time when separate trusts otherwise would be established for them hereunder, all of the aforesaid trust property shall be distributed to the Settlor’s heirs at law, determined by the laws of the State of Hawaii in force at such time. 7 The proposed modifications to Article V.B.(a) of Elaine’s Trust read as follows: a) The Successor Trustee shall divide the aforesaid trust property into two equal shares. The Successor Trustee shall hold one of such shares as a separate trust for the benefit of the Settlor’s son, WILLIAM SHORT, and the (continued . . .) 7 FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER costs. In the petition, FHB listed the Cooks as heirs at law and contingent beneficiaries under Elaine’s Trust. David filed an affidavit in support of FHB’s petition, asserting that because he and his mother Elaine had little to no contact with her brother Leroy, or with any of Leroy’s issue for many decades prior to Elaine’s death, it was his belief that Elaine’s intent was to make her husband and sons the “primary beneficiaries” of her trust. The Cooks contested the petition by filing a response and objection to FHB’s petition. The Cooks agreed that David’s subtrust should terminate at David’s death but opposed FHB’s proposed modification that would allow the distribution of principal to David. Elaine’s Trust was not ambiguous as to the (. . . continued) Successor Trustee shall hold the other of such shares as a separate trust for the Settlor’s son, DAVID SHORT. The Successor Trustee shall pay all or portions of the income and portions of the principal of each separate trust to the Settlor’s son for whom such share was set aside, in accordance with his needs for health, education, support and maintenance, as determined by the Successor Trustee in its sole discretion, with full discretion to withhold any income or principal from time to time if circumstances so warrant, and each separate trust shall terminate upon the death of the Settlor’s son for whom such share was set aside. In the case of William Short who has a drug-related disability at the present time, the Successor Trustee shall withhold income for everything but the vital necessities unless said son is drug-free and has continued to be for at least one year, the Successor Trustee to have absolute discretion in making such determinations from time to time. (Emphasized portions indicate proposed modifications.) 8 FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER permitted distribution of the principal, the Cooks contended, and thus FHB’s attempt to change the language of Elaine’s Trust should be rejected as improper. The Cooks also disputed the contents of David’s affidavit. The Cooks, through the declaration of Susan Kay Cook Galvin (Susan), stated that Leroy’s relationship with Elaine was close and that, through Elaine’s numerous visits to Minnesota to see Leroy and the Cooks over many years, they learned Elaine’s relationship with David was “strained” in light of concerns during her lifetime regarding the level of financial support David expected from her. Susan declared that in 1998 she stayed with Elaine in a Minneapolis hotel for three days during the Opera America Convention, and that in 1999 she stayed with Elaine and Clarence in Hawaiʻi. Susan further stated that after Leroy died, the Cooks maintained regular phone contact with Elaine until 2009 or 2010. The Cooks also included several photographs of themselves with Elaine in activities, two of which appear to show Elaine present at one of the Cooks’ weddings, while others appear to be group family photos. The Cooks also submitted a petition for the appointment of a guardian that showed David’s whereabouts were unknown when Elaine needed a guardian due to her advanced dementia. Further, the Cooks argued that the amendment to Article V.B.(a) was not made in response to Williams’ drug-related disability because 9 FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER Elaine did not amend this provision after William’s death that year. Lastly, the Cooks requested attorneys’ fees from the principal of Elaine’s Trust, arguing that their involvement in the matter was necessary to clarify the provisions of Elaine’s Trust. In response to the Cooks’ objections, FHB argued that its petition properly sought clarification of its duties under Elaine’s Trust. FHB stated that permitting discretionary distributions of principal to David would be in furtherance of Elaine’s intent to provide for her sons and any issue they might have. It was premature for the Cooks to assert their rights as contingent remainder beneficiaries, FHB contended, because the Cooks would be “completely divested” if David were to have issue before his death. While Elaine’s Trust did not expressly provide for distributions of principal to David, FHB maintained, it did not expressly prohibit such action and thus Elaine’s Trust was ambiguous. FHB contended that Hawaiʻi trust law permits the court to modify a trust document, and that the proposed amendment was supported by the text of Elaine’s Trust and extrinsic evidence. FHB also argued against payment of attorneys’ fees to the Cooks from the principal as a potentially improper use of trust assets for non-beneficiaries because the Cooks were contingent beneficiaries. Finally, FHB requested that its attorneys’ fees be paid from the principal because it 10 FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER had raised questions that affected the principal of the trust estate. In a supplement to its initial petition, FHB also responded to a September 16, 2015 letter from the Cooks’ counsel requesting information under Hawaiʻi Revised Statutes (HRS) § 560:7-303(2)&(3).8 In the letter, the Cooks requested that FHB provide them with the following information: (a) a list of assets of Elaine’s Trust at the time of Elaine’s death, (b) a statement of accounts for Elaine’s Trust during 2012-2014, (c) a statement of income distributed to David during 2012-2015, (d) the amount of income that David received from Clarence’s Trust 8 HRS § 560:7-303 (2006) provides in relevant part as follows: The trustee shall keep the beneficiaries of the trust reasonably informed of the trust and its administration; provided, however, during the life of the settlor, the trustee of a revocable inter vivos trust shall not be required to register the trust, reveal the terms to beneficiaries, or account to beneficiaries, unless otherwise directed by the settlor. 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. 11 FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER during 2012-2015, and (e) the amount of David’s total income for 2012-2015. FHB objected to the Cooks’ request for information regarding David’s income and information as to Clarence’s Trust because the requested information did not relate to Elaine’s Trust and was not necessary for the Cooks to protect their interest. Citing Article XIV of Elaine’s Trust, FHB contended that only adult beneficiaries then entitled to receive income or principal of the trust estate were allowed to receive regular accounts of Elaine’s Trust.9 Since the Cooks were not yet in the position to receive income from Elaine’s Trust and because Clarence’s Trust was a separate matter altogether, FHB argued that requests (d) and (e) set forth in the Cooks’ letter were unwarranted. FHB requested the probate court give instructions as to whether the Cooks, as contingent remainder beneficiaries who could be completely divested of their interest in Elaine’s Trust if David dies with issue, were entitled to the information sought in requests (a), (b), and (c). 9 Article XIV of Elaine’s Trust provides in pertinent part as follows: The Trustee and all Successor Trustees shall not be required to give any bond or surety or file any account in any court, but shall deliver regular accounts to the Settlor during the Settlor’s lifetime and subsequently to all adult beneficiaries then entitled to receive income or principal of the trust estate. 12 FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER David filed a response to FHB’s petition and to the Cooks’ objection to modify Elaine’s Trust. In his response, David agreed with both FHB and the Cooks as to setting a proposed termination date for Elaine’s Trust. David further agreed with FHB that he should receive discretionary distributions of principal from Elaine’s Trust, stating that Elaine’s Trust contained ambiguous language that should be read in his favor as the sole income beneficiary. David argued that Elaine’s unquestionable intent was to provide for him, William, and their respective descendants, and he was the only one living. David disputed the Cooks’ objections, contending that if the Cooks were truly as close to Elaine as they claimed, there would be more express language in Elaine’s Trust to provide for them if he and William left no issue. Instead, David maintained, Elaine’s Trust merely contains an “Armageddon clause” referencing “heirs at law,” which does not provide a sufficient basis for the Cooks to frustrate Elaine’s primary intent to benefit her sons. Finally, David included a declaration from Carol Short, Elaine’s sister-in-law through Clarence, stating that she was in frequent contact with Elaine and Clarence, she had never heard of the Cooks, Elaine had never mentioned the Cooks, and she believed Elaine’s intent was to provide financial support to David after her death. 13 FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER The probate court held a hearing on FHB’s petition, with counsel for FHB, David, and the Cooks present.10 The minutes of the hearing indicate that the court found “there is an ambiguity” and would “focus on the settlor’s intent.”11 In its Order Granting Petition for Instructions Regarding Distributions and Termination, and for Modification of Trust (Order), the court granted FHB’s petition, modifying Elaine’s Trust to provide for discretionary payments of principal to David and terminating his subtrust under Amended Article V.B.(a) and (b) at his death. The probate court’s order contained no findings of fact as to whether Elaine’s Trust contained an ambiguity regarding the distribution of principal, whether extrinsic evidence was considered in the court’s determinations, and if so, the evidence that was considered and the evidentiary standard used to review the evidence. The court also concluded FHB was not required to provide financial information to the Cooks. The court instructed the parties to provide a termination date for Elaine’s Trust and ordered that the attorneys’ fees for all parties involved in the proceedings be paid from the principal 10 The Honorable Derrick H.M. Chan presided. 11 Although the Cooks requested a transcript of the hearing, it was not included in the record on appeal. 14 FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER of Elaine’s Trust. The probate court entered its judgment on December 16, 2015 (judgment), from which both the Cooks and David appealed to the ICA.