Court Opinion

ID: 9626020
Source: CourtListenerOpinion
Date Created: 2023-08-22 07:59:30.170806+00
Date Added: 2024-06-11T18:06:19.651677
License: Public Domain

LEWIS, J.,
WITH WHOM MIZUHA, J., JOINS, CONCURRING IN PART AND DISSENTING IN PART.
As the court holds, plaintiff must sustain his standing as one suing in a representative capacity on behalf of the beneficiaries to restore the status qua because of a breach of trust. As the court further holds, the allegations of breach of trust fall into two broad categories, the first relating to the trustees’ decision that the 15-acre parcel was included in the contract to lease, and the second relating to the reasonableness of the terms agreed upon. I would limit plaintiff’s standing as a representative of the beneficiaries to the first of these two categories. I would not recognize his standing as to the second category.
From the affidavits on file it appears that plaintiff was the principal negotiator for the trustees at a time when he held a two-year unexpired term of a lease on a 15-acre parcel that was tied in with the over-all development of beach frontage property1 already available for development, and which, by the terms of the 1959 contract to lease which plaintiff himself negotiated, was required to be developed within the first two years of the new lease— allowing only one year after the expiration of plaintiff’s lease — with a water and road system serving the beach frontage and other property, costing at least $120,000.00.. Whether it was proper for the trustees to put plaintiff on the two-man negotiating committee in view of this conflict of interest need not be considered. Perhaps this conflict of interest was not noted in the beginning. In any event, *64according to an exhibit attached to plaintiff’s own affidavit, the trustees on February 8,1961, two months before their execution of the formal lease, were informed by an affidavit of Garner Anthony, president of Hualalai, the corporation with which the contract to lease had been made: “Mr. Richards told both Mr. Sumió Nakashima, secretary of our corporation, and myself that when we were ready to start the development on the beach, he would assign to us the lease he held on the 15-acre parcel. In return for this assignment Mr. Richards stated that he would like a lot on the beach frontage with a certain period of time being rent-free.”
This same affidavit also informed the trustees that even before the contract to lease was formulated “Mr. Richards and I discussed the possibilities of Kahua Ranch taking over the ranching operation involved in the project.” Plaintiff had the controlling interest in Kahua Ranch, as noted in the court’s opinion. This affidavit further averred that after the contract to lease, dated July 24, 1959, was entered into, “I again discussed the possibility of Kahua Ranch assuming the ranching operation involved in this project.” In the early fall of 1959, according to this affidavit, plaintiff formulated a proposal the effect of which was “that if our company would assume all of the development obligations with regard to the ranching lands as set forth in the trustees’ offer of July 24, 1959, then Kahua Ranch would take over the ranching operation of this project and pay the ranching rental as stipulated in the trustees’ offer. Mr. Richards expressed concern over his position as trustee and stated that perhaps an independent or subsidiary corporation would have to be set up to take over the ranching operation, in effect to act as a dummy for Kahua.”
The possibility that the trustees’ principal negotiator *65throughout the negotiations had an eye to his own profit as a rancher and as the present holder of a key 15-acre parcel of beach frontage, precludes the affirmance of the summary judgment so far as the terms of the lease are concerned. Were it not for this possibility I would agree that the action is one in which a court cannot substitute its judgment of value for that of the trustees. The value is too speculative for a case of abuse of discretion to be made out on that basis, even if the return for the 15-acre parcel be considered apart from the provisions of the lease as a whole.
However, the situation with which this court is confronted is not this. Instead, in refuting the plaintiff's claim that the 15-acre parcel was not included in the negotiations at all defendants have placed on the record unanswered accusations which preclude complete affirmance of the summary judgment.
The mere fact of participation by a cotrustee in a breach of trust does not prevent the cotrustee from bringing a suit to rectify the breach. Tracy v. Central Trust Co., 327 Pa. 77, 192 Atl. 869; Scott, Trusts, § 200.2, p. 1504; Restatement, Trusts, § 200, comment e (2d ed.). But this rule is based on the assumption that a cotrustee in prosecuting the suit truly represents the beneficiaries.
As seen, plaintiff has standing only as the representative of the beneficiaries of the trust. His position therefore is analogous to that of a class representative. In a representative suit “care must be taken that persons are brought on the record fairly representing the interest or right involved, so that it may be fully and honestly tried.” Smith v. Swormstedt, 16 How. (U.S.) 298, 303.
Plaintiff's whole concern in this case is to show that the 15-acre parcel never was included in the negotiations and the trustees wrongfully proceeded against the advice *66of their principal negotiator, himself. Whether, under all of the circumstances, the trustees acted properly in view of the accusations of self-interest made against their principal negotiator, the plaintiff, is a question not raised by the pleadings. Had the Attorney General represented the beneficiaries, the case would not have been so restricted.2 The question whether the defendant trustees, in view of Hualalai’s knowledge of the pertinent circumstances, could have and should have taken different action in extricating themselves from the unfortunate situation in which they had been placed, requires consideration. At least, the matter should have been investigated by the Attorney General and his pleading filed, either making further averments of breach of trust going to the heart of the matter or sustaining the acts of the defendant trustees. As the record stands, I can only conclude that the beneficiaries of this charitable trust have not had fair representation as to the second portion of this case, which concerns the acts of the trustees other than their determination that the 15-acre parcel was included in the 1959 agreement and that no reformation should be sought. Plaintiff lacks that identity of interests with the beneficiaries he seeks to represent which is requisite to his standing. For plaintiff to be the one to frame the issues and himself decide how much the chancellor may consider is intolerable in view of the accusations that have come to light.
The court evidently finds these accusations relevant only to the first portion of the case. I cannot concur. ■ In a charitable trust case, the court should enter a proper decree irrespective of the pleadings. 2 Perry, Trusts and Trustees, § 747, pp. 1277-78 (7th ed..). I do agree, how*67ever, that there is no genuine issue as to any breach of trust by the defendant trustees in respect of their decision that the 15-acre parcel was included in the 1959 contract to lease.
I would remand for entry of a modified judgment, to consist of (1) dismissal of the action with prejudice insofar as the amended complaint avers that the defendant trustees committed a breach of trust in determining that the 15-acre parcel at Raupulehu Beach, formerly subject to Bishop Estate Lease No. 5597, was included in the 1959 contract to lease (Exhibit A of the amended complaint) and that no reformation should be sought; and (2) dismissal of the action without prejudice in all other respects, on the ground of lack of standing of the plaintiff to represent the beneficiaries with respect thereto.

 According to a letter from the defendant trustees to the Attorney General, dated June 27, 1961, members of Bisbop Estate’s staff “advised that the Kahuwai Bay area [the 15-acre parcel] was the key to the beach development of Kaupulehu.” Reference is made in this letter to a staff report of August 25, 1960 and a memorandum of December 12, 1960.

 When defendants’ motions were heard and judgment granted thereon the Attorney General had not pleaded." The Attorney General named in the complaint has left office and no substitution has been effected.