In re Elaine Emma Short Revocable Living Trust Agreement Dated July 17

Decision Date18 June 2020
Docket NumberSCWC-15-0000960
CourtHawaii Supreme Court

Thomas E. Bush for petitioners

Rosemarie S.J. Sam, Edmund K. Saffery, Deirdre Marie-Iha, Honolulu (Lynda L. Arakawa with them on the brief) for respondent First Hawaiian Bank

Rhonda L. Griswold, Calvert G. Chipchase, Summer G. Shelverton, Honolulu (Stacy K. Takekawa with them on the brief) for respondent David Short



In this case, we consider whether the Intermediate Court of Appeals (ICA) properly upheld an order and judgment of the probate court that modified a trust provision regarding the distribution of trust principal without issuing findings of fact to explain or support its ruling. We also address whether the terms of a trust may override a trustee's statutory requirement to provide accounts information to contingent beneficiaries.

Upon review, we conclude that the absence of factual findings by the probate court did not enable the ICA to meaningfully review the basis of the probate court order to modify the trust and that the ICA's reliance on selective extrinsic evidence was improper. We further hold that the ICA erred when it concluded that the terms of a trust could supersede the trustee's statutory duty to provide accounts information to contingent beneficiaries of the trust. Accordingly, we vacate the ICA's judgment on appeal and the probate court's order and judgment, except as specified below, and remand the case for further proceedings consistent with this opinion.

A. General Overview

Elaine Emma Short (Elaine), who passed away on January 3, 2012, was married to Clarence Short (Clarence), and they had two sons, David Short (David) and William Short (William). Elaine's brother, Leroy Cook, is the father of five children (collectively, "the Cooks").1 In a will dated September 4, 1979 ("1979 Will"), Elaine named Clarence as trustee of her estate, with their two sons and First Hawaiian Bank (FHB) as successor trustees in the event Clarence was unavailable or predeceased her. Elaine subsequently established a revocable living trust in 1984 ("initial trust"), as did her husband ("Clarence's Trust"). Both trusts were created to provide for the settlor's respective spouse, as well as their two sons David and William. Article V.B.(a) of the initial trust provided that if Elaine was not survived by Clarence at the time of her death, subtrusts would be created for David and William, from which the Successor Trustee could distribute principal and income to her sons as needed for health, education, and support and maintenance for each son's accustomed standard of living.2 Article V.B.(a) also provided that once each son reached the age of 45, the Successor Trustee would distribute to that son the remaining trust balance and terminate his subtrust. Under Article V.B.(b) of the initial trust, if either son died before Elaine, the property that would have otherwise funded the subtrust for the deceased son's benefit was to be distributed to his issue, per stirpes; if the son died without issue, the Successor Trustee was to hold the property for the surviving son. Articles V.C. and VIII provided that if neither Clarence nor any of Elaine's descendants survived her, then the trust estate was to be distributed to Elaine's heirs-at-law at the time of her death.3

On March 10, 1993, Elaine amended several articles of the initial trust ("Elaine's Trust").4 Relevant to this litigation, Article V.B.(a) was amended to provide the Successor Trustee with full discretion to withhold distribution of income to David and William if warranted by the circumstances (Amended Article V.B.(a)).5 Upon Elaine's death, the Successor Trustee could only distribute income, and not principal, from David and William's respective subtrusts as necessary to meet their needs for "health, education, support, and maintenance," as determined by the Successor Trustee in its sole discretion. Also, because William at the time had a drug-related disability, income distributions to him were to be restricted to vital necessities unless he had been drug-free for at least a year. The amended trust no longer provided for the distribution of principal to either of Elaine's sons after her death nor did it provide for termination of their subtrusts.

On June 8, 1993, William passed away unmarried and without children. Under the terms of Elaine's Trust, William's interest in the property was to be held by the trustee for David at Elaine's death.6 Clarence passed away on April 10, 2010. Elaine was declared incapacitated in 2005, and she passed away on January 3, 2012. David has not married and has no children.

B. Probate Court Petition

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 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 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 Hawai‘i. 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 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 Hawai‘i 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 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 Hawai‘i 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 during 2012-2015, and (e) the amount of David's total income for 2012-2015.

FHB objected to...

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