In re Mitsuo Yoneji Revocable Trust Dated Nov. 27
| Decision Date | 16 April 2020 |
| Docket Number | NO. CAAP-15-0000188,CAAP-15-0000188 |
| Citation | 464 P.3d 892 |
| Parties | In the MATTER OF MITSUO YONEJI REVOCABLE TRUST DATED NOVEMBER 27, 1985 |
| Court | Hawaii Court of Appeals |
On the briefs:
Patrick Shea (Rebecca A. Copeland on the briefs) for Petitioner-Appellant.
Ryan G.S, Au, for Beneficiary-Appellee.
This appeal arises from a Petition for Surcharge (Petition ), case number T.No. 13-1-0004, filed by Petitioner-Appellant Neil Yoneji (Petitioner Trustee Neil ), as Successor Trustee of the Mitsuo Yoneji Revocable Trust dated November 27, 1985 (Mitsuo Trust ), seeking a surcharge against Mary Yoneji (Mary ), a beneficiary of the Mitsuo Trust. Petitioner Trustee Neil appeals from a Judgment in favor of Mary entered by the Circuit Court of the Fifth Circuit (Circuit Court ).1
The Petition alleges, inter alia, that due to Mary's refusal to release information about trust properties, her conversion of trust assets, and her refusal to return the assets, the Mitsuo Trust was forced to initiate, and successfully litigated, two prior civil lawsuits against her during which the Mitsuo Trust incurred significant attorneys' fees and costs. The Petition also contends Mary filed a counterclaim in one of those lawsuits that the Mitsuo Trust successfully defended against. The Petition thus seeks to surcharge Mary, as a beneficiary of the Mitsuo Trust, the attorneys' fees and costs incurred by the Mitsuo Trust in litigating to recover losses caused by Mary and the interest on assets that Mary removed from the Mitsuo Trust.2
In denying the Petition, the Circuit Court ruled that: the Petition was barred by the doctrine of res judicata ; Petitioner Trustee Neil failed to timely request attorneys' fees in one of the prior lawsuits under Hawaii Rules of Civil Procedure (HRCP ) Rule 54(d)(2) ; Petitioner Trustee Neil had waived the claims in the Petition; and laches applied. The Circuit Court also held that, pursuant to Hawaii Revised Statutes (HRS ) § 607-14.5 (2016), the claims in the Petition were frivolous and thus awarded attorneys' fees and costs totaling $19,377.66 in favor of Mary and against Petitioner Trustee Neil.
On appeal, Petitioner Trustee Neil asserts two points of error: (1) the Circuit Court erred in denying the Petition against Mary because he was authorized and obligated to recoup the trust losses, Mary is subject to surcharge for her breach of trust as a co-beneficiary, and the surcharge claim is not barred by res judicata or any other form of waiver, laches, or untimeliness; and (2) the Circuit Court abused its discretion in awarding Mary attorneys' fees and costs because the claims in the Petition were not frivolous.
We hold that the claims in the Petition are not barred due to res judicata , waiver, laches or untimeliness. Further, we recognize that pursuant to the Restatement (Third) of Trusts § 104 (Am. Law Inst. 2012), Petitioner Trustee Neil had a legal basis to bring the Petition against Mary, as a co-beneficiary of the Mitsuo Trust, to the limited extent that he alleged Mary participated in a breach of trust regarding the Mitsuo Trust. Thus, the Circuit Court erred in ruling that the Petition's claims were frivolous and in awarding attorneys' fees and costs to Mary.
We vacate the Circuit Court's rulings on the Petition and remand this case for further proceedings.
The Grantor for the Mitsuo Trust was Mitsuo Yoneji (Mitsuo ), and the primary assets of the Mitsuo Trust were two commercial properties (Commercial Properties ) on the island of Kaua‘i. The Mitsuo Trust provided for distributions to Mitsuo's sons, Owen Yoneji (Owen ) and Neil Yoneji (Neil ), and to the children of Owen and Neil. Owen and his wife Charlene Yoneji (Charlene ) had one daughter, Mary. Neil and his wife Claire Yoneji (Claire ) had two sons, Brandon Yoneji (Brandon ) and Rylan Yoneji (Rylan ).3
The Circuit Court found, and it is undisputed by the parties, that the Commercial Properties are co-owned by four family trusts: the Mitsuo Trust (15%); the Yoneji Revocable Family Trust dated August 21, 1998 (Yoneji Family Trust )(42.5%), for which Neil and Claire are trustees; the Revocable Trust of Owen Kazuo Yoneji dated January 11, 1994 (Owen Trust )(21.25%); and the Revocable Trust of Charlene Tsuruko Yoneji dated January 11, 1994 (Charlene Trust ) (21.25%).
To put the Petition in context, we first discuss the two prior lawsuits in which the Petition alleges the Mitsuo Trust incurred attorneys' fees and costs due to Mary's conduct.
On November 21, 2008, Neil, as Successor Trustee of the Mitsuo Trust, and Neil and Claire, as trustees of the Yoneji Family Trust, filed a "Complaint for Partition of Real Properties" (Complaint for Partition ) in Civil No. 08-1-0225 against Mary, as trustee of the Owen Trust and Charlene Trust. The Complaint for Partition, filed in the Circuit Court of the Fifth Circuit, alleged that neither the Owen Trust nor the Charlene Trust had replied to requests from the Mitsuo Trust and the Yoneji Family Trust for information regarding management of the Commercial Properties, thereby asserting there was a "failure on the part of the co-tenants to properly own and manage the properties."
On February 24, 2009, the Circuit Court entered its "Findings of Fact, Conclusions of Law, and Order Granting Plaintiffs' Motion for Summary Judgment as to All Defendants Filed on January 8, 2009" (Partition FOFs/COLs/Order ). In its FOFs and COLs, the Circuit Court, inter alia , (1) found that the parties could not agree on the co-ownership and management of the Commercial Properties, (2) designated the respective ownership interests of the four family trusts, (3) concluded that Neil was properly appointed as Successor Co-Trustee of the Mitsuo Trust, and (4) concluded that if the Commercial Properties were incapable of being partitioned in kind, a partition by sale may be the appropriate remedy. The attached Order (1) concluded that Neil, as Successor Trustee of the Mitsuo Trust, and Neil and Claire, as trustees of the Yoneji Family Trust, were entitled to summary judgment as to all named Defendants, (2) set forth instructions for a partition sale, including permission for the parties to purchase the Commercial Properties, and (3) retained jurisdiction to determine the parties' post-sale claims and entitlements, and to hold a hearing to consider confirmation of sale of the Commercial Properties, as needed.
On January 4, 2011, the Circuit Court entered an order granting a Motion for Confirmation of Sale, confirming the sale of the Commercial Properties to the Yoneji Family Trust as the highest bidder at public auction. No appeal was filed.
On October 26, 2009, Neil, as Successor Trustee of the Mitsuo Trust, and Neil and Claire, as trustees of the Yoneji Family Trust, filed a Complaint in Civil No. 09-1-0282 against Mary and Charlene, in their individual capacities, asserting various tort and equitable claims including, inter alia , conversion of trust assets from the Mitsuo Trust and unjust enrichment through retention of said assets.4 The Complaint, filed in the Circuit Court of the Fifth Circuit, additionally requested that "the Court order that defendants pay Plaintiffs' costs and attorneys' fees[.]"
On February 22, 2013, Charlene filed a Motion for Summary Judgment in response to the Complaint.
On March 20, 2013, Mary filed a Counterclaim against Neil and Claire, in their respective trustee capacities, alleging that they were unjustly enriched by benefitting from using Mary's personal money to have expenses paid related to the Commercial Properties.
In pretrial hearings, the Circuit Court granted Charlene's Motion for Summary Judgment, ruling that Charlene was not liable for any counts alleged in the Complaint. The Circuit Court also granted summary judgment in favor of Mary on the constructive fraud, conspiracy, prima facie tort, and constructive trust claims asserted against her. The Circuit Court also awarded Mary attorneys' fees and costs for claims brought against her by Neil and Claire in their individual capacities.5
A jury trial was held regarding the remaining claims of conversion and unjust enrichment against Mary in the Complaint and the claims asserted in Mary's Counterclaim.
On May 1, 2013, in a Special Verdict Form, the jury found that: (1) Mary was liable for conversion and unjust enrichment in the total amount of $129,645.59; (2) Mary had not proven her counterclaim for unjust enrichment against Neil or Claire in their respective trustee capacities; and (3) nothing should be awarded to Mary in restitution for personal monies spent on legitimate business expenses for the Commercial Properties.
On January 27, 2014, the Circuit Court entered an Amended Judgment with regard to Charlene. On February 25, 2014, Neil and Claire in their respective trustee capacities filed a timely notice of appeal from the Circuit Court's Amended Judgment regarding Charlene.
On March 7, 2014, the Circuit Court entered an Amended Final Judgment with regard to the verdict against Mary. The Amended Final Judgment ordered that the converted funds from the Mitsuo Trust and the net rental income related to the Commercial Properties be apportioned between the four family trusts in accordance with their respective ownership interests in the Commercial Properties. The Amended Final Judgment also awarded costs in favor of Neil and Claire in their respective trustee capacities and against Mary in the amount of $32,256.94, and "dispose[d] of all claims remaining in this action."
On April 7, 2014, Neil and Claire in their respective trustee capacities filed a notice of appeal from the Circuit Court's Amended Final Judgment regarding Mary.
On July 10, 2014, Petitioner Trustee Neil, in his capacity as Successor Trustee for the Mitsuo Trust, filed...
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