Richards v. Midkiff

• Decision Date: 04 September 1964
• Docket Number: No. 4298,4298
• Citation: 48 Haw. 32,396 P.2d 49
• Parties: Atherton RICHARDS, Trustee under the Will and of the Estate of Bernice Pauahi Bishop, Deceased, v. Frank E. MIDKIFF, Edwin P. Murray and Richard Lyman, Jr., Trustees under the Will and of the Estate of Bernice Pauahi Bishop, Deceased, Hualalai Development Corporation, a Hawaiian Corporation, and Shiro Kashiwa, Attorney General of the State of Hawaii.
• Court: Hawaii Supreme Court

Page 49

396 P.2d 49

48 Haw. 32

Atherton RICHARDS, Trustee under the Will and of the Estate of Bernice Pauahi Bishop, Deceased, v. Frank E. MIDKIFF, Edwin P. Murray and Richard Lyman, Jr. Trustees under the Will and of the Estate of Bernice Pauahi Bishop, Deceased, Hualalai Development Corporation, a Hawaiian Corporation, and Shiro Kashiwa, Attorney General of the State of Hawaii.

No. 4298.

Supreme Court of Hawai'i.

Sept. 4, 1964.

Syllabus by the Court

1. A motion to dismiss is converted into a motion for summary judgment where matters outside the pleadings are presented to and not excluded by the court.

2. Summary judgment should be granted to the moving party where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.

3. Where the affidavits supporting a motion for summary judgment, as well as the counter affidavits, filed against such motion, show no genuine issue as to any material fact the pleadings cannot supply one.

4. Multiple trustees can only act as a unit. The determination of whether the trust estate should maintain a legal action requires the requisite concurrence of the trustees just as the exercise of any other power.

5. Reformation may be had only by a party to an instrument or those in privity with him.

6. A trustee may bring an action against a cotrustee to compel performance of duties under the trust or to enjoin him from committing a breach of trust or to compel him to redress a breach of trust.

7. Restitution of property conveyed in breach of trust or restoration of the status quo through cancellation is a proper remedy available to a trustee as against his cotrustee where the transferee of the trust property has notice of the breach of trust.

8. Trustees are under a duty to the beneficiaries to take all reasonable steps to realize claims held in trust. However, they have no duty to bring an action to enforce a claim pertaining to the trust property if it appears unreasonable to do so either because the action might be unsuccessful or would involve an expense disproportionate to the possibility of success.

9. Trustees may rely on the opinion of reputable counsel in determining the possibility of success in legal proceedings in order to arrive at a judgment whether or not to pursue such a course of action.

10. The parol evidence rule would effectively bar an action for reformation or rescission of a written instrument by one of the parties thereto where it was executed with knowledge of the fact which might have given rise to a claim for reformation or rescission.

11. When given the power to enter into leases by the trust instrument, a trustee is under a duty to act with prudence and there is no breach of trust if he makes a lease which under all the circumstances is reasonable.

Masaji Marumoto, Honolulu, for plaintiff-appellant.

J. Garner Anthony, Honolulu (Robertson, Castle & Anthony and Smith, Wild, Beebe & Cades, Honolulu, on the brief), for Trustees Estate of Bernice Pauahi Bishop, deceased, defendant-appellees.

J. P. Russell, Honolulu (on the brief) for Hualalai Development Corporation, defendant-appellee.

Bert T. Kobayashi, Atty. Gen., pro se.

Before TSUKYAMA, C. J., and CASSIDY, WIRTZ, LEWIS, and MIZUHA, JJ. WIRTZ, Justice.

This controversy concerns a suit brought by plaintiff-appellant, one of the Trustees of the Estate of Bernice Pauhi Bishop, against his fellow trustees, ¹ Hualalai Development Corporation, an Hawaiian corporation, and the Attorney General of the State of Hawaii, to secure either annulment (cancellation) or reformation of a lease entered into between the Bishop Estate and Hualalai based upon a claim of breach of trust by the defendant trustees for having included in the lease a 15-acre parcel of land then under lease to plaintiff.

Plaintiff first brought an action for reformation of the lease on the ground of mistake. The chancellor granted motions to dismiss with leave to amend. Plaintiff thereupon filed an amended complaint containing detailed amplification of the original claims but asking for similar relief, namely, either annulment (cancellation) or reformation of the lease conceding, however, that there was no mistake in the execution of the lease but basing his claim for relief on an allege breach of trust by his fellow trustees.

A motion to dismiss and for summary judgment, together with affidavits in support thereof, was filed by the defendant trustees. A motion for summary judgment, together with affidavits in support thereof, was filed by Hualalai. The Attorney General, against whom no relief was asked, apparently felt to necessity to plead. In response to the supporting affidavits a counter affidavit was filed by plaintiff.

The chancellor, after extensive briefing and argument, filed a decision on January 23, 1962, finding in effect (1) that the motion to dismiss should be granted for failure to state a claim upon which relief could be granted and (2) that the motions for summary judgment should be granted, inasmuch at these was no genuine issue as to any material fact in the case entitling the defendants to judgment as a matter of law. On January 25, 1962, the chancellor issued a judgment reciting the foregoing decision and granting both motions and ordering the amended complaint dismissed. From this judgment this appeal has been taken.

Preliminarily, the factual background of the controversy is best summarized. Specific phases of the controversy will be detailed later herein as they appear necessary.

The Bernice P. Bishop Estate owns certain lands in the Kona District of the Island of Hawaii known as the lands of Kauplehu. These lands as described in the lease in question comprise some 18,228 net acres and extend from the ocean up the southwest slope to the ridge of Mt. Hualalai and have an ocean frontage of approximately 15,000 feet.

In 1936 plaintiff, prior to becoming a trustee of the Bishop Estate leased from the estate for a period of 25 years a 15-acre parcel (covered by Bishop Estate Lease No. 5597) of the lands of Kaupulehu, being a portion of the three mile Kaupulehu shore frontage and all of the frontage of Kahuwai Bay. ² This 15-acre parcel, which is the principal bone of contention in this controversy, was and is undeveloped; it has never had a source of potable water, road access or electricity. However, because of its location it was deemed necessary by Hualalai to consider the future development and use of the parcel in conjunction with the over-all development of the other lands of Kaupulehu as herein described.

Until 1952 the other lands of Kaupulehu had been leased to the John A. Maguire Estate and were operated as a cattle ranch known as 'Huehue Ranch.' The operations of this ranch, carried on in a haphazard manner, were not overly successful. Plaintiff, as a trustee of the Bishop Estate, came to the conclusion that these lands could be more profitably utilized if leased for a long term not only for the conduct of a cattle operation but also for the development of a resort area consisting of a number of mountain and beach sites for use by vacationers. He contacted one Randy Galt concerning the possibility of Galt's leasing the lands. Through Galt, defendant Hualalai's president became interested in the project.

The negotiations between plaintiff and Hualalai's president culminated in Hualalai's proposal by letter dated July 2, 1959, to lease the lands of Kaupulehu, a counteroffer by the trustees dated July 24, 1959, and Hualalai's acceptance of the trustees' counteroffer. The contract thus formed is the basis of the parties' rights and obligations pertaining to the lands of Kaupulehu and will be referred to herein as the 1959 agreement. This agreement for the leasing and development of 'the entire land of Kaupulehu' was 'subject to the rights of the lessee under Bishop Estate Lease No. 5597 expiring September 1, 1961 demising 15.00 acres at Kaupulehu Beach.' The disputed 15-acre parcel is that covered by Bishop Estate Lease No. 5597.

No question was raised as to the right to have the disputed 15-acre parcel included in the lease until some 15 months later when late in October 1960 for the first time plaintiff allegedly stated to Hualalai's president that it was the position of the trustees that this 15-acre parcel was not included and would have to be handled separately. Thereupon Hualalai offered to lease this 15-acre parcel separately for a term to run concurrently with the lease contemplated in the 1959 agreement. After plaintiff advised his fellow trustees in November of 1960 that in his opinion the 15-acre parcel should not be included in the lease contemplated by the 1959 agreement, the defendant trustees decided to submit the question to counsel. It was the advice of counsel that the 15-acre parcel was clearly included but that the trustees might be able to seek reformation of the contract if there had been a mistake. Following receipt of this opinion the defendant trustees advised Hualalai that the contemplated lease under the 1959 agreement would include the 15-acre parcel.

When plaintiff questioned the validity of the opinion rendered by general counsel for the Bishop Estate, the defendant trustees submitted the question to independent counsel who also advised that the 15-acre parcel was included under the 1959 agreement.

Considerable delay ensued in the preparation and delivery of the lease while the trustees endeavored to secure changes in the 1959 agreement and plaintiff sought to exclude the 15-acre parcel. On February 8, 1961, counsel for Hualalai addressed a demand to the trustees to issue the lease in accordance with their contract including the 15-care parcel. After further negotiations, resulting in certain concessions by Hualalai in order to secure the lease without litigation, the lease including the 15-acre parcel was finally executed on April 14, 1961.

This appeal is concerned with the single...