NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
Electronically Filed Intermediate Court of Appeals CAAP-XX-XXXXXXX 13-NOV-2024 08:03 AM Dkt. 55 SO
NO. CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI#I
IN THE MATTER OF
THE TSUGIO KURIHARA REVOCABLE LIVING TRUST DATED AUGUST 21, 1997, as Amended and Restated
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CASE NO. 1TR161000036)
SUMMARY DISPOSITION ORDER (By: Leonard, Acting Chief Judge, Hiraoka and McCullen, JJ.)
Respondent-Appellant Ted Kurihara (Ted) appeals from
the March 8, 2021 Judgment On Order and Findings of Fact
Regarding Petition for Accounting, for Distribution of Trust
Assets, for Removal and Surcharge of [Ted] as Successor Trustee
of the Tsugio Kurihara Trust [(the Trust)], for Constructive
Trust and for Other Equitable Relief [(the Petition for Removal
and Surcharge)] Filed April 30, 2020 (Judgment), entered by the
Circuit Court of the First Circuit (Probate Court)1 in favor of
Petitioner-Appellee Douglas Kurihara (Douglas). Ted also
challenges the March 8, 2021 Order and Findings of Fact Regarding
1 The Honorable R. Mark Browning presided. NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
[the Petition for Removal and Surcharge] (Order Regarding
Petition).
Ted raises three points of error on appeal, contending
that the Probate Court erred in: (1) adopting certain
recommendations in the November 10, 2020 Master's Report
(Master's Report), filed by the court-appointed master,
Christopher A. Dias (Master); (2) failing to explain, in
reference to paragraphs 3, 4, and 5 of the Order Regarding
Petition why it adopted certain findings from the Master's
Report, but not the Master's recommendation; and (3) by not
holding an evidentiary hearing or deeming this as a contested
matter to be transferred to the civil trials calendar.
Upon careful review of the record and the briefs
submitted by the parties, and having given due consideration to
the arguments advanced and the issues raised by the parties, we
resolve Ted's points of error as follows:
(1) Ted argues that the Probate Court erred when it
adopted the Master's recommendations regarding (1) the reduction
of Ted's trustee compensation, and (2) the surcharge against Ted,
which was based on, inter alia, Ted's breach of his fiduciary
duties including his offsets against and reduction of Douglas's
distribution.
Ted first argues that the Probate Court abused its
discretion in awarding Ted fees for his services as trustee based
on the statutory formulation set forth in Hawaii Revised Statutes
(HRS) § 607-18 (2016), rather than the amount of fees that Ted
2 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
claimed he was entitled to due to his good faith actions with
respect to the Trust property. HRS § 607-18 states, in part: § 607-18 Compensation of trustees. (a) Unless the trust instrument otherwise provides, or the settlor and trustee otherwise agree, or, after the settlor's death, all the beneficiaries and the trustee otherwise agree, the trustee shall be entitled to the compensation set forth in this section and the compensation shall be deemed to be reasonable. For good cause shown, the court may also approve any other fee arrangement that it deems reasonable.
Ted does not contend that the Trust provided for any
particular compensation calculation, or that the settlor (Tsugio)
and Ted agreed to any particular compensation calculation, or
that the beneficiaries and Ted agreed to any particular
compensation calculation. Ted offers no authority supporting his
assertion that the Probate Court abused its discretion in
adopting the Master's use of the statutory formula in HRS § 607-
18, rather than Ted's calculations. The Probate Court adopted
the Master's findings and determined that Ted breached his
fiduciary duties by, inter alia, "unjustifiably overcompensating
himself in fiduciary fees, as more fully described in the
Master's Report, at the expense of the Trust and its
beneficiaries." While Ted argues that the Trustee's fees he paid
himself were "necessarily incurred," he fails to specifically
address the Master's findings and recommendations (and
calculations), including but not limited to those set forth in
paragraphs 21-39 of the Master's Report, which support the
Probate Court's award of reasonable fiduciary fees based on the
statutory computation of fees in the amount of $45,135.00, rather
than the $257,384.36 in trustee fees that Ted had already paid
3 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
himself. We conclude that the Probate Court did not abuse its
discretion in the reduction of Ted's trustee fees.
It appears to be uncontested that, as set forth in the
Master's Report, the sale of the Trust property in Waimanalo2
realized $667,130.94 in net sales proceeds to the Trust, and Ted
made $654,713.92 in offsets, distributions to himself, and
omnibus reservations to himself, ultimately resulting in a
beneficiary distribution to Douglas in the amount of $6,208.51.
Ted argues obliquely that he properly offset and reduced
Douglas's distribution, and increased his own distribution, based
on Ted's assessment that the Trust property should have generated
$300,000 more in sales proceeds than it did and Ted's suspicion
that Douglas "embezzled" $100,000 from one of Tsugio's checking
accounts.
Regarding the latter issue, in his opening brief, Ted
acknowledges that he did not object to the Master's findings that
there was no suspicious activity in that account. Accordingly,
Ted's argument that the Probate Court erred in determining that
he was not entitled to pay himself more because of this suspected
embezzlement is without merit.
Ted's arguments regarding his other disallowed offsets
are somewhat confusing. Ted references an appraisal that pre-
dated the sale of the Property, which estimated a higher fair
market value for the Waimanalo property than the sales price.
2 The Waimanalo property was owned 50/50 by the Trust and a trust settled by Tsugio's late wife.
4 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
However, Ted fails to demonstrate that the Probate Court clearly
erred in adopting the Master's recommended findings that, inter
alia, Douglas was not responsible for any diminished value of the
property and that the large offset against Douglas's distribution
was without valid justification.
Upon full consideration of Ted's arguments in light of
the Probate Court's adoption of the Master's findings, we
conclude that the Probate Court did not err in its determination
of the amounts due to Douglas, including from Ted.
(2) Ted argues that the Probate Court did not properly
explain, in its findings and conclusions, the basis for the
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NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
Electronically Filed Intermediate Court of Appeals CAAP-XX-XXXXXXX 13-NOV-2024 08:03 AM Dkt. 55 SO
NO. CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI#I
IN THE MATTER OF
THE TSUGIO KURIHARA REVOCABLE LIVING TRUST DATED AUGUST 21, 1997, as Amended and Restated
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CASE NO. 1TR161000036)
SUMMARY DISPOSITION ORDER (By: Leonard, Acting Chief Judge, Hiraoka and McCullen, JJ.)
Respondent-Appellant Ted Kurihara (Ted) appeals from
the March 8, 2021 Judgment On Order and Findings of Fact
Regarding Petition for Accounting, for Distribution of Trust
Assets, for Removal and Surcharge of [Ted] as Successor Trustee
of the Tsugio Kurihara Trust [(the Trust)], for Constructive
Trust and for Other Equitable Relief [(the Petition for Removal
and Surcharge)] Filed April 30, 2020 (Judgment), entered by the
Circuit Court of the First Circuit (Probate Court)1 in favor of
Petitioner-Appellee Douglas Kurihara (Douglas). Ted also
challenges the March 8, 2021 Order and Findings of Fact Regarding
1 The Honorable R. Mark Browning presided. NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
[the Petition for Removal and Surcharge] (Order Regarding
Petition).
Ted raises three points of error on appeal, contending
that the Probate Court erred in: (1) adopting certain
recommendations in the November 10, 2020 Master's Report
(Master's Report), filed by the court-appointed master,
Christopher A. Dias (Master); (2) failing to explain, in
reference to paragraphs 3, 4, and 5 of the Order Regarding
Petition why it adopted certain findings from the Master's
Report, but not the Master's recommendation; and (3) by not
holding an evidentiary hearing or deeming this as a contested
matter to be transferred to the civil trials calendar.
Upon careful review of the record and the briefs
submitted by the parties, and having given due consideration to
the arguments advanced and the issues raised by the parties, we
resolve Ted's points of error as follows:
(1) Ted argues that the Probate Court erred when it
adopted the Master's recommendations regarding (1) the reduction
of Ted's trustee compensation, and (2) the surcharge against Ted,
which was based on, inter alia, Ted's breach of his fiduciary
duties including his offsets against and reduction of Douglas's
distribution.
Ted first argues that the Probate Court abused its
discretion in awarding Ted fees for his services as trustee based
on the statutory formulation set forth in Hawaii Revised Statutes
(HRS) § 607-18 (2016), rather than the amount of fees that Ted
2 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
claimed he was entitled to due to his good faith actions with
respect to the Trust property. HRS § 607-18 states, in part: § 607-18 Compensation of trustees. (a) Unless the trust instrument otherwise provides, or the settlor and trustee otherwise agree, or, after the settlor's death, all the beneficiaries and the trustee otherwise agree, the trustee shall be entitled to the compensation set forth in this section and the compensation shall be deemed to be reasonable. For good cause shown, the court may also approve any other fee arrangement that it deems reasonable.
Ted does not contend that the Trust provided for any
particular compensation calculation, or that the settlor (Tsugio)
and Ted agreed to any particular compensation calculation, or
that the beneficiaries and Ted agreed to any particular
compensation calculation. Ted offers no authority supporting his
assertion that the Probate Court abused its discretion in
adopting the Master's use of the statutory formula in HRS § 607-
18, rather than Ted's calculations. The Probate Court adopted
the Master's findings and determined that Ted breached his
fiduciary duties by, inter alia, "unjustifiably overcompensating
himself in fiduciary fees, as more fully described in the
Master's Report, at the expense of the Trust and its
beneficiaries." While Ted argues that the Trustee's fees he paid
himself were "necessarily incurred," he fails to specifically
address the Master's findings and recommendations (and
calculations), including but not limited to those set forth in
paragraphs 21-39 of the Master's Report, which support the
Probate Court's award of reasonable fiduciary fees based on the
statutory computation of fees in the amount of $45,135.00, rather
than the $257,384.36 in trustee fees that Ted had already paid
3 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
himself. We conclude that the Probate Court did not abuse its
discretion in the reduction of Ted's trustee fees.
It appears to be uncontested that, as set forth in the
Master's Report, the sale of the Trust property in Waimanalo2
realized $667,130.94 in net sales proceeds to the Trust, and Ted
made $654,713.92 in offsets, distributions to himself, and
omnibus reservations to himself, ultimately resulting in a
beneficiary distribution to Douglas in the amount of $6,208.51.
Ted argues obliquely that he properly offset and reduced
Douglas's distribution, and increased his own distribution, based
on Ted's assessment that the Trust property should have generated
$300,000 more in sales proceeds than it did and Ted's suspicion
that Douglas "embezzled" $100,000 from one of Tsugio's checking
accounts.
Regarding the latter issue, in his opening brief, Ted
acknowledges that he did not object to the Master's findings that
there was no suspicious activity in that account. Accordingly,
Ted's argument that the Probate Court erred in determining that
he was not entitled to pay himself more because of this suspected
embezzlement is without merit.
Ted's arguments regarding his other disallowed offsets
are somewhat confusing. Ted references an appraisal that pre-
dated the sale of the Property, which estimated a higher fair
market value for the Waimanalo property than the sales price.
2 The Waimanalo property was owned 50/50 by the Trust and a trust settled by Tsugio's late wife.
4 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
However, Ted fails to demonstrate that the Probate Court clearly
erred in adopting the Master's recommended findings that, inter
alia, Douglas was not responsible for any diminished value of the
property and that the large offset against Douglas's distribution
was without valid justification.
Upon full consideration of Ted's arguments in light of
the Probate Court's adoption of the Master's findings, we
conclude that the Probate Court did not err in its determination
of the amounts due to Douglas, including from Ted.
(2) Ted argues that the Probate Court did not properly
explain, in its findings and conclusions, the basis for the
court's decision to remove Ted as Trustee.3 However, the Probate
Court determined that Ted breached his fiduciary duties as
Trustee by, inter alia, unjustifiably overcompensating himself in
fiduciary fees, failing to file Trust tax returns for five years
in a row, leaving the Trust with outstanding tax liabilities,
unnecessarily and excessively incurring attorneys' fees and
costs, and unilaterally and wrongfully offsetting Douglas's
distribution. The Probate Court clearly (and specifically) found
that these breaches rose to the level of misconduct warranting
removal. We conclude that the arguments in support of Ted's
second point of error are without merit.
(3) Ted asserts that the Probate Court erred by not
holding an evidentiary hearing or transferring the case to the
3 The Master recommended that Ted be removed as Trustee if he fails to comply with any of the recommendations adopted by the Court.
5 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
civil trial calendar, in light of its contested nature. Ted
appears to argue that the Probate Court erred and abused its
discretion in repeatedly denying his requests to transfer the
matter to the civil trial calendar, thereby retaining the matter
on the regular probate calendar, because it denied him of his
right to "independent discovery" and a trial. However, Ted does
not identify what discovery was necessary, particularly in light
of the Master's investigation and Ted's control over all
documents and records regarding his trusteeship. It does not
appear that Ted filed a request for discovery pursuant to Rule
20(d) of the Hawai#i Probate Rules. At the December 17, 2020
hearing on the Petition for Removal and Surcharge, the Probate
Court considered the parties' declarations, including the
exhibits submitted with Ted's declaration, as well as the
Master's Report and the parties' arguments thereon. Live
testimony was not presented; none was any offered by the parties
or rejected by the Probate Court. In In re Trust Agreement Dated
June 6, 1974, the Hawai#i Supreme Court observed that "[u]nder
Hawai#i probate court rules, contested matters in probate do not
clearly give rise to the right to discovery, and it is rare for
the court to specifically address the issue." 145 Hawai#i 300,
310, 452 P.3d 297, 307 (2019) (citation and quotations omitted).
Finally, we note that the matters concerning the fiduciary duties
of trustees are squarely within the expertise of the Probate
Court. We conclude that the Probate Court did not abuse its
discretion in retaining the Petition for Removal and Surcharge on
6 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
the probate calendar; nor did the Probate Court err or abuse its
discretion in the manner in which it considered the evidence and
arguments presented by the parties, as well as the report and
recommendations of the Master, in its findings and conclusions
made in conjunction with the disposition of the Petition for
Removal and Surcharge.
For these reasons, the Probate Court's March 8, 2021
Judgment is affirmed.
DATED: Honolulu, Hawai#i, November 13, 2024.
On the briefs: /s/ Katherine G. Leonard Acting Chief Judge Michael D. Rudy, Sofia Hirosane McGuire, /s/ Keith K. Hiraoka for Respondent-Appellant. Associate Judge
Natasha R. Shaw, /s/ Sonja M.P. McCullen Gale L.F. Ching, Associate Judge for Petitioner-Appellee.