In Re: Kurihara Revocable Living Trust Dated August 21, 1997

NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER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NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER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

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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

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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.

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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.

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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

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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.

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