David A. Hodges, Jr. & a. v. Alan Johnson & a.
177 A.3d 86
| N.H. | 2017Background
- Settlor David A. Hodges, Sr. created two irrevocable 2004 trusts holding primarily non‑voting stock of Hodges Development Company to preserve the family business and obtain tax benefits; trustees had discretionary distribution and decanting powers and a Committee of Business Advisors handled business management.
- Beneficiaries included the settlor’s wife Joanne, his three children (including plaintiff David A. Hodges, Jr.) and two step‑children (including plaintiffs Barry and Patricia); trusts prioritized Joanne’s welfare and permitted unequal discretionary distributions.
- Attorney Joseph McDonald, and attorneys/board members Alan Johnson and William Saturley, carried out decantings in 2010, 2012, and 2013 that progressively removed the plaintiffs’ future beneficial interests (and later Joanne’s) from successor trusts; decanting was effected by temporary resignation and delegation to McDonald.
- Plaintiffs sued in probate court seeking to void the decantings as void ab initio and to remove Johnson and Saturley as co‑trustees. The trial court voided the decantings and removed Johnson and Saturley, finding the decanting trustees failed to consider the plaintiffs’ interests.
- The New Hampshire Supreme Court affirmed, focusing on trustees’ statutory duty of impartiality and concluding the record supports the finding that the trustees did not give any consideration to the plaintiffs’ future beneficial interests before eliminating them by decanting.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the decantings that eliminated plaintiffs’ future interests were void | Hodges plaintiffs: decantings are void because trustees failed to consider beneficiaries’ interests and thus breached duties | Defendants: decanting was authorized by trust terms and statute; plaintiffs’ interests were mere expectancies so no further consideration required | Court upheld voiding: trustees violated duty of impartiality by giving no consideration to plaintiffs’ future beneficial interests, so decantings were void ab initio |
| Proper interpretation of “interests of the beneficiaries” in RSA 564‑B:8‑801 | Plaintiffs relied on broad reading to require consideration of beneficiaries’ welfare when decanting | Defendants argued statute doesn’t impose duty of impartiality via this phrase; decanting statute controls | Court clarified: “interests of the beneficiaries” means interests defined by trust terms, but RSA 564‑B:8‑801 incorporates the statutory duty of impartiality (RSA 564‑B:8‑803), so trustees must act impartially in light of trust purposes and terms |
| Whether decanting permitted unequal distributions or elimination of beneficiaries without violating impartiality duty | Plaintiffs: elimination of beneficiaries by decanting may still violate impartiality if trustees don’t treat beneficiaries equitably in light of trust purposes | Defendants: Uniform Trust Code and decanting statute allow unequal distributions and decanting that alters non‑vested interests | Held: Unequal distributions/decanting are permitted by statute but breach impartiality when trustees fail to treat beneficiaries equitably in light of purposes/terms; here trustees failed that duty |
| Whether removal of co‑trustees Johnson and Saturley was appropriate | Plaintiffs: removal warranted for breach of fiduciary duty and failure to consider beneficiaries | Defendants: removal unwarranted absent bad faith, dishonesty, mismanagement, or other serious grounds | Held: Removal sustained — trial court did not abuse discretion; trustees’ failure to consider plaintiffs’ interests amounted to a serious breach and removal was in beneficiaries’ best interest |
Key Cases Cited
- Wentworth v. Waldron, 86 N.H. 559 (N.H. 1934) (deferential review of trustee discretion; court supervises to prevent abuse)
- Shelby/In re Pack Monadnock, 147 N.H. 419 (N.H. 2001) (interpretation of trust is question of law and courts give effect to settlor’s intent)
- Shelton v. Tamposi, 164 N.H. 490 (N.H. 2012) (discusses duty of impartiality and trustee removal)
- In the Matter of Munson & Beal, 169 N.H. 274 (N.H. 2016) (failure to exercise discretion can render trustee action unsustainable)
- In re Estate of Couture, 166 N.H. 101 (N.H. 2014) (probate findings of fact are final unless plainly erroneous)
- Bartlett v. Dumaine, 128 N.H. 497 (N.H. 1986) (extrinsic evidence may inform settlor intent but cannot contradict trust terms)
- Devine v. Cote, 109 N.H. 235 (N.H. 1968) (recognition of trusts for support and interpreting trust purpose)
- In the Matter of Goodlander & Tamposi, 161 N.H. 490 (N.H. 2011) (trustee owes fiduciary duties to all beneficiaries, including future or contingent ones)