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Hodges v. Johnson - 170 N.H. 470, 177 A.3d 86 (2017)

Rule:

N.H. Rev. Stat. Ann. § 564-B:8-801 requires a trustee to administer, invest and manage a trust and distribute trust property in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with Rev. Stat. Ann. ch. 564-B.

Facts:

The defendants, Alan Johnson, Joseph McDonald, and William Saturley, appealed an order of the 7th Circuit Court-Dover Probate Division which, following a bench trial, set aside “decantings” from two 2004 irrevocable trusts of which the plaintiffs, David A. Hodges, Jr. (David Jr.), Barry R. Sanborn, and Patricia Sanborn Hodges, had been beneficiaries, and which removed defendants Johnson and Saturley as co-trustees of those trusts. Decanting was the distribution of trust property to another pursuant to the trustee’s discretionary authority to make distributions to, or for the benefit of, one or more beneficiaries. The decantings at issue eliminated the future beneficial interests of the plaintiffs. The trial court ruled that the decantings are void ab initio because McDonald, as the decanting trustee, and Johnson and Saturley, to the extent they assisted as co-trustees in facilitating the decantings, failed to give any consideration to the plaintiffs' beneficial interests.” The trial court also determined that it best served the interests of all beneficiaries to order removal of Saturley and Johnson as co-trustees.

Issue:

1) Was the determination of the trial court that held that co-trustees violated the duty of impartiality under N.H. Rev. Stat. Ann. § 564-B:8-801 when they decanted from two irrevocable trusts of which plaintiffs had been the beneficiaries without taking plaintiffs' future beneficial interests into account proper?

2) Did the trial court err when it removed two defendants as trustees under N.H. Rev. Stat. Ann. § 564-B:7-706(b) based on their violation of their duty of impartiality?

Answer:

1) Yes; 2) No.

Conclusion:

The Supreme Court of New Hampshire held that the decantings in question are void ab initio because the decanting trustee violated the duty of impartiality required under N.H. Rev. Stat. Ann. § 564-B:8-803, without taking into account plaintiffs' future beneficial interests into account. According to the Court, the statutory duty of impartiality was owed to all beneficiaries, regardless of whether their interests were present or future, vested or contingent. N.H. Rev. Stat. Ann. § 564-B:8-803 provided that in order to act impartially, a trustee must give due regard to the beneficiaries' respective interests when administering, investing, managing, and distributing the trust property. Moreover, the Court held that the trial court properly removed two defendants as trustees under N.H. Rev. Stat. Ann. § 564-B:7-706(b) based on their violation of their duty of impartiality. In this regard, the Court noted that a court may remove a trustee to remedy a breach of trust, such as a breach of the duty of impartiality, as provided in N.H. Rev. Stat. Ann. § 564-B:7-706. N.H. Rev. Stat. Ann. § 564-B:10-1001(b)(7) (2007).

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