Deconstructing The Descendants: How George
Clooney Ennobled Old Hawaiian Trusts and Made the
Rule Against Perpetuities Sexy
Presented to the Social Science Association on 1/7/2013 by Randall Roth
The first and last sections of my talk tonight are about a reel story. That’s reel, spelled
R...E...E...L. Of course I’m talking about the movie, The Descendants. It’s based on a book of
the same name, written by Hawaii’s own Kaui Hart Hemmings. 1 The stories in the book and the
film are quite similar, but not identical. 2
The movie was nominated for five academy awards: best screenplay, best editing, best direction,
best leading actor, and best movie. It won for best screenplay. If you saw the movie and stayed
to watch all the credits—and I mean all the credits—you saw my name. It was the last name …
on the last page … coming right after Dollar Rent-A-Car … but it was there.
My involvement began three years earlier with a phone call from one of the movie’s producers
wanting me to meet with Alexander Payne, the creative genius who was writing the script and in
a few months would be directing the movie. I had not yet read the book, but the chance to meet
with successful moviemakers sounded like fun, so I invited both of them—Alexander and the
producer, Jim Burke—over to dinner. I also invited my Broken Trust co-author, federal judge
Sam King, and his wife Anne. The Roths and Kings immediately read Kaui’s book and learned
more about Alexander’s movies, including the one that won an Academy Award—Sideways. 3
Early in the dinner conversation I asked Alexander if the George Clooney character in the movie,
Matt King, would be patterned after the 94-years old Sam King. Before Alexander could
respond, Sam said that he would prefer to be played by Dwayne “The Rock” Johnson.
Alexander loved Sam’s humor, including Sam’s response when asked if King Street in Honolulu
had been named after someone in the King family. Sam smiled and said, “You know, there’s a
Queen Street, too.”
I then started to describe some of the real people and stories that came to mind as I read Kaui’s
book; for example, there is a thrill-seeking person suddenly on life support because of a
speedboat racing accident (which brings Tom Gentry to mind); 4 and a spendthrift playboy whose
1
Kaui also happens to be the daughter of family friends who lived several blocks from us in the 1980s. So when I
think of Kaui, I picture a spunky little girl with a huge smile running after a soccer ball. Although this essay focuses
on the movie, there obviously would not have been a movie if it weren’t for Kaui’s book. She is a masterful
storyteller. The Descendants is her first novel. Interestingly, the movie’s producers acquired the movie rights
before it had even been published – thanks to a heads-up from the publishing house.
2
Selected differences between the movie and book are noted in footnotes and in Appendix A.
3
The award was for Best Screenplay. His other films include Citizen Ruth, Election, and About Schmidt.
4
Barbara Lloyd, “Tom Gentry, 67, Powerboat Racing Record Holder,” NEW YORK TIMES, Jan. 17, 1998 (“a wealthy
real estate developer whose fascination with powerboat racing brought him several world records, died at home in
Honolulu Thursday, nearly four years after a severe crash at a world championship left him hospitalized and in a
1
ancestor invented the shopping cart (which because of the shopping-cart connection brings the
Goldman brothers to mind). 5 Before I could describe any of the many other connections I had
made, Alexander reassured everyone at the table that he would never pattern a movie on the life
of a real person without that person’s full knowledge and informed consent. Anne King smiled
sweetly and said, “I don’t believe you!” Alexander roared with laughter.
When Alexander later asked if I would be willing to comment on selected sections of his movie
script, I jumped at the opportunity. That led to a series of emails 6 and two face-to-face meetings,
during which we discussed issues such as a trustee’s power to act unilaterally; the fiduciary
duties trustees owe to trust beneficiaries; problems associated with co-ownership of valuable
undeveloped land; and reasons why some trusts must eventually terminate. 7
Alexander tweaked his script to the point that I was surprised by how much I enjoyed the
movie. 8 I vividly recall sitting in the theater during the first showing in Honolulu, watching
George Clooney as he said those three words: Rule … Against … Perpetuities.
coma. … Just a month before the 1994 crash, Mr. Gentry set a world speed record for his class by driving Team
Gentry at an average of 157.4 miles an hour in San Diego Bay. In 1989, Mr. Gentry set the trans-Atlantic speed
record of 62 hours 7 minutes. … He took and overcame risks, both in business and in sports. He loved the pulse of
business and the intensity of competition.”)
5
Alfred and Monte Goldman reportedly inherited more than $400 million from their father, Sylvan Goldman, who
invented the shopping cart. In 1971 Alfred and Monte purchased the 7.5-acre Henry Kaiser Estate in the Portlock
area of Hawaii Kai. According to later news reports, the brothers dissipated most of their inheritance and both may
have committed suicide. In the book, the fellow who was driving the speedboat at the time of the accident was a son
of the man who invented the shopping cart, and he had “little to do except sleep with lots of women and put my wife
in a coma,” according to Matt King.
6
In his first email to me, Alexander wrote: “Please let me know if I'm on the right track, it if rings true, if any
additional details might help experts like you think that, well, I consulted an expert! I can take it all like a man.”
7
We also discussed advanced directives, but that topic is not relevant to this essay. With Russell Ota’s permission,
here’s a fun story about the advanced directive document that he prepared for use in the movie: “[O]ne of my
partners … knew the person in charge of props and gave them my name. The document I prepared for the movie
was rejected twice. The first time it was because ‘it didn’t look like a legal document.’ I added a blue back and
changed the font to look like an old style will. The second time it wasn’t notarized (hello, Elizabeth Thorson King is
not a real person!)…. The third time was the charm, and I put my name and address on the blue back. .... My
parents were quite impressed.”
8
I was not the only trust lawyer or professor to enjoy the movie. I hear nothing but praise from trust colleagues
around the state and nation, and the legal authorities and publications that publically reviewed the movie declared it
a winner. See, e.g., “Film for Trust Buffs,” THE TRUST ADVISOR, Jan. 16, 2012 (“Our favorite film of the season …
a depiction of what the trust industry is all about … a MUST see for anyone in the trust world.”); Deborah L.
Jacobs, “George Clooney Makes Estate Planning Sexy,” FORBES, Feb. 23, 2012 (“[T]he legal issues were
painstakingly developed and fact-checked.”); Joseph S. Karp, “The Descendants Shows Challenges for Trustees,”
LEXISNEXIS ESTATE PRACTICE & ELDER LAW COMMUNITY, Nov. 29, 2011 (“The film … masterfully portrays how
difficult it can be to satisfy all family members when an estate planning pie must be divided and distributed. The
situation depicted in the film is spot-on realistic.”); “Hollywood and the Rule Against Perpetuities,” TORONTO
ESTATE LAW BLOG, Nov. 28, 2011 (“The Descendants … is a great movie from the perspective of an estates and
trusts lawyer); Leonard Link, “The Rule Against Perpetuities Provokes a Family Crisis,” NEW YORK LAW SCHOOL
PROFESSORS BLOG, Jan. 2012 (“my reaction as a law professor [is that] the whole thing is well put together”);
Jeffrey A. Cramer, “Movies About Estate Planning,” CRAMER LAW CENTER, Apr. 10, 2012 (The movie “deals with
the estate planning issues accurately, while entertaining and enlightening the viewer”).
2
Although the details of that law are legendary among law students as being virtually
indecipherable, its purpose is simply to limit how long the will of a dead person can be imposed
on people still alive. The maximum time allowed by the rule usually works out to about 100
years. 9
The Story
In the movie, Matt King is the sole trustee—and one of about 20 beneficiaries—of a private trust.
The trust’s most valuable holding is 25,000 acres of pristine land on the island of Kauai, acquired
in the 1860s by a Hawaiian princess who married a haole 10 banker. The princess and her
husband eventually put this and other valuable land in a trust for the benefit of their descendants.
Because of the rule against perpetuities, the trust must terminate in another 7 years, according to
the script. And there will be a “train wreck” if Matt simply distributes this undeveloped land to
the beneficiaries when the trust terminates, which alludes to the likelihood that the beneficiaries
would end up in a cumbersome and costly partition lawsuit. To avoid that outcome and because
many of the cousins need money now, Matt decides to sell the land, either to a group out of
Chicago that has offered the most money—a half billion dollars—or to a guy by the name of
Holitzer who grew up on Kauai and whose approach to development would probably be more in
tune with local preferences. 11 Many of the locals on Kauai do not want the land developed by
anyone, 12 but Matt’s duty as trustee is to do what’s best for the trust beneficiaries, whether or not
the local community likes it.
As the trust’s sole trustee the decision is Matt’s to make, but he polls the other beneficiaries
anyway, to see what they view as being in their best interests. A clear majority wants to sell the
land, and they want to sell it to Holitzer. However, just as Matt is about to sign the sales
document he decides not to sell it to anyone; he’s going to keep it in the trust. 13 Matt’s decision
9
The common-law rule generally provides that no private trust can last longer than 21 years beyond the death of the
last beneficiary who was alive at the trust’s formation. Many states have a statutory rule against perpetuities that
sets a maximum time of 90 years. In very recent times, a small but growing number of states have abolished the
rule, so that any trust—private as well as charitable—can be designed to last “forever” (i.e., in perpetuity).
10
Haole,” literally “without breath,” means “foreigner” in Hawaiian. In modern colloquial usage, “haole” refers only
to Caucasians. Although Matt (played by Clooney) and his cousins look Caucasian, because of their Hawaiian
ancestry, they are not haole.
11
In the book, Matt expresses a preference to sell to someone “with a history here,” and considers it a plus that
Holitzer would “lease some land to the conservancy.” The movie includes a comment that the profits from
developing the land would “stay in Hawaii” if the sale is to Holitzer. In the book, Matt says that he’s “wary of
giving New Yorkers (which became the Chicago group in the movie) this much land [in Hawaii] … it just doesn’t
seem right.”
12
They think it would just attract more people and more cars, and that their island paradise would never be the same.
It’s the same sentiment Joni Mitchell sang about in Big Yellow Taxi: “They paved paradise to put up a parking lot.”
Here’s Mitchell’s description as it appeared in Robert Hilburn, “Both Sides, Later,” LOS ANGELES TIMES, Dec. 8,
1996: “I wrote 'Big Yellow Taxi' on my first trip to Hawaii. I took a taxi to the hotel and when I woke up the next
morning, I threw back the curtains and saw these beautiful green mountains in the distance. Then, I looked down
and there was a parking lot as far as the eye could see, and it broke my heart... this blight on paradise. That's when I
sat down and wrote the song.”
13
Those of you who read the book or saw the whole movie know that Matt had a very personal reason not to sell to
Holitzer, but that consideration seems not to have played a conscious role in Matt’s decision not to sell to the land
… at least not in the movie’s version of the story.
3
not to sell reflects a new-found conviction that he and his cousins should approach this more like
native Hawaiians and less like haole; and that their ancestors who established the trust would
want them to preserve this “piece of paradise.” 14 Because at least some of the cousins need
money and don’t share Matt’s newly discovered sense of Hawaiianness, a lawsuit is quite
possible.
A Question
After watching a movie, my wife will sometimes ask, “How do you think the story will end?”
The first few times she did this, I explained that the story in a movie isn’t real, or at least isn’t
supposed to be real—those are called documentaries. There is no “rest of the story.”
I quickly learned, however, that that was the wrong answer. I also learned that it can be fun to
talk about how a movie’s story will eventually end. In that spirit, at the end of my talk I’ll ask
what you think will happen to Matt and his cousins and the land. But first, I’ll share several real
stories from Hawaii that may give you some ideas, and then describe several relevant principles
of trust law.
Real Stories Echoed by the Movie
The most obvious echoes of real stories in this movie begin with the description of Matt’s
ancestors—a haole banker and a Hawaiian princess descended from Kamehameha the Great.
That describes Charles Reed Bishop and Princess Pauahi. 15 And like the banker and princess in
the movie, Charles and Pauahi transferred breathtakingly beautiful land into trust. 16 But Charles
and Pauahi left no descendants, and they established charitable rather than private trusts. That’s
why the rule against perpetuities never applied to the trusts they created. 17
The Bishop Estate
Pauahi’s trust currently operates under the trade name of Kamehameha Schools but is still widely
known as the Bishop Estate. 18 Charles’ trust, once known as The Bernice P. Bishop Museum
14
In the book, Matt says that princess “wanted the land used to fund a school for children of Hawaiian descent,” but
the movie suggests that neither she nor her husband left clear instructions regarding the trust’s purpose, other than to
benefit their descendants. Also in the book, Matt says, “Why let some haole swoop it up?” and “I want all this land
to go to a good home … but [I] don’t like our decision [and] neither would my father.”
15
In the book, the princess originally wanted to set up a school for native Hawaiian children, which is what Pauahi
actually did. The book does not explain why the princess left her property to her descendants instead; and the movie
mentioned nothing about the princess ever wanting to do anything other than what she did with her wealth.
16
There is an even more direct connection in the book, where Matt says that the princess “wanted the land used to
fund a school for children of Hawaiian descent,” which is the mission actually being pursued by Pauahi’s trustees.
The movie, however, makes no mention of any such plan or possibility.
17
The rule against perpetuities has never applied to charitable trusts; such trusts are legally allowed to operate “in
perpetuity.”
18
See generally, King and Roth, Broken Trust: Greed, Mismanagement & Political Manipulation at America’s
Largest Charitable Trust, University of Hawaii Press (2006). When judge King and I wrote the Broken Trust essay,
the Bishop Estate was mismanaged and in serious danger of losing its tax exempt status. Since then, however, the
Estate has reorganized itself and significantly expanded its education mission.
4
Trust, no longer exists—not because of the rule against perpetuities, but because in 1975 its
trustees converted that trust into a nonprofit entity called Bishop Museum Corporation. 19
There are potentially important similarities between the Bishop Estate trustees and Matt in the
movie. Like Matt, those trustees feel responsible to protect the aina 20 and to preserve Native
Hawaiian culture. 21 Part of Matt’s problem is that the governing document for his trust fails to
include land stewardship or cultural preservation as a trust purpose. 22 But that is also true with
respect to Pauahi’s will. 23
The Waterhouse Estate
An article in Alexander Payne’s hometown newspaper, the Omaha World-Herald, 24 traced the
history of the land shown in the movie—now known as Kipu Kai 25—to the Waterhouse Estate.
19
This is different than simply transferring trust property to an entity in exchange for ownership interests in the
entity. When trustees do that, the trust continues to exist with the trustees owning the entity that owns what used to
be trust property. The trustees of Charles’ trust got permission from the probate court to terminate his trust by
transferring all trust property to a new nonprofit corporation that had no shareholders. So instead of managing trust
property as trustees, the now-former trustees carried on as directors of the new corporation. As such, they continued
to owe fiduciary duties and are still subject oversight by the state Attorney General, but as directors they have
considerably more latitude than they did as trustees in reshaping the organization’s management and mission.
20
Aina generally refers to Hawaiian ancestral lands. Aloha aina—to nurture and care for the land—is at the core of
the Hawaiian culture and spiritual beliefs.
21
The following appeared on Kamehameha Schools Endowment Group’s webpage on March 14, 2005: “LAND
STEWARDSHIP AND ECO-CULTURAL EDUCATION. In additions to its core and non-core real estate assets,
the Endowment Group manages 360,000 acres of Hawai'i land zoned for agriculture and conservation. The land
includes 63 miles of ocean frontage, 100 miles of streams, historic fishponds, forests and lava fields. These lands
and resources are deeply tied to the Hawaiian culture and define KS as an ali'i trust. Consequently, they are managed
separately from KS' freely traded investment portfolio.”
22
In both the book and the movie, Matt studies old documents and letters, trying to figure out what his ancestors had
in mind. Was the whole idea of the trust to enrich their descendants, or did they have something more noble in
mind? As he puts it in the book, it’s difficult “imagining what two people I’ve never met would want.” The movie
makes clear that neither the princess nor her husband left explicit instructions regarding trust purpose. In the book
Matt says, “we’ve turned our backs on our legacy,” “Why let some haole swoop it up?” and “I want all this land to
go to a good home … but [I] don’t like our decision [and] neither would my father.”
23
See King and Roth, Broken Trust, at p. 297 (Bishop Estate trustees hold 360,000 acres of non-income-producing
land as “program assets,” to be held in perpetuity “for educational purposes”); see also the relevant will provisions,
Id. at pp. 301-303.
24
Bob Fischbach, “‘Descendants’ beachfront property is real,” OMAHA WORLD-HERALD, Feb. 25, 2012 (“That
pristine Hawaiian beachfront property in Alexander Payne's ‘The Descendants,’ the land George Clooney's character
ponders selling, isn't just the stuff movies are made of.”).
25
Kipu Kai is a 3,000 acre cattle ranch in a rare coastal valley on the southeast end of Kauai. It has been used in the
filming not only of The Descendants, but also Raiders of the Lost Ark, The Lost World (a sequel to Jurassic Park),
Outbreak, Mighty Joe Young, and Six Days/Seven Nights. John T. “Jack” Waterhouse deeded the property to the
state, subject to a life estate for his nieces and nephews. It is currently managed by the Waterhouse Estate, which is
a trust established by Waterhouse for his nieces and nephews. At the time of the gift, Waterhouse expressed hopes
that Kipu Kai would be used as a nature, animal, and wildlife preserve. Roughly half the land is classified as
conservation land, the other half as agricultural use. Kipu Kai is not accessible to the public by land. The single lane
road that leads over the high ridges of the Ha'upu Range is private property and blocked by several gates. The only
uninvited guests are those that come by boat or kayak. The tour operations are confined only to one of its four
beaches, and only up to the high-water mark.
5
Kipu Kai was once owned by a Hawaiian princess who, like Matt King’s ancestor, was one of
the last descendants of Kamehameha the Great, and who married not one but two haole. 26
Princess Ruth Ke‘elikolani’s will said that Kipu Kai was to pass to her sister, Princess Pauahi,
but Ruth sold the land to William Hyde Rice before she died. 27 One of Rice’s descendants, Jack
Waterhouse, 28 placed Kipu Kai into a trust—known locally as the Waterhouse Estate—for the
benefit of his nieces and nephews, but when the last of them dies, Kipu Kai will be owned by the
State of Hawaii. 29 If one assumes that the State will preserve it in a culturally responsible way,
then maybe Matt King would view that as a happy ending.
I’m not so sure of that assumption. Picturing Kipu Kai in the hands of a government agency
brings to my mind litigation in the late 1980s regarding Kapiolani Park. In that litigation, the
City Park Department wanted to lease a small portion of that magnificent park to a Burger King
restaurant. Although that clearly violated the terms of the controlling trust document, the state
attorney general gave his blessing to the transaction anyway. Fortunately (if you like preserving
undeveloped land for public use more than you like eating at Burger King), a group called the
Kapiolani Park Preservation Society managed to get standing to sue, and did so successfully. 30
More recently, Governor Abercrombie has been pushing hard for “public-private partnerships,”
to develop state-owned properties. Environmental groups have expressed outrage, but the news
coverage has generally been supportive. 31
The Damon Estate
26
See, e.g., Michael Tsai, “The princess diaries,” HONOLULU ADVERTISER, June 7, 2004.
The author of the article asked a member of the Rice family if the movie rang true. His response was, “I didn’t
find a single false detail.”
28
Waterhouse descended from missionaries who came to Hawaii in the 1830s, and from William Alexander, who
co-founded Alexander & Baldwin (A&B) in 1870. A& B is one of the “Big 5” companies that dominated sugar and
pineapple in Hawaii until the latter part of the twentieth century. A&B currently owns over 88,000 acres of land in
Hawaii, primarily on the islands of Kauai and Maui.
29
See, e.g., Jan TenBruggencate, “Kipu Kai gets power from nature,” HONOLULU ADVERTISER, April 23, 2002.
30
Kapiolani Park Preservation Society v. City and County of Honolulu, 69 HAW. 569 (1988)(Trust was established
in 1896 by “(1) the Kapiolani Park Association, which held a little over nine acres of land in fee, and a larger area on
lease from the Republic; William G. Irwin, who owned certain fee premises in the area, and (3) the Republic of
Hawaii” …the agreement was that “(a) Irwin would convey certain of his fee lands, which were leased to the Park
Association for park use, to the Republic, to be used permanently as a free public park, in exchange for certain other
lands owned by the Republic, (b) the Park Association would turn over its leased and fee lands to the Republic, for
the same use, and (c) the Republic, in turn, would deed the lands received from Irwin and the Park Association, and
certain Crown lands then under lease, to six individuals as the Kapiolani Park Association … for the maintenance of
a free public park, [but that] “the said Commission shall not have authority to lease or sell the land comprising the
said park or any part thereof.”)(The City argued that the transaction with Burger King was a permitted license rather
than a prohibited lease. To that, Justice Padgett quoted Shakespeare, “What’s in a name? That which we call a rose
by any other name would smell as sweet.”).
31
See, e.g., “Our View: Making most of state lands seems doable,” HONOLULU STAR-ADVERTISER, Jan. 27, 2013
(“Gov. Neil Abercrombie has chalked a middle path in land utilization that deserves serious exploration …. It lies
between the status quo of undercapitalized state resources and the controversial Public Land Development Corp
[that he previously championed] which drew heated criticism from those concerned that the public would not have a
say in its projects. … Especially in the parks arena, public-private partnerships are gaining favor in other states …
weaning state parks there off the public purse.”).
27
6
A Hawaii Reporter news story compared the movie to the circumstances of a different local trust,
the Damon Estate. 32 The article pointed out that Samuel Damon had been a banker, just like
Edward King in the movie, and that although Damon never married a Hawaiian princess, much
of his fortune had been given to him by Princess Pauahi. 33 The article also highlighted that the
Damon Estate had bumped up against the rule against perpetuities a few years earlier. Unlike
Matt King’s decision in the movie, however, the Damon trustees sold all the trust’s land and
distributed cash to the beneficiaries. Perhaps the decision to sell rather than distribute the trust’s
billion-dollar estate was influenced by the fact that Damon beneficiaries had sued or threatened
to sue the Damon trustees many times during the trust’s existence. One high-profile lawsuit
answered the question of when the trust had to end; another defined “per stirpes,” as used in
Damon’s will. 34
It is conceivable that Damon trustees—like Matt in the movie—wanted to ensure that culturally
sensitive land would never be developed. In March 2007 they sold the 3,716-acre Moanalua
Valley to the Trust for Public Land for $5.5 million. The buyer then transferred that
breathtakingly beautiful property to the State Division of Forestry & Wildlife, to add to its Forest
Reserve system. 35
The Knudsen Estate
Some years ago, one of the two large Knudsen trusts 36 on Kauai also had to terminate because of
the rule against perpetuities. At the time, it owned a great deal of valuable real estate, significant
amounts of which were undeveloped. The lawyering was intricate, but when the dust cleared the
various beneficiaries reportedly owned separate parcels of land (as opposed to being co-owners
of a larger tract). 37
32
Jim Dooley, “Real Life Version of ‘The Descendants’ Now Playing in Court,” HAWAII REPORTER, Dec. 12, 2011
(the news hook for the article involved a complaint by two of the Damon beneficiaries that the trustees had not
provide sufficient information about the dissolution; they specifically wanted to know how much had been paid to
Goldman Sachs; one of the complainants was the brother of a Damon trustee, the other was that trustee’s ex-wife)
33
See King and Roth, Broken Trust, at p. 34 (“in a codicil to her will, Pauahi gave Damon the ahupuaa (district) of
Moanalua”).
34
[*Cite cases]
35
According to Lea Hong at the Trust for Public Land: “The [transactions] ended an over 30-year community
struggle over the land, once slated for a freeway development. The culturally sensitive and native-species rich
valley has served as a refuge over the millennia. With nine miles of meandering streams, well-used hiking trails,
historic stone bridges, and 14 endangered plant and animal species, the valley continues to serve as an outdoor
classroom for children and others. The valley is an important watershed area for Honolulu, and serves as one of the
few natural open spaces within minutes of urban Honolulu.” The valley had an appraised value of $5,570,000. TPL
negotiated a purchase price of $5.5 million …. The State of Hawai‘i appropriated $3 million, and obtained a grant
of $1.6 million from the U.S. Fish & Wildlife Recovery Land Acquisition Program. The Trust for Public Land
secured $900,000 through the U.S. Army buffer program.”
36
The two Knudsen Trusts were established by Eric and Augustus Knudsen with land that their father, Val Knudsen,
had given them. When the trust set up by Augustus terminated, he left no living descendants, so the remainder
interest in that trust passed to heirs of Augustus’ father. Each family group received 100% ownership of certain
parcels. Properties subject to long-term leases, however, were put into entities and then shares in those entities were
distributed to all the family groups. Eric’s trust will terminate 20 years after the death of his last surviving child.
37
[*Cite something; if not a newspaper story, perhaps the probate file]
7
The Campbell Estate
A 2011 Wall Street Journal article about The Descendants movie 38 marveled at the number of
“echoes” in the movie from actual people and events in Hawaii, and suggested that the strongest
echo came from yet another local trust—the Campbell Estate. 39 In anticipation of that trust’s
mandatory termination in 2007, the Campbell trustees—rather than liquidate all trust property
and distribute cash like the Damon trustees had done, or distribute parcels of land like the
Knudsen trustee did—dropped most of its undeveloped land into an LLC and distributed
interests in the LLC to beneficiaries when the trust dissolved. It did, however, sell the
spectacular Honouliuli Forest Preserve to the Trust for Public Land for just over $4 million. 40
The Castle Estate
The Campbell trustees’ strategy of operating as an LLC beyond the trust’s mandatory
termination date might have itself echoed steps taken in the 1980s by the trustees of the Harold
and Alice Castle trusts. 41 Those trustees dropped trust assets, including the trust’s undeveloped
land, into a group of LLCs with Kaneohe Ranch LLC as the common parent. 42 Because of the
rule against perpetuities, the last of the Castle trusts will eventually have to end, but there’s no
legal reason why Kaneohe Ranch and its baby LLCs cannot go on forever. There also is a
related Harold Castle charitable foundation that is expected to continue in perpetuity. 43
The Galbraith Estate
A more recent Wall Street Journal article 44 compared the movie to yet another private trust that
was forced to dissolve—this time it was the Galbraith Estate. 45 The Journal suggested that the
Galbraith trustee’s sale of 1,732 acres of undeveloped land 46 near Wahiawa was the kind of deal
the movie’s Matt King would have loved. It was negotiated by the Trust for Public Land on
38
Julia Flynn Siler, “The Descendants Aims to Lay Down the Law in Hawaii,” THE WALL STREET JOURNAL, Nov.
26, 2011.
39
See Appendix B for information about James Campbell and the Campbell Estate.
40
More precisely, the Campbell trustees sold a much bigger tract to the Gill/Olson Joint Venture, which then sold
the preserve to the Trust for Public Land, which then transferred the land to the State Forest Reserve system.
41
For a brief history of Harold K.L. Castle and description of Kaneohe Ranch, see
http://www.kaneoheranch.com/history/harold-castle.cfm.
42
Kaneohe Ranch is now owned by the Castle family directly and through a variety of trusts. The Harold and Alice
Castle trust still owns only Kapaa Quarry. Trustees of that trust distributed LLC units and other assets to trust
beneficiaries and some of them placed their interests in new trusts.
43
Regarding the Harold K.L. Castle Foundation see http://www.castlefoundation.org/.
44
Jim Carlton, “Heirs Preserve Hawaiian Tract,” THE WALL STREET JOURNAL, Nov. 18, 2012 (“The trustee for
hundreds of heirs to a large land tract here on Oahu island has agreed to sell their inheritance to the state for
preservation as farmland, reversing a decades-long trend of most such open land being developed. … The episode
recalls "The Descendants," a 2011 movie starring George Clooney as a trustee in a similar predicament—whether to
sell a huge parcel of Hawaii land for development.”).
45
See Appendix B for information about George Galbraith and the Galbraith Estate.
46
The land is classified for agriculture use and developers reportedly were uncertain of their ability to get it
reclassified to urban use.
8
behalf of the City, State, U.S. Army, and Office of Hawaiian Affairs. 47 Not all of the 600
Galbraith beneficiaries were happy with the sale or sales price, but the Journal portrayed the
transaction as having a win-win-win outcome: cultural sites preserved, agricultural use
facilitated, and beneficiaries receiving full value for their interests in the trust. 48
Grove Farm Company, Inc.
Forbes magazine saw a connection between the movie and a controversy on Kauai that pitted
cousins against cousins following their indirect transfer of tens of thousands of pristine land
owned by Grove Farm. 49 The new owner of Grove Farm is someone who, like Holitzer in the
movie, has family roots in Kauai and made a fortune in the high-tech world: Steve Case. 50
As further evidence of a likely connection, the article pointed out that Kaui Hemmings is herself
related to George Norton Wilcox, the man who founded Grove Farm and in 1933 willed all his
Grove Farm stock to his nieces and nephews in equal shares. Because they received the stock
outright rather than in trust, the rule against perpetuities had nothing to do with their later
“forced” sale of the company. Simply put, the company found itself over-leveraged at a time
when the bottom had fallen out of the Kauai real estate market. 51 Virtually all the cousins
eventually agreed to the sale, but many did so with great reluctance at the time and subsequently
had second thoughts: when market conditions improved a few years after the sale, they filed
lawsuits in federal and state courts. 52 One of the many allegations was that the legal
representation of Steve Case by his father at the same time that his father’s law firm was
representing Grove Farm was unethical and illegal. 53 The plaintiffs acknowledged that both
clients had consented to the arrangement, but argued in court that it had been the kind of conflict
of interest that isn’t consentable. The courts did not agree. 54
Interestingly, the sale to Steve Case took place only after a proposed sale to a different buyer
garnered only 60% approval, which was short of the 75% required by the Grove Farm bylaws.
47
The Trust for Public Land assembled the $25 million purchase price from a variety of sources, including $13
million from a Hawaii state bond; $4.5 million from the U.S. Army; $4 million from the City and County of
Honolulu; $3 million from the Office of Hawaiian Affairs; and $500,000 from D.R. Horton-Schuler Division. The
U.S. Army money came from the Pentagon's Readiness and Environmental Protection Initiative (REPI), which
protects land around military bases.
48
Some of the 600 beneficiaries have privately expressed disappointment in the sales price and few say they wanted
land in lieu of money, but the beneficiary quoted in the Journal article praised the deal as having served the interests
of both the public and the beneficiaries.
49
Deborah L. Jacobs, “George Clooney Makes Estate Planning Sexy,” FORBES, Feb. 23, 2012; Stewart Yerton,
“Litigation that divides family stems from sale clouded in suspicions, HONOLULU STAR-BULLETIN, Apr. 23, 2006
(part 1 of 2-part series—Grove Farm: A House Divided), and “Suitors bring relief, and strife, to cash-poor kamaaina
company,” HONOLULU STAR-BULLETIN, Apr. 24 (part 2 of 2-part series—Grove Farm: A House Divided).
50
Steve had been CEO of AOL and Time Warner, and was on Forbes’ list of billionaires.
51
The Company had constructed roads, sewer treatment plant and other utilities for a major residential development
when Hurricane Iniki hit with devastating force and left much of the island in shambles. In the book, Matt King
initially blames the trust’s weak financial performance on “the hurricane.”
52
See e.g., Jan TenBruggencate, “Grove Farm sale challenged,” HONOLULU ADVERTISER, Dec. 12, 2005.
53
See e.g., Stewart Yerton, “Shareholders claim Steve Case had insider information that helped him buy the
company,” HONOLULU STAR-BULLETIN, Dec. 3, 2005.
54
[*Cite state and federal cases]
9
The buyer in the failed deal happened to be the son-in-law of Grove Farm’s CEO. In the book
version of The Descendants, the lawyer for the King family’s trust is the father-in-law of
Holitzer’s CFO.
Asked by Forbes if the book is based on what happened at Grove Farm, Kaui dodged … but not
completely. She said that she had been away at school when Grove Farm was sold, but that she
remembers family members talking about it, and that her step-grandfather—federal Judge Martin
Pence—had openly opposed the sale. But then Kaui told the reporter that estate planning isn’t
her subject, that instead it was the world of her parents and grandparents. Then she added, “I’m
just writing about all my elders.” 55
Kaui hasn’t said whether there will be a sequel, but if Steve Case is on the list of echoes in her
first book, perhaps she should raise the financial stakes the next time. Steve’s reported net worth
of $1.7 billion is small potatoes compared to Pierre Omidyar, 56 the Ebay founder who reportedly
is planning a controversial resort development on Kauai near Hanalei, and Larry Ellison, 57 the
Oracle founder who is planning to do heaven-only-knows-what to the island of Lanai. 58
The Lucas Estate
Scriptwriters for a sequel might also want to consider the Lucas Estate, which, like the trust in
the movie, owns thousands of acres of breathtakingly beautiful land on the island of Kauai. 59
Things got interesting from a legal standpoint when one of the two trustees decided a few years
ago that he wanted to buy a majestic tract of undeveloped Lucas Estate land for his personal
account. 60 Rather than seek instructions from the probate court as a Hawaii statute requires a
trustee to do when there is a conflict of interests, the Lucas trustees got the consent of all the
beneficiaries. But then, when the real estate market on Kauai improved, some of the
beneficiaries had second thoughts—and sued the trustees. This self-dealing controversy was
settled out of court, but not before costing the trust more than $5 million in legal fees. The
55
Movie critic Roger Ebert speculated that the book might be autobiographical in another way. He said he
suspected that there must be a lot of her in Alexandra and Scottie.
56
Omidyar reportedly has a net worth of $8.2 billion.
57
Ellison reportedly has a net worth of $41 billion.
58
Residents of Lanai have expressed optimism about the impact Ellison will have on them and their community.
See, e.g., Andrew Gomes, “Big plans for Lanai,” HONOLULU STAR-ADVERTISER, Jan. 26, 2012 (“Overall the
community is I think excited and optimistic about the potential,” said Butch Gima, … president of Lanaians for
Sensible Growth. “There are really no red flags at this point.”)(Maui Mayor Arakawa, as quoted in the article: “I see
Ellison as trying to find all the things that can enhance Lanai. I don't think it has to be his way or the highway.”).
59
See Malia Zimmerman, “Family in Center of Kauai’s Ka Loko Dam Breach Faces Extensive Legal Battles,”
HAWAII REPORTER, May 5, 2006 (In 1862, the “favorite wife” of Kamehameha the Great, Kaahumanu, informally
adopted a Native Hawaiian infant, Mary Nauepu, who eventually married Charles Lucas; when Mary Lucas died in
1965 at the age of 103, she left 4,000 acres of land to her descendants … in a trust that many people call the Lucas
Estate; that trust currently owns about 1,000 acres on Kauai, most of it near the Ka Loko Reservoir, which burst on
March 14, 2006, killing seven people); “Son sues father, uncle in fight over Lucas Estate,” Pacific Business News,
Mar. 19, 2007 (this story is mostly about the Charlotte Cassiday Trust but involves land in Hawaii Loa Ridge, Niu
Valley, and Niu Beach, that Charlotte received from her mother Mary Lucas, who had received it from her
grandfather sea captain, Alexander Adams, who had received it from Kamehameha I).
60
The five tracts of undeveloped land ranged from 21 to 1,073 acres and totaled 2,035 acres. Id. See also Tom
Finnegan, “Pflueger drives wide emotions on Kauai,” HONOLULU STAR-BULLETIN, March 26, 2006.
10
trustees then sued their lawyers, arguing that they had relied on flawed legal advice, as evidenced
by the costly settlement of the beneficiary’s lawsuit. The malpractice claim was settled
confidentially minutes before a jury returned with a verdict in excess of $4 million.
Inconvenient Facts and Relevant Legal Principles
Keep in mind that the land in the movie is currently worth half a billion dollars. 61 That fact
could put it beyond the reach of an organization like the Trust for Public Land, Nature
Conservancy, or Office of Hawaiian Affairs to buy it.
Also keep in mind that distribution of the land to the cousins—now or in seven years—could be
problematic whether beneficiaries receive undivided interests in the entire property or full
ownership of carved-out portions of the property. If Matt distributes undivided interests in the
whole, any one co-owner could veto the idea of any other co-owner, no matter how many of the
co-owners liked it. The cousins would almost certainly end up in a costly and highly inefficient
partition lawsuit, and the land would end up in the hands of a developer—defeating Matt’s
reason for not selling now. If instead, Matt first carved the tract into separate parcels for
distribution to the cousins, he would probably thereby reduce the total market value significantly
(i.e., breaking a large tract of developable land in Hawaii into relatively small pieces tends to
reduce the land’s total value for development purposes). If the land in the movie were not
developable, it might actually increase total value by breaking it up into smaller parcels—but it is
developable, as evidenced by the $500 million that two different developers were willing to pay.
There would be additional legal and practical issues if Matt wanted to buy the land from the trust
or drop it into a new entity with a goal of preventing its development. A trustee like Matt holds
legal title to the trust property and that gives him the power to sell or not to sell. But that power
is limited by strict fiduciary duties that a trustee owes to the beneficiaries. The first of these
duties is undivided loyalty, which requires that the trustee act only in the best interests of the
beneficiaries. 62 What the trust might personally like to see happen cannot enter into the
equation. In short, if we assume that a sale of the land to the highest bidder is in the best
interests of the beneficiaries, Matt could be duty bound to do exactly that.
It is theoretically possible for a trustee to buy property from the trust, but any form of selfdealing is fraught with peril. Although Matt’s cousins might agree to such a transaction if the
sales price is comparable to what Holitzer or the Chicago group is willing to pay, he would need
to petition the probate court before pursuing such a transaction, as the trustees of the Lucas
61
There is equally beautiful land in Hawaii that has a much, much lower value, because its land classification does
not permit development and/or because of practical problems with any potential development. See, e.g., “Transfer
of land confirms preservation commitment,” THE MAUI NEWS, Jan. 15, 2013 (“The Molokai Land Trust has received
the deed to a 5-mile stretch of remote and environmentally sensitive coastline along the rugged north shore of
Molokai that has endangered ferns, subsistence gathering areas and an extensive tidal pool system, the trust
announced Monday. The 1,719 acres is known as the Mokio Preserve… The gift from Molokai Properties [from
Molokai Ranch] … took more than four years to complete….”).
62
It is Matt’s job as trustee to decide what is and isn’t in the beneficiaries’ best interests, which could conceivably
be different than what they think is in their best interests; but Matt cannot abuse his discretion.
11
Estate learned the hard way, and he would run the risk that one or more of his cousins were later
argue that the information provided by the trustees had been incomplete or misleading.
Matt could drop the land into an entity, such as a corporation or an LLC, but his fiduciary duties
would remain, and the decisionmakers in any such entity would owe their own fiduciary duties.
It’s true that their fiduciary duties are not quite as restrictive as are a trustee’s duties, but the
differences are not great enough to enable Matt to avoid selling the land simply by putting an
entity between the land and the trust.
Another one of Matt’s fiduciary duties generally requires that under-productive assets be made
productive (such as by selling or developing land) and that trust assets be reasonably diversified
(which appears not to be the case in the movie). A governing document can authorize or instruct
a trustee not to make productive and not to diversify trusts holdings, but there is no indication of
any such provision in Matt’s case, according to both the book and the movie.
Anything that Matt might do to reduce land’s market value, such as grant a conservation
easement or seek a more restrictive land classification or zoning status, 63 would clearly be a
breach of his duty of loyalty—unless, perhaps, that furthered an important trust purpose.
Matt could perhaps do what he wants to do by establishing to the court’s satisfaction an original
trust purpose of holding this land in perpetuity for the public’s benefit, rather than selling or
distributing it to private beneficiaries at the end of the rule against perpetuities period. 64 Matt
has been unable to find any such documents thus far, 65 but he has another seven years to look.
More realistically, courts sometimes interpret original intent liberally. 66
The End of the Story
Now that you’ve heard some stories of real trusts in Hawaii and a brief summary of applicable
legal principles, I’ll end my prepared remarks with the question Susie always asks me: “How do
you think the story will end? 67
63
Similarly, a trustee cannot simply convert a private trust to a charitable trust.
This is essentially what will happen to Kipu Kai when the Waterhouse Estate finally terminates. See page
discussion infra, at p. 6.
65
In the book, Matt says, “I look at everything. I even try to decipher documents and letters from 1920, imagining
what two people I’ve never met would want. The princess, the last in the royal lineage. My great-grandfather [great
great grandfather in the movie], that frisky white boy.”
66
See Queen’s Hospital v. Hite, 38 HAW. 494 (1950), where the Hawaii Supreme Court essentially read the word
“may” as meaning “must” in order to achieve what the court perceived to be Queen Emma Kaleleonalani’s intent the
trust she established for both private and charitable purposes. Consider, too, that the Bishop Estate trustees continue
to operate somewhat like a Nature Conservancy without language in the governing instrument instructing or
authorizing that. The land in question includes 63 miles of ocean frontage, 100 miles of streams, historic fishponds,
forests and lava fields. According to the trustees, “These lands and resources are deeply tied to the Hawaiian culture
and define KS as an ali'i trust.”
67
In the book, Matt tells his cousins, “I’ve decided that you won’t be receiving any money, but we’ll all get to keep
something, and we’ll get to pass it on.” So he evidently thinks there’s a way to maintain the status quo, in one form
or another, despite the rule against perpetuities.
64
12
******
Appendix A – Selected Differences between Book and Movie
According to the book and movie, Matt King is a frugal man 68 in midlife ennui suddenly faced
with personal tragedy: his thrill-seeking wife is on life support because of a speedboat-racing
accident. Standing next to her in the hospital, Matt promises to be a better father and moreattentive husband, if only she will recover. He soon discovers, however, that she was having an
affair with a realtor by the name of Brian Speers. Eventually, Matt’s wife dies, but not before he
manages to become a better father and husband … and stick it to Brian Speers. 69 So much for
that side of the story. Here’s “the good stuff” with some of the ways in which the book and
movie differ:
Matt is the great, great grandson of Princess Kealohilani, 70 who was one of the last direct
descendants of King Kamehameha. 71 Kealohilani had been slated to marry her own cousin, 72 but
that didn’t happen; instead, she married a haole banker named Edward King. 73 Kealohilani and
Edward eventually gave their considerable wealth to their descendants, in trust for as long as the
law would allow. 74
Matt King is currently the trust’s largest beneficial-interest holder and its sole trustee, 75 and the
trust is scheduled to terminate in 7 more years because of the rule against perpetuities. 76 Matt
wants to distribute cash rather than undivided interests in land when the trust terminates to avoid
what he describes as a “train wreck.” 77 So he’s negotiating the sale of the trust’s crown jewel,
25,000 acres of breathtakingly beautiful land on Kauai. 78 There are two competing bids: one for
68
In the movie he eats his lunch out of Tupperware at his desk and says he wants to leave his own kids enough that
they think they can do anything but not so much that they think they can do nothing.” In the book he says, “I don’t
like legacies. I think everyone should start from scratch.”
69
According to movie critic Roger Ebert, “An undercurrent, which Payne wisely keeps subtle, is that perhaps Matt
lost touch with his wife and daughters after first losing his special bond to the land. … The film follows Matt's legal,
family and emotional troubles in careful detail, until Payne shows us, without forcing it, that they are all coiled
together. A solution for one must be a solution for all. This is so much more complex than most movie plots, where
good and evil are neatly compartmented and can be sorted out at the end.
70
Kekipi is the princess’s name in the book. Kealohilani was the name of one of the Queen’s Waikiki homes, and it
is now the name of one of the towers of the Waikiki Beach Marriott Resort, which sits on the same site.
71
The princess was the very last Kamehameha descendant in the book.
72
She was to marry her brother in the book.
73
In the book, Edward was her estate planner and they had a scandalous affair before marrying.
74
In the book, the trust was formed in 1920. Neither the book nor the movie indicates which of Matt’s ancestors—
Kealohilani or Edward—established the trust.
75
In the book, instead of being the trustee, Matt’s vote simply counts more than anyone else’s, because he has a 1/8th
interest and all the others have 1/24th interests.
76
The book does not mention the rule against perpetuities.
77
When a large number of individuals all own undivided interests in a single tract of undeveloped land, it is likely to
end up in a costly court process generally called a partition action.
78
In the book, the push to sell the land comes from the cousins’ need for money; some of them are broke and the
rest want to cash in on their inheritances. That’s only part of the equation in the movie. Clooney frames the
situation early when he says he’s being pushed by the rule against perpetuities, and later when he says that he
doesn’t want to distribute the land to the beneficiaries when the trust terminates.
13
half a billion dollars 79 from a group out of Chicago; 80 the other slightly lower one is from Don
Holitzer, a high-tech billionaire who is originally from Kauai. Both of the potential buyers want
to develop the property, but Matt and most of his cousins think Holitzer would be slightly more
sensitive to the local community than would the Chicago group. 81 An interesting twist from the
book that didn’t make it to the movie screen: the trust’s lawyer was encouraging Matt to sell to
Holitzer—which troubled some of Matt’s cousins partly because they wanted the sale to generate
as much cash as possible, but mostly because the trust lawyer’s son-in-law was Holitzer’s chief
financial officer—an apparent conflict on interests.
Throughout the movie, Matt has the nagging feeling that he and his cousins do not deserve the
financial riches that the land sale would produce; that the land was entrusted to their care; 82 that
these descendants should view the land more as a responsibility than a windfall. 83 As best we
can tell, Matt’s cousins do not share Matt’s feelings about the land, at least not to the extent that
he does. Near the movie’s end, all the cousins gather on Kauai to vote their preference, and the
clear majority wants to sell the land to Holitzer. 84 Matt is supposed to sign the papers on the
spot, and he’s poised to do so when suddenly he decides not to sell. He says this remaining piece
of paradise was entrusted to him and his cousins to protect and that it would be wrong to sell it to
any developer; 85 that he has 7 years to figure things out. 86 When one of the cousins threatens to
sue, Matt defiantly says, “That will just make us closer.”
******
79
No dollar amount is provided in the book.
This higher bidder in the book is a publically traded company out of New York.
81
In the movie, Matt says that the money “would come from Hawaii and stay in Hawaii.” In the book, Matt initially
leans toward selling to the local guy, not just because Holitzer “has a history here,” but also because Matt is wary of
“giving New Yorkers this much land … it just doesn’t seem right.” Also in the book, Matt considers it a plus that
Holitzer would “lease some land to the conservancy.”
82
In the book Matt says, “I belong to one of those Hawaiian families who make money off of luck and dead
people,” and “we’ve turned our backs on our legacy.” He also says, “Why let some haole swoop it up?” and “I want
all this land to go to a good home … but [I] don’t like our decision [and] neither would my father.”
83
In both the book and the movie, Matt studies old documents and letters, trying to figure out what Edward and
Kealohilani/Kekipi had in mind as the trust neared its mandatory termination date. Was the whole idea to enrich
their descendants, or did they have something more noble in mind? As he puts it in the book, it’s difficult
“imagining what two people I’ve never met would want.” Also in the book, Matt says that the princess “wanted the
land used to fund a school for children of Hawaiian descent.” The movie makes clear that neither the princess nor
her husband left explicit instructions regarding trust purpose.
84
In the book, Matt is worried about getting sued by one or more of the cousins if he doesn’t sell to the highest
bidder. In the movie, he seems to think it would be legally safe for him to sell to Holitzer because most of the
cousins want him to do that. In both the book and the movie, Matt fully understands that he might get sued for not
accepting either of the two offers.
85
In both the book and movie he says, “I don’t want it to go to Brian Speers” (obviously assuming that a sale to
Holitzer would enrich Speers), but in the movie it seems clear that Matt decides not to sell for “the right reasons,”
rather than to get back at Brian Speers.
86
Presumably, he wants to figure out a way to protect the land from development the way Kealohilani and Edward
perhaps would have wanted. In the book, Matt says that the princess (Kekipi) “wanted the land used to fund a
school for children of Hawaiian descent,” but the movie suggests that neither she nor her husband left clear
instructions regarding the trust’s purpose, other than to benefit descendants.
80
14
Appendix B – Overviews of Selected Trusts Mentioned in this Essay
Galbraith Estate: George Galbraith immigrated to Hawaii from Ireland. He died on
November 5, 1904 in Hawaii leaving an estate of land, cash, notes, stocks, and bonds totaling
$260,000. Nearly half that value came from 2,000 acres of ranch land near Wahiawa, 16 miles
from the center of Honolulu. Galbraith left a will and three codicils, all dated January 21, 1904
(apparently the drafter—a notary public who drew up wills on the side—did not want to retype
the entire document each time Galbraith decided to change something in the will that had not yet
been signed), which devised his estate to Hawaiian Trust Company, as trustee of a private trust
that was to pay up to $8,450 each year (later reduced to $7,500 because of deaths with no
alternative takers) 87 in 19 specified shares to 49 annuitants (i.e., some of the annuities were for a
named individual and, e.g., “his seven children”) who would received their annual distributions
“for life, and then to, their heirs … except for the last three [annuitants] who are to receive only
their life annuities and at their death all their interests to cease.” The trust was to continue “as
long a period as is legally possible … the termination or ending of said trust to take place when
the law requires it under the statute;” and then “[o]n the final ending and distribution of the trust,
the trust fund [was] to be divided equally amongst those persons entitled at that time to the
aforementioned annuities.”
As any trust lawyer could have seen—the wills were drafted by a notary public, Robert William
Cathcart—there were glaring problems. For example, the trust was to last until required by “the
statute” to end, yet the law the drafter evidently had in mind—the rule against perpetuities—is
part of the common law, not a statute. Also, exactly what did the word “equally” mean in the
context of the final distribution under this trust? Would that word be interpreted literally, with
each beneficiary taking a equal share regardless of the size of their respective annuity segment;
or would it be interpreted to mean “proportionately,” so that a beneficiary whose annuity
distribution was 100 times greater than another’s annuity distribution would be entitled to a 100times greater share of the final distribution would it be interpreted to mean that one-thirteenth of
the final distribution amount should go to each of the 13 annuity segments, and then divided
among the recipients of each annuity segment equally—oops, there’s that word again—on a per
capita or pro rata basis? Finally, were the annuity interests in the trust freely transferable, as the
will seemed to say, so that they could be transferred by gift, sale, or even inheritance? If so, then
annuitant could theoretically increase “his” share of the final distribution tenfold by giving a
sliver of his annuity interest to each of nine close family members. Perhaps he could even do
this by transferring tiny interests to nine of his own wholly owned corporations!
In Fitchie v. Brown, 18 Haw. 52 (1906), the Hawaii Supreme Court held that the trust was valid
but declined to rule on the following question: “[W]hether the trust fund is to go to the heirs of
the annuitants proportionately, meaning that the representatives of each annuity take the share of
the fund determined by the ratio between the annuity and the aggregate sum of the annuities, or
equally without regard to such ratio.” The Court acknowledged that this question would need to
be answered sooner or later, but it did not consider the question to be “ripe.” In Fitchie v.
87
The Galbraith trustee petitioned the court for instructions as to whether inflation adjustments should be made.
The court confirmed that Mr. Galbraith had intended fixed sums of money, unadjusted for any reason.
15
Brown, 211 U.S. 321 (1908), the U.S. Supreme Court affirmed the ruling, so payment of the
annuities would continue for 21 years beyond the death of the last survivor of the annuitants
named in the will and codicils, and that the remaining corpus and surplus income would then be
distributed in accordance with the terms of the will and codicils, as a court might interpret them
at that time. According to the U.S. Supreme Court, “it is not now necessary to determine to
whom the distribution is to be made when the time for distribution shall arrive.”
In Hawaiian Trust Co. v. Galbraith, 25 Haw. 174 (1919), the Supreme Court of Hawaii held that
persons who succeeded to the interests of the original trust annuitants as the heirs of those
original annuitants acquired so-called “estates of inheritance” in such interests, meaning that
such persons became absolute owners of those interests. The implications were huge: it was
now clear that annuitants could transfer all or part of their respective interests in the trust not
only by inheritance, but also by sale, inter vivos gift, or by devise in a will.
When the last such annuitant (Arthur Cathcart) died on April 26, 1986, the termination date was
set for April 26, 2007. By the time of the trust’s termination in 2007, there were roughly 600
owners of beneficial interests in the trust, and the size of their respective annuity interests varied
dramatically. The annual required distribution to some was more than 100 times greater than the
required distribution to others. The estate on that date had a market value of approximately $91
million, according to the 6,000 page final accounting submitted to the probate court.
The trustee tried to develop the land in the early 1990s. “When the Hawaii Trust Company
[announced] plans to build thousands of homes on 892 acres of land in Wahiawa, probably no
one was more surprised than the owners of the land—the beneficiaries of the George Galbraith
Trust Estate.” 88 This January 1993 commentary in Hawaii Monitor was less-than-precise in
describing beneficiaries as land owners. Actually, the trustee owned legal title and all the
powers that go with it; the beneficiaries had what is sometimes called beneficial or equitable
ownership. A common way of describing it is that they held beneficial interests in the trust. In
any event, the trustee clearly had the power to develop the land, and could properly do so if it
was in the best interests of trust beneficiaries. In fact, depending on a number of variables, a
trustee could conceivably have a duty to develop land, or sell it to a developer, if development is
its highest and best use. According to the news commentary, here’s how a trust officer with the
corporate trustee responded to the reporter’s question about the planned development being news
to the beneficiaries: “We don’t need their approval, nor do we seek it. We don’t have to ask
them. But we do inform them from time to time.” 89
Damon Estate. The Damon Estate was founded in 1924 by the will of Samuel Mills Damon,
who at that time headed the bank currently known as First Hawaiian Bank. In addition to his
bank stock, Damon owned 121,000 acres of land including some that had been given to him by
Princess Pauahi Bishop when she died. Damon’s will—which had no punctuation other than a
single period at the very end of the 10-page document—was very unclear about what he intended
at the trust’s termination; indeed, it’s unclear about when the trust should terminate. In 1994, the
88
Ian Lind, “Proposed development raises trust company questions,” Hawaii Monitor, January 1993, available at
http://www.galbraith.ilind.net/%20monitor-jan93/source/galbraith1__1.htm.
89
Here’s a link to the 2006 Report to Galbraith Annuitants: http://www.galbraith.ilind.net/Annual012706.pdf.
16
State Supreme Court decided that it must terminate at the death of Damon’s last surviving
grandchild who was alive at Damon’s death. There were 20 beneficiaries who received a
distribution when the trust terminated in 2004—all were his great grandchildren or great, great
grandchildren. Some of the cousins took the position that “per stirpes,” as used in Damon’s
highly unconventional will, should be interpreted so that all of the 20 beneficiaries would take an
equal share of the termination distribution. Other cousins argued for interpretations that in each
case maximized the share of the arguing cousin. 90 The probate judge’s ruling—that the assets
should first be split into two shares and then given to the descendants of Damon’s two longdeceased children—eventually was upheld by the State Supreme Court. 91
As part of the termination process, the trustees sold 220 acres of light industrial lands in
Mapunapuna in 2003 for $466 million, and a 25% stake in First Hawaiian Bank to the bank’s
parent, Banc West Corp., for $500 million. Two of the great granddaughters would have taken
$40 million each under the interpretation favored by most of the other cousins; but under the
approach taken by the court, they instead each took $100 million. Those two beneficiaries live in
California and have had little contact with their cousins over the last several decades of the
trust’s existence. One of their cousins told a reporter that he “had not seen or heard from them in
over 15 years.” 92
[Consider adding some stories about beneficiaries suing or threatening to sue the trustees over
alleged breaches—the trustees have been criticized for the way they dealt with, or didn’t deal
with, various conflicts of interest (e.g., they received substantial trustee fees and substantial fees
for serving on the First Hawaiian Bank board of directors while the trust owned 25% of the
bank’s stock).]
Campbell Estate. James Campbell was born in 1826 in Londonderry, Ireland, the eighth
child in what would eventually be 12 kids, the son of a carpenter. He went to sea at age 13, “to
seek his fortune in the New World.” 93 He survived the wreck of a whaling ship and capture by
natives in the Tuamotus. He ingratiated himself by fixing a broken musket owned by the local
chief and then escaped on a passing schooner to Tahiti. Finally arriving in Hawaii in 1850,
Campbell made money as a carpenter, “much in demand for building and repairing boats and
constructing homes.” His first wife, Hannah Barla, died in 1858, without children. Campbell
inherited some properties from Hannah and with savings from his carpentry business he started
investing, first in Pioneer Sugar Company on Maui. It went bankrupt after two years, but
Campbell and his partners bought the assets and this time thrived. He became known by
90
Because the document was so poorly written, there was significant doubt about what Damon actually wanted. As
interpreted by the court, some of Damon’s great grandchildren got nearly three times as much as other great
grandchildren, because there were fewer branches on their side of the family tree. Is that what Damon would have
wanted? The whole idea of interpreting a document is a belief that a person’s intent is important in making sense of
his words. In The Descendants, Matt has a one-eighth interest and each of the other cousins has only a one-twentyfourth interest. Because neither the book nor the movie mentioned any controversy over that, the words of the
governing document were evidently clearer than Damon’s will.
91
See Mary Vorsino, “High court settles Damon Estate distribution,” Honolulu Star-Bulletin, Feb. 17, 2006.
92
Rick Daysog, “Damon heirs to get $500M: Beneficiaries will receive payments representing 70% of the cash
assets,” Honolulu Star-Bulletin, Nov. 28, 2004.
93
James Campbell, Esq., 1826-1900, The Estate of James Campbell, 1978 (Campbell booklet).
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Hawaiians as Imo Ona-Milliona (James the Millionaire) and his interests turned to ranching and
real estate.
In 1896 Campbell was kidnapped in San Francisco by someone claiming to be interested in
buying coffee lands in Hawaii and wanting Campbell to assure the man’s “invalid wife” that the
climate in Hawaii would be good for her health. When they got to the man’s “home,” the bad
guy and another man stole $300 from Campbell and demanded a $20,000 ransom. Campbell—
70 years old at the time—refused to comply. After several days of working him over and
denying him food or drink, the culprits gave up and release Campbell. After a high-profile trial
the kidnapper was sentenced to life in prison.
Campbell said “always living on than he made” was the principle upon which he had
accumulated his wealth. His estate was valued at “over $3 million.” He wrote his will in San
Francisco four years before his death. It set up a trust for his wife, children and other
descendants: “It being my purpose to provide a safe and certain income and maintenance for my
wife, our children and grandchildren, for and during the period of the trust” which was until 20
years after the death of his last surviving daughter. He directed that “the Trustees and their
successors keep intact my estate and administer the same under the name of ‘The Estate of James
Campbell’ … and that the realty thereof shall be particularly and especially preserved intact and
shall be aliened only in the event, and to the extent, that the obvious interest of my estate shall so
demand.” In January of 1902, Abigail married Colonel Sam Parker. In 1952, the trustees got
court approval to enter into long-term leases that could extend beyond the trust’s termination
date. In 1971, the trustees got court approval to acquire properties outside Hawaii (to diversify).
“The Trustees … have been sensitive to the economic and social needs of our state and
community and have responded to these needs to the extent possible within their fiduciary duties
under Mr. Campbell’s Will.” [See the Campbell booklet.]
[The above needs weeding and rewriting. Lots more could be added, particularly regarding
lawsuits and threatened lawsuits by beneficiaries against their trustees and the lawyers who
represented the trustees; also, describe the split between beneficiaries who wanted to maximize
financial value and those that wanted to be good local citizens; and the split between those that
wanted a Hawaiian trustee and leadership more sensitive to Hawaiian issues vs. the camp that
kept hiring haole to run their trust; finally talk about several of the lawsuits over issues such as
trustee selection, and the statute that was basically written just for the Campbell Estate. One
more thing; talk about the role of adoption of a grandchild by the grandmother in moving
members of one branch higher on the family tree and thereby increasing their shares at
termination.]
Around the turn of the twenty-first century, several Campbell Estate beneficiaries complained
publicly that the Campbell trustees were rapidly shifting the focus of trust investment activity to
outside Hawaii. 94 They also were pushing hard to have Associate Justice Robert Klein appointed
to fill the vacant fourth trusteeship, because Klein was more sensitive to local Native Hawaiian
issues than the existing trustees, who were all haole and originally from outside Hawaii. In
94
Ken Kobayashi, “Campbell heirs clash over priorities,” Honolulu Advertiser, May 20, 1999
18
anticipation of the trust’s mandatory termination in just seven years, the Campbell trustees were
spending a great deal of time with the beneficiaries, seeking their input. “Because it will be
easier to get court approval for a proposal that is supported by beneficiaries, the trustees have
been gathering their feedback,” according to the trust’s CEO. “The trustees are faced with the
problem of being fair to everybody,” he added.
The Will of James Campbell provided for three trustees, but in 1971 with the support of most of
the beneficiaries, the court appointed a fourth trustee. But the three sitting trustees wanted not to
fill the vacancy, to save the trust money for the beneficiaries. The lawyer for one of the unhappy
beneficiaries accused the trustees of taking a side and lobbying to keep the number at three. He
said this violated their duty of loyalty to all the beneficiaries. They ad “breached their duty to
remain impartial,” he said.
A few years later, one of the same dissident beneficiaries took the position that the trustees had a
duty to sue their lawyers because of a botched arbitration. 95 When the trustees declined to do
that, the beneficiary sued them! The three trustees then sought an expert opinion from Atlanta
attorney Jeffrey Smith. Based on his opinion, they agreed to sue their lawyers (using the lawyer
the unhappy beneficiary had hired to sue the trustees) if the complaining beneficiaries would
agree not to sue the trustees. They were then faulted for having factored their own interests into
the equation—and doing so without first petitioning the probate court, as required when trustees
find themselves in a conflict of interests such as this one.
Alexander & Baldwin CEO Bobby Pfeiffer publicly supported the call for more local investing
and more sensitivity to native Hawaiian issues: “Diversification of assets is important. No less
important is the need to be a good neighbor and provide local opportunities and jobs to expand
Hawaii’s economy. Previous trustees always have understood that an estate that controls so
much property in Hawaii has a historic obligation to remain sensitive to the state’s economy. …
While economic growth is essential, it does not have to be at the expense of the qualities that
make Hawaii so special. … Large businesses have a particular responsibility in maintaining that
quality of life (that makes Hawaii so special). … It is a matter of balance and long-term
commitment. … It appears to be assumed that those with Mainland backgrounds obtain their
positions because they are highly qualified in terms of education, experience and background.
On the other hand, it seems to be assumed that native-born people, such as Justice Robert Klein,
are considered only because of their connections and political experience. I am always offended
by this kind of mentality.” 96
[More on Campbell turmoil in 1999: 97 “…parallels to a broader struggle evolving in Hawaii in
recent decades, which pits those who advocate a local sensitivity—supportive of the rights and
95
A partner in the law firm had contacted an arbitrator for clarification shortly before the court confirmed the
arbitrator’s award in a 1994 arbitration involving the trust’s lease of land at Campbell Industrial Park to the Hawaii
Meat Company. The judge tossed out the first arbitration award, which required the trustees to spend more money
on a second arbitration that did not turn out nearly as well. The unhappy beneficiary claimed it all cost the trust $3
million because of unnecessary costs and lower rent in the second arbitration award.
96
Robert J. Pfeiffer, “Estate articles had right focus,” Hon. Advertiser, June 20, 1999.
97
Ken Kobayashi, “Cracks in the Campbell Estate: Family Feud,” Hon. Advertiser, May 19, 1999.
19
needs of Native Hawaiians and local residents—above the quest for profits by large landowners
such as Campbell, which are turning more to the Mainland to invest and to maximize their
profits. … Money and power and the future of the Hawaiian economy are at the heart of the
issues.” At the time, Campbell owned 70,700 acres in Hawaii: “The fear is that when the estate
dissolves in 2007 its assets in Hawaii may be divested to overseas ownership and that absentee
landlords may not share the same interests as Hawaii managers and owners.” “Trotter said the
Campbell Estate trustees are traditionally Caucasian males from Hawaii’s corporate world, with
a Republican Party philosophy.” “Larger issue of local sensitivity.” Includes chart of the
beneficiaries.]
[Abigail K. is great-granddaughter by blood; granddaughter by adoption (largest share at 12.5%).
Three other beneficiaries are related by adoption.]
[“This broader story has to do with the rapidly changing face of Hawaii’s economy and social
culture. It is a story of Hawaii losing its isolation, becoming increasingly part of the national and
international economies. It is a story of the struggle, perhaps a losing one, to preserve some of
what makes Hawaii’s culture and traditions so different from the rest of the world.” 98]
[From Ken Kobayashi, “Campbell trustees sue law firm in dispute over arbitration award,” Hon.
Advertiser, June 2, 1999: The Campbell Estate trustees have sued A&W over the 1994
arbitration, “an offshoot” of an earlier action by Trotter. The estate incurred costs and the 1998
arbitration set the rent at a lower amount.]
[“Whenever any appointment of a trustee under a private trust is made by any court of record, if,
prior to such appointment, beneficiaries who constitute a majority both in number and interest of
the beneficiaries of the trust (as hereinafter defined) nominate for the trusteeship by an
instrument or instruments in writing filed in the court any qualified person or corporation worthy
in the opinion of the court to be appointed, the court shall appoint the nominee as the trust, unless
the express terms of the trust provide an effective method of nomination or appointment. No
person so nominated as trustee by the beneficiaries of any such trust shall be held disqualified to
be appointed or to act as the trustee for the sole reason that the person is a beneficiary or a
possible beneficiary under the trust estate.” 99 [According to Sam, this was enacted especially
with Campbell in mind.]
[From In the Matter of the Estate of James Campbell, Deceased, 33 Haw. 799 (1936): Will
provision authorizing the trustees to fill vacancies held invalid. “In our opinion the testator, by
providing that nominations to fill a vacancy in the office of trustee be confirmed by the Hawaiian
court having probate jurisdiction, made an invalid attempt to confer upon a judicial tribunal
jurisdiction which was not vested in it … [and so that provision is] null and void.” “Courts
having probate jurisdiction are creatures of law and their duties and jurisdiction in most … states
… are defined by law.” Appointment of a trustee can only be done by circuit court sitting at
98
Editorial, “Campbell struggle part of a larger Island story,” Hon. Advertiser, May 21, 1999.
99
HRS 554-2.
20
chambers in equity, not law. It would have been fine if the word “probate” had not been
included!]
More of Appendix B yet to come….
[Lucas Estate]
[Grove Farm]
[Bishop Estate]
[Parker Ranch]
[Queen Liliuokalani Trust]
[Castle Estate: The foundation got 29% of Harold’s assets in 1967; in 2011 it received $38% of
the downtown Kailua revenue. As of 2012, it had made total contributions of $168 million and
currently owns assets worth $162 million. It is being run with a goal and expectation of lasting
indefinitely. … Additional info about Castle: Tremendous amounts of cash were generated in the
1970s due to land reform. In 1974 the trust owned 5,500 residential lots; today the LLC owns
less than 200. The family has been remarkably free of lawsuits thus far.]
21