Thursday, January 1, 2009

HSC gets Pointed about Points of Error

In re Estate of Damon (HSC December 30, 2008)

Background.  Samuel M. Damon died in 1924.  His will created a trust to administer over his property.  By 1999, the trust assets included stock in publicly-traded companies and significant land holdings in Hawai'i and California.  By 2003, the trust sold off nearly all of the assets and put the proceeds in a securities portfolio managed by Goldman, Sachs.  The trustees filed a petition for approval of accounting in the probate court.  The probate court appointed James Kawachika as a master for overseeing the accounting.  Christopher Damon Haig objected to the appointment and filed a response.  Haig contended that Kawachika could not be a master because of a conflict of interest.  In his master's report, Kawachika concluded that there may be a conflict, but that he disclosed them.  The probate court approved the income and principal accounts in the petition.  Haig appealed.

Points of Error not to be Tampered with.  The HSC first took the opportunity to explain the requirements of the "Points of Error" section in opening briefs.  Hawai'i Rules of Appellate Procedure Rule 28(b)(4) requires that the opening brief contain a statement of the points of error in separately numbered paragraphs.  Each point of error must indicate "where in the record the alleged error was objected to or the manner in which the alleged error was brought to the attention of the court or agency."  Id.  Each point must also include "a quotation of the objection to the report" when it involves a ruling upon the report of a master.  Id.  Haig's opening brief cites the record and quotes the probate court's order that approved of the master's report, but it did not state where the objection was made.  The brief also did not quote the objection to the master's report.  Furthermore, the HSC noted that even when the trustees pointed out this error in their answering brief, Haig failed to cure it in his reply brief.  Instead, he wrote that quotation of the objection would have been "too voluminious[.]"  Noncompliance with HRAP Rule 28(b)(4) is alone sufficient to affirm the judgment on appeal.  Morgan v. Planning Dep't, County of Kauai, 104 Hawai'i 173, 180, 86 P.3d 982, 989 (2004).

But the HSC heard the merits of Haig's appeal anyway.  The HSC explained that while citations to the objections, however, were not in the points-of-error portion, they were made in the statement-of-facts.  The HSC also adheres to a policy of "affording litigants the opportunity to have their cases heard on the merits, where possible."  Id. at 180-81, 86 P.3d at 989-90.

Too Voluminous?  Try the Appendix.  The HSC appears to be interpreting the "shall" in HRAP Rule 28(b)(4) as mandatory, rather than directory.  Shall, therefore, means "must" in this case.  But the court, in enforcing the mandatory-shall is tempered in part by its own policy of giving litigant their day in court.  In this case, Haig appeared to have got most of it right, but misplaced the necessary citations, and so the policy won out.  But what about Haig's response that the quotation of the objections were too voluminous?  The HSC did not express an opinion on the matter, but the rules address this problem: "[l]engthy parts of the transcripts that are material to the points presented may be included in the appendix instead of being quoted in the point."  HRAP Rule 28(b)(4).

Disqualifying the Judge: the mere Appearance of Impropriety Suffices.  As for the merits of his appeal, the HSC agreed that the probate court abused its discretion in appointing Kawachika.  Kawachika's law firm represented the Damon trustees in two unrelated cases that were pending in other courts at the time the probate court appointed him as the master.  A master comes within the ambit of the Revised Code of Judicial Conduct and so the conflict-of-interest rules from the code applied to Kawachika.  Under the code, a "judge must avoid all impropriety and appearance[s] of impropriety."  RCJC Canon 2(A) cmt.  The appearance of impropriety arises when "the conduct would create in reasonable minds a perception that the judge's ability to carry out judicial responsibilities with integrity, impartiality and competence is impaired."  Id.  This test is an objective one based "not on the beliefs of the petitioner or [adjudicator], but on the assessment of a reasonable impartial onlooker apprised of all the facts."  In re Water Use Permit Applications, 94 Hawai'i 97, 122, 9 P.3d 409, 434 (2000).  Furthermore, "a judge shall disqualify himself or herself in a proceeding in which the judge's impartiality might reasonably be questioned[.]"  RCJC Canon 3(E)(1).

Here the HSC held that the representation of the trustees in unrelated lawsuits by Kawachika's firm position while the petition was pending approval created a perception that Kawachika's "impartiality might reasonably be questioned" as master of the petition.  Furthermore, the HSC also pointed out that the internal separation (i.e. "Chinese" wall) between Kawachika and the lawyers who worked on the other cases was no cure to this defect.  Otaka, Inc. v. Klein, 71 Hawai'i 376, 387 n. 4, 791 P.2d 713, 719 n. 4 (1990).

So is Impartiality the same thing as Impropriety?  The HSC read two parts of the Code of Judicial Conduct together.  First, judges must avoid the appearance of impropriety.  Second, a judge must be disqualified in proceedings where "the judge's impartiality might reasonably be questioned."  And so the HSC appears to have indicated that a conflict of interest, or, the appearance of impropriety, arises to impartiality that might reasonably be questioned.  Does this mean that the "remedy" for the appearance of impropriety will always be disqualification of the judge?  Perhaps so.

The Other Issues.  The HSC rejected the rest of the Trustees' arguments and held that Haig's objections to the Kawachika appointment were timely.