Hodges v. Johnson

David Hodges Sr. founded Hodges Development Company (HDC). In 2004, he created two irrevocable trusts naming as beneficiaries his wife Joanne; his children Nancy, Janice, and David Jr. (coplaintiff); his stepchildren Barry Sanborn and Patricia Sanborn Hodges (coplaintiffs); and all of their descendants. The trusts held all HDC’s nonvoting stock, with the primary purpose of ensuring HDC continued after David Sr.’s death by avoiding liquidating HDC to pay estate taxes. The second evident purpose was supporting the beneficiaries. David Sr. appointed his attorney William Saturley and long-time HDC employee Alan Johnson (codefendants) as trustees. In 2009, David Sr. hired estate-planning attorney Joseph McDonald (codefendant) to decant the two irrevocable trusts into distributee trusts that cut out some of the beneficiaries. McDonald acted as trustee temporarily to decant the trusts three times. The first decanting in 2010 cut out the two stepchildren. HDC fired stepson Barry in 2012, who after 36 years was a senior executive. Then, David Sr. appointed Johnson HDC’s president and fired David Jr. shortly thereafter. McDonald decanted the trusts a second time, removing David Jr. Joanne and David Sr.’s divorce ensued, and McDonald decanted a third time to remove Joanne. In 2014, David Jr. and the two stepchildren sued to invalidate the decantings and remove Saturley and Johnson as trustees. McDonald testified that he “never gave the [claimants’] financial interest any consideration.” The trial court voided the decantings and removed the trustees. The trustees appealed.