Ka Wai Ola - Office of Hawaiian Affairs, Volume 16, Number 7, 1 July 1999 — The duty of undivided loyalty [ARTICLE+ILLUSTRATION]

The duty of undivided loyalty

RECENTLY, EXCERPTS from United States trust law were called to my attention whieh I believe are worth sharing with you, my fellow trustees and staff. Let me quote directly from the passages of legal publication known as the American Jurisprudence 76 2d: Restatement - United States Trust Law. I have taken the liberty so that wherever the words "trustee" or "she/she" appear, I have substituted the words "The state." The original wording as it appears in the American _______

Jurisprudence is in parentheses. Ji379 General (A trustee) The state must act in good faith in the administration of the trust, and this requirement means that (he or she) the state must act honestly and with undivided loyalty to the trust, and to the interests of the beneficiary. 6380 Acting in interest oftrust exclusively In administering the trust, (a trustee) the state is under the duty of acting exclusively and solely in the interest of the trust estate or the beneficiaries, within the terms of the trust, and is not to act in (his or her) the state's own interest or in the interest of a third person. Thus, (the trustee) the state may not, without a breach of duty: (1) take part in any transaction concerning the trust, where (he or she) the state has an interest in such transac-

tion adverse to that of the beneficiary; (2) enter into situations wherein (his or her) the state's own interests are brought into conflict with those of the trust, irrespective of (trustee's) the state's good or bad faith; (3) do anything tending to interfere with the exercise of a wholly disinterested and independent judgment; and (4) use any information gained in the administration of the trust to the prejudice of the trust.

(A fiduciary) The state cannot eontend that, although (he) the state had conflicting interests, (he) the state served it's masters equally well or that his primary loyalty was not weakened by the pull of a secondary one and it has been stated that the rule of undivided loyalty must be enforced with uncompromising rigidity. |f you read the above paragraphs using the word "state" instead of "trustee" or "he" or "she", does this now take on a different meaning? With regard to the oublic land trust. the

STATE is the TRUSTEE. We, the Native Hawaiians, are one beneficiary class. Now, let me pose the question to you. Is it reasonable to assume that the state will administer the trust loyally on behalf of the trusts beneficiaries - all of the trust beneficiaries equally and with undivided loyalty to the beneficiaries if such administration would eonflict with the state's own goals and objectives? Or if administration of the trust assets would negatively affect the state revenue stream? I remind you onee again, that the above paragraphs are legal interpretations of the existing federal laws governing the administration of all trust entities. The questions I pose herein are not hypothetical. Think about our history and all that

has transpired over 40 years ot statehood. I shall leave it to your opinion and research to determine if the state has been practicing its fiduciary responsibility to the Native Hawaiian beneficiary. I leave you to draw your own conclusion. "And into whatsoever house ye enter, first say, peaee he to this house." Luke 10: 5 ■

"Is it reasonable to assume that the state will administer the trust loyally on behalf of the trust beneficiaries?,,

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