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NOTICE: This opinion is subject to motions for rehearing under Rule 22 as well as formal revision before publication in the New Hampshire Reports. Readers are requested to notify the Reporter, Supreme Court of New Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any editorial errors in order that corrections may be made before the opinion goes to press. Errors may be reported by E-mail at the following address: reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00 a.m. on the morning of their release. The direct address of the court's home page is: http://www.courts.state.nh.us/supreme. THE SUPREME COURT OF NEW HAMPSHIRE ___________________________ Carroll No. 2007-692 CHARLES H. SMITH v. LILLIAN V. DONAHUE TRUST Argued: June 18, 2008 Opinion Issued: July 15, 2008 Sager Law, P.L.L.C., of Ossipee (Richard D. Sager on the brief and orally), for the petitioner. Krasner Law Office, of Farmington (Emmanuel Krasner on the brief and orally), for the respondent. DALIANIS, J. The respondent, the Lillian V. Donahue Trust (Trust), appeals the order of the Superior Court (Fitzgerald, J.), granting the petition for specific performance filed by the petitioner, Charles H. Smith. We affirm. The record supports the following facts. The Trust was created in 1991 by Lillian V. Donahue. It was a revocable trust that named Lillian as grantor, beneficiary and trustee. It named her son, Patrick J. Donahue (Donahue), as successor trustee and contingent beneficiary. Under the trust document, upon Lillian's death, all of the remaining "principal, real, personal or mixed and any accumulated net income" was to be paid to Donahue, and the Trust would

terminate. The property in trust included approximately 200 acres of land on Horn's Pond in Wakefield. In June 1993, Lillian resigned as trustee and named her attorney, Elmer E. Runyon, as a successor trustee to serve with her son as co-trustee. At that time, the Trust was further amended to require that, upon Lillian's death, seventy-five percent of the remaining "principal, real, personal or mixed and any accumulated net income" was to be paid to Donahue, and the Trust would terminate as to the portion distributed to him. The remaining twenty-five percent was to be held in trust for his daughter and distributed to her when she turned twenty-five. During Lillian's lifetime, however, all of the net income from the trust property was to be paid to her, and the successor trustees were permitted to use as much of the principal as they, in their sole discretion, deemed necessary for her support and maintenance. In September 1993, Donahue and Runyon, as successor trustees, filed a trustee certificate at the Carroll County Registry of Deeds, which stated, in pertinent part: The undersigned Trustees as Trustees under the LILLIAN V. DONAHUE TRUST . . . have full and absolute power in said Declaration of Trust to convey any interest in real estate and improvements thereon held in said Trust and no purchaser or third party shall be bound to inquire whether the trustees have said power or are properly exercising said power or to see to the application of any Trust asset paid to the Trustees for a conveyance thereof. See RSA 564-A:7, II-III (Supp. 1994) (amended 1995). The trust document gave "any successor Trustee" the power to, inter alia: (1) "collect, hold, and retain Trust assets . . . until, in the judgment of the Trustee, disposition of the assets should be made"; (2) "acquire an undivided interest in a Trust asset"; (3) "invest and reinvest Trust assets"; (4) "deposit Trust funds in a bank"; (5) "acquire or dispose of an asset, for cash or credit, at public or private sale"; (6) "manage, develop, improve, exchange, partition, change the character of, or abandon a Trust asset or any interest therein"; (7) "encumber, mortgage, or pledge a Trust asset for a term within or extending beyond the term of the Trust, in connection with the exercise of any power vested in the Trustee"; and (8) "borrow money to be repaid from Trust assets." See RSA 564-A:3 (1974) (amended 1996, 1998). On June 30, 1996, Donahue entered into an agreement with Smith to sell him a house located on five acres of the Wakefield land held in trust, with approximately 550 feet of lake frontage. The agreement provided that although the property was not yet subdivided, it would be subdivided upon request. The 2

agreement also provided that Smith would pay the $50,000 purchase price in installments, and that Donahue would hold the deed in escrow until Smith paid the final installment. The agreement did not identify the property as being held in trust. Nor did it identify Donahue as trustee. Donahue and Smith were the only signatories. Runyon resigned as trustee on June 19, 2000. Three months later, on September 20, 2000, Donahue and Smith entered into another agreement, which they termed an "allonge" to their original purchase agreement. The allonge, unlike the original purchase agreement, identified Donahue as the trustee of the Trust. Pursuant to the allonge, Donahue, as trustee, agreed to sell Smith an additional approximately three acres of the Wakefield land held in trust, with 200 feet of lake frontage. Like the original agreement, the allonge provided that Smith would pay the purchase price in installments. The purchase price for the additional property was $50,000. Donahue signed the allonge twice: once "personally," and once as "Trustee." Smith was the only other signator. In August 2002, Smith brought this petition for specific performance, alleging, among other things, that although he had already paid Donahue $70,000, Donahue had not conveyed any property to him, nor had he subdivided the Wakefield land as requested so that the conveyance could take place. Instead, he had placed the entire Wakefield lot for sale for $700,000. After a bench trial, the trial court ruled that the 1996 agreement between Donahue and Smith was invalid because Donahue's co-trustee at the time, Runyon, had not authorized it. The court found, however, that the 2000 allonge ratified the 1996 agreement and made it binding upon the Trust. Impliedly finding that it was equitable to do so, the court granted Smith's petition for specific performance. Because Smith had not yet paid the entire $100,000 purchase price, however, the court ordered him to do so, and ordered the Trust to deed the disputed property to him provided that it was possible to subdivide Smith's parcel from the larger parcel. If this was impossible, the court ruled that Smith was entitled to be reimbursed for his payments. We will not disturb the findings of the trial court unless they lack evidentiary support or are erroneous as a matter of law. N.H. Dep't of Envtl. Servs. v. Marino, 155 N.H. 709, 717 (2007). We review legal conclusions, as well as the application of law to fact, independently for error. Id. Our inquiry is to determine whether the evidence presented to the trial court reasonably supports its findings, and then whether the court's decision is consonant with applicable law. Id.

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I On appeal, the Trust first argues that the contracts between Donahue and Smith are void because Smith had actual or constructive knowledge that Donahue acted outside of the scope of his authority, without authorization, and not to the benefit of the Trust. The Trust alleges that Donahue committed a breach of trust first, by entering into the 1996 agreement without his cotrustee's authorization or consent, and second, by using the money he received from Smith for his own purposes. The Trust argues that Smith's constructive knowledge of the first breach and/or his actual knowledge of the second deprives him of the remedy of specific performance. A We first address whether Smith's constructive knowledge of any alleged breach of trust by Donahue suffices to void the contracts at issue. We hold that constructive knowledge is legally insufficient. To support its assertion that constructive knowledge of Donahue's breach of trust suffices to void a contract, the Trust relies upon the Restatement (Second) of Trusts

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