995 N.W.2d 84
S.D.2023Background
- Fred Petersen created a revocable Living Trust (funding personal property and directing immediate transfer of a 20‑acre homestead to Sally and Mike) and later an irrevocable Land Trust (funding the farm land) before his 2018 death.
- A drafting error in the trustee’s deed moved the homestead into the Land Trust contrary to Fred’s intent; the attorney who drafted the trusts admitted the deed was mistaken.
- After Fred’s death the three daughters met, agreed the homestead was intended for Sally/Mike, but Mindy refused to sign a stipulation; Sally sued for court supervision and reformation of the Land Trust; Mindy filed competing petitions seeking trust modification and other relief.
- The circuit court reformed the Land Trust to effect Fred’s intent, denied Mindy’s requests, found Mindy not credible, but denied Sally’s motion for reimbursement of $290,066.32 in attorney fees under SDCL 15‑17‑38 on the ground the trust received no economic benefit from the litigation.
- On appeal the South Dakota Supreme Court held (1) an economic benefit is not required to award fees under SDCL 15‑17‑38; reforming a trust to effect a settlor’s undisputed intent may be a sufficient benefit, (2) Sally failed to prove the litigation produced an economic benefit from the mortgage/lease issue, (3) fees for resisting Mindy’s modification request were not authorized, and (4) remanded for the trial court to exercise its discretion on whether and how much to award for the successful homestead reformation claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SDCL 15‑17‑38 requires an economic benefit to the trust to award attorneys’ fees | Sally: No; a non‑economic benefit (e.g., enforcing settlor’s intent) suffices | Mindy/Jody: Yes; fees require a tangible economic benefit to the trust beyond a self‑interested beneficiary gain | Held: Economic benefit is not required; benefit may include reforming a trust to effect settlor’s intent; trial court erred to treat economic benefit as a prerequisite |
| Whether Sally established an economic benefit from litigating the mortgage/lease issue (rent payments and upkeep savings) | Sally: Yes; showed $958,168.50 in option rent payments plus $6,600/year upkeep savings to the trust | Mindy/Jody: No; rental income could have been obtained on the open market and the litigation produced no net economic gain to the trust | Held: No economic benefit shown for the mortgage/lease issue; trial court did not abuse discretion in denying fees on that theory |
| Whether fees are authorized for resisting Mindy’s petition to modify the trust (accelerate mortgage payments) | Sally: Resisting Mindy upheld the settlor’s intent and thus merits fees | Mindy: Her modification claim was an asserted legitimate alternative and not defeated by proof of settlor intent | Held: Fees not authorized for resisting Mindy’s modification claim; different legal standard applies and no basis for fees here |
| Whether appellate attorney fees should be awarded | Sally: Requests appellate fees if trial fees are permissible | Mindy/Jody: Oppose | Held: Although trial‑level fees may be permissible, the Court declines to award appellate fees and leaves trial award decisions to remand |
Key Cases Cited
- Wagner v. Brownlee, 713 N.W.2d 592 (S.D. 2006) (clarified that attorney fees in estate/trust matters are permitted where services were beneficial to the estate)
- In re S.D. Microsoft Antitrust Litig., 707 N.W.2d 85 (S.D. 2005) (standard of review and that fee awards must employ correct standards)
- In re Engebretson’s Estate, 1 N.W.2d 351 (S.D. 1941) (early articulation that fees may be allowed when services are beneficial to the estate)
- In re Estate of Perry, 582 N.W.2d 29 (S.D. 1998) (discussed benefits‑to‑estate test for fee awards)
- In re Estate of Laue, 790 N.W.2d 765 (S.D. 2010) (interpreting substantial‑benefit concept under probate statute)
- In re Bickel, 879 N.W.2d 741 (S.D. 2016) (litigation resolving will disputes can benefit the estate)
- In re Heupel Family Revocable Tr., 914 N.W.2d 571 (S.D. 2018) (SDCL 15‑17‑38 is discretionary; fees must benefit the trust)