#29745-aff in pt & rev in pt-MES 2023 S.D. 44
IN THE SUPREME COURT OF THE STATE OF SOUTH DAKOTA
****
IN THE MATTER OF THE FRED PETERSEN LAND TRUST
IN THE MATTER OF THE FRED PETERSEN LIVING TRUST
APPEAL FROM THE CIRCUIT COURT OF THE THIRD JUDICIAL CIRCUIT MOODY COUNTY, SOUTH DAKOTA ****
THE HONORABLE PATRICK T. PARDY Judge
RONALD A. PARSONS, JR. PAMELA R. REITER ANTHONY P. SUTTON of Johnson, Janklow, Abdallah & Reiter, LLP Sioux Falls, South Dakota Attorneys for appellants Michael and Sally Johnson.
JOHN A. SHAEFFER Flandreau, South Dakota Attorney for appellee Mindy Smith.
DANNY R. SMEINS Britton, South Dakota Attorney for appellee Jody Wallin.
**** ARGUED MAY 26, 2022 OPINION FILED NOVEMBER 23, 2022 REHEARING GRANTED AND OPINION WITHDRAWN AUGUST 18, 2023 OPINION FILED 08/18/2023 #29745
SALTER, Justice
[¶1.] Prior to his death in 2018, Fred Petersen created two trusts. After
Fred’s passing, one of his daughters, Sally Johnson, filed separate petitions seeking
court supervision and reformation of one of the trusts. Another of Fred’s daughters,
Mindy Smith, opposed the reformation of the trust and filed her own petition
seeking clarification from the court and requesting other relief.
[¶2.] The circuit court conducted a two-day court trial to determine the
merits of the petitions. In its memorandum decision, the court granted Sally’s
request to reform the trust and denied each of Mindy’s requests for relief. Sally
then sought reimbursement from the trust for her attorney fees and expenses
incurred during the litigation. The circuit court denied the request, concluding the
trust did not receive an economic benefit from the litigation, which, the court
determined, was required to justify reimbursement from the trust. Sally has
appealed this denial. We affirm in part, reverse in part, and remand.
Facts and Procedural History
[¶3.] Fred Petersen farmed and raised cattle in Moody County for many
years. His farm consisted of approximately 1,000 acres of crop and pasture land,
including a twenty-acre homestead with outbuildings, a cattle yard, and a
farmhouse where Fred and his family lived. At one point, the farm was valued at
nearly six million dollars.
[¶4.] Fred and his first wife were divorced in what appears to have been the
late 1970s. Prior to the divorce, they had three daughters together: Jody, Mindy,
and Sally. As they grew older, Jody and Mindy left the farm and moved out of
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state. 1 Sally, however, remained. She and her husband, Mike Johnson, lived one
mile from the homestead and helped Fred on the farm.
[¶5.] In 1997, Sally and Mike rented all the crop ground from Fred and
farmed it themselves. When Fred retired from farming altogether, Sally and Mike
took over the cattle operation as well. Though Fred continued living on the
homestead after his retirement, Sally and Mike began making farm-related
improvements to the property with the understanding—expressed to them by
Fred—that they would inherit the homestead after his death.
[¶6.] Marital tension between Fred and his second wife, Sharon Petersen,
prompted Fred to create the Fred Petersen Living Trust. The Living Trust was a
revocable trust prepared by Thompson Law in Sioux Falls and was funded with all
of Fred’s real and personal property. Fred named himself as the initial trustee with
Fred and Sharon as the income beneficiaries. Fred selected his sister along with
Sally and Mike to serve as successor co-trustees after his death and named his three
daughters as successor income beneficiaries.
[¶7.] The Living Trust contained several specific distributions, including
Fred’s directive to have his twenty-acre homestead surveyed, platted, and
distributed to Sally immediately upon his death. The Living Trust instrument also
provided an option for Sally and Mike to lease the entirety of the agricultural land
from the trust after Fred’s death, with rent for the tillable acres calculated at ninety
1. Mindy returned to South Dakota in 2010 and lives near Flandreau with her husband. -2- #29745
percent of the county average rental rate. 2 The term of the option was the
remainder of Sharon’s life plus three years.
[¶8.] In 2013, Sharon initiated a divorce action. During the pendency of the
divorce, Fred returned to Thompson Law and amended the Living Trust to remove
Sharon as an income beneficiary. He also created a new irrevocable trust, known as
the Fred Petersen Land Trust, which he funded with the farm land owned by the
Living Trust. Fred named Sally, Mike, and Fred’s sister as co-trustees, with Fred
as the sole income beneficiary.
[¶9.] In an effort to resolve the divorce without selling the farm, Fred agreed
to make a cash payment to Sharon of $800,000. Fred was able to pay $253,000 with
available funds, and he obtained a loan to cover the balance. The loan agreement
required annual payments over a twenty-year term with the final payment due on
December 1, 2033. The debt was secured by a mortgage on the property now owned
by the Land Trust.
[¶10.] The trust instrument establishing the Land Trust included several
provisions relating to the mortgage, leasing, and the eventual distribution of its
corpus. Under its provisions, the mortgage payments due after Fred’s death could
be made from the rental income received by the Land Trust. Mike and Sally had
the option to lease the land, as they had with the Living Trust, at the ninety-
2. The county average rental rate was calculated using information published by the South Dakota field office of the United States Department of Agriculture National Agricultural Statistics Service. Information in the record suggests that Fred set the rental rate below the average because he believed the soil quality of the cropland was generally below average for the area, though Mindy has frequently described the rent as “below market.” -3- #29745
percent-of-the-average rate on the tillable acres for up to three years after Fred’s
death or three years after the loan was paid off, whichever occurred later. The
Land Trust instrument designated Jody, Mindy, and Sally as income beneficiaries
after Fred’s death and provided that they would eventually receive all the
agricultural land from the Land Trust once the mortgage was paid off and the trust
was terminated.
[¶11.] After creating the Land Trust, Fred executed a trustee’s deed
conveying all the real property from the Living Trust to the Land Trust. However,
the deed contained a drafting error. Instead of excepting the homestead that Fred
intended to gift to Sally and Mike immediately upon his death, the deed
unconditionally transferred the homestead to the Land Trust as part of a larger
tract without any reference to the intended distribution of the twenty-acre parcel to
Sally and Mike. The attorney who drafted both trusts later acknowledged that this
was a mistake and that Fred had always planned to transfer the homestead to Sally
and Mike in the same manner described in the terms of the Living Trust.
[¶12.] At the time of his death, Fred had reduced the mortgage balance to
approximately $150,000 through periodic additional principal payments. However,
the terms of the Land Trust required unanimous agreement among Jody, Mindy,
and Sally to continue accelerating the mortgage payments beyond the minimum
annual payments.
[¶13.] Jody, Mindy, and Sally met at Thompson Law several times in the
months following Fred’s death to discuss the implications of his estate plan. During
these meetings, the sisters and the trust attorney realized for the first time the
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error in the Land Trust, which failed to account for the transfer of the homestead to
Sally and Mike. After this, the discussions seemed to focus on two main topics—the
fate of the twenty-acre homestead and the pace at which the Land Trust retired its
mortgage debt.
[¶14.] At an October 2018 meeting, the sisters each acknowledged it was
Fred’s intent to give the homestead to Sally and Mike and that they should take the
necessary steps to fulfill their father’s plan. As for the mortgage, Mindy expressed
her desire to use all the Land Trust’s income to pay down the mortgage as quickly
as possible, which would allow the sisters to vote to terminate the Land Trust and
distribute the land among themselves. Despite universal consensus on the
homestead issue, the sisters were unable to resolve either matter. A memo drafted
by a paralegal at Thompson Law in January 2019, described Sally as “fearful” that
Mindy “would not sign off on the [homestead transfer]” if Sally did not agree to
accelerate the mortgage payments using all of the Land Trust’s income.
[¶15.] On February 4, 2019, the sisters met a final time at Thompson Law to
again discuss the mortgage and the homestead. According to two “family
stipulation” agreements drafted by the Thompson Law attorney and sent to the
sisters after the meeting, the parties discussed the following terms: (1) the
homestead would be surveyed and deeded to Sally and Mike as originally intended;
(2) the parties would retain additional income from the Land Trust to accelerate the
mortgage payments in an amount to be agreed upon at a later date with the
unanimous consent of all the beneficiaries; and (3) Sally and Mike would retain an
option to rent the tillable farm ground for three years after the satisfaction of the
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mortgage at the ninety percent rate and, thereafter, would have an additional
seven-year option to rent the ground at one hundred percent of the county average
rate.
[¶16.] Jody and Sally each signed the stipulations, but Mindy did not.
Further communications among the sisters ceased. Sally and Mindy retained
separate counsel, and this litigation followed.
[¶17.] On August 8, 2019, Sally filed a petition for court supervision of the
Land Trust, see SDCL 21-22-9, and a petition for reformation of the Land Trust to
correct the scrivener’s error in the trustee’s deed, see SDCL 55-3-28. 3 Mindy then
filed her own petition seeking trustee direction and “other relief[.]” She specifically
asked the court to order that the parties cease making mortgage payments from the
income of the Land Trust because, Mindy alleged, the mortgage was the obligation
of Fred’s estate or the Living Trust. Alternatively, Mindy asked the court to reform
the Land Trust and remove the requirement of unanimous approval of the
beneficiaries to accelerate mortgage payments and order that all Land Trust income
be used for that purpose until the mortgage was satisfied.
[¶18.] Sally and Mindy each opposed the relief requested by the other.
Despite her earlier acknowledgment of her father’s intent, Mindy responded to
Sally’s petition by claiming it was a “violation of Sally’s duty of undivided loyalty to
the beneficiaries[.]” Mindy also alleged that Sally was “taking advantage” of her
3. Sally, Mike, and the third co-trustee (Fred’s sister) also filed a petition requesting court supervision and instructions in the Living Trust. As noted below, these actions were later consolidated by the circuit court. Sally and Mike then executed a temporary release of their powers as co-trustees of the Land Trust during the litigation. -6- #29745
role as a trustee and that Mindy had not been given a “full and fair opportunity to
explore and rebut Sally’s contentions” that Fred intended to give Sally the
homestead. (Emphasis added.)
[¶19.] Mindy also filed a motion asking the court to enforce what she alleged
to be an earlier oral agreement, in which, Mindy claimed, the sisters had previously
agreed to accelerate mortgage payments during their initial discussions at
Thompson Law. Sally then alleged that Mindy had violated the Living Trust’s “no
contest clause” and, therefore, forfeited her right to distributions.
[¶20.] The circuit court consolidated the actions and held a two-day court
trial. The court heard testimony from several of the beneficiaries, including Mindy,
Sally, and Mike, as well as from a Thompson Law attorney. In its memorandum
opinion issued after the trial, the court granted Sally’s petition to reform the Land
Trust and denied all of Mindy’s various petitions and motions. In findings of fact,
the court found Mindy was not a credible witness at trial.
[¶21.] Sally subsequently filed a motion for reimbursement of attorney fees
and expenses from the Land Trust, citing SDCL 15-17-38, which authorizes a court
to “award attorneys’ fees from trusts administered through the court[.]” The motion
was supported by affidavits from Sally’s attorneys and extensive invoices detailing
the services rendered throughout the course of the litigation. Sally ultimately
sought reimbursement in the amount of $290,066.32. Both Jody and Mindy
opposed the motion.
[¶22.] At a subsequent hearing, the parties’ arguments focused principally on
whether an economic benefit to the trust as a result of the litigation was a
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prerequisite to recovering attorney fees under SDCL 15-17-38. Initially, Sally
alleged that reforming the Land Trust to reflect Fred’s intent was a sufficient
benefit to recover attorney fees irrespective of the economic implications of the
litigation to the trust. However, Sally also advanced an economic benefit argument,
using an affidavit from Mike, in which he stated the Land Trust would receive
$958,168.50 over the term of the option to lease the land from the trust. Mike also
asserted that conveying the homestead to Sally and Mike would relieve the Land
Trust of approximately $6,600 in annual upkeep costs, thereby resulting in an
additional economic benefit.
[¶23.] Mindy and Jody argued that the litigation resulted in no economic
benefit to the trust and, instead, benefited solely Sally and Mike, who received the
homestead. Mindy and Jody also disputed Mike’s economic benefit theory,
asserting that the tillable land could have been leased on the open market for more
than the ninety-percent-of-the-average market rate.
[¶24.] The circuit court concluded that to recover attorney fees under SDCL
15-17-38, there must be an economic benefit to the trust. The court further stated
“that fulfilling the testator’s intent is not a benefit when it comes to determining the
attorney’s fees.” The court found that although the litigation “benefited [Sally]
individually” that benefit did nothing “in the way of helping other beneficiaries.”
The court also found that extending the lease option to Mike at the ninety percent
rate did not benefit the trust and that “the value of the trust was [not] increased” as
a result of the litigation. Therefore, the court denied Sally’s motion.
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[¶25.] Sally has appealed, asserting the court’s ruling that a trust must
receive an economic benefit to recover attorney fees from the trust was an error of
law. She also claims that the court clearly erred when it found that the litigation
did not result in an economic benefit to the trust.
Standard of Review
[¶26.] The grant or denial of attorney fees is ordinarily reviewed for an abuse
of discretion. Wagner v. Brownlee, 2006 S.D. 38, ¶ 17, 713 N.W.2d 592, 598. “An
abuse of discretion ‘is a fundamental error of judgment, a choice outside the range of
permissible choices, a decision, which, on full consideration, is arbitrary and
unreasonable.’” In re Trust Fund of Baumgart, 2015 S.D. 65, ¶ 27, 868 N.W.2d 568,
575–76 (quoting Gartner v. Temple, 2014 S.D. 74, ¶ 7, 855 N.W.2d 846, 850). “[A]
trial court’s decision based on an error of law can be by definition an abuse of
discretion.” In re S.D. Microsoft Antitrust Litig., 2005 S.D. 113, ¶ 28, 707 N.W.2d
85, 98 (citation omitted).
[¶27.] “When reviewing a trial court’s award of attorney fees, questions of
fact are reviewed under the clearly erroneous standard.” Id. “A trial court’s finding
is clearly erroneous if, after reviewing the entire evidence, we are left with the
definite and firm conviction that a mistake has been made[.]” In re Estate of
Dokken, 2000 S.D. 9, ¶ 10, 604 N.W.2d 487, 490–91 (alteration in original) (citation
and internal quotation marks omitted).
[¶28.] “When applying the abuse of discretion standard of review, we must be
careful not to substitute our reasoning for that of the trial court.” S.D. Microsoft
Antitrust Litig., 2005 S.D. 113, ¶ 27, 707 N.W.2d at 98 (citations and internal
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quotation marks omitted). “In other words, a fee award is within the court’s
discretion so long as it employs correct standards and procedures and makes
findings of fact not clearly erroneous.” Id. (cleaned up).
Analysis and Decision
Benefit to a Trust
[¶29.] In South Dakota, parties generally pay their own attorney fees under
what is commonly known as the American rule. Id. ¶ 29, 707 N.W.2d at 98; see also
Credit Collection Services, Inc. v. Pesicka, 2006 S.D. 81, ¶ 6, 721 N.W.2d 474, 476
(“An award of attorney’s fees is not the norm.” (citation omitted)). However, a court
may award attorney fees when permitted under the terms of a contract or when
such an award is explicitly authorized by statute. See In re Estate of O’Keefe, 1998
S.D. 92, ¶ 17, 583 N.W.2d 138, 142. A motion requesting attorney fees, therefore,
“must specify the judgment and the statute, rule, or other grounds entitling the
moving party to the award[.]” SDCL 15-6-54(d)(2)(B); see also Stern Oil Co., Inc. v.
Brown, 2018 S.D. 15, ¶ 44, 908 N.W.2d 144, 157 (“The party requesting an award of
attorneys’ fees has the burden to show its basis by a preponderance of the evidence.”
(citation omitted)).
[¶30.] The provisions of SDCL 15-17-38 provide that a court “may award
attorneys’ fees from trusts administered through the court as well as in probate and
guardianship proceedings.” But the text of the statute provides no further guidance
regarding the circumstances under which such an award is appropriate.
[¶31.] At one time, our decisions held that attorney fee awards under SDCL
15-17-38 in estate and trust cases were authorized “where the attorney’s services
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have been beneficial to the estate and were necessary because of the executor’s
negligence, fraud or inactivity.” In re Estate of Perry, 1998 S.D. 85, ¶ 36, 582
N.W.2d 29, 36 (emphasis added) (citation omitted). The rule originated with our
decision in In re Engebretson’s Estate, 68 S.D. 255, 1 N.W.2d 351 (1941), and
became known, perhaps predictably, as the two-prong test used to determine
requests for attorney fees. See In re Estate of Hafferman, 442 N.W.2d 238, 241 (S.D.
1989), superseded by statute, SDCL 29A-3-720.
[¶32.] However, we later concluded that the second prong of the test—
requiring the attorney services to be necessary because of a fiduciary’s negligence,
fraud, or inactivity—was improvidently gleaned from the Engebretson case. See
Wagner, 2006 S.D. 38, ¶ 12, 713 N.W.2d at 596. In Wagner, we held that the
principal rule of Engebretson was simply that “an allowance may be made out of the
estate of a deceased person for the services of attorneys for beneficiaries where
those services were beneficial to the estate.” Id. (quoting Engebretson, 68 S.D. at
260, 1 N.W.2d at 353).
[¶33.] Hastening the demise of the two-prong test after “a lengthy and
conflicting history regarding [its] applicability[,]” Wagner, 2006 S.D. 38, ¶ 13, 713
N.W.2d at 597, was the Legislature’s 1995 adoption of the Uniform Probate Code
and the enactment of SDCL 29A-3-720. This statute allows a court to “award
necessary expenses and disbursements, including reasonable attorney’s fees, to any
person who prosecuted or defended an action that resulted in a substantial benefit
to the [probate] estate.” SDCL 29A-3-720.
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[¶34.] Under SDCL 29A-3-720’s substantial benefit inquiry, we have held
“that an estate ‘is benefited when genuine controversies as to the validity or
construction of a will are litigated and finally determined[.]’” In re Bickel, 2016 S.D.
28, ¶ 51, 879 N.W.2d 741, 755 (alteration in original) (quoting In re Estate of Laue,
2010 S.D. 80, ¶ 43, 790 N.W.2d 765, 774). We sourced our rationale for this
conclusion to a decision of the Supreme Court of North Dakota, which summarized
the public policy behind similar fee provision statutes as one that “allow[s] the
personal representative, as a fiduciary acting on behalf of persons interested in an
estate, to in good faith pursue appropriate legal proceedings without unfairly
compelling the representative to risk personal financial loss by underwriting the
expenses of those proceedings.” In re Estate of Flaherty, 484 N.W.2d 515, 518 (N.D.
1992).
[¶35.] But here it is not necessary to determine whether we should extend
the substantial benefit rule of SDCL 29A-3-720 from the probate class of cases to
the trust context. The original holding set out in Engebretson remains the law. It
states an accepted rule that we have previously applied in trust cases—attorney
fees are permitted where the attorney’s services have been beneficial to the estate.
See 68 S.D. at 260, 1 N.W.2d at 353. The issue we confront here is whether the
benefit necessary for an award of attorney fees from a trust under SDCL 15-17-38
must be economic. On this narrow question, we hold the benefit need not be
economic and may include reforming a trust instrument to correspond with the
intent of the settlor. See Restatement (Third) of Trusts § 88, cmt. d. (Am. L. Inst.
2007) (“Ordinarily, [attorney fees] are limited to situations in which the
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beneficiary’s participation in the proceeding is beneficial to the trust, usually either
because of a recovery that benefits the trust’s beneficiaries generally (rather than
merely the beneficiary in question) or by clarifying a significant uncertainty in the
terms of the trust.” (emphasis added)).
[¶36.] Although the formulation of the standard for attorney fees under
SDCL 15-17-38 has varied and been clarified over time, we have never required an
economic benefit. It is certainly possible that an economic benefit could support an
award of attorney fees, but it has no talismanic significance. See In re Estate of
Hass, 643 N.W.2d 713, 720 (N.D. 2002) (“To be beneficial, it need not be shown that
net tangible monetary advantage was realized or that a money loss was avoided.
The administration of trust property does not permit so simplified a test of
‘benefit.’” (citation omitted)). Rather, a circuit court’s decision to grant or deny an
application for attorney fees under SDCL 15-17-38 lies within the broad ambit of its
discretion so long as the trust estate has benefitted from the underlying litigation.
See In re Heupel Family Revocable Tr., 2018 S.D. 46, ¶ 36, 914 N.W.2d 571, 581
(holding SDCL 15-17-38 “is discretionary”); Engebretson, 68 S.D. at 260, 1 N.W.2d
at 353 (holding the attorney’s services must be “beneficial to the estate”). The
conspicuous lack of any statutory restrictions or conditions supports this view.
[¶37.] Nor do we believe that a party’s status as a beneficiary places her at a
disadvantage under SDCL 15-17-38. The plain fact that a party who is a
beneficiary derives a benefit from successful litigation involving a trust or will
should not detract from a circuit court’s focus upon the benefit to the estate. See In
re Unfunded Insurance Trust Agreement of Capaldi, 870 A.2d 493, 498 (Del. 2005)
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(holding that a court “cannot dismiss the benefits conferred [on the trust] out of
hand simply because they flow from litigation motivated by self-interest as a
beneficiary”). Indeed, it hardly seems remarkable at all that a beneficiary would, in
fact, be benefitted. And where the beneficiary must pursue litigation to obtain the
benefit the testator or settlor intended, there may well be a distinct value to the
estate. A contrary rule would discourage beneficiaries from pursuing strong claims
and undermine the reasonable expectations of individuals who wish to dispose of
their property in a way that suits their particular intent. 4
[¶38.] Here, we conclude the circuit court abused its discretion by denying
Sally’s motion for attorney fees based on its erroneous view that an attorney fees
award under SDCL 15-17-38 “requires” an economic benefit to the trust and that
fulfilling the intent of the settlor is not a basis for awarding attorney fees. While
the circuit court was certainly permitted to consider economic benefit to the Land
Trust in formulating its decision, it should not have treated its absence as a bar to
recovery. Nor should it have discounted Sally’s efforts to reform the trust to align
with Fred’s undisputed intent simply because she benefitted from the successful
outcome of the litigation. We hold, therefore, that the court was authorized to
award attorney fees to Sally under SDCL 15-17-38.
4. This is particularly true in cases like this where the intent of the settlor is so clearly undisputed. See In re Sunray Holdings Tr., 2013 S.D. 89, ¶ 14, 841 N.W.2d 271, 274 (“When presented with a trust instrument, our task is to ensure that the intentions and wishes of the trustor are honored.” (cleaned up)). We recognize that this is an exceptional case in this regard and that divining intent from extrinsic evidence is often a more complicated endeavor. -14- #29745
Economic Benefit to the Fred Peterson Land Trust
[¶39.] As indicated above, an economic benefit to the trust obtained from
litigation can, generally speaking, support an award of attorney fees. Sally
alternatively contends under this theory that the Land Trust received additional,
purely economic benefit from the litigation and that the court’s finding to the
contrary was clearly erroneous. 5 She makes two arguments on this point. First,
had Mindy been successful in her competing petition to reform the trust, the
mortgage payments would have been accelerated, thus shortening Mike and Sally’s
option to rent the agricultural ground. By succeeding against Mindy, Sally argues
that the trust will receive $958,168.50 in rent payments from Mike and Sally over
the term of the option. Second, Sally claims that deeding the homestead to her
results in a savings of $6,600 per year in upkeep costs that no longer burden the
trust. Given our holding above that the reformation of the trust to carry out Fred’s
intent to transfer the homestead to Sally and Mike could be considered as a benefit
5. Sally argues she should also be eligible for attorney fees for her efforts to resist Mindy’s request to modify the trust instrument because Sally was furthering Fred’s intent in the same way as she had with her request for reformation relating to the farmstead. But we disagree. Unlike Sally’s petition for reformation to conform the trust instrument to Fred’s undisputed intent, see SDCL 55-3-28, Mindy attempted to modify the trust, alleging the existence of “circumstances not anticipated by the trustor” and the asserted need to “substantially further the trustor’s purposes in creating the trust.” SDCL 55-3-26. Mindy was unsuccessful but not because Sally persuaded the circuit court that Fred had specifically intended that Sally and Mike should have a lengthy option to rent all of the farm ground. Rather, the circuit court determined that the variable lease option term was anticipated by Fred and expressed in unambiguous terms. In other words, there was no single outcome regarding the ultimate length of the rental option that Fred intended, only scenarios and variations depending upon contingencies over which he had no control. -15- #29745
to the trust, it is unnecessary to consider this latter argument relating to an
additional economic benefit that may also be realized as a result of the transfer of
the homestead.
[¶40.] As to the former contention about rent payments to the Land Trust, we
believe that Sally did not establish any benefit, economic or otherwise, to the trust
as it relates to litigating the mortgage payments issue. It does not appear from the
record that the rental payments from Mike and Sally were any more beneficial to
the Land Trust than would have been the case if the land had been leased to
different farmers in the absence of the option. In other words, it does not appear
the successful litigation provided the estate with income it could not have otherwise
obtained from a different renter. For this reason, the circuit court did not abuse its
discretion when it determined that the litigation on this issue did not provide the
trust with an economic benefit.
Appellate Attorney Fees
[¶41.] Sally and Mike have also requested appellate attorney fees. An award
of appellate attorney fees is authorized “only where such fees are permissible at the
trial level.” Farmer v. Farmer, 2020 S.D. 46, ¶ 58, 948 N.W.2d 29, 45 (quoting
Charlson v. Charlson, 2017 S.D. 11, ¶ 36, 892 N.W.2d 903, 913); see also SDCL 15-
26A-87.3 (authorizing appellate attorney fees “where such fees may be allowable”).
Though we believe the circuit court had authority to grant attorney fees below, we
decline to exercise our discretion to grant them here.
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Conclusion
[¶42.] Attorney fees are authorized in trust supervision proceedings under
SDCL 15-17-38 where the litigation has been beneficial to the trust estate. Though
the benefit will often be expressed in terms of an economic benefit, the concept is
broader than that and can include instances, such as this one, where a beneficiary’s
litigation was necessary to uphold the settlor’s universally acknowledged intent. In
those cases where the benefit asserted by an attorney fees applicant is economic,
the applicant must show that the litigation produced a benefit beyond that which
the trust estate would have otherwise realized.
[¶43.] Here, then, attorney fees are authorized for Sally’s efforts to vindicate
her father’s intent. Short of litigation, there was no other means for her to do so.
We reverse the circuit court’s denial of attorney fees for Sally’s litigation efforts to
obtain the homestead. However, the circuit court correctly determined that
attorney fees were not authorized for Mike and Sally’s efforts to resist Mindy’s
attempt to reform the Land Trust and retire the mortgage debt sooner, and we
affirm this determination.
[¶44.] Finally, the plain fact that fees are authorized does not make a fee
award a fait accompli. See Ctr. of Life Church v. Nelson, 2018 S.D. 42, ¶ 34, 913
N.W.2d 105, 114 (holding the fact that a court was authorized to exercise its
discretion and award attorney fees did not obligate it to do so). Whether to exercise
its discretion to award attorney fees and, if so, in what amount are beyond the
issues presented here, and we remand the case for the court to consider these
questions.
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[¶45.] JENSEN, Chief Justice, and KERN, DEVANEY, and MYREN,
Justices, concur.
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