Trusts and Estates

Smith v. Szeyller

Cite as B281758
Filed January 16, 2019
California Court of Appeal, Sixth District

By Golnaz Yazdchi
Sheppard Mullin Richter & Hampton LLP

Summary: Under the substantial benefit doctrine a probate court may award attorneys’ fees to a litigant whose efforts have resulted in a substantial benefit to other parties, whether such benefits are pecuniary or non-pecuniary.

Case Brief:

Don Smith Sr. and Gladys Smith created a family trust, naming their five children as beneficiaries. Don predeceased Gladys. Gladys amended the Survivor’s Trust several times to benefit one of the children, JoAnn. JoAnn and her husband, Edward, became co-trustees of the trust following Gladys’s death. JoAnn’s brother, Don, filed an action seeking an accounting and alleging various breaches of trust, amongst other claims, against JoAnn and her husband. None of the other siblings participated in the probate proceedings, despite receiving notice. The parties settled mid-trial. Under the terms of the settlement, the trustees agreed to pay tax penalties and interest for undisclosed gifts on behalf of the trusts, to pay for the appointment of a referee to oversee accountings and an amended IRS Form 706 on behalf of the trusts, to a certain sum to Don from JoAnn’s share, and to reimburse Don’s attorneys’ fees and costs from the trusts. The trial court approved the settlement as part of an order after trial. One of the non-participating beneficiaries, Donna, filed post-trial motions for a new trial and to vacate the judgment, arguing that Don’s fee award was not warranted under the substantial benefit doctrine. The trial court denied Donna’s motions.

The Court of Appeal affirmed. Under the substantial benefit doctrine, a trial court may award fees to be shared by others upon whom a benefit was conferred, when a litigant, proceeding in a representative capacity, obtains a decision that results in a substantial benefit of a pecuniary or nonpecuniary nature. Although Donna had notice of all of the proceedings, she failed to participate in the underlying action. By failing to participate, Donna forfeited her objections, and was not deprived of due process. In the first published case to apply the substantial benefit doctrine in a probate context, substantial evidence existed to support the court’s exercise of discretion to order fees to be split amongst the trust beneficiaries, because the non-litigating beneficiaries received pecuniary and nonpecuniary benefits as a result of the litigation.

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