Metropolitan News-Enterprise


Wednesday, April 29, 2015


Page 1


C.A. Says Contingency Fee Lien Attached to Client’s Interest in Trust




An attorney who agrees to represent a client in a claim to trust property on a contingency basis may enforce a fee lien against that property, the Court of Appeal for this district ruled yesterday.

Div. Five reversed a probate court judgment in favor of Michael Fay, who has resisted paying Encino attorney Mark S. Novak’s fees for representing Douglas Kelly in a claim against the Dana Teitler Trust.

Fay is the father of Abigail Fay, daughter of the late Dana Teitler and residual beneficiary of the Dana Teitler Trust. That trust is the beneficiary of Teitler’s rights as a named beneficiary of the Teitler Family Trust.

Kelly married Teitler in 2002; the marriage ended with her death in 2006, when Michael Fay became successor trustee of the Dana Teitler Trust. In 2011, Kelly—represented by Novak—petitioned the probate court for an order of distribution from the Dana Teitler Trust.

Kelly contended that because the trust had been established before he and Teitler were married, he was a pretermitted spouse and entitled to a one-half share of the trust. Prior to filing the petition, he entered into an agreement with Novak, obligating him to pay the attorney 40 percent of whatever he recovered from the trust.

All Liens

The agreement specifically assigned to Novak all liens “known to the common law” in order to collect his fees. Five months after the petition was filed, a settlement was reached, under which Michael Fay—acting both as Abigail Fay’s guardian as well as the successor trustee of the Dana Teitler Trust—agreed to pay Kelly $3,500 per month and 40 percent of all amounts passing to the Dana Teitler Trust from the Teitler Family Trust.

The settlement agreement further provided that while Kelly could distribute the amounts received during his lifetime however he wished, half of the amounts coming due after his death would go to Abigail Fay, with Kelly having the right to distribute the remaining half by will, trust, or gift. But if he failed to make any such distribution, the agreement said, his stepdaughter would get the remaining half as well.

Two months after the settlement was agreed to, Novak served Michael Fay with a notice of his fee lien. Six months later, Kelly died, leaving no will and having not created a trust or made any gifts of distributions from the Dana Teitler Trust.

Probate Court

Novak then petitioned the probate court to force Michael Fay to pay his fees. He also claimed that Fay had a conflict of interest, had converted funds belonging to Novak, and should be removed as trustee.

Novak argued he had standing as Kelly’s successor in interest, and thus as a beneficiary of the trust, and as a person entitled to take an interest under Probate Code §262. Fay responded that Novak was not a beneficiary, that Kelly had no interest in the trust because he died without having made any distributions, and that Novak’s sole remedy for nonpayment of his fees was a claim against Kelly’s estate.

In a supplement to his petition, Novak revealed that Kelly died with no assets, and said a creditor’s claim would have been pointless.

Los Angeles Superior Court Judge Roy Paul held a hearing, then asked for supplemental briefing before issuing his order. He agreed with the trustee that Novak’s sole remedy was a creditor’s claim against Kelly’s estate, which could not be brought because more than a year had passed since Kelly’s death, and denied the petition.

Enforceable Lien

Presiding Justice Paul A. Turner, however, writing for the Court of Appeal, said Novak had an enforceable lien under §9391. The statute, the jurist explained, “permits a lienholder, such as plaintiff, to pursue a lien claim in probate court against the personal representative of an estate without filing an independent action to foreclose on the lien [and] to do so without filing a probate claim...and the Code of Civil Procedure section 366.26, subdivision (a) statute of limitations is inapplicable to a lien holder’s petition.”

Once the settlement was approved by the probate court, Turner elaborated, Novak’s charging lien, explicitly recognized by the fee agreement, attached to Kelly’s interest in the trust.

Turner also explained that while Kelly’s failure to name a beneficiary effectively resulted in Abigail Fay acquiring his interests after his death, this “did not destroy plaintiff’s pre-existing attorney fee lien rights.”

The presiding justice noted that the ruling leaves a number of issues, including the value of Kelly’s interest in the trust, “in the good hands of the probate court.”

The case is Novak v. Fay, B256889.


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