## Facts

- Dan K. Stevenson died by suicide in August 2001, leaving an estate with extensive debt.
- In January 2002, the probate court appointed Kenneth G. Petrulis as administrator with will annexed.
- Petrulis retained his own law firm to represent the estate; the court approved a stipulation separating Petrulis’s commissions from the firm’s fees.
- Creditor claims exceeded $12 million; multiple creditors requested special notice of probate proceedings.
- The court approved an “extraordinary services” attorney-fee agreement that compensated counsel by hourly rates and hours worked, rather than a percentage of recovery.
- The court dispensed with notice of the hearing approving the agreement and sealed part of the record to prevent creditors from learning of the agreement during settlement negotiations.
- Counsel settled most claims, reducing asserted claims to about $1.7 million and obtaining roughly $700,000 in payments, yet the estate remained with a negative net worth of about $1 million.
- The administrator later sought approximately $1.25 million in attorney fees under the agreement; a creditor objected that the arrangement would leave nothing for creditors.

## Issues

1. Whether the approved fee agreement was a “contingency fee” agreement under Probate Code section 10811, subdivision (c).
2. Whether the probate court properly dispensed with notice of the hearing approving the fee agreement under Probate Code section 1220, subdivision (c).
3. Whether the probate court abused its discretion by declining to award fees under the agreement and instead awarding $200,000 for extraordinary services.

## Decision

- The court held the agreement was not a statutory contingency fee agreement because it was based on hourly rates and time expended, not recovery.
- The court held the probate court erred by dispensing with notice; withholding notice to prevent creditors from learning about the fee arrangement during negotiations was not “good cause.”
- The court affirmed the $200,000 extraordinary-fee award, concluding it was just and reasonable and within the probate court’s discretion despite counsel’s substantial work and claim reductions.

## Legal Principles

- A probate “contingency fee” agreement under Probate Code section 10811(c) requires compensation contingent on recovery; an hourly/time-based arrangement does not qualify.
- Probate courts retain authority to determine reasonable compensation for extraordinary services and are not required to enforce nonconforming fee arrangements as written.
- Dispensing with notice under Probate Code section 1220(c) requires “good cause”; tactical concealment of a fee arrangement from creditors, particularly those entitled to special notice, is insufficient.
- In setting extraordinary fees, a probate court may consider the benefit conferred, the estate’s financial condition, and the effect of fees on creditor recoveries.

## Conclusion

The Court of Appeal held that an hourly extraordinary-services fee agreement was not a statutory contingency fee and could not be approved without proper creditor notice; it nonetheless affirmed the probate court’s discretionary reduction of requested fees to $200,000 as reasonable under the estate’s circumstances.


Estate of Stevenson, 141 Cal. App. 4th 1074, 46 Cal. Rptr. 3d 573 (Cal. Ct. App. 2006)