{ "id": 4180499, "name": "In the Matter of the Foreclosure Of the Deed of Trust of: VOGLER REALTY, INC., Mortgagor-Grantor, to CHARLES N. STEDMAN, Trustee-Appellant, and J.B. LEE & COMPANY, a N.C. General Partnership, Noteholder. As recorded in Deed of Trust Book 1090, Page 338", "name_abbreviation": "In re the Foreclosure of the Deed of Trust of Vogler Realty, Inc.", "decision_date": "2010-12-07", "docket_number": "No. COA09-1714", "first_page": "212", "last_page": "227", "citations": [ { "type": "official", "cite": "208 N.C. App. 212" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "219 S.E.2d 502", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1975, "pin_cites": [ { "parenthetical": "action for wrongful foreclosure alleging, in part, breach of fiduciary duty by trustee" } ], "opinion_index": 0 }, { "cite": "27 N.C. App. 516", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8554743 ], "year": 1975, "pin_cites": [ { "parenthetical": "action for wrongful foreclosure alleging, in part, breach of fiduciary duty by trustee" } ], "opinion_index": 0, "case_paths": [ "/nc-app/27/0516-01" ] }, { "cite": "N.C. Gen. Stat. \u00a7 45-21.20", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "weight": 2, "opinion_index": 0 }, { "cite": "N.C. Gen. Stat. \u00a7 32-51", "category": "laws:leg_statute", "reporter": "N.C. Gen. 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Stat.", "year": 2009, "opinion_index": 1 }, { "cite": "266 S.E.2d 812", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1980, "pin_cites": [ { "page": "814-15" } ], "opinion_index": 1 }, { "cite": "300 N.C. 286", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8561053 ], "year": 1980, "pin_cites": [ { "page": "289" } ], "opinion_index": 1, "case_paths": [ "/nc/300/0286-01" ] }, { "cite": "16 S.E. 325", "category": "reporters:state_regional", "reporter": "S.E.", "year": 1892, "opinion_index": 1 }, { "cite": "111 N.C. 340", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8651306 ], "year": 1892, "opinion_index": 1, "case_paths": [ "/nc/111/0340-01" ] }, { "cite": "150 S.E. 32", "category": "reporters:state_regional", "reporter": "S.E.", "year": 1929, "opinion_index": 1 }, { "cite": "197 N.C. 572", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8630410 ], "year": 1929, "opinion_index": 1, "case_paths": [ "/nc/197/0572-01" ] }, { "cite": "200 S.E.2d 40", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1972, "opinion_index": 1 }, { "cite": "284 N.C. 236", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8560879 ], "year": 1972, "opinion_index": 1, "case_paths": [ "/nc/284/0236-01" ] }, { "cite": "143 S.E. 254", "category": "reporters:state_regional", "reporter": "S.E.", "year": 1928, "opinion_index": 1 }, { "cite": "195 N.C. 644", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8631205 ], "year": 1928, "opinion_index": 1, "case_paths": [ "/nc/195/0644-01" ] }, { "cite": "70 S.E.2d 578", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1952, "opinion_index": 1 }, { "cite": "235 N.C. 446", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8625413 ], "year": 1952, "opinion_index": 1, "case_paths": [ "/nc/235/0446-01" ] }, { "cite": "227 S.E.2d 120", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1976, "pin_cites": [ { "page": "123" } ], "opinion_index": 1 }, { "cite": "30 N.C. 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Stat.", "opinion_index": 1 } ], "analysis": { "cardinality": 1209, "char_count": 37291, "ocr_confidence": 0.735, "pagerank": { "raw": 4.03580807328026e-08, "percentile": 0.13732673217627747 }, "sha256": "0904852653501c478c18a4e48fffe6023fa8a53ba541dbee444824251f4cb44b", "simhash": "1:8bfb3542d57aae50", "word_count": 6185 }, "last_updated": "2023-07-14T21:19:36.775795+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Judge STROUD concurs.", "Judge HUNTER, JR. dissents with a separate opinion." ], "parties": [ "In the Matter of the Foreclosure Of the Deed of Trust of: VOGLER REALTY, INC., Mortgagor-Grantor, to CHARLES N. STEDMAN, Trustee-Appellant, and J.B. LEE & COMPANY, a N.C. General Partnership, Noteholder. As recorded in Deed of Trust Book 1090, Page 338" ], "opinions": [ { "text": "McGEE, Judge.\nCharles N. Stedman (the Trustee) was trustee on a deed of trust executed by Vogler Realty, Inc. (the Mortgagor-Grantor) and J.B. Lee & Company, to a parcel of land in Burlington. The Trustee, acting both as Trustee and the Trustee\u2019s Attorney, filed a foreclosure proceeding under power of sale as set forth in the deed of trust, on 20 March 2009. The Alamance County Clerk of Superior Court (the Clerk) conducted a hearing at which the Mortgagor-Grantor appeared, admitted its default, and did not contest the foreclosure. The Clerk entered an order authorizing the Trustee to proceed with the foreclosure sale. After the sale was completed, the Trustee filed a Final Report and Account of Foreclosure Sale (the Final Report), for audit and approval, dated 26 June 2009. In the Final Report, the Trustee noted, inter alia, the following disbursements to himself: (1) \u201cTrustee\u2019s Commission\u201d in the amount of $16,813.12; and (2) \u201cAttorney\u2019s Fee\u201d in the amount of $33,573.82.\nAt the time of the sale, CommunityOne Bank, N.A. (the Bank) was a junior lienholder on the real property secured by the deed of trust. The Bank filed a \u201cmotion and objection to disbursements pursuant to the final report and account of foreclosure\u201d on 13 July 2009. The Bank argued that the Trustee\u2019s Final Report authorized a disbursement of additional attorney\u2019s fees beyond that which was justified, and that the Trustee failed to properly support the amount of the attorney\u2019s fees. The Clerk entered an order on 27 July 2009, disapproving the Final Report and ordering the following:\n1. The proposed Final Report and Account of Foreclosure Sale dated June 26, 2009 and showing a Trustee\u2019s Commission payable to the Trustee/Attomey in the amount of Sixteen Thousand Eight Hundred Thirteen Dollars and Twelve Cents ($16,813.12) and Attorney\u2019s fees payable to the Trustee/ Attorney in the amount of Thirty-Three Thousand Five Hundred Seventy-Three Dollars and Eighty Two Cents ($33,573.82) is not approved.\n2. Within thirty (30) days of the docketing of this Order, Trustee/Attorney Charles N. Stedman is to prepare an Amended Final Report and Account of Foreclosure Sale reflecting receipt of Sixteen Thousand Eight Hundred Thirteen Dollars and Twelve Cents ($16, 813.12), being the Trustee\u2019s Commission of Five Percent (5%), plus additional attorney\u2019s fees in the amount of Four Thousand Seven Hundred Twenty Six Dollars and Eighty Eight Cents ($4,726.88), to be shown on separate lines of the amended Final Report and Account of Foreclosure Sale.\n3. The Amended Final Report and Account of Foreclosure Sale shall be submitted to the Clerk of Superior Court for review, audit, and recording within thirty (30) days of the docketing of this Order, unless this Order is appealed to Alamance County Superior Court.\nThe Trustee appealed the Clerk\u2019s 27 July 2009 order to the superior court which, in an order entered 4 November 2009, \u201caffirm[ed] the Clerk\u2019s Order, in its entirety.\u201d The Trustee appeals.\nThe Trustee first argues that the trial court erred in affirming the Clerk\u2019s order because neither the superior court nor the Clerk had authority to make determinations of reasonableness when auditing the Trustee\u2019s Final Report. We agree.\nN.C. Gen. Stat. \u00a7 45-21.31(a) sets forth the procedure for distributing the proceeds of a sale from a foreclosure action:\nThe proceeds of any sale shall be applied by the person making the sale, in the following order, to the payment of\u2014\n(1) Costs and expenses of the sale, including the trustee\u2019s commission, if any, and a reasonable auctioneer\u2019s fee if such expense has been incurred;\n(2) Taxes due and unpaid on the property sold, as provided by G.S. 105-385, unless the notice of sale provided that the property be sold subject to taxes thereon and the property was so sold;\n(3) Special assessments, or any installments thereof, against the property sold, which are due and unpaid, as provided by G.S. 105-385, unless the notice of sale provided that the property be sold subject to special assessments thereon and the property was so sold;\n(4) The obligation secured by the mortgage, deed of trust or conditional sale contract.\nN.C. Gen. Stat. \u00a7 45-21.31(a) (2009). Likewise, N.C. Gen. Stat. \u00a7 45-21.33 provides for a: \u201cFinal report of sale of real property\u201d and an audit by the clerk of superior court, as follows:\n(a) A person who holds a sale of real property pursuant to a power of sale shall file with the clerk of the superior court of the county where the sale is held a final report and account of his receipts and disbursements within 30 days after the receipt of the proceeds of such sale. Such report shall show whether the property was sold as a whole or in parts and whether all of the property was sold. The report shall also show whether all or only a part of the obligation was satisfied with respect to which the power of sale of property was exercised.\n(b) The clerk shall audit the account and record it.\nN.C. Gen. Stat. \u00a7 45-21.33 (2009).\nIn In re Foreclosure of Ferrell Brothers Farms, our Court addressed the scope of the statutory authority granted to the clerk of superior court when conducting an audit pursuant to N.C.G.S. \u00a7 45-21.33. Ferrell, 118 N.C. App. 458, 455 S.E.2d 676 (1995). In Ferrell, we reviewed the trial court\u2019s order granting the trustee in a foreclosure proceeding a trustee\u2019s commission, as well as allowing the payment of the trustee\u2019s attorneys\u2019 fees. Id. at 459, 455 S.E.2d at 677. After the sale, the holder of a second mortgage filed notice with the trial court, claiming ownership of any surplus funds from the foreclosure sale. Id. The trustee and the trustee\u2019s attorneys filed motions with the trial court to allow the commission and attorneys\u2019 fees, while the second mortgagee moved \u201cto limit\u201d the attorneys\u2019 fees and the trustee\u2019s commission. Id. The trial court conducted a hearing but did not allow the second mortgagee to present evidence as to the reasonableness of the commission and attorneys\u2019 fees. Id. The trial court determined that the requested commission and attorneys\u2019 fees were reasonable and that the trustee and attorneys were entitled to those disbursements. Id.\nOur Court stated that the issue for review was \u201cwhether a trustee conducting a sale of real property pursuant to an express power of sale contained in a mortgage or deed of trust is required to receive court approval of the amount of disbursements made pursuant to N.C. Gen. Stat. \u00a7 45-21.31(a).\u201d Id. \u201cThe only question is whether the legislature has provided or whether the instrument provides any means for [the second mortgagee] to contest the amount of disbursements made by the trustee. The answer is no.\" Id. at 460, 455 S.E.2d at 677-78 (emphasis added).\nIn reviewing the relevant law, our Court noted that: \u201cThe trustee is entitled to compensation \u2018as is stipulated in the instrument,\u2019 . . . [and] [although N.C. Gen. Stat. \u00a7 45-21.31(a) does not have specific reference to attorneys\u2019 fees, to the extent the instrument provides for the payment of such fees, they become an \u2018obligation secured by\u2019 the instrument.\u201d Id. at 460-61, 455 S.E.2d at 677. We therefore recognized that \u201cany entitlement to and the amount of attorneys\u2019 fees required for the conduct of the sale is also controlled by the instrument and subject to deduction from the sale proceeds.\u201d Id. at 461, 455 S.E.2d at 677.\nOur Court then addressed the issue of whether the trustee was required to seek approval of the amount of disbursements:\nChapter 45, Article 2A contains no language that suggests the trustee must seek or obtain approval from either the clerk of the superior court or the court prior to making the disbursements permitted in N.C. Gen. Stat. \u00a7 45-21.31(a). . . . Thus, in this case, the disbursements made pursuant to N.C. Gen. Stat. \u00a7 45-21.31(a) are within the sole province of the trustee. The trustee is required to file a final report and that report must be audited by the clerk of the superior court. In conducting the \u201caudit,\u201d however, the clerk is merely authorized to determine whether the entries in the report reflect the actual receipts and disbursements made by the trustee..\nAccordingly, the trial court did not err in refusing to allow [the second mortgagee] to present evidence on the reasonableness of the trustee\u2019s commission and attorneys\u2019 fees. Indeed, the reasonableness of these expenses was not an issue properly before the trial court.\nId., 455 S.E.2d at 678 (emphasis added). Thus, we held in Ferrell that a clerk of superior court, conducting an audit of a final report and account of sale pursuant to N.C.G.S. \u00a7 45-21.33, lacks the statutory authority to make determinations of the reasonableness of expenses listed on the report. Id.\nOur Court revisited this issue in In re Foreclosure of Webber, 148 N.C. App. 158, 557 S.E.2d 645 (2001). In Webber, the trustee sought pre-approval from the clerk of superior court of certain costs, expenses, and obligations related to a foreclosure sale. Id. at 158-59, 557 S.E.2d at 645. The trustee allocated a payment of \u201c$12,000.00 in legal fees.\u201d Id. at 160, 557 S.E.2d at 646. The mortgagees objected to certain of the proposed payments, and the clerk of superior court conducted a hearing. Id. at 159-60, 557 S.E.2d at 645-46. The clerk entered judgment disapproving the amount of attorney\u2019s fees and reducing them, which was appealed to the superior court. Id. at 160, 557 S.E.2d at 646. The superior court ruled, inter alia, that it had jurisdiction to conduct de novo review of the clerk\u2019s order; that the clerk did not exceed his authority in entering the order; and that the amount of attorney\u2019s fees should be increased in part. Id. The trustee and the mortgagors appealed. Id. On appeal to our Court, we noted that\nwithin the context of a foreclosure proceeding pursuant to Chapter 45, Article 2A, the legislature has not provided any means for a party to contest payments made by a trustee pursuant to [N.C.G.S. \u00a7 45-21.31] subsection (a), and that disputes regarding such payments are not issues properly before the clerk of superior court or the superior court as a part of a foreclosure proceeding.\nId. at 161, 557 S.E.2d at 647 (citing Ferrell, 118 N.C. App. at 461, 455 S.E.2d at 678). Our Court then held that the trustee\u2019s attorney\u2019s fees fell \u201cwithin the costs, expenses, and other obligations listed in subsection (a) of N.C. Gen. Stat. \u00a7 45-21.31.\u201d Id. at 162, 557 S.E.2d at 647. Therefore, the trustee\u2019s proposed payments of attorney\u2019s fees were \u201c \u2018within the sole province of the trustee.\u2019 \u201d Id. (quoting Ferrell, 118 N.C. at 461, 455 S.E.2d at 678). Finally, our Court held that\nneither the clerk of superior court nor the superior court had statutory authority under Chapter 45, Article 2A, to review the trustee\u2019s proposed application of the proceeds of the foreclosure sale, or to allow, disallow, or modify the amount of such proposed payments, or to rule on whether the trustee had breached his fiduciary duties.\nWebber, 148 N.C. App. at 162, 577 S.E.2d at 647-48.\nIn the case before us, we find Ferrell and Webber controlling. The facts in the present case show that the Trustee conducted a foreclosure sale under a deed of trust containing a power of sale pursuant to Chapter 45, Article 2A of the General Statutes. The Trustee filed a Final Report pursuant to N.C.G.S. \u00a7 45-21.33, dated 26 June 2009. In the Final Report, pursuant to N.C. Gen. Stat. \u00a7 45-21.31, the Trustee set forth several items, including the distribution of the proceeds of the sale. As stated in Ferrell, \u201cany entitlement to and the amount of attorneys\u2019 fees required for the conduct of the sale is also controlled by the instrument and subject to deduction from the sale proceeds.\u201d Ferrell, 118 N.C. App. at 461, 455 S.E.2d at 677-78. The deed of trust in the case before us specifically provides that the Trustee may \u201cretain an attorney to represent him in such proceedings [under power of sale] . . . [and that] [t]he proceeds of the Sale shall[,] after the trustee retains his commission, together with reasonable attorneys fees incurred by the Trustee in such proceeding, be applied to the costs of sale[.]\u201d Thus, the Trustee\u2019s payment of attorney\u2019s fees and his own compensation fall within the \u201ccosts, expenses, and other obligations listed in subsection (a)\u201d of N.C.G.S. \u00a7 45-21.31, and were \u201c \u2018within the sole province of the trustee.\u2019 \u201d Webber, 148 N.C. App. at 162, 557 S.E.2d at 647 (quoting Ferrell, 118 N.C. App. at 461, 455 S.E.2d at 678).\nThe Bank argued in its motion and objection to disbursements in the Final Report, and in its brief, that the Trustee\u2019s payment of additional attorney\u2019s fees to himself, as attorney for the Trustee, was prohibited by N.C. Gen. Stat. \u00a7 32-61 and by our Court\u2019s holding in In re Foreclosure of Newcomb, 112 N.C. App. 67, 434 S.E.2d 648 (1993). The Bank also relies on language from the North Carolina Clerk of Superior Court Procedures Manual, which states that: \u201cExcept in unusual circumstances, there is no authority to justify receipt by a trustee/attorney of both a trustee\u2019s fee and a separate attorney fee for a foreclosure under power of sale contained in a deed of trust.\u201d School of Government, University of North Carolina at Chapel Hill 2003 at 130.5. The Bank also refers us to the Corpus Juris Secundum. However, neither Corpus Juris Secundum nor the Procedures Manual are binding authority on this Court, whereas the North Carolina General Statutes and prior case law of our Court are.\n. In Newcomb, our Court addressed the clerk of superior court\u2019s authority, under former N.C. Gen. Stat. \u00a7 32-51, to review the reasonableness of an attorney-trustee\u2019s payment to himself of attorney\u2019s fees incurred during an incomplete foreclosure sale that was terminated pursuant to N.C. Gen. Stat. \u00a7 45-21.20. Newcomb, 112 N.C. App. 67, 434 S.E.2d 648. We note that the current N.C.G.S. \u00a7 32-61 contains substantially the same provisions as in the former N.C.G.S. \u00a7 32-51. N.C. Gen. Stat. \u00a7 32-61 provides that:\nThe clerk of superior court may exercise discretion to allow counsel fees to an attorney serving as a fiduciary or trustee (in addition to the compensation allowed to the attorney as a fiduciary or trustee) where the attorney, on behalf of the trust or fiduciary relationship, renders professional services as an attorney that are different from the services normally performed by a fiduciary or trustee and of a type which would reasonably justify the retention of legal counsel by a fiduciary or trustee who is not licensed to practice law.\nN.C. Gen. Stat. \u00a7 32-61 (2009).\nIn Newcomb, the trustee-attorney initiated a foreclosure sale, but the mortgagor decided to satisfy the outstanding debt prior to completion of the sale pursuant to N.C. Gen. Stat. \u00a7 45-21.20. Newcomb, 112 N.C. App. at 69, 434 S.E.2d at 649. The trustee-attorney agreed to the arrangement proposed by the mortgagor, but \u201cinsisted upon a commission of $10,000.00 to accomplish termination of the power of sale[.]\u201d Id. Eventually, the property was sold by the mortgagor through a private sale pursuant to N.C.G.S. \u00a7 45-21.20, and the trustee-attorney and the mortgagor brought the issue of the $10,000.00 commission before the clerk of superior court. Id. The clerk ordered $10,000.00 to be paid to the trustee-attorney as a commission. Id. The superior court affirmed, ruling that the trustee-attorney was entitled to the $10,000.00 as \u201cboth commission and compensation for legal services.\u201d Id. at 72, 434 S.E.2d at 651 (emphasis in the original).\nCiting former N.C.G.S. \u00a7 32-51, our Court in Newcomb held:\nWhen a trustee of a deed of trust who is also a licensed attorney performs such extraordinary services as described in [former N.C.G.S. \u00a7 32-51] in connection with a foreclosure proceeding, . . . counsel is entitled under [N.C.]G.S. \u00a7 45-21.20 to an award of attorney\u2019s fees as an \u201cexpense [] incurred with respect to the sale or proposed sale . . . .\u201d\nId. However, we noted that \u201c[i]n passing on the allowance of attorney\u2019s fees pursuant to statutory authority . . . our appellate courts have consistently held a trial court\u2019s order \u2018must contain a finding or findings upon which a determination of the reasonableness of the award can be based[.]\u2019 \u201d Id. (citation omitted). Our Court then reviewed the record and concluded that the \u201cfindings of fact and conclusions of law [did] not support the amount of attorneys\u2019 fees awarded as \u2018legal expenses].]\u2019 \u201d Id. at 74, 434 S.E.2d at 652.\nThus, as the Bank contends, Newcomb did recognize the role of the clerk in evaluating the reasonableness of an attorney-trustee\u2019s payment of fees to himself. However, the Bank\u2019s reliance on Newcomb is misplaced with respect to its argument that the clerk may review a trustee-attorney\u2019s payment of fees when auditing a final report. Newcomb, and its application of N.C.G.S. \u00a7 32-51, dealt solely with a foreclosure sale that was incomplete and terminated pursuant to N.C.G.S. \u00a7 45-21.20, which is a different context than that which faces us now.\nIn contrast, our Court in Ferrell and Webber dealt with cases where the trustee completed the foreclosure sale and filed a final report pursuant to N.C.G.S. \u00a7 45-21.33. Neither Ferrell nor Webber discussed the applicability of N.C.G.S. \u00a7 32-51 to a clerk\u2019s audit of a final report pursuant to N.C.G.S. \u00a7 45-21.33. The proceeding in the case before us arose from the Bank\u2019s objections to the Trustee\u2019s Final Report pursuant to N.C.G.S. \u00a7 45-21.33, and thus Ferrell and Webber, rather than Newcomb, are controlling. Under N.C.G.S. \u00a7 45-21.33, the clerk \u201cis merely authorized to determine whether the entries in the report reflect the actual receipts and disbursements made by the trustee.\u201d Ferrell, 118 N.C. App. at 461, 455 S.E.2d at 678.\nThe dissenting opinion contends that Newcomb is not limited to proceedings where a sale was terminated pursuant to N.C.G.S. \u00a7 45- 21.20. The dissent also maintains that there is an existing conflict between Newcomb, Ferrell, and Webber and questions the role of our Court in resolving that perceived conflict. Although we do not disagree that the holding in Newcomb is not expressly limited to circumstances involving N.C.G.S. \u00a7 45-21.20, we find that Newcomb is clearly distinguishable from Webber, Ferrell, and the present case because of the focus in Webber and Ferrell of the authority of a clerk regarding' an audit of a final report and account of sale pursuant to N.C.G.S. \u00a7 45-21.33. In making this distinction, our interpretation of Webber and Ferrell reconciles the holdings in those two cases with that of Newcomb and is most applicable to the procedural posture in the case before us.\nOur Court provided further guidance in Webber, stating:\nWe suggest that the proper procedure, as contemplated by Chapter 45, Article 2A, was for the trustee to have: (1) made all payments pursuant to subsection (a) of N.C. Gen. Stat. \u00a7 45-21.31 as he deemed proper in his discretion; (2) either paid the surplus to the persons entitled thereto, or paid the surplus to the clerk if there were any dispute as to who was entitled thereto, pursuant to N.C. Gen. Stat. \u00a7 45-21.31(b); and (3) filed a final report and account with the clerk pursuant to N.C. Gen. Stat. \u00a7 45-21.33. We note that a party wishing to challenge payments made pursuant to N.C. Gen. Stat. \u00a7 45-21.31(a) may do so in a separate proceeding against the trustee for a breach of fiduciary duty once such payments have been made. See Sloop v. London, 27 N.C. App. 516, 219 S.E.2d 502 (1975) (action for wrongful foreclosure alleging, in part, breach of fiduciary duty by trustee).\nId. at 162-63, 577 S.E.2d at 648. In the case before us, the Bank challenged payments listed in the Final Report made pursuant to N.C.G.S. \u00a7 45-21.33. The \u201cproper procedure,\u201d as set forth in Webber, would have been for the Trustee to make payments as he deemed proper under N.C.G.S. \u00a7 45-21.31 (a) and (b), and then to file his Final Report. The Clerk should have audited the Final Report solely to determine whether the payments were made as reflected in the Final Report. Thereafter, if the Bank wished \u201cto challenge payments made pursuant to N.C. Gen. Stat. \u00a7 45-21.31(a)[,] [it could] do so in a separate proceeding against the [T]rustee for a breach of fiduciary duty once such payments [had] been made.\u201d Webber, 148 N.C. App. at 163, 557 S.E.2d at 648. The \u201cproper procedure\u201d suggested by Webber focuses on the correctness of the foreclosure proceeding itself. Nothing in our holding affects the right of an aggrieved party to challenge the actions of a trustee in a separate action against the trustee focused on the propriety of the trustee\u2019s actions, just not by motion filed at the time of the audit where the clerk is without authority to resolve such matters.\nBecause the Clerk lacked statutory authority to assess the reasonableness of the payments set out in the Trustee\u2019s Final Report, the Clerk\u2019s order must be vacated. Id. We therefore vacate the Clerk\u2019s order and the trial court\u2019s order affirming it. In light of our ruling, we need not address the Trustee\u2019s remaining arguments.\nVacated.\nJudge STROUD concurs.\nJudge HUNTER, JR. dissents with a separate opinion.", "type": "majority", "author": "McGEE, Judge." }, { "text": "HUNTER, JR., Robert N., Judge,\ndissenting.\nFor the reasons set forth herein, I must respectfully dissent.\nThe majority opinion addresses two lines of conflicting authority from this Court regarding the discretion, if any, the clerk of court and the superior court possess to approve or deny the attorney\u2019s fees charged by trustees in a foreclosure proceeding. In re Foreclosure of Newcomb, 112 N.C. App. 67, 434 S.E.2d 648 (1993) represents the first line of cases; and In re Foreclosure of Ferrell Brothers Farms, 118 N.C. App. 458, 455 S.E.2d 676 (1995), and In re Foreclosure of Webber, 148 N.C. App. 158, 557 S.E.2d 645 (2001), represent the second line of cases.\nIn Newcomb, this Court addresses the propriety of the trial court\u2019s order approving a request by the attorney-trustee for attorney\u2019s fees as a \u201cfair and proper amount.\u201d 112 N.C. App. at 70, 434 S.E.2d at 650. The Newcomb Court noted that N.C. Gen. Stat. \u00a7 32-51 provides for \u201ccounsel fees,\u201d in addition to the compensation to be paid to an attorney for his services as a trustee when an attorney-trustee provides services during the foreclosure that would justify the retention of counsel. Id. at 72, 434 S.E.2d at 651 (quoting N.C. Gen. Stat. \u00a7 32-51 (1991) (repealed 2005)).\nI agree with the majority that the language of the statute supporting the decision in Newcomb, N.C. Gen. Stat. \u00a7 32-51, is substantially the same as the presently enacted section 32-61, which permits counsel fees for attorneys serving as fiduciaries. N.C. Gen. Stat. \u00a7 32-61 (2009). I further agree that Newcomb recognizes that the clerk of superior court and the superior court have discretion in determining the reasonableness of an attorney-trustee\u2019s request for disbursement of fees to himself. I cannot agree, however, that Newcomb limits the clerk\u2019s or the trial court\u2019s discretion in determining \u201creasonable attorneys\u2019 fees\u201d to only those situations in which the foreclosure was arrested by payment of the underlying debt pursuant to N.C. Gen. Stat. \u00a7 45-21.20 (2009).\nLongstanding North Carolina precedent permits the award of attorneys\u2019 fees only when the fees are provided for in an instrument and allowed by statute.\nAs was stated by Chief Judge (now Justice) Brock in Supply, Inc. v. Allen, 30 N.C. App. 272, 276, 227 S.E.2d 120, 123 (1976), \u201c[t]he jurisprudence of North Carolina traditionally has frowned upon contractual obligations for attorney\u2019s fees as part of the costs of an action.\u201d Certainly in the absence of any contractual agreement allocating the costs of future litigation, it is well established that the non-allowance of counsel fees has prevailed as the policy of this state at least since 1879. See Trust Co. v. Schneider, 235 N.C. 446, 70 S.E.2d 578 (1952); Parker v. Realty Co., 195 N.C. 644, 143 S.E. 254 (1928). Thus the general rule has long obtained that a successful litigant may not recover attorneys\u2019 fees, whether as costs or as an item of damages, unless such a recovery is expressly authorized by statute. Hicks v. Albertson, 284 N.C. 236, 200 S.E.2d 40 (1972). Even in the face of a carefully drafted contractual provision indemnifying a party for such attorneys\u2019 fees as may be necessitated by a successful action on the contract itself, our courts have consistently refused to sustain such an award absent statutory authority therefor. Howell v. Roberson, 197 N.C. 572, 150 S.E. 32 (1929); Tinsley v. Hoskins, 111 N.C. 340, 16 S.E. 325 (1892).\nStillwell Enterprises v. Interstate Equipment Co., 300 N.C. 286, 289, 266 S.E.2d 812, 814-15 (1980).\nIn the foreclosure proceeding underlying the instant case, Volger Realtor (hereinafter \u201cdebtor\u201d) signed a promissory note dated 26 June 1997 in the principal amount of $250,000 to accrue interest at the rate of 9% per annum and payable in 179 equal monthly installments of $2,011.56. The promissory note\u2019s language provides for receipt of attorneys\u2019 fees as follows:\nUpon default the holder of this Note may employ an attorney to enforce the holder\u2019s rights and remedies and the . . . endorsers of this Note hereby agree to pay to the holder reasonable attorneys\u2019 fees not exceeding a sum equal to fifteen percent (15%) of the outstanding balance owing on said Note, plus all other reasonable expenses incurred by the holder in exercising any of the holder\u2019s rights and remedies upon default.\n(Emphasis added.) The note further provides, \u201c [tjhis note is to be governed and construed in accordance with the laws of the State of North Carolina.\u201d\nThe debtor\u2019s obligation was secured by a \u201cNorth Carolina Deed of Trust\u201d form prepared by the N.C. Bar Association. This document provides the following language:\nIf, however, there shall be any default (a) in the payment of any sums due under the Note, this Deed of Trust or any other instrument securing the Note and such default is not cured within ten (10) days from the due date, or (b) if there shall be default in any of the other covenants, terms or conditions of the Note secured hereby . . . and such default is not cured within fifteen (15) days after written notice, then in any of such events, without further notice, it shall be lawful for and the duty of the Trustee, upon request of the Beneficiary, to sell the land herein conveyed at public auction for cash ....\nThe proceeds of the Sale shall after the Trustee retains his commission, together with reasonable attorneys fees incurred by the trustee in such proceeding, be applied to the costs of sale, including, but not limited to, costs of collection, taxes, assessments, costs of recording, service fees and incidental expenditures, the amount due on the Note hereby secured and advancements and other sums expended by the Beneficiary according to the provisions hereof and otherwise required by the then existing law relating to foreclosures.\n(Emphasis added.) These are all the relevant terms of the instruments which govern the award of a trustee\u2019s commissions and a payment of attorneys\u2019 fees in this case.\nA trustee in a foreclosure proceeding may or may not require the services of an attorney. When a non-attorney trustee employs an attorney, one assumes that the trustee examines the fee to be charged in discharge of his fiduciary duty to act as a reasonable person would act in conducting his own affairs and insure that the attorneys\u2019 fees charged are reasonable. When a trustee also serves as the attorney for the foreclosure proceeding, however, self-dealing makes the exercise of fiduciary duty problematic for the trustee and the determination of a \u201creasonable\u201d-fee under N.C. Gen. Stat. \u00a7 32-61 is given to the clerk.\nFor example, the trustee in prosecuting this foreclosure proceeding acted in conformance with North Carolina law provided in N.C. Gen. Stat. \u00a7 6-21.2 (2009) and \u00a7 32-61 that enables him to receive \u201creasonable attorneys\u2019 fees\u201d under an instrument of indebtedness. For example, his affidavit contains the following language:\nIn my experience, a reasonable attorney\u2019s fee for the attorney representing the trustee in a foreclosure special proceeding of fifteen percent (15%) of the outstanding balance due on a note immediately prior to the filing of a foreclosure special proceeding is a fair and reasonable fee and is supported by the statutory and case law of North Carolina.\nIn addition, the trustee filed with the clerk of court an itemization of his time spent in this matter as trustee and as attorney for the trustee and copies of the documents he prepared. These documents were submitted along with his motion to audit and approve his final account. An examination of the record reveals that the trustee in this matter submitted a factual basis for an award of attorneys\u2019 fees using the proper procedure, which I would hold needs to be utilized in all foreclosure proceedings. In my opinion, this action judicially estops the appellant from submitting a different argument on appeal than the argument he put forth in the underlying proceeding. Even if estoppel is not applicable here, it appears this appeal is not based on a difference in law as to what procedure should be used to determine a reasonable fee, but instead is based on a disappointment in the results of the procedure utilized.\nThe note and deed of trust should be read in pari materia to allow an attorney, or a trustee collecting on the note for the holder, to collect reasonable counsel fees \u201cnot to exceed fifteen percent\u201d of the note. When an instrument does not provide for calculation of the amount of \u201creasonable\u201d attorneys\u2019 fees, as in the present case, our courts have held such calculation to be a proper subject for judicial determination. \u201cWhen the court determines that an award of attorneys\u2019 fees is appropriate, but such amount is not fixed by statute or otherwise, the amount ordinarily lies with the discretion of the court.\u201d Coastal Production Credit Ass\u2019n v. Goodson Farms, Inc., 70 N.C. App. 221, 319 S.E.2d 650 (1984) (citing Hill v. Jones, 26 N.C. App. 168, 170, 215 S.E.2d 168, 170 (1975)).\nThe plain language of the deed of trust, as well as North Carolina law, imposes a duty to use diligence and fairness in conducting the sale and receiving and disbursing the proceeds of the sale. Sloop v. London, 27 N.C. App. 516, 219 S.E.2d 502 (1975). Our Supreme Court has described the duty of the trustee as follows:\nThe relaxation of the strict rules equity imposes upon the mortgagor in relation to deeds of trust is predicated upon the theory that the trustee is a disinterested third party acting as agent both of the debtor and of the creditor, thus removing any opportunity for oppression by the creditor and assuring fair treatment to the debtor. He is trustee for both debtor and creditor with respect to the property conveyed. A creditor can exercise no power over his debtor with respect to such property because of its conveyance to the trustee with power to sell upon default of the debtor.\nThe trustee for sale is bound by his office to bring the estate to a sale under every possible advantage to the debtor as well as to the creditor and he is bound to use not only good faith but also every requisite degree of diligence in conducting the sale and to attend equally to the interest of the debtor and the creditor alike, apprising both of the intention of selling, that each may take the means to procure an advantageous sale. He is charged with the duty of fidelity as well as impartiality, of good faith and every requisite degree of diligence, of making due advertisement and giving due notice. Upon default his duties are rendered responsible, critical and active and he is required to act discreetly, as well as judiciously, in making the best use of the security for the protection of the beneficiaries.\nMills v. Building & Loan Ass\u2019n, 216 N.C. 664, 669, 6 S.E.2d 549, 552 (1940) (citations omitted).\nGiven this theory of foreclosure law, it is clear, whether the foreclosure is complete or partial, that a trustee is a fiduciary within the context of N.C. Gen. Stat. \u00a7 32-61. In this context, a debtor or his assignee, such as a second mortgagee whose pecuniary interest in the proceeds created by the sale (the in rem estate), adversely affected by a trustee\u2019s discretion, has the right to petition the clerk for relief. In this case, the original debtor\u2019s liability for funds due the second mortgagee is adversely affected where the trustee reduces the amount of proceeds available to the second mortgagor. I would hold a successor in interest to the debtor has sufficient standing to raise this issue before the clerk.\nNewcomb has not been directly overruled by another panel of this Court. Our panel lacks the ability to overrule Newcomb as well. The two decisions cited by the majority in support of its opinion, Ferrell and Webber, postdate Newcomb without expressly overruling or modifying its holding. Newcomb ratified a well-established procedure in clerks\u2019 offices across the state. Until Newcomb\u2019s rationale has been overruled or affirmed by our Supreme Court, the effect of the majority\u2019s decision places in doubt a practice which is efficient and beneficial and does so without any compensating benefit.\nThe remedy that Webber suggests, that a person injured by a trustee\u2019s decision may bring a suit for breach of fiduciary duty, seems to me to be a problematic solution for both the fiduciary and the debtor. Webber, 148 N.C. App. at 162-63, 577 S.E.2d at 648. Foreclosure procedures are intended to be summary and expeditious. Webber's proposed solution unnecessarily lengthens the dispute and would be estopped by a clerk\u2019s approval of fees charged.\nThe prompt judicial review of attorneys\u2019 fees is routine in probate and special proceedings matters and is a procedure familiar to both clerks and the practicing bar. For example, the appellee in this case prepared and filed his petition containing sufficient information with which a clerk or judge could ascertain a \u201creasonable fee.\u201d\nA trustee\u2019s commission fee is predetermined by the instrument or by statute. Permitting a trustee to set his own attorney\u2019s fees, however, when the fee is not established by the instruments is inherently a conflict of interest. For example, a trustee is prohibited from jointly representing himself and a noteholder under the North Carolina Rules of Professional Responsibility. See North Carolina Revised Rules of Professional Conduct, Rule 1.7 (2009). When a trustee self-deals with regard to fees he is charging a beneficiary, it would be difficult, if not impossible, for him to subsequently show he acted openly, honestly, and fairly taking no advantage of his beneficiary. On the other hand, when a fiduciary seeks judicial approval for his \u201creasonable\u201d fees in advance, any interested party may object openly and have the matter promptly resolved by a neutral decision maker. This latter procedure would meet the transparency standard required for trustees establishing their own compensation from funds which are under their supervision.\nAs neither our General Assembly nor our Supreme Court has resolved the conflict presented by Newcomb, Ferrell, and Webber, the real property practitioner will continue to have difficulty applying the law regarding this matter of significant public interest.\nOur statutes and case law hold that trustees are fiduciaries. See N.C. Gen. Stat. \u00a7 32-61; Sloop, 27 N.C. App. 516, 219 S.E.2d 502. Clerks are allowed to use discretion in the audit procedures contained in N.C. Gen. Stat. \u00a7 45-21.33 and \u00a7 32-61 for review of \u201creasonable\u201d attorneys\u2019 fees when the instruments do not provide a method of calculating those sums and when a trustee is also serving as his own attorney.", "type": "dissent", "author": "HUNTER, JR., Robert N., Judge," } ], "attorneys": [ "Stedman Law, by Charles N. Stedman, for Trustee-Appellant.", "Bell, Davis & Pitt, P.A., by Michael D. Phillips and Michael A. Myers, for CommunityOne Bank, N.A., Appellee." ], "corrections": "", "head_matter": "In the Matter of the Foreclosure Of the Deed of Trust of: VOGLER REALTY, INC., Mortgagor-Grantor, to CHARLES N. STEDMAN, Trustee-Appellant, and J.B. LEE & COMPANY, a N.C. General Partnership, Noteholder. As recorded in Deed of Trust Book 1090, Page 338\nNo. COA09-1714\n(Filed 7 December 2010)\nTrusts\u2014 foreclosure proceeding \u2014 attorney fees \u2014 audit of expenses in final report \u2014 reasonableness determination improper for superior court or clerk of court\nThe trial court erred by affirming a clerk of court\u2019s order disapproving a trustee\u2019s final report after a foreclosure proceeding, based on the amount of attorney fees. Neither the superior court nor the clerk of court had authority to make determinations of reasonableness of expenses when auditing the trustee\u2019s final report. Under N.C.G.S. \u00a7 45-21-33, the clerk was merely authorized to determine whether the entries in the report reflected the actual receipts and disbursements made by the trustee. An aggrieved party may challenge the trustee\u2019s actions in a separate action focused on the propriety of the trustee\u2019s actions instead of by motion filed at the time of the audit.\nJudge HUNTER, Robert N., dissenting.\nAppeal by Trustee from order entered 4 November 2009 by Judge Ronald L. Stephens in Superior Court, Alamance County. Heard in the Court of Appeals 12 May 2010.\nStedman Law, by Charles N. Stedman, for Trustee-Appellant.\nBell, Davis & Pitt, P.A., by Michael D. Phillips and Michael A. Myers, for CommunityOne Bank, N.A., Appellee." }, "file_name": "0212-01", "first_page_order": 236, "last_page_order": 251 }