Court Opinion

ID: 4094251
Source: CourtListenerOpinion
Date Created: 2016-11-01 12:09:26.092162+00
Date Added: 2024-06-11T14:36:59.633742
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                  No. COA16-443

                              Filed: 1 November 2016

Union County, No. 09 CVS 00674

SWAPS, LLC, Plaintiff,

             v.

ASL PROPERTIES, INC., THE HEYWARD GROUP D/B/A THE HEYWARD
COMPANIES and VIRGINIA E. FAVREAU, Defendants.

      Appeal by defendants from order entered 11 December 2015 by Judge W.

Erwin Spainhour in Union County Superior Court. Heard in the Court of Appeals 22

September 2016.

      Koy E. Dawkins for plaintiff-appellee.

      Raynor Law Firm, PLLC, by Kenneth R. Raynor, for defendants-appellants.

      DIETZ, Judge.

      The issue presented in this appeal is whether the North Carolina Uniform

Declaratory Judgment Act permits a trial court to award attorneys’ fees. We hold

that it does not.

      The act states that “the court may make such award of costs as may seem

equitable and just.” N.C. Gen. Stat. § 1–263. Our Supreme Court has held that costs

are a creature of statute and are governed solely by statute, not common law.
                           SWAPS, LLC V. ASL PROPS., INC.

                                   Opinion of the Court

      In the General Statutes, costs and attorneys’ fees are separate categories and

attorneys’ fees may be awarded as part of an award of “costs” only where the

authorizing statute expressly permits it. The Declaratory Judgment Act does not.

Accordingly, we vacate the trial court’s order awarding attorneys’ fees under the

Declaratory Judgment Act.

                          Facts and Procedural History

      Plaintiff Swaps, LLC prevailed on a claim under the North Carolina Uniform

Declaratory Judgment Act, N.C. Gen. Stat. § 1–253 et seq. Swaps later moved for an

award of attorneys’ fees and costs under N.C. Gen. Stat. § 1–263. The trial court

granted the motion and awarded Swaps $37,300.91 in attorneys’ fees and $677.61 in

court costs. Defendants timely appealed.

                                       Analysis

      The sole issue in this appeal is whether the Uniform Declaratory Judgment

Act permits a trial court to award attorneys’ fees. In a section titled “Costs,” the act

provides that “[i]n any proceeding under this article the court may make such award

of costs as may seem equitable and just.” N.C. Gen. Stat. § 1–263. The parties dispute

whether the term “costs” in Section 1–263 includes attorneys’ fees.

      “At common law, neither party recovered costs in a civil action and each party

paid his own witnesses.” Lassiter ex. rel. Baize v. N.C. Baptist Hosps. Inc., 368 N.C.
367, 375, 778 S.E.2d 68, 73 (2015) (quoting City of Charlotte v. McNeely, 281 N.C.

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                                   Opinion of the Court

684, 691, 190 S.E.2d 179, 185 (1972)). “Today in this State, all costs are given in a

court of law by virtue of some statute.” Id. (brackets omitted). As a result, awards of

“costs” to litigants in civil actions “are entirely creatures of legislation, and without

this they do not exist.” Id.

      For more than a century, the statutes governing costs generally have excluded

attorneys’ fees, and our Supreme Court has acknowledged that this was “deliberately

adopted as the policy” by our legislature. Wachovia Bank & Trust Co. v. Schneider,

235 N.C. 446, 454, 70 S.E.2d 578, 584 (1952). As a result “attorneys’ fees are not now

regarded as a part of the court costs in this jurisdiction.” Id.

      When the General Assembly intends to depart from this general rule, it always

has done so expressly. For example, N.C. Gen. Stat. § 6–21 governs costs in certain

civil proceedings and states that “[t]he word ‘costs’ as the same appears and is used

in this section shall be construed to include reasonable attorneys’ fees.” See also N.C.

Gen. Stat. §§ 6–21.1 to 6–21.7.

      Here, the General Assembly chose only to refer to “costs” in Section 1–263 and

not to specify that the term costs includes attorneys’ fees. Thus, we hold that N.C.

Gen. Stat. § 1–263 does not permit the trial court to award attorneys’ fees.

      Swaps does not dispute this reasoning or assert any textual argument for why

Section 1–263 should be interpreted to include attorneys’ fees. But Swaps argues

that this Court approved an award of attorneys’ fees under Section 1–263 in Phillips

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                                   Opinion of the Court

v. Orange Cty. Health Dep’t, 237 N.C. App. 249, 765 S.E.2d 811 (2014) and that this

Court is bound to follow Phillips. We disagree.

      In Phillips, this Court never stated that the word “costs” in Section 1–263

authorized an award of attorneys’ fees, nor did we engage in the analysis that we do

here. More importantly, Phillips involved a suit against a county, and in this Court’s

discussion of attorneys’ fees, we quoted N.C. Gen. Stat. § 6–21.7, which provides that

“[i]n any action in which a . . . county is a party, upon a finding by the court that the

. . . county acted outside the scope of its legal authority, the court may award

reasonable attorneys’ fees and costs to the party who successfully challenged the . . .

county’s action.” Phillips, 237 N.C. App. at 261, 765 S.E.2d at 820. Thus, Phillips

involved a case in which a different statute (not N.C. Gen. Stat. § 1–263) expressly

authorized the award of attorneys’ fees. Swaps does not identify a similar statute

that expressly authorizes attorneys’ fees in this case, and there is none.

      Swaps also cites Heatherly v. State, 189 N.C. App. 213, 658 S.E.2d 11 (2008),

in which the Court affirmed an award of “the costs of this litigation” under Section

1–263. But as in Phillips, in Heatherly this Court did not analyze the language of

Section 1–263 or hold that the word “costs” in Section 1–263 authorized an award of

attorneys’ fees. Indeed, the majority opinion does not even mention attorneys’ fees.

And, in any event, Heatherly later was affirmed by an equally divided Supreme Court

in a per curiam opinion holding that “the decision of the Court of Appeals is left

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                                  Opinion of the Court

undistributed without precedential value.” Heatherly v. State, 363 N.C. 115, 115, 678
S.E.2d 656, 657 (2009). Thus, we would not be bound by Heatherly even if that

decision had addressed the issue (which it did not).

      Our holding today also aligns our interpretation of the Uniform Declaratory

Judgment Act with the overwhelming majority of other jurisdictions to address this

issue under their versions of the act. As with other uniform laws, the Uniform

Declaratory Judgment Act “shall be so interpreted and construed as to effectuate its

general purpose to make uniform the law of those states which enact it.” N.C. Gen.

Stat. § 1–266.

      Other states interpreting this same provision in their own versions of this

uniform law have held that the term “costs” does not include attorneys’ fees. See Nat’l

Union Fire Ins. Co. of Pittsburgh, P.A. v. Dixon, 112 P.3d 825, 830 (Idaho 2005)

(holding Idaho UDJA “does not provide authority to award attorney fees in a

declaratory action”); Trs. of Ind. Univ. v. Buxbaum, 69 P.3d 663, 670 (Mont. 2003)

(holding Montana UDJA provision allowing court to make award of costs “does not

authorize an award of attorney fees”); Pub. Entity Pool v. Score, 658 N.W.2d 64, 68

(S.D. 2003) (“No provision in the [sic] South Dakota’s Declaratory Judgment Act

allows for an award of attorney’s fees to the prevailing party.”); Soundgarden v.

Eikenberry, 871 P.2d 1050, 1064 (Wash. 1994) (“[The Uniform Declaratory Judgment

Act] provides that ‘[i]n any proceeding under this chapter, the court may make such

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                                   Opinion of the Court

award of costs as may seem equitable and just.’ But the term ‘costs’ does not include

‘attorney fees’.” (second alteration in original)); Kremers-Urban Co. v. Am. Emp’rs Ins.

Co., 351 N.W.2d 156, 168 (Wis. 1984) (“We decline to expand or enlarge the ‘costs’

available in declaratory judgment actions to include attorney’s fees.”).            Our

interpretation of Section 1–263 aligns our state’s law with these other states’

interpretation of this uniform act.

      Finally, Swaps makes a policy argument for the award of attorneys’ fees under

N.C. Gen. Stat. § 1–263, asserting that the “recovery of cost and attorney’s fees is of

utmost importance to the litigants in a Declaratory Judgment Action” and that, if the

trial court has no authority to grant attorneys’ fees under the Declaratory Judgment

Act, “why bring the action under the Declaratory Judgment Act?”

      The answer, of course, is that the Uniform Declaratory Judgment Act provides

a mechanism for parties to have their respective rights and obligations adjudicated

where there is a justiciable controversy but no affirmative claim ripe for litigation:

             The Act recognizes the need of society for officially
             stabilizing legal relations by adjudicating disputes before
             they have ripened into violence and destruction of the
             status quo. It satisfies this social want by conferring on
             courts of record authority to enter judgments declaring and
             establishing the respective rights and obligations of
             adversary parties in cases of actual controversies without
             either of the litigants being first compelled to assume the
             hazard of acting upon his own view of the matter by
             violating what may afterwards be held to be the other
             party’s rights or by repudiating what may be subsequently
             adjudged to be his own obligations.

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                                         Opinion of the Court

Lide v. Mears, 231 N.C. 111, 117–18, 56 S.E.2d 404, 409 (1949).

       Indeed, Swaps’s policy argument cuts the other way. If litigants could recover

attorneys’ fees in declaratory judgment actions, it would create incentives to frame

legal disputes in terms of declaratory relief. Particularly in contract or property

disputes where the cost of litigation might exceed any monetary recovery,

enterprising litigants would have tremendous incentives to race to the courthouse

with a request for declaratory relief rather than pursuing a traditional, affirmative

claim for relief.     Nothing in the text of the Uniform Declaratory Judgment Act

suggests that the General Assembly wanted to encourage these types of preemptive

lawsuits.

       In sum, we hold that, because N.C. Gen. Stat. § 1–263 does not expressly

include attorneys’ fees within the definition of the term “costs,” the statute does not

permit an award of attorneys’ fees.1

                                           Conclusion

       We vacate the trial court’s order awarding attorneys’ fees under N.C. Gen.

Stat. § 1–263.

       VACATED.

       Judges HUNTER, JR. and McCULLOUGH concur.

       1  We also note, to avoid any confusion, that where another statute authorizes an award of
attorneys’ fees, nothing in N.C. Gen. Stat. § 1–263 prohibits a trial court from awarding those fees in
an action brought under the Uniform Declaratory Judgment Act.

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