Court Opinion

ID: 6722873
Source: CourtListenerOpinion
Date Created: 2022-07-20 22:58:43.909284+00
Date Added: 2024-06-11T16:01:35.103948
License: Public Domain

Justice NEWBY,
dissenting.
Today we are faced with a power of sale trustee-attorney who mistakenly paid himself an attorney’s fee based on N.C.G.S. § 6-21.2(2). The question before us is whether there is a judicial role in correcting that error. Though it recognizes that the trustee improperly relied on N.C.G.S. § 6-21.2(2), the majority holds that the clerk of superior court lacks the authority to determine the reasonableness of that fee. The majority’s rigid view gives the trustee sole power over the distribution of proceeds in a power of sale foreclosure. Here this position results in a clear wrong that has no remedy, but requires this Court to overlook it nonetheless. Foreclosure by power of sale is a special judicial proceeding in which the clerk has judicial authority. To hold that the clerk nonetheless lacks authority to determine whether proceeds were distributed lawfully and reasonably would ignore the statutory framework under which power of sale foreclosures occur and the clerk’s judicial role in that system. This cannot be what the General Assembly intended. Therefore, I respectfully dissent.
In this case the power of sale foreclosure was carried out under a deed of trust that provided for payment of “reasonable” attorney’s fees in'the event of such foreclosure. After the foreclosure sale the trustee, *400who also acted as the trustee’s attorney, based on his misunderstanding of the law paid himself an attorney’s fee of fifteen percent of the outstanding balance that the first priority creditor was owed on the promissory note. The clerk of superior court, believing he had the judicial power to correct this error, reduced the amount of attorney’s fees such that the trustee’s total compensation equaled the value of all services he actually performed.
In North Carolina clerks of superior court have no power other than that which is given to them by statute. In re Locklear, 314 N.C. 412, 416, 334 S.E.2d 46, 49 (1985). For the reasons stated by the majority, I agree that N.C.G.S. § 32-61 does not give clerks the authority to determine the reasonableness of attorney’s fees in these cases. The authority to assess reasonableness can nonetheless be found in our statutes. N.C.G.S. § 7A-40 states that “[t]he clerk of superior court... in the exercise of other judicial powers conferred upon him by law in respect of special proceedings ... is a judicial officer of the Superior Court Division.” N.C.G.S. § 7A-40 (2011). This Court has interpreted this statute to “confer[ ] judicial power in special proceedings upon the clerk.” In re Locklear, 314 N.C. at 416, 334 S.E.2d at 49; see also In re Estate of Adamee’s, 291 N.C. 386, 396, 230 S.E.2d 541, 548 (1976) (“ ‘[T]he Clerk of Superior Court retains his pre-existing judicial powers in . . . special proceedings ... as a judicial officer ....’” (citation omitted)). Indisputably, a foreclosure by power of sale is a special proceeding. Clerks, then, have judicial power in a power of sale foreclosure proceeding, which includes the power to determine reasonableness of attorney’s fees.
Though the majority holds that there is no allowable review of a fee paid under the deed of trust’s “reasonable fee” provision, .the judicial role of the clerk remains the same in cases in which an instrument provides for reasonable attorney’s fees. In such cases, courts of this state will inquire into the reasonableness of fees. See Nucor Corp. v. Gen. Bearing Corp., 333 N.C. 148, 150, 156, 423 S.E.2d 747, 748, 751-52 (1992) (indicating that, had a stock purchase agreement providing for reasonable attorney’s fees been governed by N.C.G.S. § 6-21.2, the court nonetheless would have inquired into the reasonableness of the award); see also West End III Ltd. Partners v. Lamb, 102 N.C. App. 458, 459-61, 402 S.E.2d 472, 473-74, disc. rev. denied, 329 N.C. 506, 407 S.E.2d 857 (1991); Coastal Prod. Credit Ass’n v. Goodson Farms, Inc., 70 N.C. App. 221, 227-29, 319 S.E.2d 650, 655-56, disc. rev. denied, 312 N.C. 621, 323 S.E.2d 922 (1984). Therefore, when a deed of trust provides for reasonable attorney’s fees in a power of sale foreclosure, the clerk of *401court, as the judicial officer in that special proceeding, has the power to determine the reasonableness of the fees awarded.
When attorney’s fees are appropriate and the amount is not fixed by instrument, statute, or otherwise, it is within the court’s discretion to approve the amount of the fee. See Owensby v. Owensby, 312 N.C. 473, 475, 322 S.E.2d 772, 774 (1984); see also Goodson Farms, 70 N.C. App. at 227-29, 319 S.E.2d at 655-56. The amount of the fee must be reasonable, Hood v. Cheshire, 211 N.C. 103, 105, 189 S.E. 189, 190 (1937), a determination that involves consideration of a number of factors. These factors include, inter alia, “the nature and scope of legal services rendered,” “the customary fee,” and “ ‘the novelty and difficulty of the questions of law.’ ” Owensby, 312 N.C. at 476-77, 322 S.E.2d at 774. In particular, the courts of this state have repeatedly emphasized that the actual number of hours worked is significant in this analysis. See id.; Hood, 211 N.C. at 105, 189 S.E. at 190; Lamb, 102 N.C. App. at 461, 402 S.E.2d at 475; Lowder v. All Star Mills, Inc., 82 N.C. App. 470, 478, 346 S.E.2d 695, 700 (1986) (“There are no findings indicating the number of hours reasonably expended .... The findings are deficient under [Supreme Court precedent].” (citation omitted)).
In concluding that clerks have a judicial role in determining reasonableness of fees, it is necessary to explain why In re Foreclosure of Ferrell Brothers Farms, Inc., 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), misinterpret N.C.G.S. § 45-21.33. In those cases the Court of Appeals held that under N.C.G.S. § 45-21.33(b), the clerk’s “audit” of the final report of sale is limited to “determin[ing] whether the entries in the report reflect the actual receipts and disbursements made by the trustee.” In re Webber, 148 N.C. App. at 161, 557 S.E.2d at 647; In re Ferrell Bros. Farms, 118 N.C. App. at 461, 455 S.E.2d at 678. Here the trustee relies on this statement to argue that the clerk is therefore barred from inquiring into the reasonableness of those entries. The statutory framework under which power of sale foreclosures are carried out demonstrates that this assertion is incorrect.
The General Assembly has provided specific procedures for conducting a power of sale foreclosure. Among these is a provision governing the distribution of sale proceeds. N.C.G.S. § 45-21.31(a) (2011). Under the statute the proceeds must be distributed in a particular order by the trustee, id., and the trustee’s commission and attorney’s fees are paid out of the proceeds, id.; see also In re Ferrell Bros. Farms, 118 N.C. App. at 460-61, 455 S.E.2d at 677-78. These disbursements are to be disclosed in the final report of the sale. N.C.G.S.. § 45-21.33(a) (2012). To *402hold that the clerk’s audit power under N.C.G.S. § 45-21.33 extends only to determining whether the entries reflect actual receipts or disbursements means the clerk cannot evaluate the report to determine whether the distributions were made in compliance with the provisions of N.C.G.S. § 45-21.31(a) specifying how sales proceeds are to be distributed. Notwithstanding whether the trustee’s misapplication was intentional or negligent, the majority would say there is no power to review the trustee’s distribution of proceeds. This holding would seem to give the trustee unrestrained power to violate the statute. We cannot assume that the General Assembly would enact a provision specifying the order of distribution of proceeds in a foreclosure sale without intending that the provision be enforceable by some means — in this case by the judicial officer charged with supervising the sale. See Hall v. Simmons, 329 N.C. 779, 784, 407 S.E.2d 816, 818 (1991) (“ ‘[Significance and effect should, if possible,... be accorded every part of the act, including every section, paragraph, sentence or clause, phrase, and word.’ ” (alternations in original) (citation omitted)). I agree with the majority’s conclusion that N.C.G.S. §§ 6-21.2(2) and 32-61 do not provide this enforcement mechanism. Nevertheless, the General Assembly has given the clerk a judicial role in special proceedings. The clerk has specific duties under the statutory framework of Chapter 45, as well as the more general supervisory authority awarded by N.C.G.S. § 7A-40.
Here the clerk appropriately acted within his judicial power and properly concluded that the trustee paid himself an unreasonable attorney’s fee. The clerk multiplied the 71.8 hours the trustee worked on the matter by the trustee’s standard charge for legal services of $300.00 per hour, producing a total of $21,540.00. After approving the trustee’s commission of $16,813.12, the clerk reduced the attorney’s fee to $4,726.88, recognizing that a reasonable attorney’s fee is one that accurately reflects the amount of work performed. This brought the trustee’s total fee to $21,540.00, a payment equal to the value of the services he provided.
Because power of sale foreclosures are a special proceeding in which clerks of superior court have judicial power, clerks are authorized to exercise the courts’ general power to determine the reasonableness of attorney’s fees paid by the trustee-attorney to himself. The analysis of reasonableness properly includes an inquiry into the value of the services actually performed, as the clerk did here. Consequently, I respectfully dissent.
Justices TIMMONS-GOODSON and HUDSON join in this dissenting opinion.