Fund Holder Reports, LLC v. N.C. Dep't of State Treasurer

Citation854 S.E.2d 64
Decision Date31 December 2020
Docket NumberNo. COA20-94,COA20-94
CourtNorth Carolina Court of Appeals

Factual and Procedural Background

Fund Holder Reports, LLC (FHR) appeals from an Order of the Wake County Superior Court affirming a Declaratory Ruling by the North Carolina Department of State Treasurer (the Department) interpreting N.C. Gen. Stat. § 116B-78(d) and its application to FHR's business practices. The Record before us reflects the following:

FHR is a multi-state company that assists its clients in locating and processing escheated fund claims. FHR began assisting North Carolina residents in collecting their escheated funds in 2015. FHR typically enters into a written agreement with a client stating FHR will advance the expenses related to finding and collecting the escheated funds and will receive a percentage of the escheated funds as a finder's fee. FHR, as part of the agreement, also obtains a power of attorney to collect the funds and "to perform all acts necessary to protect and recover [the funds]." Once FHR has located and negotiated recovery of the escheated funds on a client's behalf, the State sends FHR a check payable to the client in the "care of" FHR. FHR endorses the check for deposit only and deposits the check into its client trust account. Then, FHR sends its client a check from the client trust account for the value of the escheated funds minus FHR's finder's fee. FHR then transfers the value of the finder's fee into its operating account after the client deposits the check from FHR.

The Department is the North Carolina state agency responsible for administering the Unclaimed Property Act as codified in Chapter 116B of the North Carolina General Statutes. On 24 October 2018, FHR received a letter from the Department notifying FHR it was in violation of N.C. Gen. Stat. § 116B-78(d). Specifically, the letter stated the Department's Unclaimed Property Division learned FHR was "endorsing and depositing checks from the Division made payable to claimants" and that the Department would "cease processing any pending or submitted claims from [FHR] until it receives assurances that [FHR] is no longer in violation of [ Section 116B-78(d) ]."

Section 116B-78(d) states:

Any person who enters into an agreement covered by this section with an owner shall be allowed to receive cash property, but not tangible property or securities, on behalf of the owner but shall not be authorized to negotiate the check made payable to the owner. Tangible property shall be delivered to the owner by the Treasurer, and securities will be registered into the owner's name.

N.C. Gen. Stat. § 116B-78(d) (2019). On 7 December 2018, FHR's counsel sent the Department a response to its 24 October letter requesting the Department issue a Declaratory Ruling pursuant to N.C. Gen. Stat. § 150B-41 as to whether: (1) FHR, with a valid power of attorney, may deposit a check made payable to the owner; (2) the Department is authorized to issue a check payable to the owner and a separate check payable to FHR for its finder's fee; and (3) the Department interpreted Section 116B-78 to permit FHR to receive cash but not negotiate a check. On 22 February 2019, the Department issued its Declaratory Ruling concluding: (1) FHR may not deposit a check made payable to the owner using a valid power of attorney; (2) the Department may only issue checks to the legal owner and may not issue separate checks to FHR for its finder's fee; and (3) under Section 116B-78(d), FHR may receive cash property in the form of checks, but may not negotiate those checks.

On 29 March 2019, FHR filed a Petition for Judicial Review of the Department's Declaratory Ruling in Wake County Superior Court.2 Before the Superior Court, FHR argued the Department's Ruling misinterpreted and misapplied North Carolina law by: (1) reading Section 116B-78(d) as superseding the North Carolina Power of Attorney Act; (2) reading Section 116B-78(d) as preventing FHR from negotiating or depositing checks made payable to its clients when it had a valid power of attorney; and (3) reading Section 116B-78(d) as preventing the Department from issuing separate checks to FHR.

On 26 November 2019, the Wake County Superior Court entered an Order affirming the Department's Declaratory Ruling. In its Order, the Superior Court first determined the applicable standard of review of the Department's Declaratory Ruling under N.C. Gen. Stat. § 150B-51(c) was de novo. Applying this de novo standard of review, the Superior Court concluded the "plain language," of Section 116B-78(d) : (1) allows a property finder to receive cash property, but not to negotiate a check even if the property finder possesses a valid power of attorney; (2) does not allow the issuance of a separate payment to a property finder for its finder's fee; and (3) the Department, thus, did not err in its Declaratory Ruling. FHR filed a written Notice of Appeal from the Superior Court's Order on 23 December 2019.


The dispositive issue on appeal is whether the Superior Court properly affirmed the Department's conclusion that Section 116B-78(d) does not permit FHR, even with a valid power of attorney, to endorse and deposit checks made payable to an owner in its client trust accounts.3

Standard of Review

Under North Carolina's Administrative Procedure Act the role of a superior court reviewing a final agency decision is as follows:

The court reviewing a final decision may affirm the decision or remand the case for further proceedings. It may also reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the findings, inferences, conclusions, or decisions are:
(1) In violation of constitutional provisions;
(2) In excess of the statutory authority or jurisdiction of the agency or administrative law judge;
(3) Made upon unlawful procedure;
(4) Affected by other error of law; (5) Unsupported by substantial evidence admissible under G.S. 150B-29(a), 150B-30, or 150B-31 in view of the entire record as submitted; or
(6) Arbitrary, capricious, or an abuse of discretion.

N.C. Gen. Stat. § 150B-51(b) (2019) (emphasis added).

"A party to a review proceeding in a superior court may appeal to the appellate division from the final judgment of the superior court as provided in G.S. 7A-27." N.C. Gen. Stat. § 150B-52 (2019). Our scope of review under § 150B-52 is "the same as it is for other civil cases." Id. When this Court reviews an order from a superior court examining a final agency decision, we examine the order for errors of law. Shackleford-Moten v. Lenoir Cnty. Dep't of Soc. Servs. , 155 N.C. App. 568, 572, 573 S.E.2d 767, 770 (2002) (citations omitted). This process is a "twofold task: (1) determining whether the trial court exercised the appropriate scope of review and, if appropriate, (2) deciding whether the court did so properly." Holly Ridge Assocs., LLC v. N.C. Dep't of Env't & Nat. Res. , 361 N.C. 531, 535, 648 S.E.2d 830, 834 (2007) (citation and quotation marks omitted).

Thus, as an initial matter, when a superior court reviews a final agency decision, the standard of review "depends upon the particular issues presented on appeal." ACT-UP Triangle v. Comm'n for Health Servs. , 345 N.C. 699, 706, 483 S.E.2d 388, 392 (1997) (citation and quotation marks omitted). Questions of law receive de novo review. N.C. Gen. Stat. § 150B-51(c) (2019) ; N.C. Dep't of Env't & Nat. Res. v. Carroll , 358 N.C. 649, 659, 599 S.E.2d 888, 894 (2004) (citation and quotation marks omitted). Here, FHR petitioned the Superior Court to review the Department's Declaratory Ruling arguing the Declaratory Ruling "misinterpret[ed] and misappl[ied]" North Carolina law. As FHR raised questions of law, the Superior Court accordingly correctly applied a de novo standard of review. Id.

FHR contends, however, the Superior Court erred in its de novo review by affirming the Department's interpretation that N.C. Gen. Stat. § 116B-78(d) ’s prohibition on property finders negotiating checks bars FHR from depositing its clients’ checks. Although the Superior Court did not expressly conclude Section 116B-78(d) prohibited FHR from depositing checks, it did conclude the law prevented FHR from negotiating checks and affirmed the Department's Declaratory Ruling, which itself concluded FHR could not deposit its clients’ checks.

We review an agency's alleged error of law de novo. Carroll , 358 N.C. at 666, 599 S.E.2d at 898. Our courts give "great weight to an agency's interpretation of a statute it is charged with administering; however, an agency's interpretation is not binding." N.C. Acupuncture Licensing Bd. v. N.C. Bd. of Physical Therapy Exam'rs , 371 N.C. 697, 700, 821 S.E.2d 376, 379 (2018) (citation and quotation marks omitted); see also Carpenter v. N.C. Dep't of Human Res. , 107 N.C. App. 278, 279, 419 S.E.2d 582, 584 (1992) ("the court should defer to the agency's interpretation of the statute ... as long as the agency's interpretation is reasonable and based on a permissible construction of the statute."). Our "primary task in construing a statute is to effectuate the intent of the legislature" and the "best indicia of ... legislative purpose [is] the language of the statute[.]" N.C. Acupuncture Licensing Bd. , 371 N.C. at 701, 821 S.E.2d at 380 (citations and quotation marks omitted).


N.C. Gen. Stat. § 116B-78 is a statute of limited application. It governs contracts to locate unclaimed property within the scope of Chapter 116B. Specifically, it only governs an agreement "if its primary purpose is to locate, deliver, recover, or assist in the recovery of property that is distributable to the owner or presumed abandoned." N.C. Gen. Stat. § 116B-78(a1) (2019).

It is in this specific context the Department issued its Declaratory Ruling responding to a very general question posed by FHR. FHR asked whether the Department believed FHR, as a...

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