In the Matter of The Foreclosure of The Deed of Trust of Vogler Realty Inc.
| Decision Date | 07 December 2010 |
| Docket Number | No. COA09–1714.,COA09–1714. |
| Citation | 703 S.E.2d 159 |
| Court | North Carolina Court of Appeals |
| Parties | In the Matter of the Foreclosure of the Deed of Trust of VOGLER REALTY, INC., Mortgagor–Grantor, to Charles N. Stedman, Trustee–Appellant,andJ.B. Lee & Company, a N.C. General Partnership, NoteholderAs recorded in Deed of Trust Book 1090, Page 338. |
OPINION TEXT STARTS HERE
Appeal 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.
Stedman Law, Burlington, by Charles N. Stedman, for Trustee–Appellant.
Bell, Davis & Pitt, P.A., Winston–Salem, by Michael D. Phillips and Michael A. Myers, for CommunityOne Bank, N.A., Appellee.
Charles 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's 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) “Trustee's Commission” in the amount of $16,813.12; and (2) “Attorney's Fee” in the amount of $33,573.82.
At 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 “motion and objection to disbursements pursuant to the final report and account of foreclosure” on 13 July 2009. The Bank argued that the Trustee's Final Report authorized a disbursement of additional attorney's fees beyond that which was justified, and that the Trustee failed to properly support the amount of the attorney's fees. The Clerk entered an order on 27 July 2009, disapproving the Final Report and ordering the following:
1. The proposed Final Report and Account of Foreclosure Sale dated June 26, 2009 and showing a Trustee's Commission payable to the Trustee/Attorney in the amount of Sixteen Thousand Eight Hundred Thirteen Dollars and Twelve Cents ($16,813.12) and Attorney's 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.
2. 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's Commission of Five Percent (5%), plus additional attorney's 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.
3. 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.
The Trustee appealed the Clerk's 27 July 2009 order to the superior court which, in an order entered 4 November 2009, “affirm[ed] the Clerk's Order, in its entirety.” The Trustee appeals.
The Trustee first argues that the trial court erred in affirming the Clerk's order because neither the superior court nor the Clerk had authority to make determinations of reasonableness when auditing the Trustee's Final Report. We agree.
N.C. Gen.Stat. § 45–21.31(a) sets forth the procedure for distributing the proceeds of a sale from a foreclosure action:
The proceeds of any sale shall be applied by the person making the sale, in the following order, to the payment of—
(1) Costs and expenses of the sale, including the trustee's commission, if any, and a reasonable auctioneer's fee if such expense has been incurred;
(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;
(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;
(4) The obligation secured by the mortgage, deed of trust or conditional sale contract.
N.C. Gen.Stat. § 45–21.31(a) (2009). Likewise, N.C. Gen.Stat. § 45–21.33 provides for a: “Final report of sale of real property” and an audit by the clerk of superior court, as follows:
(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.
(b) The clerk shall audit the account and record it.
N.C. Gen.Stat. § 45–21.33 (2009).
In 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. § 45–21.33. Ferrell, 118 N.C.App. 458, 455 S.E.2d 676 (1995). In Ferrell, we reviewed the trial court's order granting the trustee in a foreclosure proceeding a trustee's commission, as well as allowing the payment of the trustee's attorneys' 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's attorneys filed motions with the trial court to allow the commission and attorneys' fees, while the second mortgagee moved “to limit” the attorneys' fees and the trustee's 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' fees. Id. The trial court determined that the requested commission and attorneys' fees were reasonable and that the trustee and attorneys were entitled to those disbursements. Id.
Our Court stated that the issue for review was “whether 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. § 45–21.31(a).” Id. Id. at 460, 455 S.E.2d at 677–78 (emphasis added).
In reviewing the relevant law, our Court noted that: “The trustee is entitled to compensation ‘as is stipulated in the instrument,’ ... [and] [a]lthough N.C. Gen.Stat. § 45–21.31(a) does not have specific reference to attorneys' fees, to the extent the instrument provides for the payment of such fees, they become an ‘obligation secured by’ the instrument.” Id. at 460–61, 455 S.E.2d at 677. We therefore recognized that “any entitlement to and the amount of attorneys' fees required for the conduct of the sale is also controlled by the instrument and subject to deduction from the sale proceeds.” Id. at 461, 455 S.E.2d at 677.
Our Court then addressed the issue of whether the trustee was required to seek approval of the amount of disbursements:
Chapter 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. § 45–21.31(a).... Thus, in this case, the disbursements made pursuant to N.C. Gen.Stat. § 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 “audit,” however, the clerk is merely authorized to determine whether the entries in the report reflect the actual receipts and disbursements made by the trustee.
Accordingly, the trial court did not err in refusing to allow [the second mortgagee] to present evidence on the reasonableness of the trustee's commission and attorneys' fees. Indeed, the reasonableness of these expenses was not an issue properly before the trial court.
Id., 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. § 45–21.33, lacks the statutory authority to make determinations of the reasonableness of expenses listed on the report. Id.
Our 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 “$12,000.00 in legal fees.” 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...
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In re Vogler Realty, Inc.
...TEXT STARTS HERE Appeal pursuant to N.C.G.S. § 7A–30(2) from the decision of a divided panel of the Court of Appeals, ––– N.C.App. ––––, 703 S.E.2d 159 (2010), vacating an order entered on 4 November 2009 by Judge Ronald L. Stephens in Superior Court, Alamance County. Heard in the Supreme C......