In re the Foreclosure of the Deed of Trust of Vogler Realty, Inc.
722 S.E.2d 459
N.C.2012Background
- Debtor Vogler Realty executed a $250,000 promissory note secured by a deed of trust naming Stedman, a licensed attorney, as trustee with a power of sale and a provision for reasonable attorney’s fees.
- Foreclosure proceeded; clerk conducted hearing, trustee conducted sale, and final report showed proceeds of $336,262.50.
- trustee paid a trustee’s commission of $16,813.12 and a trustee’s attorney’s fee of $33,573.82, with other distribution to creditor and junior lienholders; CommunityOne was left with a remaining balance.
- Creditor CommunityOne objected to the distribution, arguing no justification for paying the trustee’s own attorney’s fees in addition to the trustee’s commission.
- Clerk approved the commission but reduced the attorney’s fees to $4,726.88; Stedman appealed, superior court affirmed, and Court of Appeals vacated, ruling clerk lacked authority to determine reasonableness of trustee-attorney’s fees.
- North Carolina Supreme Court held section 32-61 does not apply to foreclosure deeds of trust; clerk’s audit is ministerial and limited to actual receipts and disbursements, so trustee’s attorney’s fees must be determined by the deed and applicable statutes, with breach remedies available but standing limited to foreclosing lienholders.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether clerk has authority to determine reasonableness of trustee-attorney fees | CommunityOne contends clerk has discretion under §32-61. | Stedman argues clerk lacks authority; §32-61 applies only to trusts under the Uniform Trust Code, not foreclosures. | Clerk lacks authority; §32-61 inapplicable; clerk’s audit is ministerial. |
| Proper basis for reviewing distributions of fees in foreclosure | Clerk should correct overpayment of fees to trustee-attorney. | Distributions follow deed-of-trust terms and statutory order; no judicial review of reasonableness by clerk. | Trustee’s fee determinations must follow deed terms; clerk cannot review reasonableness. |
| Remedies for challenged distributions and standing to sue | Aggrieved creditor should have remedy; breach of fiduciary duty claims may be pursued. | Only foreclosing lienholders may bring breach claims; CommunityOne lacks standing. | Standing limited to foreclosing lienholders; no remedy for CommunityOne. |
| Role of clerk vs. court in special power-of-sale proceedings | Clerk has judicial power to ensure proper distribution and fee reasonableness. | Clerk’s role is limited to ministerial audit; judicial review not permitted by statute. | Foreclosure is a special proceeding; clerk’s role is judicial in determining reasonableness of fees, but here resolved that clerk exceeded authority; see dissent. |
Key Cases Cited
- Mills v. Mut. Bldg. & Loan Ass’n, 216 N.C. 664 (North Carolina 1940) (fiduciary duties of trustee; standard for fees and duties)
- In re Webber, 148 N.C. App. 158 (North Carolina Appellate 2001) (audit limited to actual receipts/disbursements)
- In re Ferrell Bros. Farms, 118 N.C. App. 458 (North Carolina Appellate 1995) (audit scope and fee review in foreclosure context)
- Nucor Corp. v. Gen. Bearing Corp., 333 N.C. 148 (North Carolina 1992) (recognizes judicial inquiry into reasonableness of fees in contracts)
- In re Locklear, 314 N.C. 412 (North Carolina 1985) (clerks’ powers are statutory)