Swaps, LLC v. Asl Props., Inc.

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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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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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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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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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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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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