Swaps, LLC v. Asl Props., Inc.

Citations: 791 S.E.2d 711; 250 N.C. App. 264; 2016 N.C. App. LEXIS 1099Docket: 16-443

Court: Court of Appeals of North Carolina; November 1, 2016; North Carolina; State Appellate Court

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The Court of Appeals of North Carolina ruled that the North Carolina Uniform Declaratory Judgment Act does not allow for the award of attorneys' fees. The act permits courts to award costs deemed equitable and just under N.C. Gen. Stat. 1–263. However, it was emphasized that costs and attorneys' fees are distinct categories governed by statute, with attorneys' fees only awarded when explicitly permitted by law. The court referenced prior case law stating that, historically, attorneys' fees are not considered part of court costs in North Carolina and that the legislature has consistently chosen to exclude them unless specifically stated otherwise in statutes. In this case, the trial court had awarded Swaps, LLC $37,300.91 in attorneys' fees and $677.61 in court costs, but this decision was vacated. The plaintiff did not contest the court's reasoning but argued that a prior case, Phillips v. Orange County Health Department, permitted such awards under Section 1–263, a claim the court rejected.

The Court clarifies that the term "costs" in Section 1–263 does not authorize the award of attorneys’ fees, differing from the case of Phillips, which involved a county and referenced a different statute (N.C. Gen. Stat. 6–21.7) permitting such awards when a county acts outside its legal authority. Swaps fails to identify any similar statute that explicitly allows for attorneys’ fees in this case. The Court notes that while Heatherly v. State affirmed the award of "the costs of this litigation" under Section 1–263, it did not analyze or address the inclusion of attorneys’ fees, and its precedential value is limited due to a split Supreme Court decision. The interpretation of the Uniform Declaratory Judgment Act aligns with the majority of states, which have determined that "costs" does not encompass attorneys’ fees. Multiple cases from other jurisdictions support this interpretation, emphasizing that the Uniform Declaratory Judgment Act aims to stabilize legal relations without escalating disputes. The Court ultimately rejects the notion of expanding "costs" to include attorneys’ fees, affirming that the Act serves to adjudicate rights in justiciable controversies without necessitating fee recovery for litigants.

Courts of record have the authority to issue judgments that clarify the rights and obligations of parties involved in actual controversies, allowing them to avoid the risks associated with acting on their own interpretations of the law. The case Lide v. Mears highlights this judicial function. The argument presented by Swaps suggests that allowing recovery of attorneys’ fees in declaratory judgment actions could lead to an influx of such lawsuits, particularly in contract or property disputes, where the costs of litigation might surpass any potential monetary recovery. The text of the Uniform Declaratory Judgment Act does not indicate an intention to promote preemptive lawsuits. Therefore, N.C. Gen. Stat. 1–263 does not include attorneys' fees in its definition of "costs," and thus does not permit their award. The trial court's order granting attorneys' fees is vacated, with Judges Hunter, Jr. and McCullough concurring. Additionally, it is clarified that other statutes allowing for attorneys' fees remain unaffected by N.C. Gen. Stat. 1–263 when such fees are awarded in actions under the Uniform Declaratory Judgment Act.