North Carolina Appellate Court Decision Clarifies Jurisdictional Authority of Clerks of Superior Court
James E. Hickmon, JD, MBA, CFP
Alec C. Roberson, B.A., B.S. Accounting
The North Carolina Court of Appeals has issued a published opinion that provides some degree of clarity as to the Court’s position on the jurisdictional authority of Clerks of Court in connection with the payment of certain claims made against a decedent’s estate, as well as the Clerk’s authority to determine the reasonableness of attorney’s fees related to an estate administration. In addition, the Court of Appeals’ holding in In Re Taylor, No. COA15-159, Cumberland County, No. 12-E-673 (N.C. Ct. App. July 7, 2012), provides the Court’s most recent analysis of the standard of review applicable to appeals from a Clerk’s order when heard before a Superior Court judge.
In addition, the N.C. Court of Appeals (“COA”) determined that the Clerks of Superior Court have broad discretion to award or deny attorneys’ fees incurred in connection with the administration of a decedent’s estate, going further to analyze and distinguish those situations in which an attorney is serving as a fiduciary versus those in which an individual fiduciary engages the services of an attorney in the course of an estate administration. This manuscript will analyze the COA’s conclusions and specifically address the authority and standard of review for courts and Clerks of Court in estate matters.
Frances Sorrentino Taylor died on 5 May 2012 survived by her four children Richard E. Taylor, II (“Taylor”), Sharon Taylor Dixon (“Dixon”), Frances Lynn Taylor Stoller (“Stoller”), and Pamela Blackmore (“Blackmore”), all beneficiaries of the decedent’s estate. Taylor submitted the decedent’s last will to probate and qualified as executor. Taylor thereafter published the required notice to creditors for four successive weeks putting potential creditors on notice to submit claims on or before 19 August 2012.
Taylor’s sister, Blackmore, timely filed a claim seeking reimbursement for caretaking services claimed to have been provided by her to the decedent prior to the decedent’s death. Blackmore had filed no other claim against the estate to that point. The executor rejected Blackmore’s claim resulting in Blackmore’s commencement of a civil action against the estate to recover her claimed expenses. Taylor, as executor, engaged a law firm to represent the estate in the Blackmore litigation, as well as provide general legal services related to the estate’s administration. On 23 July 2012, the trial court granted summary judgment against Blackmore and dismissed her action with prejudice. In its order, the trial court (1) determined that “[t]he Estate has incurred reasonable attorneys’ fees, costs, and expenses in this matter in the total amount of Thirty-Four Thousand Three Hundred Sixteen and 86/100 Dollars ($34,316.86)”; and (2) concluded that Blackmore’s complaint against the estate was frivolous and that Blackmore should have known that the complaint “had no justiciable issues”; and (3) ordered Blackmore, pursuant to N.C. Gen. Stat. § 6-21.5, to “pay to the Estate in reimbursement of its reasonable attorneys’ fees, costs, and expenses the total amount of $500.00.” In re Taylor, No. COA15-159, Cumberland County, No. 12-E-673 (N.C. Ct. App. July 7, 2015).
On 17 July 2013, over a year after the decedent’s death, Blackmore filed a second claim against the estate, this time seeking reimbursement for funeral expenses that had been paid by Blackmore from a joint bank account owned by Blackmore, the decedent, and Dixon but into which only the decedent made contributions. In response, Taylor, as executor, filed a petition requesting the Clerk enter an order denying Blackmore’s funeral reimbursement request and further seeking approval to submit a final accounting, disburse estate assets, and finally close the estate. In the petition, Taylor alleged that Blackmore’s funeral expense claim was time-barred. On behalf of the estate, Taylor’s response to Blackmore’s claim was, as noted by the Court, “absolutely and unequivocally rejected, disallowed and denied.” Id.
Taylor thereafter submitted a proposed final accounting on 3 January 2014 which included disbursements from the estate to pay the estate’s legal expenses related to both the estate administration and the prior litigation. The proposed final accounting reported the total amount of attorneys’ fees and expenses incurred was $91,340.77. This included $16,927.67 in fees and expenses related to probate matters, $35,150.85 in attorneys’ fees and expenses for litigation matters, and $39,262.22 in attorneys’ fees and expenses that were not specifically designated as being either for probate-related or litigation-related matters.
Blackmore filed an objection to Taylor’s final accounting in which she (1) challenged the estate’s failure to reimburse her for funeral expenses; and (2) alleged that the amount of attorneys’ fees charged by the estate’s legal counsel was “excessive.” Subsequent to a hearing, the Cumberland County Clerk of Superior Court entered an order (1) granting reimbursement to Blackmore for the funeral expenses; (2) approving only $26,211.31 of the requested attorneys’ fees as a valid estate expense (denying the remainder); and (3) ordering a final accounting be tendered within 30 days. Taylor, in his capacity as executor, and Taylor, Dixon, and Stoller, in their capacities as beneficiaries, appealed the Clerk’s order to Superior Court.
On appeal, the Honorable Beecher R. Gray vacated the Clerk’s order, denied Blackmore’s claim for funeral expenses, and ordered the full amount of legal fees and expenses sought be paid by the estate. It was on these facts and issues that Blackmore appealed to the North Carolina Court of Appeals.
ISSUES AND ANALYSIS
The issue(s) presented center on the question of the authority that Clerks of Court and reviewing trial courts have during probate proceedings. Blackmore asserted that the trial court’s order was wrong because (1) there were proper findings of fact and conclusions of law made by the Clerk and the trial court failed to properly assess the record as a whole, (2) the trial court substituted its own findings of fact and conclusions for those of the Clerk sitting as an appellate court, and (3) the trial court erred in its allowance of attorneys’ fees and withholding of funeral expenses to be paid to Blackmore. In arguing against Blackmore’s assertions, the Estate also recognized the issue over authority but framed it in a matter that looked at the power of the executor of an estate versus the power of a Clerk of Court in the context of administering an estate and argued the trial court’s reviewing authority was warranted because there were errors of law. Basing its analysis and opinion on the questions of authority, the COA addressed separately the two main issues of (1) the claim for reimbursement of funeral expenses and (2) the Clerk’s authority to allow or restrict attorneys’ fees and expenses.
A. Standard of Review on Appeal from Clerk’s Order
Generally, a party may appeal a Clerk of Court’s order within ten days to the appropriate court for a full hearing de novo under N.C. Gen. Stat. § 1-301.1. This means that the court has the authority to review the evidence as if it was brought to them originally and is not limited by the findings of fact or conclusions of law by the clerk. However, in estate matters the Clerk has original jurisdiction to determine all issues of fact and law and, under N.C. Gen. Stat. § 1-301.3, the reviewing trial court only has authority to review whether the facts as determined by the clerk are supported by evidence, the facts support the clerk’s conclusions of law, and the clerk’s order or judgment is consistent with the conclusions of law. If there are issues with specific findings of fact or conclusions made by the Clerk of Court, the trial court applies a whole record test to affirm, reverse, or deny the Clerk of Court’s findings and then assess as a whole the legal conclusions of the clerk to see if supported by findings of fact. The judge may also request additional evidence if the record is insufficient on a specific issue, or may simply remand the case to the clerk for a new hearing or try the case with the evidence presented if there is prejudicial error. If there are errors of law after applying the whole record test, then it is appropriate for the court to use de novo review.
B. Reimbursement of Funeral Expenses
The Superior Court denied the reimbursement of funeral expenses because Blackmore’s claim was brought fourteen months after the claim arose and eight months after the deadline under N.C. Gen. Stat. § 28A-19-3, requiring claims against an estate arising at or after the decedent’s death to be brought within six months of the date on which the claim arose, and N.C. Gen. Stat. § 28A-19-16, requiring the filing of a civil action within three months of receiving notice from the executor of a rejected claim against the estate. She argued that her “request for reimbursement” wasn’t time-barred because funeral expenses are considered an obligation of an estate under N.C. Gen. Stat. § 28A-19-8(a) and the claim is automatic. The Court of Appeals disagreed, stating that Blackmore’s assertion lacked statutory support and that after rejection of a claim by the executor, the claim against the estate must be filed as a civil claim within three months of the notice of rejection. Clerks of Court have no jurisdiction to hear suits in civil matters. Blackmore submitted her claim to the Clerk (not the court) after the required time limit. As a result, the COA affirmed on this issue and stated the Superior Court had the authority to make such a determination on whether the Clerk’s order was “legally correct.”
C. Attorneys’ Fees and Expenses
The second issue the COA considered was whether the Superior Court erred in vacating the Clerk’s conclusions by stating that (1) the Clerk didn’t have the authority to establish a reasonable standard for review of legal fees incurred by the Estate and (2) even under the standard the Clerk used, she failed to fully assess the reasonableness of attorneys’ fees. The question over authority here is whether a Clerk’s discretionary authority is sufficiently broad to allow or deny attorneys’ fees based on a reasonableness standard, or whether the Clerk’s function is merely ministerial and limited to making sure receipts and disbursements listed in the submitted accounting actually match those made by the executor.
By statute, an executor is allowed to hire an attorney to provide advice and professional services with estate administration, but no provisions specifically address the payment of legal fees to that attorney. However, if the executor is an attorney, there is a procedure for paying attorneys’ fees by the estate under N.C. Gen. Stat. § 28A-23-4. The Estate argued that with no specific statutory provision governing the Clerk’s authority over payments to an attorney hired by an executor, the authority is limited to making sure receipts and disbursements are accurate. The Estate cited In re Vogler Realty, Inc. in which the N.C. Supreme Court emphasized that, generally, the Clerk of Court has limited jurisdictional authority and cannot perform functions involving the exercise of judicial discretion without express statutory authorization. However, the COA pointed out that in Vogler the N.C. Supreme Court went on to say that the clerk’s authority is far more expansive in estate matters and that when statutory language includes “may” or “in the discretion of” the clerk has broad discretionary authority.
Under N.C. Gen. Stat. § 28A-23-3(d)(1), Clerks of Court have authority to allow reasonable sums for necessary charges and disbursements for the management of an estate. The N.C. Supreme Court stated in Phillips v. Phillips that attorneys’ fees arising during estate administration fall under this statute and it makes sense for the Clerk of Court to have the authority to determine the reasonableness of attorneys’ fees because the Clerk has overseen the estate administration from the beginning. Here the COA stated that Phillips, Vogler, and N.C. Gen. Stat. § 28A-23-3(d)(1), when read together, indicated that the Clerk does have the discretionary authority to determine the reasonableness of attorneys’ fees in the context of an estate administration. In such a situation, the reviewing court must assess whether the Clerk’s findings of fact support the Clerk’s legal conclusions.
While the COA disagreed with the Superior Court’s assertion that the Clerk lacked authority to determine the reasonableness of attorneys’ fees, it did agree that the Clerk had insufficient findings to support its decision in the determination of what was reasonable. The COA then directed the Superior Court to remand the matter to the Clerk so that she may make the requisite findings of fact and conclusions of law to support her determination of the attorneys’ fees to allow.
This case marks an important clarification on the authority of the Clerk of Court to assess the reasonableness of attorneys’ fees and the authority of reviewing courts in certain probate proceedings. The outcome demonstrates the wide discretionary authority of Clerks in the context of estate administration matters, and the difficulty an appellant may encounter in these cases in which a Superior Court judge, sitting as an appellate court, is limited to the so-called whole record or “abuse of discretion” standard of review. It also sends a powerful message to the Clerks regarding the breadth of their authority in such matters. As attorneys rendering services to estates, practitioners may wish to seek to have the Clerk characterize professional legal fees as necessary expenses arising during the administration and management of a decedent’s estate. This may aid in defending an attack on those fees as unreasonable, when it can be demonstrated that those fees and expenses arose in the context of representing an estate in litigation, or an individual in that person’s fiduciary capacity.