In certain incidences, it is possible under North Carolina law for the winning side in a legal dispute to make the loser pay its costs. It is not clear, however, which specific costs can be recovered. A new N.C. Court of Appeals ruling on the subject, by the judges’ own admission, may add to the confusion.
In general, each side of a dispute covers its own costs in pursuing or defending against lawsuits. The General Assembly has, however, approved some exceptions to this rule. One applies in condemnation proceedings.
In 1998, the N.C. Department of Transportation moved to acquire two parcels of land owned by Charlotte Area Manufactured Housing, Inc. in Cabarrus County for a new road. The company rejected the DOT’s offer as inadequate and the issue went to trial to determine the land’s fair market value. Charlotte Area Manufactured Housing was awarded substantially more money than the DOT had offered. The company then moved to have its costs taxed to (paid by) the DOT.
Superior Court Judge Clarence E. Horton, Jr. only taxed to the DOT some of the expenses submitted by the company. He ruled that he lacked statutory authority to tax the nearly $21,000 in appraisal fees, maps, and trial exhibits that the company had incurred in its case. The company appealed his ruling to the N.C. Court of Appeals.
Judge Eric Levinson, writing for a three-judge panel of the Court of Appeals, noted that North Carolina courts, including the Court of Appeals, have used two different and “irreconcilable” approaches in determining what constitutes a cost. “One line of authority holds that any reasonable and necessary expense may be considered a ‘cost;’ the other line of authority holds that the term ‘costs’ encompasses only those expenses either listed in N.C.G.S. § 7A-305(d) or previously recognized as assessable by the common law.”
Under a reasonable and necessary expense standard, trial exhibits and the other expenses would be costs that could be taxed. These expenses are not, however, recognized by state statue nor are they included in common law definitions of assessable costs.
Faced with this conflict, the Court of Appeals in this case opted to adopt the latter method. “We choose to follow the ‘explicitly delineated’ approach because this approach is premised upon an interpretation of N.C.G.S. § 6-20 which is more consistent with the Supreme Court’s pronouncement that costs are creatures of statute… To follow the ‘reasonable and necessary’ approach would do further violence to the plain meaning of [several state statues] and further erode the general rule that non-statutory costs are not taxable.” It thus rejected the Charlotte Area Manufactured Housing contention that it should have been able to recover the costs of the appraisal fees, maps, and trial exhibits.
The appeals court ended its opinion on a cautionary note. “Admittedly, the current status of our common law breeds much confusion for the bench and bar regarding something seemingly as simple as what constitutes a ‘cost.’ Regrettably, our opinion may contribute to the confusion. Barring intervention by our General Assembly or Supreme Court, the law of costs will remain unclear.”
The case is Department of Transp. v. Charlotte Area Mfd. Housing, Inc., (02-1305).
Lowrey is an associate editor at Carolina Journal.