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CITY OF DURHAM; COUNTY OF DURHAM, Plaintiffs-Appellants, v. JAMES
M. HICKS, JR., and wife, MRS. J.M. HICKS; ALL ASSIGNEES, HEIRS AT
LAW AND DEVISEES OF JAMES M. HICKS, JR. AND MRS. J.M. HICKS, IF
DECEASED, TOGETHER WITH ALL THEIR CREDITORS AND LIENHOLDERS
REGARDLESS OF HOW OR THROUGH WHOM THEY CLAIM, AND ANY AND ALL
PERSONS CLAIMING ANY INTEREST IN THE ESTATES OF JAMES M. HICKS,
JR., AND MRS J.M. HICKS, IF DECEASED; GEORGE W. MILLER, JR.,
PUBLIC ADMINISTRATOR, CTA, DBA OF THE ESTATE OF LEILA PHILLIPS
AND WILLIAM A. MARSH, JR., GUARDIAN AD LITEM FOR JAMES M. HICKS,
JR., Defendants-Appellees
No. COA99-101
(Filed 7 December 1999)
1.                                                                                                      Estate Administration--pending estate administration--tax lien on estate property--
precedence over payment of estate expenses
The trial court erred by granting summary judgment in favor of the Public Administrator
so he could continue to administer the estate and attempt to sell the pertinent property despite the
County of Durham’s attempt to foreclose on the property tax lien pursuant to N.C.G.S. § 105-
379(a) because although N.C.G.S. § 28-19-6 and N.C.G.S. § 105-356(a)(1) do not reference each
other and are conflicting over whether a tax lien takes precedence over all other claims against
the estate, case law provides that tax liens against real property held in an open estate take
precedence over the costs of administration.
2.                                                                                                      Taxation--enjoining collection and foreclosure of taxes--statutory prohibition--
                                                                                                        property in pending estate administration
The trial court violated the statutory prohibition of N.C.G.S. § 105-379(a) against
enjoining the collection and foreclosure of taxes when it denied the County of Durham’s right to
foreclose on a tax lien even though the property was in the midst of a pending estate
administration because N.C.G.S. § 105-374(k) requires the County in its foreclosure proceeding
to be obligated to raise enough funds to satisfy the tax debt, while N.C.G.S. § 28A-19-6 provides
that the Public Administrator is not obligated to pay the back taxes if the sale of the property
does not generate enough funds.
3.                                                                                                      Estate Administration--pending estate administration--foreclosure sale--
                                                                                                        administrator’s advance of additional funds
Even though N.C.G.S. § 105-374 only requires the County of Durham to raise enough
money from the foreclosure sale of the pertinent property to cover the taxes and the property is
still in the midst of a pending estate administration, the Public Administrator is only required to
use funds from the estate itself under N.C.G.S. § 105-383 and N.C.G.S. § 28A-12-5 in advancing
the costs of the estate and his decision to advance funds beyond the amount that is available in an
estate upon the reliance that real property will be sold to cover those costs is an unprotected risk.
4.                                                                                                      Estate Administration--payment of claims--funds not available
In a foreclosure proceeding, the Public Administrator is not required to raise enough
funds to pay all of the claims against the property because even though N.C.G.S. § 28A-19-6
governs the order in which claims against the estate must be paid, nowhere does it dictate that all
claims must be paid in full regardless of whether funds exist to do so.
Appeal by plaintiffs from judgment entered 28 October 1998 by
Judge  Craig  B.  Brown  in  District  Court,  Durham  County.    Heard  in




the Court of Appeals  21 October  1999.
Kimberly  Martin  Grantham,  Assistant  County  Attorney,  for
plaintiffs-appellants.
Haywood,  Denny  &  Miller,  L.L.P.,  by  Thomas  H.  Moore,  for
defendant-appellee George Miller, Jr., and Marsh and Marsh, by
William  A.  Marsh,  Jr.,  as  Guardian-Ad-Litem  for  defendant-
appellee James M. Hicks, Jr.
WYNN, Judge.
N.C. Gen. Stat.  §  28A-19-6  (1984) dictates that the costs of
an estate administration must be paid before all other claims.   In
this case, however, the City and County of Durham argue that their
tax  liens  against  real  property  held  in  an  open  estate  take
precedence to the costs of administration.   We agree and therefore
hold  that  the  trial  court  erred  in  preventing  the  foreclosure
proceeding to collect the tax liens against real property held in
an open estate.
Leila  Phillips  died  in                                                     1975  leaving  by  will  two  adjacent
properties on Teel Street in Durham County to her grandson, James
M. Hicks, Jr., then a minor.   At the time of her death, no property
taxes were due on the parcels.
In  1981, the Durham County Clerk of Court appointed Attorney
George W. Miller, Jr., to act as the Public Administrator for the
Phillips estate which consisted of the two Teel Street lots (one of
which contained a dilapidated house), and about  $100.00 in a bank
account.    The  whereabouts  of  James  M.  Hicks,  Jr.,  was,  and  still
is,  unknown,  so  the  court  appointed  William  A.  Marsh,  Jr.,  as
guardian ad litem to represent his interests in the estate.
During the administration of the estate, the County of Durham
ordered that the house on the Teel Street properties be demolished.




Although  it  was  not  statutorily  required  to  do  so,  the  Public
Administrator’s  law  firm  advanced  the  costs  of  the  razing.    The
Public  Administrator  has  since  tried  to  sell  the  properties,  but
the properties are economically unattractive and have not yet sold.
In  the  meantime,  taxes  on  these  properties  have  not  been  paid
because the estate is otherwise insolvent.   As of 26 October 1998,
the back taxes and interest on the two lots totaled  $1,606.22.1
Through  October                                                              1998,  the  Public  Administrator  advanced
through his law firm  $2,584.00 to administer the Phillips estate.
This  included  the  cost  of  demolishing  the  house,  appraising  the
properties, filing annual accounts with the Durham County Clerk of
Court, and paying various other expenses.   In addition, the estate
generated nearly  $10,000 in legal expenses, mostly related to the
Public Administrator’s efforts to sell the properties.
In  1992, the City and County of Durham initiated proceedings
to  foreclose  its  tax  lien  on  the  Teel  Street  properties.             (The
County  apparently  was  unaware  that  the  Public  Administrator  was
still administering the estate since he was not initially named as
a  defendant,  but  was  later  added  in  an  amended  complaint.)    The
County sought to recover the back taxes and interest, to appoint a
commissioner to sell the Teel Street properties, and to first apply
the proceeds from the sale to pay the back taxes and interest.
In their representative capacities, the Public Administrator
and  the  Guardian  Ad  Litem  answered,  asking  the  Court  to  stay  the
foreclosure proceedings, and noting that a special proceeding had
been instituted by the Public Administrator to sell the Teel Street
1
An estate administrator must pay taxes due on property
under his control, but, like the costs of the razing of the house
in this case, he is only required to use funds from the estate
itself.    N.C. Gen. Stat.  §§  105-383  (1997),  28A-12-5  (1984).




properties  and  that  this  sale  would  likely  generate  sufficient
funds  to  pay  the  costs  of  the  estate  administration  and  the  back
taxes.
The  City  and  County  of  Durham  took  no  steps  to  proceed  with
this action until ordered to do so by District Court Judge Craig B.
Brown in September  1998.    After a hearing, Judge Brown denied the
City and County’s motion for summary judgment and instead granted
summary judgment in favor of the Public Administrator so he could
continue to administer the estate and attempt to sell the property.
This appeal by the City and County followed.2
[1] The County of Durham argues that it has the authority to
foreclose a   property tax lien even if the property is in the midst
of  a  pending  estate  administration.    It  also  contends  that  the
trial  court  violated  the  statutory  prohibition  against  enjoining
the collection and foreclosure of taxes when it denied the County’s
right to foreclose.   We agree with both of the County’s arguments.
Chapter 105 of the North Carolina General Statutes governs tax
assessments  and  collections.    N.C.  Gen.  Stat.                            §   105-355   (1997)
provides that a tax liability on a piece of property creates a tax
lien against that property.   N.C. Gen. Stat. § 105-356(a)(1) (1997)
provides  that  a  tax  lien  is  superior  to  all  other  claims  against
the  property:  “the  lien  of  taxes  .  .  .  shall  be  superior  to  all
other  liens,  assessments,  charges,  rights,  and  claims  of  any  and
every kind in and to the real property to which the lien for taxes
attaches  regardless  of  the  claimant  and  regardless  of  whether
2
The arguments set forth by the County of Durham apply
equally to the City of Durham, so for the sake of brevity we will
refer to the plaintiffs jointly as  “the County.”




acquired  prior  or  subsequent  to  the  attachment  of  the  lien  for
taxes.”
Chapter 28A of the North Carolina General Statutes governs the
administration of a decedent’s estate.   N.C. Gen. Stat. § 28A-19-6
(1984) dictates the order of payment of claims against any estate
being  administered  in  North  Carolina.    The  statute  provides,  in
pertinent part, that
After   payment   of   costs   and   expenses   of
administration, the claims against the estate
of  a  decedent  must  be  paid  in  the  following
order:  .  .  .
Fourth  class.     All  dues,  taxes,  and  other
claims  with  preference  under  the  laws  of  the
State of North Carolina and its subdivisions.
The   purpose   of   the   ranking   system   is   to   provide   orderly
administration  of  estates,  with  proper  safeguards  and  definite
rules  to  benefit  all  creditors.      See  Farmville  Oil  &  Fertilizer
Co. v. Bourne,  205 N.C.  337,  339,  171 S.E.2d  368,  369  (1933).
Under                                                                         §                                            28A-19-6,  the  County  of  Durham  is  a  fourth  class
creditor  and  should  be  paid  after  the  costs  and  expenses  of  the
Phillips  estate  administration  are  paid.     However,                     §                                            105-356
dictates  that  a  tax  lien  takes  precedence  over  all  other  claims
against  the  estate.                                                         These  two  conflicting  statutes  do  not
reference each other.
The  defendants  argue  that  to  break  the  deadlock,  we  should
rely  on  the  ranking  system  in                                            §                                            28A-19-6,  which  requires  that
administrative  costs  be  paid  before  local  taxes.    But  a  similar
reliance could be placed on the plain language of § 105-356, which
gives precedence to all tax liens.   Although the plain language of
these  statutes  present  an  inherent  inconsistency,  our  case  law
provides guidance for resolving the conflict.




In Moore v. Jones, 226 N.C. 149, 36 S.E.2d 920 (1946), Justice
Barnhill writing for our Supreme Court considered a case in which
the  debts  of  an  estate  were  greater  than  the  personalty  left
behind.    In  that  case,  the  estate’s  administrator  needed  to  sell
some of the real estate to pay all of the estate’s debts in full.
The Court held that an estate’s personalty is primarily liable for
paying the estate’s debts, and the real estate is only secondarily
liable.     Furthermore,  the  Court  held  that  the  statute  which
dictated  the  order  in  which  debts  were  to  be  paid  related
exclusively  to  the  application  of  personal  property,  and  not  the
realty.   Moreover, when real estate is sold by an administrator to
pay debts, the proceeds of the sale remain realty until all liens
against the real estate are discharged.   Only the residue, if any,
converts  to  personal  property  which  may  be  used  to  satisfy  other
claims against the estate.
The  rationale  of  Moore  is  applicable  to  the  case  at  bar  in
that  it  establishes  the  order  by  which  claims  against  an  estate
must be paid when the sale of real estate is necessary to pay the
debts.    If  real  property  must  be  sold  to  satisfy  the  debts  of  an
estate,  such  as  in  the  case  at  bar,  all  liens  against  that
property, such as a tax lien, must be satisfied first.    Only then
can  the  remainder  be  used  to  satisfy  other  claims,  such  as  the
costs of the estate administration.
In  an  even  earlier  pronouncement  from  our  Supreme  Court  in
Guilford County v. Estates Administration,  213 N.C.  763,  197 S.E.
535                                                                             (1938),   Justice   Winborne   wrote   that   the   right   of   an
administrator  to  sell  an  estate’s  realty  to  pay  the  debts  of  an
estate  did  not  prevent  the  holder  of  a  tax  sale  certificate  from
foreclosing   in   a   civil   action   during   the   pendency   of   the




administration  of  the  estate.    In  Estates  Admin.,  the  taxes  in
question which took precedence to other claims against the estate
accrued before the death of the decedent.   Logically, that rule of
precedence applies equally to tax liens that arise after the death
of the decedent.
In   any   event,   Justice   Winborne’s   rationale   in   Estates
Administration that the holder of a tax sale certificate does not
lose the right to foreclose the property just because that property
is in the midst of an estate administration applies to the case at
bar.   Our current law treats a tax sale certificate and an original
tax lien identically, and allows the holder of either to institute
a foreclosure action.   N.C. Gen. Stat. § 105-374 (1997).   Under our
extension of the holding of Estates Administration, we must allow
the  County  of  Durham  to  proceed  with  its  tax  foreclosure  despite
the fact that the Public Administrator is still administering the
estate.
[2]  Finally,  we  are  supported  in  our  holding  by  N.C.  Gen.
Stat.  §  105-379(a)  (1997) which provides that:
No court may enjoin the collection of any tax,
the  sale  of  any  tax  lien,  or  the  sale  of  any
property  for  nonpayment  of  any  tax  imposed
under the authority of this Subchapter except
upon  a  showing  that  the  tax                                              (or  some  part
thereof)  is  illegal  or  levied  for  an  illegal
or unauthorized purpose.
And  our  courts  have  consistently  allowed  local  governments  to
collect  taxes  due  to  them  unless  the  tax  was  somehow  illegal  or
invalid.    See, e.g., Sherrod v. Dawson,  154 N.C.  525,  70 S.E.  739
(1911);  Onslow  County  v.  Phillips,  123  N.C.  App.  317,  473  S.E.2d
643  (1996),  rev’d  on  other  grounds,  346  N.C.  265,  485  S.E.2d  618
(1997).
In the case before us, the trial court’s decision effectively




denied  the  County  its  right  to  foreclose  on  the  tax  lien,  a
violation of § 105-379(a).   The defendants do not contend that the
taxes  in  question  were  illegal  or  invalid,  thereby  invoking  the
exception  to  the  rule.     Rather,  the  defendants  argue  that  the
Public  Administrator  is  also  a  government  official,  so  the  trial
court’s  ruling  did  not  enjoin  the  collection  of  the  taxes,  but
merely dictated who would sell the property.
We  note,  however,  that  the  Public  Administrator  is  not
obligated  to  pay  the  taxes  if  the  sale  of  the  property  does  not
generate  enough  funds.    N.C.  Gen.  Stat.                                     §   28A-19-6.    Only  the
County  in  its  foreclosure  proceeding  will  be  obligated  to  raise
enough  funds  to  satisfy  the  tax  debt.    N.C.  Gen.  Stat.                  §   105-
374(k).    Although the Public Administrator may raise enough funds
to  pay  the  back  taxes,  he  may  in  fact  not  be  able  to  do  so.    To
allow him to proceed with a private sale would, in effect, enjoin
the  County  from  collecting  the  taxes  since  such  a  sale  may  not
raise sufficient funds to pay the taxes.    Only the County has the
ability and the obligation to cover the tax debt.
[3] The Public Administrator’s final argument is that if the
tax lien takes precedence over the payment of the estate expenses,
a harsh and absurd result will arise--direct out-of-pocket losses
to  himself  for  the  advancements  made  by  his  law  firm  in  the
administration  of  the  Phillips  estate.    The  Public  Administrator
points  out  that  N.C.  Gen.  Stat.  §  105-374  only  requires  that  the
County raise enough money from the sale of the properties to cover
the taxes.
We recognize the possibility of an inequity in the event the
property does not yield more than the value of the tax lien.   Yet,
in advancing the costs of the estate, the Public Administrator did




so  without  statutory  authority  or  obligation.    Under  N.C.  Gen.
Stat.  §§  105-383  and  28A-12-5,  the  Public  Administrator  is  only
required  to  use  funds  from  the  estate  itself.    To  advance  funds
beyond that amount that is available in an estate upon the reliance
that  real  property  will  be  sold  to  cover  those  costs  is  an
unprotected risk.
Moreover, while N.C. Gen. Stat.  §  105-374(k) requires that a
seller in a tax foreclosure sale raise at least enough money to pay
all of the taxes owing on the property, subsection (k) limits what
may  be  sold  to  “the  sale  of  real  property  or  as  much  as  may  be
necessary  for  the  satisfaction  of  all  of  the                            [debt]”   (emphasis
added).    A  sale  by  the  County  will  not  necessarily  encompass  the
entire  property,  leaving  the  remainder  to  continue  in  the  estate
administration.
In  addition,  N.C.  Gen.  Stat.                                               §         105-374(q)  establishes  the
order  in  which  the  proceeds  from  a  tax  foreclosure  sale  must  be
applied.   Generally, proceeds are first applied to the costs of the
sale, then to any taxes and special benefit assessments.   Finally,
subsection  (q)(6)  provides,  “any  balance  then  remaining  shall  be
paid in accordance with any directions given by the court  .  .  .             .”
Under  this  subsection,  the  remainder  of  the  tax  foreclosure  sale
could be paid to the Phillips estate.
[4]  The  Public  Administrator  further  argues  that  he,  unlike
the County, would be required to raise enough funds to pay all of
the claims against the property.   But it is unclear how he arrived
at this conclusion.
N.C. Gen. Stat.  §  28A-19-6 governs the order in which claims
against  an  estate  must  be  paid  nowhere  does  it  dictate  that  all
claims must be paid in full, regardless of whether funds exist to




do so.    In fact, our Supreme Court has addressed the issue of how
a payment-order statute, such as the one in the case at bar, should
be applied.
[T]he debts of a decedent must be paid, if he
leave anything with which to pay them, and if
his estate is not sufficient to pay his debts
in  full,  then  they  are  to  paid  in  classes,
with  those  of  the  last  class,  if  and  when
reached, sharing ratably in what is left.
Rigsbee  v.  Brogden,                                                          209  N.C.   510,   512,   184  S.E.   24,   25   (1936).
Clearly,  when  an  estate  cannot  pay  all  of  its  debts,  those  debts
can and will remain unpaid.    The Public Administrator, therefore,
is  no  more  obligated  to  raise  enough  money  to  satisfy  all  of  the
claims against the property than the County.
Since  the  trial  court  improperly  prevented  the  County  of
Durham from proceeding with its tax lien foreclosure, the decision
of the trial court is,
Reversed.
Judges HORTON and EDMUNDS concur.

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