UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 09-1432

SHEILA B. LAWS; RONNIE E. LAWS,

Plaintiffs - Appellants,

v.

PRIORITY TRUSTEE SERVICES OF NORTH CAROLINA, LLC; MORRIS, 

SCHNEIDER & PRIOR, LLC,

Defendants - Appellees.

Appeal from the United States District Court for the Western 

District of North Carolina, at Charlotte. Graham C. Mullen,

Senior District Judge. (3:08-cv-00103-GCM)

Argued: January 28, 2010 Decided: April 28, 2010

Before WILKINSON, NIEMEYER, and DAVIS, Circuit Judges.

Affirmed by unpublished per curiam opinion.

ARGUED: John Handy Culver, III, K&L GATES LLP, Charlotte, North 

Carolina, for Appellants. Andrew H. Erteschik, POYNER SPRUILL 

LLP, Raleigh, North Carolina, for Appellees. ON BRIEF: E. 

Fitzgerald Parnell, III, T. Richard Kane, POYNER SPRUILL LLP, 

Charlotte, North Carolina, for Appellee Priority Trustee 

Services of North Carolina, LLC; Melody J. Canady, CRANFILL, 

SUMNER & HARTZOG LLP, Wilmington, North Carolina, Samuel H. 

Poole, Jr., CRANFILL, SUMNER & HARTZOG, LLP, Charlotte, North 

Carolina, for Appellee Morris, Schneider & Prior, LLC.

Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:

Sheila and Ronnie Laws, whose North Carolina house was 

foreclosed on by their lender, Equity One, Inc., commenced this 

class action against the law firm hired by Equity One, Morris, 

Schneider & Prior, LLC (“Morris Schneider”), and the firm that 

Equity One designated and Morris Schneider hired to conduct the 

foreclosure sale, Priority Trustee Services of North Carolina, 

LLC (“Trustee Services”). They alleged that Trustee Services

was the “alter ego” of Morris Schneider and that the 

relationship between the two firms caused (1) Trustee Services 

to breach fiduciary duties of neutrality owed to the Laws under 

North Carolina law and (2) Morris Schneider to operate under a 

conflict of interest in representing both Equity One and Trustee 

Services. The Laws’ complaint sought a declaratory judgment 

that the relationship between Morris Schneider and Trustee 

Services violated North Carolina law, restitution of legal fees, 

disgorgement of profits, and damages.

The district court granted the defendants’ motion to 

dismiss, under Federal Rule of Civil Procedure 12(b)(6), for 

failure to state a claim upon which relief can be granted, 

holding that the Laws failed to allege any irregularity in the 

foreclosure proceedings or to demonstrate any loss resulting 

from the relationship between Morris Schneider and Trustee 

Services. We affirm the judgment of the district court.
3

I

In April 2002, the Laws borrowed $52,200 from Equity One, 

securing repayment of their loan with a deed of trust on their 

house in Gastonia, North Carolina. The deed of trust gave 

Equity One the power to sell the house upon default and 

authorized First American Title Insurance Company as trustee to 

conduct the foreclosure sale and “sell the Property at public 

auction to the highest bidder.” It also authorized Equity One 

to designate a substitute trustee and to purchase the property 

at the foreclosure sale. By the terms of the deed of trust, the 

trustee conducting the sale was required to give notice of the 

sale, to sell the property to the highest bidder, and to apply 

the proceeds of sale first to the expenses of sale, then to the 

sum secured by the deed of trust, and finally to “the person or 

persons legally entitled” to the excess.

In March 2005, the Laws defaulted on the loan, and Equity 

One retained Morris Schneider, who, on behalf of Equity One, 

appointed Trustee Services as the substitute trustee to conduct 

a foreclosure sale.

Before the foreclosure sale could occur, however, the Laws 

filed a voluntary petition under Chapter 13 of the Bankruptcy 

Code, which automatically stayed the foreclosure sale. On 

behalf of Equity One, Morris Schneider requested the bankruptcy 

court to lift the stay. Following negotiations between the Laws 
4

and Equity One, however, the bankruptcy court entered a consent 

order providing that the automatic stay would remain in force as 

long as the Laws made specified payments to Equity One. When 

the Laws later failed to make the payments, the automatic stay 

was lifted, and Trustee Services proceeded to conduct the 

foreclosure sale of the property.

At the sale, which took place on May 22, 2007, Equity One 

was the high bidder with a bid of $62,613.87, an amount 

apparently sufficient to pay the outstanding loan. The Laws, 

however, later received notice from Equity One that the proceeds 

of the sale were not sufficient to satisfy their loan and that a 

deficiency remained in the amount of $19,165.82. According to 

the Laws’ complaint, this was the result of Trustee Services’

failure “to accurately report the use of the proceeds of the 

foreclosure sale.”

Nonetheless, the Laws did not challenge the foreclosure 

sale or the report of the sale in any legal proceeding. Rather, 

they commenced this action some nine months later, in February 

2008, challenging on behalf of themselves and all others 

similarly situated the practice by which Morris Schneider 

designated Trustee Services as the substitute trustee in 

foreclosure proceedings handled by them. In their complaint, 

the Laws alleged that Morris Schneider created Trustee Services 

to serve as substitute trustee in foreclosure proceedings in 
5

which Morris Schneider represented the lender, and that Morris 

Schneider controlled Trustee Services which was, in effect,

Morris Schneider’s alter ego. They alleged that through this 

relationship, Trustee Services violated its fiduciary duty of 

neutrality when conducting the sale because it was so closely 

connected to Morris Schneider and that Morris Schneider operated 

under a conflict of interest in representing both the lender and 

the substitute trustee appointed by the lender. Their complaint 

purported to allege claims for breach of contract, breach of 

fiduciary duty, aiding and abetting breach of fiduciary duty, 

breach of the duty of good faith and fair dealing, constructive 

fraud, and violations of the North Carolina Unfair and Deceptive 

Trade Practices Act, N.C. Gen. Stat. § 75-1.1.

On the defendants’ motion, the district court dismissed the 

complaint under Federal Rule of Civil Procedure 12(b)(6), 

concluding that the complaint did not state any claim upon which 

relief can be granted. See Laws v. Priority Trustee Servs. of 

N.C., L.L.C., 610 F. Supp. 2d 528 (W.D.N.C. 2009). First, the 

court concluded that the complaint did not plead against Morris 

Schneider a violation of anything other than the North Carolina 

Rules of Professional Conduct, which, the court noted, cannot 

serve as a basis for civil liability in North Carolina. See id.

at 530-31. With respect to Trustee Services, it concluded that 

the complaint did not allege any action for common law breach of 
6

fiduciary duty because the only breach alleged was the firm’s

“mere status” as an interested party, which the district court 

concluded did not constitute a violation of North Carolina law. 

See id. at 531-32. It held that a claim for breach of fiduciary 

duty requires a showing of some type of harm or other 

irregularity with the sale, rather than the simple fact that the 

trustee was in an interested relationship. See

Addressing the individual counts more specifically, the 

court gave additional reasons for dismissal. First, as to the

first and sixth counts, for declaratory and injunctive relief 

and for constructive trust, the court found them defective in 

that they simply claimed relief without alleging any causes of 

action. 

id.

See id. at 532. Second, as to the fourth count, for 

aiding and abetting breach of fiduciary duty, the court held 

that no such cause of action exists in North Carolina. See id. 

Third, as to the eighth count, for violation of North Carolina’s 

Unfair and Deceptive Trade Practices Act, the court dismissed 

the claim on the ground that it was barred by an exception 

within the Act for “professional services rendered by a member 

of a learned profession,” which applies to attorneys. See id.

(citing N.C. Gen. Stat. § 75-1.1(b)). Finally, as to the counts 

for breach of contract and constructive fraud, the court 

dismissed the claims on the grounds that the Laws did not 

identify any contractual provisions that were breached and that 
7

the Laws suffered no harm from any alleged fraud. See id.

From the district court’s judgment, entered on March 16, 

2009, the Laws filed this appeal.

at 

532-33.

II

We conclude that the district court properly dismissed the 

Laws’ complaint. The sole bases for the Laws’ complaint were

the “mere status” of Trustee Services as an interested party and 

Morris Schneider’s representation of both Equity One and Trustee 

Services. As the Laws acknowledge on appeal, under North 

Carolina law, a violation of the Rules of Professional Conduct 

for attorneys cannot serve as a basis for civil liability. See

McGee v. Eubanks, 335 S.E.2d 178, 181-82 (N.C. Ct. App. 1985). 

Furthermore, the Laws did not allege any irregularity with the 

sale, other than the accounting problem for which they did not 

attempt to state a claim for relief, nor did they allege that 

they suffered any damages as a result of the arrangement. Under 

North Carolina law, alleging only the fact that Trustee Services 

is in this type of relationship with Morris Schneider is 

insufficient to state a claim for breach of fiduciary duty. See

Denson v. Davis, 124 S.E.2d 827, 830-31 (N.C. 1962) (holding 

that a trustee did not commit a breach of fiduciary duty simply 

by virtue of the fact that he was also an employee of the 
8

lender); Dove v. Harvey, 608 S.E.2d 798, 801 (N.C. Ct. App. 

2005) (“Certain torts require as an essential element that a 

plaintiff incur actual damage. These torts include breach of 

fiduciary duty”); Piedmont Inst. of Pain Mgmt. v. Staton Found.

Consequently, we affirm substantially for the reasons given 

by the district court.

, 

581 S.E.2d 68, 76-77 (N.C. Ct. App. 2003) (same).

AFFIRMED