**UN PUBLISHED** 
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

- Appe llees

. 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 2 8 , 2010

Before WILKINSON, NIEME YER , and DAVIS, Circuit Judges.

Affirmed by un published 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. Po ole, Jr., CRANFILL, SUMNER & HARTZOG, LLP, Charlotte, North Carolina, for Appellee Morris, Schneider & Prior, LLC.

Unpublished opinions are not binding precedent in this circuit.2 PER CURIAM: Sheila and Ronnie Laws, whose North Carolina house was forec losed on by their lender, Equity One, Inc., commenced this class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 foreclo sure sale, Priority Trustee Services of North Carolina, LLC (“Trustee Services”) . They alleg ed 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 du ties 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 bet ween 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 fail ure to state a claim upon which relief c an 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 aff irm 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 pur chase the property at the foreclosure sale. By the terms of the deed of trust, the
trustee conducting the sale was requir ed 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 Tru stee 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 beha lf of Equity One, Morris Schneider requested the bankruptcy court to lift the stay . Following negotiations between the Laws4 and Equity One, however, the bankruptcy court entered a consent order providing that the automatic stay would remain in force as lo ng as the Laws made specifi ed payments to Equity One. W hen 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 a nd 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 , t he 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 , c halleng ing on behalf of themselves and all others similarly situated the practice by which Morris Schneid er 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 in5 which Mor ris 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 , T rustee Services violated its fiduciary duty of neutrality whe n co nducting 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 alle ge claims for breach of contract, breach of fiduciary duty, aiding and abetting breach of fidu ciary 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) , conclud ing that the complaint did not state a ny claim upon which relief can be granted. See Laws v. Priority T rustee 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 of6 fiduciary duty because the only breach alleged w as 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 o ther irregularity with the sale, rather than the simple fact that the
trustee wa s in an interested relationship. See Addressing the individual counts more specifically , the court gave additional reasons for dismissal . First, as to the first and sixt h c ount s , 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 c ount , for aiding and abetting b reach of fiduciary duty , the court held that no such cause of action exists in North Carolina. See id

. Third, as to the eighth c ount , 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 c ount s for breach of contract and con structive fraud , the court dismissed the claims on the grounds that the Laws did not identify any contractual provisions t hat were breached and that7 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 bas e s for the Laws’ complaint w ere the “mere status” of Trustee Services as an interested party and Morris Sch neider’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, 18 1

- 8 2 (N.C. Ct. App. 1985). Furthermore, t he 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 da mages 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 the8 lender); Dove v. Harvey , 608 S.E.2d 798, 801 (N.C. Ct. App. 2005) (“Certain torts require as an e ssential element that a plaintiff incur actual damage. These torts include breach of fiduciary duty” ) ; Piedmont Ins t . 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