Court Opinion

ID: 9863377
Source: CourtListenerOpinion
Date Created: 2023-09-25 04:13:12.529136+00
Date Added: 2024-06-11T11:43:38.755407
License: Public Domain

HUNTER, JR., Robert N., Judge,
concurring in part and dissenting in part.
While I agree with the majority opinion that the trial court properly dismissed Plaintiffs’ claims for common law fraud, misrepresentation, negligence and violation of the North Carolina Securities Act, I disagree with the majority’s conclusion that Plaintiffs’ breach of fiduciary duty or constructive fraud claim is beyond the applicable ten-year statute of limitation.
The majority rests its conclusion exclusively on Toomer v. Branch Banking & Tr. Co., 171 N.C. App. 58, 614 S.E.2d 328 (2005). Until our Supreme Court’s opinion in Barger v. McCoy Hillard and Parks, 346 N.C. 650, 488 S.E.2d 215 (1997) there was no distinction between the elements of constructive fraud and breach of fiduciary duty; the elements were essentially the same. In Barger, our Supreme Court took the position that “[i]mplicit in the requirement that a defendant ‘[take] advantage of his position of trust to the hurt of plaintiff’ is the notion that the defendant must seek his own advantage in the transaction; that is, the defendant must seek to benefit himself.” Id. at 666, 488 S.E.2d at 224 (second alteration in original). There is considerable difficulty in applying this notion of a defendant seeking his own advantage in actions for constructive fraud and breach of fiduciary duty because of the burden-shifting involved in analyzing both torts.
In establishing the elements of either tort, the initial burden of proof is on the plaintiff to “allege the facts and circumstances (1) which created the relation of trust and confidence, and (2) [which] led up to and surrounded the consummation of the transaction in which defendant is alleged to have taken advantage of his position of trust to the hurt of plaintiff.” Rhodes v. Jones, 232 N.C. 547, 549, 61 S.E.2d 725, 726 (1950).
*269Our pattern jury instructions summarize the law as follows:
“Did the plaintiff take advantage of a position of trust and confidence to bring about (identify transaction)?”
On this issue the burden of proof is on the plaintiff. This means that the plaintiff must prove, by the greater weight of the evidence, two things:
First that a relationship of trust and confidence existed between the plaintiff and the defendant. Such a relationship exists where one person places special confidence in someone else who, in equity and good conscience, must act in good faith and with due regard for such person’s interests. . . .
And Second, that the defendant used his position of trust and confidence to bring about (identify transaction) to the detriment of the plaintiff and for the benefit of the defendant.
N.C.P.I.-Civ. 800.05 (2010).
The second phrase, “for the benefit of the defendant,” has been, in my view, improperly inserted in the plaintiff’s case-in-chief and rather should be inserted in the defendant’s affirmative defense of openness. Where a confidential relationship is alleged to have been abused, the specific benefit question should clearly be a defensive matter. It should be shown by the defendant that he dealt with the plaintiff fairly, and the plaintiff should not be required to prove advantage was taken as an initial element of his case-in-chief. Our case law appears to require this element in the plaintiff’s case-in-chief, which is problematic given the presumption of fraud to which a plaintiff is entitled from the initial showing of a confidential relationship.
In this case, Plaintiffs’ proof meets both requirements. The uncontested facts show Defendant was not properly licensed under state or federal law. Without a license, he was legally prohibited from marketing the securities, advising'anyone on the suitability of financial transactions, or charging or collecting any sales commissions from the marketing or sale of securities. The transactions herein clearly involve the sale of securities. It is undisputed Defendant obtained some commissions in this case to which he would not have been legally entitled. When a defendant is not licensed at all, the receipt of an illegal commission would clearly meet the factual predicate that the transaction was “to the detriment of the plaintiff and for the benefit of the defendant.”
*270The majority opinion would dismiss Plaintiffs’ Complaint on the grounds that “ ‘[a] plaintiff must allege that the benefit sought was more than a continued relationship with the plaintiff or payment of a fee to a defendant for work it actually performed.’ White, 155 N.C. App. at 295, 603 S.E.2d at 156.” In White, the defendant was an employee of a licensed broker. Thus, he was legally entitled to receive a commission or to have a “continuing relationship” with regard to the plaintiff and to charge a commission.
In this case, the alleged tortfeasor is an individual, not an employee of a legally licensed entity, who began a series of acts which were the equivalent of rendering securities advice or marketing securities in violation of N.C. Gen. Stat. § 78A-36. Unlike the parties in White, Defendant is not entitled to any legal commission for his advice. The “benefit received” is completely illegal.
The second ground for the majority’s dismissal is that Plaintiffs only alleged a “breach of fiduciary” claim rather than a claim for constructive fraud because the Complaint lacks an allegation of entrustment or placing of trust. In my view, this is a distinction without a difference. In a constructive fraud claim, the allegation of a trust relationship arises from the facts alleged. Clearly, in this case the confidence of Plaintiff was entrusted to Defendant through the transactions alleged in paragraphs 4 through 14 of the Complaint.
Furthermore, the only material difference between breach of fiduciary duty and constructive fraud, in this context, is that the law presumes a confidential relationship of trust exists if certain fiduciary relationships are present. Indeed an instruction on confidence is mandatory in these situations.1 The agent-principal relationship alleged here is clearly sufficient to meet this requirement.
Under these facts, I would hold Plaintiffs have established facts sufficient to survive a summary judgment motion based upon a ten-year statute of limitation.
I would reverse the trial court and remand for a trial on breach of fiduciary duty.

. The pattern jury instruction for constructive fraud provides for a peremptory instruction where the evidence shows a fiduciary relationship: “In this case, members of the jury, the plaintiff and the defendant had a relationship of (name presumptive fiduciary relationship, e.g., . . . agent and principal, etc.) You are instructed that, under such circumstances, a relationship of trust and confidence existed.” N.C.P.I.-Civ. 800.05 (2010).