Court Opinion

ID: 1023448
Source: CourtListenerOpinion
Date Created: 2013-07-04 23:38:02.310349+00
Date Added: 2024-06-11T12:39:39.173345
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                            No. 06-1802

SOUTHWESTERN LIFE INSURANCE GROUP,

                                                          Plaintiff,

          and

JOY MOREHEAD,

                                             Defendant - Appellant,

          versus

FEWKES MANAGEMENT CORPORATION,

                                              Defendant - Appellee,

          and

ROBIN HOOD GROUP, INCORPORATED,

                                  Third Party Defendant - Appellee.

Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. Malcolm J. Howard, Senior
District Judge. (4:05-cv-00018-H)

Argued:   May 22, 2007                    Decided:   August 16, 2007

Before TRAXLER and DUNCAN, Circuit Judges, and Frank D. WHITNEY,
United States District Judge for the Western District of North
Carolina, sitting by designation.

Affirmed by unpublished opinion. Judge Whitney wrote the opinion,
in which Judge Traxler and Judge Duncan joined.
Donald S. Higley, II, HOPF & HIGLEY, P.A., Greenville, North
Carolina, for Appellant. Gary J. Rickner, WARD & SMITH, P.A., New
Bern, North Carolina, for Appellees.

Unpublished opinions are not binding precedent in this circuit.

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WHITNEY, District Judge:

     Joy Morehead appeals from a final judgment of the district

court,    following    a   bench   trial,       declaring   Fewkes   Management

Corporation as the rightful owner of the proceeds of her late

husband’s life insurance policy and denying her claim of unfair and

deceptive trade practices against Robin Hood Group.                We review the

district   court’s     findings     of    fact    for   clear   error   and   its

conclusions of law de novo.        Williams v. Sandman, 187 F.3d 379, 381

(4th Cir. 1999).       Finding no error, we affirm.

                                         I.

     Joy Morehead’s late husband, Ralph Morehead, was a participant

in a group life insurance plan that provided him $100,000 in life

insurance benefits. Initially, Mrs. Morehead was designated as the

beneficiary of the life insurance benefits payable under the

policy.

     Sometime in or around 1998, Mr. Morehead was diagnosed with a

potentially terminal illness, severe chronic obstructive pulmonary

disease.     On the advice of their insurance agent, the Moreheads

converted the policy to an individual policy of insurance so that

it could be sold immediately for cash through a regulated process

that is known as viatication.                The monthly premium under this

individual    policy    was   $352.58,        which   apparently   exceeded   the

Moreheads’ ability to pay.         Rather than allow the policy to lapse,

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the Moreheads, through the Medical Escrow Society, a Florida-based

viatical broker, solicited bids to sell the policy for cash to

viatical investors.        Robin Hood Group, an Illinois-based viatical

settlement provider that represents a group of such investors, made

the Moreheads an offer of $21,000 for the sale of the policy.             The

offer by Robin Hood was the highest offer made by any viatical

company for the sale of the policy.

      On or about October 25, 2005, Ralph Morehead, Joy Morehead,

and   Robin    Hood   executed   a    Viatical/Life    Settlement   Agreement

whereby the Moreheads agreed, in exchange for a lump-sum payment of

$21,000, to assign their interest in the policy to a trustee for

the benefit of new beneficiaries named on the policy.           The trustee

appointed to take ownership of the policy was Fewkes Management

Corporation. The new beneficiaries were seven individual investors

who invested varying amounts to fund the settlement agreement, pay

the premiums on the policy as long as Mr. Morehead lived, and who,

at Mr. Morehead’s death, were to receive the entire proceeds of the

policy ($100,000) pro rata to their investment.

      At all times relevant to the viatical settlement transaction,

neither Robin Hood nor Fewkes Management were licensed to conduct

business      in   North   Carolina   as    viatical   settlement   providers

pursuant to N.C. Gen. Stat. § 58-58-210(a) (2002), although Kristan

Fewkes (Vice-President of Robin Hood Group) was personally licensed

in North Carolina as a viatical settlement broker and erroneously

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believed that this was the only license required. Also, Robin Hood

failed to provide Mr. Morehead with a brochure describing the

process of viatical settlements as required by N.C. Gen. Stat.

§ 58-58-245(a)(8), and failed to use contracts in execution of the

viatical settlement that had been approved by the Commissioner of

Insurance, as required by N.C. Gen. Stat. § 58-58-220.

     Despite these technical defects, the viatical settlement was

fully and satisfactorily performed as contemplated by all parties.

Neither    of   the   Moreheads    complained   about    the   terms   of    the

transaction prior to the institution of this litigation by the

insurer,   Southwestern     Life    Insurance   Group,   which   filed      this

declaratory judgment action seeking a judicial determination of

whether Fewkes or Mrs. Morehead was the proper owner of the policy

proceeds, in light of the fact that Fewkes was not licensed to

engage in viatical settlements within North Carolina at the time of

the Morehead transaction.

                                     II.

     This appeal presents the question of whether, under North

Carolina law, a party to a fully executed contract may rescind it

on the basis of the other contracting party’s failure to comply

with licensing and similar regulatory statutes, which statutes do

not expressly create such a private right of action.                     North

Carolina case law clearly and directly answers the posited question

                                      5
in the negative.   Hawkins v. Holland, 388 S.E.2d 221, 223 (N.C. Ct.

App. 1990) (citing Annotation, Recovery Back of Money Paid to

Unlicensed Person Required by Law to Have Occupational or Business

License or Permit to Make Contract, 74 A.L.R.3d 637 (1976)).

     Morehead    mistakenly   relies       on   a   line   of   North   Carolina

decisions standing for the proposition that “unlicensed persons who

contract to provide services for which a license is required may

not recover on the contract.”        Marker & Assoc., Inc. v. J. Allan

Hall & Assoc., 314 F. Supp. 2d 555, 561 (E.D.N.C. 2004); see also

Hanover Realty v. Flickinger, 362 S.E.2d 173 (N.C. Ct. App. 1987);

Gower v. Strout Realty, Inc., 289 S.E.2d 880 (N.C. Ct. App. 1982).

Those cases are inapposite here, however, because Appellees are not

attempting to recover moneys still owing to them under the tainted

agreement.      Rather,   Morehead    is    trying    to   recover      back   the

consideration she and her late husband voluntarily parted with as

part of their performance under the Viatical Settlement Agreement,

after receiving the full benefit of their bargain.

     The   analysis   contained      in    Hawkins    squarely    disposes     of

Morehead’s arguments in favor of an equitable remedy in these

circumstances.     Here, as in Hawkins, the relevant regulatory

enactment provides for ample penalties and enforcement mechanisms,

not one of which is a private right of action for annulment and

                                      6
avoidance of a concluded transaction.*            This counsels us against

recognizing such a remedy by judicial construction.              Hawkins, 388

S.E.2d at 223.    Furthermore, to undo the life insurance assignment

after full and satisfactory performance by Appellees would result

in a disproportionate forfeiture by Fewkes and its investors (who

paid $21,000 to the Moreheads for the assignment of the policy in

addition to two years’ worth of monthly premiums to Southwestern

between the assignment and Mr. Morehead’s death, in expectation of

a $100,000 return on their investment at Mr. Morehead’s death) and

a corresponding windfall recovery by Morehead. Such a result would

run contrary to established principles of equity.                   Id.    The

district court, then, properly declined to disregard the assignment

of   the   life   insurance   policy       pursuant   to   the   Viatical/Life

Settlement Agreement and properly awarded Fewkes ownership of the

policy proceeds.

                                   III.

      We next consider whether Morehead has a remedy under North

Carolina’s unfair and deceptive trade practices statutes.                  By

      *
      See, e.g., N.C. Gen. Stat. § 58-58-215 (providing for
revocation or suspension of license for violations of the act); id.
§ 58-58-250(j) (providing for avoidance of a concluded viatical
transaction only where consideration has not been timely tendered
to the viator); id. § 58-58-265(a) (providing criminal penalties
for fraud); id. § 58-58-290 (providing for civil remedies
generally, including: prohibitory injunctions, money damages, and
miscellaneous civil penalties).

                                       7
enacting N.C. Gen. Stat. § 58-58-295, the North Carolina General

Assembly   has     declared       that   “[a]   violation      of    [the    Viatical

Settlements Act] is an unfair trade practice,” which in turn gives

rise to a private right of action under N.C. Gen. Stat. § 75-1.1 et

seq. entitling a successful plaintiff to certain statutory remedies

such as treble damages and, potentially, attorney’s fees.

       Robin Hood conceded throughout the proceeding below that it

was not properly licensed at the time of the viatical transaction

and that this defect constituted a violation of the Viatical

Settlement Act.       However, the district court properly rejected

Morehead’s unfair trade practices claim because she was unable to

prove any actual damages resulting from the violation.                        To the

contrary, the evidence and the findings of the district court

demonstrate that, had the Moreheads not sold the policy to the

Robin Hood investors, the policy would have lapsed (in which case

she would have received northing) or would have been sold to

another group of viatical investors (in which case the Moreheads

would   have     settled    for    something    less    than   the    $21,000    they

received from Robin Hood, since Robin Hood submitted the highest

bid in response to their solicitation).                 Because Morehead cannot

show    actual     injury     resulting       from     Robin   Hood’s       statutory

infractions, the district court properly granted judgment in favor

of Robin Hood.

                                          8
                                  IV.

     In sum, we conclude that appellees’ technical violations of

North Carolina’s Viatical Settlement Act neither entitle Morehead

to unwind the viatical transaction after it has been fully executed

and satisfactorily performed, nor give rise to a claim at law where

she can prove no actual injury.         Accordingly, we affirm the

judgment of the district court.

                                                          AFFIRMED

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