Court Opinion

ID: 9565329
Source: CourtListenerOpinion
Date Created: 2023-08-21 19:19:18.918085+00
Date Added: 2024-06-11T09:19:34.203211
License: Public Domain

ARNOLD, Judge.
Plaintiffs contend that the trial court erred in dismissing their complaint setting forth claims for constructive fraud and constructive trust. We agree.
In order to survive a motion to dismiss under Rule 12(b)(6) a plaintiff must only “state enough to give the substantive elements of a legally recognized claim.” Raritan River Steel Co. v. Cherry, Bekaert and Holland, 79 N.C. App. 81, 85, 339 S.E. 2d 62, 65, disc, rev. granted, 316 N.C. 734, 345 S.E. 2d 392 (1986). To set out a claim for constructive fraud a complaint must allege facts “(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.” Terry v. Terry, 302 N.C. 77, 85, 273 S.E. 2d 674, 679 (quoting Rhodes v. Jones, 232 N.C. 547, 549, 61 S.E. 2d 725, 726 (1950)).
Plaintiffs have alleged facts and circumstances surrounding the formation and development of the confidential relationship between Booher and Frue and Payne. Plaintiffs have identified the specific transactions that they allege to have been procured through constructive fraud and the times that these transactions occurred. Plaintiffs also have stated that the defendants were trusted to look after plaintiffs’ best interests.
*393Our Supreme Court has stated that a claim for constructive fraud requires less particularity than a claim for actual fraud since constructive fraud is based on a confidential relationship and not a specific misrepresentation. Terry v. Terry, 302 N.C. 77, 273 S.E. 2d 674 (1981). Although plaintiffs stated in their complaint that they never retained Payne to represent them in any capacity, plaintiffs also allege that they assumed he worked for Frue. Plaintiffs’ complaint implies that a confidential relationship existed between Booher and both Frue and Payne. In order to prevail against Payne for constructive fraud, plaintiffs must prove at trial that a confidential relationship did in fact exist between Payne and Booher. It is enough at this stage, however, that plaintiffs’ complaint imply that such a relationship existed.
A claim for relief should not be dismissed based on insufficiency unless it is certain that a plaintiff would not be entitled to relief under any state of facts which could be proved in support of plaintiffs claim. Morrow v. Kings Department Stores, 57 N.C. App. 13, 290 S.E. 2d 732, 734, disc. rev. denied, 306 N.C. 385, 294 S.E. 2d 210 (1982). Plaintiffs’ complaint for constructive fraud survives a motion to dismiss pursuant to Rule 12(b)(6).
Plaintiffs’ complaint also states a claim for constructive trust which survives a motion to dismiss pursuant to Rule 12(b)(6).
Concerning plaintiffs’ claim for constructive trust, defendants make the statement in their brief that unjust enrichment is “based upon the principle that one person is unjustly enriched to the loss of another person.” Defendants suggest that in all unjust enrichment cases, a plaintiff must have actual damages. This is incorrect.
Restitution recovery and damages recovery are based on entirely different theories. D. Dobbs, Law of Remedies, § 4.1, at 224 (1973). “(T)he main purpose of the damages award is some rough kind of compensation for the plaintiffs loss. This is not the case with every kind of money award, only with the damages award.” Id. § 3.1 at 136. In this respect, restitution stands in direct contrast to the damages action. Id. § 4.1 at 224. “The restitution claim, on the other hand, is not aimed at compensating the plaintiff, but at forcing the defendant to disgorge benefits that it would be unjust for him to keep.” Id. A plaintiff may receive a windfall in some cases, but this is acceptable in order to avoid any *394unjust enrichment on the defendant’s part. Id. The principle of restitution “is to deprive the defendant of benefits that in equity and good conscience he ought not to keep . . . even though plaintiff may have suffered no demonstrable losses.” Id.
The relationship between attorney and client is based upon the utmost trust and confidence. This relationship imposes “high duties and responsibilities” on the attorney. Mebane v. Broadnax, 183 N.C. 333, 335, 111 S.E. 627, 628 (1922). If counsel, contrary to the duty that his skill must be used solely for the benefit of the client, makes a personal profit out of the relationship, “the court will always set aside the transaction, or decree that the benefit which the attorney has reaped must be held in trust for the benefit of the client . . . .” Id. at 338, 111 S.E. at 629.
In Speight v. Trust Co., 209 N.C. 563, 183 S.E. 734 (1936), our Supreme Court stated that the major premise underlying a constructive trust is that the trustee would be unjustly enriched if he were allowed to keep any profit made from a violation of the trust. The trustee must not gain any personal advantage touching the property as to which the fiduciary position exists. Id. If a fiduciary has made a profit through the violation of a duty owed to a plaintiff “he can be compelled to surrender the profit to the plaintiff.” V. A. Scott, The Law of Trusts § 462-2, at 3418. “It is immaterial that the profit was not made at the expense of the beneficiary or principal . . . .” Id. § 502, at 3555.
We recognize that in McGee v. Eubanks, 77 N.C. App. 369, 374, 335 S.E. 2d 178, 181 (1985), disc. rev. denied, 315 N.C. 589, 341 S.E. 2d 27 (1986), this Court stated that a breach of the Code of Professional Responsibility “in and of itself would not be a basis for civil liability.” However, what is involved in the case sub judice is not only a possible breach of the Code of Professional Responsibility, but also a claim of unjust enrichment based on the breach of fiduciary duty owed to plaintiffs. The McGee decision does not insulate attorneys from civil actions based on principles of common or statutory law, including claims for constructive fraud, unjust enrichment and constructive trust. To hold that defendants have no civil liability when a violation of a disciplinary rule is involved would fly against sound judgment and would ignore certain basic and well-established principles of law.
*395In summary, plaintiffs, by alleging that a fiduciary relationship existed, that a fiduciary duty was breached, and that defendants gained because of that breach (even though plaintiffs may have suffered no direct loss) have made a claim for constructive trust. The decision of the trial court dismissing this action is reversed and this case is remanded for further proceedings.
Reversed and remanded.
Judge Parker concurs.
Judge Johnson dissents.