where the court observed that North Carolina law distinguishes between damages recovery and restitution recovery; the damage award is designed to compensate a plaintiff for her loss whereas “[t]he 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”
How later courts described this case
- where the court observed that North Carolina law distinguishes between damages recovery and restitution recovery; the damage award is designed to compensate a plaintiff for her loss whereas “[t]he 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”
- internal citations omitted; quoting D. Dobbs, Law of Remedies, § 4.1, at 224 (1973)
Written by the judges who cited it.
The opinion
Judge JOHNSON
dissenting.
I respectfully dissent from the majority opinion to the extent that it holds that plaintiffs have alleged a legally recognized claim against defendants Frue and Payne.
Plaintiffs’ complaint does not allege that defendants Frue and Payne entered into an attorney and client relationship with him. There are no allegations of a retainer fee offered by plaintiffs or accepted by defendants prior to the trip to Texas. Indeed plaintiffs’ complaint alleges, inter alia, that “At no time did Booher intend to retain Frue to negotiate settlement or to institute legal proceedings in the State of Texas . . . . At no time did Booher retain Payne to represent him in any capacity . . . .” (Emphasis supplied.)
Assuming arguendo that there were allegations that plaintiffs retained defendants Frue and Payne to assist him in finding competent legal assistance, I do not find allegations that plaintiffs retained defendants Frue and Payne to negotiate a fee arrangement with Saunders. Moreover, there are no allegations that defendants Frue and Payne negotiated plaintiffs’ fee arrangement with Saunders. There are no allegations that defendants Frue and Payne influenced plaintiffs to accept the fee arrangement with Saunders. There are no allegations that defendants Frue and Payne requested a referral fee from Saunders prior to or during any negotiations with Saunders regarding plaintiffs’ fee arrangement with Saunders. Nor are there any allegations that defendants Frue and Payne influenced plaintiffs to retain Saunders *396 because they knew they could get a referral fee from him in particular or that their referral of plaintiffs to him was contingent upon their receiving a referral fee from him.
Plaintiffs’ complaint, to the contrary, alleges that “At no time during the above meeting did Frue or Payne attempt any negotiation regarding Saunders’ fee.” There are no allegations in plaintiffs’ complaint that the referral fee received by defendants, in any way, affected Saunders’ contingency fee. In plaintiffs’ complaint, it is patently alleged that defendants did not approach Saunders until the conclusion of the conference wherein plaintiff and Saunders had agreed to the contingency fees and plaintiff retained Saunders to represent him. Therefore, Count I of plaintiffs’ complaint must fail or survive based on the allegation that defendants accepted a referral fee without disclosing said acceptance to plaintiffs.
It is a violation of the disciplinary rules of the North Carolina Code of Professional Responsibility for a retained attorney to divide legal fees with another attorney merely because an attorney has referred a client. DR 2-106ÍA), North Carolina Code of Professional Responsibility. This Court has previously stated that a “breach of the Code of Professional Responsibility in and of itself would not be a basis for civil liability.” 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 22 (1986). A violation of the ethical principle of not accepting a division of legal fees for a referral has not been accepted as a violation of a legal duty. I conclude that Count I of plaintiffs’ complaint fails due to insufficient factual allegations to satisfy the elements of a legally recognized claim.
Plaintiffs’ second count of the complaint seeks restitution through imposition of a constructive trust aimed at forcing defendants Frue and Payne to disgorge benefits that it would be unjust for them to keep. See D. Dobbs, Law of Remedies, sec. 4.1 at 224 (1973). Our Supreme Court has described a constructive trust as follows:
A constructive trust is a duty, or relationship, imposed by courts of equity to prevent the unjust enrichment of the holder of title to, or of an interest in, property which such holder acquired through fraud or some other circumstance making it inequitable for him to retain it against the claim of *397 the beneficiary of the constructive trust .... It is an obligation or relationship imposed irrespective of the intent with which such party acquired the property, and in a well-nigh unlimited variety of situations. Nevertheless, there is a common, indispensable element in the many types of situations out of which a constructive trust is deemed to arise. This common element is some fraud, breach of duty or other wrongdoing by the holder of the property, or by one under whom he claims, the holder, himself, not being a bona fide purchaser for value.
Wilson v. Crab Orchard Development Co., 276 N.C. 198, 211-12 , 171 S.E. 2d 873, 882 (1970).
My review of plaintiffs’ complaint does not reveal factual allegations sufficient to survive defendants’ motion to dismiss. As discussed supra there are insufficient allegations of constructive fraud and insufficient allegations of a breach of a fiduciary duty. The essence of plaintiffs’ allegations is that defendant Frue breached an ethical principle imposed upon him by the Rules of Professional Conduct. This principle prohibiting a non-disclosed division of legal fees as payment for a referral has not been accepted as a legal principle. Without precedent from our Supreme Court or this Court I decline to hold that plaintiffs have alleged a valid claim for a constructive trust on alleged referral fees received by defendants Frue and Payne from Saunders which plaintiffs allege were negotiated subsequent to the contingency fee agreement with Saunders and Booher’s retention of Saunders to represent his interests. See Eubanks, supra.