NO. COA97-387

Catawba County No- 94CVS2362

Filed: 4 August 1998




personal representatives of
the Estate of J. Bruce Teague, DAVID B. LINGAFELT,


Appeal by plaintiffs from order and opinion entered 24 October 1996 by Judge Ben F. Tennille in Catawba County Superior Court. Heard in the Court of Appeals 20 November 1997.

James, McElroy & Diehl P.A., by Edward T. Hinson, Jr., J. Mitchell Aberman, J. Michael Mulvaney, and Katherine Line Thompson Kelly, for plaintiff-appellants.

Patrick, Harper & Dixon L.L.P., by Eloise D. Bradshaw and Kimberly A. Huffman, for defendar2t-appellees Vassie B. Balkcurn and Beatrice K. Balkcum.

Kennedy & Black, P.A., by K. Dean Black, for defendantappellees David B. Lingafelt and Janet W. Lingafelt.

MARTIN, John Judge.

Plaintiffs filed this action seeking damages for alleged

- 2 -

violations of North Carolina securities laws, common law fraud, negligent misrepresentation, and unjust enrichment. The controversy arises from plaintiffs' sale, over a period of two months in the fall of November 1992, of approximately 43,945 shares of common stock in Citizens Savings Bank, SSB, Inc - (Citizens) , in varying amounts, to defendants. Plaintiffs' claims as to all defendants other than defendants Lingafelt and defendants Balkcum have been resolved and are not involved in this appeal. Plaintiffs appeal from an order granting summary judgment in favor of defendants Lingafelt and defendants Balkcum. We affirm.

Summary judgment is appropriate if the evidentiary materials before the court show "that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law," N.C. Gen. Stat. 1A-1, Rule 56 (1967) ; Savings & Loan Assoc. v. Trust Co., 282 N.C. 44, 191 S.E.2d 683 (1972). Issues of fact which are immaterial to the outcome of the dispute, however, will not preclude summary judgment. Kessing v. Mortgage Corp., 278 N.C. 523, 180 S.E.2d 823 (1971). The burden is upon the moving party to establish the lack of any triable issue and his entitlement to judgment; the court must view the evidence in the light most favorable to the non-moving party, and where the evidence discloses an actual good faith controversy as to a material fact, summary judgment must be denied. Page v. Sloan, 281 N.C. 697, 190 S.E.2d 189 (1972); Glover v. First Union National Bank, 109 N.C. App. 451, 428 S.E.2d 206 (1993) A party defending

-3 -

a suit is entitled to summary judgment if he can show that the claimant cannot prove the existence of an essential element of the claim or cannot surmount an affirmative defense. Berkeley Federal Savings & Loan Assn. v. Terra Del Sol, 111 N.C. App, 692, 433 S.E.2d 449 (1993), disc. review denied, 335 N.C. 552, 441 S.E.2d 110 (1994).

In ruling upon a motion for summary judgment, it is not the function of the trial court to decide issues of fact; thus, an order for summary judgment does not ordinarily contain findings of fact and conclusions of law. Capps v. City of Raleigh, 35 N.C. App. 290, 241 S.E.2d 527 (1978). However, it is sometimes helpful for the trial court to summarize the undisputed material facts upon which it bases its judgment. Id., Noel Williams Masonry v. Vision Contractors 103 N.C. App. 597, 406 S.E.2d 605 (1991) . In the present case, the trial court summarized the undisputed material facts appearing from the pleadings and evidentiary materials before it and upon which it based its judgment.

The undisputed evidence shows that as of 1 August 1992, plaintiffs collectively owned 43,945 shares of the stock of Citizens. The stock of Citizens was not widely traded; trades were generally made through the bank, which maintained a list of persons who were interested in buying and selling Citizens' stock. William Bradshaw, senior vice president and secretary of Citizens, maintained the list at times relevant to this action. His procedure for handling such transactions, as set forth in his affidavit, was uncontroverted:

-4 -

5. It was my procedure, upon receiving a call from a person wishing to sell stock, to write down his name, the number of shares he wished to sell and the price at which he wished to sell. If someone called wanting to purchase stock, I recorded his name, the number of shares he wished to purchase, and the maximum price he wished to pay, if that information was given to me. On occasion, potential purchasers called and asked if I would let them know when any shares became available and did not indicate a price. I recorded those names also. If asked by a potential buyer or potential seller, I gave information an those recent trades of Citizens' stock known to me, including the number of shares and the price per share. If I was asked, I also gave the book value of the stock as indicated by the latest quarterly report. I did not advise any potential seller on a price to ask, nor did I advise any potential buyer on what price to pay. I did not disclose any confidential information about Citizens or its potential customers.

6. After receiving an inquiry from an individual desiring to sell stock, my procedure was to contact persons on the buying list in the order they had contacted me. If the seller's asking price was greater that [sic] the price a potential buyer had indicated he would pay, I skipped over that individual to the next name on the buyer list. I told each potential buyer I called how many shares of stock were available and the price per share set by the seller. If the potential buyer was not willing to pay the potential seller's price, I called the next person on the buyer list. I would not call the potential seller and ask if he was willing to come down on his price. I never negotiated any term of any purchase or sale an behalf of the parties. If the potential buyer indicated he wished to purchase the shares at the price requested by the potential seller, he was instructed to bring the purchase funds to Citizens. The buyer's funds were deposited in a special escrow account at Citizens which was solely for stock transactions. The seller was instructed to bring the endorsed stock certificate to Citizens. When the purchaser's check cleared, the funds were disbursed to the

- 5 -

seller, and the stock certificate was sent to First Union National Bank, as transfer agent, for transfer to the purchaser. Citizens never charged a fee for these ministerial services.

7. My activities in assisting with share transfers were limited to those set forth above. I did not solicit sales or purchases of stock, negotiate a price for the stock on behalf of either party, attempt to persuade either party to meet the other's price, urge either party to buy or sell, or act as the agent for either party. My role was limited to conveying information about the availability of stock and to providing ministerial services to facilitate the exchange of money and the stock after the parties themselves reached an agreement. These activities were performed by me solely in my role as an officer and employee of Citizens.

In late summer of 1992, plaintiff Richard Frazier contacted Bradshaw about the possibility of selling some of the Citizens, stock belonging to Frazier's daughter. Because he had heard rumors of a possible merger of Citizens with a larger bank, Frazier inquired of Bradshaw as to whether there were any plans or discussions involving a merger, and indicated that he would not sell any of plaintiffs' stock if a merger was being considered. Bradshaw replied that he was not aware of any merger negotiations. Over the period from 23 September 1992 until 25 November 1992, plaintiffs sold all of their shares in Citizens for prices ranging from $12.00 to $13.80 per share. Before each transaction, Frazier inquired of Bradshaw with respect to merger negotiations and was told that no such negotiations were taking place. These sales included a sale of 12,000 shares to defendants Lingafelt for $13.30 per share on 5 November 1992, a sale of 14,420 shares to the

-6 -

Lingafelts for $13.80 per share on 25 November 1992, and a sale of 10,075 shares to defendants Balkcum for $13.80 per share on 25 November 1992. The 25 November 1992 transactions were made directly between plaintiffs and defendants; neither Bradshaw nor Citizens were involved in the closing, though immediately prior thereto, Frazier addressed a similar inquiry concerning a merger to another Citizens employee, Richard McGee, who also denied the existence of merger discussions.

Contrary to Bradshaw's and McGee's representations, however, the undisputed evidence shows that during the summer and fall of 1992, Citizens was engaged in negotiations with several larger banks with respect to a merger. Though no merger agreement was in place on the date of any of plaintiffs' sales of stock to defendants, on 19 January 1993 Citizens announced its merger with Branch Banking and Trust Company (BB&T). Citizens' stockholders received the equivalent of between $28.97 to $33.19 per share in cash and BB&T stock.

Plaintiffs specifically did not allege that either defendants Lingafelt or defendants Balkcum made any misstatement or misrepresentation to them, or omitted to state any material fact. In addition, plaintiffs offered no direct evidence to show that defendants Lingafelt or defendants Balkcum had any knowledge of any of the representations made to Richard Frazier by Bradshaw and McGee with respect to Citizens' merger discussions.

In addition to the present suit, plaintiffs brought an action against Citizens and Bradshaw. Their claims against Citizens and

- 7-

Bradshaw were settled under the terms of a Mutual Release and Settlement Agreement dated 22 June 1995.


Plaintiffs first argue the trial court erred when it granted summary judgment in favor of defendants Lingafelt and Balkcum with respect to plaintiffs' claims alleging unjust enrichment. The equitable doctrine of unjust enrichment applies when the defendant has been unjustly enriched at the expense of the plaintiff under circumstances which would render it unjust to permit defendant to keep the benefits without compensating the plaintiff. "The rule of unjust enrichment is based upon the equitable principle that a person should not be permitted to enrich himself unjustly at the expense of another." Stauffer v. Owens, 25 N.C. App. 650, 652, 214 S.E.2d 240, 241 (1975).

In order to establish a claim for unjust enrichment, a party must have conferred a benefit on the other party. The benefit must not have been conferred officiously, that is it must not be conferred by an interference in the affairs of the other party in a manner that is not justified in the circumstances. The benefit must not be gratuitous and it must be measurable (citation omitted) . Wells v. Foreman, 236 N.C. 351, 72 S.E.2d 765 (1952), says that the defendant must have consciously accepted the benefit. A claim of this type is neither in tort nor contract but is described as a claim in quasi-contract or a contract implied in law. A quasi-contract or a contract implied in law is not a contract. The claim is not based on a promise but is imposed by law to prevent an unjust enrichment, If there is a contract between the parties the contract governs the claim and the law will not imply a contract. Concrete Co. v. Lumber Co., 256 N.C. 709, 124 S.E.2d 905 (1962).

- 8 - '

Britt v. Britt, 320 N.C. 573, 577, 359 S.E.2d 467, 469-70 (1987). When a court awards relief for unjust enrichment, it is necessarily implying a contract where none existed before. However, it is a well-established legal principle that the existence of an express contract precludes a finding that an implied contract existed with reference to the same matter, Concrete Co. v. Lumber Co., 256 N.C. 709, 124 S.E.2d 905 (1962), and thus no claim for unjust enrichment concerning the subject matter of the contract may be maintained.

In the present case, express contracts existed between plaintiffs and defendants with respect to the sale of the stock. Defendants argue the express contracts preclude plaintiffs' claims against them for unjust enrichment; plaintiffs contend, however, they were induced to enter the contracts by fraud. A contract which has been induced by fraud on the part of one of the parties or his agent is unenforceable. Ward v. Heath, 222 N.C. 470, 24 S.E.2d 5 (1943) ; Daniel Boone Complex, Inc. v. Furst, 43 N.C. App. 95, 258 S.E.2d 379 (1979), disc. review denied, 299 N.C. 120, 261 S.E.2d 923 (1980).

Plaintiffs attempt to argue that, due to relationships between defendants and a member of the Citizens board of directors, an inference can be made that defendants had knowledge of the pending merger which would be sufficient to create an issue of fact as to whether they fraudulently failed to disclose to plaintiffs that merger negotiations had occurred. In their complaint, however, plaintiffs have "specifically not alleged" that defendants personally made any misrepresentations or omitted disclosure of any

-9 -

material fact. A party is bound by his pleadings and, unless withdrawn, the allegations contained therein are binding on the pleader and the court as judicial admissions. Universal Leaf Tobacco Co. v. Oldham, 113 N.C. App. 490, 439 S.E.2d 179, disc. review denied, 336 N.C. 615, 447 S.E.2d 412 (1994). Thus, there is no genuine issue of fact as to whether defendants personally misrepresented or omitted to disclose the existence of any tact material to the contracts.

There being no genuine issue of fact as to whether defendants personally induced plaintiffs to enter into the contracts for the sale of their stock by fraud, any such fraud must necessarily have been committed by Bradshaw's denial to plaintiffs that merger discussions were occurring. Plaintiffs allege that, in misrepresenting the existence of merger negotiations, Bradshaw was acting as defendants' agent. A principal may be liable for a fraud committed by his agent, "even though the principal did not know or authorize the commission of the fraudulent acts." Norburn v. Mackie, 262 N.C. 16, 23, 136 S.E.2d 279, 284-85 (1964).

Plaintiffs have admitted, in responses to defendant Balkcums' requests for admissions, not only that the Balkcums committed no fraud and made no misrepresentation of any kind to plaintiffs in connection with their purchase of plaintiffs' stock, but also that Bradshaw never acted as the Balkcums' agent in connection with the transaction. Thus, the existence of an enforceable express contract between plaintiffs and defendants Balkcum precludes plaintiffs from maintaining an action against them for unjust


enrichment, entitling defendants Balkcum to summary judgment in their favor.

The question remains as to whether Bradshaw can be found to have been acting as an agent for defendants Lingafelt so that his alleged fraud may be imputed to them. Though the question of agency is usually an issue of fact for the jury, where the evidence could lead to only one conclusion, the issue may be resolved as a matter of law by the court. Smock V. Brantley, 76 N.C. App. 73, 331 S,E.2d 714 (1985), disc. review denied, 315 N.C. 590, 341 S.E.2d 30 (1980).

"Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act." Colony Associates v. Fred L. Clapp & Co., 60 N.C. App. 634, 637-38, 300 S.E.2d 37, 39 (1983) (quoting Restatement (Second) of Agency 1(1) (1957)). "Two essentials are present in a principal-agent relationship: '(1) authority, either express or implied, of the agent to act for the principal, and (2) the principal's control over the agent.'" Id. at 637, 300 S.E.2d at 39 (quoting Vaughn v. Dept of Human Resources, 37 N.C. App. 86, 91, 245 S.E.2d 892, 895 (1978)). "The key factor is whether or not the alleged principal has any power or control over the agent." Smock at 75, 331 S.E.2d at 716; see Peace River Elec. Co-op, Inc. v. Ward Transfer Co. Inc., 116 N.C. App. 493, 449 S.E.2d 202 (1994).

No genuine issue of fact exists as to whether Bradshaw was


acting as an agent for defendants Lingafelt; as a matter of law he was not. Bradshaw was not a stockbroker, who is generally said to function as an agent for parties seeking to purchase stock, See Lane v. Griswold, 273 N.C. 1, 159 S.E.2d 338 (1968) To the contrary, Bradshaw's uncontroverted affidavit discloses that under the procedures he employed to facilitate the transfer of Citizens stock, neither the potential seller nor the potential buyer had the right to exercise any control over him; they could do no more than act on the information which he provided them. He did not solicit purchases or sales nor did he negotiate the terms thereof. Moreover, Bradshaw had absolutely no involvement in the 25 November 1992 transactions, which were negotiated directly between Richard Frazier and David Lingafelt. Plaintiffs have forecast no evidence which would support a finding that Bradshaw was acting other than solely on behalf of Citizens to facilitate the exchange of its stock and, therefore, have failed to show the existence of an essential element which would invalidate their express contracts to sell their stock to defendants Lingafelt and entitle them to pursue a claim of unjust enrichment.

Finally, as to plaintiffs' claims for unjust enrichment, we note the equitable doctrine of unjust enrichment applies to provide the remedy of restitution only when the aggrieved party has no adequate remedy at law. Jefferson Standard Life Ins.. Co. V. Guilford Co., 225 N.C. 293, 34 S.E.2d 430 (1945) . In this case, the alleged wrong which plaintiffs seek to rectify resulted from the misrepresentations and false statements allegedly made by

-12 -

Bradshaw and McGee, employees Of Citizens. Plaintiffs have a legal remedy against those parties and, in fact, have pursued that remedy to a successful conclusion, reaching a substantial settlement apparently satisfactory to them. Thus, their legal remedy was adequate and the equitable remedy of unjust enrichment is not available to them. See Jones Cooling, and Heatinq, -Inc. v. Booth, 99 N.C. App. 757, 394 S.E.2d 292 (1990), disc. review denied, 328 N.C. 732, 404 S.E.2d 869 (1991) . Summary judgment dismissing plaintiffs' claims for unjust enrichment is affirmed.


Plaintiffs also assign error to the entry of summary judgment dismissing their remaining claims for fraud, securities law violations, and negligent misrepresentation against defendants Lingafelt. Plaintiffs have not, however, alleged direct acts of wrongdoing by defendants Lingafelt, ; each of these claims is dependent upon the existence of an agency relationship between defendants Lingafelt and Bradshaw. As we have determined as a matter of law that no such agency relationship existed with respect to the transactions at issue here, defendants Lingafelt cannot be held vicariously liable for any wrongdoing on Bradshaw's part. The trial court's grant of summary judgment in favor of defendants Lingafelt on these claims is affirmed.


Judges JOHN and SMITH concur.

Report per Rule 30(e).