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Attorneys_lease payments held in trust account-disbursement_duty to client only
Summary judgment was correctly granted for defendant-attorneys who had disbursed to
their clients (the Timmonses) lease payments by plaintiffs where the lease included an option to
purchase and the property was eventually lost in a foreclosure. Defendants' fiduciary duty was to
their clients, the Timmonses, not to plaintiffs, and defendants were obligated to disburse the
funds when requested. Moreover, defendants were also obligated not to disclose the Timmonses'
confidential information to plaintiffs.
Young, Morphis, Bach & Taylor, L.L.P., by Thomas C. Morphis,
Valeree R. Adams, and Jimmy R. Summerlin, Jr., for plaintiffs-
Poyner & Spruill LLP, by E. Fitzgerald Parnell, III, for defendant-appellees Julie M. Hance, Esq., L. Keith Hance, and Hance & Hance, P.A.
No brief filed for defendant-appellees Rickey D. Timmons and Teresa Lynn Timmons.
Thomas L. and Deborah J. Noblot (plaintiffs) appeal from order entered granting summary judgment to Julie M. Hance, Esq., L. Keith Hance, and Hance & Hance, P.A. (defendants). We affirm.
Purchase Option. It is agreed that Lessee
shall have the option to purchase real estate
known as: 3161 CANSLER ROAD[,] VALE, NC,
28168 for the purchase price of ONE HUNDRED
THIRTY NINE THOUSAND Dollars with a down
payment of TEN THOUSAND FIVE HUNDRED dollars
payable upon exercise of said purchase option,
and with a closing date no later than 30 days
Defendants agreed to represent the Timmonses after disputes arose between plaintiffs and the Timmonses. Defendants agreed to receive plaintiffs' monthly rental payments under the lease on behalf of their clients, the Timmonses. The funds accumulated in defendants' trust account.
After several months' rental payments had accumulated in defendants' trust account, the Timmonses requested defendants to disburse the funds to them. Defendants contacted the North Carolina State Bar to determine the ethical requirements regarding the disbursement of funds. After consulting the State Bar and reviewing the North Carolina State Bar Rules of Professional Conduct, defendants disbursed the funds to their clients. Defendants did not disclose this disbursement to plaintiffs. During the time plaintiffs rented from the Timmonses, at least four foreclosure actions of the property were initiated. Defendants represented the Timmonses in some of the foreclosure actions. The fourth foreclosure action was filed 31 October 2002. The Timmonses separated prior to that filing. Defendants were not retained to defend that action.
On 21 February 2003, plaintiffs filed suit against Richard P. McNeely, substitute trustee of a deed executed by the Timmonses, for use and benefit of the Federal National Mortgage Association, Fannie Mae; the Timmonses; and Julie M. Hance as trustee. Plaintiffs alleged breach of contract and fraud against the Timmonses and demanded an accounting of money held in trust by defendants for the Timmonses.
On 14 May 2004, plaintiffs filed a motion to amend their complaint. Plaintiffs added causes of action for [d]amages as to [defendants] and for punitive damages against defendants.
Defendants filed a motion for summary judgment on 3 August 2004. On 26 August 2004, the trial court granted defendants' motion and dismissed all claims against defendants. On 9 September 2004, plaintiffs filed a notice of appeal.
This Court dismissed plaintiffs' interlocutory appeal in an unpublished opinion on 19 July 2005. On 25 July 2005, plaintiffs filed a voluntary dismissal without prejudice of their claims against the Timmonses. Plaintiffs filed a second notice of appeal on 3 August 2005.
Damages as to Defendants Julie Hance, Keith
Hance and Hance & Hance, PA
. . . .
40. That at no time did Keith Hance or Julie Hance reveal to the Plaintiffs that the subject property was being foreclosed upon or that the payments that the Plaintiffs were making were going anywhere other than to the mortgage lender.
41. That both Keith Hance and Julie Hance had an obligation of fair dealings and truthfulness to the Plaintiffs and had an obligation to disclose the foregoing facts to the Plaintiffs and not to disburse any sums without having made said disclosures to the Plaintiffs.
. . . .
44. That without the knowledge or consent of Plaintiffs beginning with a check written from Julie Hance's trust account dated 10/26/01, the Defendant Julie Hance ultimately distributed all funds paid by the Plaintiffs into her trust account to Rickey or Teresa Timmons or others at their discretion.
. . . .
Punitive Damages as to Defendants Keith Hance, Julie Hance and Hance & Hance, PA
. . . .
48. That the action and conduct of Defendants Keith Hance and Julie Hance was done in wanton, willful, reckless and arrogant disregard of the rights and sensibilities of the Plaintiffs and are so aggravating as to justify an award of punitive damages.
On appeal, plaintiffs contend defendants should: (1) not have disbursed the rental proceeds to the Timmonses; (2) have disclosed the fact that they disbursed the funds to the Timmonses; and (3) have informed plaintiffs' attorney of the status of the pending foreclosure actions. Plaintiffs also argue defendants owed them a fiduciary duty. Plaintiffs contend a fiduciary obligation arose when plaintiffs, in reliance upon Hance's status as a member of the legal profession, reposed confidence in her to receive and distribute their monies in accordance with the Trust Agreement reached between the Plaintiffs, the Timmonses, and the Hance Defendants.
In their brief to this Court, plaintiffs also assert a right to damages as third-party beneficiaries of defendants' attorney/client relationship. Plaintiffs failed to allege a cause of action in their complaints for this claim. We decline to address it.
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