Investors Title Ins. Co. v. Herzig

• Decision Date: 27 January 1992
• Docket Number: No. 28PA91,28PA91
• Citation: 413 S.E.2d 268,330 N.C. 681
• Court: North Carolina Supreme Court
• Parties: INVESTORS TITLE INSURANCE CO. v. David F. HERZIG, Jerry S. Chesson, Southeastern Shelter Corporation, Lee L. Corum, and Everett, Creech, Hancock & Herzig, a Partnership.

Page 268

413 S.E.2d 268

330 N.C. 681

INVESTORS TITLE INSURANCE CO. v. David F. HERZIG, Jerry S. Chesson, Southeastern Shelter Corporation, Lee L. Corum, and Everett, Creech Hancock & Herzig, a Partnership.

No. 28PA91.

Supreme Court of North Carolina.

Jan. 27, 1992.

On discretionary review pursuant to N.C.G.S. § 7A-31 of the decision of the Court of Appeals, 101 N.C.App. 127, 398 S.E.2d 659 (1990), affirming the judgment entered by Hudson, J., in the Superior Court, Durham County, on 6 September 1989 and 2 October 1989. Heard in the Supreme Court on 12 November 1991.

Maxwell & Hutson, P.A. by James H. Hughes and Robyn R. Compton Whitman, Durham, for plaintiff-appellee.

McCall & James by Randolph M. James and M. Lee Decker, Winston-Salem, for defendant-appellant Southeastern Shelter Corp.

Womble Carlyle Sandridge & Rice by G. Eugene Boyce and Elizabeth L. Riley, Raleigh, for defendant-appellant Everett, Creech, Hancock & Herzig.

MARTIN, Justice.

In this appeal this Court is faced for the first time with the issue of whether a cause of action for unfair practices is assignable. For the reasons later related, we hold that such cause is not assignable. We also discuss additional issues presented by defendant Southeastern Shelter Corporation and find them to be without merit.

This is an action arising out of an attorney's fraudulent certification of a title insurance application. On 29 February 1984, plaintiff filed a lawsuit against defendant Southeastern Shelter Corporation ("Southeastern"), David F. Herzig ("Herzig"), Jerry S. Chesson ("Chesson"), and Lee L. Corum ("Corum") seeking damages for fraud, conspiracy to commit fraud, unfair or deceptive practices under N.C.G.S. § 75-1.1, negligence and breach of warranty. On 20 June 1984, plaintiff amended its complaint to add Herzig's law partnership, Everett, Creech, Hancock & Herzig ("Partnership"), as a defendant in this action.

On 13 September 1985, plaintiff and defendant Partnership filed cross-motions for summary judgment on the issue of defendant Partnership's vicarious liability. Summary judgment was entered for defendant Partnership denying plaintiff's cross-motion. The Court of Appeals affirmed, but this Court granted discretionary review, reversed the Court of Appeals and remanded the case to the trial court. Investors Title Ins. Co. v. Herzig, 320 N.C. 770, 360 S.E.2d 786 (1987). The trial judge granted defendant Southeastern's motion for directed verdict on its crossclaims against defendant Herzig. On 27 July 1989, the jury returned verdicts for plaintiff against Herzig on the issues of fraud (specific acts later found to constitute an unfair practice), compensatory damages in the amount of $34,364.38 and punitives damages in the amount of $100,000 and against defendant Southeastern on the issue of conspiracy to commit fraud and compensatory damages in the amount of $42,000. On 6 September 1989, the trial court entered judgment against Herzig and Partnership, jointly and severally, on the issues of breach of warranties and representation of title certificate in the amount of $34,364.38. On 6 September 1989, the trial court held that the acts of Southeastern and Herzig constituted unfair or deceptive practices; it trebled all damages and awarded attorney's fees against Herzig and Southeastern pursuant to N.C.G.S. § 75-1.1. On 2 October 1989, the trial court denied Partnership's motion for judgment notwithstanding the verdict and Southeastern's motion for a new trial.

On appeal by defendants Partnership and Southeastern, the Court of Appeals affirmed on 18 December 1990. Partnership and Southeastern filed petitions for discretionary review with this Court. We allowed their petitions on 12 June 1991. We now reverse the Court of Appeals and remand for entry of judgment against Southeastern in the amount of $34,364.38. We also hold that Partnership's petition for discretionary review was improvidently allowed.

In September 1975, the Redevelopment Commission of the City of Henderson recorded restrictions on a tract of land consisting of four parcels in Vance County. Southeastern was selected as the developer of this land as part of the city's urban renewal program.

Southeastern and J. Leo Hawkins entered into a limited partnership called Henderson Heights, Ltd. Hawkins agreed to pay Southeastern $100,000 for all of the rights to Southeastern's contract with the Redevelopment Commission. On 11 November 1980, the Commission deeded the tract of land to Henderson Heights. The deed was subject to some prior recorded restrictive covenants which prohibited any encumbrances on the land and any transfers of the property without the consent of the Commission. Hawkins failed to pay Southeastern the $100,000, and Southeastern did not close on the sale of the land.

Henderson Heights deeded two parcels of the land to Southeastern as security for $45,000. Southeastern agreed to reconvey the parcels back to Hawkins when he paid Southeastern the $45,000. The Commission did not approve the conveyance to Southeastern or the contract for sale between Hawkins and Southeastern; both transactions violated the restrictive covenants of record. Hawkins never paid Southeastern the $45,000; consequently, Southeastern was in serious need of cash.

Herzig, an attorney for Southeastern, informed Southeastern that if he and his law firm, Partnership, held the deed for the two parcels in escrow, it would be possible to obtain a loan of $30,000 using the parcels as security. Southeastern conveyed its contract for the sale of the parcels to Herzig and later recorded a deed conveying the two parcels to Herzig.

Herzig subsequently obtained a $30,000 loan from Planter's Bank ("Bank") in violation of Southeastern's instructions to Herzig not to encumber the land. The loan was evidenced by a promissory note and secured by a deed of trust. Herzig himself certified title to Investors and stated that the restrictive covenants were not violated. Lee Corum, an attorney, presented Bank with a preliminary certificate of title listing three exceptions. After further investigation over Herzig's objections, Corum discovered that the deed from Southeastern to Herzig was not recorded; Corum added this fact as a fourth exception to the certificate of title. The final certificate signed by Herzig, below the typed name of his then law partnership, stated that there were no violations of the restrictive covenants.

The $30,000 loan obtained from Bank was divided between Southeastern and Herzig: $20,000 to Southeastern and $10,000 to Herzig. Investors issued a title insurance policy to the Bank in reliance on Herzig's certification of title.

In March 1981, Herzig presented a Trust Agreement to Southeastern granting full discretionary authority to Herzig over the two parcels deeded to him. Southeastern refused to sign the agreement. In December 1981, Southeastern learned for the first time that Herzig had encumbered the two parcels he held in escrow.

Herzig defaulted on the $30,000 loan. On 7 June 1982, Herzig recorded a quitclaim deed to Southeastern trying to persuade Southeastern to assume all the encumbrances on the land. Southeastern refused to accept the deed.

The Bank filed a claim on the title insurance policy issued by Investors because of the improper acknowledgment on the deed from Southeastern to Herzig. Investors stated that it would pay the claim only after the Bank pursued all its available legal remedies. The Bank subsequently instituted a foreclosure proceeding that was denied due to the restrictive covenants that were placed on the land in 1975. The Bank's appeal is still pending. In preparing for the foreclosure proceeding, Herzig was deposed in August 1983, before his incarceration for failure to disclose liabilities on a financial statement to a bank. Plaintiff paid the Bank $30,000 plus interest in the amount of $4,364.38. The Bank assigned all its rights arising out of the claim to plaintiff.

I.

This Court having concluded that discretionary review was improvidently allowed as to defendant Partnership, the only defendant remaining on this appeal is Southeastern.

Plaintiff alleges in its complaint that Bank has assigned to plaintiff "all rights and causes of action which it has against all defendants." Whether an unfair or deceptive practice claim pursuant to N.C.G.S. § 75-1.1 is assignable is a question of first impression in North Carolina. No North Carolina statute allows the assignment of fraud or unfair practice claims. Plaintiff, citing Allstate Ins. Co. v. Kelly, 680 S.W.2d 595 (Tex. Ct.App.1984), argues that the Court should allow assignment of the unfair practice claim because assignability is the general rule under modern law and nonassignability is the exception.

While, in general, causes of action may be assigned, 2 N.C. Index 4th Assignments § 2 (1990), we hold that unfair practice claims pursuant to N.C.G.S. § 75-1.1 cannot be assigned. See generally North Carolina Baptist Hospitals, Inc. v. Mitchell, 88 N.C.App. 263, 362 S.E.2d 841 (1987); Southern R. Co. v. O'Boyle Tank Lines, Inc., 70 N.C.App. 1, 318 S.E.2d 872 (1984). Claims such as defamation, abuse of process, malicious prosecution or conspiracy to injure another's business are not assignable as such claims are considered personal torts. See generally Southern Ry. Co. v. O'Boyle Tank Lines, Inc., 70 N.C.App. 1, 318 S.E.2d 872 (1984); 6 Am.Jur.2d Assignments § 37, (Supp.1991); R.D. Hursh, Annotation, Assignability of Claims for Personal Injury or Death 40 A.L.R.2d 500, § 3 (Supp.1991).

The causes of action of conspiracy to commit fraud and unfair practice are also personal in nature. Therefore, the assignment of such claims violates our public policy and will not be enforced. See generally North Carolina Baptist Hospitals, Inc. v. Mitchell, 88 N.C.App. 263, 362 S.E.2d 841 (1987), aff'd, 323 N.C. 528, 374 S.E.2d 844 (1988); Southern Ry. Co. v. O'Boyle Tank Lines, Inc., 70 N.C.App. 1, 318...