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NO. COA12-999
NORTH CAROLINA COURT OF APPEALS
Filed:                                                                  7 May  2013
THE STATE HEALTH PLAN FOR
TEACHERS AND STATE EMPLOYEES,
Plaintiff
v.                                                                      McDowell County
10 CVS  789
JENNIFER BARNETT and
EUGENE W. ELLISON,
Defendants
Appeal  by  defendant  Eugene  W.  Ellison  from  order  entered  15
May                                                                     2012  by  Judge  Laura  J.  Bridges  in  McDowell  County  Superior
Court.    Heard in the Court of Appeals  9 January  2013.
Attorney  General  Roy  Cooper,  by  Special  Deputy  Attorney
General Heather H. Freeman, for plaintiff-appellee.
Constangy,  Brooks  &  Smith,  LLP,  by  Michelle  Rippon,  for
defendant-appellant Eugene W. Ellison.
CALABRIA, Judge.
Eugene  W.  Ellison                                                     (“Ellison”)  appeals  the  trial  court’s
order  granting  summary  judgment  in  favor  of  The  State  Health
Plan  for  Teachers  and  State  Employees                              (“State  Health  Plan”  or
“plaintiff”).    We affirm.
I.    Background
On  3  September  2007,  Jennifer  Barnett  (“Barnett”)  sustained




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injuries  in  an  automobile  accident  caused  by  a  third  party.
Plaintiff  provided  Barnett,  a  State  Health  Plan  member,  with
$73,075.43   in   benefits   for   the   treatment   of   her   injuries.
Ellison,   an   attorney,   represented   Barnett   and   three   other
individuals  who  were  also  riding  in  the  vehicle  with  Barnett  in
their  personal  injury  claims  against  the  third-party  driver.    On
24  October                                                                  2007,  the  claims  of  all  four  of  Ellison’s  clients
were  collectively  settled  for                                             $100,000.00.     Barnett  received
$70,000.00  in  the  settlement,  minus                                      $14,000.00  in  attorney’s
fees,                                                                        $9,386.50  in  medical  expenses,  and                      $222.98  in  rental  car
expenses.                                                                    Thus,  Ellison  ultimately  disbursed                                                  $43,390.52   to
Barnett.                                                                     Upon  receipt  of  those  funds,  Barnett  executed  a
“Summary  of  Disbursements”  which  purported  to  “releas[e]  the  Law
Office  of  Eugene  W.  Ellison  from  any  further  obligation  as  to
the   medical   bills   or   liens   from   any   insurance   providers.”
Ellison  informed  Barnett  that  plaintiff  had  a  lien  on  her
settlement  funds,  but  she  directed  him  not  to  disburse  any
proceeds to it.
Plaintiff   sent   Ellison   and   Barnett   multiple   letters
requesting  satisfaction  of  the  amount  owed  to  plaintiff  pursuant
to  plaintiff’s  right  of  subrogation  under  N.C.  Gen.  Stat.  §  135-
45.15.    However,  neither  party  disbursed  any  settlement  proceeds




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to plaintiff.
On                                                                           30  August                                                                                                                                2010,  plaintiff  initiated  an  action  against
                                                                                                                                           Barnett  and  Ellison  in  McDowell  County  Superior  Court  seeking  to
                                                                                                                                           recover  $28,000.001  in  satisfaction  of  its  lien.  Plaintiff  filed
a  motion  for  summary  judgment  on                                                                                                                                                                                                                                     20  October   2011.    On   2  April
                                                                                                                                           2012,   Barnett   filed   a   voluntary   petition   for   Chapter                                                                                         13
bankruptcy  and  the  proceedings  against  her  were  automatically
stayed.     On                                                               15  May                                                       2012,  the  trial  court  granted  plaintiff’s
summary   judgment   motion   and   ordered   Ellison   to   reimburse
plaintiff in the amount of  $28,000.00.    Ellison appeals.
II.   Summary Judgment
Ellison  argues  that  the  trial  court  erred  by  granting
plaintiff’s   motion   for   summary   judgment.                             Specifically,   he
contends  that  N.C.  Gen.  Stat.  §  135-45.15  does  not  authorize  the
recovery  of  settlement  proceeds  directly  from  an  attorney  who
represents  a  State  Health  Plan  member  in  a  personal  injury
action.    We disagree.
“Our  standard  of  review  of  an  appeal  from  summary  judgment
is  de  novo;  such  judgment  is  appropriate  only  when  the  record
shows  that                                                                  ‘there  is  no  genuine  issue  as  to  any  material  fact
and  that  any  party  is  entitled  to  a  judgment  as  a  matter  of
1  This  amount  represented                                                 50%  of  Barnett’s  total  recovery  after
the payment of attorney’s fees.




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law.’”  In  re  Will  of  Jones,  362  N.C.  569,  573,  669  S.E.2d  572,
576  (2008)(quoting  Forbis  v.  Neal,  361  N.C.  519,  524,  649  S.E.2d
382,  385  (2007)).    N.C. Gen. Stat.  §  135-45.15 provides that
(a)  The                                                                      [State  Health]  Plan  shall  have  the
right  of  subrogation  upon  all  of  the  Plan
member’s   right   to   recover   from   a   liable
third  party  for  payment  made  under  the  Plan,
for    all    medical    expenses,    including
provider,                                                                     hospital,                                                surgical,   or
prescription  drug  expenses,  to  the  extent
those   payments   are   related   to   an   injury
caused  by  a  liable  third  party.  The  Plan
member  shall  do  nothing  to  prejudice  these
rights.  The  Plan  has  the  right  to  first
recovery   on   any   amounts   so   recovered,
whether  by  the  Plan  or  the  Plan  member,  and
whether                                                                       recovered                                                by          litigation,
arbitration,    mediation,    settlement,    or
otherwise.
(d)  In  no  event  shall  the  Plan’s  lien  exceed
fifty  percent                                                                (50%)  of  the  total  damages
recovered  by  the  Plan  member,  exclusive  of
the   Plan   member’s   reasonable   costs   of
collection  as  determined  by  the  Plan  in  the
Plan’s  sole  discretion.                                                     ...  Notice  of  the
Plan’s  lien  or  right  to  recovery  shall  be
presumed  when  a  Plan  member  is  represented
by   an   attorney,   and   the   attorney   shall
disburse proceeds pursuant to this section.
N.C.  Gen.  Stat.                                                             §  135-45.15  (2009).2    Thus,  under  this  statute,
the  State  Health  Plan  is  authorized  to  recover  up  to  one-half  of
the  total  damages,  less  attorney’s  fees,  recovered  by  a  Plan
2  This statute has been recodified as N.C. Gen. Stat.  §  135-48.37
as of  1 January  2012.    See  2011 N.C. Sess. Law  85.




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member  from  a  third  party.     Moreover,  the  statute  explicitly
requires  an  attorney  representing  a  Plan  member  to                    “disburse
proceeds  pursuant  to  this  section.”  Id.  The  question  before  this
Court  is  whether  Ellison’s  failure  to  do  so  in  the  instant  case
made  him  liable  for  satisfying  plaintiff’s  lien  against  Barnett
under the statute.
“Issues  of  statutory  construction  are  questions  of  law,
reviewed  de  novo  on  appeal.”  McKoy  v.  McKoy,  202  N.C.  App.  509,
511,  689  S.E.2d  590,  592  (2010).    Our  appellate  courts  have  not
previously  interpreted  N.C.  Gen.  Stat.                                   §                       135-45.15.     However,
there  are  several  cases  which  have  interpreted  an  analogous
statute, N.C. Gen. Stat.  §  44-50.
N.C.  Gen.  Stat.                                                            §                       44-50  requires  any  person  who  receives
settlement  funds,  including  an  attorney,  to                             “retain  out  of  any
recovery  or  any  compensation  .                                           .  .  received          .  .  .  a  sufficient
amount  to  pay  the  just  and  bona  fide  claims  for  any  drugs,
medical  supplies,  ambulance  services,  services  rendered  by  any
physician,  dentist,  nurse,  or  hospital,  or  hospital  attention  or
services,  after  having  received  notice  of  those  claims.”  N.C.
Gen.  Stat.                                                                  §                       44-50                                         (2011).   Thus,  this  statute   places  an
affirmative  duty  on  an  attorney  for  an  injured  party  to  retain
the  full  amount  of  a  medical  provider’s  lien  before  disbursing




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settlement  proceeds.    Our  Supreme  Court  has  acknowledged  that  an
attorney  who  violates  this  duty  is  subject  to  legal  liability
for  the  amount  of  the  lien  under  the  statute.  See  N.C.  Baptist
Hospitals,  Inc.  v.  Mitchell,  323  N.C.  528,  532,  374  S.E.2d  844,
846  (1988)(agreeing  with  the  defendant’s  argument  that  “N.C.G.S.
§                                                                            44-50  provides  the  only  mechanism  by  which  to  obtain  funds
from   an   attorney   who   has   received   them   for   a   client   in
satisfaction  of  a  personal  injury  claim.”);  see  also  Triangle
                                                                                                                                                   Park  Chiropractic  v.  Battaglia,             139  N.C.  App.                                      201,   205,   532
S.E.2d                                                                       833,                                                                  836                                            (2000)(permitting   medical   provider   to   seek
enforcement  of  its  lien  against  an  injured  party’s  attorney
using  N.C.  Gen.  Stat.                                                     §                                                                     44-50  where  the  attorney  was  on  notice
of  the  lien  but  chose  to  pay  the  entire  settlement  amount
directly to his client.).
The  plain  language  of  N.C.  Gen.  Stat.  §  135-45.15  similarly
places   a   duty   upon   an   injured   party’s   attorney   to   direct
settlement  funds  recovered  by  an  injured  State  Health  Plan
member  to  plaintiff  in  satisfaction  of  its  statutory  lien.    By
establishing  this  duty,  the  statute  necessarily  also  creates  a
cause  of  action  by  which  the  State  Health  Plan  may  enforce  its
lien  under  the  statute  against  an  attorney  who  violates  its
requirements  by  failing  to  disburse  his  client’s  settlement




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proceeds  in  accordance  with  the  statute.    See  Mitchell,  323  N.C.
at  532,  374  S.E.2d  at  846.    Since  it  is  undisputed  that  Ellison
failed  to  comply  with  the  requirements  of  N.C.  Gen.  Stat.  §  135-
45.15  in  the  instant  case,  the  trial  court  properly  concluded
that he was liable for the amount of plaintiff’s lien.
Ellison  additionally  claims  that  his  failure  to  comply  with
the  requirements  of  N.C.  Gen.  Stat.                                      §                                135-45.15  should  be
excused   because   he   only   violated   the   statute   based   upon
Barnett’s  instructions.    However,  he  cites  no  authority  for  the
proposition  that  an  attorney  may  violate  a  statutory  duty  based
upon   his   client’s   instructions.                                         Instead,   he   cites   North
Carolina  State  Bar  Ethics  Opinion  RPC  69,  which  states  that  “[a]
lawyer   is   generally   obliged                                             .   to   disburse   settlement
proceeds  in  accordance  with  his  client’s  instructions.  The  only
exception  to  this  rule  arises  when  the  medical  provider  has
managed  to  perfect  a  valid  physician’s  lien.”  North  Carolina
State  Bar  RPC  69  (October  20,  1989).    This  opinion  by  the  State
Bar   does   not   excuse   Ellison’s   failure   to   disburse   any   of
Barnett’s  settlement  funds  to  plaintiff.    Instead,  the  opinion
clearly    acknowledges    that,    regardless    of    a    client’s
instructions,  an  attorney  cannot  ignore  a  valid  statutory  lien,
a  physician’s  lien  under  N.C.  Gen.  Stat.                                §                                44-50.    An  attorney




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likewise  cannot  ignore  a  valid  State  Health  Plan  lien  under  N.C.
Gen.   Stat.                                                                 §                                                                  135-45.15   when   disbursing   settlement   funds,
                                                                             regardless   of   his   client’s   wishes.                         Accordingly,   it   is
immaterial  to  the  determination  of  Ellison’s  liability  that
Barnett  may  have  directed  him  to  disburse  all  of  her  settlement
funds  directly  to  her.     Ultimately,  the  trial  court  correctly
concluded  that  Ellison  was  liable  for  his  failure  to  disburse
settlement  funds  to  plaintiff  pursuant  to  N.C.  Gen.  Stat.  §  135-
45.15,  and  thus  properly  granted  summary  judgment  to  plaintiff.
This argument is overruled.
III. Mitigation of Damages
Ellison  also  argues  that  the  trial  court  erred  by  granting
summary  judgment  to  plaintiff  because  of  the  possibility  that
plaintiff  failed  to  mitigate  its  damages  by  filing  a  proof  of
claim against Barnett in her bankruptcy case.    We disagree.
The  record  does  not  reflect  that  Ellison  raised  this  issue
before  the  trial  court  and  therefore  this  argument  is   not
preserved  for  appeal.    See  Westminister  Homes,  Inc.  v.  Town  of
Cary  Zoning  Bd.  of  Adjust.,                                              354  N.C.                                                          298,                                                  309,   554  S.E.2d   634,
641                                                                          (2001)(“[I]ssues  and  theories  of  a  case  not  raised  below
will  not  be  considered  on  appeal.”).    Moreover,  even  assuming,
arguendo,  that  Ellison  did  preserve  this  issue,  there  is  no




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evidence   in   the   record   which   establishes   whether   or   not
plaintiff  filed  a  claim  in  Barnett’s  bankruptcy  proceeding.
Ellison’s  mere  speculation  that  plaintiff  may  not  have  filed
such  a  bankruptcy  claim  is  insufficient  to  create  a  genuine
issue  of  material  fact  precluding  summary  judgment.  See  Johnson
v.   Scott,                                                                   137   N.C.   App.                                 534,        537,               528   S.E.2d   402,   404
(2000)(“[O]nce  the  moving  party  presents  an  adequately  supported
[summary  judgment]  motion,  the  opposing  party  must  come  forward
with  specific  facts                                                         (not  mere  allegations  or  speculation)  that
controvert  the  facts  set  forth  in  the  movant’s  evidentiary
forecast.”).    This argument is overruled.
IV.   Conclusion
Pursuant  to  N.C.  Gen.  Stat.                                               §                                                 135-45.15   (now  N.C.  Gen.
Stat.  §  135-48.37),  the  State  Health  Plan  has  the  right  to  first
recovery  of  up  to  50%  of  any  amounts  recovered  by  a  Plan  member
for  injuries  which  were  inflicted  by  a  third  party  and  for  which
the  State  Health  Plan  provided  treatment  benefits.    The  statute
places  an  affirmative  duty  on  the  attorney  representing  the
State  Health  Plan  member  to  use  any  settlement  proceeds  to  first
satisfy  the  State  Health  Plan’s  lien,  and  failure  to  comply  with
the  statute  subjects  the  attorney  to  liability  for  the  amount  of
the  lien.     Since  Ellison’s  failure  to  comply  with  N.C.  Gen.




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Stat.                            §   135-45.15  is  undisputed  in  the  instant  case,  the  trial
                                     court  properly  granted  summary  judgment  to  plaintiff.    The  trial
court’s order is affirmed.
Affirmed.
Judges ELMORE and GEER concur.

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