September 1, 2015
by Ronald C. Scott and Reginald P. Corley
Scott & Corley, P.A. – USFN Member (South Carolina)
The scope of the duty that a real estate closing attorney has towards a buyer’s-side client has veered into strict liability territory under a recent South Carolina Supreme Court decision.
On July 29, 2015 the opinion in Johnson v. Alexander, Appellate Case No. 2014-001167, was entered. It holds that a buyer’s attorney has a duty to ensure that good title passes to the buyer as a result of the purchase of real estate and that a breach of that duty as a result of relying on another attorney’s erroneous title search is, as a matter of law, malpractice.
Background: Amber Johnson hired attorney Stanley Alexander to perform a closing for the purchase of residential real estate. Johnson had previously hired attorney Mario Inglese for the closing. Inglese had hired Charles Feeley, also an attorney, to perform the title search. Johnson, as the client, was aware that attorney Alexander would be using attorney Feeley’s title exam during his representation of her.
Prior to the title examination and closing, the property was sold at a Charleston County delinquent tax sale on October 3, 2005. Johnson purchased the property on September 14, 2006 from the previous (tax-delinquent) owner, making transfer of title to Johnson useless. Johnson filed suit against Alexander for negligence. The trial court granted Johnson summary judgment on the basis that attorney Alexander’s pleadings and deposition exhibited that attorney Alexander singularly had a duty to ensure that Johnson, as his client, received clear and marketable title (which she did not), even though Johnson had consented to attorney Alexander using the title search product of Attorney Feeley.
The Court of Appeals overturned the trial court, stating that the question at issue was whether attorney Alexander acted reasonably in relying on attorney Feeley’s title exam — a triable factual question. The Supreme Court reversed the Court of Appeals, agreeing completely with the trial court.
The Supreme Court found that all evidence in the case indicated that attorney Alexander singularly owed a duty to ensure that Johnson received clear and marketable title as a result of her purchase, and Johnson did not. The Supreme Court suggested that the only way a real estate attorney could be relieved of not providing clear and marketable title to a buyer when retained for a closing, is if the client previously agreed to waive malpractice causes of action [which, the Supreme Court was quick to note, requires outside counsel review before such an agreement will be enforced under Rule 1.8(h) of the Rules of Professional Conduct and Rule 407 of the South Carolina Appellate Court Rules].
Accordingly and in a landmark opinion, the Supreme Court’s ruling in Johnson has now created a strict liability standard for buyer’s-side closing attorneys. It asks the question: Did clear legal title pass? If it did not, then under this decision, no matter the circumstances, the attorney has committed malpractice. The Supreme Court did not include any analysis regarding the degree of skill, care, knowledge, and judgment usually exercised by members of the profession given the situation presented to the attorney at the time, stating that the Court of Appeals “erroneously equated delegation of a task with delegation of liability.” The Supreme Court reasoned that “attorney Alexander owed Johnson [as his client] a duty and absent her agreement otherwise, he was liable for that responsibility regardless of how he chose to have it carried out.”
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