Month: January 2020

Hobcaw Barony owner claims title to North Inlet

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hobcaw-church

Image from south-carolina-plantations.com

I grew up in Georgetown, SC, and enjoyed visiting the beach with my family on Pawleys Island. Between the City of Georgetown and the beautiful “arrogantly shabby” Pawleys beach lies Hobcaw Barony, a gorgeous stretch of land that was developed as a winter hunting resort by Bernard Baruch.

Bernard Baruch is a name South Carolinians should cherish. Baruch was born in Camden in 1870 and became a Wall Street financier, stock investor, philanthropist, statesman and political consultant. After his success in business, he devoted time advising war-time Presidents Woodrow Wilson and Franklin Roosevelt. He was a personal friend of Winston Churchill.

Between 1905 and 1907, Baruch purchased a total of 69,690 acres of the former 18th century Hobcaw Barony, consolidating 69 plantations located on the peninsula known as Waccamaw Neck between the Winyah Bay and the Atlantic Ocean. Famous visitors included presidents, royalty and world leaders.

For an interesting and entertaining history of the plantation properties developed by wealthy northerners in Georgetown County for hunting purposes, I highly recommend Columbian David Hodges’ book Sunset Lodge in Georgetown: The Story of a Madam.  Hodges is a frequent visitor to Georgetown who conducted extensive interviews and research about Hazel Weisse, who moved to Georgetown in 1936, when the International Paper Company plant was being built, and established a brothel to entertain the builders. Despite being illegal, the business remained open for thirty-three years until Weisse retired in 1969.  Do yourself a favor, South Carolinians. Read this book.

But I digress.

Hobcaw Barony is a treasure. Baruch’s daughter, Belle, established a foundation to use the property as an educational and research preserve. The property includes 37 historic buildings representing the 18th and 19th century rice growing industry and the 20th century winter hunting resort. Tours of the property are open to the public. My brother, Alec Tuten, is one of the tour guides who will happily talk your ear off given half a chance.

The picturesque property reminds me of George Washington’s home at Mount Vernon but, sadly, little or no funding was established to maintain the buildings, so they are not preserved to the standards of Mount Vernon. The grounds, on the other hand, are beautifully maintained. For example, both Carolina and Clemson have established coastal and marine sciences programs at Hobcaw. Wetlands, forests and coastal ecosystems are studied. The entire property was named to the National Register of Historic Places in 1994. I recommend a visit to this little-known local gem!

An interesting lawsuit is now brewing in Georgetown County involving the property of Hobcaw Barony and adjacent North Inlet. The Baruch Foundation is claiming title to 8,000 acres of marsh at North Inlet, a vast marshland that has always been used by the public for recreational purposes. The lawsuit claims title to the property by virtue of a Kings Grant.

stay tuned

Local gossip indicates the Foundation simply intends to clean up title issues and does not intent to preclude the public from enjoying the property. But the complaint reads like a normal quiet title action of marshland property and the locals are nervous. An easement has been suggested to resolve the conflict, but this suggestion has been rebuffed by the Foundation.

Stay tuned to learn more about what will happen to this slice of God’s country.

HOA seeks to oust orphan from age-restricted neighborhood

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HOA grandparents grandson

Image from KOLD.com (News 13), Tucson, Arizona

 

A fifteen year-old California lad lost both of his parents last year. Collin Claybaugh’s mother, Bonnie, died in the hospital from a long-term illness. And his father, Clay, took his own life two weeks later.

What do good able-bodied grandparents do in this situation besides grieve the loss of their children? They take in their grandson, of course. That’s what Randy and Melodie Passmore did. The Passmores are both in their 70’s and live on a small pension plus social security. They own their home in The Gardens at Willow Creek, a 55-plus community in Prescott, Arizona.

The age restriction apparently has a limited exception for residents who are 19 years of age and older. But a 15-year old boy is definitely not allowed by the rules.

The Passmores received a letter from the homeowners’ association advising them that Collin must move out. The letter said that the board must balance the interests of all parties involved, not just the Passmores. The HOA board said they are concerned that if they fail to enforce the age restriction, they could endanger the ability for the development to remain an age-restricted community.

The Passmores’ only alternative is to sell their home and move, which they believe will be difficult considering their age and financial position. They do not have funds to mount a legal battle.

My husband and I would love to downsize at this point in our lives, and we would be interested in living in a community where the exterior and grounds are maintained by someone else. But this story convinces me to stay clear of age-restricted communities.

How do you think this story would play out from a legal standpoint in South Carolina?

Recent HOA foreclosure case leads to new rule in Beaufort County

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Master imposes rule based on Chief Justice Beatty’s concurring opinion

foreclosure notice

This blog recently discussed the remarkable homeowners’ association foreclosure case, Winrose Homeowners’ Association, Inc. v. Hale, South Carolina Supreme Court Opinion 27934 (December 18, 2019.) You can read the earlier blog here.

The case focused on the inadequacy of the foreclosure sales price and the business model of a third party to leverage a nominal debt to secure an exorbitant return from homeowners who fear eviction. I believe the case will require HOA foreclosure attorneys to rethink their approach going forward.

In his concurring opinion, Chief Justice Beatty said he would go a step further than the majority opinion and adopt the equity method of determining an adequate sales price for residential property in a foreclosure. The equity method compares the winning bid price to the equity in the property. The alternative debt method compares the total debt on the property to its fair market value.

The majority opinion stated that our courts have not established a bright-line rule for what percentage “shocks the conscience”, but a search of our South Carolina’s jurisprudence reveals that our courts have consistently held a price below ten percent definitely does. In this case, the debt method would have resulted in a ratio of 53.9 percent, while the equity method would have resulted in a ratio of 4.9%.

The new rule of the Beaufort County Master-in-Equity Marvin Dukes focuses on a totally separate issue in the case. The homeowners, who were in default, did not receive a notice of the date and time of the foreclosure sale. Judge Dukes’ office disseminated a message to foreclosure attorneys requiring new wording in foreclosure orders.

The new required wording entitled “Special Default Foreclosure Order and Sale Notice Service Instructions” reads as follows:

“That, in addition to all notices to the property owner(s) which are required by the  SCRCP or other law, in a case involving property owner’s SCRPC 55 default, or any other case or circumstances where property owner(s) would not ordinarily receive a copy of the Order of Foreclosure and/or Notice of Sale, the party seeking foreclosure (Foreclosing Party) shall, within 5 (five) days of the execution of this Order cause this Order and Notice of Sale (if available) to be served by US Mail upon said property owner(s).

An affidavit of such service shall be filed with the Clerk of Court expeditiously.

In cases where the Notice of Sale is executed later in time than the Order, service shall be accomplished separately, and shall be sent no later than 5 (five) days from receipt by the Foreclosing Party.”

I suspect additional guidance will be coming from our courts about whether the Winrose case will have broad application in foreclosure cases or be limited to its facts. I’m confident foreclosure attorneys feel they need more information.

Representing a subcontractor and a homeowner against the contractor. Is it ethical?

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gavel handshake

Please take a look at South Carolina Bar Ethics Advisory Opinion 19-05 here. This blog rarely touches litigation, primarily because the litigation knowledge of this blogger would fit easily on the head of a pin. But this EAO does affect real estate, and I can envision dirt lawyers getting themselves into this ethical conundrum, so here goes.

The facts are simple:  The attorney represents a subcontractor against a contractor regarding payment for work performed on a new home. The time for filing a mechanics’ lien has run, and the contractor has been paid in full. The homeowners want to retain the attorney to represent them to sue the contractor for breach of contract and negligently performed construction work. The homeowners’ claims do not appear to involve the work of the subcontractor.

The attorney is concerned that the contractor may not have sufficient assets to satisfy judgments of both parties.

So, the question becomes whether the attorney may ethically represent both parties.

The Ethics Advisory Committee provides the framework for consideration, but leaves the difficult analysis to the attorney.

The short answer is: The attorney may represent both parties provided the attorney analyses the prospective representation under Rule 1.7, SCRPC, and then considers whether the “material limitation” conflicts section in section (a)(2) may apply.

The attorney must also evaluate the risk of future availability of assets and should engage in a course of ongoing assessment for conflicts, particularly those that may arise if the claims are reduced to judgments and the clients dispute their recovery amounts relative to each other.

Rule 1.7 provides:

  • Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a current conflict of interest. A current conflict of interest exists if:
  • The representation of one client will be directly adverse to another client; or (2) there is significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third party or by a personal interest of the lawyer.
  • Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:
  • the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;
  • the representation is not prohibited by law;
  • the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and
  • each affected client gives informed consent, confirmed in writing.

 

 

(I added the emphasis.)

The material limitation of (a)(2) is the primary concern. Given the attorney’s concern about the sufficiency of the assets of the contractor to satisfy judgments, the attorney must evaluate whether that potential risk may materially limit his ability to represent either party.

The Committee eliminated (b)(2) and (b)(3) from consideration based on comments to the rule.

The analysis boils down to (b)(1) and (b)(4): the attorney’s assessment of whether he can provide competent and diligent representation to both parties and whether they consent to the representation after being informed of the benefits and risks of joint representation, particularly of the possibility of inadequate assets and the possibility of needing new counsel should they dispute recovery between themselves.

What do you think? Would you do it?

Supreme Court to hear CFPB Constitutionality Challenge

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Seila Law, LLC v. Consumer Financial Protection Bureau likely to be heard by mid-2020

CFPB building

The United States Supreme Court has chosen a case to decide the constitutionality of the CFPB. The case is Seila Law LLC v. Consumer Financial Protection Bureau (U.S. Supreme Court 19-7). The announcement was made on Friday, December 27. The allegation in question is that the structure of the agency grants too much power to its director, in violation of the Constitution’s separation of powers doctrine.

Under the current structure, the director of the CFPB cannot be fired by the president absent “inefficiency, neglect of duty, or malfeasance in office.” The heads of other federal agencies may be removed at the pleasure of the president.

The order posted by the Court requested that both sides address the following question: “If the Consumer Financial Protection Bureau is found unconstitutional on the basis of separation of powers, can 12 U.S.C §5491(c)(3) be severed from the Dodd-Frank Act?”

The United States House of Representatives’ motion to file an amicus curiae brief because the Department of Justice has chosen not to defend the constitutionality of the agency.

Concern about the structure of the agency has been voiced since its inception based on the fact that such huge power has been placed in the hands of one individual director. The argument continues that the CFPB has more power than any agency ever created by Congress. While most federal agencies are controlled by commissions or by a director who serves at the pleasure of the President, the CFPB’s sole director is removable only for cause. Also, since all of the funding of the agency is not controlled by Congress, there is little legislative oversight.

In previous hearings, when the CFPB has been asked what the appropriate remedy should be if the structure of the agency is held to be unconstitutional, the CFPB has maintained that formative statute would have to be amended to allow the President to remove the director with or without cause.  Some have suggested that all of the actions of the CFPB might be suspect if its structure is held unconstitutional. Others have suggested that agency should be headed by a multi-person, bi-partisan commission rather than a single director for greater transparency and accountability.

If a decision in the case is announced in mid-2020, the presidential election could be affected since Sen. Elizabeth Warren’s role in creating the agency is a central pillar of her presidential bid.

Justice Brett Kavanaugh has made clear in a previous dissent that he believes the structure of the agency is unconstitutional.