South Carolina

This scam hits home!

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Two fugitives arrested in Murrells Inlet

One smart agent avoided involvement by placing a temporary block on her trust account

Warren and Frances Berkle

WBTW TV News 13 in Myrtle Beach reported on November 22 that two fugitives were arrested in Murrells Inlet. Warren Berkle and Frances Berkle were reported to have been wanted in several states at the time of their arrest.

According to the report, the Berkles had been living under false names and living in a house in Murrells Inlet in connection with a lease to purchase arrangement. Police said they received a call from the homeowner who said she had gone through an eviction process because the two were behind in their payments. She said she was concerned that they were not who they said they were, and were possibly squatting in her house.

WBTW reported that Warren Berkle was stopped by police when he was leaving the neighborhood. He had an expired Florida license plate, no insurance, and a driver’s license that was not in his name. A background check indicated Berkle had a valid license in Maryland and was wanted for extradition. A check on Frances Berkle indicated she was wanted in Florida and Pennsylvania.

Horry County police charged Warren Berkle with forgery and obtaining a signature or property under false pretenses, among other offenses. Frances Berkle was being held without bail as a fugitive.

Warren Berkle had pleaded guilty in 1992 to conspiracy to sell worthless insurance policies and mail fraud, a multimillion-dollar scam. According to an article in the Baltimore Sun, prosecutors said around 800 insurance policies were sold and premiums were collected using false records and without licenses.

Our very astute agent had been contacted by Warren Berkle numerous times, seeking to wire funds into her trust account to accommodate a real estate transaction. Our agent had “such a bad feeling” about Mr. Berkle that she put a block on her trust account just a short time before he tried to wire funds into her account. This occurred after she told him she was not going to be able to work with him.  She said he seemed so insistent and so evasive when she asked questions that she could not trust him to do business with him.

We are so glad her fraud radar was working so well! She paid attention to clues that saved her from a disaster in her trust account!

SC Supreme Court rule change affects every lawyer with a trust account

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Make one simple change to stay in compliance

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On October 23, our Supreme Court implemented several changes to the South Carolina Appellate Court Rules dealing with lawyer and judicial disciplinary rules enforcement procedures. If things go well in our respective practices, most of us will never have to study the rule changes.

But one change affects every lawyer with a trust account.

Rule 1.15(h) of the Rules of Professional Conduct has been amended to state that every lawyer maintaining a trust account must file a written directive requiring his or her financial institution to report to the Office of Disciplinary Counsel, rather than to the Commission on Lawyer Conduct, when any properly payable instrument is presented for payment against insufficient funds.

In other words, NSF checks must now be reported by your bank to the ODC.

The Court recognized in a footnote that these written directives will take time to update and that lawyers whose written directives currently require reporting to the Commission on Lawyer Conduct are not in violation of the rule. The Court stated that lawyers should update these directives at their earliest convenience.

Most dirt lawyers pay close attention to detail, and I would recommend paying attention to this one sooner rather than later.

SC DOR announces implementation of tax lien registry as of Nov. 1

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SC tax liens will no longer be filed in individual Counties

This blog previously discussed tax lien legislation effective March 28, 2019 that will change the way titles are examined in South Carolina. The South Carolina Department of Revenue has announced that the change will be effective November 1.

The announcement indicates the statewide tax lien registry will have a similar look and feel to the Mississippi Department of Revenue Lien Registry, which can be accessed here.

The legislation, an amendment to South Carolina Code §12-54-122, is intended to allow the Department of Revenue (DOR) to implement a statewide system of filing and indexing tax liens centrally, that is, “accessible to the public over the internet or through other means”. Once the new system in in place, the clerks of court and registers of deeds will be relieved of their statutory obligation to maintain newly filed tax liens.

The new law states that it is not to be construed as extending the effectiveness of a tax lien beyond ten years from the filing date, as set out in South Carolina Code §12-54-120.

When the new system is implemented, the law requires a notice to be posted in each county where liens are generally filed providing instructions on how to access the DOR’s tax lien database.

We will keep you posted as more details become available. Title insurance company underwriters will certainly weigh in on this issue.

Rock Hill residential real estate lawyer arrested

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Thankfully, it has been ten years or more since we’ve heard word “defalcation” used in connection with a South Carolina real estate lawyer. Sadly, we have to use that word in 2019 because a Rock Hill lawyer was arrested on September 13 after funds allegedly went missing from a residential closing. That lawyer, Thomas Givens, was suspended by the South Carolina Supreme Court on September 25.

The closing took place on July 15, but the $166,000 mortgage payoff was never made. Two months later, Givens was arrested and charged with breach of trust over $10,000. The arrest warrant reads that Givens failed to make the mortgage payoff and does not have the funds.

We usually do not experience defalcations when the economy is good. With the economic downturn that began in 2007, we learned the difficult lesson that attorneys who are prone to dip into their trust accounts often manage to keep the balls in the air as long as closings continue to occur. They typically steal from one closing to fund another. They rob Peter to pay Paul.

Like a game of musical chairs, when the music (and closings) stop, bad actor attorneys no longer have closings to provide funds for prior transgressions, and the thefts come to light.

It is a very sad commentary, and one I hoped not to see again.

Matthew Cox, notorious fraudster, resurfaces

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Check out the August issue of The Atlantic

matthew cox

Picture courtesy of The Atlantic, August 2019 issue

I’ll never forget the name, Matthew Cox or the telephone call that tipped us off that we had a serious mortgage fraud situation here in Columbia. Long before the housing bubble popped, an attorney called to let us know what was going on that day in the Richland County ROD office. Representatives of several closing offices were recording mortgages describing the same two residential properties in Blythewood, as if the properties had been refinanced multiple times in the same day by different closing offices.

At first, we thought our company and our attorney agent were in the clear because our mortgage got to record first. South Carolina is a race notice state, and getting to record first matters. Later, we learned that deeds to the so called borrower were forged, so there was no safety for anyone involved in this seedy scenario. Thousands of dollars were lost.

Next, we learned about the two fraudsters who had moved to Columbia from Florida through Atlanta to work their mischief here. The two names were Matthew Cox and Rebecca Hauck. We heard that Cox had been in the mortgage lending business in Florida, where he got into trouble for faking loan documents. He actually had the guts to write a novel about his antics when he lost his brokerage license and needed funds, but the novel was never published. With funds running low, Cox and his girlfriend, Hauck, moved to Atlanta and then Columbia to continue their mortgage fraud efforts.

We didn’t hear more from the pair until several years later, when we heard they had thankfully been arrested and sent to federal prison.

For a much more colorful account of these criminal activities and Cox’s attempt to write “true crime” stories from the Coleman Federal Correctional Complex in Florida, I refer you to the comprehensive and entertaining article written by Rachel Monroe in the August issue of The Atlantic magazine. Please enjoy the full text of the article here.

Ms. Monroe said she had been contacted by Matthew Cox by email telling her he was attempting to write a body of work that would allow him to exit prison with a new career. He described himself as “an infamous con man writing his fellow inmates’ true crime stories while immersed in federal prison.”

The crimes perpetuated by Cox and Hauck were made easier by the housing bubble itself. Everything was inflated and values were hard to nail down. And closings were occurring at a lightening pace. This excellent article made my heart skip a beat as I was reminded of those times. I hope all of us in the real estate industry have learned valuable lessons that will similar prevent mortgage fraud in the future. Those of us who made it through the economic downturn are certainly older and hopefully wiser!

South Carolina Supreme Court abolishes common law marriage

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Maybe we’ll get a “Big Chill” sequel

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“The Big Chill” is one of my husband’s favorite movies, in fact, it’s up there with “Braveheart” and “Casablanca”. Several years ago, we celebrated a milestone birthday by inviting two couples who were friends from law school to the mountains for a “Big Chill Weekend” of eating great food, playing great music* and reminiscing about the old days. We did agree to eliminate drugs and spouse swapping from the Big Chill agenda.

Last week, the South Carolina Supreme Court abolished common law marriage in South Carolina.** This rule will be prospective only. Parties may no longer enter into a valid marriage in South Carolina without a license.

Hang on. I will explain how the movie and common law marriage in South Carolina connect for those too young to remember the news. (And the connection has nothing to do with our Big Chill weekend.)

When the movie was being filmed in the winter of 1982-83 in Beaufort, actor William Hurt was living with Sandra Jennings, a former dancer in the New York City Ballet. Ms. Jennings became pregnant with Mr. Hurt’s son, Alexander Devon Hurt, who was born in 1983. The couple lived together in New York and on the road from 1981 – 1984.

When the couple split, Ms. Jennings brought suit in New York claiming a share of Mr. Hurt’s substantial assets, based on the theory that they had established a common law marriage during the few months they lived in South Carolina. She sought a divorce. Child support was not an issue because Mr. Hurt was paying $65,000 per year to support the couple’s son. Common law marriages hadn’t been recognized in New York since 1933, so the claim was based on South Carolina law and the short time the couple lived together in Beaufort.

Ms. Jennings was not successful in the law suit, but litigation is very expensive and the story got lots of mileage in South Carolina. The standing line was that actors had to be careful in this state! Maybe the cast can finally return for a sequel.

The Supreme Court stated that the time has come to join the overwhelming national trend, despite our legislature’s failure, to abolish common law marriage. The court said, “The paternalistic motivations underlying common-law marriage no longer outweigh the offenses to public policy the doctrine engenders.”  I know some other outdated ideas I’d like to see abolished in South Carolina.

* Favorite lines from the movie which demonstrate, in part, why it’s a favorite: Michael:  “Harold, don’t you have any other music, you know, from this century?” Harold: “There is no other music, not in my house.”  There is no other music in the Manning house either.

Favorite movie trivia: The dead guy, the corpse being dressed for his funeral in the opening scenes, was played by none other than Kevin Costner. There were plans to have flash-back scenes to the characters’ college antics, but those scenes were later eliminated.

** Stone v. Thompson, South Carolina Supreme Court Opinion 27908 (July 24, 2019).

Dave Whitener’s “Palmetto Logs”

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Two weeks ago, this blog paid tribute to the late, great Dave Whitener, a giant among real estate legal professionals in South Carolina. As suggested in that blog about Dave’s “Top Ten You Betters”, I also wanted to share with you Dave’s “Palmetto Logs”.

Several years before his death, Dave was asked to address the American Bar Association. The issue was whether a successful defense might be mounted if a federal agency attacked the rights now existing in South Carolina for lawyers, and only lawyers, to close real estate transactions. In that talk, Dave cited ten areas of defense that he called the Palmetto Logs. For non-South Carolinians, the palmetto log has traditionally been a symbol of protection for South Carolinians in time of war. South Carolina is nicknamed “The Palmetto State”.

Here are Dave’s suggested protections against an attack from outside our state for closings performed by licensed South Carolina attorneys:

Caselaw

  1. State v. Buyers Service, 292 S.C. 426, 357 S.E.2d 15 (1987). In this case, the South Carolina Supreme Court defined the practice of law in a residential real estate closing to include: certification of the title; preparation of the deed and loan closing documents, closing the transaction and overseeing recording.
  2. Doe v. Condon, 351 S.C. 158, 568 S.E.2d 356 (2002). In this case, the South Carolina Supreme Court reiterated and confirmed that the four protected areas set out in Buyer’s Service would also apply to residential refinances.
  3. Doe v. McMaster, 355 S.C. 306, 585 S.E.2d 773 (2003). In 2003, the South Carolina Supreme Court again reiterated its holding in Buyer’s Service.

Statutes and South Carolina Constitution

  1. C. Code §40-5-310 makes it a felony for an individual to participate in the unauthorized practice of law.
  2. C. Code §40-5-320 makes it a misdemeanor for a corporation or other entity to participate in the unauthorized practice of law.
  3. C. Code §37-10-102 gives a borrower the absolute right to choose the closing attorney in a residential loan closing. The statute provides for a $7,500 penalty if the disclosure is not given.
  4. South Carolina’s Constitution gives the S.C. Supreme Court the exclusive right to define the practice of law within South Carolina

Practical Considerations

  1. The low cost attributable to attorneys’ fees for residential closings in South Carolina. Dave believed the low cost would present a major difficulty if a federal agency argues that South Carolina’s practice is anti-competitive or increased prices.
  2. Major job losses would possibly result from the outsourcing of jobs to closing centers outside of South Carolina
  3. Major risks would be raised in turning over the duties now performed by experienced lawyers to unregulated and inexperienced lay persons.

I’m not sure whether Dave would say differently if he were here to analyze this topic for us today. I fear that the retirement of Chief Justice Jean Toal may have resulted in the loss of the South Carolina lawyer’s strongest advocate in the South Carolina Supreme Court. So far, the Palmetto Logs are holding strong, but some more recent cases from our Supreme Court give me some concern on this topic.

In any event, I am continually thankful for Dave Whitener and his influence, mentorship and friendship to South Carolina dirt lawyers!

Paying tribute to a giant of the SC Real Estate Bar

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Dave Whitener was a friend and mentor to us all

Have you ever tried to organize your old forms, seminar materials and documents only to start waxing nostalgic and ultimately getting absolutely nothing accomplished? That happened to me today.

I am sorely behind schedule writing an update to the Handbook for South Carolina Dirt Lawyers. I’m sure my name is “Mud” with Terry Burnett and Alicia Hutto, my good friends at the South Carolina Bar who are not very patiently waiting for results. I had a plan to get the update done in 2017 and again in 2018, but that never happened. I’ve been so busy with new initiatives at work that I didn’t even attempt to develop a plan to write an update in 2019. Now, I’m shooting for the date of my death or retirement, whichever comes earlier. Wish me luck!

Hugh Dave WhitenerBut today, I began to organize ancient materials in an attempt to breathe new life into this aged project. And I kept coming across the same name, my late, great friend, Dave Whitener. Why? Because Dave wrote and taught much of the subject matter I now need to address.

Dave was 70 years old when he died in 2014 after practicing commercial real estate and teaching law school in Columbia for many years. He was married to my friend, Tricia Wharton Whitener, who continues his good work today. Dave was not only an excellent practitioner and teacher, but he was also, as his obituary quips, “renowned as a raconteur whose stories made others happy”. He loved people and he loved the law. He loved talking to law students and lawyers and telling them memorable stories in an effort to keep them out of trouble.

Since keeping my fellow South Carolina dirt lawyers out of trouble is the mission of this blog, I’m finding that many of the lessons Dave taught are appropriate on my day of waxing nostalgic.

If a law student or lawyer called Dave with a disturbing current event that the caller said “rang a bell” from one of Dave’s ethics lectures, Dave would reply, “You’re hearing the dinner bell at the federal prison.” That would get the caller’s attention!  I thought of that quote when I came across a lecture from Dave entitled “Top Ten ‘You Betters’”.  I thought I’d share that list with this audience today because this particular top ten list will never go out of style for real estate practitioners.

Dave Whitener’s Top Ten “You Betters”

    1. You better not facilitate the unauthorized practice of law.
    2. You better do what you should be doing.
    3. You better know what you should be doing.
    4. You better be on time.
    5. Everything better be shown on the closing statement.
    6. Everything on the closing statement better be correct.
    7. You better communicate with your clients.
    8. You better understand the rules on conflicts of interest.
    9. You better remember that your trust account is sacred.
    10. You better train your staff properly.

 

 

I could editorialize about each item on the list, but I believe the simplicity of this list speaks volumes for today’s purposes. But if I were to write a chapter on each item on the list, my handbook would be complete.

stay tuned

Thank you, Dave, for your example. My next blog may be about Dave’s ten-point plan for defending the rights of South Carolina licensed practitioners to handle real estate closings. Watch this space! 

Here’s a gift, SC dirt lawyers: Your official recording fee list!

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This blog reported on May 29 that South Carolina Governor McMaster signed House Bill 3243 into law on May 16. This legislation, called the Predictable Recording Fee Act (S.C. Code §8-21-310), will streamline document filing in ROD offices by creating predictable fees for many commonly recorded documents such as deeds and mortgages. The new law will take effect on August 1, 2019. You and your staff will no longer have to count pages for documents to be recorded!

You can read the short but effective statute here.

My friend and colleague, Jennifer Rubin, was instrumental in the creation and passage of this legislation. Jennifer drafted the legislation and spearheaded Palmetto Land Title Association’s efforts to get the bill passed. Since the legislation was enacted, Jennifer has worked with members of South Carolina Court Administration, as well as leaders in ROD offices throughout the state, to draft a uniform recording fee schedule.  Attached is the newly created official recording fee list.

This law should simplify and streamline your practice and result in significant time and money savings for you and your clients.

SC Court of Appeals provides lis pendens primer

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Termination on the merits is required for malicious prosecution claim

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A lis pendens is a handy tool for real estate lawyers. When litigation is brought affecting title to real estate, a lis pendens gives notice to third parties that sales, loans and construction draws should, most likely, come to a screeching halt until the issues affecting title are resolved.

Back in the days when I was in private practice, malicious prosecution claims arose relatively routinely when lis pendens were filed in cases where the title to real estate was not in question. That situation is the subject of a Court of Appeals case from early this year.*

The case involved Somerset Point at Lady’s Island, a subdivision in beautiful Beaufort County. The developer, Coosaw, and River City, one of the construction companies building homes in the subdivision, became involved in a dispute about design and construction standards. River City accused Coosaw of failing to enforce the standards with other builders, and Coosaw, in turn, accused River City of failing to comply with the standards.

River City brought suit in 2011 alleging causes of action for breach of fiduciary duty, breach of contract, and unfair trade practices. Coosaw counterclaimed and crossclaimed against River City for violating the design standards and sought a temporary injunction against continued construction. Coosaw also filed a lis pendens describing one property, Lot 16, in Somerset Point.

River City moved to strike the lis pendens on the ground that title to Lot 16 was not at issue. The master-in-equity agreed and struck the notice of lis pendens. On reconsideration, the master stated, in part, that striking the lis pendens would allow River City’s construction lender to resume providing construction draws and would allow River’s City’s project to be completed. Coosaw appealed but ultimately withdrew the appeal after River City’s sale of Lot 16 rendered the issue moot.

In late 2014, River City filed the lawsuit at issue, alleging causes of action for malicious prosecution and abuse of process based on Coosaw’s filing the lis pendens in the 2011 action. River City argued the cause of action for malicious prosecution was proper because the lis pendens had been terminated in its favor.

The Court of Appeals listed the elements of malicious prosecution to include termination of the proceedings in the plaintiff’s favor. River City argued that a lis pendens is an ancillary proceeding, and termination of an ancillary proceeding will support a malicious prosecution claim. The Court of Appeals held, however, that a lis pendens is not an ancillary proceeding but is simply a notice of the proceeding.

Citing earlier cases, the Court reviewed the law of lis pendens:

  • A lis pendens is a statutory doctrine designed to inform prospective purchasers or encumbrancers that a particular piece of property is subject to litigation.
  • A properly filed lis pendens binds subsequent purchasers or encumbrancers to all proceedings evolving from the litigation.
  • Generally, the filing of a lis pendens places a cloud on title which prevents the owner from freely disposing of the property before the litigation is resolved.
  • The lis pendens mechanism is not designed to aid either side in a dispute between private parties. Rather, the lis pendens is designed to protect third parties by alerting them of pending litigation that may affect title.
  • When no real property is implicated, no lis pendens should be filed.
  • A lis pendens is merely a form of pleading that does not provide any substantive right. It is simply a notice.

The Court held that the termination of a lis pendens to support a malicious prosecution cause of action must be a victory on the merits of the litigation, not a termination based solely on technical or procedural considerations. In the case at hand, the underlying merits remained pending after the termination of the lis pendens. The Court held that the subject action is, therefore, premature.

In short, the Court held that a maliciously filed lis pendens can act as the primary basis for a malicious prosecution claim, provided the plaintiff can establish a favorable termination of the lis pendens reflective of the merits of the underlying action.

*Gecy v. Somerset Point at Lady’s Island Homeowners Association, Inc., South Carolina Court of Appeals Opinion 5622 (January 30, 2019).