SC Supreme Court holds email provides sufficient written notice

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….for at least one purpose

This blog is about dirt, but from time to time, dirt lawyers should review the rules our brother and sister litigators follow. Why? Sometimes those rules bleed over into our world, and sometimes, unfortunately, the transactions we handle are subject to litigation. And in this “ever changing world in which we live in”*, we should pay particular attention to changing rules involving technology. This is one of those changes.

The South Carolina Supreme Court held on February 28 that an email that provides written notice of entry of an order or judgment, if sent from the court, an attorney or record, or a party, triggers the time to serve a notice of appeal under Rule 203(b)(1) of the South Carolina Appellate Court Rules (SCACR)*.  And the Court held that this is such a novel question of law that its holding applies only prospectively, and not to the case at hand.

Here’s the background. On December 15, 2014, the master-in-equity denied the foreclosure defendants’ petition for an order of appraisal. That same day, the master’s administrative assistant emailed a signed and stamped copy of the order and Form 4 to the bank and the defendants. Three days later, the defendants received a copy of both documents in the mail.

Believing the time to appeal began on the day they received the documents in the mail, the defendants served notice of appeal on January 15, 2015, which was thirty-one days after the email and twenty-eight days after they received the documents in the mail.

The Court of Appeals held that the email triggered the time to serve notice of appeal. On appeal to the Supreme Court, the petitioners did not dispute that the email constituted written notice of entry of the order or judgment. But they argued that the time to serve notice of an intent to appeal is only triggered when written notice is received by mail or hand delivery according to Rule 5 of the South Carolina Rules of Civil Procedure (SCRCP). The Supreme Court held that the SCRCP do not apply to appellate procedure.

The Supreme Court examined Rule 203(b)(1), SCACR, which requires that a notice of appeal must be served within thirty days after receiving written notice of entry of the order or judgment and held that there is no requirement of service. All that is required, according to the Court, is that the parties receive notice. Further, there is nothing in the appellate court rules suggesting that the manner in which a party may receive notice is limited to the methods used to effectuate service.

Got it, dirt lawyers?  It’s technical, but this holding suggests that our Court is gradually accepting the technology we use every day as sufficient for notice purposes. One lesson for us is that we should be careful what we say in our emails as we handle our transactional practices! Another lesson for us is that we should all check our spam and junk email files to make sure we receive all communications that may create responsibility or liability for us.

*…with sincere apologies to Sir Paul McCartney.

**Wells Fargo Bank, N.A. v. Fallon Properties South Carolina, LLC, South Carolina Supreme Court Opinion 27773, February 28, 2018.

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SC dirt lawyers sued for email funds diversion by a third-party criminal

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This is the first suit of this type I’ve seen. I’m confident it won’t be the last!

A dirt lawyer friend sent a copy to me of a hot-off-presses lawsuit filed in a circuit court in South Carolina against a closing law firm because the purchaser’s $50,000 in closing funds were diverted by a third-party criminal posing in an email exchange as the transaction’s real estate agent. My friend said he sent the case for my information. I think he sent it so I wouldn’t sleep!

Here are the facts as recited in the complaint. The names are being changed to protect all parties.

Paul and Penny Purchaser signed an Attorney Preference Form on March 28, 2017, selecting Ready and Able, LLC as their legal counsel for the purchase of a residential home and the closing of a purchase money mortgage with Remedy Mortgage, LLC.

On April 10, Paul and Penny Purchaser received Ready and Able, LLC’s “Purchaser’s Information Sheet” which required Paul and Penny to pay all closing funds over $500 to Ready and Able, LLC by wire transfer. The complaint states that these were silent as to the security of wire transfers, the security of private information to be conveyed between the purchasers and the law firm, and the security or lack of security of the use of email for closing information.

Also on April 10, Penny Purchaser telephoned the law firm and spoke with paralegal, Candy Competent, providing her with the purchasers’ Social Security numbers. The complaint states that Ms. Competent accepted the information and provided no wiring information or warnings.

hacker

The complaint states that on April 14, Paul Purchaser received what purported and reasonably appeared to be an email from Regina Realtor, their real estate agent for the transaction, asking Mr. and Mrs. Purchaser to wire closing funds in the amount of $48,490.31 that day so that the closing scheduled for April 21 would not be delayed. Penny Purchaser replied to the email requesting wiring instructions. An attachment purporting to be wiring instructions for Ready and Able, LLC. was sent via reply email.  The complaint states that the wiring instructions reasonably appeared to be the correct wiring instructions for the law firm and appeared to be printed on law firm letterhead. This email exchange was actually with a third-party criminal.

Later on April 14, Penny Purchaser telephoned Candy Competent and requested the amount needed to close. Ms. Competent discussed the amount needed to close despite the fact, according to the complaint, that she knew or should have known that the law firm had not sent wiring instructions to the purchasers or the real estate agent.

On April 17, Ms. Competent sent an email to Mrs. Purchaser advising her to add $550 to the funds due to close to cover a survey bill that came in on April 14. No mention was made of wiring instructions in that email. The email also did not discuss the fact that the law firm had not yet provided an amount to close to the purchasers or to the real estate agent. Mrs. Purchaser wired $49,015.31 using the wiring instructions provided by the third-party criminal.

On April 21, Paul and Penny Purchaser learned for the first time that the wiring instructions were the work of a criminal third party, who received the funds and has failed to return the funds.

The complaint states two causes of action, negligence and legal malpractice, and lists the following breaches of duty committed by the law firm:

  • Requiring the plaintiffs to use wire closing funds to defendant, without counseling the plaintiffs about the methods by which the secure delivery of such funds could be compromised;
  • Failing to counsel the plaintiffs about the risks and insecurity of email communications, particularly of private, sensitive, or financial closing information; and
  • Failing to be alerted by the circumstances of Mrs. Purchaser’s telephone call on April 14, and therefore to warn her that no communication had been sent by the law firm.

Is this, in fact, negligence or legal malpractice?  We will have to wait to see.  Would the processes established by your law firm for the protection of your clients’ funds prevent this type of crime? That is the question of the day. Please discuss among yourselves!

Blogging in the holiday spirit

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Be excellent to each other!

Bill and Ted christmas

The purpose of this blog is to, in a very small way, assist South Carolina real estate lawyers in their constant quest to stay out of trouble. And there are so many ways we can get ourselves into trouble!  Trust accounting, cyber-security, legislative changes, case law changes and rule revisions are just a few examples. But I’m in the holiday spirit, and it occurred to me that one of the easiest ways to get into trouble is to simply fail to be nice.

Some lawyers had developed such terrible habits of failing to be courteous to each other and to opposing parties that our Supreme Court added a “Civility Oath” in 2003, which reads:  “To opposing parties and their counsel, I pledge fairness, integrity, and civility, not only in court, but also in all written and oral communications…”  New lawyers now take this oath when they are sworn in, and the rest of us had to attend seminars or functions that included the new oath as a component. We have all now pledged to be civil.

South Carolina lawyers have been disciplined for being uncivil and unprofessional. One lawyer wrote a letter questioning whether the officials of a municipality had brains and souls. He was suspended for 90 days and required to complete the Bar’s legal ethics and professionalism program. Another lawyer was suspended for 90 days for slapping an opposing party during a deposition.

The Office of Disciplinary Counsel has requested a sanction for bringing the profession into disrepute through a blog. Because the lawyer didn’t identify himself as a lawyer in his blog, the Supreme Court said the profession was not harmed. (I promise to be careful!)

Some authorities on the subject of attorney civility have speculated that technology and social media have exacerbated this problem. It’s easy to be rude while hiding behind a computer screen. Another factor has been the economy. When young lawyers are forced to hang out shingles without the careful mentorship of seasoned lawyers, they often fail to obtain the requisite training on how lawyers should behave.

Litigation lawyers are in the business of fighting for a living, so they often walk a tight rope between vigorously representing their clients and mowing over their opponents in an uncivil manner. I remember, however, attending a trial early in my career to witness two excellent, seasoned, respected Columbia lawyers attempt to out-polite each other. It was an impressive display of civility and effective representation that has remained vividly in my memory for many years. If we were all as civil as those two litigators were, no civility oath would have been necessary.

Unlike trial lawyers, transactional lawyers are in the business of providing solutions, solving problems, arriving at consensus and properly documenting all of the above. Transactional lawyers should, in theory, have fewer problems getting along with each other than trial lawyers have. That is definitely not always the case.

Sitting here in Columbia and listening to title problems from lawyers across South Carolina all day long, the lawyers in our office hear fights between real estate lawyers on a routine basis. It seems to us that an inability to communicate civilly can have a direct dollar impact on business through lost time and productivity.

Books and articles on business ethics stress the value of being nice. I believe that being nice is particularly valuable to transactional lawyers. Being nice can, for example, go a long way toward keeping a lawyer from being sued.

I was taught as a young lawyer to be courteous to the most annoying real estate agents and the most exasperating clients. We should all own up to and fix our mistakes, even when fixing a mistake requires writing a check. Our written and oral communications should demonstrate that we are not only effective lawyers, but also courteous, caring, sympathetic individuals. Being a meticulous and effective lawyer is the best method to eliminate being a defendant in litigation, but being nice is probably the second best method.

I am now stepping off of my soap box and wishing each of you happy holidays and a healthy, happy and prosperous 2018!

Criminal defense lawyer’s advertising debacle may be instructive for us

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Title insurance companies in South Carolina persistently encourage attorney agents to market their firms. We offer seminars on social media marketing. We invite experts to the table to explain the latest and greatest marketing tactics. I trust all the title companies also explain the professional responsibility rules that relate to marketing and bring in professionals to assist with compliance. The rules are detailed and specific, and any South Carolina lawyer who dips a toe into that arena should get the education needed to stay out of trouble. The South Carolina Supreme Court and the Office of Disciplinary Counsel (ODC) are serious about the rules.

The criminal defense lawyer who received a public reprimand in last month’s disciplinary case, In the Matter of Lord,* apparently did not take the safe approach.

fingers crossed realtor

To market his legal services, Lord sent direct mail solicitation letters to potential clients who received traffic tickets. One of those clients filed a complaint with the ODC. Lord made several mistakes in those letters. He used the tagline “attorneys at law” in his letterhead although he was a solo practitioner.

He touted “28 years’ experience both as a lawyer and former law enforcement officer” although he had been a lawyer and former law enforcement officer for only 16 years. His telephone number was (844) FIXTICKET, which may have created unjustified expectations or an implication that he can receive results by unethical means. Further, the Court held that the phoneword is also an improper moniker that implies an ability to obtain a certain result.

The letter also referred to the lawyer’s website which claimed he has “unique insight into the South Carolina traffic laws that many other lawyers simply do not have.” Lord admitted that this claim cannot be factually substantiated. Finally, the letter indicated Lord learned of the traffic tickets from “court records”. The court held that this source identification as not sufficiently specific.

The letter also referred to the lawyer’s profile on www.avvo.com (“AVVO”), a legal marketing website. AVVO, according to the Court, creates profiles for attorneys without their consent, knowledge or participation, then invites them to “claim” their profiles and participate in a variety of AVVO marketing activities, including “ratings”, peer endorsements, client testimonials and online contact with prospective clients.  Lord claimed his AVVO profile and used the website to market his legal services, making him responsible for the content.

A prior disciplinary investigation revealed a negative review on AVVO to which respondent replied. In the response, Lord revealed information relating to the representation of the complaining client and said: “Do me a favor. The next time you are arrested, call a public defender and see what happens after you sit in jail for 3 months they might get around to sending you a form letter. Good luck.” He was issued a confidential admonition in 2013 as a result of this exchange. Lord failed to remove the offending post after receiving the admonition.

He was also required to add a “clear and conspicuous” disclosure regarding endorsements, testimonials and reports of past results. He added this disclosure, but the terms “clear and conspicuous” were not defined in the rules until 2014, and Lord failed to revise the disclosure when that rule changed.

The lawyer advertising rules are not always intuitive. But they are always taken seriously by the ODC and the Supreme Court. If dirt lawyers choose to market their services, as the title companies believe they should, they should make every effort to follow the rules. Your title insurance company will help. Ask!

* South Carolina Supreme Court Opinion 27741 (November 15, 2017)

Lawyer accolades

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Is it ethical to advertise you’ve won?

If you are a recipient of legal awards and accolades, you’ll be glad to know that we now have an Ethics Advisory Opinion that tells us it is acceptable to let the world know you have won, under certain circumstances.

trophies

Many newspapers, television stations and national publishers compile an annual “best of” list by surveying their customers or conducting evaluations. Some of the entities ask for nominations from their customers or ask for a fee to be paid in order to receive a nomination. Some accept all nominations and votes without the consent of the nominee. Most offer a badge or emblem to be used on firm websites and in other marketing materials to publicize the honor.

The question posed in EAO 17-02 is whether a South Carolina lawyer may accept and advertise a designation or accolade such as “Best Lawyers” or “Super Lawyers” in a legal publication or newspaper readers’ poll, in conformity with the rules for lawyer advertising.

The Ethics Advisory Committee answered that these accolades and designations, including the badges and symbols are ethical when:

  1. The entity or publication has strict, objective standards for inclusion that are verifiable and would be recognized by a reasonable lawyer as establishing a legitimate basis for determining whether the lawyer has the knowledge, skill, experience, or expertise indicated by the listing;
  2. The standards for inclusion are explained in the advertisement or information on how to obtain the standards is provided in the advertisement. Referral to the publication’s website is adequate;
  3. The date of the designation or accolade is included;
  4. An advertisement makes it clear that the designation or accolade is made by a specific publication or entity through the use of a distinctive typeface or italics;
  5. No payment of any kind for any purpose, including, but not limited to, advertising or purchase of commemorative items, is required of the lawyer, or the lawyer’s firm, for giving the designation, accolade or inclusion in the listing; and
  6. The organization charges the lawyer only reasonable advertising fees to the extent it not only confers the designation or accolade but also provides a medium for promoting or advertising the designation or accolade.

The opinion stated that courts and bars of several jurisdictions nationwide uniformly approved the acceptance of designations or accolades including badges, symbols and other marks in attorneys’ advertising, subject to conditions designed to insure that the use of the accolades or designations is not false or misleading.

A recorded power of attorney may not be necessary to establish agency where real estate is involved

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In a recent South Carolina Court of Appeals case*, a mother was held to be bound by the actions of her wheeler-dealer son who appeared to act in her behalf buying and selling properties in Laurens County.

Frank Lollis lived with and took care of his mother, Kathleen Lollis, and managed real estate transactions for the family. The attorney who handled these transactions testified that he saw Frank sign his mother’s name and that he thought he recalled Frank showing him a power of attorney.

power of attorney

Lisa and Dennis Dutton, plaintiffs in this case, suing to enforce contracts Frank signed, testified that Frank had said he had a power of attorney. At trial, following Frank’s death, Mrs. Lollis denied the existence of the power of attorney.

Lisa Dutton testified that she had known Frank for nineteen years and had done a lot of real estate business with him and his family. She said that all of the locations where she had lived for the ten years prior to the trial were related to the Lollis family and every time she purchased property that was titled in Mrs. Lollis’ name, she dealt with Frank and his attorney. She said she “never had an issue” until she tried to obtain a deed to enforce a contract at issue in this case.

Frank’s attorney testified that Frank did a lot of his business in cash and always carried a lot of cash. Frank typically bought property in other individuals’ names and signed their names to documents, including not only his mother, but a former employee. The attorney signed an affidavit to the effect that Frank explained his “checkered past” required him to operate in the names of other individuals. The affidavit further stated that Mrs. Lollis knew Frank titled properties in her name.

Frank was diagnosed with cancer, and when he became increasingly ill, he asked his attorney to prepare a power of attorney for his mother naming his sister as the attorney-in-fact. After Frank’s death, the Duttons unsuccessfully attempted to obtain the deed to consummate the contract Frank had signed in his mother’s behalf. This lawsuit followed.

The case contains a detailed discussion of the law of agency in South Carolina. Real estate lawyers should know that their clients can become bound by their actions even in the absence of a recorded power of attorney because agency is a question of fact that does not necessarily depend upon an express appointment and acceptance.

An agency relationship is frequently implied or inferred from the words and conduct of the parties and the circumstances of the particular case. The Court of Appeals stated that agency may be proved circumstantially by the conduct of the purported agent exhibiting a pretense of authority with the knowledge of the principal.

The doctrine of apparent authority provides that the principal is bound by the acts of his agent when he has placed the agent in such a position that persons of ordinary prudence, reasonably knowledgeable with business usages and customs, are led to believe the agent has authority and they can deal with the agent based on that assumption.

This rule is based on public policy and convenience to provide safety for third parties.  In this case, the attorney testified that the mother was “fully aware that Frank was buying and selling property in her name” and was “transacting business in her name.” Lisa and her husband testified that Mrs. Lollis was present when they made some payments to Frank. Mrs. Lollis never objected and even retrieved the receipt book for Frank on a few occasions.

Lisa testified (1) Frank told her he had a power of attorney; (2) Lisa relied on Frank’s representation; and (3) she would not have entered into the contract and made payments had she known Mrs. Lollis would not acknowledge the existence of the contract. Dennis testified that (1) he believed Frank was acting on his mother’s behalf; (2) he relied on the course of dealing established in a number of transactions; and (3) if he had known Mrs. Lollis was not going to honor the contract, he would not have entered into it nor made payments.

The Court said that Mrs. Lollis’ knowledge that her son was buying and selling real estate in her name and her tacit acceptance of this practice placed Frank in such a position that the plaintiffs were led to believe he had the authority to act. The plaintiffs dealt with Frank based on that assumption. The preponderance of the evidence, according to the Court, shows an agency relationship between Mrs. Lollis and Frank as well as his apparent authority to sell. Frank’s actions were binding on his mother.

*Lollis v. Dutton, South Carolina Court of Appeals Opinion No. 5522 (November 1, 2017)