Are you up for some haunted entertainment?

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…or do you think 2020 has been frightening enough?

“It’s got great curb appeal!”

This article entitled “Would You Buy a Haunted House?” by Amanda Farrell at PropLogix caught my eye this morning. A real estate lawyer might face a challenge or two closing a haunted house!

And it’s Halloween week! Let’s entertain ourselves.

If you and your kids are up for some in-person creepy places, try Sweet Dreams Scare House in Easley, Madworld Haunted Attraction in Piedmont, Dark Castle Haunted Attraction in Elgin, Nightmare Haunted House in Myrtle Beach or Ripley’s Haunted Adventure in Myrtle Beach.

If your family prefers to check-out real haunted sites in South Carolina, check out this article.  Even the names of “Greenville Tuberculosis Hospital” and “South Carolina Lunatic Asylum” are menacing!

I grew up in the Low Country (otherwise known as “God’s Country), and the story of Alice Flagg, a ghost in Murrells Inlet, is considered fact.

The story, according to this article, is that in 1849, a wealthy doctor named Allard Flagg moved into The Hermitage and invited his beautiful sister, Alice, to live with him. (They’re always beautiful.) Alice, of course, falls hopelessly in love with an unsuitable man, who is sent away by her brother.

Alice continued to see her suitor secretly. When her brother discovered the assignations continued, he sent sweet Alice off to a boarding school in Charleston. She contracted malaria, and just before she died, her brother brought her home. After her death, he found an engagement ring on a ribbon around her neck and furiously threw it into the marsh. Beautiful Alice has spent the last 150+ years clutching her chest while walking around All Saints Cemetery. 

I bet that story would scare your kids, especially if you tell it after dark in the cemetery!

If you’re like me, though, 2020 has been scary enough. “Casper, The Friendly Ghost” is pretty much the most my family can handle this year. I wish you and your family more treats than tricks this weekend. Stay safe and Happy Halloween!

Boeing to move all Dreamliner production to North Charleston

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This is the time of the year when many of us are feverously working on budgets. My own crystal ball is particularly murky this year as COVID-19 has created more uncertainty than usual about the future of the real estate market in South Carolina.

Our state received excellent economic news on October 1, however, when Boeing issued a press release announcing the company will consolidate the production of its widebody jet in North Charleston.  Our gain is Washington State’s loss.  This move seeks to improve efficiencies during the market downturn caused by the pandemic to position the company for recovery and long-term growth.

The change won’t happen immediately. The press release indicated Boeing will continue to manufacture its 787-8 and 787-9 jets in Everette, Washington until it reaches its previously announced rate cut to six jets per month, which will probably occur sometime in mid-2021.

The release said that a company study confirmed the feasibility and efficiency gains created by consolidation will enable the company to accelerate improvements and target investments to better support customers. The North Charleston plant has lower production costs because labor is less expensive in South Carolina, and it’s a non-union plant.

Anyone who has driven from Columbia to Charleston has witnessed the extensive growth in the North Charleston area of not only Boeing, but the industries and housing developments that support Boeing. This is excellent news for us at a time when we need it!

How does the rest of 2020 look in South Carolina housing?

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We have had an incredible year in real estate in South Carolina!

Mortgage rates are at historic lows resulting in a refinance boom. Home sales have also been strong. We have seen a steady stream of migrations to our beautiful state from less desirable locations. We have seen folks tire of being stuck inside their homes by COVID looking for larger and more modern residences. And the low interest rates have assisted in those moves, too.

And commercial real estate has remained strong for us. We’ve seen the due diligence periods of some commercial projects slowed by COVID uncertainty, but these transactions appear to be closing, even if later than expected.

Real estate closing attorneys and their staff members have worked at a frenzied pace this year! They have tried to keep up with the whirlwind of activity while sanitizing between closings, performing closings on porches, in tents and in parking lots. They’ve worn masks and given away the used pens. It has taken a great deal of innovation to run a closing law firm in this environment, and they have succeeded!

It’s almost October, and we haven’t yet seen a slowdown. I point you to this article, however, written by Warren L. Wise for Charleston’s Post and Courier newspaper. The article points to a slip in the numbers of real estate sales in August as compared to August of 2019. Sales seem to have been slowed by inventory. We are still experiencing a desire for new and improved housing, but the houses aren’t available. It’s a true seller’s market.

I doubt these numbers will result in a huge slow-down between now and the end of the year. Perhaps we will see something akin to the seasonal slowdowns we have historically seen toward year-end. And if things go well, spring will give us the typical increase we are accustomed to in housing sales. Hang on for the ride!

Newberry land-transaction dispute replete with equitable issues

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We don’t often see current land-transaction dispute cases among South Carolina’s appellate court decisions, but the Court of Appeals handed down an opinion on September 16 that covers the gamut of equitable issues. Not uncommon, though, is that the facts in this equitable case involving real estate, like most, are quite interesting.

The use of the property in the case, Shirey v. Bishop*, is interesting in itself. Mr. and Mrs. Bishop operated a grave digging and burial vault business on the property for more than 30 years. Mr. Bishop died in 2010, leaving his wife to run the business by herself. Mrs. Bishop suffered from depression and anxiety and ultimately determined that she did not want to continue operating the business.

In 2012, Mrs. Bishop entered into a contract to sell the property to her niece, Cassandra Robinson. Although the bank wasn’t consulted, Robinson agreed to assume the mortgage and make the monthly payments until the mortgage was satisfied.

In 2014, however, Mrs. Bishop approached Shirey about purchasing the property, and a contract was signed in 2015 to sell the property to Shirey for $125,000. (Apparently Robinson was late on many mortgage payments.) The closing was to occur between August 3 and August 12, 2015. Time was stated to be of the essence.

On August 12, 2015, Shirey attempted to close by tendering funds to his attorney. After it became apparent that Mrs. Bishop was not going to appear, Shirey’s attorney called Bishop to ask if the closing period could be extended to August 13. Bishop agreed.

On August 13, Shirey arrived at his attorney’s office, but Bishop again failed to appear. Bishop’s doctor sent a note to Shirey’s attorney asking that Bishop be excused from the closing. (I’ve never seen a doctor’s excuse for a closing!) However, that afternoon, Bishop entered into a second contract with Robinson. This contract added a provision that Bishop would indemnify Robinson against “any and all issues of illegality or fraud concerning the transaction.” Bishop executed a deed conveying the property to Robinson, and Robinson recorded the deed the same day.

This lawsuit followed. The special referee ordered specific performance in favor of Shirey and further determined that Shirey was a bona fide purchaser who took free of any interest of Robinson, that Robinson and Bishop were in a confidential relationship, that the phone call from Shirey’s attorney to Bishop was tantamount to an extension of the contract, and that Bishop’s entering into the 2015 contract with Robinson demonstrated an intention to hold Robinson in default of the 2012 contract.

The Court of Appeals affirmed and made the following points:

  1.  Bishop and Robinson waived their statute of frauds argument by failing to plead it or argue it in the lower court.
  2.  Robinson was not entitled to the property under the 2012 contract because the 2015 contract held her in default.
  3.  The equities in the situation favored Shirey.
  4.  Bishop and Robinson were in a confidential relationship, not only because of their familial relationship, which is not sufficient standing alone, but because the facts indicated Bishop trusted Robinson and failed to seek legal advice. Additionally, Robinson drafted her second contract, and Bishop testified she didn’t understand what she was signing.
  5.  Shirey partially performed by tendering funds.
  6.  Shirey was a bona fide purchaser because he did not have notice of Robinson’s claim at the time he attempted to close. The Court held he had the “best right to” the title to the property.
  7.  Shirey was entitled to attorney’s fees because he prevailed under his contract, which provided for the award of attorney’s fees to the successful party.

All these issues are discussed in detail, and I recommend this case to any lawyer who seeks a refresher on equitable questions involving real estate under South Carolina law.

*South Carolina Court of Appeals Opinion 5718 (September 16, 2020).

Court of Appeals decides same-sex common law marriage case

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In a same-sex common law marriage case, our Court of Appeals recently weighed in on the applicability in South Carolina of Obergefell v. Hodges*, the 2015 United States Supreme Court case that held same-sex couples may exercise the fundamental right to marry and that state laws challenged in that case were invalid to the extent they exclude same-sex couples from civil marriage on the same terms and conditions as opposite-sex couples.

In an appeal from the family court’s dismissal of Cathy Swicegood’s complaint alleging the existence of a common-law marriage with her same-sex partner, Polly Thompson, Swicegood argued the family court erred by dismissing the case for lack of subject matter jurisdiction**.

The family court case was filed in 2014. While Swicegood’s appeal was pending, the Supreme Court of the United States decided Obergefell.

The case sought an order recognizing the existence of a common-law marriage, a decree of separate support and maintenance, alimony, equitable division of marital property and related relief. Swicegood alleged she and Thompson cohabited as sole domestic partners for over thirteen years, until December 10, 2013, agreed to be married and held themselves out as a married couple. She also alleged the couple exchanged and wore wedding rings, co-owned property as joint tenants with the right of survivorship and included each other as devisees in their wills. She also alleged they shared a joint bank account and that Thompson listed her as a “domestic partner/qualified beneficiary” on Thompson’s health insurance and as a beneficiary on her retirement account.

Thompson moved to dismiss the action, alleging the family court lacked subject matter jurisdiction over Swicegood’s complaint because the parties were not married and lacked the capacity to marry.

Swicegood submitted the affidavits of two individuals who each attested they witnessed a wedding ceremony between Swicegood and Thompson in Las Vegas on February 12, 2011.

Thompson submitted a memorandum and several exhibits in support of her motion to dismiss. She argued that in August 2012 and September 2013, she and Swicegood signed affidavits of domestic partnership in which they acknowledged they had “a close personal relationship in lieu of a lawful marriage,” were “unmarried” and “not married to anyone.”

Thompson contended these documents indicated the parties did not hold themselves out as a married couple. In her affidavit, Thompson attested Swicegood knew they were not married. She stated she and Swicegood participated in a “commitment ceremony” in Las Vegas “on a lark,” but they knew it was not a wedding and that they could not legally marry in Nevada. Thompson attested she gave Swicegood several rings during their relationship, but she intended none of these to signify they were married. She stated she was not and never had been married to Swicegood: “We both knew that if we wanted to get married, we could go to a state that allowed same-sex marriage. It was not our intent to enter into marriage, and we did not”.

The family court dismissed Swicegood’s complaint, concluding it lacked subject matter jurisdiction to adjudicate the issues because a common-law marriage was not legally possible pursuant to section 20-1-15 of the South Carolina Code (2014), which was still in force at the time. That statute read: “A marriage between persons of the same sex is void ab initio and against the public policy of this State.”

The Court of Appeals issued an unpublished opinion remanding the case to the family court with instructions to “consider the implications of Obergefell on its subject matter jurisdiction.” The family court again concluded it lacked subject matter jurisdiction, finding that although Obergefell applied to common-law marriages, it could not retroactively create a common-law marriage between the parties.

The court concluded Obergefell could not “logically be read to exclude common-law marriages,” and so long as South Carolina continued to recognize the validity of common-law marriages for opposite-sex couples, it had “a constitutionally mandated duty to recognize the validity of common-law marriages for same-sex couples.” The court did not expressly resolve the question of whether Obergefell applied retroactively, but it concluded the couple could not have formed a common-law marriage because section 20-1-15 was in place throughout the couple’s thirteen-year period of cohabitation, and they believed they lacked the legal right to be a married couple.

The Court of Appeals applied Obergefell retroactively, but held that retroactive application of the decision did not require them to ignore the fact a state statute operated as an impediment to the formation of a common-law marriage between same-sex couples when it was still in force. Our state law concerning impediments to marriage was held to be “a pre-existing, separate, independent rule of state law, having nothing to do with retroactivity,” which formed an “independent legal basis” for the family court’s dismissal of Swicegood’s complaint.

 

*135 United States Supreme Court 2584 (2015).

**Swicegood v. Thompson, South Carolina Court of Appeals Opinion 5725 (July 1, 2020)

South Carolina is one of three states without remote online notarization

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This HousingWire article really caught my attention this morning. South Carolina is one of only three states without an online notarization option.

Efforts have been in progress to pass Remote Online Notarization (RON) legislation here for a couple of years, but the Council of the Bar’s Real Estate Section opposed the legislation on the theory that RON would challenge the control South Carolina licensed lawyers currently enjoy. Many other lawyers disagree with that position, but the legislation stalled.

Other states have used a variety of permanent and temporary solutions to allow for remote online notarization during the COVID-19 crisis. But, at this moment, California, Oregon and South Carolina are the only states with no solution.

What’s your opinion, South Carolina real estate lawyers? Would RON be a good solution to facilitate closings in South Carolina or would it erode your control? The legislation is likely going to be discussed in the next legislative session. Your opinion matters!

The Episcopal Church property saga continues

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We have a new circuit court order

This is my third blog about the controversy surrounding the properties of various Episcopal churches in South Carolina. I previously said I am thankful to be a real estate lawyer as I attempt to decipher these issues.

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St. Philip’s and St. Michael’s Episcopal Churches, Downtown Charleston, SC 

In August of 2017, the South Carolina Supreme Court issued a 77-page opinion in this litigation. We now have a new circuit court order, and I am confident we will hear more at a later date.

I don’t have to solve the mystery of the rights of gays in churches. I don’t have to ascertain whether the “liberal mainline” members or the “ultra-conservative breakaway” members make up the real Episcopal Church.  I don’t have to delve into the depths of neutral principles of law vs. ecclesiastical law. I don’t have to figure out who will own the name “Episcopal Diocese of South Carolina.”

The real estate issues are sufficiently thorny to occupy our collective real estate lawyer brains. The South Carolina Supreme Court seemed to indicate that the 29 breakaway churches had to return their properties to the national church under the “Dennis Canon”. But the Supreme Court left open the possibility that the lower court might clarify the position, and clarify Circuit Court Judge Edgar Dickson did.

He wrote that state law, not church law, requires the transfer of real property by deed. He said that no parish expressly acceded to the Dennis Canon. He said, “This is a property case. A decision on property ownership is usually governed by the title to real estate—the deed. In this case, all the plaintiff parishes hold title to their property in fee simple absolute.”

News articles refer to the properties as being valued at hundreds of millions of dollars. The historic value of the properties, including St. Michael’s and St. Philip’s of Charleston, is also quite significant. Future appeals are almost guaranteed. Nothing is settled at this point. Let’s not try to insure these titles anytime soon.

The controversy began more than five years ago when local parishes in eastern South Carolina left the Episcopal Church over, among other issues, the rights of gays in church. Since then, the two sides have been involved in a battle over the church’s name, leadership and real estate.

Interestingly, the national church had offered a settlement to the breakaway parishes that would have allowed them to retain their properties if they gave up the name and leadership issues. That settlement offer was apparently summarily rejected.

The South Carolina Supreme Court’s ruling upheld the Episcopal Church’s position that it is a hierarchal church rather than a congregational church in which the vote of church membership can determine the fate of real property. The new circuit court order begs to differ.

I continue to be thankful that I am a real estate lawyer!

*The Protestant Episcopal Church in the Diocese of South Carolina v. The Episcopal Church, South Carolina Supreme Court Opinion 27731, August 2, 2017.

Is it ethical to buy a competitor’s name as a search engine “keyword”?

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Most South Carolina dirt lawyers don’t do much direct advertising, but some make use of Internet keyword advertising. For that reason, I wanted to make sure you noticed the recently issued Ethics Advisory Opinion 20-01, which you can read here.

South Carolina’s Ethics Advisory Committee was asked the following question:  “May a lawyer bid on and use the names of other lawyers and law firms as a part of a competitive keyword advertising strategy?” In other words, it is ethical for a lawyer to pay an internet search engine to insert his or her ads when a searcher types a competitor’s name into the search engine?

In some search engines, the resulting advertisements appear on the right side of the page. In other search engines, they may appear marked as an “ad” or “sponsored” above the organic search results.

The Committee pointed out that competitive keyword advertising is different from search engine optimization (SEO). SEO is the process of increasing the visibility of a web page by users of a search engine and is directed at optimizing unpaid placement organic results. This opinion addresses only keyword advertising.

The Committee followed the lead of New Jersey, Texas and Wisconsin and opined that a lawyer may purchase an internet competitive advertising keyword that is the name of another lawyer or law firm in order to display a “sponsored” website advertisement.

The Committee stressed that lawyers should be mindful to comply with all advertising rules and should use care to ensure that no derogatory or uncivil message is conveyed. The Committee also pointed out that surreptitious redirection from a competitor’s website to a lawyer’s own website via hyperlink is prohibited under our Rules.

What do you think?

SC lawyers connected to Hardwick receive admonitions

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Nat HardwickIn additional fallout from the Nat Hardwick fiasco in Atlanta, the South Carolina Supreme Court has anonymously admonished two bar members for failing to restrict access to South Carolina-based trust accounts containing client funds and failing to ensure proper monthly reconciliations of those accounts*.

This blog has discussed Nat Hardwick, a name familiar to many South Carolina real estate lawyers three times. He was convicted in 2018 of embezzling more than $25 million from his former companies, including his former law firm, Morris Hardwick Schneider. In February of 2019, he was sentenced to 15 years in prison. His co-conspirator and controller, Asha Maurya, was sentenced to seven years after she cooperated with the government. In May of 2019 Hardwick and Maura were ordered to pay $40 million in restitution.

Nathan E. Hardwick IV, described himself as the face of Morris Hardwick Schneider, an Atlanta residential real estate and foreclosure firm that grew into sixteen states, including South Carolina. The firm once had more than 800 employees and boasted of offices in Charleston, Hilton Head, Columbia and Greenville.

This story hits close to home. My company was one of the victims of the crimes and one of the parties awarded restitution because it funded the firm’s escrow accounts when the losses were discovered.

The prosecutor described an extravagant lifestyle that Hardwick enjoyed at the expense of others. The case was said to be particularly troubling because the illegal activity was orchestrated by a lawyer who swore an oath to uphold the law and represent his clients with integrity. The U.S. Attorney said he hoped the case sent the message that the FBI and the U.S. Attorney’s office will not tolerate this type of white-collar crime.

According to the evidence, from January 2011 through August 2014, Hardwick stole more than $26 million from his law firm’s accounts, including its trust accounts, to pay his personal debts and expenses. The firm’s audited financial statements showed that the firm’s net income from 2011 through 2013 was approximately $10 million. During that time, according to the evidence, Hardwick took more than $20 million from firm accounts.

Asha Maurya, who managed the firm’s accounting operations, reached an agreement last May with the U.S. Attorney’s office and pled guilty. She was expected to testify at the trial, but was unexpectedly not called as a witness. Her lawyer argued at the restitution hearing that she should be liable for only $900,000, the amount she admitted taking from the firm for her own benefit. She had agreed to pay restitution in that amount as a part of her plea bargain.

During the trial, Hardwick did take the stand in his defense and attempted to blame Maurya with the theft. He said that he trusted her to his detriment, that he was entitled to the funds, and that he was unaware that the funds were wired from trust accounts. Hardwick testified for more than a day and explained that he believed Maurya followed proper law firm procedures.

On the stand, Hardwick, described as the consummate salesman, said that he gave his cellphone number to almost everyone. He said he returned calls and messages within a few hours and instructed his employees to do the same. He apparently believed himself to be a master in marketing and customer service and prided himself in focusing on the firm’s expansion strategy. He hoped to expand to all fifty states and make money through a public stock offering.

With his ill-gotten gains, Hardwick bought expensive property, made a $186,000 deposit for a party on a private island, spent $635,000 to take his golfing friends to attend the British Open in 2014, paid off bookies, alimony obligations, and sent more than $5.9 million to various casinos, all according to trial evidence. Hardwick’s activities lead to the loss of his law license and the bankruptcy of his firm.

Hardwick’s former partners, Mark Wittstadt and his brother, Gerald Wittstadt, were each awarded $6 million in restitution, and Art Morris, a retired member of the firm, was awarded $5 million.  All claim damage to their reputations in addition to substantial monetary losses.

These two South Carolina disciplinary cases began in May of 2014 when SunTrust Bank reported it paid three wires that were presented against insufficient funds on one of the firm’s South Carolina IOLTA accounts, leaving the account overdrawn by more than $65,000. Approximately a month later, the bank reported the same account was overdrawn by more than $18,000. The ODC began its investigation about the same time the law firm and my company began investigating the problems in Atlanta.

In South Carolina, the misappropriations occurred primarily through online transfers between firm trust accounts. More than $9 million in transfers in and out of the South Carolina trust accounts occurred during 2014 alone. As a result of the investigations and the subsequent funding of the shortage by my company, no South Carolinians lost funds.

*In re Anonymous Member of the South Carolina Bar, SC Supreme Court case 27937 (May 27, 2020) and In re Anonymous Member of the South Carolina Bar, SC Supreme Court case 27974 (May 27, 2020).