Claire Manning

SC Supreme Court upholds Myrtle Beach’s “family friendly” zoning overlay district

Standard

In Ani Creation, Inc. v. City of Myrtle Beach, * the South Carolina Supreme Court upheld an ordinance that imposed a zoning overlay district intended to bolster the “family friendly” nature of Myrtle Beach’s historic downtown area. The ordinance targeted smoke shops and tobacco stores and the merchandizing of tobacco paraphernalia, products containing CBD, and sexually oriented material.

The opinion begins, “The City of Myrtle Beach (the city) is a town economically driven and funded by tourism.” The facts indicate that the city received frequent criticism from tourists and residents that the proliferation of smoke shops and tobacco stores repelled families from the area. The city passed a comprehensive plan that aimed at increasing tourism and concluded that all businesses needed to encourage and support a “family beach image”.  The city passed an ordinance which created a zoning overlay district known as the Ocean Boulevard Entertainment Overlay District that encompassed the historic downtown area.

The prohibited uses in the district were declared immediately nonconforming when the ordinance was passed on August 14, 2018, but an amortization period was allowed which gave affected businesses until December 31, 2019, to cease the nonconforming portions of their businesses.

The zoning administrator issued citations to the nonconforming businesses. Nine of the 25 affected stories appealed to the Board of Zoning Appeals which found (1) it did not have jurisdiction to declare the ordinance unconstitutional; (2) it could not grant a use variance because it would allow the continuation of a use not otherwise allowed in the district; and (3) the businesses were engaged in one or more of the prohibited uses. On appeal, the circuit court affirmed the Board’s opinion, finding the appellants’ 25 grounds for challenging the ordinance meritless. The businesses appealed directly to the South Carolina Supreme Court.

The appellants raised a “host” of constitutional and procedural challenges, all of which fell on deaf ears at the Supreme Court. The Court held that the ordinance was a valid exercise of the city’s police powers. According to the Court, municipal governing bodies clothed with authority to determine residential and industrial districts are better qualified by their knowledge of the situation to act upon such matters than are the courts, and they will not be interfered with in the exercise of their police power to accomplish their desired end unless there is a pain violation of the constitutional rights of the citizens.

A comment on the Dirt Listserv said, “S. Carolina is OK with cancel culture after all.”  A store selling sexually oriented materials was removed from Garners Ferry Road in Columbia (about three miles from my house) using similar legal arguments. I was delighted to see that store torn down before I had to explain it to my grandchildren! But I do understand the “cancel culture” argument. What do you think?

*South Carolina Supreme Court Opinion 28151 (April 19, 2023)

Beware the Ides of March!

Standard

We have three scary March 15 disciplinary cases

Three disciplinary cases* from March 15 of this year give us some timely reminders of activities we should avoid as lawyers.

Et tu, Brute?

The Brown case may be most on point for dirt lawyers. Attorney Brown practiced in family court. During testimony in a trial, a former client of Brown testified that her signature was not the signature reportedly sworn by a notary seal on the financial declaration filed with the court.

Here’s the scariest part of this story. After the trial, the family court judge reviewed several of Brown’s pending cases and found four documents attested to by Brown or her employee that appeared to be fraudulent. Brown self-reported to the ODC, acknowledged her misconduct, and signed an affidavit in mitigation. The affidavit stated that she had learned an important lesson, that she had attended several educational programs and had availed herself of Bar resources for new attorneys. She attested that she never intended to “mislead, misrepresent, or defraud anyone.” In other words, she was just trying to make things happen as quickly as possible for her clients.

The Court imposed a public reprimand and required Brown to pay the costs of the investigation and prosecution.

Dirt lawyers, no matter how much stress a closing creates, never, never fraudulently witness or notarize any document. You want to be able to testify in any deposition or court proceeding that you always appropriately monitored, witnessed, and notarized your clients’ documents. And it is not an excuse, as this case indicates that there was no intent to mislead, misrepresent or defraud anyone.  Take the time to handle documents appropriately every time.

The Williams case is a simple reminder to file and pay taxes. Williams failed to file and pay state income taxes for the 2015-2018 tax years. He was charged and arrested for this failure and timely self-reported his misconduct. He pled guilty, paid a fine, paid the taxes, and was sentenced to time served.

In mitigation, Williams stated that his mother’s mental and physical health began to deteriorate in 2012. He acted under  health care powers of attorney for both parents and cared for their needs as best he could while maintaining a busy law practice. He turned to alcohol “as an escape.” His mother died in 2018.  He stated he has been sober since 2019, has completed a six-week impatient treatment program, and regularly attends AA meetings. He also entered into a one-year monitoring contract with the Bar’s Lawyers Helping Lawyers program. He now serves as mentor to others in recovery.

The Court acknowledged its sympathy for Williams’ personal difficulties but imposed a definite suspension of ninety days.

Filing and paying taxes is one of those “black and white” functions that you cannot ignore. I once had a relatively wealthy real estate developer client who failed to file taxes for many years. That man, from a well-known and respected family, went to federal prison for several years. Paying taxes is not a step you can skip!

The Lynn case involved a disbarment for failure to hold unearned attorney’s fees in trust, for misappropriating client funds and for failing to keep clients informed. Read the opinion if you need a real Ides of March cautionary tale. One grave mistake Lynn made was failing to respond to the ODC’s investigation inquiries. Two things our Supreme Court takes very seriously are misappropriating funds and failing to cooperate with the ODC.

Let these sad facts be lessons to all of us! Just don’t do it!

*In the Matter of Brown, South Carolina Supreme Court Opinion 28139 (March 15, 2023), In the Matter of Lynn, South Carolina Supreme Court Opinion 28140 (March 15, 2023), In the Matter of Williams, South Carolina Supreme Court Opinion 28141 (March 15, 2023).

IRS provides safe harbor for conservation easements

Standard

Be aware of the July 24, 2023 deadline!

When I was a title insurance underwriter, I helped many South Carolina lawyers close and insure their clients’ conservation easements, so I know many of these easements are recorded in the public records in South Carolina. I wanted to make sure all dirt lawyers who represent clients with conservation easements are aware of a development in this area of the law.

The Secure 2.0 Act of 2022 authorized the IRS to issue “safe harbor” language for conservation easements to cover situations where the easement is later extinguished because of unexpected circumstances or where a boundary line adjustment is needed. Using the correct “safe harbor” language will avoid the loss of the grantor’s charitable deduction.

Here is the important news: if your client has previously granted a conservation easement, the document can now be amended to add the “safe harbor” language. But the amendment must be recorded by July 24, 2023.

You can read the Treasury Notice here.

You can read the press release here.

Is this a classic case of “bad facts make bad law?”

Standard

Or do you think this JTROS decision is accurate and fair?

This Alabama case* was discussed extensively on the DIRT listserv. I’d love to know how South Carolina lawyers react to the decision.

Here’s the recital of the facts from DIRT:

“Michael Upchurch, his brother Davis Upchurch, and his nephew Jason Upchurch owned several pieces of real property as joint tenants with the right of survivorship. They signed a contract to sell the properties to third parties. However, before closing, Michael died. In this declaratory judgment action, Michael’s widow Carol Upchurch, individual and as executor of Michael’s estate, asserted, among other things, a claim to one-third of the proceeds from that sale. David and Jason filed a motion for a summary judgment, which the circuit court granted. The Alabama Supreme Court held that under the circumstances, Michael, David, and Jason’s decision to enter into a contract to sell the properties severed their joint tenancy and that, as a result Michael’s estate was entitled to one-third of the proceeds from the sale of the properties. The Supreme Court therefore reversed the trial court’s judgment and remanded the case for the entry of a judgment in favor of the estate.”

What do you think about this opinion?  Would a South Carolina court come to the same result?

 I don’t believe our statute answers the question. For your consideration, here are relevant portions of our statute on the subject:

  • § 27-7-40. Creation of joint tenancy; filing; severance
  • (a)(ii) In the event of the death of a joint tenant survived by more than one joint tenant in the real estate, the entire interest of the deceased joint tenant vests equally in the surviving joint tenants who continues to own the entire interest owned by them as joint tenants with right of survivorship.
  • (iv) If all the joint tenants who own real estate held in joint tenancy join in an encumbrance, the interest in the real estate is effectively encumbered to a third party or parties.
  • (vi) If real estate is owned by more than two joint tenants, a conveyance by one joint tenant to all the other joint tenants therein conveys his interest therein equally to the other joint tenants who continue to own the real estate as joint tenants with right of survivorship.
  • (ix) If real estate is owned by two or more joint tenants, a conveyance by all the joint tenants to themselves as tenants in common severs the joint tenancy and conveys the fee in the real estate to these individuals as tenants in common.
  • (c) Except as expressly provided herein, any joint tenancy severed pursuant to the terms of this section is and becomes a tenancy in common without rights of survivorship.

The answer would seem clearer to me if only one joint tenant had entered into a contract. Severance of the joint tenancy would appear to be the correct answer.  But under the facts recited here, I have my doubts.

The intention of the parties is always relevant. We don’t have any clear statement to that effect here. If all three had survived the sale, each joint tenant would have been entitled to his portion of the proceeds. But no document among the owners addressed a death prior to the sale. Originally setting up their interests as JTROS suggests their intent that a death of one would result in ownership by the other two. Did signing the contract evidence their intent to no longer own the properties as joint tenants?

One comment from DIRT suggested the court might have decided that the contract rights of the deceased owner survived his death and passed to his estate. But that’s not what the court held. It held that the JTROS was severed by the contract.

Dirt lawyers, what do you think?

*Upchurch v. Upchurch, Supreme Court of Alabama Case SC-2022-0478 (April 7, 2023)

Virginia court holds HOA assessment invalid

Standard

Dirt lawyers hear stories of dysfunctional homeowners’ associations routinely. I have one for you!

My husband and I built a second home at the beach in a relatively modest subdivision in 2011. Many of the houses are owner occupied, but many are on rental plans. My twenty-something daughter met a neighbor who asked her two questions, (1) “Is this your family’s first vacation home?” and (2) Your parents aren’t going to rent this house, are they?” It wasn’t a good start to our relationship.

We had several issues with ARB approvals during the building process, which were handled by our builder. At one point, he threw his hands in the air in frustration and said, “These people need to understand this isn’t DeBordieu.” In other words, the ARB seemed to believe the subdivision is much more affluent than it is.

When we attended our first (and only as it turns out) annual meeting of the owners, the president of the board promptly threw one of our neighbors out of the meeting for asking a question!  It was during the first five minutes of the meeting. We were shocked and vowed to steer clear of those meetings.

During our first winter, we received a very nasty letter telling us we had a dead tree that must be removed immediately. We were in Columbia, didn’t know about the dead tree, and even when we investigated, we decided the tree didn’t look any worse than the other winter trees. But we quickly took it down! We heard another neighbor received a similar letter telling him his mailbox was dirty and needed to be cleaned immediately.

We decided that we were going to be good neighbors and properly maintain our house and yard, but we would enjoy the beach and the gatherings of our growing family (including the four grandchildren we’ve been blessed with since we built the house) without getting involved with the neighbors.

Believe it or not, this story has a happy ending. Apparently, all the problems were caused by one homeowner who managed to get herself elected to the board and the ARB. She roamed the streets looking for rules violations and wrote the letters herself.  About the time we figured out the problem, she and her husband, thankfully, moved. The trouble among the neighbors immediately improved. Now, we have delightful neighborhood parties and enjoy getting to know our neighbors. And it seems everyone has a story about the bad neighbor. We stand around drinking beer and telling stories.

My guess is that our earlier bad HOA is like the one described in Buckholder v. Palisades Park Owners Ass’n, Inc.*, a Virginia case where the HOA imposed an assessment on all owners to fund the cost of inspecting each property for the purpose of finding violations of the HOA rules. Homeowners sued to have the assessment declared invalid.

Virginia has a statute that provides, “(e)xcept as expressly authorized by the Act, the declaration or as otherwise provided by law, no association shall…make an assessment or impose a charge against a lot owner unless the charge is a fee for services provided or related to use of the common area.”

The court invalided the assessment and remanded the case to the lower court.

I read about this interesting case on the DIRT listserv that I recommend routinely. You won’t be sorry if you sign up for the emails!

Professor Dale Whitman who moderates the listserv commented that this is the sort of thing that gives HOAs a bad name. He also commented, “While most states won’t have a statute exactly like Virginia’s, the lesson of the case remains applicable. If an HOA or condo board is going to impose an assessment to be used on anything other than the common areas (or reserves that will ultimately benefit the common areas), it needs to be certain that it has the legal power to do so, either by virtue of an applicable statute or its own declaration. This is particularly true if the assessment is almost certain to irritate and raise the hackles of some owners, as this one was.”

Several lawyers commented about the nature of folks who like to serve on HOA boards. Read the comments if you need a good laugh. The listserv is searchable.

I think I’ll share the case with my neighbors at the beach.

*76 Va. App. 577, 882 S.E.2d 906 (2023)

Foreign ownership of real estate has become a political issue

Standard

Pending legislation in South Carolina may affect your transactions

Remember the Chinese surveillance balloon the United States shot down off the coast of the Palmetto State in February? That incident and other rising tensions between our government and China over several issues (the war in Ukraine, recognition of Taiwan, to name only two) have resulted in politicians proposing to broaden state law bans on foreign ownership of real estate.

According to a New York Times article dated February 7, entitled “How U.S-China Tensions Could Affect Who Buys the House Next Door”, legislation in Texas was proposed after a Chinese billionaire with plans to create a wind farm bought more than 130,000 acres of land near a U.S. Air Force base.

Proposed legislation is also pending in Florida, California and now South Carolina to restrict ownership of real estate by “hostile nations” or “foreign adversaries.” Some have suggested that such bills may run afoul of due process and equal protection issues.

Chicago Title published an Underwriting Memorandum on April 5 entitled “Foreign Ownership of Property in South Carolina” to advise agents of the pending legislation in our state.

You may recall that we have an existing statute (S.C. Code §27-13-30) prohibiting any “alien” or corporation controlled by an “alien” from owning or controlling more than 500,000 acres of land in South Carolina. Recently, the South Carolina Senate passed Senate Bill 576 that amends the existing statute by expressly prohibiting any citizen of a foreign adversary or corporation controlled by a foreign adversary from acquiring any interest in South Carolina property.  The proposed legislation will now be considered by the House.

The term “foreign adversary” is defined in the bill as “any foreign government or nongovernment person determined by the United States Secretary of Commerce to have engaged in a long-term pattern or serious instances of conduct significantly adverse to the national security of the United States or the security and safety of United States citizens.”

And there are other bills pending along the same lines.

Senate Bill 392 would amend our existing statute to reduce the amount of property allowed to be owned by an “alien” to 1,000 acres. House Bill 3566 would add a statute to reduce to 1,000 acres the amount of land that can be owned or controlled by China, the Chinese Communist Party, or an entity whose principal place of business is located within China.  House Bill 3118 would prohibit any company owned or controlled by China or the Chinese Communist Party or that has a principal place of business in China from owning, leasing, possessing, or exercising any control over real estate located within 50 miles of a state or federal military base for the purpose of installing or erecting any type of telecommunications or broadcasting tower.

All dirt lawyers will know immediately that all versions of the proposed legislation will create uncertainty in our market. I have only two pieces of advice at this point. First, let’s all monitor the proposed legislation. And, second, let’s pay attention to guidance provided by our excellent title insurance underwriters.

Who said real estate law is boring?

Standard

Take a look at this “Deed of Child”

My friend and self-professed “fellow title nerd”, Lacey Higginbotham, who practices in Myrtle Beach, sent to me a “Deed of Child” she found in the Horry County records. The document is dated May 10, 1930, recorded June 3. 1930, and purports to convey a child from a father to another family .

Because the document is difficult to read, I’ll squint for you and set it out here for your reading pleasure:

I can imagine Professor Spitz presenting this document to us as an exam in our first- year property law class. He might ask for us to spot all the issues concerning the enforceability of this document. Thanks, Lacey, for this diversion!

How do mail away closings work in light of In re Lester*?

Standard

A reader posed this question to me

A recent blog about a South Carolina Supreme Court amendment to a comment following our UPL rule contained the following paragraph:

“Remember that our Supreme Court adamantly told us in In re Lester* that a lawyer must be physically present for a closing. Prior to Lester, a closing attorney might be on vacation and available by telephone to answer closing questions. Lester called a halt to that practice.”

A reader responded, “Claire, can you clarify the effects of In Re Lester on ‘mail away’ closings?” This is such a great question, and I responded that I would answer with a new blog. This is that blog!

In the South Carolina Bar’s publication, Handbook for South Carolina Dirt Lawyers, I included the following discussion of mail-away closings.

“Attorneys in resort areas have done “mail away” closings routinely for years. Titles are examined, closing packages are prepared and mailed to a remote location for signatures. Recent South Carolina Supreme Court disciplinary cases requiring attorneys to be present at closings have caused some attorneys to question whether mail away closings can be done ethically by South Carolina attorneys.

The Supreme Court has not addressed this issue specifically, so no one knows the answer to this question. However, in a seminar in 2005, a lawyer from the Office of Disciplinary Counsel was asked whether an attorney can ethically handle a closing by mail.

He responded that it was his opinion that the attorney should:

           •     Schedule a closing date, time and place;

           •     Advise the clients that they should attend the closing;

           •     Advise the clients that the attorney will be able to provide better representation if the clients attend the closing; and

           •     Require the clients to sign a document indicating they received the foregoing advice but chose not to attend the closing.

Another speaker at the seminar suggested that he would only handle mail away closings if the clients agreed to meet with a lawyer in the clients’ location to execute the documents.

On September 16, 2005, we received a more formal opinion in the form of Ethics Advisory Opinion 05-16. This opinion states that an attorney may ethically conduct a real estate closing by mail as long as it is done in a way that:  (1) ensures that the attorney is providing competent representation to the client; (2) all aspects of the closing remain under the supervision of an attorney;  and (3) the attorney complies with the duty to communicate with the client, so as to maintain the attorney-client relationship and be in a position to explain and answer any questions about the documents sent to the client for signature. To meet this test, according to the opinion, clients must have reasonable means to be in contact with the attorney, by telephone, facsimile, or electronic transmission.

The Opinion states that there is no legal requirement that a client attend the closing, but it must be the client’s decision not to attend the closing. The Opinion acknowledges today’s climate by this statement: “Given today’s technological advances in communications and funds transfer, to require a client living in one part of the country to attend a closing against the client’s own wishes is both unnecessary and punitive.” The Opinion makes the point that the duties of the attorney do not change when the closing is accomplished by mail in this statement: “The prudent attorney will conduct closings by mail in such a fashion that the client is fully informed and properly advised, that the client has a reasonable means to consult with the attorney, and that all personnel assisting the attorney are properly supervised.”

South Carolina closing attorneys are relieved to have this authority and appreciative of the efforts of the South Carolina Bar Ethics Advisory Committee.”

Of course, technology has drastically changed since these words were written, but the legal issues have not. A dirt lawyer can certainly handle mail away closings ethically. But dirt lawyers must still practice law in connection with those closings.

Please feel free to make comments and ask questions about these blogs!

*353 S.C. 246, 578 S.E. 2d 7 (2003).

Transactions involving failed banks require extra attention

Standard

Dirt lawyers: call your friendly, intelligent title insurance underwriter!

Unfortunately, failed banks are back in the news and again affecting the stock market and our 401(k) accounts. It is doubtful that the California and New York banks that have failed have significant assets or loans in South Carolina, but Chicago Title’s underwriters have heard of at least one recent local transaction that involved one of the failed banks.

How should real estate lawyers protect their clients and themselves?

First, here’s a link provides general information about failed banks: http://www.fdic.gov/bank/individual/failed/index.html

Next, remember that assets are not automatically transferred by state law to an acquiring bank when the FDIC is appointed receiver and simultaneously announces the acquisition of the failed bank’s assets. Also, remember that the acquiring bank is not necessarily a “successor” to the failed bank.

Such an acquisition does generally mean that we can treat the acquiring bank as the owner of certain loans of the failed bank. We can generally rely on payoff statements, releases, satisfactions, and foreclosure actions by the acquiring bank if the acquiring bank asserts that it is the assignee by purchase. Documents should recite that the acquiring bank is the assignee of the loan. And we should be able to rely on that recitation.

In foreclosure situations, the acquiring bank may be required to prove its ownership of the debt and its record interest in the mortgage.

Payoff statements from the failed bank may be relied upon and the payoff statement may be made at the failed bank’s direction. But any release or satisfaction executed in response to that payoff must come from the receiver or its attorney in fact. Closing attorneys should confirm that the appropriate signature will be obtained before making the payoff.

The FDIC should sign recordable affidavits, as receiver, to the effect that it sold the particular loan asset to the acquiring bank to support assignments and modifications.

If your client purchases an REO asset that was owned by a failed bank, the proper grantor in the deed will be the FDIC, as receiver for the named failed bank. The FDIC will likely grant powers of attorney to individuals at the failed bank, at the acquiring bank, or internally, to facilitate signing these deeds. The power of attorney should comply with South Carolina law.

FDIC Statement of Policy on Foreclosure Consent and Redemption Rights provides that where the FDIC holds a junior mortgage, it “hereby grants its consent” to any foreclosure by a holder of a bona fide senior mortgage. Your title insurance company may require notice to the FDIC and the acquiring bank.

My best advice in all these cases is to call the person who either knows the answer to your many questions or will find out the answers to each of these questions for you: your favorite friendly and intelligent title insurance company underwriter!

SC Supreme Court amends comment to UPL rule

Standard

The intent is to allow lawyers from other jurisdictions to work remotely here

I begin this blog by admitting that I wouldn’t have thought this Supreme Court Order was a big deal if the brilliant Teri Callen (Chicago Title lawyer and USC Law School Adjunct Professor) had not pointed out its significance.

On March 15, The South Carolina Supreme Court amended Comment 4 to Rule 5.5, South Carolina Rules of Professional Conduct, Rule 407, by adding the following sentence at the end of the comment:

“A lawyer admitted in another jurisdiction does not establish an office or other systematic presence in this jurisdiction for the practice of law by engaging in remote work in this jurisdiction, provided the lawyer’s legal services are limited to services the lawyer is authorized to perform by a jurisdiction in which the lawyer is admitted, and the lawyer does not state, imply, or hold out to the public that the lawyer is a South Carolina lawyer or is admitted to practice law in South Carolina.”

This type of remote work in South Carolina by out-of-state lawyers was formerly only allowed in the event of a state of emergency, as in a global pandemic. Now, a lawyer admitted in New York can live, permanently or temporarily, in Hilton Head and practice law from her computer and telephone. The South Carolina Bar had requested an amendment to this comment, and the Court adopted a modified version of the Bar’s proposal.

Teri has previously taught us that a South Carolina lawyer working remotely in another state might be participating in the unauthorized practice of law. A Charleston lawyer who decides to live, permanently or temporarily, in the mountains, should check the court rules of that state to determine whether remote work is considered UPL in that state. 

Remember that our Supreme Court adamantly told us in In re Lester* that a lawyer must be physically present for a closing. Prior to Lester,  a closing attorney might be on vacation and available by telephone to answer closing questions. Lester called a halt to that practice.

The Court didn’t weigh in on whether a South Carolina lawyer is allowed under our rules to work remotely in another state where he is not licensed without running afoul of our rules. Our Court probably wouldn’t touch that issue because of the implications and unintended consequences that might occur. For example, if it is permissible for a South Carolina lawyer to work remotely in another state, is it also permissible to perform a South Carolina closing there?

There are land mines everywhere, lawyers. I feel as if I end 9 out of 10 blogs with the thought that everyone needs to be careful out there. This blog falls in the “be careful” category.

* 353 S.C. 246, 578 S.E. 2d 7 (2003).