Source: https://letstalkdirtsc.com/category/south-carolina-law-2/page/2/
Timestamp: 2019-10-20 19:50:20
Document Index: 657156762

Matched Legal Cases: ['§62', '§62', '§62', '§62', '§62', '§12', '§12', '§12', '§12', 'art 1', 'art 1', '§37']

South Carolina law – Page 2 – Let's Talk Dirt
Mortgage modification practices get out-of-state lawyers in trouble
On April 24th, two out-of-state lawyers were debarred by the South Carolina Supreme Court.* If the word “debar” isn’t familiar to you, don’t feel alone. Miriam-Webster indicates the definition of the word, used in a legal sense is, “to bar from having or doing something.” Our Supreme Court uses the word to mean to preclude a lawyer from another state from practicing law or seeking any form of admission to practice law in South Carolina, including pro hac vici admission, without first obtaining an order of the Supreme Court.
What did these two lawyers do to cause the wrath of our Court? They were both involved in mortgage modification schemes in multiple states. Naderi was licensed in California and provided legal services operation as the Pacific National Law Center (PNLC).
Ochoa was previously licensed in Florida but was disbarred in 2018 for misconduct involving lack of competence, failure to keep clients’ property safe, and conduct involving dishonest, fraud, deceit, or misrepresentation. He operated a solo practice and entered into an agreement with a non-attorney owned company (NVA) to market his legal services on the internet. Through NVA’s advertisements, he specifically targeted South Carolina residents seeking to negotiate modifications of their home loans.
Let’s look at just one example of the activities of these lawyers from the Naderi case. The Court refers to this scenario as “The J. H. Matter.” In December of 2013, Naderi was hired by J.H. a South Carolina resident, homeowner and veteran, to assist him in negotiating a modification of his home loan. Individuals from PNLC assured J.H. that the firm could get his loan modified and decrease his mortgage payments by securing both a balance reduction and a lower interest rate. J.H. was promised that the firm would work diligently and return his telephone calls within 48 hours.
J.H. signed several forms provided by PNLC staff members, including an “Attorney Client Retainer Agreement” and a “Third Party Authorization and Release Form”. The release form permitted the lender to discuss the loan with PNLC. Naderi was specifically named as the individual permitted to discuss the loan on behalf of J.H., but, interestingly, the form listed Naderi’s title as “Paralegal”.
The retainer agreement provided that, in exchange for $2,995, PNLC would provide “legal services” including “representation…for negotiation and resolution of disputes with current lender(s) regarding the subject real property and mortgage loan(s).” But litigation services were excluded from the scope of representation.
The agreement also provided that the fees were not conditioned on the outcome of the case and restricted J.H.’s ability to cancel the agreement and seek a refund after five days. Disputes arising after five days were to be handled by the guidelines and standards adopted by the California Bar.
In January, February and March of 2014, J.H. made payments totaling $2,995 via counter deposits into PNLC’s bank account. PNLC staff members told J.H. not to worry, that the law firm would secure the loan modification, and his lender would not take his home. Shortly after making his last payment, J.H. began experiencing difficulties reaching anyone at PNLC. PNLC never obtained a loan modification or offered J.H. any other solutions.
J.H. received notice of a foreclosure hearing, but he was unable to reach anyone at PNLC. J.H. appeared by himself and eventually hired another lawyer to file bankruptcy.
J.H. testified that he was unaware of any contact PNLC made with his lender. He believed he had been scammed and thought the wrongdoer should be in jail or disbarred.
Other matters were similarly described in both cases. It sounds as if the services were to collect fees only, and not to, in fact, perform legal work. The fact that these schemes cause delays when homeowners are in trouble with their loans make them particularly egregious. Dirt lawyers who are legitimately licensed by the South Carolina Supreme Court should be aware of these schemes and should be in a position to advise clients to avoid them with a vengeance!
* In the Matter of Naderi, South Carolina Supreme Court Opinion 27881 (April 24, 2019); In the Matter of Ochoa, South Carolina Supreme Court Opinion 27881, (April 24, 2019).
Tags Attorney Client Retainer Agreement, Chicago Title, Chicago Title Insurance Company, Claire Manning, Claire T. Manning, CTIC, CTIC SC, debar, In the Matter of Naderi, In the Matter of Ochoa, mortgage modification, mortgage modification scheme, Naderi, NVA, Ochoa, Pacific National Law Center, PNLC, South Carolina Supreme Court, Supreme Court Opinion 27881
From a “dirt” point of view, it seems cases where I am able to agree with the South Carolina Court of Appeals are few and far between these days. But an estate case was handed down on April 3 that should make perfect sense to all dirt lawyers*.
The case involved the will of William Paradeses who lived in Richland County and died in early 2016. The will, which was executed in 2008, was discovered in the home of the deceased shortly after his death.
The will contained a strikeout of Item IV(2), which originally provided for a $50,000 bequest to Fay Greeson, the respondent in this case. Next to the deletion was a handwritten note: “Omit #2 W.D. Paradeses.” The will also contained a handwritten addition to Item IV(1), which placed a condition on Paradeses’ bequest of his interest in the Saluda Investment Company. That notation stated: “A.D. and J.D. Paradeses will have control until it is sold and no one else.” There were no witnesses to either of these changes. A.D. and J.D. Paradeses agreed to comply with the Testator’s second notation.
Georganna Paradeses, the personal representative, filed a petition for a declaratory judgment seeking an order from the probate court declaring the rights of the parties and the effect of the notations. Faye Greeson filed an answer denying the deletion of her bequest was made by the testator and asserting the deletion failed because of improper attestation. The remaining family answered and alleged the testator made the notations with the intent to change his will.
The probate court found that the addition and deletion were consistent with a codicil and required proper execution. The probate court therefore held that the bequest of $50,000 to Faye Greeson remained valid. The remaining notation on the will was not in dispute.
The Court of Appeals relied on South Carolina Code §62-2-502, which states that a will may be freely modified or revoked by a mentally competent testator until death, and §62-2-506(a), which states that a will may be revoked by executing a subsequent will or by burning, tearing, canceling, obliterating or destroying the document with the intent to revoke it.
The appellants argued that the deletion in the will amounted to a partial revocation, which should have been allowed by §62-2-506(a) despite the absence of witnesses. They cited a 1912 South Carolina Supreme Court case** which held a strikeout in a will amounted to a revocation of the stricken provision.
The Court of Appeals, however, relied on another South Carolina Supreme Court case** that decided changes to a will with both an addition and a deletion were more akin to a codicil, which requires the normal formalities of the execution of a will. The testator’s notes in the case at hand were held by the Court of Appeals to amount to a codicil, and the bequest to Faye Greeson stood.
Dirt lawyers like certainty, and, for that reason, we like this case!
*In the Matter of Paradeses, South Carolina Court of Appeals Opinion 5635 (April 3, 2019)
**Citations omitted.
Tags §62-2-502, §62-2-506(a), Chicago Title, Chicago Title Insurance Company, Claire Manning, Claire T. Manning, codicil, CTIC SC, Fay Greeson, Georganna Paradeses, In the Matter of Paradeses, Opinion 5635, Richland County, Saluda Investment Company, SC Court of Appeals, William Paradeses
Tax liens will no longer be filed locally when the system is implemented
South Carolina Governor Henry McMaster signed tax lien legislation on March 28 that may change the way titles are examined.
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 stated effective date of the legislation is July 1, 2019, but nothing in the legislation sets a deadline for the DOR to act, and, in fact, the statute indicates the DOR “may” implement a statewide system.
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.
Tags §12-54-120, §12-54-122, Chicago Title, Chicago Title Insurance Company, Claire Manning, Claire T. Manning, CTIC, CTIC SC, Department of Revenue, DOR, Henry McMaster, July 1 2019, tax lien legislation
Supreme Court reminds lawyers to reconcile trust accounts
In my line of work, we have reason to review the trust accounts of real estate practitioners.
We have learned over time that most lawyers have great intentions when it comes to trust accounting. Most put proper procedures in place in their offices and put a smart, hardworking staff person in charge of the daily and monthly work. Most employ trust accounting software related to their closing software. Most review reports each month to make sure the work has been done. Many use the services of a company that reconciles trust accounts daily. Many use positive pay, an automated fraud detection tool that matches the account number, check number and dollar amount of each check presented for payment against a list of checks previously authorized and issued by the law firm.
Here are some examples we have witnessed over the years:
The person in charge of reconciliations gets sick or has a baby or changes jobs and no one picks up the slack in her absence.
The wife of a partner is in charge of reconciliations, and she gets busy at home over the holidays.
Something goes out of whack one month and, when the problem can’t be resolved easily, it gets put off month after month until it becomes an impossible task.
A trust account has to be closed for some reason and the transition to the new account with trust accounting software becomes a daunting task.
A lender’s wire is missed and no one noticed.
A staff person makes himself a vendor in the closing software and pays a small fee to himself from each closing…so small that no one catches it…until a check bounces. That staff person is probably a long-time trusted employee who believes he is correcting the fact that he is underpaid.
The office just gets too busy handling closings to manage the work that doesn’t bring in fees.
In November, The South Carolina Supreme Court reminded lawyers that reconciling trust accounts is not optional.* In a disciplinary case, the lawyer’s bank reported a bounced check. The lawyer explained he forgot to tell his office manager to make a deposit to the account while the lawyer was out of town, resulting in a disbursement before the deposit. (Life happened.) When the Office of Disciplinary Counsel investigated, the lawyer was unable to provide reconciliation reports.
During the investigation, the lawyer retained the services of a bookkeeper and a certified public accountant and also implemented electronic accounting software. Because he took those precautions, the Supreme Court gave him a public reprimand only. The lawyer was also required to complete Legal Ethics and Practice Program Trust Account School and Law Office Management School. And for a period of two years, the lawyer is required to submit his monthly reconciliations for review.
We should all take this reminder seriously. When life happens, continue to reconcile your trust accounts to avoid finding yourself in the Advance Sheets!
*In the Matter of Pyatt, South Carolina Supreme Court Opinion 27846 (November 14, 2018).
Tags Chicago Title, Chicago Title Insurance Company, Claire Manning, Claire T. Manning, In the Matter of Pyatt, Law Office Management School, Legal Ethics, Office of Disciplinary Counsel, Opinion 27846, positive pay, real estate practitioners, reconcile, reconciliation, South Carolina Supreme Court, Trust Account School, trust accounting
…and dirt lawyers are not going to like it
The South Carolina Court of Appeals ruled recently in favor of Quicken Loans, Inc. in a foreclosure case where the defendants argued the lender was not entitled to foreclose because it had violated the attorney preference statute during the application process.* My friend and classmate, Special Referee James Martin Harvey, Jr., had granted partial summary judgment in favor of the defendants, and Quicken appealed.
Quicken telephonically takes information for loan applications from borrowers, according to the recited facts. Quicken’s system prompts Quicken’s banker to ask the borrower: “Will the borrower select legal counsel to represent them in this transaction.” If the borrower responds “no”, the attorney preference form is populated to read, “I/We will not use the services of legal counsel.” No list of acceptable closing attorneys is provided to borrowers who answer “no” to this question, and the file is sent to Quicken’s affiliate company, Title Source, Inc., which acts as settlement agent in the transaction and subcontracts with attorneys to perform the settlement services.
If the borrower answers “yes”, Quicken’s system populates the attorney preference form to read, “Please contact lender with preference.” The system does not allow an attorney’s name to be entered at this stage of the application process.
The borrowers in this case declined legal representation during the initial telephonic application process.
The Court of Appeals indicated the form used by Quicken is identical to the form promulgated by the South Carolina Department of Consumer Affairs (DOCA) except that Quicken’s form is prepopulated with responses. Like the DOCA form, Quicken’s form states, “I/We have been informed by the lender that I (we) have a right to select legal counsel to represent me (us) in all matters in this transaction relating to the closing of the loan.” Unlike the DOCA form, however, Part 1(a) of the Quicken form is prepopulated to read, “I/We will not use the services of legal counsel.”
Under Part 1(b) the Quicken form, like the DOCA form, initially states, “Having been informed of this right, and having no preference, I asked for assistance from the lender and was referred to a list of acceptable attorneys. From that list I select…” Unlike the DOCA form, which provides blank lines to fill in an attorney’s name and the borrower’s signature, the Quicken form is prepopulated with the response, “Not Applicable.”
Quicken produced the affidavit of closing attorney Carlton D. Robinson, who said it was his practice to explain the legal effect of the attorney preference to borrowers and that he would not have closed if the borrowers had expressed any dissatisfaction with having him act as closing attorney.
The Attorney Preference Statute (S.C. Code §37-10-102(a) provides that when the primary purpose of a loan secured by real estate is for personal, family or household purpose, the creditor must ascertain prior to closing the preference of the borrower as to the legal counsel employed to represent the borrower in the closing. The purpose of this statute is to protect consumers.
DOCA filed an Amicus Brief arguing that Quicken had violated the statute. The Court of Appeals held that Quicken complied with the statute because an agent of Quicken asked the borrowers if they would be using preferred legal counsel and only populated the form after the borrowers responded that they did not have counsel of preference. Quicken sent the form to the borrowers, who signed and returned it without asking further questions.
Will the Supreme Court agree with the Court of Appeals given the opportunity? My guess that the current Justices will agree. My guess would have been different before the retirement of Chief Justice Jean Toal. Will the legislature tighten the language of the statute? That is always a possibility, but we have heard nothing on that front to date. I hate to be the bearer of such bad news for South Carolina real estate practitioners.
*Quicken Loans, Inc. v. Wilson, South Carolina Court of Appeals Opinion No. 5613, January 9, 2019.
Tags Amicus Brief, attorney preference statute, Carlton D. Robinson, Chicago Title, Chicago Title Insurance Company, Claire Manning, Claire T. Manning, Court of Appeals, CTIC SC, DOCA, James Martin Harvey Jr., legal representation, Quicken Loans, SC Code 37-10-102a, South Carolina Court of Appeals, South Carolina Department of Consumer Affairs, Title Source Inc.