Real estate closing attorneys in SC have strict liability to ensure the conveyance of good and marketable title – right? NO. Johnson v. Alexander (2014 WL 1047112).
THE QUICK SKINNY. Johnson (client) hires attorney Inglese to close a real estate transaction in North Charleston. Inglese has a scheduling conflict and passes the ball to attorney Alexander. Alexander pays Inglese for a title examination that had been conducted by yet another attorney, Feeley. In conducting the title examination, Feeley overlooked delinquent taxes which were in the public record. Soon after purchasing the property at a closing which was supervised by Alexander, the Charleston County delinquent tax collector seizes and sells the property. Needless to say, the client was not happy and sued both Alexander and Inglese.
The trial court granted partial summary judgment against Alexander finding that Alexander breached his duties to the client as a matter of law by closing the transaction without ensuring that good and marketable title had been conveyed. Sounds simple so far, right? Not so fast, says the South Carolina Court of Appeals.
In analyzing the situation, the Court first reminds us that the duty of the attorney is to render services with the same degree of care, skill and learning as would be expected of a reasonable and competent attorney under similar circumstances. In the end, attorneys are liable for their breaches of this duty – ie. their negligence. Thus, the issue in the case appeared to be whether the closing attorney was negligent in failing to identify the delinquent taxes prior to closing. However, the real issue in the case shifted to whether the closing attorney was negligent in relying on the title search conducted by the attorney who examined the title (an issue for which there was no factual record and no finding of the court).
In reversing the partial grant of summary judgment, the Court found that there remained genuine issues of material fact as it relates to the agency relationship between the closing attorney and the title examination attorney. The Court also found that genuine issues of fact existed with regard to the reasonableness of the closing attorney’s reliance on the work of the title examination attorney. In other words, it is not as simple as there was a defect in title and therefore the closing attorney is responsible. The negligence of the closing attorney must still be established.
Clearly, the attorney who actually examined title in this setting was negligent in failing to find delinquent taxes which were a part of the public record. It may ultimately be determined that the negligence of the examination attorney will be imputed to the closing attorney through agency principles, but that issue was not before the Court. Likewise, the facts may also prove that it was not reasonable for the closing attorney to have relied on the work of the examination attorney, as a result of which the closing attorney will be found liable for his own negligence. These issues were remanded for trial.
THE BOTTOM LINE: A closing attorney is not strictly liable just because clear and marketable title did not convey. Just as in other settings, the closing attorney is liable for his or her own acts of negligence – AND perhaps for the negligent acts of the agents who assist them in the closing – but on that note, we will have to wait and see.
ON A RELATED NOTE: Another interesting issue which was not before the court in Johnson is whether the duty to ensure marketable title in a real estate closing is a non-delegable duty. Many decisions from other jurisdictions recognize the non-delegable duties of attorneys in other settings. For example, the duty of loyalty which attorneys owe their clients is typically considered non-delegable. The duty to ensure proper service is made on a defendant has been held by other jurisdictions to be non-delegable (ie. don’t blame the process server). Also, in signing a pleading filed with the court, other jurisdictions have addressed the non-delegable duty of the attorney to make reasonable inquiry to ensure that the pleading is legally and factually responsible. If it is ultimately the duty of the closing attorney to ensure that good and marketable title has been conveyed, shouldn’t that duty likewise be non-delegable?