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Blog Posts Tagged "south carolina supreme court"

South Carolina Supreme Court Sides with Innovation in Real Estate Lending Law

A strongly worded decision from the South Carolina Supreme Court has surprised many real estate lawyers and lenders by firmly validating a new competitor that has become a gamechanger in the marketplace.

The case Boone v. Quicken Loans centered on whether internet-based residential refinance closings by Quicken Loans and Title Source constituted the unauthorized practice of law.

South Carolina requires a lawyer to close residential real estate transactions, but laws vary in other states where lawyers may have limited involvement and professional title abstractors or a title insurance company are permitted to handle closings.

The five steps that South Carolina lawyers must supervise in a residential closing were established in the 1987 state Supreme Court case, State v. Buyer Services Company. Those steps where a lawyer must be involved meaningfully are document preparation, title search, closing, recording and disbursement.

But in its ruling, the state Supreme Court cited an earlier opinion that said its duty is to protect the public, not lawyers:

"[T]he policy of prohibiting laymen from practicing law is not for the purpose of creating a monopoly in the legal profession, nor for its protection, but to assure the public adequate protection in the pursuit of justice, by preventing the intrusion of incompetent and unlearned persons in the practice of law."

In the Quicken case, the high court found that lawyers were involved in the internet-based transactions and used their professional judgment in each step. The declaratory judgment reversed the special referee’s decision earlier that said no lawyer was involved in a way that protected the interests of the borrower.

The court noted the existence of significant federal regulations, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, Truth in Lending Act and Real Estate Settlement Procedures Act, which provide consumer protection. It said requiring more attorney involvement would not benefit the public or justify the increase in costs, which in turn could result in a reduction of consumer choice and access to affordable services.

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Creditors’ Rights Trump Ownership Restrictions in LLC Operating Agreements

A recent South Carolina Supreme Court decision affirms the supremacy of creditors’ foreclosure rights, and sounds a cautionary note for LLCs. The state’s high court said that LLCs can’t use an operating agreement to force a creditor to sell a distributional interest it obtained via judicial foreclosure. 

The ruling came in Levy v. Carolinian, LLC, a case involving an LLC that owns an oceanfront hotel. One of the members, who owned about a quarter of the LLC, found himself on the wrong end of a judgment for $2.5 million. Creditors obtained a charging order – essentially a lien – against their debtor’s distributional interest in the LLC. The creditors then foreclosed on its charging lien and purchased the member’s distributional interest at public auction. 

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Court Comes Down Hard On Bank That Didn’t Satisfy Open-Ended Mortgage in 90 Days

The South Carolina Supreme Court recently sent a clear message to banks: all mortgages – including those with a home equity line of credit (HELOC) – must be satisfied within 90 days of receiving a payoff. Banks that don't have a procedure for timely execution of payoffs where there is a line of credit should implement one immediately or risk certain liability.

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Guarantors Can’t Slow Down Foreclosures by Asking for a Jury Trial

One way for debtors to slow down the foreclosure process in South Carolina has been to file counterclaims and request a jury trial. For guarantors of bad loans, that door was closed in January, thanks to a decision by the South Carolina Supreme Court. In what banks should regard as a victory for creditors’ rights, the high court said that guarantors who have been included in a foreclosure action in order to seek a deficiency judgment do not have a right to a jury trial. 

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