Real estate attorneys can hand someone else the work involved in performing a title search, but they can’t hand off the liability if the search turns out to be faulty, the South Carolina Supreme Court has ruled.
The court decided July 29 that a Mount Pleasant attorney will be on the hook for the malpractice that resulted after another attorney failed to discover that a property had already been sold at a tax sale. The decision overrules an opinion by the state’s Court of Appeals, which had held that an attorney would only be liable for malpractice if his reliance on another attorney’s work was unreasonable.
The attorney, Stanley Alexander, was retained to close a real estate transaction in North Charleston after the client’s previous attorney had a scheduling conflict. The original closing attorney had hired Charleston attorney Charles M. Feeley to perform a title search on the property, and Alexander purchased Feeley’s title work, which indicated that all taxes due on the property had been paid.
In reality, however, the property had been sold at a tax sale almost a year earlier, meaning that the client, Amber Johnson, did not end up with valid title to the property. Johnson brought claims for malpractice, breach of fiduciary duty, and breach of contract against Alexander and against her original attorney, Mario Inglese of Charleston.
Charleston County Circuit Judge J.C. Nicholson granted Johnson’s motion for partial summary judgment on the question of Alexander’s liability. On appeal, however, the Court of Appeals reversed the ruling, finding that the proper issue was not whether the title search was performed negligently, but whether Alexander acted reasonably under the circumstances in relying on Feeley’s title search.
The Supreme Court then took up the case and decided that Nicholson had gotten it right after all. The justices ruled that the Court of Appeals had erroneously equated delegation of a task with delegation of the liability for any mistakes. Alexander had a duty to provide Johnson with clear title to the property, the court said, and he was responsible for that duty regardless of the manner in which he chose to carry it out.
“Certainly, Feeley’s negligence is the issue here, but that does not displace Alexander’s ultimate responsibility,” Justice Kaye Hearn wrote for a unanimous court. “While an attorney may delegate certain tasks to other attorneys or staff, it does not follow that the attorney’s professional decision to do so can change his liability to his client absent that client’s clear, counseled consent.”
Attorneys and clients could limit an attorney’s exposure to liability by explicitly agreeing to limit the scope of the attorney’s representation, Hearn wrote, but the Court of Appeals’ reasoning would effectively let an attorney independently limit the scope of his representation by delegating certain duties to others. The court ruled that attorneys should instead be bound by what their clients understand their responsibilities to be.
Justin Kahn and Wes Allison of the Kahn Law Firm in Charleston and Mary Leigh Arnold of Mount Pleasant represented Johnson. Kahn said that the court’s ruling would protect clients from the negligence of attorneys and their agents. Kahn analogized the case to a situation where an attorney asks her paralegal to file a complaint—if the paralegal made a mistake in such a situation, the attorney would ultimately be liable for it.
“If the lawyer hires somebody to perform a task central to the lawyer’s representation, then that lawyer is responsible for the negligence of the person they hire if that task is performed improperly. I think that’s just basic fiduciary responsibility,” Kahn said. “I don’t think a lawyer can simply evade responsibility by saying, ‘I gave it to somebody else and they’re usually pretty good.’”
The Supreme Court decided that based on the facts of the case, Nicholson properly granted summary judgment on Alexander’s liability for malpractice. At trial, Feeley had submitted an affidavit describing his usual procedure for conducting title searches, and said that if the records of the tax sale had been public, he would have discovered them. The Supreme Court held that that wasn’t sufficient to create a genuine factual dispute over whether Feeley was negligent in failing to discover the tax sale.
Joel Collins of Collins & Lacy in Columbia and Robert Goings of the Goings Law Firm in Columbia represented Alexander. Collins said he was disappointed with the court’s decision, adding that the opinion created something akin to a strict liability standard for closing attorneys. He noted that an attorney would have little ability to double-check an abstractor’s work without conducting the entire search anew.
“I think we’ve got a new standard that real estate lawyers need to be mindful of,” Collins said. “Real estate lawyers routinely use abstractors, and if you read this case carefully, [as an attorney] you say I rely on that abstract to my peril if he makes any mistakes. The very economical system we have now with abstractors doing that work and not charging a whole lot for it may have to change.”
The case now heads back to Charleston County Circuit Court for a determination of damages.
The seven-page decision is Johnson v. Alexander (Lawyers Weekly No. 010-089-15).
Follow David Donovan on Twitter @SCLWDonovan