Reprimand For Rubber Stamp

The South Carolina Supreme Court has publicly reprimanded an attorney

We now clarify that an attorney’s duty to oversee the disbursement of loan proceeds in a residential real estate transaction is nondelegable. To fulfill his or her duty, the attorney must ensure: (a) that he has control over the disbursement of loan proceeds; or (b) at a minimum, that he receives detailed verification that the disbursement was correct. In practice, an attorney may find that utilizing his own trust account and disbursing the funds himself provides the most effective means of fulfilling this duty. We stand by our decision in Richardson, however, and do not require that the funds must pass through the supervising attorney’s trust account. See id. Therefore, we also find an attorney’s verification of proper disbursement, via sufficient documentation or information received from the appropriate banking institution—in addition to the disbursement log itself—to be acceptable in fulfilling his duty to oversee the disbursement of funds.

In essence, Respondent was used as a rubber stamp for a non-lawyer, out-of-state organization with no office in South Carolina, whose involvement was not disclosed to Respondent’s clients. This Court has insisted on lawyer-directed real estate closings in order to protect the public. Respondent’s method of handling his client’s business provided no real protection to his clients and no attorney record of the transaction by which to verify the details of the closing if problems developed after closing.

Chief Justice Pleicones would not impose a sanction

I respectfully dissent. Through an error on the part of a title insurance company, the Office of Disciplinary Counsel became aware of a single closing wherein Respondent failed to explain the nature of a “net funding transaction” — to clients who admittedly sought and obtained a home mortgage refinance from their mortgage company, and who suffered no prejudice. In my opinion, these facts do not warrant a public reprimand. Moreover, nothing in this single instance justifies the modification of our holding in Richardson -declining to “specify the form [that attorney supervision of loan disbursements] must take . . . .” – in favor of adopting a non-delegable duty to oversee loan disbursements through “detailed verification” or through the receipt of “sufficient documentation or information” in addition to the disbursement log itself. The majority neither explains what this means nor how more oversight could have prevented the title company from issuing checks drawn on the wrong account.

(Mike Frisch)