Unlicensed Lawyers and Undue Influence – Setting Aside Deed Rejected

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In a recent unpublished opinion, 2018 WL 679484,  the South Carolina Court of Appeals addressed the circumstances under which a deed prepared by an unlicensed attorney would be voided in a challenge that also involved claims of undue influence in the execution of the deed.  Briefly, the decedent (“Mother”) executed a deed to her home in favor of her daughter (“Daughter”), granting Daughter a remainder interest in the home, while reserving a life estate for Mother.  However, Daughter died first, and Daughter’s interest in the home devolved to her heirs (“Heirs”).  Mother then sued the Heirs to set aside the deed on the grounds of unilateral mistake and undue influence.   The Heirs answered and counterclaimed.   The matter proceeded to a jury trial, and the jury returned a verdict in favor of the Heirs.  During the appeal, Mother died, and another daughter was substituted as personal representative of Mother.  The Court of Appeals considered two issues on appeal.  First, whether the deed should be set aside because the attorney who prepared it was disbarred at the time he drafted and recorded the deed.  Second, the Court considered whether Mother had proven the elements of an undue influence claim.

The Court rejected Mother’s first argument, seeking to declare the deed void as a matter of law because it was prepared by an unlicensed attorney. Mother argued Matrix Financial Services Corp. v. Frazer and Wachovia Bank v. Coffey, aff’d as modified, 404 S.C. 421, 746 S.E.2d 35 (2013), prohibited  the Heirs from benefitting from a deed prepared by an unlicensed attorney.  The Court generally acknowledged these two cases held parties could not equitably benefit from their own misconduct.  In this appeal, the Court agreed the closing attorney was disbarred at the time of the deed’s recording.  However, because the evidence in the record showed neither Mother nor Daughter knew the closing attorney had been disbarred, the Court held Matrix and Coffey inapplicable to the facts of this case. 

The Court rejected Mother’s second argument, seeking to set aside the deed based on undue influence.  Mother argued the trial court should have granted her motion for directed verdict because Daughter enjoyed a fiduciary relationship with Mother at the time of the deed.  Initially, the Court agreed there was a fiduciary relationship between Mother and Daughter, which gave rise to a rebuttable presumption of an invalid deed under Middleton v. Suber, 300 S.C. 402, 405, 388 S.E.2d 639, 641 (1990).  Nevertheless, the Court found sufficient evidence to submit the claim to the jury.  A key witness testified Mother wanted Daughter to have the property after Mother died.   The same witness also testified, after Daughter died, Mother stated she wanted the Heirs to have the property after Mother died. Finally, the witness testified Mother never mentioned that Daughter pressured Mother to execute the deed.  Because the Heirs provided evidence that rebutted the presumption of invalidity of the deed, the Court affirmed the trial court’s submission of the cause of action to the jury.

While lawyers should not cite this unpublished opinion for precedential value, it does illustrate an important element in reviewing transactions – knowledge of the “guilty party.”  If defending present and future actions, parties can and should formulate an “innocent party” defense whenever possible.  Under circumstances like this, Lawyers should investigate and develop facts that show the party did not know the attorney was unlicensed, or were unaware a licensed attorney did not supervise the contested transaction.  After all, the party “seeking equity must come with clean hands”. 

Bruce Wallace practices with Nexsen Pruet’s business and consumer litigation group in Charleston. He represents a variety of banking and financial institutions in real estate litigation, commercial litigation, and mortgage foreclosures. He also represents insurers and corporate clients in bad faith and coverage issues, professional liability, business litigation (including disputes involving partnerships, limited liability companies, and closely held companies), and probate litigation matters (including trusts and estates).