According to Freddie Mac, average fixed mortgage rates remained at or near 4.00 percent for the past three weeks. The increasingly popular 15-year fixed rate mortgage averaged 3.31 percent for the week the week ending November 17, 2011.

A settlement statement may often times show a fee for a title examination or an abstract of title.  For purchasers unfamiliar with real property purchases, such a fee may create confusion. Many believe that determining the ownership of real estate simply involves “looking up the title” and finding a name.  However, the process is much more complex and often requires an attorney or his paralegal performing a title search and compiling an “abstract of title” a summary of the history of the title to a parcel showing all conveyances and encumbrances that have occurred regarding the property for a period of time.

Under South Carolina’s Recording Acts, subsequent purchasers or encumbrancers for value are protected against prior unrecorded instruments only if the subsequent purchaser (1) is without notice of the prior instrument and (2) records before the prior instrument is recorded.  See S.C. Code S.C. Code §§ 30-7-10, 30-9-30(A) and 30-9-40. (It should be noted, however, that an improperly indexed instrument does not serve as notice, S.C. Code Ann. § 39-9-40 (Supp. 2004), nor does mere possession of the real property, S.C. Code Ann. § 30-7-90 (1991).) As such, South Carolina is considered a “race-notice” state giving priority to documents recorded in the county records in the order in which they are recorded.  As such, an attorney must examine the “chain of title” to determine the true status of title.  The abstract is a summary of that chain after reviewing the records.

How long is the search?

Though some attorneys and title insurers have reduced their requisite search period to forty (40) years, especially for residential property, the traditional search period in South Carolina is sixty (60) years. Some title insurers have reduced their search period requirement for competitive however, opine that a 40-year search is appropriate based on South Carolina’s statute of limitations for real property actions, S.C. Code Ann. § 15-3-380. However, note that the statute does not run against remaindermen until the death of a life tenant, Curtis v. DesChamps, 290 S.C. 315, 350 S.E.2d 201 (Ct.App 1985), and does not apply to minors or persons that are insane, S.C. Code Ann. 15-3-370. Thus, traditionally, attorneys have reasoned that 60-year search is best practice in that it would extend the 40-year statute of limitations past the age of majority.

Obtaining a Legal Description

Title examinations are conducted in the Office of the Register of Deeds or Office of the Clerk of Court in the county in which the subject property is located. Before entering the R.O.D., one should have the name of the current owner and a legal description (metes and bounds or a lot number and reference to a recorded survey) of the property in hand.

Establishing the Chain

Once the examiner has the name of the current owner and a description of the subject property, he or she will then need to establish the ownership history of the property, from the present owner to the first within the search period. These linked segments of ownership are referred to as the “chain of title.” The first step in establishing the chain is to trace the property back through the “Grantee Index.” Though most R.O.D.’s now have computerized indexes and/or records, the systems vary widely and different records are maintained electronically. Some counties may have separate computers with separate indexes for deeds, mortgages and UCC financing statements.

The first step is to search the Grantee Index, divided into volumes alphabetically and chronologically, for the current owner. (Importantly, corporate grantees and other business entities are usually indexed separately.) Each entry will have a short description of the property for which it refers and, hopefully, the examiner will be able to match his or her legal description with one of those entries. Indexes contain inaccuracies, however, so always examine the deed to confirm that it concerns the subject property. The examiner will then continue to search the Grantee.

Search the index in reverse chronological order until reaching the first deed in the chain past the requisite search period. An alternative and often easier way to trace the chain back is to utilize the deed reference in the derivation clause in the deed. A derivation clause provides information about the deed into the grantor, usually including the date recorded and the book and page. All deeds and mortgages executed after July 1, 1976, must include a derivation clause to be recorded in the R.O.D., S.C. Code § 30-5-35.

Once the first link in the chain is found, the examiner will then “bring the chain forward,” to the present day utilizing the Grantor Index. The process may sound simple but an examiner will often encounter inaccurate indexing, inadequate legal descriptions, documents which are difficult to read and scriveners errors, etc. The list of conceivable issues is endless but the creative examiner may be able to cross-reference other public records in order to complete the chain.

Abstracting Links in the Chain

Each deed in the chain must be examined to ensure there are no defects in the conveyance. The following is a non-exclusive list of questions to ask:

• Does the deed indicate valid consideration?
• Are there errors in the legal description?
• Do the signatures match the grantor’s name exactly?
• Was the deed signed by an attorney-in-fact for the grantor? (If so, the relevant power of attorney should have been recorded and should be located and examined.)
• Are there two witnesses?
• Does the deed contain a correct probate or acknowledgment dated simultaneously with or after the deed?
• Does the habendum clause match the granting clause?
• What type of warranty is given (quitclaim, special warranty, limited warranty, or general warranty)?
• Does the deed contain any restrictions or exceptions?
• If the deed is dated prior to May, 1984 (when dower was abolished in South Carolina), does the deed contain a renunciation of dower if from an individual married male?
• Are there any indications of forgery (e.g., do all signatures look like they were signed by the same person)?

Although there are several approaches that an examiner may take in searching title, it is preferable to search each link in the chain separately. For each link, the examiner should search the Grantor/Grantee indexes for deeds out, easements, rights of way, restrictions, leases, assignments of rents and leases, or any other grantor or interest in land. The examiner should also search each plat in the chain of title and review them in conjunction with deeds and note any discrepancies.

Obtain any and all disclosed information contained in the deed to include plats and probate information.  Always note if a plat is not referenced by a book and page number and cannot be found by owner name.  Also note any metes and bounds descriptions to determine if it is consistent with the scope of the property search.

Estates

Examiners may find missing links in the chain at the R.O.D. The grantor may have died before conveying the property so the examiner should check the county probate records. Every estate filed in the probate records should be examined for defects and completeness.

On July 1, 1987, South Carolina passed the Probate Code which mandated the filing of deeds of distribution in the R.O.D. or clerk of court’s office. Though the Code made statutory the owner, S.C. Code Ann. 62-3-101, the Code also requires that a personal representative, upon settlement of the estate, execute a “deed of distribution” to be filed in the R.O.D. S.C. Code Ann. § 62-3-907(a). Though the Code provides protection for purchasers or lenders of value from a distributee who received a deed of distribution, S.C. Code Ann. § 62-3-910, examiners should still check the estate file.

Mortgages

Each link in the chain should also be checked for mortgages which have not been satisfied or cancelled or from which the subject property has not been released. Counties may have separate Mortgagor/Mortgagee Indexes organized alphabetically and chronologically. As with deeds, each relevant mortgage in the index must be examined to determine if it encumbers the subject property, along with all assignments, modifications, subordinations, etc. The examiner should attempt to locate a satisfaction for each mortgage found or a release of the subject property from the mortgage. Each satisfaction should be examined for proper execution and form, just as a deed.

UCC Financing Statements

UCC financing statements are effective for five years from the date of filing unless a continuation is filed before the lapse, § 36-9-515(a), and they are usually indexed separately in the R.O.D. 

State and Federal Tax Liens

State and federal tax liens constitute liens on the delinquent taxpayer’s property, however, they expire after ten years from the date of assessment.

Lis Pendens

Notices of lis pendens, recorded to warn person that property is the subject matter of litigation and may be attached to any judgment, must be filed within twenty (20) days of the commencement of the lawsuit. However, once a summons is published or served, the lis pendens constitutes notice for five (5) years from the date of filing. S.C. Code Ann. Thus, prudent practice would be to check lis pendens back six (6) years. A lis pendens may also be renewed and refiled if the litigation has not been completed within those five (5) years.

Judgments

South Carolina Code § 15-35-810 provides that “money” judgment liens on real estate continue for ten (10) years from the date of the final judgment. Federal judgments under the Fair Debt Collection Procedures Act (also filed in the county records) are enforceable for twenty (20) years and can be renewed for an additional period of twenty (20) years.

However, judgments for in rem actions, such as for quieting title, resolving boundary disputes, partition actions and foreclosures, may concern title to the property directly and never “expire.” Therefore, judgments must be examined for each owner in the chain of title for the entire search period.

Real Property Taxes and Miscellaneous Liens

County property tax records, usually found in the county’s treasurer’s office should be checked for ten (10) years. Unpaid assessments for municipal services, such as for road maintenance and water and sewer services may also ripen into liens on the real property by being filed with the R.O.D. A county may maintain records of hospital liens or liens placed by social services. Maintenance of such records is usually county specific and an examiner should inquire with an R.O.D. employee.

Think the language in your loan documents doesn’t matter? Think again.  In a recent foreclosure matter appealed to the South Carolina Court of Appeals, the foreclosure defendants requested relief from jury trial waiver language included in the loan documents arguing that the waiver was not “knowing and voluntary” (presumably because it was buried in the legalese that comprise loan documents and were not read).  The court denied their request for relief from the jury trial waiver stating that the language was “conspicuous and unambiguous” and that the documents were not “lengthy and the waivers contained therein [were] not buried withint he language of other provisions.”  The court said that by signing the documents, the borrowers were charged with having read them and cited case law holding that a person who signs a legal document cannot avoid the document by claiming not to have read it.

The court, however, did say that the defendants counterclaims which were based on circumstances surrounding the transaction, but not the transaction itself, were not subject to the jury trial waiver.

Opinion:  Wachovia Bank, NA v. Blackburn, No. 4874 (Ct. App. August 24, 2011)

Holdings:  The borrowers could not avoid jury trial waivers in the promissory note and guaranty signed by them since, by signing the documents, they were charged with having read their contents. However, the waivers did not apply to the borrower’s counterclaims since the counterclaims arose out of the alleged pre-sale misrepresentations and fraud of Wachovia and not out of the note. Therefore, the waivers are outside of the scope of the counterclaims.

Facts: William Blackburn, the borrower, delivered a promissory note to Wachovia Bank, N.A. to finance the purchase of investment property in a Georgetown County planned development. The note was secured by a mortgage on the property executed by William Blackburn, Judith Blackburn, Tammy Winner, and Watson Felder.  Judith Blackburn, Winner, and Felder also executed personal guaranties to secure the note. The note and each of the guaranties contained waiver of jury trial provisions in separate paragraphs with bold headers.

About two years later, Wachovia filed a foreclosure action against the Blackburns, Winner, and Felder.  In response, the Blackburns filed a second amended answer, counterclaim, cross-claim, and third-party complaint in which they asserted claims against Wachovia and several third-party defendants asserting counterclaims and that Wachovia partnered with the third-party defendants to promote and sell the property at a “high pressure” sales event which included a lottery.  According to the Blackburns, Wachovia and the third-party defendants defrauded buyers by artificially inflating property values and making misrepresentations regarding the construction of amenities in the development.  The Blackburns demanded a jury trial. 

Wachovia filed a motion to strike the Blackburns’ jury trial demand and refer the case to the master-in-equity arguing that the Blackburns waived their right to a jury trial in their loan documents.  The Blackburns argued that the waivers were unenforceable in that they were not knowing and voluntary, were unconscionable and the language of the waivers did not apply to their counterclaims.

The circuit court granted Wachovia’s motion, finding the jury trial waivers were clear and unambiguous and the Blackburns’ counterclaims were within the scope of the waivers.  The Blackburns appealed.

Lonon Law Firm is pleased to announce that Stephanie Blanton Munsey has joined the firm as a partner, enhancing and strengthening the firm’s expertise and capabilities in the areas of commercial real estate, insurance regulation and business law.

Stephanie began her legal career serving as Judicial Law Clerk to the Honorable Gary E. Clary, South Carolina Circuit Court At-Large. After her clerkship, she joined an esteemed law firm in Columbia, South Carolina, focused on commercial transactions and title insurance litigation, representing real estate developers throughout the Southeast and most title insurance companies licensed in South Carolina in the areas of claims, underwriting, and regulation.  In 2002, she became a partner at the firm, with a concentration on commercial real estate development and lending (including construction and development lending, permanent commercial finance and conduit loans) and related business law. 

After servicing as outside counsel for TransUnion National Title Insurance Company (formerly known as Atlantic Title Insurance Company (“TU National”)) for numerous years, in October 2003, Stephanie joined TU National as Director of Underwriting, later assuming the role of General Counsel for TU National wherein she also handled claims and regulatory matters. 

Within a year, Stephanie began leading TU National’s license expansion, converting a southeastern regional company with eleven (11) core states to a national contender.  Under her guidance, the National Association of Insurance Commissioners (“NAIC”) accepted TU National as a pilot project with the National Treatment & Coordination Working Group resulting in an additional 23 licenses within an 18-month period.  Additionally in 2005, Stephanie was instrumental in TU National’s parent company acquisition of a California title insurer and underwritten title company as a sister company to TU National, with the Form A application process completed and approved in seventy days.

Stephanie became President of USA Title Insurance Company (formerly known as State National Title Guaranty Company), a Louisiana domestic title insurer, in January 2008, in order to rehabilitate a dormant company in its regulatory capacity. Following, the regulatory rehabilitation, she expanded her regulatory parlous by working with Companion Life Insurance Company and Niagara Life and Health Insurance Company, both wholly-owned subsidiaries of Blue Cross Blue Shield of South Carolina, as Compliance Manager. At Companion Life Insurance Company, Stephanie expanded her knowledge of insurance regulation into various business lines including life, dental, vision, disability (short-term and long-term), and mini-medical specialty markets, while still working with state insurance regulators throughout the country. 

Stephanie is a native of Gaffney, South Carolina and recently returned to the South Carolina upstate to live in Campobello.  She holds a Bachelor of Arts in History from the University of South Carolina, and a Juris Doctor from the University of South Carolina School of Law.  She was admitted to the South Carolina Bar in January of 1997. 

She is a member of the American Bar Association, the South Carolina Bar Association, the Richland County Bar Association, the South Carolina Women Lawyer’s Association, the Palmetto Land Title Association, and most recently, joining the Spartanburg County Bar Association. Commencing in 2004, Stephanie has served on the Board of Directors for Palmetto Land Title Association, as the organization’s government liaison in relation to local, state, and national governmental issues; and President of the Association for the 2009-2010 term.