IN THE MATTER OF BRECKENRIDGE, SC: Supreme Court 2016 – Google Scholar:
This case involves allegations that a lawyer failed to properly supervise the distribution of funds from an escrow account after the completion of a real estate closing. The lawyer essentially made a minor error in failing to properly reconcile the account, which then had a negative balance.
What is of more interest is the court’s concern that lawyers are in its words being used as “rubber stamps” in real estate closings. The court explained:
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.[11]In essence, Respondent was used as a rubber stamp[12] 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.
The case illustrates the pressures affecting lawyers who do real estate closings.
Edward X. Clinton, Jr.
Legal Ethics Lawyer 