Inglese v. Beal

742 S.E.2d 687, 403 S.C. 290, 2013 WL 1830834, 2013 S.C. App. LEXIS 137

• Court: Court of Appeals of South Carolina
• Decided: May 1, 2013
• Docket: Appellate Case No. 2012-208307; No. 5123
• Status: Published

Opinions

FEW, C.J.

Mario Inglese, a lawyer, was retained to close a real estate transaction. Inglese failed to obtain a written release of a judgment hen of which he had actual knowledge, and as a result, a title insurance company was forced to pay the judgment creditor $10,000. The title insurance company sought reimbursement from Inglese, which he paid. Inglese then sued the seller — his client — for unjust enrichment and equitable indemnity. The circuit court granted summary judgment to the seller. We affirm.

I. Facts and Procedural History

In September 2006, Carl H. Beal Jr. entered into a contract to sell real property. The contract provided that Beal would deliver “marketable title ... free of encumbrances.” Because Beal is not an attorney, he hired Inglese to close the transaction. Inglese commissioned a title search and discovered a judgment lien against the property in excess of six million dollars.¹ Inglese claims he contacted the judgment creditor’s attorney, Russell S. Stemke, and reached an oral agreement with him regarding how the judgment lien would be resolved. According to Inglese, Stemke agreed to allow the net proceeds from the sale to be held in escrow on the condition the property would be released from the judgment lien, pending the outcome of the appeal in the defamation case. However, no such agreement was ever reduced to writing.

At the closing in November 2006, Inglese represented both Beal and the buyer. Beal executed an owner’s affidavit, which certified to the title insurance company that there were “no pending suits, proceedings, judgments, ... [or] liens” against him. However, this provision was crossed out and initialed by Inglese, not by Beal. Beal executed an affidavit of ownership, which required Beal to swear that “no judgment, decree or lien exist[ed] against [him], or against [his property], and no actions exist[ed] which may lead to such a judgment, decree or lien.” This provision was also crossed out and initialed by Inglese, but not by Beal. Beal claims Inglese took these actions without Beal’s knowledge.

In accordance with the alleged agreement, Inglese withheld the net proceeds of $28,940 at closing and listed that amount on the settlement statement at line 507 as “Escrow to Russell S. Stemke/Linda Erickson.” After the closing, however, Stemke denied he had an agreement with Inglese and refused to release the property from the judgment lien.

The buyer made a claim on the title insurance policy, and the insurance company paid the judgment creditor $10,000 to release the lien. The title insurance company then revoked Inglese’s status as an approved title insurance agent and filed a lawsuit against him. Inglese paid the title insurance company $10,000 to settle the lawsuit.

In December 2010, Inglese filed this lawsuit against Beal on the theories of unjust enrichment and equitable indemnity. As we mentioned, Beal was Inglese’s client. Beal filed a motion for summary judgment. In addition to claiming there was no issue of material fact as to either of Inglese’s causes of action, Beal asserted the voluntary payment doctrine and the doctrine of unclean hands as defenses. At the summary judgment hearing, Beal’s attorney argued “basically our attorney is suing us for what [the attorney] did,” “my client is not an attorney,” and “now there’s an argument ... that because Mr. Beal somehow benefitted from this mistake made by his attorney,” Beal must compensate his own attorney. The circuit court summarily granted the motion in open court, stating, “you blame Mr. Beal and Mr. Beal is not a lawyer. He can’t certify title---- The buck stops with the closing attorney.”

II. The Summary Judgment Ruling

Summary judgment is appropriate when “there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.” Rule 56(c), SCRCP.

A. The Role of an Attorney

We begin our discussion with an examination of the role of an attorney in a real estate transaction. In South Carolina, all real estate closings must be supervised by an attorney. Matrix Fin. Servs. Corp. v. Frazer, 394 S.C. 134, 138, 714 S.E.2d 532, 534 (2011). This requirement is based on the policy determination that the use of an attorney to close a real estate sale is necessary to protect the participants in the transaction and the public from the numerous things that can go wrong when transferring real estate. See State v. Buyers Serv. Co., 292 S.C. 426, 431, 357 S.E.2d 15, 18 (1987) (per curiam) (requiring real estate closings to be conducted by attorneys “for the protection of the public from the potentially severe economic and emotional consequences which may flow from erroneous advice given by persons untrained in the law”). As the supreme court stated in Buyers Service,

We are convinced that real estate and mortgage loan closings should be conducted only under the supervision of attorneys, who have the ability to furnish their clients legal advice should the need arise and fall under the regulatory rules of this court. Again, protection of the public is of paramount concern.

292 S.C. at 434, 357 S.E.2d at 19; see also Matrix, 394 S.C. at 140, 714 S.E.2d at 535 (stating “the presence of attorneys in real estate loan closings is for the protection of the public and that ‘protection of the public is of paramount concern’ in loan closings” (quoting Buyers Serv. Co., 292 S.C. at 434, 357 S.E.2d at 19)).

The attorney’s role pursuant to this policy, therefore, is to protect the participants in real estate transactions from the numerous potential problems that may arise. When an attorney is aware of such a potential problem, it is the responsibility of the attorney to ensure that the potential never materializes. One such problem is the existence of a judgment against the seller. A lien arises from the judgment, and if the lien is not released, the judgment creditor may foreclose against the buyer after the sale takes place. See Ducker v. Standard Supply Co., 280 S.C. 157, 158, 311 S.E.2d 728, 729 (1984) (“Under South Carolina law, a judgment represents a judicial declaration that a judgment debtor is personally indebted to a judgment creditor for a sum of money. A judgment may also establish a lien upon the real property of the debtor.”); see also S.C.Code Ann. § 30-7-10 (2007) (a properly recorded judgment lien on real property is valid against a purchaser of the property). In the specific context of a judgment lien against the property, the attorney-client relationship imposes on the attorney the fiduciary responsibility of protecting the client by getting the judgment lien released.

B. Unjust Enrichment Claim

Inglese first argues the circuit court erred in granting summary judgment on his unjust enrichment claim. We find Inglese failed as a matter of lavs? to establish the elements required to recover for unjust enrichment. Therefore, the circuit court was correct to grant summary judgment on this cause of action.

“A party may be unjustly enriched when it has and retains benefits or money which in justice and equity belong to another.” Dema v. Tenet Physician Servs.-Hilton Head, Inc., 383 S.C. 115, 123, 678 S.E.2d 430, 434 (2009). The remedy for unjust enrichment is restitution. See Sauner v. Pub. Serv. Auth. of S.C., 354 S.C. 397, 409, 581 S.E.2d 161, 167 (2003) (“Restitution is a remedy designed to prevent unjust enrichment.”). To recover restitution in the context of unjust enrichment, the plaintiff must show: (1) he conferred a non-gratuitous benefit on the defendant; (2) the defendant realized some value from the benefit; and (3) it would be inequitable for the defendant to retain the benefit without paying the plaintiff for its value. Campbell v. Robinson, 398 S.C. 12, 24, 726 S.E.2d 221, 228 (Ct.App.2012); Niggel Assocs., Inc. v. Polo’s of N. Myrtle Beach, Inc., 296 S.C. 530, 532, 374 S.E.2d 507, 509 (Ct.App.1988).

Inglese failed as a matter of law to establish any one of these elements. In fact, Inglese did not address the elements of unjust enrichment in the circuit court or in his briefs on appeal. Neither his initial brief to this court nor his reply brief refer to the elements of unjust enrichment even once. He simply argued there was no basis for summary judgment as to the defenses Beal asserted. Because we need not address the defenses if Inglese has failed to establish the elements of the cause of action, we address the elements.

As to the first element, Inglese did not confer a benefit on Beal. Instead, the title insurance company conferred a benefit on Beal when it paid the judgment creditor to release the lien. After that payment, the harm Inglese caused to Beal was mitigated as much as possible because the release extinguished any further liability Beal had with respect to the sale. Therefore, Inglese’s decision to settle the lawsuit against Inglese had no impact on Beal. Moreover, not just any benefit conferred meets the first element. Rather, the benefit must be non-gratuitous, either because it was conferred at Beal’s request or because the circumstances were such that Inglese could reasonably rely on Beal for repayment. Campbell, 398 S.C. at 24, 726 S.E.2d at 228 (citing Niggel Assocs., 296 S.C. at 532-33, 374 S.E.2d at 509). Inglese did not pay the insurance company at Beal’s request. He made the payment entirely in his own self-interest to settle a lawsuit. Also, a lawyer may not rely on his client for repayment in the event the lawyer incurs liability for the lawyer’s mistake in failing to protect the client. Because Inglese conferred no benefit on Beal, he failed to meet the first element as a matter of law.

As to the second and third elements, Inglese also failed as a matter of law. We have already discussed that Inglese conferred no benefit on Beal, and thus, Beal could not have realized any value from the non-existent benefit. Finally, there is absolutely nothing inequitable about Inglese’s inability to recover restitution from Beal. Beal was merely trying to sell a parcel of real estate, and he should have been able to rely on his lawyer to protect him from the adverse effects of the judgment. Accordingly, all of the inequity in this case falls on Beal.

C. Equitable Indemnity Claim

Inglese next argues the circuit court erred in granting summary judgment on his claim for equitable indemnity. We find this claim also fails as a matter of law, and thus the circuit court ruled correctly.

The right of equitable indemnity arises out of the relationship between the indemnity plaintiff and the indemnity defendant. “Traditionally, the courts have allowed equitable indemnity in cases of imputed fault or where some special relationship exists between the first and second parties.” Town of Winnsboro v. Wiedeman-Singleton, Inc., 308 S.C. 52, 57, 398 S.E.2d 500, 503 (Ct.App.1990) (Winnsboro I) aff'd, 307 S.C. 128, 414 S.E.2d 118 (1992). Under the doctrine of equitable indemnity,

a right of indemnity exists whenever the relation between the parties is such that either in law or in equity there is an obligation on one party to indemnify the other, as where one person is exposed to liability by the wrongful act of another in which he does not join.

Stuck v. Pioneer Logging Machinery, Inc., 279 S.C. 22, 24, 301 S.E.2d 552, 553 (1983). Generally, an indemnity plaintiff may recover damages from a defendant “where the wrongful act of the defendant has involved the [indemnity] plaintiff in litigation with others or placed him in such relation with others as makes it necessary to incur expense to protect his interest.” Addy v. Bolton, 257 S.C. 28, 33, 183 S.E.2d 708, 709 (1971) (citation and quotation marks omitted).

When a sufficient relationship between them exists, the indemnity plaintiff (Inglese) must prove the following elements to recover damages on an equitable indemnity claim: (1) the indemnity defendant (Beal) is at fault in causing the damages of the third party (the title insurance company); (2) the plaintiff has no fault for those damages; and (3) the plaintiff incurred expenses that were necessary to protect his interest in defending the third party’s claim. See Town of Winnsboro v. Wiedeman-Singleton, Inc., 307 S.C. 128, 132, 414 S.E.2d 118, 121 (1992) (defining a sufficient relationship for equitable indemnity); Addy, 257 S.C. at 33-34, 183 S.E.2d at 709-10 (describing the requirements for proving equitable indemnity); Walterboro Cmty. Hosp. v. Meacher, 392 S.C. 479, 485, 709 S.E.2d 71, 74 (Ct.App.2011) (stating the elements of equitable indemnity); Winnsboro I, 303 S.C. at 57-59, 398 S.E.2d at 503-04 (discussing what must be proven to recover for equitable indemnity).

As to the first element, the title insurance company’s damages resulted from the fact that the judgment lien was valid and enforceable against the buyer after the sale. In this regard, Beal did nothing wrongful. He was simply attempting to sell real estate and did the right thing by retaining an attorney to close the sale.

Instead, it was Inglese’s wrongful act in failing to resolve the lien that caused the title insurance company’s damages. Because Beal is not at fault in causing those damages, Inglese failed to establish the first element.

Inglese argues, however, that he meets the first element because Beal committed wrongful conduct that led to the judgment, and this misconduct “has involved [Inglese] in litigation with others or placed him in such relation with others as makes it necessary to incur expense to protect his interest.” See Addy, 257 S.C. at 33, 183 S.E.2d at 709. The argument misses the point of equitable indemnity. First, it was not Beal’s conduct that led to the judgment. See Erickson, 368 S.C. at 455-57, 629 S.E.2d at 659-60 (describing the conduct of Pat Beal leading to the judgment against her). Second, Pat Beal’s conduct and the resulting judgment merely created the situation giving rise to Inglese’s responsibility to protect his client. In other words, regardless of any misconduct resulting in a judgment and a lien against the property, Inglese was aware of the judgment lien and had a fiduciary responsibility to protect Beal from any adverse effect it may have on the real estate sale. Inglese cannot avoid this responsibility to protect Beal by claiming the judgment was Beal’s fault. Viewing the evidence in the light most favorable to Inglese, Beal is not at fault in causing the title insurance company’s damages. Therefore, Inglese failed as a matter of law to establish the first element.

Inglese also failed as a matter of law to establish the second element — whether he has no fault for the title insurance company’s damages. In many cases, the resolution of an underlying lawsuit resolves the second element of an equitable indemnity claim. For example, the jury’s determination in the underlying lawsuit of the indemnity plaintiffs fault will carry over to the indemnity lawsuit. See, e.g., Addy, 257 S.C. at 32, 183 S.E.2d at 709 (“The jury returned a verdict ... against the [indemnity defendant], thus exonerating the [indemnity plaintiff] of any liability.”). The underlying lawsuit did not resolve the second element here because Inglese settled the underlying lawsuit before any determination of his fault. This court recognized in Meacher that even though the indemnity plaintiff settled the underlying lawsuit, the “settlement alone does not preclude indemnification when there is ... evidence to support a finding of ... lack of fault by the indemnitee.” 392 S.C. at 487-88, 709 S.E.2d at 75.

In this case, there is no possibility, and certainly no evidence, that Inglese has no fault in causing the title insurance company’s damages. The title insurance company’s claim would not have arisen had Inglese satisfied his fiduciary duty to Beal and resolved the lien in writing. In addition to this duty to his client, Inglese had a duty to the title insurance company. The company’s lawsuit against Inglese was based on the allegation that Inglese breached that duty — by failing to resolve the lien in writing, by crossing out the representations that there were no pending judgments or liens against Beal, and by otherwise failing to disclose the judgment to the company. Ingiese’s decision to pay the title insurance company’s claim under these circumstances requires a finding that he cannot be “exonerated from any liability for those damages,” 392 S.C. at 485, 709 S.E.2d at 74, and thus that he was at fault in causing the company’s damages. Therefore, Inglese failed as a matter of law to satisfy the second element of equitable indemnity.

Inglese argues, however, that if there actually was an oral agreement to resolve the lien, the factfinder could determine he was without fault and thus he met the second element. He argues summary judgment should not have been granted on this element because there is a material issue of fact as to whether there was an oral agreement. We agree there is evidence in the record that Inglese reached an oral agreement to resolve the lien. We find, however, that the existence of this evidence does not create an issue of material fact.

Our state’s policy determination that a lawyer must supervise a real estate closing is based on the lawyer’s ability and responsibility to successfully prevent the very consequences Inglese permitted to occur. One of the primary purposes of a real estate closing is to bring finality to the transaction. In Brazell v. Windsor, 384 S.C. 512, 682 S.E.2d 824 (2009), our supreme court discussed the importance of this finality, stating, “Numerous legal documents are executed in a real estate transaction and several entities involved in the transaction, including the buyer, seller, lender, mortgage company, and title insurance company, rely on the finality of the closing.” 384 S.C. at 518, 682 S.E.2d at 827. A cloud on the title of the seller, such as the judgment lien in this case, and the risk that the cloud may pass to the buyer, is one of the reasons this finality is so important. The real estate closing is the last opportunity for the parties to bring finality to this issue and prevent the cloud on the title from passing to the buyer.

As we have discussed, the responsibility to bring this important finality to the issue falls on the lawyer retained to supervise the closing. If the closing is properly conducted, the lawyer enables finality and prevents future litigation. If the agreement Inglese claims he made with the judgment creditor did in fact exist, Inglese should have documented the agreement in writing and made the writing part of the closing. Had Inglese performed this task, he would have prevented all this from occurring. Inglese chose not to document the alleged agreement, however, and thus chose to rely on the hope that the judgment creditor would later agree to relinquish his interest in the judgment. This choice by Inglese is critical to our analysis of the second element — whether Inglese is without fault — because Inglese’s choice created the consequence he was retained to prevent. Inglese’s choice left Beal at risk of losing all the proceeds of the sale and left the buyer at risk of having to take legal action to remove the cloud from his title. These risks are representative of those the supreme court had in mind when it stated in Matrix and Buyers Service that “the presence of attorneys in real estate loan closings is for the protection of the public and that ‘protection of the public is of paramount concern’ in loan closings.” Matrix, 394 S.C. at 140, 714 S.E.2d at 535 (quoting Buyers Serv. Co., 292 S.C. at 434, 357 S.E.2d at 19).

We find that Inglese’s failure to protect Beal and the buyer from these risks resolves the second element of Inglese’s equitable indemnity claim as a matter of law. When a closing attorney representing the seller does not document in writing the resolution of a judgment lien on his client’s property as to which the attorney has actual knowledge, but instead relies only on an oral agreement with the judgment creditor, the attorney does so at his own risk.² When that risk materializes, as it did here, the possibility that the judgment creditor might later have acknowledged an oral agreement to resolve the lien, or that such an agreement might have been proven in subsequent litigation, is not a material fact. What is important is that the lawyer had a fiduciary duty to bring finality to the transaction, and failed. This failure cannot be excused, even if there was an oral agreement to resolve the lien. Thus, the lawyer is at fault in the transaction and cannot recover for equitable indemnity. As we stated in Meacher, “[t]he most important requirement for the finding of equitable indemnity is that the party seeking to be indemnified is adjudged without fault and the indemnifying party is the one at fault.” 392 S.C. at 486, 709 S.E.2d at 74.

D. Defenses

Inglese failed as a matter of law to establish any of the elements of either of his theories of recovery against Beal. It is unnecessary, therefore, that we address Beal’s defenses. See Futch v. McAllister Towing of Georgetown, Inc., 335 S.C. 598, 613, 518 S.E.2d 591, 598 (1999) (holding an appellate court need not address remaining issues when resolution of another issue disposes of the appeal).

III. Conclusion

The circuit court’s granting of summary judgment is AFFIRMED.

WILLIAMS, J., concurs.

1 . The judgment was entered against Pat Beal, presumably Beal's wife, in a defamation case brought by Linda Erickson. See generally Erickson v. Jones St. Publishers, L.L.C., 368 S.C. 444, 629 S.E.2d 653 (2006).

2 . This appeal does not present the question of whether Inglese's failure to obtain a written release of the judgment lien results in Inglese's liability to Beal as a matter of law. We address the consequences of Inglese’s failure only in the context of his lawsuit against his own client for equitable indemnity.