“Scenarios” To (Almost) Insure You Will Need To Insure That Your Professional Liability Policy Is Current (Read At Your Own Peril) – Scenario No. 1

On October 30, 2008, I made an ethics presentation to our Anderson, South Carolina Inn of Court during which I presented 18 different “scenarios” of varying fact patterns regarding real-world issues encountered in family court litigation.  What remains fascinating to me, however, is that in the 6+ years following that presentation, I still continue to see (and to encounter in my mediations) those identical problems and pitfalls.  So I thought it might be interesting to share these “scenarios” with a wider range of family law attorneys to see whether and how you address them in your family law practices.  At the very least, I hope that some of you will find this informative (and maybe, at times, even helpful).  Here’s the first one:

Scenario No. 1:

The husband and wife are both represented by attorneys in their divorce action. You represent the wife. The parties have reached an agreement which is approved by the family court judge at their final, uncontested hearing. The judge signs the divorce decree which provides for a merger of the agreement into the decree.

The agreement provides, in part, that the parties will sell “by owner” a 20-acre tract of land and divide the net sales proceeds equally. This tract is titled solely in the husband’s name.  Aside from this “marital asset”, which is the most valuable one to the parties, the other marital assets were several bank accounts and the furnishings, all of which have already been divided between the parties prior to their final divorce hearing.

Several months after the final hearing the wife calls you to inform you that her best friend had just called her to inform her that the area newspaper had shown a property transfer from her ex-husband to some third party, and the wife wants you to find out how that could have happened without her knowledge. You have someone check the records at the RMC Office and you are told that the ex-husband did sell this 20-acre tract for $40,000.  In a semi-panic, you immediately contact the husband’s attorney wanting her to have the husband immediately deliver a certified check to your office for the wife’s 50% of these net proceeds, but the husband’s attorney calls you later in the day to tell you the husband informed her he had already spent all the money from the property sale.

To CYA, you immediately file a contempt of court action against the husband; the husband comes to court and is found in civil contempt by the family court judge and sentenced to 90 days at the detention center with a right to be purged of the sentence by the husband’s making the full payment to the wife within 7 days of the contempt hearing including paying your attorney’s fees within this 7-day “grace period”. The payment is never made, a bench warrant is subsequently issued, the husband serves his contempt sentence and is then released from detention. The wife, although she may be glad her ex-husband went to jail, wants her money and wants you to explain how that could have happened.

Are you in trouble?

The answer to this question is “probably” or, at best, “maybe”.

“Suggestions” to try and insure this never happens to you again:

During your initial interview process with your client (once the client has retained you), if the client is aware there is marital real estate titled solely in the name of the other spouse (or perhaps even jointly titled), you should always attach to, and file with, your pleadings (Summons and Complaint or Answer and Counterclaim) a “notice of pendency of action”( lis pendens) involving the affected real property.

South Carolina Code Ann. §20-3-670 (Supp.2008) states the following in part (regarding real property):

“(A)(1) In a proceeding under this article, either party may record a notice of the pendency of proceedings in the manner provided in civil actions generally, which has the same effect as a notice in civil actions. The rights and interests of each spouse in the other’s property created by this article are not effective against third parties:

(a) with regard to any parcel of real property in which an interest under this article is claimed until a Notice of Pendency of Action is filed as provided in Section 15-11-10 with the clerk of court of the county in which such parcel of real property is situated; …”. [Emphasis added]

Also, Rule 19, SCRFC, states the following:

“RULE 19. LIS PENDENS.  In domestic relations actions any party may record a notice of pendency of the proceeding under the circumstances and in the manner provided in other civil actions.”

Not only does this cited statute and the family court rule authorize the filing of a lis pendens, arguably the failure to file protects a third party good faith purchaser for value from having the property transfer set aside.

Also, and as additional protection, if your family court order – whether interlocutory or final – requires the payment of money or transfer of property to the other spouse, you should always file a “transcript of judgment” with the applicable Clerk’s Office, as authorized by South Carolina Code Ann. §20-3-670 (B)(1), utilizing the form created by South Carolina Code Ann. Section 20-3-680.

Good luck out there … and be careful.