Boone v. Quicken Loans, Inc.

• Decision Date: 19 July 2017
• Docket Number: Opinion No. 27727.
• Citation: 420 S.C. 452,803 S.E.2d 707
• Court: South Carolina Supreme Court
• Parties: Vance L. BOONE, Thelma Boone, Travis G. Messex, Theresa S. Messex, Brian Johnson, and Kelli Johnson, on behalf of themselves and all others similarly situated, Petitioners, v. QUICKEN LOANS, INC. and Title Source, Inc., Respondents.

420 S.C. 452

803 S.E.2d 707

Vance L. BOONE, Thelma Boone, Travis G. Messex, Theresa S. Messex, Brian Johnson, and Kelli Johnson, on behalf of themselves and all others similarly situated, Petitioners,

v.QUICKEN LOANS, INC. and Title Source, Inc., Respondents.

Opinion No. 27727.

Supreme Court of South Carolina.

Heard October 19, 2016

Filed July 19, 2017

Rehearing Denied September 13, 2017

Charles L. Dibble, of Dibble Law Offices, of Columbia, Steven W. Hamm, of Richardson Plowden & Robinson, P.A., of Columbia; C. Bradley Hutto, of Williams & Williams, of Orangeburg and Daniel Webster Williams, of Bedingfield & Williams, of Barnwell, for Petitioners/Respondents.

Benjamin Rush Smith, III, Allen Mattison Bogan, and Carmen Harper Thomas, all of Nelson Mullins Riley & Scarborough LLP, of Columbia, and Jeffrey B. Morganroth, of Morganroth & Morganroth, PLLC, of Birmingham, MI, pro hac vice, for Respondents/Petitioners.

JUSTICE KITTREDGE :

We accepted this declaratory judgment matter in our original jurisdiction to determine if Respondents/Petitioners Quicken Loans, Inc. (Quicken Loans) and Title Source, Inc. (Title Source) have engaged in the unauthorized practice of law (UPL).¹ In their complaint, Petitioners/Respondents Vance L. and Thelma Boone, Travis G. and Theresa S. Messex, and Brian and Kelli Johnson (collectively "Homeowners"), alleged the residential mortgage refinancing model implemented by Quicken Loans and Title Source in refinancing the Homeowners' mortgage loans constitutes UPL. In addition to seeking declaratory relief, Homeowners' complaint also sought class certification and requested class relief.²

We referred this matter to a Special Referee to take evidence and issue a report containing proposed findings of fact and recommendations to the Court regarding the UPL issue, as well as on the issues of class certification and class relief. Following an evidentiary proceeding during which the parties submitted extensive testimony and documentary evidence, the Special Referee issued a report proposing various factual findings and recommending this Court declare that Quicken Loans and Title Source engaged in UPL but opining that neither class certification nor class relief were appropriate under the circumstances. Quicken Loans and Title Source took exception to the Special Referee's proposed findings of fact and UPL recommendation. Homeowners took exception to Special Referee's recommendation that class certification and class relief were unwarranted under the circumstances.

We find the record in this case shows licensed South Carolina attorneys were involved at every critical step of these refinancing transactions, as required by our precedents. We also find that requiring more attorney involvement would not effectively further our stated goal of protecting the public from the dangers of UPL. We therefore respectfully reject the Special Referee's conclusion that Quicken Loans and Title Source committed UPL. Because we reject the finding of UPL, we need not address the parties' remaining exceptions, including Homeowners' request that we declare their mortgages void and certify this case as a class action.

I.

Quicken Loans is a nationwide online mortgage lender that provides, among other things, residential mortgage loan refinances. Prior to expanding into the South Carolina market, Quicken Loans engaged South Carolina attorneys—with expertise in real estate transactions and knowledgeable of our UPL jurisprudence—to review the Quicken Loans refinance procedure. After reviewing the procedure, the attorneys opined that the procedure would not constitute UPL, as evidenced by the sufficient involvement of a South Carolina lawyer at each critical step. Buoyed by the supporting opinions of South Carolina lawyers, Quicken Loans moved forward with offering residential mortgage loan refinance services to South Carolina borrowers.

Under the Quicken Loans refinance procedure, the borrowers have already purchased the property and are simply seeking a new mortgage loan (presumably with more favorable terms) to replace the existing loan. The process begins with a potential borrower completing a loan application, which is typically done online. Thereafter, the borrower speaks on the telephone with a licensed mortgage banker employed by Quicken Loans. Each borrower is informed that he or she has the right to select legal counsel to represent him or her in the transaction and asked whether he or she has a preference as to a specific attorney.³ If the borrower does not desire to use a particular attorney during the loan transaction, Quicken Loans engages Title Source, a nationwide provider of settlement services and title insurance, to provide the necessary settlement services. Title Source, in turn, subcontracts with various individuals and entities (including licensed South Carolina attorneys) to perform those various services in compliance with South Carolina law.

For the transactions at issue in this case, Title Source turned to a non-attorney abstractor (Abstractor) to perform a title search and prepare a title abstract. In each of these transactions, Title Source initiated the title search by ordering a title abstract from Abstractor via email for each particular parcel of property to be refinanced. The scope of each title search was directed by Title Source in the email ordering the search; for loan refinances, no transfer of ownership takes place, so the title search includes two years back from the relevant vesting deed. Upon receiving a title abstract order from Title Source, Abstractor determined the county in which the property is located, then traveled to the relevant county land records office to locate and photocopy the pertinent documents on record, such as deeds, mortgages, mortgage assignments, loan modifications, tax documents, and personal judgments against the borrower(s). Thereafter, Abstractor prepared an "abstract" or index of the documents pulled from the public records, scanned and uploaded the abstract sheet along with the documents themselves, and electronically transmitted both the abstract and supporting documents back to Title Source through a web portal.⁴

After Abstractor's reports were transmitted to Title Source through the web portal, Title Source subsequently digitally transmitted those reports to David Aylor, a South Carolina attorney, who personally reviewed the title abstract and accompanying documents. If appropriate, based on his review of the documents, Aylor used an electronic template to generate and digitally sign title review certificates, verifying that he had reviewed the title documents and that the property owners held fee simple title to the property they were seeking to refinance.⁵ Following receipt of the title certification, Title Source produced a title commitment, which it submitted to Quicken Loans.

Thereafter, Title Source and Quicken Loans coordinated to schedule the loan closings and prepare the closing package, including the HUD-1 settlement statement, note, mortgage, and closing instructions, which were reviewed by the closing attorney prior to closing. In reviewing the closing package documents, the closing attorney confirmed that the title work was certified by a South Carolina lawyer and that the closing documents were accurate and complied with the law, and if necessary, made corrections or refused to proceed with the closing until the discrepancies were resolved.

Thereafter, the closing attorneys met with the borrowers in person, explained the legal effect of the loan documents, answered any questions the borrowers had, and supervised the borrowers' execution of the legal instruments.

Once the closing was finished, the attorney returned the executed documents to Title Source, along with detailed instructions on recording certain documents and disbursing loan proceeds. Upon the disbursement of funds, Title Source provided each closing attorney with a closing ledger, which the closing attorney used to confirm that disbursement of the funds was done in accordance with the HUD-1 settlement statement. Following recordation in the proper county land records office, a certified copy of each recorded document is mailed to the closing lawyer for their review.

Notably, each of the attorneys involved throughout these challenged transactions testified that they maintained their independence and were not controlled by Quicken Loans or Title Source in the exercise of their professional judgments. Moreover, at the hearing before the Special Referee, William Higgins, an expert in ethical and professional responsibility issues associated with real estate transactions in South Carolina, opined that Quicken Loans and Title Source had developed an "efficient, automated, consumer-friendly method" and "they've done so in a way that includes direct and appropriate involvement of South Carolina licensed lawyers, and they've done it in a way that [ ] allows those lawyers to act independently that does not impinge on their professional responsibilities or their professional independence."

Nevertheless, at the conclusion of the evidentiary hearing, the Special Referee issued a report recommending this Court declare Respondents' conduct to be UPL and issue an injunction against Respondents conducting real estate refinance transactions in South Carolina. In so finding, the Special Referee focused on the proper issue, that is, whether the supervision by the South Carolina attorneys was sufficient and "meaningful."

Quicken Loans and Title Source take exception to the Special Referee's recommendation that the Court find they engaged in UPL and contend the Report and Recommendation misconstrued this Court's UPL precedents and omitted and ignored material facts demonstrating Respondents' compliance with the law and protection of South Carolina consumers. Conversely, the Homeowners urge this Court to adopt the Special Referee's finding that Quicken Loans and Title Source engaged in UPL; the Homeowners...