Leasing Enterprises, Inc. v. Livingston

Court of Appeals of South Carolina
363 S.E.2d 410, 294 S.C. 204 (1987)

ELI5:

Rule of Law:

A deed for the conveyance of real property in South Carolina is invalid against subsequent creditors of the grantor unless it is executed in the presence of two subscribing witnesses. The recording of a deed with only one witness is improper and does not provide constructive notice to third parties.

Facts:

Joe E. Livingston and his mother, Margaret Schlee, jointly owned approximately 37 acres of land in Oconee County, South Carolina.
On October 21, 1977, in California, Livingston executed a quitclaim deed to convey his interest in the South Carolina property to Schlee for the consideration of 'love and affection.'
The deed was executed in the presence of only one subscribing witness, Earl Schlee.
In 1980, Livingston entered into a Lease Purchase Agreement with Leasing Enterprises, Inc., for a forklift, representing in financial documents that he still owned a one-half interest in the Oconee County property.
Livingston subsequently failed to comply with the lease agreement.
On April 21, 1983, the quitclaim deed from 1977 was recorded in Oconee County.

Procedural Posture:

In November 1981, Leasing Enterprises, Inc. obtained a default judgment against Joe E. Livingston in a California court.
In May 1984, Leasing filed an action in the Court of Common Pleas for Oconee County, South Carolina, seeking to domesticate its foreign judgment and to set aside the conveyance from Livingston to his mother, Margaret Schlee.
Livingston was served but failed to appear and was held in default.
The case was referred to a Master-in-Equity for a final judgment.
The Master-in-Equity found in favor of Leasing, ordering the deed from Livingston to Schlee to be canceled.
Margaret Schlee (appellant) appealed the Master's decision to the South Carolina Court of Appeals, where Leasing (respondent) sought affirmance.

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Issue:

Is a deed conveying South Carolina real estate, which is executed with only one witness, valid against a subsequent creditor of the grantor, even if the deed has been recorded?

Opinions:

Majority - Cureton, J.

No. A deed conveying South Carolina real estate that is executed with only one witness is not valid against a subsequent creditor of the grantor. The court reasoned that the law of the situs, South Carolina, governs the validity of a conveyance of real property located there. Under South Carolina statute and longstanding precedent (Craig v. Pinson), a deed must be subscribed by two or more credible witnesses to be valid for conveying a freehold interest. While a deed with a witness defect may be valid as between the original parties (e.g., Livingston and Schlee), it is not valid against a third party like Leasing, a subsequent creditor. For a transfer to be effective against third parties without actual notice, it must be properly recorded. Because the deed was facially defective due to having only one witness, it was not entitled to be recorded. Therefore, its improper recording did not provide constructive notice to Leasing, and the conveyance cannot defeat Leasing's subsequent judgment lien.

Analysis:

This decision reaffirms the critical importance of strict compliance with statutory formalities for the conveyance of real property in South Carolina. The court clarifies that a defect in execution, such as the lack of a required witness, renders a deed invalid as to third parties, even if it is mistakenly accepted for recordation. This holding protects subsequent creditors and purchasers by ensuring that the public record can be relied upon, establishing that a facially defective instrument provides no constructive notice. The case serves as a stark warning to practitioners that execution formalities are not mere technicalities but are essential to the validity and priority of a conveyance against the claims of third parties.

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