the official publication of the American Land Title Association

~·:· :· · Happy New Year January 1974 A Message from the President

JANUARY, 1974

As we roll into the year 1974 with high hopes for recovering from the cataclysmic events of 1973, the nostalgic aura of Christmas is still with us. As the Spirit lingers, which one of us does not momentarily, at least, hearken back to his boyhood and its poignant memories, and in an orderly progression of thought, reiterate our philosophical acceptance of the differences between Then and Now?

Perhaps as we face a ponderous 1974, we might do well to recapture some of the spirit of adventure in which we reveled when, as youngsters, we pored deeply into the exploits of Sinbad the Sailor, Captain Ahab in Moby Dick, worthy men of the sea in Treasure Island, Mutiny on the Bounty, Two Years Before the Mast. Was there ever a tale of high adventure on the high seas in which a stalwart sea captain did not at some point give the confident order, "Steady as she goes, boys"? We might adopt this classic cliche and draw relevant analogies as we prepare to deal with the conduct of our business in the coming year. True, conditions are not the best and there are serious problems which none of us can ignore. Leaders in business and education and the professions have characterized their comments on our times with one word which appears repeatedly in every trade journal, business magazine, and professional publication- the word "uncertain." Let us acknowl­ edge the uncertainties, but let us also remember that it would be a mistake to underestimate our current economic capability, and our ability to hold steady until a new balance is restored to our national and inter­ national affairs.

In the meantime, we have work to do. We are in the midst of preparations for the Mid-Winter Conference, and I hope to see you all there. Our Association is the vehicle which will take us a very long way toward where we want to go, and our Association needs every one of us in there working.

Best wishes for your peace, happiness, and fulfillment in 1974.

Sincerely, U/e)d-C?. 0~~ Robert C. Dawson FIRST MAJOR "BREAK- THRfJfJfiH'' IN 25 YEARS IN REAl ESTATE TABlES! NEW INTEREST RATES INCLUDED

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Write todt1y for your complimenttlry copy (to Lending Institutions only) PROFESSIONAL PUBLISHING CORPORATION 55 MITCHELL BOULEVARD • SAN RAFAEL, CALIFORNIA 94903 ALTA, PLTA Testify Before Subcommittee on Housing

Representatives of ALTA and the Pennsyl­ vania Land Title Association appeared before the House Subcommittee on Hous­ ing December 5 in hearings on settlement charges and practices related to Subcom­ mittee consideration of housing and com­ munity development legislation. Shown from left in the upper photograph are ALTA Executive Vice President William J. Mc­ Auliffe. Jr.: Research Committee Chair­ man John E. Jensen. Chicago Title and Trust Company; President Robert C. Dawson, Lawyers Title Insurance Cor­ poration: and Federal Legislative Action Committee Chairman James G. Schmidt, Commonwealth Land Title Insurance Com ­ pany. In the lower photograph. Joseph J. Hurley. left. PLTA president, The Title Insurance Corporation of Pennsylvania. confers with Moses K. Rosenberg. PLTA executive vice president. who is associated with the Harrisburg law firm of McNees, Wallace & Nurick. Testimony of both as­ sociations favors the approach of H. R. 9989, a bill sponsored by Congressman Robert G. Stephens, Jr. (D -Ga .) and 16 other House Committee on Banking and Currency members from both sides of the aisle. which provides settlement anti­ abuse. disclosure and reform measures while repealing the existing federal au ­ thority to regulate settlement charges un­ der the Emergency Home Finance Act of 1970.

2 JANUARY 1974 1itle News the official publication of the American Land Title Association

Proceedings. 67th Annual Convention. Association Officers President . American Land Title Association. Robert C. Dawson Los Angeles. California yers Title Insurance Corporation Law General Sessions Richmond, Virginia Address of Welcome, S. M. Marcus 4 President-Elect President's Report, James 0. Hickman 5 Even Number Three Tries Harder, Edw in 0. Guthm an 6 Robert J. Jay Joint Title Plants: Progress and Problem; Land Title Abstract Co. Comments by James H. Vorhies 9 10 (Port Huron) Detroit, Michigan Comments by Louis Balocca Comments by Victor Gillett II by 0 . B. Taylor II Committee Comments Chairman, Finance TIPAC: Shaping Your Political Destiny, Francis O'Connor 12 Alvin W. Long Political Action: ow More Than Ever, Mrs. Lee Ann Elliott 12 Chicago Title and Trust Company Ratin g Bureau Perspective Comments by J. Mack Tarpley 14 Chicago, Illinois Comments by Moses K. Rosenberg 14 Comments by Dwight Shipley IS Treasurer Zoning Endorsement 43 Fred B. Fromhold Abstracters and Title Insurance Agents Section Land Title Insurance Company Commonwealth The Title Business- From A Woman's Viewpoint Philadelphia, Pennsylvania Comments by Mary C. Feindt 17 Comments by Betty Lynde 17 Chairman, Abstracters and Tille Comments by Phyllis Schnebelen 18 Insurance Agents Section Comments by R. Claire Wetherell 19 Philip D. McCulloch Title Insurance and Underwriters Section Hexter Fair Title Company Trends and Developments in Title In surance Claims, Jack L. Tickner 20 Dallas, Texas Condominiums, Clark F. Staves 22 NA IC Update, J. Mack Tarpley 24 and Materialmen's Lien Coverage and Mechanics' Chairman, Tille Insurance Comments by Ray E. Sweat 24 U nderwrilers Section Comments by Irving Morgenroth 28 Jr. 30 Richard H. Howlett Report of ALTA Standard Title In surance Forms Committee, Marvin C. Bowling, Title Insurance and Trust Company Election of Officers Los Angeles, Ca lifornia National Officers 32 Sec ti on Officers 32 Immediate Past President Workshop Session James 0. Hickman Workshop on Considerations Affecting Sale and / or Valuation of an Abstract or Title Plant Pioneer National Title Insurance Company Comments by harte' Jone' 33 Chicago, Illinois Comments by Thomas S. McDonald 33 Comments by John B. Wilkie 34 Comments by Otto Zerwick 34 Association Staff Comments by Ray Frohn 35 Executive Vice President Committee Reports William J . McAuliffe, Jr. Report of ALTA Federal Legislative Action Committee, James G. Schmidt 36 Report of National Conferen ce of ALTA and ABA, Alvin W. Long 3~ Director of Research Report of ALTA Liaison Committee with the Mortgage Bankers Association of America, Robert C. Bates 39 Michael B. Goodin Report of ALTA Research Committee, John E. Jensen 40 Report of ALTA Public Relations Committee, James W. Robinson 41 Director of Public Affairs ALTA Resolutions Co mmittee Report, Glenn Graff 43 Gary L. Garrity Departments A Message from the President In side Front Cover Manager Business Index to 1973 Title News Articles 45 David R. Mclaughlin State Association Corner 48 Names in the News 50 Association General Counsel Meeting Timetable 52 ALTA Educational Aids In side Back Cover Thomas S. Jackson Jackson, Laskey & Parkinson VOLUME 53, NUMBER I, 1974 1828 L Street, 1828 L Street, N.W. TITLE NEWS is published by American Land Title Association, Washington, D.C. ·20036 N. W., Washington, D.C., 20036; (phone) 202-296-3671 GARY L. GARRITY, Editor CAROL MATHES HALEY, Managing Editor

TITLE NEWS GENERAL SESSIONS

Address of Welcome

S.M. Marcus

President Board of Public Works, City of Los Angeles

Good morning, and welcome to the City of streets or sewers or storm drains or any provement standards and to provide addi­ Los Angeles. Mayor Tom Bradley wanted other such set of statistics that are im­ tional services into some areas. The city's very much to be here and personally observe portant in Los Angeles. The most important capital improvement program for the current the start of your convention. However, he is and most outstanding feature of our city is fiscal year is in excess of fifty million dollars. providing his dynamic leadership in so many the people who live in it. Consequently, Approximately one-third of this amount is new areas for our great city, and is presently there is a singleness of purpose at city used to acquire property for city projects. in Washington, that it is impossible for him hall to effect equity and bring about fair Without going into procedural details, Los to be here today. So he has asked me, one of' treatment for all residents. Gone is the un­ Angeles, currently, is processing about 500 his new commissioners in this new adminis­ spoken priority system under which trees in division-of-land maps a year, each of which tration, and as President of the Board of Westwood are trimmed before those in requires a title guarantee in some form. As Public Works, to welcome you to the nation's Watts, or when one section of the city sees the city acquires land in connection with third largest city and, we believe, most pro­ long delays between essential city services capital improvement projects, the city must gressive city. such as street sweeping, while another depend on private title companies to supply This city was founded before there was section gets almost overnight service. a substantial proportion of the necessary a United States of America. It began in In Los Angeles, the doctrine of imparti­ title reports. Last year, Los Angeles pur­ 1781 with a nucleus of II families near what ality is not debatable nor negotiable. As one chased about 1700 title reports from private is today Olvera Street, an area I am sure example, any contractor now getting a city title companies for public improvement you will wish to visit close to the present contract for $5,000 or more must ethnically projects. downtown area. In 1850, the new pueblo was balance his work force to equate fairly with Mayor Bradley, elected earlier this year by only four square Spanish leagues in size - the minority balance of the city's population. a predominantly white electorate, initiated 28 square miles. In 1870, there were 5,700 City investigators constantly check com­ many improvements for our local govern­ people living here, a population which rose pliance and wipe out job-discrimination ment, even as a councilman. Protection for to 50,000 by 1890. Today there are 2.8 hiring practices. The city has a standard the consumer was one of the most important. million people living in the 463 .7 square operating procedure, and fairness and equal Recently, a new ordinance called "Truth miles that make up Los Angeles. treatment to all citizens are at the top of the in Real Estate" began to protect the buyer The first settlers established their tiny list. by making him aware of what he is pur­ pueblo along the banks of the Los Angeles No great city can ever be said to be com­ chasing. During the first six months, the River and never dreamed that that river pleted. Failure to progress results in stag­ requirement is not mandatory, but voluntary. course would not meet all the future water nation, and cities that flourish , and grow After February 24, 1974, it becomes manda­ needs of Los Angeles. However, early in this quickly, can just as easily die. Not all the tory for the seller to provide basic infor­ century it was obvious that new water sources ghost towns in our nation surround aban­ mation to the buyer regarding zoning, legal had to be developed and it was done. Water, doned gold or silver mines. Some of our use and occupancy, and pending assessment today, comes from as far away as 250 miles major cities today, which placed too much liens. from the snow fields of the High Sierras and emphasis only on size, are certainly dying Much credit belongs to your organization from the Colorado River. So it was water now, if indeed, for all practical purposes for its assistance, for its progressive that enabled the city to grow and develop they are not already dead as viable popula­ thinking, and I hope you will continue to from a desert community into a major tion centers. support whatever measures are necessary to take the buyer out of the jungle of mis­ metropolis-today, the largest American The Board of Public Works, of which I city of the vast Pacific Basin. information and jeopardy when he or she have the honor to be President, is now start­ buys a piece of property. Los Angeles is a naturally arid area ing its second century of existence, and a This nation has focused attention on bounded on the south and west by the Pacific major goal is to assure that our city doesn't Los Angeles and Mayor Bradley's new ad­ Ocean. Two major mountain ranges, the die, that it does not confuse mere change ministration. We will not disappoint them. Santa Monica mountains and the Verdugo with real progress. One problem we work at Good things, and exciting things, are hap­ mountains, cut across the city separating every day is to assure that individual citi­ pening daily and you are in a city where the San Fernando Valley from the rest of zens are not lost sight of in city govern­ true equal opportunity for communities and the city. ment's daily relationship with the nearly individuals is not merely a campaign slogan The highest point in the city is almost a three million people it serves. or promise. If this is the dawn of a new mile above the beaches at the foot of the Your profession indirectly plays an im­ tomorrow, a new beginning for Los Angeles, Pacific Palisades. portant part in the processing of tract maps let it be the best. The land-use patterns in the city are by the city and helping with the orderly Again, on behalf of the Mayor, permit me characterized by clusters of high intensity control of development projects. Since you to extend his warmest welcome and best development (including skyscrapers) inter­ all have a specialized interest at this con­ wishes. May you have a most successful spersed by undeveloped land, neighborhoods vention, you will be interested to know that meeting and I hope you also have the leisure of single-family homes, and sections of low the Board of Public Works administers many time between meetings to avail yourselves density industrial development. One hun­ functions that affect the use and title of of all that this great city has to offer in the dred and thirty-three miles of freeways and property, particularly in subdivision and way of entertainment and recreation. a grid pattern of almost 7000 miles of' streets parcel map procedures. Thank you for bringing your 1973 Con­ and highways crisscross the city. As the older areas are more intensely vention to Los Angeles. I assure you, you But it is not the hundreds of miles of used , it becomes necessary to revise old im- come as honored guests.

4 JANUARY 1974 President's Report

James 0. Hickman

1972-73 President. American Land Title Association Senior Vice President, Pioneer National Title Insurance Company, Chicago, Illinois

I appreciate this opportunity to add an­ must become involved. It has been your in­ once again the whipping boy of the economy. other chapter to the continuing history of the volvement and your work with your legisla­ I know that I need not advise you that we are American Land Title Association. Our his­ tures that has allowed us to attain some de­ in a tight-money market. From visiting with tory has been replete in the past year with gree of success. you throughout the country, you have re­ tales of money crisis, new systems, legis­ The course of action that we have pursued ported a decline in orders in the past few lative woes, and I must report that this year's has been guided by our committee and fol ­ months. chapter will provide more of the same. lowed by the ALTA staff, headed by Bill During the Convention, we have on the Before I list these events, I would like to McAuliffe, with a big assist coming from program Dr. Julian H. Taylor, economist, pay tribute to our past leaders who have built Tom Jackson. Also vital in these matters has who will give his views on what we can ex­ the ALTA into its present position and been a special Ad hoc Committee under the pect on the money market. strength. guidance of Tom Finley. The state conventions that I have been I particularly commend their foresight On behalf of myself and the Association, privileged to attend have been most en­ in moving our headquarters to Washington, I would like to extend our appreciation to lightening as well as entertaining. The D.C. Today our Association, on a daily basis, these people for the outstanding work done. agendas have been varied. Certainly they is in contact with many departments on Besides the legislative activity on the indicate that our industry has interest in Capitol Hill. This, and by virtue of our national level, we are also witnessing much joint plant computers and all of the varied having a strong, capable staff, has allowed activity on the state level. I'm certain that new systems. us to keep abreast of the changing Washing­ insurers are aware of the impact that rating While we can view the matters that I have ton scene. bureaus and some rules and regulations is­ reported on this morning as problems, which During the Convention, you will receive a sued by some insurance commissioners have they are, we also must be cognizant that ours complete update on our federal legislative on the industry. As to the activity of state is a changing industry. Many of these same matters. legislatures at work, some examples that we types of problems of change confront us in As a recap, however, we still have on the have are as follows: our society today. And our measure of suc­ books as law the Emergency Home Finance The Code of North Carolina now pro­ cess will be measured on our ability to adapt Act of 1970. This act grants HUD the vides issuance of a title insurance poli­ and cope as they arise. The title industry has authority to set up standards for closing cy is prohibited unless an underwriter attained the status of being a highly pro­ costs. Presently, there are three bills pending first obtains an opinion of title from an fessional industry. Our Association has in Congress relating to closing costs. These attorney licensed to practice law in that never been in a stronger position. You the bills have been submitted by Senator Brock, state, who is not an employee of the members are showing greater interest in Senator Proxmire and Representative underwriter. working harder than ever before. Because of Stephens. I'm certain that you will be in­ In Texas, there was defeated a bill this, I can view our problems and our solu­ terested in our industry's position on these which would have permitted organiza­ tions with confidence. bills. tion and operation of title companies I regret that time doesn't permit me to The Association was disappointed in the without regulation of forms or rates by thank each of the committee chairmen and recent action taken by the Federal Home the Insurance Board. members that have served so well. I appre­ Loan Bank Board that permits service cor­ New Jersey is reported to be progressing ciate the officers of my company and my porations of federally chartered savings and on a title insurance code which is ex­ associate workers for their understanding for loan associations to engage in business as pected to include a prohibition against the time that this position entails. agents or brokers for title insurance com­ kickbacks. Also, in the new code, it is A special thank you to Bill McAuliffe panies, although the S & Ls were denied the reported that it contains a prohibition and his staff; they have always anticipated authority to serve as title insurance under­ of closings by title insurance companies. the needs and provided assistance for a writers. And so it goes across the land. In these course of action. We also still have in the wings the question days of our fast-moving society, our associa­ Pat and I have enjoyed the opportunity to whether the metric system will be adopted, tion cannot be complacent as to what is hap­ have visited your state conventions. You have and if so, if applicable to the title industry. pening in one particular locale, for the ac­ been wonderful hosts, and we will always In connection with the legislative scramble tion taken by one legislative body, or one cherish the line memories of these moments. that we have witnessed, our members have insurance commissioner can soon have reper­ It has been a pleasure to have had the oppor­ been most active. I know that our member­ cussions across the country. tunity to have served as your President and ship has come to the realization that they It appears that the housing industry is I thank you for this honor. Thank you.

TITLE NEWS 5 Even Number Three Tries Harder

Edwin 0. Guthman

National Editor, Los Angeles Times

Mr. Hickman, ladies and gentlemen, out some reference to that, but first, of House in the latter part of 1971 by Mr. thank you very much . I'm pleased to say it is course, I have to deal with the fact that I do Nixon's top aides and some of his assistants a real pleasure to be invited to come and stand before you as number three, on a on the Committee to Re-elect the President. speak to the American Land Title Associa­ special list of White House enemies who were These lists were kept in the office of Charles tion . I've had a long association with TI here singled out for special attention from a W. Colson then a special counsel to the in Los Angeles. I've known George Garber master list that contained names of 20 I in­ President. when he was in Seattle for many years from dividuals and the names of 18 separate or­ And among them was this special list of the time I was a little boy. Carl Ronning, the ganizations. twenty forwarded from Colson's office to auditor of TI is a long-time friend of mine When I mentioned that I was an enemy, Dean with this notation: and I go over there for lunch fairly often. you all laughed and there has been a lot of "Having studied the attached material Now, I've gone so many times, they don't joking about it. Everybody I meet con­ and evaluated the recommendations for charge me any more when I u se the auto­ gratulates me about it. It doesn't make any the discussed action, I believe that you matic shoe shining machine. I still have to difference where ·I go. You know I don't will find the list worthwhile for go pay for my lunch, but I'm hoping that may­ think everybody down at the title company status." be now that I have spoken to your organiza­ is a Democrat - there's a few Republicans And there I was following Arnold M. Picker, tion and have had a chance to say what I down there, and even they have come up and Director of United Artists Corporation in have on my mind, that perhaps they will said to me, "oh gosh, congratulations. That's New York, and Alexander E. Barkan, look with a little greater favor at the august really great." And I' ll tell you, as number National Director of the AFL & CIO's company on Spring Street. three, I' m not trying to be number two and Committee on political action. I'm not trying to be number one. Number three, Guthman, Ed, Managing three tries harder. I have Well, the number And even though I found myself in the Editor, Los Angeles Times. And below my to explain that, because I'm number three on company of some very distinguished Ameri­ name was this notation: the enemies list of the White House. cans, there was a Derrick Bock, the Presi­ Guthman- Former Kennedy aide who the Allen McGurk and the good people at the dent of Harvard, Robert McNamara, was a highly sophisticated hatchet man World Bank, James Watson title companies in your Association thought President of the against us in 1968. It is obvious he is the Joe you ought to get a good look at a real enemy the head of IBM, and Carol Channing, prime mover against the current Key I wouldn't have been surprised as you start your deliberations here. Namath, and Biscayne project. It is time to give him there. You know a few days before John Adams to see Rocco Siciliano's name on the message. died in 1826 hi s fellow townsmen in Quincy, Well maybe through the years, to have Massachusetts asked him to send them a been marked as an enemy by that crew in the Now it's bad enough to be on anybody's list; toast for the Fourth of July and his response White House, whether deserved or unde­ I don' t want to be on anybody's list and I was brief. He recommended that the patriots served, might become a badge of honor, but resent it. And I'm also puzzled. Really, I of Quincy drink to a simple sentiment­ I don't feel that congratulations are in order. don't know whether I'm more puzzled or Independence Forever. And old John Whether I had been on the list or not, I more resentful, but I'm very puzzled about Adams' toast echoing down through the would feel that of all the White House the notations beside my name. years seems quite appropriate these days. horrors, as former Attorney General John You know this list contained many mis­ I think that one of the bones of truth Mitchell described them, nothing was more takes. Enemy number fourteen was Dr. that has come out of Watergate with its sinister or more threatening than that list. Samuel M. Lambert who until recent retire­ disclosures of perjury, obstruction of justice And nothing was more revealing or more ment was executive secretary of the National and wiretapping and burglaries and suppres­ damaging to the Nixon Administration. Education Association. Lambert not only sion of dissent, preoccupation with the I' ll tell you why. Clark Clifford, former voted for President Nixon in the last elec­ highest level of our government with com­ Secretary of Defense, he was also on the list, tion, but had been asked by the Adminis­ piling enemies lists, is that we, the Ameri­ made what I believe was the real point about tration to suggest people for the various can people, were coming close to losing our the list. He said one of the first acts of a appointments, including that of U.S. Com­ independence. police state in gaining control· of a govern­ missioner of Education, but apparently, he There were a few pieces of masking tape ment is to list the names of persons for was executive secretary to the N EA and that on a door in the Watergate complex in Wash­ liquidation. automatically made him an enemy. ington that a night watchman spotted. They We have not got to that point yet. But Joe Namath was listed as playing for the led to crisis in our internal affairs, which here were people listed for retribution. New York Giants. is still going on and is far from being re­ Now consider for a moment that you were Now in my case, except for spelling my solved. Those few pieces of tape, leading to on that list. And the way things were going, name correctly and noting that I am a former the revelations of what our leaders were if you look at that list, really it's not so far Kennedy aid, everything else was inac­ doing and, perhaps, more important than ex­ fetched that any of you could have been on it. curate. posing their states of mind, have given us Had you known that the White House was I'm not the managing editor of the Los the opportunity to revive our democracy and keeping an enemies list, the effect would have Angeles Times; Frank Haven is and has been to reclaim our rights as free men and women. been chilling. Your independence as a law­ for many years. I've been the national editor And in the last analysis, that's not so much abiding citizen would have been considerably since 1965. what President Nixon does, or what the lessened. My responsibility is for the coverage of the courts do, or what the Watergate Committee Now to find out after the facts, so to speak, news in the United States, outside of does, but what we do and whether we are at the least it would leave you very uncom­ southern California; that includes our Wash­ worthy of those great traditions that we are fortable, even as in my case, you were not ington bureau. heirs to. aware that the government attempted to I did not take part any way whatsoever in And that will decide whether John Adams' harass you in any way. the 1968 Nixon-Humphrey campaign, so I toast will still be meaningful when our I learned that I was one of the President's don't know how I could have been a sophis­ children are our age. And that's what I want enemies when John Dean handed the Senate ticated hatchet man against the President. to talk about today and also I can't stand Watergate Committee a se ries of type­ I suppose I'm the only sophisticated hatchet these days as representative of the press with- written li sts furtively prepared in the White man ever to come out of Seattle, Washing-

6 JANUARY 1974 ton. Biscayne effort, in which we were not in­ thought that it would be a good idea if Tony But I'd like to know what caused that. volved at all. Ulasewicz, or some other White Hpuse pri­ What brought that on? Then, more impor­ I would have felt a lot better, I think, if vate eye probed into Monroe's personal life tant is the so-called Key Biscayne effort. the White House would have said that I was and think of it. Monroe has worked on Now, if I were to testify, I'd have to swear "obviously the prime mover behind the Son­ Capitol Hill for all these years without the that I don't know what that refers to. lay Prison story," rather than something slightest stain on his reputation. His crime The Times did not undertake any investi­ that we didn't have anything to do with . in the eyes of the White House was that he gation in Key Biscayne prior to the time the And finally, there is that sinister notation, worked for Senator Jackson, who was a po­ list was compiled; we have been interested "it's time to give him the message." Well tential candidate for the Democratic Presi­ in a little piece of property down in Orange what's the message? Harassment of my wife dential nomination. So he was marked for in­ County, in San Clemente, and we have and four children; an attempt to get my job; vestigation. I was slated to be given the looked into that from time to time, but we a tap on my telephone; burglary of my home; message. I don't think this is what we ex­ never looked into anything in Florida. We a breakin to rifle my office files; an audit pect from our government. It does smack of have never had anything remotely con­ of my income tax returns; an investigation a police state mentality. nected with a "Key Biscayne effort." of my personal life by Tony Ulasewicz that But, I think of crusty Paul Vi via, a colonel Now what I suspect is that the concern in jolly White House private eye? in the regiment I served in in World War II, the White House about a Key Biscayne effort Now the sad part of it is that any one of and he had a phrase which I think is particu­ referred to an investigation by three re­ those acts was possible, as we've learned larly fitting. When he found one of us out of porters of Newsday, a Long Island news­ from Watergate. But as I said, nothing line, he would chew us out unmercifully and paper, who looked into the Florida business happened; if the message was sent I didn't then he'd end by saying, "This is either activities of the President's friend, C. G. get it. But possibly the publication of the list blind stupidity or invincible ignorance!" (Bebe) Rebozzo in 1971. shed some light on a puzzling incident, a And we'd stand stiffly at attention and he'd Newsday is owned by the Times-Mirror, small incident which occurred last year. say, "alright is it stupidity?" "No sir." "Then which also owns the Times. John Ehrlichman, the former Presidential God Damn it, it must be ignorance!" and Now mistakenly, I think that the men who advisor for domestic affairs, and I are from then he'd turn and walk away. compiled the list might have thought that the Seattle. Although I was an investigative and I wish this list was a laughing matter. former Kennedy aide, and sophisticated political reporter up there for Seattle news­ When the list was made public, Colson in­ hatchet man in Los Angeles, was able to papers from 1945 to 1961, I never met sulted our intelligence by explaining that the instigate an investigation of Bebe Rebozzo Ehrlichman, although I did know his Uncle list was the counterpart of a friends' list, through Newsday. Ben, who was a prominent financier and which was terribly helpful to the White If that is the case, it shows how little Republican fund raiser. House social office. the White House knows about newspaper Last year, at the Republican Conven­ Reasonable people are more likely to be­ reporting, about Newsday, and about the tion in Miami Beach, John Ehrlichman was lieve John Dean's explanation. In a memo­ Los Angeles Times. having lunch with two Los Angeles Times randum to H.R. Halderman and to Ehrlich­ There's no way that I could have per­ reporters. I happened to eat in the same man informing them of the problems in­ suaded Newsday to do something that we restaurant and as I was walking out, our re­ volved in getting Enemies Enterprise off the would have wanted to do. If we had thought porters saw me and motioned me to come to ground he wrote: that there was something worth investi­ their table and they introduced me to Ehr­ "This memorandum addresses the mat­ gating in Florida, we would have done so lichman. And here's the way the conversa­ ter of how we can maximize the fact of ourselves. tion went as we shook hands: "You're from our incumbency in dealing with persons And except for ownership, there is no con­ Seattle aren't you?" And I said yes. "You known to be active in their opposition nection between the two papers. But if my left in 1961 to work for the Kennedys didn't of the Administration. Stated more suspicion is well founded, a question has to ya" And I said yes. And then he said: "Are bluntly, how can we use the available be asked; who in the White House would be you still working for them?" And I'll have to federal machinery to screw our political so concerned about Newsday's investigation tell you I was taken aback, and I finally enemies?" of Bebe Rebozzo? fumbled for an answer and I said: "well Now we have to ask ourselves how could Is it a visible part of what the London John, I'm not working for the Kennedys so many seemingly intelligent, well appear­ Sunday Times in writing about all this called now, but I'd be proud to be if either one of ing men engage in such blind stupidity and the tip of the iceberg of executive para­ them was alive." lawlessness? Those men who talked so much noia? And I have to give John Ehrlichman his about strict construction of the Constitu­ Of course, if I am correct, the references due now. I think he, like John Dean, may tion and who preached to us so often about calling for it shows that the White House was have read that list from Colson' s office and law and order. What has come through loud not concerned with what the Los Angeles that might explain the insensitivity of his and clear in the Watergate testimony is that Times was doing. We have fifteen skillful, remark; or maybe that was his way of giving so many of these said in effect that they aggressive reporters in Washington. They've me the message. were only following orders. The President's worked hard. They've worked to get at the I hope to find out some day, just to satis­ personal attorney said he had never done an truth during the Nixon Administration. But fy my curiosity, but besides being curious, I illegal act before. But over and over in ex­ no harder than they did during the Johnson have been left ill at ease. And if my wife and plaining why he undertook to participate in Administration to try to find out what our I were the kind of people who looked over a cloak and dagger scheme to hand over government was doing. our shoulders, I think it would have af­ thousands of dollars in cash to the Water­ In the process, our Washington reporters fected how we went about our lives. gate defendants he said: brought to public attention considerable in­ And besides being aware of that, I have "I was given a very important assign­ formation which the White House, under some pity for these men who drew up the list. ment and I carried it forward." both Democrats and Republicans, would They are high in the counsels of the govern­ No questions asked. have preferred the public not to know. ment, and yet they were spending their time White House staffer E. Howard Hunt, Jr. One article which I thought would really drawing up lists of enemies. in explaining why he falsified State Depart­ get to the Nixon White House detailed the And then, that was bad enough. But in the ment cables in an unsuccessful attempt to planning and execution of the November process they made many mistakes and they smear a dead President and engaged in bur­ 1970 raid to rescue American POW's from used atrocious judgment. glary, said: the Sontay prison in North Viet Nam. We I want to cite just one more example. "I was acting on the had information from a source that we Number ten on this list of twenty is Sterling orders of senior White House figures and my twenty-six couldn't ignore that when they ordered that Monroe, Jr. He's Senator Henry Jackson's years of service to the United raid, they knew the prisoners weren't there. Administrative Assistant. He's worked for States predisposed me to accept orders We investigated. We ran a story in early Jackson for fifteen years or more. He's an with­ out questions." 1971 which exposed the bungled intelligence able, conscientious senate assistant. Above procedures which meant that the mission all, he is a very decent man. And here's the And that is a problem. We elected an planners didn't have any good information notation that was beside Monroe's name: Administration which, while sneering at on whether Americans were kept at Sontay, "We should give him a try. Positive peace demonstrators and long-haired youth, or whether, if indeed, it was a prison. results would stick a pin in Jackson's raised to high office men who would ride But that article and others, which were white hat." roughshod on our basic rights and then ex­ published, apparently didn't concern the I think any reasonable interpretation of plain blindly: White House as much as some kind of Key that is that the White House operators "I was only following orders."

TITLE NEWS 7 dared to do first eye-witness account of the breakin. But these civil servants would have what they did. heard that before. it did not succeed. Now we've I want to point out that neither the Times is something to be greatly John Lawrence, our Washington bureau And I think it or the Post published any of the allegations Nobody apparently asked chief, spent a few hours in jail because he concerned about. which we did, that could not be checked out All kinds of stupid illegal refused to turn over a tape of a conversation any questions. by at least two independent sources. And done. If not in the name of the we had. Furthermore, and most important, things were doing this, and giving outlets to the leaks of of the United States, then in an the White House was denying every fresh President information from within the government, the mindless ruthlessness to secure his disclosure. almost , de­ press raised enough questions about Water­ re-election, no matter what the cost to the Now despite what you might believe Administra­ gate so that when the Watergate burglars country, or what the cost to law abiding spite what many people in the tion like to think, newspapermen do not get went to trial, a courageous federal judge was individuals. not satisfied with what he heard and saw in President, enemy of­ any pleasure in publishing stories which im­ In the name of the courtroom and he took the steps that Department plicate our White House in unsavory activi­ his fices were broken into. State broke the case wide open. cables were faked. All conversations in the ties. truth Now what is the meaning of Watergate? Oval Office were recorded. Telephones were What we're trying to do is get at the a free As the story continues to unfold, I despair tapped illegally. Political opponents were and that's a basic responsibility of essential ele­ when I hear high officials say "I was only sabotaged. The integrity of the FBI, the CIA press and a free society. It's an expression. following orders." We have to wonder when the Internal Revenue Service and other ment in preserving freedom of And it's your freedom of expression. we can be concerned about our youth and government agencies was compromised and the war, We need to be almost continually re­ people who were dissenting against undermined. to me, that we also have to be con­ to Re­ minded these days of something that I think tt seems The financing of the campaign cerned about the fact that we have raised a corrupted. was best expressed by one of our wisest feder­ elect the President was of people in our country who say they a massive effort al judges, the late Leonard Hand who said group And finally, there was to do things on the grounds that destruction that "the interest protected by the first are willing to obstruct justice with perjury, following orders. How far payments to si­ amendment presupposes that right conclu­ they are only of records and undercover they have followed those orders? How they would take the sions are more likely to be gathered out of a would lence seven men, so that far would Howard Hunt have gone? rap. multitude of tongues than through any kind Judge I share the feeling of Howard Simon, the Now, unfortunately, these are not figments of authoritarian selection." To many, be folly courageous managing editor of the Washing­ of someone's imagination and they are not Hand said "this is and always will ur all." ton Post. that the men closest to the Presi­ typical of the American political campaign. but we have staked upon it -o pro­ dent were evolving a unique notion of how They happened and regardless of what more And so we have the first amendment, of best to commemorate the bicentennial in the Watergate investigation turns up, or who viding for freedom of religion, freedom . They were going to repeal the Bill to have told the truth and who is speech, freedom of the press and the right of 1976 is proven of Rights. shown up as not telling the truth, these things the people peaceably to assemble to petition And as I reOect on what has happened, I have happened and we are all going to have the government for a redress of grievances. It have to conclude that these men either did to live with the consequences. is a declaration of a national policy in favor not understand what our country is all about And I have to say that when the Water­ of public discussion of all public questions. from or at least they had very little faith in our gate burglars were caught, I did not and It does not set the fourth estate apart rights. system. Rather they seemed to have felt that would not have believed that that incident society or give the press any special the they had to manipulate, subvert, misuse, the others that we later learned about were But in our system, what it does do is give or what is really still a very fragile not figments of the imagination. I believed press a responsibility not to accept govern­ abuse, probe and political and social experiment called de­ the President and his men were too smart to ment statements meekly, but to mocracy. have been behind the break-in, even though question and to dig for the truth and to dis­ Watergate and what it represents is no I had come not to trust their public state­ close it. . Whitehouse version of a panty raid as some ments totally. But that does not apply just to journalists you. people would have us believe. It was not "as When the break-in occurred, we treated It applies to Mr. Nixon and to all of American as applepie" as John Ehrlichman it first as a police story. There are, after We're all in this together. too told a nationwide television audience. It is all, roughly fifty burglaries daily in the It would be a mistake, however, to give too not something that every American political District of Columbia. Most go unreported much credit to the press and I think press for party has engaged in . It was no third-rate except in small type in a crime column in the much credit has been given to the s of the burglary, as the White House press secretary Washington Post. And of course, this bur­ the fact that the wider implication called it. And it was definitely not a patriotic glary was a little bit different. It was in the Watergate break-in ultimately were disclosed action taken in the interest of national headquarters of a national political party to the public. security. and the burglars were caught with sophis­ The enemies list, which started out as a ene­ And as we have come to learn, the break­ ticated electronic equipment. grand strategy for "screwing political , tailed in in the Watergate was the least of it. So it was more than passing interest, and mies" some real and many imaginary One way to look at it is the way George we followed it, but we didn't get into it off into Ad hoc instances of vindictiveness of the AFL looked at it. He said: actively until a few days later when it primarily because the White House could not Meany very bless the blunderers at Water­ known publicly, thanks to some per­ bend the career employees of the Internal "God became gate. If they hadn't been so clumsy, sistence on the part of two young Washington Revenue Service to its will. Even though could America would never have known about Post reporters, that the burglars had links the White House changed directors, it the Inter­ things like this." with Howard Hunt of the White House staff not, except in a few instances, get it wanted it A few pieces of masking tape. with Gordon Liddy of the Committee to nal Revenue Service to do what and And that I think, is the good part of it. Reelect the President. And at that point, we to do. 's men sought to This system is working, thanks to a diligent assigned two reporters of our Washington And when the President there was, as judge, courageous civil servants, a free press Bureau to the story. And ultimately, we had keep the lid on Watergate, our news­ and independent legislative branch of gov­ all fifteen reporters in Washington, and re­ Edward Epstein wrote recently in of the ernment. But, it seems to me there's a deeper Chicago, New York and Los An­ paper in an appraisal of press coverage porters in meaning. That is that we can never remain geles working to try to penetrate the official scandal, a revolt by career men and women and submissive when our government engages in shrouded the case. in the FBI, in the Department of Justice secrecy that lawlessness. And we can never condone that running down tips, some in other agencies of the government. This involved the end justifies the means. true, some false, trying to persuade reluctant These were the sources of the unprecedent­ so ve­ Justice Louis Brandeis responded eloquent­ men and women to talk, piecing together bits ed leaks that the White House denied about. ly, in support of that stand, and his words of information and running down many blind hemently and complained so bitterly careers be­ need no embellishment when he said in 1928 alleys. Civil servants were risking their what they in words that have central meaning today: And for several months, the Times, The cause they couldn't go along with "In a government of laws, existence of Washington Post, Time Magazine and News­ saw happening in our government. our re­ the government will be imperiled if it almost alone in disclosing the Now what the press did, what week were Post, fails to observe the law scrupulously. wider ramifications of the Watergate break­ porters and those of the Washington , was that had Our government is the potent, omni­ And it was very tough going. and Time and Newsweek, did in. and present teacher. For good or for ill it The Justice Department sought in one they not been out in the street probing doubtful that teaches the people by its example. Crime instance to prevent us from publishing the asking questions, it is very

JANUARY 1974 8 is contagious. If the government be­ improve our government on all levels, and to President. Had he lost, he would not have comes the law breaker, it breeds con­ strenghten our rights as free men and despaired, blamed or retreated but he would tempt for the law. It invites every man women, so that our children and their have fought on the best he could. to become a law unto himself. It invites children will live their lives in peace and And in either case, he would have called anarchy ...... " freedom. to us, as he so often did: What we need is a government of honor. . Robert Kennedy used to say: "Come my friends, Without it, our system cannot work. And "Above a ll , the spirit of youth is the 'Tis not too late to seek a newer world. that to me is what Watergate is all about. conviction of possibility: The knowledge We are now that strength, which in the Now in closing, and I've said several that we are not bound in chains of im­ old days moved earth and heaven, times in here that Watergate was not typical potence, and that with courage and That which we are, we are. of the American political system. I urge you energy and purpose we can build a bet­ One equal temper of heroic hearts. not to become cynical about politicians or ter nation, and attain a peaceful world." Made weak by time and fate, but strong about government because of Watergate. And to know anything about him, whether in will That's the easy way out. The harder and you agreed with him or disagreed with him, To strive, to seek, to find and not to better course is to stay in the arena, and is to know that had he lived, and won in yield." stand up for what you believe and work to 1968, he would have been a courageous Thank you very much.

Joint Trtle Plants: Progress and Problems

Comments by James H. Vorhies

Vice President. Security Title Insurance Co .. Los Angeles. California

This morning our discussion will center plant in our company since 1947, and to panies have access to. When we run onto a around joint title plant operations. I think date we have accumulated about three mil­ starter in one company that belongs to an­ our program indicates that we are to speak lion records in the general index file, that other, we have a point of contact that we on problems of progress and I sincerely hope we update every day, and we've accumulated call, plus a round-robin messenger service that we report more on progress than prob­ about 36 million records in the property four times a day to all nine companies, lems. index file. So when you work with a volume where we pick up the policies and deliver In introducing our subject this morning of 39 million records, it's nearly essential, or them, or copies of the policies, and we all I couldn't find anything more appropriate mandatory really, that you consider some share in the cost of the messenger service. than something I had read recently that was type of automated operation. Going beyond Los Angeles County, we written by Bob Dawson, who is President of Our company is operating with a com­ have a slightly different concept. We started Lawyers. This was an article that appeared pletely computerized title plant. We've been first in San Diego, by operating remotely as in the July 8th issue of the ALTA Title operating in this environment for the past I just described, and there our total general News; so, if I may, I'm going to quote ex­ three-and-a-half years, and we also operate index plant is on the computer and again we cerpts from that article which I consider with remote video terminals. We do offer are offering that service to those companies timely and appropriate, and I quote: this service to other companies in Los An­ who care to contract for a monthly fee. But, "The success of any business in indus­ geles County and currently have under con­ in addition, a new concept we are advancing try is directly related to creative, pro­ tract some companies that link into our data is to "go forward" only. To go back where gressive thinking. We must hold fast to base. They pay a monthly fee for using our most plants are hand posted, or any type of the sound business principles and the service, and they operate just as if they had posting to a lot book plant or the general ethical practices which have made our their own computer facility. If you were a index, the cost of creating a data base is industry great. And yet, thinking about customer observing them operate the video nearly prohibitive. So we have agreed that it new concepts, which will make our fu ­ terminals, and getting a property chain is best to freeze a plant as of a specific date ture even more impressive than our past print-out or a name print-out, you wouldn't and then proceed on the basis of sharing has been. And although our present know that the computer facility is not lo­ monthly operating costs on a "go forward" economic climate is a vital factor in cated on their premises. basis. determining success in any given enter­ I feel, and perhaps I'm prejudiced, but In San Diego, we have agreed that Security prise, it is not the only factor. Even in this has been an extremely successful oper­ Title would manage this facility which in­ the most adverse set of circumstances, ation. After getting started, and over-coming cludes data entry for about 1200 to 1500 there is always opportunity for achieve­ the barrier that a title plant service should documents per day. We will do all of the ment." not be sold or shared, is when Lou Balocca locating and the "arbing", the draftsman Now I would like to talk about California and others in the TRI Group and ourselves will be at that location, but they'll be a part and some of the things we're doing in Los started talking about further joint efforts, of the facility that is under the management Angeles County and what we're doing out­ and I think the starter exchange is one of the and control of Security Title. This means side the County of L.A. By comparison, I most significant things we have accomplishee another company coming in on the service, would imagine that Los Angeles County in Los Angeles. such as-well, any company for that matter probably has a larger volume of public docu­ Currently, there are nine companies that - will have two levels of searching, their ments than you'll find any place in the coun­ share in the exchange, and presently we have back plant first, and then the current plant try. We have been building an automated about 2 y, million starters which a ll com- which will be accessed through video termi-

TITLE NEWS 9 to implement it in Portland, Oregon, nals. The program is currently underway and of expense, and I think with some intelligent ning bring in two adjoining counties, as if we'll have six companies sharing thinking on the part of all of us, giving in and then it looks and Washington Counties. this type of service and cost. just a little and agreeing to get along, we Clackamas also entertaining the idea of imple­ This is being further extended into the certainly can cut our operating expenses." We're menting the system in Seattle and perhaps next largest county which is Orange County Another operation we are beginning to in Spokane, Washington. in Santa Ana. It is operating in Riverside; implement in California is similiar to the that my time is running out, and the it will be operating in San Bernadino, Ven­ "Dynacomp" operation and this is being I see purpose of our discussion this morning was tura and Santa Barbara later this year. managed by Title Insurance and Trust Com­ our experiences with you. We aren't And, again, it is a true sharing of the cost pany. We have a prototype operation in to share that any approach is the ideal ap­ for such an operation. It means posting the "Kern" County, Bakersfield, California, and saying or the right approach. But we wanted plant only once, and, again, I emphasize it is nearly identical to the "Dynacomp" proach know that these are some of the ways that we have overcome the grey area- the operation in Phoenix. We're hoping this can you to are doing business in various loca­ barrier of sharing our plants, and I agree be extended to other northern California that we and we hope that from this discussion with Lou that the real competition lies in counties, particularly into the Bay area and, tions, you can take back with you some business development. again, this is opened to any company that perhaps that will help your operation to be­ I believe we could sum up this type of cares to come in on the service, on a "go­ ideas come more efficient, stabilize your cost, and operation by quoting a remark I heard Jerry forward" basis, and freezing their back enjoy a better business as a result of what we Lawhun make recently: "A title plant is a plants. talking about. necessary evil, it's a lot of work, it's a lot Yesterday, we met on this and are plan- have been

Comments by

Louis Balocca

Manager, Division Title Operations, Title Insurance Company of Minnesota, Los Angeles, California

annual basis. a bit complex-but it's not; All too often our cntlcs point to the joint tive device in purchasing that material where It may sound extremely well. It works be­ title plant as the panacea, the remedy, for volume equates to either a lower price or and it works we've reached the epitome of a joint all of the problems which we, as members of higher quality. cause individual greed has been the title industry face, individually and col­ Though not all of our TRI brethren are title adventure; lectively. They forget, or ignore, the dramatic involved, we also have a combined drafting abandoned! TRI facilities, by the way, are respon­ (or even traumatic) escalation of the costs of activity, three of us cooperate in that venture. The manager. This one man main­ doing business affecting every facet of our It, too, is on site at our TRI facilities. sive to a TRI control over the entire operation and operation. Our computer is operated by an inde­ tains between the supervisors, the The joint title plant, or any other joint pendent computer facilities management acts as liaison . He attends all meet­ endeavor upon which we embark, can only firm. We have been very comfortable with officers, and the board level of the TRI strata. It's a be regarded as a defensive move, absolutely that company, which is independently profit ings at each the poor guy is respon­ necessary to our preservation and totally motivated. It's amazing how many things hellish job because but it pays well. directed to those few areas in which expenses can be quickly accomplished when profit is sible to five bosses, the joint plant philosophy be stabilized. the cudgel. In Los Angeles, can stone to almost vision­ This is the philosophy which cornerstones One might think that individual company has been the stepping Title Records, Incorporated, (or TRI as we loyalty or morale is s ubverted by putting ary arrangements. and Security Title and its call it) a joint activity the members of which five searching crews into one common facili­ The TRI group joint title adventurers entered into a starter are: ty; I can assure you such is not the case. Each about a year ago. It's worked ex­ California Land Title Company crew operates independently of the other exchange both groups. Prior to that First American Title Insurance and responds solely to the directions of each tremely well for move, TRI and Security Company through its affiliate, Los company's searching supervisor. very ,progressive discuss a joint data base Angeles Land Title Company The TRI group has devised ·an extremely Title sat down to We were both computerized, we Stewart Title Guaranty Company workable method of combined control. It take-off. same format, so why through its affiliate, West Coast functions this way: used virtually the We couldn't answer Title Company The five searching supervisors, each an duplicate a take-off. because logic dictated Lawyers Title Insurance Corporation employee of his respective company, meet on that question logically should only be one take-off and, and a monthly basis to discuss mutual problems that there logic prevailed; as a con­ Chicago Title Insurance Company and goals. needless to say, and the Security To go on to the mechanical, as opposed to The results of that meeting are brought to sequence the T~l group common take-off. the philosophical, our plant is completely th..: attention of what we call the TRI offi­ group make a success in the joint or combined activi­ computerized, using an IBM 370/135 as its cers' board. It is comprised of an operational The on ultimately led us to the basic work horse, IBM 3270 CRT terminal executive from each company. The officers' ties I just touched of a joint messenger approach. retrieval stations link each member directly board meets the day following the super­ consideration too, has been implemented and is oper­ to the computer. visors' meeting, again on a monthly basis. That, considerable success. Our computer, and our individual corpo­ Although the officers' board has some ating with specifically, and Cali­ rate searching components are located on limitations on its authority, it can either im­ In Los Angeles, generally, the industry has, I believe, one site; the rent is divided equally. We co­ plement or negate most of the matters di­ fornia, the real area of competition operate in the building and maintenance of rected to its consideration by the supervisors. realized that with our business development staff, an on-site map library and a covenants, con­ Then we have the final authority, the rests and our escrow officers­ ditions and restrictions library. In stead of TRI Board of Directors. It is composed of our title officers title plant. That's a hard pill five separate county recorder film libraries, senior executives from each company and is and not in the many an old title man, it we find that only an original and one copy presided over by the President of TRI; it to swallow for but once the pill has been in­ of the film fulfills our searching needs. meets quarterly. The presidency of TRI was for me, effect is rem arkably salutary. Too, our combined TRI muscle is an effec- normally rotates among the members on an gested, the

JANUARY 1974 10 Comments by

Victor W. Gillett

President, Stewart Title & Trust of Phoenix. Phoenix, Arizona

Phoenix is the county seat in Maricopa Dynacomp furnishes to each of the eight for ownership work . It's an advantage to County in Arizona. We have eleven title companies a history film which goes back have it for our philosophies of underwriting. companies operating there, and these com­ to approximately 1945, and this is a leased Our examiners and other title personnel are panies are very competitive in a very com­ copy of the old Lawyers' Title Plant. Please in our office under our control and super­ petitive area. For many years, it has been remember and keep in mind that we all con­ vision, which is important in these days of pretty hard for all eleven companies to agree tinue to have our own plants up to the date rising costs and expenses in our business. We on anything over there. We sit down and that we went into the joint plant. We also are able to sit there and manage our per­ fight at land title meetings, but this is the have the right at anytime to move out of sonnel properly because they're all under our environment in which our joint plant grew. the joint plant if we want to with a copy of roof. The county records about 1200 to 1600 docu­ the magnetic tapes. So we are furnished a The eight companies formed a corporation ments a day. All the title companies, all history film, which goes back to 1945. We called the Maricopa Title Service. Each com­ eleven, had their own title plants, all dif­ have a year-to-date tract book, which is pany has one vote. Each company has one ferent types, all different methods. the complete plant from January I, 1973 man on the Board. And we also provide one In July, 1967, a group was formed called through September of 1973. Then all eight person from each company who is a tech­ "Dynacomp", which is a separate profit companies are furnished daily, at seven nician and works with the Dynacomp people oriented independent corporation. An ex­ o'clock in the morning, a tract book that is on a Technical Committee. The Technical IBM man by the name of Buzz Flemming our month-to-date tract book and Gl. Now Committee meets once every month and and an ex-Lawyers' Title man, Bruce Came­ this is, in other words, all of the recordings irons out and refines new procedures and ron formed Dynacomp. So you had people that were filed in Maricopa County, yester­ works out problems that several of the com­ who were technically oriented in both title day, by 5:00p.m. panies may be having. We also have auto­ and computer oriented fields working to­ During the night the documents were matic bringdown so that when a company gether. And they worked out an arrangement merged with what was filed on the first day has an open order and somebody files a with Lawyers Title and two other companies of October, and we have furnished a brand federal tax lien or judgment, it's going to be in '67 to furnish a "take-orr· to three com­ new tract book at seven o'clock this morning thrown out and we're going to know about panies. with all the up to date data just as you would it and able to immediately get to clearing up Now, this was Dynacomp's first venture have in the old days posted them in long­ that defect in the title before closing. into providing computerized title informa­ hand. This is a computer generated tract Now, the only thing Dynacomp continues tion. They continued to refine and work on book. Yesterday's information was keyed to own is the program and the software and their programs to where in 1970 they ap­ into a disc, verified, then put on the mag­ each of the eight companies own the copies proached the rest of the companies in the netic tape. It was then during the night, of the plant. area. In the nineteen years that I've been in taken into an outside computer corporation This joint plant has stabilized our labor the title business, I've been a poster, chainer where they used an IBM 370-135 and it pre­ cost in maintaining the title plant. And this examiner and so forth in all different types pared our printed out tract book for seven is something in today's rising cost of labor. of plants. I've visited plants. I've visited the o'clock this morning. My company certainly feels that this is a joint plant here in Los Angeles and other Now, what is the advantage of this, as far good plant today. Its been very successful communities that have joint plants, and I as we're concerned? We, I think, because of for our area. I've heard no complaints from was sold on the Dynacomp system, and I'd the great competitiveness in our valley, all the other seven companies of the Dynacomp like to take a few minutes to tell you the wanted to maintain our own personnel in Service. I know that today it's good, to­ reasons why. our own offices, so that our customers all morrow there might be something better. We We looked at the Dynacomp System and feel that they're dealing with our company are never going to quit looking for progress. five other companies joined in together so and our plant; even though my plant is the Title people, by nature, have to be pushed to that we had a total of eight companies out same as seven other companies in the valley. look at new things. Tomorrow if there is of the eleven, using Dynacomp to furnish This is an advantage, I think. Also it's an something else that does a better job than the title information . advantage for us to have our own plant there Dynacomp system, we're going to look at it.

Comments by 0. B. Taylor. Jr.

Chairman of the Board, Mississippi Valley Title Insurance Company, Jackson, Mississippi I am going to try to relate to you this used to abstracts to some extent. for each other and we sort of lost some of morning a situation that was created in Being from a state where title information this feeling of what you might say competi­ Little Rock, Arkansas about two or three was obtained from the public records, it was tiveness. In other words, we began to realize years ago which is in the nature of a joint a long time before I learned much about that we were all human beings, that we were title plant situation. abstract plants. But as our company began all in business, so all of a sudden one day Now, I don't have to tell you people who to develop and spread out to other areas, the the people in the Standard Abstract Com­ are in this title business what a tremendous thought struck me immediately that when pany in Littl~ Rock said, why don't we just job it is to control your costs. Mississippi is you go into a place where there are two go in and pool our efforts and make a joint a state where we do not have to have title abstract plants, you have built-in an enor­ takeoff and operate a joint plant. Well, we plants because these are maintained by the mous amount of waste and duplication of said that looked like a pretty good idea. So recorder. There are three abstract plants in effort particularly on the input area of the it began to come to fruition by our renting the whole state of Mississippi. One special­ thing. a separate office for this operation and izes in just oil field business. We are able to We now operate in Birmingham, Mobile, moving our records into this office and their maintain a plant in Jackson because it is a Memphis and over in Little Rock. We have moving their records into this office. We large place and the lawyers have gotten out made some progress toward joint takeoff in took people off our payroll and put them on of the habit of going to the courthouse check­ all areas with the exception of Memphis and the payroll of the joint corporation which ing out the records. And then there is one Mobile. In Little Rock, through attendance was to operate this plant. They took people down in Gulfport, Mississippi, which is at Arkansas Land Title Conventions and off of their payroll and put them onto the able to stay in business because a lot of getting acquainted with people in the busi­ joint operation. We were able to let New Orleans go of people own land around the ness there where there were four abstract some space which we didn't need anymore, Gulfport and on the Gulf Coast and they are plants, we sort of began to have a respect so that just immediately there was some

TITLE NEWS II savings to both companies; and it operated Now, as a further development of that, we I would recommend to any of you folks, very well. now have gotten to the point where the two particularly if you' re in a place, a smaller Now, we had some of the usual difficul­ companies are almost merged, you might say. place where there are two or three or four ties, I guess, that anybody who goes into a The Standard Abstract of Little Rock is plants, or something like that, take time to thing like that has. Our biggest difficulty our agent in Little Rock and is doing a fine go to your competition and at least just sit was that we were using our punch card job for us. We have, in effect, leased our down and broach the idea to them, you system, but it was being operated by the peo­ records which used to be known as the Ar­ know, and see if it is possible for you to work ple in the other company who had been used kansas Abstract Company to them. We have it out. With the number of records increasing to a tract book system. We had to do some a rather complicated formula which we use daily, and we have to keep them all you shuffling of personnel, and we did run into to compute the lease rental, which leaves us know, with the difficulty in securing good a problem about the attitude that "my own in the same or better position we were when help, the rising salary scale all the time, it is way of doing things is better than anybody we were trying to operate independently. The just my firm opinion that unless we do take else's and nobody can tell me anything people who own that plant are Jack Camer­ these economy measures, a lot of folks are different." But we did some shifting of per­ on, Gerald Cathey and a boy named Ken not going to survive. So, I would recommend sonnel and we hired an extra fellow there Jones. They are all extremely fine gentlemen, to you that you talk to your competition and who kind of took charge of the whole thing, good title people, and we are very proud to see if you cannot do something to improve and it just worked out real beautifully. be associated with them. your own situation, if it's appropriate.

TIPAC: Shaping Your Political Destiny Francis E. O'Connor Chairman, Board of Trustees, Title Industry Political Action Commillee Senior Vice President, Chicago Title and Trust Company, Chicago Illinois

In politics, there is no such thing as an Effective candidate support requires politi­ zations as effective vehicles to communicate "off-season". cally knowledgeable people who keep up to their viewpoints to legislators in particular Our elected officials, at all levels, are in date on issues, candidates and campaign and the public in general. business throughout the year, every year. techniques. If sufficiently supported and AMPAC, the American Medical Political Most of the time, most of them are thinking financed, TIPAC will do this for the title Action Committee, has been a leader in this strongly about the next election. Conse­ industry. movement, and we are most fortunate in quently, there should be no "off-season" for In the eighteenth century, Samuel John­ having Mrs. Lee Ann Elliott, associate our people in the title industry who are con­ son stated, "A man should keep his friend­ executive director of AMPAC, which is cerned with what the government is doing ships in constant repair." It will be TIPAC's headquartered in Chicago, with us today. and how it will affect us. All of us, I am sure, function to keep in repair our friendships in Mrs. Elliott's counsel in the formative at this point in time realize that the land the Congress and hopefully, if we are suc­ stages of TIPAC has been invaluable, and I title industry needs a stronger voice in pre­ cessful, in the various state legislative would like to take this opportunity to pub­ senting its case to these elected officials. bodies. It also is designed, of course, to licly express our sincere appreciation for Jim Schmidt's report of the ALTA Feder­ increase our circle of such friends. As many all she has done on our behalf. al Legislative Action Committee, which was of you are aware, we are now in the impor­ I also thank Jim Hickman for giving me presented Monday morning by Bill Mc­ tant stage of seeking active financial assist­ the honor of making this official introduc­ Auliffe, and Tom Finley's report from Capi­ ance for TIPAC's activities. We can ensure tion. tol Hill, which will be presented later this the successful future of our industry only An economics graduate of the University morning, underline this need. through effective support of, and communi­ of Illinois, Mrs. Elliott worked in the Ameri­ At this very moment, matters crucial to the cation with, legislators. As I have said quite can Medical Association Bureau of Economic future of our industry are pending in the often, it is time for us in the title industry Research and Legi.slative Department be­ Congress and in state legislative bodies to act rather than to be acted upon. fore joining the AMPAC staff. Mrs. Elliott throughout the country. This demands that When you receive a request to become a has the distinction of being the first woman we organize our efforts so that our voice may member of TIPAC, I am confident that each member of the Public Affairs Committee of be heard by those having a vote on issues af­ of you will bear in mind that your contribu­ the U.S. Chamber of Commerce as well as fecting us so vitally. TIPAC which is the tion is an investment in the future of your being the first woman president of the Title Industry Political Action Committee, is industry. I urge you to inform your employ­ Chicago Public Affairs Group to which, in­ designed to do just that for us. ees and associates about TIPAC and encour­ cidentally, I belong. I certainly have been Now, how can TIPAC present our case age them to join. Our success, or failure, exposed to her tremendous work and effec­ most effectively? Simply by supporting with depends on you. tiveness in that area. financial contributions, the election of candi­ The political action movement, of course, I am certain that you will lind Mrs. dates whose views are acceptable to us in the is an integral part of our American heritage Elliott's discussion of political action and title business. But the organization of such and can be traced back to our revolutionary its crucial role in the future destiny of our support is a rather demanding task. Experi­ forefathers. More recently, major industries respective spheres of interest most in­ ence has shown that isolated efforts and one­ and professions have come to realize the teresting and in formative. shot programs just do not get results. value of establishing political action organi- It's a pleasure to present Mrs. Elliott. Political Action: Now More Than Ever Mrs. Lee Ann Elliott

Associate Executive Director American Medical Political Action Commillee, Chicago. Illinois

Congratulations, and welcome to the politi­ tunity to congratulate you for your commit­ problems for those who are taking their first cal action movement. On behalf of the Board ment to good government and for this bold step in coordinated political action. Today, of Directors of the American Medical Politi­ and imaginative step into creative politics. the television and newspapers provide a cal Action Committee let me take this oppor- The climate in America today presents ready-made excuse for every would-be dodger

12 JANUARY 1974 of c1v1c responsibility to use as his ulti­ fact, lighting with one hand tied behind congressional district where it belongs. It mate reason for inactivity. Of course, I refer its back. For it was lighting without the belongs to the doctors and their wives, and to the Watergate Hearings. But I also refer strong right hand of political action- of other medical volunteers at the grass roots to much more than that. I refer to political candidate support-against two-listed op­ level who work hard to elect the candidate. scandals from coast to coast at every govern­ position. But political action is only part of mental level and in both parties. As one of our lirst chairmen said, "Lobby­ AMPAC's program. The other phase of our I live in Illinois, and in Chicago, you have ing plus climate building minus political activity is what we call political education, to stand in line to get your political scandal action equals futility squared". and it is exactly that. Through brochures, on the front page. Since the Watergate Hear­ I do not want to leave you with the im­ lilms, and speeches, physicians and their ings began, we have sentenced a governor, pression that until the formation of AM PAC, wives are given the opportunity to learn several members of our legislature and sever­ physicians and their wives were not active how to spend their political hours more al members of our city council. And so many politically. As a matter of fact, they were wisely, and their political dollars more other public officials are under indictment, very active. But this activity lacked one wisely. Our educational materials include that it is scarcely newsworthy anymore. thing- identification. pamphlets and manuals on how to manage a But these things that are happening today, Until the formation of the PAC move­ campaign for the House of Representatives, or at least coming to light today, should not ment, most politicians felt that physicians how to evaluate a campaign, how to act as be our reason to avoid political action, but not only sat on their hands politically, but opinion makers, how to do political re­ our reason to become involved politically. sat on their political pocketbooks. search, and other practical, professional Politicians are realists. It was realistic of tools for physicians and their wives in a There are those who will sit idly by on the them to ask: "Why, when you seek our sup­ campaign. This part of our program is educa­ sidelines bemoaning the excesses, abuses and port in your time of legislative crisis, do you tional and is not financed through our volun­ inequities and by shrill denunciation, trans­ turn away in our time of political crisis? tary political account: It is financed through fer any personal involvement concerning Where are you when Congress adjourns and corporate contributions. politics in America today. the campaign begins?" Our political education program has been But more Americans, and hopefully all of The formation of AMPAC and the forma­ extremely successful and physicians and you here today, will use the avenues, oppor­ tion of state medical political action com­ their wives are active politically at every tunities, and possibilities unique to our mittees in all of the lifty states, the District level of a political campaign from coast to system to leap into the fray, and by your own of Columbia, and the Virgin Islands has coast. This part of our activity fully justifies dynamic action, help to bring forth positive brought identification to the political activi­ all the work that went into the creation of change in a time of flux. These things can ty of physicians and their wives. AM PAC. happen with your concern and your commit­ When we lirst began, we were often asked Elihu Root put it this way, "Politics is the ment. Problems can be viewed positively as how we decide who we will support and what practical expression of self-government and challenges; crises can be viewed optimistical­ philosophy we espouse. First of all, we have somebody must attend to it if we are to have ly as an opportunity for creative change. no statement of philosophy other than the self-government." Most of us have been too Just as in the physical sciences, politics general statement that we support candidates willing to let the somebody be somebody will not permit a vacuum. who believe in the free enterprise system and other than ourselves. We really can no If you and your like-minded friends fail constitutional government. We could have longer endure the luxury of being neutral to become involved in politics, these spots ceaseless arguments about philosophy, but and disinterested in politics. If for no other will be filled and decisions will be made for when it comes down to a choice between two reason, plain basic economic self-interest you by those who do not share your views or candidates in a congressional district, mem­ should motivate all of us to increase political your ideals. bers of the medical profession pretty much activity. So congratulations are in order and we agree on which candidate should be sup­ Certainly your profession as well as medi­ wish TIPAC every success. ported. It is the physicians and their wives cine is affected every day by governmental I'd like to tell you a little bit about the in the congressional district who decide what action, either locally, in the state or at the American Medical Political Action Commit­ candidates AMPAC will support. federal level. tee. Quite obviously AMPAC cannot support The reason for any type of political activi­ Let me begin by saying that AMPAC is candidates in all 435 races for the House of ty, is, of course, a legislative result. Only the the brain child of the American Medical Representatives or the 33 Senate races that most incredibly naive can believe that legis­ Association, and that the AMA, at least in are up for election every two years. Nor lation will be substantially affected by ap­ matters political, believes strongly in planned would we want to. We support neither sure peals to reason and logic. The type of legis­ par.en thood. winners or sure losers. We try to restrict our lation that will be enacted in the current The AMA's decision to form AMPAC was activity to the lifty per cent in the middle congress was substantially decided on elec­ not taken hastily. To the contrary, the AMA of the spectrum which may be marginal or tion day in November of 1972. The philoso­ and its appropriate committees decided to vulnerable for one reason or another. We try phy and the views of the men who were elec­ form AMPAC only after thorough study, to become involved in those races where ted on that day will influence and deter­ prolonged discussion, and a solid review of an addition of a few more dollars may spell mine the legislation which will be enacted past experience dating from the late 40's. the difference between victory and defeat. today. Those who would have a substantial AMPAC became official in 1961, and our The one thing we do not take into considera­ influence on legislation must become in­ lirst board meeting took place that October. tion when evaluating candidates is their volved politically, if they are to be effective. Like any parent, the AMA acknowledged political party. AMPAC is bipartisan and As one politician said so succinctly, "It is its offspring publicly. It lent us two-thirds of feels strongly that neither party is the sole necessary to make the candidate feel the its name, gave its full blessing, exercised its repository of virtue. heat, not see the light". parental duty of guardianship by appointing Our criteria for support begins with the Oliver Wendell Holmes once said, "It is the AMPAC Board of Directors, and gen­ degree of activity physicians and their wives required of a man that he should share the erously supported its off-spring with corpor­ in a congressional district are giving to the action and passion of his time at peril of ate dollars. candidate. We next want to know the politi­ being judged not to have lived". I like this cal history in the district. We examine the quotation because it says "get involved". Why AMPAC was formed is simple candidate's position of leadership- present That's why AMPAC was formed, that's why enough. AMPAC was badly needed. or potential. We look at his voter appeal, at TIPAC was formed. Through the AMA, the medical profession the caliber of his opponent, the adequacy of Since we are in California today, I'd like was conducting an effective legislative and particularly his to paraphrase California's Governor Ronald lobbying program at the federal level. his political organization, campaign manager, and whether his budget Reagan. He said, "If some among you fear Through state and county medical societies, is realistic. taking a stand because you are afraid of the same job was being done at the state and When it is decided that AMPAC will sup­ reprisals from customers, clients, or even municipal levels. port a specific candidate, we do not give the government, recognize that you are just feeding the crocodile, hoping he'll eat you In addition, a strong program of public money directly to the candidate. We send our last". education was working to build the climate money to the State Medical Political Action A republic is not something that once in­ for American Medicine with the general Committee that has requested the money, stituted, is sure to be perpetuated. It must public. and they, in turn give it to the physicians and their wives in the congressional district to be continuously earned. And it can only be But no matter how successful these pro­ give to the candidate. We insist that the earned if we work for it with our volunteer grams were, the medical profession was, in identification for this support remain at the hours and our volunteer dollars.

TITLE NEWS 13 Rating Bureau Perspective

Comments by J. Mack Tarpley. Moderator

Vice President, Chicago Title Insurance Company

Ladies and Gentlemen. The avowed pur­ the regulator, for the purposes of aiding and the state of bringing the body to work but pose of the panel today is to convince you abetting him in the discharge of his respon­ leaving the mind at home. that a Rating Bureau is more than a singing, sibilities to the people of his state. We believe we have people today, on the sewing, marching and chowder society. Now there's a little bit of indication that panel, who have had very close experience A rating bureau, actually, is a very im­ some people in our industry have been ap­ in the birth of rating bureaus, in the organ­ portant part of the regulatory processes in proaching rating bureaus sort of in an un­ ization of rating bureaus, and the discharge states in which provisions are in the statutes pregnant and semi-retired way. of their responsibility. They can tell you for a rating bureau. It has been said that a Now, unpregnant is defined by Webster as what their problems were, and maybe assist rating bureau, actually, becomes an arm of 'inept.' Semi-retired is defined by Tarpley as you in solving some of your problems.

Comments by

Moses K. Rosenberg

General Manager, Pennsylvania Land Title Rating Bureau, Harrisburg, Pennsylvania

I had a speech prepared for delivery here, that in making rates, due consideration shall know that approximately 85 per cent of our and I am tempted to demonstrate Mack's be given to past and prospective loss experi­ costs are in loss prevention in determining definition of someone who is semi-retired, ence, to exposure to loss, to underwriting and evaluating risks before we ever assume by just reading it to you, because I would practices and judgment, to the extent appro­ them. So that the only possible method for have liked to have left my brain outside and priate to past and prospective expenses, in­ us to determine how to set rates is on a rate not worry about what I am going to say. I cluding commissions paid to agents and of return basis. am however, dissuaded from doing that be­ applicants for title insurance, the expenses In discussing this theory, I want to just cause of some of the other things that have incurred by a title insurance company, to a quote a little bit from our most recent filing: been said from this podium before this, par­ reasonable margin of profit and contingen­ "The establishment of a proper structure of ticularly the good report from the statistical cies, and to all other related factors both rates for title insurance can best be carried committee and from the conversations in the within and outside of the Commonwealth. out through a two-stage process. In the first hall about what has gone on and also, be­ It continues, "Rates shall not be inade­ stage, the regulatory authority should look cause of a communique I have just received quate or unfairly discriminatory, nor shall into the capital employed in the title insur­ last week from Dr. Herbert Denenberg, Com­ rates be excessive. That is, such as to permit ance industry and determine what level of missioner of Insurance of Pennsylvania, in title insurance companies to earn a greater aggregate revenue is necessary if the insur­ response to a recent filing. But I would ven­ profit after payment of taxes upon all in­ ance industry is to retain and attract suffi­ ture that the most important reason I am not come than is necessary to enable them· to cient ·funds to provide · an adequate supply going to read that speech is that Mack earn over the years sufficient amounts to pay of title insurance services. In the second Tarpley told me not to. their actual expenses and losses arising in stage, the regulatory authority must consider The Pennsylvania Title Insurance Code the conduct of their title insurance business, the rate structure through which this re­ was enacted into law in 1963. Prior to that, including commissions paid, and the actual quired total revenue should be raised, giving the Title Insurance Industry was governed cost of maintaining a title plant plus a rea­ careful consideration to the relative burdens by the general insurance laws of Pennsyl­ sonable profit." which a particular rate structure places upon vania. Under the General Insurance laws of You will see that the Pennsylvania legis­ specific segments of the public. By employing Pennsylvania, the Pennsylvania Title Insur­ lature has cranked into the Act itself what this two-stage procedure, the regulator can ance Rating Bureau filed in 1953 and 1960 a is almost a definition and a compelling rea­ insure that his decisions taken in furtherance Manual of Rates under the old law. In 1969, son to determine title insurance rates on a of his obligation to protect the consuming we filed under the specific Title Insurance revenue or rate of return method. As a matter public do not conflict with his concomitant Law. This year we filed again under the of fact, the very nature of title insurance decisions in furtherance of his obligation to Title Insurance Law. We have never in mandates that title insurance be rated and maintain the viability of the industry." Pennsylvania in four filings come head on established on the basis of revenue or rate Pennsylvania is one of sixteen states that with the problem of how do you rate title of return. has a statute that has a specific rating meth­ insurance? We have never even discussed the We cannot say, nor can any regulator say, od for title insurance. Of the remaining 34 statutory provisions, (even though the Penn­ that a title insurance rating must be governed states plus the District of Columbia, thirty­ sylvania Act antedates the Model Title In­ on an actuarial basis; it is absolutely incapa­ five (35) of them have no specific rating surance Code by a year, it is similar to the ble of calculation on that basis. We are not method at all. Nineteen (19) of these 35, the Model Title Insurance Code) as to the proper a casualty company-we're not a casualty method of rating is included in the rating method for pricing of title insurance. business, we cannot be governed or regulated used for other types of insurance. Twenty­ For instance, the Pennsylvania Code says on the same basis as casualty business. We three (23) are excluded from rating from other

14 JANUARY 1974 types of insurance. And in three states, in­ for the past three years. reau. For instance, yo u've heard me read in cluding Pennsylvania, there is a provision in We have a three-year experience of a connection with the Pennsylvania rates, a the code itself, which states that smaller statistical plan that was engaged in and par­ reference to commissions. Fortunately, the insurances may be rated lower than cost and ticipated in by all of the licensed under­ Pennsylvania Title Insurance Rating Bureau the excess charged to larger insurances with­ writers in Pennsylvania; we have filed com­ eliminated the propriety of the payment of out considering these smaller rates unfairly posites of each year, and to support our any commissions in its filing. discriminatory. filing, this year, we prepared a composite This too is a part of a rating structure. In only six states, there is a method of of the three years of the statistical plans. We The payment of commissions, the payment setting a "risk" rate based on actuarial have recalculated them and have projected of any kind of inducement to anyone placing method plus cost of searches. them for th e new rates as to what we could title insurance, the definition of an agent, Which leads me to discuss "risk rate." expect. There is no set of statistics available which can be changed to avoid a proscrip­ In Pennsylvania we have completely elimi­ in all of the states that are comparable to tion against payment of commissions, all are nated from our filing those words, because those. appropriate elements to be considered in the they are meaningless. They are completely And, again , I urge the American Land rating process. false. It is not a "risk rate," it is an under­ Title Association, as an entity, to please do There are so many things that are matters writing fee, and I don't care if you call it a something to enable this organization, or an of policy of ALTA which normally would be euphemism or what, it is more accurate, alter ego, if counsel says it should be by a functions of a Rating Bureau. because there is no earthly way anyone can separate organization, to be a duly licensed, What I am really saying is, that we must determine that $3.00 or $3.50 a thousand is if necessary, statistic and fact collecting get our own house in order, we must arm a legitimate risk rate which implies based agency which will enable us to support our ourselves with the facts that are necessary on an actuarial method. rates and our presentation and rate filing for us to maintain a viable industry and a So, I would hope and urge all of the mem­ in any jurisdiction in the country. credible industry. bers here to urge their legislators to eliminate These things are vital, if we are to have We must do other things in addition to all any reference to this language, because it the credibility before state regulators and to of these things. For instance, in a filing, we leads to wrong conclusions and wrong meth­ be able to beat off the advances of those pro­ must prove we're not in violation of Phase ods of rating. posing federal regulation. We must be armed 4, for the moment; and at the time that we Some of the questions that have been with facts and we must be able to submit to filed, we had to file a legal opinion, we posed to the Pennsylvania Title In surance responsible state regulation. We cannot do it weren't in violation of the provisions of Rating Bureau by our Commissioner are as without hard numbers, and only we are capa­ Phase 3 1/z, and after the filing they came follows: ble of co llecting and collating those hard back and asked for more information as to To show your fair rate of return, we would numbers. Phase 4. like to see studies of rate of return on title Now, let's face it; a rating bureau does companies not incorporated in Pennsylvania. not only deal with numbers, because for the We must be, in effect, the arbiter of all our members We assume you are able to do this study numbers to be significant they have to relate activities, we must be statis­ through the American Title Association to a product, and the product is a policy or ticians, logicians, developer and dispenser of facility. an endorsement; it's all of the forms we use a philosophical concept governing the oper­ No so - American Land Title Association everyday. When we use these and we relate ation of the industry. We must be the Su­ preme facilities, some of the figures we heard this our rates to these forms, the forms them­ Court handing down opinions of the morning, are based on the Form Nines of selves become a part of the rate regulating legal justification of it and an economist developing all of the member underwriters. (I think I process. So that even the ALTA, when its and determining its justification. am accurate on that.) They are not based on Standard Forms Committee has a recom­ We must do all of the things to keep our the more explicit and comprehensive statisti­ mended form, is, in fact, performing a func­ industry prosperous and to keep public ac­ cal plan that has been developed by Ohio tion of a rating bureau. ceptance. and in which Pennsylvania had participated There are other functions of a Rating Bu- Thank you.

Comments by

Dwight Shipley

Ohio State Counsel, Lawyers Title Insurance Corporation. Columbus, Ohio

Ladies and Gentlemen. It is a privilege to consider that it was not until 1967 that we point, but necessary modifications had to be participate in this panel discussion of a had a title insurance chapter in the Ohio made to adapt it to existing Ohio law. subject that is likely to require attention from code. Until then, title insurance was recog­ Further major changes, deletions, and the title insurance industry for the remainder nized only by references in general insurance modifications were made prior to its intro­ of our working lives. Those of you who served statutes, which references had been inter­ duction, and during its progress through the your stint in the military will recall that after lineated by amendments from time to time legislature, all made necessary as part of the a training exercise or a combat operation a as title insurance began to be used in the inevitable process of compromise and trade­ critique was conducted. One of the reasons state, and as the need developed. off in order to produce a bill which could be for a critique was to identify and to articulate With a clear need for clarification of exist­ passed. Some of those compromises produced the "Lessons Learned" from the operation. ing statutes as they related to title insurance, difficulties later, but such changes appear to My assignment will be to bring to you and for more effective regulation on the state be inevitable as a part of the practical legis­ from the Ohio experience the lessons we level, industry spokesmen in 1964 and 1965 lative process if any grist at all is to come out have learned. To do that, it will be necessary began to suggest the need for a review of of the legislative mill. Even then, it required to recount brieny what has been done in insurance laws, with a view to preparing and work over 3 years and two General Assem­ order that you will have a background on submitting to the Ohio General Assembly a blies before the bill was passed. which to base an understanding of the prac­ title insurance code. While title insurance companies had been tical problems which you may encounter Working through a committee appointed under the general control and supervision of during the formation and first operations of by the Ohio Title Insurance Underwriters the Department of Insurance, it was not a Rating Bureau. Association, a proposed code was prepared. until the passage of Chapter 3953 ORC, ef­ Many of you will no doubt recognize yo ur The 1964 version of the ALTA Model Title fective December 12, 1967, that effective own situation in your home state when you Insurance Code was used as the starting control of the industry was given to the

TITLE NEWS 15 department. The passage of that chapter membership through direct work in the of information. While there have been some marked the first time, for example, that there Rating Bureau, and by the use of drafting suggestions that it is, perhaps, too sophis­ existed a requirement for mandatory filing committees. Preparation of and agreement ticated for our present needs, the answer is of policy forms. on the major policy forms was simplified, of that at the moment we do not know precisely But even with the passage of the title insur­ course, by the fact that this organization has what statistical information our industry will ance chapter there was, as yet, no specific long since taken the lead in promulgating need for the Regulator's requirements, nor requirement in the Ohio Insurance Code for standard forms. Without that prior effort to what needs the industry may have. Accord­ the filing of risk rates. It was not until draw upon, our task in Ohio would have ingly, it was the recommendation of Arthur amendments had been made in the general been enormously more formidable. The in­ D. Little, Inc., that the program be flexible rating bureau sections, effective January 14, dustry members pitched in and did accom­ enough to avoid the need for redesigning 1972, that filing of rates was required. plish miracles of a sort in some areas in a within the near future, with all the attendant Faced with that requirement, industry relatively short time, but it was done only costs connected with any such second effort, representatives immediately formed a Rating by the willing efforts of all concerned. and the program was prepared with that in Bureau and began the work necessary to The filing was made by the Rating Bureau, mind. comply with the statutory requirement. It is and supported by the consolidated statistical I want to emphasize that much of the hard gratifying that the members of the industry compilation which had been the pattern in work in developing the Statistical Plan was doing business in Ohio, almost without ex­ other states. Since the Ohio Department done by members of a special Industry Task ception, rallied to the call and joined the deemed that statistical data inadequate, and Force composed of computer experts, and Rating Bureau in order to participate in the faced with a dearth of available industry others with special knowledge of industry deliberations and to share the work load. statistical data, the Rating Bureau agreed statistical capabilities. The plan that was Some idea of the work involved in this phase with the Department to employ expert as­ evolved has the approval of that Industry is apparent when I tell you that in all more sistance to help it in preparing a statistical Task Force. than 40 working days in 1972 were used by data gathering plan in support of the rate The Task Force approach was also used the Rating Bureau to produce the initial filing. As a result, Arthur D. Little, Inc., of for the development of the Income and Ex­ filings. And most of those days were not Cambridge, Massachusetts, was retained to pense plan. An Accounting Task Force of measured by the usual quitting time. assist in the preparation of the plan. The experts from the accounting departments of Unfortunately, prior experience in other result will be in two parts: One plan relates member companies, working with , and under states proved not to be too helpful. Perhaps to gathering statistical data related to policy the guidance of personnel from Arthur D. time and the tides and the stars conspired, forms and rates; the other, to company in­ Little, Inc., put together an Income and because our time in Ohio came as consumer­ come and expenses as such income and ex­ Expense plan which provides the second part ism peaked, and during the clamor raised by penses are allocated to Ohio operations. of the apparatus needed to meet the statis­ Senator Proxmire and other voices equally With these developments, the administra­ tical requirements of the Ohio Department as ill-informed. The HU D study also ap­ tive and financial problems of the Rating of Insurance. peared on the horizon during that period. All Bureau became pressing. The Articles and Upon completion of those two plans, the of these factors had their influence on the By-Laws provide for the employment of an administrative burdens of the Rating Bureau Ohio experience and contributed to the total Executive Director, and for the levy of as­ will largely be concerned with the day to day result which will be produced when we have sessments against the membership for oper­ flow of statistical data to the data processor, completed our work. ating funds. During the formation period, and with the compilation of the necessary If my recollection is correct, eight or nine and while rates and forms were being devel­ end product at the end of each processing states had formed title insurance rating oped preparatory to filing, we were able to year. It is, of course, essential that the con­ bureaus before Ohio. In most of those states operate with a minimum budget and use fidentiality of each member company's mate­ the pattern had been for individual com­ member personnel to staff the Bureau. Such rial be maintained. The personnel to perform panies to file policy forms, and to support use of membership resources was appropriate those operations must not be drawn from any the rates by a consolidated compilation based and desirable during the formation of the of the membership for fear of violating that upon the annual report, which consolidation Rating Bureau and while the initial filings confidentiality. was filed by the Rating Bureau. and forms were being developed. While the initial high costs of preparing The Ohio Department declined that ap­ With the more detailed administrative and implementing the necessary statistical proach and required that Rating Bureau requirements arising out of the statistical plans will not be with us in the future, it is forms be filed on behalf of all member com­ plan, which included the preparation of a necessary to provide for the financial support panies. This requirement appears logical computer program and the employment of of the operations on a continuing basis. No inasmuch as the Department's position was a data processer, it became apparent that a relief from that cost can be anticipated. that if rates were filed in support of policy paid Executive Director was essential. It It must also be emphasized that a Rating forms those forms must be uniform as be­ took some time to locate the right man to Bureau can be concerned only with the tween the companies else the rates would be perform that function, but we now have an matter of rates and, in the Ohio experience, useless. Executive Director who has ably taken over with the filing of forms as agreed upon by It would appear obvious that if forms and the day to day functions of the Rating the membership. A Rating Bureau may not coverage differ as between companies, any Bureau. be used as an arbiter of competitive prac­ rate applied to the different forms would be The statistical plan will gather data perti­ tices in areas other than rates; nor can it be meaningless if the terms and provisions and nent to policies and all other rated and filed used as policeman over the industry, and any conditions and stipulations resulted in un­ forms, and will require the continuing serv­ attempts to use the Rating Bureau for any equal basic protection to the insured. ices of a data processer. Each member com­ purposes other than in the area of rates and As a result, in addition to rates, the Rating pany monthly submits to the Executive Direc­ forms must be firmly resisted. Bureau was required to consider forms of tor the policy data for that company, who What have we learned in Ohio? We have coverage, as that coverage related to rates. then sends it to the computer processer. This learned, as with any new endeavor, the Being a somewhat complex state, the title processing procedure takes time and atten­ process of growth and development can be insurance industry had developed along lines tion and money, and will result in some painful. But the results, in my opinion, will which were not completely parallel in parts return of rejected material to the companies be good and will be a mark of progress and of the state. In the end, however, some 17 for review and correction. maturity for an industry which is still in its different forms were prepared and adopted At the end of each year the data will be formative stages. We have much to learn and by the membership as Rating Bureau forms. consolidated. The computer program has to do, and I think we've made a good start. Agreement as to forms was achieved by the been designed to permit access to many areas Thank you for your attention.

16 JANUARY 1974 ABSTRACTERS AND TITLE INSURANCE AGENTS SECTION

The Title Business- From A Woman's Viewpoint

Comments by Mary C. Feindt President, Charlevoix Abstract & Engineering Company, Charlevoix, Michigan

Do you know the title insurance world has in a course. I acknowledged I was handi­ to win his confidence by pra1smg his male been invaded by women? I am one of those capped, but I grew up in a world playing ego . I recently had a client who enjoyed invaders and after 40 years I speak with with dolls and sewing doll clothes. On the being in my presence so much, he would just authority on what it is like to be pulled and other hand, there were pros even then in my stop by for chats. Of course, that was con pushed and to be tossed and twisted in a world. Some of the professors went over­ too, because I couldn't get my work done. world mostly dominated by men. board the other way. I particularly remember There are all kinds of silly whims of being I compare it to a roller coaster. You are one who gave me all of the answers to the on the male side of the world, or the female excited about the anticipation of the ride, experiments I missed in a lab course when side. On hot days, I am glad I don't have to you tremble while you are riding, and after­ I went in after hours to make up some work. forever wear a coat or have a tie around my wards you wonder, would I do it again? And then there was the con the day I was neck. I am proud I belong to the sex that can There are pros and cons brought on by our cornered in a dark room by one of the pro­ wear any type of clothes whatever the mood invasion. I am going to weigh them for you fessors. Woe to that female enchantment. or the weather. I can be comfortable. But it from my own personal point of view. I must All my life it has been a struggle to be is con, when I put on slacks and have no tell you that my views are a bit more biased accepted on an even keel. I will admit it was pockets, and no pockets in my blouses. It is than those of most title women, because, as a real pro to be a woman, back a number of miserable not to have a place to keep my some of you know, I am a land surveyor, and years ago when I made a mistake of 100 feet pencil when I am working. I am forever for that reason my prevalent contacts with on a survey and I had to secure the signature dropping one here and there. men have made indelible impressions on of a male client on a Quit Claim Deed to In the title insurance business, it has been me. Life has been rugged. release that I 00 feet. I played my sex against a terrific help to have invaded The man's world number one rule I have learned the his and I made the trip from Northern enough to understand all hard way phases of descrip­ is that you cannot fight the law of Michigan to Chicago where I met him. It tions, not only from the paper standpoint nature. Men were born with ego, and their took 12 hours of convincing and all of the and the legal standpoint, but from the primary drive phy­ is to chase the female sex. Men charm I could muster, but I won. That was sical standpoint of actually seeing how de­ were created with beards, like the male birds the day I was glad to flaunt myself as a scriptions fit on the ground. were created with the brilliant plumages, and woman. Let's check the scale. It leans the male heavily deer with the antlers. On the other Even last week, I was sitting alone in my toward having the man at the helm. His hand the females were created with cunning branch office in the upper peninsula of training for this began in his youth and has and guile with which to ensnare their coun­ Michigan and a man came in to order a continued throughout his life terparts. . But the weight This distinction has been further en­ survey and expressed his discontent at not on the other side of the scale is becoming hanced by society in the way that children having someone present who knew enough stronger. I like being on that side. I like the are reared. The male child is given toys with to take in an order for a survey. This is the challenge and even though the climb movable is more parts and things to interest him. He con of being a woman. Even while I con­ difficult, once I have reached the top, I has been taught to strut and preen himself. versed with him, I wondered if he really have a feeling of accomplishment, which is The girl is given dolls and housekeeping toys believed or had confidence in what I was life's greatest satisfaction. and instructed to cogitate on man's existence. telling him, or that I do wear boots and I do I like being a woman and I love the title This mode of living is instilled from the carry a transit on my shoulder. business, its legal problems, its crazy com­ moment a child is born. No matter how hard It is con to be a woman because society plicated descriptions and entanglements. I we females try, we cannot combat nature or does not permit me to feel free to enter a bar. am privileged to work with men to solve the change society except on a slow inch by inch Oh sure, I can go, but if you were to see me things I love doing most, and I am privileged movement. there sitting alone, I know what would cross to work with the opposite sex which adds The con of this battle is that there is no your mind. I could only be there for one spice to life. And what is more, there is al­ way for our sex to be accepted as an equal. reason. It is a con when I take clients out for ways woman's world for retreat, so precious Society is more lenient today than when I lunch. I feel the necessity of asking my male to my sex. first entered engineering school. One of my escort (usually chosen from my office) to pay Even though I enjoy my role in life, I am professors alerted me to the fact I had no the bill. still pulling and yanking to get that scale in "hydraulic sense" and promptly flunked me It is pro to be able to flirt with a man and balance.

Comments by

Betty Lynde

President, Lawyers Title of Pueblo, Inc., Pueblo. Colorado

Recently I attended a Testimonial Lunch­ ful State of Colorado to go to, in his words, this panel and he inquired about the sub­ eon for former Gov. John Love in Denver. "Camp Runamuck on the Potomac", that ject, and before I could answer he remarked: After I0 \.'z years as Governor of Colorado, he pleads temporary insanity. " I hope it isn't about women in the Title he has now become embroiled in the Wash­ This is my plea as to why I said yes to Business". Unfortunately for all of you, and ington scene as the so-called "Energy Czar". Bob Jay when he asked me to appear on for Mr. Johns, I am going to talk about this In his address he remarked that when peo­ this panel. I happened to mention to Jack woman's view of the Title Business but I may ple question him as to why he left the beauti- Johns that I had been invited to appear on digress somewhat from time to time.

TITLE NEWS 17 If you will check the ALTA Actually my view of our industry is proba­ has been to become active on our Chamber do a better job. ever increasing ably no different than my male counterparts. of Commerce Legislative Committee. Our Directory you will note own­ Perhaps coming from a smaller city, and Chamber has recognized the need for close numbers of women who are managers, executive positions. There a smaller company, than many of you, I liaison with our legislators and has arranged ers and in other the real have a greater opportunity for more personal many opportunities for our business com­ are more and more women entering women in executive contact with my customers. Many of them munity to actually sit down and discuss our estate business, more & loans and are good friends as well as business associ­ mutual concerns with them. Here I am di­ positions with banks, savings prefer deal­ ates. I am familiar with their hopes and gressing and speaking on a favorite subject other Iendors. Many times they woman. plans for their projects. It isn't just some which causes some teasing from my friends ing with another projects our large development on paper but is very real in my home town. This has to do with be­ One of the most important handled, Pueblo West, was and close to our office and to our employees coming active in community affairs. I feel Company has the seller became as well. It is exciting to be included in many it is closely tied into any successful business. partially secured because were reaching of the preliminary discussions and to know Certainly the title business is not going to seriously ill just as negotiations forced to take his well ahead of the general public and the thrive if the economy of the area is not a climax. His wife was before closing and news media, of apartment and motel proj­ good. Since my work load is extremely heavy place at the conferences would feel more secure of assisting in the acquisition of the at the office, I must decide where my time the Realtor felt she ects, woman present at many parcels necessary for a new shopping will be best spent outside of the office. In my and at ease with another called upon center, of watching the progress of a new particular case, I have found our Chamber these important meetings. He relied upon high-rise office complex being built by one of to be the most dynamic force working for me and she was pleased and company our banks and the immense satisfaction of the total good of our community. This is my advice and we were the title knowing that our office, and the entire Title probably not true in some areas but we do awarded the title insurance. The Realtor and Industry, plays such an important role in the not have a Chamber that just brags about our was so pleased at having her reassured individual home ownership so dear to most great climate, beautiful scenery and attempts content that he has given us much additional is our Americans. to create the impression that we are Utopia. business and McCulloch Properties now have 7,000 It has been a challenge for me, as the They attempt to take a realistic view of the biggest single customer. We sales during the past first woman in our state to be elected Presi­ situations as they arise and appoint a task files covering their lot dent of our State Association, and to be serv­ force, as needed, to work out solutions. 3 years. also help ing now as the first woman Chairman of the Working with them. has been interesting, per­ However, a woman's touch can in transactions. State Board of Abstract Examiners. There sonally reward,ing and has given me the when only men are involved was sched­ are no finer people than those in the abstract opportunity of .· meeting important visitors Recently a very important closing attorney flew in and title insurance business. Without the to our city. I can trace several important uled and the purchaser's be present. When he encouragement of many wonderful business orders we have received directly to contacts from Pennsylvania to was associates and friends, I would never have I have made through Chamber activities. arrived at the office, I could tell that he had made it. These gentlemen are always ready The advantages gained for our business not well. I inquired and he told me he of flu. He with advice and assistance whenever the have far outweighed the hours of service I apparently developed a severe case all the previous night going was rough and they kept me from have given to the Chamber and there has had been miserably ill the closing. being discouraged. I know I can depend upon been this opportunity for community service and doubted he could sit through ice them anytime I feel the need of their coun­ at the same time. It is well to give back some­ Remembering that my doctor prescribed sent out and sel. It would not be possible to name all of thing to the city where you live and work. cold ginger ale when I was ill, I the them but there are several of them in attend­ By devoting a minimum of 5 hours of public purchased a six-pack. All morning I kept friend. ance at this convention and I want them to relations contacts for the Chamber each cold ginger ale beside our attorney and he and all know how grateful I am for their support. month, I am at the same time, doing public The closing was completed grateful. Perhaps a man As our business has grown from 5 em­ relations work for our business. concerned were of this simple ployees to 25 it seems the problems have The Title Business is a great business for would not have thought multiplied in the same proportion. More of a woman who is seriously interested in a remedy. choice of my time must be spent attempting to solve challenging and rewarding career. Woman's You can tell I am happy in my the Title Business is the really difficult title cases and dealing Lib notwithstanding, there are still many career and my view of business oppor­ with employee turnover, which for many kinds of business and industry where a that it affords the greatest years was not a major problem in our office. woman cannot compete on an equal basis tunity for women. letting me publicly express The possible threat of more government with a man. Thank you for that has been interference is something else that concerns In the important detail work of the ab­ my gratitude to an industry the fine gentlemen me, as it does our entire industry, and my stracting section of the Title Business, a very good to me and to a part of it. way of attempting to do something about it woman can compete and in many instances responsible for my being

Comments by Phyllis Schnebelen

Vice President, The St. Francois County Abstract Co., Farmington, Missouri

I doubt very much if the title business their own particular piece of real estate. vincing, kind and knowledgable. We have from a woman's viewpoint is very different An abstracter searches the records to to like the public-and show that we do. we from a man's viewpoint. None of us would determine the condition of the title to the Sometimes this takes more time than atti­ be in this occupation, at least for very long, land which represents one of the most im­ have but I really believe that the right unless we were interested and enjoyed our portant investments made during a lifetime. tude pays off. In the years that we have been work. Without assurance of the title company, dealing with the public, I can recall only one The title business is the history of the land. there would be no real feeling of security. person that was utterly impossible. This It has all of the romance, mystery and trage­ The average person contemplating purchase person was a man who apparently disliked dy noted throughout the years-and all avail­ of real estate has no conception of what is all women-and guess who was handling able from the public records. Each parcel of entailed, hence he has to rely on some de­ the closing!! We try to land has it's own story to tell. There are no pendable source for the correct information Clientele have their preference. two locations exactly alike on this earth, about the condition of the title and guidance know them and to suit their whims whenever hence no two land titles are exactly alike. So in the completion of the sale transaction. possible. I believe that the older and more it is with people. We work with people and In meeting the public we find all kinds of mature women prefer to have another woman the land. people. Some are old, some are very young. take care of their needs rather than a man. One of the most important things in life to Some are impatient, others are very patient If men feel that women are knowledgable, . people, is the land they live on, their homes and understanding. Some are arrogant and there is no discrimination retain her or their places of business located on the hard to talk to. When we deal with all types, A successful woman has to land. Their security is knowing that they own we have to be friendly, firm, patient, con- femininity. When she tries to be masculine,

18 JANUARY 1974 she loses her touch. In spite of the trend position by anything else but hard work. We matter what station in life a customer has, toward Women's Lib today, it is my personal have been interested in the title industry or he should always be treated with respect, if opinion that if women would keep their ideas we would not be where we are. Our training his actions warrant. as they should be, they can have their cake in all phases of our business ranges from Women can perform their best for hu­ and eat it too. indexing, microfilming, compiling chains, man kind by determining and directing their Each land title is a romantic history of platting and examining to closings. There is sense of values in the right direction. Person­ it's own equalled by none other. Many of the much responsibility in each part of our work. ally, I enjoy my life. I like to feel the satis­ abstracters and searchers are women. I be­ I will not go so far as to say that women are faction that comes from serving the public. lieve they are more inclined to pay attention better than men, but do say that any woman In closing, I would like to pass on a bit of to detail and to be more exacting and meticu­ who is capable of doing her job, is at least advice read the other day-" Before you lous than men. I think you all will agree that equal to a man in the land title industry. We begin to give somebody a piece of your mind we simply cannot do without them. All of us can recall people's names even after months just make sure you can get by with what you who are speaking this morning are executives or years have passed since they have come have left." in our own companies. We did not reach our to us for our particular service. It should not Thank you.

Comments by R. Claire Wetherell

Owner, Guaranty Title & Abstract Co., Mountain Home, Idaho

Being selected as a participant with this new-but, usually they have been relegated the remarks and comments amusing? Such panel is a flattering and humbling experi­ to the lesser tasks and kept at the tract books as: "Who consumes the mortgage?", "Can ence. My father often reminded me that you or the typewriter, and not that of discussing you make up a leaps and bounds description can tell a man by the company he keeps. land descriptions or loan closings, con­ for me?", or, this one which tops them all­ If he could see me today, with this group, he sequently, the question. "If 1 am to get in and out of this property, would really be proud of me and my friends. There has been a lot of talk these days they'll have to give me incest and excess!" Yes, I am a Woman in the Title Business. about Woman's Lib, and I suppose I would When examining these chains, I am sure, I took over the operation of my office follow­ be remiss if I didn' t at least mention the you as well as I are curious to know what ing the death of my husband and have found term; Bobby Riggs wants to put us all in the drove our forefathers to develop, build and it to be a rewarding and gratifying experi­ kitchen, but Billy Jean showed him a thing explore; and then to acquire, trade and sell­ ence. I must say, without the encouragement or two. Why should we let such Chauvanists and, unfortunately, sometimes, meet with and assistance of a lot of people in the indus­ put us down? more depressing times and lose all because try, who instilled the confidence, and were I take heart from Pat Paulson's words, of inability to meet the tax demand. Yes, it there with the "helping hand", 1 would not when he said, "I say no one should be denied is fascinating. be so involved today. equal rights because of the SHAPE of their Yes, I am a Woman in the Title Business A Woman in the Title Business- What are skin." Him, I like. willing to help, willing to serve, willing to her problems which differentiate her role Fortunately, I have never felt that I had explain, willing to care and even willing to from that of the man? Surely, we meet the to be liberated - granted, there are some hold the baby while the closing papers are same challenge when examining a chain or minor problems, but 1 had a father who being executed. closing a loan; but, it does have its setbacks believed in education for all and a husband Yes, I am a Woman in the Title Business, at times. As one of my colleagues stated who always encouraged me to become in­ who is proud to be associated with a growing when a customer comes to the office and volved. Women do have ability and a par­ industry and realize more everyday that we asks for the manager. She stated, "( am the ticular characteristic- is it called intuition?­ will never be likened to the Obstetrician in manager." He answers, "I mean the MAN that serve them well. Gratefully, 1 must say, Sun City, (Arizona) or St. Petersburg, Flori­ in charge." Or, the man who asks, "Do you the Title Industry is an area where the da. We are going to be even more in demand mean you found the Section corner?" woman is particularly adept. You may accuse for the services we provide, and we do pro­ Why do these people feel that women do her of having a "nose for news", but she vide a service. I have always enjoyed helping not have the ability or the knowledge to also has a nose for detail and a great deal of people whether it be physical or mental serve them? This is where we must assert patience. problems, and 1 feel that I am providing a ourselves and assure them that we, even Reading a chain of title is likened to an need when I write a title report - and, like though a woman, can serve them. historical novel - it's newsy and informative you, after I give the report-( PRAY A Seeing a woman in a title office . is not -isn't it fascinating? And, aren't some of LOT.

TITLE NEWS 19 TITLE INSURANCE AND UNDERWRITERS SECTION

Trends and Developments in Title Insurance Claims

Jack L. Tickner

Chairman, Section Commi/lee on Claims Vice President and Associate General Counsel, Chicago Title Insurance Company, Chicago, ll/inois

When I was asked to speak on the subject liens represented 15.9 percent. In 1970, 8.7 cede the point and release his lien. Well, if of trends and developments in title insurance percent. In 1971, 11.7 percent. In 1972, 19.5 it is this easy, then I must be doing some­ claims, my first reaction was that so many percent. In dollars paid, mechanic's lien thing wrong. The co urts have always been new things have been happening that my claims are the number one problem for the solicitous of the right of a lien claimant to main problem would be to eliminate topics title insurance industry. The second place be paid for his labor and materials. That to talk about. As I reflected, however, I came category, erroneous omission in the examina­ tendency has most certainly not decreased in to the conclusion that most of what keeps the tion or opinion, was not even close at 10.6 recent years. Commencement of construction claims people busy is not particularly new, percent. is largely a factual issue, and the evidence but more of the same. I doubt that this comes as much of a that will convince me does not necessarily I realize that many in this group are in­ surprise to any of you. Let us look behind this convince the court. Seven years ago my volved in the claims activities of their com­ observation for a moment and see if there company was involved in a lien suit that panies, and you may very well be aware of have been any subjective trends in mechan­ went to the appellate court of the state and new and novel things that I do not mention. ic's lien claims. Ten years ago we probably received a construction of the lien statute There are, of course, certain types of claims had as many lien claims as we do now, but a that denied the lien. The opinion was in that occur with greater and more expensive high percentage of those claims were on accord with prior decisions. Five years later frequency, and there are others that appear single-family residence. The insurance pro­ we were involved with an almost identical set to me to be somewhat new and unique. If you tection was generally given after the improve­ of facts and the same court gave a directly hear nothing new this morning, you can take ment had been completed and we had made contrary finding. While the court did not comfort in the fact that someone is sharing some effort to determine that construction directly overrule the prior decision, the writer your misery. If something is mentioned that costs were paid. If the lien claims were for of the opinion seemed rather amazed that you have not yet encountered, you can con­ anything other than the finishing work, they his court could have arrived at its previous gratulate yourself that you have so far been probably had been filed before we insured. conclusion. spared. The claims on a single house were not too But let us assume that the evidence is over­ To start our discussion, I would like to great in amount. In those days, a really bad whelming that the construction mortgage was take up briefly the ALTA Claims Report. I lien claim involved a speculatively built sub­ recorded prior to commencement. No other will not go into this in any great detail since division with multiple liens on the last dozen finding is possible. Does that end the case? the Research Committee will include this in or so houses. Not necessarily. There have been noticeable its report at this meeting. We now have a My experience in recent years has been instances in the last year or so where claim­ four-year history for this report. In 1972, 48 that the lien against the single family resi­ ants' attorneys do not rest their case solely of the 91 underwriters, representing 75 per­ dence is the exception, with the five and six on an interpretation of the lien statute, but cent of the gross premium, reported to digit liens on multi-family and commercial in effect appeal to the conscience of the ALTA. Within the obvious limitations of the projects being the rule. In addition, our court. They will point out that the construc­ report, it should be a fairly good barometer underwriting procedure has changed and the tion lender (or title company) is a trustee, a of the industry claims activity. An interest­ insurance is now frequently written on a con­ partner in the project, or that the construc­ ing feature of the 1972 report is the percent­ struction loan at the inception of the project. tion loan was disbursed in such a negligent the age by categories as to both new claims and Instead of dealing kindly with an electrician manner and with total disregard to (or payments made. Most of the categories have or painter for a thousand dollars or so, we interests of the claimants that the lender remained fairly constant, percentagewise, may have our back to the wall if, indeed, we title company) should be penalized for this generally not varying more than several are not surrounded by an army of material gross and wan ton negligence. I am not pres­ percentage points over the four-year period. suppliers each intent upon sharing with the ently aware of any appellate decisions sup­ I shall illustrate one category of the report, stockholders a part of the annual dividend. porting this type of case, but I am pessimist and it both confirms and contradicts my pre­ Some states grant priority to a construc­ enough to believe that it will happen. There vious statement. B-1, better known as me­ tion mortgage if the mortgage is recorded is one decision in Arizona in which a dis­ chanic's liens. Of the new claims received in prior to the commencement of construction. bursing title insurance company was held 1969, 3.8 percent were mechanic's liens. In Suppose that we are fortunate enough to have liable for a subcontractor's claim on the 1970, it was again 3.8 percent. In 1971, 4.1 evidence of such priority. Our problems are basis of representation to the claimant that percent. In 1972, 3.3 percent. This is a rea­ over. Right? All we must do is to take our he would be paid in due course. sonably constant percentage. In dollars of affidavit, photograph or other evidence to All of you will agree that commercial real loss payment, however, in 1969 mechanic's the lien claimant and he will graciously con- estate transactions have become increasingly

JANUARY 1974 20 complicated and sophisticated. Couple this know of no title insurance policies that we plaint. Of course, the rules of equity have with the increased volume of business that we have issued on the land in question, and have always been with us and have not really have all experienced and the perpetual pres­ about concluded that one of the other com­ changed much unless you consider legis­ sure to close the deal, and it should be no panies is the guilty party and should be there lative changes such as truth-in-lending and surprise that we all have more claims because instead of us. interstate land sales. In the real estate title of having less experienced personnel at No more than two years ago, a complaint business, we are used to thinking about con­ critical judgment making levels. The rather to an insurance department was a rare thing. tracts, deeds and other written instruments, speculative insurance against mechanic's Today, it is no longer an infrequent occur­ and court decisions that determine from such liens may be a prime example, but it is by rence. Some of the complaints are justified. written instruments the intention of the no means limited to that. I believe that an insured is entirely justified parties and which say "This is what you Enough of that dreary subject. Mechanic's in filing a complaint where he has received contracted for and this is what you get." lien claims are not any fun. They are the no recognition of the fact that he is making We now see people appealing to the con­ pick and shovel work of the claims business. a claim. He is entitled to a "yes" or "no." science of the court on matters that we have I know that you came here this morning to If the insured presents a matter for which always thought of as contractual. The buzz hear about condominium claims. Some parts responsibility is accepted, he should receive words for equity are now "contract of ad­ of the country have gone condominium crazy, some indication as to what the company hesion" and "unequal bargaining position." and it would naturally follow that we should plans to do to correct the situation. It is my I have mentioned this trend in mechanic's have condominium claims by the score. So experience that most of the complaints about lien claims and matters of public rights. We far as my company is concerned, I am happy inaction on the part of the title insurance are now witnessing across the country a to report a non-trend. We simply have not company occur when the insured has re­ massive assault upon the non-judicial fore­ had many problems with condominiums. ported the claim to and is dealing with an closure of security agreements as being viola­ There have been some claims in which the agent or branch office, and the matter has tive of due process of law among other things. fact that the project was a condominium had not been referred to the proper claims office Whenever I read a complaint attacking the no bearing with the claim. It would have of the company. foreclosure process, I am reminded of a case existed had it been an apartment, a farm­ I would say that most complaints, at least I was involved in about 12 years ago. We had house or anything else. The only feature to my way of thinking, are not justified. The a foreclosed mortgagor making every alle­ worth noting in the true condominium claims third party claimant-a mechanic's lien gation you can imagine as to why the fore­ is that they almost always involve some claimant, or a judgment creditor, for example closure was invalid. The case went through dispute over the common elements. "You - does not have a justifiable complaint. Such the state appellate and supreme court and parked in my parking space," "Your guests claimants are adversary to the interests of certiorari to the United States Supreme abused the swimming pool privileges," or our insured and the company, and we should Court was denied. Although the foreclosure some such thing. Most of the suits that I be entitled to beat them in court if we can. was upheld at ever level in this case, there have seen are nothing more than testimony Most of us do not believe that the insur­ was a strong and lengthy dissent in the Court to the inability of people to live at peace in ance department is the proper forum for of Appeals. One of the justices in the majori­ close proximity to each other. construing liability under a title in surance ty felt the need to comment in a concurring The title insurance industry has not entire­ policy, or for determining the amount of opinion that all of the arguments for the ly escaped the effects of the ecology move­ damages that may be due to an insured when plaintiff would have more appeal to the court ment, if you will include within the definition a loss has occurred. While I have never been if the plaintiff at any time in the proceedings of ecology the desire to maintain public told so, it is my impression that most insur­ had shown any desire to pay back the money rights in the natural habitat. Certainly, ance departments are reluctant to step into he borrowed to purchase the property. groups associated with the ecology move­ the role of the courts. Some years ago I researched the question ment have been strong forces in asserting There is another area of activity of recent of the "due on sale" clause frequently found public rights in property previously con­ vintage that does not directly affect the title in mortgages. Such clauses provide that if sidered private and not subject to the public insurers, but we seem to be caught in the the mortgagor shall convey the title without rights being asserted. backwash. Class actions. Most of you are the consent of the mortgagee, the mortgagee The Gion and Dietz cases here in Cali­ familiar with the numerous class suits filed may accelerate the indebtedness. I found not fornia are prime examples. You will recall against the savings and loan institutions in one case in the United States that did not that the California court recognized an im­ California. Millions in damages are sought uphold and enforce such a clause as a matter plied dedication of an easement across pri­ against the savings and loans because of of contract. Recently, the Arizona courts vate property for the public to gain access late charges, pre-payment penalties, failure were presented with the question and held to the beaches. Titles to ocean-front proper­ to pay interest on impound accounts, due on that, while the clause was valid, equity would ties have been in confusion since those deci­ sale clauses, and any number of other re­ not enforce the clause if the transfer of title sions. strictive provisions in a mortgage loan. The by the mortgagor did not violate the purpose In New Jersey, the claim by the state to institutions have tendered defense of each of the clause. the meadowlands has brought claims and and every such suit to each and every title In one of the California class suits pre­ apprehension to all title insurers doing busi­ insurance company doing business in the viously mentioned, the Supreme Court of ness in the state. It probably will not be in State of California. It is my opinion that California recently held that a late charge the lifetime of any of us that there is a de­ the subject matter of these suits have nothing must bear some relationship to the expense termination as to what land is and is not to do with the coverage of a title insurance imposed upon the mortgagee by the late meadowland. policy, but we are confronted with the matter payment, and anything in excess is an invalid My company has been made a defendant almost daily it seems, and it does not go penalty. I suggest to you that there is a trend in a suit involving beaches in one of the away simply because we wish it. I am sure that tends to diminish the value of the written coastal states. The suit has numerous defend­ that the savings and loan institutions have contract and substitute the conscience of ants including every county, state and federal even less reason to appreciate the situation. whoever is called upon to enforce the con­ official you can imagine. The plaintiff seems The last matter that I will mention is very tract. I do not speak to the merits of this to allege that the ocean-front has been or is interrelated to what I have previously dis­ trend. We can all have our own opinions on about to be desecrated by commercial inter­ cussed. I will call it a "trend toward equity." that and they may differ from case to case. ests, all with the blessing of the various gov­ It might have other names. Consumerism is However, I submit to you that the trend ernmental agencies. We have not yet been certainly a part of it. However, I am talking toward equity does exist and the failure to able to discover why we are in the suit. We about the cause of action as stated in a com- recognize this trend will be to our peril.

TITLE NEWS 21 Condominiums

Clark F. Staves

Vice President and Chief Title Officer Security Tille Insurance Company. Los Angeles. California

Although the philosophy of condominium, I suspect that if there is any one factor they did not easily relent on the "pre-con­ as a concept of separate and common owner­ which, more than any other, has reduced the struction" map idea. One ploy which was ship, transcends national boundaries, the incidence of condominium litigation in this attempted involved the use of a map showing implementation of that concept in this coun­ state, it is due to the insuring practices of parcels, denominated " units", the boundaries try is a matter of individual state statute and California title companies. Where those of which were recited to be the (a) surface of regulation . practices are premised upon conservative the ground, (b) the vertical projections of In California, for example, where develop­ interpretations of the implementing legis­ lines so located horizontally as to embrace ments involving community or common own­ lation, recognizing that such statutes did not that part of the proposed building which was erships have a more than fifty year (50 year) purport to override existing rules regarding to contain a particular apartment, and (c) recognition in real estate commerce, a limited the certainty of descriptions, proper con­ with no upper limitations. Such would result amount of legislation has been devoted to veyancing and other such fundamental ele­ in the so-called "chimney of airspace" con­ these varying programs. Such legislation that ments of our concern, this experience is likely cept, or "a building in space". That concept, does exist, largely occurred through the result to continue. However if title people permit however, would not meet the statutory defini­ of pressure to protect the public from specu­ themselves to 'Qe overly dazzled by the op­ tion of a condominium unit in California as latory frauds and misrepresentations, for timistic and gnidiose schemes of developers, "space in a building" (Cal. Civil Code Sec­ example, the full disclosure statutes under the or compete with one another in risk-taking, tion 783; i.e., "a building in space" is not the Subdivided Lands Act (Cal. Bus. & Prof. perhaps the courts will again tell us what we same thing as "space in a building"). Code Sec. II 000, et seg), and the powers should have recognized. A more modern variation on this theme of delegated to local government to regulate While it is apparent that the scope of "pre-construction" drawings involves the use subdivisions and other lesser divisions of land condominium legislation varies from state to of a map which, instead of representing a under the Subdivision Map Act. (Cal. Bus. state, in our zeal to secure business for our survey of each "unit", delineates what is & Prof. Code Sec. 11500, et seg). In only one companies we may fail to fully examine and supposed to be the exterior boundaries of the of these California variations had legislation identify areas of potential risk , and to con­ buildings (intended to contain several units) been attempted to improve the quality of the sider and suggest possible alternatives to wlthin the project. There is also separately purchaser's title, that is, the so-called those risks. Lest we get too carried away with delineated the horizontal boundaries of a Condominium Act of 1963 (Ch. 860, Stats. the developer's enthusiasm, this may be an "typical" unit, with a notation as to which 1963). opportunity to discuss at least two recurrent buildings are to contain "similar" units. The California legislature wrestled long concerns. Furthermore, critical dimensions and bear­ and heroically with the difficulty in recon­ It will be noted that in such projects, title ings, necessary to "tie" the buildings, and the ciling then extinct law with the requirements boundaries are usually intended to be coin­ units therein, to the surveyed boundaries of of acceptability to, among others, Eastern cidental with physical portions of improve­ the project are generally lacking. Thus a con­ investors, and certainly the approach ments (that is, surfaces or centers of walls, veyance of a unit by reference to such a map adopted in that 1963 legislation was quite floors, ceilings and the like). Where con­ may be analogous to the conveyance of "five different from that adopted by other states. veyances are made by reference to a map, acres within the northwest quarter of Section Despite the fact that the legislation clearly such map ought to be a survey of the as­ 10, etc." That is, it may be void for un­ accommodated some new California rules built location of those physical improve­ certainty. with respect to such essentials as the owner­ ments which constitute boundaries. It is true Another concern, which could be identified ship of free or occupied space, the jurisdic­ that the California condominium statutes, un­ today, involves what we may commonly refer tion of a court in a partition action involving der Civil Code Section 1351, require that to as "annexation," sometimes referred to both separate interests as well as tenancies­ diagramatic floor plans need only identify the as "progressive" or "incremental develop­ in-common, and the separate assessment of " relative location" and the "approximate ment." Because of the rather sweeping con­ taxes on undivided interests, other considera­ dimensions" of units, and impliedly sanc­ sequences, perhaps one of the dominant con­ tions were less well established -often ap­ tion the use of "pre-construction" drawings siderations should be to ascertain whether pearing as legislative suggestions rather than fo( the condominium map. However:, these the development is to be constructed and sold as changes in substantive law . Notwith­ requirements should be considered as mini­ in increments. If so, it will be important to standing the several inadequacies and un­ mal criteria for compliance with the con­ determine whether each of these increments certainties of that legislation, it is signifi­ dominium law; title insurance considerations is to be "free-standing", or whether there cant that, in the ten years since it's enact­ obviously necessitate more stringent require­ is involved an area, or areas, intended for use ment, there have been no substantive amend­ ments-such as definiteness and certainty. by the owners in all increments, i.e., involv­ ments and few, if any, cases reaching the That requirement of a survey, after com­ ing "phasing" or "annexation." appelate level requiring judicial interpreta­ pletion, to assure the size, shape and loca­ Frequently, a developer owns or controls tion of the Condominium statutes. tion of the land which is to be the subject of acreage sufficient to support a considerable This happy circumstance is certainly not title insurance, was, understandably, met number of housing units, yet he may be un­ because of any dearth of condominiums in with a good deal of resistance from develop­ willing, or unable, to develop all of this California. One title insurer, with respect to ers who nevertheless wanted to reap the acreage at the same time. Typically, the de­ its office in one of the largest and fastest benefits of the Condominium Act. Such a re­ veloper's sales program requires, or contem­ growing counties, reports that in the first six quirement would, of course, add to the de­ plates, an initial construction of a major months of 1973, condominium units repre­ veloper's costs to bring his product to mar­ recreational facility (for example, an Olym­ sented between fifty and eighty per cent of ket, and might extend the time for his clos­ pic-size sw imming pool, elaborate clubhouse, its subdivision business. Nor can it be said ings. Furthermore, because of the apparent golf course, tennis courts, and so on), de­ that condominiums have completely replaced willingness of some insurers to accept more signed to serve the entire community of earlier community versions. The more re­ casual mapping in connection with con­ owners. However because of limitations on cent variations and refinements in communi­ veyancing under other concepts, it was dif­ the availability of construction funds, or ty concepts of all types, conceived through ficult to convince developers that those because of an unwillingness to pay out main­ the inventive genius of California developers, earlier standards must be raised. tenance expense until all homes are sold, have produced some exciting-and exotic­ While those developers eventually became or simply because the market is untested, the programs. reconciled to the requirements of a survey, developer is advised to proceed with his

22 JANUARY 1974 program on an increment or "phase" basis. haps joining with the developer in common If that can be accomplished, such would Where such a scheme is contemplated, how deeds. If the contemplated increments are accommodate the use of a homeowner's should such community facilities be con­ not developed within the trust period, the corporation to hold title to such a communi­ veyed-and to whom-and when? trustee would then convey all remaining in­ ty facility. Although initial membership in Real estate regulations in California are terest to those owners within the developed such corporation would be limited to owners such that annexation of other property to an increments on a pro rata basis. The anomaly within the first increment, provision would initial increment, which might substantially of this solution (even though it ostensibly be made in the enabling declaration for the increase assessments, or might substantially meets the requirements of the Division of admission of additional owners, as members, increase the burden upon such common Real Estate), is that most trusts of this type when future increments were annexed, de­ facilities, will not be approved unless (a) the are deliberately designed to provide for little veloped and sold. That program obviates the procedure for annexation is reasonable and or no discretionary powers in the trustee and, need for complicated conveyancing, or the detailed in the original filing, or (b) if not as a result, such a trust probably would not creation of exotic interests and, because detailed, provision is made for the approval achieve the intended purpose. the title is, from the first sale, in an entity of the annexation by at least a two-thirds Another, at least theoretical, solution composed of the unit owners, the concerns of majority of the voting power, excluding that would be to decrease the quantum of un ­ the Division of Real Estate are met. An of the developer (Regulation 2792.10). Fur­ divided interests conveyed to the first place additional advantage is that such a corpora­ thermore, the Division of Real Estate re­ purchasers as subsequent increments are de­ tion may be formed, not only to hold title to quires that, at the time of acquisition by a veloped. That concept is also referred to as the community facility, but also to function buyer, title to his dwelling -as well as his the creation of estates subject to executory as the management body for each of the in­ interest in the common or community facility limitations (i.e., estates subject to a "shift­ crements. While there are mapping con­ -must be free and clear of all blanket en­ ing" or "springing" use). Under that con­ siderations-such as to accommodate access cumberances (liens other than those created cept it is contemplated that, in addition to from each increment, and zoning matters or assumed by the buyer solely upon his the minimum, or basic, fractional interest in which could be anticipated-among sophis­ interest) (Cal. Bus. & Prof. Code Sec. the common area, there would also be con­ ticated, knowledgeable attorneys, the home­ 11013.1). veyed to each of the grantees in the first in­ owners' corporation is the vehicle most Parenthetically, we should note at this crement a larger fraction (representing their frequently selected to solve the increment point that the hypothetical program sub­ pro rata share if future increments are not de­ problem. mitted for consideration requires the crea­ veloped). That larger fraction would be fur­ The steady tion of insurable titles to such areas, not the ther expressed to be subject to defeasance, increase in population, to­ gether mere recognition of some vague, "expanded either in whole or in part, by the develop­ with the reduction of vacant, "close­ in " common area" use through covenants in the ment of later increments within a specified land which can be economically de­ veloped, enabling declaration. The structuring of that time, portions of which fractions would then has created severe pressure areas in different creation, within the context of condominium vest in buyers within those later developed parts of the country. To the real estate promoter, titles, in consistent documentation, will re­ increments. In addition to the difficulty in cluster or community projects provide quire considerable anticipation. The key, of expressing this rather archiac concept in each an obvious solution to that course, will be to conceive of a program of the developer's deeds is the probable lack pressure. We may expect future developments to consist, under which the developer may preserve his of acceptance of such exotic titles by pur­ not only of conventional fee title options to annex further increments, or not, chasers and lenders. ownerships, but also of leaseholds and sub­ leaseholds. Title to for as long a period as possible. Although Another program, occasionally encount­ airspace, or rights to many variations and combinations have been ered, would provide for non-exclusive ease­ occupy airspace, both inside and outside of put forward, there are really only four which ments over all of the common area, for the existing buildings, combined with tenancies­ in-common merit comment. benefit of and appurtenant to each unit in the , easements, or rights through One approach is to provide for an increase fir st phase and all prospective increments. membership in a corporation, all may be in­ volved. in the quantum of undivided interest con­ The creation of such easements will, of veyed to buyers in the first phase, in the course, require appropriate reservations and We have recently noticed the current trend event that subsequent increments are not grants in each deed in each increment. Even toward "sweetening" certain otherwise mar­ developed. Sometimes such a program is dis­ in this solution, however, several problems ginal developments through accommodation covered as a provision in the developer's en­ can be anticipated. One of these is the de­ of tax shelter benefits. Resort condominiums, abling declaration, reading so mewhat as nomination of the easement area, as well as for example, which afford opportunities for follows: "If such additional lands are not the identification of the grantees, or users, of rental income when not used by the owners, annexed to the project within the time and in the easement, so that the later extension to or the so-called "time sharing" concepts in accordance with the provisions set forth owners in future increments will not sur­ which a buyer's purchase price represents his above, the ownership of the common area charge the servient tenement. Ideally, there use of the dwelling for a limited time each shall automatically become one twentieth should be some sort of limitation so as to cut year. Due to the ancillary existence of rental thereof as to each respective unit in lieu of off the easement if the subsequent incre­ pool arrangements, or other management one one hundredth thereof." (i.e., by some ments are not developed within a definite contracts, conveyances in some of these de­ magic, the developer's remaining interest is period of time. But perhaps the most serious velopments also constitute corporate securi­ to "automatically" vest in the owners of consideration is the limitation on the uses for ties and may involve SEC regulation with those developed increments). I think .we will which such easement may be exercised. In respect to advertising, sales and financing. all recognize that titles cannot vest in the attempting to so circumscribe those uses, it The spectrum of problems attendant upon absence of a conveyance-in this instance is frequently difficult to categorize in a the insurance of titles in these developments from the developers. However, since the de­ manner other than "for any and all pur­ is staggering. That we may properly respond veloper cannot assure, in advance, that such poses." That broad specification may simply to the expected increase in requests for title future conveyances would be free and clear be tantamount to a fee and, consequently, insurance covering these developments, it is of all encumberances, those reserved in­ such a reservation may be repugnant to the evident that we must reevaluate our prac­ terests are customarily conveyed to a trustee purported grants of undivided interests in the tices-and reeducate ourselves-with regard (the purpose of which is to insulate those same land. to fundamental concepts. We may ulti­ titles from liens and judgements against the It may well be that the simplest approach mately elect to insure - but we should be developer). As successive increments are de­ would be to segregate those parcels which are aware of these legal uncertainties and veloped, such trustee would convey appro­ intended for use by the entire community potential conflicts, and proceed, if at all, priate fractional interests to buyers-per- from the common areas of each increment. with that knowledge.

TITLE NEWS 23 NAIC Update

J. Mack Tarpley

Chairman, ALTA Committee to Establish Liaison with the NAIC; Vice President. Chicago Title Insurance Company, Chicago, Illinois

Subsequent to the adoption by the ALTA ments have been delivered to the Washing­ committee is composed of five members and of the revised Model Title Insurance Code ton office of the ALTA and are on file there. its primary charge is to advise the section 1973, copies thereof were transmitted by Your chairman spoke to the meeting re­ management committee with respect to mat­ members of this committee to the members ferring to the written comments of ALTA ters which should be included in or excluded of the NAIC Task Force with an appropri­ relating to the NAIC's draft which had pre­ from a Model Title Insurance Code. ate letter of transmittal. On May the 8th, viously been transmitted to the task force and Now in trying to give you an update fre­ 1973, the chairman of your committee, requested permission to respond in writing quently things happen so fast in the NAIC accompanied by Bob von Doenhoff and John to the comments of Messrs. Kellogg and and in other matters that frequently a Wilkie, committee members, attended a Kappes. Your committee met in Chicago on written report is out of date. Commissioner meeting of the NAIC Task Force on Title June 18th and 19th and drafted written re­ Van Hooser of Michigan, Michigan being Insurance held in Austin, Texas, at which sponses to those comments, which responses the chairman of the task force, has re­ time the committee chairman stated at open have been submitted to the NAIC Task signed his position effective September meeting ALTA's comments and suggestions Force. Copies of the responses are also on the 30th. If the NAIC follows its usual and relating to the NAIC's discussion draft of file in the Washington office of ALTA. normal practices wherein the states are desig­ a Model Title Insurance Code. The NAIC Task Force decided in Execu­ nated to task force or to committees and not The existence of that discussion draft has tive Session to revise the discussion draft, individuals then the new Michigan commis­ been previously reported to you. On June submit it to membership of the NAIC and to sioner, a Mr. Demlow, will become Chair­ the 5th, 1973, the chairman of your com­ interested parties, which has not yet been man of the NAIC Task Force on Title In­ mittee, and Dick Howlett, committee mem­ done and then to hold an open meeting with surance. ber attended a meeting of the NAIC Task no date ascertained wherein anyone in­ I thing Commissioner Van Hooser's resig­ Force held in Washington, D.C. on title terested could appear with a view towards nation may result in a delay and a com­ insurance in conjunction with the June finalizing an NAIC Model Title Insurance plete interruption of the timetable pre­ meeting of the NAIC. At that meeting, Code to be submitted for adoption for NAIC viously announced for the task force to sub­ John S. Kellogg of Colorado Attorney's at its December 1973 meeting. mit something in December. Also the ABA Title Guaranty Fund and Mr. Philip S. As a further matter of interest to you, committee is a Aew committee appointed Kappes, Chairman of the American Bar your committee has learned that the Ameri­ only in August. I do not believe it has had Association's Standing Committee on can Bar Association's Section on Real a meeting; however, there is some indica­ Lawyers Title Guaranty Fund appeared and Property, Probate and Trust Law has desig­ tion that the posture of ABA will be to made statements with respect to a Model nated an ad hoc committee to advise the sec­ work to postpone anything that looks like a Title Insurance Code. Copies of those state- tion on a Model Title Insurance Code. The Model Title Insurance Code.

Mechanics' and Materialmen's Lien Coverage

Comments by

Ray E. Sweat

Senior Vice President and Senior Title Counsel, Pioneer National Title Insurance Company, Los Angeles, California

Mechanics' liens were unknown in Eng­ fornia Art. XX, Sec. 15 and Texas Art. that varied conditions made uniformity im­ land, either at common law or in equity. The XVI, Sec. 37 the lien is mandated or con­ possible. first mechanic's lien law enacted in the ferred by the constitution of the state. Since There are two general types of mechanic United States was in Maryland in 1791. The enactment of the original provisions for lien statutes, one known as the "New York Maryland Act was passed to assist in the mechanics' liens, the legislatures have been system" and the other the "Pennsylvania establishment and improvement of the City prolific with amendments. Generalizations system". Under the New York system the of Washington, now in the District of Co­ are difficult and the case law is unreliable holders of the lien cannot recover more than lumbia and secured a lien on the buildings since the decisions are meaningless unless is due from the owner to the contractor, that erected and land occupied in favor of master the particular statute under which the case is, mechanic's lien rights are derivative. builders only. The next mechanic's lien law was decided and the precise language of the Under the Pennsylvania system, the rights of was enacted in Pennsylvania in 1803. Since statute is closely studied. mechanic lienors are direct as against the then mechanic's lien laws, notorious for the There was an attempt to adopt a uniform real property and do not depend on the extent to which they vary from each other mechanic's lien law originally drafted in existence of any indebtedness due from the in their application and operation, have been 1932 after 8 years of work, but was adopted owner to the contractor. enacted in every state and the District of by only one state in II years Florida, and According to 68 Yale Law Journal 142, Columbia and in some states such as Cali- was withdrawn in 1943 for the stated reason the following states are believed to follow

24 JANUARY 1974 the New York system: the mortgage or deed of trust is filed prior to mechanics' liens in certain instances. The Alabama New Jersey the commencement of improvements on the State of Washington recently amended the Connecticut New York land the lender should prevail. mechanic's lien statutes to provide that Florida North Carolina Arizona Nebraska certain advances for hard construction costs Illinois South Carolina California Nevada after proper certification by the general con­ Louisiana South Dakota Colorado New Jersey tractor and owner, absent filing of a stop Massachusetts Texas Connecticut New Mexico notice, will be superior to mechanics' liens. Mississippi Utah Delaware North Carolina Chapter 47, Laws of Washington, First Nevada Vermont Florida North Dakota Extraordinary Session, 1973. New Hampshire Virginia Georgia Ohio In addition to recording prior to com­ as well as the District of Columbia; while Hawaii Oklahoma mencement and making only obligatory ad­ the states next listed subscribe to the Penn­ Idaho Pennsylvania vances, construction lenders must also in sylvania system: Kansas Rhode Island some jurisdictions make sure that the mort­ Alaska Minnesota Kentucky South Carolina gage contains "magic language" as pre­ Arizona Missouri Louisiana South Dakota scribed by statute. For example, see Public Arkansas Montana Maine Tennessee Act No. 73-545, January 1973 Session of California Nebraska Maryland Utah the Connecticut Legislature. Colorado New Mexico Massachusetts Vermont Except in New York and Texas, protec­ Delaware North Dakota Michigan Washington tion against mechanics' liens is most often Georgia Ohio Minnesota West Virginia afforded by using the American Land Title Hawaii Oklahoma Mississippi Wisconsin Association Loan Policy 1970. In Texas, the Idaho Oregon as well as the District of Columbia. commissioner has promulgated Mortgagee Indiana Pennsylvania In the states of Title Policy Binder on Interim Construction Iowa Rhode Island Alabama Missouri Loan (Form T-13), while in New York, Kansas Tennessee Alaska Montana either the New York Board of Title Under­ Kentucky Washington lllinois Oregon writers Form or the American Land Title Maine West Virginia Indiana Virginia Association Loan Policy 1946 Form is used. Maryland Wisconsin Iowa Wyoming The New York Board of Title Under­ Michigan Wyoming Mississippi writers Form insures the insured against all Under the Pennsylvania system, not only no priority or at best, imperfect priority is loss or damage by reason of may the owner be forced to pay "twice" , gained by the lender recording prior to com­ "Any statutory lien for labor or mate­ that is, the contractor, mechanic and mate­ mencement. rial furnished prior to the date hereof rialman, but the total amount due the me­ Unfortunately, in the states which have which has now gained or which may chanic lienholders may exceed the contract statutes sufficient to protect the lender, mort­ hereafter gain priority over the interest price. gagors and contractors will many times be insured hereby." As a matter of fact, a materialman may unwilling to wait to begin commencement This language is not further explained in the have a valid lien even though the material until after the recordation of the mortgage, conditions and stipulations of the policy. is used in such a way by the general con­ so in effect, in many instances, in all these The American Title Association Loan Poli­ tractor or his employees to result in damage states the lender is faced with a complete loss cy 1946 Form insures the insured against or lack of benefit to the owner, Tri-State of priority. loss or damage by reason of: Construction Company vs. Miller, 492 P. Another iffy question is what constitutes "Any statutory lien for labor or mate­ 2d 877, Colorado '71. commencement? Does demolition of an exist­ rial which now has gained or hereafter Justice would seem to dictate "first in ing structure constitute commencement? How may gain priority over the lien upon time- first in right" but as between the com­ about dumping a load of sand or stacking said land of said mortgage or deed of peting mechanic lien claimant and the con­ lumber on the property in question? How trust." struction lender we have a doctrine of rela­ about parking excavation equipment on the The second sentence in paragraph 8 of the tion back. In no case that has come to my property? See Ramsey vs. Peoples Trust &: conditions and stipulations provides in part: attention can the construction lender relate Savings Bank, 264 N. E. 2d Ill, Ind. 70, "The Company will not be liable for subsequent advances back beyond the date commencement for purpose of no lien con­ loss or damage by reason of defects, of recording of his mortgage. Mechanics' tract. In most jurisdictions commencement claims or encumbrances created sub­ liens are believed to attach at the time of is a question of fact to be determined under sequent to the date hereof (excepting commencement of the improvements in the the statute and case law. In some states such any statutory lien for labor or material following jurisdictions: as Florida there is a provision for recorda­ insured against by this policy)." Alabama Montana tion of an instrument known as Notice of The American Title Association Standard Arkansas New Jersey Commencement, while Louisiana provides Loan Policy- 1960 insured against loss which Colorado North Dakota for concurrent recording with the mortgage, the insured shall sustain by reason of: District of Columbia Ohio of an affidavit by an architect, civil engineer, "The priority over the mortgage of any Georgia Oklahoma or registered land surveyor certifying that the statutory lien, or right thereto, for labor Iowa Oregon affiant has inspected the site on the date of or materials which lien or right exists at Kansas Pennsylvania recording and found no evidence of com­ the date hereof, whether recorded or not, Louisiana Rhode Island mencement. These statutes are a step in the or arises from construction which is to Maryland South Dakota right direction but do not resolve all of the become security for and is to be paid in Michigan Wisconsin problems. Under the Florida statute com­ whole or in part from the proceeds of Minnesota Wyoming mencement must be made within 30 days, the indebtedness secured by the mort­ Missouri while under the Louisiana statute, lienholders gage which the insured has advanced or However, in Arizona, California, Connecti­ claiming unpaid wages for labor will have a is presently obligated to advance." cut, Delaware, Idaho, Indiana, Kentucky, super priority which will prime the mort­ Paragraph 3 (d) (4) of the conditions and Nebraska, Nevada, New Hampshire, New gage despite proper recordings. stipulations of the 1960 Form provides Mexico, North Carolina, Tennessee, Vir­ In general, recording prior to commence­ "This policy does not insure against loss ginia, Washington and West Virginia, the ment will only protect lenders who make or damage by reason of defects, liens, lien attaches when the lienor begins furnish­ mandatory or obligatory advances. If for encumbrances, adverse claims against ing services or materials; while in Florida, some reason the lender is no longer bound the title as insured or other matters Georgia, New York, South Carolina and under a building and loan agreement or other attaching or created subsequent to the Vermont, the lien attaches from time of similar agreement to make advances or if the date hereof. (Excepting any statutory filing the claim, American Law of Property, lender retains too much discretion, the court lien for labor or material and ... which Sec. 16.106F. In lllinois, the mechanic's lien will find that the advance is optional and is are insured against by this policy.)" relates back to the date of the contract or primed by mechanics' liens. Columbia Wood When Mr. Ben Henley, then Chairman of commencement, whichever occurs first, Sees. Products, Inc. vs. Equity Investors, 506 P. the Committee on Title Insurance Standard I and 21. Chap. 82 Ill. Rev. Stat .. and in 2d 20, 1973. but see E. K. Wood Lumber Forms, reported this policy to the Conven­ Texas, to the "inception" of the contract, Company vs. Mulholland, 118 CA 475, 1931 . tion in Dallas in October 1960, he said: 26 Southwestern Law Journal 24. There has been some attempt to give ad­ "The clause insuring against loss result­ We believe that in the following states, if vances which are optional priority over ing from mechanics' liens is modified to

TITLE NEWS 25 make it clear that the insurance relates as to the nature of the clause, I am told it may well be optional and subordinate to only to those liens or rights thereto reads as follows: other encumbrances. Elmendorf-Anthony which exist at the date of the policy or "Pending disbursement of the full pro­ Co. vs. Dunn 116 P. 2d 253, Wash. The only which arise 'from construction which is ceeds of the loan secured by the mort­ recourse at this point is to foreclose the to become security for or is to be paid gage described herein, this policy insures mortgage and this, subject to all rights of for, in whole or in part, from the pro­ only to the extent of the amount actually redemption for periods, in some states, up ceeds of the indebtedness secured by the disbursed but increases as disbursements to two years of not only the owner foreclosed mortgage which the insured has ad­ are made in good faith and without against but junior encumbrances of such vanced or is presently obligated to ad­ knowledge of any defect in or objection owner as well. The project must sit during the vance'." to the title up to the face amount of the period of foreclosure plus the period of re­ The 1962 Form which allegedly accom­ policy." demption since as far as I know, only Ala­ plished a clarification of phraseology and did There may also be a requirement for con­ bama undertakes to protect buyers at fore­ not change the actual coverage insured tinuation down to the date of disbursement. closure sales who subsequently improve against loss or damage which the insured I believe this clause expresses the majority premises against redemptioners. In addition shall sustain by reason of: rule relative to additional advances made to the necessary action to foreclose it will in "Any statutory lien for labor or mate­ under a mortgage which secures such ad­ all probability be necessary to bring a legal rial which now has gained or hereafter vances in all cases other than construction action against the corporate writer of the may gain priority over the lien of said loans, 138 ALR 566. but a Missouri case bond. mortgage upon said estate." decided in 1972 styled, Drilling Service Co. Title insurance companies quite frequently In the 1962 Form, paragraph 3 (d) (4) of vs. Baebler, reported at 484 S. W. 2d I, is excuse the contractor from furnishing such the conditions and stipulations limited the illustrative of the so-called "first spade rule". bonds and take an indemnity agreement coverage afforded by the insuring paragraph The case stated that the theory of this rule from the owner andf or contractor to save of the policy by excluding from coverage: is that the fact of improvements gives its own the title company harmless from having in­ "Defects, liens, encumbrances, adverse notice to all the world. Under the first spade sured against mechanic's lien. This is credit claims against the title as insured or rule a lender who makes additional advances underwriting and must be based in large other matters attaching or created sub­ subsequent to the recording of his mortgage measure on the financial statement of the sequent to the date hereof (excepting is on notice that mechanics and materialmen indemnitor and his ability to make a satis­ any statutory lien for labor or material are improving the security and that their factory financial response in case of difficulty. insured against by the policy, provided, lien may well relate back so that the con­ Title companies sometimes engage in a however, the Company shall not be struction lender must make any advances in form of funds control whereby they under­ liable for any statutory lien arising a manner so as to relate back to the date of take to police construction lenders' funds to from the construction on the land con­ recording, that is, the advances must be make sure that the proceeds of the loan go tracted for and commenced subsequent obligatory. into improving the property. There seems to to the date hereof which is not financed In order to advise a lender as to his need be some statutory recognition of this type of in whole or in part by the proceeds of to make only mandatory advances I would service in California, Fin C Sec. 17005.1 and the indebtedness secured by said mort­ suggest a pending disbursement clause sub­ Nevada, Chap. 627 Nevada Rev. Stat. The gage which the insured has advanced or stantially as follows: statutes apparently contemplate furnishing of is presently obligated to advance)." "Pending disbursement of the full pro­ funds control service by title companies and The 1969 American Land Title Associ­ ceeds of the loan secured by the mort­ others. Title companies very often combine ation Standard Loan Policy Form was iden­ gage described herein, this policy in­ their version of controlling funds with re­ tical to the 1962 Form insofar as mechanic's sures only to the extent of the amount quirement for waivers of mechanic's lien lien coverage was concerned. actually disbursed as of the date of the rights. The 1970 Form insures against loss or policy but increases as obligatory ad­ In any of the above situations where the damage to the insured by reason of: vances are made in good faith and with­ title company undertakes to afford mechan­ "Any statutory lien for labor or material out knowledge of any defect in or ob­ ic's lien coverage by insuring paragraph 7 which now has gained or hereafter may jection to the title up to the face amount in the Loan Policy, with or without a pending gain priority over the lien of the insured of the policy." disbursement clause, bond for labor and mortgage, except any such lien arising This clause may be supplemented by add­ materials, indemnity agreement or funds from an improvement on the land con­ ing the additional sentences if desirable control and a mechanic's lien is filed, the tracted for and commenced subsequent under the circumstances: title company will have a problem. At best to the date of the policy not financed in "Record title shall be continued down the title company will be charged with the whole or in part by proceeds of the in­ to the date of each disbursement and costs of litigation, plus an unhappy customer debtedness secured by the insured mort­ the company shall furnish to the mort­ whose reasonable expectation has been frus­ gage which at the date of the policy the gagee a continuation report stating trated. In most cases there are questions insured has advanced or is obligated to whether since the date hereof or since which go over and beyond the mere priority advance." the date of the last preceding continu­ between the mechanic's lien and the con­ In the 1970 Form the Schedule of Exclu­ ation report, any liens or encumbrances struction loan. In a recent case we had in sions from Coverage expressly excluded in have been recorded. Nothing contained Tennessee, in addition to the question of paragraph 3( d): in this paragraph shall be construed as priority, we had the question of right of re­ "Defects, liens, encumbrances, adverse extending the date of the policy or as demption for a period of two years because claims or other matters attaching or limiting any exception under Schedule a Georgia deed to secure a debt was used created subsequent to the date of the B or any printed provision of this rather than a Tennessee deed of trust. We policy (except to the extent insurance is policy." had some question as to the effect of the afforded herein as to any statutory lien Sometimes we are told that we should trust deed sale since there was a substitution for labor or material)." forget mechanic lien problems because there of trustee at the point of sale. Mechanic's The operating people in California believe will be a labor and material payment bond lien claimants also contended that the lender that they can afford mechanic's lien cover­ written by a corporate surety company desig­ and the trustor were joint venturers and that ages to a lender who records prior to com­ nating the title insurance company as an if, in fact, a loan existed, it was usurious. In mencement by offering to the lender cover­ obligee as well as the lender and owner. Such a recent Kansas case there was no question ages by use of the 1970 American Land Title bonds are actually a form of credit and the of the relationship between the mortgagor Association Loan Policy without including bonding capacity of each individual or entity and the mortgagee but the mortgagee had in the policy a pending disbursement clause. is limited based upon their financial state­ two separate mortgages without any pro­ They believe that they are insuring the lender ment. In case of problems, the corporate vision for cross-default, the larger mortgage against mechanics' liens as to any advances surety company is oftentimes slow to respond being on an apartment project and the small­ made under the Loan Agreement at the date and the title company may be asked to take er mortgage being on additional acreage for of the issuance of the policy and obligatory over the loan and step into the shoes of the future apartment and other planned improve­ advances which are thereafter made. lender. Once the terms of the mortgage or ments. In case of foreclosure, the apartment Quite frequently when the question of building loan agreement has been breached project would likely be sold to the mortgagee mechanic's lien comes up, I am told there is the lender or the title company as assignee but outside bidders were almost certain to no problem as far as the title insurer is con­ of the lender cannot put additional funds in buy the unimproved parcel. Our insured cerned because the policy will contain a the project and hope to prevail as against mortgagee was offered a deed in lieu of fore­ pending disbursement clause. Upon inquiry mechanic lienholders since such advances closure. If we consent to the deed in lieu,

26 JANUARY 1974 does this prejudice our right to test the pri­ Owner concludes that he would like to have further held that lis pendens procedures do ority of the mortgage as against the mechan­ an apartment house built and takes his plans not present any " extraordinary" circum­ ic's lien claimants? and specifications to contractor who says "I stances or "countervailing state interest of I believe that the Construction Disburse­ can build the apartment house for X dollars". overriding significance" which would distin­ ment Program as conducted by our company Owner then goes to permanent lender who guish the summary prejudgment procedure and other title companies is a reasonable commits to loan owner Y dollars when the in the lis pendens statute from those already response to the construction lenders' need apartment house is completed and a specified held to be unconstitutional. Lake Tulloch for protection against mechanics' liens. The percentage of occupancy is attained. Owner Corporation vs. Dingman, Los Angeles obvious way to avoid mechanics' liens is to then takes the commitment from the perma­ County Superior Court Case No. WEC- pay all construction costs. This can only be nent lender to construction lender, who 27140. done with money and the Construction Dis­ agrees to loan owner Z dollars, if disburse­ There is a contrary holding in the Cali­ bursement Program ascertains that the ments are made under the title company's fornia Court of Appeals which concedes that source of this money is other than monies disbursement program. Owner then goes to the marketability of the property is impaired held by the title company treasurer for the the title company which will want owner's but points out the countervailing interest of benefit of policyholders and finally for the plans and specifications, the contractor and the state in an orderly recording and notice widows and orphans who hold stock in the major subcontractors contracts, all of which system for transactions in real property company. will be submitted to a person skilled in con­ makes imperative notice to buyers of proper­ Our company sees a Construction Dis­ struction costs, usually an architect who will ty of the pending cause of action concerning bursement Program as a proper escrow estimate the hard construction costs pre­ the property, Enfield vs. Spicka, Court of activity which affords an underwriting tech­ sumably X dollars. The title company will Appeals of the State of California, Second nique allowing us to offer mechanic's lien then consider other costs such as interest Appellate District, Division Two, Civil No. coverage superior to limiting our contract during the course of construction, taxes, fees 42127. liability under paragraph 7 to obligatory and other items which the owner must pay From a title industry's standpoint statutes advances, accepting bonds or indemnity or accrue during the course of construction. providing for filing notice of lis pendens are agreements or any other technique presently When a sum sufficient to cover the hard desirable since in the absence of such statutes known. construction costs plus the other items, plus we would be back under the common law Our contract is a four-party agreement by a suitable contingency has been made avail­ rule which says nothing relating to the sub­ and between contractor, owner, lender and able to the title company, the contract will ject matter of the suit can be changed while our company, as escrowee, and is sufficiently be entered. it is pending and anyone acquiring an inter­ broad to include all our rights and obliga­ During the course of construction the title est in the property involved therein from the tions as between our company and the other company will cause an inspection to be made party thereto takes such interest subject to parties. prior to each payout and will only disburse the party's rights as finally determined and Our obligations are pretty simple and are funds to pay for items that have been in­ is conclusively bound by the litigation. In the spelled out in the contract as follows: corporated in the premises in accordance absence of a lis pendens statute providing "Should owner and contractor fail to with plans and specifications or suitably for the recording of notice, suits affecting complete in accordance with the terms stored. real property act as their own lis pendens of this contract, escrowee is obligated to If problems should develop the title com­ in the state and federal courts where filed. the lender, at escrowee's option either pany may elect to purchase the construction There are a number of very recent cases (a) to complete the improvements sub­ loan under (b) above. This does not material­ .holding that an attachment of real estate, stantially in accordance with the plans ly add to the option which the title company even though accomplished in full compliance and specifications, or, (b) to purchase has under section 5 of conditions and stipu­ with the state statutes, including the furnish­ lender's note and mortgage by paying lations, American Land Title Association ing of a bond, but without providing owner all sums then due under said instruments Loan Policy- 1970, but neither does it in with notice and an opportunity to be heard wherein the lender shall endorse with­ any way restrict such option. In addition, at a meaningful time and in a meaningful out recourse and deliver said note and the title company has the right under (a) manner, violates the due process clause of assign the note and other security to the above to complete the improvements sub­ the 14th Amendment. 41 Law Week 2492. escrowee. Escrowee has no liability to stantially in accordance with the plans and March 20. 1973 Idaho; 42 Law Week 2035, owner or contractor to complete. Es­ specifications and this right is granted from July 17, 1973 Maine; 42 Law Week 2132. crowee's obligations to lender to com­ the owner and con tractor as well as the September II, 1973 Massachusetts. plete shall be consummate with the lend­ lender. The title company also has the right In the Massachusetts case the United er's acceptance of the improvements. to use all funds of the owner and contractor States District Court pointed out that in Provided, however, escrowee shall have held in escrow as well as all remaining funds only a few limited situations has the court no obligation either to complete pur­ unadvanced by the lender. allowed outright seizure without opportunity suant to (a) above or to purchase pur­ Following Sniadach vs. Family Finance for a prior hearing. First, in each case the suant to (b) above to the extent that Corporation of Bay View, decided in June, seizure has been directly necessary to secure completion is prevented or rendered 1969, 395 U.S. 337. which held that the Wis­ an important governmental or general public more costly because of soil conditions, consin garnishment statutes were uncon­ interest. Second, there has been a special or by an Act of God, earthquake, fire stitutional, other customary and accepted need for very prompt action. Third, the or other casualty, vandalism, riots, civil practices such as attachment, cognovit notes, state has kept strict control over its monopoly commotion, war, National emergency, summary eviction, replevin ·and ·self-help of legitimate force: the person initiating the labor dispute, or order of court or gov­ under Section 9-503 of the Uniform Com­ seizure has been a government official re­ ernmental agency. mercial Code have been attacked as violative sponsible for determining, under the stand­ Escrowee has not been employed and of due process clauses of the state and federal ards of a narrowly drawn statute, and it was has no responsibility to supervise con­ constitutions by sanctioning the taking of necessary and justified in the particular in­ struction or determine adequacy of de­ property without prior notice. stance. Such are the extraordinary situations sign in plans and specifications. Es­ This attack has run the gamut from re­ which will justify suspending the due process crowee shall have no liability for lo ss plevin an ancient law remedy to the self-help clause of United States Constitution. resulting from defect or deficiency of provisions incorporated in the Uniform Com­ Aren't mechanic lien statutes subject to design or engineering, supervision, ar­ mercial Code which is one of the most the same general attack on the basis of their chitectural administration, quality con­ modern and well considered pieces of recent constitutionality under the federal and state trol, sampling, testing or defective mate­ legislation, 5 Indiana Legal Form 300, statutes? Such statutes, like lis pendes re­ rial and workmanship provided by con­ Spring '72. quire no bond and also like lis pendens can tractor, owner or those employed by The Superior Court in Los Angeles Coun­ be and often are misused. The filing of a either of them. Escrowee further agrees ty, California, in a well reasoned case, mechanic's lien inhibits the transfer, sale or upon completion to issue, or cause to be recently held that the lis pendens statute is assignment by the owner and deprives him of issued by an affiliated title insurance unconstitutional since the owner of real the economic value of his property which company, an American Land Title Asso­ property is deprived of the use of his proper­ amounts to an unconstitutional pre-hearing ciation Loan Policy- 1970, without ex­ ty by restricting saleability. The Court went taking of property just as much perhaps even ception as to mechanics' and material­ on to say that this deprivation is as great as more than lis pendens or attachement. In men's liens." a depositor whose bank account has been lis pendens or attachment the moving party An oversimplification of the application attached or one who has been sued for claim would normally be acting under advice and of our program would go something like this. and delivery, that is replevin. The Court direction of counsel an officer of the court,

TITLE NEWS 27 and would of necessity be required to pay viding for attachment of real estate and under the due process and equal protection filing fees, while in cases of filing mechanics' allowing the relation back of a later per­ provisions of the federal and state constitu­ liens he probably would be acting pro se fected lien to some earlier event for the tions because the provisions were discrimina­ using a stationery type form with nominal purpose of determining priority, United tory since they permitted no such allowance filing fee. States vs. Security Trust and Savings Bank, to a successful defendant, Gaster vs. Cold­ 340 U.S. 47, 1950, nor is a FHA mortgage iron, Del. Supr. 297 A 2d 384, 1972. Mechanic lien statutes may also be bad assigned to the United States inferior to Mechanic's lien provided by statutes of insofar as federally insured or guaranteed subsequently filed mechanics' liens notwith­ the several states are an ancient remedy mortgages are concerned because of the standing the state law which provides that which may have lost some of their social mechanic lien relation back concept. Ever mechanics' and materialmen's liens relate justification. Most, if not all other creditors since 1942 when Clearfield Trust Co. vs. back to the date upon which the labor or have to select their debtors with care and United States, 318 U.S. 363, was decided it material was first furnished, T. H. Rogers cannot look to property of third parties for has been the law that when the federal gov­ Lumber Company vs. Ape/, 468 F. 2d 14, security in the absence of contractual ar­ ernment acts to disburse funds or recover lOth Cir. 1972. rangements made before extending credit. debts, it is exercising a constitutional func­ In any event, I see nothing wrong with and tion and federal law controls. The federal Statutory provisions which allow attor­ I believe the industry should be willing to rule is "First in time, First in right". This neys' fees to successful mechanic's lien use Sniadach and its progeny to test the rule gives no weight to state doctrines pro- claimants were found to be unconstitutional constitutionality of mechanic's lien law.

Comments by

Irving Morgenroth

Senior Vice President and Chief Counsel, Commonwealth Land Title Insurance Company, Philadelphia, Pennsylvania

You know, I don't recall speakers being we want to discover some method to evaluate ment notices or other legal devices that are applauded before they spoke earlier this our position so that we can discover a method permitted under the statute of the jurisdic­ morning and I feel like leaving at this stage, for giving it and giving it safely. We are tion to protect the priority of the mortgage. particularly if I could share the optimism of often guilty of oversimplifying this very If continued priority depends on searches my learned colleague-and I suppose that is complex subject and then, having over­ or waivers prior to each advance, then an what I have to call Ray in the context of simplified it and creating a simplistic frame­ appropriate "pending disbursement" clause, this debate today- if I could share the work, weaving such a mysterious aura around correctly limited as Ray Sweat has indicated, optimism of my learned colleague that Me­ it that we no longer understand it ourselves. or other limitation in Schedule B, should chanics' Lien Statutes will be declared un­ Ray has ably demonstrated that juris­ condition coverage on such requirements. constititional. She is an old lady, gentlemen, dictions differ very drastically on the ques­ This underwriting is something with which but she is not dead, and I don't see any tion of priority of mechanics' liens versus the we are all familiar, well within our abilities, indications of her last gasp. priority of a construction loan mortgage. with no greater risk, except numerically I I think that I'm most reminded in my Some jurisdictions provide legal means for suppose, than that undertaken in other forms invitation to come here today by my own the achievement of priority by the mortgage. of underwriting. position several years ago when I attended This may be in the form of prior recording Notwithstanding that the determination a convention at which a speaker was invited or some other method to effect the junior may be one of extreme complexity or require to discuss Mechanics' Lien coverage and date to which a subsequent mechanics' lien the resolution of such questions as when does Underwriting and at which, I, like yourself, may relate. This priority may often be lost construction commence? Or what kind of sat waiting for something meaningful to by the failure of the mortgagee to limit his advances are obligatory? Admittedly me­ emanate from the podium. To my amaze­ advances to those he is legally obligated to chanics' liens are problems because they are ment and somewhat to my chagrin, the major make. so much a function of local law and history thesis of our expert was that there were as Other states do not furnish any means to and are among the most difficult to fathom. many different methods of underwriting protect the priority of the construction lend­ But if it is difficult to underwrite a risk Mechanics' Lien coverage as there were er against the mechanic lien claimant. It within the framework of what appears to be underwriters present. would seem that in these areas problems of an all out effort on the part of all the par­ I'm sorry to say that since that episode underwriting are more severe. Between these ticipants in the transaction to obtain priority time has not demonstrated that that gentle­ two extremes are jurisdictions in which pri­ for the insured mortgage or deed of trust, man was wrong. orities may or may not be established on then it must merit canonization to under­ We're talking about Mechanics' Lien behalf of a mortgagee, depending on a write situations involving no priorities or coverage today in the context of our loan variety of factors such as whether or not where the priority has been lost by actions policy ALTA form 1970 and we're making waivers or releases are obtained or whether of the participants. several assumptions. or not advances are made only after a search Underwriting in that kind of environment First of all, that the lender requires the discloses no liens or notices of liens. is a gamble which at best can rise to the coverage. This is a justification that has been It is significant that when we talk about height of an educated guess; and I think we used frequently and although it's a justifica­ underwriting mechanics' lien coverage, we are being very foolish when we delude our­ tion, it certainly is not an excuse. The lender distinguish between two basic acts. The first selves into the belief that somehow we have requires the coverage; he also would like to act, the one which by custom and tradition reduced what is essentially soothsaying to the have insurance against the non-payment of and because we have assumed this respon­ certainty of scientific achievement. principal and interest. He also would like to sibility, we're prepared, or ought to be pre­ Regardless of the music or the beat to have a few Martinis with you, and he also pared, to do and that is determining the which we dance, the lyrics of the song in­ might like to have a beautiful girl for the applicable law of the jurisdiction, making the variably relate to these factors. First, the night. We can't supply him with all of these decision that all of the legal prerequisites stability and past performance of the prin­ unfortunately. Perhaps we should move in have been met to entitle the insured mort­ cipals, a form of credit underwriting. Second, the direction of the last two rather than the gage to a priority over a mechanics' lien; or the sufficiency and control of the disburse­ first two. making the decision that we can obtain the ment and, third, the availability of indemni­ The other assumption that we're making appropriate evidence of later commencement ties or sureties and their value. None of is that we want to give this coverage and of the work or later filing of the commence- these factors offer absolute protection al-

28 JANUARY 1974 though certainly the availability of a sub­ liens and encumberances." The title to the lose the war. stantial and valuable surety bond appears to land improved by an incomplete building There are other dangers in embarking on come closest to that goal. can be free of defects, liens and encum­ a project to find a cure for this disease. We're But I would like to direct my attention, berances as can the title to real estate upon on the threshold of a substantial economic however, to one significant area of contro­ which a complete structure has been erected." uncertainty and having said that -I suppose versy that seems to be developing over that The options that completion guarantees everybody says continuously that we're protective device which my colleague euphe­ appear to present to the title underwriter are always on the threshold of economic un­ mistically described as Construction Dis­ by no means all the options that I would certainty- the fact that that is a truism does bursement Program and which I like to call want. Conditions of the policy would appear not detract in any way from its applicability "completion guarantees", and I think there­ to give us a greater opportunity to resolve in this circumstance. by hangs the basis of our controversy. mechanics' lien claims than the alternatives There is a certain element of conceit that Basically, control of disbursements is a provided by completion guarantee agree­ the industry and the title underwriters have highly effective means of limiting exposure. ments. enjoyed. We always consider ourselves super­ However a guarantee of completion is cer­ Although it must be admitted that the lawyers because of our willingness to plunge tainly not necessary to operate such a device practical result of many such claims may, headlong into making determinations that successfully. If there is any justification for after all, require us to step in with the funds participants and their counsel are unwilling all the effort and analysis involved in deter­ necessary to complete, the completion of the or unable to make. mining the sufficiency of the funds, obtain­ structure is entirely irrelevant if we are able Now should we also consider ourselves ing inspections and making certain that ad­ to establish, for example, the priority of the super-engineers and super-architects. Shall vances are not misdirected, it is to insure insured mortgage over such mechanics' liens we have Oying squads of experts dispatched that those who have supplied labor and that are filed or potentially filed. to every geographical and financial environ­ materials to the project have been paid Now my colleague indicated that this ment with a greater ability to discern the rather than to insure or guarantee that avail­ could be a complex lawsuit and I suppose the unknown than the local contractors, engi­ able funds will purchase a given amount of existence of a claimant on our title policy neers and architects. And particularly, a labor or materials. with impending litigation is never easy in greater ability to discern the unknown than I have to raise the spector of "permissive­ connection with our obligation or desire to the local lender who is eager for this pro­ ness" in this situation; or whether we're make the title as insured. But if we are able tection. entitled to assume our statutory authority to to establish that priority, certainly it is not In addition we have to recognize there is engage in completion guarantees. But, with­ necessary that we complete the structure. no way to cope with fraud under any circum­ out any equivocation, let me say categorically Under some conditions involving a cessation stance. There doesn't appear to be any way that I think completion guarantees are not of work on the project it is not impractical to stop a thief, and I don't think that the title insurance. to conceive of opportunities arising to defend protection of a disbursement program are Now that is a gauntlet and every time on mechanics' liens on their merits or to fraud-proof or thief-proof in this circum­ someone throws that down we walk away settle and compromise the liens without com­ stance. and I don't think we're going to resolve it pleting the project, so that instead of offering Drastic cost escalations are not unknown. in this forum, but let me read something to additional alternatives to the underwriter How are we to protect ourselves? By larger you if you'll permit. completion guarantees would, in my opinion, and larger contingency funds? Is a form of "Title insurance is insurance of owners of appear to limit the options which the under­ competition, inverse rate competition if you property or others having an interest therein writer has available for consideration and will, to be based upon whether Company A or liens or encumberances thereon against often amounts to a waiver of those possible will require a ten thousand contingency fund loss by en cum berance or defect of title or avenues of approach which the policy seems and Company B a seven thousand dollar con­ invalidity or adverse claim to title." Or how to provide. tingency fund . And that really does bring about this one? "Title insurance means in­ In addition, the question of completion up one of the important problems that we suring guaranteeing or indemnifying owners seems, itself, to imply that in a given situa­ have to consider: whether or not we are will­ of real property or others interested therein tion of complexity, particularly the one that ing to compete on this basis to offer this new against loss or damage suffered by means of Ray Sweat described regarding usury -the coverage with rate competition in a basically liens, encumberances upon , defects in or the allegation that the lender was in fact a joint unregulated area combined with rates which unmarketability of the title to some prop­ venturer-that money or the availability of are basically regulated. Is this going to create erty." Or this one, and I won't bore you too funds to complete is necessarily the essential instances in which our surety binding aspects much further. element or the end all or be all in resolving may be a loss leader for our title insurance "Title insurance means the insuring, the problem. or vice versa. guaranteeing or indemnifying of designated A sufficiency of funds to complete may not Whether indirect rebating or other evils owners of real estate or any interest therein necessarily resolve all of the perplexities may result and whether, at best, we will against loss or damage which may result by that may plague a situation in which the recognize a tendency to increase risk taking reason of the title being vested in a manner project is terminated or stopped and legal and movement into areas of unsound under­ than otherwise is stated in the title insurance problems and mechanics' liens arise whtch writing on a casualty basis, is an important policy or by reason of the title being un­ would require the title underwriter to par­ question. marketable or by reason of the title being ticipate in litigation. Since the original justification of our me­ subject to liens, encumberances or other In addition completion guarantees do not chanics' lien coverage is the establishment matters adversely affecting the rights of use attempt to resolve issues of marketability by of priority, the maintenance of priority and enjoyment or disposition thereor• - now we reason of the exposure of a mortgage to the the protection that was designed to minimize might get something out of that-"and not hazard of unfiled liens particularly in situa­ risk are now lost. Since we have enough excepted in the policy." tions in which the law of the jurisdiction may money to complete this structure in any Now, I'll let you make the decision as to provide a method where that mortgage could event, there is no reason for us to be more whether the various definitions prescribed have obtained priority. than casual about these problems. by state statutes which regulate title insur­ In such a circumstance it's entirely con­ I think I want to talk for a moment about ance permit completion guarantees. I would ceivable, particularly in our current market the question of whether the customer really just like to quote once again with your fore­ situation, for a permanent lender to reject wants guarantees of completion. I can't deny bearance-and it's always nice to quote from the tender of the assignment of the loan, their value, particularly to the least sophis­ someone who agrees with you- so I' m going upon completion of the building but during ticated lender, but there is no question that to read this for a moment. The opinion of the mechanics' lien period under the so it interferes with the normal borrower­ the Deputy Attorney General directed to the called Pennsylvania system, because the lender relationship. It is true that in the Secretary of Banking, on November 19, mortgage is unreasonably exposed to that states and jurisdictions in which advance 1941, the Commonwealth of Pennsylvania ­ hazard notwithstanding the willingness of the money mortgage doctrine applies, and the now that's a while ago, and that's why I underwriter to insure or to complete the obligatory nature of the advance is all that thought it was particularly significant. After project. This is a serious problem, I think, saves the continued priority of the mortgage, discussing what he refers to as completion and one which we have often grappled with that waivers of defects or defaults on the bonds, he says, " ... it is clear from the as to what our liability would be in such a part of the lender would certainly tend to above that the purpose of the title insurance circumstance. To be required to suffer a loss make present and future advances voluntarily company is to insure the owner of real estate in that manner would be a particularly ap­ and exposed to the mechanics' lien risk. or a mortgagee or others interested in real palling thought since no liens might ever be I think the lenders are well aware of this, estate from loss by reason of defective title filed and we would thus win the battle but and I think notwithstanding that they do not

TITLE NEWS 29 foreclose as a practical matter, and often The permutations and combinations of the legislatures and the courts that they are advance in the face of a default, primarily risks seem to be without limit. Jack Tickner not protecting carpenters and bricklayers because they are appreciative of the relation­ tells us that mechanics' liens are not fun and any longer-that quite often sub-contractors ship in which they are put, the situation in I agree; and they do tend to create greater and material suppliers have greater sub­ which they are sponsoring or financing the difficulties for us. There's no question that stance than the parties to the transaction, project. this problem calls for stricter controls on the often with more financial resources than the What will be our decision when such an part of the title underwriter, but rather than title underwriter and sometimes the lender. item arises? If we are participating in a com­ afford more insurance or potentially a dif­ We should stop being ashamed of requiring pletion guarantee program and the lenders ferent kind, I believe we should offer less. protection, such as controlled disbursement advise us of a minor defect or default in the I think we should exercise sufficient discre­ and professional evaluation and contingency course of the construction, are we now going tion in our assumption of mechanics' lien deposits and we should stop being so ashamed to begin overriding, or underwriting, if you risk so that our insureds come to recognize of requiring that the buyer bear the expense will, these defaults because they're not signi­ that such underwriting is not obtainable with of these protective devices, that we feel com­ ficant or because we can get added protec­ the same ease as flight insurance. pelled to offer a bakers dozen of coverage. tion. We should exert greater efforts to convince Thank you.

Report of ALTA Standard Title Insurance Forms Committee

Marvin C. Bowling. Jr.

Committee Chairman Vice President and Counsel, Lawyers Title Insurance Corporation, Richmond. Virginia

Now, I want to give you immediately two hold policy and what amount of claim do you when that right of occupancy is lost. In suring items of relief. Number one, I'm not going intend to pay on those elements of damage ~ title to ownership other than lease-hold, the to talk about z-o-n-i-n-g and number two, we So it involves, I suppose. four major prob­ amount of the loss suffered by the insured have no amendments or endorsements or lems: the value of the lease-hold estate, can be calculated on the basis of the value standard forms to recommend. Rather I defining the interest in land insured, the of the interest much more easily than a lease­ want to refresh your memory on why the damages that might be paid for eviction hold estate. Standard Forms Committee is busy at work from that lease-hold estate, and the inciden­ The value of the former can be appraised and what it is busy at work on. tal damages that the insured suffers if he has at fair market value and the insured has paid At least three years ago this industry and to abandon or be evicted from all or part of for his fee simple estate and suffered the loss our customers, the Board of Governors and his estate. of the amount of that payment. On the other the Standard Forms Committee thought it Now, let's ju t for a second take a look at hand, determining th e value of the lease­ was about time we had a lease-hold policy. a lease-hold estate. We have an idea that a hold estate is difficult because the insured The present ALTA Owner's policy was not fee simple interest furnishes all the rights and doesn't have an interest that easil y can be considered to be completely definitive in muniments of title, and we ta lk about the given a fair market value, but rather the being used as insuring the interest of a lessee. entire bundle of sticks: but when we look at right to use the property for a term of years. So why a leasehold policy~ a lease-hold estate we find a rather strange The value of this right is extremely difficult I'm reminded of a call that I got from an animal which has varying definitions from to determine. The in sured has received the agent who had given some libera l and rather one state to another. Is it a chattel real? Is it use of the land for the rent paid and in the wild in surance and I said, "Why did you an estate for years? A right to occupy? Is it event of title failure wi ll lose the right of give this~" And he said, "Well , the customer privity of estate and privity of contract? future use which, aside from any payment wanted it"! Now, that's a pretty good reason, Well , certainly the lessee gets a right to he has to make to the true owner, he will and it is certainly one of the reasons that we occupy the property for a certain term of not ordinarily be obligated to pay. are working on a lease-hold policy. I think it years: but, along with that right, he receives We're confronted with this question. what is not just the customer who needs such a certain contractual rights which he may en­ will be the insured's loss in the future if he policy, but a lso our industry needs to better force against the lessor. So the le ase-hold cann ot use the land as contracted for in the define what we intend to do when we insure seems to take a dual aspect. Do we intend in lease~ In looking at methods of eva luating a lease-hold estate. issuing our policy to insure not only that he lease-hold estates. we found that the most What are the problems in volved in in sur­ has the right of occupancy but that he has common method found in the ca es was that ing a lease-hold estate? And this will give enforceable contractual rights against the used in condemnation. In those states in you some idea of what our committee is lessor-types of contractual rights that might which the lessee's interest is condemned and wrestling with at the moment. What interests possibly be cut off by the bankruptcy of the paid for separately from that of the lessor, we in land do you intend to insure in in suring lessor. found that in many instances this formu la is a lease-hold estate? What is the value of a So our committee has been wrestlin g with used: he is paid for his loss of bargain, i.e., lease-hold estate? What should be the amount showing in the policy which rights and privi­ the difference between the actual rent he is of the policy has been a continuing problem. leges we intend to insure when we insure a paying and what is fair rent. So if the actual What are the elements of damage we intend lease-hold estate. We're also wrestling with rent that he is paying is below fair rent, then to pay in the event of a claim under a lease- what damages should be paid under a policy he has a bargain. The difference is ten thou-

30 JANUARY 1974 sand ($10,000.00) dollars a year, l"or example, where it is recorded and that it has a term considering the payment of rent and damages and he has ten more years on his lea se-hold of a certain number of years to run. for use and occupatio n wh ich the in sured estate and theoretically he has a bargain or This ties in with our insurance against loss may become obligated to pay to any person a hundred thousand dollars and that amount due to eviction and loss of use of the property having a title paramount to the lessor and is discounted and he is paid a lump sum. over the remainder of the term, which then paying the amount of rent which by the This appears to be the most prevalent permits the title company. if it so desires, to terms of the lease the insured is required to method of determining the value of a lease­ inclu de not only the original term but to pay to the lessor after eviction. We are con­ hold estate. If we adopt this rule we seem to include any options to renew so that in cal­ sidering paying the fair market value at the be talking about making sure the lessee cu lating va lu ation, we're talking about the time of such evictio n of the estate or interest doesn't lose the good bargain he's made by use of the property by the insured for eith er of the insured in sub-leases which he loses contracting to pay a lower than fair market the remainder of his original term or of because of his eviction and the payment of rent. Then we talk about incidental damages renewed terms. judgements for money damages entered by a he might suffer. In addition to losing his We're thinking about defining lease-hold court of competent jurisdiction again st the good bargain. he has the cost of moving out estate as the right of possession for the term insured arising out of an action brought by if he is evicted, and the values of moveables or terms shown on the face of the policy. In sub-lessees on account of something insured and immoveables. other words. you might insure that the in­ against. The immoveables he must leave behind. sured at the date of policy has the right to You can see that the coverage I have out­ The moveables he wi ll suffer loss in having to possess the property for the remainder of the lin ed to you relates to the eviction of the transport them and any other possible loss fifty (50) year term subject, of course. to the insured and this we feel is what the insured that he might suffer by having to take them terms and conditions of the lease which are may lose under a lease-hold estate. We intend up and put them in in another place. bi nding upon the lessee. to in sure the right of occupancy and losses Can we limit our liability just to the value Now what have we done by defining this arising out of the loss of the right of occu­ of the insured's interest in the land? Does as the right of possession? You are aware, as pancy. Now this does not mean to say that this mean that in the event of total loss we I have mentioned, that there are other cove­ our policy will not continue to insure against would not have to pay incidental damages'' nants and conditions enforceable by the all other matters. We do intend that it con­ This probably would not appeal to the lessee lessee wh ich in many cases are called con­ tinue to insure against judgement li ens, for the va lu e of his estate may be small. If tractual rights. -not real estate rights. but Federal tax liens, a nd so forth. he is paying more than fair market rent then rights which ;Ire enforced in contract. It is These can ripen by their enforcement into he theoretically hasn't suffered any loss be­ this type of cevenant and condition which a loss of occupancy, so there is not a dimi­ cause he has gotten out of a bad deal. the lessee may enforce against the lessor nution in our coverage being given to our We're considering then the spelling out of that we are of the opinion should not be an insureds under the lease-hold policy, but incid ental damages which may now from the insurable interest in a title in surance policy. rather a defining of that coverage so that in loss of the use of the property. What do we At the present time most of us include in our the event of loss of occupancy, the insured mean by reasonable cost of moving severable policies an exception to the terms and con­ and the title company can look at the pro­ improvements') How far can they be moved ditions of the lease. This is a ve ry vague and visions of the policy and· have some guide­ at o ur expense? Is a building a severable difficult exception to explai n. a nd it is our lin es for the payment of that loss. We a lso improvement? Do we pay for decrease in hope that this insurance can be clarified by hope that by putting in these guidelines or value of those improvements due to moving? defining a lease-hold estate as the right to valuation of the insured's estate. some help Should we consider paying the difference in occupy the property. wi ll be given in determining what should be rent at a new location? What about loss of We then have put in a method of evalua­ the amount of the policy issued to a lessee. good wi ll . and loss of profit? tion of the insured's interest, using the con­ I hope this will indicate to you the reasons How about rental or use and occupation demnation theory. We have stated that in the Standard Forms Committee has not over­ claims again st the lessee for past use by the the event that the insured is evicted from night produced a lease-hold policy. We are true owner of the property who hasn't gotten possession of a ll or a part of the land by working vigorously a nd we do have some his fair rent? reason of any matters insured against, the ideas, as you can see, which we are attempt­ These are some of the questions that your va lu e of the interest of the insured will be ing to iron out. committee has been considering in talking determined pursuant to the above method. Now before I leave I want to again th ank about a lease-hold policy and to some extent wh ich i s the method I have outlin ed to you, this association fo r furnish in g me an excel­ we have answered them by a tentative form and that damages and obli gations in addition lent committee. They have worked hard and wh ich we are now working o n wh ich we feel thereto may be considered and these are the done a good job in attending the meetings is a definite improvement over issuing our incidental damages that we are considering and sitting through the dotting o f the i's owner's policy and saying we insure a le ase­ insuring against. and the crossing of th e t's and the theorizing. hold interest. We think it would be advisable Loss includes reasonable cost of removing They are a dedicated group of men who in­ to sho"' on the face of the policy that the and relocating severable improvements situ­ tend to provide our customers with the cover­ interest we are insuring is a lease-hold estate ated on the land at the time of eviction and age they need but within sound underwritin g as defined in th e po li cy in the conditi ons and the reasonable cost of repairing improve­ policy that will protect us against undue loss. stipulations, show by whom it is executed, ments damaged in transporting them. We're Thank you.

TITLE NEWS 31 ELECTION OF NATIONAL OFFICERS

nomination and second, the Treasurer-FRED B. FROMHOLD, Phila­ antee Company By proper Streets 21202 following officers were unanimously elected delphia, Pennsylvania St. Paul and Lexington for 1973-74: President and Chief Executive Officer, Commonwealth Land Title Insurance NICS. HOYER, Milwaukee, Wisconsin Title Service Co., President - ROBERT C. DAWSON, Rich­ Company President, Wisconsin mond, Virginia 1510 Walnut Street 19102 Inc. 53202 President, Lawyers Title Insurance Cor­ 700 North Water Street poration Salt Lake City, Utah 3800 Cutshaw Avenue 23230 BOARD OF GOVERNORS FLOYD B. JENSEN, (Term Expiring 1974) Vice President, Western States Title - ROBERT J . JAY, Detroit, Company President-Elect Street 84111 Michigan JOHN E. FLOOD, Los Angeles, California 370 East Fifth South Land Title Abstract Company President, Title Insurance and Trust Com­ President, Illinois (Port Huron) pany JOHN E. JENSEN, Chicago, , Chicago Title and 2661 Guardian Building 48226 433 South Spring Street 90054 Senior Vice President Trust Company Street 60602 Chairman, Finance Committee-ALVIN (Term Expiring 1976) Ill West Washington W. LONG, Chicago, Illinois Title and Trust Com­ JOHN W. BROWN, JR., Baltimore, Mary­ JOHN B. WILKIE, Tucson, Arizona President, Chicago Arizona pany land President, Lawyers Title of Box 5406 85703 Ill West Washington Street 60602 Executive Vice Preside11.t, The Title Guar- 199 North Stone Avenue,

ELECTION OF SECTION OFFICERS ABSTRACTERS AND TITLE INSURANCE AGENTS SECTION

By proper nomination and second, the voix, Michigan New Mexico following officers were unanimously elected President, Charlevoix Abstract & Engi­ Senior Vice President & Chief Title Of­ to serve for 1973-74: neering Company ficer, New Mexico Title Co. 213 Bridge Street 49720 301 Gold Avenue, S.W. 87101 Chairman-PHILIP D. McCULLOCH, Dallas, Texas JERRY D. NIXON, Pine Bluff, Arkansas President, Hexter Fair Title Company President, Pine Bluff Abstract & Title Co. 1307 Pacific 75202 EXECUTIVE COMMITTEE 105 Main Street 71601 Vice Chairman - ROBERT G. FRED­ F. EARL HARPER, Bartlesville, Oklahoma ERICK, Salina, Kansas Secretary & Manager, Southern Abstract PHYLLIS SCHNEBELEN, Farmington, President, C. W. Lynn Abstract Co., Inc. Company Missouri County 115 South Seventh Street 67401 221 East Frank Philips.Box 966 74003 Vice President, The St. Francois Abstract Company Secretary-MARY C. FEINDT, Charle- FRANCIS J. MORRATO, Albuquerque, First & South Jefferson Streets 63640

TITLE INSURANCE AND UNDERWRITERS SECTION

By proper nomination and second, the fol­ Secretary - O.B. TAYLOR, JR., Jackson, Senior Vice President, Security Title lowing officers were unanimously elected Mississippi Insurance Company for 1973-74: Chairman of the Board, Mississippi Valley 13640 Roscoe Boulevard 91409 Title Insurance Company Chairman-RICHARD H. HOWLETT, 315 Tombigbee Street, Box 2428 39205 CHARLES H. MANN, JR., Jacksonville, Los Angeles, California Florida Senior Vice President and General Coun­ EXECUTIVE COMMITTEE President, Title & Trust Company of sel, Title Insurance and Trust Company Florida 433 South Spring Street 90054 RICHARD H. GODFREY, Oklahoma City, 200 East Forsyth Street 32201 Oklahoma PEARSON, President, American-First Title & Trust Vice Chairman-THOMAS Illinois York, New York Company RICHARD L. MARTIN, Chicago, New Title Insurance President, Security Title and Guaranty 219 Park Avenue, Box 25225 73125 Vice President, Chicago, BRUCE M. JONES, Panorama City, Cali­ Company Company 60602 630 Fifth Avenue 10020 fornia Ill West Washington Street

1974 32 JANUARY Workshop on Considerations Affecting Sale and/or Valuation of an Abstract or Title Plant

Comments by Charles Jones

President, Boone County Abstract Co .. Inc., Lebanon, Indiana

This workshop as it says is a Workshop This is going to be your part of the pro­ All right, then how many are a stock on Considerations Affecting Sale and/ or gram. You have taken the first step and corporation? Or a partnership? Well, gang, Valuation of an Abstract or Title Plant. I indicated to us that you are owners of a you've seen the evidence as presented to us. didn't get any applause on that. Now this plant. You have taken that step. We're not You know where we stand, the first thing I type of a workshop, if I may be so blunt, in here to tell you how to run that plant once think we will tackle will be what happens to fact I will be blunt. How many in this group you have assumed that ownership or manage­ us in relationship to Uncle Sam and that's are owners of abstract companies and plants? ment. Too often, too often the next step is a the IRS bite, and Mr. McDonald from And I would like a show of hands if I may. sorely neglected area. The plate has now Florida has all the answers. Now, before he Now to feed the panel with further infor­ been passed down front if you people would gets up here, I would like to make this very mation. How many have plants with fewer like to come up. informal. If you choose I will stop the speak­ than ten ( 10) employees? Let's go to twenty How do you prepare to sell your plant? er whomever it may be, and we will or want employees? Let's go to thirty? Okay. Under­ How do you prepare to sell it for a profit? to have a joint venture panel because all of write fifteen, okay. Okay, we've laid the How do you prepare to sell it for the most you have taken a step to purchase and you groundwork for a tremendous task. We're money, net? How do you perpetuate the went through certain routines, certain evalu­ dealing with a group of fifty per cent under plant that you would wish to continue? Okay, ations. This is going to be an exchange of the ten or twelve bracket, probably the let's go with one or two more questions. How ideas and this is going to be our opportunity remainder, thirty or forty per cent up to many of these plants are solely owned? How as a group of abstracters to get together and twenty, and then the remainder over into the many are a closed corporation? Closed corpo­ let it all hang out. So I not only encourage thirty, forty and fifty bracket. ration? All right, eight. you, but ask you to participate.

Comments by

Thomas S. McDonald

President. The Abstract Corporation, Sanford, Florida

A corporation is a tax entity separate and which must make the sale and receive the Each method may result in different tax distinct from the individuals who own the proceeds. consequences. Being aware of the various stock of the corporation. In the closely held If the corporation makes the sale of its alternatives and planning the method of sale corporation, the stockholders often do not assets, the proceeds are in the hands of the can save the sellers tax dollars. Proper plan­ think of the corporation as an entity distinct corporation and not in the hands of the ning can result in the seller receiving a great­ from themselves, and operate the business stockholders. These proceeds must somehow er amount of dollars on the sale of the busi­ as if they were the owners without regard to be distributed to the stockholders. ness. the distinction. You prepare title evidence, The sale of the assets by the corporation The owner of a corporate Title business serve your customers and generally operate to the purchaser, and the distribution of the who wishes to sell his business can (I) sell the business in the corporate name, but with­ cash proceeds by the corporation to the his stock in the corporation to the purchaser, out appreciating the fact that the corporation stockholders are two separate and distinct (2) cause the corporation to sell its assets to is a separate entity. tax transactions which, for tax purpose, must the purchaser, or (3) cause the corporation When the occasion arises, and the owners be separately accounted for. to distribute its assets to the stockholder feel that they wish to sell the business, either Similarly, if the stockholders themselves who can then sell the assets directly to the because they have had a good offer or be­ wi sh to sell the assets directly to the pur­ purchaser. If a sale of assets is made by the cause they wish to retire, they still feel that chasers, the corporation must somehow dis­ corporation directly to the purchaser, then they, as individuals, constitute the business tribute the assets to the stockholders, who arrangements must be made for the distri­ and can sell it without regard to the corpo­ then can make the sale. The distribution of bution of the cash to the stockholders if the rate entity. the assets to the stockholders by the corpo­ stockholders want the sale proceeds. It is at this point that the owners of the ration and the sale by the stockholders to the Each of the above methods has advantages business have a rude awakening. When the purchasers are two separate and distinct tax and disadvantages and the method finally owners negotiate a sale they negotiate for transactions which must be separately ac­ decided upon may be the result of negotia­ the sale of the business usually with the counted for. tion between the purchaser and the seller. thought in mind that they will receive the It is also possible for the sellers to sell The Individuals who wish to purchase a proceeds from the sale of the business. They their stock in the business directly to the business being operated in corporate form frequently ignore the fact that the corpo­ purchasers. also have a choice of the manner in which ration owns the business assets, and if the Thus, there are several ways for the owners they wish to acquire the business. business assets are sold it is the corporation of a corporate business to sell that business. The manner in which a purchaser pur-

TITLE NEWS 33 chases the Title Plant will affect his future prerequisites are met, to liquidate the corpo­ ful planning, expert advice of an experienced operations of and profits from the Title ration and allocate the purchase price for tax consultant, a competent negotiator (your business. the stock to the underlying assets, which corporate attorney, or one he recommends), Generally, a purchaser of a business being then would become the tax basis for the and hard work on your part; however, it is operated in corporate form can buy either underlying assets. worth it. the stock of the corporation or the individual The purchaser may purchase assets, in In our case we started planning to sell by assets of the business. If stock is purchased, which case the purchase price is allocated to getting our Title Plant in top shape, our the purchase price for the cost of the stock the various assets purchased in the same buildings spic and span, and the bottom line is allocated exclusively to the stock and has manner as if he were purchasing a proprietor­ of our Profit and Loss Statement at the maxi­ no effect on the underlying corporate assets. ship. mum amount. In fact, we got things in such It is possible, however, providing certain The sale of a Title Plant does require care- good shape, we decided not to sell.

Comments by John B. Wilkie

President. Lawyers Title of Arizona. Tucson, Arizona

I feel a little bit like a fish out of water a cost of two hundred and fifty dollars. This type of thing. You can't negotiate with here. I've bought and sold about twelve title Now what does that do to the cost of a a buyer without knowing as much as you can plants in an area where we're growing and title plant? It really knocks a lot of these about the buyer. all you're doing is adding new competition formulas completely out of line. Regardless What kind of terms is he willing to pay? when you sell and getting into a new com­ of what you're making or how much you Do you want cash? We try to sell under a petitive area when you buy. It is a little spend to acquire a title plant, if someone long-term situation rather than selling for different sort of approach than has been can come in arid· reproduce that plant with cash. We do not want Internal Revenue look­ talked about here previously. Generally, some modern methodology it makes your ing at us and saying we're in the business we're not talking about a business, we're plant go down· in value. Any buyer who is of selling title plants and see what that does talking about the actual title plant itself. I buying is going to look at two things and to your capital gains picture. have drawn up a few criteria which we use, keep in mind the area that I'm talking about Recently we have further discussed swap­ some of which I intend to keep secret be­ is not selling a business to a new buyer and ping or trading. We'll trade almost anywhere cause I'm presently negotiating with some going out of the business. You're selling a in the United States title plant for title plant. of the people in the room here. title plant to someone who is going to come This is a little different outlook than some of in and compete with you. the others have brought up, but this is the One very interesting thing-we're negoti­ This is the type of thing that is going on kind of thing that we're involved in. ating for a title plant in a little county of in many parts of the country. You've got to Another thing is joint title plants. What about, oh I'd guess about twenty-five thou­ look at the factors that he is looking at. are they going to do to the cost of plants? sand people. In Arizona most of the title You've got to put yourself in the buyers shoes What is the value of your plant if your com­ plants we own are on a computer or in some and say at what cost can I go into that coun­ petitors are all together in a joint plant? If way computer related and I had been dis­ ty? Here it is very important of course, what they will allow somebody to come in and at cussing the sale with them off and on. We're kind of a plant law is there? what price? Also, what does it do for you as updating the plant next week so considering far as maintenance is concerned? You may that we were doing this negotiation, I called In Arizona you cannot go into the larger be able to cut your maintenance cost. It without a title plant, and in the up the software company and said you're counties never works out quite the way you think its bootleg all you want. updating this plant in X county and I may smaller counties you can going to, but if three companies are running be selling a copy of it, how much would it So if the title plant gets too expensive, why a plant, it cuts your maintenance cost con­ run your titles at cost me to run off an additional copy of the buy it? Why not go in and siderably and this is a very important factor. same time using plant? He said, oh, about twenty-five dollars. the court house and at the What percentage of the business are you The price that I'm asking or hope to get is these modern methods the people up on the doing? If you're doing only ten percent of about fifteen thousand dollars so that is a nineteenth floor here will tell you about. the business in a particular area, you just pretty good return. You've got to figure out what it would cost can't afford high maintenance costs of a title This is the point I really want to bring out him to get into business to compete with you plant. If you're doing a hundred percent of and forgive me if it is outside the realm of as opposed to what you want to try and get the business, and I don' t know how many many of your companies, but this is what is out of him. You've got to figure also how people have that situation, you can pay more happening to title plants because of the much time is involved. How much is it worth maintenance costs. So therefore you go into changes in procedures. The automation of to him to get into business sooner than if a plant and pay more money for a title plant title plants and their computerization gives he was to wait while he was constructing or with lower maintenance costs. the ability to take a title plant-and I'm building a title plant. These are the kind of Th"ese are the kind of things that we take talking about a complete title plant going factors that we look at. We also look at our a look at, kick around and nip a coin. I back thirty or forty years- to put it on proposed purchaser very carefully. What has looked back at some of my past experience. magnetic tape and reproduce it for about he done before? Who has conned him out of I've purchased about nine and sold about that length of time for about two hundred a plant before at what price if you can find five. I always bought high and sold low, so and fifty dollars. You can do it overnight at out. So you know what his past habits are. I' m right in the proper area. Thank you.

Comments by Otto Zerwick

President, Abstract & Title Associates. In c .. Madison, Wisconsin

I'm not sure that I do wish to. After I saw dicated, with two standards-the objective, you're one of ten, your title plant is unique. the title they put us under up here, I told and the subjective. There is just no way to It is not something somebody can run off on them by Golly if I had seen that, I'd never reconcile them and this is the unusual thing a machine. have appeared. in appraising a title plant. Each is unique. I think the objective standards are (as I think that we're faced, as has been in- Whether you're alone in a county or whether mentioned) this multiple of gross. I don't

34 JANUARY 1974 think you can tie youself to one and a half very much affected by the trends, the eco­ I thought I had a great deal where I paid times gross or two times gross because that nomic trends, both national and local. I half of the gross income for a title plant and is affected by some of the subjective con­ have made substantial blunders, I hope I inside of four years I closed it out. I just siderations which I will get to. I don't think don' t make many more in underestimating hadn't appreciated how important the lady you can strictly capitalize net earnings be­ the economic trends in a county. I missed was who was running that thing. She had cause, as the chairman pointed out, you can one by a hundred percent not long ago. I friends, I didn't have any. bury your net earnings- particularly in a didn't realize the tremendous economic force The number of competitors of course is small company. How much are you charging of a rapidly expanding vacation area. Farm another factor. I think its somewhat of a as your salary? This can make all the differ­ lands were being rapidly sub-divided and stabilizing factor-the more there are the ence in the world between a losing proposi­ changed from agricultural lands to private proportion of business that you get is prob­ tion and a fashionably profitable one. vacation lands. The potential was far greater ably not as immediately affected by a change Historical cost, I think, gives you a per­ than I had realized and caused a tremendous in management as it would otherwise be. spective, it indicates to some extent what has margin of error at least between what I The state of the public records is some­ gone into the plant, but as we've found out as figured the value of the plant was and what thing that I think you should carefully ap­ many of us are dispensing with their plants, the sale finally took place at. praise, particularly when you' re buying. We we don't have any historical cost. You have I think the efficiency at which a plant is know of areas where title plants have simply to reproduce this by a system of inquiry ­ being run is a most important subjective fac­ phased out because the public records were what would it cost you to reconstruct the tor which plays into the hands of a knowl­ so satisfactory, or the cost of maintaining a plant? And here, as our last speaker pointed edgeable abstracter. You see a man netting plant was so great in light of the size and out, you have a very excellent objective twenty-five thousand dollars and doing an number of the competition. It became un­ gauge. Nobody is going to come in and pay operation that you know you can run twice economic for any one abstracter or title com­ you more than it would cost to come into the as well. You have a secret weapon for evalu­ pany to carry on the plants. Many title county and reproduce that plant. ating that plant which nobody else has. plants were terminated in the New York I said objectively, but then you get over As I've also pointed out to the small ab­ area not too many years ago. And then of into the subjective considerations. How many stracters (and most of us here are small course the state of the law. competitors will you have after you've made abstracters) another wide· margin of error is In Wisconsin, we have a thirty year law. the sale? Of course, ordinarily we think of the matter of personnel. How are you going We've got a five year statute that may in the sale in terms of getting out of the busi­ to sell a plant where you're "it"? When time make much of what we thought was ness, turning it over to somebody else. So I you're gone business may drop to zero par­ valuable worth a lot less. I think these are have worked under the theory that when you ticularly if at the same time that you sell a some of the secret and subjective things that sell you are not multiplying the competition. new competitor comes into the county? And we have to pay attention to when we're The buyer is stepping into your shoes. I think more than one buyer has been fooled evaluating a title plant. But the multiple of gross, for example, is by this-including me. Thank you.

Comments by

Ray Frohn

Chairman of the Board, Nebraska Title Company, Lincoln, Nebraska

We've just recently gone through a num­ discuss it reminds me somewhat of the dis­ that we must consider and the buyer must ber of comments here as to what a title cussion at our own state convention when consider if he is going to buy your plant or plant is actually worth. the speaker got through and he read a long business. Many of them are not plants. Many Now I think before I get into any of my prepared topic, and that is it was quite a of them have a daily takeoff, but they don't thoughts and discussion regarding this, I'll lengthy one and I had really thought I was maintain a complete title plant, that is, as have to make a comment about the panel. going to present it here but we've had so far as judgements and probates and things of I talked to Otto Zerwick and I said, Otto many ideas presented so far that actually a that nature are concerned. have you seen our moderator and talked to lot of this is covered. But the one thing that So what is it that really constitutes a fair him about what we're going to talk about? interested me the most was when the speaker price for your business? I have always heard He said, no I haven't seen him. Charlie was got all through and one of the fellows in the that one and a half times the gross for one out buying his coat. back of the room got up and said, now, he year or two years average is a fair price for Now there are so many variables we re­ says, if you're through with your talk, and your operation. But I think it all boils down cently had a discussion at our own state title this was rather insulting to our guest speaker to what has been fairly well discussed and convention regarding the buying and selling and I was embarrassed, he said, as I under­ that is, what does the business make after of title businesses that it gets somewhat stand you, you haven't told us anything. fair salaries are paid to your employees and confusing, I know, to all of us. As soon as Now how much more disrespectful to a your overhead is also taken care of. I think somebody starts talking about buying or speaker can you get than that? it is a profit picture. I don't think that we selling, immediately the individual that's I really feel that we have so many variables can get away from it. I think personnel usually selling gets dollar signs in his eyes. that we consider in the buying and selling of enters into the price of what you're going to Now this is true even when you go to an a title plant and I know that I was not picked get for your operation. antique sale, and who can buy anything more on this panel because of the fact that I re­ l think all of us at some time or other antique than a title plant? cently had out an option on my business. I during our operation, ask our employees if It really gets somewhat humorous and if don't know whether you can actually get for you were running a business would you hire you don't believe this go to an antique sale your business what you think its worth and yourself? And l think the same thing is true in the midwest, and you have buyers there the other fellow is willing to pay for it on buying a title business. I think you have to from Colorado, Wyoming and then some of that basis. say to yourself or, if you're selling it, if I was your metropolitan cities close by. You get We have so many different systems around buying this business, would I buy it? And I quite an education. In fact, I was just to one over the· United States as to what actually think pretty much this is what it all boils two weeks before I came back here and I comprises a title plant. Many states have a down to. almost missed the convention because my closed title plant law. A lot of states have I'm sorry I didn't discuss the tax matter wife didn't leave very much for me to make licensing laws. We do in our state, but there more fully with Tom McDonald before I the trip. are a lot of states where they don't. There sold our business because I think that I Antiques are something that you sell and are many states where attorneys will handle probably could have done a bit better in you evaluate at the time because of the fact most of the closings. There are other states some respects, but I do think that I speak that they publish books. We have so many where this practice is followed by the title for a lot of people that have tried to sell their variables in the selling and buying of title plant or the title people. title business and wondered what is it that plants that for us to sit around here and Now these are all variables that I know constitutes a fair and reasonable price.

TITLE NEWS 35 Concluding Comments by Mr. Jones underwriter takes the pos1t10n if we have a generation. Then also, a very important part, loss, don't tell anybody. If you have a plant which has been brought out very vividly and Okay, gang, I want to summarize if I may for sale, I think we're going to have to tell that is the personnel that is with your plant. and if we have done one thing and this is the people this plant is for sale. I think this is I have seen plants sold that the personnel sole and only purpose as f:y- as I am con­ one area, if I may, that the ALTA is not didn't even know the plant was for sale. You cerned and I do not wish lo discredit our doing their part. I'm not being overly critical, have too. You didn't tell anybody. What if President-Elect in any way, shape or form, but I think we are not using ALTA in this they would have all quit? And it may happen. but if we have caused you to become bet­ fashion when these things do come up. Hey! I want to say one thing. I have en­ ter acquainted with each other, better ac­ You are going to be selling a plant. ALTA joyed California. I'm going to stay 'til the quainted with the problem and if you will can, and should be, giving us help and guide­ sun comes out, been here nine days. I appre­ open up and discuss these things with your lines and helping locate buyers. BUYERS! ciate your initial applause which indicates fellow abstracters, I think possibly on a one So you are in a position to negotiate rather to us up here that that was faith. Two or on one situation you may get some answers, than a secretive after-hours where you're three times during the speeches, there was you may get some help. not supposed to be seen with the prospective applause, that is charity. And if nothing is But I think we have established one im­ buyer, and you try and negotiate on a one on said when you leave here and your plant is portant factor and that is your IRS problem. one situation. You have no place to negotiate. for sale, don't tell anyone, make it secretive This is not only important if you have a stock You don't have a middleman. There is no and do the best you can. sale, or you dissolve the corporation, per­ place to negotiate, he's mad and you ' re mad You've been real great and I hope you've sonnel sells the assets, whether it is a gift and you quit. Okay, do you sell it to a com­ gotten to know the guy next to you, you've situation, whether it is for estate planning. petitor? Do you sell it to an underwriter? Do quizzed each other, you've quizzed us, quizzed Yes you must and I would encourage you to you sell it to an investor? Do you sell it to a the guy next to you in your neighboring get all the help you can get from your tax Mom and Pop operation? states because this is a preparation for the attorney and your accountant. It is important These are things that you have to decide next step that you're all going to have to who you sell to. because it is a very, very personal thing, par­ take. We're all going to have to take it. And I think we have to assume a position as the ticularly the small operation. These are this is one area that we as an industry are title underwriters have and phase it out to a personal, very personal. We like to see our sorely missing the opportunity for preplan­ hundred and eighty degrees and that is, an own little thing continued on for the next ning. You've been great, thank you so much.

COMMITTEE REPORTS

Report of ALTA Federal Legislative Action Committee

James G. Schmidt

Committee Chairman Consultant, Commonwealth Land Title Insurance Company, Philadelphia, Pennsylvania

In the previous reports of the Federal these bills, a copy of this comparison could man Stephens and the sixteen other Con­ Legislative Action Committee to this assem­ be of value to you . If you will get i1 . touch gressmen who introduced this bill think that bly, I have stressed the fact that all of the with the ALTA office in Washington, a copy the listed provisions of the bill will correct members of the American Land Title Associ­ will be sent to you. any existing underlying abuses and problems. ation should consider themselves as members H.R. 9989 is very similar to the former The bill provides that the Secretary, after of the Federal Legislative Action Committee Chapter IX with an improvement in lan­ consultation with the Administrator of Vet­ and that all of you should be girded for guage. It repeals Section 70 I of the Emer­ erans' Affairs, the Federal Deposit Insurance Federal legislative action. Our President, gency Home Finance Act of 1970 which has Corporation and the Federal Home Loan Jim Hickman, has expressed this same been the source of all our problems. H.R. Bank Board shall within two years report to thought in his message appearing in the 9989 provides for the following: a uniform Congress whether in view of the implementa­ September Title News where, after com­ settlement statement; special information tion of these provisions there is any neces­ menming about how much work has been booklets covering an explanation of the uni­ sity for the establishment of maximum done by the ALTA officers, committees, form settlement statement and the choices charges, and if there is such necessity, the Washington staff and outside counsel, available to the home buyer; advance dis­ whether reasonable and justifiable charges he states that "the backbone of our strength, closure of settlement costs; a prohibition can be effectively obtained by means of however, has been you, the individual mem­ against kickbacks and unearned fees; a state or local regulation. bers". limitation on the requirement of advance This bill differs from the former Chapter There are many problems involving Fed­ deposits on escrow accounts; a disclosure by IX to a very slight degree. H. R. 9989 in­ eral action at the present time, but the most the seller of certain information relative to cludes a definition of "settlement services" important still deals with the Federal regu­ the property being sold including previous so that it is clear as to what is covered by the lation of closing costs. Three bills are now selling price; no fee for preparation of truth­ information booklet, the advance disclosure before Congress; H.R. 9989 introduced by in-lending and uniform settlement state­ of costs, the anti-kickback provisions, etc. Congressman Stephens, S 2228 by Senator ments; the establishment on a demonstration Chapter IX had provided for a one year Brock and S 2288 by Senator Proxmire. I basis of a model land parcel system; a pro­ study by HUD, whereas H.R. 9989 pro­ have made a comparison of each of these hibition of seller of property requiring that vides for a two year study. The former pro­ bills, section by section, with the text of title insurance be obtained from any par­ vision that a title company could not issue Chapter IX of the 1972 Housing Bill which ticular title company; a disclosure of the insurance where it was owned or controlled was approved last autumn by the House identity of person having the beneficial by the seller, has been changed to the pro­ Banking and Currency Committee. You will interest where mortgage is created by a hibition of any seller requiring insurance by recall that this Chapter was re-written by trustee; the authorization of a study to deter­ a particular title company. The word Congressman Stephens. If you are planning mine the feasibility of requiring lender to "model" is now used instead of "computer­ to contact your Congressman relative to pay interest on escrow accounts. Congress- ized" in the recommendation that there

36 JANUARY 1974 should be an improved land recordation gage shall be guaranteed. A lender who son and I had a conference with Russell system. Those of us who have had problems makes a loan when the settlement charges Chapin, Chief of the General Claims Section in computerizing our own plants will appre­ are in excess of the applicable maximums is of the Justice Department, and Lountz ciate that the change to "model" is advisable. liable for damages and the costs of any Hamilton and Robert B. Webber of the You will also recall that when the Stephens action. If the settlement does not occur be­ Small Business Administration. We dis­ Chapter IX was before the House Commit­ cause any person who is furnishing services cussed costs, delays in foreclosures, notice tee, Congressman Williams added to Section charges an amount in excess of the applicable to parties, transfer of title possession, re­ 906, dealing with kickbacks, language that maximum, then the prospective borrower demption, possible unconstitutionality and a referral fee could be paid if (I) the thing is not liable to any person for any services the disadvantages of not having a judicial of value is reasonable in relation to the value rendered incident to or a part of such settle­ sale. Here again we are calling on you for of the referral service, (2) the referral is ment. This would mean that the title com­ action because we would like some title man performed by a person acting in good faith, pany or the su rveyor would not be paid if the in each state to analyze the proposed act as and (3) the nature and amount of the thing termite inspection bill was excessive. Prox­ to whether a purchaser at such a sale would of value is fully disclosed by the person ac­ mire's Bill also provides in addition to the acquire a good and insurable title to the cepting the thing of value to the borrower at anti-kickback provisions, that an attorney property foreclosed. the time of the referral. This language has shall not receive any commission in connec­ Other matters which have received our been omitted from Section 106 of H.R. 9989. tion with the issuance of title insurance. attention during the year include S 268 cited The Brock Bill, S 2228, is an abbreviated While the Federal Legislative Action Com­ as the "Land Use Policy and Planning As­ Stephens Bill. It provides for a uniform mittee would support either the Stephens sistance Act of 1973". This bill practically settlement statement; information booklets Bill, H.R. 9989, or the Brock Bill, S 2228, provides for State and Federal zoning. This explaining settlement statement; advance we think that the Stephens Bill is preferable. would just add one more problem to the pro­ disclosure of settlement costs; and a pro­ We are definitely opposed to the Proxmire posed endorsement to afford zoning cover­ hibition against kickbacks. There is no pro­ Bill, S 2288. We hope that all of you will age. A further matter was the amendment to vision for a further study by the Secretary. take this matter to heart and advise your the Interstate Land Sales Full Disclosure It does repeal Section 70 I. Senator and Congressman that Federal regu­ Act making some changes in the title evi­ The Proxmire Bill is quite similar to bills lation of closing costs would not work and dence required under Part V of the Act which he has introduced in 1972. One new that a bill such as H.R. 9989 would result dealing with "Condition of Title, Encum­ feature is to extend the definition of "fed­ in a reduction in closing costs. Bill McAuliffe, brances, Deed Restrictions and Covenants". erally related mortgage loan" to also include together with the Ad Hoc Committee and We would advise any of our members who a loan secured by residential properties sold Tom Finley, will be making sure that every are requested to supply information under as condominiums and co-operatives regard­ member of Congress will be contacted, but the provisions of this Act that they should less of size. I think that the Senator meant it will also be necessary for each of you, the study the provisions of this amendment. "or" rather than "and". While there is no backbone of our association, to do your part. At our Mid-Winter Conference we advised definition of "settlement services", it does A second matter which has received our you that our national office had learned that define "title services" in the same way that attention is the decision of the Federal Home a study of costs of title insurance to the it was defined in the first draft of Section Loan Bank Board. Back in January a pro­ federal government was undertaken by the 90 I of H. R. 16704. Title services include the posed amendment was published in the Fed­ General Accounting Office and the House performance of title examinations, the fur­ eral Register which would permit service Subcommittee on Conservation and Natural nishing of title abstracts, or similar docu­ corporations of federally-chartered savings Resources. It had been recommended that ments, the escrow closing and the furnishing and loan associations to enter the title insur­ agencies of the federal government would of title insurance and the furnishing of legal ance business as title insurance underwriters not require title insurance. On July 31, Bill opinions on the status of a title and the or agents. Subsequently, Bill McAuliffe, McAuliffe and I met with Phineas Indritz, routine preparation of all documents per­ after consultation with Tom Jackson, the Chief Counsel of the Committee, and sup­ taining to the conveyance of title. His bill Executive Committee and our Committee, plied him with certain information which then proceeds to provide in Section 12 that su bmitted two written statements opposing he had requested. We had a very friendly any title company and its agent can perform this proposal. On August 15 the Board voted conversation and we left with the impression these title services. Any lawyer reading Sec­ on the proposal and voted against permitting that no action would be taken at this time. tion 12 would not be blamed if he thought service corporations being title insurers, but In closing, I think that it would be of that the title industry was responsible for the voted in favor of permitting them to act as interest to you to know how our Committee wording of Section 12. Personally, I have agents. On September 6, Bill McAuliffe sent works. Fortunately, our national office was given two reports to the Pennsylvania Bar a letter to the Board protesting this regula­ moved some years ago to Washington and Association on the subject of "Closing Costs" tion stating that it was contrary to the pur­ we are also fortunate to have a man like and on both occasions I have stressed that poses of the anti-trust laws. Then in the Bill McAuliffe as our Executive Vice Presi­ the ALTA was opposed to this provision. September issue of Capital Comment, Bill dent. Bill spends much of his time on Capitol I stated that title companies were only inter­ asked ALTA members who might suffer Hill following the progress of existing bills ested in performing the very valuable service loss of business as a result of service corpo­ and learning about any new bill which is which we perform for someone who has an rations acting as title insurance agents to introduced. Inasmuch as decisions relative interest in real property, namely, the search­ write to the ALTA Washington office. This to action on bills must be made quickly, most ing andfor the insurance of titles. I think is of primary interest to the members of the of the work of our Committee is carried on that this understanding helped a great deal Abstracters and Title Insurance Agents by correspondence and telephone. When in the drafting and partial approval of a Section and we urge you to respond promptly there is discussion of action to be taken, Declaration of Principles. This Declaration to Bill's request. statements to be filed, conferences to be was unanimously approved by the Real A third matter being considered is a pro­ held, each member of the committee receives Property, Trust and Probate Section in July posed "Federal Foreclosure Act" which is a letter or a phone call and I commend them and will go to the House of Delegates in being prepared by counsel of the General for their prompt replies. In the actual draft­ January, 1974. I think that it would be ad­ Claims Section of the Justice Department. ing of statements, Bill has excellent assist­ visable for all of you to advise your attorney It has not been introduced as yet and I am ance from his staff and from Tom Jackson, friends that while we oppose Senator Prox­ not sure whether the final draft has been our Counsel. In many cases the advice and mire's Bill in its entirety, we particularly completed. The proposed act provides that help of the Executive Committee is sought oppose Section 12. where mortgages are made, owned, guar­ and received. So you see that Federal legis­ The Proxmire Bill goes far beyond the pro­ anteed or insured in whole or in part by a lative action is indeed a joint effort. But it visions of Section 701 of the Emergency department, agency or wholly-owned corpo­ also has to be a joint effort on your part. As Home Finance Act and empowers HUD to ration of the United States Government, the I have stated above, Bill often makes an establish maximum amounts of closing costs holder may designate a foreclosure commis­ appeal to you in Capital Comment and I for practically all mortgages. No lender shall sioner who would have a power of sale to hope that you read these appeals and join make a loan where the maximum amounts conduct a non-judicial foreclosure in the with us in our efforts to have Federal legis­ of charges are exceeded and no such mort- event of default. Bill McAuliffe, Tom Jack- lation which will help our industry.

TITLE NEWS 37 Report of National Conference of ALTA and ABA

Alvin W . Long

ALTA Conferees Chairman President, Chicago Title and Trust Company, Chicago, Illinois

I last reported to this Association on our I think we can say that the original reso­ A third item, of course, is our continuing National Conference to the American Bar at lution was defeated. It was withdrawn and no problems in Washington with regard to Con­ our mid-winter meeting in Phoenix. If you action was taken upon it, but we do regret gressional bills and HUD regulations, which recall, at that time, we were concerned about that our substitute resolution could not have your President referred to a moment ago. a resolution that was pending before the Gen­ been presented and that the Assembly could The American Bar Association, of course, eral Assembly of the American Bar Associa­ not have taken formal action to ratify the from the inception, should have taken a tion which would have given formal recog­ prior action of the Board of Governors of the rather strong interest in this matter, but nition by the American Bar to the National American Bar Association. We do feel that they did not. At our Conference a year ago, Attorney's Guarantee Fund. At the annual our conference resolution was successful, at we brought this matter before our Confer­ meeting of the American Bar a year ago, this least, in having the Georgia resolution with­ ence, urging the American Bar Association to matter was brought before the General As­ drawn. join with us in our efforts with regard to the sembly. At that time, based on a motion I am sure that we have not heard the end Proxmire Bill and with regard to the pro­ from the noor, it was referred to five separate of this. I am sure the Standing Committee posed federal standards pursuant to the 1970 committees or conferences of the American for Attorney Guarantee Funds will again Emergency Housing Act. Bar Association for comment. present that resolution, or similar resolu­ Since then, the American Bar has taken One of those conferences was our own con­ tion at some future convention of the Ameri­ a rather active interest. are now informed by them that they ference with the American Bar Association. can Bar Association. If so, we stand ready to We position with regard to the After considerable review of this matter, our fight it. will support our They are opposed to Conference drafted a so-called substitute At our meeting in Phoenix, immediately Stephens amendment. up Bill. resolution which, in effect, would have simply following our Mid-Winter, we also took the Proxmire agenda in Phoenix. It will recited the history of all of the previous several other matters, which I will comment This was on our our agenda again here in Los Angeles. actions taken by the American Bar Associa­ upon brieny. be on I think we can expect real support from the tion in regard to the National Attorney's All of us are, of course, concerned, along Bar Association on both of these Guarantee Fund. with every other industry, about the increase American matters. recited the in class action suits. As I mentioned at our In addition, it would have One last item. At our last meeting in of Mid-Winter Conference, we did have this on action taken by the Board of Governors Phoenix, we were advised that the American our agenda for our meeting in Phoenix. At the American Bar Association, which clearly Bar Association has created still another not sponsor any that meeting, a sub-committee was appointed stated that the ABA does new committee. And this committee has the fund. Fmally our to draft a resolution to be considered by our title insurance company or purpose of determining the role of the attor­ it be conference, and to attempt to have other substitute resolution recommended that ney in residential real estate transa€tions. by formal trade associations adopt si milar resolutions, enacted by the General Assembly This is a separate committee and not related pre­ so that we can attempt to make our voices action. This substitute resolution was to our Conference now. im­ heard on the tremendous problems created sented to our Conference at its meeting, There is one common member, however, by this drastic increase in number of class mediately following our mid-wi nter meeting Mr. Stan Mullin, who is the Co-Chairman of action suits. in Phoenix. our Conference, and who is also on this other Such a draft has now been prepared by By unanimous action of our conferees, and new committee to determine the role or to try our sub-committee and it will be presented at the ABA conferees, the substitute resolution to define the role of the attorney in resi­ our Conference, which takes place here in was adopted by our Conference. dential real estate transactions. He has been Los Angeles, again, immediately following Subsequently, by virtue of activity taken appointed by the American Bar Association this convention. by members of our Conference, this resolu­ to be a liaison between these two committees. tion was presented to the Real Estate Pro­ Another brief item. There has been a sug­ We are informed by Mr. Mullin that they bate and Trust Section and that section also gestion that our Conference merge with the have divided the subject into some six sub­ adopted our so-called substitute resolution Conference of Attorneys and Realtors. This headings, including such items as role of the without change. was taken up again at our meeting in attorney who works for the escrow company, our Con­ We then went to the American Bar meet­ Phoenix. It was the decision of the role of an attorney who works for a title Conferences should not ing in August in Washington with a hope, at ference that the two company. Each of these sub-headings have we do have many over­ least, that this substitute resolution might be be merged. While been given to a subcommittee. many items by the General Assembly of the lapping interests, there are We have now been informed that all six passed , and it American Bar Association. Unfortunately, where the interests are not identical preliminary drafts of the study have been Conferences however, by taking advantage of a Parlia­ was our feeling that the two completed and they will be presented to our mentary Procedure, the proponents of this should remain separate. Conference here in Los Angeles on Saturday. Georgia resolution withdrew the resolution, However, it was felt that the work of the We, of course, have a strong interest in what so that it did not appear on the agenda of the two Conferences should be coordinated. these drafts might say. We have not yet seen General Assembly. Therefore, we propose to exchange agendas, them. We'll go over them again on Saturday. Our substitute resolution was, in effect, an exchange minutes of the two Conferences, The membership of ALTA will be subse­ amendment to the Georgia resolution. Since and from time to time, send representatives quently advised, of course. is most worth­ the Georgia resolution was withdrawn, our from one Conference to the other, when there I think our Conference much for substitute resolution had no standing. There­ are items on the agenda that indicate prob­ while. I think it has accomplished I think it should continue. fore, it was not presented to the Assembly. able interest by the other Conference. our Association.

JANUARY 1974 38 Report of ALTA Liaison Committee with the Mortgage Bankers Association of America

Robert C. Bates

Commitlee Chairman Senior Vice President, Chicago Title and Trust Company, Chicago, Illinois

The ALTA-MBA Liaison Committee has consideration, and if he feels it is appropriate in mortgage policies. I think most of you had two meetings since I last reported to the for us to implement our proposal by par­ also know that First Wisconsin is a very general session of ALTA in Phoenix. ticipating in the programs of any one of the large national construction lender. John The first was held in Washington, D.C. many formal activities of MBA, he wi ll ask Poehlmann, as its general coun sel, has been on April 18 at the MBA national head­ us to do so. very much concerned with th e s ubject of quarters. All of our committee members were Another item that we discussed was the mechanics liens. present. There are three representatives from future of the FHA. There appears to be a As 1973 unfolded, Mr. Poehlmann began ALTA and four from MBA. Bill McAuliffe, split in the MBA as to whether the FHA to be particularly concerned with the prob­ Executive Vice President of ALTA and Tom should be separated from H U D, its social lems that might arise between title insurance Finley, Special Counsel to the Ad Hoc Com­ programs should be dropped, and it should companies and between mortgage lenders mittee of the title industry, were also present. go back to being an insuring agency only. with respect to the rights and obligations of In addition, most of the Washington staff The consensus in MBA at this time seems to the in surer and the insured when trouble of the Mortgage Bankers Association was be that a split will not occur, and that the develops under various circumstances during present, including Dr. Oliver Jones, executive FHA will remain a part of the Department the period of construction. vice present of MBA, and Lee Holmes, who of Housing a~d Urban Development. We were not sure which committee of is the legislative counsel for that Association. I think the .·most important result of this ALTA was most appropriate to deal with Mr. Robert Ell is of Chicago Title Insur­ meeting was our decision to respond to the this request so it was initially placed in the ance Company was also in attendance be­ notice published in the Federal Register by hands of the ALTA-MBA Liaison Commit­ cause of some pending class action litigation James T. Lynn, Secretary of HUD, inviting tee. Our August 14 meeting was called pri­ as to which he has some special background. those involved in the real estate industry or marily for the purpose of considering this There were eight items on our agenda- it real estate-related industries to furnish com­ subject, and we invited John Poehlmann to was a very full day. ment to HUD as to what the future of the attend. At all of our meetings we have a report Department of Housing and Urban Develop­ We actually had four items on the agenda from both an ALTA representative and a ment should be, what role it should play, for that day. I will touch on those briefly Mortgage Bankers representative as to the and what role the Federal Government and then get back to the subject of mechanics congressional activity on closing costs. Mr. should play in the real es tate and housing lien coverage. McAuliffe made the report for ALTA. industries in the years to come. Again, we had an updating with respect to We also had a discussion of class actions This matter, as Bill McAuliffe reported, the congressional activity on closing costs. then pending against our respective associ­ had been given earlier consideration by the We had some discussion on the proposed ations. Federal Legislative Action Committee of Federal non-judicial foreclosure act that We were looking for areas or avenues that ALTA. We had about decided that there was Bill McAuliffe just mentioned, and I think we might fo ll ow together, the ALTA along no necessity in the ALTA furnishing a re­ I also reported to you on that earlier in with the MBA, in attacking the problem of sponse to H U D's invitation. Phoenix. The position of the MBA remains the proliferation of class actions throughout MBA staff members stated that MBA was pretty much the same. Generally speaking the United States. The most practicable way going to file a statement, and that in their there are so many of them that are involved to attack the problem of a proliferation of judgment it would be a mistake for ALTA in the FHA types of transactions, they are unjustifiable class actions appears to be to to not file one. They pointed out that we very interested (particularly those mortgage work toward a modification of Federal Rule really did not know Mr. Lynn at that time bankers in states where complicated fore­ 23 of the U.S. Code of Civil Procedures. and we didn't know his modus operandi. It closure procedures exist) in the adoption of That's a difficult objective to achieve. We was recommended by MBA staff members the Federal non-judicial foreclosure act. have a long way to go before we will see any and Tom Fin ley that ALTA file some kind However, the MBA members did feel the progress in this effort, but we will continue of statement to keep our options open and proposed bill needed to be revised and im­ to work on it. not be caught later with the argument that proved, because the drafting left a good deal The next item that we discussed was the we had been given our chance to state our to be desired. Ray Jensen, who is co-chair­ proposed change in the Truth in Lending position and philosophy but had failed to man of this committee, is also an advisor of Act. This proposal is better known as the respond. the committee that has been developing the Gonzalez Amendment. As a result we immediately undertook to Uniform Land Transaction Code, which will Neither the MBA members nor the ALTA prepare a statement with the help of Tom be a code presented to all of the 50 states. members felt that this proposal affected Finley. I think every member of the Associ­ A great deal of time and effort has been either industry any more than the Truth in ation received a copy. It was filed with put into the development of an acceptable, Lending Act already affects us. There were HUD. Basically it was a restatement of the meaningful, logical and workable non-judicial a couple of changes as to which Tom Finley, philosophies and the position we had already foreclosure proceeding which will affect all our special counsel on closing cost legis­ stated to Congress in previous papers with loans-commercial, conventional, and Fed­ lation, had some mild concern, but we de­ respect to the Federal involvement in regu­ erally-insured. Ray Jensen fears, and the cided we would not attempt any joint action lating closing costs. Uniform Land Transaction Code Committee as to th~ proposed amendment. That was the last item of business con­ probably fears, that an adoption of the An old subject that we continue to bring ducted at our meeting of April 18, 1973. Federal act prior to the presentation of the to the attention of the MBA is our goal of The second meeting of the Liaison Com­ Uniform Land Transaction Code to the 50 achieving more ALTA participation in the mittee was held in Chicago on August 14. states might impair the adoption by the 50 formal activities of the Mortgage Bankers This was triggered by a letter which our states of a much more extensive and superior Association. At this meeting Dr. Oliver President, Jim Hickman, received from piece of legislation. That appears to be the Jones, Executive Vice President of MBA, John Poehlmann. Mr. Poehlmann, as most only significant objection in MBA to the did extend to us an invitation to discuss with of you probably know, is general counsel for proposed Federal non-judicial foreclosure him any specific proposals or subject matter the First Wisconsin Mortgage group, which act. that we would like to bring to the Mortgage includes the First Wisconsin National Bank Another subject which we discussed at our Bankers Association as a part of their schools, of Milwaukee. His letter requested that August meeting is a matter of serious concern regional meetings, or as a part of their annual ALTA give consideration to some specific to one of the past presidents of the Mortgage conventions. He will give our request due problems involving mechanics lien coverage Bankers Association, Bob Pease. This is the

TITLE NEWS 39 of some endorsements. proposal or Secretary Shultz to amend the loan policy, without exception as to unfiled meaning standardization of mechanics as they relate to real estate. Mr. mechanics liens, the liability and rights of the Seventh, the tax laws endorsements would be diffi­ Pease asked that we bring the proposal of insurer can become very uncertain, and even lien qualifying of the wide variances of state Mr. Shultz to the attention of our industry confusing, depending upon the state of facts cult because but if standardization by state could and the mortgage banking industry through at the time trouble is recognized and the law laws, of the jurisdiction in which the land is be achieved, it would be desirable. our committee. companies are being re­ There were four primary points made by located. And last, title more and more to handle the dis­ Secretary Shultz when he appeared before Second, most title companies, in some quested of construction loan funds under House Ways and Means Committee. The cases, are giving mechanics lien coverage bursement the vague disbursing agreements, first point of concern is the recommendation during construction in reliance on the credit ambiguous and greater risks than those that taking real estate losses as a tax deduc­ of one or more parties to a transaction (that which may impose the policy coverage as well tion be limited to the specific project out of is, taking a written indemnity or guarantee assumed under liabilities for consequential which the loss arose. Second, this proposal from such parties that the title insurer will as potential not include the low or middle income, be saved harmless from having given such damages. would were simply conditions as subsidized, housing projects. coverage). Many title companies are less These, as I said, better known at our meeting, The third point of concern was that this qualified to evaluate this kind of risk than of fact that we memorialized environment in which we are provision would be retroactive to May I, are the customers who are requesting the reflecting the 1973. The fourth part of the Shultz proposal coverage, such as banks, savings and loans, now operating. were reached except would require the capitalization of interest and mortgage bankers. So we are being No other conclusions agree that John Poehlmann paid on construction loans. asked to give credit coverage or credit insur­ that we did to develop a report to the The general feeling was that any attempt ance to people who have more expertise in would undertake outlining what he feels to oppose the proposal of Secretary Shultz the area than we have, in many cases. Liaison Committee lending industry is entitled to at that time was at best premature. The con­ Third, the title insurance industry has the mortgage insurance industry, with sensus was that Mr. Shultz's proposal had allowed the practice of giving mechanics expect from the title lien coverage during not reached the stage at which it could be lien coverage during construction in reliance respect to mechanics from commence­ effectively challenged. However, there was on credit in individual residential or com­ all phases of construction of the project. Mr. some concern that we might wait too long, or mercial loans to evolve in to the practice of ment to completion what he feels to not take advantage of some opportunities to giving this coverage in reliance on credit to Poehlmann will document and demands that the oppose it at the appropriate time. large multi-state developers, incurring many be the requirements to make in various situ­ important factor is that everyone millions of dollars of liability with respect lenders are entitled Another then undertake to the proposal to be bad, to a single developer, often at little or no ations. Alex Marzek will does not consider as to what the particularly in view of the fact that Secretary charge. develop recommendations title industry should be with Shultz himself has now retracted the recom­ Fourth, although some states have statutes position of the to each of the suggestions of John mendation that the effective date be retro­ under which priority of construction mort­ respect active. So there remains some doubt as to gage can be achieved, insufficient care is Poehlmann. two reports will then be seriously this would affect the real estate used by title companies, lenders and devel­ Copies of these how of the Liaison industry. It is therefore questionable that opers to assure that this priority is not lost. distributed to all members then have another meet­ the ALTA-MBA Liaison Committee will Fifth, mortgage lenders will accept as Committee. We will At that time we will decide whether consider this matter any further. much coverage as to mechanics liens as a ing. our Liaison Commit­ Now, back to the matter of John Poehl­ title insurer will furnish, even though the there is anything more as to this subject matter. mann's letter and mechanics lien coverage. lender himself is of the opinion that such tee can or should do coverage might be too extensive or not justi­ We will consider whether we should recom­ As we all know, this is probably the largest fiable from a title insurance standpoint. mend to the Board of Governors or the Ex­ single area of risk of the title insurer today. Sixth, many kinds of endorsements are ecutive Committee that the subject matter John Poehlmann opened this discussion by used in construction loan policies in an at­ continue to be pursued by some other exist­ he reviewing a two-page outline of items tempt to limit or qualify the coverage af­ ing or special committee. We think it's a very wanted to discuss. forded as to mechanics liens, by providing, serious subject that can affect the continued our companies if un­ We agreed that our two industries are now for example, pending disbursement clauses. existence of some of assumed that result in working in an environment in which a num­ Often these endorsements are confusing, reasonable risks are that the time ber of specific conditions of fact exist con­ misunderstood, or not applicable in light catastrophic losses. We believe look at ourselves, cerning mechanics lien coverage, the rights of the facts and laws of the state where the has come for us to take a title industry, and devel­ of the insurer and the rights of the lender. I project is located. Title companies sometimes to take a look at the that will bring a think it worthwhile for me to quickly read use these endorsements without fully com­ op some recommendations to the subject of to you today. prehending the meaning themselves, and sane and logical approach those . First, when a title insurer issues an ALTA lenders frequently don't understand the full mechanics lien coverage

Report of ALTA Research Committee

John E. Jensen

Committee Chairman Senior Vice President, Chicago Title and Trust Company, Chicago, Illinois

has happened to us over the past Several years ago your Association de­ for me to report to you what your committee What One thing is for certain. Every that Bacon's advice "Knowledge is has observed about our industry. five years? cided exception, good years and bad, power" applies to the ALTA. So for the past Based on our analysis of statutory reports year without our costs have gone up. On average, our five years, the Research Committee has been submitted by most title underwriters and on operating expenses have increased fourteen attempting to gather data concerning our the excellent work done by the Organization cent per year every year for the past industry. That five-year period has been a and Claims Committee in their survey of (14) per five years. The bulk of these expenses have particularly interesting one encompassing a title insurance agents and abstracters, it is in salaries and other staff costs. How complete real estate cycle ranging from the estimated that I am addressing an industry been much of this is a real increase and how much tight money markets of 1969 and 1970 at this moment that has assets in excess of of it is inflation, I leave to the economists. through the prosperous years of '71, '72 and one billion dollars. We are a large and im­ tell me that the GNP price deflator now into what appears to be another down­ portant industry serving the real estate fra­ They averaged about 4.8 per cent a year since turn. It is especially appropriate at this time ternity and serving the public.

JANUARY 1974 40 1968. That means we've been running a real industry. This is a result of work done by the on the state level at least, that insurance com­ increase in expenses and in salaries of about special Claims Committee of the Under­ missioners are devising unique profitability 9 per cent a year over each in the past five writers Section. measures which are outside of the purview years. I am pleased to report (after being dis­ of the various statutory reports filed by insur­ Comparing 1968 to 1972, we've had a sub­ pleased to report the last two times I tried ance companies. The A. D. Little Organi­ stantial increase in operating income. How­ to do it) that more and more companies are zation has been working with the Ohio ever, in the years between '68 and '72, we've beginning to participate in the claims study; Rating Bureau and the Pennsylvania Rating had one or two years where our income de­ and although we do not yet have enough Bureau on this problem. And I'm pleased to clined. With costs constantly increasing, a companies participating in this work so that say that your Research Committee has small decline in the revenue of our industry the absolute dollars that have been reported received a great deal of cooperation from has a drastic effect on pre-tax net operating have any meaning, the percentages are be­ both of those organizations as well as the income of the industry. For example, in 1970, ginning to take on a pattern. Texas Group, which is working with Pro­ the gross revenue for title underwriters fessor Todd in Texas on exactly the same dropped just two per cent (2) from 1969. As As was mentioned in one of the meetings problem. a result of that drop, the pre-tax net oper­ yesterday, the highest percentage amount of claims dollars spent over the past four years Our goal in this area is to develop an ating gain for the title underwriters fell fifty approach, a philosophy, if you like, which per cent (50). On average, the revenues of our has consistently been in the category defined as "special risks authorized by company will satisfy the needs of you the members of companies have increased but with fluctua­ the industry. We hope to demonstrate, either tions. On average, the expense of our com­ practice" and most specifically in the cate­ gory of mechanic's lien claims. The most to the Department of Housing and Urban panies have increased but without fluctua­ Development or to various state insurance tions. steady growth in claims has been in the category of examination and opinion error­ commissioners, on a basis consistent one What does this mean then, and how do we state with another, that our charges are compare with other businesses? Over the past where the percentage of dollars expended has grown at a very steady 6 per cent per year. reasonable and that our profits are not ex­ five years, the percentage of our operating cessive. income that has been eaten up in operating Does this indicate that we have to do a expenses has been 82 per cent. This compares better job of training and supervising our One of the dangers we face is the tendency with stock life insurance companies that examiners? of regulators, state and federal, to look upon have average operating expense ratios over One of the areas that has concerned many profit margin as being the key measure of a the past five years of about 30 per cent. of us for many years has been the effect of successful operation and of the justification Boiler and machinery companies-companies our closing and escrow procedures. No pat­ of prices. We feel that this is incorrect. that have been frequently compared with tern as yet has been discerned as to the ours because of their risk prevention, risk dollars being spent in claims in that area A more realistic, a more useful and a more economically sound methodology, in our elimination approach as opposed to risk although it does rank just behind taxes and assumption - have averaged 58 per cent of special assessments concerning the number opinion, is to look at the assets we have in­ operating income as operating expenses. of claims that we receive. We get a lot of vested in our business; look at the risks Our pre-tax operating profit margin over closing and escrow claims but, up until now, involved in committing these assets to the the past five years has in aggregate been this category is not a leader in dollars spent. title industry; and determine the return on our investment as compared with alternative 13.8 per cent of gross revenue. This compares This is a very brief, a very summary pro­ with 15.4 per cent for 425 industrial com­ file of our industry that I thought you might investments for these assets. This is an find of interest. approach that will affect not only title insur­ panies as reported in Standard & Poor's. It ance underwriters but title insurance agents compares with 20.9 per cent for small loan During the past year, the major effort of and abstracters as well. companies as reported in Standard and the Research Committee has been to work Poor's. It compares with approximately 25 with the Arthur D. Little Organization in I hope that by this time next year, we will per cent for the mortgage banking industry attempting to understand and define proper be able to present to the Executive Commit­ over the past five years. measures of profitability for the title insur­ tee, to the Board, and to the membership, One of the major elements of our expenses, ance industry. We feel this is a crucial task an approach that you will find helpful in not in terms of absolute dollars, but in terms since either under federal or state regulation, your home state in determining your profit­ of the services we perform, is our claims we are going to have to justify the charges ability and the profitability of the industry experience. For the past four years, we have we make to our customers. As a part of this in your state. been collecting data relative to claims in our justification process, it has become apparent, Thank you .

Report of ALTA Public Relations Committee

James W. Robinson

Committee Chairman Senior Vice President, American Title Insurance Company, Miami, Florida

Good morning everybody, you've just ALTA members with serving the public, the approval of a revised ALTA model Title heard an example of market identity rein­ public relations program is able to reach Insurance Code at the Mid-Winter Confer­ forcement by ALTA past president Don a much larger audience then would other­ ence, a news release, telling about this action, Nichols. His company radio advertising was wise be possible. was published in an impressive group of produce4 with the help of ALTA's, "Do It Because of the public interest and the dailies across the nation. Yourself," commercial kit, offered to mem­ educational value of our messages, television To further reinforce our position that title bers this year through the Association's and radio stations and newspapers are able company charges should be regulated by Public Relations Program. to give us a lot of free air time and print state rather than by federal government, a So far, this kit has been purchased by space. related editorial, mentioning the ALTA ALTA members in 18 states, but bear in Now, to provide an idea of what we are model code, was sent to suburban and rural mind that it was designed for members who getting for our money, here are some high­ newspapers. It has been published in more wouldn't normally have the facilities of de­ lights of the 1973 ALTA public relations than a hundred of these papers, with millions veloping their own. action that is carrying our message to nation­ of readers, with additional clippings still Development of this advertising tool is wide audiences in the millions. Since 1973 is being received. one of the many ongoing activities that the a busy year in the legislative and regulatory Excellent newspaper visibility was re­ Association PR program uses to call atten­ arena, it was only natural that we would use ceived this summer on a release summarizing tion to the importance of land title services. our public relations capability for reporting the testimony of Jim Schmidt, whom you By emphasizing messages that identify the Association's position. Following member know is Chairman of our Federal Legisla-

TITLE NEWS 41 production of films will continue to be tive Action Committee. He appeared before Television has proved to be an eminently The part of ALTA public relations hearing of the Senate Subcommittee on successful medium for PR program messages an important a next year. Our Association commit­ Housing and Urban Affairs. The publicity for your Association. Through television, activity ALTA staff are presently working on emphasizes that ALTA favors reasonable ALTA films, film clips and slide announce­ tee and for a new promotional film to em­ safeguards. ments reach millions across the nation each the script land title services. Favorable exposure was also received with year. phasize in production, de­ an early release supporting ALTA's Presi­ As an outstanding example, the ALTA While the new film is to be strong for loan dent, Jim Hickman, on protecting home film, "Blueprint For Homebuying" has just mand should continue ALTA films. Title com­ ownership against land title hazards. And completed a period of national television prints of existing an schools and others regularly with the 1973 version of the "Lincoln Lost distribution. This film has been seen by pany customers, from the Washington office, His Home Story." audience of 20 million, all in free air time, borrow prints is anticipated that the Association An ALTA release, quoting Bill McAuliffe donated by the stations. and it clips continue to purchase prints federal income tax deductible closing costs ALTA homebuyer educational film membership will on their own use. and pointing out that far more than title of 30 and 60 second length also reach an of our films for busy year for de­ company charges make up the bottom line on audience of millions. A series of three clips, 1974 will be another ALTA publicity in print a settlement sheet, received considerable containing announcements by celebrities veloping favorable our contact with newspaper coverage. Ted Knight, Bob Reed, and Rod Sterling is a media and for continuing media personnel. A release announcing the availability to good example of the effectiveness of this important news next year will be the public of the pamphlet, "The Things You activity. These announcements have been New on the horizon for of the Mortgage Should Know About Home Buying and Land telecast this year by more than 180 stations the February 1974 issue tell which will feature title Title Protection," has resulted in a great from coast to coast, and I don't need to Banker Magazine, assisting with the plan­ many requests for the publication. you the impact that has on their listeners. insurance. ALTA is A release quoting President Hickman on Television and radio activity are quite ning and content for this issue. of land title evidence also prominent in ALTA public relations action, A brisk demand for ALTA educational the importance and good newspaper publicity. because they offer a highly effective means publications is expected from the public received next year. Monthly "Home Buyer" advice columns, for developing public awareness of land title from association members again relations assistance, by-lined by ALTA officers and staff, and in­ protection to a vast national audience. These And professional public things as model speeches and formative home buyer educational cartoons two media have a key role in our 1973 including such be offered our continue to receive excellent use among activity and in our plans for 1974. counseling will continue to suburban and rural newspapers. With us tms morning to provide informa­ members. these are some of the high­ The useful life of ALTA home buyer edu­ tion about our public relations effort for Briefly, then, looking forward to in 1974. At cational messages has continued to be im­ next year is Marv Diefendorf, who has served lights we are like to add that an ex­ pressive. As an example, the Broken Arrow, as vice chairman of the Public Relations this point, I would team works with Jim Oklahoma Ledger, this summer, used an Committee this year. ceptionally dedicated our activity possible. ALTA educational feature that was entitled and me to make all of Comments by Mr. Diefendorf the Association Public "Avoid A Costly Title Victory." That re­ Serving with us on re­ are Randy Farmer, lease was sent out to suburban and rural As mentioned, television continues to Relations Committee Frank O'Connor, Ed newspapers from coast to coast more than ceive a major place in our public relations Joe McNamara, - and there are four years ago. planning for 1974. Schmidt, and Bill Thurman staff: Bill Homebuyer's educational messages also We plan to produce and distribute the fol­ three, very professional ALTA and a new addi­ are offered to print media through the publi­ lowing: Two 60 second film clips that contain McAuliffe, Gary Garrity, cation Editors Digest. This recent release, many documentaries, stressing the impor­ tion, Carol Haley. a successful public rela­ explaining closing costs, was requested by tance of land title protection to home buyers, Needless to say, without the nearly 200 editors and has appeared in a a package of celebrity film announcements tions effort would not be possible of Governors, the significant number of newspapers and other and we plan to continue national television support of ALTA's Board most importantly, publications. distribution of the ALTA fifth feature film, Executive Committee and, While on the subject of news media, let "A Place Under the Sun." And also produce the individual ALTA members. our grati­ me report that the 1973 PR Program in­ a series of ALTA homebuyer education tele­ For this, we sincerely express cluded continuing efforts by ALTA repre­ vision slide announcements for distribution tude to you. special gratitude sentatives to maintain contact with leading next year. And I want to express Jim Robinson journalists, and I know that Gary Garrity Thus far, this year, similar announcements and emphasize the fact that as the was busy on the road. Some of those who have been telecast by stations in 32 states has been one fine guy to work with Committee this were visited this year included the editorial throughout the country. Chairman of our ALTA PR personnel of Barron's, Fortune, Forbes, Also, on the drawing board for 1974, are year. Better Homes and Gardens, House and two new television activities: One, is a public Now, with that, I'll turn it over to Jim. Home, Best's, Associated Press, The New service film announcement, where an ALTA York Times, ABC Television News, and representative tells about closing costs that MR. ROBINSON: are Federal income tax deductible. The other others. , Marv. Thank all have been completed for the ALTA is a short television film subject of "Pre­ Thank you very much Plans given us in to sponsor, for the fifth consecutive year, a paring For Settlement." These are designed of y9u for the support you've Relations Program possi­ category of the National Association of for general audience viewing. making the Public personal conviction that the Realtors' Creative Reporting Contest. Be­ Radio also continues to be highly effective ble. It's my this Association receive $100 side aligning an important land title cus­ in reaching the public with ALTA's mes­ members of every dollar we spend tomer group, this sponsorship in a contest sages. In 1974, we plan more public service worth of value for all agree. to recognize outstanding real estate journa­ radio spots, similar to those broadcast by I hope that you our report. Thank you so lism also fits in very well with the ALTA more than one thousand stations thus far This concludes patience. homebuyer educational objectives. this year. much for your

42 JANUARY 1974 Zoning Endorsement

The following two zoning endorsement policy and is subject to all the terms and pro­ 2. The Company hereby further insures forms were approved by ALTA members visions thereof and of any prior endorse­ against loss or damage arising from a final present during the General Session Limited ments thereto. Except to the extent expressly decree of a court of competent jurisdiction to Active Members Wednesday afternoon stated, it neither modifies any of the terms (a) prohibiting the use of the land, with October 3, 1973 in Los Angeles. and provisions of the policy and prior en­ any structure presently located thereon, dorsements, if any, nor does it extend the as specified in paragraph I (b) above, or effective date of the policy and prior en­ (b) requiring the removal or alteration of dorsements or increase the face amount said structure ENDORSEMENT thereof. on the basis that as of Date of Policy said BLANK TITLE INSURANCE COMPANY ordinances and amendments thereto have Policy No. ___ BLANK TITLE INSURANCE COMPANY been violated with respect to any of the following matters: The Company hereby insures that, as of ALTA End. 3 (Zoning) (i) Area, width or depth of the land as a Date of Policy: building site for said structure. (a) According to applicable zoning ordi­ (ii) Floor space area of said structure. nances and amendments thereto, the land (iii) Setback of said structure from the is classified Zone . ENDORSEMENT property lines of the land. (b) The following use or uses are allowed BLANK TITLE INSURANCE COMPANY (iv) Height of said structure. under said classification subject to com­ Policy No. ____ Loss or damage as to the matters insured pliance with any conditions, restrictions or against by this endorsement shall not in­ requirements contained in said zoning I. The Company hereby insures that, as of clude loss or damage sustained or incurred ordinances and amendments thereto, in­ Date of Policy: by reason of the refusal of any person to cluding but not limited to the securing of (a) According to applicable zoning ordi­ purchase, lease or lend money on the estate necessary consents or authorizations as a nances and amendments thereto, the land or interest covered hereby in the land de­ prerequisite to such use or uses: is classified Zone___ _ scribed in Schedule A. There shall be no liability under this en­ (b) The following use or uses are allowed This endorsement is made a part of the dorsement based on the invalidity of said under said classification subject to compli­ policy and is subject to all the terms and ordinances and amendments thereto until ance with any conditions, restrictions or re­ provisions thereof and of any prior en­ after a final decree of a court of competent quirements contained in said zoning ordi­ dorsements thereto. Except to the extent jurisdiction adjudicating such invalidity, the nances and amendments thereto, including expressly stated, it neither modifies any of effect of which is to prohibit such use or but not limited to the securing of necessary the terms and provisions of the policy and uses. consents or authorizations as a prerequi­ prior endorsements, if any, nor does it ex­ Loss or damage as to the matters insured site to such use or uses: tend the effective date of the policy and prior against by this endorsement shall not in­ There shall be no liability under this en­ endorsements or increase the face amount clude loss or damage sustained or incurred dorsement based on the invalidity of said thereof. by reason of the refusal of any person to ordinances and amendments thereto until purchase, lease or lend money on the estate after a final decree of a court of competent BLANK TITLE INSURANCE COMPANY or interest covered hereby in the land de­ jurisdiction adjudicating such invalidity, the scribed in Schedule A. effect of which is to prohibit such use or ALTA End. 3.1 (Zoning-Completed This endorsement is made a part of the uses. Structure)

ALTA Resolutions Committee Report

Glenn Graff

Chairman, Resolutions Committee Executive Vice President, Florida Souchern Abstract & Ticle Company, Winter Haven , Florida

It is a pleasure for me to present for your presenting such an interesting program of us reluctant to leave Los Angeles. consideration the following resolutions: events for the ladies; and, Whereas , the delegates in attendance have Whereas, the cordiality expressed by Sol Whereas, the California Land Title Associ­ benefited significantly by the challenging, Marcus, President, Board of Public Works, ation, as host of the Convention, provided stimulating and informative messages pre­ City of Los Angeles, in hi s address of wel­ the delegation a meaningful and most mem­ sented by a distinguished group of guest come has instilled a warm and hospitable at­ orable convention in this great city of Los speakers who discussed vital issues of today mosphere for this 67th Annual Convention Angeles; which face all of us: of the American Land Title Association; and, Therefore, be it resolved, that the mem­ Whereas. The host Convention Chairman bers of the American Land Title Associa­ Therefore, be it resolved that the delegates Allen C. McGurk and the many members of tion express their appreciation and thanks here assembled express and record their sin­ his California committee have worked so to President Marcus, Mr. and Mrs. McGurk cere appreciation for their participation in diligently to plan a successful convention and the members of their committees, and this 67th Annual Convention of the Ameri­ program; and, the California Land Title Association for can Land Title Association to: Whereas , Mrs. Ermal E. McGurk, chair­ exposing all delegates to the very special William T. Finley, Jr., Partner, Sharon, lady of the Ladies Committee and the mem­ brand of hospitality that can only be found Pierson, Semmes, Crolius and Finley, Wash­ bers of her committee have succeeded in in the City of Los Angeles, which does make ington, D.C.

TITLE NEWS 43 Dr. Norman Sigband, University of Southern tees; and, The members of the Board of Governors California, Los Angeles, California Whereas. each of them has made notable The chairmen and members of all standing Mrs. Lee Ann Elliott, Associate Executive contributions of time, talent, and effort to the and special committees of this Association Director and Assistant Treasurer, American guidance of this Association during the past And to other members of our Association Medical Political Action Committee, Chi­ year; outstanding leaders in their own busi­ who have contributed so generously to this cago, Illinois nesses, they have shared their broad knowl­ convention edge, sage counsel and vision with the entire Dr. Julian H. Taylor, Whereas. the American Land Title Asso­ Vice President & title industry; they have brought this organi­ Senior Economist, Bank ciation again has completed a successful of America, Los zation not only an educated awareness of the Angeles, California year of operations in its Washington office, problems with which we are faced, but also Edwin 0. Guthman, National Editor, Los Therefore, be it resolved that the delegates the kind of administrative skills and fore­ here assembled express their sincere thanks Angeles Times, Los Angeles, California sight required to provide the solutions to the to: Whereas, the 67th Annual Convention problems; Therefore, be it resolved that on behalf of William J. McAuliffe, Jr., Executive Vice delegates have benefited not only from a dis­ President; cussion of recent developments in our busi­ all members of the American Land Title Association, the Convention delegates hereby Michael B. Goodin, Director of Research; ness but also a frank appraisal of ourselves Gary L. Garrity, Director of Public Affairs; and of our industry; pay tribute and express their very great gratitude for the significant role played in and Therefore, be it resolved that members of the direction and development of this Asso­ David R. Mclaughlin, Business Manager; this Association express deep appreciation ciation to: of our National Headquarters, for a year of for the appearance on the program of our James 0. Hickman, President outstanding progress in the annals of our own industry speakers; James A. Gray, Vice President Association, Whereas, the responsibility for the Ameri­ Alvin W. Long, Chairman of the Finance Mr. President, on behalf of the members can Land Title Association during this year Committee of this committee, who are: has been entrusted by the membership to James G. Schmidt, Treasu~er Mr. Clyde V. Devillier the elected national officers, the members of Robert J . Jay, Chairman, Abstracters and Madison, Wisconsin our Board of Governors, the chairmen and Title Insurance Agents Section and executive committees of the respective Robert C. Dawson, Chairman, Title In­ Mr. Bruce M. Jones sections, and to the appointed chairmen and surance and Underwriters Section Los Angeles, California members of all standing and special commit- John W. Warren, Immediate Past President I move the adoption of these resolutions.

44 JANUARY 1974 Index to 1973 Title News Articles

ALTA Judiciary Committee Report Part I ...... February Part II ...... March Part Ill ...... April Part IV ...... • ...... July Part V ... ..•...... August Part VI . . . .. October Part VII ...... November ALTA Home Buyer Benefit Activity Cited in New Fannie Mae-NAREE Publication ...... October ALTA Presents Testimony at Senate Hearings ...... September ALTA Radio. TV Spots Reach Millions in 1973 ...... April ALTA Sick-Pay Plan Announced ...... January ALTS Sponsors Realtor Editorial Contest Consumer Category ...... December American Honors First Employee ...... , ...... November American Title Honors 25-Year Employees ...... November Attorney's View on Metrication ...... June Awarding of Honorary Membership to William H. Deatly ...... January Bank Holding Companies: Their Constraints Rewritten ...... March Bannon to Helm ...... October Buyers Informed ...... October California Presentation for 1973 ALTA Annual Convention ...... • ...... • ...... January Chelsea Acquires Four New Companies ...... September Chelsea Acquires Garden ...... • ...... June Commonwealth Campaign Cited ...... April Commonwealth Expands in Two States .. November Commonwealth Campaign Wins " ADDY" ...... January Commonwealth Conducts Housing Sale Survey ...... August Commonwealth Develops New Ad Campaign ...... • ...... July Commonwealth Opens Exton Settlement Office . . . • ...... June Dixie Association Offers New Folder ...... • ...... • . . ... November District-Realty Honors Fitzgerald. Donohoe for Service ...... August Election of Abstracters and Title Insurance Agents Section ...... January Election of National Officers ...... January Election of Title Insurance and Underwriters Section ...... January Effective Political Action ... . June Effective State Legislative Relations . .. January Energy Challenge Ahead. The . January Essay Contest for Mid-South ..... March Federal Settlement Legislation Major Concern at Convention ...... •.. . . . December First Land Title in Second Century ...... November FLTA, Florida Bar Corporation Sponsor Seminar . . . October First American Opens in New York ... . February Gallagher Honored ...... January Gehringer Elected .. January Giardina Aids Parade ...... June Home Buyer Facts in N EL TA Folder ...... August Home Title of Fresno Changes Name . . . September Howlett Addresses FLTA. Florida Bar Seminar ...... • ...... November HUD Settlement Cost Regulation ...... January HUD Settlement Regulation and Mortgage Banking ...... January Index to 1972 Title News Articles ...... January Interstate Land Sales Full Disclosure Act. Regulations Concern Title Companies ...... May Joint Title Plant and Equipment Workshop ...... January Legislation. Political Action Major Topics at Mid-Winter .... May Lasseter Completes ABA Service ...... August Lawyers Title Qualifies in Territory of Guam ...... July Local Title Company Public Relations Workshop . . . January Louisville Expands ...... October Louisville Title Beats Traffic with Facsimile Transmitting System . November Major Expansion Planned by First American Title ...... June Marketing of Title Insurance . . .. August Martins Ride to Retirement Luncheon in Style . August McDonald Honored for Insurance Trust Leadership . October Mid-Winter Conference Set for New Orleans .. December Missouri Concern Acquired by Tl ...... June Mid-South Awards 1973-74 Law Scholarship .. November Mid-South Honors Essay Contest Winner ... June Mortgage Insurance New Tl Endeavor . March Morrato to Spain ...... October NELTA Convention Emphasizes Federal. State Legislation ...... August Nichols Tapes Commercials. Hillsboro Takes Notice ... October

TITLE NEWS 45 NAIC Update . January Obituaries Burns. Eugene . February Johnson. William . September Sauers. George, Jr. . ... March Smith, Joseph ... . . October Oregon Titleman Active 87 Years ...... November Opening of New Chelsea Title Branch Marks 51 Years of Successful Operation ...... • ...... May Outlook: Service Corporations . . December PLTA Retains Public Relations Firm . . . March President's Report . . January Proposed Zoning Endorsement . January Problem of Inflation. The ... . February Proposal to Amend the Model Title Insurance Code ...... •...... January Public Is Your Not-So-Silent Partner ...... • . . .. .•...... January Proposed Amendments to ALTA By-Laws To Be Considered at 1973 Convention .. August Perspective: Pass-Through Securities ...... January Resolutions ...... •...... January Report of ALTA Group Insurance Trust ...... • . . . . January Realtors Washington Committee at Work ...... January Real Estate: The Economy and the Future ...... January Revised Model Title Insurance Code (special insert) ...... May Research Committee Report Shows Cyclical Nature of Title Business ...... June Riggs Heads Board . . •...... •...... October Report of ALTA Federal Legislative Action Committee ...... •..•...... January Report of ALTA Public Relations Committee ...... •.....•...... January Report of National Conference of ALTA and ABA . . .• ...... • ...... January Report of ALTA Research Committee ...... •...... •...... • ...... January Schmidt Awarded Citation ...... August Sky No Longer Is The Limit ...... January SLC Exchange ...... • ...... • . . . . . • . . . . • . . .. January Silent Partner of the Realtor ...... • . . • ...... July Southwest Expands ...... July Successful Campaign in Mobile ...... March Secondary Mortgage Market: It's Challenges and Opportunities . April Secondary Mortgage Market Behavior ... July Saving Through a Microfilm System ... February State Association Conventions Dixie ...... March Florida ...... February Indiana ... January Kansas . . . . . •...... •... . February Minnesota ...... October Missouri ...... March New Jersey ...... October New York ...... • ...... •...... • . .• . .•...... • . . .. .•. .... October New England . ..• .. •...... August Oklahoma .. June Oregon ...... September Pennsylvania ...... August Texas . . . .. October Wisconsin . November TICOR Conducts Tax Probate Forum . June TIM Acquires Baldwin ...... July Uniform Land Transactions Code Part I ...... • ...... September Part II ...... • ...... October Part Ill ...... November Washington Report . January Western Tl Office Plans Fall Move . . . September Wemhoener. Berry Acquire Missouri Company .. June

46 JANUARY 1974 Fight Inflation and Promote Your Industry! Buy A Slightly Used "Blueprint" Film at Reduced Price

Here's your chance to fight inflation while promoting your industry! If you haven't already obtained a copy of ALTA's highly successful film, "Blueprint for Home­ buying" -or if another print would come in handy for a new branch or to increase circulation-you can receive one now at reduced price. ALTA has 50 prints of this public education film back from national television distribution and is making them available to members­ on a first come, first served basis-for $55.00 which includes postage and shipping container. The prints are in good condition, and the reduced price represents a significant savings from the $95.00 cost for a new print. This 16 mm color sound film takes home buyers through the basics in selecting, financing, and Mr. and Mrs. Home closing with regard to Buyer as seen in the ALTA film purchasing residential real estate. Featured on the screen are the various experts who provide closing services -including the land title Write: professional. Most of the American Land Title Association film consists of animated sequences, although a live 1828 L Street, N.W. narrator also appears. Washington, D. C. 20036 Remember the supply is limited so order your print today.

TITLE NEWS 47 corner Carolinians Name association Pittman as President .....,Q) The Carolinas Land Title Associa­ .....,ro tion held its seventh annual convention (j) on October 26 and 27, 1973, at the Fox­ fire Golf and Country Club in Pine­ hurst, N.C. William B. Pittman, presi­ dent of First Title Insurance Company, Raleigh, N.C., was elected president; John G. Martin, agent for Title In­ surance Company of Minnesota, Columbia, was elected vice president; Mrs. Lucille Lee, vice president and manager of Commercial Standard Title Company of N .C., Raleigh, was elected KL T A Elects Marjorie Wright President secretary; and Carl E. Wallace, assist­ ant vice president of Jefferson-Pilot Title Insurance Company, Greensboro, was held The 1973 convention of the Kansas The 66th annual convention was elected treasurer. Inn Plaza. Land Title Association elected Mar­ in Wichita at the Holiday The convention program included guests at­ jorie Wright, a partner in the Logan Over 190 title people and addresses by Gary L. Garrity, ALTA County Abstract Company of Russell tended the meetings. Public Affairs Director, on national Robert Springs, as its new president. Convention speakers included activity of the Association; Joseph M . ; James Other newly-elected officers were Roger J . Jay, ALTA president-elect Parker, assistant counsel, Lawyers vice president of N. Bell, president of the Security Ab­ W. Robinson, senior Title, Richmond, Va., on "What Title Company; stract and Title Company of Wichita, American Title Insurance Policies Really Cover (and Don't of vice president, and Robert G . Fred­ J . Mack Tarpley, vice president Cover);" Charles L. Fulton, attorney, Company and erick, president of the C. W. Lynn Chicago Title Insurance Raleigh, on responsibilities for dis­ vice president Abstract Co., Inc., Salina, secretary­ E. Gordon Smith, senior closures from a title attorney to a title treasurer. of Lawyers Title. company; J . Troy Smith, Jr., attorney, New Bern, N.C., on 1973 state legis­ lative highlights; and Clifton W. Everett, attorney, Bethel, N.C. on the North Carolina Marketable Title Act. Also heard from was Julius Dees, Jr., attorney, Greensboro, reporting as chairman of the attorneys section. The newly-elected chairman is Charles L. Fulton, attorney, Raleigh.

Lawyers Acquires Oregon Company

Lawyers Title Insurance Corporation announces the acquisition of Jackson County Title Company of Medford, Oregon. Louis J. Poggione, previously with Lawyers in California, serves as presi­ dent of the operation. Neil 0 . David­ son, formerly president of Jackson County Title, will continue with the company in an advisory capacity; the are : !from left to right) Pi ctured above at the re ce nt Kansas Land Title Association Convention company's present staff is being re­ .. retiring president of the associa­ newly-elected President Marjorie Wright; Harry H. St. John. Jr s. Jay. tained. tion. and Mrs. St. John; ALTA President-Elect Robert J . Jay and Mr

JANUARY 1974 48 Mobile Company Active in Historical Effort Purchase Completed

Robert D. Dorociak. chief executive officer of USLIFE Title Insurance Company of Dallas. has announced the completion of the purchase of Fort Worth Title Company from Fort Worth Pictured above is Thomas Burke (left) president of the Mobile. Alabama. Historic Development Capital Corporation. Pictured at the final Commission who presented a citation to R. D. Geist. Jr.. vice president of the Title Insurance Com­ transfer are. left to right. Charles H. Newman. pany of Mobile (second from left). Mrs. E. S. Sledge. (second from right) was the recipient of a cita­ Ill. newly-appointed president and chief execu­ tion from M rs . William Tipler. (left) president of the Historic Mobile Preservation Society, for convey­ tive officer of Fort Worth Title Company; Doro­ ing a scen ic easement on Georgia Cottage. her historically significant home. to the society. The cita­ ciak; and Steward W . DeVore. president of tion received by the Title Insurance Company reads. in part: " The Title Insurance Company has Fort Worth Capital and former owner of Fort shown civic responsibility in giving free access to title information necessary for the documenta­ Worth Title. who will remain as a director of tion of properties of historic and/ or architectural merit." the title company.

Security Changes Name to SAFECO Security Title Insurance Company changed its name to SAFECO Title Insurance Company, effective January 0 Automated title plants l, 1974. Wil liam H. Little , president of 0 Cartridged microfilm systems the firm, has announced that the name 0 Plant-building change does not reflect a change in services ownership or management. TITLE INFORMATION MANAGEMENT SYSTEM 0 Automation feasibility studies LANDEX systems and services are designed with the help of title people North Valley Title to serve the information-management needs of the title industry. May we tell you more? Check the topic above that interests you, clip this adver­ Changes Name tisement, and send it with your business card to - North Valley Title & Escrow Com­ Donald E. Henley, President pany of Redding, California has (213) 990-2130 changed its name to First American Title Company of Shasta County. In conjunction with its new identity, the firm, which is affiliated with First INFORMATA INC American Title Insurance (!J Company, is embarkin g on an extensive remodel­ SPEC IALISTS IN INFORMATION MANAGEMENT /17258 VENTURA BOULEVARD, ing program. ENCINO, CA 91316

TITLE NEWS 49 Frank B. GloYer has become president and chief executive officer of American Title Insurance Company, effective January I, 1974. Jay R. Schwartz, one of the founders of the Miami-based firm 37 years ago and president of the firm since 1958, has been elected chair­ man of the board of directors and will remain as chairman of the executive committee. GLOVER SCHWARTZ ABBOTT BLOOMGARDEN GloYer- who has more than 25 years in title insurance management and op­ erations-joined American Title in 1970 and has served the past year as the company's executive vice president and chief administrative officer, following two years as senior vice president and director of agencies. In addition, George J. Abbott has recently been appointed Connecticut state manager for American Title; Paul HEILIG GALLOWAY EKSTROM SEYMOUR M. Bloomgarden has been appointed to supervise the policy review section of the national office. * * * Chelsea Title and Guaranty Com­ pany announces the following promo­ tions in the company's home office: Harry L. Heilig, senior title officer and associate counsel; Larry Galloway, vice president-operations; Carl Ekstrom, BRATTON SHIELL STARNES vice president-auditor; DaYe Seymour, ALEXANDER vice president-corporate relations; Vincent W. Alexander, assistant vice president-corporate insurance; Leslie R. Bratton, assistant vice president­ personnel. * * * Bernard W. Shiell, president of The Commonwealth Corporation, Talla­ hassee (Fla.), and James L. Starnes, chairman of the board, Phipps-Harring­ CAS BON FERGUS ANDERSON KEAN ton Corporation, Atlanta, have been elected to the board of directors of

JANUARY 1974 50 Peninsular Title Insurance Company. John N. Casbon, assistant vice presi­ dent, has been appointed manager of the company's newly-established divi­ sional office in New Orleans; the office serves Louisiana, Mississippi and Ala­ bama.

* * * William F. Fergus has been elected RAHAL SCHEMBRI SURPRENANT MOSKOWITZ manager of the San Francisco branch office of Lawyers Title Insurance Cor­ poration; Stephen W. Anderson, Sr., has been elected manager of the com­ pany's Augusta (Ga.) office. * * * Harold C. Kean, president of Wash­ ington Federal Savings and Loan As­ sociation, Seattle, has been elected to the board of directors of The First American Financial Corporation and CLARK€ PARRA HULDACK PER CONTI its principal subsidiary, First American Title Insurance Company. Lawrence E. Joseph A. Perconti has been pro­ Rahal, Wichita (Kansas), has been moted to assistant vice president at the named regional vice president- mid­ Paterson (N.J.) office of Common­ west states for the title company; wealth Land Title In surance Company. Anthony Schembri, Arlington (Va.) has Philip E. Horvitz, Cherry Hill (N.J.) been appointed regional representative has been named an assistant counsel in the Mid-Atlantic states. for the company and Frank Cozzo has * * * been appointed title officer and man­ ager of the Drexel Hill (Pa.) office. Roger L. Surprenant, Hartford HORVITZ EASTMAN (Conn.), has been elected assistant vice * * * president of Security Title and Guar­ George K. Eastman has been named anty Company. The company also has manager of Colorado operations for named Edward Moskowitz and George Transamerica Title Insurance Com­ J. Clarke as vice preisdents and Mil­ pany, and Lawson Warburton has been dred Parra and Janet Huldack as as­ named regional manager in Colorado. sistant secretary and administrative as­ Norman E. Larkins has been appointed sistant. manager of Boulder County (Col.) * * * operations. * * * WARBURTON LARKINS Don Cline has been named as man­ Four persons have been elected to the ager of Galveston County (Tex.) opera­ boards of directors of Title Insurance tions for American Title Company. and Trust and Pioneer National Title Insurance. Elected to office in Tl were: vice president: Timothy Ahlberg, manager, marketing department, San Francisco County; trust officer: Simon J. Am an, trust administrator. Elected to office in PNTI were: vice president: James A. Callahan, Southeast agency manager, Georgia; assistant vice presi­ CLINE dent: Stephen C. Wilson, New England area manager, Boston. * * *

TITLE NEWS 51 meeting f~metable

June 27-29, 1974 Utah Land Title Association Park City Resort Park City, Utah March 6-8 , 1974 May 31 -June 1. 1974 A LTA M id-Winter Conference Tennessee Land Title Association Fairmont- New Orleans Hotel Ri verside Motel New Orleans. Louisiana Gatlinburg. Tennessee June 27-29, 1974 Ida ho Land Ti tle Association Shore Lodge M cCa ll . Idaho April 18-20, 1974 June 2-4 , 1974 Oklahoma La nd Title Association New Jersey Land Title Insurance Association Lincoln Plaza Inn Seaview Country Club Oklahoma City. Oklahoma Absecon. New Jersey July 21 -24, 1974 New Yo rk Land Title Association The Otesaga Hotel Cooperstown. New York June 6 -8, 1974 April 24-28, 1974 Land Title Association Texas Land Title Association New England Sea Crest Hotel and M otor Inn Hyatt R egency Hotel . Massachusetts Houston. Texas North Fa lmouth August 15-17,1974 M ontana Land Title A ssociation Miles City, M ontana

May 5-7, 1974 June 9-11 . 1974 Iow a Land T itle Association The Ti tle Insurance Corporation August 22-24, 1974 Holiday Inn of the Amana Colonies of Pennsylvania Minnesota Land Title Association Amana. Iowa Seaview Country Club Absecon. New Jersey Holiday Inn Anoka. Minnesota

May 9-11 , 1974 June 14-16. 1974 New M exico Land Title Association September 12-13, 1974 Ill inois Land Title Association Four Season M otor Inn W isconsin Land Titl e Association Stouffer's Riverfront Albuquerque, New Mexico Pioneer Inn St. Louis. M issouri Oshkosh. Wisconsin

May 9-11.1974 June 20-22, 1974 Washington Land Title Association September 13-15, 1974 Michigan Land Title Association Quay Inn M issouri L and Ti tle Association Boyne Highlands Vancouver, W ashington M arriott Hotel Harbor Springs. M ichigan St. Louis. M issouri

May 22-24. 1974 June 20-22, 1974 Californ ia Land Title Association September 29-0ctober 3, 1974 Land Ti tle Associat ion of Colorado ALTA Annual Convention Hotel Del Coronado The Lodge at Vail Americana Hotel Coronado. California Vail. Colorado Ba l H arbour. Florida

May 31 -June 1, 1974 June 20-22, 1974 December 4 -6, 1974 South Dakot a Land Title Association Oregon Land Title Association Lou isiana Land Title Association Phil-Town Inn The Inn at Otter Crest Royal Orleans Stu rg is. South Dakota Otter Rock. Oregon New Orleans. Lou isiana

52 J ANUARY 1974 Tell Your Story More Effectively . with t hese ALTA Educational Aids (All orders plus postage; write Business Manager, AlTA, 1828 l Street, N.W., Washington, D.C. 20036)

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THINGS YOU SHOULD KNOW ABOUT HOME LINCOLN LO:'iT HIS HOME THE IMPORTANCE OF THE ABSTRACT IN YOUR BUYING AND LAND TITLE PROTECTION. Folder BECAUSE OF DEFEC­ COMMUNITY. An effectively illustrated booklet designed for No. 10 envelope includes a concise TIVE LAND TITLES . . A that uses art work from the award-winning ALTA explanation of land title industry operational meth­ memorable example of the film. ''A Place Under The Sun." to tell about land ods and why they are important to the public. Nar­ need for land title protection title defects and the role of the abstract in land ration provides answers to misinformed criticism is described in this folder. title protection. Room for imprinting on back of the industry. $5.75 per 100 copies. $5.00 per 1 00 copies. cover. $12.00 per 100 copies.

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