OFFICIAL PUBLICATION OF THE AMERICAN LAND TITLE ASSOCIATION

1876-1976 A Message from the President

JANUARY, 1976

With the beginning of each new year, it is incumbent on all of us to evaluate not only our personal achieve­ ments in our private and business lives but also the achievements of our industry. We can be justly proud of the contributions that the members of the American Land Title Association have made to the real estate in­ dustry and we should reaffirm our dedication to improving our services for the betterment of the public and the industry.

The American Land Title Association seeks to coordinate the efforts of the various state associations and the individual members in promoting public understanding of the value of our services to the public and in the improvement of those services.

Many feel that the economic conditions during 1976 will be somewhat better than what we have experi­ enced in the past few years and we should use this opportunity to increase our activities as an association in those areas which will effectively inform the public and the members of various regulatory bodies of the necessity for and the value of our services.

The officers and staff of our Association seek the advice of the membership and, therefore, request and urge that you now plan to attend the Mid-Winter Conference at the Greenbrier in White Sulphur Springs, West Virginia, on March 21-24, 1976, so that your ideas and wishes can be directly communicated to your officers.

On behalf of the officers and staff of the Association, we wish to express our thanks for the helpfulness of the membership and we wish all a very prosperous New Year.

Sincerely,

Richard H. Howlett FIRST MAJOR "BREAN- THRfJfJfiH'' IN 25 YEARS IN REAl ESTATE TABlES!

Your NEW Hard-Working fiiiT FOR REAlTORS! Created by Realtors for Realtors

In addition to the conven­ tional loan amortization payment tables, the New, 240-page Realty Computer p rovides, in shirt-pocket size, thirty-eight tables and checklists badly needed by real estate people in their daily transactions. You owe yourself an appraisal of the REALTY COMPUTER-one of the finest professional fact­ finders you have ever seen. Your clientele will be asking for it.

Write todt1y for your complimenttlry copy (to Lending Institutions only) PROFESSIONAL PUBLISHING CORPORATION 122 Paul Drive • San Rafael, California 94903 The ALTA Executive Committee will meet January 17 in Phoenix, Ariz. Major topics on the Committee's agenda include the program for the 1976 Mid-Winter Conference and the assignment of ALTA representatives for attendance at affiliated state association conventions.

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ALTA Director of State Governmental Affairs Ralph J. Marquis advises that state legislatures around the country are readying themselves for the 1976 session. In 1975, 49 state legislatures met in regular session, passing numerous bills of interest to the land title industry. All pertinent legislation, as well as insurance department rulings and regulations, attorney general opinions, briefs of leading cases, and cases in digest form, is published monthly in the State Legislative Bulletin, which is sent to subscribing members of the service.

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An increasing number of orders are being received from ALTA members in response to the Centennial Kit sent in October. The Kit, developed by the Centennial Ideas Sub­ ALTA committee of the ALTA Public Relations Committee, suggests numerous ways by which one may publicize and celebrate the Centennial of Land Title Insurance. Among the Kit's sale items, which include postage meter slugs, a Centennial ad, and a Centennial historical folder, the postage meter advertising slug has been the most popular item to date. A feature commentary on the Centennial appears elsewhere in this issue of Title News. Members of the Centennial Ideas Subcommittee include Chairman EdwardS. Schmidt, H. Randolph Farmer, and James W. Robinson .

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ALTA Judiciary Committee Chairman Ray E. Sweat reports that the Uniform Probate Code has been passed, in whole or in part, by state legislatures In Alaska, Arizona, Colorado, Idaho, Minnesota, Montana, and North Dakota. The ALTA Executive Commit­ tee has requested that any cases relating to such state law be reported to the Associa­ tion membership immediately. Any ALTA member knowing of a case relating to the code is asked to advise Chairman Sweat (Pioneer National Title Insurance Company, 433 South Spring Street, Los Angeles, Calif. 90054) as soon as possible and send a copy of correspondence to Executive Vice President William J. McAuliffe, Jr., in the ALTA Washington office.

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A cumulative national audience approaching 6 million viewed the award-winning ALTA film, "1429 Maple Street", in local public service telecasts during the last eight months of 1975. Stations donate related air time free in the public interest. Television distribution of the film is continuing in 1976 as an activity of the ALTA Public Relations Program. Members of the Association who wish to order 11-mlnute, 16mm color sound prints of the film for $104 each plus postage, may do so by writing the ALTA Washington office. The film tells about a house, the families who own it over half a century, and the land title problems they encounter. ~TITLE -"'f! '-1< ~;.,.,.,)NEW~~0 s ,.,.l£ n•s\l

Association Officers Features President Let's Celebrate 5

Richard H. Howlett Proceedings, 69th Annual Convention American Land Title Association, Chicago, Illinois Title Insurance and Trust Company Los Angeles, California General Sessions President-Elect President's Report, Robert J. Jay 7 The 1976 Centennial of Title Insurance: Beginning a Second Century of Excellence, Philip D. McCulloch H. Randolph Farmer and Edward S. Schmidt 8 Hexter Fair Title Company Presentation of Title Insurance Centennial Proclamation from Mayor Richard Daley of Chicago, Dallas, Texas Alvin W. Long 10 Presentation of American Revolution Bicentennial Liberty Bell to ALTA, Fred B. From hold 10 Chairman, Finance Committee Award of ALTA Honorary Membership to Hart McKillop, Alvin R. Robin 10 Changing Patterns in Real Estate Development and Use, The Honorable Philip Alvin W. Long M. Klutznick 12 Do's and Don'ts of Labor Relations and the Effect of Equal Employment Opportunity Chicago Title and Trust Company Legislation on the Land Title Industry, Charles J. Griffm, Jr. 15 Chicago, Illinois Developments in State Legislation and Regulation Comments by Gerald L. Ippel 17 Treasurer Comments by Dr. Irving H. Plotkin 21 Fred B. Fromhold The Real Estate Settlement Procedures Act of 1974: Where Are We Now? Commonwealth Land Title Insurance Company Comments by Donald p_ Kennedy 24 Philadelphia, Pennsylvania Comments by Sanford Witkowski 25 Political Involvement-Our Heritage in a Democracy Chairman, Abstracters and Title PAC Means Act; Comments by Mrs_ Lee Ann Elliott 28 Insurance Agents Section The Land Title Industry Challenge; Comments by Francis E. O'Connor 30 The Economy and Housing, Herbert E. Neil, Jr. 32 Roger N. Bell Washington Report, William J. McAuliffe, Jr. 34 The Security Abstract & Title Company, Inc. Wichita, Kansas Title Insurance and Underwriters Section Some Disturbing Developments Chairman, Title Insurance and in Claims and Suits Tort Liability Under Title Policies; Comments by Joseph Mascari Underwriters Section 36 Class Actions; Comments by John C. Connelly 38 C. J. McConville Mechanic's Liens; Comments by Jack Tickner 40 Title Insurance Company of Minnesota Minneapolis, Minnesota Abstracters and Title Insurance Agents Section Problems Enco untered in Rewriting Chapter Nine, Texas Insurance Code, Robert C. Sneed 42 Immediate Past President Liability Under Title Insurance Agents Contracts, A Confrontation or Cooperative Survival Robert J . Jay Comments by William B. Boyd 44 Land Title Abstract Co. Comments by Robert L. Saville, Jr. 46 (Port Huron) Detroit, Michigan Election of Officers National Officers 50 Association Staff Section Officers 50 Executive Vice President Committee Reports William J. McAuliffe, Jr. Navigational Servitude Committee Report, Ray E. Sweat 51 Director of Public Affairs Report of the Committee on the Commission on Uniform Laws "(Uniform Land Transactions Act)", James M. Pedowitz 54 Gary L. Garrity Report of the Committee on Improvement of Land Title Records, Thomas E. Horak 56 Report of the Research Committee, John E. Jensen 58 Director of State Governmental Affairs Report of the Federal Legislative Action Committee, James G. Schmidt 61 Ralph J . Marquis Departments Director of Research A Message from the President Inside Front Cover Richard W. McCarthy ALTA Action 2 Index to 197 5 Title News Articles 62 Business Manager Names in the News 64 David R. McLaughlin Meeting Timetable 68 ON THE COVER: Best wishes for a prosperous centennial year. Association General Counsel VOLUME" 55, NUMBER 1, 1976 Thomas S. Jackson TITLE NEWS is published b.- American Land Title Jackson, Parkinson & Jackson Auociation. 1818 L Street. N. W .. Washington. D.C. 10036. /ph 1828 L Street, N.W. one / 101-196-3671. Washington, D.C. 20036 RICHARD W. RONDER, Editor It's not easy to avoid the liDielight for 100 years.

For 100 years the people of the and others- to establish a good land insurance. The first insurance Land Title Insurance Industry have title as the foundation for safe and premium is the only one you pay been working behind the scenes to secure ownership or investment. and there are no renewal premiums serve the home-buying public­ In 1976the Land Title Insurance ever. The protection lasts as long searching the public records, Industry celebrates its centennial- as you and your heirs have an working with real estate 100 years of service and protection. interest in the property. professionals such as the broker, Whenever you buy or invest in real It's one of the best policies of attorney, mortgage lender, builder estate always get land title protection you can buy.

American Land Title Association 1828 L Street, N.W., Washington , D.C. 20036 Edward S. Schmidt, Chairman Centennial Ideas Subcommittee

LET'S CELEBRATE

(Editor's Note: The author is vice pres­ the ultimate security provided for the gredients for your own celebration. ident and secretary of Commonwealth purchasers and investors. You will find them in the Centennial Land Title Insurance Company.) There are many positive values in­ Kit recently distributed to all mem­ herent in our Centennial celebration. bers. The Kit includes sample materials * * First of all it gives us very special and information for your immediate * opportunities and reasons to publicize use. 1976 Surely Can Be a Banner Year. our industry and the services it per­ Here is a run-down on what has But It Takes a Good Many of Us forms in our communities. Our pro­ already been done for you: to Carry the Centennial Banner. gram will demonstrate our pride in our work and our determination to main­ tain the excellence and integrity of our (1) Folder for distribution - "Land industry in the future. The net effect Title Insurance, Consumer Pro­ The 197 6 Land Title Insurance of a well-planned Centennial program tection Since 1876" - priced at Centennial is indeed a cause for na­ can only be a reflection of credit on only $9.00 per hundred copies. tional observance by the membership you and your company. Add YOUR imprint! of ALTA. But the Centennial will be nothing Besides being the celebration of a more than an historical fact unless we (2) Centennial Logo - camera-ready significant historical event, our Cen­ implement it with our own enthusi­ art for imprinting on your sta­ tennial should be a meaningful, pro­ asm, our own ideas and energy. Your tionery, envelopes, etc. ductive occasion that creates a lasting ALTA Public Relations Committee favorable climate for our industry. and the Washington headquarters staff (3) Centennial Postage Meter slug - Based on a determined action pro­ have anticipated your needs, and have an extremely low-cost item pro­ gram, 1976 should prepared a number of ready-made in- be a time for viding year-long advertisement renewal within our field, and a time to impact. generate - for those outside the indus­ try - an understanding and apprecia­ tion of the real meaning, role and ( 4) A model Title Insurance Centen­ importance of title insurance. nial Speech, ready for your per­ All over the country, people's atten­ sonal use with just a few addi­ tion will be attracted to our nation's tions or changes you might want bicentennial. But this circumstance to make to add local color. need not overshadow our 1 OOth Land Look for and take advantage of Title Insurance Birthday activities. the opportunity to explain the Rather, it is up to us to join them vital, valuable service our indus­ together whenever possible - to use try offers to most Americans. ingenuity and hard work in linking Do your bit to overcome the these two important events occurring ignorance and misunderstanding in 1976. of our product and service which The objective of our action program seems to be at the root of our is to heighten awareness among those industry problems. Let's com­ we serve of the excellent contribution municate! of land title insurance services, the benefits derived by the real estate (5) Suggested forms of news releases professionals through our work, and Author Schmidt to announce or report on your

TITLE NEWS 5 speech. This form of public rela­ of publicity can be developed, industry message over your name and tions activity costs nothing more not the least of which is the at your expense. Preparation and pro­ than your energy and determina­ association of people in our in­ duction costs have already been under­ tion to make it happen. Here dustry with the leaders in local written by ALTA and the only cost to t_oo, the job has been done for government. Once again, do it you is for the plate, mat or repro proof you, subject only to minor re­ and the benefit is all yours! needed for publication. Price informa­ visions to personalize it to your Model forms of publicity an­ tion is in the kit. We believe the own advantage. nouncements relating to the message is important and that getting proclamation are included in the it across to the people in your com­ Centennial Kit. munity will be helpful to you in your (6) A model TV Interview Script. business. naming a spe­ Here is a concise, clear expres­ And, incidentally, cial week each year is a great sion of the nature and advantage So far we've been talking external American custom. If others can of land title insurance. Be a relations. It's mighty important do it why can't we; so just think public celebrity and promote yourself, to remember the job we can do about getting a proclamation for us or someone in your office, as a public relations - to every year to advertise our busi­ with internal spokesman for Title Insurance. that the Centennial can be a ness! realize Do so, and the benefit will be all beneficial influence within our organi­ yours. This interview script can The PR tools are all there for you. zations. Make your employees con­ easily be converted to use on So let's COMMUNICATE! scious of the legacy of service and radio. stability the Land Title Insurance in­ their Another special opportunity for you dustry represents, and enhance pride in continuing this standard of (7) Proclamation of LAND TITLE to publicize your operations and the excellence. Encourage your employees INSURANCE CENTENNIAL Centennial is availab le to you through to be speakers or authors of articles WEEK. Be a leader! Contact the use of the special advertisement pre­ publicizing the positive attributes of politician of your choice and pared by the ALTA Public Relations our business - our protection of the arrange for this excellent form Committee on behalf of all members. purchaser, the security we add to the of recognition. State Land Title The ad, "It's not easy to avoid the investment of the lender, the coopera­ Associations should take the limelight for 1 00 years", appears else­ tion we offer to the real estate broker, lead in this endeavor and obtain where in this issue of Title News. mortgage banker, builder, attorney a proclamation from the Gover­ Camera-ready proof copies of this ad and all others having a role in the real nor. Others should take the ini­ can be obtained and are recommended estate transaction. tiative to get the job done at the for your use in local newspapers, mag­ city, county and other local azines, trade journals, - in fact wher­ about the whole story. levels of government. All kinds ever you are willing to sponsor this That's just This is your one and only chance to celebrate the Centennial of our indus­ try. Do it right! It's all up to you, and it will only be as good and effective as you make it. You will gain positive publicity for yourself and your indus­ try, or you will forfeit the oppor­ 0 Automated title plants tunity. 0 Cartridged microfilm systems much we 0 Plant-building services Working together there is can accomplish. The Centennial gives a studies TITLE INFORMATION MANAGEMENT SYSTEM 0 Automation feasibility most unusual opportunity to gain visi­ LANDEX systems and services are designed with the help of title people bility and recognition within our own to serve the information-management needs of the title industry. May we communities for a most important tell you more? Check the topic above that interests you, clip this adver­ service. tisement, and send it with your business card to - through your ALTA Cen­ Donald E. Henley, President Look back tennial Kit now, or request informa­ (213) 346-9203 tion from ALTA headquarters. Then add your own originality and personal­ ity to your program for success in (i) INFORMATA INC your horne town. So, as I said when I started this MANAGEMENT 1 23241 VENTURA BOULEVARD. WOODLAND HILLS. CA 91364 SPECIALISTS IN INFORMATION article- "Let's Celebrate". 0

6 JANUARY 1976 GENERAL SESSIONS

President's Report

Robert J. Jay

1974-75 President, American Land Title Association President, Land Title Abstract Co., Port Huron, Michigan

Honored guests, members, Ladies & Gen­ Title industry is a profession. It takes many record of accomplishment and of your tlemen. Serving as your president has been a skills, it takes long hard work; and yet, it important part in advancing the well-being unique experience. It has enabled me to get borders on the professional side. of our society." Signed, Gerald R. Ford. to know may of you better, to meet many, It has been a challenge to accept these I think it's a tribute to our industry that many more people in the Land Title profes­ responsibilities. I certainly appreciate the we do receive these communications. And sion, and above all, given me a chance to active cooperation of the other officers and to realize that our one segment of our work closely with many of you in func­ the staff and the support that each and industry, the Title Insurance segment, is tioning as your President. every one of you have given to me as your half as old as the United States. Abstracting I don't think that this job could be President. of land titles goes back further than that. As accomplished, beca use of the varied scope At this point, I would like to read several you know, the theme of this convention is of the responsibilities, without the complete co mmunications that I did receive since the Centennial celebration of Title Insur­ cooperation of your executive staff in Wash­ being here in Chicago. The first is from ance. ington, D.C. headed by Bill McAuliffe. Charles H. Percy of the United States In that connection, I feel proud to I really feel that these men are probably Senate. be here acting as your President. Probably the one of the best executive staffs in the "Dear Mr. Jay: Please extend my best biggest challenge facing us at the present co untry working for a trade association. wishes to everyone attending the 1976 Title time, is the Real Estate Settlement Pro­ Any wish that you express or thought that Insurance Centennial Convention. I'm sure cedures Act of 1974. As you know, it went you have, they're very willing to cooperate the convention will be an enjoyable and into effect on June 20; it changed a lot of and carry out their responsibilities. productive one. Welcome to Chicago. I hope what many of us have to do regarding It's been interesting visiting many of your you enjoy our city. Sincerely, Charles closings of real estate transactions. As you State Association Meetings and listening to Percy." are probably aware, Senator Proxmire with the problems and challenges that are facing We also have one from Adalai Stevenson his sub-committee on banking, called a our industry. It is surprising that there are of the United States Senate. "I am happy to meeting of the various consumer groups and many different concepts as to what to do welcome the members of the American industries to analyze what affect RESPA, as about these challenges. But I do feel that Land Title Association to Chicago for their it's commonly called, was having on our most of the members of the American Land 1976 Title Insurance Centennial Conven­ industry and the other industries. Title Association feel that their Association tion. Please extend my best wishes to all for He conducted three is working for them. a pleasant visit and a successful convention. days of hearings in Washington, D.C. The fust There's no doubt that this association is With best wishes, Sincerely, Adalai Steven­ day was for made up of many diverse individuals with son." goverment officials and Mr. Elliott made what we feel diverse and different thoughts. It is a job to Also the day before yesterday, I received is a classic presentation as far bring and hold all these things together. the following telegram from Gerald R. Ford. as his views on what RESPA should do in Because you have abstractors, title search­ "I am pleased to greet the members of the the future. The second day was the Trade ers, abstractors and title agents, and you American Land Title Association, as you Associa lions' chance to testify. have your larger Title Insurance Under­ hold your Centennial Convention. The pros­ There were seven groups there including writers, their aims and goals are different. pect of land ownership has always been part Mortgage Bankers Association, the Ameri­ But with the aid of the other officers and of our American dream. And through half can Bankers Association, United States Sav­ the staff, we try to work for each and every of our nation's history, your organization ings and Loan League, the Mutual Banks, one of you. has worked to help make that dream come and the Credit Union and also the American This is difficult because of the varying true for millions of Americans. By offering Land Title Association. views. But we do try to make a concerted insurance of land titles, you have assisted in I was given the opportunity to testify on effort. That's why the money is spent to providing valuable protection for home buy­ behalf of each and every one of you here in send the officers or a member of the staff or ers and other investors in real estate. You this room and on behalf of our association. both to your State Association meetings. have given buyers a fum basis for confi­ To say the least, it was an extremely This American Land Title Asso cia tion is dence as they undcrtak e property transac­ fascinating and interesting experience. All of meant for each and every one of you, to tions. And this confidence, in turn, has you are aware of the fact that ·Senator help you in pursuing your chosen profes­ strengthened the entire real estate sector in Proxmire has had his eye on our industry sion. I honestly believe that being in the our economy. You can be proud of your for quite a few years.

TITLE NEWS 7 We were, I think, surprised to find that criminal penalties. And as your President, I Now a century, one hundred years, is a his attitude on the second day of the do urge you to comply in all respects with long, long time. But Dick Best of the Illinois hearings at which we testified, was that of a RESPA. Land Title Association has compressed our reasonable individual listening to the broad There are many details that I could go Centennial into a few exciting moments. reaching effect that this act has had on into in this report of the activities of the And here's how he views the past one every segment of our industry and also the Executive Committee and of the Board of hundred years of our history. lending institutions. Governors. Many of them are technical and The closing words of that pictorial epi­ It was my impression that he realized that they will be reprinted at a later date. I've sode, our challenges and opportunities for this legislation had tried to cut through so tried to make the thrust of my year in office the future. The next hundred years will be many procedures that had been long estab­ that of listening to the problems of the determined by some of the things that you lished, that perhaps we should take another various individuals and state associations, do or decide to do hopefully as a result of look at RESPA. We are fortunate that carrying messages back to our headquarters, your attendance at this convention. Senator Garn from Utah was there with back to the other officers; so that we can I think as I've spoken around the country some very interesting comments and work together as one unit. With so many and also in private conversations, the legis­ thoughtful ideas regarding RESPA. diverse elements, so many diverse views, it is lators and the regulators for Federal and difficult. But believe me, we are listening, State and Municipal, have their eye on the the As you may be aware, he introduced we are trying. Title Industry. We've got to become politi­ bill to suspend Sections 4,6, and 7 until And we certainly want you to feel free to cal figures in one way or another. And for they can have further hearings in the House come forward with any suggestions, any that reason, the whole theme of this 69th and in the Senate, and determine just what thoughts that you do have. Because, ladies annual convention of the American Land "I to do with RESPA. As Senator Garn said; and gen tie men, this is your association. I've Title Association, is to point up and awaken believe that the United States Congress been proud to be a part of it, and now we an interest in you as as far as what is hap­ take built an atomic bomb or a cannon to shall get on with the program. pening in America today, as far as our Title care of a few isolated mosquitoes." In keeping with the Centennial, we industry is concerned. In view of these hearings we are optimis­ thought that although Title Insurance won't tic regarding the future of RESPA. become a hundred years old until 1976; we I think you'll fmd many of the things It appears that these Sections may be felt it appropriate that this convention shocking. I know you'll find them interest­ repealed or various parts of the act repealed. should kick off the Centennial celebration ing. And I certainly urge your participation However, I want to caution you to remem­ of Title Insurance. And this will give you an in all the meetings, because what you learn ber that at the present time and until opportunity to think about what you want over the next few days and how you apply something is actually done in the halls of to do in connection with perhaps your it, may determine and probably will deter­ Congress; that RESPA is still very much advertising, or your thoughts on the celebra­ mine the entire future of your own business with us in regards to civil penalties and the tion of the Centennial and of our industry.

The 1976 Centennial of litle Insurance: Beginning a Second Century of Excellence

Comments by H. Randolph Farmer

ALTA Public Relations Committee Chairman Assistant Vice President and Director of Public Relations and Advertising Lawyers Title Insurance Corporation, Richmond, Virginia

and

EdwardS. Schmidt

Chairman, Centennial Ideas Subcommittee Vice President and Secretary, Commonwealth Land Title Insurance Company, Philadelphia, Pa.

MR. FARMER: Thank you Bob. MR. SCHMIDT: Over the past several activities, will be reinforced by the special 1976 will be a memorable year for years, members of your ALTA Public Rela­ interest generated through the observance of America. While joining our fellow citizens tions Committee, have been thoughtful of the Land Title Insurance Centennial. If you next year and observing the National Bicen­ the once-in-a-century opportunity that take advantage of it, it will be a banner year tennial, those of us in ALTA also will awaits our industry in 1976. We're excited for telling the entire nation about our celebrate the Centennial of Land Title about this chance to use a Centennial industry in a positive manner. Randy ... Insurance. For us, 1976 will be a year in celebration for gaining favorable public which we can point with special pride to the exposure and recognition. beginning of a second century of excellence In 1976 our regular ALTA PR program MR. FARMER: All this favorable impact in the insuring of land titles. Ed ... and existing state and local public relations on public opinion will depend on two major

8 JANUARY 1976 elements. First, we must continue to com­ be placed in professional and trade publica­ MR. FARMER: Before we close, Ed municate the values and benefits of our tions, as well. and I would like to thank the ALTA officers industry across the nation through regular and board members for their support that ALTA state and local public relations MR. FARMER: A Land Title Insurance makes it possible for your national associa­ activity. Then we must amplify the effect Centennial theme can be carried forward tion to continue a public relations program by a special industry wide celebration of the from the local company office in many that consistently registers impressive results Land Title Insurance Centennial. ways. Continuity will be helped by using the on a budget that is modest in comparison to Centennial logo seen at this convention on size of task. office stationery and a variety of other MR. SCHMIDT: The ALTA Public Rela­ material. Another effective low cost effort And we extend special appreciation to tions Program and supporting activity by will be including the Centennial logo on the our fellow Public Relations Committee regional and state associations and individ­ office postage meter. members; Phil Branson, Pat McQuaid, Frank ual companies, will create an impressive O'Connor, Jim Robinson and Bill Thurman, foundation on which to build a nationwide and to Bill McAuliffe, Gary Garrity and momentum in 1976. MR. SCHMIDT: And let's not forget local Richard Ronder of ALTA staff, for their Our ALTA PR Program continues to government. By working with their county dedication and hard work in this team ef­ reach an audience of literally millions of or municipal officials, ALTA members will fort. people from coast to coast. Home buyer be able to arrange for local proclamations messages that tell about Land Title protec­ designating your choice of a specified time In 1976 providing the public with tion, are especially effective. They're widely period as Land Title Insurance Centennial accurate information about the services of used by television, radio and print media in week. Model proclamations and the right our industry will be among the greatest free public service time and space. local contacts, will expedite this activity and challenges confronting us all. Through an you will get the extra benefit of personal industry-wide public relations effort, that publicity. includes the celebration of our Centennial, MR. FARMER: Our overall success in Proclamations at the level of state govern­ we will be seen and heard by an ever­ public relations next year, will be enhanced ment, should be a number one priority for changing national audience of millions. and assured of success by the involvement all state associations. Your participation in our Centennial of individual ALTA members and state program is essential. Let's tell the world we associations in celebrating the Land Title MR. FARMER: Now that we have know what we're doing and that Land Title Insurance Centennial. There are exciting presented the Centennial ideas, it would be Insurance is the best real estate protection things to be done, and it will take wide­ nice to offer assistance for implementing available. spread state and local effort to make them a them. And assistance just happens to be reality. available. After a good deal of hard work, your ALTA Public Relations Committee and MR. SCHMIDT: The possibilities for state staff, have developed a Land Title Insurance and local individual Centennial action are Centennial kit that will be sent to associa­ numerous. for example, a folder Land Title tion members in the near future. A sample Insurance-Consumer Protection since of this kit is on display in the registration 1876, that concisely states the history of area here at this convention. Title Insurance and explains Land Title Included in the kit; are a folder, Cen­ protection, will be very useful. Use it as a tennial logo, order forms for postage meter give away item to reinforce speeches. Use it slug and print ad, model Centennial speech, as a direct mail piece, as an envelope stuffer. with model before and after news releases It has many other good applications. model radio and television interview script, and model proclamations with accompany­ ERRORS & OMISSIONS ing model before and after news releases. MR. FARMER: The audience for Cen­ INSURANCE tennial speeches will be increased by distrib­ MR. SCHMIDT: We urge and we hope uting before and after news releases to local that every ALTA member will use the media. And basing these on speech content. Centennial kit in developing a program for Additional media exposure can be obtained individual celebration of this historic event Title Opinion Coverage by use of a model script as a basis for in 1976, by planning and budgeting now, an arranging local radio or television interviews impressive observance can become a reality featuring ALTA members. in your community. Remember that this is a The radio or television appearances also once in a century opportunity for all of us '~ TITLE AGENT will be built around a Centennial theme and to apply some imagination in planning a should be well publicized in advance. memorable Centennial Celebration. FOR TITLE PEOPLE" The Centennial kit is designed to stim­ ulate your creative thinking, and we hope MR. SCHMIDT: Newspaper and magazine your activity will extend beyond what is advertising is another good way to call suggested by its content. Whether your local attention to the importance of Land Title activity includes media placement, speeches, Insurance. Advertisements can mention the planned tours, advertising, essay contests, R.~1. unique nature of our industry in remaining scholarship&, direct mail, or whatever else out of the limelight for a century, while you create; we hope that it will reflect the NTRELL always providing vital information and pride of you and your employees in our protection for those who invest in real industry. GENCY, INC. estate. If you need assistance in planning your Box 516 (918) 456-8883 Advertising of this type is institutional in Centennial activity, it is available through format and can be scheduled for local our ALTA staff in Washington. Similar Tahlequah. Okla. 74464 newspapers by groups of Land Title com­ assistance is being offered to affiliated panies or by individual concerns. It can also associations.

TITLE NEWS 9 Presentation of title Insurance Centennial Proclamation From Mayor Richard Daley of Chicago

AL lvin W. ong

President, Chicago Title and Trust Company, Chicago, fllinois

Thank you Bob. which I'd like to present this morning. And whereas the American Land Title Several years ago our association made a can't help but saying, this is one public Association is this year observing the decision to forego the former tradition of official who sincerely believes in fiscal Centennial of Land Title services, now having a local public official give an address responsibility and who acts accordingly. therefore I, Richard J. Daley, Mayor of the of welcome to our association at the open­ Therefore, I'm doubly delighted to present City of Chicago; do hereby proclaim this ing session. If you recall, that was usually this proclamation today. Mr. President, the week of September 29 through October 4, followed by a response to the address by proclamation reads: 1975, to be Land Title Insurance week in our president-elect. We will follow the new Chicago. And urge all citizens to take custom this year, and will not have such an "Whereas the nation's first Land Title cognizance of the special events arranged for address of welcome. Insurance policy was issued in 1876, and at this time. Dated this 29th day of August whereas Land Title Insurance service has 1975. Sincerely, Richard J. Daley." However, upon learning of our conven­ since been developed as an industry opera­ By presenting this proclamation, we do tion and of our Centennial celebration, the ting throughout the United States offering give a very warm welcome to our city and great mayor of the city of Chicago did protection against hazards of title to real hope you enjoy your stay. Mr. President, prepare a proclamation and signed one estate investors and to dealers in real estate. the proclamation.

Presentation of American Revolution Bicentennial Liberty Bell to ALTA

Fred B. Fromhold

President and Chief Executive Officer, Commonwealth Land Title Insurance Company, Philadelphia, Pennsylvania

As we have all just heard this morning, phia in June of 1876, by the Real Estate Mr. President, I am very proud and happy through Dick Best's presentation, the first Title and Trust Company, a predecessor of to present you with a replica of the Liberty title insurance policy was issued in Philadel- Commonwealth. Bell commemorating our 100th anniversary.

Award of ALTA Honorary Membership to Hart McKillop

Alvin R. Robin

President, Guaranty Title Company, Tampa, Florida

Once or twice in a man's lifetime, he is foresight. He is a man of extraordinary though, his primary Company affiliation accorded a privilege which he values so talent and ability whose illustrious career was with Lawyers Title Insurance Corpora­ highly that it ranks with the great moments has embraced many diverse endeavors. He is tion, beginning in 1936, he was directly of his life. This is such an occasion for me. a man whose imagination and ingenuity has involved in the title business long before It is a great honor to be able to present to been manifest in his unusual accomplish­ that. He was the prime mover, the organizer Hart McKillop this Certificate of Honorary ments. He is, in fact, a living legend whose and the architect that created Florida Membership in the American Land Title achievements rank with the great men of Southern Abstract and Title Company in Association. our time. Winter Haven, Florida in 1925. He served as Before doing so, however, I want to tell Those of us who have known him over an officer of Florida Southern for many you something about this man, for he is no the years are aware of his long and distin­ years and that Company which is presently ordinary man. He is a man of vision and guished service to the title industry. AI- an active member of ALTA still enjoys the

10 JANUARY 1976 eventually sold to the prestige of having Hart McKillop serve on its ation with Lawyers Title in 1936. In 1972, entire project was Board of Directors. he was honored by the Florida Bar Associ­ Clyde Beatty Circus. Florida His career with Lawyers Title was particu­ ation upon his 50th anniversary as a mem­ He is a past President of the the history larly outstanding and he served the Com­ ber of the Florida Bar. Historical Society and has found is various capacities until his retire­ of Florida to be so fascinating that he pany in He is also a prolific and very excellent ment in December of 1970. At that time, he presently producing a series of educational writer. He has authored many, highly read The pilot was Senior Vice President and a member of films on the history of our State. educational articles on title insurance which and is now in post its Board of Directors, having served in the film has been completed have appeared in the University of Florida his own script which latter capacity since 195 8. During those production. He writes Law Review, The Florida Realtor Magazine, motion picture scenario, years, he established Lawyers Title's facil­ is a complete National Realty Board's Journal and other and action directions. He has built ities in Detroit, Atlanta, Washington, D.C., camera publications. In addition, he has provided the sets himself and he employs Newark and Miami. He also created and all of text material for the University of Florida camera crews to do the techni­ supervised the Florida Agency System professional Law School and the Continuing Legal Edu­ He uses students from the local which has been one of the strongest and cal work. cation Department of the Florida Bar. for the minor casting parts. most productive in the country. colleges the narration based on his own He is also a much sought after public He does In addition, he established various other facts. As an indication speaker. He has appeared on many conven­ research of historical branch offices throughout the State of and depth of this project, the tion programs and has lectured widely in of the scope Florida. During his later years with Lawyers with the geologic origins of educational seminars throughout the coun­ first film deals Title, he served as Chairman of the Continu­ going back as far as 200 try. the State of Florida ing Education Department and was responsi­ million years and proceeding through vari­ ble for creating and administering the Com­ Now, let me enumerate briefly some of ous ice ages and land uplifts coinciding with pany's employee training program. his other activities, not necessarily chrono­ the uplift of what is believed to be at the After his official retirement, and I say it logically in the order of occurrence or time of the rise of the Appalachian Moun­ that way, because this man will never importance, but as an illustration of the tain range. All of this is being done on his actually retire, he continued his efforts in versatility of this man and the scope of his own initiative and with his own resources. this field by creating Land Title Institute endeavors. He hopes that whoever sponsors this series and offering through its facilities an indus­ He was a co-founder of the Winter Haven of films will eventually make the series a gift try wide educational program. During the Hospital. to the children of Florida. past several years, he has had thousands of He organized and helped develop the I think I must also relate to you a highly students from many of our member com­ Winter Haven airport. dramatic, but little known event that panies processed through the Institute's He is a 32nd degree Mason. occurred in his life. As the war clouds correspondence courses with which some of He helped organize and was the first gathered over Europe in 1939, he and his you, I am sure, are familiar. In this way, he President of the Florida Title Underwriters wife were vacationing in England. The be­ continues to serve the industry and is Bureau. ginning of hostilities in September of that the making a significant contribution to the He has been a TV personality and was found him rather urgently trying to book education and welfare of many of our central performer in a long running series passage by ship back to the United States. employees. which was aired from the West Palm Beach He tried several but found no space available area. general exodus that was occur­ He has also served well our Association. due to the He was the central organizer and served as ring at that time. Finally, they were granted He was a member of the ALTA Board of Chairman of the Board of Directors of the on a ship only to learn a few hours Governors from 1949 to 1951. He has been space Lake Region Bank of Commerce in Winter sailing time that their passage had Chairman of the ALTA Committee on before Haven, Florida which is now the First cancelled in the confusion of early Advertising and Public Relations and has been National Bank of Winter Haven. name of that ship was the served on the Standard Forms Committee. wartime. The He has designed and developed residential for those of you do not He also served in other unofficial capacities Athenia and housing. your World War II history, that and whan I first began attending these Con­ remember He has designed and built uniquely styled ship sunk by a German ventions some 25 years ago, he was the was the first office furniture. war. He was later able perennial Master of Ceremonies at Conven­ submarine during the He has owned and skippered a seagoing back home and was tion Banquets injecting his own brand of to secure safe passage vessel. make his contribution to the Cajun, Scottish and Blacked Faced humor thus spared to Title Industry and to all mankind. into the proceedings. Prior to attending the University of Flori­ I cannot conclude these remarks without By profession, he is an attorney, having da Law School, he was a student at the adding a personal word of friendship and graduated from the University of Florida Georgia Institute of Technology more gener­ admiration. This man has been my business Law School in 1922, when he was still to as Georgia Tech, where in ally referred adviser, my personal counsellor and my legally a minor. Because of that, he holds he starred addition to studying architecture, years. His advice and the unique distinction of having had his friend for over 30 on the grid iron for the Yellow Jackets. and I might add, disabilities of minority removed by the counsel has been invaluable proper. It is with the Supreme Court of the State of Florida so One of his more unusual endeavors was always, Sound and that I now present to that he could practice Law in that State. His that of being a lion farmer. Yes, you heard greatest of pleasure this Certificate of Honorary initial practice was in Clearwater but he me correctly. During the 1930's he was Hart McKillop American Land Title soon moved to Winter Haven where he engaged in the business of raising African Membership in the continued to practice law until his associ- Lions, both for show and for sale. The Association.

TITLE NEWS 11 Changing Patterns in Real Estate Development and Use

The Honorable Philip M. Klutznick

Former Ambassador to United Nations, Klutz nick Investments, Chicago, fllinois

Mr. President, ladies and gentlemen. almost impossible to limit one's self to a pollution and limits of growth; the emerging Following the introduction of the act small horizon, without touching at least on new powerhouse of OPEC, with their threat that preceded also reminds me of Mark the broad political, economic and social of embargoes. Even the poor developing Twain. There's nothing quite as hard to live issues that seem to impact everything and nations were fighting to get some dirt and up to as a good example. And what everyone. pollution from growth on their hands and preceded me was a good example of the A friend of mine who is one of the out of their lands, no matter how unlimited. kind of devotion to your business. And nation's largest developers, began a recent In this complex of almost revolutionary perhaps he should have made this speech on speech with an appropriate observation, proportions, in one way or another, land has the changes because his life indicates diver­ which as far as I know is original with him. been substantially involved. We Americans sity, which unfortunately mine does not. He said and I quote him : "Whoever isn't with a wealth of square miles and with When I was invited here, I was told I was confused these days, isn't really thinking natural resources of unbelievable magnitude, free to discuss any subject I feel appro­ clearly." There may be just enough wisdom have never really fully appreciated the priate. After I had written a few thoughts, I in these words to question the judgment of predicament of other areas of this troubled received the official program, in which my anyone who tries to talk meaningfully about world. statement carried the title, Changing the broad aspects of land and its real Let us glance at a few issues quickly and Patterns In Real Estate Development. character in but a few minutes. examine the role of land either in the Frankly, I want to say that which I had But until outer space or the seas become question or the answer. One I've already written on a plane returning from a hurried habitable, almost every key issue of our day briefly referred to , the oil embargo. It trip to Europe; so if you find a strange involves land, its use , its abuse, its owner­ created a new universe of problems. The combination of ideas, charge it to my ship, its productivity, etc. My friends, we world system since post World War II has stubborness and to the fact that, as I was fight for it, we debate and argue about it. been based on a viable western alliance, that introduced, a good part of my life is spent We plan and replan it, some make fortunes is; Western Europe, the United States, and in the international community. And even and others lose fortunes over it. We cannot Japan. real estate patterns affect that community. lightly dismiss the source of wars, the Domestic energy in Western Europe and And I may be speaking more from that foundation of wealth, the means to feed Japan was always a major economic perspective, than from the immediate chal­ humanity, the jealous storehouse of much element. Our country is more blessed. But lenge of what's happening in my town and of the energy that powers the world, and our people have become accustomed to an yours. the direct means of happiness as well as economy of waste, big cars, too much heat And yet as I do so, I'm back last night distress. and too much air-conditioning at the wrong from an annual meeting of a firm with This concerns not only the quality, but time. Even our relatively abundant resources which I'm associated, "Salomon" Brothers. the character in the quality of this heavily have been abused and misused under the Normally that firm has a wonderful evening endowed asset. I don't know how many of opiate of Middle East cheap oiL as its annual meeting, especially when you would agree that we should be indebted When the international cartel demanded business has been good. We indulge in an to the Club of Rome and some distinguished more, it was one thing. But when they said intellectual discussion after eating too much MIT collaborators for a statement entitled no oil, if our Arab cousins do not get what and drinking enough. But the night before Limits of Growth. they want from Israel, the shock was last, the Muhammed Ali-Joe Frazier fight enough, to painfully stress a compelling fact was on, so they decided to celebrate it with This emerged from a study that was of life. Now my friends, why should we a different kind of aftermath. begun in 1968. It produced a series of new concern ourselves in this meeting with this This was the first fight I've ever witnessed formulae that related people to land, to matter? on television or anywhere else for that environment, to production, to pollution, In Israel, there's a witticism. That if matter. I must say that maybe the idealism and to population growth. You name it, and Moses had turned left instead of right, Israel that I want to express in my remarks that they discovered a way to count it in one would have been a part of OPEC instead of follow, are inappropriate having witnessed manner or another. Saudi Arabia, and the West would have had four and a half million dollars of even In global terms, this study was devas­ a friend in court maybe. But this also proves devalued currency going into the hands of tating as well as completely misunderstood. another point that I must make. Everything one, and a couple of million to another, Some of us who criticized isolated con­ has a price. who really knocked the hell out of each clusions, nevertheless, felt that the warning It is true that Israel would have been in other and nothing more. to both the industrial and developing OPEC, but then what about the Ten Com­ I came away with an impression that countries merited careful analysis. And all mandments, and for my people, what about what I saw was realistic. I came a way with this was going on while an enormous shift in the Torah? And a question mark in to what another impression. I'd rather make money wealth began with the "OPEC" Price Rebel­ commitment would Jesus have been born? my way than theirs. Nevertheless, I'm at lion. So while the sophisticated leaders of What has this to do with land? Simply that least constrained to touch tangentially on industrial giant nations, were struggling with the greatest oil reserve known today, is in land. Although in these days, I consider it new questions of environment, ecology, Saudi Arabia. Tomorrow there are rumors it

12 JANUARY 1976 electricians and the plumbers and the may be the Peoples Republic of China, ahead, it is fair to observe, that land is let the go on a strike, and everything either on dry soil or wet seas that adjoin rapidly becoming a question of prime carpenters stop." Well, Sam Lefrak who is a pretty them. importance. will independent person likes to make these it is land above or land below reiterate, prime national sig­ Whether And I statements without recognizing that in his of our posterity will It not enough to say that the water, the destiny nificance. is own business, he has been successful be­ of land to produce we live and we work, con­ depend on the capacity places where cause he is a good planner. And there's no quality of life called but a few million acres of all of our the indispensable stitute man in business today who can continue to more to go . It is important energy. land and there's run a substantial business, without the Club of Rome exist and Now second, to offset these withholdings to understand, that while ten, or fifteen years and of limits looking ahead five, of the OPEC countries, the industrial world brought us through the back door his operation an mans' attempting to build into is feverishly looking for new sources to to growth impressively demonstrated that appropriate planning mechanism. power its machinery and bring comfort to failure to guard his environment; of this and obvious abuses, environ­ the people. They tell me here at home we because And when you consider another fact of and ecological questions have possess a coal supply to meet our needs for mental life. In this city is the headquarters of public matters with an unusually over six hundred years. But it is either close become Arthur Anderson & Co. Harvey Kapnick, long life span. to the surface, which means stripping the the Chairman of its Board, recently wrote of the earth. land, or in the bowels But if we add to this, the need to expand an article on the importance of accountabil­ To get at it is a problem of how to use usage of land both above the surface as well ity in the federal government. And hidden huge areas of land without abusing it. And as the ocean and water beds to sustain a in that article was a type of statement on collaterally there is shale oil, a reclamation decent standard of livelihood as well as a assets and liabilities which he feels the which requires again, a use of land. dwelling environment of our people, the federal government should publish regularly. with him, although there is some Third, all of this has already produced an character of the question that confronts our I agree in the government itself. enormous redistribution of material wealth. nation staggers the imagination. resistance United States has dropped noticeably in the This brings me to a position which seems But in his article was a very interesting standings of per capita earnings and in the inconvertible in logic, yet one that will not observation. In a statement of assets and standings of monetary reserves held by appeal to people customarily interested in liabilities, on one little line there appeared nations. On the other hand, one factor that the private aspects of land and its use. I am an indication of land owned by the govern­ has slowed up that run has been our not sure what detailed proposals I am ment carried at its acquisition cost. In 1974 agriculture. Again, land and its productivity. prepared to support, for I have not ade­ that total cost was 6.7 billion dollars. In the balance of payments deficit has dis­ Our quately surveyed the field. But I am sure of explanatory article, there is a statement that as our food has met the diet appeared a general position with respect to the a House Committee in 1972 determined deficits of the world. subject that I can no longer find comforting. that the then value of land holdings by the Surpluses are no longer our problem, nor United States of America, was closer to 29.0 is it popular to speak of limitations on That position was expressed briefly but billion dollars, a fairly decent profit, al­ crops. So where on one hand, the oil below fairly in the key editorial of last month's though I think grossly understated. the sandy land and water beds impose a issue of Nations Business. Most likely many burden on our life, the product of our farms of you recall it, so I quote only parts. "The That the number of acres of this land lessens the load for the time being. And American business community is firmly owned by the federal government at this even now, (and I think this is pertinent to committed to using the nation's land re­ moment, is like the agricultural land and its the your business), the experts are eyeing sources in a sound manner that best serves potential, 7 60 million acres or roughly greater agricultural use of our land for these all citizens." one-third again of all the land in this nation. purposes. The Department of Agriculture recently That we can all applaud. But then it says When you consider the land uses which most reported that while three hundred and that businessmen recognize that the are keeping us out of trouble, that involves a sixty-one million acres, of three hundred effective way to reach the goal , is to take a third; the land uses in the future that we and eighty-five usable acres, are being cul­ positive approach grounded on traditional must put this land to, to get us some degree tivated; it estimates that there are two American values, private property rights and of sufficiency in energy, and the fact that hundred and sixty-six million acres that can decisions made at the level of government the government owns one-third of the land, be readily made usable and as much as an closest to the problem. It goes on depending how can one possibly posit a proposition additional one hundred and thirty million on the scope of the issue, that could be that you can reasonably consider land and acres with limited potential that could be local, county, regional, or state government. its use in America, and exclude the federal tilled occasionally or used for growing Note the omission of federal. government. It suggests to me, that you are excluding the principal actor, not because fodder. "Land use legislation pending in Congress , over seven he doesn't belong in the act, not at all. Only This totals in my calculation meets few of these positive standards," says acres or about because we are afraid of it, at a time in hundred and eighty million Nations Business. And then it states putting of our country. American history when we are going to have one-third of the expanse the power of decision in the hands of a is illustrated by to quit fearing our governments and start The magnitude of the figure federal bureaucracy is unsound and imprac­ thirty times improving them. the realization that it is about tical. And good land use planning is sound , the amount of land used for dwellings and practical. businesses, manufacture, and related We have to quit fighting government and common or public purposes. My friend who spoke about confusing start to learn how to live with it. Willy-nilly, Now, these few excursions into astronom­ times also made a statement that's of great the era through which we're passing, is an ical figures, is meant to preface a few interest to me. He is engaged in one of the era of enormous flux and change. There is remarks that may be reasonably unpopular great projects in New York City and he has no choice but to look at the totality of the in this presence. If we add land used for been upset by the way planners have been land problem. agriculture and available for this vital getting into his hair. So in one of these another observation which purpose nationally to the scattered multi­ speeches he said: "I don't like planning, I I must make to home. Those of you who are million acres of land used or sorely needed think it's an unnecessary so-called art." He gets closer business directly or indirectly know to be used , for; oil, gas, coal, shale oil and said, "as a matter of fact, if the planners all in this years have not been the easiest other indispensable efforts to achieve energy quit planning tomorrow, nothing would that recent years in American history, not sufficiency if not independence, and our happen." Nothing would be interfered with, development recession. Our com- economic and social balance in the years everything would go on. But he said: "just altogether because of a

TITLE NEWS 13 pany continues to operate in or out of a We are still looking for one among the way you can do it for five or six, is to in­ recession. But in large measure because of fourteen that may merge as being economi­ crease the density to eight to ten. Then it is the difficulties that are imposed by cally viable. really no longer a freestanding house even ecological, environmental and other stan­ though it purports to be one. dards, some of them real and some of them Therefore I suggest, that when we start It seems to me that under these condi­ not so real. criticizing the government in an assumed tions, if we talk about land use seriously, we role, we should understand what that role is In the should be talking about the use of land midst of this to contend that we in and the interest to the government. And the private enterprise field, can solve this which has been ignored, mistreated, abused, when we start talking about private enter­ problem alone, puts us in a position and we must bring back the life to the city of prise roles, the one thing we should remem­ wearing blinders. I spoke to a convention by bringing people back into the city to live ber is that private enterprise can only live by not too many years ago, a certain national as well as to work. being free. And that means, not taking on association, one of the largest interested in In short my friends, we are facing land uneconomic businesses which government real estate and investment in real estate. problems that in the aggregate or even in the can handle. And we were then celebrating a thought, the smaller dimension, are so unique and over­ whelming, that we need all of our combined great achievement of our industry when the There will be all sorts of new ideas for the wisdom. And most of all we need a sense of government finally established Title 235 and utilization of government strength in order understanding and willing cooperation be­ 236 and gave the private enterprise field the to bring back the development business. privilege, if you please, of providing sul:r tween the public and the private sectors of And I plead with you that we accord to the our society. sidized housing with interest rates reduced government that which it can do best and to as low as one percent. There is every indication that the inter­ that we seek for answers that have an national, economic, social and political In addressing that group, I cautioned element of free enterprise and private enter­ arrangements which enabled our nation to prise in them. them not to applaud too early. We are in a attain a premiere position since World War field that I don't think we in the private II, are in great flux. I suggest that we need field are prepared to handle. We can build Permit me to talk about one other thing, and then to a conclusion. I have said this a not fear this kind of change. We can make it them but most of us can't manage them. We our ally if we will it, but we can be don't understand the uneconomic operation number of times. We tend to be behind the times. The fellows ahead sometimes make destroyed or diminished by it if we ignore to which this is addressed. Today we witness pressing reality and indulge ourselves in a half million homes that were provided that extra dollar. It was the most natural thing after World War II for most building yesterday's prejudices of platitudes. under that program in one year, and more a As World War II ended, one of the better little before and after. And we also witness to take place in the suburbs. There wasn't anywhere else to build except on abandoned minds of our federal bureaucracy predicted tragedies all over America, of houses that that the post-war period would be charac­ are bolted up, boarded lots. And land was so cheap and so easily up, neglected, and terized by the people seeking to satisfy their abandoned. developed. And like everything else, we perhaps overdid it. hunger for things. Our nation satisfied that This is simply because we fought govern­ hunger for many. For a long while it has ment. Instead of finding a way of working We expanded boundaries to a point where helped satisfy similar hungers elsewhere in together in a process which was not exclu­ it was difficult enough when commuting the world. sively private enterprise, we floundered cost was cheap to travel that hour or hour The achievements of our science, our badly. The tragedies are so that in the press, and a half in some of the metropolitan industrial machine, and our labor mark one that the very good things that did happen cen'ters each way each day. But today, when of our proud efforts in the history of man. under that program are forgotten. commuting costs are at all time highs and Today, the evidence suggests that the people when driving a car to work is an expensive Or let us look at another area. Some of are not satisfied with things alone. They exercise, it becomes completely contrary to my friends in Chicago know that I headed believe that there is a national weal a good economic and public sense to continue company that built only emerging for something called conditions of new town that was to multiply our problems. built by private enterprise in post war life. This is not yet America, that fmished its job and didn't go Not that the suburbs don't have and clearly defined. But major shifts and emphasis broke. Quite recently, we started telling the won't continue to have a legitimate place in are casting long shadows government that private enterprise can build our society. But the time has come to look over the satisfactions of the past generation. new towns if it only gets government inward and see if we haven't neglected assets I do not suggest nor am I wise enough to assistance. that have been lying waiting for us to use. I say, that I understand or even agree with all think we are going to turn inward. that has happened. But that it is happening Title Seven was born. Fourteen projects and it is predicting new goals, new values, with nearly two hundred million dollars of I think we are going to see within the and even new restraints, is a fact of life we advance loans were made available to great cities of America what we're trying to cannot and must not ignore. developers some of whom understood and prove here in Chicago in a project which It is fitting my friends, that in the year some who didn't. But there was the gravy time does not permit us to describe. I think 201 of our republic, which will be ushered boat available for anyone who would take we can find land that is as cheap for in in '77, that we also usher in a peaceful it. residential and related uses within walking revolution to commemorate the birth of a nation created out of a clash of arms. In the Some of us who had lived through the distance of major work opportunities, as it cradle of the next century, there will be misery of building a new town, said that the takes today to develop new land in the born new attitudes and new purposes for formula was wrong - there was too much suburbs under existing ecological and en­ the precious land that is America. We owe it money going in at the front end and it vironmental conditions. to the past, which has been so good would take too long to get to the turning to our One of our better architects said the nation, to grasp the call of point from loss to profit. The government the future by other day, that you can't afford more than wanted to prove contrary-wise. The pressure joining those who would urge that the land five thousand which has been so good, become of those who felt that real estate and land dollars for a freestanding better. house if the And the life which was so rich in development are exclusively a private total package is priced within things, reach of a twenty-five grow deeper domain prevailed. and thirty thousand in its sense of values and dollar a year income. And to produce a de­ commitment. And right now we're in the midst of cent sized lot today from scratch requires This then my friends, will justify the witnessing the debacle of one transaction more than five thousand dollars in the prologue of two hundred years out of which after another. In our company we are Chicago or typical city area. It may be I am certain will be reborn even a greater reasonably well informed on this subject. closer to eight or ten thousand. The only and a better America.

14 JANUARY 1976 Do's and Don'ts of Labor Relations and the Effect of Equal Employment Opportunity Legislation on the Land Title Industry

Charles J. Griffin, Jr.

Attorney at Law Seyfarth Shaw Fairweather and Geraldson, Chicago, fllinois

The qualifications of the speaker are On consideration of this advice, and from 35 percent to 32 percent of the rather unique - he knows nothing of real knowing that my partners are somewhat less national workforce. It is time for unions to estate uses, claims, mechanic liens, liability conversant about EEO, I will devote my once again gird for action. insurance, title searches, Real Estate Settle­ time overall to unionization, although, as I You may well point out that the unions' ment Procedures Act of 1974. It is, in fact, shall attempt to point out later, the area of share of white collar workers has not signifi­ up until your cocktail party last night the equal employment is of more practical cantly improved in the last 12 years - why speaker believed that RESPA was a product significance for the simple reason that should there be concern now. You may look sold during intermissions on late night conformity with the EEO laws is perhaps at financial institution figures and see that movies. one of the best methods of retaining unor­ .1 of one percent of financial industry The subject is also almost as ironic - the ganized, ununionized status. employees are organized. Certain ly, that is dos and don' ts in labor relations and the But first an overview of the land title not much progress in 12 years. effect of equal employment opportunity industry program for remaining unorganized On the other hand, the unions did not fail laws could fill the entire agenda of this with a squint here and there to the federal in the last 12 years. In 1963, the AFL-CIO convention. protector of this country's labor organiza­ stated that the white collar campaign would I guess the limited time allotted is in tions, the National Labor Relations Board. center on four main occupational types: keeping with the many, many subjects you With respect to unions, the most School teachers, engineers, postal workers will be discussing in the three days of the important single thing that you can take and retail trades. convention. For that reason, I will attempt from this speech is a decision that you will Overwhelming successes have been to limit my talk to a brief description of the do all within your power to prevent union achieved in two of these areas - school problems and opportunities of the land title organization. And that you will take all of teachers and postal workers. In addition, industry today in the area of labor the steps required to prevent a repetition of one other area of white collar workers has legislation. the calamaties that Mr. Little has just become increasingly organized - profes­ In discussing labor law, I will focus on spoken of. sional nurses. two aspects of how federal personnel laws THE UNION PICTURE affect the title industry, specifically laws Three developments in the last 15 months organizing relating to this industry's relationship with There are presently about 25 million have caused a lessening of union community, its employees via the labor organizations, Americans in the various labor organiza­ pressure overall on the financial to convert commonly known as unions, and this tions. Approximately 15 percent of that not a decline in union attempts worker: (1) the amendment industry's relationship with its employees number are white collar employees, and of the white collar Law in 1974 placing via the Equal Employment Opportunity that 1 5 percent, the vast rna jori ty are in of the Taft-Hartley employees of eleemosynary hospitals under Commission. industries in which blue collar employment National Labor Rela­ OVERVIEW is much larger than white collar. Example ­ the protection of the An example of the impact this In attempting to decide which particular automotive. tions Act. has accomplished is District 65, RWDSU issues might be of most concern and interest A study in 1 963 by the University of which, in New York two years ago, to you, I surveyed both an operations Chicago demonstrated that 45 percent of attempted to organize a unit of one of the officer of one of your member companies the potential union membership in the member companies of 1 2 employees. and a variety of my own partners. Their United States was white collar. At that time, Today, that union, formerly localized in the conclusions were radically different. the UAW formed T.O.P.; the Teamsters New York metropolitan area, is a party to Your member said, we have been in the declared a nationwide white collar organiz­ elections in hospitals and nursing midst of planning affirmative action pro­ ing attempt, and the AFL-CIO itself started several here in Chicago . The population of grams for the past. It has become old hat. two successive organizing campaigns in the homes to 1 000 employees - not The members of my fum said something to L.A. area; Johnny Desmond sang at a rally these units is 600 typical financial the effect that of their total work, roughly in the Manhattan business district extolling the smaller fish in the more professors. (3) three to four percent is spent in combatting the virtues of the Office and Professional organization. (2) University - organizing campaigns of unions, while 25 Employees Union . The California Agricultural Labor Bill percent is spent on EEO and AAP questions. Twelve years have passed. The govern­ UAW, Teamsters, AFL-CIO. Thus, they suggested that the more signifi­ ment has, at the beginning of this year, Again , with the exception of nurses, most cant area to your members is EEO ques­ issued a report that by 1985,53 percent of of these units are in psychology closer to tions, at least when one considers that the the entire workforce in the United States the blue collar than the historic white collar odds of your confronting either situation will be white collar - an increase of more of AL T industry. While the big fish are are at least seven to one in favor of than six percent. there, campaigns for the smaller fmancial confronting equal employment problems. Blue collar employment will decrease units are generally going by the boards.

TITLE NEWS 15 Remember, it is only a matter of time The way to prevent the campaign from Labor Relations Board election could be before the union starts - and almost any beginning is obviously to prevent the insip­ held be structured in the best way possible union will attempt organization when it is ient psychological probes of the union for the employer. Depending on the number sought out by the employees. organizer and his allies - the in-office of people allowed to vote, the unions' This is a time, then, to put your house in pro-union employees. As in marriage, the chances to win the election obviously in­ order - as a university personnel director flfst and most essential ingredient to pre­ crease or decrease. A union can organize a exclaimed in a speech this year - if you venting the destruction of identification smaller group of employees with much less don't want your employees to organize, with the company is communications - effort and much less cost than a signifi­ treat them as if they had a union; if you do, communications both downward and cantly larger group. they won't. upward. Communications at all times must Making sure that any future election will The impact of nurses and school teachers emphasize the plusses of working with the occur in as large a group as possible should organizing is difficult to gauge, but they company in the land title industry - e.g. be one of the concerns of the company in would seem to be a significant indicator of The means of communication should in­ many of its personnel activities on a daily the future - in that both are traditionally clude three different systems: (I) A formal basis. One theory which I subscribe to is female occupations and both have a work employee handbook; (2) a carefully devised that unions' failures in the true white collar identity similar to the usual white collar house organ ; (3) verbal communication organizational field has stemmed primarily worker. directed to the employees through their from the enormous heterogenety of the This female white collar turning to unions supervisors. In short, a campaign to build up voters as compared with the usual blue is a new phenomenon overall. Its impact the identity of an employee with the com­ collar group. The engineer, draftsman, secre­ must be carefully measured in consideration pany before the union arrives at the tary, accountant, see themselves as some­ of the fact that approximately 56 percent of doorstep. thing different from the file clerk, switch­ the employees in the insurance industry are Equally important are communications board operator and pool typist and, female , according to EE0-1 statistics, and in upward. One of the most emphasized points interestingly enough, different from each conjunction with AAPS will more than in any union campaign is that a union other. contract would provide the employee likely increase in the future. In addition, with Within the white collar group, there is a the resolution of his complaints through a both teachers and nurses are professionals. great variation in the amount of education contractual grievance procedure. There is no Today, 75 percent - tomorrow, higher. and personality trends. Group cohesion is reason not to have as effective a grievance diminished. Consequently, what I refer to as As a general rule of thumb, union organ­ procedure in an unorganized office. unionization melting point is necessarily ization will occur when fulfillment cannot increased. Interesting results in hospital be found in an employee's job A word of caution, the "open door" and in the elections. relationship with his supervisor and the policy that many unorganized companies To insure company. Unions know this and have pride themselves on is often an open door to as much as possible the largest possible attempted to train their organizers to be an empty office. ONLY HARM WILL heterogenous unit, personnel amateur psychologists. OCCUR IF THE EMPLOYEE, WHEN HE policies should be structured so as to make OPENS THE DOOR as broad as possible the benefits and salary In ascertaining what is required to remain FINDS EITHER NO ONE structure between the various groups of in the highly enviable position of an unor­ PRESENT TO HEAR HIS COM­ PLAINT OR NO ONE employees to encourage transfers across ganized enterprise, it is necessary to know WITH AUTHORITY TO DO ANYTHING departmental or group lines and to carefully about labor organizations and how they ABOUT A VALID plan a table of organization and interlocking operate. COMPLAINT. An established grievance pro­ cedure starting with the flfst level supervisor supervision. Characteristics such as these In planning its campaign, a union will and ending with a high-ranking official will, in the event of a union petition, be involve itself with collecting as much infor­ possessed of both good judgment and examined by the NLRB in determining mation as it can on the company and its empathy toward the employee may be the whether to allow a department to vote operations, including the personal idio­ most important single tool in preventing the separately or to require the entire office syncrasies of the managers. Among other soil in which union seeds will grow. population (or several office populations) to things, union manuals instruct organizers for Another essential ingredient is a policy vote. the need to determine immediately the not only of fairness to the individual It is heartening that the NLRB has thus racial and sex breakdown of the potential employee, but of striving to give the appear­ far continued to apply generally wall-to-wall employee unit and the educa tional level of ance of fairness in all actions dealing with unit determinations in financial organiza­ the group, so as to slant the campaign in the individual employee. An example: Linda tions; that is, in the appropriate unit for an different ways . Schein's promotion. election, all non-supervisory employees in The major goal of the union organizer is Fourth, the realization that unions are the office are allowed to vote. using this storehouse of information to designed for the benefit of the mass of the An aside here - the use of officers in the stimulate and develop complaints of the employees as opposed to the individual fmancial community, including the ALTA, employees against the way they have been employee. The individual employee's has consistently been found by the NLRB treated in the past and with respect to the individual motivations must be kept care­ not to create a separate status for voting. various salary and benefits that are currently fully in mind in an unorganized office . I Thus, the Board will allow officers to vote if enforced at the office. need not spend much time on such needs as they are not true supervisors (possess Creation of an in-office committee. feeling "in on things," recognition of authority to hire and fire) regardless of title. At the same time, the organizer has been diligent performance, opportunity for Finally, it may be noted that with the instructed to make every effort to destroy advancement, recognition of merit in dollar accession of Betty Southern Murphy to the the employee's identification with the values and loyalty. The important thing is Chairmanship of the NLRB, the Board has company. It is not until the identification that the individual employee's values be not changed its overall view with respect to has been weakened that the union will discovered and tapped. the right of the employer to speak out very generally begin an all-out effort to whip up Supervisory training. As you recall, I forcibly on the dangers and evils of unioni­ enthusiasm for the union and open hostility earlier said fulfillment of the employee job zation during the election campaign. Thus, against the employer. THIS IS THE POINT and relationship with supervisors as well as for example, just two months ago, Mrs. WHERE THE ACTUAL ORGANIZING the company. Murphy issued an opinion finding nothing CAMPAIGN WHICH IS HIGHLIGHTED IN In addition to the silent campaign I have illegal with an employer telling his em­ ALL OF THE BOOKS ABOUT COUNTER referred to, it is also important as a purely ployees that unionization could prove fatal ORGANIZING STRATEGY COMMENCES. technical measure, e.g. , no solicitation rules, to his job. On the other hand, Chairman At that point, it may just tum out to be too pension and profit sharing eligibility Murphy's Board is more inclined· to slap late to avoid a forced marriage to a union. wording, that any unit in which a National harsh punishments upon the company that

16 JANUARY 1976 is not the grants a wage increase or fires an employee typical white collar union contracts with the Just cause, it should be noted, but is a supposed without cause or surveils union activities present requirements imposed by Title VII employer's to determine, devined by the during a campaign period, including bargain­ on employers. "objective" consideration e.g., while many in this ing orders requiring the employer to bargain The labor agreement generally makes EEOC staff. Thus, the arrest of a messen­ with the union without regard to the out­ detailed provision for the salary structure - room might consider just cause to discharge him, come of any NLRB election. ln addition, description of job positions and the amount, ger for theft as would find such action unlawful, seeking immediate injunctive relief from the if any, of a merit spread, application of the EEOC if either a female or minority were involved. federal courts to compel an employer to seniority to reductions in the work force, Just cause not only includes the reasons bargain immediately after the unfair labor and promotions, leaves of absence, cause for considered legitimate, but the procedures practice has occurred. The law will change discharge, promotional procedures, overtime followed in disciplining employees. These because it is changed every four years in the work, grievances and fringe benefits. procedures, including warnings, counseling, past - the remedies will change because Each one of these areas has been ad­ detailed explanations of failures, are again too, have changed often. Keep the dressed by the EEOC;just to mention a few they, not necessarily the employer's way of incentive for your employees to remain - the administration of the salary program handling problems, but are required by the ununionized, and you will not have to is the norrnal subject for examination by the administrative practice of the EEOC. with counter organizing experts, Insurance Compliance Staff in perforrning consult And where did the EEOC get these rules consultants, or even people reviews for determining compliance with the management they expect employers will live by - from myself with respect to what you can Executive Order governing AA Plans. like primarily decisions of labor aribtrators inter­ cannot do during a typical campaign. The application of seniority is presently and preting union contracts. The EEOC has EQUAL EMPLOYMENT before the U.S. Supreme Court on the issue borrowed other items as well from union As mentioned earlier, equal employment of whether length of an employee's service contracts. In fact, the EEOC can be said to legislation may be of more practical impor­ with the company will be allowed to oper­ have combed thousands of agreements and tance for several reasons - first, the chances ate as a criterion for promotion, reductions picked as its test of fairness the practices of defending the company against the in the work force, or for any other reason thought most fair to the employee. Federal or State Commissions seems greater when the employer had or was thought to they of whether you know it or mathematically than the chance of a union have discriminated against protected classes · So, regardless have a contract with your em­ organizing attempt. in the past. not, you most of the items ordi­ Second, the remedies for violations may In addition, in determining whether a ployees covering contract, enforced be as sweeping or expensive as a successful promotion was discriminatory, the EEOC narily found in a labor and Profes­ union attempt. I am sure you are aware of looks to first seniority even where the not by the Teamsters, Office by the Federal the settlement of ATT and the Basic Steel employer has never had a policy of follow­ sional Employees Union, but Industry. ing seniority. (Tell about Yellow Freight Government. of this Every day, a class action suit is filed Lines.] Careful discovery of the terms somewhere in the U.S. - millions of dollars On discharge, the EEOC has taken the contract, and conscientious administration are involved. position that unless a just cause exists for a of its terrns will lead not only to avoidance Thirdly, the effect of equal employment discharge, or any form of discipline, it is of EEOC investigations and class action , will laws has been to compel every employer to presumed that the reason for the discharge suits, but, as I mentioned much earlier operate as if he had a union contract. The was discrimination on the basis of race or serve to avoid unionization. reason I say this is based on a comparison of sex. Thank you.

Developments in State Legislation and Regulation

comments by Gerald L. I ppel

Executive Vice President, Title Insurance and Trust Company, Los Angeles, California

, it was The publication of the HUD study in published, and often misleading, articles in by the McCarran-Ferguson Act by many of January 1972, and the subsequent publica­ newspapers and other media became a sub­ expected, or at least anticipated a veritable flood of tion of proposed maximum settlement costs ject of interest to insurance regulators over us, that there would be devoted to title in­ in real estate transactions created an the nation and attracted the attention of new state legislation those states that had awareness of and interest in title insurance some state legislators. With premium volume surance, especially in title insurance buried that never previously existed. The Congres­ of title insurers relatively small compared to only a few sections on And, also sional hearings and newspaper publicity that the insurance industry as a whole, it is quite in their general insurance laws. states that followed not only caused the title insurance understandable why insurance regulators, additional regulations from those chaptered industry to join ranks to vigorously oppose with few exceptions, devoted so little already had rather comprehensive threatened Federal control but also moved attention to the title insurance industry. title insurance laws. it into an unprecedented state of self­ Looking back to those rather hectic times of the title industry was examination. Concerns created by widely and having in mind the protection afforded Although much

17 TITLE NEWS active in encouraging stronger state partici­ property, provided no advertising or promo­ and concern over so-called "reverse compe­ pation in the regulation of the industry, tional material for the benefit of the person tition" which was the underlying reason for either through new legislation or enforce­ requesting the information is included, but Section 8 in RESPA. ment of existing laws, and even though the furnishing of information kits, This brings us to a consideration of the many of us were extremely busy with appraisals, comparable sales information or 197 5 Texas Legislation which is cited as the hearings before some state regulators and in similar packages cannot be furnished with­ "Texas Title Insurance Act" and which reviewing proposed legislation and regula­ out charge. became effective September 1, 1975. Texas tions, in reflecting on the last 3'12 years and Rule 24, which prohibited a title com­ has long had strong title insurance statutes viewing the state activity in the field of title pany from paying for all forms of entertain­ and is one of the 2 states which has insurance overall since 1972, the expecta­ ment, meals, beverages, lodging, etc., was complete regulatory power over rates and tion of a flood of new legislation was amended to permit moderate expenditures the promulgation thereof. With the 1975 somewhat exaggerated. for food, meals and beverages to th e extent amendments to Chapter 9 of the Texas Title A survey of the state insurance laws as that (1) no more than $7.50 per month per Insurance Act, the announced finding of the they exist today reveals that as to rates 11 person entertained is expended, (2) there is Texas Legislature is that, "The business of states do not require filing, 18 states require at least one title entity representative title insurance, both the direct issuance of only that the rates be filed , 9 states require present for each two customers in atten­ policies and the insurance of assumed risks, filing of rates which become effective after a dance at the meeting, luncheon or business of every type, shall in all respects be totally specified waiting period unless disapproved, gathering and (3) the discussion of mutual regulated by the State of Texas for the 9 states require filing of rates and specific business problems, objectives or service to protection of every consumer and purchaser approval and 2 states provide for promulga­ the consumer is the primary purpose of the of a title insurance policy." tion of rates. With only a f ew exceptions, gathering. (Now doesn't that create a hellava While time does not permit reporting on a this same situation existed in 1971. bookkeeping problem?) complete analysis of the new amendments Although the enactment of new legisla­ The amendment also permits plant tours to the Texas Title Insurance Act, there are tion may not have come up to expectations, or seminars for customers provided no more some changes which are particularly many state regulators, acting under author­ than $2.50 per customer in attendance is significant. ity of existing statutes, were quite active in expended, and (2) the tour, seminar or The prior law was amended to include the issuance of new regulations. This activ­ gathering is dedicated exclusively to the definitions of "residential real property," ity not only occurred in the anti-rebate and presentation or discussion of title insurance "Thing of value" and "person" with each prohibited practices area, but also in the and escrow products or services. But educa­ such definition substantially following the field of rates, rate making and justification tional seminars, movies , closed circuit tele­ definitions contained in RESPA. of rates. While we cannot this morning in vision presentations and similar programs, The amended act then provides under the the time allotted cover all of the new dedicated in whole or in part to subjects heading "Rebates and Discounts" the legislation affecting our industry in all its other than title insurance and escrow RESPA Section 8 prohibitions in almost aspects, nor all of the various regulations products or services is prohibited as an identical language, except that the prohibi­ that have been issued, I will try to cover unlawful inducement. tions relate to the conveyancing or mort­ those that have special significance and Rule 26 , as originally promulgated, pro­ gaging of any real estate located in the State which may indicate possible trends. hibited paying for any advertising concern­ of Texas rather than the Federal limitation Let me begin with my own state, Cali­ ing the title entity in any pamphlet, of "A transaction involving a federally fornia. In 1973, the California Legislature magazine, brochure, or any other advertising related mortgage loan." enacted a law which, among other things, material promoted or distributed or used by The amended act also provides that the redefmed the business of title insurance and any customer. Samples given of the pro­ State Board of Insurance shall prescribe rates. These new, broadened definitions hibited advertising material were advertise­ uniform closing statement forms to be used included the concept that rates mean the ments appearing in newsletters distributed in the closing or settlement of any trans­ charges for all services performed in trans­ by real estate brokers, listings in exchange action whereby a title policy is issued, acting the business of title insurance and as bulletins or information sheets published or excepting those transactions regulated by such, therefore, included for the first time, paid for by a title entity, subdivision tract the Real Estate Settlement Procedures Act the charges for performance of escrow brochures issued by land developers or of 1974, or a transaction not closed by a services by a ti tie insurer. builders, jointly sponsored promo tiona! title insurance company or its agents, In early 1974, following on the heels of magazines and other such advertising attorneys, or employees. the effective date of this legislation, the material. Another section provides for advance California Insurance Commissioner pub­ This rule has been modified by amend­ disclosure of settlement costs on trans­ licized and distributed Bulletin 74-2 which ment which provides that in determining actions involving improved residential listed 33 prohibited practices which, if whether there has been a violation of the property upon the written request of the continued, constitute unlawful rebates. You rule, a presumption of "substantial subsi­ buyer, seller or borrower prior to closing may remember Don Kennedy's very incisive dization" will be made whenever 50% or except costs or charges which the lender is and enlightening discourse on this subject more of the advertising revenue or printing required by law to disclose to such party. last year. I remember quite well Don saying, costs is paid for by one or more title This article also provides that it is not to be "We created a problem where one didn't entitles. The amendment also permits adver­ construed as placing upon any title in­ exist." tising novelties and gift items that bear the surance company any of the obligations Certain of the prohibited practices have name of the title entity, but not the name imposed on lenders by RESPA. been clarified and "softened" slightly by of the recipient, may be given to customers Texas, however, did not adopt the penal amendments to 4 of the rules, through a provided it costs no more than $2.50 per provisions for violation of this article that supplementary bulletin issued January 31, item and is generally available for distribu­ are contained in Section 8 of RESPA. 1975. The regulations still constitute a tion among customers indiscriminately. Some other significant amendments to formidable and somewhat unrealistic array Under date of August 21, 1974, the the Texas Title Insurance Act were: One, a of prohibited practices. South Carolina Insurance Commis ioner new article which established the "Texas For instance, under Rule 3 a title com­ issued a regulation which closely followed Title Insurance Guaranty Act." Covered pany could furnish only the name of the the California regulation in listing pro­ risks up to $100,000 would be guaranteed ostensible owner of record without charge. hibited pratices. The South Carolina regula­ against failures to pay claims by an impaired By the amendment a title company may tion dealt with "reverse competition" insurer. An "impaired insurer" is defined as now furnish, without charge, the name of alleging that it tends to increase title one placed in temporary or permanent the record owner, a single photo copy of the insurance premiums or prevent lowering of receivership because of insolvency by a deed of record, maps and plots of the such premiums. This is the same philosophy court of competent jurisdiction or an in-

18 JANUARY 1976 surer which has been placed in conservator­ insurance was not included under property some clarification as to just what insurances ship after being deemed insolvent by the insurance and therefore not subject to such are included in the classifications. The in­ Insurance Commissioner. Upon the happen­ guaranty or pooling funds. We have pointed solvency of an insurer in the particular ing of either event, the Commissioner may out that the solvency requirement of title classification or account would trigger an assess individual insurers an amount equal to insurers is different from property insurers, assessment against the other insurers in that the ratio that the total net direct written because catastrophic loss is not as probable particular account up to 2% per year. premiums collected in the State of Texas by in title insurance as it is in property in­ For over 35 years a section of the New the insurer during the next preceding year surance. The entire approach to the risk and York Insurance Law provided that "a title bears to the total net direct written loss prevention characteristic in title insurance corporation may pay a commis­ premium collected by all insurers (except insurance is different than the approach of sion to a licensed real estate broker or to an impaired insurers) in the State. The assess­ property insurance. attorney and counselor-at-law for procuring ment during a calendar year may be up to Another provision of the new Texas law business for such corporation." As a result, but not in excess of 2% of each insurer's net requires the issuance of owner and mort­ it has been the customary procedure to pay direct written premiums for the preceding gagee title policies on a residential a commission amounting to 15% of the calendar year. If this formula does not transaction (defined as improved real prop­ premium to real estate brokers or attorneys produce sufficient funds to cover payment erty designed principally for occupancy by who place the order for title insurance. of covered claims against the policies issued one to four families including individual The last general increase in title rates in by impaired insurers, assessments may be units of condominiums and cooperatives) New York was on November 1 , 196 8 and made in the next successive calendar year. unless the purchaser rejects in writing, on a the increase amounted to approximately "Covered claim" is defined as an unpaid form prescribed by the State Board of 11 %. claim of an insured, not in excess of the Insurance, the owner title policy. In 1971 the New York Board of Title applicable limits of the title insurance policy The State Board is required under the Underwriters applied for an increase in title issued by an insurer licensed to do business new act to hold an annual meeting at the insurance rates and were advised that no in Texas on real property in Texas, if such request of a title insurer or agent, et al to rate increase would be granted so long as the insurer becomes an "impaired insurer" after consider RATES. It also keeps the require­ title companies continued to pay commis­ the effective date of the act. "Covered ment that reinsurance sources be exhausted sions for the placement of business. This claims" also include any sum up to from licensed Texas companies before seek­ was about the time price controls were $100,000 for which any insurer is liable in ing reinsurance from non-licensed imposed and the refusal to grant an increase connection with the fidelity or solvency of companies. was based on the existence of price controls. any agent of such insurer. A new article provides for the creation Although attempts had been made to Two: Article 9.49, authorizes title in­ and operation of attorney's title insurance amend the law to abolish the commissions it surance companies to issue insured closing company. It defines an "Attorney's Title was not until RESPA came into being that and settlement letters, in the form pre­ Insurance Company" as any domestic com­ New York finally passed an amendment to scribed by the State Board of Insurance, in pany organized for the business of this section of the Title Insurance Law connection with the closing and settlement attorney's title insurance. Provision is made which became effective June 20, 197 5, the of loans by title insurance agents for any for private corporations that may be created same day that RESPA became effective. title insurance company. Further provision by 15 or more Texas resident members of The section as amended now reads, "No is made that "The liability of the ti tie the State Bar of Texas to insure titles to real title insurance corporation or any other insurance company shall not be changed or property in Texas. If the corporation is person acting for or on behalf of them, shall altered by the failure of the title insurance created as an affiliate or subsidiary of the make any rebate of any portion of the fee, company to issue such insured closing and organized State Bar of Texas or any founda­ premium or charge made, or pay or give any settlement letters as authorized by this tion created by or through the State Bar of applicant for insurance, or to any person, article." Texas it must have a paid-up capital of not firm , or corporation acting as agent, repre­ Other sections go into detail on marshal­ less than $250,000 and a surplus of not less sentative, attorney, or employee of the ling of assets and how covered claims will be than $150,000. Any other attorney's title owner, lessee, mortgagee or the prospective determined and approved by the receiver or insurance company must meet the capital owner, lessee , mortgagee of the real prop­ conservator of an impaired insurer which and surplus requirements upon organization erty or any part of its fees or charges, or any has been placed in temporary or permanent as required by Article 9.06 which requires other consideration or valuable thing, as an receivership by a court of competent juris­ paid-up capital of $1 ,000,000 and a surplus inducement for, or as compensation for, any diction. of not less than $400,000. title insurance business." The Texas Legislature in connection with Any attorney's title insurance company is A new sub-section has been added to this article on the title insurance guaranty expressly made subject to The Texas Title provide for a penalty of $1,000 or 5 times fund, provided that "it shall be unlawful for Insurance Act, except as otherwise the amount of the unlawful commission or an insurer to advertise or refer to this act in provided. The only exception I can find is rebate, whichever is greater, against any any manner as an inducement to the pur­ with respect to the capital and surplus person or entity who accepts or receives chase of title insurance." requirements which, as is apparent, are such unlawful commission or rebate. Section 12 of the article on Title In­ considerably less than required for other In addition, and this is a step beyond surance Guaranty Fund creates an associa­ title insurance companies. RESPA, a new sub-section was added which tion to be known as the "Texas Title The new article goes into detail regarding provides, "premium rates for coverage Insurance Advisory Association" to be qualification of "title attorneys," licensing, effected on or after June 20, 197 5, shall be composed of four insurers, which the State surety bond payable to the State Board of reduced to fully reflect the prohibition of Board of Insurance shall appoint. The duties Insurance in the amount of $7 ,500, and commissions prescribed by this section." of the Advisory Association include advising annual audits and reports. As a result, title insurance rates for New and counseling with the Commissioner upon Puerto Rico enacted in 1974 a law which York have been reduced by 15% across-the­ matters relating to the solvency of insurers. creates the "Insurance Guaranty Associa­ board, effective June 20, 1975 even though As far as I am aware, Texas is the first tion." In April1975, the Commissioner, for the previously authorized 15% commission state to create such a guaranty fund specifi­ the purpose of administration, has set up payment had not been applicable to all cally with reference to title insurance. Many four separate accounts, that is , (a) vehicle orders received. states have created guaranty funds or insurance, (b) accident insurance, (c) Finally let's look briefly at New Jersey. pooling arrangements with respect to prop­ warranty insurance and (d) other insurances. The New Jersey Title Insurance Act was erty insurance and, until the passage of the The Commissioner has taken the position enacted into law May 29, 1975. This new Texas Guaranty Act, some of us have been that title insurance is included in "other law is significant because it is a compre­ successful in taking the position that title insurances" and we are presently exploring hensive title insurance regulatory statute in

TITLE NEWS 19 a state where we fmd a high volume and use as a title insurance agent in an individual, applicant, insured, or such owner, lessee or of title insurance. But, prior to the partnership or corporate capacity. mortgagee, shall knowingly receive or enactment of this new law, the only ref­ Other sections provide for the examina­ accept, directly or indirectly, any commis­ erence to title insurance in the New Jersey tion, licensing and regulation of title in­ sion, rebate, discount, abatement, credit or statutes related to premium tax and surance agents. This is not remarkable reduction of premium, or any special favor "unearned" premium reserve. So in this case except for a sub-section which provides as or advantage or valuable consideration or we have a new law which fills an almost follows: "No bank, trust company, bank inducement prohibited by this act." absolute void in the law on title insurance. I and trust company or other lending institu­ may add its adoption was strongly urged by tions, mortgage service, mortgage brokerage Section 38 provides for a permitted the New Jersey Land Title Association. The or mortgage guaranty company, or any division of fees and charges between title complete lack of regulation before the new service company of or for any lending insurance companies or between one or act, pi us the forces of intense competition institution or any officer or employee of more title insurance companies and one or led to negotiated title insurance fees and the any of the foregoing shall be licensed as or more title insurance agents representing the payment of commissions for the placement permitted to act as an agent for a title same title insurance company or among two of business - practices none of us liked but insurance company. No bank, trust com­ or more title insurance agents representing were apparently unable to control. pany, bank and trust company, or other the same title insurance company. While the New Jersey Title Insurance Act lending institution, mortgage service, mort­ Another section covers personal or con­ does not go as far as Texas, which totally gage brokerage or mortgage guaranty trolled insurance by providing that if the regulates the industry, the act is a strong company, or any service company of or for rates and charges for personal or controlled regulatory one. any lending institution shall make the selec­ insurance from any one source so issued in Title Insurance is defined essentially as it tion of a particular ti tie insurance company any one calendar year received by a ti tie is defined in the ALTA Revised Model Title or agent a condition precedent to the insurance company or by a title insurance Insurance Code, except for the added granting of any mortgage loan." agent shall exceed 25%, or from all such provision of "guaranteeing, warranting, or sources shall exceed 50% of the total rates otherwise insuring by a ti tie insurance and charges received by such title insurance company the correctness of searches relating There is also a prohibition against the company or by such title insurance agent to the title to real property. payment of commissions except the pay­ for title insurance issued in the same year, "Premium" for title insurance is defined ment of a commission or other compensa­ the excess shall be deemed unlawful rebate. as "That portion of the fee charged for the tion to a regular full-time employee of a title insurance company or agent of a title assumption by the title insurance company So here we see in New Jersey a good insurance company as part of the regular of the risk created by the issuance of the example of a state moving from zero regula­ compensation of such employee or agent. title policy." tion to a comprehensive and strong regula­ After defining "premium" the New tion of the title insurance companies and Jersey Act then defines "fee" for title Section 35 prohibits rebates or reduced ti tie insurance agents. insurance as including the premium for the fees by providing, "(a) No ti tie insurance assumption of the insurance risk, charges for company and no title insurance agent shall There is no question that our industry is abstracting or searching, examination, pay, allow or give, or offer to pay, allow or one "affected with a public interest" and as determining insurability, and every other give , directly or indirectly, as an inducement such is subject to regulation. We have seen charge, whether denominated premium or to insure, or after insurance has been that presently the state laws on title in­ otherwise, made by any of them, but the effected, any rebate, discount, abatement, surance run the gamut from no regulation at term "fee" shall not include any charges credit or reduction of premium or special all, except from statutes on premium taxes paid to and retained by an attorney at law favor, advantages, or other benefit to accrue and "unearned" premium reserves, to total whether or not he is acting as an agent of a thereon or any valuable consideration or regulation. title insurance company, or an approved inducement whatever, not specified or attorney. provided for in the policy, except to the I believe that we should view the con­ You will observe the difference in the extent provided for in an applicable filing tinued reasonable regulation of our industry treatment of attorney fees under the defini­ with the commissioner as provided for by both as a challenge and as an opportunity. tions of "rate" in the Model Code and the this act, and (b) no title insurance company Our industry does not have the legal definition of "fee" in the New Jersey Title and no title insurance agent shall quote any authority and power to effectively police Insurance Act. Under the Model Code fee or make any charge to any person which itself despite our own good intentions. We definitions of "rate" attorney fees are is less than that currently available to others need intelligent regulation by the several excluded if the attorney is acting other than in a like amount and allowing the same states. And without regard to prescribed as a title insurance agent and on behalf of a factors as set forth in the schedule of fees penalties we should, simply as good busi­ client other than a title insurance company. and charges established pursuant to Section nessmen and for the preservation of the The New Jersey Act, however, excludes 41 of this act or otherwise make or permit industry, operate within the letter and spirit attorney fees whether or not he is acting as any unfair discrimination in the premium or of the statutes and regulations. It can bring agent of a title insurance company or an rates charged for insurance or in the fees nothing but discredit to our industry to do approved attorney. and charges or in other benefits, or in any otherwise. The action of the Texas Legisla­ "Personal" or controlled insurance is other of the terms and conditions of the ture in extending the RESPA prohibited defined in the same language as is contained insurance policy, except to the extent pro­ practices to all transactions is, in my in the Model Code, except that the New vided for in an applicable filing with the opinion, quite proper and perhaps the Jersey Act in addition to defining such commissioner as provided by this act. The industry should adopt the same philosophy insurance as meaning a policy of title amount by which any fee or charge is less without waiting for specific legislation to insurance "where the insured or one of the than that prescribed by the schedule of fees that effect. insureds under such policy is, or the loss and charges established pursuant to Section thereunder is payable to" the specifically 41 of this act is an unlawful rebate and (c) We have entered in to a period of enforced defined classes, includes "a policy of title no applicant for insurance, nor any insured, self-examination which cannot help but insurance where the source of origination of nor any owner, lessee, mortgagee, existing have beneficial results. Just one phase of the application for insurance" is one of the or prospective, of the real property or this process, the justification of rates, has specifically defined classes and defines interest therein which is the subject matter revealed how little we really know about "source" as meaning and including clients of the application for insurance, nor any our business, outside of the technical ex­ and customers of attorneys and real estate person acting as agent, representative, pertise of examining and reporting on the brokers, where such attorney or broker acts attorney, broker or employee of such state of the titles.

20 JANUARY 1976 comments by Dr. Irving H. Plotkin

Arthur D. Little, Inc., Cambridge, Massachusetts

Thank you for the kind introduction. follow the Casualty Press, although some potentially actionable by the Commissioner. Your Chairman could have added, "He things may sound a little shocking, I am not As an attorney I'm sure Mr. McNamara knows very little about title insurance and is giving you !lny privileged information nor considered that well. constantly learning with the help of the am I exaggerating. He is in effect telling the casualty people industry." I listened carefully to Gerry The casualty industry during the last that he has done in their behalf as much as Ippel's remarks because I think that it is seventy years of rate making has coordi­ he can and yet he cannot move the Depart­ instructive and very important to find out nated and built up a system of national ment to grant rate relief. I think, and again, what the legislatures are doing. To the statistical gathering and where it is still I haven't researched the Jaws, if you will extent you have chosen, and I think wisely, permitted, it is represented in individual look at the legislative standards for rates to cast your lot with State rather than States by a national rate-making bureau. (non-excessive, adequate and not unfairly Federal regulation, these statues will certain­ The name of that particular bureau has discriminatory), you'll find a parallelism ly give the boundaries and the playing field changed over time. There use to be one for between the rate regulation in your title and also perhaps one could say, the tenor of the fire insurance industry separate from the statute and the rate regulation of the casual­ your interaction between running a business casualty industry. When those two indus­ ty statute. as a private entrepreneur and the necessary tries were joined, the rate-making bureau The invitation and implication of Mr . quantum of State regulation. joined. It was fairly recently known as the McNamara's Jetter was: if you can, get out However, having good laws is only a part Insurance Rating Board; The I.R.B. That or­ of the State of New Jersey, because that is of the problem. It's also necessary to have a ganization emerged in a few more com­ the only thing we feel might move the good regulatory environment and under­ panies and with the spread of open com­ Commissioner to reconsider his actions. standing with the insurance departments of petition in States other than California, they Such a thing is not unprecedented. It the several States. Let me take as an changed their name to the Insurance happened in the late 1960's when there was example of this theme the last State that Services Office. The I.S.O. It's President is a so-called capacity crisis in New Jersey and Mr . Ippel discussed in detail: the regulatory Daniel McNamara, an attorney and an ac­ a few other States. developments in the State of New Jersey. tuary. I go through all this for an important Some of you know that various com­ I think it's fair to say that overnight - setting. panies, such as the Aetna, have put agents in and this is part of the trauma that I think A few weeks ago, Mr. McNamara sent a Pennsylvania on notice that they will take upsets the industry because things are hap­ letter to the Chief Executives of all the on no new business. The law requires them pening overnight - overnight you have companies subscribing to the Insurance Ser­ to renew their existing book of business but moved from, if you will allow me to be an vices Office; these are virtually all the they will take on no new business. Almost economist for a moment, from a laissez faire companies operating in New Jersey and every major casualty company in Massa­ environment (do what you will as long as include all the companies you commonly chusetts has gone through the first required you don't obviously break some of the think of as the large property casualty legal steps of notifying their agents that criminal statutes) to a fully regulated en­ insurers - Hartford, Aetna, Travelers, Fire­ they intend to discontinue writing all auto­ vironment equivalent to that which the man's Fund, U.S.F. & G., Maryland Casual­ mobile insurance in Massachusetts. They are property /casualty industry has been in for ty, more than likely, your own insurers for putting the legislature on notice that unless at least thirty, forty, fifty years in the State those services. the Jaws change and the Commissioner acts of New Jersey. Accordingly, I think it is on it, they will follow through with that as very useful and instructive to find out what He advised in the Jetter that the I.S.O. far as it is legally possible. By the automatic is happening right this day in the State of had expended vast amounts of time and renewal provisions put into certain laws, the New Jersey with the property/casualty in­ energy and had produced enumerable statis­ industry's ability to cut down is much dustry. tical reports; all in an attempt to convince reduced. There was a time when they just the New Jersey insurance regulator and ltis cut everyone off as of the expiration of the The property/casualty business is an in­ Chief Actuary of the desperate state in policy. Now in some states they can only dustry which counts its premiums and assets which the industry finds itself. A lo st ratio cut off new applicants or withdraw from the by a factor of one hundred compared to such that they Jose eight cents on each whole state. yours. You speak in millions; they speak in dollar of premiums they write. That's on I won't pause anymore to talk about the billions. An industry that the average con­ average. casualty business, but, I hope my point has sumer deals with not on an average once Specifically in auto insurance, in New been illustrated - getting a good Jaw is only every seven years or once every ten years, Jersey, that Joss might be up to twelve part of what you need to be successfully when he may be involved in a real estate cents, although I have not personally re­ regulated under a State system. transaction, but yearly and sometimes more viewed the data. Mr. McNamara went on in Why are the Regulators acting so? Is it frequently than yearly, as he deals with his his letter to say that he has no reason to that they are malicious? Is it that they don't automobile, his fire, his liability protection expect that there will be any rate relief understand? that they can't see the implica­ and the various kinds of insurances that he granted in New Jersey and is advising his tions? I think none of those is the answer. has. An industry considered (and rightfully Chief Executives to expect guaranteed losses The answer lies more in the fact that so) absolutely essential to the smooth func­ for two years in the future. It's an unprece­ granting a rate increase to an insurance tioning in the economy. dented Jetter in the world of casualty company other than under the threat of Everything I'm going to say is a matter of insurance. It's a letter with certain legal removal of coverage and leaving the State, public record. You can read this if you implications and I suppose may be perhaps gives them no benefit whatsoever and costs

TITLE NEWS 21 them and their employer, the Governor, a work charge is unregulated. They are poten­ them into direct confrontation with the great deal of good will with the public and tially politically embarrassed if that could consumer interests and with their Gov­ the ire of the consumer advocates. This is so be brought out in a Court such as the ernor's and sometimes as in the State of because it is alleged in every State that AFL-ciO has tried to do in property insur­ Florida, their own running for office as insurance is an out and out rip off, a ance. One could claim that this type of defenders of the consumer interests. That cornucopia of endless profits for the com­ regulation is very carefully locking and the non-granting of rate increases is some­ panies. guarding of the front door of the house and times inconsistent with expectation of com­ This charge is levelled against your indus­ leaving the back door wide open. So, that pany solvency and the availability of try by the Proximire's and by others, as it is the appearance of a total system must be product, they say is your problem and not levelled against other aspects of the insur­ there despite the way the particular legisla­ their problem, as far as they can make it ance industry - except oddly enough the tion is drafted or the way the regulator is out. life insurance industry, where it has a acting. Therefore, in my mind, to be reasonably chance of being true. (laughter) They also want you to keep Washington regulated you must make a very, very strong away. The only other thing that State The problem is severe. I do not at all case. You must give the appearance on the Regulators are fearful of - mean to paint with an overly broad brush other than Regulator's behalf, that he has access to all companies getting out of the State or failing and include all States and all Regulators. the data which reasonably could be used by - is the States' Rights Issue, the fear of Even when we talk about a State, we have a man discharging his duties fairly and Washington superseding them. to specify when, under what Administra­ honestly in a workmanship like manner. He tion. New Jersey was not always the New I assign a great deal of the credit (or must be able to review what the industry is Jersey it is now. Texas was never the State blame) to the rejuvenation of State and doing, what it is charging, whom it is that New Jersey was. And, it is interesting NAIC interest in title insurance to the charging, and what benefits it is getting so to note that the form of rate regulation - publication in the early '70's of the he can say the rates are not excessive, whether it is no filing at all or filing and use, HUD/V A Report. This report on title insur­ inadequate, or unfairly discriminatory. It is prior approval or promulgated rates - does ance set out a mechanism for Federal not sufficient to say just look at my bottom not appear to be the explanation. regulation. line. These people are trained to look at almost every single class and type of occur­ For example, both Texas and Massachu­ There is no way to get a Senate Commit­ rence in all other insurance. setts are promulgated rate states. One of tee more interested in passing a law in a them, Texas, has excellent regulation, not particular area than for another committee It is incredible to them; they have great legislation, but excellent regulation and un­ to try to study that area if the first difficulty believing - one Regulator made derstanding of the insurance companies committee feels that it is in its jurisdiction. me swear under oath that it was the truth - needs. I'm talking not only about title, but Well, as soon as the NAIC and the State that the companies really did not know how about property as well. Texas strikes a Regulators perceived that via Title Insurance many policies of each type they wrote and reasonable balance between the consumer Washington was challenging their control of how many dollars of premiums they col­ and the industry. regulation of insurance on the State level, lected for each differentially designed and Massachusetts has a yearly crisis on its they reacted strongly. They spurred on the identified rate in the Rate Manual. The hands, at least in automobile insurance, and NAIC Task Force to try to tighten things up regulators really believed the companies this is true year in and year out for the last on the State level. were lying to them when they said they fifteen years. Such a crisis that the rates are The regulators want the industry to keep didn't know that. I'm talking about the never determined. All policies go into effect Wa~hington away. They also want the com­ Pennsylvania situation. There it took a great the first of the year. The companies can't panies to remain solvent because failure is deal of effort to convince the Regulator that send out a bill usually until at least April or an embarrassment. Though with the institu­ the individual numbers were not known and May. It went into June this past year tion of insolvency funds in property/ more so , the Ohio situation, to convince the because they were still arguing over what liability, some have claimed that the Com­ Regulator that the companies could not go the rates should be and they made provi­ missioners are now less concerned about backwards five years and create these data. sional billings. solvency because if there is an insolvency in Well, let me run through briefly the their State, the consumer, the voter, the several States in which we've been working The one year when they made a profit, political force, does not get hurt. The fund, with the industry to see where they stand the one year out of eleven, they made a which really is the other companies, is and what has to be done. Ohio has under­ profit (even though the total eleven years assessed for the damage. I think that the taken an extensive (and I think if there showed a significant loss), a new law quickly State of Wisconsin would argue that title is hadn't been as much hard feelings between passed by the legislature remanded back to already included in their insolvency fund the indus try and the Regulator, it wouldn't the public in a rebate 95 % of the underwrit­ and maybe also the State of Maryland, have been quite so extensive) data collection ing profits that they made. I'm not making although, I don't know whether any assess­ on an individual transaction basis and an this up. It's all a matter of public record. ments have been levelled against these com­ income and expense report. The industry I was asked to discuss with you what do panies. has filed the plan with the Department, so it the regulators expect of the industry. Main­ Insolvency funds are very, very important is now the Department's official plan. The ly the regulators expect the industry to keep for making effective the states regulating method of gathering the data has already them out of political trouble. To keep them system, because insolvency is the weakest been adjudicated if you will, has been out of embarrassment. link in the armor against Federal regulation. specified by the Department, so that in any Tom Finley will probably institute a suit Much reasoning could be deduced to sup­ rate filing they may choose to make or may against me because he'll say , "What is an port the idea that you must have insolvency be called on to make, no one can argue with economist doing talking more like a lobby­ regulation on a national level such as the the method of data collection. The results ist." But, I really think that the data and FDIC if it is not provided on a State level. have been filed for 1973. There seems to be everything else that we've talked about is That accounted for the passage in '68 of some dawdling about getting everything in necessary, but, it can be appreciated for the individual state insolvency funds in a for 1974. what it is only with this understanding, so I matter of two years. Anyone can clearly see I do hope the companies appreciate and hope you will bear with me. the effect of the threat of Federal interven­ I'm sure they do, that they have entered To keep them out of embarrassment - tion on the State level by noting that a into a firm commitment with the Depart­ even in those States which, because of Model Code, each with its own State varia­ ment - and the quid pro quo was allowing various political interests, do not want to do tion, could be passed in 48 States in just them to stay in the State if one goes a total job of regulation. Those which do two years! through the history - to regularly report not reach the totality of your charge but say The Regulators would also like you not and maintain those numbers on an up to that only the risk rate is regulated and the to ask for rate increases, because that brings date basis. This must be done. It has

22 JANUARY 1976 removed all pressure from the Department Over the past five years three quarters of One, that there was just not the pre­ on the industry in that the Department is no one percent (3/4%) of the policies issued in conditions of self-policing. There was pre­ longer calling the industry in every week or New York by count, produced roughly 20% conditions perhaps of inverse competition. every two weeks to ask what it is doing. of the total net revenue. By net revenue, I Two, that the rates that were charged have Rather, it's shifted the ball to the indus­ mean, gross revenue less direct commissions, led to vastly excessive profits. He "proved" try: When they look at their numbers, do procurement commissions and agents com­ this by noting that the margin on sales as they want to ask for a rate increase, if they missions. Those were the very, very large reported in the annual statement could do, they have the material to set out what policies. I forget the break point, but it was sometimes approach twenty percent. Well, revenue new rates would generate and an­ probably the policies over three million you know, if you m ake five cents but you swer the question whether or not that dollars. That's how strongly levered the only record your after commission sale, it would be reasonable. rates are in favor of the smaller house looks like a twenty percent profit margin Pennsylvania was one of the very few owners. when, in fact, it's a five percent profit States that had an existing, but not com­ margin from the point of view of the plete, data capture mechanism. Based on its Whether that is even too strongly levered consumer's dollar. to cause strains in the system is results the industry filed for a rate increase. a real I think we have been successful, although The new rates captured question and maybe some adjustments the old procurement he has not actually dropped the second shoe commission, ought to be made in the manual. The an inflation adjustment, and New and rejected the second basis. He may increased the profit York people must now present a manual margin. reimpose prior approval. The industry was Approval was not easily forthcoming. and rate filing and that's a hard decision for Not in favor of that, but without the finding them to make, but, they must come to it if only did the industry make a very substan­ that excessive they want to obtain rate relief. and monopolistic returns have tial statistical and economic record, but been made. entered into over one year of negotiation I would pick up on a point that was with two different Commissioners. Only on Colorado and Oregon are in the process mentioned about Texas, where the law the threat of legal process and after making of establishing statistical and income and requires an annual meeting of the Board of the threat very real by showing the papers, expense plans. Very interestingly, and let Insurance at the request of the companies if me complement which if the meeting did not end successful­ the industry, in these two they want to have a rate review. Let me ly would that day be filed in Court, did they places they acted without a direct threat or advise you to take a lesson from that law. necessary finally get, after four go rounds, an accepta­ gun at their heads by the Regu­ lator or in consequence of an immediate ble adjudication. It was acceptable in the The casualty people have been operating rate justification. But, rather to sense that it accepted the manual as pre­ set the stage under that same law for many years and for good regulatory review, and to sented. It had a lot of poor "dicta" in it, fend off every single year they make a rate filing. even baseless but still expensive to defend but, "dicta" hopefully can be ignored in this They usually wind up with about half of private anti-trust cases. They acted to give type of situation or be remedied the next whatever they asked for in the promulgated the appearance of regulation as well as the time around. rate and they know it, so they double their fact of regulation. Delaware is just beginning In Washington, D.C. the industry which request accordingly. to collect data pursuant to certain agree­ has no rating bureau, pulled together on an ments with the Commissioner. "Ad hoc" basis, and did create a summary But, why don't you people go to the well of its income and expense and rates of a bit more often in terms of making your I want to end by calling your attention to return for the previous five years. Because case with the Regulator. You don't win three items. The first one is a document Congressional pressure has been elsewhere, every time. It's much like the man standing circulated by the Nevada Commissioner no use has been made of that analysis. on the corner propositioning every gal that somewhat haphazardly at a Nevada Title California has adopted, with the Regula­ passes, and saying, "Sometimes I don't get meeting. I want to speak specifically to this tor's approval, an income and expense plan slapped." (Laughter) But, it's important to but use it as an example and echo something and is in the process of negotiating a data understand that you have to create that Mack Tarpley said yesterday. This, ladies collection network where each company environment. You don't get many brownie and gentlemen, is a booby trap. It is a will individually keep its own numbers points by standing up to the Regulator and quagmire. Such innocent questions as total holding them ready for reporting. It is saying, "We haven't been here in ten years." assets in Nevada; total premiums collected; instructive to note that the Chief Rating and they respond, "Why, because you've consolidate all your operations; total net man in California expressed grave doubt been ripping off the public so much .... " profit. All are completely undefined. If that the companies will actually perform (laughter). filled out by the most well intending people what they promised to perform. He would at the local level this form could do nothing rather that they send the data into a I'm not saying go every year, and I'm not but sabotage your presentations not only in designated statistical agent, a much more saying go when it's not justified. But, think Nevada but at the NAIC level and in the expensive process. He has begrudgingly about the Texas L!lw and consider what you other states. can agreed to go along with the industry, allow­ learn from the operations of your Please set up systems so that any requests ing each company to maintain its own data brethren in the casualty industry. Because from individual Regulators to your local they subject to proof that it is actually doing it. know how to work the regulatory people be sent directly to identified indi­ The industry has a real opportunity, but if system (or did until these recent consumer viduals at the head office. problems they make a commitment, they must follow in some States) like a finely tuned Further, as far as you will not run afoul violin. You're still beginning through on it. students at it. of the Anti-Trust Laws - I can not give you You're trying to learn in five years what New York did not attempt to recapture opinion on this, but I think that you do they developed over seventy years. in its rate through an interim adjustment the have the right to do it - you might 15 % procurement commission which they I'll go very quickly over some of the coordinate with someone like Mack Tarpley, stopped paying pursuant to the new law. other States. Wisconsin held a very interest­ who has offered his help to see whether The Department had said as soon as the ing hearing. They had under statutory some of these questions, undefined as they industry gives it up the Department would authority revoked or made the first steps to are, are possible to answer or might appear be willing to entertain a rate increase appli­ revoke open competition and reimposed at great variance with what your company is cation. They have just now put together a prior approval into title insurance. It's a saying in other States and other jurisdictions five year history of profits and a distribu­ legislative intent that the Regulator not use or even plans to say in the particular State tion of business which shows the great prior approval unless it is absolutely neces­ at issue. progresscivity of the rates. I think this sary. The Commissioner, in his statement to I will devote just half a minute, because progresscivity is one of your strongest reapply prior approval and revoke open my time has run out, to telling you to points with the consumers. competition, used two bases. listen very carefully to tomorrow's report

TITLE NEWS 23 by Jack Jensen on the Uniform Income and in Washington; making your case known. target of people like Proxmire and people Expense and Uniform Statistical Plans. It is The problem is they do not have the like the authors of the HUD Report. Those time that the individual companies realize numbers to work with. If you will seriously people can always gather information about that they should not deal with States undertake to fill out these forms despite your gross charge, observe that in most completely on an "ad hoc" basis. their expense and inconvenience, I think years your loss ratio is 2o/cr5%, and con­ Much of the data that individual state you will put yourself in a position to give clude that you have a 95% profit; and do so plans have to collect, especially the income those working on your behalf the material in the press! and expense data, is more economically to bring your cases and your arguments to a done in what we call a 50 State Spread successful and happy conclusion. So, p.lease give careful consideration to Sheet, done once a year when you fill out these things, not in the interests of your your annual statement then try to crack up However, if you don't undertake this consultants or your Trade Associations, but, for each emergency. expense, if you don't undertake this trou­ in my opinion, in your own interests. Thank The ALTA is desirous of defending you ble, you stand to be the favorite kicking you very much.

The Real Estate Settlement Procedures Act of 1974: Where are We Now ?

comments by Donald P. Kennedy

President, First American Title Insurance Company, Santa Ana, California

Ladies and Gentlemen, and I think that situation before. Recently during a bout about some of the recent developments as the respective statutes of the State and with the flu and high fever, I recalled why I far as the Congress is concerned. Federal Government will allow me to call thought this was all so familiar. The first panelist is Mr. Sanford Witkow­ you that. (laughter) As President Bob ski. In talking to his secretary I learned that pointed out, material prepared for this When I was in the Navy I served on a very promoted since the mid-winter. meeting may no longer be valid. I think that small ship which received directives from he has been Executive Assistant Commis­ Mr. Finley will be able to help us with that the Chief of Naval Operations. These direc­ He is now FHA. He formerly was Acting as he gets into his remarks. tives attempted to deal at the same time sioner of with the battleship, the cruiser, the sub­ Executive Assistant Commissioner of FHA. You will recall that on December marine and the little dinky ship. I was on. He is no longer Acting. 22nd-27th, 1974, Public Law 93533 was This, I think, is the basic problem with enacted in to law to be effective on June RESPA. There are so many different vari­ At this point, we're going to hear for 20th, 1974. It was given the affectionate eties of closing situations that it was very about 25 minutes from each of the panel­ title of "RESPA." Which reminds me, I was difficult for Congress to produce one Bill ists, and then we'll handle q uestlons from in Anchorage about three weeks ago. I say covering all areas. the floor. I would hope that you will ask that to show how far flung our operations questions and I would hope also that you even though I realize that's are. (laughter) I was having lunch with head It was easier at the lower levels in the would interrupt, you. of the largest savings and loan in Anchorage Navy. We threw away directives felt to be rude, at anytime the questions occur to how he was getting along and asked him impractical - not a workable solution as to He was formerly Acting Director, Policy problems. He said he didn't with RESPA RESPA. and Program Analysis and Development it was, and, therefore, he was know what Division, U.S. Department of Housing and fine. (laughter) getting along One last personal comment, which I Urban Development, Washington, D.C. He is know none of you are sitting on the edge of In any event, the preamble of the Act now Director. He is no longer Acting Direc­ your chairs waiting for, I've come to the states that significant reform in the real tor. Congratulations. (laughter) conclusion that from now on, the only estate settlement process is needed to ensure Federal Legislation I would wholeheartedly Sandy received his degree from South­ that the consumers throughout the nation would be a resolution which stated eastern University in 1942, Southeastern be provided with greater and more timely support couldn't pass any more laws being in Washington, D.C. He is admitted to information on the nature of cost and that Congress the D.C. and Maryland Bars. Prior to 1962 settlement. for at least two years. (Applause) he was employed in the title industry. He for Title & Trust, which It futher provided that the Secretary In any event, the purpose of this panel is worked in Oregon able to overcome report not less than three years nor more to bring you up to date on what has is now Pioneer. He was returned to than five years as to whether additional happened since the mid-winter meeting, that obstacle, and (laughter) corrective legislation was needed. where we heard some interesting remarks Washington, D.C. in 1962 for private prac­ from Mr. Witkowski. We'd like to find out tice. It's my pleasure now to introduce During the past six months I've had the what HUD's present viewpoint is in refer­ Sandy Witkowski for remarks in connection uneasy feeling that I've been through this ence to the Act. Tom is going to talk to us with RESPA.

24 JANUARY 1976 comments by Sanford Witkowski

Director, Policy and Program Analysis and Development Division, Department of Housing and Urban Development, Washington, D. C

"Where Are We Now"? That's the title solve them. There is just no way of satis­ that advance disclosure was not really for the panel. It's a good title for a panel, fying every interest. Several witnesses helping the consumer. In fact, it had the but it's a darn tough question. I must insert advocated repealing the entire Act, others opposite effect. Homebuyers were waiting the usual disclaimer that any similarity only the advance disclosure provisions. Still unnecessarily because of the 1 2-day dis­ between anything that I might say and others thought it could be "cleaned" up by closure requirement. Most of these letters where RESPA will be a few months, or even HUD without any statutory change. urged a substantial revision of the disclosure a few days from now, would be purely When I called my office yesterday - I've requirements. A minority advocated repeal coincidental. been away from the office for about a week of the whole Act. Quite a common com­ I think we're really missing someone on now - I talked to Bob Elliott, the HUD ment was "Stop trying to protect the this panel and that's Jeanne Dixon or some General Counsel. He said it looked like the consumer" or "This is only adding to the other fortune teller. (laughter) Six months Senate Committee would probably report consumer's confusion". (The one consumer ago, I believe the title industry favored the on the Gam Bill. Last evening, Jack Jensen who bothered to write in about advance use of the Uniform Settlement Statement as of Chicago Title told me that the Com­ disclosure was actually quite pleased with a way to demonstrate that the lion's share mittee had in fact done so. it!) The consumer advocates who testified at of closing costs did not go to the title I'm picking up as much information in the Senate hearings still either see merit in industry. Now, who knows whether the the halls as I am anyplace else. (laughter) I advance disclosure or want the closing costs other problems of RESPA are really worth had a phone call this morning from one of to be absorbed in the interest rate by the what any industry sees as a benefit. the fellows in my office, just to make sure lender. Consumer advocates are also making RESPA on June 20th. RESPA on that I knew something had happened yester­ day. The House Committee intends to hold another point, that even though we only get October 3rd. Are they at all alike? The one letter from a consumer in response to answer is really "yes" and "no". We're still hearings sometime this month. Now, I understand that the Senate bill was passed an invitation for comments in the Federal operating under Regulation X, regardless of Register (which is like tacking a notice on what you may hear. The regulations haven't and I don't know whether it was passed yet or not. It depends on what time it is. But if the courthouse door), consumers don't changed too much so far. And, yes, RESPA write in to tell you when they are satisfied is still on the books - today, but maybe not passed, it may go directly to the floor of the House without hearing. It depends on what with something. You only receive mail from tomorrow. No, we all see it a bit differently them when they're dissatisfied. Therefore, now with the benefit of just three short the parliamentary maneuver is. we can't assume that one letter, or the months of experience. Another no - Although it looks like Sections 4, 6 and 7 absence of a thousand letters, has any real RESPA is going to change shortly. of RESPA, the sections which require the significance. The change is coming from two directions uniform settlement statement, advance dis­ closure and disclosure of the previous selling We also received quite a few letters - administrative action by HUD and from relating to the coverage of Sections 7 and 8. price of existing property under certain the Congress. As you probably know, HUD There are many questionable situations circumstances, may very well be suspended provided a sixty (60) day comment period under both sections. Probably the most under the Senate Gam bill, I think a on RESPA and Regulation X which closed pressing is Section 7. Under what circum­ discussion of some of the other possibilities just this past week. As of September 30th, stances does disclosure of the previous may be worth while. we had received about 300 comments. Many selling price have to be given? Although it of these comments were very well developed On August 1st, as I mentioned, HUD may look like it's fairly clear in the statute, and very cogent, but few dealt with regu­ published an Advance Notice of Proposed what about the newly constructed home, latory change which is really what we were Rule Making in the Federal Register, in more than a year old, sitting in a builder's asking for. Most urged repeal, attacking the which we solicited comments on Regulation inventory? How about estate sales or condo­ basic concept of the usefulness of prior X, which implements Sections 4, 5 and 6, minium conversions? As I mentioned, in disclosure weighed against the costs. Even and on Sections 7 and 8, which at that time September HUD issued RESPA Legal though most viewed it that way, we recog­ had not been interpreted by a Federal Opinion No. 2, which addresses many of nize that if RESPA stays, regulatory change agency. RESP A Legal Opinion No. 2, which these questions. is needed. was dated September 12th and published on Although I won't try to go over every We know that change is also coming from September 25th, gave our interpretations of part of it, I would like to highlight some of another source, the Congress. The Senate certain situations and their relations to the major points. First, it states once more Committee on Banking, Housing and Urban Section 7. I will explain those in more detail that the previous selling price need not be Affairs held oversight hearings on RESPA shortly . disclosed unless the seller has not owned the on September 15th, 16th and 17th. As I said, we received nearly 300 com­ property for two years prior to the date of Witnesses appeared from HUD, other ments in response to the August 1st Notice, loan application and did not use it as a place government agencies, lenders and consumer nearly all of them from lenders, realtors, of residence. Note that we said "and" and groups; Bob Jay capably represented ALTA. and settlement attorneys. By far , most of not "or". Both conditions must be met. I'm sure those who attended the hearings the comments addressed the added costs, This is probably one of the most misunder­ know that the hearings established that the added delay and the added confusion stood sentences in RESPA. We get several RESPA has some problems. What they caused by RESPA. calls a week on it. Many lenders are inter­ didn't establish was a consensus on how to Invariably, industry comments argued preting it to say that if either of the

TITLE NEWS 25 conditions are met, the price must be was a part of Senator Proxmire's bill which Although Senator Proxmire's bill would disclosed, but this is simply not true. would amend RESPA. repeal Section 6, he "expressed hope for Second, RESPA Opinion No. 2 provides Most of the comments received men­ some kind of arrangement by which the that a lender may accept an affidavit from tioned the added delays and expense in lender could give a simplified good faith each and every purchaser, in lieu of the complying with RESPA. Inevitably, the estimate of total closing costs in advance." Section 7 Disclosure, stating that he or she culprit for the delay was singled out as the Lenders would still have to hand out the tried unsuccessfully to obtain the disclosure waiver requirements, which are very strict. special information booklet and use HUD-1 from the seller, listing the specific attempts. This was done because that was how we as the standard settlement sheet. This will enable the lender to go ahead with interpret the legislative history, as dis­ My impression is that the lender-pay the transaction when the seller simply couraging the use of the waiver. This was provlS!on doesn't have much support. doesn't want to give the statement. one point that everyone seemed to agree on although the other provisions certainly do. last March at your mid-winter convention in So far as lender-pay is concerned, probably Third, Section 7 will not apply to forced San Diego. purchase sales, court-approved sales, no more than 25 or 30 percent of the However, since that time a completely closing costs would really be affected. assumptions, newly constructed housing, different picture has emerged. Everyone, Therefore, the homeowner still has to write co-owner transfers or estate sales. Section 7 including the Congress, thinks the 21 day a sizable check at closing, and he pays a does, however, apply to condominiums and rule is too strict, that there shouldn't be any higher interest rate. cooperative conversions. There is no way as conditions attached to the use of the waiver. Senator Garn's bill will suspend for a year we read it that we can get around that. We The letters paint a very dreary picture of the think this opinion goes a long way towards Sections 4, 6 and 7 of RESPA, presumably use of the waiver and its effects - families until something more appealing could be solving a number of the problems that have living in motels and hotels, moving vans all come up under Section 7. The most pressing worked out. Although there is wide support packed up, and families renting homes prior for either a temporary suspension or an of these were the estate sales and the newly to moving in. These may be isolated cases or constructed inventory housing. outright repeal of Section 6, (and to a they may be exaggerations, but it really somewhat lesser degree Section 7), there What about Section 8 - the prohibition does appear that many consumers, not just doesn't appear to be a uniform against kickbacks? So far, no opinion has only the lenders and the title people and industry-wide position on Section 4, the appeared on Section 8. We've been dis­ opposing attorneys, but many consumers, uniform settlement statement. Some like it cussing the issue with the Department of really do want some relief from the waiver and some don't. Justice for some months, but nothing has provisions. Many would just as soon wait. You may notice that none of the bills been finalized. Mr. Finley has also been Many just know there is not much they can we've talked about would repeal Section 5, discussing it with them and probably will do after they get the advance disclosure the special information booklet. Generally, talk a little more about that. anyway. the booklet has received pretty high marks. Finally, a number of the comments In HUD's proposed legislative amend­ It is a slight added expense to the lender - ments to RESPA, we request the authority touched on more technical issues. Some anywhere from 15¢ to 50¢ depending upon to prescribe rules, regulations and inter­ urged that taking title subject to an existing whom you buy it from - but it doesn't take pretations for every section of the Act, mortgage be exempted when the lender has any special effort to pass it out. That's the including Section 8. One of the major no knowledge of the transfer until after the nice part - you hand it out and that's it. As problems is that the Act didn't give us the fact. Others complained of invasion of a matter of fact, the booklet was cited at privacy, pointing to the confusing para­ authority to issue interpretive regulations on the hearings as a possible solution to the most of the sections so that we can say what graphs in Regulation X as to whether or not the seller should get a copy of the Truth in advance disclosure problem. The lender or we think it means and absolve a lender or HUD, no one seems quite sure, would be other person relying on the opinion from Lending Statement. (Incidently, there is no Regulation Z requirement that the seller required to insert a range of costs statement future problems, even if it turns out that we in the booklet instead of providing a are wrong. receive it.) Still others asked about the coverage of construction loans, refmancing, detailed advance disclosure on Form Several letters we received addressed the definitions of loan commitment, settle­ HUD-1. another section of RESPA which certainly ment date and home mortgage. At last As you probably know, HUD's right now needs some interpretation, Section I 0. It is count, there were some 50 separate subject in the middle of the section 15 Range of generally agreed that the purpose of Section areas covered in the comments. Settlement Costs Survey required to meet I 0 is to prohibit excessive amounts being Addressing these will be a rather major the statutory direction to provide ranges of required to be deposited in an escrow job for HUD. The answer as to how we are settlement costs to home buyers in selected account. After the taxes and insurance bills going to do it is not clear today, because we market areas. are paid, there should be no more than a are not really sure what the Congress will We've collected copies of HUD-1 used at month's worth of taxes and premiums in finally do with Sections 4, 5 and 6. settlement from seven areas: Bridgeport, that account. However, this is not what it Although legislative remedies generally Boston, Washington, Orlando, Des Moines, says and we defy you to read it and get that take a long time, RESPA has kicked up Denver and Los Angeles. My staff is devel­ out of it. What it says is confusing. It quite a storm. I think it is clear that the oping a Range of Settlement Costs for each attempts to cover a lot of situations and Congress is going to pass a bill very soon. of these areas, which will be printed as a doesn't do too good a job. We have offered The mail is just simply too heavy for the supplement to the booklet. These supple­ proposed changes which we think will help the Congress to take no action. ments will be furnished to the home buyer clear it up or at least give us the authority to Although Senator Proxmire's bill has at loan application along with the booklet, try to clear it up in the regulations. Among apparently been bypassed in favor of the and a questionnaire will be placed in that the suggested changes we made was to allow Garn bill, perhaps it would be useful to supplement to be completed by the home lenders to require at least two additional discuss its content for a moment. It would buyer and returned to HUD. The question­ months escrow so that there is a little more repeal Section 6 - the advance disclosure naire will solicit information on how helpful leeway. provision; amend Section 9 by prohibiting the range of settlement costs were. I'm sure Another part of RESP A we received lenders, as well as sellers, from requiring the there's going to be a Jot of interest in the comments on was Section 9, which pro­ title insurance be purchased from a partic­ Congress on the results of the survey. hibits a seller from requiring the buyer to ular company; and, it would give lenders the What I am suggesting to you is that a purchase title insurance from a particular option of paying closing costs and passing suspension of Sections 4, 6 and 7 does not title company. These letters suggest that the them along to homebuyers in the form of shelve all of RESPA. Some legislative solu­ lender not be allowed to select a title higher interest rates. Lenders agreeing to tion is still going to be required for the company either. This idea was also ex­ "pay" would be exempt from State usury other sections of the Act which are not pressed by many at the Senate hearings and laws. affected by the Gam bill. This leaves a

26 JANUARY 1976 question - how does one gather data if As far as amending the regulations, which although Bob testified in favor of the there is to be no uniformity in the data we can do within the present law, we are uniform settlement statement, I'm afraid base? aiming to have amendments to the regula­ that it could go also. The reason I say I'm I promised a little while ago I'd give you tions published by the middle of this afraid of it is, that if we're going to use any my prognosis on where RESPA is going. Let month. Were it not for the rapid Congres­ form as a data base for anything, it has to be me tell you first what we proposed, particu­ sional action, we probably would have standardized or you just can't gather larly as it applies to the parts of RESPA not eliminated the 21 day restriction on waivers accurate data rapidly and use it for any affected by the Garn bill. We've recom­ and shortened the three day waiver period purpose. mended several changes in the statute that to one day. Thus, a transaction really could Let me say this, the Garn-Morgan bill after receiving a dis­ we think will go a long way toward be closed one day calls only for a suspension of Section 4, 6 "civilizing" RESP A. closure. and 7, but anyone who believes that there is First, we would like to change the defini­ As far as using abbreviated forms for any importance in developing accurate data tion of a Federally related mortgage loan so advance disclosure or using some other on settlement costs would really want to that it would apply only to first mortgages. vehicle like the booklet, we were and still retain Section 4. What we're talking about is Currently, second trusts used for paying are undecided. I think there are good a suspension, not a repeal. Without data, part of the downpayment are covered. This reasons on both sides for whether you how can there be an informed legislative doesn't seem particularly necessary and it should use the same form for advance consideration of what to do when the does cause a lot of problems. disclosure as for settlement. Aside from this suspension period runs out? We would also like to change the defini­ issue, the form could be significantly tion of home mortgage from "is eligible for shortened and we could permit that in the So, I return to my original question, purchase" to "is intended by the originating regulations. RESPA on June 20th and RESPA on lender for purchase" in the secondary October 3rd. Are they the same? One thing market. This would exempt from RESPA We also would make it clear that only is certain. We know a lot more now than we those transactions where a seller takes back good faith estimates are required on advance did then. Every law and every regulation has a mortgage. With the present language in the disclosure, and not exact costs. One of the some natural growing pains and Regulation statute, because of the wide authority that problems over the last three months is that X has certainly caused other pains as well. It GNMA and FNMA have to buy mortgages, lenders have rather deliberately interpreted is our responsibility and yours to try to anything could be eligible for purchase. the regulations as strictly as possible. They ensure that any change made will be con­ We recommend amending Section 6 by didn't want to take any chances. This structive and better balanced to serve the requesting that the Secretary of HUD be caused a lot of delay and extra cost that consumer - and we're all consumers - but given the authority to exempt those types probably wasn't necessary. We've repeatedly with more regard to providing useful infor­ of transactions which she determines would told lenders and consumers that advance mation without complicated procedural serve no adequate purpose of consumer disclosure could be given before a loan requi.J.ements. protection. I might add that we proposed commitment. In fact, we encouraged it, but very few have followed that advice. We should try to avoid the situation in these changes prior to the Senate hearings. which HUD was given authority under Section 7 by We would propose amending Another change we probably would make Section 701 of the Housing Act of 1970 to circum­ requiring disclosure in very limited is to exclude assumptions from RESPA, regulate closing costs for VA and FHA has been stances - when the property where the lender has no previous knowledge mortgages. Although repeal of that owned by an investor for less than two years that an assumption is going to take place. authority was considered at the time the and he hasn't lived in it. Otherwise, we Assumptions where the buyer is assuming a Congress considered passage of RESP A, simply see no value in the Section 7 builder's loan would still be covered. they decided to leave that authority in Disclosure. We would also statutorily effect, the theory being that HUD could sales, Federal agency sales, As I said, we could probably clear up a exempt estate crank it up at anytime to curb abuses. My and lot of the minor problems. We could have sales of newly constructed property concern is that repeal of RESPA would conversions probably made sure that the regulations condominium or cooperative leave a vacuum which can attract almost from Section 7, rather than relying on covered more situations than just the The Western anything. interpretation. In addition, we would put Eastern "Sit Down" closing. too clear in the the burden of disclosure on the seller, not Escrow Oosing is not I should also like to point out that to change the the lender, prior to the time that the buyer regulations. We also need suspension of Sections 4, 6 and 7 leaves in and loan is bound to a contract. definitions of loan application effect the requirement for delivering the commitment so that potential homebuyers Section 8 would be amended by specif­ special information booklet, Section 5; the are not prevented from getting loan cost and ically exempting real estate broker's mul­ prohibition against kickbacks, Section 8 settlement cost information on the phone. tiple listing services as being cons trued as a (which is badly in need of clarification); the kickback. As to what's · going to be the final prohibition against the seller of property We recommend rewriting Section 10, the Congressional action, it's anyone's guess, as requiring use of a specific title company, section limiting the size of the escrow or Mr. Jay has already indicated. Probably (and Section 9; and the limitations on escrow impound accounts. l'm guessing), advance disclosure in Section deposits, Section 1 0, which is also in need Finally, we would like to amend Section 6 is going to be killed. of clariftca tion. 18(b) of the Act to give HUD regulatory Section 4, the uniform settlement state­ On that happy note, I thank you very authority to issue rules and regulations for ment, is apparently tied in the mind of the much for bearing with me and !leave to you any section of the Act. Congress with advance disclosure and the solutions to the problems. (Applause)

TITLE NEWS 27 Political Involvement-Our Heritage In a Democracy

PAC Means Act

comments by Mrs. Lee Ann Elliott

Associate Executive Director and Assistant Treasurer, American Medical Political Action Committee, Chicago, Illinois

It is indeed a pleasure to have the In the middle of August the U.S. Court of to send even one communication to each of opportunity to talk to you again about the Appeals for the District of Columbia upheld the registered voters in his district. political action movement in America. When the constitutionality of the key provisions Since the candidate will have less and less I was with you in 1973 in California, your of the Federal Election Campaign Act of money with which to communicate with his own political action committee - TIPAC­ 1974. This decision has been appealed to constituents he will be looking to commu­ was just getting started. the Supreme Court of the United States. A nity leaders who in turn can spread the While my visit with you was just two decision is expected in December. message for him. years ago so many things have happened In his dissenting opinion, Judge Edward In some districts this will look like politically in this nation that I sometimes A. Tamm showed that he, at least, under­ cronyism, but in other districts each candi­ feel that 1973 was in another lifetime. stood the issues the plaintiffs were trying to date will be appealing to community leaders There have been changes in the country's raise. He wrote "never before in our history to do what they can to spread the message leadership. has the government attempted to regulate on his behalf. There have been changes and ever increas­ the quantity of debate in the political It is extremely important that you be­ ing regulations so that business and finance arena ... This type of paternalism in the come personally active so that others in the and industry are battling against mountains area of ideas and political communication is, community will follow your lead in support­ of over-regulation. or should be, completely alien to our ing candidates who are interested in the free But the biggest change of all has occurred Democratic system of government." enterprise system and who share your con­ within the process that we call politics. But as restrictive as this law is and as cern of governmental over-regulation. These changes make it more difficult for unfortunate as this court's decision was, it is There is another provision of this law you and me to be involved politically. Some the law under which 435 Congressmen, 33 which says that a person can spend up to of these changes are so insidious that both Senators and a President will be elected. $5 00 on reception-related items for a candi­ you and I must be alert to every twist and I can't take your time today to point out date without this amount applying to either nuance of the changing political scene. all of the things which I feel are wrong with the candidate's or the individual's spending Today's economic climate has presented the new laws, but I would like to point out limitations. problems for all industries and all profes­ those provisions of the law which are most The Jaw permits you, as an individual, to sions. The mere problem of continually important to you as an individual and which hold a fund-raiser, or a reception of any meeting deadlines is so pressing that we are are most important to you because it type, for the candidate of your choice as in danger of becoming so preoccupied with involves TIPAC and all other political action long as you ask the candidate to attend and the very short run that we fail to see some committees. he does not ask you to hold the party. This of the political changes in perspective. One of the primary provisions of the law function that you sponsor must be within For that very reason I want to take says that candidates for the U.S. House of your residence. This regulation is very advantage of your invitation so that I might Representatives can spend only $70,000 in a specific in the law and is being tightly discuss important changes in the political primary and $70,000 in a general election. interpreted by the Federal Election Com­ direction of this country and suggest to you While this might seem to be a lot of money, mission which was created by the 1974 some of the things that you can do, and it is less than one-third of the amount that amendments. must do, to reaffirm our traditional values. was spent in my own congressional district If you live in an apartment building that The biggest single change in American by each of candidates in the 1974 elections. has a party room you may not use it for a politics occurred when the 1974 amend­ This regulation has a great deal of impor­ political event. It cannot be in the country ments were added to the Federal Election tance to you as an individual because you club, it cannot be out in the street where Campaign Act of 1971. The law has been are a community leader and a person who block parties are held. It must be in your challenged by an assortment of liberal and feels social responsibility. Responsibility residence. As a person interested in good conservative politicians and organizations. walks hand-in-hand with capacity and government, you have the opportunity to They are united only in their common power. invite the candidate and your friends into concern that the law passed by Congress, in Every campaign must have a headquar­ your home to help the candidate get his response to the Watergate revelations, went ters, a certain amount of literature, a cam­ message across. so far in limiting campaign contributions paign manager, an allowance for travel and Remember that I said that an individual and expenditures as to jeopardize freedom other general campaign expenses. could hold this reception. If your neighbor of speech, and inhibit the competitive forces The $70,000 allowed for each election brings a cake or a plate of cookies then you in U.S. politics. will not permit a candidate for federal office are now a committee and must file.

28 JANUARY 1976 Even worse, your expenditure will go What this means is the full political mit tee study both the legislative implica­ against a candidate's $70,000 limitation and spectrum is political action committees, tions and the political realities concerned against your personal $1,000 limitation. such as TIPAC, have never been more with each of the races and spend its funds in 197 6 has been characterized as the "year important than they are today. a way where they are used to the best of the volunteer." The reason for this is that The fact that you began TIPAC several advantage of the association. within the new law and its strict interpreta­ years and have encouraged its growth, is a When you really examine it closely, it is tion there is no substitute for volunteer salute to your perception of things to come. just as important for a Congressman on a efforts. TIPAC was never more important to you as key committee from Nebraska to have your Another important provision of the law an individual or to your association as it is support as it is for your own Congressman says that an individual can give no more under the new law. to have your support, when he may not than $1,000 to any candidate for federal Over the years AMPAC has worked with serve on a committee important to your office. The law goes on to limit individual approximately 125 groups in the formation association. contributions to an aggregate amount of of political action committees. This week The thing to remember is that the legisla­ $25,000 for Federal candidates. alone we had calls from several organiza­ tion that will be passed in the next Congress I expect many of you here have con­ tions asking how to set up multi-candidate is determined by the philosophy of the tributed more than $1,000 to a congres­ committees. persons elected in November 1976. sional candidate. This will no longer be Since political action committees are The legislation in which you are inter­ possible. more important to the political process than ested in the current Congress will die when But even if your contributions have been ever before, the money that you contribute Congress adjourns in the election year. The substantially less than $1,000, your con­ to TIPAC is the most important money that persons you support will be looking at tribution, whatever it is, is proportionately you contribute because it has the effect of entirely different legislation when the Con­ more important to the candidate than it creating identity for you as an individual gress is seated the following January. ever was before. Since candidates will have and identity for the association to which The flrst responsibility for a political to raise money in small amounts, any you belong. action committee is to support those incum­ contribution is more precious than ever. This was a concept that was hard to sell bents that are its friends. It is more impor­ Your reputation and your experience as a to physicians in AMPAC's earliest days. tant for a friendly incumbent to continue in community leader makes it important for Many people wanted to spend all their the Congress than it is to replace a member you to join the volunteers for your candi­ money solely for the candidate of their of Congress who does not share your point date in making sure that each of your choice within their congressional district. of view. Persons already in the Congress friends and acquaintances are asked to make Certainly AMPAC encourages its members have some seniority and experience and are even a minimal donation to your candidate. to give to the candidate of their choice, but more important in the legislative process AMPAC commissioned a nationwide sur­ much of this money was wasted. It was than a Freshman Congressman. wasted in several ways. Some of vey within the last month concerning the it was given The next most important group to sup­ to candidates mood of the American people. This survey that didn't have a prayer of port are the persons challenging those Fresh­ winning. Some produced some very interesting results. of it was wasted because it man incumbents who do not share your went to candidates that were sure When the respondents were asked whether to be point of view. It is easier to defeat a elected. they would volunteer to take part in a Freshman than it is a long-term Congress­ political campaign, 70% of the total sample, Some of it was wasted because it went to man. comprising hundreds of interviews candidates who coast to espoused the platitudes of Likewise, if many of the persons who coast, said yes, if asked. free enterprise, but who systematically share your views are Freshmen, they are When asked whether they would con­ voted against the association's interest in more vulnerable in the second election than tribute money to a candidate, over 80% said Congress. are long-term incumbents and should yes, if asked. This survey went on to show be Contributing your political dollars to helped. that Americans perceive themselves as your political action committee eliminates The' expertise of responsive to grass roots participation and much of this waste. Notice I did not say all your political action responsive to an opportunity for involve­ of this waste. A political action committee committee will be very important in making these ment. that spends money only on winners is not decisions. They are not decisions to be made The real test will be if candidates, and the doing much more than keeping the status lightly or for emotional reasons. They volunteers who join them, will be willing to quo. The job of political action committees must be made in the cold, hard reality of ask the grass roots constituents for volun­ is to change and improve the climate in electability and practicality, and all wishful thinking teer help and for political dollars. If you, as Congress and, in fulfilling this function, will must be put aside. a community leader, will join the ranks of not always support winners. Some of a The concept of the PAC movement in­ those who are asking for political participa­ PAC's contributions must be looked upon as corporates all of the good aspects of feder­ tion, you contribution to the political scene long-term investments and this year's loser ated giving. The PAC movement allows will be more than substantial. might be a winner when he runs again two members of your association in Florida to There is only one way in which more years from now. help your members in Minnesota elect a key than $1,000 may be contributed to a It is often important for an association to Congressman. lt permits members of your candidate for the Congress. This way is make contributions to the members of key association in Indiana to help elect a key multi-candidate committees. committees in the Congress. Only persons Congressman in Arizona. Political action committees such as who do not understand the political process TIPAC also fulfills the functions of pro­ TIPAC and AMPAC can contribute more construe this as vote buying. Individuals or viding continuity to the momentum of than $1,000. political action committees do not contrib­ political contributions. This continuity is The federal law permits multi-candidate ute to candidates because they hope their extremely important and should be devel­ committees to contribute $5,000 in a pri­ contribution will sway the candidate to oped and nurtured. mary campaign and $5,000 in the general their point of view. They contribute because During AMPAC's organizational days election. the candidate already holds a position they there was a group of physicians in one state To meet the definition of a multi­ support. Political action committees support who thought that they would raise their candidate committee, within the confines of candidates who understand and share their political dollars and have it distributed by a the law, a political action committee must: philosophy. They know that it is both naive, physician who had a long record of political 1. Have 50 members impractical and virtually impossible to per­ involvement in the state. We tried all man­ 2. Receive or spend more than $1,000 suade someone to change their point of view ner of persuasion to get this physician to 3. Contribute to at least five federal because of a political contribution. include others in his political activity and to candidates. The directors of a political action com- spread the identification.

TITLE NEWS 29 Quite frankly, this physician's political Everything that you can do to encourage "But let us not be deceived. While good activity was his ego trip. He basked in the your colleagues to support TIPAC is needed. men sit at home, not knowing that there is personal identification. He was unwilling, or Your efforts will be rewarded in a stronger anything to be done, nor careing to know; unable, to share his expertise and his con­ America. cultivating a feeling that politics is tiresome tacts. Unfortunately this physician was and dirty, and politicians vulgar bullies and the year of participatory killed in an automobile accident and his 1976 will be bravoes; half persuaded that a republic is the years of political involvement and identifica­ politics. The success of this most significant contemptible rule of the mob, and secretly history will be more tion were buried with him. There was no period in our political longing for a splendid and vigorious dependent on the number of participants continuity to his efforts since it was based despotism - then remember, it is not a than on the number of spectators. solely upon his name and reputation. government mastered by ignorance, it is a Participation in politics is not a new government betrayed by intelligence; it is Another less tragic incident occurred problem. Over one-hundred years ago, not the victory of the slums, it is the when one physician was involved with a George William Curtis, an American journal­ surrender of the schools; and it is not that candidate to the exclusion of other mem­ ist and one-time editor of the New York bad men are brave, but that good men are bers of the profession. He was a PAC Tribune wrote: infidels and cowards." supporter but his contacts with his Con­ Each of us must share the responsibility gressman, who was his neighbor, were "If ignorance and corruption and intrigue for making sure that the best and the always on a personal basis. He never stressed control the primary meeting, and manage brightest are in government. Your effective­ the PAC, he never mentioned it. He never the convention, and dictate the nomination, ness in politics is expanding every year included other members of the PAC when the fault is in the honest and intelligent through TIPAC, and there is every reason to he talked politics with his Congressman. workshop and office, in the library and the be optimistic about future successes. The One day the physician invited the Con­ parlor, in the church, and the school. When future is purchased by hard work invested in gressman to speak to his local medical they are as constant and faithful to their the present. society and when the Congressman arrived political rights as the slums and the grog­ In the words of Thomas Wolfe - "1 think he was amazed to find out that this physi­ shops, the poolrooms and the kennels, when the true discovery of America is before us. cian was the Chairman of his state PAC. The the educated, industrious, temperate, thrifty I think the true fulfillment of our spirit, of Congressman had never put the two things citizens are as zealous and prompt and our people, of our mighty and immortal together because it had been a one-on-one unfailing in political activity as the ignorant land is yet to come. I think the true dis­ personal relationship. and benal and mischievious, or when it is covery of our own Democracy is still before plain that they cannot be roused to their us, and I think that all these things are cer­ Continuity of effort and identification duty, then, but not until then - if ignorance tain as the morning, as inevitable as noon. both with the association and with indi­ and corruption always carry the day - there And I think I speak for most men living viduals is important. TIPAC provides this can be no honest question that the Repub­ when I say that America is here and now bonus. lic has failed." and beckons on."

The Land Title Industry Challenge

comments by Francis E. O'Connor

Chairman, Title Industry Political Action Committee Board of Trustees Senior Vice President, Chicago Title and Trust Company, Chicago, Illinois

Thank you Robert. After hearing from Capitol Hill in Washington at this very support. I know that a very great number of Congressman Michel and Mrs . Elliott this moment. If our industry is to survive in its us provide individual assistance to candi­ morning and some of the presentations that present form, every one of us in the title dates and this is fine and it should be done. we've heard over the last few days I don't business must join in supporting Congres­ But a coordinated effective political action think there should be any doubt remaining sional candidates who believe in private effort, depends directly on TIPAC member­ of the importance of Political Action within enterprise - so that we can achieve repre­ ship. our industry. sentation capable of countering bad legisla­ Now I'd like to get this a little closer to tion. In short, we must become far more TIPAC is essential because much of the home. As you now know, the passage of active than ever before in backing Congres­ work in Congress is performed by com­ RESPA has not taken the Title Industry off sional candidates with views compatible to mittee. And this is where it is most the political hook. All indications point to ours. important for our views to be heard. Your increased interest, and activity toward more particular Senator or Representative may be legislation and regulation. It is clear that One of our primary protective tools is a member of one or more committees congressional opponents on the liberal side TIPAC - Title Industry Political Action considering legislative matters, but not will continue their efforts to replace the Committee. Surely the idea of protecting necessarily those which concern our in­ reform approach of this act with their own your interests is nothing new to the Title dustry. And, if bills on important issues are proposals. Industry! We just never applied it until voted out of committee and reach the The RESPA situation is just one illustra­ 1973, when TIPAC was created. Now we Senate or House floor, their fate falls into tion of why we must remain vitally con­ know that collectively we can begin to the hands of 100 Senators and 435 Repre­ cerned with the makeup of Congress. There protect our interests by assisting financially sentatives with results impossible to is a vigorous anti-business element on those candidates whose political views we influence or even predict.

30 JANUARY 1976 TIPAC is a collective voice that will be Another function that TIPAC performs compliance could mean a company losing heard in Congress, and which will identify and will perform I hope, is the education of the struggle to stay alive and prosper. our industry to the Senators and Represen­ our legislators. You've heard a little bit Every year on the state and federal level, tatives from various states who toge~her can about this earlier in the sessions. How many thousands of new regulations are passed. make the difference on what happens to of us here have all but given up trying to Often little or no thought is given to what critical legislation. Through TIPAC con­ explain that the rendering of title services is their true cost will be. It's this heavy-handed tributions to the campaigns of appropriate NOT a rip-off - why title insurance should attitude that makes both of our "hidden tax Congressional candidates, our voice will be not be compared to au to insurance or life bills" higher each year. amplified on Capitol Hill. insurance? People generally - and some Legislators need to hear a message from legislators in particular - simply do not all of us: Government red tape means you Incidentally, there's nothing underhanded understand the nature of our business. and 1 are forced to spend more dollars to about this. It's been an effective strategy for Because people tend to think in terms of buy what we need. For many companies, many groups, from airline pilots to zinc actuarial tables, their comparisons are based more red tape means more of a chance of miners' unions. YOU SUPPORT PEOPLE on misconceptions that show the title indus­ layoffs, production cutbacks - maybe even WHO SHARE YOUR POLITICAL PHILOs­ try in a most unfavorable light. Those of closings . .. and they clearly have an impact OPHY. It's part of the American system. you who read the August, 1975 issue of on business profits which are so badly You assist those who reflect and represent Consumers Report know exactly what kind needed for business expansion and the your viewpoint. However, we can develop a of distortions I'm creation of new jobs. great deal more impact as a group than as talking about. The current negative and restrictive individuals. Our collective bargaining power These are the kinds of misunderstandings attitude toward business in general is not is greater; certainly our pooled resources are that must be overcome through our com­ very healthy for our country. Our free synergistic in nature - that is, the total munications with legislators - and the enterprise system functions better without effect is greater than the sum of its parts. general public, too, of course - but too many fetters. We cannot allow our especially the lawmakers first . . . and fast. To purists, it may sound a bit like industry to be strangled by increasing fed­ They must learn packing the jury. But in practical fact, it's how we operate and why. eral regulation, onerous controls, and price­ the way our government runs and always Now there is one further, very long-term setting under any disguise. It's not only has run. We in the title industry were just a goal which TIPAC will help to accomplish. unhealthy for our industry, but disastrous little slow to catch on to the techniques that In a real, yet philosophic way, TIP AC when applied across the board to our labor and other groups have been utilizing attempts to use our country's political country's economic system. constructively for years to aid their causes system to strengthen its economic structure. This larger fight for survival is part of or underscore their positions on vital issues. More and more frequently, it appears that TIPAC's mission, too . some of our legislators work relentlessly to But back to the level with which we are Your membership in TIPAC during its create laws that tax away or restrict business more immediately concerned ... it's in the early stages has raised some ITIOney for efforts - or to over-regulate entire indus­ key U.S. congressional and senatorial races campaign contributions. Our advisory tries. that TJPAC will serve our interests. trustees will assist the Executive Trustees of In this, our upcoming Bicentennial Year, TIPAC in determining the Congressional The cost of responding to government Jet's concentrate on influencing the course candidates who warrant our support. Your regulations runs in to billions of dollars of human events a bit ourselves - together, suggestions on worthy candidates are wel­ nationally each year for both businesses and through TIPAC. come as well. Please send them to my the general public. This takes money away In the near future, you will receive a attention. from all of us . U.S. News and World Report mailing that will invite your continuing If TIPAC is to continue growing in calculates that government regulations cost membership in TIPA C. I hope that you will effectiveness, we must retain the continuing every American family two thousand dollars respond generously - and ask your em­ membership of every person employed in each year. As an example, required safety ployees and agency personnel to do the the land title industry. Title people in and environmental devices added three same. attendance at this convention, are the hundred and twenty dollars to the price of a It has been wisely stated that the future leadership of our industry - and your help typical 1974 automobile. belongs to those who prepare for it. The is urgently needed in ex tending TIP AC The federal government today employs in time of preparation is upon us and the membership to your thousands of em­ regulatory functions over sixty-six thousand future of our industry lies in the balance. I ployees and agency personnel from coast to people who process more than seven hope every one of you will immediately coast. hundred thousand forms each year. Most of begin a commitment to political involve­ which are filled out by business firms. ment and TIPAC membership. By respond­ The time has passed when our industry ing with the vigor that characterizes our can afford to ignore its political responsi­ Government red tape adds to the cost of industry, we will preserve I am sure what we bility. Political involvement no longer is an nearly everything you and I buy. When the have become over the past century - for the option for us. It is an obligation. government regulates business, the cost of greater benefit of aU. Thank you.

TITLE NEWS 31 The Economy and Housing

Herbert E. Neil, Jr.

Vice President and Economist Harris Trust and Savings Bank, Chicago, Illinois

Thank you Mr. Jay. I'm delighted to be most important in terms of the poor fore­ concentrate only on final sales, the econ­ with the American Land Title Association cast: the economists had their charts upside omy was actually rising at about a 4%% this morning, and share my views on the down. (Laughter) annual rate. gross national economic outlook. However, I have brought some charts I have referred to the emp loyment, and industrial out­ Judging from your favorable remark on with me. When I told this story at a product, indicators. the University of Michigan, let us hope that meeting last summer, I put my charts on the put, all of which are coincident is to forecast future economic Michigan will win its fust game in three this screen and they were not upside down, but If one must focus on indicators that afternoon. were backwards. However, the charts have trends, we What is the Although your chairman indicated a been checked out this morning, and that move ahead of the economy. at the present switch in the program from politics to will not occur. status of these indica tors economics; I would submit that the econ­ time? They are very favorable. In 1973, the omy of 1976 is likely to be the most crucial The American economy, in my judgment, leading indicators began to turn down while factor in terms of the results of the elections is clearly on the upturn and I think this has the economy was still quite strong. of next November. I think the subject is commenced during the latter part of the Throughout 1974 the leading indicators quite relevant to politics and as I go through spring. Industrial production, which had plunged downward as the industrial produc­ months of 1974 my remarks, I think you will gather that dropped 12% in the final tion weakened very modestly. up slightly in there are some political implications in the and early '75, began to turn The sharp downturn in the economy, it has been economic situation as it is developing. May. In the past few months which developed in the fall of last year, was rising at a faster rate. Consequently indus­ clearly suggested by the performance of the It's generous of you to invite an econo­ trial production index is now going up at leading indicators. Then the leading indica­ mist to speak at your conference, because about a 10- 12% annual rate. tors began to turn up in early 197 5, economists are not always accurate. In fact, One observes the same strength in terms accurately forecasting a recovery by at least you may recall just about a year ago, of employment. Employment plunged very mid year. President Ford recommended to Congress sharply between last September and this The latest reading of the indicators is very that a surtax be imposed. The economics March, by about 2% million. However, a strong, which leads me to forecast that profession must take a fair degree of credit rather significant rise has taken place in the industrial production and other overall mea­ for that recommendation which, of course, past six months, including the numbers that sures of the economy will be rising rather turned out to be rather poor for that were announced yesterday for the month of sharply in I976. In fact, from now until the particular time. President Ford had just September. middle of next year, the indicators would completed his so called summit conference Employment has increased by about 1% suggest that the economy can rise at about in which all the top economists in the million since March, erasing 60% of the an 8% real rate of growth. sat with him. From the summit country earlier decline. The unemployment rate con­ One of the most important leading indica­ the conclusion was reached that the meeting tinues to remain high, in the neighborhood tors, from a standpoint of real output, is the problem of the United States was great of 8%% of the labor force because the labor durable goods new orders. The durable part inflation. force is now again expanding. During the of our economy is the most fluctuating None of his economic advisers, public or major part of the recession, there was no question of the economy. Durable goods private suggested that the unemployment growth in the labor force due to discouraged new orders fell 30% from last August rate would approach nine percent of the workers. through about March. However, they turned up in the spring and in the summer of labor force. Consequently, the economics It's my judgment that the employment the this year by about 20%. profession is a bit red-faced at some of continue to rise at a rather substantial will In the month of August orders were predictions that were offered a year ago. rate as the economy picks up in terms of com­ slightly above the sales; so that unfilled Shortly after the major recession overall industrial output. Real gross national of economists was orders are again increasing. If unfilled orders menced, a commission product, spending that is corrected for the economists did are moving in a positive direction, it is very set up to analyze why inflation, plunged at a 10% annual rate in a poor job in forecasting the American likely that production will also expand. such the latter part of 1974 and early 1975. economy. Some of the most learned gentle­ Where will the strong recovery occur? Inven­ men and ladies were put to work on this However, by the second quarter of 1975, tory policies are in the process of a shift. task. Tht:y developed very sophisticated the economy had stabilized and real gross Last year when the economy plunged so econometric models, including the use of national product was rising for the first time sharply toward the end of I974, most economic theories, statistics, and rna the­ since the fourth quarter of 1973. The businesses found that they had highly ex­ rna tics in setting up a huge number of increase occured despite a mammoth liquid­ cessive inventories. Sales were dropping equations, perhaps as many as two hundred. ation of inventories. sharply resulting in unwanted inventories. After grinding all this data through their Inventories were cut at an annual rate in If sales are declining and inventories are computers, they came out with the conclu­ excess of $30 billion during the spring going up, the inventory/sales ratio can rise sion that there was one factor which was quarter. If one takes out the inventories and very sharply. Retailers cut their stocks in

32 JANUARY 1976 the early months of 1975. The combination With a moderation in the inflation in spending. Prospects look favorable for the of a 5% reduction in inventories in the first 1975 as compared with '74, there has been a economy in 1976. half of the year, and an increase in sales of good recovery in real income. Real income Concern for inflation continues with the about 9% enabled retailers to get their represents the average wage of clerical and acceleration in inflation last summer. inventories back in line by the middle of the factory workers, corrected for inflation, Inflation in terms of consumer prices was year. Retail inventory/sales ratios are now changes in social security taxes, and the reduced to a 5 % annual rate earlier in the down to the lowest point in the last two progressive nature of the federal income tax year, but has moved up to an 8% level years. which continually pushes people into higher through the summer. The wholesale price In contrast, manufacturers were a bit tax brackets. index, which is often a leading indicator for slower in reducing inventories. In fact, Throughout 1973 and 1974 and into the consumer prices, rose at an annual rate of stocks were still going up through the early months of '75, real income was only 3% through the early months of this month of February. However, beginning in steadily declining. With the tax rebate and year. However, it accelerated to an 8% rate March, manufacturers have been reducing moderation in inflation, real income turned during the summer raising few of a return to their inventories at a rate of $1 billion per up. the double digit pace of 1974. month. Purchasing agents anticipate that The combination of a change in inventory The major contributor to the upsurge in manufacturers will have completed their policy, and strong consumer spending leads prices during the summer was farm prices. inventory liquidation by this fall, within a me to believe that the American economy They have gone up almost 20% just since month or two. will be rising at an 8% annual rate through March. The Russian grain deal is one of the the next nine to twelve months. major contributors to higher farm prices However, the liquidation of manufac­ that played into the markets there. In­ turing inventories will probably continue The only weak part of the economy at the present time is capital spending, new creased food prices combined with some through the fourth quarter of this year. higher gasoline prices to lift consumer prices However, retailers are definitely adding to plant & equipment outlays, which have declined moderately in terms of dollars in sharply. their inventories. As retailers increase their United States crop harvests will be close stocks, manufacturers' sales will advance. 1975 . In terms of real dollars, there has been a drop of about 1/6 in real spending to record levels for wheat, corn, and soy­ Manufacturers did not enjoy a pick up in for new plant & equipment since the middle beans. This augers well for limiting the rise sales in the first half as did retailers. of 1974. in meat prices next year. The United States However, they are beginning to experience can accommodate substantial grain exports In the second half of the year capital sales gains as retailers add to their inven­ in the next six months without generating spending is rising slightly, but only in dollar tories. The combination of higher sales and substantially higher food prices. terms. Moreover, during the past year each declining inventories will lead to a correc­ Industrial prices have been trending up­ of the surveys conducted by the Depart­ tion of excessive manufacturing inventories ward throughout the recession. However, ment of Commerce has tended to overstate within the next four to five months. announced increase in prices may not stick, capital spending. The actual numbers have such as aluminum The steel industry an­ In the quarter the major part of the steadily come in lower which will probably nounced a number of price increases effec­ inventory liquidation has been completed. happen again for the third and fourth tive on October 1. However, many steel Retailers are adding to their inventories, at quarters. least moderately, while manufacturers are companies have told their customers that Real capital spending liquidating inventories at a slower rate than will be down they will honor all orders placed prior to earlier. The economy will return to a zero throughout 1975 . However outlays are like­ October 1 at the old prices even if shipment rate of inventory accumulation as compared ly to join the parade of strong economic takes place later. forces in 1976. The operating with negative $30 billion in the second rate of manu­ Many manufacturers are interested in quarter. facturers plunged so sharply in the final raising their list prices because of fear of months of 1974 and early 1975, that Final sales plunged very sharply in the price and wage controls. However, if they approximately 1/3 of total manufacturing discount these prices, the indexes do not fourth quarter of last year. Total consumer capacity was not being utilized last spring. spending in the fourth quarter of last year pick up the moderation in inflation that has Currently utilization rates are definitely up occurred in the industrial sector. when corrected for inflation, declined at a as industrial production moves ahead at a 10 13% annual rate. Consequently, I expect the inflation rate to 12% annual rate. to run 5 to 6% in 1976. Of more concern That is unprecedented for American con­ In addition, the corporate profits picture are interest rates. After the prime rate fell sumers since the 1930's. But with the will be improving. Corporate profits de­ from 12% last fall to 7%, it moved back up beginning of the year, there was a pick up in clined one-third between the middle of to 8% in the early stages of the recovery. all types of consumer purchases, not only 1974 and the first quarter of 1975. The major cause of this rise in interest durable goods but non-durables and services However, in the third quarter of last year, rates during the summer, was a tightening of as well. Retail sales are running 12% above 1/3 of after tax profits represented inven­ Federal Reserve policy. their level of last November and December. tory profits. Businesses were buying raw During May and June, the money supply With this pickup of retail sales, there has material, at one price. And after processing advanced at a 15 % annual rate, well above been a recovery in automobile purchases them into goods were selling products at the 5-7Vz% objective set by the Chairman of from a six million annual rate in March and higher prices. Over $30 billion of $90 billion the Federal Reserve, Arthur Burns. April. dollars in corporate pro fits after taxes repre­ Tax rebates distributed in May con­ In the month of August sales were run­ sented inventory profits. tributed to the sharp rise in the money ning at approximately an eight million rate. The reported decline in profits was the supply since many people passed their $100 With the inclusion of imports, which have sharpest drop in profits since the 1930's. or $200 checks into their checking been very strong, car sales have recovered to However, if we remove inventory profits, accounts. a ten million rate. Car sales seem to be earning s declined not by 1/3 but by only However the 15% number was alarming. holding up pretty well with the introduction 11 %. Consequently, the Federal Reserve took of the new models. An 11% decline in corporate profits in action to slow growth in the money supply. The pick up in consumer spending is the recent recession was the smallest decline Since June the money supply has been rising genuine and it will continue. Personal in­ in profits in any of the post-war recessions. at an annual rate of just 3%. The Federal come is moving ahead at a good rate. In the Operating earnings held up well during the Reserve has brought the growth of the month of August, private wages and salary, recession and in the second quarter very money supply back within their objectives which were weak, during the recession moderately registered an $8 billion recov­ over a six month period. period, showed the largest monthly advance ery. The central bank is attempting to control on record. People are being called back to Profits next year will be up by 25 to 30% the money supply and permit it to rise at work and they are working longer hours. from the level of '7 5, encouraging capital only a moderate rate. This is a favorable sign

TITLE NEWS 33 private construction has in terms of longer run inflation. However financed by the commercial banks in the Non-residential decline in recent months re­ the cost has been a rise in interest rates. first half of 1975 because the commercial continued to banks had a sharp run down in business flecting weak capital spending. The Federal Reserve now is in a better loans. Residential building turned up in May, position to permit the money supply to and has advanced 10% in dollar terms. declined at a 15% annual rate grow at a somewhat faster rate in the fall of They Housing starts, running at a million annual first half of the year. The drop and in to early 197 6. This will during the rate earlier in the year, have shown some this year through the third quarter of in short term interest has continued recovery to a 1-1/4 million pace. Mortgage alleviate any sharp rise and retailers can be con­ 1975, but as manufacturers commitments of savings and loan associa­ rates, if the Federal budget their inven­ begin to add even modestly to tion are up some 70% from the end of last trolled. going to tories, business loans are no longer year. Building permits in the summer quart­ will show some Congressman Michel gave what I consider go down. In fact, they er advanced 50% from the tough first quarter of this year. some favorable comments on congressional increase in the fourth quarter. Consequently, there is considerable The new Congressional action spending. Commercial banks were able to finance momentum lifting housing, which I expect is having a modest im­ Budget Committee $25 billion of the $40 billion deficit in the will reach a 1 Yz million rate by the end of the line on spending. pact on holding first half of the year. this year. However, the federal government will be However, savings inflows to the savings obliged to finance a deficit of over seventy Other financial intermediaries absorbed association must improve again if housing billion dollars in the current fiscal year. The approximately $10 billion of federal debt in starts are to exceed 1Yz million. At the deficit actually ran at an annual rate of 105 the first half of the year because of the current time, I'm afraid that is rather billion in the second quarter because of the strong savings flows. Foreign central banks doubtful Federal Reserve policy must main­ tax rebates. It has declined to $65-$70 invested $5 billion in U.S . Treasuries when tain a just a fairly moderate growth in the billion in the third quarter. Unfortunately the dollar was weak. However, the Treasury money supply, which may push up interest the it's going to remain high although was forced to attract individuals to finance rates in 1976. In the longer run moderate Treasury may be underestimating receipts. recent note issues. Non-competitive bids, monetary expansion limits inflation and a than Expenditures may rise more rapidly largely represented by individuals, have ac­ rise in interest rates. anticipated, however. counted for half of the new offerings. In terms of a forecast for 1976, I'm quite optimistic on the total economy. The gross Major increases in spending are taking During the summer Treasury bill rates, national product in dollar terms will be up place in transfer payments, including food municipal yields and intermediate-term gov­ by about 13% after only 4'/z% this year. stamps, Welfare payments, Social Security rates advanced to some extent. ernment Real growth is likely to run around 7%. This benefits, and federal grants to state and and loan associations exper­ Some savings implies 6% inflation which is only half as local governments for various programs in­ of funds in August and ienced outflows severe as in 1974. revenue sharing. The sum of transfer less in the summer of 1973 cluding September, but Industrial production will increase ap­ and Federal grants will exceed payments and in 1974. proximately 12% and the unemployment $200 billion in the current fiscal year and and loan associations had a net rate will drop, but remain around 7Yz%. make up over 50% of the total federal Savings funds of nearly $3 billion in July, Finally, corporate profits, after their drop budget. inflow of a sharp drop to $1-1/4 billion in August, of 1/6 this year, will be up nearly 30% in These expenditures in the past four years and probably less in September. The marked 1976. I am quite optimistic for have risen 80% rate. The large deficit in the slackening in savings inflows to fmancial In conclusion, through at least the middle of first half of the year created little problem intermediaries raises questions as to pros­ the economy, Beyond mid-year prospects will re­ for the American economy. Consumers were pects for home building. Residential con­ 197 6. effective the government is in liquidating their installment credit, but in struction has just begun to show some flect how its deficit position, and the the past couple of months with the rise in improvement in the second half of this year controlling of the Federal Reserve in consumer spending, households again are after a sharp drop running through most of determination to its announced monetary goals. borrowing. The Treasury deficit could be 1973and1974. adhering

Washington Report

William J. McAuliffe, Jr.

Executive Vice President, American Land Title Association, Washington, D. C

Act. At that time the FTC issued a number There have been many reports made nature and scope of the investigation in­ of subpoenas to title insurance underwriters. during this convention concerning Associ­ cludes but is not limited to an investigation But there is to determine whether corporate acquisi­ ation activities and involvement. I received from FTC a discussed tions, affiliations by directors of title insur­ On April 29, 1975, one matter which has not been the produc­ ance companies with other corporations, subpoena duces tecum requiring and I shall cover it. of docu­ attempts to monopolize, and other acts and tion of 22 different categories ments. Basically, the period of time Covered Over a year ago, the Federal Trade practices within the industry may violate by the subpoena was from January 1, 1969, Commission began an investigation of com­ Section 7 or Section 8 of the Clayton Act or to the date of the subpoena. But one petition in the title insurance industry. The Section 5 of the Federal Trade Commission

JANUARY 1976 34 specification requested material back to produce minutes of the meetings of the and assisted price fixing exists in setting 1940, another to 1950, and a third to 1960. Executive Committee and Board of Gover­ premiums. It appears that such legalized Tom Jackson, the ALTA General Coun­ nors. price fixing does exist to a significant sel, and I met with attorneys from the degree in this industry. (Footnote. The Commission concerning the subpoena. We We were given a month to comply. We Bureau of Economics reports that 20 inquired if they wanted me to testify under responded and turned over all documents in states do not have statutory authority to oath when producing the material. The indi­ our files in a timely fashion. disapprove or set title insurance rates. cated that initially all they sought were the One state prohibits title insurance. The documents. With respect to the material re­ Since then, we have heard nothing other 29 apparently do have laws on the quested, they said that they would take directly from the FTC. However, we have question, but the Bureau of Economics the original documents or copies made at obtained a copy of an intra-agency report says only seven appear to have taken ALTA expense. They said that they might concerning this investigation. It is called a serious steps to regulate title insurance have to keep these documents for as long as Mid-Year Review, January 1975. The paper rates.) person to the 5 years. Accordingly, we xeroxed copies of was leaked by an FTC staff * * * the documents called for by the subpoena. Bureau of National Affairs. The Bureau story on the Review. As a published a short "Mr. Halverson does not believe that result, we have been able to obtain a copy One specification called for "documents title insurance should be regarded as part of the article. Some of the statements and sufficient to show ALTA's current docu­ of the business of insurance for the conclusions are most interesting. I'd like to ment retention and destruction policies and purposes of the antitrust exemption con­ read excerpts from the Review. procedures." ALTA had nothing in writing tained in the MFA. He believes that the relating to this. I suggest that every title only case on this point, which holds to "I (the Bureau of Competition) suggests company consider establishing such a policy the contrary, is 'clearly wrong'. that substantial consumer benefit could in writing. result if the price of title insurance could be brought down. * * * FTC sought documents relating to stan­ "What about those states in which the dard forms. They wanted information con­ MFA exemption is not or will not be "We agree that substantial benefit cerning legislative action by the Association, applicable? If it is correct, as the Bureau could result if such prices could be both federal and state. Inasmuch as ALTA advises, that title insurance rates 'vary only brought down. We also believe that they does not become involved in state legisla­ slightly throughout the country,' there is probably could be brought down. We tion, we had virtually no information on something very fishy present here. We raise, however, some question that they this subject. The Commission asked for would not ordinarily expect to find the can be brought down by the FTC because to title fees. We had very price fixing has material relating of the possible limitations created by the same rates in states where They asked for mem­ the application of little on this subject. McCarran-Ferguson Act (MFA). been exempted from bership applications, all the way back to federal antitrust laws (under the MFA) 1960. 1 inquired of one of the FTC attor­ and in states where it has not been so neys, why the Commission wanted to go "We agree with both the Bureau of exempted. back so far and why did they require all Competition and the Bureau of Eco­ "The facts tend to suggest the exist­ documents relating to the applications when nomics estimates that the performance of ence of collusion everywhere. (Footnote. ALTA correspondence on membership in­ this industry is very poor. We are not Either that or a high degree of competi­ volves form letters, for the most part. The sanguine, however, about the chances of tion, which we do not believe to be the response was, ALTA may violate the anti­ Commission success in bringing prices case in this industry.) The question then trust laws by denying applicants member­ down at all in those states as to which the becomes how best to attack it." ship. However, FTC relented on requiring us FMA would oust the Commission from This investigation is a very serious matter. to produce form letters relating to each jurisdiction over the sale of title policies. It obviously has the attention and concern application. of your ALTA officers. They shall keep on * * * top of this matter and if it requires our legal Other materials sought by the FTC con­ counsel's further attention, I am sure that cerned market share of business and com­ "High concentration in this industry, such assistance will be sought. In my munications with state or local bar associ­ however, has essentially no competitive opinion it is one of the more important ations. Of course, they required us to significance so long as state authorized issues facing the industry at the moment.

TITLE NEWS 35 TITLE INSURANCE AND UNDERWRITERS SECTION

Some Disturbing Developments in Claims and Suits

Tort Liability Under Title Policies

comments by Joseph Mascari

Assistant General Counsel, SAFECO Title Insurance Company, Los Angeles, California

What is one of the most dynamic and ments of an actionable tort are (1) existence sonably similar to the amounts ulti­ fastest growing areas of the law today? of a legal right in favor of the plaintiff, (2) a mately recovered. According to a recent advertisement in a corresponding legal duty from defendant to Almost all of the reported cases involve California legal publication, it is the pursuit plaintiff, (3) a breach of that duty and (4) insurance coverage other than of legal action against insurance companies damage as a proximate result of the breach title insur­ for their tortious conduct, rather than for of this duty. There must always be a ance, such as auto, health, fire and general breach of contract. Many state bar affiliated violation of some duty owing to the plain­ insurance. The decisions in these cases, associations have also conducted seminars tiff, and generally such duty must arise by imposing duties and obligations on the on new tort remedies in insurance cases. operation of law and not by mere agreement insurance companies, apply equally to title Any practicing attorney can now purchase a of the parties. (4 Witkin, Summary of Cal. insurance companies. In a case involving a "How To Do It" kit, with textbook and Law' (8th Ed. 1974) Sec. 488, P. 2749). legal description problem, the court held tapes, on the successful techniques to be When all of these elements prevail, the that a policy of title insurance, being a used in cases for punitive damages and bad courts have held that the title insurance contract of indemnity, is subject to the faith. company is liable for damages resulting same rules of construction as any other insurance policy. We are all familiar with the law of from this tort, including punitive damages. (Lagomarsino V. San Jose, etc. Title Ins. abstractor's liability, which has been with us In general terms, the tort liability under Co. 178 Ca 2d 455 ; Sa/a V. Security Title Ins. & Co. (1938) 27 Ca 2d since the first abstract of title was ever title policies can be segregated into four 693). In another case, the court stated: issued ("Title Abstractor's Liability in Tort categories: (1) bad faith, (2) duty to defend, "Policies of title insurance furnished no and Contract" THE AMERICAN UNIVER­ (3) fraud and (4) negligence. Each of these exception to the general rules of construc- SITY LAW REVIEW, VoL 22, No. 2, areas of legal liability is founded on duties tion ... applicable to contracts of insur- Winter, 1973; "Title Searches: Tort Liabil­ owing to the insured which are codified as ance ...." (Coast Mutual ity in California" Santa Clara Lawyer, VoL well as in case law. Bldg. Loan Assn. 7, No. 2, Spring 1967) however, tort liabil­ California has the dubious distinction of V. Security Title Ins. & Guar. Co. (1936) 14 ity under a title policy is a relative new­ being in the vanguard of holding title Ca 2d 255, 57 P. 2d 1392). A 1972 case in comer to our industry. companies liable for their tortious conduct. which a title insurance company was held The very term "tortious breach of con­ In 1972, the legal duties involving fair claim liable to the United States for ad valorem tract" is inconsistent. practices were imposed on all insurance tax assessments, the court again stated that The word "tort" comes from the Latin, companies doing business in the state (Ins. " ... in considering (the exclusions from "torquere" which means "twist, twisted or Code Sec. 790.03); Exhibit A. Thirteen coverage), we bear in mind that title policies wrested aside." It is a private or civil wrong unfair claims settlement practices were ex­ are subject to the same rules of construction or injury, independent of contract. Once the pressly prohibited, the more significant of as are other insurance policies (United tort is established, the court is then free to which are: States V. City of Flint 346 F. Supp. 1282 impose punitive damages on the title insur­ (5) Not attempting in good faith to (1972); 9 Appleman, Insurance Law and ance company, if, in the opinion of the effectuate prompt, fair, and equitable Practice, Section 5 20 1.) court, the facts warrant punitive damages. settlements of claims in which liabil­ The purpose of imposing punitive damages ity has become reasonably clear. BAD FAITH is: (1) to punish the title insurance company ( 6) Compelling insureds to institute liti­ Every contract contains an implied in law involved in the subject case and (2) to set an gation to recover amounts due under covenant of good faith and fair dealing; this example to the entire insurance industry. an insurance policy by offering sub­ covenant provides that neither will interfere From the recent cases that have been stantially less than the amounts ulti­ with the rights of the other to receive the reported, the court is accomplishing both mately recovered in actions brought benefits of the contract. (Gruenberg V. objectives all too well. We are getting the by such insureds, when such insureds Aetna Ins. Co. , 9 Cal. 3d 566; Comunale V. message loud and clear. The essential cle- have made claims for amounts rea- Traders & General Ins. Co. , 50 Cal. 2d 654).

36 JANUARY 1976 Breach of the covenant provides the injured 2d 113). This notification, incidentally, FRAUD party with a tort action for "bad faith," need not be from the insured, but may Assuming underwriting risks is an every­ notwithstanding that the acts complained of originate from other sources such as a day occurrence in our industry. In the event may also constitute a breach of contract. complaint which has not yet been served on a defect, lien or encumbrance is omitted in a (Crisci V. Security Ins. Co., 66 Cal. 2d 425; the insured. (Hartford Accident and Indem. policy of title insurance on a risk basis, with Fletcher V. Western Nat'/ Life Ins. Co., 10 Co. V. Civil Service Employees Ins. Co., 33 or without an indemnity, and with or Cal app. 3d 376). The cause of action is Cal. App. 3d 26). without a security deposit, we are under a applicable to all insurance contracts, includ­ In many cases, the action against the legal obligation to advise the proposed ing policies of title insurance. (Kapelus V. insured has a number of causes of actions, insured of the fact that the exception to United Title Guaranty Co. 15 cal. app. 3d with perhaps only one cause of action title will be omitted on a risk or underwrit­ 648) imposing an obligation on the insurance ing basis, and not on the basis that the There are two allegations which must be company to defend. If the action filed defect has been cured. Each company has its proven in order to establish a case of bad against the insured states several causes of own standard operating procedures to be faith: (1) the absence of a reasonable basis action, some of which are within the cover­ followed in communicating this information for denying a claim, and (2) the denial of a age of the policy and some of which are not, to the proposed insured. claim while knowing, or recklessly disregard­ the insurance company still has the duty to In Moe V. Transamerica Title Ins. Co. ing, the fact that there was no reasonable defend the insured. (41 ALR 2d 434, (1971), 21 Ca 3d 289, the title company basis for denying the claim. Obviously, what 435-438 Sec. 2, Sec. 3(a)(b); 50 ALR 2d issued its policy insuring the assignment of a is or is not reasonable in a given case is a 458,506-511 Sees. 24 & 25.) secured note, and in doing so intentionally question of fact. In each case, we must ask In this type of case, there are serious omitted reference to pending bankruptcy ourselves: (1) was there a full investigation problems involving reservation of rights and proceedings affecting the property secured. of the facts on which the claim was made, conflict of interests. U.S. Steel Corp. V. As a result of these proceedings, the insured (2) was there a fair and reasonable review Hartford Ace. & Indem. Co., 511 F 2d 96 note became valueless. The court found that and evaluation of the results of the investi­ (1975); Duke V. Hoch, 468 F 973 (1972). the title company had conspired to commit gation and (3) was the decision to deny fraud on the insured and rendered judgment liability a reasonable decision? The title insurance company has a reason­ in favor of the insured for compensatory The Jachow case (Jachow V. Trans­ able time after receiving notice of a defect damages in the amount of $80,000, interest america Title Ins. Co., 48 ca 3d 91 7), which insured against, to perfect the title. In a and attorneys' fees in the amount of awarded general damages of $200,000 for 1971 case, it was held that three years was $35,000 and punitive damages in the emotional distress, was decided in part on not a reasonable time for the title insurance amount of $50,000. The court held that the the reasonable expectations of the insured. company to clear up the title defect intentional failure to disclose a material fact It affirmed the decisions in Gray V. Zurich (NEBO, Inc. V. Transamerica Title Ins. Co., is actionable fraud if there is a fiduciary (Gray V. Zurich Ins. Co., 65 Cal. 2d 263, 21 Ca 2d 222). The fact that the insurance relationship giving rise to a duty to disclose and Coast Mutual V. Security Title) Coast company was willing to reinsure title in a it, Citing Black V. Shearson, Hammill & Co. Mutual S-L Assn. V. Security T.I. & G. Co., buyer with reflecting the defect in title did (1968) 266 Cal. App. 2d 362. 14 Cal. app. 2d 225) in holding that the not release the title insurance company provisions of the policy "must be construed from liability. NEGLIGENCE so as to give the insured the protection For many years, the ALTA conditions to expect." which he reasonably had a right What should a title insurance company do and stipulations contained the following if it firmly believes that it has no liability language: DUTY TO DEFEND under a claim being made against it, but is "Any action or actions or rights of The duty to defend is found in the concerned with the potential liability in tort actions that the insured may have or may conditions and stipulations of both the should this denial of liability, or refusal of bring against the company arising out of ALTA policies as well as most, if not all, of the tender of defense, be subsequently held the status of the lien or title insured the standard coverage policies issued erroneous? One obvious solution is to resort herein must be based on the provisions of throughout the country. To paraphrase the to a declaratory relief action, in which the this policy." language, the title company, at its own cost court can determine the rights of the parties In October, 1970, this provision was and without undue delay, is required to before these rights have been violated. If the amended to read as follows: provide (1) for the defense of the insured in court exercises its discretion to grant declar­ "Any claim of loss or damage, whether all litigation consisting of actions com­ atory relief on both the duty to defend and or not based on negligence, and which menced against the insured or (2) for such the duty to indemnify, the title insurance arises out of the status of the title to the action as may be appropriate to establish company can ascertain its obligations under estate or interest covered hereby or any the title as insured, where the litigation is the policy and have any disputed facts action asserting such claim, shall be re­ founded upon an alleged defect, lien or decided before updertaking the insured's stricted to the provisions and conditions encumbrance insured against by the policy. defense. However, even this option is not and stipulations of this policy." This imposes two obligations on the without some risks. This was a noble effort, I am sure, to insurance company: (1) to defend the in­ avoid liability under the tort of negligence, sured's title if a third party claims, in a In the Johansen case (Johansen V. Cali­ but numerous court decisions have appeared judicial proceeding, an interest insured fornifl State Automobile Associfltion Inter­ to ignore this provision. In a number of against by the policy and (2) in the event Insurance Bureau, 41 Ca 3d 974) decided as cases, the courts have rejected the title that a third party claimant chooses not to recently as August 11, 1975, the California insurance argument that in issuing the litigate his claim, to take affrrmative action, Supreme Court held that an insurance com­ policy it was acting as an insurer and not as either by filing an action to quiet title or by pany breaches an implied covenant of good an abstractor of title, and therefore could offering to compromise a third party's faith when it fails to settle a lawsuit against only be liable on the insurance con tract and claim, so as to provide the insured with title the insured during the pendency of a sepa­ not in tort. as stated in the policy. Failure to respond to rate action for declaratory relief by the either of these two obligations gives rise to a insurance company. If the settlement of the In Banville V. Schmidt (1974) 37 Ca 3d cause of action in tort, and is an extension claim is reasonable, the insurance company 92, the buyer accepted a note secured by a of the tort of bad faith. should have satisfied or paid the claim, if it deed of trust on other property as part of The duty to defend, or quiet tile, arises then is subsequently determined that the his down payment Six days prior to closing, when the insurance company is notified of insurance company was, in fact, not liable the owner of the other property had deeded the existence of the defect. (Overholtzer V. under the policy, "it could have sought it to a third party. The title policy had Northern Counties Ins. Co., 116 Cal. App. reimbursement from its insured." failed to reflect this transfer and reported

TITLE NEWS 37 the title to the other property in the name insurer and an abstractor of title. In that fashion and he does not want any extrane­ of the prior owner. No payments were made case, a lis pendens had been recorded ous matters shown in the policy which must on the note and the sellers brought this ac­ sixteen years prior to the issuance of the be shown in an an abstract. It is our position tion against the title company on the theory policy. The title policy failed to reflect it, that a title policy is not a summary of of negligence. The appellate court held the but the title insurance company was not public record; on the contrary, it is a title insurance company liable for negligence held liable. The agent, or abstractor, was contract of indemnity, and the liability of on the theory that a portion of the premium held liable because, "unlike a title insurer the title insurance company should be is attributable to a title search and examina­ who can define the extent of his liability limited to the law of contract and not the tion, since the amount of the premium was under its insurance policy, an abstractor Jaw of tort. However, we must recognize identified in the policy as being for the must report all matters which may affect his that the co urts are tending to rely upon the "total fee for title search, examination and client's interest and which are readily dis­ restatement of torts, section 552, (exhibit title insurance." It logically followed that coverable from those public records ordinar­ B) which states the rule regarding a "sup­ the title insurance company had the usual ily examined when a reasonably diligent plier of information." abstractor's liability "to reasonably and title search is made." carefully perform their search and examina­ Unfortunately, we can see the handwrit­ tion." (Northwestern Title Security Co. V. It is easy for us to editorialize by saying ing on the wall very clearly. The current Flack, 6 Cal. App. 3d 134; Viotti V. Giomi, that the consideration of the title in surer's judicial climate is to expand the tort liabil­ 230 Cal. App. 2d 730). liability in tort ignores the realities of the ity under title insurance policies. We have The Contini case (Contini V. Western transaction, the expectations of the parties no alternative but to perform all of our Title, 40 Ca 3d 5 36), on the other hand, and the contracts they have made. The duties in such a professional manner as to respected the distinction between a title buyer wants his title in sured in a designated minimize this exorbitant poten tialloss.

Class Actions

comments by John C. Connelly

Senior Vice President and Counsel, Title Insurance Company ofMinnes ota, Minneapolis, Minnesota

Commencing in about July of 1971, a monopolies and restraint of trade. Merger s, Sherman Act. The reaction to this was new wave of litigation came on the horizon consolidations, and such, fall under this Act. immediate by the NAIC, the insurance for Title Companies, known as the "Class Also enacted in 1914, was the Federal Trade industry as a whole, and State public offi­ Action". Originally the cases were based Commission Act, which related to unfair cials, and Congress was prompt in introduc­ upon Federal Law and brought in Federal competition. The next important Act of ing remedial legislation , so that in the Court. The allegations were founded upon Congress in this area, was the Robinson­ following year, hot on the heels of the alleged violations of various Acts of Con­ Patman Act in 1936, which related essential­ Southeastern Underwriters case, came the gress relating to antitrust and the defenses ly to price discrimination. And then finally McCarran Act, which provided that no Act interposed raised the question of whether came the McCarran Act in 1945 , which of Congress shall be construed to invalidate, the business of title insurance was com­ related specifically to Insurance and the impair or supersede any Jaw of any State for merce and controlled by the Federal Gov­ regulation thereof either by State Law or the purpose of regulating the business of ernment or by the States. Several of the Federal Law. I believe a little more histori­ insurance unless such Act specifically relates later cases have been brought in State cal background may help to understand the to the business of insurance, with the Courts, alleging violation of State Law. basis for the McCarran Act. following proviso, which is important: Pro­ These are all in the preliminary stages and as In 1868, the United States Supreme vided that the Sherman, Clayton and Feder­ yet, no decisions have been handed down. I Court held in the case of Paul v. Virginia, al Trade Commission Acts shall be applica­ will refer to those later on, but for our that the issuance of a policy of insurance, ble to the business of insurance to the purpose much of my discussion will apply even though the parties were domiciled in extent that such business is not regulated by to two cases in particular, which have gone different States, was not interstate com­ State Law . to the Circuit Court of Appeals, and in merce, but only a simple contract of indem­ Class Actions in Federal Court can be both, the Title Companies have prevailed. nity and subject to regulation by the State. maintained under Rule 23(A) of Federal Because Acts of Congress are referred to In light of this it was thereafter for 7 6 years Rules of Civil Procedure. by common name, such as, Sherman Act, until 1944, generally assumed in the insur­ The first case I want to discuss is one Clayton Act, and McCarran Act, I believe it ance industry that the Sherman Act and which was commenced in Colorado in July wise to briefly tell you essentially what other Federal antitrust Jaws, were not appli­ of 19 71, known as Commander Leasing these Acts of Congress provide. They are all cable to the insurance business. But in 1944, Company v. Transamerica Title Insurance pursuant to the Commerce Clause of the that assumption was knocked for a loop Company and all other Title Insurance U.S. Constitution. when the United States Supreme Court in Companies and some Title Insurance Agents The first enactment was known as the U.S. v. Southeastern Underwriters Associa­ doing business in Colorado, and brought in Sherman Act, which was passed in 1890. tion held that a fire insurance company, Federal Court. For lack of sufficient" time, I This essentially related to price fixing. Next which conducted a substantial part of its will not go deeply into the facts, but merely in line was the Clayton Act, which was business across State lines was engaged in say there were two main issues: (1) Whether passed in 1914, and related essentially to interstate commerce and subject to the the business of title insuring is the business

38 JANUARY 1976 of insurance within the meaning of the on the regulation of rates. In the Colorado type of allegations, but also other grounds. McCarran Act; and (2) Whether Colorado case, state law provided for rate regulation. Most states have statutes on antitrust and regulates title insurance to the end that by Plaintiffs sought to overcome this by claim­ restraint of trade, and also court rules virtue of the McCarran Act, the Sherman ing the Commissioner's enforcement was a permitting class actions under certain cir­ and Clayton Acts are not applicable. The mere pretense. This was rejected by the cumstances. In the cases under State laws, defendants main defense was the McCarran Court. In Alabama, the state law gave the McCarran Act is not available as a Act and the Trial Court granted pretrial authority to the Commissioner to regulate defense. All of the cases which I will motions to dismiss and answered both ques­ unfair trade practices and unfair methods of mention are in the preliminary or discovery tions in the affirmative. The Tenth Circuit competition, but with respect to rating stages or have had hearings on motions and Court, by its decision in 197 3, affirmed this provisions, the Alabama code charges the none have at this point, gone to trial. In holding. The trial court did dismiss, how­ Commissioner with the duty of regulating fact, the cases I hereinbefore mentioned in ever, without prejudice to file an amended rating bureau provisions applicable to insur­ Colorado, Northern California, and Ala­ complaint in connection with abstracting ance companies, except Life, Accident and bama, were dismissed prior to trial. services not connected with the issuance of Health, and Title Insurance. Because of this, a title insurance policy. No such amended plaintiffs argued that the Commissioner had The first of the cases in State Court was complaint was ever filed. In this case the no authority to enforce rates and thus commenced in Los Angeles in January of plaintiffs argued the mere pretense rule, unfair methods of competition. This the 1973. It alleges conspiracy to restrain price which the Court rejected. In the interim, majority of the court rejected. competition. The Court in April 1973, cases were commenced in Federal Court in stayed the case to permit plaintiff to pro­ Northern California, Kansas, Alabama, and The main question raised by the dissent­ ceed with the Insurance Commissioner; the Pennsylvania. I am not familiar with the ing opinion of Judge Godbold is how closely Insurance Commissioner did not act and first Pennsylvania case, only to know that it the Federal Courts should scrutinize State now the case is back in Court on prelimi­ was decided last year on summary judgment schemes for regulating insurance practices nary motions and discovery. It has not yet in favor of the defendants, and no appeal before determining that the McCarran Act been determined if plaintiffs can proceed as has been taken. The acts complained of for exemption applies. As we said Alabama a class. This case is important to title there, was a service charge against seller. I statute specifically prohibits the unfair underwriters and may be expected to move understand there are two related cases now method of competition. State regulation along from here on at a faster pace. Also, in pending in Pennsylvania with identical com­ varies from Texas which is strict, to others 1973, in Washington, D.C., a class action plaints: one in Federal Court; one in State which are almost at a minimum. The Dis­ was commenced against title underwriters, Court, which involve an additional charge trict Court took a middle of the road grounded upon the unauthorized practice of for mechanic's lien coverage. approach in deciding that the Alabama law. The plaintiffs sought an injunction, ask The next decision came at the District scheme was sufficient and the majority of that a constructive trust be imposed based Court level in the Alabama case of Crawford the court held that decision was correct. upon allegations of fraud and deceit, and vs. American Title Insurance Company, et However, the dissenting opinion goes deep ask for damages of monies which have been a1, in April of 1974. The theory of the into legislative history and Congressional paid and which will be collected on account allegations was a conspiracy in restraint of Records in connection with the passage of of unauthorized practice of law. The case is trade and commerce to raise and fix prices the McCarran Act, and the Judge notes that pending on motions to dismiss and to deny in the Birmingham area and to monopolize. in Commander Leasing, the title companies injunctive relief and a constructive trust. The defendants moved to dismiss for lack of were subject to rate setting regulations. The The following year a similar action was jurisdiction over the subject matter and Court in that case said: It's task was to commenced in Maryland by the same plain­ failure to state a claim on which relief can determine whether there was regulation and tiffs, based upon the same type of allega­ be granted, grounded upon the McCarran not if it could be done better. Judge tions, but because of some differences in Act. The District Court dismissed in April of Godbold takes the view that the principal Maryland law from District of Columbia, 1974, and the plaintiffs appealed. The deci­ purpose of Congress was to authorize State the complaint varies some in form and is sion from the Fifth Circuit Court of Appeals rating systems and that it was opposed to also more comprehensive. Essentially, this was just handed down August 27, 1975, and private price fixing. He also feels that complaint is a four-count declaration based after a brief comment about two other regulations in general, such as forms of upon (1) deceit, (2) negligent misrepresenta­ cases, I will go into that quite thoroughly. policies, licensing of agents, adequate capital tion, (3) breach of contract, and (4) public structure and such, are not enough without nuisance. Each count asks for injunction In the meantime following the Circuit adequate rate and price regulation. He states and damages. The Court has already sus­ Court decision in the Colorado case and the in his concluding paragraph of the dissent, tained a demurrer with leave to amend the Federal District Court decision in Alabama , that he would prefer to hold in this case complaint, and an amended complaint has the Federal Court in Kansas in July of 1974, that the State's machinery is inadequate on been filed. adopted the same basic approach as the its face and at a minimum he would remand Alabama District Court and dismissed the the case to the District Court for considera­ plaintiff's case based upon the McCarran Another theory as grounds for a class tion of adequacies of the statutory scheme action against Title Companies has been Act. Likewise, the Federal Court in North­ in the light of the Act and for detailed ern California, dismissed that case in Octo­ advanced in an action started in 1974 in findings, and he would direct the District Nebraska, which is based upon Arizona lot ber 1974, on the grounds that California Court to consider on remand the extent if now regulates rates so that the State law at subdivision sales and alleges fraud and deceit any, to which the Commissioner has actual­ in the sale of unregistered securities under present was sufficient to create the exemp­ ly utilized the antitrust enforcement power tion under the McCarran Act. the U.S. Securities Act. The claim against given him. So, while at this stage of the the Title Company is that because it was In the Circuit Court decision in the Court proceedings we have won the battle, involved in insuring purchasers of lots and Alabama case, five weeks ago, the court we have not yet won the war, and there held the legal title and handled collections affirmed the lower court and held that the remains to be seen whether a rehearing will from lot buyers under an Arizona-type land Alabama statutory scheme for regulation of be granted, or if not, whether a petition for trust agreement with the original land owner the title industry was sufficient to bring the certiorari will be filed with the U.S. Su­ the first beneficiary and the promoter the industry within the exemption under the preme Court, and whether the Supreme second beneficiary, that the Title Company McCarran Act. A dissenting opinion, how­ Court will take the case. aided and abetted in the sale of securities. In ever, was filed by Judge Godbold, and I this connection, both the Federal and State understand that plaintiffs encouraged by Now for a few comments with respect to Courts in Minnesota have held that the sale this dissenting opinion have filed a motion the other cases which have been filed in of investment contracts for lot sales was the for rehearing. The dissent is centered mainly State Court and involve not only antitrust sale of securities. The main thrust of the

TITLE NEWS 39 defense is that a Title Company acting as securities; that sale of vendor's interest in agents, and has cost a fortune in litigation Trustee under such a trust agreement was such contract to investors violated SEC law . expense. My personal feeling is that if we doing so only in the performance of a There are no further developments in this can prevail in the Alabama case, this should service. The case has not yet proceeded to case. just about mark the end of the cases where the point where it has been determined it I also understand that that Kansas case the McCarran Act is available as a defense. may be maintained as a class action. heretofore mentioned has been refiled in However, the end is not yet in sight with A similar case has been filed in South State Court. respect to the cases in State Courts, and Dakota, in July 1975, where jurisdiction is From this, I believe you can see that the until at least some of the cases now pending based upon the sale of unregistered securi­ class action has been quite a burden to Title has been concluded favorably, our burden ties. Plaintiffs claim that land contracts were Underwriters and in some cases, Title will continue.

Mechanics Liens

comments by Jack Tickner

Vice President and Associate General Counsel, Chicago Title Insurance Company, Chicago, Illinois

Hatch, I believe this is not working out as liens. And from what I've heard since I've that. For some maybe it was. I know for a we had planned it at lunch today. You said been here the last couple of days, I don't lot of others, it wasn't. If you think that it the panel was supposed to scare the a udi­ think that '75 is going to show any improve­ was , how much would you like to gamble ence. They're holding up pretty well and ment, but probably will be worse than '74. today that three years from now mortgage I'm terrified. I believe we can see that it has been an financing will be more readily available, or Maybe all's not so bad though. I have expensive school that we've been to, and that building costs will be subject only to a been told the story that one of Bob hopefully we can benefit a little from the "reasonable" rate of inflation? Dawson's predecesors, Mr. Laurie Smith of education. To that end, I would like to try Lawyers Title, years ago used to frequently to get a profile of what we have today as a To state this in another way, I think the pronounce that what the title insurance in­ typical mechanic's lien claim. significance of this profile is that we were dustry needed was more and bigger claims. To start off with the project is a multi­ putting out a risk on a thing that took a Well, in our Centennial Celebration, I think million dollar, multi-family or commercial long period of time, during which time the he'd be proud of us. dev.elopment. The project was commenced risk continued, got greater; and the things (Laughter) and the title insurance coverage was written that could affect it, we had no control over. Two years ago, I addressed this group on in 1972 or 1973. a rather broad subject of Trends of Title The construction was to be completed In recent years, the title insurers have Insurance Claims. At that time, I started the over a period of several years. The construc­ taken the underwriting view that giving lien discussion by talking about mechanic's lien tion lender is a bank or an REIT. The coverage by priority of recording is a fairly claims; and as I reread my notes of that project is not now completed. The safe method and much to be desired. And I discussion, I predicted some rather dire developer is now in bankruptcy. The lien certainly don't knock it. I love to get a case things. claims are at least in six figures. The with priority. I would only ask or only say If I said that things were going to be construction mortgage priority is either not that I would like to see a little more worse before they are better, I'll take no there or is being seriously questioned. evidence of priority in the file to prove it. pleasure in being right. Mechanic's lien Now, John Connelly is mumbling; he says claims got worse and still are. I'd like to run I'm talking about his claims. John, I am; I'm If priority is not available, then we over some figures very quickly here, maybe talking about mine and I'm talking about all believe that a risk was acceptable if the title put a little perspective on the thing. the rest of them. Can we learn anything insurer was satisfied that the disbursement In 1970, the title insurance underwriters from this simple profile? Poss ibly not, but of the construction loan funds would be who furnished claims information to ALTA, let's take a shot at it. to those who could claim a lien. If the reported that 8. 7% of their total claims In 1972 and 197 3, those were the glory made was made by the insurer or payments were for mechanic's liens. In years, everything was go. Developers, disbursement lender directly to the sub-contractors, the 1971, it was 11.7; in '72, 19%; some reason lenders, title insurance companies were risk was thought to be minimal. it dipped to 17% in '73; and then in 1974 it riding the crest of the waves. Everything was was 22%. rosy. No title insurance company wanted to I have an idea that that percentage risk losing a big order by making a stringent The method of greatest risk would be to possibly should be a little higher, but we mechanic's lien requirement for waiving the disburse to the general contractor and trust don't always agree on assignment of claims mechanic's lien exception. After all, this that he would pay his subs. I think that's a to a categery, and there may be some claims particular builder had a fme track record; he little bit of what we just talked about. that are assigned to other than the Me­ would never go broke. However, we have now seen a new element chanic's Lien category that are really If any emergencies did develop, the devel­ in this picture. Any large building project mechanic's lien related. But in any event, oper could always refinance, get some extra gathers momentum to the point that the the percentage is rather substantial and money, so it was a good bet. Well , we're construction cannot be stopped on a we're getting up very close to 1/4 of all of looking at it three years later. Was it a good moment's notice. What happens when a our claim payments being for mechanic's bet? Each company will have to answer lender decides, for whatever reason, that the

40 JANUARY 1976 borrower is in default and the lender will knowing to whom the approved attorney in knew that the general contractor was at the make no further disbursement? Well, first a particular case owes his allegiance. point of insolvency, and found the duty you'll always have at least a month's back­ upon the lien claimant to notify the owner log of unpaid bills. Second, the borrower On the litigation front, we're finding that of this situation. This is certainly a switch will usually keep the job going for a time the courts would still rather give a judgment from the considerations previously men­ hoping to either convince the lender to for lien claimants than they would for tioned in favor of lien claimants. I think the continue the disbursement, or to obtain motgage lenders or purchasers or par­ court would have had a much harder case if refinancing. Third, as certainly as night ticularly title insurance companies. We con­ they were looking at a mortgage lender follows day, the unpaid bills will become tinue to see the departure from the rather than a purchaser or an owner of mechanic's liens. traditional mechanic's lien suit and find that property. the lien claimants are alleging not only their statutory lien rights, but claim alternatively There's another development. I wouldn't Now remember that these bills would numerous equitable rights to a lien. say that it's a new one, but it still seems to have been paid if the disbursement con­ surprise a lot of people. And that's the rule tinued on a normal schedule. And also that that a federal mortgage has priority over a the work and material were contemplated Most of the suits in which these equitable rights are being asserted have not reached mechanic's lien claim that has not been by the construction loan agreement. Since reduced to judgment. This is a situation the title insurance company has issued a the appellate courts. And I don't know whether I hope they do or not. One case where, under state law, the mechanic's lien policy without a mechanic's lien exception, would be prior. But federal law requires a somewhat along that line was decided by we find that a number of lenders see lien to be cohate to obtain priority over a the Minnesota Supreme Court in the past nothing wrong with asking the ti tie in­ federal lien. In the case of a mechanic's lien, year. The lien claimants were contending surance company to pay for this work and it is not cohate until it has been reduced to that the construction lender disbursed in a material that has resulted in a mechanic's judgment. And we have seen several cases negligent manner by not seeing that the lien . where the Department of HUD has taken an proceeds went to the suppliers, and con­ assignment of a mortgage pending the sequently that the lender should be mechanic's lien suit, and the suit has been estopped to claim priority by recording. Well, I tell you I see something wrong dismissed on summary judgment. with it. I find the demand most objection­ The trial court had John Connelly able. I grant you that there are variations on I believe that the development of greatest nervous for a little while on this. But then the facts that I have given ; the facts may not consequence, and I'm sure one you've all the Supreme Court reversed the trial court, always be that clear. But I see no reason heard of, is the decision by the Supreille and found that the construction lender had why a lender should accept the benefit of an Court of Connecticut; that the Connecticut no duty, as a matter of law, to protect the improvement that was to be paid for from mechanic's lien statute violated the due supplier. I think this was a rather limited the proceeds of the mortgage loan , withhold process clause of the Fourteenth Amend­ holding. It's good as far as it goes , but the those payments, and then expect the title ment of the United States Constitution. insurance company to pick up the tab when facts were rather limiting. they have become converted to mechanic's The court, primarily following the liens. I thought that an even more interesting Fuentes decision, found that the statute did aspect of that particular case was the defini­ not make provision far the property owner tion of a reasonable inspection by a con­ to obtain a reasonably prompt hearing as to There is another area of concern that I struction mortgagee to determine whether the right to me a. lien, and therefore, lack~d have noticed. In many cases, the under­ or not construction had commenced prior procedural due process. Even more recently, writer may have weighed the mechanic's lien to the recording of the mortgage. The lender two courts at the trial level in Maryland risk and issued instructions concerning had - or an inspector for the lender had have ruled in a similar fashion. I understand disbursements, collection of lien waivers, made an inspection by standing on the side that certiorari has been applied for to the whatever other requirements they have of the road and looking over the forty acres, Supreme Court of the United States, in the made; and the task of compliance with these and reported that he saw no signs of instructions ultimately fall upon an Connecticut Case. If the same reasoning commencement. As a matter of fact, there holds up, there are a number of states that approved attorney to see to the protection had been some disturbance out there that have the same in firma ties in their statutes of the company. was apparently covered up by weeds . The and they may suffer the same fate. court held that notice of commencement is After the case has blown up, we are able not given where nothing can be seen of the In defending mechanic's lien suits the to see that the borrower is the primary construction from the edge of the field. (I constitutional issue certainly gives us more client of the attorney, not the title com­ used a double negative, but I'm quoting to go on than we have had in the past. pany. The interest of the borrower and the precisely from the court's language.) In Mechanic's liens in Maryland are somewhat title insurance company have not coincided other words, the inspector was not required easier to settle in the past few months. I in this case. And there are some other cases to walk every square foot. I think that's doubt, however, that we can take long range where we have found that the approved rather new. I don't know of another me­ comfort from this tum of events. Most of attorney is not only certifying the title and chanic's lien case that holds exactly that. the statutes can probably be patched up if I've always thought you had to walk every ultimately the underwriting, but is actually the legislatures decide to do so. Most the borrower or is financially in teres ted in square foot. mechanic's lien statutes are relics of the the borrower. The conflict there is obvious. 19th Century, and we might hope that this The appellate court in Hawaii recently will be a good opportunity for the various barred an other-wise valid mechanic's lien legislatures to start all over on a mechanic's It does seem to me that both under­ from enforcement against an owner of lien law that will be fair and equitable to all writers and agents should be interested in property, for the reason that the claimant parties.

TITLE NEWS 41 ABSTRACTERS AND TITLE INSURANCE AGENTS SECTION

Problems Encountered in Rewriting Chapter Nine, Texas Insurance Code

Robert C. Sneed

Sneed, Vine, Wilkerson, Selman & Perry, Austin, Texas; Legislative Counsel, Texas Land Title Association

To the specifics of change in Texas. You are each aware of the Federal come from Washington. We were concerned My old granddaddy used to tell me many changes - changes that are so great and so that our strong (and then existing) state law years ago that while New York was the swift that we - at least in Texas - are could well be in conflict with whatever biggest state, it wouldn't be too long before unable to comprehend Congress might fmally enact. California would pass New York - and But before we get to specifics about title subsequently in like manner thereafter insurance, let me give you a little back­ Third. We thought it obvious that both Texas would pass California in size. He also ground of our insurance history and tradi­ the Bar and the title insurance indus try taught me that at any time you wanted to tion. would inevitably face a microscopic ex­ judge the future of Texas, look to see what Until the economic upsurge following amination as to business competition and had already happened in New York and in World War II - the insurance industry was anti-trust. At least some of us correctly California. almost totally dominated by its domestic anticipated the outcome of the Goldfarb Though many years have passed, the old industry; and for two reasons: (i) we were case. We did then - and still do - believe gentleman has proven himself right. so poor no one really wanted to do business that the present FTC investigation will Within the broad expanse that is Texas with us; and (ii) a 1913 Act known as the follow the approach that title insurance is three of our cities at the next Federal census "Robertson Act" required foreign com­ not really "insurance" within the meaning may well be within the top 15 cities of the panies to invest policy reserves in Texas and concept of the McCaran-Ferguson Act United States - possibly the top ten. investments or pay approximately 3 times a - partly because of the attorney involve­ What many of you visualize as sand, greater premium tax than was paid by the ment and partly because of - in many cactus and a burning desert is now a melting domestic companies. following the Robert­ instances - a failure on the part of the pot of the old frontier, cattle, cotton, grain, son Act, the limited number of out of state states to regulate title insurance as strictly as oil, gas, vast developing cities and expanding companies departed. But before doing so, was that of other types of insurance. industries that have brought in people from the foreign companies were able to obtain a But to fully understand our conflicts and other areas. referendum on that Robertson Act. our difficulties other Texan historical facts For example - Austin - our state capital The people voted for the Robertson Act must also be explained. Texas has existed - - when I was a boy it had a population of - the people have since remained responsive government wise - under six separate and 35,000. Today its metropolitan area popula­ to the subject of insurance. distinct sovereignties. And we have titles tion exceeds 300,000 - and 40% of that They have demanded strict regulation - granted from four of those six sovereignties. population has lived there five years or less. there has grown up wi U1 that regulation a You must remember that when Texas With that population and economic demand of rate regulation - regulation that joined the Union, the United States took change - views and ideas have changed. is one of rate setting - not merely rate such a dim view of Texas economic condi­ Consumerism, regulation of business, en­ approval tion that it would not assume the bonded vironmental controls and growth restraints As to title insurance - the demand for indebtedness of the Republic of Texas. It let are no longer items for discussion - they are change continued to mount. the new State of Texas keep title to all of its the enumerated commandments of a politi­ First. In the 1973 legislative session, a public lands. Such were the terms of the cian's bible. committee of the Senior Bar and the Junior Treaty of Guadalupe-Hidalgo. to create a special Thus with the state having four sources of Not only is the change passed on from Bar sponsored legislation of company to be a Bar Related (and title and 254 counties - you can easily see else where within the United States but it is type in part Bar owned) title company. At least we have many complicated title problems. modified by cultures from our Black citi­ as to the first version, the bill would have The best way I know to explain the compli­ zens and the ever increasing input of the allowed such a company to exist without cations is that in 1925 the State of Texas Mexican-American population moving north regulation and State Control. While the bill paid two little old ladies $25,000 for a from south of the border. was soundly defeated, obvious efforts were quitclaim deed to the state capital building Thus the ideals - both socially and again being made for its revival. built back in the 1800rds. economically - of yesterday as so vividly Secondly. It was certain that by the With these pressures, the indu.stry was portrayed in "Giant" have been modified efforts of ALTA and the critics of title confronted with a judgment requirement and amended. insurance some substantial change would - which way the future.

42 JANUARY 1976 The frontier heritage simply would not of Houston, spoke for the unregulated last day for free introduction of bills. Sixty permit the industry to opt for Federal concept of rate, non~isclosure and no days of the 140 day session were now gone regulation. We knew that title insurance was abstract plant requirements. and we were back at the place of beginning. insurance - we believed that the McCaran­ We opposed - we urged strict regulation, The issue was simply how, under what Ferguson Act intended for the states to a guaranty act, full disclosure, increase in conditions and at what price would the regulate and that the states with adequate capital and surplus requirements, uniform attorney obtain information from a geo­ tools could do it best - not because the closing statements and regulation of reinsur­ graphical abstract plant. Would an ab­ people at the state level were any smarter ance. stractor be statutorily "required" to furnish but because the people at the state level From that point on discussions con­ title information to the title attorney? could better understand - the old and the tinued. And we continued to work within Now I wouldn't say that the situation new, the big and the little that was Texas. our industry. We had made it clear to the became violent - but it sure didn't become Likewise dual regulation was and is simply Bar Committee that at this point we spoke tranquil. pure waste. only for our committee and not for the It was even rumored that there was some It was obvious that any effort should be entirety of TLTA. name calling - some which did proud to the the joint project of the State Board of Likewise at this point in time we had not memory of Harry Truman. Insurance, the State Bar of Texas and the gone to the State Board of Insurance be­ And about this time TLTA had its annual title industry. The question followed as to cause of the strict regulation of the Texas convention; a full one-half day was devoted how to put it all together. Lobby Registration Act. Any discussion of to the confrontation. The hitting was so And we had one other major problem. proposed legislation with the administrative hard I thought for a moment that Vince How to get the title industry together. How body requires immediate registration as a Lombardi had returned and was coaching to blend the economic differences - and the lobbyist - this was one of Common Causes' both sides - or at least Dick Butkus was emotional differences, particularly when it contribution to Texas governmental playing middle line backer. came to any concession as to Bar Related processes. Anyway, the Board of Directors survived Title insurance. We pursued the dual problem - com­ and voted to work out a solution. The title industries economic divisions promises within the industry, and com­ One month of the legislative session were: promise with the Bar. remained - the bill was just now to be 1. the title underwriters At times both seemed too large a cross to heard in committee. With the usual prob­ 2. the title agents of the metropolitan bear. lems and degree of good luck the bill areas; and Within the industry conflicts continued suddenly out of the Senate by a unanimous 3. the rural abstractors and agents. to grow. At times almost reaching the vote. With two weeks of the session left it Any major legislation in this day of breaking point. carne out of the House Committee only to consumerism would necessarily include a Would the underwriters agree to a guaran­ be met with great opposition on the HotJse guaranty act as to underwriters solvency in ty fund arrangement? Whoever heard of a floor. at least the area of residential properties. uniform closing statement? Why should The make up of the opposition was - While this is an accepted way of life among attorneys be permitted to steal away the I. The liberal wing - those who oppose property-casualty companies and to a lesser huge investments in abstract plants? Why business sponsored legislation. They could degree among life companies, it was un­ didn't we learn from Florida's title indus­ not believe that industry would sponsor true known to title underwriters. It was a big tries problem with bar related title insur­ consumer oriented legislation. step, but a must ingredient if total regula­ ance? But most of all - why didn't we have 2. The lawyers of the smaller towns and tion is to exist on a state level. Texas guts enough as an industry to just stand up rural areas who examined titles, prepared consumers ultimately will demand no less and fight? papers and wanted everything left as it was. protection. It is well to note that at this point the 3. Those of the junior bar membership or All the time, the State Bar's PEER TLTA committee was composed of mostly thinking who were not satisfied with the Committee continued to urge to the Real young men - the officers and directors of Senior Bar Committee and Board of Di­ Estate, Probate and Trust Section that a Bar the Association were mostly young and the rectors agreement and thought that the bill Related Title Company be free of rate managing executive was new, young and was designed to eliminate the attorney from regulation and devoid of any requirement from the Washington scene. Put them all the title business. for geographical abstract plants. together and they could see the future - This combination produced just enough ln May of 1974, Texas Land Title As­ their feet of judgment were not in the votes so as to postpone consideration of the sociation presented its position to the Real concrete of the past. bill by a 65 to 63 vote. Estate, Probate and Trust Section of the They oould - individually and collective­ At this point, the effort of so many Senior Bar as follows: ly - understand each persons personal and months appeared lost. Negotiations started "TLTA does not seek (nor is it entitled to economic conflicts yet never lose sight that again. receive) special legislative protection from the real issue was the consuming public. Two days later, back on the floor, the bill oompetition. But by the same token, it Finally, it was time to present TLTA's was engrossed by a voice vote. With three opposes legislation which (i) weakens much revised work product to the State days left in the session and at I :00 AM in regulation, and (ii) confers through non­ Board of Insurance. It is an outstanding the morning it passed the house with 9 3 regulation competitive advantages upon a Board headed by a strong consumer advo­ favorable votes. The Senate concurred and new type company. cate. after the session ended the Governor signed "The position of the proponents is to Meetings with the Bar Committees con­ the bill. Thus the curtain closed on this 62 weaken regulation so as to accomplish the tinued - at one such meeting only one Bar page production. desired result. member attended. But finally in January, Starting January 1, 1976, we have a new "TLTA urges that if the Bar or any of its the Bar conceded to the two largest issues: eve. Briefly stated: members desire to enter the field, each (i) rates would be set and regulated; and (ii) 1. Rates will be set at an annual hearing should come under and comply with titles would be based upon information - rates to be established reasonable to the present strict statutory provisions and obtained from a geographical abstract plant. public and non-confiscatory to both under· regulations." We thought that the issues were settled - writer and agent - a standard unparalleled Finally, that section of the Bar, set up a but we were to later tragically understand in rate regulation. hearing oommittee to receive arguments on that both committees had failed to under­ 2. All forms promulgated by the Board. Bar Related Title Insurance; the confronta­ stand each other as to geographical abstract 3. The only title insurance guaranty act tion was a simple old time debate. plants. in the United States - increased capital and Mr. Stanley Balbach, of Urbana, Illinois, Despite the disagreement, the bill was surplus requirements to add to that protec­ and his Texas counterpart, Gerald Gordon, introduced in both legislative houses on the tion.

TITLE NEWS 43 4. Uniform closing statements - applica­ Tomorrow will present more problems government and business yearning for order, ble where RESPA ceases. and require more solutions. not rejecting it - yearning to create values 5. Board promulgated insured closing let­ But it is the effort of the last of the not destroy them. ters. frontier - a frontier modified, changed and 6. Licensing of abstract plants used in altered by a new approach and in particular These are the functions for which busi­ connection with all types title insurance by an industry willing to accept the de­ ness and government must exist. If harmony agencies. mands of consumerism, full disclosure and and balance are to be maintained in the 7. Full regulation of Bar Related Title total regulation. An industry that above all future, industry as much as politics must be Insurance Companies. has learned it must work together. responsive to the new realities of these new 8. Full disclosure of all persons receiving times. any proceeds from title insurance. Much credit must be given to the men 9. Compatibility with RESPA require­ and women of this industry who would In our government and business, there ments. accept such a challenge. cannot be two Americas - one old, one 10. Total regulation of reinsurance ex­ Whatever the appearance, we sincerely new. "The earth belongs to the living", and cept as to rates for reinsurance. learned that there is much in America on business and government cannot belong to We have thus tried to move our title which to build. We rejected the vision that the past. industry and its future into today. For sure ours is a society coming apart - rather we Despite our shortcomings and sins, we this is not the end of the story, nor is it believe - it is a new society trying to come sought and hope we have found and taken perfection. together. It is a new, forming society, at least "one small step" toward the future.

Liability Under Title Insurance Agents Contracts, A Confrontation or Cooperative Survival

comments by William B. Boyd

President, Boyd & Boyd, Fulton, Missouri

My opening remark is that I am proud to Now that I have made two controversial on a title insurance agency. We vaguely share this panel with a person like Bob stat~ments I will spend most of the next 18 remember the early HOLC days. We remem­ Saville. He has earned the many friends and minutes walking backwards away from ber some of the early Farm Security Admin­ wonderful reputation that he has in our them. istration closings. We remember the early industry and I consider this a compliment to Let me first start walking backwards by Federal Housing Administration programs. share the platform with him. Phil, I appre­ stating that I, myself, my customers and my While I was in the Marine Corps in 1944 my ciate it. national title companies (spell that with an congressman sent me a copy of the GI bill Quite naturally Bob and I agreed to treat s) all agree that we are proud of my work, so that I would be ready to go to work this subject as a discussion and not as a we are proud of my title plant, we are proud when I got home. debate. We agree that our job here today is of my crew, we are proud of my product, With all this background we will return to to see if there is a problem in the field of we are proud of my reputation. We know our subject of Liability. In considering Liability, then if we find a problem, to that I cannot shirk my responsibilities. We Liability I want to ask this body six attempt to seek and answer it, but mainly believe that my office is an integral part of questions. both of us want to believe that there is not a my community. Question One: Is there one, two or problem. Secondly let me walk backwards by several abstract companies in your particular Because each dice has 24 corners Bob and asserting that any responsible abstract agent county? I have agreed that we are going to dig deep requires himself to have liability. If there are more than one, how many of and come up with some dark ideas, let them Title Insurance Companies know that them are well established by having a plant, have a few moments of daylight and then volume is the life blood of their operation. experienced personnel and a responsible allow most of these ideas to again sink to Because volume is their life blood, many reputation? their proper dark places. years ago some of the more aggressive In counties where there are two or more Because I am the first speaker it will be companies took on a few of the abstracters abstract companies it is necessary for any my job to be the one that cries "There is a as agents. Then the smaller and less aggres­ given abstracter agent to issue policies based Wolf' in the loudest voice, then Bob can sive companies decided to take on agents. on information furnished by a competing torpedo me - therefore I open this panel Later many of these agents became title company. To the question of what is the with two controversial statements: insurance companies and then in time they liability of the competitor we think of First I am on record as being opposed to too took on abstract companies as agents. several answers. abstract agents having to furnish insurance Then the competition for the better abstract In counties where there is only one to pay losses to title insurance companies companies became too keen and the title reliable abstract plant what is the liability of caused by their own errors and om1nissions. insurance companies took on the inferior this abstract plant to title insurance com­ My next controversial statement is that I abstract companies as agents. Then they panies that do not let him participate in am on record as opposed to those contracts took on lawyers, real estate agents, bankers their commissions. between an abstract agent and an insurer and insurance brokers. Question Two: What is the financial that require the abstract agent to participate Somewhere back in all of this confusion ability of each of the abstract agents to in any and all losses including losses caused my office in an attempt to improve our participate in liability? Let us say the by errors and ommissions. service and increase our own revenue took liability of a $5000.00 loss. Certainly a

44 JANUARY 1976 strong abstract company with a complete Question Six: Right now l want to call 7. The giving of unauthorized interpreta­ plant and competent personnel is more able your attention to the very conspicious and tions. to meet the liability or loss than the weak embarrassing fact that so far I have only 8. The binding of imprudent risks. company, or a company with a group of discussed, the Abstract Agent. Again the 9. Negligent failure in making full dis­ young or inexperienced personnel. Espe­ record will show that I am quite opposed to closure of the nature of the risk. cially if this weak plant bases its title the abstract agent being the only agent who In the last two above we must pay evidence on name running of the public participates in liability. There is not a particular attention to our being too eager records. person in this room who chooses to stand to make a sale and our not being selective in Question Three: In the event that there is idly by after spending many dollars to our risks. There are several test cases where­ a ti tie loss wherein the agent has to partici­ maintain a title plant, spending many dollars in we as agents assume risks because we are pate what rights, if any, does the agent have to train employees, spending many dollars too anxious of our commissions. This also in helping determine the amount of the loss on an advertising program, spending many includes our being too anxious to please our or settling the claim? hours each month on community services customer. This also includes our being con­ If I am to participate in a loss that is while that lawyer across the square or the cerned bout our competitor writing the going to damage my savings account I want real estate agent out on the Federal policy. the right to go fight that claim in the highest Highway can issue ALTA policies for the ARE WE CONCERNED ABOUT OUR court in the land. l do not want some same commission we receive without invest­ COMPETITOR WRITING THE POLICY? In executive back in the home office saying we ment, no training, no advertising, no this event I am going to also charge our only have to pay a fraction of the claim, it liability. national company with being too anxious to won't hurt us so let us pay it. However, the subject of discussion today write the policy. It is no secret in my Because most of us agents have had is liability. In discussing liability there are county (and I assume that my county is like experience selling on the local level we certain truths that we must recognize and your county) that my competition writes would also like to have some voice in paying hold. more policies on titles that I turn down than the claim. For example when I do know of a It is a proven fact that the greatest they do on orders that they originate. In my loss being paid l like to have that check liability of an insurance agent is to the opinion (for what it is worth) this is much delivered in a red truck equipped with insured. While there are a few chapters more the fault of the title company that flashing red lights, sirens and bells. written on the liability of an agent to his appointed that attorney agent than it is the Personally I once became quite unhappy principal there are volumes written on the fault of the abstract agent. with one of my national companies wherein liability to the customer. For example: I will charge that the lawyer who writes a we had a large loss on one of my policies It is the duty of the agent to give the best policy on a title that an abstract agent has and the young executive who was in charge placement. turned down hurts our professional image. of losses at that time hired one of his law The customer looks to the agent first as school buddies in another county to repre­ his claims adjuster. * * * sent the company in that loss. Naturally I The agent always must maintain a profes­ Other liabilities of an insurance agent preferred to have an attorney with more sional status to his customer. would have to include Federal and State Taxes; unauthorized practice of law; In­ experience. I preferred to have an attorney There are court decisions insisting that vasion of privacy; competiton; malpractice who was local. I preferred to have an the agent must practice law. and liability to the state. attorney whom I knew to be approved as an At the present time l have a big fat loss examiner by some of my title insurance being suffered by one of my customers. This * * * companies. Finally I preferred to have an loss has been removed from the hands of my When we discuss liability we have to attorney who was a good customer of mine company in that the attorney for my include the field of errors and ommissions. and who had thrown me some business in customer has given my customer improper In law the field of errors and ommissions the past. advice. Because trial has already been com­ is quite small. It is changing rapidly; most of Question Four: How much is the agents pleted my customer has passed all of his the experiences are based on claims against commission? proper time in which to file a loss claim. My doctors. We do have records of some exper­ Many of you, like myself, remember the customers attorney has lost my customer's iences on lawyers and other professionals - days when the agent received what, by very good case. Somewhere in the not too the barber has clipped an ear or two - the todays standards is a very small commission. distant future I have a liability to my tatoo artist has had his problems. I remember many years ago when l was in customer. To tell him what happened. As of 1974 there are no known errors and the National Title Insurance Field I loved to My customers do not read their policy. ommissions forms prescribed by the statutes proselyte the agent who was on an 8 or l 0 They call me up and say "Am I insured in the United States. per cent contract. Today I am still amazed against a particular tax bill?" Or, "Am I There are a few standard items or ground at the wide variation of the several agent's insured against this item or that situation?" rules such as insured cannot make a settle­ contracts. Yet it is still quite important on There are si tuafions wherein I must ment - that there is a time element during both sides of the coin as to the participation inform my customer that he has a loss and l which time the insuror must be notified - of the agent in liability with the participa­ must advise him on how to file a claim. that the policy does not include fraud; tion of the agent in premium. We are discussing liability. dishonest acts; criminal acts or defamation. Then does the agent with the complete Then What is our liability to the insurer?? At this time we still have scattered ideas title plant, experienced personnel and estab­ There are test cases out of court on the of how the liability companies will accept or lished reserves participate in the commission following subjects: reject the settlements of the title insurance identical with the agent who is by many l. Failure to cancel a policy upon companies. definitions inferior. request of the insurer. During the past many months consider­ Question Five: Let us call this question 2. Failure to perform properly - this able progress and understanding has been training. It is composed of numerous short includes our duty to supply information on accomplished. questions, that is: What training has the our duty of reasonable care. agent received from our associations? From 3. The giving of unauthorized instruc­ In Conclusion I am going to ask this body the Title Insurance Company? Are there tions to the insured. these three questions? adequate schools? Does the home office or 4. Delay in forwarding of underwriting (I) Is it feasible for the national under­ the district office have adequate field men? information. writer to obtain errors and ommissions Can the agent call the district office or the 5. Dishonesty and conspiracy. insurance for all of their agents? On the home office and get a definite answer? How 6. Relationship of misconduct to positive side of the answer I do believe that do the salaried employees of the Under­ damage, including insurors knowledge or the national underwriter could obtain a writer handle a problem? ratification (again this includes training). better understanding with the errors and

TITLE NEWS 45 ommiSSions underwriter; that by their vol­ come up with at least 5 answers: Is errors coffee, but also he has given me advice, he ume they could get better rates and better and ommissions on the part of the agent has run errands, he has helped me in many service. included in the premium charge that we ways to improve my services and my cus­ (2) Because the National Underwriter is make to our customers? tomer relations. He has helped me show a in the underwriting business is it feasible for My last backward step would be for me profit. him to become the underwriter of a policy to say that in my opinion the abstract agent on errors and omrnissions? On the negative and the underwriters have been like a large Please know that while I here cast nega­ side of the answer we know that this is happy family. I have always looked upon tives at my big brother I also love him, I against the insurance codes of some states. my underwriter as a big brother. He has respect him, I respect his judgment, I will (3) A stinger, any given I 0 of you could given me golf balls, he has bought me defend his integrity and I am proud of him.

comments by Robert L. Saville, Jr.

Vice President, Lawyer Title Insurance Corporation, Richmond, Virginia

Thank you Phil, and thank you Bill, for Underwriter: such as my Company. The title As a participant in the extension of title those kind words. I hope we can continue to insurance policy protects against those flaws insurance facilities in the days gone by, that be friends and I'm sure we will. Bill and I do of record which are not excepted and those Bill speaks of in his Article, I know that have different viewpoints on some of the hidden defects in the title which could not most contracts drawn 25-30 years ago varied portions of this subject under consideration. have been ascertained by the most exhaus­ one from another. As Phil said, our appearance here was caused tive search of all the records there are. The contracts for the first group of by an Article which Bill wrote for the Agents were tailored to the situation and Missouri Titlegram, and my reply thereto. If there is a combined fee charged for the they were tailored by the people who The main part on which Bill and I job that Bill and his underwriter jointly participated in those contracts. perform, it follows that the Underwriter disagree is his statement, and I quote ..."I We had some pretty high caliber people should be paid on the basis of the risk it would like to go on record against those back 25, 35, 40 years ago. One of whom takes under the policy and expects Bill to contracts between Underwriter and Agent was honored this morning. I have seen Hart do correct, adequate and complete work in that contain a clause requiring the agent to McKillop and Laurie Smith who was Presi­ of title. Then Bill should be participate in payment of any loss even the search dent of Lawyers Title a number of years responsible for the errors which he makes. including those losses caused by an obvious ago, sit on the dock in Laurie Smith's place The combined of all inclusive fee is split error or omission on the part of the Agent." in Virginia and argue all afternoon about the between Bill Boyd , who is the Agent, and In the next paragraph of Bill's Article, he provisions of a contract with Hart's abstract on that basis. Each is retreats from that stand somewhat to indi­ his Underwriter company in Winterhaven, Florida. cate his pride in the work performed by his adequately compensated for the work he I've similarly watched Laurie Smith do concern in Fulton, Missouri, and his desire performed and should stand behind that the same thing with Lionel Adams of New to stand behind his product, which he work. Orleans. Mr. Adams indicated that he was produces by searching title from the County Now,a slight parenthesis here, we all think Moravian and Laurie Smith swore he was a records and from his plant. that we are underpaid. And, costs are going Scotchman. And they loved to sit there and My disagreement with Bill is in the last up and quite often we haven't been able to see who could take the other one, for five which he asserts a raise our fees, but, forget that for right now. clause of his statement in cents or three cents or even two cents. desire to escape liability for the errors made I must agree with Bill that the Agent, Under­ by him in his operation that were obviously Abstractor or Attorney would not have to For some years now, contracts of are his own errors. participate in any loss not caused by the writing Companies, offered to Agents pretty well standard. They are not those I believe that anyone who does a job mistake, error or omission on his part. individually tailored contracts that I just should stand behind that job. And , if there Those losses should be completely borne by spoke of 35 years ago. So, the thrill of are flaws, errors and omissions, which an the Underwriter. negotiations has been reduced now from expert in that field should not have made, I had seen contracts which require a that which those men indulged in as a then the person who performed that job participation in any loss by the Agent. And, pastime, to a somewhat more mundane should stand behind his own work and make I know one of the reasons for these con­ business operation. it right to the customer. tracts. It is an attempt on the part of the I believe that this is a philosophy of the Underwriter to call the Agent's attention to It has been called to my attention that United States of America. And the swing the fact that he is expected to do his job one of the Underwriting Companies that toward consumerism is a definite indication perfectly the first time. And the Agent compete with mine, makes no mention in that the general public expects everyone of participation in loss not caused by his own the contract with its Agents, as to the us to stand behind the work which we do error are the penalties agreed to by contract liability and responsibilities to Agent. I and make it right if we err. for the agent's carelessness. Now , that may thought that this might come up today, so I When you come down to the nitty gritty be outmoded and improper thought. put it in my talk. of the subject, the Title Insurance Com­ This type of participation in loss is I am advised by my lawyer associates, pany, the Underwriter, must stand behind somewhat outmoded and in some States it is that this does not mean that the Agent has this policy. It must defend its insured and outlawed by statute. There are several States no responsibilities for the correctness and pay off any losses the insured sustains which which prevent the Agent from participating completeness of his work. On the other are covered by the Title Insurance policy. in any loss not caused by his own error or hand, it does mean that the Agent is charged That's the fust step. Then, the second step omission unless the Agent ha s qualified as with all of the responsibilities and liabilities comes in the contract of Agency between an insuring company or Underwriting Com­ which would normally accrue to hirri under the Agent, such as Bill Boyd and the pany. This philosophy I agree with. the general laws of the Agency in his State.

46 JANUARY 1976 Some companies delineate in their In the division of the portion of the all this, he doesn't have the opportunity to Agency contracts the extent of the Agent's inclusive charge known as "risk rate" one of negotiate. I would like to ask whether you liability and responsibilities by naming all the determining factors is how much of the think the Court may rewrite that contract the responsibilities of the Agent. total work is performed by the agent and more favorable to the Agent because of the This type of contract which, by the way, how much the Underwriting Company is unequal bargaining position that the Agent my Company uses, does limit the Agent in going to need in order to keep the Under­ might get into after entering into this his responsibilities and liabilities to those writing Company solvent and to set up the contract? things which are affirmatively included as necessary reserves and pay the necessary his liabilities and responsibilities in his con­ losses. tract with the Underwriter. Within the past year and a half, losses MR. MC CULLOCH: Bob, do you want Bill calls attention to the varying situa­ incurred and paid by Underwriting Com­ to take that one? tions where in some Counties, there are two panies have increased drastically, and, at the or more existing abstract companies willing same time, the volume of business has MR. SAVILLE: First off, 1 to be Agents of Underwriter Companies and don't think decreased equally drastically due to the that the Agent is unequal in his the other situation where there is only one bargaining financial condition of our Country. power abstract company. because the Underwriters want an In order for Title Insurance to be a Agent and the Agent can go to anyone of 10 In the cases where there are several saleable product, and one which will protect or 15 places and represent abstract companies, each Underwriting anyone of more the insured, then the Underwriting Com· of 10 to 15 Underwriting Companies. Company will try to get as his Agent, the So, pany has to receive enough of the risk rate the Agent is actually sitting in the drivers one abstract company that they consider for it to maintain its solvency and pay its seat right now. the most responsible and has the best title claims. We do not have time here to go into I said that the contracts plant. were standard this subject in depth. As a matter of fact, and they are. But, there are portions of the In many cases, the Underwriting com· it's a subject under continuous discussion in contract, each and every contract, which pany which gets there last either has to sign each of the Underwriting Companies and vary in accordance with the circumstances. up as an Agent one that already represents between the Underwriter Companies and Again, I'm not a lawyer, but I understand somebody else or an Agent which does not the Insurance Commissioners because we've that in law the contract is always construed have as good or complete title plant or got to exist. We can't exist without our against the person or company which drew experienced personnel as the one we spoke Agents and we've got to maintain our it and that would be the Underwriter, so, of, or the Agent who may be in the Real solvency in order for our product to be we're going to have it determined against us. Estate, law, or some other line. saleable product. Does that answer your question? Taking on an agent without expertise in Bill goes into one other subject and that the field of searching titles and in many is "errors and omissions" insurance. As he cases where indices are inadequate or where indicates, it is somewhat new. I think we all MR. MC CULLOCH: I don't think the a prospective agent does not have good and know what it is. Court will rewrite the contract but I think sufficient plant, is a dangerous practice. I'm going to assert that errors and omis­ they could probably construe in favor of the Very dangerous. sions insurance or errors and omission insur­ defended party. Anthing else? Hank? In the Bill goes into the question of how much ance for abstract title insurance agents, is a back. commission an Agent should receive from means by which the abstractor and/or title total charge. Let's distinguish right here insurance agent can protect himself and his HANK: I'd like a couple of things ad­ between "risk rate" and "all inclusive rate". company against a catastrophic loss. In dressed here by Mr. Saville. For instance, Risk rate by my definition is the rate that these days and times, a million dollar policy Mr. Boyd said possibly there was a situation the Underwriting Company has used when is not unusual. I can remember times when a where the Underwriters might get into the their so le responsibility is to accept a one hundred thousand dollar policy only field of writing errors and omissions cover­ complete search and examination of title carne by once every six months. age for their agents. I'd like to have Mr. and insure based on that search. The all Errors and omissions insurance takes care Saville's position on this and the second inclusive charge is the total charge made to of these large losses and keeps the agent thing, that Mr. Boyd mentioned, that I'd the buying public which includes abstract company solvent. Now, I know that I have like commented on, it was mentioned that search, policy writing, underwriting and in not replied to all of the points made by Bill in the cases of trying to negotiate a settle­ some instances, closing costs. Boyd, but, now is the time for you folks out ment generally, the Agent has no ability to there Let's talk first about the all inclusive rate. to ask us any questions you have or to enter into the choosing of an attorney to get deeply The Agent should receive that portion of into any of the points that we've represent the defense of the claim or to have raised the all inclusive rate which is made as a in our talks. Thank you. (applause) any decision making power in effecting the result of the work performed by the Agent settlement and I'd like Mr. Saville to address in searching the records or his plant or in Mr. MC CULLOCH: Thank you, Bob. his position on that. doing the necessary underwriting to deter­ Well, how about it. Have you got anything mine the insurability. that you'd like to bring up? Bear in mind, if The complete portion of the all inclusive MR. MC CULLOCH: Do you want to you ask a question, I'm only going to field it charge which is attributable to this portion stand while you're doing that or do you one way or another, so, go ahead, if you of the job, should be paid to the Agent, want to rest on your laurels? wish. Alright. Jim. leaving us with a risk rate to deal with. It is obvious that if the Agent is doing underwrit­ MR. SA VILLE: I'll sit. (laughter) Let's ing, typing the policy, collecting the JIM: I've heard that some insurance take the easy one first. There are at least 18 premium and forwarding the necessary policies and some contracts were recorded States which prevent Title Companies from papers to the Underwriter, then he is doing as being convinced that it is an unequal writing any other line except title insurance. part of the job that the Underwriter would bargaining situation at the time of entering Now, my company happens to be part of a do if the Underwriter were operating a into the contract. I'm wondering maybe conglomerate or maybe not a conglomerate, branch office or if he were doing a mail there might be when the standard contract but a holding company, and we do have order business from a distant point. which you speak of, is presented, differing other lines of insurance within the holding Therefore, the Agent should be compen­ from 35 years ago, when it was negotiated company, but each company is separate and sated by a portion of the risk rate equal to paragraph by paragraph, where the small distinct within the holding company. the portion of the job which he is doing. I abstractor who doesn't have a business at all Now, there is a possibility that one of the prefer rather than to call this "commission" enters into a contract with an Underwriter other companies owned by Richmond to call it a work charge for work performed. that is a standard contract, and he just signs Corporation might at sometime get into

TITLE NEWS 47 writing errors and omissions insurance. So writers writing errors and omiSSions in­ Agents and not the signing of new Agents, far, none of them have ever evidenced any surance have approached the Underwriters I'd like Mr. Saville to comment on that. desire of getting into that field. And, we of title insurance suggesting that they might cannot, because if we did, we would auto­ become the group sponsor for those of their MR. MC CULLOCH: I think it's a darn matically lose our ability to do a Title agents desiring errors and omissions cover­ good idea to be perfectly honest with you. Insurance business in about 18 States. Now, age. And, that's from an Agents standpoint. as to the choosing of claims attorneys, by That's my personal opinion. Bob? the company or the Agent, we generally feel MR. MC CULLOCH : Charlie, did you have that the Agent is closer to the local situation one just a moment ago? MR. SA VILLE: Those of you who have than we are back in Richmond, and the first looked at a Lawyers Title Contract, prob­ thing that our claims department does is to CHARLIE: Yes. I would like the position ably realized that the contract does permit call the agent and say ..."who are we going of primarily the Underwriter and perhaps us to look at your books to see that you to get to represent us in settling this some standards that I am hearing and seeing, are solvent. We don't exercise that prerog­ claim?" Underwriters coming into States as most ative very often. But, there have been Now, Bill, I don't know which Under­ States have qualified in the business, promis­ instances where we were concerned with our writer you had, I hope it wasn't Lawyers cuously, signing up agents for "Bock" be­ customers dealing with one of our Agents because that's not how you drew customers. cause this particular realtor or banker or and we thought that maybe the agent was a whatnot, has a happy client that were not little bit overboard financially and in those members of the State Association, and are cases, we have made investigations and this MR. MC CULLOCH: Let me say that I not members of the ALTA, and yet, these is as much for the Agent's benefit as it is for happen to have rights for Bob's Company Underwriters promoting ALTA are defeat­ ours. and they of course, reserve the right to ing the State Association which in turn Because quite often, we can stop what­ approve or disapprove of my selection of dilutes the entire operation. ever was causing the drain of funds and get counsel since it has primary obligation the Agent back on stream and into a solvent I under­ under the insurance contract that has been MR. MC CULLOCH: I'm not sure position. It's just good business to see that question is yet, do issued, I feel that this is their right. We don't stand exactly what the both parties to a contract remain solvent. have an over abundance of claims in my you? agency, but we have had some pretty good MR. MC CULLOCH : Bill used the term position of. ones. And, I've never, with that particular CHARLIE: The earlier referring to the Underwriter as a "big Underwriter, had any difficulty at all in brother", I would take the same position MR. MCCULLOCH: Partially, anyhow. I having a voice in selection of counsel. And, I on the receiving end, that if the understand the situation you were referring there, think from an observation standpoint, that wants to see the company to but I was waiting for the specific ques­ Underwriter the same basic situation exists with other statement or my personal financial tion, Charlie. Go ahead. financial Underwriting Companies, but, I can speak statement, I think he's just as entitled to see sense. Any others? for Lawyers in that MR SA VILLE: I think you want to it as my banker is. And, my banker has no know ... qualms about calling for one every year. And, I have no qualms about furnishing it. VOICE: In answer to the frrst question, CHARLIE: Mr. Me Culloch, excuse me. Any others? Alright. to say that there will be an inability under a Primarily this doesn't tell me ...we've got to number of state laws, would a solution ha;e a liability under title insurance agents VOICE: To get to the heart of the whole perhaps to this particular problem between and contracts. I think we have the inferred thing, we're talking about the possibility of the Agent and the Underwriters, possibly be contract in the State Associations and also a title insurance underwriter going back to solved by an adjustment in the division of to the ALTA and I think it is presented as the agent to pay for a loss because of an commissions with a rewriting of the con­ being promiscuous. error or omission on the part of the agent. tract in which the underwriter assumes his How many times has Lawyers Title responsibility for errors and omissions. MR. SAVILLE: Number one, I think you requested an agent to reimburse under these need to look at your own legislative proposi­ circumstances this year. tion and see where the approval of agency MR. SAVILLE: As indicated previously, contracts has to come from. It is a straight MR. SAVILLE: Frankly, I don't have the Underwriter could not insure the agent agreement between Underwriter and Agent. those figures. I'd say less than 10. And, this against the agent's own errors and omissions Does any regulatory authority have to is not always an Agent. This could be, in our because of state laws previously mentioned. approve it? In Texas every agency contract case in the Middle Atlantic States, we don't There is the possibility that the contract must be approved by the State Board of have agents, we have approved attorneys between an Underwriter and Agent could Insurance, before you can enter into it. who examine titles and send their certifi­ relieve the agent of the responsibility for his That's an answer to some of us, but, there cates or their results of their examination own act, but that is the subject we have are a lot of headaches there. That's a matter into us, we write the policy. But, they are been discussing here today and it is my of business practice not necessarily decep­ covered by errors and omissions insurance. contention as an Underwriter that the agent tive but I think what Charlie is saying and And, where a claim has occurred as a result should be responsible for his own act. I what I am echoing is that . . .less than of their negligence, we have asked them if would like to note here that several alterna­ honorable under the circumstances. they have errors and omissions insurance. tives have recently been suggested. Under­ writers who write errors and omissions MR. MCCULLOCH: And, the Agent has VOICE: Would you say that this is more insurance ad vise those interested in purchas­ to have a 25 year plan at least. than it was last year or the year before? Is it ing this type of insurance that it can be increasing, the same or decreasing? Do you purchased cheaper when purchased on a MR. SA VILLE: He must. This may not have any comment on that? group basis. State title associations have be true in Indiana. He also has to be licensed been approached to become the group and bonded in Texas. MR. SA VILLE: Again, I don't have any sponsor so that all members of a state title figures but I have not realized that there has association can get errors and omissions MR. MCCULLOCH: One more, Jim? been an increase recently, no. insurance under a group policy the pre­ miums for which would be paid to and JIM : What about Title Insurance Under­ collected by their own state title associ­ writers requiring Agents to furnish financial MR. MC CULLOCH: Alright. One more ation. At the same time the Casualty Under- statements. I'm talking about existing and then I'm going to have to cut it off.

48 JANUARY 1976 VOICE: The Mid Atlantic States VOICE: But, an abstractor could get attorney who hired the abstractor. And, approved attorneys in New Jersey, specifi­ $35 .00 for an abstract which would eventu­ frankly, I don't know. cally, very few approved attorneys go to the ally lead to a "50,000 dollar" policy. Courthouse and prepare a search. They hire an independent abstractor to prepare it for MR. MCCULLOCH: I think the point to MR. SAVILLE: What part of New Jersey them. The abstractor is paid strictly for his be observed is that each of us take pride in did you get that abstract search? (laughter) work. Now, is that abstractor liable for any our ability to perform a certain task. We do errors and omissions? Does he participate in our work and we are proud of it. We stand any fee, any premium? VOICE: Where it will lead to a large behind it within reasons of our financial policy. responsibility. Realizing, that we are human and that the records which we work with are prepared by human hands, there can be MR. SA VILLE: I worked in MR. MC CULLOCH: I think that's a case Jersey a Little mistakes. It's a matter of personal financial while back, Like of following the chain of command back. I ninety years, and, when I stability to be able to provide coverage for was there, the think the Underwriter could possibly have attorney was fully responsible ourselves in the event of that mistake. I don't recourse aganst the approved attorney and under his certificate to us, his examination think there has been any indication of the approved attorney to the furnisher of certificate. We, then, also investigate the anybody being overly abused by the Under· the service. abstractor who prepared his search and we writer or t.he Underwriter being abused by wouldn't take the abstract of some abstrac­ the Agent, this is the whole part of the tors in New Jersey because we didn't think product that we sell. they were properly qualified. Neither did we Thank you gentlemen for participating in MR. SAVILLE: However, in some cases, take every attorneys examination to ti tie. this particular Section of the afternoon the abstractor in New Jersey might also be a Again , as Bill says, I think probably it program. I'm indebted to both of you. title insurance agent. A number of them are. would be chain of command back to the (Applause)

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TITLE NEWS 49 ELECTION OF NATIONAL OFFICERS

By proper nomination and second, Treasurer- FRED B. FROMHOLD, 421 North Main Street, Box 267 the following officers were unani­ Philadelphia, Pennsylvania 92702 mously elected for 197S-76 : President and Chief Executive Offi­ cer, Commonwealth Land Title President- RICHARD H. HOWLETT, RICHARD L. MARTIN, Chicago, Company Los Angeles, California Insurance Illinois Street 19102 Senior Vice-President and General lS l O Walnut Regional Vice-President, Chicago Counsel Title Insurance Company Title Insurance and Trust Company ill West Washington Street 60602 433 South Spring Street 900S4 BOARD OF GOVERNORS (Term Expiring 1978) President-Elect- PHILIP D. McCUL­ KE ITH R . TOLLIVER, Cape LOCH, Dallas, Texas Girardeau, Missouri President, Hexter Fair Title Com­ JOHN R. HENDERSON, Waterloo, President, Cape Girardeau County pany Iowa Abstract & Title Company, Inc. 1307 Pacific 7 S202 Vice-President, Black Hawk County 420 H & H Building 63701 Company Chairman, Finance Committee­ Abstract Street S0703 ALVIN W. LONG, Chicago, SOl Lafayette BILLY F. VAUGHN, Dallas, Texas Illinois D. P. KENNEDY, Santa Ana, Cali­ Senior Vice-President, Lawyers Title President, Chicago Title and Trust fornia Insurance Corporation Company President, First American Title In­ 31 0 Davis Building, 1 309 Main 111 West Washington Street 60602 surance Company Street 7S202

ELECTION OF SECTION OFFICERS

TITLE INSURANCE AND UNDERWRITERS SECTION

By proper nomination and second, Secretary - MRS . BEULAH HEN- RICHARD A. JOHNSON, Lincoln, the following officers were unani­ DRICKS, Walker, Minnesota Nebraska mously elected for 197S-76: President, Cass County Abstract President, Nebraska Title Company Company 139 South 12th Street 68S08 Box 280, S6484 Chairman - ROGER N. BELL, Wichita, Kansas PHILLIP B. WERT, Kokomo, Indiana President, The Security Abstract & Manager, Johnson Abstract Com­ Title Company, Inc. pany 434 North Main Street 67202 EXECUTIVE COMMITTEE 109 North Buckeye Street 46901

Vice-Chairman- WILLIAM T. D. MARGARET A. THURSTON, Doug­ HOLSTEIN, La Crosse, Wisconsin ALFRED C. VANCE, Russellville, las, Wyoming Vice-President, La Crosse County Arkansas Manager, Converse Land Title Com­ Title Company President, Vance Abstract Company pany S09 Main Street, Box 969, S4601 I OS West Main 72801 112 North Second Street 82633 so JANUARY 1976 ABSTRACTERS AND TITLE INSURANCE AGENTS SECTION

By proper nomination and second, Secretary - NATHAN S. JARNIGAN, JACK L. DONNELL, Greensboro, the following officers were unani­ JR., Oklahoma City, Oklahoma North Carolina mously elected for 1975-76: Executive Vice-President, Standard President, Jefferson-Pilot Title Insur­ Title Insurance Company ance Company 1322 North Walker, Box 25097 I OJ North Elm Street, Box 22035 Chairman - C. J . McCONVILLE, 73125 27420 Minneapolis, Minnesota President, Title Insurance Company of Minnesota ROY P. HILL, JR., Casper, Wyoming 400 Second Avenue, South 55401 President, The Title Guaranty Com­ EXECUTIVE COMMITTEE pany of Wyoming, Inc. 537 South Center 82601 Vice - Chairman - ROBERT D. DORO­ CIAK , Dallas, Texas ROWAN H. TAYLOR, Jackson, Mis­ SAMUEL R . GILLMAN, Washington, Chief Executive Officer & President, sissippi D.C. USLIFE Title Insurance Company President, Mississippi Valley Title President, Columbia Real Estate of Dallas Insurance Company Title Insurance Company 1301 Main Street 75202 Box 2428 39205 1422 H. Street, N.W. 20005

COMMITTEE REPORTS

Navigational Servitude Committee Report

Ray E. Sweat

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

Mr. Chairman, Ladies and Gentlemen: jurisdiction. Mr. McConville defined the For many years Congress did little or I would first like to acknowledge the Committee's responsibility as keeping track nothing to establish a federal navigational members of my Committee. They are Mr. of any developments, including statutes, servitude. In 1878 the State of Oregon John H. McDermitt, New Jersey State Coun­ case law, propositions, etc., relating to enacted legislation authorizing a bridge over sel, Commonwealth Land Title Insurance tidelands, meadowlands, broadening of the Willamette River connecting Portland Company, Paterson, New Jersey; Mr. James public or governmental rights in beaches, with East Portland. Hatch and Lownsdale, H. McKillop , II, Vice President, Lawyers Environmental Impact laws as well as any of warehousemen, filed a bill in the Federal Title Insurance Corporation, Florida State the above whi ch may affect navigational Court for an injunction to halt construction Office, Winter Haven, Florida; and Mr. servitude. and abate the work done as a hazard to Albert E. Pentecost, Senior Vice President In order to orient your committee's navigation. The Court held that there was and Secretary, The Title Insurance Corpor­ report I believe that we should review the no common law which prohibited obstruc­ ation, Bryn Mawr, Pennsylvania. development of the navigational servitude tions and nuisances in navigable waters and and the jurisdiction asserted under this that until Congress acted, a state could Since I am going to be talking about servitude down to the present time. authorize the obstruction of a navigable jurisdiction, I thought it might be well to Clause 3 of Section 8 of the United States stream (Wi/lamette Iron Bridge Company vs. define jurisdiction of your Navigational Constitution provides that Congress shall Hatch, 125 U.S. 1, 1888). In reaction to this Servitude Committee. I asked Mr. C. J. have the power to regulate commerce with case, Congress passed the Act of September McConville, former Chairman of your Com­ foreign nations and among the several states 19, 1890, Chapter 907 Section 10, 26 mittee to fill me in on the Committee's and with the Indian Tribes. STAT. 454, prohibiting the creation of any

TITLE NEWS 51 are subject to the ebb and flow of the obstruction not affirmatively authorized by In 1871 the United States Supreme Court tide shoreward to their mean high water law to the navigable capacity of any waters handed down Daniel BaU vs. United States in law mark (mean higher high water mark on in respect to which the United States had which held waters were navigable the Pacific Coast). See 33 CFR 209.260 jurisdiction. which were navigable in fact and that they were navigable in fact when they are used or (ER 1165-2-302) for a more definitive was In 1899 the enactment of 1890 are susceptible of being used in their ordi­ explanation of this term. Rivers and superseded by Section 10 of the nary condition by themselves, or by uniting (2) "Navigable waters", (i) The term, of 1899 which herein for Harbors Appropriations Act with other waters, as highways for com­ "navigable waters," as used any obstruction the Federal prohibits the creation of merce under which trade and travel are or purposes of Section 404 of by Congress to is adminis­ not affirmatively authorized may be conducted in the customary modes Water Pollution Control Act, of any waters of the waters of the the navigable capacity of trade and travel on water. (Daniel Ball vs. tratively defined to mean further provides that it the territorial seas United States and United States 77 U.S. (10 Wall) 557, 1871). United States including be unlawful to build any structure the disposal of fill shall It should be made clear that we are with respect to of the harbor lines, or where no the territorial seas outside talking about jurisdiction and not about material and excluding lines has been established, except on to the disposal of dredged harbor riparian rights or the ownership of lands with respect recommended by the Chief of Engi­ shall include the following plans under water. These rights are to be deter­ material and neers authorized by the Secretary of the waters: mined as of the formation of the union in Army (33 USCA 403). This Section 10 has (a) Coastal waters that are navigable the original states or the admission to become known as the permit section. waters of the United States subject to statehood of those formed later. (United the ebb and flow of the tide, shore­ Section 11 of the same Act provides States vs. Appalachian Electric Power Com· ward to their mean high water mark where it is made manifest to the Secret:iry pany, 311 US 376). (mean higher high water mark on the of the Army that the establishment of In 1874 navigability for the purposes of Pacific Coast); harbor lines is essential to the preservation commerce clause was enlarged to embrace (b) AU coastal wetlands, mudflats, and protection of harbors, he may and is waters that had the capability of com­ swamps, and similar areas that are authorized to cause such lines to be estab­ mercial use not only those in actual use contiguous or adjacent to other navi­ lished beyond which no piers, wharves, (The Montello 87 US (20 Wal/430, 1874) gable waters. "Coastal wetlands" in­ bulkhead or other structures shall be ex­ and again in 1921 to bring in water bodies marshes and shallows and means tended or deposits made except under such whose past history of commercial use made cludes periodically in nunda ted by regulations as may be prescribed from time it navigable despite subsequent physical or those areas brackish waters and that are to time by the Secretary of the Army (33 economical changes preventing use for com­ saline or characterized by the prev­ USCA 404). Under this section of the Rivers merce (Economy Light and Power Company normally water vegeta­ and Harbors Act, many harbor lines were vs. United States, 256 US 113, 1921). In alence of salt or brackish and established. 1940 it was held that a waterway would be tion capable of growth determined navigable in fact if by reason­ reproduction; For many years the establishment by able improvement it could be made navi­ (c) Rivers, lakes, streams, and artificial Legislative authority of a harbor line in gable. (United States vs. Appalachian water bodies that are navigable waters navigable waters was regarded as an implied Electric Power Company, 311 US 377, of the United States up to their head­ the owners of the adjacent upland grant to 1940). waters and landward to their ordinary of the right to build on or fill in the land On May 6, 1975 the Corps of Engineers high water mark; water to such line. The establishment under published four alternate proposals entitled (d) AU artificially created channels the bulkhead or pier line denoted the of Department of Defense Corps of Engineers and canals used for recreational or Federal Government's consent to reclaim and Environmental Protection Agency Navi­ other navigational purposes that are land shoreward of such line. The establish­ . gable Waters Procedures and Guidelines for connected to other navigable waters ment of the line did not of itself, prior to Disposal of Dredged or Fill Material, to landward to their ordinary high water reclamation and further action by the State, supersede portions of the then current mark; abrogate the navigational servitude and unW waters regulations and invited comments on these (e) AU tributaries of navigable , the public rights remained as before head­ filled proposals (40 Federal Register 19776). The of the United States up to their Juris Secum Navigable Wate~ to their ordinary (Corporate Corps says that these propsals were pub­ waters and landward 113(2)). Section lished in response to an order of the United high water mark; waters landward to their The Corps of Engineers which administers States District Court for the District of (f) Interstate high water mark and up to the Federal Navigational Servitude under Columbia in Natural Resources Defense ordinary headwaters; the Department of Army and Secretary of Counsel vs. Callaway, (392 F. Supp. 685, their lakes, rivers and streams the Army, formerly Department of War and 1975). (g) Interstate ordinary high water Secretary of War, for many years concen­ As a result of these four proposals, the landward to their up to their headwaters that trated on keeping the channels of commerce Corps of Engineers on July 25, 1975 pub­ mark and : free of obstructions, that is, the Corps lished alternate 1 of May 16, 197 5 as a are utilized interstate travelers for water­ limited its jurisdiction to coincide with proposal entitled Department of Defense (1) By related recreational purposes; admiralty jurisdiction. Corps of Engineers Permits for Activities in (2) For the removal of fish that are Navigable Waters or Ocean Waters to super­ In England, navigable waters were waters sold in interstate commerce; sede portions of current regulation found in subject to the ebb and flow of the tide. This For industrial purposes by in­ 33 CFR 209.120. (3) legal concept coincided with the factual in interstate commerce; or This proposal defines navigable waters of dustries situation as it pretty much did in the early In the production of agricultural the United States as follows: (4) American colonies along the Atlantic Sea­ sold or transported in (1) "Navigable waters of the United commodities board. Our courts, however, began to interstate commerce; which was out of States." The term, "navigable waters of struggle with this concept (h) Freshwater wetlands including the Central and the United States," is administratively step with actuality in marshes, shallows, swamps and similar United States and to defined to mean waters that have been Western regions of the areas that are contiguous or adjacent to this jurisdiction (The used in the past, are now used, or are enlarge or expand other navigable waters and that sup­ 23 U.S. (10 susceptible to use as a means to transport Steamboat Thomas Jefferson port freshwater vegetation. "Fresh­ 428, 1825), (The Steamboat interstate commerce landward to their WHEAT) water wetlands" means those areas that Orleans vs. Phoebus 36 U.S. (11 PET) 175, ordinary high water mark and up to the by the are periodically inundated and that are 183 7). The Genesee Chief 53 U.S. ( 12 head of navigation as determined normally characterized by the prev- HOWARD) 441, 1851). Chief of Engineers, and also waters that

JANUARY 1976 52 alence of vegetation that requires sat­ Northern District of California as Cause No. this time the land was substantially above urated soil conditions for growth and C-73-1470 S.C. This case decided in 1975 mean high tide and overgrown with bay­ reproduction; and appears to base the higher high concept on berry. In I 9 51 , S toe co filed with the Corps (i) Those other waters which the Dis­ Public Notice No. 71-22 issued by the San of Engineers a plan to make two separate trict Engineer determines necessitate Francisco office of Corps of Engineers June waterway openings and on November 2, regulation for the protection of water 19, 1971 and regulations promulgated by 1951 the Corps, under Section 10 of the quality as expressed in the guidelines the Corps of Engineers September, 1972 Rivers and Harbors Appropriations Act, (40 CFR 230). For example, in the which purported to defme navigable waters granted a permit to dredge the two openings case of intermittent rivers, streams, of the United States on the Pacific Coasts to to be completed by December 31,1955 and tributaries, and perched wetlands that the tine reached by the mean higher high which were completed and accepted by the are not contiguous or adjacent to water (33 CFR 209.260 (k) (1) (ii)). Corps June 16, 1955. The Corps of Engi­ navigable waters identified in para­ Although the Court in its statement of neers, on April 23, 1971, took the position graphs (a)-(h), a decision on jurisdic­ "Findings of Fact" stated "The authority of that further permits were needed and com­ tion shall be made by the District the United States over navigable waters menced suit in the Districf Court. Engineer. extends (and has always extended since the The District Court found that run-off It is apparent that this is a pretty all­ enactment of the Rivers and Harbors Act of from the hydraulic process caused silting in inclusive definition and includes most water 1899) to the mean higher high water line on the dredged canals and that some dikes had or wetland areas other than drainage and the West Coast." failed causing additional silting and that all irrigation ditches, stock watering ponds and On May 27 , 1970, the Corps of Engineers of the premises including the already built settling basins, other than those that result took another action to expand their terri­ upon area were within navigable waters of from the impoundment of a navigable torial jurisdiction. The Corps announced a the United States. The Third Circuit Court water. new policy and stated that the term "harbor of Appeals reversed, holding that when the Up to this point we have been talking line" as used in the regulations was used in Secretary of the Army issues a permit under about the lateral jurisdiction of the Corps of its generic sense (general, typical and con­ the Rivers and Harbors Act of 1899 to Engineers in the exercise of the Federal crete) and includes types of harbor lines undertake dredging and filling operations in Navigational Servitude. frequently referred to by other means in­ navigable waters of the United States with You will note, however, that in the clude, for example, pierhead lines and bulk­ no reservation of the right to compel re­ proposed definition of navigable waters on head lines. It also stated that under previous moval, such consent must be considered to the Pacific Coasts, the Corps now asserts policy, practices and procedures riparian be a surrender of the federal servitude over jurisdiction to the mean higher high water owners could erect open pile structures or the fee. mark not merely to the mean high water undertake solid pile constructions shore­ The Court went on to point out that mark. ward of established harbor lines without Section 10 of the Rivers and Harbors Act is I am at a loss to explain the origination of obtaining a Section I 0 permit and that this silent as to the method of giving consent, the concept of extending jurisdiction of the practice was now of great concern, particu­ but textually a blanket consent with respect Corps of Engineers to the mean higher high larly in cases involving long established to a class of properties does not appear to water mark on the Pacific Coasts. The harbor tines since all factors affecting the be prohibited. The longstanding adminis­ property line between the Sovereign and the public interest may not have been taken trative practice, at least prior to 1970 was to private property owner was the line marked in to account at the time the lines were require consents for encroachments only by the highest tide under the civil law which established. Accordingly there was danger beyond pierhead or harbor lines. When has been recognized in some cases involving that work shoreward of existing harbor lines Stoeco purchased in 1951, what had then Mexican grants (American Law of Property, could be undertaken without appropriate been fast land for 24 years the navigational Section 12. 28). consideration having been given to the servitude had long since been surrendered. This concept is fraught with danger from impact which such work may have on the This concept was approved by the Fifth the title insurance companies' standpoint environment and without a judgment having Circut Court of Appeals in United States vs. for if the navigational servitude extends to been made as to whether or not the work Diamond, 512 F.2d 157, 1975, however, the higher high on the Pacific Coasts while was, on balance, in the public interest. It the Fifth Circuit Court case held harbor private property ownership extends to the also stated that all existing and future lines must have been established under 33 mean high tide there is a strip between high harbor tines are declared to be guidelines CFR Sec. 209.150(c) and its predecessors. and higher high subject to an easement or only for defining with respect to the impact In reliance upon Stoeco, the U.S. Army servitude which the United States can take on navigational interests the off-shore limits Corps of Engineers in San Francisco, on possession of in the exercise of its naviga­ of open pile structures (pierhead line) or fill May 8, 1975, after the Supreme Court on tional servitude without paying compensa­ (bulkhead lines). A permit will be required 18th day of February, 197 5 let stand the tion (United States vs. 422,978 Square Feet under 33 USC 403 in each case for any Third Circuit Court of Appeals decision, of Land, San Francisco 445 F. 2d 1180, work which is commenced shoreward of announced that their Washington office had 1971). An easement may not, and probably existing or future harbor lines after May 27 , decided to release the Corps' jurisdiction of isn't contained within the government regu­ 1970. But for work already completed or a proposed shopping center in the San lation exclusion. commenced in conformance with existing Francisco area. I believe the industry must either : harbor line authority before May 27, 1970, In United States vs Sexton Cove Estates, (l) seek Congressional assistance in re­ no permit is required (35 Federal Register Inc ., handed down September 6, 197 5 by defining the Corps jurisdiction under 8280, 33 CFR 209. 150). the United States District Court, Southern the Rivers and Harbors Act to the On May 23, 1974 the Third Circuit Court District of Florida on an action brought mean high water line on the Pacific of Appeals, reversing the District Court in under the Rivers and Harbors Act of 1899, Coasts U.S. vs. Stoeco Homes, Inc., held that the the Court ordered a developer who com­ (2) enter any litigation as Amicus Curiae navigational servitude had been abandoned menced canal building and modification in to obtain satisfactory limitation on in the instant case. In 1927 a tidal salt water June, 1970, without a Corps of Engineers the Corps jurisdiction, or marsh was ftlled by hydraulic means with­ permit, to restore pre-existing canals to their (3) add an appropriate exception to our out permit from the Corps of Engineers for original depth, plug and fill in those canals it contract of insurance either the dredging or the fill . This land was had constructed and replant the mangrove The Corps says that the expansion of acquired by Stoeco in 1951, who also fringe along the banks of the restored canals. their jurisdiction to the mean higher high on acquired from the State of New Jersey a The Court further held that man-made the Pacific Coasts was mandated by United quitclaim of any interest which the State canals on private property became navigable States of America vs. Freethey, a case may have had in any of the lands as may waters of the United States and thus subject decided in the United States District Court, have been or was "flowed by the tides". At to the Act's permit requirements when

TITLE NEWS 53 National Environmental Protection Act of waters. Once connected, the parties must con trot and fixed the line connected to tidal 1969 requires that for every major federal in navigable waters even if in accordance with conventional concepts such canals rema act significantly affecting the environment plugged at their seaward (Dolphin Lane Associates, Ltd. , vs. Town of subsequently requires a federal agency involved to prepare Court also held that a canal is Soothampton, 333 N.E. 2d 358, 1975). entrance. The an Environmental Impact Statement (42 within the meaning of the York Times reported on a "structure" The New usc 4331-47). statutory provision authorizing injunctive September I 0, 1975, that the Bergen Fish and Wildlife relief to prevent the construction or seek County, New Jersey Superior Court in a In addition to the Environ­ the removal of unlawful structwes. Neither meadowlands case, was not swayed by Coordination Act and the National the Corps equitable estoppel or laches precluded the expert witnesses for the State who testified mental Protection Act of 1969, involved in the Federal government from enforcing the statute by that some of the plant life in the area was has also become Control Act, Endangered seeking relief. The developer was enjoined "unhealthy" - a sign it was washed by the Waters Pollution Zone Management Act from selling any property at the develop­ tide. The Judge said such evidence was "too Species Act, Coastal Lands Act of 19 53, ment site without prior approval of the chancy a method" and "too slender a reed" of 1 972, Submerged of 1956, Migratory Court until mandated restoration had been on which to rely (New York Times, page 49, Fish and Wildlife Act Act and other Acts accomplished (United States vs. Sexton column 7, September 10, 1975). Marine Game and Fish Cove Estates Inc., 5 Environmental Law which express Congress' concern with the Not only was the Corps extending juris­ as it Reporter 20348, 19 75). quality of the aquatic environment diction as to area, it was also expanding and It has become fashionable to use type of affects conservation, improvement jwisdiction as to subject matter. The former and other exotic tests to establish enjoyment of fish and wildlife resources. vegetation expansions were the result of judicial inter­ demarcation between upland and Circuit the pretation but meanwhile the Corps of On July 20, 1975 The Tenth and the proposed regulations of the wetland Engineers was becoming involved in areas Court of Appeals handed down Scenic of Engineers define "freshwater Corps than traditional commerce as various Rivers Association of Oklahoma vs. Lynn, mean those areas that are other wetlands" to enactments were influencing which held that the office of Interstate inundated and that are nor­ Congressional periodically the role of the Corps of Engineers. Land Sales Registration cannot accept mally characterized by the prevalence of filings unless accompanied by Environ­ The Fish and Wildlife Coordination Act vegetation that requires saturated soil condi­ mental Impact Statement (5 Real Estate requires that any federal agency granting a tions for growth and reproduction (40 Law Report, September 1975). Because of or license to modify any stream or Federal Register 31324). permit the time periods prescribed by these two of water shall fust consult with the The New York Court of Appeals , in a body Acts, an almost impossible situation is States Fish and Wildlife Service, case participated by the New York Land United created and the real estate industry is caught of the Interior and also with Title Association as Amicus Curiae found Department in the middle. these tests intellectually fascinating but held the head of any agency exercising adminis­ of the Mr. Chairman this concludes the report of that stability and predictability of property tration over the wildlife resources The your Navigational Servitude Committee. lines in accordance with the expectations of particular state (16 USC 662a).

Report of the Committee on the Commission on Uniform Laws ~~(Uniform Land Transactions Act)"

James M. Pedowitz

Committee Chairman York First Vice President and Chief Counsel, The Title Guarantee Company, New York, New

For instance, there are separate defini­ A "Uniform Land Transactions Act" and secured transactions (mortgages/deeds . tions for "agreement" (Sec. 1-201(2)) and (ULTA) has been approved by the National of trust), plus some general provisions action for "Contract" (Section 1-201(3)) under the Conference of Commissioners on Uniform Separated out for possible future "Con­ General Definitions in Article 1. In Article 3 Laws. Normally such uniform acts are sub­ are the articles on "Condominiums," Liens", there is a definition for "Contract to Con­ mitted to the American Bar Association for struction Liens", "Other Statutory Proceedings", vey". It reads: "Contract to Convey" in­ approval in advance of introduction in any and "Notices of Pending and Priorities", cludes a present conveyance for considera­ of the state legislatures, but this procedure "Conveyancing, Recording Records". tion as well as an option or con tract to is not mandatory and it is possible that the and "Public Land convey at a future time." (Section Act may be introduced in some legislatures Although the fust stated purpose of the 2-103(1)). It is confusing to say the least. prior thereto. It is anticipated that the Act (Section l-102(b)(1)) is "to simplify, Many of the sections have official com­ American Bar Association will receive the clarify and modernize the law governing real ments. It is strongly recommended that the act for consideration at its February 1976 estate transactions" this act, though mod­ comments be read in advance as an aid in Mid-Winter meeting. It's adoption by any ern, is neither simple nor clear. Let all who understanding what the section is supposed state, would effect radical changes in that will read it be warned - it is slow and de­ to mean. Students of the Uniform Commer­ state's existing law. difficult reading! There are numerous cial Code may have an easier time with the This ULTA is a drastically abbreviated fined words and terms, with definitions Act, which was designed to track the lan­ version of the ULTA that was submitted to which themselves require explanation, am­ guage, terminology and concepts of the the Commissioners on Uniform Laws. It plification and clarification. Most of the 2 U.C.C. to the maximum extent possible. merely consists of the fust three (3) out of definitions are in Article 1, but Articles However, real estate is unique, and histori­ an original eight (8) articles, and presently and 3 have additional definitions applicable cally the law of real property has differed in only covers real property contracts, sales to those articles.

JANUARY 1976 54 many respects from the laws applicable to are later construed as a contract, could lose 12. Remedies for breach are also set forth personal property or negotiable instruments, his title to the earlier oral contract vendee. in detail (Part 5), and vary based upon and the changeover, if adopted, will be a Not only is the necessity for a writing whether or not the breach is "material" or difficult one. eliminated in many situations, but Section "with respect to a substantial part of the Herewith are some highlights of the Act 2-202 provides that a contract to convey contract". that are of particular significance to the title does not fail for indefiniteness if the parties A seller's right to specific performance is industry: intended to make a contract, even though severly limited (Sec. 2-506). 1. The Act creates statutory obligations the parties have: Buyers remedies include the right to a of good faith, diligence and reasonable care 1. Left one or more terms for future lien on the real estate for partial payments which may not be disclaimed (Sec. agreement; or and direct and incidental damages, (Sec. 1-103(b)). Unconsionable agreements for 2. Not included in the agreement a term 2-512) and the right to specific perform­ provisions will not be enforced (Sec. 1-311). dealing with one or more aspects of the ance (Sec. 2-511). Even a written waiver made for a consid­ contract. 13. A comprehensive scheme is created eration may be held to be invalid if a court This applies even though the price is not covering the creation, pri:ority and enforce­ as a matter of law finds it unconscionable settled (Sec. 2-203). ment of all consensual liens, as there is no (Section 1-305). 8. Absent specific provision to the con­ differentiation in treatment between con­ 2. The definition of "real estate" (Sec. trary, a seller's title obligations are that: sensual security interestes, regardless of 1-201(16)) takes in both estates and inter­ a) title must be marketable at the time form, whether or not legal title passes (Sec. ests in over or under land, including ease­ for conveyance, even if the contract only 3-202), and whether in form a mortgage ments and minerals. The leasehold interest calls for "good" or "good and sufficient" deed of trust, trust deed, security deed, of a tenant is also "real estate". title, and even if the purchase agreement contract for deed, land sales contract, lease 3. The concept of a "protected party" only calls for a quit-claim deed; (an excep­ intended as security, or an assignment of (Sec. 1-203) is created. Such a party is tion is made if the agreement is only for rents, so long as it is intended as security for entitled to special treatment and extra whatever interest the seller may have in the an obligation. (Sec. 3-1 02) protection in a transaction involving "resi­ real estate); A "security interest" is defined as an dential real estate" and the definition in­ b) The deed will automatically contain all interest in real estate which secures payment cludes almost any owner of such property. the warranties as set forth in Section 2-306, or performance of an obligation (Sec. These protections start from the time of the thus making it a general warranty deed, 3-103(7)). As an interest in real estate it initial contract and continue through settle­ unless the sale is made under a court order would no longer be treated as personal ment. They also impose additional restric­ which does not provide for them; property. tions on enforcement procedures in the c) possession must be available to 14. There is no differentiation between a event of defaults by a protected party. purchaser at the time of the delivery of the "purchase money security agreement" taken Although the mere phrase "protected deed; and or retained by a seller, or taken by a third party" conjures up a picture in one's mind d) title evidence and documentation is to party who furnished value to enable the of John Q. Public, the typical consumer, the be provided by seller at seller's expense debtor to acquire the collateral or to make definition is broad enough to encompass either by; improvements thereto. (Sec. 3-103(a)(4)). many parties not deserving of or requiring a 1) an abstract, or This is a radically new concept. statutorily protected status. Robert Krato­ 2) a title report or commitment to 15. A security interest is ineffective until vil, in a recent article, (St. John's Law insure by a title insurance company, or value has been given. (Sec. 3-203(a)(3)), but Review, Spring 1975, Vol. 49 No . 3) 3) a title opinion, certificate or report as to all future advances value is deemed to pointed out that this concept of protected prepared by an attorney acceptable to have been given at the time party value was first would likely provoke controversy the buyer; or given. (Sec. 3-203(c)) since it will bring within its ambit seemingly 4) in those states where there is a 16. A debtor may be given the unintended individuals. For example, the history of such usage, a power to Torrens certifi­ dispose of the collateral owner of a million-dollar mansion is a cate or other acceptable free of security title evidence interest. (Sec. protected party, as is one who acquires a (Section 2-304) 3-204). It is difficult to imagine circumstances under which residence subject to a mortgage placed The sellers warranty of title runs both to this might occur, except as to rents. thereon by a protected party. Thus, a large the buyer and to successors in title (Section corporation acquiring a mortgage home 2-312(a)). 17. After-acquired property can be cov­ from an employee in an employee-transfer 9. A lessor is also called a seller. The seller ered by a security interest, but such pro­ program is a protected party. of the leasehold warrants: visions are ineffective as to non-contiguous 4. The doctrine of merger of the contract a) availability of possession at the be­ residential real estate of a protected party into the deed is abolished (Section 1-309). ginning of the term and continued (Sec. 3-205)(b); but how does the title This will create additional "off record" quiet and peaceable possession; and searcher pick it up? problems. b) that the seller has power and right 18. The security interest is effective to 5. Elimination of "holder in due course" to convey the interest. cover future advances as well as present protection for assignees of mortgages (deeds 10. There are specific provisions with advances (Sec. 3-205)(c), but notwith­ of trust, etc.) other than first mortgages as respect to revocation of the transaction for standing any agreement to the contrary, to any defenses that could have been as­ breach of warranty or other obligations. future advances can only be incurred by the serted by a protected party mortgagor. (Section 2-401 and 2-402). The revoking then owner of the collateral (Sec. 3-205(d)). Written estoppel certificates, however, re­ buyer must tender an instrument that would Even though the security interest does main effective in the hands of a good faith revest title in the seller as it was prior to the not provide for future advances, or provides assignee for value and without notice of the seller' s conveyance. This may be a difficult for future advances up to a specified maxi­ defense (Section 1-314). hurdle to overcome in most situations, mum amount only, it nevertheless will 6. A description of real estate is deemed because of subsequent financing, etc. secure future advances or obligations in­ sufficient "if it reasonably identifies the real 11. A party with "reasonable grounds for curred by the secured holder for the com­ estate" (Section 1-312). Such a trend away insecurity" is given the right to demand pletion of a contemplated improvement from specifics could create more problems adequate assurances of performance, and if under a construction lean, or if made "for than are cured. it is not furnished may refrain from per­ the reasonable protection of the security 7. The statute of frauds is watered down. formance (Sec. 2-403). This could create interest in the real estate". (Sec. 3-205(e)). Oral agreements can be enforced in various additional loss exposure problems, such as if 19. Priorities between competing security circumstances. (Sec. 2-201). A purchaser for tenants stop paying rent because of a interests in the same collateral are deter­ value, with notice of oral negotiations that pending title claim. mined based partly upon time of recording,

TITLE NEWS 55 (Sec. 3-508(a) and partly on whether advanced pursuant to a "Notice of Intention to Foreclosure", the enforcement process. committment and partly on prior knowl­ contents of which are specifically prescribed 3-509(c)). edge of the competing interest (Sec. 3-301). (Sec. 3-505 and 3-506). 24. Upon disposition of the property However, an advance under a construc­ 1) By exercise of a power of sale (Sec. pursuant to an enforcement proceeding, a of any tion security interest to enable completion 3-508). This is the preferred method of purchaser for value takes title free proce­ of the contemplated improvement is given enforcement. defects or omissions in the required if any, is priority over a known intervening recorded 2) By judicial sale (Sec. 3-509). dures. (Sec. 3-5ll(a)). Recourse, (Sec. 3-513). security interest. (Sec. 3-30l(b)(4)). This 3) By taking title in satisfaction of the against the enforcing creditor. provision is to provision should bring some cheer to the obligation (Sec. 3-507). This remedy is The purpose of this radical of a rigorous title hearts of construction lenders. Unfortu­ a form of strict foreclosure without the eliminate "the necessity to Sec. 3-511). nately, mechanics' liens do not come within necessity of a judicial proceeding or of examination" (See comment the ULTA definition of "Security interest". a sale of any kind. However, this reme­ It is entirely possible that the act in its 20. A lease made in the ordinary course dy is unavailable as against a protected present condition will not receive active of business may be effective as against a party. consideration in many state legislatures. pre-existing security interest for up to two NOTE: A prerequisite to the giving of a There has been very little support expressed years under certain conditions (Sec. Notice of Intention to Foreclose, as to so far, except from the drafters. occupied 3-207(b)). The debtor may also modify realty containing a dwelling unit If adopted in any state, ULTA would related to a existing leases in ordinary course in most by a protected party or a person have far reaching effects upon title alr there has been a situations, and those modifications can be protected party, is that stractors and insurers. It contains matters (Sec. 3-505)(d)). effective as against the holder of its security default for at least 5 weeks that are both favorable and unfavorable to interest (Sec. 3-207(d)). use. A decision as to whether to support, against a protected party 21. "Due on sale" clauses are recognized Enforcement oppose, or remain passive should not be be completed for at least 10 weeks as effective, but restraints on sale without cannot made hastily. consent of the secured creditor are banned. after default under any of the methods. It should, however, continue to be (Sec. 3-208) carefully by all of us, so that 22. On default the secured creditor may 23. There are also requirements for studied decision is to be made, will be enforce by one of the following several Notice to junior lienors and others having an whatever a proper understanding. methods, after fust having served a written interest in the real estate as part of the based upon

Report of the Committee on Improvement of Land Title Records

Thomas E. Horak

Committee Chairman Vice President, Commonwealth Land Title Insurance Company, Philadelphia, Pennsylvania

parcel, the legal status, and other The past year has been very eventful for members of the title industry were present each data". Some people mistakenly the field of records improvement. I would at the meetings. ALTA gave a substantial relevant cadastre is a combination of like to report on a number of important grant to help sponsor this conference. think that "disaster". Its mystique developments. This conference covered four full days, "catastrophe" and in the dictionary The most significant event of the year and the topics ranged from highly technical is not helped by appearing I have made was the April conference held in Wash­ reports on surveying methodology to ab­ between "cad" and "cadaver". this word, and have ington, D.C., called the North American stract musings on the philosophical ap­ it a point to research traces its deriva­ Conference on the Modernization of Land proach to the treatment of public records. found a definition which which Data Systems, or "MOLDS". This confer­ The theme of the conference was the tion to the latin catasta, or scaffold, burning of ence was in direct succession with the series development of a multi-purpose approach in was a place for the public The word of meetings, starting in 1966 in Cincinnati, handling public records for the conveyancer, unbelievers in the middle ages. connotations, continuing with Mackinac in I 968, Atlanta title insurer, attorney, public official, the seems to have unfortunate (the CLIPP Conference) in 1972, and the public and private organizations which either by association or derivation. The Ottawa Conference of 1974. The Ottawa depend on this data for their work. The proceedings of the I 97 5 conference land record and are avail­ Conference, on concepts of a modern problem is to fill the need for have been recently published, users. I 5th cadastre, concerned itself with the problems data quickly and efficiently for more able from Secretary of MOLDS, 733 D.C. facing Canadian governmental units, but was The computer is seen as the tool for Street, N.W., Suite 430, Washington, open to all comers, and ALTA was repre­ accomplishing this. 20005. Single copies are five dollars each. sented by your chairman. I mention the I used the word "cadastre". For those of It would be impossible, in this short time, of the various presenta­ Ottawa meeting because many of the same you who may not be familiar with the word, to summarize all let me give you some of the people were instrumental in planning the which seems to be popping up more and tions made, but seen from the standpoint of a April meeting. The Washington Conference more in our journals and technical publica­ highlights, man. was attended by two hundred people, rep­ tions. It is defined as "a methodically title There is going to be a serious shortage of resenting government, private industry, and arranged public inventory of properties, in the United States. In 197 5, we professional groups of several countries. A within a certain district, based on a survey surveyors will graduate only half the surveyors that number of speakers from Europe and Latin of their boundaries, systematically iden ti­ Canada will license - and Canada is con­ America gave an international flavor to the fied by means of a separate designation on a with what they consider the affair. I am happy to say that fourteen map, together with registers, showing, for cerned

JANUARY 1976 56 inadequacy. Russia and West Germany, for projects for which computer programs had must be capable of referencing not only by example, are training ten times our number. failed. He warned those who are insisting on its coordinate, and street address, but by a If we are to do all the surveying required for continuous and instantaneous updating that third method, a unit descriptor consisting of a cadastral system, we will temporarily need these words are not necessarily synonymous a name and number. This would be the many times the existing number. This could with "fast". While hardware that could equivalent of our block and lot. Thus a be a serious deterrent to the whole project. assign parcel identifiers on current trans­ description could be Ekeby 1 (Lot one, Two eminent legal scholars, Allison actions already exists, it is unreasonable to Ekeby Block) Dannemora (Town) Uppsala Dunham and Luther Avery, leaders in the expect all land record keeping units to pay (County). American planners, take note. real estate section of the American Bar the necessarily high price for such capa­ One of the officials of the Swedish Association, voiced their opinions that the bilities. He also warned that the more cadastral system told me that although only existing system of deed registration and diverse the uses of the file, the more it will 1/3 the country is expected to be serviced owner protection, was apparently sa tisfao­ cost; the harder you make the programmers by this facility, they are not sure if they will tory and needed no drastic revision: They job, the less reliable will be his coding. He apply it to the rest of the country because saw no need for a Torrens System. We quoted from a recent computer periodical, of the expense. If a highly taxed, highly should feel gratified that such erudite and "the price of perfect reliability is infinite socialistic state such as Sweden is given experienced men have recognized the worth cost. A system tends to grow in terms of pause over extending this highly touted of our services, even given some of the complexity rather than of simplification public service because of cost, doesn't this shortcomings we are working to overcome. until the resulting unreliability becomes tell us something? We should be aware that certain Canadian intolerable". As to costs of public registry or record provinces have a head start on computerized Ed's talk induced quite a number of projects, let me give you some sobering registry systems. Because the relative ease questions on the practicability of instantan­ facts: with which this is being done, let no one eous updating, and certainly was an eye In the state of Rhine-Westphalia, largest confuse you into thinking it will be similarly opener into some of the technical problems of the states of West Germany, whose easy here. There is no real comparison which will be encountered in attempting to registry system is incomparably simpler than between the very simple Canadian Torrens make any data bank capable of instantan­ that of any one of our states, it takes system and our complex state recording eous questioning. 11,000 people to administer a computerized sys terns. And remember that many Representatives from West Germany and cadastre system covering eight million par­ Canadians are not happy with the many Sweden gave descriptions of their com­ cels. shortcomings of their Torrens systems. puterized cadas tral systems which were The following is not from the conference, Speakers from the title industry and quite interesting. There is not time to but private research: describe both to you, but since Sweden's related companies gave important contribu­ In Bavaria, the average cost of ti tie system is more ambitious, I will give tions, which I would like to summarize here. some registration (torrens) is 1% of sale value. facts on that project. Jim Schmidt, of Commonwealth in Remember also that the Notary gets an All land in Sweden, Philadelphia, reviewed the various systems 3.5 million units, is equal fee. In some German states the regis­ registered, or Torrenized. Sweden's for treating public records and title registra­ registry tration fee is 3% - and add the same for the system traditionally operated tion in the fifty United States and many through 1 00 Notary. If we charged 6% or even 2%, how lower courts. All transactions foreign countries. Jim's very thorough study are currently long do you think we would get away with set the stage for the rest of the speakers who handled on a once a week basis. The it? Swedish speaker had this to say about dealt in various details of existing or pro­ the There is every indication that a com­ pre-computer registry system: "Faults in the posed systems. puterized public record system is going to land registration system involve trouble Gurdon Wattles, of TI in Los Angeles, for become the darling of every city, county, turnover of real estate and mortgage credit, gave a studious review of some of the state and federal agency, each with its which often results in decisions and ex tracts problems which are met in attempting to demands for data, each with different goals from registers being delayed by several adopt current sophisticated surveying and objectives. Programmers will go mad methods weeks". Proponents of Torrens, take note! to deal with traditional boundaries trying to accommodate all the whims of There are five data banks in the established years ago by various types of computer taxing authorities, health officials, transpor­ monuments, system. They contain data on ownerships, watercourses, shorelines, etc. tation chiefs, urban planners, highway This talk demonstrated size of parcels, number and type of build­ the critical need to dep...rtments, policy departments, census include in system planning ings, occupation of the residents, auto regis­ for a cadastre, takers, building inspectors, licensing men of practical experience trations, etc. The first application of the in boundary bureaus, internal revenue, HUD, HEW, surveying and title engineering. computer is being used in parallel with the Boards of Elections, environmentalists, con­ Stanton Wong of H & W Systems manual system through 1975, in one in Los servationists, resource managers, and Angeles, described the computerized County - Uppsala. Private organizations, system undoubtedly many more agencies which will his company is implementing such as banks and insurance companies, are for Hawaii, see this data bank as a rich lode for mining. where public geographic permitted to have terminals linked to records are four the I wonder if there will be any months data bank. Files are room at the behind, and the general index is not expected to be counter for the conveyancer, current until in whose name three months out of date. This work is being twenty-four hours after any this is all transaction. being done? So much for the done for private title companies, and conference. demonstrates the economic feasibility of Property is entered by coordinates a , street The work of the conference planning well studied, thoroughly planned system addresses, and a third descriptor, described staff is continuing in this field through devised and implemented later. The one operational county, the by title experts. Uppsala, agency of the newly incorporated North Wong makes the point that successful has 100,000 land units , and annually con­ American Institute for the Modernization of version to a computer system processes 50,000 cases! can be started Land Data Systems, headquartered in prior to the implementation The current goal of sophisticated is to have 1/3 of all the Washington, D.C. ALTA is represented on parcel identifiers. land units covered The standardization of by the computer system. the Board and Executive Committee by parcel identifiers, of course, will reduce the Of the 24 departments or counties in your speaker. cost for file maintenance Sweden, 5-1/2 and updating. currently are registered by Progress in the movement to improve Ed coordinates, Grskovich of Chicago Title gave a and 4 more are in the process land records is slow because the problems splendid talk on of being assigned numbers the dangers of over­ . Quantitatively are really twofold. The first problem is to sophistication in computer this accounts for about programming. one-fifth of the land establish a definitive and uniform method of He stressed area of the country. that for each successive level of surveying with which all professionals will sophisticat ion, there are trade offs of Curiously enough, the Swedish parlia­ agree. There are a number of highly refined accuracy or expense. He cited several large ment, in its wisdom, decreed that a parcel systems of map projection since Mercator,

TITLE NEWS 57 useful tool for the title industry, and will but a surpnsmg lack of agreement as to The study was requested by county officials relieve the congestion of title people in whether the state plane coordinate system, who felt that costs of conveyancing were public buildings. lt appears that our the two degree transverse mercator system, too high, and the condition of the public presence has been more irritating than we or the universal transverse mercator system records prevented economical title may have thought. It seems even your best should be adopted. I see no need for searching. The investigation considered a friends won't tell you. attorneys, title companies, or records number of options, from building a public officers to concern themselves with these title plant to the actual searching, certifica­ technicalities. tion and underwriting of titles by the SUMMATION: There is a remarkable The second and more serious problem is county. I think you would be interested in IN in the idea of assigning a multi­ revision of the Jaw to permit computerized some excerpts from the conclusions reached unanimity digit number for the purpose of referencing indices, and the simplification of our by this group: a parcel of land in the future computer present patchwork system of public records. "Currently the cost of title search for We certainly will not quarrel with We need a thorough review of the public systems. property with the median price of $55,000 approach, although we might wonder at record problem, a cleaning out of our this is an estimated $550." need for I 7 or 19 digits, when you stop deadwood, simplification of forms, stan­ the consider that it takes only the eight digits dardization of liens, procedures and "Research indicates that the title search to of your social security number to make you terminology in the 51 United States often. costs th~ attorney between $50-$80. There is, however, no effort being jurisdictions. The inflation in final fee to the buyer occurs unique. made to simplify the problems of handling Your chairman has, on several occasions, due to ofiioe processing costs." names in the general index - the idem attempted to channel the efforts of these such as the requirement of "If practices sonans problem. I find it very strange that people into these two directions, hoping to were corrected by law, the sixty-year search we are so smug in our assigning of numbers attack the problem on two fronts simul­ fees were adjusted accord­ and if the related to describe parcels of land - no two of taneously, but to no avail would be ingly, the costs to taxpayers are alike -, and if any one of the 17 In the meantime, as you heard from Jim which significantly reduced." or more digits is copied incorrectly, the Pedowitz, the National Council of Commis­ There must be something wrong with my identification fails utterly. Yet we are quite sioners on Uniform Laws is developing its arithmetic, because I don't understand how content to allow creditors under idem own program of extensive changes for the a significant reduction in the $50-$80 title sonans, to exhibit the most flagrant and existing system search fee is going to have that much of an callous disregard in the spelling of names, In July there was a demonstration of a effect on the $550 charge being made to the among which there are almost limitless computerized cadastre system in Canadian consumer. I think someone is looking at the similarities and affinities. This is the most the statehouse in Boston, where a terminal wrong end of the problem. glaring inconsistency! When will we awake set up connected to the provincial was to the need for reform of this archaic rule? computer in Fredricton, New Brunswick. About a year or so ago, the Supreme At the last board meeting of the North was sponsored by the Massachusetts Court of the State of Pennsylvania This American Institute, I urged the group to Land Records Commission, a very active appointed a coordinator for standardizing include in a tentative schedule of workshops and forceful group, and firmly committed the computerization of all court records in the exploration of the problems involved in to the further establishment and growth of the Commonwealth. In September, it was indem sonans, with the hope that some the Torrens system In Washington they announced that a computer will be acquired solution for treating names under this proselytized their moribund philosophy to for this purpose early next year, and a archaic legal doctrine can be found that will one and all. program will be developed with the goal of be compatible with computerization. I am In February of this year, Fairfax County, evelltually putting all court records (civil happy to say that some interest was Virginia (suburban Washington), received a and criminal), taxes, and conveyancing doc­ in this idea. study from its office of Research and uments on the computer, in index form. A expressed concludes my report on what has Statistics entitled "Feasibility of Com­ committee of title people, including your This a very busy and interesting year. puterized Land Title Search in Fairfax speaker, has been asked to assist and advise been County". the effort so that the final product will be a Thank you.

Report of the Research Committee

John E. Jensen

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

now putting into final form three Thanks Bob. there are only two purposes for trying to and is Seventh Annual Analysis of To show how well the Research Com­ collect the data concerning our industry as a studies: The Nine, NAIC Report; the Sixth Annual mittee performs, we made a very careful, whole and our businesses individually. The Form of claims payments and claims scientific, analytical study of the likelihood first has to do with its use in dealing with Analysis reported by underwriters; and an analysis of of attendance of a meeting on a Saturday regulators and legislators. The second is as a rate of return, a subject which afternoon when there are football games. I forecast device both for the industry and for the industry's interest to hope the rest of our work is more accurate individual firms in the industry. is becoming one of increasing legislators. As soon as these than our prediction that only wives of In my remarks this afternoon, I would regulators and completed, copies will be dis­ speakers would be here this afternoon. like to touch on both of these purposes. reports are everybody who participated in (Laughter) First, however, let me say that during the tributed to . As far as your Committee is concerned, past year, your Committee has completed the studies

JANUARY 1976 58 In addition, this week the Board of creased 6.2% or about 20% faster than our As a result, the operating profit margin Governors authorized the Washington staff costs went up. In 1974, the Consumer Price after losses, but before taxes was a little to distribute this same information to any Index increased 11 .3 %, 414% faster than over 2%. In 1970, the profit margin in­ member of the Title industry who requests our expenses. And this at a time when the cluding losses but pre-tax was 6.7%. it. I have a word of caution in distributing CPI itself was going up at a rate about twice We had an original hypotheses on the and using this information. Very carefully as fast as in 1970. efficiency of management in the industry. examine the caveats that accompany these Another index of what's happening in the We can now come up with a conclusion studies. No two companies report all infor­ real estate market is what's happening to concerning the entire operation of under­ mation in the same way as we have learned mortgage interest rates. One measure of writers. In spite of ongoing management to our sorrow over many, many years. We mortgage interest rates is the effective skills in 1974, in operations, we did about have attempted to spell out as carefully as average FHA rate. That rate rose from 1/3 as well in 1974 as we did in 1970. we can the limitations on the data. Use the 8.19% to 9.05% between '69 and '70, about I'm going to come back to this question information as you will. But use it within an 11 % increase. In 1974, there was a 1 7% of losses but first I'd like to put these the constraints and limitations as spelled out increase in the effective average FHA rate industry results in some sort of perspective. in the reports themselves. from 8.08 to 9.47%. I've been talking about operating margins So much for distribution. As I went over In other words, to no one's surprise, we and operating profits and underwriting the 1974 studies, I began to see that there had a much sharper inflation and a much losses. When you want to take a look at the were a number of parallels between what sharper recession in 1974 than we did in whole picture for Title Insurance Com­ happened in 197 4 as a result of a recession 1970. The preliminary hypothesis that can panies, you add, in addition to operations, and what happened in 1970 when there was be drawn from the data disclosed so far is investment income, realized and unrealized also a real estate recession. Insofar as I'm that our industry reacted to sharply rising capital gains and then apply a tax estimate. talking about the 1974 NAIC and Claims inflation and rising mortgage rates with Company profits including everything - studies, I will be attempting comparisons extremely effective cost controls. Our costs gains, losses, investments, investment in­ between two recessionary periods in the real went up substantially less, for example, than come, interest income as reported to the estate industry. the Consumer Price Index. One way of Research Committee was $16.6 million. To First of all, I will surprise no one by testing this hypothesis is by looking at the achieve a $16.6 million profit, our industry saying that the operating profits for Title most important controllable operating cost had invested one billion dollars. The after­ Insurance Underwriters in United States in our industry, staff expenses. tax return on assets invested in the Title during 1974 were the lowest in the last In 1974, our staff costs as an industry industry, dollars that you could have put in seven years. Operating Profits of 1 2.3 mil­ went up about 4%. This is about 1/3 ofthe a mattress or invested in savings accounts, lion dollars for all of us put together. The inflation rate, as measured by the CPl. In stocks, bonds, government securities, tax results of our study show that the pre-tax 1970, our staff costs went up 6.3% or about exempts, whatever, was 1.68%. operating profits in 1974 fell 83% from the same rate as inflation during that year. Now, is that a good or bad return? In 1973. And operating profits in 1973 were Since built into staff cost are a number of 1974, you will recall we were listening to down 22Y2% from 1972. Why? uncontrollable elements, such as automatic the complaints of the industrials, the big The most useful way to analyze this is to increases in Social Security and Withholding companies in the United States. They were look at both sides of the profit equation, Taxes and so forth, it is not unreasonable to complaining about what a miserable year revenue on one side, expenses on the other, conclude that our industry reacted excep­ they were having and what a bad job and see what happened. 1974 revenue for tionally well in 1974. everybody was doing. In 1974, that bad Title Underwriters was the second highest in Another way of looking at this , is by year for industrials, the return on the assets the seven years we've been collecting data. looking at our operating profit margin invested in Fortune's 500 was 6.5%; the By extrapolating from some of the major before taxes and before losses. In 1973, the return to us 1.68%. We did less than 1/3 as companies going back, it was the second industry's profit margin before taxes and well as a group of companies who were highest revenue year in history. losses was 17 %. It fell to 9.4% in 1974. In complaining about the rotten year they However, that revenue had fallen by 1969, just before the drop in real estate were having. about 6% from 1973 ending up with gross market, the operating profit margin was also Let's return now, reluctantly, to a look at operating revenue of about $582 million. 17%, and then in 1970, the year of the losses. If losses in 1974 were at the same The only other times (since we have been recession, it fell to 11 %. From 17% to 9.4% rate, not the same dollars but the same rate collecting data) when revenue fell from the margins be tween '7 3 and '7 4, a slightly they were running in 1970, two things preceding year was in 1970. In that last greater drop than the earlier recession but would have happened. We would still have recession, revenue fell a little over 2%. So with sharply reduced revenue by com­ had the highest dollar loss year in history. we're talking about a 6 % drop this go­ parison and under much more difficult But our net after-tax income would have around compared with a 2 % drop last economic conditions. Based on the informa­ been more than double what it actually was. go-around. tion I have reported so far, you could Losses incurred, as I pointed out earlier, What was the effect of these kinds of conclude, I think, that as an industry we did were up 29% from 1973 and 225% over declines in revenue in the two respective very well in 1974. And, of course, if you 1970. recessionary periods? One way to find out is made that conclusion, you'd be dead wrong. A year ago I reported at this convention to examine what happened to our expenses Because as an industry we did very poorly in that there had been a sharp increase in during these two recessions. Let's first of all, 1974. And there is one explanation - losses. closing or escrow procedure losses primarily in order to keep everybody calm while we In 1974, the losses for the Title Insurance in that category concerning instructions not can get deeper into the data, let's talk about Industry were the highest in history. They properly being followed in connection with expenses and exclude loss and loss adjust­ were up 29 % from 1973. And if you escrows and closings. I am pleased to report ment expenses. compare them with 1970, our losses are up (with my fingers crossed) that in 1974, Our operating expenses as an industry in 225%. I tried to find some ways to drama­ dollars paid under this loss category have 1974 went up 2%. In 1970, our operating tize the volume of losses and have some returned to more normal levels. However, it expenses went up 5.2%. Now to put this in interesting comparisons. appears that the number of claims that were to some kind of perspective, there are a lot There were only five companies whose opened in this area have stayed at an of various indices you can use to make gross revenue was equal to or greater than extremely high level. This may mean that comparisons. The one I have chosen because the aggregate amount of industry losses. Or those pending '74 claims will ripen into our economists were able to get it to me putting it another way : aggregate 1974 197 5 payments. I would urge all of you, very fast is the Consumer Price Index which losses exceeded the industry aggregate after­ both underwriters and Title Insurance is just one way of measuring inflation. tax net operating profit for six of the last agents, to continue to closely monitor your In I 970, the Consumer Price Index in- seven years. escrow and closing operations.

TITLE NEWS 59 With one major exception, all other cate­ I've been comparing '73-'74 with 1969 My conclusion, therefore, is that in 1975 gories of payments and number of claims and 1970. This comparison, I think shows there will be a modest increase in industry maintained within acceptable statistical the magnitude of 1974 problems. In adrli­ revenue as compared with 1974. However, deviation levels, the same relative percentage tion, however, perhaps it allows for some continued heavy losses which I expect will position of the total as in 1973. Although speculation concerning 197 5 and even more continue to occur during 1975 will directly the dollars paid were frequently higher, importantly concerning 1976. This specula­ impact profits so that net results in 1975 are percentages which are the tip-off as to what tion is personal. It has not been endorsed by not likely to be much better than they were the trend is, remains substantially the same. the Research Committee. in 1974. The notable exception is the category First of all, I would expect losses, particu­ I do not see a boom year in 1976 but Special Risks Authorized by Company larly in the Mechanic's Lien and Mechanic's expect slow continued revenue improve­ Practice. Lien related area, to continue at an ex­ ment throughout most of the year. To turn tremely high level throughout 1 97 5 and improvement into bottom line profits, at Payments under this category were up then begin to drop off in 1976. We are still least three things have to be done. Of 165% over 1973 and exceeded payments for paying for those boom years. However, late course, we have to continue to operate lean. all losses of any kind during the years 1969, in 1973, throughout 1974 and so far in The cost comparisons made earlier show 1970 or 1971 . When you zero into this one 197 5, there are much fewer large projects that the industry can do this. category, your attention is caught by a coming on stream. So none of us is taking In adrlition, we must continue to monitor sub-category called Mechanic's Liens and on as many of those huge and dangerous and control our underwriting methods and Mechanic's Lien Related Losses . risks that we took on in '72 and '73. procedures. Finally, we have to be prepared to explain our profits or lack thereof to Secondly, I am convinced, again by talk­ You heard Jack Tickner speak yesterday regulators and legislators. And I would like ing to representatives of many companies, concerning Mechanic's Liens. And certainly to spend five more minutes covering this that we have all reviewed and improved our I am not competent to amplify what Jack very important paint. operating procedures. I think these two said. However, I would like to do a little A little over a year ago, a special Research factors can make a substantial rlifference in speculating as to what happened. Committee Task Force was appointed under our future loss picture. the authority of the Executive Committee and the Board of Governors. This Task First of all, we Prerlicting Title revenue is a little harder. had an economy with Force consists of members of the Research sharply rising costs and double digit infla­ In 197 5, it is now estimated that the CPI and Accounting Committees. tion. There was an increase will average about 8'/z% and at least inability to obtain The Task Force was charged with the refinancing. There were some economists are anticipating a Con­ material shortages. responsibility of developing a data collec­ You've heard all of these things before and sumer Price Index rate during 1976 of tion plan to be used as a model for the Title our natural response has been that these are between 6% and 7%. industry. After much hard work, the Task the uncontrollable factors that have caused Force has, almost in final form, developed a our Mechanic's Lien losses. Now these numbers, even the 8Yz%, are substantially below the 1974 11.3%, the uniform income and expense plan and a well known double rligit inflation. But by uniform statistical gathering system. It appears, however, that most of the any historic standards, both the '7 5 and '76 The reason for trying to develop uniform losses that we incurred during 1974 in this inflation rates are going to be very, very plans in these areas are twofold. First, there category arose out of risks we assumed high . are now about fifteen states that are requir­ during the boom years of 1972 and 1973. ing plans of one kind or another as a part of The FHA average effective residential the justification of existing rates or as a part Those were the years when the Title busi­ mortgage rate fell to 7. 78% in 1971 from of any request for a rate increase. To the ness was undergoing an explosive growth. 9.05% in 1970. Money became available for extent that we can achieve a uniform We were overwhelmed with customer investments in mortgages as we worked our approach as to how we deal with the demands. And as a service industry we bent way out of the last real estate recession. In regulators in these areas, we will in the long over backwards to try and accommodate 1975 we estimate an annual effective mort­ run reduce our expenses. Instead of fifty our customers. I suspect, based on conversa­ gage rate on FHA's of about 9%, which is rlifferent approaches to statistical gathering, tions within my own company and with down somewhat from the all time high we could have one basic system which, of many other representatives of underwriters, achieved in 1974 of 9.47. course, would be mortified to meet unique that some of us allowed our procedures to Some of us are guessing that in 197 6 this local requirements. get a little sloppy. If my speculation in this long term rate will begin to creep back up In addition, it appears, based on the area is correct, I would hope that our and end up somewhere between 9\4 and experience of the Property/Casualty in­ industry has learned its lesson. We have 9 .4%. This is almost back to the historic dustry, that statistical systems which have certainly paid enough to go to school. We 1974 level. Other factors impacting on our industry approval are more rearlily accepted are in the risk elimination business and this business will be unemployment, government by regulators. requires sound underwriting and the careful deficits which must be financed, changes in We hope to have these plans in their final following of established company the money supply, etc. ad nauseam. All of form within the next several months. We procedures. And perhaps it might be worth­ these impact rlirectly on real estate and then hope to have them approved by the while for some of us to evaluate our those things that impact on real estate, Executive Committee and given wide dis­ established company procedures. impact on our industry. tribution within the Title industry.

60 JANUARY 1976 Report of the Federal Legislative Action Committee

James G. Sch midt

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

The Federal Legislative Action Com­ as we are so involved with RESPA at this part of the American Bankers Association, mittee had an all day meeting on September time, we would not file a statement, but the United States Savings and Loan League, 4 and a two hour breakfast meeting on would depend upon the knowledge and and the National Association of Insurance Thursday of this week, and yet I will only ability of Stephen Johnakin. Savings and Loans. They had all approved the wording of the Real Estate Settlement briefly refer to the subject to which we The second question which we wish to Procedures Act last year, and now they are devoted most of our time. The reasons are call to your attention is HR 8674 which is a suddenly asking for its repeal. When they self-evident, because yesterday the subject Metric Conversion Act. It provides for the approved it last year, they had not informed was very thoroughly covered by Sanford appointment by the President of a Metric the members of their association. Now Witkowski and Tom Finley. Board which will study the question and certainly that has not been true of our So let us turn our attention to a few would allow the gradual conversion to the Association. You have heard all about other subjects. There is a Senate bill, S. metric system over an indefinite period of RESPA since it was first proposed and what 2273, also introduced by Senator Proxmire, time. This differs from the Senate Bill, S. has happened since its passage. You have which is called the Condominium Con­ 100, which provides for a ten year mandate heard it discussed at meetings such as this. sumers' Protection Act. It affects all condo­ to convert. HR 8674 is going to come up for You have been kept informed in issues of minium units which might be sold or on the 23rd and 24th of this a hearing Title News and Capital Comment and in offered by mail or by means or instruments month. of Interstate Commerce, or units which letters sent to you by Bill McAuliffe. might be financed by a federally related Another question which we discussed was this information, but condominium housing loan, the definition a proposed change in the regulation of the You have received How many of of which is quite similar to a federally Federal Home Loan Bank Board as to what have you done about it? office and related mortgage as defined in RESPA. conflict of interest. You will recall that we you have written to the ALTA of RESPA The thrust of the bill is to protect the have been working for the last couple of made comments as to the effect moment we consumer from improper acts upon the part years on this question of a service company on your operation? At this going to happen in the of the developer, such as the developer who of a Federal Savings and Loan Association don't know what's possibly the next two wants to have a long term management acting as agent for Title Insurance com­ next two months, is going to happen, it is contract, or who desires to retain an interest panies. We were opposed to this for the weeks. But whatever quickly. Bill McAuliffe in the common elements after control of the following reasons: conflict of interest, con­ going to happen very you advised, and it is condominium project is assumed by the trolled business and possible violation of the will be keeping know what Owners' Association. There are extensive Anti-Trust Laws. At our meeting at essential on your part to let us suggestions standards of disclosure in the act with a Coronado, I made an appeal to all of the you think, your comments, your right given to the purchaser to void the abstractors to send in their comments about as to what should be done. contract. this as to how it might affect their business For example, the proposed S. 2349 of There is a provision that the Secretary of in their area if a service company of the would provide a lender-pay pro­ Housing and Urban Development might Savings and Loan Associations would be­ Proxmire and send us approve a state condominium plan, but even come an agent for a national company and vision. Now can't you sit down would then the state law will be studied each year, possibly take business away from them. I a comment as to how lender-pay Also, if you and if the plan is not working out, then the regret that no answers were received from affect your particular business? of the officers, federal act would become effective. This the abstractors. However, our national have any contacts with any subject was covered in an article which office is working on this at the present time. Board of Governors, or committee members Bankers Association, appeared in April Title News by Stephen G. Bill McAuliffe has been in touch with of the American and Loan League, or Johnakin, Senior Title Attorney of Lawyers McGraw of the Federal Home Loan Bank United States Savings Insured Savings Title Insurance Company. Johnakin was Board and we're expecting some answer the National Association of because it is counsel to a study committee which was from the Board this coming month. and Loans, please let us know essential that we have those contacts at the appointed by the Virginia Real Estate Com­ by the Federal There is also a proposal present time. mission at the direction of the Virginia Reserve Board to make a change in Regula­ Legislature to study the Condominium Law. tion Z dealing with Truth in Lending. It This morning there were three addresses He is responsible for the drafting of what would provide that there would be a dis­ on the subject of becoming involved. There well might be the best Condominium Law in closure of closing costs in those areas which was never a time when it was more im­ the country. And in his article he expressed were not covered by the RESPA. And in­ portant for each one of you to become opposition to the possibility of federal cidentally, the disclosure could be quite involved in the affairs of the Association legislation. Our committee discussed the simple and it well might be that a similar than it is today. Three years ago in Atlanta I problem. We found that Johnakin was going type of simple disclosure would suffice commented that every member of the Asso­ to appear at a hearing this coming Wednes­ under Section 6 of RESPA. day, and we considered whether ALTA ciation should be considered a member of should file a statement. We decided that In any event, this brings us back to the Federal Legislative Action Committee even though we are opposed to federal RESPA. Tom Finley commented yesterday and that is true today. Please become legislation in this particular field, inasmuch that there had been an about-face on the involved.

TITLE NEWS 61 Index to 1975 Title News Articles

A Broadcaster's View . . January A Computerized Plant in Joint Use . . . August Advertising Pays In Watonga . September ALTA Film Wins Top PRSA Award . January ALTA Insurance Prompts Comment . February ALTA Judiciary Committee Report Part I .. June Part II . . . July Part Ill . August Part IV . September Part V . November Part VI December ALTA Presents Testimony at Senate RESPA Hearings November ALTA Refutes Allegations Through National Public Radio Interview March ALTA Television, Radio Messages Reach Audience of Millions . April A Response to the ABA ...... April Bette Lynde Honored By Realtor Board March Big Business: Universal Scapegoat March Business Recovery In Sight . July Chicago Acquires ...... March Chicago Acquires Continental Title . February Chicago Title Escrow Department Provides On-Sit e Service to Real Property Auction . March Chicago Title's Rockford Office To New Plant And Location . . July Company Booklet Purposely Puzzling ...... August Complex Transaction Handled BY Tl ...... July Computer Posting Replaces Chicago Title Tract Books in Cook County, Illinois . February Conference on Modernization Of Land Data Systems Set For April . February CTIC Branch Opens in Illinois . February Election Of National Officers ...... January Election Of Section Officers ...... January Excellent Seminar For Abstracters, Agents . . May Federal Condominium Regulation: Contra .. April Federal Home Loan Bank Board Update January FHLBB Legislative Outlook ...... March FLTAHoldsMid-YearMeeting ...... July Former Officer of ALTA Retires (Hale K. Warn) . April Free Inflation Rider For Commonwealth March Greenbrier Site For Mid-Winter . ... December Home Protection Program Announced . . July Housing: How Sick Is The Patient January Housing: Improvement Ahead ... . March Housing Median Passes $30,000 . . . August Housing Outlook: Modest Recovery . February Howlett Presents ALTA Testimony At House RESPA Hearings December Impact: Real Estate Settlement Procedures Act of 1974 . . June Index to 1974 Title News Articles . . January Investors Acquires Columbian Title . ... April Kratovil Retires; To Teaching Post . February Lawyers Acquires Bay Abstract, Inc. January Lawyers Announces Baker Retirement June Lawyers Title 50 Years Old . . . July Let's Tell 'Em About It ...... July Looking Back Without Stumbling . . . May Major Decline in Multi-Family Units Noted By Realtor Association March Major Realignment In Tl Organization ...... October Market Outlook Noted By Realtors ...... February Marketing Of New Title Coverage Wins Award For Title Insurance and Trust . February Millions Hear ALTA Radio Spots . . September Minnesota Title Acquires Southwest . February Minnesota Title Promotion Honored .. . July Morris Chairs ABA Committee ... April National Metric Conference Set . . . . February New Book Explores Real Estate Math . August New Chicago Acquisition ...... January New E & 0 Insurance Now Available March New Kratovil Book Recently Published .. July

62 JANUARY 1976 New NAHB President Norman Outlines Housing Program .. . March New Owner's Policy For Minnesota Title ...... September

Obituaries

Burgess, Paul C. . August Kennedy, Frank . May Thomas, W. L. . . April

Pamphlet Describes NHP Operations . March Premiere: An Important New ALTA Film January President Jay Honored In Michigan . . July President's Report ...... January Principles Adopted In D.C. . . July Private Mortgage Insurance Outlook January Qualification Noted By Commonwealth . February Rattikin Expands And Relocates . February Rattikin Honors 25 Year Service . February Ray L. Potter Retires ...... January Realtor Perspective ...... May Realtors Seek New Warranty Program . . March Regulation Major Convention Topic . December Reliance Acquires Commonwealth . March Report of ALTA Federal Legislative Action Committee January Report of ALTA Research Committee ...... January Report of the Committee on the Commission of Uniform Laws January Report of the Committee to Establish Liaison with the National Association of Insurance Commissioners January Resolution ...... January Rising Expenses Affect Land Title Industry December SAFE CO Acquires Boise Title Company . February Scholen Chairs Rates Committee . April Seminar Held March Settlement Procedures Act Major Mid-Winter Conference Topic . May Sheetz Elected ...... June Small Volume Builders Make Special Efforts to Help Purchaser Difficulties March

State Association Conventions

Florida .. February Idaho . . September Indiana . . February Michigan . September Missouri . .. February New England . September New York . September Ohio . . February Oklahoma .. .. July Oregon . September Pennsylvania . August Texas ...... July

Stewart Stock Purchase Completed . August St. John Retires From Columbian Title . . July Teams Speed Work For St. Paul . . . . October Telecopier Aids Service In Mobile .. . . February Texas Looks At Problems Confronting The Title Evidencing Industry . January The Uniform Land Transactions Act: A First Look

Part I . October Part II November

Third Abstracter-Agent Study Completed . . August Tl Expands in Los Angeles . February TIPAC Report ...... January T. I. PLUS Wins Second Award ...... July Title Company Executive Suggests Positive Approach . January Titleman's View Of The Statehouse: ALTA Legislative Reporting Service . February Two Companies Add Inflation Protection ...... February Two Seattle Reporters Receive Awards in ALTA Sponsored Realtor Editorial Contest . February Underwriters Discuss Marketing Concepts .. May Washington Report ...... January West Jersey Title Now Continental Title .. July Workshop On Title Company Equipment January Weatherford Retires From American Title .. June

TITLE NEWS 63 First American Title Insurance Com­ pany has announced the appointment of Robert N. Mistretta as vice president and manager of its main office located in Mineola, N.Y.

* * *

Richard F. Cimpl has joined Chicago Title Insurance Company as customer MISTRETTA PORTERFIELD service officer in its Milwaukee office. Chicago Title Insurance Company also announced the appointment of Margaret E. Elz as assistant secretary in their North Central Region.

* * *

Roger W. Quan has been appointed OURADA market development manager for Title Insurance and Trust Company and Pioneer National Title Insurance. Title Insurance and Trust Company also has announced the following new appointments in its Ventura county office: John T. Porterfield, vice president and manager; Max Crist, assistant vice president, sales and marketing manager; PEYTON KAMP Frank W. Lane, assistant vice president, senior advisory title officer; Michael J. Rose, assistant secretary, manager of The Title Guarantee Company an­ plant and title operations; and Imogene nounces the election of Thomas C. Carlin McKenzie, manager of escrow opera­ and B.L. Treadwell as assistant vice tions. presidents. In addition, Anton J. Ourada has been * * * named manager of Cook County opera­ tions for Pioneer National Title In­ Jan G. Berryhill has been named surance Company. customer representative of USLIFE KENT

64 JANUARY 1976 Title Insurance Company of New York and assigned to their Metropolitan James Peterson Records 50 Years Regional Office. In Land Title Evidencing Industry • • •

Clarence J. Jackson has been named manager of the Clearwater, Fla., office of Commonwealth Land Title Insurance Company. • • •

Lawyers Title Insurance Corporation has announced the e lection of the following branch o ffice managers: Carl E. Ergenbright, Jr., Roanoke, Va.; Hobart G. Ferree, Jr., Vero Beach, Fla.; Donald E. Grabski, Milwaukee; Lester G. Pe y ton, Sandusky, 0 .; Harlan Pease, Elyria, 0. ; and John Kamp, Newton, N.J. • • •

Terence Green has been promoted After 50 years with the Abstract and Title Corporation of South Bend , Ind ., James Peterson, an to assist state manager of First Ameri­ Indiana Land Title Associat ion past president, still plays an active part in the business' can Title Insurance Company's Texas operation. In the photograph above, Peterson , at right , examines a land patent with Wayne operations. Holl eman , president of Whitcomb & Keller, the firm's parent company.

• • • Beulah Hendricks Elected President of Charles A. Kent has been appointed Minnesota Land Title Association to the new position of national title for the Ticor Title operations manager The 1975 Annual Convention of the The meeting's well-planned program Insurers. Minnesota Land Title Association was included a special tribute to Jay held recently at the Holiday Inn Down­ O'Connor, vice president ofMLTA, who • • • town in Rochester, Minnesota . resigned from the board of directors for health related reasons. Mrs. Beulah Hendricks, president of Peninsular Title Insurance Company the Cass County Abstract Company, has announced the reassignment of Walker, Minn. , was elected the first John N. Cashon, assistant vice presi­ woman president of the Minnesota Land PLTA Develops dent-marketing, to New Orleans, La. Title Association . Consumer Table • • • Philip D. McCulloch, then chairman of the ALTA Abstracters and Title The Pennsylvania Land Title Asso­ C.J. McConville, president, chief ex­ Insurance Agents Section, and now ciation has developed a table sum­ ecutive officer and chairman of the ALTA president-elect, addressed the marizing the changes effected by a executive committee of both Title Insur­ delegates. Other speakers included R.G. new rate schedule and manual of ance Company of Minnesota and Minne­ Gandrud, vice president and assistant procedures regarding land title in­ sota Title Financial Corporation, has counsel of the Title Insurance Company surance in the state. been named 1976 Minneapolis Aqua­ of Minnesota, Kenneth J. Judge, division tennial vice president. McConville, cur­ counsel of Chicago Title Insurance Designed to aid the consumer, the rently ALTA Title Insurance and Under­ Company, and Melville R. Bois, division table provides a simplified look at writers Section chairman, is a past vice president of St. Paul Title Insurance various procedures related to home general chairman of the festival. Company. buying.

TITLE NEWS 65 Shouldn't You Be In Pictures? house, the people who own it over half a century, and the land title problems they encounter.

Running time for the 16mm color sound film is 11 minutes. That gives you a period after showing for explanation of local details.

Price is $104 plus postage, which includes a perma­ nent shipping container. Just write the ALTA Washington office. You've probably heard about the award-winning The public needs to better promotional film for ALTA understand what the land member use. It's called title industry really is-not "1429 M apie Street". what the critics say it is.

The film story is one most Shouldn't you be in anybody can understand: a pictures?

American Land Title Association 1828 L Street. N.W. Washington. D.C. 20036

66 JANUARY 1976 ALTA Sponsors Realtor Editorial Contest Consumer Category for Seventh Year

Winners in the ALTA-sponsored Consumer Information Category Estate Editors. Robert Marsh (shown at center in the other of the 1975 National Association of Realtors Creative Reporting photograph), associate editor, Changing Times magazine, was Contest are shown here. In the photograph at right (from left) unable to attend the Realtor Convention to receive his first ALTA President Dick Howlett and Realtor Association President place award in the category but the presentation was made later Art Leitch talk with Charlie Evans, real estate editor, Houston in the ALTA Washington office. Shown congratulating Marsh are Chronicle, third place winner, and Bob Brennan, real estate editor, Morris Knouse (left), president of the District of Columbia & Cleveland Press who accepted the second place award during a Metropolitan Area Land Title Association, and Duke Brannock, 1975 Realtor Association Convention banquet on behalf of president of the District of Columbia Board of Realtors. ALTA Robert Modic of the Cleveland newspaper. Both Evans and has sponsored the contest category as an activity of its Public Brennan are past presidents of the National Association of Real Relations Program for the past seven years.

services, has been established as an public contact and will offer consumers American-First to agent for Commonwealth Land Title Spanish editions of educational booklets Insurance Company in Reading, Pa. on title insurance and other real estate New Location Lawrence W. Hendrickson is president. related subjects.

American-First Title & Trust Com­ pany has moved to new quarters in American Opens Tl Corporation downtown Oklahoma City. The reloca­ tion, prompted by local urban renewal programs, will provide more ade­ New Latin Division Declares Dividend quate and more attractive facilities to better serve both commercial and con­ The American Title Insurance Com­ The board of directors of the TI sumer customers, according to John pany recently announced the opening of Corporation recently declared a quar­ R. Cathey, company executive vice its new Latin Division office in Coral terly dividend of 25 cents a share. An president. Gables, Fla. accompanying report indicated higher third quarter revenues and earnings The new division will seek to provide than in the same period in 1974. Sentry Abstract personalized and efficient title insurance service to Spanish speaking people Ticor attributed the earnings re­ Open in Reading residing in the Greater Miami area. covery to the upturn in the national economy affecting its major- opera­ Sentry Abstract Company, a new The new department will place bi­ tions in title insurance, financial print­ firm providing land title insurance lingual persons in positions involving ing, and employee relocation services.

TITLE NEWS 67 meeting t•metable

January 18-21, 1976 June 12-15,1976 September 9-11 , 1976 National Association of Home Builders New England Land Title Association Minnesota Land Title Association Dallas Convention Center Jug End Inn Maddens Lodge Dallas, Texas South Egremont, Massachusetts Gull Lake , Minnesota

March 21-24, 1976 September 9-11, 1976 ALTA Mid-Winter Conference June 13-15, 1976 North Dakota Land Title Association The Greenbrier New Jersey Land Title Dickinson , North Dakota White Sulphur Springs , West Virginia Insurance Association Seaview Country Club Absecon, New Jersey September 17-19, 1976 April 1-3, 1976 Missouri Land Title Association Oklahoma Land Title Association Marriott Sheraton Skyline East St. Lou is, Missouri Tulsa, Oklahoma June 17-19, 1976 Land Title Association of Colorado Steamboat Village Resort May 2-4, 1976 Steamboat Springs, Colorado September 18-21 , 1976 Iowa Land Title Association Indiana Land Title Association Holiday Inn Rodeway Inns-Airport Amanas, Iowa Indianapolis, Indiana June 17-19, 1976 Michigan Land Title Association May 6-9, 1976 Bay Valley Inn September 23-24, 1976 Texas Land Title Association Bay City, Michigan Nebraska Land Title Association Hilton Inn Omaha, Nebraska Fort Worth , Texas

June 17-19, 1976 May 13-15, 1976 Oregon Land Title Association September 23-24, 1976 New Mexico Land Title Association Salishan Lodge Wisconsin Land Title Palms Motor Hotel Gleneden, Oregon Association, Inc. Las Cruces, New Mexico The Concourse Madison, Wisconsin June 6-8, 1976 Pennsylvania Land Title Association July 16-18, 1976 Seaview Country Club Idaho Land Title Association October 16-20, 1976 Absecon , New Jersey Sun Valley, Idaho ALTA Annual Convention Olympic Hotel Seattle, Washington June 6-11, 1976 Nat ional Association of Insurance August 5-12, 1976 Commissioners American Bar Association Annual Meeting Atlanta, Georgia October 25-27, 1976 Mortgage Bankers Association of Ameri Fairmont-Roosevelt ca San Francisco New Orleans, Louisiana Hilton San Francisco, California August 12-14, 1976 June 10-12, 1976 Montana Land Title Association Colonial Inn Utah Land Title Association November 14-18, 1976 Helena, Montana Salt Lake Hilton National Association of Realtors Salt Lake City, Utah Houston, Texas

June 11-12, 1976 August 20-21, 1976 South Dakota Land Title Association Kansas Land Title Association November 14-19, 1976 Towne House Motel Ramada Inn United States League of Savings Associations Sioux Falls, South Dakota Manhattan, Kansas New York , New York

68 JANUARY 1976 Tell Your Story More Effectively . with these ALTA Educational Aids (All orders plus postage; write Business Ma nager, ALTA, 1828 L Street, N.W., Washington, D.C. 20036)

HOME BUYER: HORSE SENSE CLOSING COSTS AND YOUR PURCHASE OF A AMERICAN LAND TITLE ASSOCIA­ HELPS! A concisely-worded direct HOME. A guidebook for home buyer use in learning TION ANSWERS SOME IMPOR­ mail piece that quickly outlines obout local closing costs . Gives general pointers on TANT QUESTIONS ABOUT THE title company services. An attrac­ purchasing a home ond discusses typical settlement TITLE TO YOUR HOME. Includes tive promotional item at $8.50 sheet items including land title services. 1-11 doren, the story of the land title industry. per 100 copies; designed to fit in a $2 .25 per doren; 12 or more doren, $2.00 per $23.00 per 100 copies of the book­ No. 10 envelope. doren. let.

THINGS YOU SHOULD KNOW ABOUT HOME LINCOLN LO~T 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 t itle 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. $7 .00 per 100 copies. $6.00 per 100 copies. cover. $23.00 per 100 copies.

(RIGHT) BLUEPRINT FOR HOME BUYING. Illustrated booklet contains consumer guidelines on important aspects of bluepr nt home buying. Explains roles of vari­ ous professionals including broker, for attorney and titleman. $24.00 per hundred copies. !RIGHT) ALTA home FULL-LENGTH FILMS: " BLUE­ buying PRINT FOR HOME BUYING." Col ­ orful animated 16 mm. sound film. 14 minutes long. with guidance on home selection. financing, settle­ ment. Basis for popular booklet mentioned above. $95 per print. " A PLACE UNDER THE SUN ." Award winning 21 minute animated 16 mm. color sound film tells the story of the land title industry and its services. $135 per print. American Land itle Association