OffiCIAL PUBLICATION

VOLUME XXXIV NOVEMBER, 1955 NUMBER II TITLE NEWS 0 fficial Publication of THE AMERICAN TITLE ASSOCIATION 3608 Guardian Building-Detroit 26, Michigan Volume XXXIV November, 1955 Number 11

Table of Contents Page

Report of National President...... 4 Lawrence R. Zerfing

Bankruptcy, Land Titles and...... 7 Judge Carl D. Friebolin

What Does the Mortgagee Expect of Title Insurance...... 15 W. Carroll Keesey

Abstracter-Title Insurance Relations ...... ·-·········· ...... 21 A PANEL Gordon Gray J. Mack Tarpley A. B. Wetherington Percy I. Hopkins, Jr. Marvin Wallace R. W. Stockwell Robert J. Jay George E. Harbert, Moderator

Training Program Activities, Surveys Relating to Same and Application...... 45 . Ernest J. Loebbecke

Legislative Committee, Report of...... 50 'Wa/lace A. Colwell, Chairman

:The Escrow Department, Efficiency and Perfection In ...... 59 A PLAYLET John B. Waltz W. I. Diefenderfer Elmer S. Carll James M. Hart E. M. Frankhouser Joseph J. Hurley Gordon M. Burlingame Andrew Sheard Preston D. Brenner, Director Table of Contents (con't)

federal Tax Liens ...... 62 David E. MacEllivan (Thomas J. McDermott)

Good Public Relations ...... 74 Carroll R. West '

Grievance Committee, Report of...... 79 'I Mortimer Smith, Chairman

Roll of Honor...... 80

[ 2] MORTON McDONALD National President, American Title Association; President, The Abstract Corporation, DeLand, Florida

[ 3] Proceedings of Annual Convention (Part I) American Title Association Cleveland, Ohio-September 25-29, 1955 To Be Continued in December, 1955, lsme

REPORT OF THE NATIONAL PRESIDENT

LAWRENCE R. ZERFING President, Land Title Insurance Company, Philadelphia, Pa.

This assembly constitutes the the past ten years have been phenom­ Forty-ninth Annual Convention of enal and new equipment is being The American Title Association and constantly made available. This is closes a year of considerable title of extreme importance because of the activity throughout the entire coun­ difficulty which exists in securing try. It marks a continuation of growth and retaining competent help. As a and development which has existed result, mechanical processes must be for some few years and which shows used wherever possible. Much of the no real signs of abating and, indeed, latest and newest equipment is on we all hope there will be no abating. exhibit at this Convention and the In favor of such probability is the time spent studying those exhibits fact that the number of persons gain­ will be time profitably spent. fully employed is at an all-time high; On this point, I can report that the wages are also high and these two Committee on Plants and Photogra­ conditions help the market for real phy are well along with the consoli­ estate which, in turn, creates business dation of information secured over for our industry. Although tighter the past years; when entirely com­ credit has affected the mortgage pleted, which should be within the market somewhat, there is no indica­ next few months, this will prove a tion that construction in dollar value valuable reference work for informa­ will be lower in 1956 than in 1955; tion on any mechanical processes rather, there are some indications used or apparently usable in -our that aggregate construction of all industry. types may have a slight increase over The scarcity of qualified help points 1955. It must be conceded that the up the necessity for formalized train­ sudden illness of President Eisen­ ing or instruction procedures. Such hower may result in temporary plans, although they would be costly lessening of confidence, but our if operated by individual companies, economy is basically sound so that could well lend themselves to de­ the upward trend should not be long velopment by local or regional com­ interrupted. I know I speak for all binations of several companies. There of us when I say we sincerely hope have been some discussions of this for his early recovery. subject but I do not believe much In our industry, improvements in has been accomplished in a practical mechanical equipment and photo­ way along these lines. I commend graphic reproduction processes over this to you for consideration in an [4] effort to develop personnel and, what company, for instance, to list as many is just as important, to make our as six or eight officers you can well industry an attractive one to ambiti· understand what is going to happen ous and intelligent young people com· to the size of the directory. Size, of mencing their careers. course, adds to the cost and I don't During the year business activity think it adds to the value to have has been so good that there has been excessive listings of officers by each very little material received at head· company. quarters, either in the way of No.2. The other publication issued criticism or contructive advice; that by us which is of benefit to the mem­ is, of course, good for the various bers and can be of considerably m,embers making up the organization greater benefit is our monthly publi· but it does not make for the very cation of "Title News" that contains best in organizational activity. interesting articles and matters that One of the greatest services that are very informative. We in the in· cah be rendered to the members is dustry have become rather well the rapid production of the annual acquainted with each other so that directory. As you know, that di· the magazine could well afford a rectory should ordinarily be available greater means of exchanging interest­ shortly after the first of the year. ing information pertaining to the It is unfortunate that this year the membership; I mean company activi· . directory has not been delivered at ties, for instance, such items as an early date. Headquarters has been mergers, consolidations or other making every effort to get this di· changes such as movings, new build· rectory into circulation and, as a ings and material of that type. It matter of fact, as far back as Febru· could also include such items as ary of this year the proofs were peculiar losses or claims and peculiar available to the members showing title problems. All these could be set the way in which the various listings out in "Title News" and in that way would appear in the directory. A exchange that information among all number of members in submitting the members of the organization. their information did so on a basis Some such items appear in practical· which was considered inaccurate and ly every issue, but this information incorrect by other members. As a can only be made available by the result, the correct information was members. I suggest this is a job for not available until a short time ago each State Secretary to forward such so that the directories are in the pro­ information to National Headquarters cess of being issued at this time; ad· for inclusion in the magazine. The mittedly, too late to be of much members can very greatly assist in practical benefit. As a result, our making the publication a much better membership has lost the advantage one; the officers cannot do the whole of that publication during the past job by themselves. nine months of this year. It is im· Some few years ago you will re· perative that the Board of Governors member we set up a Grievance Com­ fix p.n absolute deadline in which the mittee and a few complaints have directory must be issued and it must reached this committee. Some hold be with the understanding that the to the view that the committee can· information then available will be not proceed and take jurisdiction used and, if that is found to be in­ over these cases becaus.e the duties correct or inaccurate, there must be and obligations were not spelled out a correction of that information in clearly enough in the article setting the next year's directory. up that committee. It is important No. 1. The Board should spell out, that the Board of Governors spell as far as possible, the number of out very clearly and definitely the du· lines which should be allotted under ties and obligations of the Grievance each company name; perhaps there Committee, liberalize the methods should be a limitation of number of under which it can operate so that officers listed or some other informa· we can exercise the proper control tion as well because if we permit one over the few members who are not [ 5] operating in the way that we know financial strength to assure protection is a proper way in which to operate. to the public. It is vital that either the Board or In the long run attempts by one a special committee undertake this group, or a small section of one job and undertake it promptly. If group as I believe often is the case, we don't do it we will find a continu­ whether that group is industrial or ation of those wrongful acts which professional, to hamper needed ac­ is going to be harmful not only to the tivities or services, must fall of their organization as a whole but is going own weight as being adverse to the to be harmful to every member of public interests. the organization. In the cases of controversy between No. 3. There is no apparent change the Bar, local or otherwise, and t.j:le with respect to our relations with the title companies, I earnestly hope these Bar; conflicts exist in several areas can be settled and will be settled, by but these conflicts arise because of calm consideration of all the factors conditions peculiar to those areas involved, recognition by both si~es and not because of general antagon­ of the table of the rights and the ism toward the industry. Many of our privileges of the other; and by ac­ members are members of the Bar and ceptance from both sides that the of Bar Associations and as such con­ public interest is paramount, and scientiously endeavor to live within must be served-first, last and all the canons of the legal fraternity. the time. In the -natural functioning of the During my term of office I attend­ laws of economics, corporate entities ed State Conventions in a number of have come into the picture to furnish states and was greatly impressed by indemnity which, under no conceiv­ the activity of those associations; able circumstances, could be furnish­ they are all trying to do a good job ed by an attorney in private practice. and they serve their members well. these Of particular interest is the Wash­ If there be no public call for Title Association which these contracts of · ington Land protective services, reached its fiftieth milestone this indemnity and insurance, and the fall year. A few have passed that and as companies which issue them, will ourselves of lack of a National Association we by the wayside because that milestone next year. support. will reach public My sincere appreciation for the many If there be need and call for their courtesies extended to me while visit­ services and products, the public will ing these various conventions. demand and continue to demand de­ To Jim Sheridan and Joe Smith of livery of these. National Headquarters, the Officers, Attempts to hamper or prevent the Committee Members and others who delivery of such products and serv­ so willingly gave their time and ices to the public will not be gracious­ effort to the activity of the Associa­ ly accepted by the public. Witness the tion, my sincere appreciation. I doubt cotton gin and attempts to prevent whether there is an organization in its use. It is only one of many I could which the acceptance of committee use to illustrate my point. assignments were so freely givei1 as Definitely there is need for avoid­ in our own Association and such co­ ance of legal conflicts between operation is most gratifying. groups- the attorney in private No effort was spared to make this practice on the one side and on the Convention one of the best and· you other good title insurance companies, will determine for yourselves whether of repute, of honor, with sufficient the effort was successful.

[ 6] LAND TITLES AND BANKRUPTCY

JUDGE CARL D. FRIEBOLIN Referee in Bankruptcy United States District Court, Northern District of Ohio, Cleveland, Ohio

It is customary, as you must know, parently, they regard it as an esoteric for a speaker in his opening remarks subject complicated to the point of to say something flattering of his mysticism. aj.Idience. If you have any notion that It occurs to me that at the present I'm going to follow that banal cus­ time, with bankruptcy cases in the tom, you're right. country exceeding in number any­ The fact is that a number of years thing before recorded- close to 65,000 ago I had an extraordinary - a is the probable number of cases this Homeric - experience. I made a year- you might be interested in a speech on the subject of bankruptcy brief explanation of the Bankruptcy to the Ohio Title Men, and- mirabile Act. It will give you perspective and dictu- they gave every evidence of should help you to understand more knowing what I was talking about. readily that aspect of bankruptcy in Ever since then, I have had the which you are peculiarly interested. warmest feeling, not to say an ex­ Who knows? The time you save may travagant admiration, for the dis­ be your own. criminating intelligence of title men. I say this although your publica­ I suppose that I could account for tion informs me that Title Insurance my being asked to speak to you to­ Companies are in clover and having day, by what we Presbyterians call their best year. Incidentally, I have predestination and predetermination. read also that some entirely new But, remembering that one of my kind of insurance is being written. It audience at that earlier meeting was has been said that this new insurance my loyal friend of many years, Wal­ works this way: If you are drawing ter Belding, I suspect that you will unemployment compensation and the be safe in blaming him for my being Unemployment Commission notifies here. you that they have a job for you, the It is true that I have been in the insurance company defends you. Bankruptcy Court an unconscionable Most people don't even know what number of years, but that doesn't kind of animal a referee in bank­ argue that I know all about titles. ruptcy is- they may be pardoned for What I shall say about that, should thinking he's the third man in the not be received by you as divine ring, where honest creditors battle revelation. In that particular field, it out with indifferently honest you are the experts. So, it is my bankrupts. Under the Bankruptcy guess that this afternoon I am carry­ Act, the U.S. District Court is also ing hair oil to Italy. If you should the U.S. Bankruptcy Court. And the disagree with me, I'll be tempted to District Judges appoint Referees in take it all back. The truth, as you Bankruptcy who then, as a bankrupt­ know, is manysided, and I've lived cy court may administer all bank­ long enough to know that the world rupt estates, with the right of formal is round. appeal to the Judges. Scanning your Association's publi­ Bankruptcy is one method of ad­ cation: "Title News", for many years justing or liquidating insolvent es­ back, I find that of the hundreds of tates, and differs radically from other speeches published, there are very, methods, such as assignments for the very few which discuss bankruptcy benefit of creditors, receiverships and as it affects your business. In truth, corporate dissolution proceedings. En­ I have discovered that most business­ acted by Congress, it is uniform in men have a very hazy, often a dis­ procedure throughout the country, torted, notion about the subject Ap- and it is the only court which has [ 7] the power to impair the obligation is in every case someone who is vest· of contract by granting the debtor a ed with the same title, rights and discharge of his debts. powers as a trustee; it may even be There has been one underlying the debtor himself who however, is feature of bankruptcy ever since it then designated as the Debtor-in-Pos­ was invented way back in the 15th session; as such he is in law a trus· Century: there is one person in every tee with the same title and powers case who is delegated to act as the as a trustee. representative of all creditors and Hereafter, when I use the word who administers the estate for all of trustee, I include his equivalent in a them; today we call him a trustee. Debtor Relief proceeding. And when To a degree, the entire administration I use the word bankrupt it wm revolves about the trustee: his title, generally include a debtor. his rights and powers which he It might be stated here that in exercises for the benefit of all some Districts, no trustee is appoint· creditors. ed in strict bankruptcy cases where But we do not have a trustee with no creditor appears and no assets are that specific title in all cases in the scheduled. (This is permitted by a bankruptcy court. This is owing to General Order of the Supreme Court the fact that today the Bankruptcy (G. 0. 15) which, I suggest, is con· Act comprises two general classes of trary to the express provisions of proceedings: (1) Strict or straight or the Act). In such cases, there being old fashioned bankruptcy proceedings no trustee and no equivalent officer, and (2) Debtor Relief proceedings. there is no opportunity for the vest­ (1) Strict bankruptcy proceedings ing or assertion of the title, rights involve the adjudication of a debtor and powers of a trustee. as a "bankrupt"; the election by With that preamble let us consider creditors, or appointment, of a trus· the right, title and powers of a trus­ tee; the sale and liquidation of the tee (or his equivalent in Debtor Re­ property, distribution of the fund, lief proceedings). and to the so-called honest bankrupt, First- and of chief interest to you a discharge of his debts except -the trustee is vested by operation certain kinds of debts such as frauds, of law with the title of the bankrupt taxes and alimony. This is the kind to all property wherever situated of "bankruptcy" which is by far the which the bankrupt (or debtor) most common and is usually the kind could, by any means, transfer, or referred to simply as "bankruptcy." which could be levied upon by his (2) The Debtor Relief proceedings creditors, under state law, except - of which there are several-are de­ however, property which by the bank· signed to avoid liquidation and to ruptcy court holds to be exempt, permit the debtor to retain his proper· under state law, as a rule. He steps ty. The debtor although he files his into the shoes of the bankrupt. And­ petition in the Bankruptcy Court, re­ this is important- the trustee (or his mains a "debtor" and is not adjudicat· equivalent) is so vested with title, ed a bankrupt; he is permitted to as of the date the petition-voluntary offer some form of adjustment of his or involuntary, in strict bankruptcy debts by way of an Arrangement or or Debtor Relief- is filed. I say this a Plan of Reorganization which, if is important because rather frequ_ent· accepted by a majority of creditors ly you will hear it said that the and confirmed by the court, acts as trustee's rights date as of the date of a discharge of the old debts and cre­ adjudication; there can be no ques· ation of a new, adjusted liability. tion about that since 1938 when the Among these the best known perhaps Chandler Act was passed which was is Corporate Reorganization formerly a rather complete revision of the law. known as 77B. While it is said that the date that In these Debtor Relief cases we the petition is filed-also called "date do not always have a trustee by of bankruptcy"-fixes the liabilities name. But to remember is, that there as well as the assets and title of a [ 8] bankrupt (or debtor), there are a proceedings is not constructive notice few exceptions- and these exceptions and does not affect the title of a bona are of particular interest to you. fide purchaser from bankrupt unless (1) Since 1938 when the so-called a certified copy of the bankruptcy Chandler Bankruptcy Act was passed, petition, or of the adjudication or of it is the law that the trustee (or his the approval of the trustee's bond is equivalent) also takes title to any filed with the recorder or other property-not exempt-which vests officer of such county, authorized to in the bankrupt within six months receive such certificate. (Sec. 21g of • of the date of the filing of the pe­ Act). (By the provisions of the Act, tition by bequest, device or inherit­ the trustee has the duty to record a apce--windfalls we sometimes call certified copy of the approval of his them; and it vests in the trustee as bond in every county where bankrupt of the date when it vests in the bank­ owns real property (Sec. 47e). Where rupt-but of course, always within bankrupt owns property in a foreign si~ months of the date of bankruptcy. country, the bankrupt is required to And it vests free of any transfer by, execute a sufficient transfer thereof or suffered by, the bankrupt after to the trustee. (Sec. 7a(5)). bankruptcy. (Sec. 70a(8)). It has been (3) There is another exception to held that an assignment by the bank­ this general rule: that title passes rupt prior to bankruptcy of his ex­ at the date of bankruptcy. It seldom pectancy is valid. Re: Barnett (2CA arises. Since it affects only personal '42) 128 F. 2d 567. I assume in that property I merely mention it in event, that such transfer might be passing. (Sec. 70d of the Act.) vulnerable as a fraudulent transfer The trustee (or his equivalent) or other transfer of property voidable under the Act. in addition to taking whatever title to property held by the bankrupt, has Similarly, the trustee is vested, as rights which may result in bringing of the date of bankruptcy, with title property into the estate. He succeeds to property in which the bankrupt to all the rights any general creditor has an interest "by the entirety" and may have by reason of his being which, within six months after bank­ merely such creditor of the bank­ ruptcy becomes transferable by the rupt. (Sec. 70e). Those rights are bankrupt. (Sec. 70a(8)). Ohio and primarily, if not exclusively, those many other states do not have estates available to creditors under the state by the entirety. In the case of ten­ law, e.g. the right to set aside ants in common or joint tenants, title fraudulent transfers by bankrupt as would vest at bankruptcy of any in­ provided by state statute; suit is terest the bankrupt could convey on usually required to be brought with­ that date. in four years. Also, to set aside void­ Somewhat similarly in the case of able preferences as provided in vary­ contingent remainders (unless, as in ing language by state statute; the Ohio, such remainders are alienable limitation here is also about four and the trustee takes title at bank­ years. Also, actions to avoid Bulk ruptcy) executory devices, rights or Sales; usually creditors must act possibilities of reverter and like in­ within 90 days after the sale. (See terests in real property which are Sec. lle of the Act-limitations). not assignable at bankruptcy but be­ Again the trustee (or his equiv­ come assignable within six months alent) stands in the shoes of a thereafter, the trustee takes title. hypothetical levying creditor, that is, (Sec. 70a(7)). the filing of the petition in bank­ (2) Another exception relates to ruptcy is, in effect, an omnibus levy; real property located in a county it creates a lien by legal or equitable other than the county in which the proceedings on bankrupt's property. court records are kept of the par­ He also has the rights of a hy­ ticular pending bankruptcy proceed­ pothetical judgment creditor with an ing. With respect to such property, execution returned unsatisfied. There the commencement of bankruptcy need not be at bankruptcy an actual [ 9] creditor having these rights. (Sec. ent, within four months of the date 70c). of bankruptcy, if the creditor had By reason of this provision, the reasonable cause to believe that the trustee (or his equivalent) may avoid bankrupt was insolvent. transfers by the bankrupt, or liens This section is frequently relied upon his property, which by state law upon by trustees to recapture proper­ require recording or possession for ty or money, where the bankrupt has validity against a levying creditor within four months of bankruptcy and there is a failure of compliance given security for, or paid, a perfectly by the creditor with this requirement honest but pre-existing debt. Al­ prior to bankruptcy. Examples are: though you find courts speak of unrecorded mortgages and condition­ "illegal preferences" and "fraudule t al sales contracts, pledges without preferences" the fact is that there is possession, assignment of accounts no illegality or fraud involved in se­ receivable where by state law some curing or paying an honest debt. The filing or other act is required for purpose of this section is to establi ·h validity against levying creditors and a sort of retroactive moratorium of these have not been complied with four months before bankruptcy with­ prior to bankruptcy. in which there may be no diminution The fourth power is the right­ of the bankrupt's estate. This section, several rights- provided expressly in since its amendment in 1950 is pretty the Bankruptcy Act itself. (a) Thus, tricky. Reading it, one gets an ap­ in the Act itself regardless of state paling sense of anarchy. A noted law, the trustee is empowered to set author commented that "the lan­ aside fradulent transfers made with· guage of this section is of a kind in one year of bankruptcy. (Sec. 67d). which would have astonished and de­ This particular section of the Bank­ lighted Gilbert and Sullivan." So I ruptcy Act is substantially the Uni­ shall not explain it further, but shall form Fraudulent Transfer Act adopt­ be glad to answer questions in re­ ed in some states. Mind you, I have gard thereto. already referred to the trustee's right Under this section a mortgage on as successor to general creditors to real property given to secure a pres­ invoke the fraudulent transfer sta­ ent loan prior to four months of tutes of the particular state. The bankruptcy, might be avoided as a limitation for bringing suit under preference if the mortgage is not these statutes is usually four years recorded until a date within four or more. (See Sec lle of the Act). months of bankruptcy on which re­ I might interject here, that in your cording date the loan clearly was an magazine some months ago you were antecedent debt; and if on the record­ was told that by reason of this section­ ing date the bankrupt mortgagor the Bankruptcy Act's fraudulent insolvent and the mortgagee had transfer section with a one year lim­ reason cause to believe it. This would itation- no title could be found clear be true, of course, only if by state for one year after bankruptcy. law such mortgage had to be re­ corded for validity against bona fide Even if this were a valid conclusion purchasers. I can't understand why he limited One more right and power which it to one year, when the trustee has the trustee is given by the express the benefit of possibly four years­ terms of the Act: He may avoid at least two years- or more under any lien obtained upon bankrupt's the state statute to attack the same property by execution, attachment or fraudulent transfers. (Sec. lle). by any other form of judicial action Again, by the Act itself, the if such lien is obtained within four trustee (or his equivalent) may avoid months of bankruptcy while the preferences (Sec. 60c and b) that is, debtor was insolvent, that is, the transfers by a bankrupt to secure, debtor's assets (including exempt or payments upon, antecedent debts, property) were worth less than the made by the bankrupt while insolv- amount of his liabilities. This is not a [10] preference, except perhaps in a is closed and the trustee discharged, general sense. A fraudulent transfer the only way to divest the trustee of suit filed within four months would title is to reopen the case by motion constitute such a lien; also a general and payment of a $45.00 filing fee; receivership or a judgment lien. But have a new trustee appointed and a foreclosure suit of a consensual have him dispose of it in one of the lien would not be a lien obtained by three ways I have suggested. Al­ judicial or legal action. Although no though this is practically a new ad­ foreclosure suit may be filed after ministration with a new successor bankruptcy, if a foreclosure suit is trustee, the title dates back to the pending at the date of bankruptcy, filing of the original case. In the although the bankrupt still has title meantime, although the naked- if and the trustee is vested with that you will excuse the expression-title title, the Bankruptcy Court will not was in the bankrupt, it had vested in take jurisdiction except, to issue a the trustee in the original case. The t~'nporary restraining order in order new, the successor, trustee will now to permit the trustee to assert his get the benefit of the unearned in­ rights in the foreclosure suit. Some· crement, if any, which accrued to the times by consent of the parties, the property in the meantime. Bankruptcy Court will take jurisdic· I said that the trustee may tion. dispose of the title by setting the Now that you have a general property aside as exempt. If he files analysis of the trustee's title, rights a report setting certain property and powers, let's get back to his title aside as exempt and the report is which vests in him as to all bank­ approved by the court, it revests title rupt's property- whatever that title in the bankrupt. may be. If claimed as a homestead we, in Having title, what can the trustee Ohio at least, run into difficulty. In do with the property?- He is re­ another place I have fully discussed quired to dispose of it somehow. this subject (send a stamped en­ Briefly, he may (1) set the property velope and I'll tell you where). Brief­ aside as exempt, or (2) abandon any ly, the Ohio statute-and perhaps interest in it or (3) sell it. Unless he other states-exempts to husband disposes of it in some way, he will and wife living together, a home­ retain it, even after the case is closed. stead of the value of $1,000.00 or less (If no trustee is appointed in strict (Rev. Code Sec. 2829.80). In bank­ bankruptcy, the title will not leave ruptcy, for the purpose of this ex­ the bankrupt.) emption, it is not the value of the property occupied as a homestead If there are executory contracts, in· that is considered, but the bankrupt's eluding unexpired leases of real equity in it. If his equity in it is property, which bankrupt- as lessor $500.00 or less, the property- the fee or lessee, or as promisor or promisee - will be set aside as exempt. (In re -could assign, the trustee has the op­ Hewitt (D.C. 0. '17) 244 F ed. 241). tio~;~. to assume or reject them within Keeping in mind that a homestead 60 days after adjudication. If not as­ exemption is- in sumed within that period they will Ohio- merely a right of occupancy, if be deemed rejected. (Sec. the homestead 70b). And property is worth if rejected it relates back-it more t h a n will be $1,000.00, if it regarded as rejected is not divisible, it is, as of the date by our state statute, to be appraised of bankruptcy (Sec. 63c) ; and the and the yearly rental fixed. Then the promisee (the other party to the judgment debtor- there must contract) may file his claim be a for creditor who has a judgment damages if any, for a in the bankruptcy certain amount-the debtor must pay proceeding for breach of contract. (Sec. 63a(9)). into court upon the judgment the yearly rental fixed by the appraisers, If the trustee does not dispose of but with a deduction of $100.00 for property in some way and the case the year, until the judgment is paid. [ 11] (Rev. Code Sec. 2329.28). Conceding of secured creditors who wish to that bankruptcy preserves the right foreclose. In such instances the lienor, of exemptions prescribed by the state (mortgagee), should file an applica­ statute, how can such a statute be tion for either (1) an order by the followed in bankruptcy? For how court directing the trustee to proceed long could we require a bankrupt to with a sale of the property or to pay the rental? Until what sum is abandon any interest thereon; or (2) paid upon what judgment? Bankrupt­ for authority to the mortgagee or cy is not a · judgment for any other lienor to file a foreclosure suit amount. It seems to me that Judge subject to further order of the bank­ Killets of this District has taken the ruptcy court. only sensible and practical view in Just another word about the trus­ this situation: Regard the homestead, tee's abandonment of property. if valued over $1,000.00, the same as (There is nothing in the Bankruptcy an encumbered homestead property, Act upon the subject.) There are two in which case the judgment debtor kinds of abandonment: (1) Forn1al (bankrupt) is entitled to receive and (2) Informal. Formal abandon­ $500.00 from the sale price received ment is by express order of the court for the property. (Re Crum (D.C. 0. abandoning all interest of the trus­ '13) 34 ABR 586). Our title companies tee in the property. A certified copy encounter difficulty when trustees of the order will revest the bankrupt are not careful in setting aside these with title "as is." exemptions, to distinguish a home­ Incidentally, I find no warrant for stead exemption-a right of oc­ orders sometimes made in bankrupt­ cupancy with the title to the property cy, abandoning property to somebody in the trustee- and exemption in lieu -to a mortgagee for instance. To of a homestead: property set aside "abandon" means to foresake, to absolutely at $500.00 in cash. drop, let go- to "leave it lay". It If not set aside as exempt, the means that there is to be no ad­ trustee might get rid of his title by ministration at an of the property abandoning any interest in the by the court. If an order is made property. That is to say, if it is of abandoning property to somebody, it practically no value; if the particular is in effect a transfer of the title to property is encumbered beyond its somebody- in effect a sale without value there would be no point in price. That is administering the selling it, because there would be no property not abandoning it. surplus for general creditors. Strict An informal abandonment means bankruptcy is primarily for the bene­ that the bankruptcy court records fit of unsecured creditors and the show no order of abandonment of trustee should spend no time or the property, but it appears that money respecting secured creditors certain property was listed in bank­ unless there will be a benefit to the rupt's schedules, and the trustee did estate, that is to unsecured creditors. nothing about it, and the case It is true that in some instances was closed without any formal dis­ the secured creditors themselves pre­ position of lt in any way. Knowleage fer to have the property sold in bank­ by the trustee of the property is es­ ruptcy because it is more expeditious sential to an inferred intention to and our public sales have proven un­ abandon. When the question of title usually well conducted and produc­ arises after bankruptcy, the person tive of good prices. In such instances claiming title to such property al­ the trustee may be authorized to sell legedly abandoned informally by the at the expense of the secured credit­ trustee, will be put to it to introduce ors and without any charge against evidence of such informal abandon­ the bankrupt estate. ment. Quite frequently, a title com­ It sometimes happens that the pany will not pass title to the pur­ trustee takes an unjustifiably long chaser from a former bankrupt (or time to make up his mind about debtor) because the trustee in bank­ selling the property, to the annoyance ruptcy did not, as appears from the [12] record, dispose of certain property order of confirmation of the sale, by then owned by bankrupt, whether by the court, cures all irregularities. exemption, sale or abandonment. It (2 ) Sales free of liens mean that might even not have been scheduled. the trustee has filed a petition to sell In such instances, in order to clear (real) property therein described, the title, the closed bankruptcy case with certain alleged lien claimants must be reopened by motion as I have named as defendants or respondents. already described it; unless, of course He asks that these alleged lien claim­ , the title company is otherwise satis· ants (defendants) be required to ap­ fied that there was an informal pear and set up whatever lien or in­ abandonment. terest they claim in the property or 'If not set aside as exempt and be forever barred from asserting not abandoned, the trustee to get rid any; the lien, if any, to be trans­ of :he property which has vested in ferred to the fund. hir:n, must sell it or, possibly, dispose Of course, due process requires of it to someone by an order approv· reasonable notice of hearing on a ing some sort of compromise which fixed date, served upon the alleged involves a transfer of title from the lien claimants. The Act and General trustee to another~it might even be Orders are silent on the subject. to the bankrupt. In this District we have a rule There is a rule in strict bankruptcy which requires a ten day notice of that the trustee should not sell hearing on such petition to sell free property unless there is a probability of liens to all of the lien claimant de­ that there will be a surplus over the fendants. If they fail to appear or liens-that is, that there is some answer, they may be forever barred gain to unsecured creditors. There from asserting any claim or lien upon the property. If they file a cross pe­ is no lack of the court's jurisdiction tition setting up a lien, hearing there­ involved; the sound discretion of the on will be had and the validity and bankruptcy court is invoked. If there is an abuse of discretion, the remedy amount, if valid, are determined, as is by appeal. wen as their priority. The sale may be ordered free of any one or all There are two kinds of sales in liens. I find no warrant for the state­ bankruptcy: (1) Sales subject to liens ment that if sold free of a superior and (2) Sales free of liens- or free lien, the sale will also be free of all of some and subject to others. Strang· liens, inferior or junior thereto. ly there is practically nothing in the At this hearing, as a rule, all liens Bankruptcy Act about sales, but the will not be determined, but the pe­ courts have now clearly established tition to sell will be granted, the that the Bankruptcy Court may sell property ordered sold free of some property free of liens- even free of or all liens of the parties named de­ tax liens including Federal Tax liens fendants, and such liens, if any, trans­ - if the lien is transferred to the pro· ferred to the fund realized from the ceeds of sale. sale of the property. The Supreme (1) Sales subject to liens are al­ Court has said in effect, that as a ways permissible. No lien creditor rule, there can be no complaint by a may complain. The trustee merely secured creditor if his lien is trans­ sells whatever title or interest he may ferred to the proceeds of the sale of have in the property as successor to the property involved. whatever bankrupt may have- we However, it is still true that a sometimes call it his equity. As in all secured creditor who might not be sales in bankruptcy, the sale is by paid in full out of the proceeds of the the court. It is the confirmation of sale, may object to a sale free of his the sale by the court of the trustee's lien on the ground that there is no "sale", that operates as a transfer reasonable prospect that the sale of and gives the equitable title to the the property will result in a surplus purchaser. The trustee's deed gives for general creditors. As said before, legal title. (Sec. 70g of the Act). The the court in its sound discretion may [ 13] nevertheless order the sale free of of bankrupt's spouse in property of liens if in its judgment there might the bankrupt depends upon whether, be a surplus, possibly because some in the particular state, creditors may lien not yet determined might be compel such spouse to accept cash found invalid. If it develops that not satisfaction for such interest. (Sec. sufficient is realized to pay such lien, 2 (7) of the Act). As I understand the question of costs to be paid at the the law of Ohio, this can not be done expense of the lien claimant is a unless the spouse consents or the much disputed question, with which spouse has joined with the bankrupt you are probably not concerned. in executing a transfer, such as a The power of a bankruptcy court to mortgage, which is before the court sell free of liens is a great conveni· for determination and enforcement. ence and operates to expedite ad· (14 0. Jur. P 705). Incidentally, the ministration with the disputes rele· inchoate dower right of the bankrupt gated to the fund. It is the only court is not an estate to which the tru tee I believe in which Federal Tax liens takes title, at least in Ohio. .c may be promptly and finally disposed The trustee takes title to leases of; and in these days such liens are and land contracts. But since these frequently present. In the state court, involve executory contracts, the trus· the government is entitled to 60 days tee, unless prevented by valid terms for answer. And if the Federal Tax of the lease, has the option of as· lien is first in priority, a foreclosure suming or rejecting them within 60 sale must be made subject to the tax days of adjudication. (Sec. 70b). lien. If the Federal Tax lien is not The Act expressly provides that a first, then the sale of the property provision in a lease, to the effect that can not be final for one year within an assignment thereof by operation which the Government may redeem of law, as by bankruptcy, shall the property; in other words, it may terminate it or give the option to find a buyer for more money. (28 terminate it, is enforceable; although U.S.C.A. Sec. 2410). You will hear a prohibition against assignment from a later speaker, all about generally is not. (Sec. 70b) . Federal Liens. If the trustee assumes the lease of Although some don't agree with a bankrupt lessee, he may sell it. And me, I don't believe the Bankruptcy if he does, he will not be liable for Court has jurisdiction to sell real any subsequent breach by the buyer property located in another state free -assignee. (Sec. 70b). of the lien of a non-resident lienor If he rejects the lease of a bank­ unless such lienor in some way con· rupt lessee, it is rejected as of the sents to jurisdiction. But the trustee date of bankruptcy. (Sec. 63c of the may apply and obtain ancillary bank· Act). The bankruptcy being an anti· ruptcy proceedings in the foreign cipatory breach of the lease and not court where the real property is being assumed by the trustee, per· located. The trustee himself may then mits the lessor to prove any damage in that court file a petition to sell he sustains by the breach, but s.uch such property free of liens no damage may not exceed the amount matter where the lienor resides. (Sec. of one year's rent as reserved in th~ 2a(20)). If, although the real proper· lease (Sec. 63a(9), inclusive of any ty is outside the state, the lienor is security held by the lessor. COlflden a resident and can be served, there is v. Tonton (2CA '44) 143 F 2d 916). jurisdiction. If the property is located In Debtor Relief proceedings it is within the jurisdiction of the Bank· not to exceed tnree years. ruptcy Court, lien claimants may be Question was raised recently by served anywhere and required to set one of our title companies as to the up their liens or be barred. consequence of an abandonment by Of course, there is no difficulty in the trustee of a lease of real property selling real estate located anywhere of bankrupt lessee. It would seem subject to liens. Whether there may clear that this was not an affirmance be a sale free of the inchoate dower of the lease and therefore must be [ 14] deemed a rejection, relegating the sume and sell or reject within 60 days lessor to his claim for damages for of adjudication. If the vendor is the breach. bankrupt and the trustee assumes Similarly, the trustee takes title the contract, he may sell whatever to the lease of a bankrupt lessor, sub­ interest in the property the vendor ject to the trustee's option to assume has. Incidentally, the vendee, at least or reject it. But rejection by the trus­ in Ohio, if he occupies the premises, tee will not deprive the lessee of his might claim homestead exemption. estate unless the lease provides other­ Radford v. Kochman ('24) 27 0. App. wise. (Sec, 70b) 82. If the trustee should affirm and That just about exhausts my s~ll the lease of a bankrupt lessor, knowledge of the subject- if it hasn't or of any property occupied by one already exhausted you. Possibly, I not a title-holder, regard must be had have let my missionary zeal out­ of; the rights of an occupant of the distance your patience. But if so, pr"operty. As you know, when proper­ you will know that it is because I ty is occupied by one not having have in my official position, over the title thereto, it is notice to the world years heard so many take a quick of any rights he may have. If not glance at a bankruptcy problem and exactly constructive notice, at least it confidently reduce it to incoherence. carries a duty of reasonable inquiry I know that title men have a passion - similar to notice of possible ease­ for precision and I'm told by some ments. In such case, a trustee might lawyers that some pursue it with an file a petition to sell free of any lien almost neurotic punctilio. So, If I or interest in the property by the have in some respects failed to occupant, requiring him to set up any achieve a vulgar accuracy on some rights he may have or be barred. technical question of title, I hope Somewhat similarly, the trustee that thereby I have at least con­ takes title to land contracts. Being firmed your superiority in your field an executory contract, he may as- - which I conceded at the outset.

WHAT DOES THE MORTGAGEE EXPECT OF TITLE INSURANCE W. CARROLL KEESEY Vice President-Investments, Fidelity Mutual Life Inmrance Company, Philadelphia, Pennsylvania

Perhaps I should make it clear in I am personally qualified to talk on the beginning that I have not been this subject. When my Brother and I commissioned to speak for Mort· graduated from Law School at the gagees as a group. In fact, I have no State University of Iowa, we hung authority to speak for Life Insur· out our shingle in a prosperous little ance. But I do have authority to Southeastern Iowa County Seat town. spe'ak for my Company which, while There was no Title Insurance Com­ comparatively small, has a mortgage pany operating in that area at the portfolio of approximately 0 n e time. In fact, there was no Abstract Hundred Million Dollars, represented Company there. When an Abstract by more than 14,000 separate mort­ of Title was needed, it was made by gage loans. And when I say that, one of the local lawyers dire'ct from do you realize that this means almos t the County records. Usually, o.f 14,000 separate Title Insurance Poli· course, the Abstract was examined cies? by some other lawyer. Although I hope you will not consider it people were reluctant to consult a immodest of me to say that I believe fresh young lawyer or to "trust Jiis [ 15] advice on most matters, they seemed subject of this talk. However, I trust perfectly willing to permit him to that you will begin to take some in· prepare an Abstract of Title in con­ terest in it and that there may be nection with their real estate trans· something which will be mutually actions-often times the most im· helpful as we go along. portant business transaction of their Certainly we have come a long way lifetime. And so it was that I learned from those bulky, cumbersome diffi· to run titles the hard way. Occasional· cult-to-read Abstracts of Title to the ly, too, some trusting soul would modern, concise Title Insurance come to us with an Abstract of Title Policy. From the standpoint of filing for examination. Usually, we were space alone, the Abstract leaves much able to find some small "flaw in it to be desired. And, in our business, ~t sufficient in the eyes of our client is simply impractical to try and main­ to justify a modest fee. tain a Law Department in Philadel· Subsequently, in the Mortgage phia which would be competent .j.:o Loan Department of my Company, it pass upon countless, complicatM was my duty for several years, to questions in all of the States of the close mortgage loans-both those we Union which might have a bearing were purchasing by assignment and upon the validity of the title in any those we closed direct with our own given case. But any competent title funds. In either case, one of the most examiner can sit at his desk in Phila· important details was the examina· delphia and pass upon an Iowa title, tion of the evidence of title. if Title Insurance is used, for the And so, I think you will agree that simple reason that the Title Insur· I have been close enough to questions ance Company has washed out all of pertaining to titles to real estate to the detail, and has presented him with recognize some of them and to have a standard form that means the same developed a very keen interest in the thing everywhere. whole matter. I should like to congratulate you upon the job you have done. It has I wonder if thete might still be been no mean accomplishment for a few of you who have not yet heard you to gear your operations to the the story of the man who bought ever expanding requirements of the a mule. He had observed this mule real estate and mortgage l o an which belonged to his neighbor- how brokers. The care well it was with which your trained- and he decided examiners have gone into the back· he would like to own that mule. He ground of titles is evidenced by the asked the neighbor how he trained comparatively few losses which you the animal and he said "I use nothing incur. You have the reputation of but kindness and understanding in the settling losses fairly and promptly. training of my mules". So he bought And, you have finally arrived at the mule. The next morning he standard forms which, while perhaps coudn't even get the animal out of not perfect from the mortgagee's the barn. He just planted his feet standpoint, are generally acceptable. and refused to budge. Eventually the I can testify that in my experience, new owner went after his neighbor covering over 25 years with my Com­ -asked if he could come over and pany, we have, with one exception, help him. The neighbor was glad to never found it necessary to make a oblige. When he arrived at the barn, claim under a Title Policy for any­ he took in the situation at a glance. thing larger than an unpaid real He looked around, picked up a three estate tax item that someone had foot piece of two by four and slugged inadvertently missed. And this record that mule a terrific belt right be· shines all the more brightly when I tween the eyes. "Hold on," said his remember that we foreclosed and friend. "I though you said all you sold several hundred parcels of real ever used on this mule was kindness estate in many states without ever and understanding." "That's right," having a purchaser or his attorney replied his neighbor, "but I always raise a really serious objection to the have to get his attention first." title. There isn't much glamour in the Today, most corporate mortgage [ 16] lenders require Title Insurance. They Now, I don't expect you to re­ will not accept the old abstract and member these figures. But a billion attorney's opinion in areas where dollars is still considered to be a lot Title Insurance is available. Yes, you of that stuff and you will remember have come a long way. I have even that the stake of Life Insurance in noticed lately that the old Torrens real estate is huge by any known Systems in some states are being standards. abolished. Some of us never did have In the light of what I have already much confidence in them anyway. said, perhaps you will permit me to But, of course, business has been make some comments with which you brrlsk. Activity in real estate and may not find yourselves in such rr1ortgage loans has leaped to un­ ready agreement as you may have precedented heights. We have all had been with what has gone before. I to work feverishly to keep up with should like to be specific about some onr.ers and to maintain our place in things which I think the mortgagee the competitive race that runs ruth­ expects of Title Insurance- which I lessly on. It is in times such as these think he has a right to expect, if you that corners may be cut, and sloppy please. work become routine. If you are to First, it is my conviction that he maintain the enviable position you has a right to expect a document have attained, it will behoove you to which can be quickly read and under­ look to the details of your business stood; one, too, in which the big print to see that careless work today does does not give it to you and the little not result in unexpected claims to­ print take it away. You have made morrow. This is especially true with great progress in this direction. But those of you who have been and are consider this exception taken from continuing to expand your opera­ the policy of one of your good com­ tions on a national scale. panies. It was found under Schedule I wonder if you have stopped to B. , of course. Here it is, word for think recently of what Title In­ word: "Special taxes and assessments surance really means to the lender. of any kind ,if any!' Now I submit To put it briefly, it means just about that a Philadelphia lawyer would everything to him. We can be just as hardly be expected to be less clear careful as is humanly possible in our even in his better moments. Isn't it appraisals of the property and our reasonable for the Mortgagee to ex­ underwriting of the credit but if the pect that such special taxes and as­ title is not good, we might just as sessments shall be specifically set well have saved ourselves the time out, if any? and trouble. It would be difficult to Second, he expects a document that overstate the importance of Title In­ is standard- that is known and is surance in the mortgage lending oper­ acceptable everywhere. Today mort­ ations of the Life Insurance Com­ gages are not the non-liquid asset panies. You are aware of the rapid they used to be. They have become acceleration of mortgage lending by readily saleable and are sold in large the Companies in recent years. In amounts in the normal course of the· first half of this year, they put business. Warehousing by banks has over 3 billion dollars into mortgages, become commonplace. All of this has an increase of almost 1 billion dollars come about to a large extent from over; the same period the year be­ the uniformity of mortgage papers, fore. The total mortgage investment particularly the Title Policy, which of all the Companies, as of June 30th are as acceptable in Pennsylvania or this year was 27% billions of dollars Ohio as in California or Texas. You -up nearly 21 billion since the end of have come up, through a maze of World War II. In addition to this, different forms, with the L.I.C .. A.T.A. many of the Companies have been and A.T.A.-Revised forms. Possibly buying real estate for investment there may be a need for different until they now have invested in this forms for different purposes but is way the rather substantial total of there any good reason why every 1 billion 400 million dollars as of mortgagee should not get the same June 30th. form of policy- the best you can [ 17] devise-wherever the real estate is Fourth, a document free from located? question as to the interest of the Third, a document which clearly issuing agent. It seems to me that and concisely insures his interest. there can be no valid argument in Here is where I think you may have favor of appointing a mortagage the most room for improvement. For banker or a real estate broker as instance, consider this exception such agent. Surely the conflict of in­ which I think you will recognize as terest here is readily apparent. The not at all uncommon. "Mechanic's and same is true of attorneys or others, Materialmen's liens not shown of who may be part of the mortgage or record." Frankly, now, the mortgagee real estate firms personnel. I submit just doesn't want to be worried about to you that in all good conscience r"o s u c h liens - whether "shown of man should be placed in a position record" or not. He wants his Title where he is serving two masters. No Policy to insure him against these man who has the most remote {n­ things. Here are a couple more old terest in the placing of a mortgage friends, "Easements as shown by re­ loan with an investor should, at the corded plat," and "unlocated pipe line same time, be in a position to validate easement". As the mortgagee, I want the most important document in the to know something about these ease· entire package-The Policy of Title ments. It is my belief that they Insurance. Human frailties are such should be defined and located in the that this practice will eventually pro­ Title Policy. I realize that these are duce one or more men whose consum­ relatively small things and I am ing desire to make a dollar at any using them simply to make a point cost, will overcome his ability to - that the Mortgagee expects his in­ think straight to the point when he terest to be fully insured with any will consciously and with malice execeptions clearly set forth. aforethought, place his name upon a clean Title Policy in order to make Let me illustrate further by men­ it acceptable to an investor, when tioning a recent experience of my he lmows that the title is in fact Company. We had agreed to buy a defective. Ladies and Gentlemen, it block of mortgages from one of our can happen here! Fresh in the minds valued mortgage loan correspondents. of all of us is the attorney in a They were being offered by one of · Southern State who went literally the large banks. When the package berserk in this direction. But in his of loans arrived, Ranney Ranneberg­ case, we find a situation which is er, who supervises our loan closings, more difficult to explain or to pre­ opened up the first Title Policy only vent. In his case we do not find the to find an exception under Schedule conflict of interest to which I refer. B. which he could not pass. It turned But I think the warning comes pretty out that 2 out of 3 of the Title Poli­ clear that no man should be per­ cies contained similar exceptions. mitted to represent you when there Frankly we were surprised that the is this conflict of interest. I am re­ bank had passed these policies with­ minded also of the rumor that at out insisting that the exceptions be least one Title Company is insuring removed. Ranney sent them back advances on open Pnd mortgages with a hint to that effect and we have upon the affidavit of the property been informed that the Title Com­ owner only. It seems to me that this pany will remove these exceptions. is going somewhat further than you So far as I know they are doing so should be expected to go in making without charge. I simply wonder why the open end mortgage attractive. the Title Company didn't do this in Isn't is iust a little naive to assume the first place. that some property owners (too Perhaps the experience of your many I fear) will not execute a false business has been good enough to affidavit in order to satisfy the re­ take just a little more business risk q_uirements of the mortgagee for an in some of these things if necessary additional advance? Isn't it possible and eliminate them as a source of also that a property owner acting in irritation to the mortgagee. good faith, may be totally unaware [ 18 J of liens that may have been filed do not want to be subjected to the since the mortgage was recorded? wide criticism that would result from Frankly, this would seem to be in­ an investigation such as the life suring titles more on a casualty basis companies had. I am certain that you -which would seem to go pretty far have no desire to go through such an beyond the original purpose of your experience with the possible adverse business and possibly assume a risk effects it might have on your busi­ which your premium structure does ness and with the heartaches which not contemplate. it would entail. May I remind you that we in the There is one thing more that I ~ife Insurance business have reason should like to mention. It has been tb be wary of such things. Some of my observation that in many in­ you are not too young to remember stances, although the mortgagor is or to have read about the Armstrong paying for the Title Insurance Policy Investigation of Insurance back in which is furnished to the mortgagee, 1905 which shook the very foundation he may walk away from settlement of the life insurance business. An with no title insurance of his own. investigation which arose out of It has occurred to me a number of abuses that had crept into the busi­ times that you might do something ness while it was growing very here in the way of public relations rapidly-as yours has been in recent and at the same time meet a real years. Some of the most flagrant of need of the property owner himself. these abuses were those resulting Again, I congratulate you upon a from this conflict of interest in job well done, with the hope that certain individuals. There certainly you will continue ,as you have in the should be no hesitation about men­ past, to do an even better job of tioning the Investigation at this time meeting the need which Title In­ because the evils then disclosed are surance alone can meet. The dynamic definitely of the past. Much of the growth of your business in order to Armstrong Investigation had to do meet the tremendous need created by with investments of the Companies. the building boom, which is still very Fortunately in 1905, the market price much alive, is one of the unheralded of stocks and bonds was at a rela­ romances of modern business. How­ tively high level and the surplus ever, this rapid growth and the n~ed funds of the Companies were large. and desire to widen fields of service Generally speaking, the investments and to expand into new areas, makes made, whether in stocks, collateral extra caution an absolute must. loans or in bonds, had been profitable. The mortgagee looks to you ex­ The reason why so much attention pectantly for a Title Insurance Policy was given to matters relating to in­ which will clearly and concisely cover vestment practices was not that the his interest and which will help to investments had proved unsound but make his investment in mortgages that the investments enabled the just as liquid as his investment in officers of the companies to make bonds and just as readily saleable. supstantial personal profit, often of In closing, I should like to quote a questionable nature, and enabled from an advertisement I recently the companies to exercise substantial read in the House Organ of one of control over other corporations. Now, our leading Title Companies, I quote: of course, all companies were not in­ "You have no risk; you fear no law volved in these abuses but the good suit. If the title is ever challenged, name of all was harmed by those who Blank Title Company stands ready were. Up to this point you have built to defend it, assumes all legal ex­ up good public relations. Y o u r pense, and in case of loss, promptly product is universally acceptable to owners and mortgagees. Most at­ pays." torneys now recommend title in­ That, in a nutshell; is what the surance to their clients. You certainly mortgagee expects of title insurance.

[ 19] 51 TITLE COMPANIES

19 COUNTIES

in California and Michigan now use

THE LARWOOD SYSTEM

for their daily take-off

MARK LARWOOD COMPANY

Main Office REDWOOD CITY, CALIFORNIA

Branches in San Francisco, California, Sacramento, California Detroit, Michigan

Direct inquiries to MARK LARWOOD COMPANY P.O. BOX ONE REDWOOD CITY, CALIFORNIA

[ 20] . ABSTRACTER-TITLE INSURANCE RELATIONS

GEORGE E. HARBERT, Moderator; President, Rock Island County Abstract and Guaranty Co., Rock Island, Illinois

In order to save time and to elimi­ Robert J. Jay, Abstracter; Presi­ :nfate the need of stating questions or dent, St. Clair County Abstract problems, we have prepared this out­ Company, Port Huron, Michi­ line of the subject matter each gan. speaker will cover. Subject matter: Is the local ab­ stracter essential to the Title SPEAKERS Insurance Company? Gordon Gray, abstracter; President, (a) Present operation. Twin Falls Title & Trust Co., (b) Future goal. Twin Falls, Idaho. J. Mack Tarpley, Title Insurance Subject matter: Consideration of Executive; Vice President, the financial aspects which con­ Kansas City Title Insurance front an abstracter who be­ Co., Kansas City, Mo. comes a representative of a title insurance company. Subject matter: How do title in­ Al Wetherington, Title Insurance surance companies view the ab­ Company Executive; President, stracter as a representative? Title & Trust Company of (a) Present. Florida, Jacksonville, Florida. (b) Future. Subject matter: The advantages Percy I. Hopkins, Jr., Abstracter; or disadvantages to the ab­ President, Palm Beach Ab­ stracter as viewed by the ex­ stract & Title Company, West ecutive of a Title Company Palm Beach, Fla. operating t h r o u g h many Subject matter: What is the fu. agents. ture of title insurance as an 1. Service to the real estate abstracter sees it? broker. Robert Stockwell, Director, State­ 2. Selling title insurance to Wide Title Insurance, Union large users by the Title Title Company, Indianapolis, Company. Indiana. 3. Assistance i n promoting Subject matter: How do you view local business. the future insofar as rela­ Marvin Wallace, Abstracter; Presi­ tions between a title insurance . dent, Cragon Abstract Com­ company and the abstracters pany, Kingman, Kansas. are concerned? Subject matter: What does the Moderator: George E. Harbert, abstracter in the small county PI"esident, Rock Island County gain (or lose) from title in­ Abstract and Title Guaranty surance? Company, Rock Island, Illinois. 1. Advantages in operation. All have been asked to comment on 2. Advantages in public rela­ the one question, "What can the tions. American Title Association do to de­ velop good relations between title in­ 3. Disadvantages. surance companies and abstracters?"

r 2u GORDON GRAY President, Twilz Falls Title & Tmst Company, Twilz Falls, Idaho The paramount advantage to an pared for each lot at a lower price, abstracter who becomes a represen­ which price usually does not take tative for a title insurance company into consideration the value of the is a pecuniary one_ I take it that property abstracted. most of us are not in business for Let me say to the abstracter who philanthropic reasons alone_ We may is considering embarking upon the love our work and enjoy the title sale of title insurance, that he need business but in the last analysis our have no fear that he will suffer Qy primary interest is income. It has reason of his customers purchasing been recently said: "Money may not a title policy for a small premium be everything but it has a big lead when an abstract would gross a much over whatever is in second place." greater sum. He will find that the It is difficult, if not impossible, to re-issues under the title insurance reconcile the different methods of method will ultimately make up for doing business in the various sec­ this deficiency and his over-all opera­ tions of the United States with re­ tion will be much more lucrative to spect to costs and net income. On him- the Pacific Coast and in the other One of the most important advan­ western states and in many other tages to the abstracter in furnishing sections of the country there is no re­ title policies to his customer is the quirement that an abstract be made fact that he has a much happier and in order for a title policy to be is­ more satisfied customer. It is easier sued. The title examination is simply to give much more rapid service to made in the plant from the plant the customer under the title insur­ records. It isn't our purpose here to ance method. In the last analysis discuss the merits or lack of merit of that is all we have to sell, service either system. Suffice to say that plus responsibility to our customer. ten years experience with title in­ It is not possible to give as quick surance in my state has resulted in service on abstracts. In this modern greatly increased net profits to the day and age our customers are all abstracters. in a hurry. When you contrast the To get right down to figures, we length of time required to close a have found from a careful analysis deal from the time you receive an of the abstract and title insurance order until the deal is entirely closed business in my state that the average under the abstract method, with the abstract order grosses $16.20, the title insurance method you will read­ average title insurance order grosses ily realize why your customers are $43.50 with a net to the abstracter of happier with title insurance. We $34.80, or a difference of $21.27 per have found that title insurance is order- This represents an average easier to write. We have found that increase of 84%. We have found it is faster to write. We have found that the actual cost of producing this that it is less expensive to write.. We business is less than that required have found that we get more money for the production of abstracts. for it. These are tangible advantages It should be pointed out that there to us as agents for a title insurance are tremendous possibilities for in­ company. creased net income by reason of new One of the factors which greatly subdivisions. We have the one chain affects an abstracter's cost of doing of title to examine as our base title. business under the abstract method From this we may and do issue title is the necessity for examining at­ policies to each lot in the subdivision torneys to check and re-check with based upon the valuation of each lot the abstracter with respect to certain in the subdivision, plus the value of defects or supposed defects, perhaps the improvements thereon. Contrast of ancient origin, in the chain of title. this with the abstract method where­ This takes considerable of yours and by a complete abstract must be pre- your employees' time. We all realize, [ 22] law is not an exact science. Although complete set of tract indexes or ab­ title has been approved by one or stract records of the county in which perhaps several attorneys, this is no such property is located. This is the guarantee that a subsequent exam· practice in many states even though iner will not differ in his opinion not a requirement of statute. and raise questions of title thereto­ I have tried to point out that not fore overlooked. There is no possi­ only is the gross revenue to the ab­ ble way to avoid this and the result stracter increased, but that it has is always an unhappy customer. He been our experience that our expenses is just as unhappy with you-the ab­ have decreased. The cost of employ­ stracter, as he is with the attorney. ment of competent legal assistants O,ur state bar association worked has been more than offset by the diligently for years to adopt a set of reduction in the number of other em­ standards for examination only to ployees who are no longer necessary find that enough of their brethren to do the tremendous amount of would not be guided by these stand­ stenographic work formerly neces­ ards. The seriousness of the situa­ sary. tion was recognized and the state In those states where a bar rule bar association several years ago requires both an abstract and a title passed a resolution recommending policy it no doubt is true that the that title insurance should come into cost to the customer is increased Idaho. (The resolution recited that considerably. The question is asked: abstracts were becoming too lengthy, May this not result in attempts to difficult and expensive.) reduce the need for frequent title In past years we have had many service? It would seem that title excellent addresses before this con­ services are required or they are not vention having to do with modern required. In other words, if one is plant methods with respect to micro­ selling or mortgaging, title evidence filming, photostating, etc. It is not is a necessity which may not be eas­ my purpose to discuss this subject ily dispensed with. It is true, that today, except to point out that such under this system you do not have modern methods have made the writ­ the advantages heretofore enumera­ ing of title insurance much less ex­ ted under the title insurance system pensive. It is unnecessary to tran­ alone, with respect to speed, ease of scribe or re-copy the record for any operation and cost of production. purpose. Examination may be made It is no doubt likewise true that directly from photo-copies or from the customer is unhappy with the microfilm with the aid of viewers. extra cost to him. An unhappy cus­ In our title insurance operations it tomer makes an unhappy abstracter. has cut our costs markedly. It would seem to those of us who It has been suggested that one of have never operated under this sys­ the disadvantages to the abstracter tem that it is a system which is not in writing title insurance is that it is conducive to good will as between possible to use one base abstract to the customer and the abstracter, be­ cover an entire subdivision, thereby cause of the expense involved. It eliminating any financial return would seem that our efforts should which an abstracter may receive from be exerted toward persuading the bar making mimeographed copies, as is to abandon such a rule. The attitude now. required under the abstract sys­ of the members of the bar in those tem. This may be true under the states exclusively using title insur­ system whereby the title insurance ance is certainly not hostile. We is issued by a title insurance company have had the wholehearted coopera­ not using the abstracter as his agent tion of the bar and I can truthfully to counter-sign policies. I am not say to you that an overwhelming pro­ familiar with this system. We are portion of the bar prefer the title in­ fortunate that our state law requires surance system once they have had it counter-signature of all policies by a in operation and used it in their prac­ person, partnership, corporation or tice. agency owning and maintaining a Briefly, in closing I have been asked [ 23] to consider what part the American on a company in any state where a Title Association sfwuld play in de­ definite manner of doing business has veloping good relations between been long established. Also, I would abstracters and title insurance com­ know of no way in which such deci­ panies_ In those states where it has sions could be enforced. We certain­ always been the custom, if not the ly do feel that we should exert what­ law, that title insurance companies ever influence we can against the select agents who are abstracters, practice of writing title insurance maintaining abstract plants, it would based upon curbstone abstracts. seem that this Association should With respect to the casualty ap- . lend its assistance to attempt to per­ proach in writing title insurance, al­ suade title insurance companies not though we may personally prefer the to select agents who are realtors or other system, I can see no methbd loan agents or brokers, rather than whereby we can regulate this prac­ abstracters. This is an association tice by those title insurance com­ of title insurance companies and ab­ panies which have always conducted stracters, and we should protect the their business on a casualty basis_ interests of each insofar as possi­ Let us be tolerant of the other man's ble. We should avoid trying to force right to conduct his business in the a different method of doing business manner to which he is accustomed.

A. B. WETHERINGTON President, Title and Trust Company of Florida, Jacksonville, Florida The Moderator in his preliminary title insurance was issued or declined. instructions to the members of this We soon found this plan to be im­ panel, suggested to each member a practicable for the reason that our particular section of this extremely local attorneys were not familiar broad subject_ However, due to the with the titles in other localities and very broad field there will, no doubt, we found that we were only insur­ be similar, if not duplicate state­ ing a small percentage of the titles ments, made by the various mem­ submitted. Spot investigation reflect­ bers of the panel. If such is the case, ed that exceptions were raised by the we ask your kind indulgence. Per­ attorney far removed from the loca­ haps it might be as well to explore tion of the property under examina­ the evolution of title insurance, par­ tion that the local attorney had long ticularly as to the experiences of our since determined was immaterial. We, company. therefore, decided to inaugurate a Prior to 1922, our predecessor new plan; namely, appointing the companies were engaged solely in local abstract company as agent; ap­ furnishing abstracts of title. In 1922, proving qualified attorneys in the we formed our present corporate ex­ county; and these two working in istence, obtaining authority to write conjunction and in co-operation with title insurance. Initially, we confined each other, we soon found created an our title activities solely to our home ideal arrangement; and that we cemld county, wherein we owned the ab­ safely insure the majority of the stract plant. Shortly thereafter, due titles. This plan is now generally in primarily to the fact that our county use in our State and has spread to was then the largest county in the all portions of Florida. · State and the center of financial It is my firm belief that title in­ transactions, we were called upon to surance cannot be successfully writ­ issue policies in other counties. It ten without the abstracter and my was our practice to secure from the company operates on this theory. A abstract company in such outside title insurance company, operating county, a complete abstract of title. through its own plant or plants, must Examination was made by our local assemble the chain of title- If it does attorneys and based on their opinion not own the plant, then the local ab­ of title as reflected by the abstract, stracter must assemble the same data [ 24 J as would be assembled in the home This is motivated to a great extent plant. This does not mean that the by the fact that the examining at­ laborious typing of a complete ab· torney knows that his opinion is not stract must be done, but the ab­ final. This same title will be examined stracter must assemble the chain of again and again by other lawyers, title sufficient enough that the ex­ and he is afaid to jeopardize his pro­ aminer will have the complete title fessional standing by having a chain. As a matter of fact, among brother lawyer at a subsequent date our agents we have long advocated raise a question that he feels can be modernizing their plants to eliminate safely ignored. Frequently, these the necessity of typing the abstract. matters are either so ancient or so We recommend that the abstracter inconsequential that a title insurance cQmpile either a pencil chain search company accepts the title as a busi­ or if his plant is so arranged that ness risk and passes the title thereby he pull the plant slips, list them in allowing the deal to close. I have the same order as if he were compil­ noticed that the most successful of ing an abstract. The examiner is our real estate brokers have printed then able to make his examination in their contract for sale, that the from such chain of title eliminating evidence of title to be furnished is the huge expense of actually typing a title insurance policy. In talking the abstract. to these real estate brokers, I have Aside from the huge saving in found them to be anxious to have time and labor when the abstract is the purchaser satisfied that he has not typed and delivered along with a title that when he desires to sell the title policy, the abstracter does or mortgage would not be forced to not sell his records. The more ab­ the time and expense necessary to stracts that are in existence in the clear an objection found by a sub­ hands of the public reduces the sequent examination. If such an event length of time that a future abstract happened the purchaser would never will be necessary. In the years of my be a customer of that broker again. experience with our various agents, Another advantage, of course, is I find that those agents that are the the speed in which a title insurance most prosperous are those that have policy can be issued. Once the title eliminated if not entirely, to a great has been insured, we never go back extent, actually typing an abstract. of that examination. This is not true It goes without saying that a title in connection with abstracts and at­ insurance policy is the best evidence torney's opinions for each purchaser of title obtainable. This fact is proven must have his lawyer examine the to a great extent in that most, if not complete chain of title. This, as pre­ all, the large life insurance com­ viously stated, is time consuming panies demand title insurance on and raises the possibility of objec­ their mortgages. tions. It is these facts and others too Let us consider this matter from numerous to mention that have the angle of the real estate broker. proven that title insurance is the best Of course, the only way that a real evidence of title. estate broker can secure his com­ Let us consider for a moment the mission is to get the deal closed and benefits that the abstract agent naturally, he prefers his commission obtains from the title insurance com­ this week, instead of next month. pany that he represents. Suppose for Then, too, the longer the transaction example, that every abstracter, as­ hangs before closing, the more likeli­ suming he had sufficient capital to hood of either the buyer or the seller do so, insured his own titles. Think backing out on the deal. Getting of the huge individual printing bills away for the moment from the time that each separate company would element, often times when an ab­ incur. In our State, we have almost stract and attorney's opinion form 60 abstract companies as agents. I the basis of the title evidence, the noticed that we carry in our station­ examining attorney will pick ancient ery vault 156 current forms used at and inconsequential flaws in the title. one time or another in issuing title [ 25] policies. All of these forms are all do so, it would be impossible for printed by us and distributed to our them all to be heard. The title com­ agents at no expense to them. pany, however, representing the en­ Obviously, printing forms in such tire group, presenting a united front volume makes the process so much for the entire group lends a great cheaper. deal of weight to the argument and Our product is no different from without doubt influences to a certain any other product. It must be sold. extent the thinking of the Legisla­ This selling job, the title insurance tive Committee. company performs to a great extent, In order to have an amicable rela­ and almost entirely to the larger tionship between the title company users; and in order to secure ap· and its agents, there are certain proval of our policies, it is necessary fundamental rights of each. We do to acquaint the life insurance com· not believe that the title company panies and large mortgage lenders, should write a policy in any locality with the financial responsibility and where they have an agent directly ability of the company to perform from their home office. It is some and to respond on its policies. This times necessary that the application service, the title company performs be processed and handled through for all its agents, relieving the agent the home office, but in those isolated of the cost of selling their individual cases the agent is a part of the trans­ abstract company. My company, for action and receives his portion of the example, makes a practice of calling fee. We do not believe that agents on or contacting periodically, all of should encroach in another agent's the large lenders by personal con· territory except by mutual agreement tact. We, therefore, do a job for al· between the two agents. We do not most 60 companies on one call. An· believe and will not appoint, as an other service that the title company agent, anyone unless he has adequate performs for its agent, is in connec· abstract plant facilities to do the job tion with closing transactions. Fre· that is necessary for safe underwrit­ quently, particularly, in the case of ing. We do not believe that lawyers, mortgagees, when entering a new realtors, mortgage loan brokers are territory, do not know the reputation qualified to be appointed as title in­ or integrity of all the abstract com­ surance agents. panies. Invariably they contact the I realize full well that some title title company and we actually give insurance companies, in their anxiety them a letter of indemnity agreeing for more business, have and are ex­ to save them harmless in connection panding into territories already ade­ with any funds entrusted to an quately covered and appointing agent. others as representatives who are not The matter of advertising is a very abstracters. This practice, I firmly important feature in any business. believe, will ultimately prove to be a Our ads in directories, publications catastrophe to the title industry. Let and pamphlets of various and sun­ us assume, for example, that in "X" dry descriptions, newspapers etc., county, there are two abstract com­ carry a list of all our agents, show­ panies maintaining adequate plant ing the names and addresses. The facilities with daily take-offs and, in cost to the individual agent alone fact, legitimately in the abstract would make such advertising, in business, and are agents for a title many instances, prohibitive. company. Let us assume further, that You all know that more and more a mortgage broker who handles mort­ legislation is offered in our various gages in volume in said city sees .an legislatures that materially affects opportunity to gain for himself ad­ our business, either beneficially or ditional revenue aside from his mort­ adversely. Obviously, it would not be gage brokerage and makes an ar­ practical for our almost 60 agents to rangement with a title insurance close up their businesses to go to the company to issue policies direct. As­ State Capitol to appear before Legis­ suming further, that the title insur­ lative Committees and should they ance company will require that he [ 26] purchase abstracts from one of the the first question is elementary. I two abstracters in the town, which personally do not feel that a title certainly any prudent title insurance company should underwrite risks company would do. One of the two assumed by individuals not engaged abstract companies will then get an in the title business. order for a short continuation ab­ The answer to the second question stract from the subdivision plat, or is, of course, more difficult. I have some known source of title. Thus the an idea that might be practical. In­ abstract company maintaining the stead of the Association attempting adequate plant is deprived of any to regulate or stop this practice, there share of the title policy fee. Assum­ may well be another solution. Every ing that this practice becomes wide title company with possibly one or spread, several other brokers and two exceptions that issue title in­ realtors likewise secure a connection surance policies in localities where with a title insurance company. they do not own a title plant, issue Sooner or later, the two abstract said policies through agents or repre­ companies who furnish the overhead sentatives. The majority of these to keep up their plants will be unable underwriting companies in some lo­ to secure sufficient income to main­ calities, particularly in their home tain their daily take-offs. Then, of state, would not think of appointing course, everybody is out of business. as an agent, anyone other than an It goes without saying that there are abstracter or abstract company, who only a certain number of transactions had a title plant sufficient to insure that will occur in any place at any safe underwriting. However, these given time, and should the fees for same underwriters, as they expand in the title evidence be divided by too localities already adequately covered, many, none will profit. appoint representatives other than Inasmuch as I have already stuck legitimate abstracters or abstract my neck out, another inch or two will companies. It would, therefore, seem not make a great deal of difference. to me that a possible solution to this So, at the risk of offending some problem is for the abstract company present, I will go a step further. in localities where these underwriters The Moderator in suggestions to do operate legitimately, to force these the Panel asked two questions: underwriters not to appoint in other 1. Should the Association decree it states as agents any person or com­ to be unethical for a member pany that is not qualified to act as company to insure a lawyer's such agent. If all of the abstract guarantee Association? companies in all of the states were 2. How far should the Association to adopt and vigorously pursue this attempt to regulate the casualty plan, it could well be that the practice approach to tit 1 e insuring? could be stopped, or at 1 east Should it declare it to be un­ remedied. ethical to write title policies I cannot believe that an underwrit­ without any abstract whatever? er who has a group of fine agents in Or based on a curbstone ab­ a state is going to jeopardize the stract? If so, how can the As­ business so well covered in that state sociation soundly enforce its de­ in order to realize an uncertain cisions? amount of potential business in an­ I! seems to me that the answer to other state.

MARVIN W . WALLACE Preside12t, Cragun Abstract Company, Kingman, Kansas

In discussing the advantages and for some time in the future in some­ disadvantages from a public relations what of a quandary, particularly, as standpoint in the issuance of title in­ to just where his best interests may surance, the Abstracter has found be. himself in the past and will, no doubt, There is no question that the ad- [ 27] vantages of title insurance are tre­ theoretical defects that probably mendous and that it is a greatly never existed in the first place. improved product over the abstract Experience in title insurance has and attorney system, the Torrens Sys­ proven tem, the lawyer its resourcefulness and prac­ search or any other tical business sense in system, since it definitely replacing the provides confusion that exists through the an insurance or guaranty contract on operation of the title the examiners as condition of the title in place of such or the Torrens System or the merely ab­ an opinion that is in most stract and attorney system. It instances pro- . of very doubtful value. vides for much faster closing of The advantages of title insurance mortgages or sales and in the pro­ would very definitely include the curement of leaseholds, easements or following advantages to the public rights of way and in fact, all matters which would quite naturally be an pertaining to real estate title and asset in so far as the public relations what is mighty important in this day of an Abstract are concerned. is its ability to make mortgage mon­ Title insurance provides protection ey far more liquid than heretofore. to the title evidence purchaser against The abstracter has the distinct ad­ loss or damage to title defects in­ vantage, in the selling of title insur­ stead of uncertainties that do exist ance by not having to prepare and in all other forms of title evidence. show the entire title history. Title insurance and guaranty You only com­ insure against loss or damage and in panies are forced by law through so doing, you do not sell that portion various state insurance departments of under which your abstract plant for every they operate to main­ attorney to tain proper legal reserves pick flaws in. Also in for losses Kansas, and various other states, and it only follows that their fees the should be based abstracter is responsible to anyone upon these experi­ relying upon the abstract ences and sound underwriting prac­ and in the tices. This method replaces common practice of the landowner the lack in loaning their of responsibilities that exists in the abstracts to the opinon of mortgagee, the lessee, the royalty the lawyer and extends the holder, responsibilities of the the pipe line company, right Abstracter's of way holder and certificate. It provides integrity with the many other indemnity for interested parties, the abstracter loss or damage in place finds himself of irresponsibilities and confusion. responsible to each and all of them and is paid only for the There are only a very few ab­ one instance, to say nothing of the stracters who place their fees upon confusion in attempting to prepare a valuation basis or set up any re­ abstracts of title to satisfy the ex­ serves for losses for the liabilities amination that is made of them by that exist under the statutes in their the attorneys of the varied group business or profession. Far too many of interested parties without being abstracters attempt to avoid rather accused of dreadful things that exist than to assume the responsibility under such arrangement. It is rather that the statutes provide and conse­ hard to serve under more than pne quently never grow to their proper master, doubly hard to serve under stature. many and practically impossible The compiling of the abstract and when you are compensated by only the tremendous duplication in ex­ one. amining of the abstract from be­ ginning to end each time a property T i t 1 e insurance eliminates ex· is mortgaged or sold constitute a pensive storage costs not only to the loss of great amount of time, money, owner of the real estate but as well labor and effort and a great portion to the mortgagee including the ex­ of it can be eliminated through the pensive clerk hire, postage and other use of title insurance. clerical expense in handling the Title insurance provides a very bulky abstracts of title. realistic approach for the disregard­ Due to the elimination of labor and ing of very remote possibilities and loss motion that exists in the various [ 28 J other forms of title evidence, it has it on a state or even a national plane been proven beyond any reasonable over night has not been done except doubt that title insurance produces in unusual instances, and certainly a much greater profit with far less these unusual circumstances are be­ expense for the abstracter. coming fewer as time goes by. From a public relations standpoint There are numerous disadvantages of the abstracter-! think the great­ to the abstracter in the use of title est advantage in writing title in- insurance. Even in the abstract states . surance is the fact that it practically there is a tremendous difference in forces the abstracter to do two very the quality of the abstracters as well important things, first, title insur­ as the tools and equipment that are ance has to be sold to the public as used in the pursuit of the vocation. well as to the agencies through In Kansas, we are making every whom the public does its business, effort to correct this situation and and the abstracter will have to sell comparatively, I believe that we have it to the public in one way or an­ probably as high a standard for ab­ other and not secure his business in stracting that exists today. Your some upstairs room or cheap rent speaker has served on the Ab­ district from some main street stand stracters Board of Examiners of operated by the banker, the attorney Kansas since its inception about · or the raealtor, as such. Secondly fifteen years ago and during this title insurance properly serviced period of registration and licensing forces the abstracter into the escrow of abstracters, the examination and business and sundry other incidental requirements incident thereto have practices that are highly technical shown a steady improvement and and incident to the proper conduct have developed an experience in of the title business, wherein it is recent years of about fifty per cent necessary for the Abstracter to trans­ fatality in the applicants who have act business directly with the public. previously been admitted to the bar Certainly the proper place for ninety not to mention the experience of per cent of all the escrow business any of the others. This standard has should be in the hands of the title been fairly well maintained in view people, who are competent to handle of the fact that it is necessary to and properly service it. Neither subordinate the standard somewhat the banker, the realtor nor the lawyer in the less populated counties where are in a position to do this service the volume of business and the in­ properly nor profitably. come is so low that it is difficult to secure applicants of higher quality Disadvantages for registration and license. Time Normally, you would assume that will correct much of this problem in any product that had so many ad­ Kansas. I mention this because in vantages as title insurance has over Kansas it is a violation of the statutes other methods of title evidence that for a title insurance company to pay it would have the same experience a commision in the sale of title in­ as .the proverbial mouse trap. That surance to anyone unless that agent the public would just fall all over is an abstracter. itself trying to take it from you but Another tremendous disadvantage such is not the case. to the abstracter is the inability of The title business, has from its the title insuring companies to grow inception been strictly a local busi­ up and act as such. There is far too ness and because of its very nature, much lack in standardization of poli­ it will probably continue local both in cies and practices and uniformity so theory and in fact. Probably the only common to inexperience in the field. exception might be in the larger The selfishness for temporary ad­ metropolitan areas but for this I vantages of the title insurance com­ would not wish to venture very far panies in securing immediate busi­ at the moment. To change a profes­ ness is most disquieting to the ab­ sion or business that has been strict­ stracter. The practice of trying to ly local from its inception and place skirt around the abstracter's back [ 29 J for business and if successful, trying insuring of the payment of interest to force his deal upon the Abstracter and principal of mortgages and do at a cut rate price which only inures not enter this field, however, in the to the benefit of the title insurance present attempt to build up a quanti­ company, is certainly not to be de­ ty volume of business by some of sired. If the profit is sufficiently our companies the speculative fea­ large for the premium that you can ture of their activities are and can afford to cut prices then let us re­ be just as disastrous. duce the price to the ultimate con­ Like sumer in the first instance. the drowning man grasping · for a straw is the title insurance The unsound underwriting practices company who insists upon an ex­ that are being employed only for clusive contract for that quarter of the purposes of securing a dollar a pound of meat that he was lucky volume of business and the insuring to send you years ago, is probably against known defects in the title the most pitiful bit of nonsense is certainly a problem and very dis­ offered the abstracter. Is there any quieting but the worst of all is the wonder why the other ambitious title absurd practice of insuring titles on insurance company should go to the a casualty basis- Is there any wonder mortgage broker for an outlet for its that there is any common walking business or otherwise circumvent the ground at all between the abstracter abstracter with the exclusive con­ and the title insurance company? tract, with its choice bit of busi­ ness that they may, for the moment, The practice of all title insurance control to its selfish advantage? companies in their eager attempt to build up a quantity business in place Most, if not all of the poor rela­ of a quality procedure of sound tions of the title insurance companies underwriting practices and relation­ with abstracters, is due not so much ship is not only disquieting but very with the service that is rendered nor disgusting to the intelligent abstract­ the product that is sold, as with the er who is jealous of his profession selfish means which are employed and business. in the relationship. When I first entered the title busi­ Some states have developed a title ness we were representing the New insurance code through legislative York Title and Mortgage Company channels for the protection of all and upon most of their literature concerned in this business. Certainly brochures was carried the skyline of there is a great amount of defining the city of New York with the and adhering to certain rights be­ phrase written underneath, "Secure fore the relationship between the ab­ as the Bedrock of New York" and stracter and title insurance companies one bit of pamphlet further described are at its best. Perhaps legislation their capital funds of $63,000,000.00 is the proper approach, at least, we in of such tremendous proportions that Kansas are seriously considering this it would form a solid shaft of gold procedure and a great deal of our 22 feet high and 3 feet square at convention time next month will. be the base. The weight of this vast taken by this subject. treasure would be more than 200,000 This brings me to the last of my pounds. In the eagerness of this fine comments-The company, without competition subject of "What in the part the association should play in national picture at least, to build up developing a quantity good relations between business and to pay a the abstracters and dividend upon that vast amount of the title insurance capital funds, they companies?" found it necessary Since the to indulge in speculative ventures only difference between and unsound practices. the abstracter and the title insurance company is the method employed and Most of you know the story and since advancement in either field how it happened and most title in­ would tend to indicate that neither suring companies in business at can get along too well without the present guard themselves against the services of the other, it would be [ 30] naturally wiser for the two to team selves in rendering the greatest and up together and to use our associa­ most satisfactory service that is pos­ tions for the improvement of our- sible for us to offer the public.

ROBERT ]. ]AY President, St. Clair County Abstract Company, Port Huron, Micbigan

As far as the abstract company is stracter with an up-to-date, reliable concerned it would not seem unfair plant. I am firmly convinced, as an for one title company to name several abstracter, that if we felt we could representatives in a particular coun­ make just as reliable abstracts in the ty. I believe it would be much fairer same manner in which a curbstoner to the abstract company for the rea­ makes his abstracts, we certainly son that a particular broker, or at­ would not go to all the expense and torney, or bank, may favor one title time consumed in maintaining an company as against another title com­ up-to-date title plant by taking off pany and if the abstracter was a daily records. From our experience representative of the wrong com­ it seems that this is the only speedy, pany, he would completely lose out efficient and reliable way in which on their business. Whereas, if an to put out an abstract of title. With­ abstract company represents more out such a plant, the process is long, than one title company, he could at cumbersome and unreliable. least have a chance of servicing all I do not believe the title company potential customers in his particular has to name an abstract a necessarily county, whether they preferred company that belongs to either the particular title company or not. I will State Title Association or the Nation­ admit it does foster more competi­ al Title Association But, I do feel tion between the two abstracters; that any abstracter named as a but there is no reason why a young, of a title company of representative aggressive, personable individual must have a plant that is equal to one abstract company should lose out plants maintained by abstracters competitor the to a dull and unambitious in either a State or National Associ­ simply because he does not represent ation. To arbitrarily hold that a title a particular title company. company must name as representa­ The use of curbstone abstracters tive an abstract company that is a or non-title people as representatives member of a state or national as­ of title companies should not only be too strict. This, for but sociation is being frowned upon and discouraged the reason that some abstracters, be­ in some manner be stopped al­ of peculiarities of their own, com­ cause together, if possible. For a title do not feel like belonging to either pany to name a curbstoner as his or National Association. , the State representative infers that the money the expense and time building a Some feel that tillJ.e and energy spent in involved is not sufficient to warrant good, sound, reliable abstract plant the association or that is in belonging to is wasted. The title company the association could bring them no effect saying, "because we are so benefit. Although this may be take some direct lar~e, we are willing to erroneous thinking, we still live in risk that the curbstoner may miss a man has a . free America where particular instruments of record" to choose what he wishes to telling the right In other words, they are do. He should not be penalized be­ public that a good, sound abstract do not run with for cause his feelings plant is not a necessity in order the majority. a title company to supply good evi­ dence of title. So, in effect, the title I truly believe that it is good company is telling the public that business for an abstract company to abstracts are equal in value whether enter into some type of agency made by a curbstoner or by an ab- agreement with the title insurance [ 31] company or companies in his par­ title commitment showed go o d, ticular state or territory. Through marketable title. The purchaser was our experience, we have found that borrowing funds from a farmer who, this does not mean a decrease in although in the argricultural profes­ revenue although it may not mean sion, was very much of a business­ any greater revenue. However, it man. The farmer had no use for the must be borne in mind that an ab­ title commitment and would not lend stracter is in a quasi-public service his money on the faith of it. Although and that many times a lawyer cannot the title commitment cost substan­ pass title on an abstract because of tially less than a new abstract from defects which he does not feel he government to date, the purchaser can safely ignore. Whereas, a title still had to put himself to the ex­ company may know that there is a pense of $135.00 to purchase a new defect and feel that the practical abstract as title evidence for his considerations warrant taking a con­ mortgage. This has happened many sidered risk as to any loss ever aris· times in our communities which are ing from such defect of title. It is very near the metropolitan area of for this reason that an abstracter is Detroit. On the other hand, we do aiding his community by taking on find that the large institutional lend­ title insurance. In this way, he helps ing agencies and banks readily accept to clean up titles that are otherwise title insurance without question. unmarketable. Also, there is the probability of an increase in net prof­ To further substantiate the point its through decreasing operating ex­ that title companies will not present­ penses. Therefore, in the interest of ly supplant abstract companies in the good will to his customers and a State of Michigan, let us look at some service to his community and pos­ of the large corporations in Detroit, sible profits it actually warrants an such as General Motors and Ford. abstract company becoming an agent They undoubtedly could make just of a title company. as good tool and die patterns as many of the small shops that exist in and At the present time I do not believe around Detroit. However, they are that we are in an interim stage, the concerned with making the best pas­ ultimate goal of which is that a title sible automobiles in order to meet company hopes to supplant abstract competition and are thinking on a companies. I limit this generalization national level. I believe they have to the state of Michigan where we found from experience that instead of have our abstract companies. I be- trying to do everything themselves, lieve you will find that in many it is more convenient and wise to rural communities and even in some farm out some of the parts that go of the medium sized communities, into automobiles to smaller com­ title insurance is still not an es- panies who specialize in that par­ tablished medium of title evidence. ticular type of work. This eliminates This is not because title insurance the headaches of production as far has not been used and talked about by as this particular part is concerned. many, many people and perhaps have They probably feel the small c9m­ been pressed to some extent by the pany can do an equal job, if not abstracter who acts as an agent for better, than the large corporation. the title company. I think it is merely In like manner, I feel that title the reluctance of many people to companies must work through - ab­ accept new evidence of title when stracters in the same manner. Al­ their fathers and grandfathers before though the goal of the title company them had used abstracts. is to finally issue a policy of title This is not a farfetched theory. insurance, the value of that policy When I was in Monroe, Michigan, on is only as good as the abstract from Monday, the nineteenth of Septem- which the opinion was written. The ber, we had issued a title insurance keeping of many records, examining committment in the amount of six of titles, and the selling and promot­ or seven thousand dollars to a pro- ing of insurance is in itself a large spective new purchaser of land. The job and the title companies should [ 32] content themselves with doing this property marketable which would job in the best possible manner. An otherwise be unmarketable until a abstracter can be to a title company further passage of time. Title in­ what a small tool and die manufactur· surance also helps to correct a great er is to General Motors and Ford. many description difficulties in our He does a small part of the work counties. that goes into a final title policy I honestly feel that in some way because he can do it equally as well the National Association should write if not better than a large title com­ into its by-laws or rules that it would pany. He is well known in his com· be highly unethical for a title com· munity and his only concern is what pany to write a title policy from the goes into making a good abstract casualty risk approach. This would without attempting to determine how mean that a title company could not the examiner for title insurance pur· write a title policy without an ab­ poses will look at it or who will buy stract or simply by appointing a the policy. curbstone abstracter or non-title per­ As an executive of a large national son as his representative. I feel that title insurance company recently said this is only fair because both ab­ at the Atlantic Coast Regional Ex­ stract companies and title companies ecutive Meeting of The American make up the National- Association Title Association, "confidence is the and we cannot stand together as a cornerstone of the industry. If and united body unless we see the com­ when the customers and particularly mon problems involved and try to the lending institutions which are aid each other as much as possible. lending billions of dollars on the as­ At least for the time being title sumption that we are using every companies cannot operate without reasonable precaution and proper. abstract companies or accessibility technical skill in the issuance of our to a complete title plant and be ab­ policies lose confidence in our under· solutely safe in insuring titles. The writing practices, we are out of busi· local abstracter also has the public ness. There is not a title insurance respect and confidence in his com­ company in this country (and I say munity and this aids the title com­ this as representing one of the larger pany in selling its product. The title companies) with assets sufficient to companies, on the other hand, can be disregard sound underwriting prac· of great help and benefit to the ab­ tices and issue its title insurance on stracter in his community by looking a casualty basis". In effect he is say­ at the practical risks and technicali­ ing, large users of title insurance ties involved in a particular defect presume the title companies are in title and after due consideration using the best possible means of pro· pass the title for purposes of title curing title evidence on which to base insurance and therefore make the their final policy. This would neces· land saleable. sarily preclude title companies by­ For these reasons, it is my con­ passing the abstracters and naming sidered personal opinion that, our as representatives mortgage com­ National Association should make a panies, curbstoners or title people be· rule or by-law with penalties provid­ cause a good abstract is the basis of ed for violation thereof, not exclud­ every good title insurance policy. ing expulsion from membership, that I · believe our national association a title company would not appoint an can play a major part in the develop­ agency or non-title person in a county ment of good relations between ab· where there is an established abstract stracters and title companies. As plant and where such abstract com­ previously noted, we, as abstract com­ pany is willing and able to cooperate panies, find that our revenue has not on all title insurance service require­ been decreased because we act as ments. This is not a farfetched theory agents for title insuranc~. Also, we but rather something t h at is find we are able to help clients, such practiced by one of our large national as banks, mortgage companies and title companies. This large company even attorneys, to make the title to puts out its title insurance manual [ 33] for approved attorneys and recog­ passed if they wish to issue good and nizes that there are so-called "ab­ reliable policies of title insurance. In stract" states and "attorney" states­ my mind for a title company not to In such states, meaning the "abstract" work with the abstracter where the states, the manual reads, "The ap­ abstracter is willing to cooperate and proved attorney may base his cer­ is able to service its needs is plain tificate of title on an examination foolish and unfair to the large title of the borrower's or seller's ab­ company's clients who put their faith stract"_ In the so-called "attorney and trust in the policies issued by states" the attorney must base his such company. certificate of title "on his own per­ Our National Association is com­ sonal examination of the records or posed of abstracters and title com­ on an abstract prepared by himself. panies. Here is where we should be The approved attorney is not per­ able to have frank discussions of our mitted to base a certificate of title problems and solve the difficulties upon an examination of abstract pre­ with which we are faced so that both pared by another approved attorney." the title company and the abstracter So you can see that even this large gets his fair share of the business national title company realizes that and we present a united front to our abstracters cannot be safely by- clients-

). MACK TARPLEY Vice President, Kansas City Title Insurance Company, Kansas City, Missouri

The subject assigned to this panel officer of Kansas City Title Insurance is one of increasing interest through­ Company_ I give you this to show you out the country and is one of the that I have han experience on both most controversial at the present sides of our question. time. I have been asked to express The first part of my subject is to the views of the title insurance com­ deal with relations between insurers panies as to a particular phase of and abstracters where there are two the general subject. That is, of course, or more competing abstract com­ a thing that I cannot do. My remarks panies in the county. The question is are based upon my own personal posed, should one insuerer name ev­ thinking and are not necessarily the ery abstracter as its agent. I would views of any title insurance com­ say, no. The insurer should select the pany_ abstracter whom the insurer thinks Since in theory all speakers pose will do the best job for it and then do as experts, I would like to state my its utmost to train and assist the background and qualifications in the agent so that by giving proper service title business. I was graduated from and proper underwriting a fair share Law School in 1935 and returned to of the available business will come my home town in Arkansas to its way. There can be exceptions. to practice law. I formed a partnership the general statement, of course. In with an older attorney who also one community where they are two operated an abstract plant. I spent abstracters, the two got together, five years there getting experience in came to us and requested that both small town justice and abstracting. be named as representatives of our In 1940 I moved to a town of 40,000 company and we complied with their and took over the operation of an request. It has been suggested that abstract company which was an is­ such action forces competition. "So suing agency for a title insurance What"- is my answer. I have learned company. In 1947 I moved to a town long ago that I can never get all the of 100,000 and became associated business available in a given com­ with 0. M. Young in the operation of munity and I also know that there is a state agency for a title insurance no way yet devised in our system of company. Then in 1952 I became an free enterprise to prevent someone [ 34 J from competing with you, whether insurer should appoint as its agent you be in the abstract, title insurance an abstracter whose abstracts pass or white shirt business. In case you current in the community and whose are not acquainted with it, the white abstracts are generally relied upon by shirt business is my favorite busi­ the bar of the community as satis­ ness. On particularly trying days I factory evidence of title, without re­ threaten to go into it. You sell noth­ gard to questions of plant facilities ing but white broadcloth shirts, one and membership in trade associa­ collar style, acceding to the cus­ tions. To impose requirements upon tomer's requests on questions of size a representative other than character, only. ability, willingness to work and a It has further been suggested that general acceptance of the product to appoint as representatives all of which he produces, is not only unfair the "plant" companies in a county to him but an open invitation for forces a competing insuror to use trouble from outside our fraternity. "curbstoners" or non-title people for It is also my opinion that any representatives. title insurer who appoints non-title First we must determine what is people as his representatives, or who a "curbstoner." I know of communi­ appoints a "curbstoner" as I have ties of considerable size where none defined him will have little if any of the abstracters have the slightest success in the community, and while semblance of a plant. Are they all he may make a big splash with his "curbs toners?" I know of other com­ dive into the waters, his method of munities where an abstracter only operation will soon catch up with has a tract index while competitors him for various reasons and he will have a complete plant. He is con­ soon sink. cidered a "curbstoner" by his com­ The thought is interwoven through petitors, although he is actually the the suggestions made in connection best abstracter in the community. with this discussion "should a title Does the lack of membership in a insurance company be required to" State Association or the American and "is it ethical for a title insurance Title Association brand an abstracter company to." My only observation as a "curbstoner?" Sometimes I get with respect to this is who shall the impression that our thinking may "require of" a title insurance comp­ be a little warped along that line. any? Shall it be a voluntary associa­ We are also faced with the problem tion of title insurance companies? that a "curbstoner" in the City of Shall it be a state or national title Oz may not be a "curbstoner" in the association? Or, shall it be a govern­ Village of Podunk. My own definition mental subdivision? By like thought, of a "curbstoner" is an abstracter who shall determine what is ethical upon whose abstracts you cannot and what is not ethical? Shall it be rely, regardless of what plant fa­ by one of those above named? Also, cilities he may have or to what as­ I submit that if requirements are sociation he may belong. to be imposed upon title insurance Next let us consider the designation companies in their dealings with ab­ "non-title people." If by that designa­ stracters as their representatives, tion it is meant real estate brokers, then similar restrictions must be im­ mortagage companies and other per­ posed upon the abstracters. It also sons having an interest in the title must be borne in mind that no broad to be insured, my unqualified answer set of rules and regulations can be is that they should not be designated laid down, but the matter must be as title company representatives. considered upon the basis of local Never, my friends, make the mistake practices and customs, certainly for of referring to or considering at­ each state. torneys as "non-title people" as Now what of the obligations of the several of our brethren have had that abstracter in this relationship we opinion pushed down their throats are discussing. In any successful re­ by bar associations. lationship there must of necessity be I feel that in abstract states a title obligations and the performance [ 35] thereof by both parties. It is the de­ stracters and want to continue to do 1 sire of title insurers to cooperate so. All that is asked is cooperation. with and work through the ab­ Don't misunderstand me. I don't stracters, but they in turn expect co­ claim that title insurance is a cure-all operation. for the title profession, nor do I The thought has been suggested claim that the title companies are that the naming of an abstracter as lily white and without fault in their representative is no guarantee that relationship with the abstracters. We he will be a sole outlet for title in­ have all made mistakes, but then the surance. Certainly no title insurer fellow who doesn't make mistakes can make such a guarantee to its is either one who does nothing or is representative. It can only guaran­ in a horizontal position six feet under­ tee to him by contract that he will be ground. If we profit by our mistakes the exclusive representative of that then our relationship should be im· company in a given territory. It can­ proved. not guarantee him against the acts It has been suggested that we are of a competing title insurer and a passing through an interim stage and competing abstracter in forming a that the ultimate goal of the title like relation. Here again we have insurance company is the owning of the factor of competition which none plants throughout the country. It is of us can avoid and none of us should also suggested that such a plan might fear. Any man or woman who can have a bright side for the abstracter successfully sell abstracts against in that it would provide a market for competition can sell title insurance. abstract plants for the families of ab­ Of course to do so, he must have an stracters at a fair price when the interest in it and a desire to sell it. family is unable or unwilling to carry No man can successfully do anything on the operation. I think that I can in which he has no interest. Ab· allay the apprehension of the abstract­ stracters have been known to accept ers and also tarnish the suggested the agency for a title company mere­ brightness by several statements. ly for the purpose of tying up the I doubt if all of the title insurance agency of a company in the hope of companies operating throughout the keeping someone else from getting country have enough available assets, it, or to try to keep title insurance over and above those committed for out of his community. Such action, reserves, statutory deposits and other of course, can result only in the purposes, to acquire all of the ab· selection of another abstracter as stract plants. I know that the title agent, and certainly is an action insurers do not have on their pay­ which does not make for better rela­ roll, nor is there available to them, tionship between title companies and the necessary personnel to operate abstracters generally. Certainly I the abstract plants asumming that acknowledge the right of any man to they owned them. I am sure that have his own opinion on any subject most of you are aware of the short­ and recognize that his opinion may age of trained title personnel, particu­ differ from mine. If an abstracter larly in the executive or managerial does not believe in the value of title category, and taking into considera­ insurance and its place in the busi­ tion the loss of those who would be ness world today, that is his business willing to work like a dog as long as and not mine, and I have no quarrel he was the owner, but who would with him. But if he so believes, aligns seek other employment if he were an himself with a title insurance com­ employee, you can see another reason pany as a representative and then against title insurance company own­ does nothing but take what business ership. the title company can throw his way, There is also the fact that the in­ then I do quarrel with him because surance commissioners of more than he is not living up to his part of a one state take a rather dim view of bargain. an abstract plant as an asset of a The title companies in most in· title insurance company. In some stances have worked with the ab- states it is not allowed as an asset [ 36] for qualifying while in others the ing company to the public becomes, amount which may be invested in in the eyes of his local customers, the abstract plants is limited by statute. insuring company, and therefore con­ To the abstracters I can say you trols the title business arising at the and your plants are here to stay. The local level. day may come, and I sincerely be­ All members of the panel have lieve that it will, when you will not been asked to comment on the part prepare to sell your product in the the American Title Association should form you do today, but there still play in developing good relations be­ must exist the abstracter and his tween abstracters and title insurance plant so long as the right to private companies. I say, and again I am ownership of real property survives. expressing a personal opinion, that The question has been raised as to the Association as it is now consti­ the possibility of domination at the tuted with its present by-laws and local level by the title insurance com­ lack of police power can promulgate pany. For the reasons just stated no enforceable rules regulating the there is no desire on the part of the relation between competing com­ title companies for domination, and panies, competing representatives, assuming there was, the spirit of and between underwriting companies competition is too keen to permit it. and representatives, but can only pre­ There is too much competition be­ sent opportunities for a frank open tween competing insuring companies discussion at which reasonable men and between competing representa­ should be able to reconcile their dif­ tives. The representative who selects ferences. If we cannot reconcile them a reputable insuring company whose perhaps the only answer lies in strict policies are generally acceptable and regulation by some agency created then equips himself to do a proper by our industry or by some agency job of selling himself and his insur- outside our industry.

PERCY I. HOPKINS, Jr. President, Palm Beach Abstract & Title Company, West Palm Beach, Florida

It is an extreme pleasure for me long road ahead. We are somewhat to appear before this group today as in the position of the elderly gentle­ a representative member of the hun­ man who, after reaching the twilight dreds of local abstract companies of life, reflected that, "If we could throughout this great country, who, only live our lives backwards, think through their energies and applica­ how many more juvenile delinquents tion throughout the years have helped there would be in the world today." elevate the title profession to its Let us hope that our title profession present respected standing and posi­ does not revert to such a condition. tion in the local communities. I am I think it timely therefore to reflect confident that I can state without upon the advantages of title insur­ fear of contradiction that the local ance and also upon the relations be­ abstract companies are the rock upon tween the title insurance companies which this profession stands. It has and we their agents. fallen to the lot of these companies In order to acquaint you with my in the past few years to sell title own local condition, so as to acquaint insurance to their various communi­ you with my personal approach, I ties. I am sure that we can now wish to state that my company is agree that this job has been well located in a fairly largely populated done. county. We have a large financial in­ Due to the tremendous growth of vestment in our plant, which plant title insurance, we now arrive at a was established some 31 years ago. time where it is well for us to look I have five competitors, three of back down the road which we have which have plants which have been just traveled and also to peruse the in existence for a number of years. [ 37] The other two are fairly new in the our Real Estate Broker. We mate­ field and do not have title plants. Our rially cut the time required between orders are aproximately eighty-five the signing of the contract of sale percent title insurance orders. The and the closing of the transaction. balance of fifteen percent ·are ab· This results in the saving of many stract orders. We are sold on title deals and at the same time helps the insurance and are constantly striving broker to obtain his commission as to increase our percentage of orders quickly as possible. in its favor. There are numerous other advan- · Needless to say, I am convinced tages, but I believe that they, to a that the advantages of title insurance great extent, can be summed up by greatly outweigh its disadvantages. stating that with title insurance, our However, for the purpose of review, income is greater and our service is let us consider these advantages better. briefly. Since the advent of title insurance, We find that the advent of title in­ several problems have come to the surance has greatly increased our fore between the title insurance com­ revenue, and that the overhead re­ panies and the abstracters. I believe quired of income from title insur­ that this is only a natural result of ance is greatly less than that re­ the growth and progress of any prod­ c:· ~>cd ~ n the preparation of abstracts. uct. Many of these problems seem If abstracts were completely elim­ insurmountable at this time. How­ inated in our community, we are ever, some of them, I believe, will satisfied that we could achieve large gradually straighten themselves out. savings in keeping up our plant daily Others which seem insignificant at as our plant organization would be the present time may bear watching completely changed. However, this as they might become the vital prob­ condition we expect to exist for some lem of the very near future. time to come. In considering the problems be­ Another apparent advantage is the tween the title insurance companies fact that we are convinced that we and the abstracters, I believe that any obtain much more income from each criticism should be constructive, re­ transaction than we would obtain in gardless of the source from which it the preparation of an abstract. For originates. We should, therefore, ap­ example, if only an abstract were re­ proach the problem with the under­ quired, our continuation cost for the standing that the problem of the abstract might possibly be approxi­ title insurance company might have mately twenty dollars. At the same a completely different approach for time a re-issue title insurance policy them than it does for us. The same covering this same transaction might might be true in reverse. It is there· bring us $100.00 or more. fore incumbent upon us that we un­ We find great advantage in the fact derstand each others approach and that we have, over the years, issued that we sincerely and conscientiously a large number of title insurance work out these problems to the. ad­ policies. This has had the effect of of this As­ on vantage of all members stock piling title examinations sociation. most of the subdivisions in our coun­ ty. By examining the title to these Naturally, there isn't enough time subdivisions we have become familiar allocated for us to consider all of wih the status of these titles up to the problems apparent at this time and including the plat. This means in our industry. Therefore, I will that we now run our chain of title touch upon what I consider the most from the plat to date, thus eliminat­ important problems at present in my ing much unnecessary work and at own community. the same time enabling us to give One of our most serious problems quicker and more efficient service to is that of title insurance companies our customers. We find that by be­ who come into our county on project ing in the position to give this type work only. They obtain a master of service, we make better friends of abstract upon the whole subdivision, [ 38] and proceed to issue the title insur­ ping at the hand of the Creator. I ance from their home office at the seriously believe that this is a mat­ national rate. They have no financial ter which should be given serious investment in our county, nor do consideration by the American Title they have a plant which covers the Association and that definite steps property in our county. From our should be taken to curtail it. point of view, they appear satisfied Another problem along this same in receiving the same income from line which is of some concern to the these policies as they would if they abstracters is the growing practice had an agent in our area. I believe of title insurance companies appoint­ this to be a serious detriment to the ing attorneys in various communities abstracter and one over which there as agents. This has led in some cases should be some control. to the issuance of title insurance Another even more serious prob· upon inadequate title evidence. I lem concerns the organization by the realize, of course, that with the attorneys in our state of a Guaranty growth in the number of title insur­ Fund upon which the lawyers are ance companies, that these companies now writing title insurance in com­ have felt it necessary to appoint such petition with us. Some of your states agents where the existing abstract have this same situation I under­ companies already represent a com­ stand. Only attorneys may belong pany. However, I do believe that it to this Fund and it has grown con­ could lead to an unbealthy situation siderably in the last two or three as far as the reputation of title in­ years. Now the lawyers are still our surance is concerned. We all wish friends, and we obtain a considerable and intend to be in business for a amount of abstract work and some long time to come and I think there­ title insurance orders from them. fore that we should be vitally con­ However, we still cannot afford to lose cerned with the wholesome reputa­ sight of the fact that we are in direct tion of the product which we are to competition with them for the title sell. I do not personally know the insurance business in our vicinity. answer to this problem. However, At the present time, it is not a tre­ I do believe that it is one which we mendous disadvantage to us as their should watch and discuss in order policies are not generally and freely that it not lead to disastrous results. accepted by the mortgage lenders nor Gentlemen, the title insurance com­ by the Real Estate Brokers. At the pany is the best friend that the ab­ same time they are not in a position stracter has. They have increased to give the same type of service to his income. They have been instru­ the public as we are. However, re­ mental in prevailing upon him to in­ cently it came to my attention that stitute more modern and up to date two title insurance companies are procedures and equipment and they negotiating with this Fund in an ef­ have given him a better product to fort to obtain permission of the Fund sell to the public. We know that the to underwrite their policies. You can title insurance companies feel the readily see that if this is done, con­ same toward us. With this whole­ siderably more stature would be given some relationship, we should there­ the policies of this Fund. Should that fore approach our problems on mu­ happen, it will immediately become a tual ground with the aim of solving much more serious problem to us. them for the advantage of all and to To me, gentlemen, this is like snap- the detriment of none.

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CompanY------Strcct______City ______Statc ______ROBERT W. STOCKWELL, Vice-President & Directot·, State Title lnsurmzce Department, Uniotz Title Company, lndimzapolis, Indiana I consider my participation in this abstracter to sell title insurance as panel to be a distinct honor and privi­ it is for the attorney. These lege. are only So far as I am personally con­ a few of the principal reasons why cerned it is a privilege to exert to the title insurance company has the al­ utmost my meager talents in an most an indispensable need for the attempt to explode the illusionary services of the abstracter fiction in every among some abstracters and county. If the abstracter could fully title insurance companies that title appreciate the extent of this insurance need, is somehow inimical to he would never have any qualms as the interest of the abstracter; that to the possibilities of encroachment the abstracters' functions are some­ by a title insurance company. how I say antagonistic to title insurance. this because I have frequE:;ntly heard More than twenty years experience this fear expressed by the small ab­ working constantly with about two stracter. hundred Indiana abstracters has But, just as much proven to me, at least as the title in­ , that nothing surance company needs the abstract­ could be farther from the truth. The er title so does the abstracter need the insurance company cannot sell title insurance title insurance company. Unless the without the abstracter, abstracter's business period. Neither can is very large the abstracter sell and is backed by a very considerable title insurance without the title in­ amount surance of capital, it is neither feas­ company. The fact that they ible nor both must profitable for him to get sell title insurance now into the title insurance seems quite obvious. business on Title insurance his own. The title as a faster, safer insurance business , and more econom­ is a separate and distinct ical means of title evidencing function needs and is a very different business little proof for the modern title from man. that of abstracting. The truth of this In other words, title insurance is fact has been proven several times selling itself with a pyramiding and in Indiana within the experience of a snowballing acceleration in sales. In number of our larger abstracters who Indiana the rate of increase is 25 % have seriously considered insuring each year over the previous year dur­ their own titles. After long considera­ ing the past ten years. Therefore, tion and extensive research into the for both abstracter and title insur­ matter, even with our agreement to ance company - sell title insurance cooperate in re-insuring their policies, they must. This then is their first they have always definitely decided point of mutual interest bringing against entering the title insurance them together as indispensable and business. Although the local abstract­ interdependent partners. Notwith­ er and examiner do practically all of standing all the illusionary talk about the work necessary for title insur­ so-called "casualty title insurance" ance, their title evidence which is the title company cannot safely issue the result of such work, is strength­ title insurance without the abstract­ ened immeasurably by the seal of er's search of the public records and approval and the guaranty of the the attorney's examination. The title separate title insurance company. The insurance company needs the abstrac­ title insurance company greatly in­ ter in a great many ways: first, creases the business of the abstracter because as a local distributor and by sending him business which clears salesman the abstracter's office is the on a state wide or national level best marketing place for title evi­ through the title insurance company. dence in the county; second, because The abstracter may obtain in this his functions are not competitive with manner four different items of profit those of the attorney, the realtor, the - abstract profit, examination fee, lender, or other title users; thira, closing fee and commission on title because it is not unethical for the insurance. Business development oper- [ 42] ations, advertising, public relations, a finger earch of the record?", my for and on behalf of the local small answer is: No. abstracter, are furnished to him by To the third question, "What pro­ the title insurance company he repre­ tection may be obtained by such a sents as agent. Yes, the abstracter is title insurance company against such also dependent upon the title insur­ non-agent abstracter if he steals title ance company and with title insur­ insurance customers during the time ance sales pyramiding he definitely that he is making an abstract for needs its services. such title insurance company?", my Although the abstracter and the answer would have to be that such title insurance company are indispen­ company does not have much pro­ sable and interdependent partners, tection except that of the appoint­ what seem to be insurmountable diffi­ ment of examining attorneys and culties may sometimes arise between directing the title insurance custom­ them. Some of such difficulties have ers to the examiner's office. been referred to me for answers on The fourth question is: "What about this panel. They are divided into: A­ multiple agencies?" My answer is the problems of the title insurance that I believe that they are not feas­ company that wishes to operate in ible for any of the parties concerned. a county where the only abstracter It is difficult to serve two masters with a good plant is not its agent and and serve both well or to carry water B--the problems of such an abstract­ on both shoulders. I am not in favor er who has the only good plant in of multiple agencies. the county. Now under Bin regard to the prob­ Now under A is the following ques­ lems of the abstracter who has the tion: "Will the title insurance com­ only good plant in the county_ Should pany appoint a lawyer as agent and he sell title insurance or not? The buy abstracts from such abstracter answer is that he should. To answer who has the only plant but is not its all questions under this heading I representative?" I think they will believe the crux of such questions is buy abstracts from the non-agent ab­ resolved in that of the feasibility of stracter with the only good plant in multiple agencies. As stated before, the county if they have any worries I do not believe in multiple agencies. at all about paying claims on their In fact, I feel that they are just about title insurance, and most good title as unworkable and impracticable as insurance companies do. The other the marriage of a man to several kind do not get much business any­ women or vice versa. The abstracter way. In Indiana, though, it is not with the only good plant in the coun­ feasible to appoint an attorney as ty should pick the title insurance an agent if you expect to establish which is best for him. He should con­ a permanent business of any size. In duct himself and his business in such general, a practicing attorney as a manner as to merit the abstracting agent is the competitor of other at­ business of all title insurance com­ torneys who are potential title insur­ panies. He should not positively and ance customers. Therefore, if this actively attempt to steal title insur­ particular problem is to be handled ance business of companies he does properly such a title insurance com­ not represent, because he will prob­ pany in such county should appoint ably get such title insun;mce anyway a lawyer as an examiner only; have if he conducts his business in such a him obtain his abstracting from the manner as to merit it. If such lone non-agent abstracter with the only abstracter has the best plant, the best good plant and probably handle all personnel and speed of service, he the other functions of an agent with­ need have no fears of any kind of in the home office of the insurance competition from foreign title insur­ company. ance companies that he does not To the second question, "Will such represent. He will reap as large, if a title insurance company be justified not a larger portion of title insurance in relying on curbstone abstracts or in his county as he formerly did in [ 43] abstracting. They go together and fact and refuse to patronize them. one follows the other. Yes, I still believe that title insurance In closing I would like to make cannot be sold in volume with the one last observation as to both the greatest speed, safety and assurance abstracter and the title insurance without an adequate search of the company. As stated before, within the public records by competent and well last two or three years, it has become established professional abstracters quite apparent that title insurance as using the best equipment together a means of title evidencing is sweep­ with an examination by the best and ing the country and will eventually most experienced title examiners. I prevail almost exclusively. The "gold asure you that I am not just married rush" is on. All manner of nefarious to this old and conventional plan of schemes and plans to get in on the selling title insurance, but I believe pickings will naturally ensue. But, those who know me well will agree, most of you who are wise in the title that if there were any other way to, business I think will agree that this with honesty and dignity, make more is not a business that can be "rushed." money in the title insurance business, It does not change rapidly. It has its I would be the first to try it. roots in tradition and is based upon I have been asked to comment on one word more than any other, and Number 4 which is the following that is "assurance." The plan of so· question: "What part should the asso­ called "casualty title insurance"; the ciation play in the development of plan of appointing, either directly or good relations between the abstract­ indirectly, as agent, a large lending ers and title insurance companies?" company or any other title user; the This is an exceedingly difficult ques­ plan of mutual insurance of attor­ tion to answer wisely, and should be neys' opinions - all such plans are given slow and very calm considera­ completely antagonistic to the estab­ tion. In fact, the question reminds me lishment of "assurance" and confi· very much of an audience which was dence. They all stem from a very attempting to badger a very eminent natural greed to get in on the glean­ pediatrician into answering a ques­ ings, to get in on the pickings in this tion: "Just how should we raise our new "gold rush." All of such plans children?" The eminent pediatrician in my opinion are doomed to fall of came forth with this answer, and I their own weight, because they are believe it might have something to do not right, they are not ethical, and with our question. He answered, the wise and established title users "Feed'm, love'm, set'm a good ex­ of the country will recognize this ample and leave'm alone."

[ 44] TRAINING PROGRAM ACTIVITIES, SURVEYS RELATING TO SAME AND APPLICATION ERNEST J. LOEBBECKE President, Title Inmrance and Trust Company, Los Angeles, California

When I first saw the long title Then, having surveyed the situation which had been given the subject as­ -either informally or in great de­ signed to me, I started to object. But tail- or perhaps somewhere in be­ on second thought I decided that it tween- we are ready for the third was very descriptive of the situation. part of our title-application. If we analyze it, I believe you will Application agree with me. Let's look at the first part of it. At this point we are sure we have gotten to the meat of the coconut­ Training Program Activities this is where the big pay-off comes. After all, training programs aren't Unfortunately, however, this is sel­ new. They have existed ever since dom true. I have talked to many title the first cave-woman lured an unsus­ men about training-both in small pecting male into dragging her off operations and in large ones. In every • to his cave. Before the dust had set­ case the results are just the same as tled she instituted a training pro­ in my own shop-they have long been gram for him. Today, we all have aware of the need for training­ training programs-when you hire they have studied the problem-they your first employee, you irrevocably have instituted programs - BUT, add training to the list of jobs that there is always an underlying note must be done in the daily operation of disappointment when results are of your business. Naturally, in a discussed. In short, the big pay-off small operation it is an informal and hasn't materialized, and all concern­ intermittent activity-but still it is ed are filled with just a little bewild­ there. The bigger the operation, the erment as to why this should be so. rn.ore it pushes to the front in the list Being curious by nature-and also of problems facing management. more than a little unhappy that our And for that reason we have the own results hadn't been better, I be­ second part of our title- gan to look for reasons. The first Surveys Relating to Same conclusion I came to was that train­ As the problem of training looms ing programs are like the weather. ever larger we realize we must do There is a rather strong tendency to something about it. So we make a talk about them, but accompanied by survey-find out what the other fel­ the failure to do very much about it. low ,is doing. Some of us do it very However, that analysis only describ­ informally- talk to our business as­ ed the results-not the reasons be­ sociates at lunch or at the club. Or hind those results. So I dug a little we go to meetings on the subject deeper. I believe I have found the and try to pick up ideas. Some of us reasons, and if this talk accomplish­ go all out. We add a training direc­ es nothing else, perhaps it will help tor with a department all his own to make your training programs a to our organization. We have him little more effective because of an attend classes on the subject. He goes added awareness of them. to conventions and management sem­ But to get back to the reasons. inars- he joins the training directors Basically I believe there are two­ association-he writes to other com­ Too busy and too much. panies which have formal programs Let's look at the first one. In prac­ - in short he shoots the works to cov­ tically every case I find that some­ er the subject from every angle. body is too busy to let the training [ 45] program really work. A program is learner's skill, attitude, or behavior." devised and set in operation-and in­ Why, there is nothing to it- that de­ variably, before it is completed or scribes our training program to a T. even really tested, it breaks down be­ Let's get on with it- we'll fill this cause the employees are needed for shop with grade A help in nothing production work, or the instructor flat. And so we start. We expose our ' has to take on a special job, or vaca­ embryo title man to a class which is tions or sickness increase the load set for two days a week for a period here or there-or something else of twelve weeks. An hour each day- comes along to delay or completely 30 minutes of which is grudgingly stop the program. In other words, given of company time, and 30 min­ when the pressure is on the training utes of his own- and that often caus­ program is the first to suffer. While tically commented on by his spouse this is perfectly understandable- it because the kid's dinner has to be de­ is most unfortunate, for the very layed on those two nights each week. reason for having a training pro­ Parenthetically, I might say that we gram is to supply the needed help expect him to do just as much work when these pressure spots appear. on those two days on which we give Instead of that, the pressure spots him the 30 minutes, as on any other. put an end to the device which has I was not brave enough to try to find been created to cure them. It is a out what his spouse expects, but in vicious circle, and the solution is not some cases at least, I imagine that • an easy one. the student finds the company's atti­ Now let's turn to the second reason tude by far the most reasonable. - too much. This one is not nearly so Well, at last it is over with- the clear-cut nor does it offer easy analy­ twelve weeks have passed and we sit sis or simple solution. Being human, back to watch our atomic-powered, we are always on the lookout for new jet-propelled, twelve-week wonder get gimmicks which will make life eas­ under way. But what happens? Noth­ ier for us. A training program seems ing- or at least the change is hardly to be just such a gimmick. Histori­ perceptible. He goes about his work cally, in the title business, we have much as before, and the fact that he come to expect that an employee approaches his problems each day needed six, eight or ten years of job just a little surer because of what experience in order to become a com­ he learned, goes by unnoticed. Why petent title man. Also, current needs - because of the disappointment thCl't have shown that we can't wait that he is not" a completely finished pro­ long. We are completely in agree­ duct- a better man than those who ment with Henry Ford's statement have learned the hard way, through that "the school of experience is a years of experience. So comes con­ great teacher, but its graduates are demnation and loss of faith in the too old to work." And we know just program. The hard-bitten operating what to do about it. We have nodded man decides it's no good-just a new­ our heads sagely as we read over the fangled idea dreamed up by some words of Louis W. Lerda of Standard ioker to make a soft job for himself. Oil of New Jersey, for they describe But the real truth of the matter is, what we want to do exactly. Just the real fault lies in the fact that in case you have forgotten, or may­ somebody expected too much. Yes­ hap there are some here who have the major reasons for failure of not read them, I will quote: "Train­ training programs- "too busy" and ing is passing along the know-how "too much." through carefully selected methods, With that, perhaps I should quit. according to a well-conceived plan, I've covered the three segments of by competent and well-prepared peo­ my topic as set forth in the title. ple, in a suitable training climate, to I've stated a conclusion. I should shorten learning time or experience. shut up. But many years of listening Training is telling-plus showing­ to Bill Gill, Al Suelzer, Mort Smith, plus supervised practice until the de­ George Rawlings, Jim Sheridan, etc., sired change is achieved in the etc., ad infinitum has filled me witJ::l [ 46] a desire to emulate them. Thus I being better qualified to accept new shall continue until the last possible assigntnents and greater responsi­ second. bilities as time goes on. Seriously though, before I close, I This is the philosophy that we try would like to voice a few thoughts to follow in our own shop. While we on the importance of training pro­ have been only mildly successful grams and why it is so necessary thus far, we have done a lot of work for us to find a solution to the prob­ and are continuing to do more. I ·lems they pose. have here a report which Tom Mc­ These programs are important to Knight, our training director, made us. The current shortage of help for me. It is 22 pages long, and so makes it imperative that we train our I will not attempt to cover it for new people more quickly. We must you. I will, however, make just a bring them up to an acceptable level few references to it, in order to of efficiency just as quickly as pos­ illustrate some of the areas in which sible-not only so that we can get we are working. If you are interested the work out that is piling up on our in specific details, please feel free to desks, but also to reduce turnover. write to Tom. He will be glad to help These employees are interested in you in any way he can. Just write to: how much they can earn. They can't T. R. McKnight, Training Director pay today's grocery bills with to­ Title Insurance and Trust Company morrow's promotional increases. Thus 433 So. Spring St. they are susceptible to promise of Los Angeles 13, California. more pay, particularly in the early Here are some of the things we stages of their employment. The are doing: sooner we get them up, the sooner Excerpts from Tom's Report they get out of the reach of those First of all, we decided to try to who would lure them into other areas do the job right. That is always an where they can get higher pay for easy decision to make, but not always less skilled activities. easy to carry out. Our attempt went There is another, and actually a something like this: more important reason. Our industry I. In November 1953, we established has grown greatly in stature. Title an education and training sec­ men and women must be better tion as a part of our Personnel t ained in things other than the pure- Department with responsibility ly technical aspects of our business. for training and development, Public relations, economics, t h e both as to actual training in some intricacies of mortgage financing, areas, and as to development and government insurance and controls, co-ordination of program and and many other matters are esssen­ techniques in all areas. Sort of a tial if they are to have the kind of supervisory-advisory set up. background which will enable them II. In setting up this section, we to meet the challenge of our chang­ were correlating our first steps, ing times. which had been- 'these are some of the reasons why A. The establishment in May I feel we must have training pro­ 1953, of an Orientation and grams, and why we must overcome Induction Process. the obstacles. Instead of saying that B. The addition, in July of 1953, we are too busy- that we can't afford to our written Management the time, I believe that we must Guide of a statement of the adopt the attitude that we can't general objectives of our afford not to take the time. Further management in regard to I believe that we musn't expect "too training and development. much". We must keep the real goals C. The spelling out, in August in mind- not expecting to do the job 1953, of the methods which overnight, but realizing that constant would be used in carrying effort will not only shorten the time out the program. This in­ that it takes an employee to learn a cluded such things as who given job, it will also result in his would be responsible for [ 47] training; which specific areas terests in land are en­ would be company-sponsored cumbered (or burdened). and which should be sought F. The reason for our industry. from public educational fa­ G. Real estate practices and cilities; set forth the make procedures. up and duties of an Advisory H. Title Plant contents and Training Committee com­ operations. posed of the heads of the I. The story of our own com­ chief operating and staff di­ pany. visions of the company. III. Title Typist Training Pro- III. When this had all been as­ gram. sembled and activated, the next This is our beginning operation step was the creation of an over­ for girls. Training material is all program by the training sec­ rather voluminous and is gener­ tion and the Advisory Training ally restricted to matters neces­ Committee. Basically, it consists sary for the girl to be able to of the following: become proficient at typing re­ I. Induction and Orientation Pro- ports and policies. A training cess. period of 6 to 8 weeks is general­ ly sufficient. Designed to acquaint the new employee with the company-to IV. Title Secretarial Training make him feel at home and want Program. to work there. On this problem It was originally planned that the of "too busy" which I have al­ title typist, after finishing her ready mentioned, it is interesting original training, would receive to note that one of our announc­ training as a title secretary be­ ed objectives was to "Hold fore being promoted to Title regular follow-up meetings to be Secretary. sure that the employee has no Again let me refer to actual ex­ further questions to ask, requests perience. My report shows as to make, etc. These to be held follows: "In many instances approximately 30 days after em­ supervision has been reluctant to ployment." The report states: "So allow title typists to take suf­ far division and department ficient advance training in title managers have been reluctant to secretarial work because of prej release employees for these meet­ sing production problems. One'.! ings and therefore none have again-"too busy." been held." Once again-"too V. Title Searcher Training Pro- busy". gram. II. Title Orientation Program. I will not take the time to This is designed to let our new enumerate the details of this employees in on the secret of program. I am sure you all know what the title business is all the multitude of things we have about. We have reached the con­ to do to start a title man on the clusion that when someone on road. Suffice it to say, we the outside asks an employee: desperately hope that after a few "What does your company do?" days he can find his way from that he should have a slightly the lot books to the General better answer than: "I dunno." Index alone. We don't expect him So these are the things we tell to know what to do when he gets him about: there, but hope that sufficient A. The nature of land. exposure to training and job B. How land is described. experience will do the trick. My C. The nature of ownership of report lists this complaint: "The land. new searcher is not tested suf­ D. The manner by which in­ ficiently prior to assignment to terests in land are cre­ the job, as to aptitude, intellig­ ated and transferred. ence and adjustment." Well, E. The manner by which in- that's true, but then the choice [ 48] isn't too large, so it is just one "There is the continuing prob· more hurdle for the training lem of instructors and making program to get over. them available when needed." VI. Title Officer Training Pro· -Again-"too busy". gram. "While most instructors did an I have gotten from searcher to excellent job, yet it was diffi· title officer in a hurry. But don't cult to require them to expend be misled. Actually it has been their personal time writing and a long road through the maze developing lecture and training of knowledge that must be im· material." Again-"too busy" parted before the searcher is to do it on company time. ready for promotion to title of­ Those deal with the sending end ficer. And when that time comes, of the problem. Here are some there is an even greater amount on the receiving end: to be done. In addition to know!· edge of the many codes, cases, "In most cases the attendance law reviews, texts, etc. which was in direct ratio to the comprise the more important as· amount of interest shown by pects of the procedures pertain· the employee's immediate first ing to our business, · we expect or second line supervisors." him to have a very good working "The percentage of people who knowledge of the following: can or will take the time to read and study technical rna· The California Land Title As· terial voluntarily, or on their sociation Manual. own time, is very small." The Handbook for Title Men. Well, I could go on, but I am sure that you get the point. It Our Manual of Operating Pro· isn't an easy or an over-night job. cedures (some of which haven't yet gotten into the VII. Other areas of training. Manual because we are "too We cover a number of other busy".) areas, such as Branch Office Training, basic Supervision and Our file of Title Officer Re· the like. We also participate in minders. the Education and Training pro­ All of our write-up and vesting gram of the California Land Title forms. Association. We have found Special Articles and material much to help us in working with on such subjects as Partner· our fellow title men in Cali· ships, Bankruptcy, H om e. fornia, and have been happy to steads, etc., etc. have the opportunity of con· The material contained in Mel tributing printed material, hand­ Ogden's "Outline of Land books, manuals, taped lectures, Titles." and the like which were created I am sure you recognize that in our own shop. This joint covering that job is no little ac· effort, has I believe been helpful complishment. It isn't achieved to all of us in the Association. in a week, or even in a year. I could go on and on, for this Here are just a few of the is not a simple subject, nor one hurdles, as shown by the report which should be lightly regard· on our training program: ed, but I think I have taken enough of your time. "There is no apparent inclina· tion to make the training pro­ In closing, I want to again remind gram a pre-requisite to promo· you. Don't let the pitfalls of "too tion to title examining work." busy" and "too much" wreck your There it is again-"too busy"­ training program. You need the pro­ when we need him, shove him gram, but remember, you will have into the job and let him learn to work to make it successful. It will the hard way. not come easily. [ 49] REPORT OF LEGISLATIVE COMMITTEE

WALLACE A. COLWELL, Chairman Vice President, Abstract and Title Guaranty Company, Detroit, Michigan

This is a brief summary of all re­ Service of Writ: Underwritten Title ports, interim and final, received from Company-covers the method of serv­ committee members, of legislation af­ ing the writ upon banks, savings and fecting real estate and related sub­ loan associations, and title insurance jects. companies, requiring that any such institutions having branch offices ALABAMA and ARKANSAS should be served by leaving a copy (Interim) of the writ and notice with the Nothing affecting real estate or manager or officer at the appropriate title to real estate. office or branch. This section is ARIZONA (Final) amended to include underwritten title First regular session of 22nd Legis­ companies. In addition, the section is lature. Laws now in effect: clarified with respect to the circum­ stances under which a copy of the Surplus - for sale, lease or ex­ complaint must be served upon such change of surplus property by cities institutions. This is done by making to the United States Government for clear that if the demand as stated governmental purposes. in the writ does not exceed $300.00, Old Age-no recovery against es­ then a copy of the complaint must tates of old age assistance recipients. also be served. Utilities, Oondemnation-for cities Sponsored by the California Land and towns to have right to condemn Title Association. plants, systems and business of pub­ lic utilities. Counties: Purchase of Real Proper­ Flood Control- for county to ac­ ty: Pulblication of Notice- Section quire and provide, without cost to 25350 of the Government C o d e United States Government, lands, presently provides that no purchase easements and rights-of-way neces­ of real property where the purchase sary for construction of flood control price exceeds $300.00 shall be made unless notice of intention of t~ projects. Board of Supervisors to make the Negotiable Instruments - due on purchase is published at least three Saturday, payable next succeeding weeks prior thereto. This section is business day except on demand. amended to raise the $300.00 to Sale of Land I;Jy Game Commission $2,000.00. - provides authority for Game and Fish Commissioner to sell land with Securities Excluded From Corpor­ reservation of mineral rights. ate Securities Law-Section 25102 of Sale Approval - requires approval the Corporations Code lists several of commercial leases and sales by classes of securities and provides that State Land Commission by Board of the Corporate Securities Law shall Appeals. not apply to such classes. This sec­ Tax Reduction- Flood Loss - pro­ tion is amended to add to the classes of securities which do not fall within vides for reduction of assessment of the Corporate Securities Law "a property loss through floor or fire promissory note secured by a lien on (Act of God). a single parcel of real property, when CALIFORNIA (Final) such. note is not one of a series of Have several interesting items of notes executed by one maker or legislation to report, including the persons associated together in the repeal of the Torrens Law - never issue of notes." more than 300,000 certificates in the Creation of J1oint Tenancies-Sec­ state-so repeal is not of great signi­ tion 683 of the Civil Code, relating ficance to the title business here. to joint tenancy, is amended to pro- [50] vide that a joint tenancy may be tion, dedicate or convey real property created by a transfer from joint to certain governmental agencies. tenants to themselves or some of This section is amended to add to them, or to themselves or any of those agencies to which such dedica­ t.hem and others, and to provide that tions or conveyances may be made, a husband and wife may create a the United States of America or any joint tenancy by a transfer to one of agency or instrumentality thereof. In them and to another or others. This addition, the section is amended to -is an extension of existing law, and provide that executors or administrat­ present provisions governing creation ors may convey, release or relinquish of ]oint tenancies are not limited. to the State or any county or Judgment Liens: Duration of-Sec· municipal corporation access rights tion 674 of the Code of Civil Pro­ to any street, ·highway or freeway cedure now provides that a judgment from any real property of the estate. lien continues after recordation of Section 1515 of the Probate Code, an abstract, for a period of five years which is virtually identical to Section from the date of entry of judgment 587 except that it relates to guardians or decree. This Section is amended rather than to executors and ad­ to make the duration of such liens ministrators, is amended in identical ten years rather thC~n five years. manner. Notices of Completion, Notices of Sponsored by the California Land Cessation: Who May Sign-Section Title Association. 1193.1 of the Code of Civil Procedure, Estates: Distribution to Deceased relating to mechanics' liens, now Distributee - Section 1023 of the provides that notices of completion Probate Code presently provides that or notices of cessation shall be signed where an heir, devisee or legatee dies and verified by the owner or some­ before distribution his share may be one on behalf of the owner. This distributed to the representative of language is amended to provide that his estate or to the estate itself with such notices shall be signed and the same effect as if it had been dis­ verified by the owner or his agent. tributed to him while living. The In addition, paragraph (i) of Sec­ amendment adds a paragraph to this tion 1193.1 is amended to change the section permitting distributions by present statement that where the in­ a decree of distribution purporting terest or estate is held by several to distribute to the deceased dis­ persons as joint tenants or tenants tributee by name rather than to his in common, any one or more of the estate or the representative of the co-tenants may be deemed to be the estate. Such decrees are to have the owner, substituting for the word same effect as though distribution "several" the words "two or more". had been made to such distributee Sponsored by the California Land while he was alive. There is a further Title Association. provision that such purported dis­ Married Minors; Males Treated tribution shall be void, however, same as females-Section 25 of the where it is distributed pursuant to a Civil Code, relating to minors, is will which provides that the dis­ amended to: (1) make the section tributee shall be entitled to take only applicable to married male minors in the event that he survives the date over 18 years of age as well as to of distribution. female minors. (2) The provisions Decrees of distribution heretofore relating to actions affecting marital entered are validated, but Section 2 status are broadened to include any of the measure states that any pro­ action or proceeding involving sup­ ceeding or defense based on the in­ port or the custody of children of validity of such a decree on the the marriage or determination of ground it purported to distribute to property rights. a deceased distributee by name can Executors an d Administrators: only be commenced or maintained Guardians: Conv,eyances- Section 587 within one year from the taking ef­ of the Probate Code presently pro­ fect of this act. vides that executors and administrat­ Sponsored by the California Land ors may, with or without considera- Title Association. r su COLORADO (Interim) due installments and on such judg­ The Colorado Title Association in­ ments hereafter rendered the issue troduced a bill to the 1955 session of is now closed. If all payments due the Colorado Legislature which would at a given time under the decree have placed all domestic and foreign have been paid in full, the judgment title companies doing business in is not a lien and the defendant may Colorado under the supervision of the sell his property free from any excep­ State Banking Commission. This bill tion. was written after a careful study of Distribution: Court may distribute a number of title insurance laws of the entire estate to surviving widow various states but it failed to become or minor children when value of es­ a law as considerable controversy tate does not exceed $5,000.00. Widow arose between the foreign and domes­ now allowed $600.00 immediately tic title companies operating in Col­ from bank accounts of decedent. orado. Mortgage-no longer necessary to A bill which would have repealed specify the maximum amount of the the present Colorado law governing obligation to be secured by a mort­ the abstract business was introduced gage. but also failed to be enacted. Mortgage-future advances may be CONNECTICUT (Interim) made to another than the original Considering legalization of open­ mortgagor. end mortgages. Income Tax: The 15% deduction allowed by the 32nd Legislature was FLORIDA (Interim) repealed and a 71,6 % increase passed Plat Act - amendment defeated in the nature of a surtax. which would have required that be­ fore a plat could be accepted for IOWA (Interim) record by the Clerk, the developer must present to the Clerk an original Acts passed provided: and two copies of a complete abstract Death Certificate-for recording of from government to date. The pro­ death certificate in county of resi­ posed amendment provided that a dence when death occurred in differ­ lawyer could borrow the abstract. ent county. Tax Stamps-pending bill to elimin­ Notary Public-for notaries public ate Florida tax stamps on mortgage to have power to act in any county by notes when the mortgages are ware­ filing their certificates in extra coun­ housed for a period of time. ties. IDAHO (Interim) Taxes, Inheritance-for inheritance 33rd Session of Idaho Legislature. taxes, not a lien on real estate prior to July 4, 1941. New Laws effective May 2, 1955, unless given immediate effect (1E). Bills not passed but under consi- deration: Judgment: Present statute provid­ to authorize county recorder .to ing that lien of a judgment attached keep records to show death of to the debtor's property with the act joint tenant by affidavit of sur­ of docketing the judgment is re­ vivorship. pealed. Effective immediately, the to clear record of stale reverters judgment now becomes a lien when such as schoolhouse sites, church the transcript or abstract thereof is sites, restrictions on title (ap­ filed with the Recorder. Duty of plain­ proved by Title Standards Com­ tiff's lawyer to see that the transcript mittee of Bar Association). is prepared and filed in order to create the lien. MARYLAND (Final) The same section also settles the Acts effective June 1, 1955, provide: question of when and to what extent Probation of Estate - requires at a decree for alimony and child sup­ least 90 days notice to creditors in port is a lien on defendant's property. equity proceeding for sale of property By the act, the lien is only for past for the purpose of partition where [52] estate has not been previously ad­ if acquired within five years from ministered. honorable discharge. (IE). Minor Wife - authorizes married Misc.-Banks and Trust Companies female, who has attained the age of - permit bank and trust companies 16 years and who holds title to prop- to subscribe for stock of Federal . erty with her husband by the entire­ National Mortgage Association . ties, to join with her husband in an Misc.-Malicious Damage, Minor­ instrument of conveyance, either deed permits recovery from parents for or mortgage. malicious destruction of property by Mortgage- increases from $500.00 minors. to $1,500.00, as limit for future ad­ MISSISSIPPI vances allowable under a mortgage. No regular session during 1955. Mechanics Liens - for filing of mechanics lien to include the drilling MISSOURI (Interim) and installation of wells to supply 68th General Assembly. water. New Probate Code-approved and passed by both Senate and House. If Land Contracts- requires the in­ signed into law, it will cause many clusion of additional provisions in all important changes land in the present law installment contracts relating to and clarify abstracting of estates. notices received by the vendor as to repairs or improvements. MONTANA (Final) MICIDGAN (Final) The Montana Title Association re­ ports no new legislation New Laws affecting real Effective October 14, estate or the title to real 1955, except those given immediate estate. effect. (lE). NEBRASKA (Final) Drains, Recording-requires there­ 67th Session. cording of all drain agreements and New Acts become effective Septem­ easements 30 days after confirmation. ber 17, 1955, and provide as follows: ClE). Decedent's Estates- for the trans­ Land Conveyances--permits grant­ fer of personal property of deceased or or grantors in land conveyances to person without judicial proceedings be named as grantee directly. Grantor where the value of the estate, less may create joint tenancy or tenancy liens and encumbrances, does not ex­ by the entireties directly. (PA3). ceed $700.00. Decedents' Estates - that petition Land, Submerged Lake Bottom - Great for license to sell real estate for pay­ Lakes--permits State Conserv­ ment ation Department to of debts shall set forth that real grant and con­ estate to be sold vey unpatented submerged is not exempt for lake bot­ sale for any reason, including tom lands and artifically filled lands home­ along shoreline of Great Lakes. (IE). stead rights. Decedents' Estates-to make sur­ Plat Act - establishes minimum viving joint owner or owners of joint­ width for all residential lots at 60 feet, ly held real or personal property with 50 feet width permitted only if liable for the debts and obligations of facilities are installed or to be install­ the deceased joint owner or owners ed immediately. Permits proprietor within limitations and under condi­ to deposit funds to insure installation tions prescribed. of facilities. (IE). Decedents' Estates- procedure for Taxes-requires inspection by State determination of heirship when de­ Tax Commissioner of all assessment cedent died without estate. rolls prior to July 1st of each year. Tax, payment of- for manner of (IE). payment of tax and interest when Taxes--permits estate and inherit­ rights, interests or estates are uncer­ ance taxes to be paid from residue tain or contingent. Bond to assure of intestacy estates before assign­ payment of tax when uncertainty has ment. been resolved. Tax Exemption- permits veterans Tax, Inheritance - determine date one year tax exemption on homestead when transfer of real estate shall be [53] treated as made in contemplation of after January 1, 1956, shall allow as death set at 3 year period ending with admitted assets of a title insurance date of death except in case of bona corporation premiums and fees for fide sale. title examinations and insurance not more than ninety days past due, less NEW HAMPSHIRE (Interim) commissions payable thereon. Previ­ New law effective April 1, 1955. ously such premiums and fees nof Real Estate Mortgages- Subsequent more than twelve months past due Advances- Any sum or sums which were admitted as assets. shall be loaned by the mortgagee to Savings Bank - Investment of · the mortgagor at any time after the Funds (Effective March 25, 1955). execution of any mortgage hereafter made, shall be equally secured with To permit mortgage loans up to and have the same priority as the 80 % of the appraised value of a original indebtedness, to the extent single family residence not more than that the aggregate amount outstand­ 10 years old, occupied by the owner, ing at any one time when added to if the appraised value does not ex­ the balance due on the original in­ ceed $15,000; or if the value is great­ debtedness shall not exceed the er, 80% of the first $15,000 and 50% amount originally secured by the of the remainder of such appraised mortgage. value. on Holi­ NEW MEXICO (Interim) Business in Cow1ty Offices days and Saturdays (Effective June 1, Amendment to Mental Illness Stat­ 1955). ute effective June, 1955. are to be New law authorizes abstracters and Holidays and Saturdays records considered as Sundays for all pur­ attorneys to examine court of cases. poses relating to the transaction on Mental Illness throughout NOTE: (The 1955 New Mexico Leg­ business in county offices a statute known as the state except in counties which are islature passed a city. the Mental Illness Statute becoming wholly contained within law as N.M. Sess. L. '53 c. 182, which Whenever the last day on which a was apparently an exact duplicate of paper shall be filed or an act done the Idaho Statute passed somewhat or performed in any such office ex­ earlier. This law carried a $500.00 pires on Saturday, the time therefor penalty for the disclosure of informa­ is hereby extended to and including tion relative to the mentally ill or the next business day. insane. As a result of this law, most Decedent Estate Law-Election by of the District Court Clerks placed surviving spouse against or in ab­ the Insanity Dockets and Files under sence of Testamentary Provision (Ef­ lock and key, and in most places fective April 19, 1955). where they were not locked up the The words "intestate share" shall title people placed exceptions in their be construed to mean the surviving abstracts and did not search this rec­ spouse's share of the estate as in ord. intestacy or one-half of such, net Title insurance underwriters quali­ estate, whichever is smaller fied in New Mexico agreed to issue without excep­ Decedent Estate Law - Power of Mortgagee's policies April tion to this fact, but did include sale after-born child (Effective proper exception in Owner's policies 2, 1955). of title insurance. Provides for a child- born after a will is made and not provided for or NEW YORK (Final) mentioned therein- succeeds to the Summary of laws passed: same portion of the parent's estate Title Insurance Corporations -As­ as would have descended to such sets (Insurance Law Effective July 1, child if the parent had died intestate. 1955). Decedent Estate Law-Wills-Right The amendment provides that the of Election (Effective April 19, 1955). Superintendent of Insurance, on and The amendment clarifies the Ian- [54] guage of the subdivision and provides were regular and providing further, expressly that all estate taxes shall that after two years from the date be disregarded in computing the net of the record of the deed the pre­ estate for the purpose of ascertaining sumption shall become conclusive. the share of the surviving spouse after an election to take against the NORTH CAROLINA (Final) will. Real Estate - Power of Attorney - authorizes married woman to ex­ Real Property Law-Proof by sub­ ercise powers of attorney conferred .scribing witness (Effective July 1, 1955). upon her by her husband, including power to execute and acknowledge When the execution of a convey­ deeds to property owned by her, by ance is proved by a subscribing wit­ herself and her husband, or by her ness who resides in a city the proof husband. (Proposed Constitutional must include the street and number, Amendment). if any, of his residence. Real Estate- Abandonment-Rail­ Real Property Law-Acknowledg· road - provides that railroad which ment by Corporation and Form of has removed tracks from a right-of­ Certificate (Effective July 1, 1955). way and has not replaced any part If the proving officer resides in a of them or made other railroad use city, the certificate of acknowledg­ of any part of right-of-way for seven ment must include the street and years ensuing is presumed to have number, if any, of the residence of abandoned right-of-way. such officer. Decedents' Estate Law - provides Real Property Law-Record of Cer­ that where decedent's personalty is tain Conveyance Validated (Effective insufficient to pay all debts, applica­ July 1, 1955). tion may be made to superior court After September 1, 1955, a record­ for sale of decedent's realty for pay­ ing officers shall not accept for re­ ment of debts without first exhaust­ cording any conveyance of real prop­ ing personal property assets. Vali­ erty executed subsequent to that date dates previous sales of realty under unless the city, town or village in section to extent that sales were held which the property is located is stated without first exhausting personalty. iJa the instrument of conveyance. This Does not apply to pending litigation. section shall not operate to invalidate Decedents' Estate Law-After-Born any instrument which is recorded Children - puts after-adopted and without this information nor shall it after-born children on same basis and impair any title founded on such a provides that shares of both in testa­ conveyance or record thereof. tor's estate shall be governed by pro­ Recording Act - Options to Pur­ visions of GS 28-153 through 28-158. chase a House (Effective April 21, Effective July 1, 1955. 1955). Minor Wives - authorizes married Provides that such options shall be women under 21 to make binding deemed executory contracts and agreements with respect to any trans­ makes the recording of option agree­ action involving an estate held or ments effective only up to and includ­ purchased by entirety. ing the last day fixed by the agree­ Validation of Deeds- adds executor ment for the exercise of the option. and administrator to list of officials TAx Sale -Foreclosure by Action whose deeds are not invalidated , in Rem (Effective March 10, 1955) . through omission of official seal and The amendment adds a new sub­ makes section apply to all such deeds division giving to cities the power to executed prior to March 12, 1955. adopt a local law making a deed Validation of Acknowledgments - given pursuant to a law providing for validates acknowledgments and privy foreclosure of a tax lien by action examinations taken prior to 1951 (in­ in rem presumptive evidence that all stead of 1939). Does not apply to prior proceedings required by law pending litigation. [55] Validation of Conveyances by Gen­ the company shall own and maintain eral Services Administrator-author­ in the county in which its principal izes and validates conveyances of office in the state is located a title property by General Services Admin­ plant consisting of a general index, istration for United States without adequate maps, and currently posted seal. Does not affect pending litiga­ tract or geographic indexes for al:l tion in which title to United States the lands in such county. It shall also property under General Services Ad­ directly or through its agent own and ministration's supervision is in ques­ maintain for each additional county tion. (NOTE: The Attorney General in which it shall be authorized to· of North Carolina declined to give transact a title insurance business a an 9pinion as to the constitutionality comparable title plant. of this act, but one of the Assistant Attorney Generals is of the opinion PENNSYLVANIA (Interim) that it is constitutional.) Conveyances-requirements for re­ Real Estate-Requirement of Ex· cording - to contain complete post amination- Wife- requires private office address of grantees. Effective examination of wife when making September 1, 1955. contract (of over three years) with Real Estate Tax Sale Law-pro· husband affecting her real estate or ceeds of sale now to include "lien corpus of her personalty, or income holders in the order of their priority." therefrom. Effective July 1, 1955. Effective September 1, 1955. Valillation of Contract between Hus­ Realty Transfer Act-re-enacts and band and Wife - validates contracts amends Realty Transfer Act by defin· between husband and wife (which ing transaction as "the making, exe­ come within provisions of GS 52-12) cuting, delivering, accepting or pre­ made prior to January 1, 1955, even senting for recording of a document," though acknowledged by notary, if by adding to definition of value the contract contains certificate that same words "or any other document with­ is not unreasonable or injurious to out consideration," by adding a new wife. section 4 that the tax shall have pri­ OKLAHOMA (Interim) ority out of the proceeds of any judi­ Last year the County Treasurers cial sale and the sheriff shall pay the Association of Oklahoma, through a tax out of the first moneys paid to tremendous amount of effort and him in connection therewith, and the assistance upon the part of every tax shall apply to all documents of­ abstracter in this state, successfully fered for recording subsequent to got adopted a constitutional amend­ May 31, 1953, and shall not apply to ment covering the releasing and ex­ any documents delivered prior to Feb­ tinguishing of ad valorem taxes. This ruary 1, 1952. Effective June 1, 1955. proposition was submitted as State Real Estate-Real Estate Title Held Question No. 361 at the general elec­ by Foreign Corporation - validates tion on November 2nd, 1954, and was and quiets title to real estate held by passed with a very good majority. In a foreign corporation not authorized order to vitalize the amendment, to transact business in Pennsylvania House Bill No. 596 was enacted by and heretofore conveyed to a citizen our Legislature, and became law on or citizens of the United States, or a February 28th, 1955. corporation authorized to hold such real estate. Effective June 23, 1955. OREGON (Final) Tax Law - Townships, Boroughs, Title Insurance Act-Now Effective School Districts to impose local Realty -New Act regulating and controlling Transfer Fee-provides that certain • the conduct and operation of title political subdivisions may levy taxes insurance companies sets forth re­ "as they shall determine to be paid quirements to organize and provides by the transferor upon the transfer for creation of "Title Insurance Un­ of real property or of any interest in earned Premium Reserve Fund." real property situate within such poli­ In addition to capital and deposit tical subdivisions regardless of where requirements, the Act requires that the instruments making the transfers [56] are made, executed or delivered, or are not to be issued within a period where the actual settlements on such of one year for any improvements transfers take place." within the limits of the proposed highway. RHODE ISLAND (Interim) Local Improvement Liens- An im· · Nothing affecting real estate or portant revision of RCW 35.50 relat­ title to real estate except Act which ing to the lien of local improvement created Rhode Island Mechanics Lien districts of cities and towns. The city Law Commission to study the Mech· or town creating a local improvement ·anics Lien Law. district is required to file with the SOUTH DAKOTA officer authorized to collect assess· and ments, the title, district number, dia­ TENNESSEE (Final) gram of boundaries and preliminary assessment roll of the district show­ Nothing affecting real estate or ing the lots, tracts, and parcels to title to real estate. be benefited, and the estimated cost UTAH and expense to be borne by each. The and proposed assessment roll shall im­ VERMONT (Interim) mediately be posted to the index of Nothing involving title questions local improvement assessments presently before the legislature. against the properties to be affected. VIRGINIA WISCONSIN (Final) No regular session in 1955 (con· Divorce and Annulment Actions,­ venes in even years). the record must now show one of the parties to be a resident of the county WASHINGTON (Final) in which the action is brought. County Road Engineer-The rec­ Domestic Insurance Companies, ords and books in the County Road other than life- investment not to Engineer's office are made public rec­ exceed 5% of the company's admitted ords open to the inspection and exam­ assets in income producing real ination of the public. This act took estate. effect February 1, 1955. Mortgages- Savings & Loan As· Homesteads - The net value for sociations now authorized to acquire which homesteads may be selected mortgages from any person so long and claimed as exempt is increased as they represent loans that the as· to the sum of $6,000.00. sociation itself could have made in Probate Procedure - A new enact­ the first place. ment authorizing the court to order Highway I~ocation, Discontinuance, the continuation of the business of a Alteration and Layout-County High. decedent other than of a partnership, way Commissioner to compile a for such period of time and subject record of the laying out, alteration or to such restrictions as the court order discontinuation of all highways out­ may provide. side of cities and villages. Rights of Inheritance- This com­ Easement for Public Use- acquired plete law on the inheritance rights by gift or purchase or condemnation of slayers is designed to preclude a shall not be deemed abandoned on the slayer from acquiring any property ground of non-user for any period or receiving any benefit as a result less than that prescribed in the of the death of the slayer's victim. Statute of Limitations. Proposed State Highway Locations Lis Pendens, Filing now compuls­ - This amendment authorizes the fil­ ory,- instead of optional in all cases ing of descriptions and plans of pro­ where the complaint, cross-complaint, posed state highways with the County or counter claim contains a legal de· Auditor, at which time the owner of scription of real estate and asks re· any property affected thereby makes lief in connection therewith. It further improvements at his peril; further provides that judgment shall and after such filing, building permits not be entered in such a case until [57] 20 days after the Lis Pendens is Insurance - Regulation of Trade filed. Practices- to regulate trade practices WEST VIRGINIA (Final) in the business of insurance defining Banking Code-to provide that no unfair competition, deceptive acts, nonresident banking institution, cor­ misrepresentation of policy contracts, poration having its principal office or for cease and desist orders and pen­ place of business outside the State of alties for the violation thereof. West Virginia, or nonresident person Security Trust Agreements - Cor­ shall be appointed to act as executor, poration must be chartered under administrator, curator, guardian or laws of West Virginia to act as trus­ committee, except that a testator who tee- with principal office within the has a nonresident as his executor, State. and except that for the guardian of a nonresident infant, there may be ap­ Real Estate-Acquired by State for pointed the same person who was Non-Payment of Taxes-Release­ appointed guardian at the domicile of Title to land acquired by the State for the infant. This amendment added non-payment of taxes more than 10 the provisions with respect of corpor­ years before 10 consecutive years of ations and banking institutions and in payment of taxes shall be released other respects is the same. to the person who would be the own­ Real Estate Sale or Lease-Future er but for the title of the State, and Interests- provide for summary pro­ that all unpaid taxes prior to said ceedings for the sale or lease of real 10-year period are declared to be fully estate at the instance of persons hav­ paid, with provision that the Act shall ing future interests, vested, contin­ be retrospective and prospective, and gent, or executory, and for publica­ does not affect the title for persons tion with respect of nonresident and claiming land by transfer who had unascertainable parties. purchased for taxes.

[58] EFFICIENCY AND PERFECTION IN THE ESCROW DEPARTMENT (A Playlet) CAST John B. Waltz, President, Commonweath James M. Hart, Vice-President, Title Insur· · Title Company of Philadelphia, Phila­ ance Corporation of Pennsylvania, Bryn delphia, Pa. Mawr, Pa. Elmer S. Carll, P1·esident, Industrial Trust Joseph J. Hurley, Secretary-Treasurer, Title Company, Philadelphia, Pa. Insurance Corporation of Pennsylvania, Earle M. Frankhouser, President, Berks Bryn Mawr, Pa. Title Insurance Company, Reading, Pa. Andrew Sheard, Manager, National Depart· Gordon M. Burlingame, President, Title In· ment, Title Insurance Corporation of surance Corporation of Pennsylvania, Pennsylvania, Bryn Mawr, Pa. Bryn Mawr, Pa. Preston D. Brenner, Vice-President, Land Wilbur I. Diefenderfer, Vice-President and Title Insurance Company, Philadelphia, Title Officer, Berks Title Insurance Com· Pa. pany, Reading, Pa. Prologue by Mr. Burlingame

SCENE: BURLINGAME enters and apolo­ Settlement Table at Title Company. gizes for being late. HART enters and apologizes for CHARACTERS: being late. Grantor-John B. Waltz. SHEARD starts preparation of set­ Grantee- Earle M. Frankhouser. tlement sheet, asking sale price, de­ Real Estate Broker- James M. Hart. posit, adjustment of taxes, adjust­ Cooperating Broker - Gordon M. ment of house rent. Finds there is no Burlingame. rent adjustment 3.S rent commences Mortgagee's Representative-Elmer as of the first of the month, but S. Carll. HART has not requested WALTZ 'Attorney for Purchaser- Wilbur I. to bring lease with him. Diefenderfer. Interrupter-Joseph J. Hurley. HART promises to produce lease Settlement Clerk - An drew A. next day. Sheard. DIEFENDERFER requests that no Opening comments by BURLING­ distribution be made until lease is AME as to the purpose of skit. Might produced to the Title Company. mention this skit is not being done SHEARD proceeds with grantor's for the purpose of ridiculing the real side of settlement sheet, and looking estate or legal professions, but is only at settlement certificate finds the for the purpose of instruction in the same discloses a ground rent, ques­ proper preparation and procedure of tions WALTZ and HART if they have settlements, and that all of the mis­ procured the necessary deed of extin­ takes which will be brough.t forth, guishment for the rent, and a state­ could not possibly happen in one set­ ment as to the amount due. HART tlement. says that he has procured statement ON STAGE: and produces same, but was not · WALTZ, FRANKHOUSER, CARLL aware that it was necessary to inform and SHEARD. the Title Company that the ground SHEARD remarks about lateness rent was to be extinguished, or that of hour and what is detaining the a deed of extinguishment was neces­ brokers and attorney. sary. DIEFENDERFER enters and apolo­ SHEARD informs WALTZ that it gizes for being late. will be necessary to run the ground [59] rent title out, to see if the Blair Trust requested a reading of the meter. Company as Trustee under the Will WALTZ replies in the negative, and of Mary Brown is the proper one to then SHEARD asks FRANKHOUSER extinguish the ground rent. Also if he is willing to take subject to the informs HART that it will be neces­ same. FRANKHOUSER consults with sary for him to prepare the deed of DIEFENDERFER, and DIEFENDER­ extinguishment after the necessary FER advises FRANKHOUSER not information is furnished. to take subject to possible excess SHEARD then requests statement charges. SHEARD then suggests that on the mortgage appearing on the a suitable sum be withheld against certificate. WALTZ in order to protect FRANK­ HART produces statement from HOUSER, and after discussion, a fund David Black, and to his amazement of $100 is agreed to be withheld. finds that Black is charging interest ENTER: to July 20, 1952, not having noted the HURLEY who annoys SHEARD fact that the mortgage was an expir­ about the return of funds held for ation mortgage and not :1 within possible excess charges in a settle­ mortgage, and therefore, Black is ment which he had made about a entitled to interest to the expiration year ago. SHEARD explains to HUR­ date. LEY the steps necessary to procure SHEARD further informs WALTZ the release of the fund. and HART that it will be necessary EXIT: for David Black to appear in person HURLEY. in order that the mortgage can be WALTZ remarks he hopes satisfied of record, he dces upon receipt of not have to wait that length the principal and interest. of time for the r.eturn of his money, and SHEARD asks for the bill for 1947 SHEARD explains City and School to him the same taxes and water rent as he has explained to HURLEY. which are shown as delinquent on the certificate. SHEARD then requests a statement from WALTZ from the Black Fin­ HART states that he did not pro­ ance Company for the repayment of cure these as he thought it was the the judgment appearing on the cer­ Title Company's duty to procure the tificate, but WALTZ claims that is same. not his debt, that he only endorsed SHEARD informs HART that if the note for someone else, and there­ the Title Company had been notified fore, the other party should pay the prior to the settlement, it would have judgment note, but it is finally ex­ obtained the bills. plained to him that it will be neces­ SHEARD asks, and WALTZ does sary for him to either pay the judg­ produce 1951 tax and water rent re­ ment in full or procure the proper ceipts. release of the premises from the lien SHEARD then asks what disposi­ of the judgment. tion has been made of the lien for SHEARD attempts to insert against sewer which appears on the certifi­ WALTZ a charge for the Pen:asyl­ .cate. vania State Transfer tax in the WALTZ states that there has been amount of $100. a new sewer installed, but he J-:as not HART objects claiming received any that hi~ bill for the same. Agreement of Sale was entered SHEARD then states into that he will prior to the passage of the Act and procure the necessary bill from the also claims City that the Act is ambiguous Solicitor's office or the lien hold­ as to who is to er. pay the tax. A dis-: cussion is entered into between HART SHEARD then raises the question and BURLINGAME whether or not as to the possible excess meter FRANKHOUSER would pay the tax. charges for water and sewer rent B U R L I N G A M E refuses to have which may be assessed since May 1st, FRANKHOUSER pay the tax, and 1947, the last reading of the meter, then asks SHEARD what is the Title and asks WALTZ whether he has Company's stand. SHEARD replies [ 60 J that the Title Company is neutral in A and B on the certificate. WALTZ the affair, and that his requirement refuses to sign the affidavit as to is to see that the tax is placed on being unmarried, never having been the deed because of the fact that the married, because of the fact that he R~corder of Deeds will not accept is a divorcee, having obtained a the deed unless the stamps are affixed divorce after acquiring title- to the in the full amount of the considera­ property; also stating that he ob­ tion . tained his divorce in Allegheny Coun­ . HART and BURLINGAME then ty, Pa. ask DIEFENDERFER his opinion. SHEARD informs him that it would DIEFENRERFER states his opin­ be necessary to obtain a certified ion and it is finally decided between copy of the divorce decree and that WALTZ and FRANKHOUSER to this information should have been split the tax. furnished at the time the application Charges are then entered against for title insurance was made. FRANKHOUSER'S side of the sheet SHEARD then asks for the neces­ with CARLL stating that the mort­ sary proofs to dispose of objections gage is in the amount of $7,000 for a C, D and E on the certificate, which ten year period. FRANKHOUSER arose prior to the time that WALTZ claims he informed BURLINGAME had acquired title to the property. that he wanted a mortgage in the H A R T inform S H E A R D that amount of $6000. for fifteen year. WALTZ had been insured as owner CARLL then states that it will be of the property by some other title necessary for the mortgage and bond company, and he thought that having to be redrawn. secured such title insurance, that it FRANKHOUSER further claims would not be necessary to obtain any­ that he informed BURLINGAME that thing from that company. SHEARD title was to be taken in the name of informs him that it will be necessary himself and wife. to secure photostatic copies of the BURLINGAME states that FRANK­ proofs from the former title company H@USER had made such a request, in order to remove the objections. but in ordering title insurance, and in ENTER: applying for the loan, he had failed HURLEY desiring to know when to mention that fact. this settlement is going to be over, SHEARD asks FRANKHOUSER if as he has waited at least a half hour. the judgment of the U. S. of A. ap­ SHEARD asks him to be patient. pearing on the certificate is against EXIT: him. FRANKHOUSER states it is, HURLEY. but he was informed by BURLING­ SHEARD informs the people attend­ AME that judgments do not affect ing the settlement that a physical after acquired real property. SHEARD inspection of the property discloses informs him they do, and asks DIE­ the fact that additional property to FENDERFER to explain to FRANK­ the West of our premises is fenced H 0 U S E R why. DIEFENDERFER in and used by WALTZ. does' explain and FRANKHOUSER FRANKHOUSER claims that he agrees to pay the judgment, or have thought that he was obtaining title to the property released from the lien that portion. WALTZ a g r e e s. ~f the same. SHEARD, looking at the application, SHEARD then informs FRANK­ finds that there was no description HOUSER of the amount necessary to given, or record of the last deed, and .complete the settlement, but that an the only identity of the property was additional sum might be necessary in by house number, and as WALTZ had order to dispose of the U. S. of A. acquired title to the two properties lien, and that at the time he deposits by separate deeds, the title to the next with the company the fund necessary door property would have to be exam· to complete the settlement, he should ined. Therefore, it is entirely impos­ produce a certified check. sible to complete the settlement until SHEARD requests WALTZ to sign all of the various items have been an affidavit to dispose of objections disposed of. [ 61] FEDERAL TAX LIENS

DAVID E. MacELL VAN Vice Presidmt and Associate Counsel, W estem Title Insurance and Guaranty Company, San Francisco, California (Delivered by Thomas ]. McDermott, McDermott and Associates, Attorneys-at-Law,· Mansfield, Ohio. Remarks of Mr. McDermott in italics type.)

I have no issue to take with any of a judgment lien and shall continue of the fin dings of Mr. MacEllv an i n for five years from the time of fil­ the paper which you are about to ing," etc. (See applicable state stat­ hear, and it shows a thorough know l­ utes cited at 3L02b of California edge of his subject and consi derable Land Title Association Manual.) r esearch for it. I do commend it all to yottr attention when you hav e the Foreclosure of Prior Liens opportunity. The United States has given certain It must be realized that, as regards limited consent to actions affecting priority, enforceability and divest­ its tax liens. Such consent and the ment, Federal tax liens are creatures extent and effect thereof must- be of Federal law and most, if not all, construed and interpreted by the of the rules relating to those and Federal courts. One of the most com­ other areas of the effect of such liens monly encountered relations of pri­ must come from decisions of the vate liens to Federal liens is in the Federal, not the State, courts. For foreclosure of a trust deed by trus­ this reason ordinary concepts of cred­ tee's sale. That such sale cannot itor law and lien rights, and rules divest or cut off even an admittedly of practice relating thereto, cannot subordinate or inferior Federal li"!n, be applied to Federal liens. The liens and the whole concept of Federal are rights or property of the United sovereignty as applied to such liens, States and as such enjoy certain im­ is found in the leading case, in 19?9, munities and advantages not avail­ of the Metropolitan Life Insurance able to lesser mortals. In certain Company vs. United States, 107 Fed. regards and in certain phases of the 2d. 311, certiorari denied by the U. S. relation of these Federal rights to Supreme Court, 310 U.S. 630. private rights the law is not clearly In that case a sale under a power defined or established. A title com­ of sale in a mortgage was held to pany may find itself pioneering if not cut off a Federal tax lien which it undertakes to decide some of these was admittedly inferior to the lien unresolved issues, particularly if it of the mortgage. The court said: decides against the position of the "The U.S. as a sovereign may. be United States. The Federal courts sued only with its consent. It fol­ may later not agree with such deci­ lows that the Congress has the sion. power to prescribe not only the In approaching these problems two methods by which and the condi-~ words must be given great consider­ tions under which tax liens on real ation. One word is sovereignty, the estate may be released, but also to other is consent. A sovereign can be limit the right to sue therefor and • sued or its rights affected only by its no suit may be maintained against consent. The State of California is the U.S. for such purposes unless also a sovereign, but the various stat­ strictly within the terms of the utes creating liens for state taxes statute under which consent is have given consent that such tax given." liens must be recorded to be liens on The decision was that the tax lien property, and when so recorded shall of the United States was not extin­ have "the force, effect and priority guished by the mortgage sale even [ 62] though such tax lien was inferior to lien priority. The latter is covered by appellant's (Metropolitan) mortgage." 26 U.S.C.A. 3672. The insolvency pri­ The rule was restated as follows in ority of payment right under Section 1954 in Miner's Bank vs. United 191 is not a priority of lien question, States, 110 Fed. Supp. 563: although in some Federal cases under "Where a validly recorded prior it, debts owed the U.S. have been mortgage, followed by a validly given priority over private liens by recorded tax lien, is foreclosed in decisions that the latter were only state court without making the giv­ "inchoate or general," as contrasted ernment a party, the tax lien is not to "specific," liens. Section 191 reads thereby extinguished, the purchaser as follows: takes title subject thereto. The tax "Whenever any person indebted to lien is immune to state action. Once the United States is insolvent, or established against the property of whenever the estate of any de­ a taxpayer, it may only be removed ceased debtor, in the hands of the as federal law permits." executors or administrators, is in­ Also in 1954, the California Su­ sufficient to pay all the debts due preme Court refused a hearing in from the deceased, the debts due to Sohn vs. California Pacific Title In­ the United States shall be first surance Company, 124 Cal. App. 2d satisfied; and the priority estab­ 757, in which the opinion said; at lished shall extend as well to cases 766: in which a debtor, not having suffi­ "A Federal tax lien upon real prop­ cient property to pay all his debts, erty is not eliminated by the exer­ makes a voluntary assignment cise of a power of sale under a thereof, or in which the estate and prior deed of trust." effects of an absconding, concealed, or absent debtor are attached by That is not generally encountered process of law, as to cases in which in Ohio. We do not have any of an act of bankruptcy is committed." such sales, but it is of general inter­ est. The matter of general liens be­ comes rather involved but so far as It should be clearly understood at federal tax lien is concerned, the ef­ the outset that as against purchasers, fect is this: A state general lien has pledgees, encumbrancers and judg­ no priority under either of these fed­ m-ent creditors Federal tax liens do eral statutes, either in insolvency or not obtain any automatic priority or under the tax priority statutes. superiority. They originally did; they were secret liens but, as will be The section is, as noted, applicable pointed out, that has been corrected only to insolvency situations and is therefore not of any effect in the by Federal statutes. ordinary tax lien problem, not involv­ In other words, even though the ing insolvency. deed of trust and the exercise- not the exercise of, but the grant of the Statutes pow€r, is prior to the subordinate in­ The tax lien and tax lien priority ferior tax lien of the government; sections involved are 26 U.S.C.A. nevertheless, the tax lien still re­ Sections 3670 et seq. Section 3670 is W~,ains upon the property. to the effect that "if any person liable to pay any tax neglects or refuses to Insolvency Priority pay the same, the amount shall be a There is a U.S. priority but it is in lien in favor of the United States on an entirely different statute, 31 all property and rights to property U.S.C.A. 191. That deals with priority real or personal." The above under­ of payment of U.S. claims in cases lined words are of considerable im­ of insolvency. It should not be con­ portance i.n consideration of our prob­ fused with our problem although lems. some of the government attorneys Under S e c t i o n 3672 protection have made certain attempts to apply against the tax liens is afforded to the rules from it to the area of tax "mortgagees, pledgees, purchasers [ 63] and judgment creditors," unless the From the title standpoint there are lien is filed in the state recording two basic problems, how, when and office, in states which provide by law against what Federal taxes become for filing Federal tax liens. The Cali­ liens, and, secondly, how do we get fornia statute providing for such fil­ rid of them. On the first point, a brief ing is found in the present Govern­ examination of the history of Federai ment Code, Sections 27330-1. tax liens may be informative and Both sections, the 31 U.S.C.A. 191 helpful. insolvency-priority of payment Sec­ Historical tion, and the 26 U.S.C.A. 3672 tax lien The predecessor of the above re­ and filing section, were discussed in ferred to insolvency-priority of pay­ United States vs. Scovil, 75 S. Ct. 244, ment Section 191 came into being in decided by the United States Supreme 1799. The first Federal statute creat­ Court January 10, 1955. The Supreme ing a lien on property (now 26 Court of South Carolina had given U.S.C.A. 3670, et seq.) was a combin­ priority to a landlord's distress for ation of 13 Stat. 470-1 in 1865, and 14 rent over U.S. Tax claims in an insol­ Stat. 107 in 1866. That act made vency receivership of the tax debtor­ Federal tax liens a lien from the date tenant. The U.S. Supreme Court the tax was due and payable. The law reversed saying it was unnecessary was amended in 1879 by 20 Stat. 331, to decide the question under Section under which the lien date became the 191, since under Section 3672 the date the Collector received the assess­ government, by proper filing, had a ment list from the Commissioner. prior tax lien. The court held that the landlord's As first stated above, the rights rights were something less than a and privileges of these tax liens differ judgment lien under Section 3672. considerably from private creditor The South Carolina "distress" ap­ rights. The chief differences may be pears to be of the nature of our summarized as follows. The Federal attachment. The South Carolina law lien under the above original forms apparently classes it as a "perfected" of the statute reached real proper_!y lien, but the U. S. Court said, "the without any public record, even as distress lien was not perfected in the against parties dealing in good faith Federal sense at the time the govern­ with the record. The liens reach~d ment's liens were filed. Such perfec­ personal property before reduction to tion is, of course, a matter of federal possession, whereas private rights as law." (Emphasis added.) The Su­ to personal property, such as by exe­ preme Court (U.S.) further overruled cution or attachment, require taking the state trial court ruling that the physical possession. The third vari­ distressing landlord was a "pur­ ance is that the Federal government chaser" under Section 3672. rights under these liens are not bound by State immunities and ex­ Two other U.S. Supreme Court emptions as the private creditor is. decisions announced the same day (January 10, 1955) may be read with The effect of the Federal liem; as interest. See U.S. vs. Liverpool etc., secret liens was definitely established 75 S. Ct. 247 and U.S. vs. Acri, et al., by the United States Supreme Court 75 S. Ct. 239, hereinafter referred to. in 1893 in United States vs. Snyder, Whether these late cases indicate a 149 U.S. 210. Under that decision. trend by the Supreme Court to draw Federal tax liens, without being made together the effects of the Section matters of record in any public office, 191 and the Section 3672 statutes, at were given effect even as against· least in the realm of judgment liens bona fide purchasers for value and (inchoate and general as against spe­ without notice of lien. cific) remains to be seen. It would This resulted in 1913 in the amend­ not seem that any such result could ment of the law by 37 Stat. 1016, occur in the area of purchaser or which created the present form of encumbrancer (mortgagee) lien pri­ protection to "mortgagees, purchas­ ority rights. ers and judgment creditors" by re- [ 64] quiring filing of the lien in the United ment has or claims "a mortgage or States District Court Clerk's office to other lien." The statute does not con­ be valid against the three•named in­ sent, for example, to a quiet title terests. It was further provided that where no government lien exists or if_in any State or territory the local is claimed. It should be particularly laws made provision for recording noted that the section consents only federal liens on an equal basis with to a judicial proceeding and not to state or private liens, the Federal a trustee's sale or any other sale, claims would be effective against such nonjudicial in character, under a purchasers and encumbrances only power of sale. The statute is definite if so filed in the State recording in this regard and the Metropolitan office. and Miner's Bank cases above have The next major amendment came so construed the section. in 1939 by 53 Stat. 882-3. That amend­ ment added "pledgees" and affected Procedure only personal property rights, the Under the section there are special above 1913 amendment having cov­ provisions as to service on the United ered the real estate interests. The States, special provision as to time 1939 amendment was brought about to answer, and a special period of by Federal Court decisions that the redemption given to the Federal gov­ tax lien was enforceable against ernment. securities even though sold or pledged to a good faith taker. The amend­ You will note that the section per­ ment gave protection to pledgees of mits quiet title. That provision was personal property, and also exempted added only in 1942. Before that date "securities," as defined in the Act, in if a private lien had been foreclosed the hands of bona fide purchasers. in such manner as to not divest the Federal lien the only relief available Removal of Liens was a later sale in which the private right would be given priority, if en­ Before turning to any consideration titled thereto, and paid first out of ot special situations, the possible the proceeds. Before the amendment methods of clearing or divesting a few lower Federal court decisions Federal tax liens once accrued is permitted what amounted to an equit­ important. Admitting that we have able quiet title against the govern­ a validly filed Federal lien, subordin­ ment on the grounds of a showing ate and inferior in point of time to a that there was no equity which could specific right or lien such as a mort­ be developed for the government on gage or deed of trust or judgment, a sale. The decisions were clearly the sovereign United States has given erroneous under the then form of the certain consent to procedures which act, they were much criticized, and can affect or divest its lien. numerous other Federal cases denied By Suit the right. The 1942 amendment per­ mitting quiet title resulted. Under 28 U.S.C.A. Section 2410, the United States has consented to be It is possible to get a waiver of sued as a defendant in State or Fed­ that one-year right of redemption by ~ral court in any action "to quiet title the United States, which is often to or for the foreclosure of a mort­ done. gage or other lien upon real or per­ Payment sonal property on which the United Another method of getting rid of 'States has or claims a mortgage or Federal liens is by payment. This other lien." method would, of course, be very Several things should be noted in unpopular, particularly if it has to connection with that section. The be used by a title company which United States has consented to being had missed one of these liens or in­ sued in a State as well as a Federal sured a title where such liens have court. The action can be brought only not been cut off by trustee's sale. For in cases where the Federal govern- an excellent discussion of the pay- [ 65] ment method of removing Federal ment or any of its instrumentalities liens I would refer you to the dis­ and not consider a foreclosure of a cussion of that subject by Bruce trust deed by trustee's sale as cutting Jones of Los Angeles, beginning on off any claims of the United States page 41 of the report of the Proceed­ or its instrumentalities or agencies ings of the 1954 CLTA Convention. even though inferior to the trust The 1954 Revenue Act has added a deed. If any reversal of this position third method of release Before that takes place, such action of the Com­ the District Director could give a re­ mittee will, of course, be brought to lease if he found that security re­ the attention of all member com­ mained subject to the lien of double panies. the value of the government's claim, Briefl.y, the recommendation is or if payment was made to the United based on what clearly appears to be States amounting to the value of its sound analysis, to the general effect equity or interest in the property. that the rights and immunities of a The third method, added by the 1954 sovereign exist in favor of itself or Act, is that the Director can now give any of its agencies or instrumental­ a free release upon determination that ities, and further that there is no no equity value exists for the United logical basis upon which to distin­ States claim. guish a sovereign's rights in a mort­ gage or judgment lien from its rights Other Federal Liens in a tax lien. In this connection it has This discussion was originally plan­ been above noted that Federal rights ned on the subject of Federal tax can be divested only by Federal con­ liens exclusively. Certain other sub­ sent. It should be noted from the jects are so closely related that it above Section 2410 that consent has would appear expedient to mention been given to judicial action against them at this time. They particularly the government as a defendant in a concern Federal claims other than case in which the United States "has tax liens, as well as all such claims or claims a mortgage or other lie!}." in favor of the so-called United States This would seem to be a direct state­ "instrumentalities or agencies," in ment that that is the only action addition to the United States govern­ consented to, and that consequently ment directly. Without going into too a trustee's power of sale cannot reaeh much detail, the following general any United States "mortgage or other observations are made. liens." Mr. MasEllven has reference her·e It has recently been suggested that to the proceedings of the California there is justification for permitting State Title Convention where this a trustee's sale to take out Federal paper was originally delivered. liens other than tax liens, or even The subject of general liens of all to permit the sale to take out tax kinds in favor of the United States, liens. The authorities cited for this or its instrumentalities or agencies. position are the above Miner's Bank came before the CLT A Uniform Prac­ case, 110 Fed. Supp. 563 in 1954, ·and tices Committee in recent months. It the case of Bank of America vs. appeared to be that although the United States, 84 Fed. Supp. 387 in practice of all member companies 1949. An analysis of those cases sim! was quite similar as to Federal tax ply shows that as to tax liens which· liens, some of the companies had have not been divested in a manner applied different rules to Federal consented to by the United States a judgments and mortgages, or to such quiet title can be maintained success-· claims of Federal agencies. The mat­ fully against the government upon a ter is still under consideration by Uni­ showing by appraisers etc. that no form Practices, although an immedi­ equity in fact exists for the govern­ ate recommendation was made that ment lien to attach to. It would seem member companies apply the same that the mere possibility that such rules to all rights or claims of any an action could be successfully main­ nature vesting in the Federal govern- tained against the government would [ 66] not be a sound justification for ignor­ section further provides that "such ing or passing Federal liens of any notice shall be valid notwithstanding kind not properly divested of record. any law of the state or territory Such suits might or might not be suc­ regarding the form or content of a c~ssful, and even if uccessful, would notice of lien." be expensive. It is obvious, of course, As pointed out in the Convention that since the Federal lien continues Proceedings, it would seem tha to exist, unless properly divested, we t the would Federal Courts recognize the doctrine be insuring that an actual of filing in existing public records by name lien does not exist, merely as being the only justifiable method because we might later be successful of in quieting imposing liens on property. The title against it if the United States Supreme factual situation permits. Court in 1953, in 345 U.S. 361, said that Congress Partnerships enacted 1he above discussed Section 3672, affording protection to mort­ Turning now to a discussion of par­ gagees, purchasers and other lienors, ticular areas in which these questions to meet the harsh rule as to unfiled may be encountered, it appears to be secret Federal liens established by our experience that numerous ques­ the United States vs. Snyder (cited tions arise as to the effect of Federal above). tax liens in partnership titles. The basic question is whether a filed Fed­ Further justification for the posi­ eral tax lien against a partner is a tion that the Internal Revenue De­ lien against the title vested in the partment recognizes the doctrine of partnership name, and vice versa. separate legal entity 'of a partnership For a discussion of this phase of the has been afforded by a case just question I would refer you to my closed in our office. Title to real remarks in the report of the 1954 estate was in a partnership. Federal CLTA Convention Proceedings, be­ tax liens in large amounts were filed g~nning at page 50. against one of the individual part­ ners. Partial releases of the real It was there indicated that there is estate were considerable given by the Collector justification for the the­ (Director) on payment to him of the ory that the Federal courts will not net proceeds of the tax debtor part­ enforce Federal tax liens other than ner's share against of the sale: There was the actual tax debtor, and no intimation that the government that if the tax debtor is a partnership would seek to claim a lien on the the lien will not reach the partner's full partnership title. The amounts personal assets, or the other way involved were large and would have around. In the Convention discussion, fully justified attention a test case had the was directed to Circuit government had any idea that it could Court of Appeal cases which upheld make its liens against one of the the validity of State filing statutes partners stick against the partnership which required a description in the title. tax' lien of property sought to be made subject to lien. Under such Be that as it may, I would direct statutes a tax lien would not be a your attention to the concluding para­ 'general lien, as in most cases, includ- graph of the discussion of the part­ ing California. There was at least nership subject in the 1954 Proceed­ one contrary holding by a Federal ings to ~he effect that the question Court of Appeals in a different Cir­ is still undecided directly in the cuit. The question never reached the courts, and the problem is, therefore, United States Supreme Court, but one for management decision in any has now been settled by the 1954 particular case. Revenue Act. Under Section 6323 (b) , Chiefly to illustrate the doctrine ·as added by the 1954 Act, such notice that Federal law controls the priority of lien is valid if in a form "as would of Federal liens, attention is directed be valid if filed with the Clerk of the to the following rule of law estab­ United States District Court." The lished by Federal decisions. [ 67] Attachment as its court has declared it, the Fed­ Under California law, if an attach­ eral question remains whether it is in ment is recorded against real estate conflict with 26 U.S. Code 3670-3672." the lien of a judgment thereafter That rule was reiterated as re­ obtained and docketed in the same cently as January of this year when case dates back to and becomes effec­ the United States Supreme Court said tive as of the attachment date. In the in the above referred to Acri case, MacKenzie case, 109 Fed. 2d. 540, it "The relative priority of the lien of was held that a Federal tax lien inter­ the United States for unpaid taxes­ vening between the attachment and is always a Federal question to be the judgment was not cut off. It was determined finally by the Federal held that the judgment did not relate Courts. The State characterization of back to the date of the attachment, its liens, while good for all state pur­ and that the judgment creditor doe.s poses, does not necessarily bind this not have a judgment lien within the court." meaning of Section 3672 until the And, therefore, the federal law as judgment is perfected by obtaining to priority is not the same as the it and recording evidence thereof. In state law. Mr. MacEllven devotes a other words, an attachment is not a considerable space here to closely judgment. connected matters as the disposition of the surplus money in case any is The cases on attachment liens il­ left over after a sale; whether it lustrate quite well the manner and should be applied to the federal lien theory of federal tax liens and their or not. These questions are debatable. priority under California law as well We can't give you an answer because as other law. The lien, if any, when there isn't any, but his comments the judgment is obtained, dates back and research are worthwhile if you to the time of the attachment, the are interested in any of these par­ attachment proceedings. In the Cali­ tict£lar stunts. fornia case it was held that the judg­ ment lien did date back to the at-• Surplus Money tachment dates. A further problem in connection In the case of Winther vs. Morrison, with trust deed sales can arise if 93, Cal. App. 2d. 608, it was held that there is surplus money. Assume fore­ a judgment lien did date back to the closure by trustee's power of sale of attachment date and cut off an in­ a first deed of trust. The next lien terviewing Federal lien. The Cali­ in point of time is a Federal tax lien, fornia Supreme Court refused a hear­ followed by a second deed of trust ing, thus affirming the decision. The and a judgment lien. The trustee's case went to the United States Su­ sale develops a surplus. Is the United preme Court as United States vs. States entitled to participate in the Security Trust and Savings Bank, 340 surplus money. U.S. page 47. The Supreme Court said in that case, "An attachment is mere­ That exact situation appeared· in ly a lis pendens notice that a right to 1954 in Sohn vs. California Pacific perfect a lien exists . . . nor can the Title Insurance Company. 124 Cal. doctrine of relation back operate to App. 2d. 757. A hearing was denied, destroy the realities of the situation. in the California Supreme Court. The When the U. S. tax liens were re­ case indicates that the surplus money corded Morrison did not have a judg­ was payable to the liens following the ment lien." On the subject of what Federal tax liens, but not to the law controls as to the effect of an United States on account of its tax attachment and a judgment, the the­ liens. The court said: ory of Federal sovereignty and Fed­ "The equitable principle which eral control of these questions was transfers the creditor's claim from clearly announced in the case by this the foreclosed property to the sale statement in the opinion. "While we proceeds does not apply when the should accept the law of California creditor's lien on the property is [ 68 l unaffected by the sale and in such became a matter of record in 1949, case the creditor's right to look to so that the grantee in 1950 may not the real estate for security con­ have the protection of 3672 since the tinues. The Federal tax lien was lien was of record when he took his not eliminated by the sale pursuant conveyanee. The obvious question is to the exercise of the power of whether, as pointed out in the above sale under the prior deed of trust." discussion of partnership matters, (Emphasis added.) the Federal courts will recognize that The court cited as part of its auth­ under the ordinary concept of record­ ority the above Metropolitan case. It ing and indexing the Federal lien was is suggested that management con­ of record in 1949, but it was not of sider carefully before such action be record against the spouse then in taken and surplus monies paid out title and technically would not be without regard to the government found under a search made in strict rights. The reason for this caution is conformity with recording law prin­ that the United States was not a ciples. party to the suit although, as above The Handbook for Title Men at pointed out, the final answer to all 21.01 says that a title company will of these questions lies in the Federal report Federal tax liens not only courts and not in the state courts. against the person in title but against In addition, it appears that in the the husband or wife of the person Sohn case certain releases had been in title unless the title is separate given by the government which could property of record of the title holder have been construed to go so far as prior to the date the Collector re­ to constitute a release of the surplus ceived the assessment list. monies. Until the question is squarely decided i.n the Federal courts it is For various situations involving suggested that any such surplus who to run for Federal liens, and money question be carefully analyzed which ones to show, consideration of before any management decision is the few following possibilities is sug­ m'!lde. gested: Community Property 1. Title is in a wife by inheritance. Another area exists in connection 2. The same, but her husband joined with Federal liens in which we have in a deed of trust last year, or joins pri~.etically no guiding or authorita­ in a trust deed to file. tive judicial rulin<;s. That is thP. que.'> ­ 3. Title is in a husband and wife tion of the possible effect or lien of in any tenancy, or simply as husband Federal taxes owing by one spouse and wife, and one deeds to the other. against property held of record in 4. Title is in one spouse (as in No. the name of the other spouse. The 1 above) and a deed is recorded to CLTA Manual at 21.01a presents the the other spouse. following possible situation: 5. In either No. 3 or 4 the grantor spouse later joins in a deed of trust 1946-Husband and wife acquire 6. Is there any difference if the title as joint tenants or as community deeds between spouses above are just property. deeds or are for value, or pursuant to 1948-0ne spouse conveys to the a valid divorce settlement. other as separate property. In connection with the effect of 1949-Notice of Federal tax lien joinder by one spouse in a trust deed against the grantor spouse for the given on property vested only in the year 1947 is recorded. other spouse, the recent Villafuerte 1950- Grantee spouse conveys to case, 125 Cal. App. 2d. 466, indicates third party. the California rule that such joinder The government theory appears to in a trust deed by a nonrecord hold­ be that as between the spouses the ing spouse gives no interest in the lien attached to the tax debtor's in­ property to such joining spouse. terest when the list was received by Under the above theories that deci­ the Collector in 1947. The tax lien sion would, of course, not be controll- [ 69] ing on the Federal government or clear that in the eyes of the Federal in the Federal courts. courts tax liens reach intangibles, and This is definitely one of the un­ can be a lien on money, debts or explored areas of Federal tax lien chases in action. law. The CLTA Manual recommends that a searcher show all possible hus­ It seems to be clearly accepted, band and wife tax liens, with man­ even though not clearly judicialiy agement to determine which to ig­ established, that absent an actual nore. (We should wish management levy or distraint there is no personal luck.) Mel Ogden, in his Outline of liability for transferring monies sub_­ Titles, said this: ject to a filed tax lien to a tax debtor. in Mer­ title practice The proposition is so stated "The only safe rule of ten's work, The Law of Federal In­ Federal taxes is to assume that come Taxation. There appears to be be a lien against either spouse may on the against any property owned by no clear-cut judicial decision point, although there are numerous unless an either or both spouses, cases as to such personal liability under the exception can be found where the element of levy or distraint statute. (3672 of 26 U.S.C.A.)." was present. There is another line of Paying Money to Tax Debtor cases involving interpleader by the one holding and owing the money. Another area in which we may be There appears to be no clear case as affected by the lien of Federal taxes to personal liability not involved in is not strictly speaking a title ques­ those types of action. That is, pos­ tion. It can, however, involve a title sible personal liability arising out of company. If you pay money to a the filed lien solely. Federal tax debtor against whom a Federal tax lien has been filed do you The following appeared in the 1938 become personally liable for making Commerce Clearing House Tax Ser­ the payment? Does it make any dif­ vice, paragraph 6249 on page 8143. ference whether or not you have It will be observed that in the mat­ actual notice of the filed Federal lien? ter referred to the bank had actua}ly This can happen to you as an indi­ been served with a notice of the lien. vidual if you pay your own obligation The following quotation is, according to a tax debtor. You may pay off a to the Tax Service, from a letter trust deed on your home, which is dated October 4, 1935, signed by the held by a tax debtor with a filed then Commissioner of Internal Reve­ Federal tax lien against him. You nue, in :mswer to a letter of inquiry. may pay your account at the local The "General Counsel's Memoran­ store and a Federal tax lien is filed dum," therein referred to, was short­ against it. As a title company you ly before 1935 and was to the effect may pay money out of an escrow to that a filed lien was in fact a lien a Federal tax debtor. If you are in on money and would support dis­ any way a trustee under a trust deed traint. or under a conventional trust you "Reference is made to your l~tter may pay money to a tax debtor. The of September 9, 1935, in which you case which happens the most often, state that your client ... has been of course, is that of a bank paying served with a notice of lien under out money to, or at the order of, a Section 3186 of the Revised Statute~ depositor who is a tax debtor with a against the account of a depositor lien filed against him. and you ask to be advised what are The so-called Western Union case the duties of the Trust Company. in 1931, 50 Fed. 2d. 102, was first towards the Collector and the accepted as authority for the proposi­ United States Government by rea­ tion that Federal tax liens would not son of the service of this notice of reach intangibles. By numerous later tax lien. Federal decisions such authority has In the second paragraph of your not only been weakened but com­ letter you observe that in General pletely overthrown. It now appears Counsel's Memorandum 5432 (C.B. [ 70] VIII-1, 134) the distinction between der the definition of securities we find a lien and a distraint is emphasized. "money." In the last paragraph of the afore­ mentioned General Counsel's Mem­ Assignment of Trust Deed orandum it is stated that the pro­ The same exception and definition c-ess of distraint is often confused of the word security leads us into with the filing of notice of lien and our next practical situation. The se­ it is stated that the notice of dis­ curity definition includes "negotiable traint "is one of the processes by instrument." The note secured by a which an existing lien for taxes deed of trust is a negotiable instru­ may be enforced." Your statement ment. If you are asked to insure an that a 1ransferee of property be­ assignment of a deed of trust and longing to a delinquent taxpayer you find a filed Federal tax lien against whom a lien had been filed against the assigning beneficiary, is would ordinarily take such property the assignment subject to the lien. subject to the lien coincides with It appears that the practice of title the view of this office. The admin­ companies differs in this regard. istrative practice and procedure of There appears to be no controlling furnishing notices of tax liens to authority on the point. It is sug­ banks, trust companies, and other gested that the answer might be dif­ holders of assets or credits of de­ ferent if at the time of the insured linquent taxpayers is followed mere­ assignment the negotiable note had ly to assure the receipt of the in­ ceased to be negotiable for some rea­ formation by the holders of such son under the Negotiable Instrument assets or credits of the existence Law. of a claim of the United States Mechanics' Liens upon the property and rights to Another area in which title work property of the delinquent taxpay­ may be affected by these liens is that ers. of mechanics' lien claims. Such rights from the above, As will be observed would clearly appear to be intan­ notice of tax lien the furnishing of gibles. In the light of the above information of the is solely for the pointed out attitude of the Federal person receiving the same and it is courts that the tax liens reach in­ only after a collector has levied tangibles, it should not be startling upon a bank deposit that there to find the liens being made effective exists a duty upon the bank to against mechanics' lien claimants' withhold funds from a depositor." rights. In this connection it is recom­ (Emphasis added.) mended that thought be given to a Although published in 1938, that recent California District Court of letter appears to still be cited as Appeals case (See Highsmith vs. about the only authority for the ab­ Lair, 127 A.C.A. 565). The case cites sence of such personal liability. It Citizens Bank of Barstow vs. United is further stated in some of the text States, 114 Fed. 2d. 380, which said in bool<',s that such absence of personal effect that, "A claim for work, labor liability "must be the law" or banks and materials furnished is evidence would have to go out of business or of a debt and a chose in action . become personally liable for the tax is property or rights to property al­ debts of all of their depositors. That though intangible in character." is obviously not a legalistic authority, but would appear to be a good com­ State Exemptions ,mon sense deduction as to what the It appears clear that state exemp­ law must be. tions do not apply to Federal liens. It is to be noted in this connection In this connection see United States that under Section 3672, the present vs. City of Greenville, 118 Fed. 2d. form of which is found as Section 963. Also 132 Fed. 2d. 345 and 158 6323 of the 1954 Internal Revenue Fed. 2d. 657. This rule reaches all Code, that there is an exception from forms of state exemption such as the lien as to securities, and that un- homesteads and spendthrift trusts. [ 71] However, although there is some lender. His "off record" knowledge of apparent conflict in the cases, there the lien would be his burden under is authority that if the case involves the policy form. a state rule of property or estate in Although some of the Federal cases property, instead of a state exemp­ have favored a lender, with actual tion of property from execution, the notice, over the tax lien, other cases Federal Courts will honor the state have held that under Section 3672 a law as to the nature of a property "purchaser" must be bona fide and right. The Oklahoma homestead was without actual notice to prevail. Since held to be an estate in property, not this again involves liens not appear­ an exemption, in 64 Fed. Supp. 389, ing in state records, we of the title and one spouse allowed to enjoin a industry are not concerned. Federal tax lien sale under a lien filed against the other spouse. In 86 Fed. In these latter connections Federal Supp. 522, the same rule was followed cases have been noted that Section as to a Texas homestead. (See the 3672 does not specifically require that above case in 132 Fed. 2d. 345, also the interest of the mortgagee or pur­ involving a Texas homestead.) chaser appear of record nor does it In 188 Fed. 2d. 326, holding the specifically require a bona fide and common law tenancy by the entirety, for value status, (except with refer­ as adopted by a state statute, to be ence to the Section 3672 exception in a rule of property and not an exemp­ favor of a mortgagee, pledgee or pur­ tion, the doctrine that Federal courts chaser of "securities," as defined in will honor state rules of property is the sectkm. Such exception operates clearly expressed. only if "such mortgagee, pledgee or purchaser is without notice or knowl­ Urffortunately the extent of the edge of the existence of such lien.") impact of Federal tax liens on the California com unity property "rights" Additional Advances or "interests" has not been clearly defined by Federal decisions and must An area in which we can be af­ thus remain as one of the as yet fected is that of insuring additiol}al unexplored areas of Federal tax lien advances. Until it has been clearly law. held in the Federal courts that obli­ Although in the title industry we gatory additional advances will take are concerned with the record title priority over intervening Federal t-ax except in certain phases of A.T.A. liens, we would be well advised to not liability as to off "record risks," it assume that risk. Optional advances is to be noticed that the cases on should, of course, be governed by Federal tax lien priority have gotten our usual rules and not insured as being prior to intervening Federal 1 into matters of priority of the lien over unrecorded mortgages or other liens. private liens and questions of whe­ Mechanics' Liens ther under state law mortgages, (a) There is conflict in the cases on must be recorded to be valid, (b) priority between a mechanics' • lien "may" be recorded, (c) cannot be claim and a Federal tax lien against recorded (personal property). the owner of property subject to the lien of the mechanic. We would nor.­ Bona Fides mally meet that question only in a Cases under Section 3672 have judicial foreclosure of the mechanics' arisen as to priority if a mortgagee lien. The United States would be a has actual notice of a Federal lien necessary defendant and the judg~ 1 which exists by return of the assess­ ment would speak for itself. Such a ment to the Collector and takes his case, if appealed, might well establish mortgage before the tax lien is re­ the law as to the California type of corded in the state recording office. lien. In cases involving such liens As title people this should be of no in other states the nature and date of particular interest if the tax lien is attaching of the mechanics' lien in not of record when we insure the the particular state have been issues. [ 72] 1954 Revenue Code The original form of the 1954 Act The 1954 Internal Revenue Code would have provided that the tax lien must be considered in several of these would be valid, without filing, as connections. As originally drawn, it against a mortgagee, pledgee, pur­ contained certain new material codi· chaser or judgment creditor with fying some of the judicial rulings, actual notice or knowledge of the overthrowing others and in some lien. The lien would also have reached cases resolving, judicial conflict. a tenancy by the entirety interest of Some appear in the law as finally the tax debtor by including that inter­ enacted, some failed of final enact­ est in "property or rights to prop­ ment. Of the latter, some have be­ erty." No reference was made to com­ come Federal Regulations (See the munity rights. Neither provision ap­ Federal Register for December 11, pears in the enacted form of the 1954). Code. One definite change appears in the In conclusion it is again suggested new law which can have considerable that in any consideration of Federal impact in some phases of title work, tax lien questions the important especially the above question of the words 'sovereignty' and 'consent' be effect of a tax lien against one spouse accorded their due weight, and that on property held in the name of the it also be kept in mind that we must other spouse. Under Section 6322 of take our rules of law from the Fed­ the 1954 Revenue Code (Section 3671 eral Court decisions. of 26 U.S.C.A.) the tax lien first One matter which arises "at the time the assessment is Mr. MacEllven made," instead of as before, doesn't make mention is the lien on "at the after acquired time the assessment list was received property. The reason by the Collector." he doesn't is that it is taken tor granted in A further 1954 change, of no conse­ most states. In Ohio and some other quence in California, is found in the states the general rule is that liens do not apply to property n~w Section 6323 (b) providing the after acquired notice of tax lien filed in state offices by the debtor. But this of record will be valid matter of federal tax lien is an ex­ if in the same ception form as would constitute valid to that rule and federal tax filing liens to apply with the Clerk of the Federal District to after acquired prop­ erty are very important Court, "notwithstanding any law of in the ex­ amination. the State or Territory regarding the form or content of a notice of lien." In referring to these statutes, it is This will prevent a state statute, such somewhat confusing to those who as the Michigan Act upheld in cases don't have frequent recourse to them. above referred to, from requiring The change in the numbering, the that a Federal tax lien contain a de­ section numbers which I have men­ scription of property to be affected tioned, Internal Revenue Code, refer by the lien. to the Act of 1939. The Act of 1954 The rule of the above discussed completely renumbered all those cases dealing with a judgment as sections and under the present law being inchoate or unperfected, and that section number is 6823, and par­ the situation of an attachment- tax allel tables which go with those sta­ lien- judgment sequence would have tutes should be consulted in those been codified in tb.e original form of cases. the new Code if enacted as first One change which was made in the "drawn. It does not appear in the act recodification, was that under the old as it became law but the new Regu­ law the tax became a lien and arose lations (301.6323-1, Federal Register, at the time the assessment list was December 11, 1954, page 8465) pro­ received by the collector. Under the vide that judgment creditor means new law it first arises at the time one with a perfected, not an inchoate, the assessment is made. judgment lien and further that an A further change in the 1954 law, attachment is not a judgment. which is not important in Ohio, but it [ 73] is in sorne states, is the matter of that if the state statutes do not con­ conformity statute. There are two form with the requirement of the kinds of conformity statutes. One of federal statutes, then you do not have ' them simply provides for protection perfection from your county records. against federal tax liens in states One of the most used texts on re.al where provision was made for record­ property lists Ohio as one of the ing them in the state recording of­ states which has an uncertainty in fice. There wasn't much problern of that respect. I hate to disagree with priority or of conformity then, but that eminent authority. As far as .I now the 1954 Act has added this: know, there is no disagreement That they will be valid if in the same among Ohio title men but what we form as would constitute valid filing have a good conformity statute. The with the Clerk of the Federal Dis­ difficulty arises when any additional trict Court, "notwithstanding any requirement is made as to federal law of the State or Territory regard­ judgments. I am digressing a bit but ing the form or content of a notice I believe this is interesting to some of lien." This is of consequence now of you. There, for exarnple, in Ohio in tkose states like Michigan which which we believe has a good law, re­ require the notice of lien to describe cording is not necessary in the coun­ the property affected. Therefore, in ty of rendition. It can be required those states where the state law does in the county of rendition if it is not not provide for the recording of the in the court office. If it is in a sep­ federal tax lien notice; without the arate recording office, but if it is in description of the property, then you the county court office it requires a do not have conformity. You will recording, then it is an uncertainty have to go outside of the county to and dangerous to rely upon. see about federal tax lien. By the way, the amendment of the The more important matter of con­ Ohio statute in regard to federal tax formity which we usually think of liens is not anything you need to be when we speak of conformity statutes concerned about. It simply providpd and ordinarily refer to, is the matter administrative procedure: procedure of lien judgments of federal courts. referring to the filing by mail and That is a matter which I would be making of a duplicate copy of the no­ glad to have anybody comment on tice, and so on, so you won't ne.ed here. The basic thought principle is to study that particular act.

GOOD PUBLIC RELATIONS CARROLL R. WEST Vice President Title Insurance and Trust Company, Los Angeles, California

The subject that has been assigned -or an hour and twenty minutes for to me is Good Public Relations and that matter. But I will try to re­ I have been allotted twenty minutes member that someone has said "A to cover the subject. In contemplating speaker who does not strike oil in the task to be accomplished in so twenty minutes should stop boring". short a time, I feel like the small Therefore, you can be assured that boy who returned from Sunday School I will stop "boring" at the end of the· and promptly fell into a molasses bar­ twenty minutes that has been allotted rel. Remembering his Sunday School to me. training, he immediately offered up Since we only have time to cover a little prayer "Lord, please make my the high spots of public relations, it tongue equal to the occasion". seemed to me that the best method to Obviously, it is not possible to approach the subject might be to cover this subject in twenty minutes imagine a mythical company and a [ 74] mythical man. I am going to suggest public relations, - who has studied that each one of you imagine that and who continues to study the sub­ you are the head of a company that jects that are so important to the job. has never assigned the responsibility Subjects such as humanities, psychol­ of public relations to an individual ogy, modern management methods, within your organization. You have economics, journalism, advertising, heard a lot of talk about this thing industrial relations, political science, called "public relations" and you de­ the social sciences and the nature and cide that your company ought to have dynamics of public opinion. some of it. You decide that you are For the purpose of this discussion, going to select someone and make however, let us assume that you do him responsible for the public rela­ not have such a man and you start tions of your company. You remem­ looking around outside your organiza­ ber the words of Theodore Roosevelt tion. Finally you find Genial Joe and who said "The best executive is one you offer him the position as head of who has sense enough to pick good your public relations department or men to do the work he wants done, division. and self-restraint enough to keep Now if Joe is the kind of fellow from meddling with them while they that I believe him to be, he is going do it". to ask a number of questions and he Now let's look for the man. Let us is going to be pretty sure of the call him "Genial Joe". Now I don't answers before he accepts the posi­ want to give you the wrong idea tion. He is going to listen to you, but about Genial Joe. He is not the bois­ he is also going to make various terous, backslapping type as his name inquiries in other places. I believe might imply. We call him Genial Joe that the first question he will have because he is genuinely fond of to determine to his satisfaction is: people and, above all, he knows how IS IT A GOOD COMPANY? That to get along with people. is a broad question but an important ..Of course, there might have been one to Joe. He will want to know if a time when you would have selected the people in your community believe a backslapper, or, perhaps someone it to be a "good company". He will like the fellow who kept this motto want to know if your company is on his desk and practiced what it ethical, if it gives good service, if its preached: employees are happy and contented I hate to be a squawker, and if the management of the com­ I always long for peace, pany has a sincere feeling of respon­ But the wheel that does the squeek­ sibility to the public that it serves. ing Of course, it's possible that Joe might Is the wheel that gets the grease. accept the challenge even though the But not this time. You do not want reputation of this mythical company someone who believes he gets most is unsavory- he might feel that he because he shouts loudest. You want could help do something about it. someone who has the temperament However, in today's tight labor mar­ that was advised by Lord Brabazon ket, I suspect that Joe would not in the Irish Digest. He wrote "Always attempt the almost impossible. He behave like a duck- keep calm and will want a satisfactory answer to unruffled on the surface, but paddle the question "Is it a good company?" like the devil underneath". So, having If the answer is satisfactory, he will decided upon the temperament of the then be concerned about this ques­ "individual that you want to head your tion: public relations, you start looking DOES THE MANAGEMENT OF around. It may be that Genial Joe THE COMPANY SINCERELY BE­ is in your own organization. If so LIEVE IN PUBLIC RELATIONS? you will want to make sure that he Joe knows that just to want public has had the formal training for pub­ relations is not enough. He believes lic relations, or that he is the kind of as does the head of one of our major a man who is deeply interested in railroads who said "Public relations [ 75] is a part of the job of everybody in well-rounded background - business the company from the president to management, economics, industrial the office boy". Joe knows that if relations, and many other types of you, as head of your company, really knowledge-it is not limited to just believe in public relations, your atti­ the use of technical skills such as tude will be reflected throughout the journalism and advertising. He cim entire organization. Joe will want to be a valuable asset in other manage­ make sure that you realize that pri­ ment decisions. vate business interest must be in the Because public relations cuts across public interest if it is to survive; that every segment of your company's the public interest is a changing con­ operations, it is also imperative that cept and that business must change Joe know what is going on. Only by with it; that the key position which such knowledge will he be able to business occupies in the American take advantage of all of the public system cannot be taken for granted relations opportunities within your but must be sold to the public; and company. Let me speak frankly, - that modern public relations tech­ modern management has come to niques can help business to do this. realize that the person responsible I believe that Joe will have one for public relations must be a part of final question that must be resolved top management. I do not mean just before he accepts the responsibility of placing him in that group on the heading the public relations depart­ organization chart, then forgetting ment or division of your company. his place until a company gets into By this time you are probably saying public relations trouble. "Who is interviewing whom"? But Now let us assume that Joe has don't forget, you selected Genial Joe satisfied himself that you have a good because he is qualified and, above all, company, that the management of sincere and honest. Because he is the company really believes in public honest, he will not attempt the job relations, and that he will be a part unless he feels that there is an op­ of management and will participqte portunity to do a good job. in policy making decisions. You hire Now, let us look at the third ques­ him and you place him in charge of tion that he will ask: public relations. If Joe is the kind of WILL I BE A PART OF TOP a man I think he is, he is going .to MANAGEMENT-WILL I SIT IN determine the answers to a number ON POLICY MAKING DECISIONS of questions relating to the job. He - WILL I BE FULLY INFORMED will want to know: AS TO WHAT IS GOING ON? Joe IS THERE AN OVER-ALL PLAN knows that unless he is a part of - OR POLICY TO GUIDE PUBLIC the management group,- unless he RELATIONS ACTIVITIES OF THE participates in major decisions, there COMPANY? It should be remem­ is little likelihood of his being able bered that policies are the rules of to do the job that you want done. conduct for the operation of a busi­ Someone has said that "The busi­ ness. They are important not only ness-man is always in a sweat. He to management but to all employees never knows whether the period just and to the general public as well. ahead is to be a new era or a new Therefore, Joe will want to know if error". That may be true to some there is a public relations policy. If extent but despite the uncertainty, I not, he will draw up a policy for your am sure that all of us want to make approval-a policy that covers all of as few errors as possible. If Joe sits the areas and activities of public re-· in on your management group, it is lations within and without the com­ quite likely that he will be able to pany, and that specifically assigns anticipate and prevent public rela­ responsibilities for those functions. tions errors. He can help to put out In other words, it will be a working public relations fires before they plan, approved by management, for start. the conduct of the public relations And don't forget, Joe has a pretty activities of your company. [ 76] IS THERE A PROGRAM OR PLAN true, it is quite likely that Joe will FOR INTERNAL COMMUNICA· suggest that the company plan a com­ TIONS? This question will be high prehensive program for participation on the list of those in Joe's mind. in community affairs - designating He knows that "Public relations like those individuals that will represent cliarity begins at home". He knows the company in each community that if employees are well-informed activity. By so doing the company they are usually good employees and will not only be carrying its share since "Public relations is the job of of community responsibility but the everyone from the president to the end result will be a good public rela­ office boy", employees are a great tions. public relations potential. DOES IT CONTRIBUTE TO Most of us remember that there W 0 R THY CHARITIES ON AN was a time when management had EQUITABLE BASIS? Here again, I the attitude that "What they don't am sure the answer is "yes". But is know won't hurt them". I think all there an over-all plan for such con­ of us would agree that Humpty tributions, or does the company mere­ Dumpty was a fence-straddling egg. ly wait until the committee calls and head. That probably explained his give the most to the charity that attitude when he said to Alice "It exerts the most pressure? simply depends on who is master, we As the head of your public rela­ or they". But all of us know that tions activities, Joe has probably the day has long since passed when spent considerable time studying the there are masters and slaves. Today, merits and the activities of all char­ everyone in a successful company is itable organizations. It is a part of his a part of a team, working together as job. He can help you outline your a team. Successful management to­ contributions program for the entire day, instead of representing the self· year- a program that will be equit­ ishness of a single group, maintains able and that will not exceed the a .,proper balance of equity between limitations of your contributions bud­ stockholders, employees, customers get. It will be a service to mankind and the public interest. and it will be good public relations. So if there is not a plan for internal DOES THE COMPANY ENCOUR­ cm'll.munications, Joe is going to sug­ AGE ITS EMPLOYEES TO PART!· gest that one be developed. It may CIPATE IN COMMUNITY SERVICE be the conference or staff meeting ORGANIZATIONS? All too frequent­ method, it may be letters and bulle­ ly, companies depend entirely upon a tins, it may be an employee publica­ few members of the management tion, or a combination of all. It group to participate in community depends on the size of the organiza­ service organizations. It appears that tion and the facilities available. What­ they either feel that employees fur­ ever plan is used, it will be compre­ ther down the line cannot be spared hensive. or that they are not interested. I am DOES THE COMPANY COOPER· convinced that companies with that ATE IN COMMUNITY PROGRAMS? attitude are overlooking a tremen­ Obviously the answer to this question dous opportunity- an opportunity to is yes, otherwise Joe's first question develop better citizens, to develop the "Is it a good company" would not leadership capabilities of employees have been in the affirmative. However, and, last but not least, to develop it is possible that our mythical com­ good public relations representatives. pany, like many companies, partici· DOES THE COMPANY USE pates only when it is called upon by EVERY AVAILABLE MEANS OF a committee from some community COMMUNICATION TO SEE THAT betterment organization. It is possible ITS VIRTUES ARE RECOGNIZED? that our company does not take the The vice president in charge of pub­ lead in helping to organize programs lic relations for one of the major that will help to build a better com­ automobile manufacturers has said munity in which to live. If this is "Good public relations is the combin- [ 77] ation of two important ingredients­ tificate. Some years ago I spent a good deeds and effective communica­ delightful vacation traveling through­ tion". The public relations head of out the Province of Nova Scotia and another national manufacturer has I am now a member in good standing said "It is not enough to do a good of the ORDER OF THE GOOD TIME, job-you must let the public know or as the Acadia French call ·it about it." L'ORDRE DE BON-TEMPS. My cer­ Effective communications means tificate carries the picture of the first more than just publicity and advertis­ grand master Samuel de Champlain ing. Joe will, of course, make it a and the date is 1606. · point to see that every available news The point I'm making is that since item about your company and its 1606, thousands of organizations have people is regularly disseminated to been formed. There is no accurate press and radio. He will talk to you count but it is estimated that there about the advertising budget and may well be as many as three hun­ even though it may be limited, he dred thousand or more individual or­ will see that you get the most out of ganizations, all of which are opinion your advertising dollars. forming groups. Your community un­ But Joe is going beyond that- he doubtedly has scores of such opinion is going to suggest the use of other forming groups. Telling your story means of communication. Probably to them will be good public relations. one of the first will be a Speakers' As other means of communications, Bureau. He will develop a series of Joe will discuss plant tours (where subjects and ask you and other mem­ groups are invited to visit your title bers of your firm to be prepared to plant), customer contacts, direct mail­ speak before trade, professional, civic ing, news releases, advertising, win­ and service club groups. It is well dow exhibits and so on. He will sug­ known that the program chairman of gest regular participation in trade any organization has a tough assign­ and professional associations related ment. He is always looking for good to your own industry such as fin~n­ speakers. Therefore, Joe will contact cial, r,eal estate, law, builders and so the program chairmen of the many on. He will remember at all times organizations in your community and that the objective of public relations let them know that speakers are is simply to win friends for one's available. The opportunities are un­ company. And now for the last ques­ limited. tion, but by no means the least im­ Up in the Acadian section of Nova portant: Scotia, more commonly known as the DOES THE COMPANY ATTEMPT Evangeline country, an iron chest was TO BUILD PRESTIGE FOR THE IN­ unearthed just a few years ago. It DUSTRY IT REPRESENTS? It is contained the records of what is prob­ an old adage that "We sink or swim ably the first "meeting and eating", together" but I prefer the positive or opinion forming group that was approach "In unity there's strength". organized on this continent. It was By unselfishly promoting the aims known as the ORDER OF THE and objectives of our state title asso­ GOOD TIME and it was organized in ciations and our American Title Asso­ 1606. The group was composed of ciation we will be helping not just ore ship builders, merchants, tradesmen company, but we will be helping our and professional men who met regu­ entire industry. I suspect that some larly to discuss current events and of our public relations difficulties in enjoy good fellowship together. some quarters may well be because Incidentally, Nova Scotia has made all of us have not worked together good public relations use of the rec­ as a team to promote the good name ords of the ORDER OF THE GOOD of the title business as a whole. Let TIME. A visitor to Nova Scotia, who me illustrate what I mean by "good spends a period of two weeks in the name". province, is made an honorary mem­ In the City of Bagdad lived Ha­ ber and presented a membership cer- keem, the wise one. A great many [ 78] people went to him for counsel which integrity of him who makes it. Con­ he gave freely to all, asking nothing sider his name before you buy". in return. There came to him a young I am convinced that, for the most man who had spent much but re­ part, our title industry has that ceived little, and he said: "Tell me, "priceless ingredient" - a reputation wise one, what shall I do to receive for honor and integrity. But let us the most for that which I spend?" remember, it is not enough to do a Hakeem answered by saying, "A good job. We must let the public thing that is bought or sold has no know about it. First, we must "prac­ value unless it contains that which tice what we preach" then use every cannot be bought or sold. Look for available means to let the public the priceless ingredient". know that our industry stands for a "But what is that priceless ingredi­ high standard of ethics and service ent?" asked the young man. to the public. For Genial Joe and Spoke the wise one: "My son, the you- your company and mine-our priceless ingredient of every product entire title industry- it will be good in the market place is the honor and public relations.

REPORT OF GRIEVANCE COMMITTEE

MORTIMER SMITH, Chairman, President, Oakland Title lnsttrance Company, Oakland, California

In making of this report, your. plete investigation have been found Grievance Committee respectfully re­ to be injurious to the public. quests that certain matters be recall­ As a result of these discussions, ed •. to your minds by you. your Grievance Committee recom­ In 1953, a committee was appointed mends that this annual convention of to draft a Code of Ethics for the As­ the American Title Association au­ sociation Membership and such a thorize the Board of Governors to Code of Ethics was adopted in 1953. define and make explicit from time In 1954, the Association at its gen­ to time those unsound business prac­ eral convention of its Membership tices which have been found to be amended its constitution to embody injurious to the public and so consti­ in the constitution references to the tute a violation of our Code of Eth­ Code of Ethics, to provide for the ics; and authorize the imposition for appointment of a Grievance Commit­ such violations of the following pen­ tee and to set forth the duty of the alties: Fines not to exceed the sum Grievance Committee. of $1,000.00, or suspension from mem­ Also, the Membership of the Asso­ bership for a period of not longer ciation at that 1954 convention adopt­ than eighteen months, or censure or ed some resolutions by the terms of expulsion from membership. which the Association set forth some That is a recommendation, Ladies btlsiness practices which should be and Gentlemen. deemed violations of the Code of Your Grievance Committee also Ethics of the Association. has a request to make. If any com­ . Your Grievance Committee has met plaint is to be made to that Com­ here in Cleveland. mittee, please make it in writing and accompanied by factual and demon­ Its discussions have had to do with strable material. the necessity for bringing about an administration of your Code of Eth­ Respectfully submitted ics in such a manner as to prohibit Grievance Committee of particular business practices which American Title Association after a careful and reasonably com- By Mortimer Smith, Chairman [ 79] ROLL OF HONOR Past Presidents of the American Title Association 1. 1907-08 W. W. Skinner ...... Santa Ana, Ca!if. ~: ~~~~~~~ ~.1i. ~~~~r .. ·.·.·.~·. ·:.·.·.·.· .· .·. ·.·.· .·.·.·.·.· .~·. ·:: : · ::·:.·::::.·::. ·. ·:::: :: :. ·:::::::::::::::::.·.·::::::.i~~::a:~~. ~:~~: 4. 1910-11 Lee C. Gates ...... Los Angeles, Cal!f. 5. 1911-12 George Vaughan ...... Fayetteville, Ark. 6. 1912-13 John T. Kenney ...... Elkhorn, Wis. 7. 1913-14 M. P. Bouslog ...... Jerseyville, Ill. 8. 1914-15 H. L. Burgoyne ...... Cincinnati, Ohio 9. 1915-16 L. S. Booth ...... Seattle, Wash. 10. 1916-17 R. W. Boddinghouse ...... Chicago, Ill. 11. 1917-18 T. M. Scott ...... Paris, Texas 12. 1918-19 James W. Mason ... :...... Atlanta, Ga. 13. 1919-20 E. J. Carroll ...... Davenport, Ia. 14. 1920-21 Worrall Wilson ...... Seattle, Wash. 15. 1921-22 Will H. Pryor ...... Duluth, Minn. 16. 1922-23 Mark B. Brewer ...... Oklahoma City, Okla. 17. 1923-24 George E. Wedthoff ...... Bay City, Mich. 18. 1924-25 Frederick P. Condit ...... New York, N.Y. 19. 1925-26 Henry J. Fehrman ...... New York, N.Y. 20. 1926-27 J. W. Woodford ...... Seattle, Wash. 21. 1927-28 Walter M. Daly ...... Portland, Ore. 22. 1928-29 Edward C. Wyckoff ...... Newark, N.J. 23. 1929-30 Donzel Stoney ...... San Francisco, Ca}.if. 24. 1930-31 Edwin H. Lindow ...... Detroit, Mich. 25. 1931-32 James S. Johns ...... Pendleton, Ore. 26. 1932-33 Stuart O'Melveny ...... Los Angeles, Calif. 27. 1933-34 Arthur C. Marriott ...... Chicago, Ill. 28. 1934-35 Benjamin J. Henley ...... San Francisco, Calif. 29. 1935-36 Henry R. Robins ...... Philadelphia, Pa. 30. 1936-37 McCune Gill ...... St. Louis, Mo. 31. 1937-38 William Gill ...... Oklahoma City, Okla. 32. 1938-39 Porter Bruck ...... Los Angeles, Calif. 33. 1939-40 Jack Rattikin ...... Fort Worth, Texas 34. 1940-41 Charlton L. H all ...... Seattle, Wash. 35. 1941-42 Charles H. Buck ...... Baltimore, Maryland 36. 1942-43 E. B. Southworth ...... Crown Point, Ind. ' 37. 1943-44 Thos. G. Morton ...... San Francisco, Calif. 38. 1944-45 H. Laurie Smith ...... Richmond, V.a. ' 39. l 945-46 A. W. Suelzer ...... Fort Wayne, Ind. 40. 1946-47 J. J. O'Dowd ...... Tucson, Ariz. 41. 1947-48 Kenneth E. Rice ...... Chicago. Ill. 42. 1948-49 Frank I. Kennedy ...... Detroit, Mien. 43. 1949-50 Earl C. Glasson ...... Waterloo, Iowa 44. 1950-51 Mortimer Smith ...... Oakland. Calif. 45. 1951-52 Joseph T. Meredith ...... Muncie, Ind. 46. 1952-53 Edward T. Dwyer...... Portland, Oregon 47. 1953-54 George E. Harbert...... , ...... Rock Island, Illinois 48. 1954-55 Lawrence R. Zerfi ng ...... Philadelphia, Pa. [ 80 J