TITLE $~EWS ~ THE OFFICIAL PUBLICATION OF THE ~ AMERICAN LAND TITLE ASSOCIATION ® ~ "OUR 60th YEAR" MAY, 1967 A MESSAGE FROM THE CHAIRMAN OF THE TITLE INSURANCE SECTION MAY, 1967 I am indebted to our President, George B. Garber, for allowing me to write a message to our members, and I am going to take advantage of this opportunity to keep our members abreast of some of the actions taken at the Mid-Winter Conference. We were pleased to learn that our President had appointed a stand­ ing committee under the Chairmanship of Daniel S. Wentworth, Esquire, to study the new Federal Tax Lien Act and to cooperate with the Internal Revenue Service in order that the regulations to be used, in the administration of the law, be realistic. The Standard Title Insurance Accounting Committee made an interim report outlining the objectives of the Committee. In order that the Committee become a standing committee of the Association, the required steps were taken to amend the constitution and by-laws. The same procedure was followed with respect to the Young Title Men's Committee and all of us will be happy that the Committee will become a standing committee at the Denver Convention. On the recommendation of the Executive Committee, the Board of Governors authorized the Association to participate in a national con­ ference with the American Bar Association, provided the conference consists of not more than twelve members-six to be chosen by our Association and six to be chosen by the American Bar Association. If such conference is established, no resolution, statement or agree­ ment proposed by the conference will become effective before approval and ratification by the Board of Governors of our Association. The Standard Forms Committee had asked for direction in the development of a single form policy, and it was decided that the Com­ mittee be authorized to correct any ambiguities existing i.n the present forms and to proceed with the development of a single form policy reflecting these corrections, and further, to develop a new leasehold policy, either separately or to be incorporated as part of the single form policy. The proposed change of section names was referred back to the Planning Committee. It was a very fine meeting and it is too bad more could not see their way clear to attend. TITLE NEWS THE OFFICIAL PUBLICATION OF THE AMERICAN LAND TITLE ASSOCIATION EDITORIAL OFFICE: Premier Bldg., 1725 Eye St., N.W., Washington, D.C. 20006 296-3671 FEATURES Don't Make A False Assumption 2 Fixtures and the Mortgage 7 Proposed Amendment to ALT A Constitution 13 Western Theme for Annual Convention 16 DEPARTMENTS Message from the Chairman, Title Insurance Section inside front cover Dear Dickie 21 In the News 23 In Memoriam 29 Letters 31 Meeting Timetable inside back cover ON THE COVER: John E. Griffith, Virgil Siepel, Victor VOLUME 46 Gillett, members of the Legislative Committee of the Land Title Association of Arizona, watch with satisfaction as Governor Jack Williams signs House Bill 79 into law. The Bill is the NUMBER 5 Arizona version of the ALTA Model Title Insurance Code and became law March 14, 1967, (John Griffith's birthday). Passage of the Bill, a milestone in Association history, is the culmination of years of work and the r esult of a fine cooperative 1967 effort on the part of Association members. JAMES W. ROBINSON, Editor MICHAEL B. GOODIN, Assistant Editor and Manager of Advertising Page 1 DON'T MAKE A FALSE ASSUMPTION By George B. Garber President, American Land Title Association Exe.cutive Vice President, Title Insurance and Trust Company, Los Angeles, and President, Pioneer National Title Insurance Co. Los Angeles, California You never know what incident will launch a successful public relations effort. When President Garber was visiting in Texas, Carloss Morris suggested to him that a strong statement regarding the dangerous practice of buyers assuming mortgages without adequate title protection would not only be a public .service but would also be of benefit to ALTA members. Carloss Morris is a man who folloW's through! He drafted some copy, he made dozens of phone calls, he worked until a fine press release and this excellent article were developed. Newspapers and magazines all over the country have carried this story. "Tight Money" Brings A New Hazard s if tight money isn't causing to dangers facing them in the pres­ A enough trouble in the real es­ ent day situation. tate industry, a survey of recent As it is, the public little under­ lawsuits by the American Land stands nor appreciates the role Title Association indicates that played by real estate brokers and little-thought-of 1ega1 liabilities lenders in helping Americans ful­ may face anyone involved in the fill their dream of home ownership. purchase, sale, or financing of real In the finest tradition of free en­ estate. terprise, they risk invested capital Homebuyers, of course, should be and their own labor, skill, knowl­ made aware of a growing problem edge, and experience toward the that has arisen because of the achievement of this goal. Their scarcity of mortgage money and contribution to the various com­ the decline in new housing, but real munities they serve and to the na­ estate people should also be alert tion is t r e m e n d o u s. Hardly 2 calculated to bring them ease of lien claim. This stands as a mind is the added hazard brought direct claim on the property about by the increasing frequency for which the buyer, as the new with which existing mortgages are owner, may have to pay in assumed by the buyer. order to clear his title. Simi­ Here's how the problem arises: larly, there might be suits To get around the shortage of pending affecting the property mortgage money and new housing, or judgments rendered against more and more homebuyers are as­ the s e 11 er, foreclosures or suming ex i s t i n g mortgages as bankruptcy a c t i on s, or any part of the sale of older homes. number of claims or legal in­ All too often-and sometimes volvements w h i c h may defi­ upon the advice of a lender or a nitely cloud the title until they real estate broker-the buyer also are p r o p e r 1 y settled or re­ believes that the owner's title moved. policy fully protects him.. This The seller may have been is penny-wise and pound-foolish. married when he bought the Why? Because many actions of the h o u s e. In the meantime, he previous owner could have ad­ may have been divorced and versely affected the title of the remarried. In one s u ch case, new buyer. the second wife signed all the In some cases lenders or real es­ legal documents. The buyer tate brokers have advised buyers who didn't know the sellers that a title search may not be re­ well, never knew the difference quired or may have neglected to -u n t i 1 the first wife ap­ alert buyers to the need for ade­ peared with a c 1 a i m for half quate title protection. The broker the value of the house! It was who fails to stress the need for a a valid claim, too. title search may be leaving himself The previous owner could wide open for a lawsuit-and an have a Federal Income Tax adverse judgment-in case a de­ Lien for not paying all of his fect in title later develops. Further­ Federal Income Taxes. This be­ more, the homebuyer who fails to comes a lien against the prop­ protect himself by a title search erty. If not paid by the seller, and a title insurance policy could the new owner would have to be inviting disaster. Here is a pay the seller's back income warning: "Don't make a 'false as­ taxes or risk losing his home. sumption' in a real estate transac­ It could even be that the sel­ tion involving an older home." ler is dishonest and has mort­ Let's briefly review some of the gaged the house or has sold it more common pitfalls which con­ to someone else. front a homebuyer who is not cov­ These are just a few of the un­ ered by up-to-date title protection: fortunate things that might hap­ If the seller, during the pe­ pen to a h o m e b u y e r who relies riod he owned the property, upon a former owner's title policy, had a new sink installed and in a situation where an existing f a i 1 e d to pay the bill, the mortgage is assumed. There are, plumber may file a mechanic's of course, many other ways in 3 which his ownership, use, and pos­ tract is a common law duty session of the property could be to p e r f o r rn with care, skill, jeopardized. reasonable expedience and Of equal concern to the real es­ faithfulness the thing agreed tate person who is involved in such to be done and the negligent a transaction is the possibility of failure to observe any of the a lawsuit arising from his failure conditions is a tort, as well as to make known to the buyer all of a breach of contract." (38 Am the facts surrounding the purchase Jur 662). of the home. In many states real "Irrespective of contracts, if estate people can be held responsible the relationship of the parties for giving advice on the validity of is such that a duty to take title to real estate.