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National
Banks and Title Insurance: Valley Nat'l Bank v. LaVecchia
A recent decision by the United States District Court for the District
of New Jersey has caused s ome concern throughout the title industry in
New Jersey. A section of the Title Insurance Act, N.J.S.A. 17:46B-30.1,
is intended to prevent lenders from owning or controlling title insurance
companies and agencies. It provides [in pertinent part]: No bank ... or
other lending institution ... or any officer or employee of any of the
foregoing shall be licensed as or permitted to act as an insurance producer
for a title insurance company. The Department of Banking and Insurance
has interpreted the quoted language as prohibiting lender-owned and lendercontrolled
title agencies. Thus, it has declined to issue licenses under the Insurance
Producer Licensing Act, N.J.S.A. I 17:22A-1 sit seq., to such entities.
On the other hand, ¤13 of the National Banking Act, 12 U.S.C. ¤ 92, permits
national banks to sell insurance in towns having a population of 5,000
or fewer persons. A recent United States Supreme Court decision, Barnett
Bank v. Nelson, 517 U.S. 25 (1996), construed this section to permit a
national bank to sell insurance in Florida, even though it was prohibited
by State law from doing so. The Federal law, which was originally enacted
in 1916, was probably intended to make it easier for persons living in
rural areas to purchase insurance. A small town might not be able to support
an insurance agent, but it would be likely to have a bank. Valley National
Bank ["Valley"] attempted to obtain a producer's license for its title
insurance subsidiary, Wayne Title, Inc. ["Wayne"]. It proposed to operate
from Riverdale, which has a population of less than 5,000. The Hon. Jaynee
LaVecchia, Commissioner of Banking & Insurance. refused to grant the license,
relying on N.J.S.A. 17:46B-30.1. Valley and Wayne sued the Commissioner
in United States District Court, arguing that Federal, rather than State,
law takes precedence, and thus 12 U.S.C. ¤92 pre-empts N.J.S.A. 17:468-30.1,
by virtue of the so-called supremacy clause. U. S. Const., Art. 6. The
Court agreed with Valley and Wayne, and Judge William H. Walls entered
a judgment prohibiting the Commissioner from denying Wayne a license because
it is a subsidiary of Valley. Valley Nat'l Bank v. LaVecchia, (No. 99
-- 1222, decided June 14,1999) (unreported). It appears that the judgment
will not be appealed to the Third Circuit Court of Appeals. It must be
remembered that the decision affects only national banks, and not state-chartered
banks or other financial institutions, such as mortgage companies and
savings banks. Therefore, most loan transactions will not be affected
by it. Furthermore, even a national bank which obtains a title insurance
license must comply with all other relevant provisions of the Title Insurance
and Producer Licensing Acts. Thus, for example, a national bank may not
require that the borrower obtain a loan policy from its title agency subsidiary
or controlled entity, because that is also prohibited by N.J.S.A. 17:46B-30.
1. Nor may it disregard filed rates or provide unlawful rebates or inducements.
N.J.S.A. 117:4613-34 et seq. The statute relied upon by Valley covers
insurance generally, and thus addresses title insurance only by implication.
Valley's efforts to obtain a title insurance producers license must be
viewed in the larger context of the nation-wide struggle by banks to obtain
the right to sell insurance, and to offer other non-banking services as
well. There is currently pending in Congress legislation which would govern
the rights of national banks to sell insurance, and effectively amend
or replace 12 U.S.C. ¤92.One proposal, which is supported by ALTA (American
Land Title Association), would permit national banks to sell insurance
to the extent state-chartered banks are permitted to do so under state
law. However, national banks which are already selling insurance would
be protected by a "grandfather' clause. New Jersey law currently prohibits
state banks from selling title insurance. N.J.S.A. 17:19A-27.1. So if
the proposed law is enacted in its current form, other national banks
would not be able to enter the title insurance industry in New Jersey.
Will other national banks follow Valley's lead? It is too soon to tell
I what the long-term effect of the court's decision in Valley Nat'l Bank
will be. Ultimately its impact on the title industry will most likely
be determined by Congressional action
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In
Memoriam: Joseph Santosuosso
Joseph Santosuosso, former Vice President and New Jersey State Manager
of Chicago and Ticor Title Insurance Companies, died on May 13,1999, after
a distinguished career of over 30 years in the title industry. He was
69 years old. A native of Newark, New Jersey, Santosuosso was born in
1929. He attended Barringer High School and Upsala College, earning a
B.S. in Business Administration. In 1965, he received the degree of L.L.B.
from New York Law School. After admission to the bar of New Jersey in
1966, he practiced law in Clifton until he was hired by Chelsea Title
& Guaranty Company in 1968. In February of 1970, "Mr. Santo", as he was
affectionately called by his co- workers, joined Chicago Title. In October
of 1973, he was named resident vice president and manager of the Company's
North Jersey operations. In 1979, Santosuosso was elected a vice president
and the same year was appointed division manager for Pennsylvania and
South Jersey. In 1981 he returned to East Orange as North Jersey manager
and was instrumental in arranging the relocation of the combined area
and branch office operations from East Orange to Roseland in April of
1984. In 1991, the southern and northern New Jersey areas were combined,
and Santosuosso became the New Jersey State Manager. In the same year,
Chicago Title &Trust Company acquired Ticor Title Insurance Company, and
he assumed responsibility for combining the two companies' New Jersey
operations, just as he had with respect to Chelsea Title in 1986 and SAFECO-Title
(now known as Security Union) in 1987. Joseph Santosuosso served as president
of the New Jersey Land Title Association in 1981-82. He received the coveted
CTP [Certified Title Professional) designation from that body as well.
In January of 1993, he retired from Chicago Title and joined his son David
at Title Agency of New Jersey in Clifton, an association which continued
until his untimely death. He is also survived by his wife Florrie, and
by a daughter, Donna Lipari. Those wishing to honor Joseph Santosuosso's
memory may do so by making contributions to:
Adult Respiratory Distress Syndrome Research c/o Shawn Sheffield, Administrator
Johns Hopkins University Hospital Div. of Pulmonary & Critical Care Medicine
JHACC, Room 4682 5502 Hopkins Bayview Circle, Baltimore, MD 21224
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Adverse
Possession: Stump v. Whibco
Adverse possession
may be defined as the exclusive, continuous, uninterrupted, visible, and
notorious entry onto, and possession of, the lands of another for the
requisite statutory period. Mannillo v. Gorski, 64 N.J. 378 (1969). The
statutory period generally is believed to be twenty (20) years, relying
upon statutes which bar rights of entry onto real estate after twenty
(20) years have elapsed. N.J.S.A. 2A:1 14-6; -7. On the other hand, another
statute provides that thirty (30) years' actual possession of real estate
(except woodlands and uncultivated tracts) and sixty (60) years' actual
possession of woodlands and uncultivated tracts are the relevarit time
periods. N.J.S.A. 2A:14-30 & -31; Spottiswoode v. Morris & Essex R.R.
Co., 61 N.J.L. 322 (Sup. Ct. 1898) Originally, actual or conscious hostility
was a necessary ingredient of adverse possession. Today, conscious hostility
is no longer necessary. Entry onto the premises in question, even under
a mistaken bel ief or claim of title, is suff icient, if the other elements
are present. Manillo v. Gorski, supra. But it must be remembered that
if the use of the property is permissive, it cannot by definition be adverse,
and thus title by adverse possession cannot be established. Mandiav. Applegate,
310 N.J. Super. 435 (App. Div. 1998). Under modem case law, minor encroachments
(e.g., fence mislocations) will not necessarily give rise to title by
adverse possession. In these instances, the court will exercise its equitable
powers to fashion an appropriate remedy. Manillo v. Gorski, supra. See
also Maggio v. Pruzansky, 222 N.J. Super. 567 (App. Div. 1998), in which
it was held that the record owners must have actual knowledge of an encroachment
in order to establish its open and notorious nature. One may not obtain
title to publicly-owned lands which are used for public purposes by adverse
possession. Patton v. No. Jersey Dist. Water Supply Comm'n, 93 N.J. 180
(1983) However, as the result of a recent decision by the Supreme Court
of New Jersey, one may (at least in theory) acquire title to lands which
are not so used.. Devins v. Borough of Bogota, 124 N.J. 570 (1991). Nor
may one co-tenant obtain title in this fashion as against another co-tenant.
Foulke v. Bond, 41 N.J.L. 527 (E. & A. 1879). On the other hand, one may
"tack on" the time during which a predecessor held adversely, in order
to achieve the requisite amount. Hack v. Cannon, 24 N.J. Super. 534 (Ch.
Div. 1953); O'Brien v. Bilow, 121 N.J.L. 576 (E. & A. 1938). Although
a title derived through adverse possession is generally regarded as questionable,
and therefore unmarketable, specific performance of a contract to convey
marketable title to such lands has been decreed, where it appeared from
the record that the requisite elements had clearly been established. Conklin
v. Davi, 76 N.J. 468 (1978). This brings us to the recent decision of
the Appellate Division in Stump v. Whibco, 314 N.J. Super. 560 (App. Div.
1998). Plaintiffs (Mr. and Mrs. Stump) filed suit to quiet title to a
parcel of land along the Maurice River in Cumberland County, which they
occupied and claimed ownership of by adverse possession. The record owner
of the premises in question was defendant Whibco, Inc., and the disputed
parcel lies along their common boundary line. At issue was a triangular
parcel measuring about 52 feet wide and over 600 feet long. The Law Division
entered judgment for defendant, and the Appellate Division affirmed. It
found that the statutory basis for the action was N.J.S.A. 2A:14-30, which
requires "...30 years 'actual possession' of real estate...". 314 N.J.
Super. at 565. Although plaintiffs had acquired title to their parcel
in 1974 (or less than 30 years prior to the commencement of the suit)
they asserted the benefit of the "tacking" doctrine (discussed above),
by which one may continue adverse possession of land begun by one's predecessors
in title. Recognizing that the "tacking" doctrine remains viable today,
the court applied it in this case, because the record established that
possession was not interrupted for a 30-year period. Id. at 568 - 571.
The court then turned to Whibco's defense that it had acquired title from
the Small Business Administration, an agency of the United States. Since
adverse possession may not, in general, be asserted against the sovereign
under the doctrine of nullum tempus occurrit regi ("time does not run
against the king), Whibco argued that the plaintiffs' possession was not
continuous, because it was necessarily interrupted during the period that
the United States held title. The court rejected this claim, because the
nullum tempus doctrine was not being asserted against the United States-,
Le, the United States was not a party to the suit, as it was no longer
in title. Id. at 571 - 576. Nevertheless, the Appellate Division ultimately
affirmed the Law Division and held for defendant Whibco. After an exhaustive
analysis of New Jersey law pertaining to adverse possession, it concluded
that plaintiffs had not met the burden of establishing all of the elements
needed to support their claim. Specifically, the panel found that, owing
to the physical condition of the fence, which marked the border at the
area in question, plaintiffs "...have not adequately established that
their (and their predecessors') occupancy was sufficiently open and notorious
for the necessary duration...". Id. at 580-581. While Stump v. Whibco
was ultimately decided on a narrow factual issue (i.e., the condition
of a fence), the opinion nevertheless contains a good review of New Jersey
law relating to adverse possession. It is also noteworthy that the case
proceeded under the 30-year statute, N.J.S.A. 2A:14-30, and not under
the 20- year statute, N.J.SA 2A:1 4-6;-7, which many attorneys blithely
assume is applied in all adverse possession cases. Although the court
did not explain why one statute (rather than the other) was applicable,
it seems that plaintiffs' complaint relied upon the 30-year statute, rather
that the 20 year statute.
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Beware
of Judgment Liens: Lieberman v. Arzee Mid-State Supply
A recent Appellate
Division decision, Lieberman v.Arzee Mid-State Supply, 306 N.J. Super.
335 (App. Div. 1997), discusses the ability of a judgment creditor to
enforce its lien against the debtor's real property. Arzee Mid-State Supply
Company ["Arzee"] obtained a judgment on July 23, 1993 against Premium
Siding and Windows, Inc. [Premium"] and its principal shareholder, John
Wahl. The judgment was entered upon the Superior Court Clerk's Civil Judgment
and Order Docket on August 5,1993, thus creating a lien against all realty
owned by Premiuma and Wahl. When the suit was commenced, Premium conducted
business at a location in Maple Shade, title to which was held by John
Wahl. However, shortly before an" of the judgment in favor of Arzee, John
Wahl conveyed the Maple Shade real estate to his brother, William. Nevertheless,
the deed from John to William was not recorded until August 9. Thus, on
the date Arzee's judgment became a lien (August 5), record title to the
realty was held by the judgment debtor. Arzee did not immediately seek
to enforce its judgment by execution against the realty. John Wahl subsequently
died, and, in or about August, 1994, Arzee learned that William Wahl was
about to convey title to the realty to Mark Lieberman and Edward Jones.
Arzee then commenced suit in the Chancery Division against William Wahl
and the Estate of John Wahl, seeking to avoid the transfer to William
as fraudulent, and to enjoin the conveyance from William to Lieberman
and Jones. The injunction was denied, on condition that $30,000 be placed
in escrow by William, pending a determination as to the allegedly fraudulent
nature of the deed from John to William. Eventually, title was conveyed
to Lieberman and Jones. The Chancery Division determined that the deed
from John to William was not a fraudulent conveyance, and released the
escrow fund to William. In May of 1996, with the Estate of John Wahl consenting.
Arzee obtained a post-judgment order in the original Law Division case
permitting the Sheriff of Burlington County to post a a writ of execution
against the Maple Shade realty. Lieberman and Jones filed suit to restrain
Arzee and the sheriff from executing against the realty- In an unreported
decision, the Law Division held in favor of Lieberman and Jones. The court
suggested that the doctrines of collateral estoppel and "entire controversy"
prevented what was, in effect, an effort by Arzee to re- litigate its
unsuccessful Chancery Division suit. Arzee appealed to the Appellate Division,
which reversed the trial court. Judge Wecker, writing for a unanimous
panel, began by observing that the lien of Arzee's judgment had validly
attached to the realty prior to the conveyance from John to William Wahl.
Thus, when the deed from John to William was recorded, the title obtained
by the grantee was already encumbered by the judgment lien. 306 N.J. Super.
at 340. The court relied upon the holding in Tobar Const. Co. v. RCP Assocs.,
293 N.J. Super. 409, (App. Div. 1996): ... a judgment docketed after a
deed disposing of the judgment debtors interest in real property is delivered,
but before the deed is recorded, becomes a lien on the property by virtue
of N.J. S.A. 46:22-1. ...New Jersey is a "race notice" state that protects
judgment creditors who record their instruments first without notice of
unrecorded instruments. The panel next discussed the effect of the Chancery
Divi sion litigation in which it was held that the deed from John to Wi
I liam was not fraudulent. Of course, in light of the fact that - - for
the reasons discussed above -William acquired title subject to the lien
of the judgment, Arzee's suit was superfluous. But was Arzee nevertheless
collaterally estopped from seeking to enforce its judgment against the
realty? The Appellate Division concluded that Arzee was not estopped.
It carefully reviewed the Chancery Division's opinion, and determined
that the court did not decide if Arzee's judgment was a valid lien on
the realty. In the view of the Appellate Division, the Chancery judge
merely decided that the conveyance was not fraudulent and consequently
ordered the release of the escrow funds. The panel likewise rejected the
trial court's invocation of the "entire controversy" doctrine, holdng
that its goals were not undermined by the instant litigation. The Appellate
Division concluded by stating that Wahl's conveyance to Lieberman and
Jones "... could not affect Arzee's lien'. 306 N.J. Super. at 343, citing
New Brunswick Sav. Bank v. Markouski, 123 N.J. 402 (1991). The tribunal
went on to say: The result is not unfair.... Plaintiffs [Lieberman and
Jones] had both actual and constructive notice of Arzee's judgment before
closing title on the Maple Shade property, 306 N.J. Super. at 343. Thus,
the judgment of the trial court was reversed, and the Consent Order permitting
execution against the realty was reinstated. Presumably because the judgment
debtor's estate is now insolvent, the court did not even suggest that
Arzee must first attempt to satisfy its judgment from the debtor's personal
property, as required by law. 306 N.J. Super. at 341. While it is true
that Lieberman and Jones had both actual and constructive notice of Arzee's
judgment, many practitioners would disagree with the notion that the result
achieved by the Appellate Division's opinion"...is not unfair". Arzee
elected to enforce its judgment by an action to establish the conveyance
to William as fraudulent, a suit which the Appellate Division characterized
as "superfluous". Id. Lieberman and Jones undoubtedly believed that the
courtordered escrow would provide them with sufficient protection against
Arzee's judgment. When the Chancery D ivision ordered the release of the
escrow funds, they were left without protection, but reasonably assumed
that the matter had been resolved in their favor. Why should Arzee be
rewarded in 1997 - at the expense of Lieberman and Jones, bona fide purchasers
for value - for having elected to initiate a "superfluous" lawsuit in
1994, rather than simply seeking a writ of execution, which was the remedy
they should have pursued at that time? In general, it is difficult to
quarrel with the appellate panel's analysis of the law pertaining to judgments
as liens against realty. However, the unusual procedural history of the
case may have led to an unjust result. Nevertheless, the opinion does
serve to emphasize the importance of the proper disposition of judgments
upon the transfer of title to realty. Although this article was originally
written for "Title Talk", it previously appeared in The Advocate, a publication
of the Agency Section of the New Jersey Land Title Association
'Title Talk" is published
periodically by Chicago Title and Ticor Title Insurance Companies, and
is distributed free of charge to their customers and friends. Steven G.
Day, Vice President& Northeast Regional Manager, Publisher Lawrence J.
Fineberg, Vice President & New Jersey State Counsel, Editor Chicago Title
Insurance Company Ticor Title Insurance Company 111 Wood Avenue South
Iselin (Woodbridge Twp.), New Jersey 08830 (732) 205-0055 Fax (732) 205-0330
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