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Mortgage
Cancellation Procedures Revised
The Legislature has made another attempt at resolving the
problem of paid mortgages which remain open of record. P. L. 1999, c,
272 was approved on November 24,1999 and became effective on or about
December 24, 1999. The new statute amends N.J.S.A. 46: 118-1111.2 to require
that when a mortgagee delivers a mortgage to the county clerk or register
for cancellation, it must simultaneously send to the mortgagor or his
or her "agent":
A copy of the letter of transmittal which the mortgagee sent to the county
recording officer requesting the cancellation of the mortgage of record.
The statute also amends N.J.S.A. 46:18-11.3 to permit fines to be levied
on a mortgagee for non- compliance with the requirements set forth
above. That section previously provided for a fine of $50.00 per day,
up to a maximum of $1,000.00, in the event a lender failed to cause a
mortgage to be timely submitted for cancellation.
P.L. 11999, c. 272 does not provide as effective a remedy as P.L. 1999,
c. 40 (enacting N.J.S.A. 46:18-11.5 et seq', which permits discharge of
a mortgage by affidavit). It should nevertheless be helpful in supplying
evidence of payment in cases where mortgages remain open of record, provided,
of course, that the lender compl ies by se nd in g the requ i red i nformation
to the borrower. Unfortunately, however, the enactment of N.J.S,A. 46:18-11.5
et seq. was deemed necessary because too many lenders failed to fulfill
their obligation to cause mortgages to be timely submitted for cancellation,
as required by N.J.S.A_ 46:18-11.2. The threat of fines under N.J.S.A
46:1811.3 proved to be an ineffective deterrent to non- compliance, particularly
to out-of-state lenders, For more information about the discharge-by-affidavit
procedure, see "Title Talk" No. 43 (Spring, 1999).
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Rule in Shelley's Case
Construed
Most practitioners assume that the Rule in Shelley's Case is no longer
an operative legal Doctrine in New Jersey Therefore, many of us were surprised
to read the opening words of Judge Fisher's opinion in In re Estate of
Hendrickson, 324 N.J. Super. 539 (Ch. Div. 1999)i
It seems unimaginable that a court, near the end of this millennium, would
be asked to consider the application of the long-abolished"Rule in
Shelley's Case". Yet this anachronistic doctrine - like Banquo's
Ghost has raised its hoary head... .
What is going on here? The short answer is that N.J.S.A. 46:3-14, enacted
as L. 1934, c. 204, §11, does in fact abolish the Rule but it does
so only prospectively. Thus, if a conveyance or devise was made prior
to the effective date of the statute, the Rule may be applicable. Trenton
Trust Co. v. Gene, 125 N.J. Eq. 389 (Ch. 1939), afrd 126 N.J. Eq. 273
(E. & A. 1939). This is precisely what occurred in Estate of Hendrickson,
where the court was required to construe a will probated in 1928, before
the Rule was abolished. 324 N.J. Super. at 640-641.
The Rule in Shelley's Case may be stated - in its simplestform - as follows.
If A conveys or devises Blackacre to B for life, and later - in the same
instrument - conveys or devises the remainder in fee to the heirs of B,
A takes a fee simple, and his heirs take nothing, The Rule is derived
from the ideathat "heirs" is a word of limitation and notpurchase.
Thus, inthe examplegiven above, thedeedorwill is construed asif the grantor
or testator had conveyed or devised Btackacre "to A and his heirs",
which is the wording normally used to create a fee simple estate. Simes
on Future Interests, §§19 et seq. (1951). Although the principle
had been applied in reported decisions going back to the Fourteenth Century
the Rule derives its name from the holding in Shelley's Case, I Co. Rep.
93b (K.B. 1681).
Unfortunately, like many technical rules of the common law, this one has
frequently served to frustrate the intent of the grantor or testator,
because once the Rule is found to apply, intent is irrelevant. See, eg.,
Lippincott v. Davis, 59 N.J.L. 241 (E.& A. 1896); Martfing v. Martfing,
55 N.J. Eq. 771 (E. & A. 1896). The Rule has persisted for many years
as part of the common law, even though its original rationale (which derived
from the feudal system) no longer exists. One learned commentator has
accordingly referred to it as "... 'exhibit A in the museum of legal
antiques". Casner's Am. Law of Property, §4.40 (1952).
In Estate of Henddckson the remainder was devised to such person or persons
as shall be [the life tenant's] sole heir or heirs ... in fee simple".
Thus, the devise (if read literally) was not made to the "heirs"
of the life tenant, but rather to a class of persons who could be described
or identified as the heirs of the life tenant. The Chancery Division,
relying on Peer v. Hennion, 77 N.J.L. 693 (E. & A. 1909), held that
the testator's use of the quoted language was sufficient to avoid the
application of the Rule, and thus the remainder was effectively devised
under the will.
324 N. J. Super. at 546-547.
The court thus managed to give effect to the probable intent of the testator
It is not likely that there will be future reported decisions involving
the Rule; nevertheless, it is important for us to bear in mind that its
abolition is only prospective.
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Fidelity National Chicago
Title Merger Completed
The anticipated merger of Chicago Title Corporation, located in Chicago,
Illinois, with Fidelity National Financial, Inc., based in Irvine, California,
will become effective on or about March 1, 2000, following approval by
the respective shareholders of the two corporations. The combined enterprise,
which will bear the Fidelity National name, has approximately 1,000 office
locations across the country, and a gross revenue base (including agency
revenue) of over $3,200, 000, 000. As a result of the merger, Fidelity
National Financial is the largest title insurer in the United States.
Nevertheless, the two companies will continue to be operated separately.
Fidelity is traded on the New York Stock Exchange under the symbol FNF.
Based on 1998 figures, premiums earned by the combined entity will be
$2,300,000, 000, representing 30% of the total net premiums for policies
underwritten by all title insurers. By contrast, First American and LandAmerica
(Lawyers Title and Commonwealth Land) each underwrote 21 ~ 2 % of the
total net premiums in 1998, whi le Stewart Title and Old Republic underwrote
(respectively) 10. 1 % and 6.4% in that year. In New Jersey, Fidelity
National administers a network of over 80 agents from its state headquarters
in Tinton Falls. According to figures compiled by the New Jersey Land
Title Insurance Rating Bureau ["NJLTIRB"] for 1998, it has underwritten
policies aggregating over $6,106,000,000, representing 8.42 % of the total
New Jersey title insurance market. Chicago Title operates branch offices
in Hackensack. Roseland, East Brunswick, Toms River and Moorestown, as
well as a state headquarters office in Iselin, from which a network of
over 85 Chicago and Ticor agents is administered. According to the NJLTIRB's
1998 figures, the combined total of liability assumed for Chicago and
Ticorwas in excess of $19,425,000,000, which represents 26.8 % of the
total New Jersey market. As noted above, Chicago / Ticor and Fidelity
National will continue to be operated separately despite the merger. Thus,
the combination of the corporations will not affect the companies' customers.
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Adverse
Possession:
J & M Land Co. v. First Union
The ancient but complex principle of adverse possession has once again
received the attention of our courts. As in Stump v. Whibco, 314 N.J.
Super. 560 (App. Div. 1998), discussed in "Title Talk" No. 44
(Summer, 1999), the tribunal in J & M Land Company v. First Union
Nat'l Bank, 326 N. J. Super. 591 (App. Div. 1999) was called upon to decide
which of the three statutory periods was applicable: 20, 30 or 60 years.
J & M Land arose from a dispute over the rents arising from a lease
which permitted the erection of a billboard on land owned of record by
First Union National Bank ["FUNE!"I but to which J & M Land
Company ["J&M"] claimed a prescriptive easement. J&M
's predecessor had entered into a lease with the billboard company to
pennit the erection of three billboards. Two are located on J&M's
land, but the third is actually located on adjacent lands owned by FUNB.
The dispute began when the tax assessor informed FUNB that the presence
of the billboard on its land would result in an increase in its real estate
taxes.
The Chancery Division held (in an unreported opinion by Gibson, J.S.C.)
that the lands in question are "uncultivated tracts", forwhich
the prescribed period under N.J.S.A. 2A:1430 is sixty (60) years, and
that J&M had failed to establish possession for that length of time.
It rejected J&M's suggestion that it had acquired a prescriptive easement,
for which twenty (20) years is the relevant time period. The Appellate
Division, in an opinion by Skillman, P.J.A.D., affirmedthe Chancery Division.
The panel analyzed the relevant statutory provisions governing adverse
possession: N.J.S.A. 2A:14-6 & -7 (which bars rights of entry after
20 years); N.J.S.A. 2A:14-31 (30 years possession under color of title);
and N.J.S.A. 2A: 1430 (30 years possession generally or 60 years possession
of woodlands or uncultivated tracts). It agreed with Judge Gibson that
N.J.S.A. 2A:14-30 applied to the case at bar.
J&M argued that it was entitled to choose the applicable statutory
period, relying on Spottiswoode v. Morris & Essex R.R. Co., 61 N.J.L.322
(Sup.Ct. 1898), afrd o.b. 63 N.J.L. 667 (E. &. A. 1899) and Braue
v. Fleck, 23 N.J. 1 (1956). However, the court interpreted the holdings
in Spottiswoode and Braue to apply to the record titleholder, and not
the adverse claimant. In otherwords, according to the Appellate Division,
the choice of statutory period lies with the record owner, regardless
of whether he is the plaintiff or the defendant. To hold otherwise would,
in the words of the court
.. undermine the objective of N~TS.A. 2A.14-30's sixtyyear limitations
period, which is to afford the owner of a 'large expanse of wild and unsettled
land'a longer period of time than other property owners to ascertain the
presence of an adverse possession or use and to bring a legal action
to preserve its title.
326 N.J. Super. at 697
Finally, the Appellate Division declined to agree with J&M that it
had established a prescriptive easement, suggesting that the nature of
its possession (ie., the billboard) was more accu rately characterized
as title by adverse possession (provided it had met the 60 year period).
Furthermore, the Re- statement of Property; §460, Comment "a"
(11944) states that
the period of prescription is fixed, in the absence of specific statutory
provision, by analogy to the period derived from the local statutes of
limitations for the acquisition of title to land by adverse possession.
In this case, the statutory period (as noted above) was held to be 60
years.
Thus, the holding in J&M Land Co. v. First Union is in accord with
the decision in Stump v. Whibco, supra, which similarly applied N.J.S.A.
2A:14-30 in determining that the thirty (30) year period was applirable.
(in Stump the lands in question were not "woodlands or uncultivated
tracts", so the sixty (60) year period was not applied.) It is noteworthy
that the Stump panel held against the adverse possessor and in favor of
the record title holder on factual grounds. Read together, both decisions
suggest that the longer 30 or 60 year periods of N.J.S.A. 2A:14-30, rather
than the shorter 20 year period of N.J.S.A. 2A:14-6 & -7, will normally
be applied when an adverse possessorfiles suit to quiet title to the lands
in dispute.
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Recording Problems Plague
Attorneys, Title Companies
Recording delays and other problems continue to present difficulties for
New Jersey title searchers, title companies and attorneys. The high volume
of real estate transactions in recent years has caused extensive delays
in indexing and recording of documents submitted to county clerks' and
registers'offices. In a number of counties "board date" (the
date to which indices are current) lags several weeks or months behind
the calendar. This means that a title search or a pre- or post-dosing
"run-down" ("bring-down") orcontinuation search may
only be meaningful as of a date far behind the date a real estate transaction
closes
The time span between these two dates (known as the .gap") has traditionally
been a matter of concern to the title industry. But in recent months and
years the gap has widened to an alarming extent in some counties. As a
practical matter, the likelihood of an intervening lien or other adverse
matter not being discovered has increased dramatically. In addition, it
is possible that unscrupulous individuals may manipulate the system for
their own benefit; e.g., by obtaining a mortgage loan shortly before selling
realty, reasoning that the mortgage will not be disclosed by the pre-closing
run-down search. While it is true that one may obtain some degree of protection
by filing a Notice of Settlement, the Notice has a life span of only forty-five
(45) days, which is - unfortunately - inadequate in somecounties. See
N.J.S.A.46:16A-1 etseq.
The problem has been exacerbated by the installation of new computer systems
in some counties. Searchers complain the data was improperly or incompletely
entered into the database, so that the computerized indices do not necessarily
disclose all recorded documents relevant to a particular transaction.
In Middlesex County, for example, a new computer system was put into effect
on February 1, 1998. Searchers are so mistrustful of it that they will
only certify search results as of the end of January, 1998; Le., prior
to the date the new system went into effect, even though the official
index date lags only two to three weeks behind the calendar. The County
Clerk has promised to install a new computer index, based upon the old
Russell or "Key Letter'system, in an effort to resolve some of the
problems complained of. Nevertheless, the Searchers Guild has filed suit
against the County Clerk, alleging that the new computerized system fails
to comport with statutory requirements. Title searchers have also expressed
frustration with the computer systems in other counties, such as Mercer
and Essex.
Some time ago, the New Jersey Land Title Association ["NJLTA7] filed
suit in the Chancery Division, Mercer County, against all county clerks
and registers and boards of chosen freeholders in an effort to compel
the clerks and registers to comply with their statutory duties.
The freeholders were joined as parties defendant because clerks and registers
frequently complain that they lack the funds to hire and train an adequate
number of personnel. At this point, NJLTA is aftemptingto resolvethe suit,
captioned NJLTA v. Mooney et aL (Docket No. 94-C-0150), by having each
county sign a consent order obligating the clerk or register to comply
with the statutory scheme by, for example, processing documents received
by mail in a timely fashion- See, e.g., N.J.S.A. 46:19-3; 46:20-4.
Under the terms of the Consent Order, which has now been signed by most
- if not all - of the defendants, the mai I wil I be opened, and a determination
of recordability will be made, within one (1 ) business day of recei pt.
The instruments accepted for recording will be indexed on the day received
or by the next business day. Furthermore, any corrections made in the
indices after the initial entry of any instrument will be noted in the
index (as required by N.J.S.A. 47:1-13).
Another issue revolves around space limitations faced by many counties.
As the number of documents grows, and as the available storage space shrinks,
counties have turned to computer scanning as a solution. N.J.S.A. 46:
19-1 and 47:1 - 5, as amended by RL. 1994, c. 140 and P.L. 1997, c. 39,
permit computerization of land records. However, even though scanning
will eventually save a great deal of space, some counties have adopted
policies pertaining to the destruction of "outdated" documents
which are in conflict with acceptable searching procedures or even common
sense. For example, some county clerks believe that it is appropriate
to destroy notices of settlement which are more that 45 days old, simply
because the notices are only effective for 45 days! Fortunately, NJLTA
was able to obtain a favorable decision from the Appellate Division which,
it is hoped, will limit the premature disposal of records. N.J. Land ritleAssn
v. State Records Comm., 315 N.J. Super. 17 (App. Div. 1998). See also
N.J.S.A. 47:1-14.
The result of all of this is unclear. Everyone agrees that upto-date,
accurate and easily accessible land records are one of the cornerstones
of our system of land ownership and conveyancing. Unfortunately, no one
has a comprehensive solution to the problems described above. Until one
is adopted and implemented, attorneys, the title industry and property
owners will continue to be at risk.
CHICAGO TITLE CORPORATION
has merged with
FIDELITY NATIONAL
FINANCIAL, INC.
Chicago Title Insurance Company
Ticor Title Insurance Company
and
Fidelity National Title Insurance Company
will continue to serve the needs of their
customers through their respecdve office
and agency operations.
'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, Esq., Regional Manager, Publisher
Lawrence J. Finebeng, Esq., State Counsel, Editor
Chicago Title Insurance Company
Ticor Title Insurance Company
111 Wood Avenue South
Iselin (Woodbridge Twp.), Now Jersey 08830
(732) 205 - 0055 Fax (732) 205 - 0330
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