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State
Banks and Title Insurance: "Parity" Achieved N.J.S.A. 17:4613-30.1
Amended
State-chartered banks have at last achieved success in their efforts to
achieve "parity" with national banks in the sale of title insurance.
By way of background, the decision in Valley Nat'l Bank v. LaVecchia,
59 F. Supp. 2d. 432 (U.S.Dist. Ct., D.N.J. 1999) permitted a national
bank to operate a title insurance agency in New Jersey, The holding was
based on [former] §13 of the National Banking Act, 12 U.S.C. §
92, which allowed national banks to sell insurance in towns having a population
of 5,000 or fewer persons, A United States Supreme Court decision, Barnett
Bank v. Nelson, 517 U.S. 25 (1996), had construed this section to permit
a national bank to sell insurance in Florida, even though it was prohibited
by State law from doing so.
Subsequently, Congress enacted the so-ralled Gramm-LeachBliley Financial
Services Modernization Act., P.L. 106- 102, which took effect in March,
2000. Gramm-Leach repealed, interalia, §13 of the National Banking
Act, but replaced it with sections which, in general: (a) permit national
banks to sell title insurance through affiliates; and (b) permit national
banks to sell title insurance clirectly, but only to the extent the law
of the states in which the national banks operate permit it. See "Title
Talk" No. 48 (Summer, 2000).
In response to Gramm-Leach, New Jersey bankers caused to be introduced
in the Legislature several bills which were aimed at establishing "parity'
between state and national banks in thq sale of insurance. The last of
those bills, A-2265, has now bee i enacted as P.L. 2000, c. 140, eff.
Nov. 1, 2000. The act amends a section of the Title Insurance Act, N.J.S.A.17:46B-30.1,toperrrit
state- and federally- chartered banks and their officers and empoyees
to be licensed as title insurance producers The act also repeals a section
of the State Banking Act, N.J.S.A. 17:9A-27.1, which had prohibited banks
from selling title insurance. As a result of this enactment, N.J.S.A.
17:468-30.1 now states Except for a State or federally chartered bank,
savings bank, savings and loan association or its subsidiary or any officer
or employee of any of the foregoing, no other lending institution, mortgage
service, mortgage brokerage or mortgage guaranty company or service company
or any person licensed pursuant to ... NJSA 17:11C-1 at seq. [the Licensed
Lenders Act] shall be licensed as or permitted to act as an insurance
producer for a title insurance company.
Thus, only state- or national- chartered banks may become title insurance
agents. The act does not permit other financial institutions, such as
mortgage bankers and brokers, or their officers and employees, to obtain
licenses. Nor does it permit lenders to require that the borrower engage
a particular title insurer or agent as a condition of the granting of
a mortgage loan, because that portion of the statute has not been changed.
Finally, the act does not repeal or amend the "anti-rebate"
or "controlled business" sections of the Title Insurance Act,
N.J.S.A. 17:46B-37; -39, or the corresponding sections of the Insurance
Producer Licensing Act, N.J.S.A. 17:22A-17 (8); (6). Of course, the anti-rebate
provisions of § 8 of RESPA, 12 U.S.C. § 2607, are still applicable
to residential title transactions.
Under §303(b) (1) of Gramm-Leach, national banks may only sell title
insurance "in the same manner, to same extent, and under the same
restrictions" that apply to state banks, Since, as noted above, the
anti-rebate and controlled business sections of the Title Insurance Act
and the Insurance Producer Act will presumably apply to stalle-chartered
banks selling title insurance oust as they apply to all other title insurance
agents), national banks should be subject to the same restrictions.
As a result of the adoption of the legislation discussed above, both state
and national banks will now be able to sell title insurance in New Jersey.
It is unclear, however, if banks will prefer to sell title insurance directly
or indirectly or at all. As noted above, state and federal regulations
still apply (in general) to banks' title insurance activities. It is thus
unlikely that this legislation will cause an immediate and dramatic change
in the New Jersey title insurance industry.
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Child Support Judgments
as
Liens on Judgments: P.L. 2000, c. 81
As the result of the enactment of N.J.S.A. 2A:17-56.23a, child support
judgments are entered upon the Civil Judgment and Order Docket, so that
they appear in Superior Court judgment searches. R. 4:101-11(b). Accordingly,
they must be disposed of in connection with a sale, mortgage or other
real estate transaction. In an effort to encourage compliance with child
support obligations, the Legislature has enacted P.L. 2000, c. 81, effective
August 14, 2000. This statute, which will be codified as N.J.S.A. 2A:17-56.23b,
provides that ajudgmentfor child support shall be a lien against the net
proceeds of a judgment, arbitration award, settlement, inheritance, etc.,
due to the debtor under the child support judgment. The Act only applies
in cases where the net proceeds to which the debtor is entitled exceed
$2,000 and the debtor is an individual. Although the word "settlement"
is not defined, it seems to include money obtained as the result of a
lawsuit (or potential lawsuit), as well as claims payments by insurance
companies.
Under the statute, the party making "final distribution" of
the proceeds may not do so unless he or she has confirmed that the beneficiary
is not a child support debtor. Confirmation must be in the form of a certification
supplied by a search company (such as Charles Jones, LLC). The information
needed by the search company (such as mailing address, social security
number, etc.) must be supplied by the judgment creditoror other beneficiary.
P.L. 2000, c. 81, §11(b)~ If the search discloses that he or she
is not a child support debtor, the proceeds may be paid "immediarlely".§I(c)
But if the search reflects that he or she is a child support debtor, the
proceeds must first be applied to satisfy the debt, with the balance (if
any) being paid to the debtor, after receipt of a warrant of satisfaction
of the child support judgment. Id. One should bear in mind, however, that
under R. 4:101- 4(c) such warrants must be executed by the "obligee"
or "creditor' (ie., the custodial parent), as well as by the Chief
Probation Officer.
It has been suggested that, in the future, warrants of satisfaction may
not be accepted by the Superior Court Clerk unless evidence of compliance
with the statute is attached thereto, How_ ever, the Rules of Court have
not yet been amended to require this. Note, however, that §3 of the
new law expressly empowers the Supreme Court to "...adopt Rules of
Court appropriate or necessary to effectuate the purposes of this act".
The text of the statute suggests that if the judgment creditor i . is
represented by counsel (as is frequently the case), the proceeds may be
paid by the attorney for the purchaser or borrower (in a North Jersey
closing) or by the title company (in a South Jersey settlement) to the
judgment creditor's attorney, without first obtaining a certification,
Similarly, in the case of estate pro- ceeds, the same may be paid to the
executor or administrator or (presumably) to the estate's attomey. This
is because, as noted above, the responsibility for compliance rests -
in the words of the statute - with the person making "final distribution"
of the proceeds. P.L. 2000, c. 81, §11(b)(1) states: "The prevailing
party or beneficiary shall provide the attorney ... or agent responsible
for the final distribution of such funds with a certification ..."
[Emphasis added.)
On the other hand, if the payment is to be made directly to the judgment
creditor or heir or devisee, etc., the duty to obtain the certification
apparently ties with the party making the distribution, which may be the
attorney for the purchaser or borrower (in North Jersey) or the title
company (in South Jersey). So, for example, if the party receiving payment
is not represented by counsel, then the attorney or other person making
the payment to him must obtain the personal information necessary to secure
the judgment search certification. RL. 2000, c. 81, §11(b).
What happens if the judgment search certification is inaccurate? Section
1(d) contains the following wording:
"An attorney ... shall not be liable for distributing net proceeds
to the prevailing party or beneficiary based on the results of a judgment
certification showing the prevailing party or beneficiary is not the debtor
of a child support judgment, if it is later shown that the prevailing
party or beneficiary provided inaccurate personal information .......
But what happens if the certification is incorrect, even though the prevailing
party or beneficiary provided accurate information? In other words, what
is the effect of an error made by the judgment search company? Unfortunately,
the statute does not address this issue. Nor does the statute discuss
the liability of an attorney or other party who negligently or intentionally
makes a "final distribution" without complying with the act.
Is he or she liable to the beneficiary of the child support judgment?
On the other hand, an attomey or other party who complies with the statute
by satisfying a child support judgment "...shall not be liable to
the prevailing party or beneficiary or to that party's creditors".
P.L. 2000, c. 81, §11(f).
In conclusion, the statute does not directly affect title closings, but
it will indirectly affect them. For example, if a judgment has been entered
against the seller or mortgagor, the statutory procedures outlined above
will make it more difficult to cause it to be satisfied of record. Where
the judgment creditor or beneficiary is a child support debtor, the requirements
of R. 4:101- 4(c) (discussed above) will undoubtedly delay the receipt
of warrants of satisfaction. Furthermore, as a practical matter, it will
be difficult to obtain warrants in cases where the child support debt
equals or exceeds the amount owed to the judgment creditor. In fact, in
those circumstances, the judgment creditor or his attorney could argue
that he is not obliged to execute a warrant, because payment of the judgment
has not been received. These and similar problems will have to been addressed
by attorneys and title companies on a case-bycase basis.
The necessary searches may be obtained by contacting Charles Jones, LLC.
at P.O. Box 8488, Trenton, NJ 08650-0488 / 609 - 538 - 1000 / 800 - 792
- 8888 / Fax 800 - 883 -0677
www.chariesjones.com.
Note: The foregoing synopsis is provided for informational purposes only,
and is not intended to constitute a legal opinion as to the applicability
of the statute in a given situation or to be used as a substitute for
a review of the text of the statute itself. References to Charles Jones,
LLC are provided as a courtesy, and do not imply an endorsement of the
products or services offered by that firm.
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Johnson Appointed Agency
Marketing Director
Steven G. Day, Vice President and Northeast Region Manager, is pleased
to announce the appointment of Steven K. Johnson as Agency Marketing Director
for New Jersey and downstate New York. A native of Schenectady, New York,
Johnson was graduated from Norwich University of Northfield, Vermont in
1973 with a Bachelor of Arts degree, and he was commissioned a Second
Lieutenant in the United States Army Reserve in the same year. He also
pursued graduate studies at State University of New York at Albany.
Johnson joined the Boston office of Pioneer National Title Insurance Company
(a predecessor of Ticor Title) as National Title Service Sales Manager
in 1980. He held a variety of agency and management positions until Ticor
was acquired by Chicago Title in 1991, at which time he was Mid-Atlantic
Zone Manager. He served as Northeast Region Agency Co-ordinator in for
Chicago and Ticor until assuming his current position.
Steve has been married to Nadine, a kindergarten teacher in Randolph Twp,,
for 27 years. He is a deacon of the Morris Plains Presbyterian Church,
and is a member of Cincinnati Masonic Lodge No. 3 in Morristown. The couple
has two children: Jeremy, a recent graduate of Emerson College in Boston,
and Mark, a teachers aide in Morris Plains.
In his role as Agency Marketing Director, Steve Johnson will continue
to be assisted by Susan Andolora, who has been appointed Senior Agency
Representative. Susan, who joined Chicago Title 18 years ago, has held
a variety of marketing and agency positions. Both Steve and Susan are
located in the State Headquarters Office in Iselin.
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Krahn joins Chicago
Title; will Manage Roseland Branch
Steven G. Day Northeast Region Manager, and John R. Riggins, Northern
New Jersey Manager, are pleased to announce the appointment of Gerry Krahn
as Branch Manager of Chicago Title's Roseland Office. Born in Germany
in 1952, Krahn came to the United States at age 6. He was graduated from
the University of Connecticut in 1974 with a Bachelor of Science degree
in Business Administration, and from the University of Puget Sound (now
the University of Seattle) School of Law in 1978 with a Juris Doctor degree.
He was admitted to the New Jersey Bar in 1979.
Gerry began his career in the title insurance industry with a Seattle-area
title company in 1975. Upon returning to New Jersey in 1978, he was employed
by Pioneer National Title Insurance Company (a predecessor of Ticor Title)
until 1983. Thereafter, he worked for various competitors in the industry,
serving as state counsel for Transamerica (now TransNation) Title, and
as state manager for Lawyers Title. From 1996 until his recent appointment
at Chicago Title, Krahn was engaged in the practice of law in Maywood.
As an attorney with 25 years of experience in real estate and title insurance
transactions, Gerry Krahn will provide invaluable support to the staff
and customers of the Roseland Branch Office. We are pleased to welcome
him I on board!
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Proprietary Title Claims
Legislation Introduced
A bill has been introduced in the Legislature which would, if enacted,
resolve some of the issues resulting from acquisition in 1998 of the remaining
interests of the East Jersey Board of Proprietors by the New Jersey Department
of Environmental Protection IDEPI . The Board, which originated in Colonial
times, is the source of title to that portion of the State formerly known
as East Jersey Although the Board had conveyed most of its lands over
the years, it still retained ownership of a significant amount of real
estate. Title disputes were sometimes resolved by obtaining a deeds from
the Board. See "Title Talk" No. 42 (Winter, 1998-99) for more
information.
However, the purchase by DEP has created concerns about its ability to
convey title to so-called proprietary lands (i.e., lands formerly owned
by the Board of Proprietors). Govern- mental agencies may not, in general,
sell publicly-owned lands, unless specifically authorized to do so by
law. The bill, which seeks to enact the "Fair Resolution of Proprietary
Title Claims Act" (A-2627), establishes procedures for obtaining
conveyances of proprietary lands or for determining that the State asserts
no claim to a parcel of real estate. The bill is sponsored by Assemblymen
Augustine and Bateman, and is based on the recommendations of the New
Je,, say Law Revision Commission.
Any person seeking to resolve an issue regarding title to proprietary
lands may apply to the DER Notice of the application must be given to
adjoining owners. If it is determined that the DEP has no derivative claim
(i.e., a claim of ownership which is derived from the Board of Proprietors),
the Commissioner is authorized to execute a Statement of No Claim in recordable
form, On the other hand, if DEP believes that it has a derivative claim,
the Commissioner is authorized to execute a deed conveying title to the
land upon payment of the fair market value thereof. But if the DEP declines
to convey the land, it must file suit in Superior Court within 3 months
to establish its title thereto, If the DEP fails to file suit, "the
State's derivalive claim to the property shall be extinguished".
The proposed legislation, while helpful, does not resolve every issue
arising from the State's acquisition of proprietary lands. For example,
the problem of competing applications from adjoining landowners is not
addressed, nor is a pre-emptive right in favor of adjacent or contiguous
owners established.. Most significantly, the bill does not discuss tidelands.
It is possible that one could obtain a deed from DEP which conveys title
subject to a tidelands claim. However, the bill, if enacted, will go a
long way toward resolving many of the concerns which have surfaced since
the East Jersey Board of Proprietors ceased to exist.
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Power of Attorney Act
Revised
The Legislature has enacted P.L. 2000, c. 109, eff. ca. Nov. 7, 2000,
known as the Revised Durable Power of Attorney Act. The Act, which will
be codified as N.J.S.A. 46:2131-8.1 at seq., revises certain statutes
dealing with powers of attorney and codifies several common-law principles
regarding same. Repealed by the Act are N.J.S.A. 46:213-8 and -9, which
contained the previous statutory treatment of durable powers of attorney.
The Act is intended to comple- ment N.J.S.A. 46:213-10 et seq., the Banking
Power of Attorney Act. The terms "power of attorney", "durable
power of attorney" and "disability' are defined in N.J.S.A.
46:213-8.2. It is noteworthy that the principal (ie., thegrantorof a powerof
attorney) is "under a disability if [he or she] is unable to manage
his property and affairs effectively".
NA.S.A. 46:213-8.3 provides that a durable power of attorney is not affected
by lapse of time, unless the instrument itself otherwise provides, N.J.S.A.
46:213-8.4 makes a an attorney-in-fact accountable to a court- appointed
fiduciary as well as to the principal N.J.S.A. 46:213-8.5 preserves the
existing statutory practice which permits the attorney-in-fact to execute
an affidavit as to the continued validity of the power of attorney. Such
an affidavit creates a presumption of validity of the acts done by the
attorney-in-fact Consislent with the foregoing, one who relies on actions
taken by the attomey-in-fact without actual knowledge the death of the
principal will not be adversely affected thereby. N.J.S.A. 46:2B-8.6 similarly
permits a third party, acting in good faith, to rely upon the authority
granted to the aftorney-in- fact.
Helpful language is found in N.J.S.A. 46:213-8.7 ("Multiple Attorneys-in-Fact")
and 46:213-8.8 ("Delegation by Attorneys-in-Fact"). The former
section requires multiple attorneys-in-fact to act jointly, while the
latter prohibits delegation, unless, in each case, the instrument provides
otherwise. Multiple attomeys-in-fact are treated similarly to co-trustees,
in that the death, resignation or disability of one or more allows the
remaining attorneys to act. N.J.S.A. 46:21138.9 requires a power of attorney
to be in writing, duly signed and acknowledged in the manner set forth
in N.J.S.A. 46:14-2.1; ie., it must be in recordable form. N.J.S.A. 46:213-8.10
discusses the formalities of revocation. The remaining sections are entitled
"Certified Copies and Photocopies", N.J.S.A. 46:213-8.1111;
"Compensation of Attomey-in-Fact", N.J.S.A. 46:213-8.112; "Fiduciary
Status and Duty to Account", N.J.S.A. 46:2B-8.13; and "Application
of Act", N.J.S.A. 46:213-8.114.
As suggested above, the new Act largely reiterates the previous statutory
or common-law rules governing powers of attorney. Accordingly, its adoption
should not require significant changes in conveyancing practices or title
company underwriting guidelines, Note that the Act does not affect N.J.S.A.
46:6-1, which requires that where a power of attorney is used in connection
with a real estate transaction, the power must be recorded in a deed book
in the county where the realty is located. Furthermore, the recording
of the power must occur prior to the recording of the instrument given
under its authority, such as a deed, mortgage, etc.
CHICAGO TITLE AND TICOR TITLE EXTEND THEIR BEST WISHES FOR A JOYOUS
HOLIDAY SEASON TO THEIR CUSTOMERS AND FRIENDS
"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. Fineberg, Esq., State Counsel, Editor
Chicago Title Insurance Company
Ticor Title Insurance Company
I I I Wood Avenue South
Iselin (Woodbridge Twp.), New Jersey 08830
(732) 205 - 0055 Fax (732.) 205 - 0330
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