On December 7, 1999 the United StatesSupreme Court, in Drye v. United States(No.98-1101), held that a disclaimer did notdefeat or divest federal tax liens which hadbeen filed against the disclaiming partyprior to the filing of the disclaimer.

At the time of his mother’s death, RohnDrye, Jr., was insolvent and owed theFederal Government some $325,000 onunpaid tax assessments, for which noticesof federal tax liens had been filed. Hismother died intestate, leaving an estate witha total value of approximately $233,000 towhich he was sole heir. Drye disclaimedhis interest in his mother’s estate, whichthen passed by operation of Arkansas law tohis daughter. The issue before the Courtwas whether Drye’s interest as heir to hismother’s estate constituted “property” or a “right to property” to which federal taxliens attached under 26 U.S.C. § 6321, despite Drye’s exercise of his state law rightto disclaim his inheritance.

The Court determined that under state law,Drye had the unqualified right to receivethe interest in the estate or to channel thatvalue to his daughter. According to theCourt, the “control rein” he held underArkansas law, (i.e. his right to either acceptthe inheritance or disclaim it) rendered theinheritance “property” or “rights to proper-ty” belonging to him within the meaning of

26 U.S.C. § 6321 and hence subject to thefederal tax liens already filed against him.Once it had been determined that state lawcreated an interest in Drye sufficient to satisfy the requirements of the federal taxlien provision, state law was inoperative to prevent the attachment of the federalliens.

The Arkansas disclaimer statute is similar in certain respects to the New Jersey disclaimer statute, N.J.S.A. 3B:9-1 et seq.Both statutes allow the filing of a disclaimerwithin 9 months after the death of the decedent and both create the legal fictionthat the disclaimant predeceased the decedent; consequently, the disclaimant’sshare of the estate passes to the person nextin line to receive that share (see N.J.S.A.3B:9-5 and 9-8).

Under New Jersey law, The Statute ofDevise and Descent (N.J.S.A. 3B:1-3), provides that upon death, title to dece-dent’s property devolves by operation oflaw to his heirs at law (intestacy) or to hisdevisees (testacy). It is clear, therefore, that under N.J. law upon death of the decedent,an heir or devisee has a property interestwhich would qualify as “property” or“rights to property” under 26 U.S.C. § 6321and consequently be subject to attachmentby federal tax liens.

Drye v. United StatesDisclaimers and Federal Tax Liens

By Gary M. Ham, State Counsel for Lawyers Title Insurance Corporation

TheThe

New Jersey Land Title Association

IN THIS ISSUE:

June 2000Volume XII, Issue 2

Drye v. United States 1

Good Funds . . . . . . . .3

Who Wants to Be A ScholarshipWinner ? . . . . . . . . . .4

The Forum in Las Vegas . . . . . . . . . .5

The LegislativeCommittee – How it Works . . . . . .6

A publication of the New Jersey Land Title Association, Monmouth Executive Center, 100 Willowbrook Road,Building 1, Freehold, New Jersey 07728

“The views and opinions expressed by the authors of the published articles are those of the authors or his/her employer. Consult your underwriter for specific guidelines.” Editor Kevin Cairns, Esq.

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3

The “Good Funds” law has been in effectfor some time now. A reading of economicforecasts and news indicate that interestsrates have gone up – and are likely to continue rising – with the resulting pressureon some lenders causing a potential for serious losses to persons who ignore thelaw and sound underwriting principles. It has become apparent from claims experience in the industry that a reminderis now timely.

Simply stated the law (N.J.S.A. 17:46B-10.1)provides that, as to insurance producers, (a)all settlement funds must be maintained in atrust (escrow) account and shall not becommingled with other funds of the titleentity and (b) no disbursement shall bemade on closings settlements unless thefunds have been deposited in the trustaccount by cash, electronic wire transfer, orcertified, cashier’s, teller’s or bank check,or other collected funds, except foramounts not exceeding $1,000 which mayhave been deposited in un-collected funds.The act goes on to define a “bank check” asa negotiable instrument drawn by a state orfederally chartered bank, savings bank orsavings and loan association on itself or onits account in another state or federallychartered bank, savings bank or savings andloan association doing business in this State.A “teller’s check” means a draft drawn by abank on another bank, or payable at or through a bank. It is noteworthy that theact does include checks from other titlecompanies nor from attorney trust accountsas “good funds”.

The Department of Banking and Insurance(“DOBI”) has informally indicated that itmay issue Regulations which include thesetwo sources as “good funds” or, in theevent that DOBI’s analysis leads them tobelieve that they lack the statutory authorityto so regulate, that they will probably agreeto proposed legislation to add these two categories to the list of “good funds”. DOBIhas indicated that it will not include Realtortrust account checks in the “approved” listbecause these accounts are not audited on a regular basis.

A separate statute, N.J.S.A. 17:11C-22(k)requires mortgage bankers and brokers tofurnish “good funds” or a “teller’s check”,which is defined as a “draft drawn by abank on another bank, or payable at or through a bank” prior to, or at, the closing.

As interest rates rise, some lenders may findthemselves in a financial “squeeze” resultingfrom the change in interest rates betweenthe time they committed for the loan andthe rate prevailing at the time of delivery ofthe loan. This may – if past experience is apredictor of future events – cause somethinly financed loan originators to run outof money. Should that occur, the settlementagent who closed on a promise of futurecollection of funds might find that thesefunds would not materialize. Should thishappen, ask yourself just whose money youdisbursed. You may find that (a) it was yourown money or (b) that, by disbursing some-one else’s money out of the trust account,you may have (legally speaking) embezzledthe funds belonging to the other person(s).This, in addition to the potential monetaryliability, can be criminally prosecuted.

Is all of this conjecture? NO!!! There ispresently pending a small matter in whichan agent closed deals for a “good customer”(mortgage broker) who did not furnishgood funds and – after his checks“bounced” – has been found by governmentinvestigators to be “short” in excess of$2,000,000. Needless to say, this title insurance producer is now having to dealwith the problem , a heavy burden, . . . allbecause (s)he tried to appease a “good customer”.

Don’t let this happen to you. ■

Good Funds

By Frank Melehoir, Vice President, Associate Regional Counsel forFirst American Title Insurance Company

Who Wants to Be a Scholarship Winner?

By: Laurence J. Usignol State Counsel, First American Title Insurance Company

4

Elliot is the beneficiary of the generosity not only of the Board of Governors of theNJLTA, but also of the Agency Section ofthe NJLTA. The Agency Section matchedthe usual $4,000 Scholarship bestowed bythe NJLTA Board of Governors with another$4,000, doubling the prize to $8,000 over afour (4) year period.

Elliot Fineberg joins a growing list of previous Weigel Scholarship Award winnerswhose high school careers epitomized academic excellence. The first WeigelScholarship was awarded in 1998 toKatherine A. Ramler. Ms. Ramler’s applica-tion was sponsored by Agency Sectionmember Anthony F. Gerike of MohawkAbstract Company, Medford Lakes,Burlington County. Ms. Ramler is a sophomore at Clemson University whereshe is enjoying success in a math major.

The 1999 Weigel Scholarship was awardedto Theresa E. Hayes, sponsored by underwriter member Stewart Title GuarantyCompany. Stewart employs her father,Harold C. Hayes, as its NJ District Manager.Ms. Hayes, who was also named a NationalMerit Scholar, is in her freshman year atRutgers, The State University. She isenrolled in the University’s Honors Program at the College of Engineeringwhere she is pursuing a degree inBiomedical engineering.■

The NewJersey LandTitleAssociationtakes greatpleasure inannouncingthat ElliotFineberg ofHighlandPark,MiddlesexCounty,New Jerseyis this year’s

winner of its John R. Weigel ScholarshipAward. This Award, named in honor of theAssociation’s Director Emeritus who servedthe title insurance industry for over twentyyears with great distinction, provides an$8,000 scholarship to Elliot, now in hissenior year at Hillel Yeshiva High School inDeal, New Jersey. Elliot is planning to pur-sue an Aviation Management major at OhioState University.

“Elliot Fineberg was clearly the most qualified applicant which the Associationreviewed this year, and we have every confidence that he will enjoy great successat Ohio State,” said Allen J. Exelby, the current President of the Land TitleAssociation. “The Land Title Association isvery happy to be of financial assistance toone of its own, especially someone withsuch sterling credentials as Elliot.”

Elliot Fineberg was eligible for considera-tion because of his father’s employment byan underwriter member of the New JerseyLand Title Association. Elliot’s father,Lawrence J. Fineberg, serves as VicePresident and New Jersey State Counsel forChicago Title Insurance Company. LarryFineberg is admitted to the practice of lawin New Jersey and New York, is a memberof the Middlesex County and State BarAssociations, and is a past Chairman of theReal Property, Probate and Trust Law Sectionof the New Jersey State Bar Association.

The Title Academy of New Jersey, L.L.C.is offering the course

“Deeds, Judgment and Tax Liens”July 20, 2000

New Jersey Land Title Institutevideo presentations

“Commercial Real Estate Transactions”July 18, 2000

“Surrogate Court Proceedings”August, 2000

CONTINUING EDUCATION COURSES

5

Like everyone else in Las Vegas, I wanted togo home a winner. Not getting the rightvibes at certain tables, I passed, seekingthose where I felt more comfortable. Therewas a lot of money riding on this, so I want-ed to make the right choice. If I were luckyhere maybe it would carry over into thecasinos. You see I was in the ballroom forALTA’s Tech Forum 2000, not the gamingfloor. This well attended Forum was held atthe Mirage in Las Vegas from the evening of March 13th though the afternoon of the15th. It consisted of a CE seminar, 20 educational sessions, eight vendoroverviews, three general meetings, participation from over 40 vendors and all the private demos that you could arrangein a 48-hour time slot.

While the obvious thrust of the event wastechnology, related matters also provedinteresting. Carol Foglesong, the Clerk forOrange County, FL., gave some officials’perspectives on the Clerk’s Office of thefuture at the Recorders’ TechnologyStrategies Session. Carol stated that she did not want us (title people) in her office;she has neither the space nor the money to accommodate us. She claims that a docu-ment sent electronically to her office forrecording can be returned with its record-ing information within five hours. She iscreating an office where all documents areavailable via the web.

However, as with all changes, there aresome trouble spots, most notably the privacy issue. For example, Florida, likeNew Jersey, requires the addresses of theparties on the deeds. Ms. Foglesongreceives numerous calls from people askingthat their address not be shown; generally the calls are from law enforcement officials.Legally the address on the deed is part ofthe record and available to the public, as isthe information on mortgages, judgments,etc. The old system requires some skill andpersonal initiative to obtain this data, butthe Internet grants accessibility to the lowliest of couch potatoes. It appears thatthis privacy matter has no simple answerand will most likely be dealt with by legislative action.

The software portion of the Forum featurednumerous known products and a few newones. With the notable exception of ahome grown package, all of the large vendors fail to offer a solution that canaccurately calculate the New Jersey ratesand produce an invoice. But there is onenew area that is very intriguing: web-basedsoftware.

A presentation by a web-based vendorstruck me with its focus. He began by stating that the biggest hindrance to gettingwork done is the telephone. By permittingclients to access their files and determinetheir status, numerous interruptions couldbe avoided. This self-service method of placing orders, amendment requests andgetting the product is very attractive.Besides being web-enabled there are otheradvantages: automatic (silent) upgrades,secure back-ups, redundant systems (nomore hard drive failure), accessibility(Internet access translates to 24/7-fileaccess) and lower hardware requirements.While there is no perfect solution, this typeof product does appear to best meet theindustry’s expanding needs.

The Tech Forum is an ideal way for deter-mining what is available in the marketplace,finding new marketplaces and keeping upwith what your competition is providingtheir clients. Next year I hope to see anautomated closing with digital signatures,smart cards, video conferencing and electronic transfer of both funds and documents. If you are curious about the latest in title technology and have an idea ofwhat you’d like to see, make sure youattend next year’s Tech Forum. ■

The Forum in Las Vegas

By: Michael Kehol, Eastern Title Agency, Inc.

6

Staying abreast of proposed and recentlyenacted legislation is just one of the manyways the New Jersey Land Title Associationbenefits its members. The LegislativeCommittee, working with the Association’slobbyist, The Marcus Group, reviews andidentifies state legislation impacting the titleindustry. The review process is a tediousone and requires the reading of all billsintroduced in both the State Assembly andSenate. No less that 3 employees of TheMarcus Group handle this initial reviewprocess. The Marcus Group, after identify-ing those bills which may be of interest tothe Association, sends full copies of theselected bills to the Legislation CommitteeChairman for review. In addition, theChairman receives a daily session service report which lists all legislation introduced in both houses thatsession day. The Chairman uses this list torequest copies of any additional bills which,because of their title, deserve review.

The Legislative Chairman reads the proposed legislation and selects thosewhich may be of interest to the Association.The NJLTA Board of Governors is notified ofthe selected bills either through a special mailing or at the regularly scheduled Boardof Governors meetings. The Chairman renders a brief synopsis of the selected legislation and recommends a position oneach. The Board of Governors votes a formal Association position, which positionis subsequently communicated to our lobbyist by the Chairman. Should theAssociation vote to oppose or support a particular bill, the lobbyist attempts to contact the bill’s sponsor(s) and communi-cate the New Jersey Land Title Association’sideas and concerns.

If necessary, the Association’s ExecutiveDirector (or another representative of theAssociation) will testify at State Senate orAssembly Committee hearings on behalf ofor in opposition to legislation of particularinterest to the Association.

Of the numerous bills that are reviewedeach month, routinely four or five pertain to matters of interest or concern to the titleindustry. Obviously, each carries a varyingdegree of impact with the more significantcommanding more of the Association’sattention. Set forth below are two exam-ples of legislation which exist as a directresult of the Association’s efforts:

A-161 signed into law 3/12/99 as P.L. 1999,c.40. The Association worked extremelyhard to get this law passed and now wehave an alternate method of canceling mortgages of record (see N.J.S.A. 46:18-11.5to 11.7).

S-928 signed into law 1/8/98 as P.L. 1998, c. 290. This is the “Good Funds Act” (seeN.J.S.A. 17:11C-22(k) and N.J.S.A. 17:46B-10.1).

Of course there are many more bills whichhave been passed, amended or defeated as adirect result of the Association’s input andtenacity.

We have recently established a legislativereporting site within the NJLTA website (www.NJLTA.ORG) which we hope willkeep our members up to date on legislativematters.

You may also track bills by going to thewww.njlawnet.com website and clicking“Legislature” or by going towww.njleg.state.nj.us. ■

The Legislative Committee – How it Works

By: Gary M. Ham, State Counsel, Lawyers Title Insurance Corporation

June 6, 2000 Annual Convention

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June 19 – Kenilworth, NJ Installations

All Agents are invited!Reservations required.

For more information, please call 877-TAANJ-00

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TITLE ABSTRACTERS’ ASSOCIATIONOF NEW JERSEY

AGENCY SECTION MEETINGS:

June 4-7, 2000 Annual Convention

October 12, 2000 4:00 pmVictorian Manor

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Who the industry looks to

8

The Surveyor Liaison Committee was estab-lished by the NJLTA to be “the front man”for a dialogue with the surveying industry.The Committee periodically meets with itscounterparts from the New Jersey Societyof Professional Land Surveyors to discusscommon problems and issues. The confer-ences are scheduled on an as-needed basis,and can be triggered by any new develop-ments or questions arising from eitherindustry. The NJLTA Committee consists of

Surveyor Liaison Committee

By: Laurence J. Usignol, Vice President, State Counsel for First American Title Insurance Company

During the past year you have been receiv-ing complimentary issues of the New JerseyLand Title Association’s (NJLTA) newslettercalled “THE ADVOCATE.” The Advocate isa quarterly publication produced for themembers of the NJLTA. It is designed toprovide agency, underwriter and affiliatemembers of the Association with relevantinformation about the title industry. Thearticles and information in the Advocate are provided by the members of NJLTA and ALTA.

In this edition and the next, we will intro-duce you to the various committees withinNJLTA and their functions. One of the primary functions of these committees isdesigned to investigate issues that affect the industry and report same to members of the Association. The ADVOCATE is onesource used to disseminate the informationproduced by these committees.

This publication will be the last complimen-tary edition received by you unless youbecome a member of the Agency Section of the NJLTA. I hope you have enjoyedreading the timely and relevant information provided.

Enclosed within this edition is an Application for Agency Membership. Pleasecomplete the application and return to theappropriate address stated thereon. If youhave questions or wish to know more aboutthe Agency Section of the NJLTA please visittheir web site at NJLTA-AGENTS.ORG or contact Robert Palmisano MembershipCommittee Chairperson at (908) 298-9090.

The Advocate

By: Kevin S. Cairns, Editor

The NJLTA established the John R. WeigelScholarship Award in honor of its DirectorEmeritus who served the title insuranceindustry in New Jersey for over twentyyears with great distinction. TheScholarship offers financial support to the most qualified candidate for a particularapplication year, taking into account academic achievement, extracurricularactivities, public service experience and other factors. The NJLTA “takes care of itsown” by requiring that the eligibility for this Scholarship be limited to those persons with a minimum of five years experience in the title industry, currentlyworking in the New Jersey title industry for an employer who is either an ActiveMember or Agency Member of the NJLTA.The eligibility also extends beyond the eligible title industry employee to include the spouse and children of the qualifying employee. The Committee for the 2000 Scholarship Award consisted ofUnderwriter and Agency Section Members.The Weigel Scholarship Committee is aTemporary Committee appointed by thePresident of the NJLTA, and serves at thepleasure of the President. Members interested in serving on this Committeeshould contact the President. ■

John R. WeigelScholarship ReviewCommittee

By: Laurence J. Usignol Vice President, State Counsel forFirst American Title InsuranceCompany

both Underwriters as well as Agents. Allmembers of the NJLTA are invited to partici-pate in the work of the Committee, as wellas to bring to the Committee’s attention anymatters requiring the Committee’s interven-tion or initiative. The Surveyor LiaisonCommittee is a Temporary Committeeappointed by the President of the NJLTA,and serves at the pleasure of the President.Members interested in serving on thisCommittee should contact the President.

9

QUESTIONNAIRE AND APPLICA TION FOR AGENCY MEMBERSHIP IN

THE NEW JERSEY LAND TITLE ASSOCIATION AGENCY SECTION

___________________________________________________________(Full Name of Company & Producer License Number)

being a Title Insurance Producer duly licensed by the New Jersey Department of Insurance,does hereby make application for Agency Membership in the New Jersey Title Association(NJLTA) and Agrees to comply with all provisions of the Association’s Constitution, By-Lawsand Code of Ethics.

In support of our request, we submit the following information:

Name of person completing application__________________________________________

Signature___________________________________________________________________

Business Address____________________________________________________________

City, State, Zip, County________________________________________________________

Telephone_________________________________ Fax_____________________________

Name the authorized officer of your comp[any to whom official correspondence should bedirected:

__________________________________________________________________________First Name Middle Initial Last Name

Names and titles of owners and officers of applicant and License Number:

Name Title License Number

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

List below all Title Companies for which the applicant is an agent.

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

10

Year in which the applicant was first licensed as a title insurance agent/producer by theDepartment of Insurance ______________

What other states besides New Jersey is the applicant licensed as a insurance agent/producer?

__________________________________________________________________________

__________________________________________________________________________

Is applicant a member of the American Land Title Association (ALTA)? ❑ Yes ❑ No

Is applicant licensed to engage in any other class of insurance other than title insurance?

❑ Yes ❑ No

Please list below all licensed title producers employed by the applicant, not previously setforth herein:

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

A minimum of three references are required, ONE must be an ACTIVE MEMBER (TitleInsurance Company) for which applicant is an agent, and TWO must be AGENCY MEMBERSin good standing with the NJLTA.

1. Name of Title Company___________________________________________________

Name of personal reference________________________________________________

2. Name of Title Agent Member________________________________________________

Name of personal reference________________________________________________

3. Name of Title Agent Member________________________________________________

Name of personal reference________________________________________________

Send application to Joseph M. Clayton, Jr., Executive Director, New Jersey Land TitleAssociation Monmouth Executive Center, 100 Willowbrook Road, Building 1 Freehold, NJ07728 along with membership dues for the current year made payable to: NJLTA, AgencySection, in the amount of $125.00.

Membership is subject to approval by the Agency Section Membership Committee and the Board of Governors of the NJLTA.

THANK YOU FOR YOUR INTEREST IN THE NEW JERSEY LAND TITLE ASSOCIATION.

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Monmouth Executive Center100 Willowbrook Road, Building 1Freehold, New Jersey 07728