2014

Second Quarter 2014 | Volume 3 Issue 2Comments and InformationWe invite your feedback andwelcome your suggestionsregarding “The Georgia Title Corner”and the publication of future articles.Address correspondence to: The Georgia Title CornerOld Republic National Title Insurance Co.

1145 Sanctuary Parkway, Suite 335Alpharetta, GA 30009(770) 475-6199(770) 475-3343 fax(800) 282-5972www.oldrepublictitle.com/

This email was sent by:Old Republic National Title Insurance Company

1145 Sanctuary Parkway, Suite 335 | Alpharetta, GA 30009 (770) 475-6199 | (770) 475-3343 FAX | (800) 282-5972

We respect your right to privacy - view our policy.

Bankruptcy Trustee’s §363(f) Sales Free and Clear – Maybe?A new requirement in underwriting bankruptcy salesBy Tim Minors-Vice President and State Counsel

It is rare that a sensational public spectacle alsobecomes a very significant departure in the legal landscape.Such was the case in Stern v. Marshall, 131 S. Ct. 2594, 2616 (2011). Aside from thesensationalism of this case, the point for title attorneys and bankruptcy attorneys is that abankruptcy judge did not have the jurisdictional authority outside of a “core proceeding.” See28 U.S.C.A. § 157. To read the article in full click here

The Georgia Title Corner

Execution of Deedsby Corporations andOther EntitiesWe are frequently askedabout execution of deedsby corporations and otherentities. To read the article in fullclick here

Spring in Bonaventure Cemetery Dogwoods in bloom, Newman, GASavannah, GA

Security Deeds NotCancelled of RecordA never-ending source ofunderwriting questionsconcern security deeds whichhave not been cancelled ofrecord. There are a few stepsthat can be taken to see if theopen security deed can becleared or insured over.To read the article in full click here

Ask Your UnderwriterWe hear debates aboutwhether title examinersshould check the liendockets in the names ofpurchasers. To read the article in full click here

Our Holidays for 2014

Memorial Day, Mon., May 26, 2014

Independence Day, Fri., July 4, 2014

Labor Day, Mon., Sep. 1, 2014

Thanksgiving Day, Thurs. Nov. 27 & Fri., Nov. 28,2014

Christmas Day, Thurs., Dec. 25, 2014

New Year’s Day, Thurs., Jan 1, 2015

Partnership Distributions& 1031 ExchangesMinimize Risk withAdvance PlanningTHE PARTNERSHIP DILEMMA: A partnership owns real propertythat it intends to sell, others wantto buy other property and stillothers want to keep their cash andnot buy anything.. To read thearticle in full click here.

HOME

Bankruptcy Trustee’s §363(f) Sales Free and Clear – Maybe?A new requirement in underwriting bankruptcy salesBy Tim Minors-Vice President and State Counsel

It is rare that a sensational public spectacle also becomes a very significant departure in the legal landscape. Suchwas the case in Stern v. Marshall, 131 S. Ct. 2594, 2616 (2011). Aside from the sensationalism of this case, thepoint for title attorneys and bankruptcy attorneys is that a bankruptcy judge did not have the jurisdictional authorityoutside of a “core proceeding.” See 28 U.S.C.A. § 157.

Occasionally, Bankruptcy trustees will sell property of a bankruptcy estate. The sale could be subject to existingliens or could be free and clear of all liens. The latter is a § 363 sale. A trustee’s sale under § 363(f) could, underthe right circumstances, be outside a core proceeding. Consequently, title derived through these orders is precariousand Old Republic is reluctant to insure them. Yet, we commonly see these orders. How does Old Republic dealwith these orders?

As background, the Stern case involved Vickie Lynn Marshall (AKA Anna Nicole Smith) who married an extremelywealthy, very old and seemingly very happy gentleman who suddenly died. While bickering with her late husband’sson in Probate Court over a huge fortune, Vickie filed a petition in bankruptcy. Next, the son filed a defamationclaim in her bankruptcy case. Then Vickie responded with a tortious interference counterclaim against the son. Itwas the tortious interference claim on which the Bankruptcy Court ruled that propelled the case to the U.S. SupremeCourt. Because the claim was really outside of any issue that would arise in a Bankruptcy case, it was deemed nota “core proceeding.” Since the Bankruptcy Judge was not an Article II judge (Article II of the U.S. Constitution -appointed for life) the Supreme Court ruled the Bankruptcy Judge did not have jurisdiction over the matter. Thuswas confirmed what legal scholars had long surmised, that indeed the Bankruptcy Court did not have the jurisdictionfor anything outside a core proceeding.

What has not happened, yet, is a Federal Court ruling that title to real property fails because it derives from an orderregarding an issue outside a core proceeding. A trustee’s sale under §363(f) could be such an order. Old Republichas taken the position that occurrence is not far away. In fact, the case of Executive Benefits Insurance Agency v.Arkison, as Chapter 7 Trustee, In Re Bellingham, 133 S. Ct. 2880 (cert granted) was argued in March 2014. UsingStern as strong authority, this case argues the Bankruptcy Court had no jurisdiction to void a fraudulent transfer toa noncreditor as it was not a core proceeding.

Since the heart of the issue is constitutionality, Congress alone is incapable of fixing this problem. Because of thisstate of affairs, Old Republic now requires that all agents submit to the Georgia State office any draft § 363(f)orders proposed to be submitted by the Trustee to a Bankruptcy Judge before authorization to insure can be issued.It may be our requirement that all creditors whose lien would be affected by such a proposed 363(f) sale must firstconsent to an Order from the Bankruptcy court to sell free and clear of their lien. It may well be that we will requirethat the non-core proceeding be referred to a District Court for adjudication. Furthermore, if any creditor has agreedto accept less than a previously stated payoff amount, we may require that a cancellation and release be presentedat closing or before insurance is issued without exception to their lien. If the Order has already been issued beforewe can scrutinize it, we will nevertheless require full details before we can authorize insurance, if any. At any rate,each case will be decided on a case by case basis.

HOME

Execution of Deeds by Corporations and Other EntitiesCharles T. Harrison, III

We are frequently asked about execution of deeds by corporations and other entities. Georgia law does notrequire either the presence of a corporate seal or any certain format in order to be valid. The bottom line iswhether the person who signed the deed actually has authority to sign it. A couple of Code Sections provide forpresumptions of authority that follow certain formats. First, under O.C.G.A. §14-2-151, the presence of thecorporate seal attests to proper authority concerning executions by “any officer” of the corporation.

By: ____________________________________________Officer

Attest:__________________________________________ Secretary or Assistant Secretary (SEAL)

Also, O.C.G.A. §14-5-7 provides for conclusive evidence of authority when the format below is used, evenwithout a corporate seal.

By: ____________________________________________President or Vice President

Attest:__________________________________________ Secretary or Assistant Secretary (NO SEAL)

If neither of these formats is available, the next best method is to use a corporate resolution. The board ofdirectors adopts a resolution which authorizes the transaction and which may designate who has authority toexecute the documents for the closing. The corporate secretary, who is the keeper of the minutes of themeeting, signs the resolution, certifying that the board of directors had adopted it.

For a deed executed by a limited liability company, review the operating agreement to see if the LLC ismanaged by members or by managers. Then be sure to include below the signature line the proper title of theperson signing for the LLC.

Concerning a deed executed by a general partnership, limited partnership or other type of partnership, reviewthe partnership agreement to see who has authority to sign on behalf of the partnership. Be sure in this casealso to include the proper capacity of the person signing for the partnership.

With regard to a deed executed by a trustee, review the trust agreement in order to identify the name and theauthority of the trustee. Be sure that the party is designated as ________, as Trustee of the ________ Trust,and not merely as the trust itself.

Deeds from past transactions will probably not present any problems as to authority, as a practical matter.When the transaction closed, the selling entity accepted the net proceeds and was relieved from liability for anyloans that were paid off at the closing. Therefore, the seller would be prevented from changing its position nowand from claiming that the deed was unauthorized. However, if you see any deeds that cause you real concern,please feel free to contact us.

HOME

Security Deeds Not Cancelled of RecordBy Nancy Bowman, Esq.

A never-ending source of underwriting questions concern security deeds which have not been cancelled of record. Thereare a few steps that can be taken to see if the open security deed can be cleared or insured over.

1. Has the old open security deed reverted? Review O.C.G.A. 44-14-80 and Title Standard 14.6, but careful attentionmust be paid to the date of execution and the requirements of the statute.

� If dated May 1, 1942-April 18-1994, title reverted:• 20 years from:

• Maturity date• If no maturity date is stated, then from the date of the instrument• If no maturity date and the instrument is not dated, then, from the recording date• If not recorded, then from the date of delivery

� If dated between April 19, 1994 and June 30, 1995, title reverted:• Seven years from:

• Maturity date• If no maturity date is stated, then from the date of the instrument, unless it contains an affirmativestatement to establish a perpetual or indefinite security interest as explained below, it which case it wouldrevert 20 years from the date of the instrument

• If not recorded, then from the date of delivery � If dated on or after July 1, 1995, title reverted:

• Seven years from:• Maturity Date, unless it contains an affirmative statement to establish a perpetual or indefinite securityinterest as explained below, it which case it would revert 20 years from the date of the instrument orseven years from maturity, whichever is later

• If no maturity date is stated, then seven years from the date of the instrument, unless it contains anaffirmative statement to establish a perpetual or indefinite security interest as explained below, it which

• If no maturity date and the instrument is not dated, then seven years from recording or from the date ofdelivery

In all four cases above, commencement of foreclosure prior to the reversion date would prevent reversion, if theforeclosure is completed without a delay chargeable to the lender or the lender’s successors.A statement establishing a perpetual or indefinite security instrument is common in construction, commercial and someHELOC’s. An example of the language is as follows:

“It is the intention of the parties to create a perpetual or indefinite security interest in the real property describedherein pursuant to O.C.G.A. § 44-14-80 and the parties agree that title shall not revert to Grantor herein until thelater of seven (7) years from the maturity of the debt secured by the Security Deed or twenty (20) years from thedate of the Security Deed, whichever is later.”

Special attention also needs to be paid to see if the record shows a recorded modification of the security deed whichwould extend the maturity date. This is common with construction and commercial security deeds. However, in the ageof loan workouts, it may frequently be seen with residential security deeds, as well. A review of the loan modifications tosee if the maturity date was extended is in order.

Be aware that the reverter provisions will change if a renewal or affidavit is recorded pursuant to Section 44-14-80 (b) and(c). This is not seen very often, but should be addressed if part of the record.

2. 4 Does it fall under the Mutual Indemnification Agreement?• If the loan is not a HELOC, it is less than $1M, not given by the insured owner on the Owner’s Policy (or • A copy of the policy must be retained in your file; the policy must be over one year old and must be onGeorgia property.

• The policy must be silent about the defect.• The policy must be written on an underwriter who is a party to the agreement.

Continued on next page—

HOME

Please contact us if you need a copy of our checklist for automatic coverage under the Mutual Indemnification Agreement.

3. Can it be insured over? We take a practical approach to that question, but each open security deed must be reviewedon a case by case basis. We are looking for comfort that the loan was paid off. A few things that can be presented to usfor consideration include:

m Settlement statement showing the payoffm Paid in full Promissory Notem MERS registration site showing the loan as inactivem Age of loan and number of conveyances since the loan was paid

The above does not encompass everything that might be required to insure over the open security deed, but is helpful toprovide us this information for consideration when making the request.

4. HELOCs are problematic as a continuing source of title claims. It is unlikely that we would agree to insure over anopen line of credit without any proof that it has a zero balance and confirmation that the account is closed. If faced withan open HELOC, please contact the previous closing attorney for information and also the HELOC lender to obtain arelease.

For assistance with open security deeds which are not covered above, please contact the underwriting department.

2. 4 Does it fall under the Mutual Indemnification Agreement?• If the loan is not a HELOC, it is less than $1M, not given by the insured owner on the Owner’s Policy (orin the case of a foreclosure or deed in lieu, a Lender’s Title Policy).

• A copy of the policy must be retained in your file; the policy must be over one year old and must be onGeorgia property.

• The date of the open security deed must predate the date of the policy.• The policy must be silent about the defect.• The policy must be written on an underwriter who is a party to the agreement.

Please contact us if you need a copy of our checklist for automatic coverage under the Mutual Indemnification Agreement.

3. Can it be insured over? We take a practical approach to that question, but each open security deed must be reviewedon a case by case basis. We are looking for comfort that the loan was paid off. A few things that can be presented to usfor consideration include:

m Settlement statement showing the payoffm Paid in full Promissory Notem MERS registration site showing the loan as inactivem Age of loan and number of conveyances since the loan was paid

The above does not encompass everything that might be required to insure over the open security deed, but is helpful toprovide us this information for consideration when making the request.

1. HELOCs are problematic as a continuing source of title claims. It is unlikely that we would agree to insure over anopen line of credit without any proof that it has a zero balance and confirmation that the account is closed. If facedwith an open HELOC, please contact the previous closing attorney for information and also the HELOC lender toobtain a release.

For assistance with open security deeds which are not covered above, please contact the underwriting department.

Security Deeds Not Cancelled of Record continued

HOME

Ask Your Underwriter By Charlie Harrison, III, Vice President and State Counsel

Question: I have an open security deed from 2003. I checked the maturity date to see if it had reverted, but

instead of a date, it says “on demand.” What does that mean and can we rule it out under the

reverter statute?

Answer: The use of “on demand” means that there is no stated maturity date. Therefore, O.C.G.A. Section

44-14-80 (a)(2) applies. The security deed reverted in 2010, unless it contains the language about

a “perpetual or indefinite security interest.” Please review the entire security deed to make sure that

it does not contain that language. If the security deed contains that language, it will not revert until

20 years from the date of the instrument which would be in 2023.

HOME

Continued on next page—

HOME