TheThe

New Jersey Land Title Association

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

New Jersey Land Title Institute Courses:

“Fraud, Embezzelment and Other Claims”Thursday January 18, 2001 6-9PM

The Title Academy of New Jersey LLCCourses:

“Updated Federal & State Legislation”and

“Power of Attorney, Trust and Estates”Saturday February 24, 2001

9-12AM and 1-4PM

CONTINUING EDUCATION COURSES

The “E-Signature Act”, more properly cited asthe “Electronic Signatures in Global andNational Commerce Act”, P.L. No. 106-229,114 Stat. 464, became effective on October 1,2000. The text of this act can be downloadedfrom the internet. (If you cannot find it, e-mailthe author at fmelchior@firstam.com to get areturn e-mail with the site). The Act providesfor the validity and enforceability of digitallyrendered signatures (without defining a specific method of signing), including notarialsignatures. From a title insurance standpoint,this provides for the possibility of electronical-ly closed real estate transactions. This act pre-empts state law except for those states whichhave adopted the Uniform ElectronicTransactions Act (UETA) or other state actsconsistent with the UETA. The UETA has, atthe time of this writing, been passed in theNew Jersey Senate (S-1183) and is pending inthe Assembly. Although the act provides forthe recognition of an electronic signature, itdoes not specify a methodology for so signing.Any of a number of methods are acceptable,such as a written signature on an electronictablet or a unique electronic code sequence,so long as the requirements for the signatureare not hardware specific.

While there have been many articles about thecoming “electronic revolution” in real estatetransactions, it appears that there are alsomany impediments to the implementation andcustomer adoption of this new methodology.These include adoption of appropriate standards or regulations by governmentalauthorities as to the method of recording andcustomer acceptance of paper-less majortransactions.

Much has been written - on both sides of theargument - as to whether County Clerks andRegisters must accept electronically signeddocuments and, if so, as to the form in which

they must be submitted (printed out on paperor electronically). It is probable that recordingofficials must ultimately accept electronic filings. However, state regulatory agencies (including, presumably, recording officials)may specify standards or formats for such filings. These standards have not yet been formulated in New Jersey.

From the consumer’s end, it appears that themajority of consumers are not ready at thistime to make major commitments, such as thepurchase of real property or the giving ofmortgages electronically. The Wall StreetJournal, in a section on e-commerce, onOctober 23, 2000, concurred with thatthought. It appears that, while some isolatedelectronic transactions have taken place, thetypical consumer still wants to “kick the tires”or “smell the house”, i.e. the consumer is notyet ready to rely on the faceless anonymity ofthe internet for major transactions.

Where does this leave a title insurance producer? Change is inevitable; the speed of change is hard to predict. There is littledoubt that, at some future date, many if notmost, real estate transactions, whether sales orrefinances, will be (at least in part) completedelectronically. Because, inevitably, the e-busi-ness will go only to those producers able tocompete in that environment, it is essential, inorder to survive, that you keep current ondevelopments and keep your resources up todate. Failure to do so will inevitably result in amajor drop-off in business.

Stay tuned for further developments . . . .

*The views expressed are solely those of theauthor and should not be deemed to be those ofany firm or organization with which the authormay be associated.

Electronic Signatures: The Premise and the Promise . . .

By Frank A. Melchior Vice President and Associate Regional Counsel, First American TItle Insurance Company

TheThe

New Jersey Land Title Association

IN THIS ISSUE:

December 2000Volume XII, Issue 4

Electronic Signatures:The Premise and thePromise . . . . . . . . . . .1

NJLTA 2001Convention . . . . . . . .3

Tempest in a TestTube . . . . . . . . . . . . . .4

New Child SupportLaw Aims to ImproveCollections . . . . . . . .6

Agency Items . . . . .10

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.

3

If you haven’t already done so, please mark your calendars and plan on attending the Association’s 2001Annual Convention in Newport, RI. This is one convention you will not want to miss. First Class accommodations have been reserved at the HyattNewport (formerly the DoubleTree Hotel) on GoatIsland, walking distance to downtown Newport.

On arrival day you will experience a traditional outdoorNew England Lobster Bake, overlooking the majesticwaters of Narragansett Bay.

The Hyatt has all the goodies; Deluxe accommodations,in/outdoor pools, health club, spa, piano bar, a worldclass executive chef and, of course, those unmatchedviews and luxurious surroundings.

We guarantee that no matter what your leisure preference we have you covered. Shopping your thing?Fa-geda-bout-it! There aren’t enough hours in the day tohit all the shops. Sightseeing you say? Let’s see, howabout a tour of the famed Newport Mansions, theInternational Yacht Restoration Institute, theInternational Tennis Hall of Fame, Churches, Museums,Wineries . . . Get the picture? For the active crowdwe’ve reserved tennis time on the famed grass courts ofthe International Tennis Hall of Fame, golf on one of

NJLTA 2001 Convention

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On Tuesday evening, our Board of Governors’ installation dinner will take place in the beautifulRosecliff Mansion overlooking the Atlantic Ocean. Builtin 1902 for Nevada silver heiress “Tessie” Fair Oelrichs,the house is best known for Mrs. Oelrich’s marvelousparties, which included a fairy tale dinner where shegreeted costumed guests as Mother Goose, and a magicparty where the famous Harry Houdini was weightedwith chains and bricks and tossed off a barge for theentertainment of the guests. The movie “The GreatGatsby” starring Robert Redford and “True Lies” starringArnold Schwartzenager were both filmed at the mansion. This will truly be a fabulous evening, no lie.

Of course, we have more goodies in store, so pleasemake plans to attend.

Newport is only a 3-hour drive from New Jersey(approx. 200 miles). ■

Tempest in a Test Tube

By: John A. Cannito

Tempest in a Test Tube

By: John A. Cannito

4 5

situation is not available.” Notwithstanding his reservations he finds it to be entirely fitting to recognizethe twins as the legal heir of William Kolacy.

A myriad of issues (not even getting to the religious, ethical and moral ones) present themselves for estateplanners, administrators and, yes, even title underwriters:

• Should the question now be routinely asked when drafting a will or insuring a sale out of an estate, has the decedent left any sperm or ova scientifically preserved for future use by his/her spouse? (Does it have to be limited to a legal spouse? Will a designated significant other be entitled to use of the preserved material?)

• Can the ovum of a deceased woman and the sperm of a deceased man be used to create an heir neither knew ?

• Will the proverbial race to the bank to empty the safe deposit box now become a race to the sperm bank to create a new class of beneficiaries?

• Can a remarried surviving spouse nonetheless have a child by the decedent?

• Just how long is reasonable? Will there be a Rule OF Perpetuities to replace the now repealed Rule Against Perpetuities? ( e.g. I direct that upon the death of my last lineal heir that my ovum and my late husband’s sperm be used to carry on the family name, and fortune) Is a sperm cell or an unfertilized egg a “life in being” in this context? How about a preserved embryo awaiting implantation?

• A frequent testamentary disposition is to leave an estate “to such of my issue as shall be alive at the time of my death” or “who shall survive me”, intending to exclude the predeceased and their issue. Will such an exclusion cut off the after conceived? Can a life estatebe left to the after conceived?

• Should there be specific direction by the decedent that he/she wants the genetic material to be used afterdeath? Can it be left to the discretion of the spouse/significant other? In the case at hand the Judge made a finding of fact, based on testimony, that the decedent has expressly intended children after his death. Can the intent be inferred if a deposit has beenmade, with no other direction?

• If a spouse/significant other is not the same person as the estate’s executive officer or personal representa-tive, who makes the decision? Can an unwilling widow/widower be compelled to conceive? Or conversely, can a surviving spouse force an executor to release decedent’s gametes?

How many goodly creatures are there here!How beauteous mankind is! O brave new world

That has such people in’t!.The Tempest, Act Five Scene I

One cannot pick up a title or real estate publicationthese days without finding a spate of articles dealingwith the impact that technology is having on the titleand settlement processes and how this can be exploitedfor the benefit of our customers (and our bottom lines).While an explosion of developments is taking place inthe information sectors, revolutions are also occurring inother branches of science which title practitioners cannot ignore. It may be a portent for the future thatthe same week President Clinton “signed” (via smartcard) the digital signature law into effect he also hadoccasion to address the successes scientists were havingin the mapping of the human genome (try pluggingthose courses into your deed plotter).

Contemporaneously, in Morristown, Judge ReginaldStanton, A.J.S.C., was delivering his opinion in In TheMatter of The Estate of William Kolacy (MRS-P-0014-00,Chancery Division, Probate Part, Morris County, June 30,2000). This was not some bitterly fought, and salacious-ly followed, estate contest involving million of dollars,disinherited relatives, and scorned mistresses. In fact,Mr. Kolacy died at the tragically young age of 26, havingbeen diagnosed fourteen months earlier with leukemia.He passed away intestate leaving virtually no assets, andsurvived, seemingly, only by his wife. Why, then, wasthis Estate the subject of litigation ?

Immediately upon learning of his disease, but beforebeginning a regimen of chemotherapy which he fearedwould render him sterile, Mr. Kolacy made a deposit inthe Sperm and Embryo Bank of NJ. Almost a year afterhis death, through in vitro fertilization, Mrs. Kolacybecame pregnant and thereafter gave birth to twindaughters. Mrs. Kolacy then brought an action to havethe children declared to be the intestate heirs of WilliamKolacy. Mrs. Kolacy is also pursuing claims through the Social Security Administration to have the twins recognized as Mr. Kolacy’s issue and qualified for benefits. While a determination of the New Jersey statecourt would not be binding on the Federal government,Mrs. Kolacy sought the State adjudication to back up her position.

Judge Stanton identified a number of issues whichpotentially stood in the way of finding the twins to bethe intestate successors of Mr. Kolacy. First he notedthat this was a matter of first impression in New Jersey,and possibly in the nation and that the State court

decision would not be dispositive of the Federal litigation. Nonetheless he thought it preferable for aNew Jersey state court to rule on the question, ratherthan having a Federal Court interpret New Jersey lawwithout any precedential guidance.

He also recognized that ultimately this should be a matter for legislative action, but felt that the lack of specific legislation currently addressing the situationshould not be a bar to a party seeking legitimate relief.He likewise considered the mootness of the matter, in view of the fact that there were no assets to be distributed under the estate. He found that while perhaps unlikely, it was possible in the future that Mr. Kolacy’s parents or other relative could die leaving a bequest to Mr. Kolacy making the question of his heirsa proper one for consideration.

The Judge pointed out that the underlying principal ofestate administration is to make a determination of thetakers and to make possible the distribution of an estateas quickly as practicable. Towards that end a decedent’sheirs are generally determined as of the date of death.He goes on to point out, however, that the law alreadyrecognizes the possibility that a man may die havingalready fathered children not yet born. New Jerseystatute provides that such offspring, if born within 300days of decedent’s death, are considered as childrenenjoying the same status as children born prior to thedate of death.

He then analyzes this statute. The current law wasadopted in 1981. He states that at the time in vitro conception was at least a theoretical possibility, butapparently not considered by the legislature. Rather, the 1981 statute is a mere repetition of the prior law,adopted in 1877. Judge Stanton finds that had the question been considered there would have been nobasis to make the distinction between children conceived as they have always been conceived, andthose conceived through scientific intervention, evenafter the fact of death of one of the parents.

Having made this decision, he is quick to point out theinherent problems. There should be a reasonable timelimit in which such artificial reproduction can takeplace. Distributions made in the course of routine estateadministration prior to the “advent of afterborn children” ought to be considered as vested interests.The rules and parameters governing such questions tobe fixed by future legislation or court determination.He is admittedly troubled by the . . . “ethical problems,social policy problems and legal problems which arepresented when a child is brought into existence undercircumstances where a traditionally normal parenting

• What if the after-conceived offspring not only alters the ratio in which an estate is distributed, but the classof takers. Collateral heirs or “strangers” may take if no issue, but may be “cut off” if there are issue. Would the parties who would be “disinherited” have standing to enjoin the procedure? Or to compel, at least a partial, distribution before the procedure?

• Is it a “one-shot” proposition? Or can the survivor go on producing new heirs as long as the supply holds out? Can the decedent restrict the number of times the preserved genetic material is used?

• The Court, in addressing the issue of distributions suggests a distinction between distribution made before or after the “advent” of the after-conceived child. When is advent in this situation? Conception? Birth? A statement of intent by the surviving spouse that he/she will undergo the procedure?

• Although gender is considered to be a “suspect class” is there basis to discriminate between a deceased male, whose surviving spouse may carry the heir and a deceased female whose ovum would need to implanted in a “host”? Is the host entitled to anything from the estate?

• Can a child support judgment be entered against an Estate if a decedent directs conception from preservedgenetic material, but fails to make provision for such children?

• If after-conceived children are recognized as rightful heirs, what about clones?

• If the estate contains real property, how do titlepeople handle any of these questions in the absence of legislation?

One cannot fault the compassion of Judge Stanton indealing with the parties before him, nor the extent ofthe soul-searching obvious in his carefully reasoned anddrafted opinion. However, this case may have been too“easy.” Besides the nameless, faceless Social SecurityAdministration (which is not even bound by this opinion), there are no “losers” here; no aggrieved partynow effectively disinherited or whose share of the estatehas been diminished. Neither the Judge nor, humbly,this author, can possibly imagine all the potential andtheoretical ramifications. Hopefully legislatures, notonly in New Jersey, will heed Judge Stanton’s call forthese questions to be considered.

In the meantime, we in the title business may need tokeep an eye on Scientific American and the AMAJournal, as well as to publications such as this. ■

New Child Support Law Aims to Improve Collections

By: Stephen L. Phillips, President, Charles Jones, LLC

6

On August 14, 2000, New Jersey Governor Whitmansigned into law new legislation to expand the child support lien process to the net proceeds of settlementsin civil suits, judgments, arbitration awards, inheritancesand worker’s compensation claims. This legislation follows and repeals 1995 New Jersey legislation(Chapter 334) that was enacted to improve collectionsof child support judgments for both humanitarian reasons and to abide by Federal mandates applying to allstates. The new law is codified as N.J.S.A. 2A:17-56.23(b).

History of Child Support LawThe 1995 legislation (Chapter 334) attempted toincrease the collection of unpaid child support byrequiring plaintiffs or their attorneys in all civil lawsuitactions to submit a certification to the court that included the name, address, Social Security number anddate of birth of the party entitled to receive the monetary award.

Over the following 30-day period, the ProbationDepartment, in cooperation with the Clerk of theSuperior Court and the State IV-D Agency, was to ascertain whether the person was a child support obligor and, if so, any amount in arrears. Any amountremaining out of the award or settlement after paymentof attorney fees, taxes and other specific costs was to bewithheld from the award or settlement and forwarded tothe Probation Department for payment to the child support obligee.

But significant logistical problems immediately ensued.Due to the large volume of lawsuits filed annually,Chapter 334 overwhelmed the New Jersey courts sinceno dollar threshold was specified and certificates werefrequently filed with the wrong office of the court. As aconsequence, the proceeds of many lawsuits wereunnecessarily delayed to the many plaintiffs who werenot child support judgment debtors, resulting in relatively poor compliance with the statute.

Work began almost immediately on amending Chapter334, resulting in the new law that expands the scope ofthe priority lien process and simplifies the compliancerequirements.

The Current LawFederal welfare reform legislation (PRWORA) requiresthat all States intercept and seize lump sum paymentsfrom judgments, settlements and workers’ compensa-tion, by imposing priority liens on those payments topay off unpaid child support judgments. P.L. 2000, c. 81is New Jersey’s response to the Federal mandate.

The new law establishes that a judgment for child sup-port entered pursuant to N.J.S.A. 2A:17-56.23a is a lienagainst the net proceeds of any settlement negotiatedprior or subsequent to the filing of a lawsuit, civil judg-ment, civil arbitration award, inheritance or worker’scompensation award. With an exception for unpaid

State income taxes, the child support lien has priorityover all other levies and liens against the net proceedsfrom legal actions defined in the law unless otherwiseprovided by the court.

The term “net proceeds” is defined as any amount ofmoney, in excess of $2,000, payable to the prevailingparty or beneficiary after attorney fees, witness costs,court costs, fees for health care providers and othercosts related to the lawsuit, award, inheritance or settlement.

The law requires that the prevailing party or beneficiaryshall provide the attorney, insurance company or agentresponsible for the distribution of the proceeds with acertification that includes the party’s full name, mailingaddress, date of birth and Social Security number. It alsorequires the attorney representing the prevailing partyor beneficiary to “initiate a search of child support judg-ments, through a private judgment search company thatmaintains information on child support judgments, todetermine if the prevailing party or beneficiary is a childsupport judgment debtor.”

The judgment search company must then provide theattorney, insurance company, agent or party bringingthe lawsuit with a certification of the results of thesearch. (The fee is chargeable against the net proceedsand the certification serves as proof that the search wasperformed prior to the distribution of the proceeds.)

If the results are clear, then the proceeds may be distrib-uted immediately. If the prevailing party or beneficiary isfound to be a child support judgment debtor, then thejudgment must be paid off and a warrant of satisfactionobtained prior to any distribution of proceeds to theparty in question.

Regrettably in the past, a low percentage of paid childsupport judgments were properly closed out with a warrant of satisfaction, leaving many paid judgmentsremaining on the Civil Judgment and Order Docket asunsatisfied. The requirement of the new law to obtain awarrant of satisfaction prior to distribution of fundsshould help over time to make Superior Court’s CivilJudgment and Order Docket a more accurate reflectionof the true status of child support judgments.

[Since 95% of all child support judgments in the CharlesJones database now include the debtor’s social securitynumber, and since supplying an SSN is a requirementunder the new law, the challenge of searching commonnames will be greatly reduced.]

A complete copy of the new law can be found at:www.charlesjones.com/childsupport.htmlOr, you may call 800.792.8888 for more informationabout this new legislation and certified Child SupportJudgment Searches.

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9

Agency Items

By: Mike Kehoe

10

At the last Agents’ meeting, the New Jersey Land TitleInstitute made a request of the Agency Section to helpfinance the publication of a New Jersey RecordingPractices Guide. The County Clerks Association developed the book to aid in the understanding and standardization of recorded and filed instruments. It was estimated that it would costs approximately $15,000 to produce 500 copies; the Section is being asked for athird of that amount. The Guide would aid in instruct-ing new county employees and as a reference for thosewho send documents to the County Clerks. If theAgency Section decides to assist in the publication and there is a high demand for the Guide, there is the possibility of receiving some profits. A decision was putoff until the next meeting.

Recently Chase, First Union and Wells Fargo closed theirresidential title agencies. (Wells Fargo has re-entered theindustry due to Norwest’s acquisition.) Several otherlarge lenders determined that they do not want to be in the title business. None have given reasons for theirchange of heart but it is suspected that the profit margins did not meet expectations. It may also be thatthe efficiencies that were anticipated also did not materialize. There should not be any rejoicing as nolender has stated, ‘Wow, we never appreciated what thetitle industry does.’ Rather they are more likely saying tothemselves, ‘There has to be a better way.’ What wemay see is another move towards alternate products.

One of the bigger changes in the industry is comingfrom Transactional Vendors a/k/a Vendor ManagementCompanies. These new entities are employed by realtors or lenders to provide all the searches and information necessary to close. They do not performthe work themselves; rather they act as ordering companies placing search requests with serviceproviders. They earn their fees by charging the orderingparty (read ‘borrower’) and requiring a ‘registration’ feefrom the service providers. Some require that youcharge only set fees (e.g. $80 to perform a closing) whileothers demand a price quote prior to the commence-ment of any work. HUD is looking into these entities tosee if they are truly providing a new ‘value’ service tothe borrower or are just another way of increasing profits to the Transactional Vendors parents (generallyrealtors, lenders and some underwriters). How they fitinto the regulatory scheme of New Jersey is question-able. The Agency Section is going to have to decide if ithas a position as to these new entities.

If you have any questions or concerns please contactone of your Board members or voice your ideas at thenext Agency Section meeting on January 11, 2001.

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