Case Law - Investors Title Insurance Company, v. Montegue
243 S.E. 2d 527 (NC APP.2220)
This is an appeal from an adverse summary judgment against Investors Title Insurance Company (Plaintiff), in a claim recovery action. Defendant executed a Deed of Trust to secure a loan made by the City of Charlotte to Defendant to purchase a condominium. Defendant sold the condominium to Edna V. Johnson. As part of the purchase price for the property, Johnson entered into an assumption agreement to assume the balance owing. The agreement did not release Defendant from liability. Johnson died, and Donald S. Gillespie, Jr. was appointed as commissioner to sell Johnson's real property. Gillespie sold the condo to Norman A. Holmes. Subsequently, the City of Charlotte instituted foreclosure proceedings on the property. Plaintiff provided title insurance to Holmes, and was required to pay off the Note pursuant to the policy. Foreclosure proceedings were never completed. Plaintiff was assigned the Deed of Trust with the Note and then demanded that Defendant pay $64,907.26. Defendant made no payment, and Plaintiff commenced an action against Defendant. Defendant answered- alleging that she had never received demand for payment from Plaintiff, that she was not made a party to and did not receive actual notice to the foreclosure proceeding, and that Plaintiff had not offered to assign the Deed and the Note upon payment. Defendant successfully moved for summary judgment.
The Court ruled that an assignee of a Note and Deed of Trust, who seeks to collect from the mortgagor, is required to assign the Deed of Trust to the mortgagor as a condition of collecting on the Note. "If the mortgagee brings an action against the mortgagor and the mortgagor pays the debt, the mortgagor is subrogated to the rights of the mortgagee against the person who assumed the mortgage. Hatley v. Johnston, 265 N.C. 73, 83, 143 S.E.2d 260, 267 (1965). The mortgagor has several options of seeking reimbursement. He may bring an action to foreclose on the property, sue to recover the land, or bring an action against the person who assumed the mortgage. Id."
The case was remanded for a determination of whether the plaintiff is willing to assign the debt instruments to the defendant. In a footnote, the Court observes (correctly, we think) that, "It does appear, however, it would be unlikely for Plaintiff to assign the Deed to Defendant, as this would result in the foreclosure of property which it insured."
Most of you have noticed all the "Privacy" notices or disclosures you have suddenly been getting with credit card bills, bank statements, insurance policies or other things.
The Federal Trade Commission has adopted interpretive regulations that provide that the definition of a financial institution also includes any person "providing tax planning and tax preparation services" and "an entity that provides real estate settlement services" to consumers "primarily for personal, family, or household use." It is rapidly becoming the consensus among the Bar that this applies to attorneys doing individual estate planning, and firms closing residential real estate. Some are arguing for reading wider applicability into this interpretation, out of a sense of due caution.
The determination was made at the last minute, and your clients had to be mailed the
notice procedure by July 1, 2001. There is no specific penalty provision in the Act for
failure to comply, although there are penalties and fines applicable for failure to abide
by FTC regulations.
The Gramm-Leach-Bliley Act (GLBA) imposes three basic requirements: (1) a privacy notice requirement; (2) a requirement that all consumers be provided the opportunity to opt-out of certain information disclosures; and (3) a requirement that measures be instituted to maintain the "security and integrity" of all nonpublic information.
All "financial institutions" must comply. This includes all title insurance companies, agents and settlement service providers. The GLBA applies only to individuals who are purchasing insurance or other financial products for personal, family or household purposes. In the title context, the rules apply only to residential closings; they do not apply to commercial activities.
A privacy notice must be given to any individual who purchases a residential title insurance product or service at the time the product or service is sold or delivered. Since closing attorneys are seemingly included in the FTCs interpretation of the definition, they also must provide a privacy notice to their customers. The notice must be provided when you and a client enter into a continuing relationship.
Members of the ABA and NCBA are looking into this issue and hope to be communicating recommendations to the membership soon. Reportedly, the ABA is organizing an effort to secure legislation that will exempt attorneys from this requirement. The North Carolina Bar Associations web site can be found at www.ncbar.org. Various list servers and bar organizations are beginning to promulgate forms of notice tailored to law practice. Until change is effected, it would be wise to prepare for sending notice to all applicable current clients, and providing it to new ones with your initial contact.
Before nonpublic personal information about any individual may be disclosed to a nonaffiliated third party, the individual must be informed of the intended disclosure and given at least 30 days to prevent it (an "opt-out" notice). The right extends to present customers, former customers, and anyone else about whom you maintain information. The right is subject to a long list of exceptions. No opt-out notice is required if the purpose of the disclosure is to complete the title insurance transaction or to service the insurance policy. If an opt-out notice is required, it must include a copy of the general privacy notice, or contain a statement that the person may obtain a copy of that notice with instructions on how to obtain it. The opt-out notice must inform the individual of the intended disclosure, and provide a mechanism for the person to opt-out of that disclosure. The mechanism may require the individual to submit a provided form, or call a toll-free number. It must not require the individual to write a letter.
GLBA privacy rules are being implemented separately by the federal banking agencies, the Securities and Exchange Commission, the Federal Trade Commission (FTC), and each of the states. The federal agencies have finalized their regulations. North Carolina is still in the process of doing so.
Legislation - LUST Land-Use Restrictions
Sponsors: Representative Gibson
This bill, as passed in the house, would simply have extended the sunset provision of Section 4 of S.L. 2000-51. The Senate committee substitute would make extensive changes to G. S. 143B-279.9 and add G. S. 143B-279.11, as well as make conforming changes in several other statutes. The thrust of the changes will be to change the standard for imposition of land use restrictions on risk-based remediation from "current" standards to "restricted use" standards. When the owner of contaminated property and the State agree on a plan of remediation that removes substantially all contamination from the property, it may then be classified for unrestricted use. When the nature of the contamination justifies a less stringent remediation, it may be a risk-based plan. If the State and the owner agree in such cases, restrictions will be placed on the current and future use of the property. The owner must agree to record the restrictions. In addition, there will be a requirement that these restrictions be recorded in the Register of Deeds, in order to provide notice that the contamination was not fully remediated. If there is subsequent full remediation, the bill contains provisions for notice and removal of restrictions. G. S. 143B-279.9(b) expressly provided that these provisions did not apply to contamination from leaking underground storage tanks. This provision is eliminated in the new version.
G. S. 143B-279.10 presently provides a recording requirement and procedure for a Notice of Contamination. G. S. 143B-279.11 is a new provision that only applies to a "cleanup pursuant to a risk-based remedial action plan that addresses damage resulting from an underground storage tank ". It also contains requirements, recording procedures and notice for these action plans.
The bill, if passed, would become effective on September 1, 2001, the same date as the existing act would sunset. It will apply to any cleanup of a petroleum discharge from an underground storage tank. Recorded restriction on land use will not be required, if DENR has issued a determination requiring no further action prior to the effective date.
This bill would provide greater certainty for title examiners, with respect to environmental concerns arising from underground storage tanks. We suspect that title insurers will receive requests from lenders asking for affirmative coverage over these notices when reported. This is not coverage that is properly afforded by title insurance. The issue may create some difficult closing negotiations, until all parties become comfortable in dealing with them.