"Every title is vested in some person or persons, and every title may be insured. It is necessary, however, to determine the defects discovered in the examination of the title which will be omitted from a title policy. "There are two schools of title insurance, one believes in taking known risks in order to facilitate real estate transactions. Companies following this school omit some defects, sometimes taking security to protect against loss thereunder. The other school believes that the province of title insurance is to give ASSURANCE that the title experts of the title company can find no defect in the title which is not set out in the policy, coupled with INSURANCE to defend any attack on the title by reason of anything which is omitted therefrom, and against losses arising from the unknowable and undiscoverable and occasioned by errors due to the usual human frailties. It is necessary for a company to determine in its early stages which school it will follow. Strong pressure will be brought to bear by those dealing in real estate to have the company follow the first school, and the lure of larger premiums will be at times, almost irresistable. If the conservative school is followed, there will be days when it will look as though title insurance is a failure. But we not only believe, we know, that the conservative school will pay in the long run. There are only two places in the United States where nothing but title guarantee or title insurance is known, namely, Los Angeles and Philadelphia. They are followers-or rather leaders of the conservative school. We are persuaded that their standard for the insurability of a title is largely responsible for the fact that title guarantee and title insurance have entirely supplanted any other method of evidencing title, and that our adherence to the same standard has contributed in a large measure to the success that title insurance has attained in this community. "We recognized that in the case of a company well established and with many millions of dollars of assets it might be safe and proper to insure against known risks, but believed that it was not the best course for us to pursue. For reasons assigned in discussing our forms, we did not adopt marketability as a standard of insurability. We require that the title be good in fact, invulnerable to an attack thereon, but ignore what some examiners are pleased to call 'fly specks' on the title trivial and inconsequential matters which may affect the marketability of a title under a fixed, rigid rule of construction. But in no event do we omit from a policy any encumbrance or defect of a substantial nature, regardless of the amount of þremium or security offered. We have in this state a statute providing for suing unknown heirs, unknown parties, etc., which is sometimes called a 'title laundry act'. Any mere defect in, the record which may be cleared by a proceeding brought under this act so as to make the title marketable, will be cmitted by us from a policy without the actual bringing of such a proceeding. "Our fixed, conservative standard for the insurability of titles has locally almost become the standard of marketability; in fact, a prominent attorney recently remarked that a title in this county is now marketable or unmarketable, depending upon whether we will insure. The liberal school can establish no such standard. It is guided by the amount of the premium offered for the insurance and the security which can be given the company for protection, affected probably by the 'condition of the liver' of the man who is the final authority in the company. The bar of the community cannot accept such a company's practice as the standard for their examination of titles, the courts cannot cite the rules of such a company as a guide for their proceedings. On the other hand, the standard, fixed rules of a conservative title insurance company become a guide for the attorneys and even for the local courts in matters concerning titles. The foundation of the rules of marketability of titles is the question whether a prudent man will accept the title; and if title insurance grows in a community where there is a safe and conservative standard, the title company will in time represent this theoretical 'prudent man' in the minds of the courts and the lawyers." TITLE AND ABSTRACT DEPARTMENT Frank C. Hackman, Editor in Charge FORFEITURE IS NOT RESCISSION Jones had some land he wanted to sell. Groves thought it a bargain at Jones' price, $12,000. So Groves contracted to buy it, paying $3,000 cash, and agreeing to pay balance in specified yearly installments. Before the first yearly installment was due, Groves changed his mind about the value of his purchase, deciding it to be a bad investment, and that he would lose less money by letting his cash payment go than by paying in full and taking the property. So he didn't pay the first installment. Jones then directed his lawyer to serve notice of forfeiture on Groves and to quiet title. The lawyer served Groves with a notice of rescission of the contract, and instituted suit against him to have the contract forfeited and rescinded. Groves, fearful he might be liable for damages or "something," handed the notice and complaint to his lawyer. Groves' lawyer answered and demanded that Jones return Groves' money because he, Jones, had elected to rescind the contract and thereby breached it. The court found for Groves, and he got his money back. A forfeiture and a rescission are not alike. This is a real case. TITLE BUSINESS BRIEFS In Eastern and Southern States it has been and is customary for lawyers and others to search the land title records and to make abstracts or render opinions based upon such searches. In the Western States, on the contrary, the making of abstracts has been almost exclusively in the hands of abstracters owning and operating their own tract index systems; and lawyers do not undertake to search records either for the purpose of making abstracts or getting data for opinions on titles. Tract indexes are a very material instrument for speedy and accurate service. One who searches records in competition with one who has firstclass tract indexes is heavily handicapped, and particularly where realty transactions are numerous and the records voluminous. The difference noted between the East and South on the one hand, and the West on the other, is, no doubt, one reason why large companies have developed in the West conducting no other than a title business. It is almost impossible to say that a given title insurance company in one state is more liberal in its business policy than is a certain company in some other state. The answer "Yes" or "No" to an inquiry as to whether the company will insure this or that kind of title is no criterion. For example, assume the question to be, Do you insure tax title? The answer of that company in yonder state is No. But this company over here answers, Yes. Is the latter, therefore, more liberal than the former? Not necessarily. The tax laws of the former's state may be such that a tax title is a big risk, while the laws of the other state make a tax title even better than any title. Hence, the difference in business policy between the two on that matter. In some states homesteads can only be claimed by formally recorded declarations, and abandoned only by sale or by formerly recorded declarations of abandonment. In other states use and occupation are all that are essential to establish a homestead. A risk arises in one case that does not exist in the other from an insurance standpoint. In some jurisdictions such important title facts as the death of an owner, his intestacy, indebtedness, and who his heirs were, are not uncommonly shown by affidavits only, and the title is not unmarketable for that reason. In other jurisdictions such proof of such facts makes the title unmarketable; probate of a decedent's estate is necessary. One can readily see that the insurance of marketability of title is a simpler propostion in the jurisdictions first referred to than in the latter ones. In the latter a company must except marketability from its title policies in order to be as liberal in its business policy as a company in one of the other jurisdictions that insures marketability. Exceptions set out in the policies of one company may appear more numerous than the exceptions in the policies of some other company. Some differences are explainable. One company inserts as a standard printed exception, for example, special taxes and assessments of any municipality in which the land covered by the policy may be situate. Another company does not make such exception generally, but only specifically, when the land is situate within a municipality the local taxes of which are not examined. Differences between the laws, customs and conditions of states, and competitive local conditions have their effect. Companies doing a title business where lawyers and others are accustomed to search records, face conditions unknown to companies having no such competition. However, not all differences between the business policy of one company and that of another arise from the dissimilarity of the local laws, customs and conditions of the respective jurisdictions in which they do busiress. The personal element has its influences, as in all business enterprises. Executions differ in temperament, skill, scholarship and methods. What may appear to be a risky complexity to one, may appear no risk at all to another. Often a gnat is strained at the while a camel is swallowed. Should extra premiums be charged for extra risks in title insurance? The question will be discussed in the next issue of this magazine. It is an interesting and practical query that should have space. What is your opinion? Write and tell us. RECENT CONSTITUTIONAL LAW DECISIONS The act of the New York Legislature authorizing the legislative body of a county or city to exempt until January 1, 1923, from taxation for local purposes, other than for improvements, buildings other than hotels completed since April 1, 1920, and commenced before April 1, 1923, and used exclusively for dwelling purposes, was held not to be within Section 18, Article 3, of the State Constitution forbidding the legislature to pass a private or local bill granting an exemption from taxation, and not to violate the equality clause of the fourteenth amendment to the Federal Constitution, and that the classification into old and newly constructed buildings was reasonable and proper. Hermitage Co. v. Goldfogle, 199 N Y. Supp. 382. N. Y. In its decision the court said: 66 * * the statute does not relieve from state taxation, but only from taxation for local purposes, and that it is not relieved from assessments for local improvements. Having declared a state-wide purpose, to relieve new buildings to be erected under its provisions from local taxation, the legislature left to the localities themselves the determination whether local housing conditions were such as to require a stimulus for new buildings to relieve the congestion. This, it seems to me, was a valid delegation of authority, in view of the power of localities over their local taxation." A statute giving liens for labor and material priority or pre-existing mortgages does not conflict with constitutional provisions against divesting vested rights and impairing the obligations of contracts, where the rights of a mortgagee are acquired after the enactment of such a law. They pass subject to the statute, and the holder takes knowing that the mortgagor may create such superior rights against the property, and the constitutional provision has no application. “And there is reason for subordinating prior mortgages to such claims, for the labor and material serve to create a greater value or security which would inure to the benefit of the mortgage, and such improvements should not be prevented or discouraged because of existing mortgages." Gleissner v. Hughes, 95 So. 529. La. SOME FACTS ABOUT COUNTIES Have counties not been created too small in area and population, and too limited in resources to properly and economically perform their functions? Generally, yes. No doubt but that certain consolidations would bring about increased efficiency and reduced expenses. That is what is needed in these times. By consolidation there could be established one good county court house, or hospital, or jail, or home for indigents, in lieu of several poor ones. And there could be one decently paid recorder, or sheriff, or prosecutor, or board of county commissioners, instead of several poorly paid ones; and money be saved at that. There are 3,065 counties in the United States, so the 1920 census tells us. Glancing over the reports of that census, one finds that the largest county in area is San Bernardino, in' California, with 20,175 square miles. Its popu lation is 73,401. Coconino county, Arizona, ranks next with 18,623 square miles; population, 9,982. And Nye county, New Mexico, is third in area, 18,294 square miles; population, 6,504. The good old state of Maine boasts a county of large size, Aroostook, 6,453 square miles. Texas presents some oddities in Cochran county, with an area of 869 square miles and 67 inhabitants; and in Loving county, area 753 square miles, population, 82. Hudson county, New Jersey, appears to be the smallest county in area, 43 square miles, but it has a large population, 629,154. Kings county, New York, with 71 square miles, has the largest population of all counties, 2,018,356. The great majority of counties have areas of from three hundred to six hundred square miles. Texas has the largest number of counties, 253. Then follow Georgia with 155; Virginia and Kentucky, 120 each; Missouri, 115; Kansas, 105; Illinois, 102; North Carolina, 100. Delaware has the fewest counties, 3. Rhode Island has 5. California has 58; New York, 62; Massachusetts, 14; Pennsylvania, 67; Maine, 8; Mississippi, 82; Minnesota, 86; Tennessee, 95; Ohio, 88; Montana, 51; Michigan, 83; and Florida, 54. "TOUCHING” ABSTRACT CHARGES Abstracters almost universally base their charges for making abstracts of titles on a fixed rate per instrument, or per court case or per abstract sheet of a court case, and at so much per year for tax searches, etc. While this system is generally not deemed satisfactory, it has seemed to meet with the fewest objections on the part of the public, and no doubt has been adopted for that reason. Various abstracters have tried to put some other system into effect and with indifferent success. One abstracter reasoned that the above method of computing charges did not take into consideration the varying degrees of liability imposed on an abstracter measured by the values of the properties. He reached the con. clusion that he ought to make a special certificate charge computed at the rate of one dollar per each thousand dollars of value of the land described in the certificate, with a minimum of five dollars for properties having a value of five thousand dollars or less. On this basis he would get six doldolars extra on a six thousand dollar property, ten dollars extra on a ten thousand dollar property, and one hundred dollars extra on a one hundred thousand dollar property, by way of compensation for his liability incurred in making the abstract in each case. This, he thought, would be fair and business-like. Enthused, he presented his views to divers of his patrons. Would they approve and agree to pay such extra charge? Yes, they approved, --thought it a very proper charge, and yes, they would pay it, too. The abstracter, encouraged, elated, forthwith adopted the system. Did it work? Orders for abstracts to properties of average value were invariably submitted with the "mandatory" request that the charge in each case be made as low as possible. "The man who is selling this land is making nothing." "I'm cutting my commission to put this deal across, and I've got to pay for this abstract to boot out my own pocket." "This bird will kick over the |