Welcome to today’s webinar! Stone[d] Soup John Rothermel and Heidi Junge December 20, 2018
In order to obtain a CE Certificate or CLE Credit, you must listen to the webinar for a minimum of 55 minutes obtain the password (provided at the end of the presentation) follow the instructions as given 2
ATTORNEY INFORMATION Because of opinions expressed by the Texas Department of Insurance (TDI) concerning rebates, legal credit is available only to: Attorneys who own title agencies that are Stewart Title Guaranty Agents Attorneys employed by a title insurance agent licensed with Stewart Title Guaranty or Stewart entities Fee attorneys who have an Escrow Officer license through a Stewart Title Agent or Stewart entity We welcome any other lawyers to listen, but cannot provide continuing education credit to you. 3
Stone[d] Soup: PACA, PSA, Pot Properties, Federal Liens, Non-Medical Reimbursement, Additional Insured, Continuing Insureds, Rollbacks John Rothermel Senior Vice President Regional Underwriting Counsel Senior Underwriter Heidi E. Junge Assistant Vice President Underwriting Counsel Senior Underwriter SW Regional Underwriting Office Stewart Title Guaranty Company
Introduction • Multiple issues have arisen in the past several years which are fairly new to the title industry. • Agricultural trust issues have been the law for decades, but were not considered title issues until a few years ago when a small number of liens became title claims. 5
Introduction • The increased acceptance of marijuana by state legislatures without concomitant changes in federal law have caused title underwriters to reflect on coverage issues. • Other issues have also arisen which need to be explored. 6
Perishable Agricultural Commodities Act (PACA) 7
Perishable Agricultural Commodities Act (PACA) 7 U.S.C. § 499a et seq. • Imposes a statutory “trust” (lien) for the benefit of unpaid suppliers (farmers), sellers and agents/brokers of perishable agricultural commodities • The trust (lien) is against produce buyers. 8
What is a “perishable agricultural commodity”? – Any fruit or vegetable, whether or not frozen or packed in ice, including cherries in brine – Except those perishable fruits and vegetables which have been manufactured into articles of food of a different kind or 7 C.F.R § 46.2(a) character. 9
Why should you be concerned about PACA? • Lien on Real Estate: PACA trust can apply to all produce buyer’s assets including real estate and can be superior to the rights of third parties, such as mortgages, dealing with the merchant, dealer or broker. • A bankruptcy cannot avoid the priority of the trust because the buyer-debtor does not have an equitable interest in the trust assets. • No Notice Required! No notice requirement to be given for unpaid supplier, sellers and agents, not necessary to have a lis pendens or claim of the trust in the real property record to perfect the lien. 10
PACA – Know Your Parties and if they could be a subject to a PACA Trust Parties whose assets may be subject to a PACA trust: • Food processors, food and grocery chains and wholesalers, food service firms, produce dealers, distributing companies, canners, processing plants, even wineries, distilleries, and breweries. • Grocery chains and supermarket chains; Chain restaurants and other major restaurants. • Company name that includes “food” or a type of food, “produce,” “packing,” or “distributor.” 11
PACA – What To Do: If your transaction involves a party whose assets may be subject to a PACA trust, you must contact your Underwriter. We may require a PACA title exception such as the following: “ Any trust, right, interest or claim that may exist, arise, or be asserted against the Title under or pursuant to the Perishable Agricultural Commodities Act of 1930, as amended, 7 U.S.C. § 499a, et seq., or any similar state or federal law .” SLS2014001 https://www.vuwriter.com/en/bulletins/2014-1/BL138998757600000001.html **NOTE: Even though the trust can only be terminated by paying all supplier in full prior to your transactions, we cannot verify with certainty and 12 therefore cannot rely on such statements.
Packers and Stockyards Act (PSA) 13
Federal Liens Involving Agriculture — Packers and Stockyards Act (PSA) The Packers and Stockyards Act of 1921 (7 U.S.C. §§ 181 et seq.) also establishes a similar unrecorded “trust” (lien) on the assets of Meat Packers to protect producers/suppliers of Livestock and Poultry . Applies to all Packer’s assets, including real estate assets. “ Livestock ” is defined as cattle, sheep, swine, horses, mules, or goats, whether dead or alive, and “ Poultry ” defined as chickens, turkeys, ducks, geese and other domestic fowl. “ Packer ” is a person or entity in the business of: a) buying livestock in commerce for purposes of slaughter, or b) manufacturing or preparing meats or meat food products for sale or shipment in commerce, or c) marketing meats, meat food products, or livestock products in an unmanufactured form acting as a wholesale broker, dealer, or distributor in commerce. 14
PSA Packers whose assets may be subject to a PSA trust may include: – Stockyards, supermarket or grocery chains, wholesalers and retailers of meat products, meat packing companies, meat processing companies, farms that purchase livestock and poultry for slaughter. If your transaction involves a party whose assets may be subject to a PSA trust, you must contact your underwriter. We may require a PSA title exception such as the following: “ Any trust, right, interest or claim that may exist, arise, or be asserted against the Title under or pursuant to the Packers and Stockyard Act of 1921, as amended, 7 U.S.C. § 181, et seq., or any similar state or federal law .” See STG Bulletin TX2014001 15 https://www.vuwriter.com/en/bulletins/2014-1/BL138998757600000003.html
Marijuana 16
SLS2017004 — Land Used for Marijuana Activities “ Stewart Title Guaranty Company is not currently insuring title to land that is known to be used or intended to be used for any lawful purpose under state law for recreational or medical marijuana activities, including cultivation, storage, transport, manufacture, retail, or distribution.” 17
Considerations – Survey endorsements vs. CCRs – Escrow Services – CPLs – Proper licensing for lawful operations under state law of marijuana related businesses – Affidavits – Exceptions 18
Medicaid Estate Recovery Program (MERP) 19
• Created for some estates to reimburse the government for Medicaid benefits received by the deceased • A MERP claim does NOT create a lien on real property. ‒ Treated as a general unsecured claim 20
Foreclosing Deed of Trust When IRS Lien is Attached 21
Cutting Off a Federal Tax Lien by Mortgage Foreclosure 1. Was the Tax Lien filed more than 30 days before the foreclosure sale? ________ If no, the tax lien is eliminated against the property. If yes, was Notice given 25 days in advance of foreclosure to the IRS? 26 USC 74259(c )(1)__________ If yes, there is a right of redemption in favor of the IRS for 120 days; if proper notice was not given, then the Federal Tax lien remains on the property. Stewart cannot recognize a re-foreclosure of an otherwise regular foreclosure simply to provide the IRS with notice. (Southern Bank of Lauderdale County v. IRS 770 F2d 1001, 1985). 22
Additional Insured Endorsement (T-26) 23
Virtual Underwriter — T-26 Guideline Explanation This endorsement is primarily used in estate planning situations where title in individuals has been conveyed to a living trust, acquisition of interest under an agreement existing at the original policy date or family partnership or family corporation, limited liability company. Texas Procedural Rule P-57 provides the basic rules for issuance of this endorsement. Please also see R-33 for more information regarding this endorsement. 24
Virtual Underwriter — T-26 Guideline Explanation To issue the endorsement the additional insured must be: a) the trustee or successor trustee of a Living Trust to whom the insured transfers the title after Policy Date, and/or the beneficiaries of the Living Trust, or b) any partner, member or stockholder that acquires the interests of the other owners of the insured in accordance with the terms and provisions of a written agreement in effect at Date of Policy, or c) a family partnership or family corporation solely composed of or owned by members of the insured's family and the insured. 25
Virtual Underwriter — T-26 Guideline Explanation For Limited Liability companies the rule provides: i. there will be a transfer(s) of all or any part of the Limited Liability Company members' interests in the insured to any transferee(s), or ii. the withdrawal(s) of one or more of the members from the Limited Liability Company, or iii. the addition(s) of one or more persons or entities as members of the Limited Liability Company. 26
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