Foxboro-based Colonial Title & Escrow defended its business practices in court last week, as the lawsuit brought against the company by eight Bay State bar associations opened in Suffolk Superior Court.
The lawyers groups, led by the Massachusetts Conveyancers Association, charge that Colonial Title employees unlawfully practice real estate conveyancing. The groups claim that Massachusetts law requires such work to be done by attorneys. Colonial Title defends its practices as authorized under another Massachusetts law that corporations can become title insurance agents.
Judge S. Jane Haggerty is presiding over the jury-waived trial. The case proceeded to trial on April 12 and is expected to last about a week. The judge’s ruling could change the way real estate conveyancing is practiced in Massachusetts.
Conveyancing can include examining title, preparing deeds and closing real estate transactions. Most states allow conveyancing to be conducted by title companies and do not require a separate review by an attorney. In Massachusetts a state law requires attorneys to do such work. Conveyancing attorneys enter into contractual arrangements with title insurance companies, often keeping 60 to 70 percent of the policy premiums.
The eight bar associations asked the judge to uphold a Supreme Judicial Court decision that said conveyancing is the practice of law. Before a real estate closing, a conveyancer reviews title for the previous 50 years and certifies that the title is free and clear. To do this job, a person needs to be very familiar with Massachusetts statutes and law and must be able to make judgments, which constitutes the practice of law, said Attorney Douglas W. Salvesen, who represents the attorneys groups.
“We contend that closing residential real estate loans, as Colonial Title does, is the practice of law,” Salvesen said.
In its defense, Colonial Title cites another state statute that authorizes it to conduct the normal business of a title insurance agent. Defense attorney Gerard F. Mackin asked the judge to make a decision if title insurance agents are barred from conveyancing.
“The lawyers are here to preserve a monopoly,” Mackin said. “They don’t want Massachusetts to join 40 other states where lay people sell insurance through non-attorney settlement agents.”
Conflict of Interest?
Colonial Title formed in 1994 and has closed 9,000 loans in New England. The company established business relationships with Stewart Title and First American Title, acting as an agent of those companies. The company currently has contracts with First American and Chicago Title, and has an application pending with Olde Republic, according to Vice President Joseph Parente.
Massachusetts lags behind the rest of the country in allowing non-attorneys to sell title insurance, to the detriment of consumers, Mackin said. By using Colonial Title instead of an attorney, customers can save an average of $308 per closing.
Mackin further asserts that attorneys who act as title insurance agents face a conflict of interest because they have a financial incentive to close transactions, even if the title is not clear.
“It’s a question of whether the court will enter an injunction against non-attorneys selling title insurance,” Mackin said. “If Colonial wins, it could be a dramatic change because other lenders may use non-attorneys for title insurance.”
The bar associations originally filed suit in May 1996 against the Massachusetts corporation Colonial Title & Escrow Inc. About a year and a half later the plaintiffs discovered that Colonial Title did business in this state under its Rhode Island corporation and had never conducted business under the Massachusetts corporation. The suit was amended to include the Rhode Island corporation, which operates in Massachusetts, Maine, New Hampshire and Rhode Island.
Colonial Title is owned by President John Sweeney and Parente, and is headquartered at 132 Central St. in Foxboro. Colonial Title asserts that its business consists primarily of title insurance and they do little closing of loans.
“We do what we do because we’re authorized through our contractual arrangements with the insurers,” Parente said.
Mackin said that Colonial Title’s practice does not amount to conveyancing, as charged by the plaintiffs.
“We are not conveyancers,” Mackin said. “We are selling title insurance.”
Salvesen said the opposite is true.
“What they really do is they close loans, and their title insurance agency is incidental to that,” Salvesen said. “They represent themselves primarily as a closing agent, they consistently do that, and they do that up to today.”
After the attorneys groups filed the suit in 1996, Colonial Title countersued, claiming that members of the MCA and the Massachusetts Association of Bank Counsel contacted two title companies and asked them to discontinue their business with Colonial.
The other bar associations involved in the suit are the Bar Association of Norfolk County, the Bristol County Bar Association, the Fall River Bar Association, the Plymouth County Bar Association, the Taunton Bar Association and the Worcester County Bar Association.
