At long last, a decision has been handed down in the Colonial Title & Escrow case that began some five years ago. Colonial has been told it can no longer perform real estate closings by itself.

Eight attorney groups first brought the suit against the company in May of 1996. They alleged that the company had conducted unauthorized conveyancing from its Massachusetts office in Foxboro. Colonial Title is a Rhode Island-based corporation. Most states allow title work to be done by title companies and do not require a separate review by an attorney. In Massachusetts, a state law requires conveyancing to be done by an attorney. Conveyancing can include examining title, preparing deeds and closing real estate transactions.

While the decision wasn’t surprising, based on Massachusetts tradition and law, it does continue the state’s minority position of states that don’t allow the practice. More than 43 states allow title companies to perform closings.

Massachusetts Superior Court Justice S. Jane Haggerty handed the decision down June 11 after a year pondering the case presented in a jury-waived trial. The same day, the Massachusetts Conveyancers Association issued a press release applauding the decision.

Kathleen M. O’Donnell, president of the MCA, said the decision was very important.

“We have almost 3,000 members in the association. While not all of them do residential real estate closings, many of them occasionally do residential real estate closings. So this is a decision that has impact throughout the state even though it’s [the case] just in Suffolk County,” she said.

Although both Colonial Title President John Sweeney and the attorney representing the company in the case, Gerard F. Mackin, declined to comment for this story, Mackin made it clear during an earlier court session that the lawyer groups didn’t have the consumer’s benefit in mind when bringing this case against his client.

“The lawyers are here to preserve a monopoly,” Mackin said during the April 2000 trial.

“I know he says that, but that’s not really the case,” said O’Donnell in an interview after the decision was handed down.

“What the lawyers are here for [is] to preserve the obligation to the public,” she said. Haggerty agreed, writing, ” … the public interest demands that legal interpretation and advice be given by attorneys who are trained to do so, and the public includes not only borrowers but also lenders.”

Additionally, attorneys are held to greater accountability. If something goes wrong, a person could sue a corporation, but if the corporation goes out of business, the person is left with little recourse. If an attorney is involved, the person may sue the attorney directly for malpractice, or report the attorney to the board of bar overseers, she pointed out.

“They [a title company] don’t have any legal obligation to certify title to you. They just give you the title policy,” she said. Most of the time, people only get title insurance that insures the lender, not themselves. But there is a statute that requires attorneys to certify title over and above issuing the title insurance policy.

“Colonial is the lender’s legal representative at the closing when it acts as a closing agent, and the borrower may incorrectly look to him for legal advice or explanation,” wrote Haggerty.

According to O’Donnell, the closing can be a murky area where people need an attorney present.

“I had a closing just the other day with somebody who seemed to think that a closing is like rolling off a log. In fact, it’s not. There are a lot of issues that come up in terms of what’s on the title and whether it’s a problem or not,” O’Donnell said, citing easements as an example. While people may view easements as “no big deal,” it’s important to explain to the buyer whether the easement could mean that a developer has the right to put in a 40 foot-wide subdivision road through it, she said.

“So, there’s always going to be some question about what the impact is, and there’s always going to be a question about the impact those things may have on the lender, who might not care, and on the owner who might care because that’s where he was going to put the kiddie pool.”

Colonial maintained that in acting as the closing agent, the company was merely conducting the normal business of a title insurance agent, which is allowed by statute.

The plaintiffs, however, maintained that by acting as the agent, Colonial was performing the illegal practice of law by non-attorneys. They asked Haggerty to prohibit Colonial from doing so.

Haggerty, in a 12-page ruling, agreed with the plaintiffs.

‘Wandering the Streets’
Colonial based a large part of its defense on a ruling by the New Jersey Supreme Court, which determined that brokers and title company officers could handle closings as long as clients were informed of the risks.

“In contrast to this factual situation, the New Jersey Court dealt with a long-standing practice of non-lawyers conducting closings in the southern part of the state. The tradition and practice arose after World War II with the advent of thousands of federally financed loans made to veterans and farmers. Due to the volume of real estate transactions and the dearth of attorneys in that part of the state, brokers and title officers historically conducted all aspects of residential real estate transactions,” wrote Haggerty in her decision.

“The practice came up there in a different fashion from Northern New Jersey where, in fact, attorneys do do closings,” said O’Donnell. “I think what she was trying to say, because the defendant was relying so heavily on the New Jersey practice, was, ‘Well, that’s fine and good, because it’s a certain circumstance that developed in New Jersey because of the war. But in Massachusetts, there’s 350 years [of tradition] of attorneys doing this’ … You’re introducing a new wrinkle, you’re not confirming an existing one.”

The plaintiffs sent a letter to the judge offering to provide volunteer attorneys to Colonial to help them with the remainder of their closings scheduled. According to O’Donnell, Colonial said the help wasn’t necessary.

“We’re willing to help out if need be, because we don’t want to have people wandering the streets … It’s not their fault the lender assigned them to Colonial Title,” she said.

Colonial Title formed in 1994 and as of 2000 had 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. During the trial, Colonial Vice President Joseph Parente said the company had contracts with First American and Chicago Title.

After the attorneys groups filed the suit, Colonial counter-sued, claiming that members of the MCA and the MABC contacted two title companies and asked them to discontinue their business with Colonial. Haggerty dismissed the counter suit.

The plaintiffs include the MCA, the Massachusetts Association of Bank Counsel, 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.

The 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.

O’Donnell said she expects Colonial to appeal the decision.