Bulletin: NL000005

Dear Associates:

The potential liability arising out of a Stewart Title office that is acting as trustee is so great that you should not enter into any such transaction without first obtaining prior written approval from the Legal Department.

Although an issuing office is not an active participant in the sale of such beneficial interests, the office can be named as a party defendant in a suit to enjoin violation of both Federal and State Securities Laws.

Example: At the request of the organizers, a Stewart Title office served in a corporate capacity, as Trustee, in holding legal title to the subject property for the beneficiaries named in each trust agreement. The issuing office was paid a nominal trustee's fee and wrote the title insurance in connection with the land purchases. The agreements provided that the trustee would perform no service other than as the holder of legal title. All other services were performed by others. To finance land purchases, many fractional beneficial interests were sold by the organizers and the beneficial interest owners named in the trust agreements. Federal and State authorities asserted the sale of such fractional beneficial interests resulted in a violation of Federal and State Securities Laws and the organizers and our office were sued.