Stewart Title Guaranty Company v. Vantage Bank Texas, Successor by Merger to D'Hanis State Bank, and Banprop, L.L.C.
This text of Stewart Title Guaranty Company v. Vantage Bank Texas, Successor by Merger to D'Hanis State Bank, and Banprop, L.L.C. (Stewart Title Guaranty Company v. Vantage Bank Texas, Successor by Merger to D'Hanis State Bank, and Banprop, L.L.C.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
ACCEPTED 04-15-00228-CV FOURTH COURT OF APPEALS SAN ANTONIO, TEXAS 4/14/2015 3:19:56 PM KEITH HOTTLE CLERK
ORAL ARGUMENT REQUESTED 04-15-00228-CV No. __________________ FILED IN 4th COURT OF APPEALS SAN ANTONIO, TEXAS IN THE COURT OF APPEALS 4/14/2015 3:19:56 PM FOR THE FOURTH DISTRICT OF TEXAS AT SAN ANTONIO, KEITH E.TEXAS HOTTLE _________________________________________ Clerk
STEWART TITLE GUARANTY COMPANY, Defendant-Appellant v. VANTAGE BANK TEXAS, SUCCESSOR BY MERGER TO D’HANIS STATE BANK, and BANPROP, L.L.C., Plaintiffs-Appellees _______________________________________
On Appeal from the 150th Judicial District Court of Bexar County, Texas Cause No. 2013-CI-14899 (Honorable Laura Salinas) _________________________________________
APPELLANT’S PETITION FOR PERMISSION TO APPEAL AMENDED ORDER GRANTING PLAINTIFFS’ SECOND MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANT’S MOTION FOR PERMISSION TO APPEAL AND TO STAY PROCEEDINGS PENDING APPEAL _______________________________________
I. Clay Rogers State Bar No. 17172150 crogers@morganlewis.com Ankita Puri State Bar No. 24074920 ankita.puri@morganlewis.com MORGAN, LEWIS & BOCKIUS LLP 1000 Louisiana Street, Suite 4000 Houston, Texas 77002 T: (713) 890-5000 F: (713) 890-5001 Counsel for Defendant-Appellant Stewart Title Guaranty Company IDENTITY OF PARTIES AND COUNSEL
Stewart Title Guaranty Company Defendant-Appellant
Vantage Bank, Successor by Merger Plaintiffs-Appellees to D’Hanis State Bank, and Banprop, L.L.C.
Appellate and Trial Counsel for Appellant
I. Clay Rogers Appellate Counsel for Appellant Ankita Puri MORGAN, LEWIS & BOCKIUS LLP 1000 Louisiana Street, Suite 4000 Houston, Texas 77002
Scott R. Breitenwischer Trial Counsel for Appellant Andrew Nash ROYSTON, RAYZOR, VICKERY & WILLIAMS, LLP 711 Louisiana Street, Suite 500 Houston, Texas 77002
Appellate and Trial Counsel for Appellees
David B. West Appellate and Trial Counsel for Appellees David Vanderhider COX SMITH MATTHEWS, INC. 112 E. Pecan Street, Suite 1800 San Antonio, Texas 78205
ii TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL ........................................................... ii
TABLE OF AUTHORITIES .....................................................................................v
STATEMENT OF THE CASE.............................................................................. viii
COMPLIANCE WITH TEXAS RULES OF APPELLATE PROCEDURE 28.3(e)(1), 25.1(d)......................................................................................................x
STATEMENT OF THE JURISDICTION............................................................... xi
ISSUE PRESENTED............................................................................................... xi
STATEMENT OF FACTS ........................................................................................1
STANDARD OF REVIEW .......................................................................................4
SUMMARY OF THE ARGUMENT ........................................................................4
ARGUMENT AND AUTHORITIES........................................................................5
I. THE COURT SHOULD ACCEPT THE APPEAL UNDER SECTION 51.014 OF THE TEXAS CIVIL PRACTICE AND REMEDIES CODE ...............................................................................5
A. This appeal meets the standards for permissive interlocutory appeals under section 51.014(d). ................................................6
B. The Amended Order appealed involves a controlling question of law to which there is substantial ground for difference of opinion and immediate appeal will materially advance the ultimate termination of the litigation. .........................................7
II. COVERAGE IS PREDICATED ON THE POLICY, STATE STATUTES AND COMMON LAW.................................................. 8
A. The Policy requires the February Notice to be filed in records established by state statutes. .......................................................8 iii B. The state statutes and City ordinance require the February Notice identify the proper owner. ...............................................9
C. Texas common law does not impart constructive notice under these circumstances...................................................................10
D. The City issued two notices that did not constitute constructive notice to a purchaser as required under the Policy, state statutes, City ordinance, or common law................................................12
1. The January Notice was defectively filed by the City....12
2. The February Notice was also defective pursuant to the Policy, applicable state statutes, City ordinance, and Texas case law. ...............................................................13
E. Plaintiffs erroneously argue that the state statutes do not apply to the Policy. .............................................................................14
PRAYER ..................................................................................................................18
CERTIFICATE OF COMPLIANCE.......................................................................20
CERTIFICATE OF SERVICE ................................................................................21
APPENDIX TO APPELLANT’S UNOPPOSED PETITION FOR PERMISSION TO APPEAL AMENDED ORDER GRANTING PLAINTIFFS’ SECOND MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANT’S MOTION FOR PERMISSION TO APPEAL AND TO STAY PROCEEDINGS PENDING APPEAL ...................................................................22
iv TABLE OF AUTHORITIES
Page(s) CASES Certain Underwriters at Lloyd’s of London Subscribing to Policy Number: £FINFR0901509 v. Cardtronics, Inc., 438 S.W.3d 770 (Tex. App.—Houston [1st Dist.] 2014, no pet.)........................8
Chicago Title Ins. Co. v. McDaniel, 875 S.W.2d 310 (Tex. 1994) ..............................................................................17
City of San Antonio v. D’Hanis State Bank, No. 04-10-00181-CV, 2010 WL 3249956 (Tex. App.—San Antonio, Aug. 18, 2010, no pet.) (mem. op.).................................................................2, 13
Coker v. Coker, 650 S.W.2d 391(Tex. 1983)................................................................................16
First S. Props., Inc. v. Vallone, 533 S.W.2d 339, 340 (Tex. 1976) .....................................................................12
Gross v. Innes, 988 S.W.2d 727 (Tex. 1998) (per curiam) ...........................................................6
Gulf Coast Asphalt Co. v. Lloyd, __ S.W.3d __, No. 14-13-00991-CV, 2015 WL 393407 (Tex. App.— Houston [14th Dist.] January 29, 2015, no pet.)...................................................7
Gulley v. State Farm Lloyds, 350 S.W.3d 204 (Tex. App.—San Antonio 2011, no pet.) ..................................6
Hebert v. JJT Constr., 438 S.W.3d 139 (Tex. App.—Houston [14th Dist.] 2014, no pet.) .................6, 7
Jones v. P.A.W.N. Enters., 988 S.W.2d 812 (Tex. App.—Amarillo 1999, pet. denied) ...............................12
Lone Star Gas Co. v. Sheaner, 305 S.W.2d 150 (Tex. 1957) ..............................................................................11
v Martinka v. Commw. Land Title Ins.
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ACCEPTED 04-15-00228-CV FOURTH COURT OF APPEALS SAN ANTONIO, TEXAS 4/14/2015 3:19:56 PM KEITH HOTTLE CLERK
ORAL ARGUMENT REQUESTED 04-15-00228-CV No. __________________ FILED IN 4th COURT OF APPEALS SAN ANTONIO, TEXAS IN THE COURT OF APPEALS 4/14/2015 3:19:56 PM FOR THE FOURTH DISTRICT OF TEXAS AT SAN ANTONIO, KEITH E.TEXAS HOTTLE _________________________________________ Clerk
STEWART TITLE GUARANTY COMPANY, Defendant-Appellant v. VANTAGE BANK TEXAS, SUCCESSOR BY MERGER TO D’HANIS STATE BANK, and BANPROP, L.L.C., Plaintiffs-Appellees _______________________________________
On Appeal from the 150th Judicial District Court of Bexar County, Texas Cause No. 2013-CI-14899 (Honorable Laura Salinas) _________________________________________
APPELLANT’S PETITION FOR PERMISSION TO APPEAL AMENDED ORDER GRANTING PLAINTIFFS’ SECOND MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANT’S MOTION FOR PERMISSION TO APPEAL AND TO STAY PROCEEDINGS PENDING APPEAL _______________________________________
I. Clay Rogers State Bar No. 17172150 crogers@morganlewis.com Ankita Puri State Bar No. 24074920 ankita.puri@morganlewis.com MORGAN, LEWIS & BOCKIUS LLP 1000 Louisiana Street, Suite 4000 Houston, Texas 77002 T: (713) 890-5000 F: (713) 890-5001 Counsel for Defendant-Appellant Stewart Title Guaranty Company IDENTITY OF PARTIES AND COUNSEL
Stewart Title Guaranty Company Defendant-Appellant
Vantage Bank, Successor by Merger Plaintiffs-Appellees to D’Hanis State Bank, and Banprop, L.L.C.
Appellate and Trial Counsel for Appellant
I. Clay Rogers Appellate Counsel for Appellant Ankita Puri MORGAN, LEWIS & BOCKIUS LLP 1000 Louisiana Street, Suite 4000 Houston, Texas 77002
Scott R. Breitenwischer Trial Counsel for Appellant Andrew Nash ROYSTON, RAYZOR, VICKERY & WILLIAMS, LLP 711 Louisiana Street, Suite 500 Houston, Texas 77002
Appellate and Trial Counsel for Appellees
David B. West Appellate and Trial Counsel for Appellees David Vanderhider COX SMITH MATTHEWS, INC. 112 E. Pecan Street, Suite 1800 San Antonio, Texas 78205
ii TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL ........................................................... ii
TABLE OF AUTHORITIES .....................................................................................v
STATEMENT OF THE CASE.............................................................................. viii
COMPLIANCE WITH TEXAS RULES OF APPELLATE PROCEDURE 28.3(e)(1), 25.1(d)......................................................................................................x
STATEMENT OF THE JURISDICTION............................................................... xi
ISSUE PRESENTED............................................................................................... xi
STATEMENT OF FACTS ........................................................................................1
STANDARD OF REVIEW .......................................................................................4
SUMMARY OF THE ARGUMENT ........................................................................4
ARGUMENT AND AUTHORITIES........................................................................5
I. THE COURT SHOULD ACCEPT THE APPEAL UNDER SECTION 51.014 OF THE TEXAS CIVIL PRACTICE AND REMEDIES CODE ...............................................................................5
A. This appeal meets the standards for permissive interlocutory appeals under section 51.014(d). ................................................6
B. The Amended Order appealed involves a controlling question of law to which there is substantial ground for difference of opinion and immediate appeal will materially advance the ultimate termination of the litigation. .........................................7
II. COVERAGE IS PREDICATED ON THE POLICY, STATE STATUTES AND COMMON LAW.................................................. 8
A. The Policy requires the February Notice to be filed in records established by state statutes. .......................................................8 iii B. The state statutes and City ordinance require the February Notice identify the proper owner. ...............................................9
C. Texas common law does not impart constructive notice under these circumstances...................................................................10
D. The City issued two notices that did not constitute constructive notice to a purchaser as required under the Policy, state statutes, City ordinance, or common law................................................12
1. The January Notice was defectively filed by the City....12
2. The February Notice was also defective pursuant to the Policy, applicable state statutes, City ordinance, and Texas case law. ...............................................................13
E. Plaintiffs erroneously argue that the state statutes do not apply to the Policy. .............................................................................14
PRAYER ..................................................................................................................18
CERTIFICATE OF COMPLIANCE.......................................................................20
CERTIFICATE OF SERVICE ................................................................................21
APPENDIX TO APPELLANT’S UNOPPOSED PETITION FOR PERMISSION TO APPEAL AMENDED ORDER GRANTING PLAINTIFFS’ SECOND MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANT’S MOTION FOR PERMISSION TO APPEAL AND TO STAY PROCEEDINGS PENDING APPEAL ...................................................................22
iv TABLE OF AUTHORITIES
Page(s) CASES Certain Underwriters at Lloyd’s of London Subscribing to Policy Number: £FINFR0901509 v. Cardtronics, Inc., 438 S.W.3d 770 (Tex. App.—Houston [1st Dist.] 2014, no pet.)........................8
Chicago Title Ins. Co. v. McDaniel, 875 S.W.2d 310 (Tex. 1994) ..............................................................................17
City of San Antonio v. D’Hanis State Bank, No. 04-10-00181-CV, 2010 WL 3249956 (Tex. App.—San Antonio, Aug. 18, 2010, no pet.) (mem. op.).................................................................2, 13
Coker v. Coker, 650 S.W.2d 391(Tex. 1983)................................................................................16
First S. Props., Inc. v. Vallone, 533 S.W.2d 339, 340 (Tex. 1976) .....................................................................12
Gross v. Innes, 988 S.W.2d 727 (Tex. 1998) (per curiam) ...........................................................6
Gulf Coast Asphalt Co. v. Lloyd, __ S.W.3d __, No. 14-13-00991-CV, 2015 WL 393407 (Tex. App.— Houston [14th Dist.] January 29, 2015, no pet.)...................................................7
Gulley v. State Farm Lloyds, 350 S.W.3d 204 (Tex. App.—San Antonio 2011, no pet.) ..................................6
Hebert v. JJT Constr., 438 S.W.3d 139 (Tex. App.—Houston [14th Dist.] 2014, no pet.) .................6, 7
Jones v. P.A.W.N. Enters., 988 S.W.2d 812 (Tex. App.—Amarillo 1999, pet. denied) ...............................12
Lone Star Gas Co. v. Sheaner, 305 S.W.2d 150 (Tex. 1957) ..............................................................................11
v Martinka v. Commw. Land Title Ins. Co., 836 S.W.2d 773 (Tex. App.—Houston [1st Dist.] 1992, writ denied)......... 17-18
Noble Mortg. & Invs. LLC v. D&M Vision Invs., LLC, 340 S.W.3d 65 (Tex. App.—Houston [1st Dist.] 2011, no pet.)........................11
Ogden v. Dickinson State Bank, 662 S.W.2d 330 (Tex. 1983) ..............................................................................16
Safeco Lloyds Ins. Co. v. Allstate Ins. Co., 308 S.W.3d 49 (Tex. App.—San Antonio 2009, no pet.) ....................................4
Sanchez v. Telles, 960 S.W.2d 762 (Tex. App.—El Paso 1997, pet. denied)..................................11
State Farm Lloyds v. Gulley, 399 S.W.3d 242 (Tex. App.—San Antonio 2012, no pet.) ................................16
Stewart Title Guar. Co. v. Cheatham, 764 S.W.2d 315 (Tex. App.—Texarkana 1988, writ denied) ............................18
Sw. Props., L.P. v. Lite-Dec of Tex., Inc., 989 S.W.2d 69 (Tex. App.—San Antonio 1998, pet. denied)..............................4
Sw. Title Ins. Co. v. Woods, 449 S.W.2d 773 (Tex. 1970) ..............................................................................11
Tamburine v. Ctr Sav. Ass’n, 583 S.W.2d 942 (Tex. Civ. App.—Tyler 1979, writ ref’d n.r.e.).......................17
Wilson v. Dvorak, 228 S.W.3d 228 (Tex. App.—San Antonio 2007, pet. denied)..........................12
RULES San Antonio, Tex. Code of Ordinances ch. 6, art. VIII, § 6-162(b)(1-2) (2014)..................................................................................................................10
TEX. CIV. PRAC. & REM. CODE § 51.014(d)...............................................................6
TEX. CIV. PRAC. & REM. CODE § 51.014(f)................................................................7
TEX. INS. CODE § 2703.001........................................................................................8
vi TEX. LOC. GOV’T CODE § 193.003(a) ......................................................................10
TEX. LOC. GOV’T CODE § 193.003(b) ......................................................................10
TEX. LOC. GOV’T CODE § 214.001(e)..................................................9-10, 13, 16-17
TEX. PROP. CODE § 13.002...................................................................................9, 13
TEX. R. APP. P. 28.3(e)(1) ..........................................................................................x
TEX. R. APP. P. 25.1(d)...............................................................................................x
TEX. R. APP. P. 28.3(k)...............................................................................................x
OTHER AUTHORITY BLACK’S LAW DICTIONARY 278 (10th ed. 2014) .....................................................11
vii STATEMENT OF THE CASE
Nature of the Case: The underlying proceeding brought by Vantage Bank Texas, Successor by Merger to D’Hanis State Bank, and Banprop, L.L.C. (“Plaintiffs”) against Stewart Title Guaranty Company (“Stewart”) alleges the failure to honor a loan policy of title insurance issued to them by Stewart (“Policy”). Plaintiffs complain they suffered losses covered by the Policy that arose out of the City of San Antonio’s (“City’s”) efforts to enforce a nuisance ordinance by demolishing buildings on the land that secured a loan made by Plaintiffs. Stewart contends that this loss is not covered because no notice of the City’s efforts to demolish the buildings was filed in the “Public Records” as defined in the Policy.
One of the pivotal issues that determines coverage is whether the City’s February 2008 demolition notice of hearing (“February Notice”) was properly “recorded in the Public Records” as defined by the Policy and in conformity with applicable Texas law. The February Notice referenced and was issued to strangers to the property—identifying two incorrect owners and the wrong property address. These facts are undisputed. If the February Notice constitutes notice in the Public Records and follows state statutes, then it falls within the coverage of the Policy. However, that is not the case here.
Plaintiffs filed a summary judgment motion on the coverage issues, claiming that the loss is covered because the February Notice was recorded in the Public Records as defined in the Policy. Stewart filed a cross-motion, asserting that the February Notice was not filed in the Public Records so as to constitute constructive notice to a purchaser of the property, and thus, there is no coverage for the viii Plaintiffs’ claims.
Judge Salinas granted Plaintiffs’ motion and denied Stewart’s, finding that the Policy covered Plaintiffs’ alleged losses. Judge Salinas’s holding was predicated on the finding that the February Notice was filed in the Public Records so as to constitute constructive notice to a purchaser of the property.
Stewart filed a Motion to Permit Interlocutory Appeal and Request for Stay Pending Appeal. Plaintiffs did not oppose this request. On March 31, 2015, the trial court signed an agreed Amended Order Granting Plaintiffs’ Second Motion for Partial Summary Judgment and Denying Defendant’s Motion for Summary Judgment and Granting Defendant’s Motion for Permission to Appeal and to Stay Proceedings Pending Appeal (the “Amended Order”) (Apx. A). Stewart now files this Petition for Permission to Appeal the Amended Order.
Trial Court: The Honorable Judge Laura Salinas, 150th District Court, Bexar County, Texas.
Trial Court’s Disposition: March 31, 2015 Amended Order Granting Plaintiffs’ Second Motion for Partial Summary Judgment and Denying Defendant’s Second Motion for Summary Judgment and Granting Defendant’s Motion for Permission to Appeal and to Stay Proceedings Pending Appeal
Parties in Court of Appeals: Stewart Title Guaranty Company—Appellant; Vantage Bank Texas, Successor by Merger to D’Hanis State Bank, and Banprop, L.L.C.— Appellees.
ix COMPLIANCE WITH TEXAS RULES OF APPELLATE PROCEDURE 28.3(e)(1), 25.1(d)
Stewart provides the following information as required by Texas Rule of
Appellate Procedure 25.1(d). See TEX. R. APP. P. 28.3(e)(1); see also TEX. R. APP.
P. 25.1(d).
1. The trial court and trial court number and style: Vantage Bank Texas,
Successor by Merger to D’Hanis State Bank, and Banprop, L.L.C., Plaintiffs v.
Stewart Title Guaranty Company, Defendant, Cause No. 2013-CI-14899, in the
150th District Court of Bexar County, Texas.
2. The order being appealed is the March 31, 2015 Amended Order
Granting Plaintiffs’ Second Motion for Partial Summary Judgment and Denying
Defendant’s Second Motion for Summary Judgment and Granting Defendant’s
Motion for Permission to Appeal and to Stay Proceedings Pending Appeal.
3. Appellant Stewart is filing this Petition and desires to appeal the
Amended Order.
4. The court to which the appeal is taken is the Court of Appeals for the
Fourth District of Texas, at San Antonio, Texas.
5. If this Petition is granted, the appeal will be governed by the rules for
accelerated appeals. TEX. R. APP. P. 28.3(k).
x STATEMENT OF THE JURISDICTION This Court has jurisdiction pursuant to section 51.014(d) of the Texas Civil
Practice and Remedies Code. The trial court signed the Amended Order permitting
interlocutory appeal on the basis that (1) the order involves a controlling question
of law as to which there is substantial ground for difference of opinion, and (2) an
immediate appeal from the order may materially advance the ultimate termination
of the litigation.
ISSUE PRESENTED
The trial court’s Amended Order involves the following controlling question
of law as to which there is substantial ground for difference of opinion, justifying
immediate appeal under section 51.014(d) of the Civil Practice and Remedies
Code:
Whether the City’s February Notice was “recorded in the Public Records” as the term “Public Records” is defined in the Policy.1
Resolution of this issue will determine whether a purchaser of the property
would have had constructive notice of the information contained in the February
Notice and whether Plaintiffs’ claims would be covered based on that notice.
1 Stewart reserves the right to present additional briefing on the issue presented if the Court so requests. xi STATEMENT OF FACTS
Plaintiffs sued for breach of contract,2 claiming that Stewart breached its
duty to indemnify them for losses arising from the City’s efforts to enforce a
nuisance ordinance by demolishing buildings on the land that secured a loan the
Plaintiffs made. Plaintiffs claim that the City’s two notices were filed in the Public
Records and are covered by the Policy. Stewart contends neither notice was
properly recorded in the Public Records so as to constitute constructive notice to a
purchaser of the property and as such, there is no coverage under the Policy.
Prior to the issuance of the Policy, the City issued two defective notices of
demolition for apartments located on the property. The first defective notice was
issued on January 2, 2008 (“January Notice”) (Apx. B). The January Notice
concerned a notice of hearing to determine if the apartments on the land at issue
constituted a public nuisance in need of abatement. The January Notice identified
the correct property owners in the chain of title but was not recorded in the Official
Public Records of Real Property in Bexar County. In a separate lawsuit between
the City and Plaintiffs, Plaintiffs denied that the January Notice was constructive
notice as to them because it was not properly recorded. This Court previously held
that the January Notice did not bind Plaintiffs and was not constructive notice to 2 On February 4, 2015, Plaintiffs added additional claims for breach of duty of good faith and fair dealing and for violations of Chapter 541 of the Texas Insurance Code. See Plaintiffs’ Third Amended Original Petition ¶¶ 44–49 (Apx. J). Those additional claims are wholly derivative of the claim for breach of contract, and as such, the viability of those claims is contingent upon Plaintiffs’ showing that Stewart is liable for breach of contract. them because the City did not properly record the January Notice in the Official
Public Records of Real Property in Bexar County. See City of San Antonio v.
D’Hanis State Bank, No. 04-10-00181-CV, 2010 WL 3249956 at *3 (Tex. App.—
San Antonio, Aug. 18, 2010, no pet.) (mem. op.) (Apx. C).
The second notice of hearing is the February 2008 Notice. Stewart
maintains that the February Notice was also defective as it failed to identify the
correct property owner, and instead identified not one but two separate and wrong
property owners (complete strangers) at the wrong property address (Apx. D).
The parties filed cross motions for summary judgment on the coverage issue.
This first round of cross motions concerned only the impact of the January Notice.
It is undisputed that the January Notice was never properly filed in the Official
Public Records of Real Property of Bexar County as required by the applicable
statutes. On October 20, 2014, Judge Price denied both parties’ motions for
summary judgment (Apx. E).
In December 2014, the parties filed a second round of cross motions for
summary judgment on the coverage issue, this time focusing on the impact of only
the February Notice. On January 30, 2015, Judge Salinas granted Plaintiffs’
motion and denied Stewart’s (Apx. F). By holding that the Policy covered
Plaintiffs’ alleged losses, Judge Salinas implicitly found that the defective
February Notice provided constructive notice to purchasers of the property.
-2- Stewart respectfully believes Judge Salinas’s order is wrong on a pivotal legal
issue—whether the defective February Notice encumbered the property and
provided constructive notice to the world of the notice of demolition.
The defective February Notice simply does not and cannot constitute
constructive notice to purchasers of the property. Correctly filed notices in the
Official Public Records of Real Property in Bexar County (where the property is
located) impose constructive notice. But, a document filed with an incorrect
grantor or grantee—such as the February Notice—is not in the chain of title and
thus would not constitute constructive notice. Plaintiffs do not dispute that the
February Notice would not be discovered by a search of Bexar County’s real
property grantor-grantee index.3
Coverage under the particular covered risks at issue exists only if a proper
notice setting forth the City’s intended action and describing the land “is recorded
in the Public Records” (Apx. G, p. 2). The precise issue is whether the City’s
February Notice was “recorded in the Public Records” as the term “Public
Records” is defined in the Policy and as required by statute. The Policy defines
3 Interestingly, the City acknowledged the errors in the January Notice and February Notice and ultimately issued a third notice to Plaintiffs on October 13, 2011 (Apx. K). The third notice was correct in form, containing none of the defects in the prior notices. Plaintiffs did not challenge the City’s third notice of hearing to determine if the structure constituted a public nuisance in need of abatement and Plaintiffs entered into a demolition and abatement agreement with the City. The third notice was provided to Plaintiffs more than two years after the Policy was effective and thus is irrelevant to coverage in this case, except to the extent it demonstrates the prior notices were defective. -3- “Public Records” as “records established under state statutes at Date of Policy
for the purpose of imparting constructive notice of matters relating to real
property to purchasers for value and without Knowledge” (Apx. G, p. 3).
STANDARD OF REVIEW
The grant or denial of summary judgment is reviewed de novo, using well-
settled summary judgment standards. Safeco Lloyds Ins. Co. v. Allstate Ins. Co.,
308 S.W.3d 49, 52 (Tex. App.—San Antonio 2009, no pet.). In addition,
interpretation of a statute is a question of law that is reviewed de novo. Sw. Props.,
L.P. v. Lite-Dec of Tex., Inc., 989 S.W.2d 69, 70 (Tex. App.—San Antonio 1998,
pet. denied). Thus, all issues raised by this appeal are reviewed de novo, without
any deference to the trial court’s rulings.
SUMMARY OF THE ARGUMENT
This Court should accept Stewart’s appeal. As the trial court and Plaintiffs
have already recognized, this is a controlling issue of law on which there are
substantial grounds for difference of opinion, and an immediate appeal will
materially advance the ultimate termination of the litigation.
The controlling issue of law concerns whether the City’s defective February
Notice is considered recorded in the “Public Records” as such term is defined by
the Policy, as required by the Texas Department of Insurance Title Policy Form T-
2, the Texas Government Code and by the Texas Code of Ordinance. Further,
-4- even if such defective notice were considered properly filed in the “Public
Records,” is such notice, which entirely fails to identify the correct grantor, grantee
and property address, considered constructive notice to a purchaser of the property
for purposes of identifying encumbrances on the insured property?
If the Court finds that the February Notice at issue was defective and did not
constitute constructive notice to a purchaser of the property by way of inaccurate
information, then the loss is not covered on that basis. As Plaintiffs agree,
resolution of this issue will materially advance the termination of this litigation.
Thus, this Court should accept the appeal so that time, energy, and resources are
not unnecessarily spent by the litigants and the courts in proceeding through trial
based on an issue that may control its outcome, only to have judgment
subsequently reversed on appeal.
ARGUMENT AND AUTHORITIES
I. THE COURT SHOULD ACCEPT THE APPEAL UNDER SECTION 51.014 OF THE TEXAS CIVIL PRACTICE AND REMEDIES CODE This Court should accept Stewart’s appeal pursuant to sections 51.014(d)
and (f) of the Civil Practice and Remedies Code. The trial court’s Amended Order
involved a controlling question of law regarding a mandatory prerequisite to
coverage under the Policy—whether the notices were properly filed to constitute
constructive notice to a purchaser of the property. There are substantial grounds
for difference of opinion on this issue, and its resolution will materially advance
-5- the ultimate termination of the litigation because, if Stewart is correct, Plaintiffs’
claim would not be covered based on the February Notice.
A. This appeal meets the standards for permissive interlocutory appeals under section 51.014(d). An interlocutory order that does not dispose of all issues against all parties is
not immediately appealable, except in situations expressly authorized by statute.
Gulley v. State Farm Lloyds, 350 S.W.3d 204, 206 (Tex. App.—San Antonio 2011,
no pet.) (citing Gross v. Innes, 988 S.W.2d 727, 729 (Tex. 1998) (per curiam)).
Texas Civil Practice and Remedies Code § 51.014(d) provides as follows:
(d) On a party’s motion or on its own initiative, a trial court in a civil action may, by written order, permit an appeal from an order that is not otherwise appealable if:
(1) the order to be appealed involves a controlling question of law as to which there is a substantial ground for difference of opinion; and
(2) an immediate appeal from the order may materially advance the ultimate termination of the litigation.
TEX. CIV. PRAC. & REM. CODE § 51.014(d).
To satisfy these requirements, a trial court must issue a written order that includes
both the interlocutory order and a statement of the trial court’s permission to
appeal the order under section 51.014(d). Hebert v. JJT Constr., 438 S.W.3d 139,
141 (Tex. App.—Houston [14th Dist.] 2014, no pet.). In the statement of
-6- permission, the trial court must identify the controlling question of law as to which
there is a substantial ground for difference of opinion and must state why an
immediate appeal may materially advance the ultimate termination of the litigation.
Id. The court of appeals may then accept an appeal. See TEX. CIV. PRAC. & REM.
CODE § 51.014(f).
B. The Amended Order appealed involves a controlling question of law to which there is substantial ground for difference of opinion and immediate appeal will materially advance the ultimate termination of the litigation. As is mandated by section 51.014(d), the trial court’s Amended Order on the
parties’ dueling summary judgment motions involves a controlling question of law
as to which there is a substantial ground for difference of opinion—whether the
February Notice was “recorded in the Public Records” as the term “Public
Records” is defined by the Policy.
This Court’s ruling on that question is controlling because it determines
whether Plaintiffs may prevail on their claim of breach of the Policy based on the
February Notice. See Gulf Coast Asphalt Co. v. Lloyd, __ S.W.3d __, No. 14-13-
00991-CV, 2015 WL 393407, at *4 (Tex. App.—Houston [14th Dist.] January 29,
2015, no pet.) (“The proper scope of a permissive appeal is the determination of
controlling legal issues, about which there are legitimate disagreements, necessary
to the resolution of the case.”). Plaintiffs agree that there is a substantial ground
for difference of opinion, which is further demonstrated by the fact that no court -7- has addressed this specific policy language. See Certain Underwriters at Lloyd’s
of London Subscribing to Policy Number: £FINFR0901509 v. Cardtronics, Inc.,
438 S.W.3d 770, 774 (Tex. App.—Houston [1st Dist.] 2014, no pet.) (noting
permissive appeal was granted where Texas appellate courts had not addressed the
specific policy language).
When the controlling legal issue addresses whether one party can properly
prevail, that issue is material to the ultimate resolution or termination of the
litigation. If Stewart’s argument is correct, there is no coverage liability based on
the February Notice. But if this Court does not accept the appeal and Stewart’s
arguments are eventually vindicated on a post-trial appeal, needless time, energy,
and resources will have been expended by all parties and the courts. All parties
and the trial court agree that allowing an immediate appeal would materially
advance the termination of this litigation. This Court should accept the appeal in
the interest of judicial economy.
II. COVERAGE IS PREDICATED ON THE POLICY, STATE STATUTES AND COMMON LAW
A. The Policy requires the February Notice to be filed in records established by state statutes. The Texas Department of Insurance promulgates the language, terms, and
definitions found in title policies issued in Texas. See TEX. INS. CODE § 2703.001.
Specifically, the Texas Department of Insurance penned the definition of “Public
-8- Records” that appears in the Policy. See Loan Policy of Title Insurance (Form T-
2) (2014), available at http://www.tdi.texas.gov/title/documents/form_t-02.pdf
(Apx. H). Plaintiffs argue that coverage for their alleged loss falls under covered
risks 5 and 6 of the Policy, which cover losses based on certain enforcement
actions as long as a “notice” of intent to enforce an ordinance or another police
power describes the land and the notice is “recorded in the Public Records.” Apx.
G, pp. 1-2.
The Policy defines “Public Records” in relevant part as “records
established under state statutes at Date of Policy for the purpose of imparting
constructive notice of matters relating to real property to purchasers for value and
without Knowledge.” Apx. G, p. 3 (Definition 1(k)) (emphasis added).
For coverage to exist, the Policy requires that a notice describing the
property be filed in the Public Records according to state statutes.
B. The state statutes and City ordinance require the February Notice identify the proper owner. The Policy’s coverage, exclusions and definitions involving Public Records
must be interpreted in light of applicable Texas law. Constructive notice to a third
party is achieved when an instrument is properly recorded. See TEX. PROP. CODE §
13.002. The Texas Local Government Code permits a municipality to “file notice
of the hearing in the Official Public Records of Real Property in the county in
which the property is located.” TEX. LOC. GOV’T CODE § 214.001(e). “The notice -9- must contain the name and address of the owner of the affected property if
that information can be determined.” Id. (emphasis added). It is undisputed
that the City knew the name of the correct owner when it prepared and filed the
February Notice, but nevertheless identified the wrong owner.
Further, the Local Government Code requires that the county clerk maintain
a “well-bound alphabetical index” for all instruments related to real property. TEX.
LOC. GOV’T CODE § 193.003(a). The index must be a cross-index that contains the
names of the grantors, grantees, and/or parties to the instrument affecting real
property. Id. § 193.003(b). Further, San Antonio Municipal Code section 6-162
proscribes the manner, form, and contents of the notices at issue here. “The pre-
hearing notice to the owner shall be “[p]ersonally to the owner in writing; or by
letter addressed to the owner at the owner’s post office address.” San Antonio,
Tex. Code of Ordinances ch. 6, art. VIII, § 6-162(b)(1-2) (2014) (emphasis added).
Although the February Notice was filed in the Official Public Records of Real
Property for Bexar County, it did not identify the proper owner, grantor, or grantee
and therefore did not provide constructive notice to a purchaser of the property or
conform with either the municipal mandate or the Texas Government Code.
C. Texas common law does not impart constructive notice under these circumstances. In order to determine whether there is constructive notice “to purchasers for
value” as described in the Policy, the Court should look to the common law. Texas -10- courts have consistently held that a “party is not charged with constructive notice
of a recorded instrument which is not in his chain of title.” Sw. Title Ins. Co. v.
Woods, 449 S.W.2d 773, 774 (Tex. 1970) (emphasis added); see also Sanchez v.
Telles, 960 S.W.2d 762, 767 (Tex. App.—El Paso 1997, pet. denied); see also
Noble Mortg. & Invs. LLC v. D&M Vision Invs., LLC, 340 S.W.3d 65, 81 (Tex.
App.—Houston [1st Dist.] 2011, no pet.) (in Texas it is a “well-established rule
that a deed or instrument lying outside of his chain of title imports no notice”).
Chain of title refers to the ownership history of a piece of land, from its first owner
to the present one. BLACK’S LAW DICTIONARY 278 (10th ed. 2014).
The rationale of this constructive notice rule is that “the only facilities
provided by statute for finding recorded instruments pertinent to any particular title
are the indices of grantors and grantees and a prospective purchaser or lienholder
will have no reason to search for instruments executed by persons outside of the
chain of title under which he claims.” Lone Star Gas Co. v. Sheaner, 305 S.W.2d
150, 155-56 (Tex. 1957). “To charge one acquiring an interest in realty with notice
of instruments executed by persons outside the chain of title would impose upon
him the duty of making a general search of every instrument filed.” Id. at 156.
Therefore, Plaintiffs would not be charged with notice of the demolition provided
by the defective February Notice, nor would a purchaser of the property.
-11- It follows that a reasonable search by a purchaser would be under the name
of each grantor from the date such grantor acquired the property going forward.
See Wilson v. Dvorak, 228 S.W.3d 228, 234 (Tex. App.—San Antonio 2007, pet.
denied) (holding that judgment creditor being able to enforce lien against innocent
purchasers who had no notice of judgment lien due to creditor’s abstracting and
indexing of judgment under debtor’s maiden name would lead to absurd result). A
proper title search includes examination of the grantor-grantee indices. Jones v.
P.A.W.N. Enters., 988 S.W.2d 812, 823 (Tex. App.—Amarillo 1999, pet. denied)
(citing First S. Props., Inc. v. Vallone, 533 S.W.2d 339, 340 (Tex. 1976)).
In compliance with the statutes and ordinance and common law discussed
above, a municipality’s notice of demolition must be properly filed in the Official
Public Records of Real Property and also correctly identify the grantor, grantee,
and/or owner of the real property in order to constitute constructive notice to a
purchaser of the property.
D. The City issued two notices that did not constitute constructive notice to a purchaser as required under the Policy, state statutes, City ordinance, or common law.
1. The January Notice was defectively filed by the City. As discussed previously, the City first issued a demolition notice in January
2008. This January Notice identified the correct property owner but was not
recorded in the Official Public Records for Real Property as required by the Texas
-12- Local Government Code. See TEX. LOC. GOV’T CODE § 214.001(e). This Court
issued an opinion that properly recognized the requirement of filing the notice in
the Official Public Records of Real Property and held that the January Notice was
not binding on D’Hanis Bank (predecessor bank to Plaintiffs) as a subsequent
lienholder. See D’Hanis, 2010 WL 3249956, at *3 (Apx. C). Now, this Court is
faced with deciding whether the City’s second attempt at notice, the February
Notice, complied with Texas law, the Policy and whether a notice which does not
name the correct owner and is not sent to the correct address constitutes
constructive notice to a purchaser as required by the Policy.
2. The February Notice was also defective pursuant to the Policy, applicable state statutes, City ordinance, and Texas case law. Because the February Notice did not identify the proper owner or property
address, it was not properly filed in the “Public Records” as the Policy and state
law require. Therefore, as to the land at issue it did not “impart[] constructive
notice of matters relating to real property to purchasers for value” (Apx. G, p. 2).
Only an instrument that is properly recorded is notice to all persons of the
existence of that instrument. See TEX. PROP. CODE § 13.002. The parties agree
that a search of the grantor-grantee index for matters affecting the land that secured
the Plaintiffs’ loan would not have disclosed the February Notice.
-13- E. Plaintiffs erroneously argue that the state statutes do not apply to the Policy. Plaintiffs contend that Texas Local Government Code § 214.001(e) does not
apply and that this is a pure contract dispute based on the language of the Policy.
See Plaintiff’s Response to Defendant’s Second Motion for Summary Judgment, p.
7 (Apx. I). Plaintiffs incorrectly argue that the Policy language expands
constructive notice beyond notice to a purchaser and contends Stewart had notice
of a filed record even when the purchaser would not be charged with notice.
However, that is not what the Policy and the law mandate. With a contorted
reading of the Policy, Plaintiffs have contended that the February Notice satisfies
the notice requirements of covered risks 5 and 6 and imparted constructive notice
to Stewart. Those covered risks provide that, subject to the Policy’s exclusions,
exceptions, and conditions, Stewart insures the named insured against loss or
damage sustained or incurred by reason of:
5. The violation or enforcement of any law, ordinance, permit, or governmental regulation (including those related to building and zoning) restricting, regulating, prohibiting or relating to:
(a) the occupancy, use or enjoyment of the Land;
(b) the character, dimensions or location of any improvement erected on the Land;
(c) subdivision of land; or
-14- (d) environmental protection
if a notice, describing any part of the Land, is recorded in the Public Records setting forth the violation or intention to enforce, but only to the extent of the violation or enforcement referred to in that notice.
6. An enforcement action based on the exercise of a governmental police power not covered by Covered Risk 5 if a notice of the enforcement action, describing any part of the Land, is recorded in the Public Records, but only to the extent of the enforcement action referred to in that notice.
See Apx. G, pp. 1-2 (emphasis added).
Covered risks 5 and 6 condition coverage on there being a “notice” of intent
to enforce an ordinance or another police power that describes the land and that the
notice be “recorded in the Public Records.” The term “Public Records” is defined
in the Policy as follows:
“Public Records”: records established under state statutes at Date of Policy for the purpose of imparting constructive notice of matters relating to real property to purchasers for value and without Knowledge. With respect to Covered Risk 5(d), “Public Records” shall also include environmental protection liens filed in the records of the clerk of the United States District Court for the district where the Land is located.
See Apx. G, p. 3 (Definition 1(k))(emphasis added).
Basically, Plaintiffs argue that Stewart should have constructive notice
because the February Notice identified the property by lot and block number, even
-15- though the notice identified the wrong owners and wrong address and therefore
would not be constructive notice to a purchaser. However, a plain reading of
covered risks 5 and 6 makes it clear that the phrase, “[i]f a notice, describing any
part of the land, is recorded in Public Records” relates not to whether the notice is
complete and proper in order to comply with the Public Records definition, but
simply that the notice must contain a description of the land. Courts should
examine and consider the entire writing in an effort to harmonize and give effect to
all the provisions of the contract so that none will be rendered meaningless. State
Farm Lloyds v. Gulley, 399 S.W.3d 242, 247 (Tex. App.—San Antonio 2012, no
pet.) (citing Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983)). No single
provision taken alone will be given controlling effect; rather, all the provisions
must be considered with reference to the whole instrument. Id. Courts presume
that the parties to a contract intend every clause to have some effect. Id. (citing
Ogden v. Dickinson State Bank, 662 S.W.2d 330, 332 (Tex. 1983). Covered risks
5 and 6 are to be read in conjunction with the definition of Public Records, which
requires the record be established under state statute. Only then is the record
constructive notice to a purchaser.
The Texas Local Government Code requires the City to identify the property
owner, if known. See TEX. LOC. GOV’T CODE § 214.001(e). There is no question
that the City knew the owner’s correct name and address when the February Notice
-16- was prepared by the City. Therefore, the City was statutorily obligated to send the
February Notice to the proper owners. Id. Failure to send the February Notice to
the proper owner means the notice was not filed in the real property records so as
to be in the chain of title. Therefore, a search by grantor, grantee or owner would
not identify the February Notice so as to be constructive notice to a purchaser.
Stewart expects Plaintiffs will argue that if the owners name is not known, the City
may take other steps. That is irrelevant to whether the City filed a defective notice,
which it did in this case, and whether the February Notice was in the chain of title
so as to constitute constructive notice to a purchaser.
Plaintiffs have broadly claimed, without authority, that Stewart owes or
owed them a duty to investigate “matters of real property” filed in Public Records.
Stewart is not a title abstractor and owes no duty to examine title. Tamburine v.
Ctr Sav. Ass’n, 583 S.W.2d 942, 947 (Tex. Civ. App.—Tyler 1979, writ ref’d
n.r.e.). Plaintiffs cannot refute this case law. The only duty imposed on Stewart is
the duty to indemnify its insured against losses caused by defects in title subject to
the terms, conditions, exceptions and exclusions under the Policy. Chicago Title
Ins. Co. v. McDaniel, 875 S.W.2d 310, 311 (Tex. 1994). A title insurance
company owes no duty to point out any outstanding encumbrances. Martinka v.
Commw. Land Title Ins. Co., 836 S.W.2d 773, 777 (Tex. App.—Houston [1st
-17- Dist.] 1992, writ denied); see also Stewart Title Guar. Co. v. Cheatham, 764
S.W.2d 315, 320-21 (Tex. App.—Texarkana 1988, writ denied).
PRAYER THEREFORE, Appellant Stewart Title Guaranty Company respectfully
prays that this Court grant its Petition for Permission to Appeal the Amended
Order in all respects, and grant such other and further relief, both general and
special, at law or in equity, to which it is justly entitled.
-18- Dated: April 14, 2015 Respectfully submitted,
/s/ I Clay Rogers I. Clay Rogers State Bar No. 17172150 crogers@morganlewis.com Ankita Puri State Bar No. 24074920 ankita.puri@morganlewis.com MORGAN, LEWIS & BOCKIUS LLP 1000 Louisiana Street, Suite 4000 Houston, Texas 77002 Telephone: (713) 890-5000 Fax: (713) 890-5001 Appellate Counsel for Defendant- Appellant Stewart Title Guaranty Company
Scott R. Breitenwischer State Bar No. 02947695 scott.breitenwischer@roystonlaw.com Andrew Nash State Bar No. 24083550 andrew.nash@roystonlaw.com ROYSTON, RAYZOR, VICKERY & WILLIAMS, LLP 711 Louisiana Street, Suite 500 Houston, Texas 77002 Telephone: (713) 224-8380 Fax: (713) 225-9945 Trial Counsel for Defendant-Appellant Stewart Title Guaranty Company
-19- CERTIFICATE OF COMPLIANCE
I, I. Clay Rogers, certify that this Petition for Permission to Appeal
Amended Order Granting Plaintiffs’ Second Motion for Partial Summary
Judgment and Denying Defendant’s Motion for Summary Judgment and Granting
Defendant’s Motion for Permission to Appeal and to Stay Proceedings Pending
Appeal was prepared using Microsoft Word 2007, which indicated that the total
word count (exclusive of those items listed in Texas Rule of Appellate Procedure
9.4(i)(1)) is 4,299 words.
/s/ I. Clay Rogers I. Clay Rogers
-20- CERTIFICATE OF SERVICE
I, I. Clay Rogers, certify that on April 14, 2015, I filed and served an
electronic copy of this document and all exhibits thereto via the Court’s ECF
system. I further certify that on this same day, I served one electronic copy of the
Petition upon each of the following counsel of record for Plaintiffs-Appellees:
David B. West David Vanderhider COX SMITH MATTHEWS, INC. 112 E. Pecan Street, Suite 1800 San Antonio, Texas 78205
Attorneys for Plaintiffs-Appellees
/s/ I Clay Rogers I. Clay Rogers
-21- No. __________________ _________________________________________
IN THE COURT OF APPEALS FOR THE FOURTH DISTRICT OF TEXAS AT SAN ANTONIO, TEXAS _________________________________________
STEWART TITLE GUARANTY COMPANY, Defendant-Appellant v. VANTAGE BANK TEXAS, SUCCESSOR BY MERGER TO D’HANIS STATE BANK, and BANPROP, L.L.C., Plaintiffs-Appellees _______________________________________ On Appeal from the 150th Judicial District Court of Bexar County, Texas Cause No. 2013-CI-14899 (Honorable Laura Salinas) _________________________________________
APPENDIX TO APPELLANT’S UNOPPOSED PETITION FOR PERMISSION TO APPEAL AMENDED ORDER GRANTING PLAINTIFFS’ SECOND MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANT’S MOTION FOR PERMISSION TO APPEAL AND TO STAY PROCEEDINGS PENDING APPEAL _________________________________________
In compliance with rule 28.3 of the Texas Rules of Appellate Procedure,
Defendant-Appellant Stewart Title Guaranty Company submits this Appendix to
its Petition for Permission to Appeal Amended Order Granting Plaintiffs’ Second
Motion for Partial Summary Judgment and Denying Defendant’s Motion for
Summary Judgment and Granting Defendant’s Motion for Permission to Appeal
and to Stay Proceedings Pending Appeal containing the following items:
-22- Apx. A March 31, 2015 Amended Order Granting Plaintiffs’ Second Motion for Partial Summary Judgment and Denying Defendant’s Motion for Summary Judgment and Granting Defendant’s Motion for Permission to Appeal and to Stay Proceedings Pending Appeal Apx. B January 2008 Notice of Hearing Apx. C City of San Antonio v. D’Hanis State Bank, No. 04-10-00181-CV, 2010 WL 3249956 at *3 (Tex. App.—San Antonio, Aug. 18, 2010, no pet.) (mem. op.) Apx. D February 2008 Notice of Hearing Apx. E October 20, 2014 Letter from Judge Richard Price denying Stewart Title Guaranty Company’s Traditional and No Evidence Motion for Summary Judgment and Vantage Bank Texas, Successor by Merger to D’Hanis State Bank’s Motion for Partial Summary Judgment Apx. F Judge Salinas’s January 30, 2015 Order Granting Plaintiffs’ Second Motion for Partial Summary Judgment and Denying Defendant’s Second Motion for Summary Judgment Apx. G Loan Policy of Title Insurance Issued by Stewart Title Guaranty Company issued to D’Hanis State Bank, and Each Successor in Ownership Apx. H Texas Department of Insurance T-2 Form Apx. I Plaintiffs’ Response to Defendant’s Second Motion for Summary Judgment Apx. J Plaintiffs’ Third Amended Original Petition Apx. K October 2011 Notice of Hearing
-23- Appendix A CAUSE NO. 2013-CI-14899
VANTAGE BANK TEXAS, Successor by 5 IN THE DISTRICT COURT OF Merger to D'Hanis State Bank and BANPROP, L.L.C.,
Plaintiffs, BEXAR COUNTY, TEXAS v.
STEWART TITLE GUARANTY COMPANY,
Defendant, 150th JUDICIAL DISTRICT
ORDER GRANTING DEFENDANT STEWART TITLE GUARANTY COMPANY'S MOTION TO PERMIT INTERLOCUTORY APPEAL AND REQUEST FOR STAY PENDING APPEAL
On January 6, 2015, came on for consideration Plaintiffs' Second Motion for Partial
Summary Judgment ("Plaintiffs' Summary Judgment Motion") and Defendant Stewart Title
Guaranty Company's Second Traditional and No Evidence Motion for Summary Judgment
("Defendant's Summary Judgment Motion"). After considering the motions, responses, summary
judgment evidence, and all other matters properly before the Court, the Court is of the opinion
that Plaintiffs' Summary Judgment Motion should be GRANTED and Defendant's Summary
Judgment Motion should be DENIED.
MAR 3 1 2015 On 2015, came on for consideration Defendant Stewart Title
Guaranty Company's Motion to Permit Interlocutory Appeal and Request for Stay Pending
Appeal ("Appeal and Stay Motion"), Plaintiff Vantage Bank Texas, Successor By Merger To
D'Hanis State Bank, and Banprop, L. L. C., filed a response stating that it does not oppose
Defendant's request for permission to appeal and to stay all pending action in the district court
pending that appeal.
DB 1f 82768049.1 After considering the motion, response, and all other matters properly before the Court,
the Court is of the opinion that the issue of whether the City's "February Notice" was "recorded
in the Public Records" as the term "Public Records" is defined in the policy is a controlling
question of law as to which there is a substantial ground for difference of opinion, and that an
immediate appeal would materially advance the ultimate termination of the litigation. The Court
is therefore of the opinion that the Appeal and Stay Motion should be GRANTED.
It is, THEREFORE, ORDERED that Plaintiffs' Second Motion for Partial Summary
Judgment is GRANTED in its entirety.
It is further ORDERED that the issue of coverage is detennined in Plaintiffs' favor as a
matter of law such that the Loan Policy of Title Insurance issued by Defendant Stewart Title
Guaranty Company, policy serial number M-5952-000007292, affords coverage for Plaintiffs'
losses sustained or incurred by reason of (1) the violation or enforcement of a law, ordinance, or
governmental regulation restricting, regulating, prohibiting, or relating to the covered property,
or (2) an enforcement action based on the exercise of a governmental police power.
It is further ORDERED that Defendant Stewart Title Guaranty Company's Second
Traditional and No Evidence Motion for Summary Judgment is DENIED in its entirety.
It is further ORDERED that Defendant Stewart Title Guaranty Company's Motion to
Permit Interlocutory Appeal and Request for Stay Pending Appeal is GRANTED.
It is further ORDERED that Defendant Stewart Title Guaranty Company is permitted to
appeal the issue of whether the City's "February Notice" was "recorded in the Public Records" as
the term "Public Records" is defined in the policy and as contained in this Amended Order to the
2 DB1/ 82768049.1 Court of Appeals for the Fourth Court of Appeals District, pursuant to section 51.014(d) of the
Texas Civil Practice and Remedies Code and rule 28.3 of the Texas Rules of Appellate
Procedure.
It is further ORDERED that all proceedings in the district court in this cause are stayed
pending resolution of the interlocutory appeal.
Iva* 3 1 2015 SIGNED THIS day of , 2015. Laura Salinas Presiding Judge 186th 'District Court Bexar County, Texas
THE HONORABLE LAURA SALINAS, JUDGE PRESIDING
DB 1 / 82768 049. 1 3 APPROVED AS TO FORM:
By: David B. West State Bar No. 21196400 dbwest@coxsmith.com David A. Vanderhider State Bar No. 24070787 dvanderhider@coxsmith.com COX MITI MATTHEWS INCORPORATED 112 E. Pecan Street, Suite 1800 San Antonio, Texas 78205 (210) 554-5500 Telephone (210) 226-8395 Facsimile Attorneys for Vantage Bank Texas, Successor by Merger to D 'Hants State Bank, and Banprop, L.L.C.
1 By: I. y Rogers V State Bar No. 71721 crogers morganlewis. om Ankita Puri State Bar No. 24074920 anIcita.puriaAmorganlewis.com MORGAN LEWIS & BOCKIUS, LLP 1000 Louisiana Street, Suite 4000 Houston, Texas 77002 (713) 890-5000 —Telephone (713) 890-5001 —Facsimile
Scott Breitenwischer State Bar No. 02947695 Scott.breitenwischerAroystonlaw.cotn Andrew Nash State Bar No. 24083550 Andrewmaslaroystonlaw.corn ROYSTON, RAYZOR, VICKERY &WILLIAMS, L.L.P. Pennzoil Place 711 Louisiana Street, Suite 500 Houston, Texas 77002-8380 (713) 224-8380 -- Telephone (713) 225-9945 — Facsimile Attorneys for Stewart Title Guaranty Company
4 DB1/ 82768049.1 Appendix B CITY OF SAN ANTONIO
NOTICE OF HEARING OWNER'S NAME; Cantu Raul S. Family Ltd. Prtnrshp #2 PROPERTY AT: 119 Jackson-Keller 8546 Broadway St. Ste 234 San Antonio, TX 78217-6348 LEGAL DESCRIPTION: NCB 10060 BLK 13 LOT 7
A Public Hearing will be held before the City of San Antonio Dangerous Structure Determination Board on January 14., 2008 at 8:30 A.M in the City Council Chambers of the Municipal Plaza Building located at 114 W. Commerce Street. All owners, mortgagees, or lienholders of record have been notified of this hearing. The purpose of this hearing is to determine whether the above property constitutes a public nuisance in need of abatement. Any persons having an interest in the property or who may be affected by the conditions of the property shall be afforded the opportunity to be heard and to present evidence for the Board's consideration.
If the property is determined to be a public nuisance, the Board may order remediation action up to and including demolition of the structure at the owner's expense.
CONTACT FOR FURTHER INFORMATION: DAVID D. GARZA Director of Housing & Neighborhood Services 1,911,1110111111111111111111 P. 0. Box 839966 San Antonio, Texas 78283-3966
The Municipal Plaza Building is wheelchair accessible. Accessible parking spaces are available upon request. Interpreters for the deaf must be requested at least 24 hours prior to the hearing by calling 207-7245-TDD
1_1111111f 1111111111111111 II 2- STATE OF TEXAS COUNTY OF BEXAR This instrument was acknowledged before me on the -2- day of 200S, by DAVID D. GARZA, Director of Housing & Neighborhood Services, on behal f the CITY OF SAN ANTONIO, Bexar County, Texas, a Municipal Corporation.
4 ,4.;ti , REVES HERNANDEZ i e —1. NOTARY PUBLIC 7 STATE OF TEXAS rotary Pu State of Texas 2 / My Comm. Exp.11-18-20(M AFTER RECORDING RETURN TO: HOUSING & NEIGHBORHOOD SERVICES DEPARTMENT AT7N: DAVID D. GARZA Doc# 8887 Fees: $0,00 P. O. Box 839966 01/04/2008 3:05PM # Pages 1 Filed 4 Recorded in the Offic141 Public San Antonio, Texas 78283-3966 Records of BEXAR COUNTY GERARD RICKHOFF COUNTY CLEF iJCI ILA l'
S
DHSB-Banprop - 000/41 Appendix C City of San Antonio v. D'Hanis State Bank, Not Reported in S.W.3d (2010)
2010 WL 3249956 Only the Westlaw citation is currently available.
SEE TX R RAP RULE 47.2 FOR DESIGNATION AND SIGNING OF OPINIONS.
MEMORANDUM OPINION Court of Appeals of Texas, San Antonio.
CITY OF SAN ANTONIO, Texas, Appellant v. D'HANIS STATE BANK, Appellee.
No. 04-10-00181-CV. I Aug. 18, 2010.
From the 73rd Judicial District Court, Bexar County, Texas, Trial Court No. 2010-CI-01778; Michael Peden, Judge Presiding.
Attorneys and Law Firms
Savita Rai, Clarissa L. Chavarria, Assistant City Attorneys, Samuel C. Adams, Office of the City Attorney, San Antonio, TX, for Appellant.
R. Harry Akin, Akin & Akin LLP, Georgetown, TX, for Appellee.
Sitting: CATHERINE STONE, Chief Justice, PHYLIS J. SPEEDLIN, Justice, STEVEN C. HILBIG, Justice.
Opinion
MEMORANDUM OPINION
Opinion by CATHERINE STONE, Chief Justice.
*1 The City of San Antonio, Texas ("City") appeals the trial court's orders denying the City's plea to the jurisdiction and granting a temporary injunction in favor of D'Hanis State Bank ("Bank"). The City contends the trial court erred in denying its plea to the jurisdiction because the Bank lacked standing to challenge an order of the City's Dangerous Structure Determination Board ("Board"). We affirm the trial court's orders.
Background
On January 14, 2008, the Board issued a demolition order finding an apartment complex (the "Property") owned by The Raul S. Cantu Family Limited Partnership No. 2 ("Cantu") constituted a public nuisance and ordering its demolition. Although notice of the hearing regarding the demolition order was filed in the public notice records of Bexar County, the notice was not filed in the real property records. Cantu sought judicial review of the demolition order by filing a petition in district court in February of 2008.
In September of 2009, Cantu sold the Property to S.A. Eden Roc Apartments, LLC ("S.A. Eden Roc"). The Bank financed the purchase price for the Property and a construction loan for its renovation. The Warranty Deed with Vendor's Lien, which documented both the conveyance of the Property to S.A. Eden Roc and the Bank's vendor's lien, and the Deed of Trust, which further documented the Bank's lien, were filed in the real property records on September 8, 2009.
2013 Thomson Reuters, No claim to original U.S. Governm .o a City of San Antonio v. D'Hanis State Bank, Not Reported in S.W.3d (2010)
On September 18, 2009, the City granted S.A. Eden Roc a series of building permits relating to the renovation of the Property, and renovation work was commenced with financing provided by the Bank. On September 24, 2009, the City revoked the permits. At that time, the Bank had loaned approximately $516,000.00 to S.A. Eden Roc. Approximately $380,000.00 of the loan proceeds was used to pay the purchase price for the Property, and the balance of the loan proceeds was spent on renovations.
On October 15, 2009, the City moved to dismiss Cantu's lawsuit seeking judicial review of the demolition order, asserting, among other grounds, that Cantu had sold the Property. In addition to being filed over one and one-half years after Cantu filed the lawsuit, the City's motion was filed after the City was on notice that the Property had been sold, after the City granted S.A. Eden Roc permits to renovate the Property, and after the Bank had advanced substantial funds to renovate the Property. On October 21, 2009, the trial court signed an order granting the City's motion and dismissing Cantu's lawsuit.
On November 12, 2009 the Bank received notice that the City revoked the permits previously granted to S.A. Eden Roc and ordered work on the Property to stop. The Bank did not have notice of the demolition order until mid-December of 2009.
On February 4, 2010, the Bank filed suit against the City requesting a temporary restraining order and injunctive relief to prevent the demolition of the apartment complex. The City filed a plea to the jurisdiction, asserting the Bank lacked standing to pursue the relief it sought. The trial court denied the City's plea to the jurisdiction and granted a temporary injunction in favor of the Bank. The City appeals.
PLEA TO THE JURISDICTION
*2 We review a trial court's order granting or denying a plea to the jurisdiction de novo. Houston Mien. Employees Pension Sys. v. Ferrell, 248 S.W.3d 151, 156 (Tex.2007). We consider the facts alleged by the plaintiff, and we consider evidence submitted by the parties to the extent the evidence is relevant to the jurisdictional issue. Id.
The City contends the trial court erred in denying its plea to the jurisdiction because the Bank lacked standing to challenge the demolition order. The City asserts the Bank lacked standing because: (1) section 214.0012 of the Texas Local Government Code permits judicial review of a demolition order to be sought only by an owner or lienholder aggrieved by the order at the time the order is issued; (2) section 214.0012 provides the exclusive method for seeking judicial review of the demolition order; and (3) the Bank cannot collaterally attack the demolition order by seeking injunctive relief. I Each of these contentions is based on the premise that the Bank is seeking judicial review of the order by challenging the validity of the order as against all parties. Although the Bank's pleadings could be broadly read as asserting such a challenge, the Bank clarified its position at the hearing before the trial court. The Bank argued at the hearing that the trial court was not deprived of jurisdiction because the demolition order was unenforceable as against the Bank, which was an innocent lender for value similar to a bona fide purchaser. The Bank explained:
But the most important problem with this case is this-it's not whether the Cantus were given their rights and had their rights of the appeals and took care of that or whether Falcon Bank [Cantu's lender and the prior lienholder] had their rights and pursued those rights. It's what about D'Hanis State Bank, who had no actual and no constructive notice of this proceeding, of the order or of anything else. Because this building was allowed to stay up, because there was no publication of notice that could have been put in the real property records and would have given constructive notice to subsequent lien holders like this bank-because that wasn't done, they took the property as an innocent-well, they were an innocent lien extender or an innocent lender for value. The purpose of the Uniform Declaratory Judgments Act is "to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations." TEX. CIV. PRAC. & REM.CODE ANN. § 37.002(b) (Vernon 2008). Under the Act, a person interested under a deed or written contract is entitled to a determination regarding any question of construction
2013 1homson Reuters. No claim to original U.S. Government Works City of San Antonio v. D'Hanis State Bank, Not Reported in S.W.3d (2010)
or validity arising under the deed or contract and to obtain a declaration ofthe person's rights, status, or legal relations thereunder. Id. at § 37.004(a). In this case, the Bank is seeking a declaration of its rights under the Warranty Deed and Deed of Trust. In particular, the Bank is seeking a declaration that its rights under the Warranty Deed and Deed of Trust preclude the City from proceeding with the demolition of the apartment complex. Because the Bank is a person interested under a deed or written contract, the Act gives the Bank standing to seek declaratory relief, and the trial court did not err in denying the City's plea to the jurisdiction.
TEMPORARY INJUNCTION
*3 The decision to grant a temporary injunction lies in the sound discretion of the trial court and is subject to reversal only for a clear abuse of that discretion. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 211 (Tex.2002); Khaledi v. H.K. Global Trading, Ltd., 126 S.W.3d 273, 280 (Tex.App.-San Antonio 2003, no pet.). The court of appeals cannot reverse the trial court's decision unless the trial court acted unreasonably or in an arbitrary manner, without reference to guiding rules or principles. Butnaru, 84 S.W.3d at 211. An abuse of discretion does not exist when the trial court bases its decision on conflicting evidence and the evidence reasonably supports its conclusion. Butnaru, 84 S.W.3d at 211; Khaledi, 126 S.W.3d at 280.
The purpose of a temporary injunction is to preserve the status quo until a final hearing on the merits. Butnaru, 84 S.W.3d at 204; Khaledi, 126 S.W.3d at 279. To obtain a temporary injunction, the applicant must plead and prove three specific elements: (1) a cause of action against the defendant; (2) a probable right to the relief sought; and (3) a probable, imminent, and irreparable injury in the interim. Butnaru, 84 S.W.3d at 204; Khaledi, 126 S.W.3d at 280.
In its brief, the City does not directly address which element it contends the Bank failed to establish. The City does, however, assert that the City's failure to file the notice of the hearing regarding the demolition order in the real property records does not render the demolition order void. We construe this argument as a challenge to whether the Bank established a probable right to relief in view of the notice filed by the City. In establishing a probable right to the relief it sought, the Bank was not required to establish that it would prevail on final trial. Khaledi, 126 S.W.3d at 280.
Status as a bona fide lender/mortgagee is obtained if the lender/mortgagee obtained an interest in the property in good faith, for value and without notice of the claim or interest of a third party. Houston First Am. Say. v. Musick, 650 S.W.2d 764, 769 (Tex.1983); World Say. Bank, F.S.B. v. Gantt, 246 S.W.3d 299, 306 (Tex.App.-Houston [14th Dist.] 2008, no pet.). The City appears to argue that the Bank is not protected as a bona fide lender because the City filed a notice of the hearing regarding the demolition order with the Bexar County Clerk. See 'Musick, 650 S.W.2d at 769 (requiring bona fide lender to be without notice of a claim or interest of a third party); Gantt, 246 S.W.3d at 306 (same). However, section 214.001(e) of the Local Government Code provides that a notice of hearing regarding a demolition order is binding on subsequent grantees and lienholders only if the municipality files the notice of hearing in the Official Public Records of Real Property. See TEX. LOC. GOV'T CODE ANN.. § 214.001(e) (Vernon Supp.2009) (providing filing of the notice of the hearing regarding a demolition order is binding on subsequent lienholders after the filing of the notice in the Official Public Records of Real Property). The evidence is undisputed that the City's notice of hearing was filed in the public notice records which are maintained separately from the real property records. 2 Accordingly, under section 214.001(e), the notice was not binding on the Bank as a subsequent lienholder, and the City has failed to meet its burden of showing that the trial court abused its discretion in granting the temporary injunction.
CONCLUSION
*4 The trial court's orders are affirmed.
• . 1.(;.;,r Ti 2013 Thomson Reuters. N im to inirij ll.S. Cavern!. t VVW,•ks. City of San Antonio v. D'Hanis State Bank, Not Reported in S.W.3d (2010)
Footnotes 1 We note that the cases cited by the City to support its contention that a demolition order is not subject to collateral attack involve subsequent proceedings brought by the individuals or entities that owned the property at the time the demolition order was issued. 2 Although the City cites cases that hold that an instrument is considered recorded when deposited for recording with the clerk even if the instrument is not recorded by the clerk, the clerk in this case had recorded the notice of hearing. No evidence was presented that the City requested that the notice be recorded in the real property records instead of the public notice records where the clerk testified that such notices are routinely recorded. Accordingly, the cases cited by the City are readily distinguishable.
End or Document (.0 2013 Thomson Reuters. No claim to original U.S. Government Works.
201 3 Thomson Reuters. No claim to original U S. Governrnent Works. 4 Appendix D CITY OF SAN ANTONIO SCANNED 1.1111711111210.11111.11118131 NOTICE OF HEARING OWNER'S NAME: OLIVARES, PABLO GARZA PROPERTY AT: 14420 HIGGINS RD CIO LUIS A GALVAN 1831 TEXAS AVE SAN ANTONIO TEXAS 78228
LEGAL DESCRIPTION: NCB 10060 BLK 13 LOT 7
A Public Hearing will be held before the City of San Antonio Dangerous Structure Determination Board on February 11, 2008 at 8:30 A.M. in the City Council Chambers of the Municipal Plaza Building located at 114 W. Commerce Street. All owners, mortgagees, or lienholders of record have been notified of this hearing. The purpose of this hearing is to determine whether the above property constitutes a public nuisance in need of abatement. Any persons having an interest in the property or who may be affected by the conditions of the property shall be afforded the opportunity to be heard and to present evidence for the Board's consideration.
if the property is determined to be a public nuisance, the Board may order remediation action up to and including demolition of the structure at the owner's expense.
CONTACT FOR FURTHER INFORMATION: DAVID D. GARZA Director of Housing & Neighborhood Services P. 0. Box 839966 San Antonio, Texas 78283-3966 The Municipal Plaza Building is wheelchair accessible. Accessible parking spaces are available upon request. Interpreters for the deaf must be requested at least 24 hours prior to the hearing by calling 207-7245-TDD
STATE OF TEXAS COUNTY OF BEXAR This instrument was acknowledged before me on the 30 day of vc.---4 ) 200ff by DAVID D. GARZA, Director of Housing & Neighborhood Services, on behalf of the CI ANTONIO, Bexar County, Texas, a Municipal Corporation. .," Ilk, REYES HERNANDEZ , if t. NOTARY PUBLIC i MU OF TEXAS .4,,,,,,0 My Corrim ixr 11.11140w? Nota blic, State of Texas AFTER RECORDING RETURN TO: HOUSING & NEIGHBORHOOD SERVICES DEPARTMENT ATM DAVID D. GARZA P. 0 Box 839966 111111111111111 San Antonio, Texas 78283-3966
a
DHSB-Banprop - 000064 Appendix E RICHARD PRICE JUDGE 285111 DISTRICT (MUM. BEXAR. COUNTY COURTHOUSE SAN ANTONIO, TX 78205
(210) 335.2086
October 20, 2014
VIA EMAIL dbwest@coxsmith.com Mr. David B. West VIA EMAIL tivanderhider@coxsmith.com Mr. David A. Vanderhider Cox Smith Matthews Incorporated 112 East Pecan, Ste. 1800 San Antonio, Texas 78205
VIA EMAIL scott.breitenwischer@roystonlaw.com Mr. Scott R. Breitenwischer VIA EMAIL andrew.nash@roystonlaw.com Mr. Andrew R. Nash Royston, Rayzor, Vickery & Williams, LLP 711 Louisiana, Ste. 500 Houston, Texas 77002
RE: Cause No. 2013-CI-14899 Vantage Bank Texas, et al. vs. Stewart Title Guaranty Company Filed in the 150th District Court
Dear Counsel:
After considering Stewart Title Guaranty Company's Traditional and No Evidence Motion for Summary Judgment and Vantage Bank Texas, Successor by Merger to D'Hanis State Bank's Motion for Partial Summary Judgment, it is my ruling that all motions are denied. I request that Mr. West prepare the order and circulate it to o using counsel for approval as to form.
ery truly yours,
RP/dg 285 District Court Appendix F Cause No. 2013-CI-14899
VANTAGE BANK TEXAS, SUCCESSOR IN THE DISTRICT COURT BY MERGER TO D'HANIS STATE BANK, and BANPROP, L. L. C.,
Plaintiffs, 150111 JUDICIAL DISTRICT v.
Defendant. BEXAR COUNTY, TX
ORDER GRANTING PLAINTIFFS' SECOND MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING DEFENDANT'S SECOND MOTION FOR SUMMARY JUDGMENT
On January 6, 2015, came on for consideration Plaintiffs' Second Motion for Partial
Summary Judgment ( "Plaintiffs' Motion") and Defendant Stewart Title Guaranty Company's
Second Traditional and No Evidence Motion for Summary Judgment ("Defendant's Motion").
After considering the motions, responses, summary judgment evidence, and all other matters
properly before the Court, the Court is of the opinion that Plaintiffs' Motion should be
GRANTED and Defendant's Motion should be DENIED.
It is, therefore, ORDERED that Plaintiffs' Second Motion for Partial Summary
It is further ORDERED that the issue of coverage is determined in Plaintiffs' favor as a
matter of law such that the Loan Policy of Title Insurance issued by Defendant Stewart Title
Guaranty Company, policy serial number M-5952-000007292, affords coverage for Plaintiffs'
losses sustained or incurred by reason of (1) the violation or enforcement of a law, ordinance, or governmental regulation restricting, regulating, prohibiting, or relating to the covered property,
or (2) an enforcement action based on the exercise of a governmental police power.
It is further ORDERED that Defendant Stewart Title Guaranty Company's Second
Traditional and No Evidence Motion for Summary Judgment is DENIED in its entirety.
SIGNED THIS *4) day of January, 2015.
ONOR LE LA A SALINAS PRESI ING
2 APPROVED AS TO FORM ONLY:
By: David B. West State Bar No. 21196400 dbwest@coxsmith.com David A. Vanderhider State Bar No. 24070787 dvanderhider@coxsmith.com Bonnie K. Kirkland State Bar No. 24074539 bkirkland(@coxsmith.com COX SMITH MATTHEWS INCORPORATED 112 E. Pecan Street, Suite 1800 San Antonio, Texas 78205 (210) 554-5500 — Telephone (210) 226-8395 — Facsimile ATTORNEYS FOR VANTAGE BANK TEXAS, SUCCESSOR BY MERGER TO D'HANIS STATE BANK, AND BANPROP, L.L.C.
By: Scott Breitenwischer State Bar No. 02947695 Scott.breitenwischeraroystonlaw.com Andrew Nash State Bar No. 24083550 Andrew.nash(@roystonlaw.com Royston, Rayzor, Vickery & Williams, L.L.P. Pennzoil Place 711 Louisiana Street, Suite 500 Houston, Texas 77002-8380 (713) 224-8380 — Telephone (713) 225-9945 — Facsimile ATTORNEYS FOR STEWART TITLE GUARANTY COMPANY
3 5766297.1 Appendix G If you want information about coverage or need assistance to resolve complaints, please call our toll free number: 1-800-729-1902. If you make a claim under your policy, you must furnish written notice In accordance with Section 3 of the Conditions and Stipulations. Visit our World Wide Web site at: http://www.stewart.com
LOAN POLICY OF TITLE INSURANCE ISSUED BY
stewar title guaranty company
Any notice of claim and any other notice or statement in writing required to be given the Company under this Policy must be given to the Company at thaddress shown in Section 17 of the Conditions.
'''COVERED RISKS:
SUBJECT TO THE EXCLUSIONS FROM COVERAVEJHE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B AND THE CONDITIONS, STEWART TITLE op,0001.7Komfaki,yi'.'470,4,pprporation (the "Company') insures, as of Date of Policy and, to the extent stated in CoyeredT*4141310004tOPate*?..plicy, against loss or damage, not exceeding the Amount of Insurance, sustained or ineUtredtftffeltia(tced.4.1:0.§oriip,
t. Title being vested other than as stated50'!Sthedule,.,, 2 Any defect in or lien or encumbrance ofithe7itle:;,ThIS'bovered4Riskindlikes • but is not limited to insurance against loss from: (a) A defect in the Title caused by: (I) forgery, fraud, undue influence, dureskincompetencyoncapacity or impersonation; (ii) failure of any person or Entity to have authorized a transfer or conveyance; (iii) a document affecting Title not properly dreated, executed, .witnessed, sealed, acknowledged, notarized or delivered; .„ (iv) failure to perform those acts niaceeSe itoi'create a doel.'ine,rithqefectronic means authorized by law; (v) a document executed under a'gikalfjed,Iexpired or otheffiiSW,I0altid power of attorney; (vi) a document not properly flied, 46Eid '15kindexed4t7the101iblib- 'ecords including failure to perform those acts by electronic means authorized by4aWticri7 (vii) a detective judicial or administi1iVOproceedi4 (b) The lien of real estate taxes or assessments e7.1W*'?a governmental authority due or payable, but unpaid. (c) Any encroachment, encumbrance, vidIalfir.-,!Nadation;•,or,adyersecircumstance affecting the Title that would be disclosed by an accurate and complete land*rVey "encroachment" includes encroachments of existing improvements located on the Land tiritoS4jolning:'1ankic:..alid encroachments onto the Land of existing improvements located on adjoining land. 3. Lack of good and indefeasible Title. 4, No right of access to and from the Land. Covered Risks continued on next page,
IN WITNESS WHEREOF, Stewart Title Guararity!Company::baa.:c4usad this policy to be signed and sealed by its duly authorized officers as of Date of Policy shown imScliedLiltiA
Countersigned by:
4, r )0314:d WNW Senior Chairman o the Boar Authorized Signature
Service Title Company Chairman ofthe 8 rd Company
San Antonio, TX City, State President „,4, 4n.`--$4.., SERVICE TITLE COMPANY 7334 Blanco Road Policy NI-5952.000007292 Serie! No_ San Antonio, Texas 78216 (210) 344-8820 11BIT rm 7-2 Loan Policy (5-. ID: 430029
D-00156 COVERED RISKS CONTINUED FROM PAGE 1
a The violation or enforcement of any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting or relating to: (a) the occupancy, use or enjoyment of the Land; (b) the character, dimensions or location of any improvement erected on the Land; (c) subdivision of land; or (d) environmental protection if a notice, describing any part of the Land, is recorded in the Public Records setting forth the violation or intention to enforce, but only to the extent of the violation or enforcement referred to in that notice. 6. An enforcement action based on the exercise of a governmental police power not covered by Covered Risk 5 if a notice of the enforcement action, describing any part of the Land, is recorded in the Public Records, but only to the extent of the enforcement referred to in that notice. 7. The exercise of the rights of eminent domain if a notice of the exercise, describing any part of the Land, is recorded in the Public Records. B. Any taking by a governmental body that has occurred and is binding on the rights of a purchaser for value without Knowledge. 9. The invalidity or unenforceability of the lien of the Insured Mortgage upon the Title, This Covered Risk includes but Is not limited to insurance against loss from any of the following impairing the lien of the Insured Mortgage: (a) forgery, fraud, undue influence, duress, incompetency, incapacity or impersonation; (b) failure of any person or Entity to have authorized a transfer or conveyance; (c) the Insured Mortgage not being property created, executed, witnessed, sealed, acknowledged, notarized or delivered; (d) failure to perform those acts necessary to create a document by electronic means authorized by law; (e) a document executed under a falsified, expired or otherwise invalid power of attorney; (f) a document not properly filed, recorded or indexed in the Public Records including failure to perform those acts by electronic means authorized by law; or (g) a defective judicial or administrative proceeding. 10. The lack of priority of the lien of the Insured Mortgage over any other lien or encumbrance. 11. The lack of priority of the lien of the Insured Mortgage (a) as security for each and every advance of proceeds of the loan secured by the Insured Mortgage over any statutory or constitutional mechanic's, contractor's, or materialman's lien for services, labor or material having its inception on or before Date of Policy; and (b) over the lien of any assessments for street improvements under construction or completed at Date of Policy. 12. The invalidity or unenforceability of any assignment of the Insured Mortgage, provided the assignment is shown in Schedule A, or the failure of the assignment shown in Schedule A to vest title to the Insured Mortgage in the named Insured assignee free and clear of all liens. 13. The invalidity, unenforceability, lack of priority or avoidance of the lien of the Insured Mortgage: (a) resulting from the avoidance in whole or in part, or from a court order providing an alternative remedy, of any transfer of all or any part of the title to or any interest in the Land occurring prior to the transaction creating the lien of the Insured Mortgage because that prior transfer constituted a fraudulent or preferential transfer under federal bankruptcy, state insolvency or similar creditors' rights laws; or (b) because the Insured Mortgage constitutes a preferential transfer under federal bankruptcy, state insolvency or similar creditors' rights laws by reason of the failure of its recording in the Public Records: (i) to be timely, or (ii) to impart notice of its existence to a purchaser for value or a judgment or lien creditor. 14. Any defect In or lien or encumbrance on the Title or other matter included in Covered Risks 1 through 13 that has been created or attached or has been flied or recorded in the Public Records subsequent to Date of Policy and prior to the recording of the Insured Mortgage in the Public Records. The Company will also pay the costs, attorneys' fees and expenses incurred in defense of any matter insured against by this Policy, but only to the extent provided in the Conditions.
EXCLUSIONS FROM COVERAGE
The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damage, costs, attorneys' tees or expenses that arise by reason of: 1. (a) Any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting or relating to: (i) the occupancy, use, or enjoyment of the Land; (ii) the character, dimensions or location of any improvement erected on the Land; (iii) subdivision of land; or (iv) environmental protection; or the effect of any violation of these laws, ordinances or governmental regulations. This Exclusion 1(a) does not modify or limit the coverage provided under Covered Risk 5. (b) Any governmental police power. This Exclusion 1(b) does not modify or limit the coverage provided under Covered Risk 6. 2. Rights of eminent domain, This Exclusion does not modify or limit the coverage provided under Covered Risk 7 or 8. 3. Defects, liens, encumbrances, adverse claims or other matters: (a) created, suffered, assumed or agreed to by the Insured Claimant; (b) not Known to the Company, not recorded in the Public Records at Date of Policy, but Known to the Insured Claimant and not disclosed in writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an Insured under this policy; (c) resulting in no loss or damage to the Insured Claimant; (d) attaching or created subsequent to Date of Policy (however, this does not modify or limit the coverage provided under Covered Risk 11, 13 or 14); or (e) resulting in loss or damage that would not have been sustained if the Insured Claimant had paid value for the Insured Mortgage. 4. Unentorceability of the lien of the Insured Mortgage because of the inability or failure of an Insured to comply with applicable doing business laws of the state where the Land is situated.
Page 2
D-00157 EXCLUSIONS FROM COVERAGE CONTINUED FROM PAGE 2
5. Invalidity or unenforceabillty in whole or in part of the lien of the Insured Mortgage that arises out of the transaction evidenced by the Insured Mortgage and is based upon usury or any consumer credit protection or truth in lending law. 6. Any claim, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors' rights laws, that the transaction creating the lien of the Insured Mortgage, is: (a) a fraudulent conveyance or fraudulent transfer; or (b) a preferential transfer for any reason not stated in Covered Risk 13(b) of this policy. 7. Any lien on the Title for real estate taxes or assessments imposed by governmental authority and created or attaching between Date of Policy and the date of recording of the Insured Mortgage in the Public Records, This exclusion does not modify or limit the coverage provided under Covered Risk 11(b), 8, The refusal of any person to purchase, lease or lend money on the estate or interest covered hereby in the land described in Schedule A because of Unmarketable Title.
CONDITIONS
1. DEFINITION OF TERMS. have had against any predecessor Insured, unless the successor (a) "Amount of Insurance": the amount stated in Schedule A, as may be acquired the Indebtedness as a purchaser for value without increased or decreased by endorsement to this policy, increased by Knowledge of the asserted defect, lien, encumbrance or other matter Section 8(b), or decreased by Section 10 of these Conditions. insured against by this policy. (b) "Date of Policy": The date designated as "Date of Policy' in Schedule A. (f) "Insured Claimant": an Insured claiming loss or damage. (c) "Entity": A corporation, partnership, trust, limited liability company or (g) "Insured Mortgage": the Mortgage described in paragraph 4 of other similar legal entity. Schedule A. (d) "Indebtedness": The obligation secured by the Insured Mortgage (h) "Knowledge" or "Known": actual knowledge, not constructive including one evidenced by electronic means authorized by law, and if knowledge or notice that may be imputed to an Insured by reason of the that obligation is the payment of a debt, the Indebtedness is the sum of: Public Records or any other records that impart constructive notice of (i) the amount of the principal disbursed as of Date of Policy; matters affecting the Title. (ii) the amount of the principal disbursed subsequent to Date of (i) "Land": the land described in Schedule A, and affixed improvements Policy; that by law constitute real property. The term "Land" does not include any (iii) construction loan advances made subsequent to Date of Policy property beyond the lines of the area described in Schedule A, nor any for the purpose of financing in whole or in part the construction of an right, title, interest, estate or easement in abutting streets, roads, avenues, improvement to the Land or related to the Land that the Insured was alleys, lanes, ways or waterways, but this does not modify or limit the end continued to be obligated to advance at Date of Policy and at the extent that a right of access to and from the Land is insured by this policy. date of the advance; (j) "Mortgage': mortgage, deed of trust, trust deed, or other security (iv) interest on the loan; instrument, including one evidenced by ;electronic means authorized by (v) prepayment premiums; exit tees and other similar fees or law. penalties allowed by law; (k) 'Public Records": records established under state statutes at Date (vi) expenses of foreclosure and any other costs of enforcement; of Policy for the purpose of imparting constructive notice of matters relating (vii) amounts advanced to assure compliance with laws or to protect to real property to purchasers for value and without Knowledge. With the lien or the priority of the lien of the Insured Mortgage before the respect to Covered Risk 5(d), "Public Records" shall also include acquisition of the estate or interest in the Title; environmental protection liens filed in the records of the clerk of the (viii) amounts to pay taxes and insurance; and. United States District Court for the district where the Land is located. (ix) reasonable amounts expended to prevent deterioration of (I) "Title": the estate or Interest .described in Schedule A. improvements; but reduced by the total of all payments and by any (M) "Unmarketable Title": Title affected by an alleged or apparent matter amount forgiven by an Insured. that would permit a prospective purchaser or lessee of the Title or lender "Insured': the Insured named in Schedule A. on the Title or a prospective purchaser of the Insured Mortgage to be (I) The term "Insured' also includes: released from the obligation to purchase, lease or lend it there is a (A) the owner of the Indebtedness and each successor in contractual condition requiring the delivery of marketable title. ownership of the Indebtedness, whether the owner or successor owns the Indebtedness for its own account or as a trustee or 2. CONTINUATION OF INSURANCE. other fiduciary, except a successor who is an obligor under the The coverage of this policy shall continue in force as of Date of Policy in provisions of Section 12(c) of these Conditions; favor of an Insured after acquisition of the Title by an Insured or after (B) if the Indebtedness is evidenced by a "transferable record," conveyance by an Insured, but only so long as the Insured retains an the person or Entity who has "control" of the "transferable estate or interest in the Land, or holds an obligation secured by a purchase record," as these terms are defined by applicable electronic money Mortgage given by a purchaser from the Insured, or only so long transactions law; as the Insured shall have liability by reason of warranties in any transfer (C) successors to an Insured by dissolution, merger, or conveyance of the Title. This policy shall not continue in force in favor consolidation, distribution or reorganization; of any purchaser from the Insured of either (I) an estate or interest in the (D) successors to an Insured by its conversion to another Land, or (ii) an obligation secured by a purchase money Mortgage given kind of Entity; to the Insured. (E) a grantee of an Insured under a deed delivered without payment of actual valuable consideration conveying the Title: 3. NOTICE OF CLAIM TO BE GIVEN BY INSURED CLAIMANT. (1) If the stock, shares, memberships, or other equity The Insured shall notify the Company promptly in writing (i) in case of any interests of the grantee are wholly-owned by the named litigation as set forth in Section 5(a) below, or (ii) in case Knowledge shall Insured, come to an Insured of any claim of title or interest that is adverse to the (2) If the grantee wholly owns the named Insured, or Title or the lien of the Insured Mortgage, as insured, and that might cause (3) If the grantee is wholly-owned by an affiliated Entity of loss or damage for which the Company may be liable by virtue of this the named Insured, provided the affiliated Entity and the policy. If the Company is prejudiced by the failure of the Insured Claimant named Insured are both wholly-owned by the same person to provide prompt notice, the Company's liability to the Insured Claimant or Entity; under the policy shall be reduced to the extent of the prejudice. (F) any government agency or instrumentality that is an insurer Subject to the provisions of this policy, upon acquisition of all or any part or guarantor under an insurance contract or guaranty insuring of the Title pursuant to the provisions of Section 2 of these Conditions, or guaranteeing the Indebtedness secured by the Insured when, after the Date of the Policy, the Insured notifies the Company as Mortgage, or any part of it, whether named as an Insured or not; required herein of a lien, encumbrance, adverse claim or other defect in (ii) With regard to (A), (B), (C), (D) and (E) reserving, however, all Title insured by this policy that is not excluded or excepted from the rights and defenses as to any successor that the Company would coverage of this policy, the Company shall promptly investigate the charge Page 3
D-00158 CONDITIONS Continued
to determine whether the lien, encumbrance, adverse claim or defect or Mortgage, or any other matter as insured. If the Company is prejudiced other matter is valid and not barred by law or statute. The Company shall by the failure of the Insured to furnish the required cooperation, the notify the Insured in writing, within a reasonable time, of its determination Company's obligations to the Insured under the policy shall terminate, as to the validity or invalidity of the Insured's claim or charge under the including any liability or obligation to defend, prosecute, or continue any policy. If the Company concludes that the lien, encumbrance, adverse litigation, with regard to the matter or matters requiring such cooperation. claim or defect is not covered by this policy, or was otherwise addressed (b) The Company may reasonably require the Insured Claimant to submit in the closing of the transaction in connection with which this policy was to examination under oath by any authorized representative of the issued, the Company shall specifically advise the Insured of the reasons Company and to produce for examination, inspection and copying, at for its determination. If the Company concludes that the lien, encumbrance, such reasonable times and places as may be designated by the authorized adverse claim or defect is valid, the Company shall take one of the representative of the Company, all records, in whatever medium following actions: (I) institute the necessary proceedings to clear the lien, maintained, including books, ledgers, checks, memoranda, encumbrance, adverse claim or defect from the Title as insured; (ii) correspondence, reports, e-mails, disks, tapes, and videos whether indemnify the Insured as provided in this policy; (iii) upon payment of bearing a date before or after Date of Policy, that reasonably pertain to the appropriate premium and charges therefor, issue to the Insured Claimant loss or damage. Further, If requested by any authorized representative of or to a subsequent owner, mortgagee or holder of the estate or interest in the Company, the Insured Claimant shall grant its permission, in writing, the Land insured by this policy, a policy of title insurance without exception for any authorized representative of the Company to examine, inspect for the lien, encumbrance, adverse claim or defect, said policy to be in an and copy all of these records in the custody or control of a third party that amount equal to the current value of the Land or, if a mortgagee policy, the reasonably pertain to the loss or damage. All information designated as amount of the loan; (iv) indemnify another title insurance company in confidential by the Insured Claimant provided to the Company pursuant connection with its issuance of a policy(ies) of title insurance without to this Section shall not be disclosed to others unless, in the reasonable exception for the lien, encumbrance, adverse claim or detect; (v) secure judgment of the Company, It is necessary in the administration of the a release or other document discharging the lien, encumbrance, adverse claim. Failure of the Insured Claimant to submit for examination under claim or defect; or (vi) undertake a combination of (i) through (v) herein. oath, produce any reasonably requested information or grant permission to secure reasonably necessary information from third parties as required 4. PROOF OF LOSS. in this subsection, unless prohibited by law or governmental regulation. In the event the Company is unable to determine the amount of loss or shall terminate any liability of the Company under this policy as to that claim. damage, the Company may, at its option, require as a condition of payment (c) If the Insured demands that the Company accept a settlement offer that the Insured Claimant furnish a signed proof of loss. The proof of loss that is not greater than the Amount of Insurance or if the Insured expressly must describe the defect, lien, encumbrance or other matter insured agrees that a settlement offer should be accepted, the Company has a against by this policy that constitutes the basis of loss or damage and right to be reimbursed if it has timely asserted its reservation of rights and shall state, to the extent possible, the basis of calculating the amount of notified the Insured that it intends to seek reimbursement if it pays to the loss or damage. settle or defend a claim that is not covered by the policy.
5. DEFENSE AND PROSECUTION OF ACTIONS. 7. OPTIONS TO PAY OR OTHERWISE SETTLE CLAIMS; TERMINATION (a) Upon written request by the Insured, and subject to the options OF LIABILITY. contained in Sections 3 and 7 of these Conditions, the Company, at its In case of a claim under this policy, the Company shall have the following own cost and without unreasonable delay, shall provide for the defense of additional options: an Insured in litigation In which any third party asserts a claim covered by (a) To Pay or Tender Payment of the Amount of Insurance or to Purchase this policy adverse to the Insured. This obligation is.limited to only those the Indebtedness. stated causes of action alleging matters insured against by this policy. (i) to pay or tender payment of the Amount of Insurance under this The Company shall have the right to select counsel of its choice (subject policy together with any costs, attorneys' tees and expenses incurred to the right of the Insured to object for reasonable cause) to represent the by the Insured Claimant that were authorized by the Company up to Insured as to those stated causes of action. It shall not be liable for and the time of payment or tender of payment and that the Company is will not pay the fees of any other counsel. The Company will not pay any obligated to pay; or fees, costs or expenses incurred by the Insured in the defense of those (ii) to purchase the Indebtedness for the amount of the causes of action that allege matters not insured against by this policy. Indebtedness on the date of purchase, together with any costs, (b) The Company shall have the right, in addition to the options contained attorneys' fees and expenses incurred by the Insured Claimant that in Sections 3 and 7, at its own cost, to institute and prosecute any action were authorized by the Company up to the time of purchase and that or proceeding or to do any other act that in its opinion may be necessary the Company is obligated to pay, or desirable to establish the Title or the lien of the Insured Mortgage, as When the Company purchases the Indebtedness, the Insured shall insured, or to prevent or reduce loss or damage to the Insured. The transfer, assign, and convey to the Company the Indebtedness and the Company may take any appropriate action under the terms of this policy, Insured Mortgage, together with any collateral security. whether or not it shall be liable to the Insured. The exercise of these rights Upon the exercise by the Company of either of the options provided for in shall not be an admission of liability or waiver of any provision of this subsections (a)(1) or (ii), all liability and obligations of the Company to the policy. If the Company exercises its rights under this subsection, it must Insured under this policy, other than to make the payment required in do so diligently. those subsections, shall terminate, including any liability or obligation to (c) Whenever the Company brings an action or asserts a defense as defend, prosecute, or continue any litigation. required or permitted by this policy, the Company may pursue the litigation (b) To Pay or Otherwise Settle With Parties Other than the Insured or to a final determination by a court of competent jurisdiction and it expressly With the Insured Claimant. reserves the right, in its sole discretion, to appeal from any adverse (i) to pay or otherwise settle with other parties for or in the name of judgment or order. When the Company has reasonable grounds to dispute an Insured Claimant any claim insured against under this policy. In coverage tinder this policy, the Company may reserve its rights to pay addition, the Company will pay any costs, attorneys' fees and the claim and the costs of defense and seek reimbursement from the expenses incurred by the Insured Claimant that were authorized by Insured for all amounts paid for which there was no coverage. the Company up to the time of payment and that the Company is obligated to pay; or 6. DUTY OF INSURED CLAIMANT TO COOPERATE. (ii) to pay or otherwise settle with the Insured Claimant the loss or (a) in all cases where this policy permits or requires the Company to damage provided for under this policy, together with any costs, prosecute or provide for the defense of any action or proceeding and any attorneys' fees and expenses incurred by the Insured Claimant that appeals, the Insured shall secure to the Company the right to so prosecute were authorized by the Company up to the time of payment and that or provide defense in the action or proceeding, including the right to use, the Company is obligated to pay. at its option. the name of the Insured for this purpose. Whenever requested Upon the exercise by the Company of either of the options provided for in by the Company, the Insured, at the Company's expense, shall give the subsections (b)(i) or (ii), the Company's obligations to the Insured under Company all reasonable aid (i) in securing evidence, obtaining witnesses, this policy for the claimed loss or damage, other than the payments prosecuting or defending the action or proceeding, or effecting settlement, required to be made, shall terminate, including any liability or obligation to and (ii) in any other lawful act that in the opinion of the Company may be defend, prosecute or continue any litigation. necessary or desirable to establish the Title, the lien of the Insured Page 4
D-00159 CONDITIONS Continued
5. DETERMINATION AND EXTENT OF LIABILITY. If a payment on account of a claim does not luny cover the loss of the This policy is a contract of indemnity against actual monetary loss or Insured Claimant, the Company shall defer the exercise of its right to damage sustained or incurred by the Insured Claimant who has suffered recover until after the Insured Claimant shall have recovered its loss. loss or damage by reason of matters insured against by this policy. (b) The Insured's Rights and Limitations. (a) The extent of liability of the Company for loss or damage under this (I) The owner of the Indebtedness may release or substitute the policy shall not exceed the least of: personal liability of any debtor or guarantor, extend or otherwise (i) the Amount of Insurance; modify the terms of payment, release a portion of the Title from the (ii) the Indebtedness; lien of the Insured Mortgage, or release any collateral security for (iii) the difference between the value of the Title as insured and the the Indebtedness, if it does not affect the enforceability or priority of value of the Title subject to the risk insured against by this policy; or the lien of the Insured Mortgage. (iv) If a government agency or instrumentality is the Insured Claimant, (ii) If the Insured exercises a right provided in (b)(i), but has the amount it paid in the acquisition of the Title or the Insured Mortgage Knowledge of any claim adverse to the Title or the lien of the Insured in satisfaction of its insurance contract or guaranty. Mortgage insured against by this policy, the Company shall be required (b) If the Company pursues Its rights under Section 3 or 5 and is to pay only that part of any losses insured against by this policy that unsuccessful in establishing the Title or the lien of the Insured Mortgage, shall exceed the amount, if any, lost to the Company by reason of the as insured, impairment by the Insured Claimant of the Company's right of subrogation. (i) the Amount of Insurance shall be increased by 10%, and (c) The Company's Rights Against Non-insured Obligors. (e) the Insured Claimant shall have the right to have the loss or The Company's right of subrogation includes the Insured's rights against damage determined either as of the date the claim was made by the non-insured obligors including the rights of the Insured to indemnities, Insured Claimant or as of the date it is settled and paid. guaranties, other policies of insurance or bonds, notwithstanding any (c) In the event the Insured has acquired the Title in the manner described terms or conditions contained in those instruments that address in Section 2 of these Conditions or has conveyed the Title, then the extent subrogation rights. The Company's right of subrogation shall not be avoided of liability of the Company shall continue as set forth in Section 8(a) of by acquisition of the Insured Mortgage by an obligor (except an obligor these Conditions. described in Section 1(e)(i)(F) of these Conditions) who acquires the (d) In addition to the extent of liability under (a), (b) and (c), the Company Insured Mortgage as a result of an indemnity, guarantee, other policy of will also pay those costs, attorneys' fees and expenses incurred in insurance, or bond and the obligor will not be an Insured under this policy. accordance with Sections 5 and 7 of these Conditions. 13. ARBITRATION. 9. LIMITATION OF LIABILITY. Either the Company or the Insured may demand that the claim or (a) If the Company establishes the Title, or removes the alleged defect, controversy shall be submitted to arbitration pursuant to the Title Insurance lien or encumbrance, or cures the lack of a right of access to or from the Arbitration Rules of the American Land Title Association ("Rules"). Except Land, or establishes the lien of the Insured Mortgage, all as insured, or as provided in the Rules, there shall be no joinder or consolidation with takes action in accordance with Section 3 or 7, in a reasonably diligent claims or controversies of other persons. Arbitrable matters may include, manner by any method, including litigation and the completion of any but are not limited to, any controversy or claim between the Company appeals, it shall have fully performed its obligations with respect to that and the Insured arising out of or relating to this policy, any service in matter and shall not be liable for any loss or damage caused to the Insured. connection with its issuance or the breach of a policy provision, or to any (b) In the event of any litigation, including litigation by the Company or other controversy or claim arising out of the transaction giving rise to this with the Company's consent, the Company shall have no liability for loss policy. All arbitrable matters when the Amount of Insurance is $2,000,000 or damage until there has been a final determination by a court of competent or less shall be arbitrated at the option of either the Company or the jurisdiction, and disposition of all appeals, adverse to the Title or to the lien Insured, unless the Insured is an individual person (as distinguished from of the Insured Mortgage, as insured. an Entity). All arbitrable matters when the Amount of Insurance is in (c) The Company shall not be liable for loss or damage to the Insured for excess of $2,000,000 shall be arbitrated only when agreed to by both the liability voluntarily assumed by the Insured in settling any claim or suit Company and the Insured. Arbitration pursuant to this policy and under without the prior written consent of the Company. the Rules shall be binding upon the parties. Judgment upon the award rendered by the Arbitrator(s) may be entered in any court of competent 10. REDUCTION OF INSURANCE; REDUCTION OR TERMINATION OF jurisdiction. LIABILITY. (a) All payments under this policy, except payments made for costs, 14. LIABILITY LIMITED TO THIS POLICY; POLICY ENTIRE CONTRACT. attorneys' fees and expenses, shall reduce the Amount of Insurance by (a) This policy together with all endorsements, if any, attached to it by the amount of the payment. However, any payments made prior to the the Company is the entire policy and contract between the Insured and acquisition of Title as provided in Section 2 of these Conditions shall not the Company. In interpreting any provision of this policy, this policy shall reduce the Amount of Insurance afforded under this policy except to the be construed as a whole. extent that the payments reduce the Indebtedness. (b) Any claim of loss or damage that arises out of the status of the Title (b) The voluntary satisfaction or release of the insured Mortgage shall or lien of the insured Mortgage or by any action asserting such claim, terminate all liability of the Company except as provided in Section 2 of shall be restricted to this policy. these Conditions. (c) Any amendment of or endorsement to this policy must be in writing and authenticated by an authorized person, or expressly incorporated by 11. PAYMENT OF LOSS. Schedule A of this policy. When liability and the extent of loss or damage have been definitely fixed (d) Each endorsement to this policy issued at any time is made a part of in accordance with these Conditions, the payment shall be made within this policy and is subject to all of its terms and provisions. Except as the 30 days. endorsement expressly states, it does not (i) modify any of the terms and provisions of the policy, (ii) modify any prior endorsement, (iii) extend the 12. RIGHTS OF RECOVERY UPON PAYMENT OR SETTLEMENT. Date of Policy or (iv) increase the Amount of Insurance. Each Commitment, (a) The Company's Right to Recover. endorsement or other form, or provision in the Schedules to this policy Whenever the Company shall have settled and paid a claim under this that refers to a term defined in Section 1 of the Conditions shall be deemed policy, it shall be subrogated and entitled to the rights of the Insured to refer to the term regardless of whether the term is capitalized in the Claimant in the Title or Insured Mortgage and all other rights and remedies Commitment, endorsement or other form, or Schedule. Each Commitment, in respect to the claim that the Insured Claimant has against any person endorsement or other form, or provision in the Schedules that refers to or property, to the extent of the amount of any loss, costs, attorneys' fees the Conditions and Stipulations shall be deemed to refer to the Conditions and expenses paid by the Company. If requested by the Company, the of this policy. Insured Claimant shall execute documents to evidence the transfer to the Company of these rights and remedies. The Insured Claimant shall permit 15. SEVERABILITY. the Company to sue, compromise or settle in the name of the Insured In the event any provision of this policy, in whole or in part, is held invalid Claimant and to use the name of the Insured Claimant in any transaction or unenforceable under applicable law, the policy shall be deemed not to or litigation involving these rights and remedies. include that provision or such part held to be invalid and all other provisions shall remain in full force and effect. Page 5
D-00160 CONDITIONS Continued
16. CHOICE OF LAW; FORUM. (a) Choice of Law: The Insured acknowledges the Company has underwritten the risks covered by this policy and determined the premium charged therefor in reliance upon the law affecting interests in real property and applicable to the interpretation, rights, remedies or enforcement of policies of title insurance of the jurisdiction where the Land is located. Therefore, the court or an arbitrator shall apply the law of the jurisdiction where the Land is located to determine the validity of claims against the Title or the lien of the Insured Mortgage that are adverse to the Insured, and in interpreting and enforcing the terms of this policy. In neither case shall the court or arbitrator apply its conflicts of laws principles to determine the applicable law. (b) Choice of Forum: Any litigation or other proceeding brought by the Insured against the Company must be tiled only in a state or federal court within the United States of America or its territories having appropriate jurisdiction.
17. NOTICES, WHERE SENT. Any notice of claim and any other notice or statement in writing required to be given the Company under this Policy must be given to the Company at P.O. Box 2029, Houston, TX 77252-2029.
Page 6 stewarr ._.._. t, Io gueranly company
D-00161 T-2 Loan Policy Schedules - Form Prescribed by Texas Department of Insurance - Revised 5/1/2008 Name and Address of Title Insurance Company: Stewart Title Guaranty Company, P.O. Box 2029, Houston, TX, 77252.
Schedule A
File No.: 0903012 Policy No.: M-5952-000007292
Loan No.:
Amount of Insurance: $900,000.00 Premium: $125.00
Date of Policy: September 8, 2009
1. Name of Insured:
D'Hanis State Bank, and each successor in ownership of the indebtedness secured by the insured mortgage, except a successor who is an obligor under the provisions of Section 12(C) of the Conditions and Stipulations.
2. The estate or interest in the Land that is encumbered by the Insured Mortgage is:
Fee Simple.
3. Title is insured as vested in:
S A Eden Roc Apartments, LLC
4. The Insured Mortgage, and its assignments, if any, are described as follows:
Vendor's lien retained in deed dated September 4, 2009, executed by The Raul S. Cantu Family Limited Partnership No. 2 a/k/a The Raul S. Cantu No. 2 Family Limited Partnership, a Texas limited partnership to S A Eden Roc Apartments, LLC, a Texas Limited Liability Company, securing payment of one note in the principal amount of $900,000.00, payable to D'Hanis State Bank, said note additionally secured by deed of trust to Laurie Mayfield, Trustee, said deed of trust filed for record on September 8, 2009, under Bexar County Clerk's File No. 20090176216.
5. The Land referred to in this policy is described as follows:
A 0.916 of an acre, or 39,903 square feet, more or less, tract of land, being all of Lot 7, Block 13, New City Block 10060, EAST SHEARER HILLS ADDITION, situated in the City of San Antonio, Bexar County, Texas, according to plat thereof recorded in Volume 4500, Page 229, Deed and Plat Records of Bexar County, Texas. Said 0.916 of an acre being more particularly described by metes and bounds in Exhibit "A" attached hereto and made a part hereof for all intents and purposes.
Schedule A - Page 1 of 2
D-00162 6. This policy incorporates by reference those endorsements selected below:
❑ T-5 (Leasehold Mortgagee Policy Endorsement) ❑ T-17 (Planned Unit Development) The following subparagraph(s) of this endorsement are deleted: ❑ T-19 (Restrictions, Encroachments, Minerals) The following subparagraph(s) of this endorsement are deleted: E T-28 (Condominium) The following subparagraph(s) of this endorsement are deleted: C T-33 (Variable Rate) ❑ T-33.1 (Variable Rate—Negative Amortization) ❑ T-35 (Revolving Credit/Future Advance) E T-36 (Environmental Protection Lien) Paragraph b refers to the following state statute(s): TEX. HEALTH & SAFETY CODE §361.194; TEX. HEALTH & SAFETY CODE §§342.007, 342,008; TEX. LOCAL GOV'T CODE §§214.0015(b), (d), AND (e), 214.001; TEX. NAT. RES. CODE §134.150, if applicable ❑ T-39 (Balloon Mortgage) ❑ T-42 (Equity Loan Mortgage) and subparagraph 2 (f) of the Equity Loan Mortgage Endorsement set forth in Procedural Rule P-44.C(2) E is ❑ is not added. The following subparagraph(s) of this endorsement are deleted: ❑ T-42.1 (Supplemental Coverage Equity Loan Mortgage) The following subparagraph(s) of this endorsement are deleted: ❑ T-43 (Texas Reverse Mortgage) The following subparagraph(s) of this endorsement are deleted: 4 Section 13 of the Conditions of this policy, which relates to Arbitration, is hereby deleted.
SERVICE TITLE COMPANY
Schedule A - Page 2 of 2
D-00163 pAE- AWSON -HeilivaEscs LAND DEVELOPMENT ENVIRONMENTAL 1RANSPORTATION WATER RESOURCES SURVEYING
FIELD NOTES FOR
A 0.916 of an acre, or 39,903 square feet more or less, tract of land being all of Lot 7, BloCk 13, New City Block (N.C.B.) 10060 of the East Shearer Hills Subdivision in the City of San Antonio, Bexar County, Texas recorded in Volume 4500, Page 229 of the Deed and Plat Records of Bexar County, Texas. Said 0.916 of an acre tract being more fully described as follows with bearings being based on the North American Datum of 1983 (CORS 1996), from the Texas Coordinate System established for the South Central Zone:
BEGINNING: At a found 'A" iron rod, on the south right-of-way line of Dot Drive, the . northeast corner of Lot 7, the northwest corner of Lot 8 of East Shearer Hills Subdivision;
THENCE: S 36°46'25" W, departing the south right-of-way line of Dot Drive, along and with the east line of Lot 7 and the west line of Lot 8, a distance of 200.00 feet to a set 1/4" iron rod with yellow cap marked "Pape-Dawson", the 'southeast corner of 7, the southwest corner of Lot 8, the north right-of-way line of Jackson-Kelller Road, a 60400t right-of-way, from which a found 1/4" iron rod bears N 04°22'20" E, 0.52 feet;
THENCE: N 53°13'35" W, along and with the south line of Lot 7 and the south right-of- . way line. of Jackson-Kelller Road, a distance of 185.00 feet to a set 1/4" iron rod with yellow cap marked "Pape-Dawson", the southwest corner of Lot 7, the south end of the northeast cutback of Jackson-Kelller Road and the east right- of-way line of Aribe Drive, a 60-foot right-of-way, from which a found 1/4" iron rodbears S 81°56'59" E, 0.92 feet;
THENCE: Northwesterly, along and with the east right-of-way line of Aribe Drive, along a tangent curve to the right said curve having radius of 15.00 feet, a central angle of90°00'00", a chord bearing and distance of N 08°13'35" W, 21.21 feet, an arc length of 23.56 feet to a set 1/2" iron rod with yellow cap marked "Pape- Dawson", from which a found 1/4" iron rod bears N 64°3 7'24" W, 1.05 feet;
THENCE: N 36°46'25" E, along and with the east right-of-way line of Aribe Drive, a distance of 170.00 feet to a set '/2" iron rod with yellow cap marked "Pape- Dawson?', the south end of the southeast cutback of Aribe Drive and south right-of-way lien of Dot Drive, from which a found '/2" iron rod bears N 59°29'02" W, 0.57 feet;
MICA' nnutsavar, axes.aasa, yam,.
sau hitiD11111 / hDsiit 555 East Ramsey San Antonio, Texas 78216 P 210.375.9000 F 210.375 9010 WWVI.PAPE-DAWS011.0t4
D-00164 0.916 of an Acre Project No. 9055-09 Page 2 of 2
THENCE: Northeasterly, along and with the south right-of-way line of Dot Drive, along a tangent curve to the right said curve having radius of 15.00 feet, a central angle of 90°00'00", a chord hearing and distance of N 81°4625" E, 21.21 feet, an arc length of 23.56 feet to a set 'A" iron rod with yellow cap marked "Pape- Dawson", the northwest corner of Lot 7, from which a found 'A" iron rod bears N 15°43'02" E, 0.92 feet;
THENCE: S 53°13'35'1 E, along and with the south right-of-way line of Dot Drive, a distance of 185.00 feet to the POINT OF BEGINNING, and containing 0.916 of an acre in the City of San Antonio, Bexar County, Texas, Said tract being described in accordance with a survey made on the ground and an exhibit prepared by Pape-Dawson Engineers, Inc.
PREPARED BY: Pape-Dawson Engineers, Inc. JOB No.: 9055-09 March 17, 2009 DOC. ID.: N:1Survey09\9-9100\9055-09\9055-09FN,doc
PAPE-DAWS0 ENSBNEERS D-00165 T-2 Loan Policy Schedules - Form Prescribed by Texas Department of Insurance - Revised 5/1/2008
LOAN POLICY SCHEDULE B EXCEPTIONS FROM COVERAGE
This policy does not insure against loss or damage (and the Company will not pay costs, attorneys' fees or expenses) that arise by reason of the terms and conditions of the leases and easements, if any, shown in Schedule A, and the following matters:
1. The following restrictive covenants of record itemized below, but the Company insures that any such restrictive covenants have not been violated so as to affect, and that future violation thereof will not affect, the validity or priority of the Insured Mortgage (insert specific recording data or delete this exception):
Volume 2589, Page 147, Deed Records of Bexar County, Texas, deleting any unlawful discriminatory provisions based on race, color, religion, sex, handicap, familial status or national origin.
2. Any discrepancies, conflicts, or shortages in area or boundary lines, or any encroachments, or protrusions, or any overlapping of improvements.
3, Standby fees, taxes and assessments by any taxing authority for the year 2009, and subsequent years, but not those taxes or assessments for prior years because of an exemption granted to a previous owner of the property under Section 11.13, Texas Tax Code, or because of improvements not assessed for a previous tax year.
_x_ Item 3 of Schedule B is hereby amended to add the following: "Company insures that standby fees, taxes and assessments by any taxing authority for the year 2009 are not yet due and payable."
4. Liens and leases that affect the title to the estate or interest, but that are subordinate to the lien of the Insured Mortgage.
5. (Insert here all other specific exceptions as to superior liens, easements, outstanding mineral and royalty interests, etc.)
a. 25 foot front building setback line as set forth in Volume 2589, Page 147, Deed Records of Bexar County, Texas.
b. Easement as set out in Volume 2625, Page 183, Deed Records of Bexar County, Texas.
c. Cable TV Easement recorded in Volume 5008, Page 71, Real Property Records of Bexar County, Texas.
Schedule B - Page 1 of 2
D-00166 d. The following matters disclosed on survey dated March 2009, by PAPE-DAWSON ENGINEERS, Job No. 9055-09, including, but not limited to:
i) Encroachment of three 2 story brick buildings upon 25 foot front building setback line along Jackson-Keller Road ii) Wood fence inset at northeast corner of lot along Dot Drive
e. Rights to oil, gas and other minerals of every kind and character in, on and under the property described in Schedule A, together with the rights, privileges and immunities relating thereto.
f. Any and all liens arising by reason of unpaid bills or claims for work performed or materials furnished in connection with improvements placed, or to be placed, upon the subject land. However, the Company does insure the Insured against loss, if any, sustained by the Insured under this Policy if such liens have been filed with the County Clerk of Bexar County, Texas, prior to the date hereof.
g. Pending disbursement of the full proceeds of the loan secured by the lien instrument set forth under Schedule A hereof, this policy insures only to the extent of the amount actually disbursed, but increases as each disbursement is made in good faith and without knowledge of any defects in, or objections to, the title up to the face amount of the policy. Nothing contained in this paragraph shall be construed as limiting any exception under Schedule B, or any printed provision of the policy.
h. Any and all unrecorded leases and rights of parties therein.
Schedule B - Page 2 of 2
D-00167 r-stewart +title guaranty company IMPORTANT NOTICE AVISO IMPORTANTE
To obtain information or make a complaint: Para obtener informacion o para someter una queja:
1.You may contact your title insurance agent at 1.Puede comunicarse con su agente de seguro de (telephone number) titulo al (telephone number).
2. You may call Stewart Tide Guaranty Company's 2. Usted puede Hamar al numero de telefono gratis de toll-free telephone number for information or to make a Stewart Title Guaranty Company para informacion o complaint at: para someter una queja al:
(800) 729-1900 (800) 729-1900
3. You may also write to Stewart Title Guaranty 3. Usted tambien puede escribir a Stewart Title Guaranty Company at P. 0. Box 2029, Houston, TX 77252-2029 Company, P 0. Box 2029, Houston, TX 77252-2029
4. You may contact the Texas Department of Insurance 4. Puede comunicarse con el Departamento de Seguros to obtain information on companies, rights or de Texas para obtener inforrnacion acerca de complaints at: companias, coberturas, derechos o quejas al:
1-800-252-3439 1-800-252-3439
5. You may write the Texas Department of Insurance: 5. Puede escribir al Departamento de Seguros de Texas: P.O. Box 149104 P.O. Box 149104 Austin, TX 78714-9104 Austin, TX 78714-9104 Fax: (512) 475-1771 Fax: (512) 475-1771 Web: http://www.tdi.state.tx.us Web: http://www.tdi.state.tx.us E-mail: ConsumerProtection@tdi.state.tx.us E-mail: ConsumerProtection@tdi.state.tx.us
PREMIUM OR CLAIM DISPUTES: DISPUTAS SOBRE PRIMAS 0 RECLAMOS:
Should you have a dispute concerning your Si tiene una disputa concerniente a su prima o a un premium or about a claim you should contact the title reclamo, debe comunicarse con el agente de seguro insurance agent first. If the dispute is not resolved, you de titulo primero. Si no se resuelve la disputa, puede may contact the Texas Department of Insurance, entonces comunicarse con el departamento (TDI).
ATTACH THIS NOTICE TO YOUR POLICY: UNA ESTE AVISO A SU POLIZA:
This notice is for information only and does not be- Este aviso es solo para proposito de informacion y no se come a part or condition of the attached document. convierte en parte o condicion del documento adjunto.
D-00168 Appendix H LOAN POLICY OF TITLE INSURANCE (Form T-2) Issued by
Blank Title Insurance Company
Any notice of claim and any other notice or statement in writing required to be given the Company under this Policy must be given to the Company at the address shown in Section 17 of the Conditions.
COVERED RISKS
SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B AND THE CONDITIONS, BLANK TITLE INSURANCE COMPANY, a Blank corporation (the “Company”) insures, as of Date of Policy and, to the extent stated in Covered Risks 11, 13 and 14, after Date of Policy, against loss or damage, not exceeding the Amount of Insurance, sustained or incurred by the Insured by reason of: 1. Title being vested other than as stated in Schedule A. 2. Any defect in or lien or encumbrance on the Title. This Covered Risk includes but is not limited to insurance against loss from: (a) A defect in the Title caused by: (i) forgery, fraud, undue influence, duress, incompetency, incapacity or impersonation; (ii) failure of any person or Entity to have authorized a transfer or conveyance; (iii) a document affecting Title not properly created, executed, witnessed, sealed, acknowledged, notarized or delivered; (iv) failure to perform those acts necessary to create a document by electronic means authorized by law; (v) a document executed under a falsified, expired or otherwise invalid power of attorney; (vi) a document not properly filed, recorded or indexed in the Public Records including failure to perform those acts by electronic means authorized by law; or (vii) a defective judicial or administrative proceeding. (b) The lien of real estate taxes or assessments imposed on the Title by a governmental authority due or payable, but unpaid. (c) Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the Title that would be disclosed by an accurate and complete land survey of the Land. The term “encroachment” includes encroachments of existing improvements located on the Land onto adjoining land, and encroachments onto the Land of existing improvements located on adjoining land. 3. Lack of good and indefeasible Title. 4. No right of access to and from the Land.
Form T-2 Sec. II Effective January 3, 2014 5. The violation or enforcement of any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting or relating to: (a) the occupancy, use or enjoyment of the Land; (b) the character, dimensions or location of any improvement erected on the Land; (c) subdivision of land; or (d) environmental protection if a notice, describing any part of the Land, is recorded in the Public Records setting forth the violation or intention to enforce, but only to the extent of the violation or enforcement referred to in that notice. 6. An enforcement action based on the exercise of a governmental police power not covered by Covered Risk 5 if a notice of the enforcement action, describing any part of the Land, is recorded in the Public Records, but only to the extent of the enforcement referred to in that notice. 7. The exercise of the rights of eminent domain if a notice of the exercise, describing any part of the Land, is recorded in the Public Records. 8. Any taking by a governmental body that has occurred and is binding on the rights of a purchaser for value without Knowledge. 9. The invalidity or unenforceability of the lien of the Insured Mortgage upon the Title. This Covered Risk includes but is not limited to insurance against loss from any of the following impairing the lien of the Insured Mortgage: (a) forgery, fraud, undue influence, duress, incompetency, incapacity or impersonation; (b) failure of any person or Entity to have authorized a transfer or conveyance; (c) the Insured Mortgage not being properly created, executed, witnessed, sealed, acknowledged, notarized or delivered; (d) failure to perform those acts necessary to create a document by electronic means authorized by law; (e) a document executed under a falsified, expired or otherwise invalid power of attorney; (f) a document not properly filed, recorded or indexed in the Public Records including failure to perform those acts by electronic means authorized by law; or (g) a defective judicial or administrative proceeding. 10. The lack of priority of the lien of the Insured Mortgage over any other lien or encumbrance. 11. The lack of priority of the lien of the Insured Mortgage (a) as security for each and every advance of proceeds of the loan secured by the Insured Mortgage over any statutory or constitutional mechanic’s, contractor’s, or materialman’s lien for services, labor or material having its inception on or before Date of Policy ; and (b) over the lien of any assessments for street improvements under construction or completed at Date of Policy.
Form T-2 Sec. II Effective January 3, 2014 12. The invalidity or unenforceability of any assignment of the Insured Mortgage, provided the assignment is shown in Schedule A, or the failure of the assignment shown in Schedule A to vest title to the Insured Mortgage in the named Insured assignee free and clear of all liens. 13. The invalidity, unenforceability, lack of priority or avoidance of the lien of the Insured Mortgage:
(a) resulting from the avoidance in whole or in part, or from a court order providing an alternative remedy, of any transfer of all or any part of the title to or any interest in the Land occurring prior to the transaction creating the lien of the Insured Mortgage because that prior transfer constituted a fraudulent or preferential transfer under federal bankruptcy, state insolvency or similar creditors’ rights laws; or
(b) because the Insured Mortgage constitutes a preferential transfer under federal bankruptcy, state insolvency or similar creditors’ rights laws by reason of the failure of its recording in the Public Records: (i) to be timely, or (ii) to impart notice of its existence to a purchaser for value or a judgment or lien creditor.
14. Any defect in or lien or encumbrance on the Title or other matter included in Covered Risks 1 through 13 that has been created or attached or has been filed or recorded in the Public Records subsequent to Date of Policy and prior to the recording of the Insured Mortgage in the Public Records. The Company will also pay the costs, attorneys' fees and expenses incurred in defense of any matter insured against by this Policy, but only to the extent provided in the Conditions. [Witness clause optional]
By President
By Secretary
The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damage, costs, attorneys' fees or expenses that arise by reason of: 1. (a) Any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting or relating to: (i) the occupancy, use, or enjoyment of the Land; (ii) the character, dimensions or location of any improvement erected on the Land; (iii) subdivision of land; or (iv) environmental protection;
Form T-2 Sec. II Effective January 3, 2014 or the effect of any violation of these laws, ordinances or governmental regulations. This Exclusion 1(a) does not modify or limit the coverage provided under Covered Risk 5. (b) Any governmental police power. This Exclusion 1(b) does not modify or limit the coverage provided under Covered Risk 6. 2. Rights of eminent domain. This Exclusion does not modify or limit the coverage provided under Covered Risk 7 or 8. 3. Defects, liens, encumbrances, adverse claims or other matters: (a) created, suffered, assumed or agreed to by the Insured Claimant; (b) not Known to the Company, not recorded in the Public Records at Date of Policy, but Known to the Insured Claimant and not disclosed in writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an Insured under this policy; (c) resulting in no loss or damage to the Insured Claimant; (d) attaching or created subsequent to Date of Policy (however, this does not modify or limit the coverage provided under Covered Risk 11, 13 or 14); or (e) resulting in loss or damage that would not have been sustained if the Insured Claimant had paid value for the Insured Mortgage. 4. Unenforceability of the lien of the Insured Mortgage because of the inability or failure of an Insured to comply with applicable doing business laws of the state where the Land is situated. 5. Invalidity or unenforceability in whole or in part of the lien of the Insured Mortgage that arises out of the transaction evidenced by the Insured Mortgage and is based upon usury or any consumer credit protection or truth in lending law. 6. Any claim, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors’ rights laws, that the transaction creating the lien of the Insured Mortgage, is: (a) a fraudulent conveyance or fraudulent transfer; or (b) a preferential transfer for any reason not stated in Covered Risk 13(b) of this policy. 7. Any lien on the Title for real estate taxes or assessments imposed by governmental authority and created or attaching between Date of Policy and the date of recording of the Insured Mortgage in the Public Records. This exclusion does not modify or limit the coverage provided under Covered Risk 11(b). 8. The refusal of any person to purchase, lease or lend money on the estate or interest covered hereby in the land described in Schedule A because of Unmarketable Title.
Name and Address of Title Insurance Company: [File No.: ] Policy No.: Loan No.: [Address for Reference only:] Amount of Insurance: $ [Premium: $ ] Date of Policy: [at a.m./p.m.]
Form T-2 Sec. II Effective January 3, 2014 2. The estate or interest in the Land that is encumbered by the Insured Mortgage is:
4. The Insured Mortgage, and its assignments, if any, are described as follows:
5. The Land referred to in this policy is described as follows:
6. This policy incorporates by reference those endorsements selected below:
T-5 (Leasehold Loan Policy Endorsement) T-17 (Planned Unit Development) T-19 (Restrictions, Encroachments, Minerals) T-19.2 (Minerals and Surface Damage) T-19.3 (Minerals and Surface Damage) T-28 (Condominium) T-31 (Manufactured Housing) referring to manufactured housing unit serial number _______ T-31.1 (Supplemental Coverage Manufactured Housing Unit) T-33 (Variable Rate) T-33.1 (Variable Rate--Negative Amortization) T-35 (Revolving Credit/Future Advance) T-36 (Environmental Protection Lien) Paragraph b refers to the following state statute(s): T-39 (Balloon Mortgage) T-42 (Equity Loan Mortgage) and subparagraph 2(f) of the Equity Loan Mortgage Endorsement set forth in Procedural Rule P-44.C(2) __ is ___ is not added. T-42.1 (Supplemental Coverage Equity Loan Mortgage) T-43 (Texas Reverse Mortgage) Section 13 of the Conditions of this policy, which relates to Arbitration, is hereby deleted.
[The Company may insert or preprint all or part of paragraph 6 as applicable and may delete boxes or substitute lines for boxes. The Company also may substitute the following at the beginning of paragraph 6: “This policy incorporates by reference those endorsements shown below:”]
SCHEDULE B File No. Policy No.
EXCEPTIONS FROM COVERAGE
This policy does not insure against loss or damage (and the Company will not pay costs, attorneys’ fees or expenses) that arise by reason of the terms and conditions of leases and easements, if any, shown in Schedule A, and the following matters: 1. The following restrictive covenants of record itemized below, but the Company insures that any such restrictive covenants have not been violated so as to affect, and that future violation thereof will not affect, the validity or priority of the Insured Mortgage (insert specific recording data or delete this exception):
Form T-2 Sec. II Effective January 3, 2014 2. Any discrepancies, conflicts, or shortages in area or boundary lines, or any encroachments or protrusions, or any overlapping of improvements. Item 2 of Schedule B is hereby amended to read: “shortages in area”. 3. Standby fees, taxes and assessments by any taxing authority for the year ___, and subsequent years; and subsequent taxes and assessments by any taxing authority for prior years due to change in land usage or ownership, but not those taxes or assessments for prior years because of an exemption granted to a previous owner of the property under Section 11.13, Texas Tax Code, or because of improvements not assessed for a previous tax year. Item 3 of Schedule B is hereby amended to delete: “and subsequent taxes and assessments by any taxing authority for prior years due to change in land usage or ownership,” Item 3 of Schedule B is hereby amended to add the following: “Company insures that standby fees, taxes and assessments by any taxing authority for the year ____ are not yet due and payable.” 4. Liens and leases that affect the Title, but that are subordinate to the lien of the Insured Mortgage. 5. (Insert here all other specific exceptions as to superior liens, easements, outstanding mineral and royalty interests, etc.) [The Company may substitute lines for boxes or delete the boxes and incorporate any applicable change to the exception above in the exception.]
CONDITIONS 1. DEFINITION OF TERMS. (a) “Amount of Insurance”: the amount stated in Schedule A, as may be increased or decreased by endorsement to this policy, increased by Section 8(b), or decreased by Section 10 of these Conditions. (b) “Date of Policy”: The date designated as “Date of Policy” in Schedule A. (c) “Entity”: A corporation, partnership, trust, limited liability company or other similar legal entity. (d) “Indebtedness”: The obligation secured by the Insured Mortgage including one evidenced by electronic means authorized by law, and if that obligation is the payment of a debt, the Indebtedness is the sum of: (i) the amount of the principal disbursed as of Date of Policy; (ii) the amount of the principal disbursed subsequent to Date of Policy; (iii) construction loan advances made subsequent to Date of Policy for the purpose of financing in whole or in part the construction of an improvement to the Land or related to the Land that the Insured was and continued to be obligated to advance at Date of Policy and at the date of the advance; (iv) interest on the loan; (v) prepayment premiums, exit fees and other similar fees or penalties allowed by law; (vi) expenses of foreclosure and any other costs of enforcement;
Form T-2 Sec. II Effective January 3, 2014 (vii) amounts advanced to assure compliance with laws or to protect the lien or the priority of the lien of the Insured Mortgage before the acquisition of the estate or interest in the Title; (viii) amounts to pay taxes and insurance; and, (ix) reasonable amounts expended to prevent deterioration of improvements; but reduced by the total of all payments and by any amount forgiven by an Insured. (e) “Insured": the Insured named in Schedule A. (i) The term "Insured" also includes: (A) the owner of the Indebtedness and each successor in ownership of the Indebtedness, whether the owner or successor owns the Indebtedness for its own account or as a trustee or other fiduciary, except a successor who is an obligor under the provisions of Section 12(c) of these Conditions; (B) if the Indebtedness is evidenced by a “transferable record,” the person or Entity who has “control” of the “transferable record,” as these terms are defined by applicable electronic transactions law; (C) successors to an Insured by dissolution, merger, consolidation, distribution or reorganization; (D) successors to an Insured by its conversion to another kind of Entity; (E) a grantee of an Insured under a deed delivered without payment of actual valuable consideration conveying the Title: (1) If the stock, shares, memberships, or other equity interests of the grantee are wholly-owned by the named Insured, (2) If the grantee wholly owns the named Insured, or (3) If the grantee is wholly-owned by an affiliated Entity of the named Insured, provided the affiliated Entity and the named Insured are both wholly-owned by the same person or Entity; (F) any government agency or instrumentality that is an insurer or guarantor under an insurance contract or guaranty insuring or guaranteeing the Indebtedness secured by the Insured Mortgage, or any part of it, whether named as an Insured or not; (ii) With regard to (A), (B), (C), (D) and (E) reserving, however, all rights and defenses as to any successor that the Company would have had against any predecessor Insured, unless the successor acquired the Indebtedness as a purchaser for value without Knowledge of the asserted defect, lien, encumbrance or other matter insured against by this policy. (f) "Insured Claimant": an Insured claiming loss or damage. (g) “Insured Mortgage”: the Mortgage described in paragraph 4 of Schedule A. (h) "Knowledge" or "Known": actual knowledge, not constructive knowledge or notice that may be imputed to an Insured by reason of the Public Records or any other records that impart constructive notice of matters affecting the Title. (i) "Land": the land described in Schedule A, and affixed improvements that by law constitute real property. The term "Land” does not include any property beyond the lines Form T-2 Sec. II Effective January 3, 2014 of the area described in Schedule A, nor any right, title, interest, estate or easement in abutting streets, roads, avenues, alleys, lanes, ways or waterways, but this does not modify or limit the extent that a right of access to and from the Land is insured by this policy. (j) "Mortgage": mortgage, deed of trust, trust deed, or other security instrument, including one evidenced by electronic means authorized by law. (k) "Public Records": records established under state statutes at Date of Policy for the purpose of imparting constructive notice of matters relating to real property to purchasers for value and without Knowledge. With respect to Covered Risk 5(d), "Public Records" shall also include environmental protection liens filed in the records of the clerk of the United States District Court for the district where the Land is located. (l) “Title”: the estate or interest described in Schedule A. (m) "Unmarketable Title”: Title affected by an alleged or apparent matter that would permit a prospective purchaser or lessee of the Title or lender on the Title or a prospective purchaser of the Insured Mortgage to be released from the obligation to purchase, lease or lend if there is a contractual condition requiring the delivery of marketable title. 2. CONTINUATION OF INSURANCE. The coverage of this policy shall continue in force as of Date of Policy in favor of an Insured after acquisition of the Title by an Insured or after conveyance by an Insured, but only so long as the Insured retains an estate or interest in the Land, or holds an obligation secured by a purchase money Mortgage given by a purchaser from the Insured, or only so long as the Insured shall have liability by reason of warranties in any transfer or conveyance of the Title. This policy shall not continue in force in favor of any purchaser from the Insured of either (i) an estate or interest in the Land, or (ii) an obligation secured by a purchase money Mortgage given to the Insured. 3. NOTICE OF CLAIM TO BE GIVEN BY INSURED CLAIMANT. The Insured shall notify the Company promptly in writing (i) in case of any litigation as set forth in Section 5(a) below, or (ii) in case Knowledge shall come to an Insured of any claim of title or interest that is adverse to the Title or the lien of the Insured Mortgage, as insured, and that might cause loss or damage for which the Company may be liable by virtue of this policy. If the Company is prejudiced by the failure of the Insured Claimant to provide prompt notice, the Company's liability to the Insured Claimant under the policy shall be reduced to the extent of the prejudice. Subject to the provisions of this policy, upon acquisition of all or any part of the Title pursuant to the provisions of Section 2 of these Conditions, when, after the Date of the Policy, the Insured notifies the Company as required herein of a lien, encumbrance, adverse claim or other defect in Title insured by this policy that is not excluded or excepted from the coverage of this policy, the Company shall promptly investigate the charge to determine whether the lien, encumbrance, adverse claim or defect or other matter is valid and not barred by law or statute. The Company shall notify the Insured in writing, within a reasonable time, of its determination as to the validity or invalidity of the Insured's claim or charge under the policy. If the Company concludes that the lien, encumbrance, adverse claim or defect is not covered by this policy, or was otherwise addressed in the closing of the transaction in connection with which this policy was issued, the Company shall specifically advise the Insured of the reasons for its determination. If the Company concludes that the lien, encumbrance, adverse claim or defect Form T-2 Sec. II Effective January 3, 2014 is valid, the Company shall take one of the following actions: (i) institute the necessary proceedings to clear the lien, encumbrance, adverse claim or defect from the Title as insured; (ii) indemnify the Insured as provided in this policy; (iii) upon payment of appropriate premium and charges therefor, issue to the Insured Claimant or to a subsequent owner, mortgagee or holder of the estate or interest in the Land insured by this policy, a policy of title insurance without exception for the lien, encumbrance, adverse claim or defect, said policy to be in an amount equal to the current value of the Land or, if a loan policy, the amount of the loan; (iv) indemnify another title insurance company in connection with its issuance of a policy(ies) of title insurance without exception for the lien, encumbrance, adverse claim or defect; (v) secure a release or other document discharging the lien, encumbrance, adverse claim or defect; or (vi) undertake a combination of (i) through (v) herein.
4. PROOF OF LOSS. In the event the Company is unable to determine the amount of loss or damage, the Company may, at its option, require as a condition of payment that the Insured Claimant furnish a signed proof of loss. The proof of loss must describe the defect, lien, encumbrance or other matter insured against by this policy that constitutes the basis of loss or damage and shall state, to the extent possible, the basis of calculating the amount of the loss or damage.
5. DEFENSE AND PROSECUTION OF ACTIONS. (a) Upon written request by the Insured, and subject to the options contained in Sections 3 and 7 of these Conditions, the Company, at its own cost and without unreasonable delay, shall provide for the defense of an Insured in litigation in which any third party asserts a claim covered by this policy adverse to the Insured. This obligation is limited to only those stated causes of action alleging matters insured against by this policy. The Company shall have the right to select counsel of its choice (subject to the right of the Insured to object for reasonable cause) to represent the Insured as to those stated causes of action. It shall not be liable for and will not pay the fees of any other counsel. The Company will not pay any fees, costs or expenses incurred by the Insured in the defense of those causes of action that allege matters not insured against by this policy.
(b) The Company shall have the right, in addition to the options contained in Sections 3 and 7, at its own cost, to institute and prosecute any action or proceeding or to do any other act that in its opinion may be necessary or desirable to establish the Title or the lien of the Insured Mortgage, as insured, or to prevent or reduce loss or damage to the Insured. The Company may take any appropriate action under the terms of this policy, whether or not it shall be liable to the Insured. The exercise of these rights shall not be an admission of liability or waiver of any provision of this policy. If the Company exercises its rights under this subsection, it must do so diligently.
(c) Whenever the Company brings an action or asserts a defense as required or permitted by this policy, the Company may pursue the litigation to a final determination by a court of competent jurisdiction and it expressly reserves the right, in its sole discretion, to appeal from any adverse judgment or order.
6. DUTY OF INSURED CLAIMANT TO COOPERATE. (a) In all cases where this policy permits or requires the Company to prosecute or provide for the defense of any action or proceeding and any appeals, the Insured shall secure to the Company the right to so prosecute or provide defense in the action or proceeding, including Form T-2 Sec. II Effective January 3, 2014 the right to use, at its option, the name of the Insured for this purpose. Whenever requested by the Company, the Insured, at the Company's expense, shall give the Company all reasonable aid (i) in securing evidence, obtaining witnesses, prosecuting or defending the action or proceeding, or effecting settlement, and (ii) in any other lawful act that in the opinion of the Company may be necessary or desirable to establish the Title, the lien of the Insured Mortgage, or any other matter as insured. If the Company is prejudiced by the failure of the Insured to furnish the required cooperation, the Company's obligations to the Insured under the policy shall terminate, including any liability or obligation to defend, prosecute, or continue any litigation, with regard to the matter or matters requiring such cooperation.
(b) The Company may reasonably require the Insured Claimant to submit to examination under oath by any authorized representative of the Company and to produce for examination, inspection and copying, at such reasonable times and places as may be designated by the authorized representative of the Company, all records, in whatever medium maintained, including books, ledgers, checks, memoranda, correspondence, reports, e-mails, disks, tapes, and videos whether bearing a date before or after Date of Policy, that reasonably pertain to the loss or damage. Further, if requested by any authorized representative of the Company, the Insured Claimant shall grant its permission, in writing, for any authorized representative of the Company to examine, inspect and copy all of these records in the custody or control of a third party that reasonably pertain to the loss or damage. All information designated as confidential by the Insured Claimant provided to the Company pursuant to this Section shall not be disclosed to others unless, in the reasonable judgment of the Company, it is necessary in the administration of the claim. Failure of the Insured Claimant to submit for examination under oath, produce any reasonably requested information or grant permission to secure reasonably necessary information from third parties as required in this subsection, unless prohibited by law or governmental regulation, shall terminate any liability of the Company under this policy as to that claim.
7. OPTIONS TO PAY OR OTHERWISE SETTLE CLAIMS; TERMINATION OF LIABILITY.
In case of a claim under this policy, the Company shall have the following additional options:
(a) To Pay or Tender Payment of the Amount of Insurance or to Purchase the Indebtedness. (i) to pay or tender payment of the Amount of Insurance under this policy together with any costs, attorneys' fees and expenses incurred by the Insured Claimant that were authorized by the Company up to the time of payment or tender of payment and that the Company is obligated to pay; or
(ii) to purchase the Indebtedness for the amount of the Indebtedness on the date of purchase, together with any costs, attorneys' fees and expenses incurred by the Insured Claimant that were authorized by the Company up to the time of purchase and that the Company is obligated to pay.
When the Company purchases the Indebtedness, the Insured shall transfer, assign, and convey to the Company the Indebtedness and the Insured Mortgage, together with any collateral security.
Upon the exercise by the Company of either of the options provided for in subsections (a)(i) or (ii), all liability and obligations of the Company to the Insured under this policy,
Form T-2 Sec. II Effective January 3, 2014 other than to make the payment required in those subsections, shall terminate, including any liability or obligation to defend, prosecute, or continue any litigation. (b) To Pay or Otherwise Settle With Parties Other than the Insured or With the Insured Claimant. (i) to pay or otherwise settle with other parties for or in the name of an Insured Claimant any claim insured against under this policy. In addition, the Company will pay any costs, attorneys' fees and expenses incurred by the Insured Claimant that were authorized by the Company up to the time of payment and that the Company is obligated to pay; or (ii) to pay or otherwise settle with the Insured Claimant the loss or damage provided for under this policy, together with any costs, attorneys' fees and expenses incurred by the Insured Claimant that were authorized by the Company up to the time of payment and that the Company is obligated to pay. Upon the exercise by the Company of either of the options provided for in subsections (b)(i) or (ii), the Company's obligations to the Insured under this policy for the claimed loss or damage, other than the payments required to be made, shall terminate, including any liability or obligation to defend, prosecute or continue any litigation. 8. DETERMINATION AND EXTENT OF LIABILITY. This policy is a contract of indemnity against actual monetary loss or damage sustained or incurred by the Insured Claimant who has suffered loss or damage by reason of matters insured against by this policy. (a) The extent of liability of the Company for loss or damage under this policy shall not exceed the least of: (i) the Amount of Insurance; (ii) the Indebtedness; (iii) the difference between the value of the Title as insured and the value of the Title subject to the risk insured against by this policy; or (iv) if a government agency or instrumentality is the Insured Claimant, the amount it paid in the acquisition of the Title or the Insured Mortgage in satisfaction of its insurance contract or guaranty. (b) If the Company pursues its rights under Section 3 or 5 and is unsuccessful in establishing the Title or the lien of the Insured Mortgage, as insured, (i) the Amount of Insurance shall be increased by 10%, and (ii) the Insured Claimant shall have the right to have the loss or damage determined either as of the date the claim was made by the Insured Claimant or as of the date it is settled and paid. (c) In the event the Insured has acquired the Title in the manner described in Section 2 of these Conditions or has conveyed the Title, then the extent of liability of the Company shall continue as set forth in Section 8(a) of these Conditions. (d) In addition to the extent of liability under (a), (b) and (c), the Company will also pay those costs, attorneys' fees and expenses incurred in accordance with Sections 5 and 7 of these Conditions.
Form T-2 Sec. II Effective January 3, 2014 9. LIMITATION OF LIABILITY. (a) If the Company establishes the Title, or removes the alleged defect, lien or encumbrance, or cures the lack of a right of access to or from the Land, or establishes the lien of the Insured Mortgage, all as insured, or takes action in accordance with Section 3 or 7, in a reasonably diligent manner by any method, including litigation and the completion of any appeals, it shall have fully performed its obligations with respect to that matter and shall not be liable for any loss or damage caused to the Insured. (b) In the event of any litigation, including litigation by the Company or with the Company's consent, the Company shall have no liability for loss or damage until there has been a final determination by a court of competent jurisdiction, and disposition of all appeals, adverse to the Title or to the lien of the Insured Mortgage, as insured. (c) The Company shall not be liable for loss or damage to the Insured for liability voluntarily assumed by the Insured in settling any claim or suit without the prior written consent of the Company. 10. REDUCTION OF INSURANCE; REDUCTION OR TERMINATION OF LIABILITY. (a) All payments under this policy, except payments made for costs, attorneys’ fees and expenses, shall reduce the Amount of Insurance by the amount of the payment. However, any payments made prior to the acquisition of Title as provided in Section 2 of these Conditions shall not reduce the Amount of Insurance afforded under this policy except to the extent that the payments reduce the Indebtedness. (b) The voluntary satisfaction or release of the Insured Mortgage shall terminate all liability of the Company except as provided in Section 2 of these Conditions. 11. PAYMENT OF LOSS. When liability and the extent of loss or damage have been definitely fixed in accordance with these Conditions, the payment shall be made within 30 days. 12. RIGHTS OF RECOVERY UPON PAYMENT OR SETTLEMENT. (a) The Company's Right to Recover. Whenever the Company shall have settled and paid a claim under this policy, it shall be subrogated and entitled to the rights of the Insured Claimant in the Title or Insured Mortgage and all other rights and remedies in respect to the claim that the Insured Claimant has against any person or property, to the extent of the amount of any loss, costs, attorneys' fees and expenses paid by the Company. If requested by the Company, the Insured Claimant shall execute documents to evidence the transfer to the Company of these rights and remedies. The Insured Claimant shall permit the Company to sue, compromise or settle in the name of the Insured Claimant and to use the name of the Insured Claimant in any transaction or litigation involving these rights and remedies. If a payment on account of a claim does not fully cover the loss of the Insured Claimant, the Company shall defer the exercise of its right to recover until after the Insured Claimant shall have recovered its loss. (b) The Insured's Rights and Limitations. (i) The owner of the Indebtedness may release or substitute the personal liability of any debtor or guarantor, extend or otherwise modify the terms of payment, release a portion of the Title from the lien of the Insured Mortgage, or release any collateral security for
Form T-2 Sec. II Effective January 3, 2014 the Indebtedness, if it does not affect the enforceability or priority of the lien of the Insured Mortgage. (ii) If the Insured exercises a right provided in (b)(i), but has Knowledge of any claim adverse to the Title or the lien of the Insured Mortgage insured against by this policy, the Company shall be required to pay only that part of any losses insured against by this policy that shall exceed the amount, if any, lost to the Company by reason of the impairment by the Insured Claimant of the Company's right of subrogation. (c) The Company's Rights Against Non-insured Obligors. The Company’s right of subrogation includes the Insured’s rights against non-insured obligors including the rights of the Insured to indemnities, guaranties, other policies of insurance or bonds, notwithstanding any terms or conditions contained in those instruments that address subrogation rights. The Company's right of subrogation shall not be avoided by acquisition of the Insured Mortgage by an obligor (except an obligor described in Section 1(e)(i)(F) of these Conditions) who acquires the Insured Mortgage as a result of an indemnity, guarantee, other policy of insurance, or bond and the obligor will not be an Insured under this policy. 13. ARBITRATION. Either the Company or the Insured may demand that the claim or controversy shall be submitted to arbitration pursuant to the Title Insurance Arbitration Rules of the American Land Title Association (“Rules”). Except as provided in the Rules, there shall be no joinder or consolidation with claims or controversies of other persons. Arbitrable matters may include, but are not limited to, any controversy or claim between the Company and the Insured arising out of or relating to this policy, any service in connection with its issuance or the breach of a policy provision, or to any other controversy or claim arising out of the transaction giving rise to this policy. All arbitrable matters when the Amount of Insurance is $2,000,000 or less shall be arbitrated at the option of either the Company or the Insured, unless the Insured is an individual person (as distinguished from an Entity). All arbitrable matters when the Amount of Insurance is in excess of $2,000,000 shall be arbitrated only when agreed to by both the Company and the Insured. Arbitration pursuant to this policy and under the Rules shall be binding upon the parties. Judgment upon the award rendered by the Arbitrator(s) may be entered in any court of competent jurisdiction. 14. LIABILITY LIMITED TO THIS POLICY; POLICY ENTIRE CONTRACT. (a) This policy together with all endorsements, if any, attached to it by the Company is the entire policy and contract between the Insured and the Company. In interpreting any provision of this policy, this policy shall be construed as a whole. (b) Any claim of loss or damage that arises out of the status of the Title or lien of the Insured Mortgage or by any action asserting such claim, shall be restricted to this policy. (c) Any amendment of or endorsement to this policy must be in writing and authenticated by an authorized person, or expressly incorporated by Schedule A of this policy. (d) Each endorsement to this policy issued at any time is made a part of this policy and is subject to all of its terms and provisions. Except as the endorsement expressly states, it does not (i) modify any of the terms and provisions of the policy, (ii) modify any prior endorsement, (iii) extend the Date of Policy or (iv) increase the Amount of Insurance. Each Commitment, endorsement or other form, or provision in the Schedules to this policy that refers to a term defined in Section 1 of the Conditions shall be deemed to refer to the term regardless of whether the term is capitalized in the Commitment, endorsement or other form, or Schedule.
Form T-2 Sec. II Effective January 3, 2014 Each Commitment, endorsement or other form, or provision in the Schedules that refers to the Conditions and Stipulations shall be deemed to refer to the Conditions of this policy. 15. SEVERABILITY. In the event any provision of this policy, in whole or in part, is held invalid or unenforceable under applicable law, the policy shall be deemed not to include that provision or such part held to be invalid and all other provisions shall remain in full force and effect. 16. CHOICE OF LAW; FORUM. (a) Choice of Law: The Insured acknowledges the Company has underwritten the risks covered by this policy and determined the premium charged therefor in reliance upon the law affecting interests in real property and applicable to the interpretation, rights, remedies or enforcement of policies of title insurance of the jurisdiction where the Land is located.
Therefore, the court or an arbitrator shall apply the law of the jurisdiction where the Land is located to determine the validity of claims against the Title or the lien of the Insured Mortgage that are adverse to the Insured, and in interpreting and enforcing the terms of this policy. In neither case shall the court or arbitrator apply its conflicts of laws principles to determine the applicable law.
(b) Choice of Forum: Any litigation or other proceeding brought by the Insured against the Company must be filed only in a state or federal court within the United States of America or its territories having appropriate jurisdiction. 17. NOTICES, WHERE SENT. Any notice of claim and any other notice or statement in writing required to be given the Company under this Policy must be given to the Company at [fill in]. NOTE: Bracketed [ ] material optional (Form T-2: Loan Policy of Title Insurance)
Form T-2 Sec. II Effective January 3, 2014 Appendix I Cause No. 2013-C1-14899 2013-CI-14899
VANTAGE BANK TEXAS, SUCCESSOR § IN THE DISTRICT COURT BY MERGER TO TO D'HANIS D'HANIS STATE BANK, § and BANPROP, L. L. C., § § Plaintiffs, § § l50TH JUDICIAL DISTRICT 150TH v. § § STEWART TITLE GUARANTY COMPANY, § § Defendant. § BEXAR COUNTY, TX
PLAINTIFFS' RESPONSE RESPONSE TO DEFENDANT'S SECOND MOTION FORFOR SUMMARY JUDGMENT
TO THE HONORABLE JUDGE OF THE COURT:
Plaintiff Vantage Vantage Bank Bank Texas, Texas, successor successor by by merger merger to to D'Hanis State State Bank, Bank, individually individually
and and as agent agent for for Banprop, Banprop, L.L.C. L.L.C. ("Bank"), ("Bank"), submits this response submits this to the second response to second motion motion for
summary judgment filed filed by defendant Stewart Title Guaranty Company ("Stewart Title").
SUMMARY JUDGMENT EVIDENCE
The Bank relies relies on the following following evidence in suppOli evidence in support of its response to Stewart response to Stewart Title's
second motion for summary judgment.
Loan Policy of of Title Insurance .................................................................................... Tab A
Notice of of Hearing (January (Janumy Notice) ............................................................................. Tab B
Notice of of Hearing Hem'ing (February (Februmy Notice) ........................................................................... Tab C
Business Records Affidavit and Dangerous Structure Determination Board Demolition Order ................................... Tab D
Commercial Contract—Improved Contract-Improved Property ................................................................. Tab E
Promissory Note ........................................................................................................... Tab F
Affidavit of of Geoff Hall ............................................................................................... Tab G Affidavit of of David B. West West.. ....................................................................................... Tab H
Exceipts of Excerpts of Deposition of of Rainey Bingham ................................................................. Tab I
This Tllis case case involves involves a dispute dispute over coverage coverage under under a title title insurance insurance policy policy issued issued by by
Stewart Title Guaranty Stewmi Title Guaranty Company Company("Stewart") ("Stewart")totoD'Hanis D'HanisState StateBank Bank("D'Hanis"). ("D'Hanis"). D'Hanis
made a $900,000 $900,000 loan in September 2009 2009 to Apmiments, L.L.c. to SA Eden Roc Apartments, L.L.C. ("Eden Roc") Roc") to
enable Eden enable Roc to Eden Roc to purchase purchase and and renovate renovate certain celiain property ("Property"), which property ("Property"), which included included a
number of apmiment Tab Fat apartment buildings ("Improvements"). Tab 1-2. F at p. 1-2.
In early In early 2008, 2008, the the City City of of San San Antonio Antonio issued issued notice notice of of aa January January 2008 2008 hearing hearing
concerning the proposed concerning the proposed demolition demolition of the Improvements Improvements on the Property Propeliy ("January ("January Notice").
Tab B. The Tab The January Notice was January Notice was filed filed and and recorded recorded in the official official public public records records of Bexar Bexar
Id. A second notice ("February Notice") was filed in the Real Property Records County, Texas. Id
of of Bexar legal description, Bexm' County with the correct legal description, but the the wrong wrong owner's nmne. Tab C. owner's name.
After the City found found the property propeliy to be a public nuisance and issued a demolition demolition order,
but before judicial review before judicial review of that that order order was completed, 1 the was completed,1 the Property Propeliy was sold sold to Eden Eden Roc. Roc.
Tabs D, Tabs D, E. E. On On September 4, 2009, September 4, 2009, Eden Eden Roc Roc closed on the closed on the purchase purchase of the the Property Property and and
loan. 2 Tabs made its loan.2 D'Hanis made Tabs F, F, G. G. Four Four days days later, Stewart Stewati Title issued a $900,000 $900,000 Loan Loan
Policy Policy of Title Insurance Insurance ("Policy") ("Policy") to D'Hanis, D'Hanis, covering covering the the Property. Tab A. The Policy Property. Tab
I The judicial review review proceeding proceeding was because the Property was sold. See City of dismissed because was later dismissed ofSan San Antonio Antonio p. v. Bank, No. 04-10-00181-CV, D'Hanis State Bank, 2010 WL 04-1O-00ISI-CV, 2010 WL 3249956, 3249956, *1 *1 (Tex. (Tex. App.—San Antonio Aug. App.-San Antonio Aug. 18, 2010, no IS, 2010, pet.). 2 Stewart Stewart Title Title disingenuously assertsthat disingenuously asserts thatthe the Bank Bank was was aware, aware, before before itit made made the the Loan, Loan, that that the the City City was was Improvements. See Stewart Second MSJ at 5-6. ItItbases attempting to demolish the Improvements. basesthis thisassertion assertion on on handwritten handwritten notations in notations in contracts contracts between between the the buyer buyer and and seller seller of the the Property Property that that "Buyer "Buyer is is aware aware of the the issue issue with with the the city" and "Buyer "Buyer has has satisfied satisfied self that it can can attain attain all all necessary necessary permits pernlits from City of San Antonio from City Antonio inin order to rehab rehab property." Id But Stewart Title is well well aware aware that that the the notations notations concern the planned renovations to the Property, Property, not any attempt attempt to demolish demolish the Improvements. Rainey the Improvements. Rainey Bingham, Bingham, the loan officer for the Bank, Bank, testified testified that the referred to "issue with the City" referred to whether the City would issue building permits to do the rehabilitation. Tab I whether or not the at 32-34
2 issued by issued Stewart Title by Stewart did not Title did not include include an an exception exception to to coverage coverage for for demolition demolition of the the
Improvements. Id Id.
While the City initially issued building permits for renovations to the Improvements, Improvements, it
later revoked those pelmits permits because another department of the City was still seeking to demolish
G. As a result of the Improvements. Tab G. of the City's City's efforts effolls to to enforce enforce its its nuisance nuisance ordinances ordinances
and and to demolish demolish the Improvements, D'Hanis made Improvements, D'Hanis made aa claim on the Policy. Id the Policy. Id. Stewart Title
coverage. Id denied coverage. Id. D'Hanis D'Hanis then then filed filed suit against against the City City to to prevent prevent demolition demolition of the
Improvements (at Improvements (at least least temporarily), temporarily), and the COUll and the court of appeals appeals ultimately ultimately held held that that D'Hanis was
not bound by the January Notice. City of of San Antonio v.v. D'Hanis State Bank, No. 04-10-00181-
CV, 2010 WL CV, 2010 WL 3249956, 3249956, *3 *3 (Tex. (Tex. App.-San App.--San Antonio Aug. 18, Antonio Aug. 2010, no 18,2010, no pet.). pet.). Undaunted, Undaunted, the
City renewed its enforcement efforts eff01ls and the Improvements were demolished in 2012. Tab G.
The The Bank Bank filed suit against filed suit Stewart Title against Stewrul Title for for breach breach of of the the Policy. Policy. The The parties patlies filed filed
competing motions competing motions for for summary summary judgment judgment on on the the issue issue of of coverage. Neither party alleged that coverage. Neither
any ally genuine issues of material genuine issues material fact fact exist exist on on the the issue issue of of coverage. coverage. Even Even so, so, both both motions motions were
denied. denied. But, But, as as demonstrated in the demonstrated in the Bank's Bank'ssecond second motion motion for for summary summary judgment, there is no isno
fact question fact question relating relating to to coverage coverage for for aa jury jury to to resolve. Coverage is established resolve. Coverage established as as a matter of
law and Stewart Title's lawalld Title's arguments arguments attempting attempting to to negate negate coverage are are negated as a matter of of law.
SUMMARY OF RESPONSE POINTS
I. Response to the second motion for traditional summary judgment.
Stewart Title Stewart not conclusively Title has not conclusively established established that coverage was not that coverage not triggered triggered under under
Covered Risks 55 and Covered Risks and 6 for the the following following reasons: reasons: (1) (1)the theFebruary FebruaryNotice Notice triggered triggered coverage coverage
because it describes because describes the property, propelly, the violation and the proposed enforcement, enforcement, and and was filed in was filed
Official Public the Official Public Records Records of Real Property Propelly of Bexar County, County, Texas; Texas; (2) (2) the Policy does not
require that notice be filed in the Official Public Records of of Real Property.
3 Stewart Title Stewart Title has has not conclusively established not conclusively establishedthat thatthe the Bank's Bank's loss loss is excluded excluded on the the
ground that ground that the the notice notice of hearing that finally fmally resulted resulted in demolition demolition was was not not filed filed until after the
Date of Policy. Date The Bank's Policy. The Bank'sloss lossresulted resulted from ii-om defects defects or or other other matters matters that that existed existed before before the
Date of Policy. Date Policy. Specifically, Specifically, the the loss loss resulted resulted from from the the violation violation of ofaamunicipal municipal nuisance nuisance
ordinance occurring ordinance occurring before before the the Date Date of Policy and enforcement enforcement of the ordinance ordinance began began before before
that date. that date. The Thefact factthat thatthe theactual actualdemolition demolition occurred occurred after after that that date date does does not not retroactively retroactively
exclude the loss.
Stewart Title Stewart Title has has not conclusively conclusively established established that that the the Bank's covered based Bank's loss is not covered based
assel1ion that on the assertion that itit affected affected only only the the value valueof of the the property propertyand andnot notits itstitle. The cases title. The cases on
Stewart Title relies for this which Stewart tlIis proposition are distinguishable distinguishable because because they they do do not apply the
specific coverage specific coverage provisions provisionshere hereatat issue. loss is issue. The Bank's loss is covered covered under under Covered Covered Risks Risks 5
and 6, which were not at issue in the cases cited by Stewart Title.
Finally, Stewm1 Stewart Title has not conclusively established that the Bank is judicially estopped
ii-om assel1ing that from asserting either the that either the January Janumy Notice Notice or the the February February Notice Notice is sufficient sufficient to trigger trigger
coverage. Stewart coverage. Stewm1 Title Title seeks seeks to to estop estop the the Bank Bank based based on on its its position position in prior prior litigation with the
City. But City. Butthat thatlitigation litigationconcerned concerned aa different different issue—whether issue-whether the the City City complied complied with statutory statutory
requirements necessary requirements necessary to to bind bind aa successor successor lienholder lienholder to to aa notice notice of of hearing. hearing. The statute, which
governs only the municipality's actions, actions, does not aid in in determining detelmining whether the January Notice
was properly properly filed filed for purposes of for purposes of triggering triggering coverage coverageunder underthe thePolicy. Policy. In addition, addition, the the Bank's Bank's
litigation with litigation with the the City City did did not not concern concern the the Februmy FebruaryNotice Noticeatat all. The Bank all. The Bank is is therefore therefore not
taking inconsistent positions and judicial estoppel does not apply.
II. IL to the second Response to second motion motion fol' no-evidence summary for no-evidence summary judgment. judgment.
Stewart Title's motion Stewart motion for for no-evidence no-evidence summary judgment should should be denied because it
does not comply comply with Rule Rule 166a(i). Pm1icularly, it does not specify what element 166a(i). Particularly, element of the the Bank's
4 cause of action is not supported supp011ed by evidence.
In the alternative, the motion should be denied because the Bank has produced evidence
raising raising a genuine genuine issue issue of material material fact fact concerning Stewart Title's concerning Stew811 Title's breach breach of of the the Policy Policy by by
denying the Bank's claim, claim, which is is covered under Covered Risks 5 and/or 6 and is not excluded.
RESPONSE TO TRADITIONAL SUMMARY JUDGMENT JUDGMENT MOTION
STANDARD FOR TRADITIONAL SUMMARY JUDGMENT STANDARD FOR JUDGMENT
The party moving for a traditional summary judgment has the burden of showing that no summ81Y judgment
genuine issue of of material fact exists and that it is entitled to judgment as a matter of of law. TEX. TEX. R.
Civ. P. 166a(c); ClY. P. Nixon v. 166a(c); Nixon v. MI'. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985); Swilley v. Mr. Property Mgmt.
488 S.W.2d 64, 67 Hughes, 488 67 (Tex. (Tex. 1972). 1972). The The evidence evidence favoring favoring the non-movant is taken as true tlUe
and and every reasonable inference fi'om reasonable inference from the the evidence evidence will will be be indulged indulged in his favor. favor. Nixon, 690
S.W.2d at 548-49; MontgOlnelY Montgomery v. v. Kennedy, 669 S.W.2d 309, 311 311 (Tex. (Tex. 1984). 1984). Further, FUllher, the non-
movant bears bears no burden unless and until the movant movant meets meets its its initial initial burden. Rhone-Poulenc, burden. Rhone-Pollienc,
Inc. v. Inc. v. Steel, 997 S.W.2d 217, 222-23 (Tex. 1999) (citing Oram v. v. Gen. Am. Oil Co., 513 S.W.2d Gen. Am.
533, S.W.2d at 534 (Tex. 1974); Swilley, 488 S.W.2d 533,534 at 67-68)).
ARGUMENT AND AND AUTHORITIES AUTHORITIES
I. February Notice The February Notice satisfied all of the filing filing requirements stated in Covered Covered Risks 5 and 6.
A. The Policy doesnot Policy does not require require that that the notice notice be be sent sent to to the the propel'ty property owner at the correct address.
The Bank asserts assells that its loss is covered under Covered Risks 5 and 6:
5. The violation The violation or 01' enforcement enforcement of of anyany law, law, ordinance, ordinance, permit, pelmit, or 01' governmental regulation (including govelmnentalregulation (including those those relating relating to to building and zoning) restricting, regulating, prohibiting or 01' relating to:
5 (a) the occupancy, use or enjoyment of the Land;
(b) the character, character, dimensions or location of of any improvement erected on the Land;. ..... the Land; ...
if aa notice, notice, describing any part describing any part of the the Land, Land, isis recorded recorded in the the Public Public Records setting Records setting f011h forth the the violation violation or intention intention to to enforce, only to the enforce, but only of the violation or enforcement refened extent of referred to in that notice.
6. enforcement action An enforcement action based based on exercise of on the exercise of aa governmental governmental police police power not power not covered by Covered covered by Risk 55 if Covered Risk if aa notice notice ofofthe theenforcement enforcement action, describing describing any part of the Land, Land, is recorded in the Public Records, but only to the extent of the enforcement refelTed referred to in that notice.
~~ (5), (6).3 Tab A at 2, Iv
The plain language of Covered Risks 5 and 6 imposes only three requirements for notice:
the notice must (1) describe any part of the Land; Land; (2) be recorded in the Public Records; Records; and (3)
set fOl1h forth the violation or intention to enforce, ~~ (5), (6). enforce. Tab A at 2, IN
Stewart Stewart Title's second second summary judgment motion summary judgment motion acknowledges acknowledges that that the the City City filed filed a
notice notice of hearing hearing on the demolition demolition of the property propel1y here issue (the here at issue (the February February Notice) Notice) in the
Official Public Records Propet1y of Bexar County. Stewart Title Second MSJ at 4-5. Records of Real Property 4-5. A
comparison of the comparison January Notice the January Notice and Notice reveals and the February Notice reveals that both contain contain the exact exact
same legal same legal property property description: NCB 10060 description: NCB 10060 BLK BLK 13 Compare Tab 13 LOT 7. Compare Tab B B with Tab C. with Tab
Both Notices also refer to the same violation and proposed enforcement:
The purpose of of this hearing is to determine detelmine whether the above property propet1y constitutes a public nuisance nuisance in in need need of abatement. abatement. .. .. Ifthe . . If the property property is is determined determined to be a public nuisance, public nuisance, the the Board Board may may order remediation remediation actionaction up up to and and including including demolition of the structure structure at the the owner's expense.
Id.
Stewart 3 Stewart I(a) and 3(a) and (b), apparently Title quotes Exclusions 1(a) apparently as somehow somehow supporting an argument that notice must be filed in real property records. See Stewart Stewart Second SecondiVISJ MSJ at 10-11. 10-11. But Butneither neither Exclusion Exclusion 1(a) I (a) nor nor Exclusion Exclusion mentions "Public Records." See Tab 3(a) contains any notice filing requirement or mentions in (1)(a), Tab A, at 221i~ 3(a). Exclusion (I)(a), 3(a). Exclusion 3(b) excludes coverage for certain defects, liens, encumbrances, encumbrances, adverse claims or other matters "not recorded in the Public Records at Date of of Policy," but does not specify specity that Public Records must be real property records. !d. Id. at 2, 11 3(a)
6 The The February Notice satisfies February Notice satisfiesthe thefiling filingrequirements requirementsofofCovered CoveredRisks Risks5 5and and6.6. It
undisputedly "describe[s] undisputedly "describe[s] any any part part of the Land," describes describes the violation violation (public (public nuisance) nuisance) and and
enforcement (demolition) enforcement (demolition)that thatform formthe basisof thebasis of the the Bank's Bank's claim, claim, and was recorded and was recorded in in the
Property of Bexar County. See Tab A at 2, TE Official Public Records of Real Propelty c.. ~~ (5), (6); Tab C.
Stewart Title contends Stewart Title that the February contends that February Notice does does not not trigger trigger coverage, coverage, however, however,
because that notice because that notice was was not not sent to the the property propelty owner owner at at the the correct conect address. Title address. Stewart Title
Second MSJ at 11. II. But Butthere thereisisno nolanguage language in in the the Policy Policy requiring requiring that notice notice be sent "to the
property owner property owner at at the the conect correct address." address." On On the the contrary, contrary, as noted, the only Policy requirements
for notice are that it (1) (I) describe any part of the Land; (2) be recorded in the Public Records; and
(3) set forth fOlih the violation violation or• intention to or intention to enforce. ~~ (5), enforce.'4 Tab A at 2, IN (5), (6). The February (6). The February Notice
satisfies each of of these requirements.
Stewart Stewati Title's own own motion motion conclusively defeats its conclusively defeats its contention that a notice contention that notice of of hearing hearing
triggering coverage was triggering coverage was never never filed filed in in the the Official Official Public Public Records Records of Real Property Propelty of Bexar Bexar
County. County. Its Its request request for for summary summary judgment judgment on this tltis ground should be denied.
B. The February Notice need February Notice need only only comply with the comply with the Policy, not with Policy, not with a statute statute regulating government action.
Stewati Title's next attempt Stewart attempt to avoid avoid the effect of of the February Februat'Y Notice Notice is is to ignore the
Policy Policy language language and and to tum instead to section to turn section 214.001 214.001 of of the the Texas Texas Local Local Government Govemment Code. Code.
Title Second MSJ at 12. Stewart Title 12. Stewart StewartTitle's Title'sreliance reliance on onsection section 214.001 214.001 fails fails because because that
statute does statute does not not apply apply in in this this case. This isisnot case. This notaadispute disputeover overwhether whether aagovernmental govemmental entity entity
complied with a statutory statutOl'Y notice requirement. See TEX. TEx. Lac. Loc. Gov'T CODE §§214.001(e). GOY'T CODE 214.001(e). This is
purely a contract dispute between private parties and the only question presented is whether the
4 There is also no requirement in the requirement in the Policy Policy that that the the notice notice be be filed filed under underthe thegrantor's grantor'sor or grantee's grantee's name. name. Thus, TIlliS, Stewart Title's assertion Stewart Title's that expert assertion that Rhonda Jolley expert Rhonda Jolley agrees agrees that that the the February Notice could February Notice could not not be be found found in the grantor/grantee index for Bexar County Real Property Records is of of no consequence. See Stewart Title Title Second Second M&I MSJ at 13.
7 February Notice complied with the Policy language.
Stewali Title's reliance on section Stewart section 214.001 214.001 evidences evidences a misinterpretation misinterpretation of of the the Policy's
definition of "Public Records": "records established Records": "records established under under state state statutes statutes at Date of of Policy for the
pUl]Jose of imparting purpose imparting constructive constructive notice notice of matters matters relating relating to propeliy to purchasers to real property purchasers for
value and without value without Knowledge." Tab A at 33 ¶~ (1)(k). Knowledge." Tab (1 )(k). AAplain, plain,grammatical gralllmatical reading reading of that that
definition reveals definition revealsthat that "established "establishedunder understate statestatutes statutes. .. . . for for the the purpose purpose of ofimparting imparting
constructive notice" refers to the type of of records, not the content .of 'of any notice filed therein.
Stewart Title has vigorously Stewart Title vigorously argued argued throughout this litigation throughout this that "Public Records," litigation that Records," as
defined, can only defined, can only mean mean "Official "Official Public Public Records Records of of Real Real Propeliy." Property." But But even even accepting accepting this
contention for contention for the sake of of argument argument establishes establishes only where the notice notice must must be be filed. What the filed. What
notice must contain is prescribed, prescribed, not not by statute, statute, but but by by Covered Covered Risks Risks 55 and and 6. As established 6. As established
above, the February Notice complies with every above, every Policy Policy requirement, requirement, including including both where the
notice must be filed and its mandatory mandatOlY contents.
any event, In any event, section section 214.001 214.001 actually actually disproves disproves Stewart Stewart Title's contention contention that that the the
February February Notice Notice did did not impart constructive constructive notice notice because because it was addressed to the correct was not addressed conect
property property owner. Section 214.001(e) owner. Section 214.001(e) provides provides that filing a notice that filing notice of ofhearing hearing concerning conceming a
municipality's municipality's intent intent to have have aa substandard substandard building building demolished, demolished, as prescribed prescribed in that statute, statute,
provides constructive notice to subsequent interest holders:
filing of The filing of the the notice notice is is binding binding on on subsequent subsequent grantees, grantees, lienholders, lienholders, or other other transferees of an interest in the property who acquire such interest after the filing transferees of the notice, and constitutes notice of the hearing on any subsequent recipient of any interest any interest in the property in the property whowho acquires acquires such interest after such interest after the filing of the the filing the notice.
TEX. LOCAL TEX. LOCALGOV'T CODE§§2l4.001(e). GOV'TCODE 214.001(e).
The statute requires requires that the notice contain "a legal description of the affected propeliy," property,"
but it does not require, require, in every instance, that it contain the the propeliy property owner's name. nallle. Id Id. Rather, it
8 states that the notice notice must must contain contain the the owner's owner's name name "if "if that that information information can can be bedetermined." determined." So,
conversely, if the owner's name cannot be determined, it need not be included in the notice.
The statute obviously contemplates that a document filed in the real propelty property records that
contains a legal description of of the affected'propeliy affected property but does not contain the name of the proPeJiy property
owner still impmis imparts constructive constructive notice. notice. In In this this regard, regard, the the statute statute is is completely completely compatible with
the Policy language which, as just demonstrated, language which, requires that demonstrated, requires that notice notice describe describe some some paJi part of the
land but does not require that it name ~~ (5), (6). naJlle the property owner. See Tab A at 2, im
The February Notice Notice was sufficient to impart constructive notice and to trigger coverage impaJi constrnctive
under the under the Policy. Policy. Stewart Stewmi Title's Title's request request for for summary judgment on summary judgment on the the ground ground of lack lack of
constructive constmctive notice should be denied.
IL II. January Notice The January Notice satisfied all of the filing filing requirements requirements stated in Covered Risks 5 and 6.
A. Section 214.001(e) 214.001(e) of of the the Texas Texas Local Local Government Government Code governs governs the legality of a municipality's action, not coverage under under the the Policy. Policy.
As Stewart Title also acknowledges, the JanuaJY acknowledges, the January Notice Notice was was filed filed in the Official Public
Records of of Bexar County. Stewart Title Second MSJ at 4. This This notice, notice, like like the the February February Notice,
describes paJi fOlih the violation or intention to enforce. See Tab A at 22 ~~ part of the Land and sets forth ill
(5), (5), (6). (6). Stewart StewmiTitle's Title'sargument argumentthat thatthe theJanuary January Notice Notice was was insufficient insufficient to to trigger trigger coverage coverage
rests on its contention that "Public Records," as defined defined in the Policy, can only only mean "Official "Official
Public Records of Property of ofReal Properly of Bexar County" rather than "Official Public Records of of Bexar Bexm
County." Stewart Stewart Title Title has has not not conclusively conclusively established established any any such narrow reading.
Stewart Title again StewaJi Title again relies relies on section section 214.001 214.001 of of the the Texas Texas Local Local Government Govemment Code, Code,
which provides that a municipality seeking to demolish a substandard building "may file notice
of of the hearing in the Official Public Records of of Real Property Propeliy in the county in which the property
9 located." TEX. is located." TEX. LOCAL LOCAL GOV'T GOV'TCODE CODE§ 214.001(e). § 214.001(e).But Butsection section214.001(e) 214.001(e)must must be be read read in
context.
Section 214.001, Section 214.001, as municipality's authority as a whole, governs a municipality's authority concerning concerning substandard substandard
buildings. Subsection buildings. Subsection (d) (d) outlines outlines aa procedure procedure whereby, after a public hearing and a finding fInding that
subject building the subject building violated violated a pertinent pe11inent ordinance, ordinance, the the municipality municipality may may order order the owner to the owner
demolish the demolish building within the building within a reasonable time. ld. reasonable time. Id. at §§ 214.001(d). 214.001(d). If If the the owner owner fails fails to to
comply, the comply, municipality then the municipality then gives gives notice notice (by personal delivery (by personal delivery or mail) to or mail) to each each identified identifIed
m0l1gagee mortgagee and lienholder identifying the property and violation and stating that the municipality
will demolish will demolish the building if the building if it is is not not done done within within aa reasonable time. ld. reasonable time. other words, Id. In other words,
subsection (d) subsection (d) gives gives the the owner owner a chance chance to act, and then gives gives the mortgagees or lienholders lienholders a
chance to act, before the municipality takes final fInal action.
Subsection (e), on which Stewart Title relies, is an alternative to the procedure outlined in
subsection (d). ItItprovides subsection (d). providesthat thatthe themunicipality municipality may may give give mortgagees m0l1gagees and and lienholders lienholders notice notice
the public before the public hearing hearing so so they they have have an an opportunity oppo11unity to comment comment at at the the hearing. hearing. ld. Id. at
214.001(e). In 214.001(e). this context, In this context, "the municipality lIlay may fIle file notice of the hearing in the Official OffIcial Public
Records of Real Real Propeliy property is located." ld. Property in the county in which the propeliy Id. (emphasis added).
Such a notice, if if filed, fIled, "is binding binding on subsequent subsequent grantees, lienholders, or other transferees of an -'
propeliy who acquire such interest after the filing interest in the property fIling of of notice, and constitutes notice
hearing on any of the hearing any subsequent subsequent recipient recipient of any interest interest in the the property property who who acquires acquires such such
interest after after the the fIling notice." kl filing of the notice," If the municipality follows this alternative procedure, Id. If
it need not give mortgagees or lienholders notice by personal delivery delivery or mail mail if the owner fails
to act. ld. Id.
10 Subsections (d) (d) and (e) set out procedures by which a municipality may require or effect
the demolition of a substandard substandard building. Ifaa municipality building. If municipality chooses chooses to to proceed proceed under subsection
(e) and files a notice of hearing to bind subsequent interest owners, owners, such notice must be filed filed "in
the Official Public Records of Real Real Property in the county in which the propelty property is located." See
id. at §§ 214.001(e). 214.001(e). But Butfiling filing the thenotice notice ininthe theappropriate appropriate records records affects affects only only whether whether the
enforceable against municipality's actions are legal and enforceable against subsequent subsequent interest interest owners. Complying owners. Complying
or failing failing to comply comply with with section section 214.001(e) 214.001(e) does does not not establish establish whether whether any any particular particular notice notice
complies with the Policy. Stewart Title is again reading into the Policy requirements that simply
do not appear in its text.
B. Policy language The Policy language isis considerably considerablybroader broader than than the statutory language.
"Public Records," as used in the Policy, Policy, is considerably broader than "the Official Public
Records of Real Records Real Propelty Property in in the county in which the county which the property propelty is located," located," as used in in section section
214.001(e). 214.001(e). Indeed, Indeed, the the Policy Policy definition definition encompasses the public encompasses the public notice notice records records of Bexar Bexar
County, where County, where the notice of the notice of hearing hearing in in this this case case was was filed. This is filed. This is because because the the Policy Policy does not
require require filing filing in the official real property records; records; it requires requires filing filing in records "relating to real
property." Tab property." 3, If~ (1)(k) Tab A at 3, (l)(k) (emphasis added). A (emphasis added). A notice notice of ofhearing hearing on on the the proposed proposed
demolition improvements certainly demolition of improvements certainly"relat[es] "relat[es]totoreal realpropelty." property." And the court of of appeals appeals in
the D'Hanis D 'Hanis opinion states that such notices "are routinely recorded" in the public notice records,
as opposed to the real property records. See D'Hanis, 2010 WL 3249956, 2010 WL 3249956, at at *3 *3 n.2. n.2. Thus, Thus, the
records where the Januaty January Notice Notice was filed filed fall definition of "Public Records." fall within the Policy definition
Section 214.001(e) is inapposite.
C. Neithet· Sal/chez Neither Sanchez nor Noble Mortgage adds to the analysis.
Stewart Title Title next looks to the common law to support SUppOit its argument that only documents
filed in real property records impart property records impart constructive constructive notice. notice. It first relies on Sanchez v. v. Telles, 960
11 II S.W.2d 762 (Tex. S.W.2d 762 (Tex. App.-El App.—ElPaso Paso 1997, 1997,pet. pet.denied). denied). But But that case case simply simply states states that that "an
instrument property must be recorded in the public records in the county in which instmment relating to real propelty
of the a part of the property located." Id. at 767 (emphasis propelty is located." (emphasis added); see TEX. TEX. PROP. CODE ANN. PROP. CODE ANN. §
11.001 (requiring instrument 11.001 instrument relating relating to to real real property property to to be recorded in county where propelty property is
without specifying without specifying "real "real property property records"). Both the records"). Both the January January Notice Notice and and the the February Febmary Notice
were filed filed in the public public records records of of Bexar Bexar County, County, where the property property is is located; located; both both comport compott
Stewmt Title then relies on Noble Mortg. with Sanchez. But Stewart & Investments, Mortg, & Investments, LLC v. v. D&M Vision
Investments, LLC, 340 Investments, 340 S.W.3d S.W.3d 65 65 (Tex. (Tex. App.—Houston [1st Dist.] App.-Houston [1st Dist.] 2011, 2011, no no pet.), pet.), to to add add
language to (and to change the meaning of) the Sanchez court's comi's statement. statement.
The issue in Noble Mortgage was "whether recording recording aa sale on an execution execution docket in
compliance with with Rule Rule 656 656 of of the the Texas Texas Rules Rules of of Civil Civil Procedure Procedure isis aa 'recording' 'recording' for the purpose
of of putting subsequent creditors and purchasers on constructive constmctive notice under sections 13.001 13.001 and
13.002 of the Texas Property Code." Id. 13.002 77. Stewart Id. at 77. Stewmi Title Title states that the Noble Mortgage states that
court "interpreted the reference in Sanchez to 'public records' as as actually actually referring "to the county tile cOllllty
real property real property records records ratller than otller rather tllall other public public records," Stewart Title records." Stewart Second MSJ at 12 Title Second 12
(emphasis supplied supplied by by Stewart Stewart Title). Title). Despite Despite the the bold bold and and italics, italics, however, this is not what the
Noble Mortgage court said. Rather, Rather, ititinterpreted interpreted "public "public records" records" to to mean mean real real property propelty records
comi." Noble "rather than the execution docket of the county court." 340 S.W.3d Noble Mortg., 340 S.W.3d at at 80. 80. This
interpretation does not interpretation does not foreclose foreclose constructive constructive notice notice being being imparted imparted by by filing filing notice notice in some some
public record other than the execution docket. See TEx. PROP. CODEANN. PROP. CODE ANN.§§11.001 11.001(specifying (specifying
of record). Noble Mortgage, like section 214.001, simply does county but not type of does not apply to
this case. tlllS
Stewmi Title Stewart Title has conclusively established has not conclusively established that that the January Notice the January did not Notice did not trigger trigger
12 coverage because the Policy requires that notice be filed in the Official Records of of Real Propelty. Property.
Its request for summary judgment on this ground should be denied.
III. The Bank's loss is not excluded under the Policy.
In addition to to asselting asserting that that the the Bank's loss is is not not covered, covered, Stewart Stewart Title also asserts asselis that
it is excluded under policy policy Exclusion Exclusion 3(d). That 3(d). That exclusion exclusion excludes excludes from from coverage coverage loss arising
reason of "[d]efects, by reason "[d]efects, liens, liens, encumbrances, encumbrances, adverse adverse claims claims or or other other matters: matters: ... . . . attaching or
created subsequenttotoDate created subsequent DateofofPolicy Policy.... . . ." Tab A at 2, ¶~ 3(d). " Tab 3(d). Stewart Stewati Title Title asserts asserts that that the
Bank's loss Bank's loss is is excluded excluded because because the the notice and hearing heating that actually resulted in the demolition of
the apartments the apartments occurred occurredafter afterthe the Date Date of Policy (September of Policy (September 8,8, 2009). This analysis 2009). This analysis
misidentifies the cause cause of the the Bank's Bank's loss.
The The defect, defect, adverse adverse claim, claim, or or other other matter matter that that resulted resultedin in the the Bank's Bank's loss loss was was not not a
patiiculat' notice particular notice or hearing. ItItwas or hearing. wasthe theviolation violationand andenforcement enforcement of ofmunicipal municipal ordinances ordinances
concerning substandard concerning substandardbuildings. buildings. Despite Despite Stewati Stewart Title's propensity to Title's propensity read portions to read pOliions of the
Policy (and statutes and cases) in isolation, the Policy provisions must be read in context.
Covered Risks 5 and 6 provide coverage for losses sustained by reason of of the violation or
enforcement of enforcement laws, ordinances, of laws, ordinances, or govemmental regulations or governmental regulationssuch suchas as are are at issue issue here here-the the
loss was Bank's loss was sustained sustained because because the the improvements improvements on the the property propeliy had constituted constituted a public
nuisance and nuisance City exercised and the City exercised its its enforcement enforcement powers powers to ensure ensure that that they they were were demolished. demolished.
Both the violation and enforcement were matters that existed prior to the September 8, 2009 Date
Policy, as evidenced of Policy, evidenced by the fact that the City City issued issued a demolition demolition order on January 14, 2008,
finding that the finding that the apartments apatiments constituted constituted a public public nuisance nuisance and and ordering ordering their their demolition. demolition. See
D'Hanis, 2010 2010 WL 3249956, *1; see also Stewart Title 3249956, at *1; Title Second MSJ at 2 ("The ("The City City of of San San
apatiments on the Propeliy Antonio had been trying to demolish the apartments Property as as far back as 2002, due to
its [sic] decrepit state").
13 The Bank The Bank obtained obtained a temporary i~unction setting temporary injunction setting aside the January aside the Januaty Notice Notice and and
temporarily halting temporarily halting the the City's City's. enforcement enforcementefforts. action, however, efforts. That action, however, did prevent the did not prevent
City from from issuing additional additional notices and continuing the enforcement action that had already been
taken. ItItalso taken. also did did not not change change the the fact fact that, that, with with the the City's City's refusal refhsal to to issue issue building building permits, pennits, a
violation violation of a municipal municipal nuisance nuisance ordinance ordinance continued continued to exist. exist. See San Antonio Antonio City Code Code
Chapter 6, Art. Chapter 6, Art. VIII, VIII, §§ 6-156, 6-157. §§ 6-156, The fact 6-157. The fact that that the the City City continued continued its its enforcement enforcement efforts efforts
of Policy and that demolition after the Date of demolition was actually actually effected effected after after that that date does not alter
of the covered risk began. when the substance of In other began. In other words, words, the the defect, defect, adverse claim, clainl, or other
matter resulting resulting in in the (i.e., matters the Bank's loss (i.e., matters falling falling within within Covered Covered Risks Risks 5 and and 6) was not
something "attaching or created subsequent to the Date of Policy." See Tab A at 2, ¶~ 3(d).
Stewart Title Stewart Title has conclusively established has not conclusively establishedthat that the the Bank's is excluded Bank's loss is excluded under under
Exclusion 3(d). Its 3(d). Its request request for for summary sumlllaty judgment on this ground should be denied.
IV. TV. The loss is The Bank's loss is covered covered under under Policy Policy provisions provisions other Covered Risk 2, other than Covered which is is the only only type type of risk risk addressed in the cases on which which Stewart Title relies.
Stewart Title Stewart Title next next argues argues that that the the Bank's loss is is not not covered covered under under the the Policy Policy because because
demolition of demolition of the apartments affected the apartments affected only only the the value value of of the insured property, the insured property, not not title title to that
property. propeliy. ItIt relies relies for for this this argument argument on Hanson Hanson Business Business Park, Park, L.P. v. First L.P. v. First National National Title Title
Insurance 209 S.W.3d Insurance Co., 209 S.W.3d 867 867 (Tex. (Tex. App.—Dallas App.-Dallas 2006, 2006, pet. pet. denied), and McGonagle denied), and v. McGonagle v.
Stewart Title insurance Insurance Co., 432 S.W.3d S. W.3d 535 535 (Tex. (Tex. App.-Dallas App.—Dallas 2014, 2014, pet. pet, filed). filed). The problem
at issue in Hanson was that the insured property was in a designated flood plain; the problem in
McGonagle was that a structure stlUcture on on the the property propeliy was was subject subject to to aa dedication instrument. See dedication instrument.
Hanson, 209 209 S.W.3d 868; McGonagle, 432 S.W.3d at 868; S.W.3d at 432 S.W.3d 538-39. Neither at 538-39. Neither case case addresses addresses the
circumstatlces or covered risks here at issue; both cases are distinguishable from the present case. circumstances
The Hanson and McGonagle courts cOUlis both addressed addressed whether whether the the problem problem at at issue issue was a
14 "defect in or lien "defect lien or or encumbrance encumbrance on on the so as the title" so as to to be becovered covered under under the the title title insurance insurance
policy. See Hanson, 209 S.W.3d at 869; McGonagle, 432 S.W.3d S.W.3d at at 539. 539. This This same language is
found found in the Policy here at Policy here at issue, as Covered issue, as Risk 2: Covered Risk 2: "Any "Any defect defect in in or or encumbrance encumbrance on the the
1, ~ (2). Title." Tab A at 1,11(2).
comis both held that the identified The Hanson and McGonagle courts identified problems problems did fall did not fall
within this covered within risk. See Hanson, 209 covered risk. 209 S.W.3d S.W.3d at 870; 870; McGonagle, 432 432 S.W.3d S.W.3d at 540. 540.
p31iicularly, the Hanson court More particularly, held that "a defect court held defect in, or or encumbrance on, title encumbrance on, title (such as
would trigger would trigger coverage coverage under under aa title title insurance insurance policy) policy) must must involve involve a flaw in in the the ownership ownership
property." Hanson, 209 rights in the property." rights 209 S.W.3d at 870. S.W.3d at 870. ItIt"refuse[d] "refuse[d] to to equate equate a defect defect in the the
condition of the condition of the property with aa defect propelty with defect in title to the the property." Id property." ld The McGonagle court comi
followed suit. See McGonagle, 432 S.W.3d at 539-40.
But Hanson and McGonagle do not govern the analysis govem the analysis in in this this case. case. First, First, the Bank is
not claiming loss from from "a defect in the condition condition of the property." See Hanson, 209 S.W.3d at
870. 870. The TheBank Bankwas wasaware awarethat thatthe theproperty propertyrequired required renovation; renovation; that was one one purpose pmpose of the
loan. ItIt is loan. is not not the condition of properly that caused the loss, of the property loss, it is the demolition order issued
under municipal ordinance and the enforcement under• aa municipal enforcement of of that order order by demolition demolition that caused the
loss. loss. That That isis aarisk riskthat thatisisexpressly expressly covered covered under the Policy under the Policy as as Covered CoveredRisks Risks55and and6.6. No
provision analogous to Covered Risks 5 and 6 were at issue, or even mentioned, in either Hanson
or McGonagle. McGonagle.
As noted, the Policy states that itit covers states that covers "loss "loss or or damage damage ... „ . sustained sustained or or incurred incurred by the
Insured by reason Insured by reasonof: of:... . . [a]ny [a]nydefect defectininororlien lienororencumbrance encumbrance on on the the Title." Tab at 1, ~¶ Tab A at
2(a). But 2(a). But that that is not the only covered is not risk. Rather, covered risk. Rather, the the Policy Policy lists lists 13 13 other other expressly expressly covered covered
id at 1-2, risks. See id. ~~ 1, 1-2, IN 1, 3-14. 3-14. And And among 3l1long those those other other risks risks are are Covered Covered Risks 5 and 6 which,
15 case. 5 of this case.5 as established above, apply to the circumstances of
Hanson and McGonagle held only that the risks asselied asserted in those cases did not fall within
the specific coverage provision at issue, which covered only defects in, or liens or encumbrances
on title (i.e., the equivalent of Covered Covered Risk Risk 22 in in the the Policy). The coverage Policy). The coverage provision at issue in
those cases those cases was was not the same as the coverage coverage provisions provisions at issue in this case (Covered (Covered Risks 5
and 6). Hanson and McGonagle do not suppOli support Stewart Title's claim to summary sunnnmy judgment.
V. The Bank is not estopped by its position in prior litigation with the City.
"Judicial estoppel "Judicial estoppel precludes precludesaa pmiy who successfully party who successfully maintains maintainsaa position position in one in one
proceeding from proceeding from aftelwards afterwards adopting adopting a clearly inconsistent inconsistent position another proceeding position in another proceeding to
obtain an unfair advantage."6 advantage.,,6 Ferguson Ferguson v.v. Bldg. Bldg. Materials Materials Corp., 295 S.W.3d 642, Corp., 295 642, 643 (Tex.
2009).
Stewmi Title Stewart Title asserts asserts that that the the Bank Bank is is judicially judicially estopped, but itit is estopped,but is not clear from not clear from its
motion just motion just what what it is is supposedly supposedly estopped estopped from from asserting. The motion asserting. The motion states states that the the Bank Bank
asserted in prior litigation against the City that the notice of of hearing on the demolition order was
never filed never filed in the the Official Official Public Public Records Records of of Real Real Property Propeliy of of Bexar Bexm' County. County. Stewart Stewart Title
Afterreciting Second MSJ at 16. After recitingcase case law lawconcerning concerning judicial judicial estoppel, estoppel, Stewart Stewmi Title concludes
that "[t]he Bank cannot now take the position that notice of of hearing hem'ing on the demolition was never
filed Official Records filed in the Official Records of of Real Real Property Property For Bexar County." Jd at 17. County." id. 17. The The two two recited recited
positions are not inconsistent; positions are inconsistent; by definition, judicial estoppel definition, judicial cannot apply estoppel cannot apply to to them. them. See
Ferguson, 295 S.W.3d at 643 (precluding clearly inconsistent positions).
5 Because Because the Bank does not seek seek coverage coverage under Covered Risk 2 ("[a]ny ("[alny defect in or lien lien or or encumbrance encumbrance on the Title"), Stewart Title's assertion assel1ion that that expert expert Rhonda Rhonda Jolley agrees that the the January January Notice and February Notice Notice do not create a cloud on title is of no consequence. See Stewart Title Second Second MSJ MSJ at 16. 6 Stewart Title appears to also invoke something it calls "estoppel in law." ,See _SeeStewart Stewart Title Title MSJ at 14. 14. The The case case it cites, Long v. Knox, 291 v. Knox, 291 S.W.2d S. W.2d 292 292 (Tex. (Tex. 1956), makes no 1956), makes no mention mention of "estoppel "estoppel in in law" law" and and the Bank has not found found any Texas Texas case case employing employing that phrase. Because Long actually discusses judicial estoppel, the Bank concludes that phrase. that Stewart Title's reference to "estoppel "estoppel in in law" law" isis simply simply aa reference reference to to judicial estoppel under another name.
16 Assuming Stewart Assuming Stewart Title Title means means that that the the Bank Bank cannot cannot take the January take the position that the January
Notice triggered coverage under the Policy because the Bank asserted in prior litigation that that
notice did not impart constructive notice did notice, its constructive notice, its argument argument lacks lacks merit. merit. Once Once again, again, Stewart Stewart Title
attempts to attempts import section to import 214.001, aa statute section 214.001, statute governing goveming action action by by aa municipality, municipality, into into this this
contract dispute between private private parties. Compliance with section 214.001 parties. Compliance 214.001 was properly at issue
litigation against the City. There in the prior litigation such issue There is no such issue in this this litigation litigation against against Stewart Stewmi
nongovemmental entity. Title, a nongovernmental
The issue in the The the prior prior litigation litigation was was whether whether the the Bank Bank properly properly obtained obtained aa temporary temporary
injunction enjoining injunction enjoining the enforcement of the 2008 the enforcement 2008 demolition demolition order. See D'Hanis, 2010 order. See 2010 WL WL
3249956, at * 3249956, at *1. I. The TheBank Bankargued argued that thatthe thedemolition demolition order order was was not not enforceable enforceable against against it
because because it had neither actual actual nor constructive notice of the constructive notice the hem'ing hearing and and was a bona bona fide lender. lender.
Id TheCity Id. at *2. The Cityargued argued that that the the Bank Bank was was not not protected protected as as aa bona bona fide fide lender lender because because notice
of of the hearing hearing was was filed filed with with the Bexar County Clerk. Id theBexar• Id. at *3. *3. The The court couti of ofappeals appeals held held that
notice hearing on aa demolition notice of hearing demolition order order is is binding binding on on subsequent subsequent lienholders lienholders "only "only if the
municipality files municipality files the the notice notice of hearing hearing in the Official Official Public Records Records of of Real Real Property." Propeliy." Id
(citing (citingTEX. TEX. LOCAL GOv'T CODE§§214.001(e». LOCAL GOy'TCODE 214.001(e)).
The issue The holding in D'Hanis specifically issue and holding specifically concemed concernedthe the City's failure to comply City's failure comply
with statutory requirements for binding binding subsequent subsequent lienholders. id It was in that lienholders. See id. that specific specific
context that the Bank asserted asselied that it did not have constructive constructive notice because the notice was not
filed filed in the the real real property property records. records. Had Had the theJanuary Janumy Notice Notice been been filed filed in in those those records, records,
constructive notice constructive notice would would have imposed by statute. have been imposed TEX. LOCAL statute. See TEX. LOCAL GOy'T CODE § GOV'T CODE
214.001(e). 214.001(e). But, But, for for all all the the reasons reasons discussed discussed in in section section II(A) Il(A) above, above, whether whether the January Notice
does does or does does not not fulfill fulfill the the City's City'sstatutory statutory obligations obligations does does not not determine detemline whether whether that same same
17 complies with notice complies with the the Policy Policy so so as as to to trigger trigger coverage. coverage. Thus, Thus, the fact that the January January Notice
did not provide constructive notice binding the Bank under section 214.001(e) does not preclude
a finding fmding that the same notice satisfied the notice filing requirement requirement of Covered Risks 5 and 6. Covered Risks
The Bank's Bank's position position on on the statutory stahltOlY issue is therefore not "clearly inconsistent" with its position
on the Policy issue.
In addition, the only addition, the only notice notice at at issue issue in in the the prior litigation was prior litigation was the the Janumy January Notice. Notice. No
mention was was made made of, of, and no no position was asselted position was asserted on, on, the the February February Notice. Notice. Stewart Stewmt Title has
therefore not therefore established that not established estopped from asserting that the Bank is judicially estopped asserting that coverage was
triggered by the February Notice.
Stewart Stewmt Title has not conclusively established established that the Bank is judicially estopped estopped from
asserting that the January asselting that Notice and the February Janumy Notice Februaty Notice Notice complied complied with the the requirements requirements of
Covered Risks 5 and and 6. 6. Its Its request request for for summary summary judgment judgment on that ground should be denied.
RESPONSE TO NO-EVIDENCE SUMMARY JUDGMENT JUDGMENT MOTION
STANDARD FOR NO-EVIDENCE STANDARD FOR NO-EVIDENCE SUMMARY SUMMARY JUDGMENT. JUDGMENT.
After After an an adequate adequate time tinte for for discovery discovery has has passed, passed, a party pmty may may move move for for summary summary
judgment on the ground that there is no evidence of of one or more essential elements of of a claim claint or
deknse defense on on which which the the adverse party would adverse party would have have the the burden burdenof ofproof proofatattrial. trial. Tax. TEX. R. R. Ctv. CIY. P.
I 66a(i). But 166a(i). Butsummary summary judgment judgment isis not not appropriate appropriate ififthe the non-movant non-movant presents evidence showing
that it is is entitled trial. Southwestern entitled to aa trial. Southwestern Elec. Elec. Power Power Co. v. Grant, 73 Co. v. 73 S.W.3d 211, 215 (Tex. (Tex.
Llanes v. 2002); Llanes v. Corpus Corpus Christi Christi Indep. Indep. Sch. Sch. Dist., Dist., 64 64 S.W.3d S.W.3d 638, 638, 641 641 (Tex. (Tex. App.—Corpus App.-Corpus
Christi 2001, pet. Christi 2001, pet. denied). denied). In In other other words, words, ififthe theevidence evidence demonstrates demonstrates a genuine genuine issue issue of
material fact, summary judgment should be denied. See TEX. TEX. R. CRT. CIY. P. P. 166a(i). 166a(1).
18 ARGUMENT AND AND AUTHORITIES AUTHORITIES
I. Stewart Title's Title's second second motion for no-evidence summary judgment judgment is fatally flawed.
Rule 166a(i) Rule 166a(i) of the Texas Texas Rules Rules of of Civil Civil Procedure Procedure authorizes authorizes aa patty party to to move move for for
summary judgment on the ground summmy judgment ground that that "there is no no evidence of one or more essential essential elements elements of
a claim or defense on which the adverse party would would have the burden of proof at trial." TEX. TEX. R.
CIV. P. I 66a(i). ItItdoes P, 166a(i), doesnot, not,however, however, authorize authorize "conclusory "conclusory motions motions and and general general no evidence evidence
challenges." Callaghan Ranch, Ltd. Callaghan Ranch, Ltd. v. v. Killam, 53 S.W.3d 1, I, 3 (Tex. (Tex. App.—San App.-San Antonio 2000,
pet. denied) (citing (citing TEX. R. CIV. TEX. R, P, 166a(i) & CIV. P. & cmt,). cmt.). Rather, Rather, the the motion motion must must state state the specific specific
elements as to which there is no evidence. Id. "If "If a no-evidence no-evidence motion for summary judgment
not specific is not specific in in challenging challenging a particular pmiicular element element or is conclusory, or is conclusory, the the motion motion is legally legally
. . . ."" Callaghan Ranch, 53 S.W.3d at 3. insufficient as a matter of law ....
The motion at issue in Callaghan Ranch stated:
The Killams The Killams are are entitled entitled to to summary summary judgment judgment because because the the Plaintiffs cannot by Plaintiffs cannot by pleading, pleading, deposition, deposition, answers answers to to intel1'ogatories or interrogatories admissible evidence or other admissible evidence demonstrate demonstrate there there is any any evidence evidence toto support suppOli the the declaratory declaratory judgment judgment seeking seeking toto declare the road in question a public thoroughfare. thoroughfm·e.
Id. It then generally challenged Callaghan Ranch's factual allegations. Id. Id. The court of appeals
concluded, "The motion concluded, "The motion fails fails to to state state the elements Callaghan Ranch's elements of Callaghan Ranch's causes causes of action action as to
which there is no evidence; therefore, therefore, it is legally insufficient as a matter of law." Id. insufficient as Stewart
Title's Title's motion motion suffers suffers the same defect.
Stewart Stewati Title's second second purported purported no-evidence no-evidence motion states that it is moving for summary
judgment on judgment on "all Plaintiffs' claims," claims," but but does does not not identify identify what what those those claims are. Stewart Title
MSJ at p. 15.. IS. It It broadly broadly states states that that "Plaintiffs "Plaintiffs cannot .... . , demonstrate demonstrate that there is any genuine genuine
issue of of material fact to support suppOli their claims," again again without identifying identifYing those claims. Id. Id. As an
attempt attempt at specificity, the motion states, "Plaintiffs specificity, the can produce "Plaintiffs can no evidence produce no evidence to support suppOli their
19 claim of breach breach of contract." contract." ItIt then then briefly briefly repeats repeats arguments arguments made in the traditional pmiion portion of
the motion. id. But Stewart See id motion. See Title does Stewart Title does not identify the essential identify the elements of essential elements of the the Bank's
breach of contract claim and does not state the specific element(s) for which there is no evidence, evidence.
Its second no-evidence motion (like its identical first no-evidence motion) is therefore deficient.
See id.
Stewart Title's second Stewmi Title's second purported purported no-evidence motion isis again no-evidence motion again nothing more than nothing more than an
abbreviated versionof abbreviated version of its its traditional traditionalmotion. motion. Because Because itit is "not "not specific specific in in challenging challenging a
particular pmiicular element [and] [and] is conclusory, motion is legally insufficient conclusmy, the motion insufficient as a matter of law" and
should be denied. See Callaghan Ranch, 53 S.W.3d at 3.
II. In the alternative, the evidence raises a genuine issue of material fact.
The only element of the Bank's Bank's claim claim for for breach breach of of contract contract even arguably arguably challenged in
Stewart Stewart Title's second no-evidence motion is whether no-evidence motion Stewart Title whether Stewart Title committed committed aa breach breach of its
obligations under the Policy. Policy. Stewart Stewmi Title Title argues m'gues that that there there can be be no no breach breach because there is no
coverage because no coverage because no notice notice of hearing was filed in the real property propeliy records and such filing is a
predicate to coverage. Stewart Title Title MSJ at 15.
The Bank has produced evidence demonstrating that Stewart Title breached the Policy by
refusing to pay refusing to pay a covered covered claim. claim. The ThePolicy Policycovers covers losses losses resulting resulting from from the the violation violation or
enforcement of of a municipal ordinance "if "if a notice, describing any part of of the Land, is recorded in
the Public Records Records setting setting fmih forththe theviolation violationororintention intentiontotoenforce enforce.... 2, ~~ . . ."" Tab A at 2, (5), (6). 71(5),
The Bank's loss The loss results results from from the the violation violation of of aa municipal municipal nuisance nuisance ordinance and the ordinance and the City's City'S
enforcement of of that ordinance. Tab D. A notice describing the Land was recorded in the Public
Records setting Records forth the violation setting forth violation or or intention intention to to enforce. enforce. Tabs Tabs B, B, C. lawsuit over the C. A lawsuit the
demolition demolition of the improvements to the property was pending improvements to pending at the time the policy was issued.
Tab G. The Bank made a claim on the Policy, and Stewart Stewm'l Title denied the claim. Tab F.
20 The The Bank Bank has has produced produced evidence raising aa genuine evidence raising issue of material genuine issue material fact fact and and
demonstrating its entitlement demonstrating its entitlementtototrial trialon onthe the issue issue of of Stewa11 StewartTitle's Title's breach breach of of contract. contract. Stewart Stewart
Title's motion motion for for no-evidence summary judgment should be denied.
OBJECTIONS TO STEWART STEWART TITLE'S TITLE'S PROFFERED SUMMARY JUDGMENT EVIDENCE
The Bank objects to Exhibit 2, which is purportedly an article at1icle from mysa.com, because it
TEX. R. is irrelevant to any summary judgment grounds and is hearsay. See TEX. R. EVID. EV1D,402, 402, 802. 802.
The Bank The Bank objects to Exhibit objects to 17, which Exhibit 17, which is is Stewart Title's Notice Stewat1 Title's Notice of Intent Intent to Use Use
Discovery Products Products Not on File with the Court for Summary Judgment Purposes (the "Notice").
TEX. R. The movant must file and serve all evidence at least twenty-one days before the hearing. TEX.
Cw. ClY. P. 166a(d). 166a(d). The TheNotice Noticereferences references "deemed "deemed Responses Responses to to Requests Requests for for Admission, Admission, Non-
Responses to Requests Responses to Requests for for Production, Production, Requests Requests for forDisclosure, Disclosure, Interrogatory Interrogatory answers, answers,
appendices, references and appendices, references and otlier other discovery," discovery," but but Stewat1 Stewart Title Title has has failed failed to attached attached any such
items to its summary judgment motion or otherwise file and serve any such items at least twenty-
one days before the hearing. hearing. Accordingly, Accordingly, the the Notice Notice provides insufficient insufficient notice of of any intent to
use the foregoing items. To foregoing items. To the the extent extent Stewart Stewat1 Title Title attempts attempts to use any "evidence" that it failed
to to file and serve at least twenty-one twenty-one days before the hearing, the Bank objects to such evidence evidence
on the grounds that itit is is offered offered in in violation violation of ofTEX. R. ClY. TEX. R. Cw. P. P. 166a(d).
Accordingly, Stewart's Exhibits 2 and Accordingly, Stewat1's and 17 17 should should be be stricken stricken from fi·om the summary judgment
record.
CONCLUSION AND PRAYER
Stewart Stewa11 Title does not conclusively prove its entitlement to summary judgment judgment on atly any of
the grounds asserted asserted in its motion for traditional summary summary judgment. judgment. Its motion for no-evidence
21 summary judgment isis fatally summary judgment fatally defective. defective. In In addition, addition, the the no-evidence no-evidence motion fails fails because because the
Bank has Bank has not only only produced produced evidence evidence supporting suppOliing its of coverage, its claim of coverage, but but has has conclusively conclusively
established coverage under the Policy.
WHEREFORE, WHEREFORE,Vantage VantageBank BankTexas, Texas,successor successorby bymerger merger to to D'Hanis State Bank, D'Hanis State Bank,
individually and and as agent for Banprop, L.L.C., respectfully requests requests that the Court COUli deny Stewart
Title Guaranty Guaranty Company's motion for summary judgment judgment in in its its entirety. entirety. The Bank also requests
such further relief to which it is entitled.
Respectfully submitted,
Cox SMITH MATTHEWS COX MATTHEWS INCORPORATED INCORPORATED David B. West State Bar No. 21196400 dbwest@coxsmith.com Ellen B. Mitchell State Bar No. 14208875 emitchell@coxsmith.com David A. Vanderhider . State Bar No. 24070787 dvanderhider@eoxsmith.com dvanderhider@coxsmith.com 112 East Pecan Street, Suite 1800 San Antonio, Texas 78205 Telephone: (210) 554-5500 Telephone: (210) 554-5500 Facsimile: (210) Facsimile: (210) 226-8395
lsi Is/ David B. West David B. West
Attorneys for Vantage Attorneysfor Vantage Bank Texas, Texas, successor by merger to D'Hanis D Wards State State Bank, Bank, Individually Individually and for Banprop, L.L. C. as Agent for
22 CERTIFICATE OF SERVICE
I hereby hereby certify celiify that that a true true and and correct COlTect copy copy of ofPlaintiffs' Plaintiffs' Response Response to to Defendant's Defendant's
Second Motion for Second Motion for Summary Judgment has Summary Judgment has been been served served on on counsel counsel of record record via e-mail and
facsimile on this 30th day of December, 2014, as follows: follows:
Scott Breitenwischer Andrew Nash Royston, Rayzor, Vickery & & Williams, L.L.P. Pennzoil Place 711 711 Louisiana Street, Suite 500 Houston, Texas 77002-8380 (713) 224-8380 224-8380— Telephone - Telephone (713) 225-9945 225-9945 — Facsimile - Facsimile
B. West /s/ David B. David B. West
5730513.2 23 Appendix J FILED 2/4/2015 4:27:25 PM Donna Kay McKinney Bexar County District Clerk Accepted By: Lisa Morales
Cause No. 2013-CI-14899
VANTAGE BANK TEXAS, SUCCESSOR IN THE DISTRICT COURT BY MERGER TO D'HANIS STATE BANK, and BANPROP, L. L. C.,
Plaintiffs,
v. 150th JUDICIAL DISTRICT
Defendants. BEXAR COUNTY, TEXAS
PLAINTIFFS' THIRD AMENDED ORIGINAL PETITION AND REQUEST FOR DISCLOSURE
PLAINTIFFS, VANTAGE BANK TEXAS, successor by merger to D'HANIS STATE
BANK ("Bank"), and BANPROP, L. L. C, file this Third Amended Original Petition against
STEWART TITLE GUARANTY COMPANY ("Stewart Title"), and in support thereof would
show the court as follows:
I. DISCOVERY CONTROL PLAN
1. Plaintiffs intend that discovery be conducted under Level 3, pursuant to rule 190.4
of the Texas Rules of Civil Procedure.
IL PARTIES
2. Plaintiff Vantage Bank Texas, successor by merger to D'Hanis State Bank, is a
financial institution created under the laws of the State of Texas, with its principal place of
business in San Antonio, Texas. Pursuant to Chapter 10.008(a)(2) of the Texas Business
Organizations Code, Vantage Bank Texas is vested with all rights, title and interests to the
property owned by D'Hanis State-Bank, including all rights, interests and claims in this law suit.
5730297.3 3. Plaintiff Banprop, L. L. C. is a limited liability corporation incorporated under the
laws of the State of Texas, with its principal place of business in McAllen, Texas.
4. Defendant Stewart Title Guaranty Company is a corporation licensed to do
business in Texas. It has entered an appearance in this case.
III. JURISDICTION AND VENUE
5. The Court has subject matter jurisdiction over this suit. The damages sought are
within the jurisdictional limits of this Court.
6. The Court has personal jurisdiction over the defendant because it resides or does
business in the State of Texas and this lawsuit arises out of acts, omissions or business it
conducted in the State of Texas.
7. Venue is proper pursuant to section 15.002 of the Texas Civil Practice and
Remedies Code because a substantial part of the events or omissions giving rise to the claims set
forth herein occurred in Bexar County, Texas.
IV. FACTUAL BACKGROUND
A. The Bank makes a loan and obtains a title policy from Stewart Title.
8. This is a suit on a title policy. In September• 2009, Stewart Title issued a
mortgagee title policy, policy number M-5952-000007292 (the "Policy"), to the Bank in the
amount of $900,000. The subject property is located at 119 Jackson Keller Road and is
described in the Policy as Lot 7, Block, 13, New City Block 10060, East Shearer Hills Addition,
situated in the City of San Antonio, Bexar County, Texas, according to plat thereof recorded in
Volume 4500, Page 229, Deed and Plat Records of Bexar County, Texas (the "Property"),
9. Prior to issuing the Policy, Stewart Title obtained a title run from one of its
agents, Service Title. That title run was made from a title plant leased from Title Plant Services
5730297.3 Division of Property Information Corporation. On information and belief, Property Information
Corporation is a wholly-owned subsidiary of Stewart Title.
10. The Policy obligates Stewart Title to indemnify the Bank against loss or damage
sustained by reason of a variety of covered risks, including:
(5) The violation or enforcement of any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting or relating to:
(b) the character, dimensions or location of any improvement erected on the Land;
if a notice, describing any part of the Land, is recorded in the Public Records setting forth the violation or intention to enforce, but only to the extent of the violation or enforcement referred to in that notice.
(6) An enforcement action based on the exercise of a governmental police power not covered by Covered Risk 5 if a notice of the enforcement action, describing any part of the Land, is recorded in the Public Records, but only to the extent of the enforcement referred to in that notice.
11. The Policy defines "Public Records" as "records established under state statutes at
Date of Policy for the purpose of imparting constructive notice of matters relating to real
property to purchasers for value and without Knowledge."
12. The Policy defines "Land" as including "affixed improvements that by law
constitute real property." "Land," in this case, thus includes improvements that existed on the
Property when the Policy was issued.
13. Relying on the protection supplied by the Policy, the Bank made a $900,000 loan
to SA Eden Roc Apartments, L.L.C. ("Eden Roc") to enable Eden Roc to purchase the Property
and to renovate a number of apartment buildings ("Improvements") located on the Property. 3
5730297.3 14. In addition, before making the loan, the Bank obtained an appraisal of the
Property, an engineering report, and verification that the City of San Antonio (the "City") would
issue building permits for the renovation of the Improvements. The Bank also obtained a title
commitment from Service Title, Stewart Title's agent. The title commitment did not contain
Schedule C,, which would have alerted the borrower or the Bank to the City's efforts to have the
Improvements demolished.'
B. The City pursues efforts to demolish Improvements on the subject Property.
15. Unknown to the Bank, the City had been taking steps to have the Improvements
demolished. These efforts, which began in 2001, led to a protracted dispute with the seller of the
Property, Raul Cantu Family Limited Partnership No. 2 ("Cantu"). Much of the relevant
information was available in a title search made by Service Title, acting as agent for Stewart
Title. In addition, documents such as the following examples were included not only in Service
Title's files, but in Stewart Title's own files:
02/06/01 A notice of hearing to Cantu regarding the possible demolition of the Improvements.
12/29/04 Notice of the City's first lawsuit against Cantu, Cause No. 2002-CI- 09703, seeking restoration and/or demolition of the Property.
02/11/08 A notice stating the Improvements on the Property were the subject of a hearing on possible demolition ("February Notice").
16. Other notices pertaining to the possible demolition of the Improvements to the
Property were filed in the Official Public Records of Bexar County, including:
The title commitment did not include any reference to notices of hearings on the possible demolition of the Improvements, the issuance of a demolition order, or the fact that a lawsuit was pending between the property owner and the City over the issuance of a demolition order. All of this information was available in the Official Public Records of Bexar County.
5730297.3 01/14/08 A notice stating the Improvements on the Property were the subject of a hearing on possible demolition ("January Notice").
02/13/08 A lawsuit between Cantu and the City appealing the demolition order, Cause No. 2008 CI-02297, Bexar County, Texas. That case was pending and set for trial before the Policy was issued.
17. At the time the Policy was issued, the City had issued an order to demolish the
Improvements to the Property which were the subject of the Bank's loan. Cantu's lawsuit
against the City concerning that demolition order was also pending at the time the Policy was
issued. Before judicial review of the demolition order was completed, however, the Property
was sold to Eden Roc.2
18. In January of 2008, the City of San Antonio issued notice of a hearing concerning
the proposed demolition of the Improvements on the Property ("January Notice"). The January
Notice was filed and recorded in the Official Public Records of Bexar County, Texas. In
February of 2008, the City issued a second notice of a hearing to demolish the Improvements
("February Notice"). The February Notice was• filed in the Real Property Records of Bexar
County with the correct legal description, but the wrong owner's name. This information was in
the title search made by Service Title, but was not noted on Schedule C of the title commitment
issued to the Bank.
19. Although the Dangerous Structure Determination Board had found the property to
be a public nuisance and issued a demolition order, a different office of the City had issued
building permits for the rehabilitation of the Property. Relying on the issuance of those permits,
the Bank closed on the loan and advanced $380,212.60 for the purchase of the Property,
2 The judicial review proceeding was later dismissed because the Property was sold. See City of San Antonio v. D'Hanis State Bank, No. 04-10-00181-CV, 2010 WL 3249956, *1 (Tex. App. San Antonio Aug. 18, 2010, no pet.). 5 5730297.3 including the Improvements. The Bank then advanced approximately $136,632.69 for
rehabilitating the Improvements, for a total of $516,845.29. At a later inspection, a Bank officer
found a "Stop Work Notice" posted on the Property. Then, in November 2009, the Bank learned
that the building permits had been revoked and the Property was the subject of a demolition
order resulting from the January Notice.
C. Stewart Title uses litigation against City as basis to deny coverage.
20. The Bank notified Stewart Title of the City's enforcement action. As obligated
under the Policy, Stewart Title assumed coverage under the Policy and retained Richard Butler to
represent the Bank and file a law suit against the City.
21. Susan Withers, claims counsel for Stewart Title, was involved in the strategy for
the law suit. She solicited affidavits for use in pleadings and became involved in the strategy for
the law suit. On January 28, 2010, Withers acknowledged in an e-mail to Butler that "a Notice
of Hearing (for a hearing on January 14, 2008) was filed of record, and not excepted on our
policy."
22. On February 1, 2010, Withers was informed by Service Title that the January
Notice "was filed in the Public Notices Record's NOT in the Official Public Records or property
records." Upon receiving this information, Withers responded, "Please DO NOT LET THEM
CHANGE THIS. IT NEEDS TO STAY AS IS."
23. Withers then forwarded her instruction ("DO NOT LET THEM CHANGE
THIS") to Butler and marked the e-mail_ "high" importance. Butler responded that Stewart Title
had received two notices of hearing concerning the Property: (1) the January Notice, which was
filed in the Official Public Records of Bexar County, and .(2) the February Notice, which was
5730297.3 filed in the Official Public- Records of Real Property of Bexar County. The February Notice was
in Stewart Title's file.
24. Withers then contacted Nancy Staton, an employee of Propertylnfo Corp. (a
wholly-owned subsidiary of Stewart Title) and requested an affidavit on how the January Notice
was recorded and indexed. Staton testified that: (1) the January Notice was not in Propertylnfo
Corp.'s database, and (2) if the January Notice had been filed in the Official Public Records of
Real Property of Bexar County, it would be in Propertylnfo Corp.'s database.
25. On February 4, 2010, Butler filed suit against the City (D 'Hanis State Bank v.
City of San Antonio, Cause No. 2010-CI-01778, in the 73rd Judicial District Court of Bexar
County, Texas) seeking to enjoin demolition of the Improvements and a declaration that the
Bank was not bound by the January Notice because it was an innocent lender without actual or
constructive notice.
26. The trial court denied the City's plea to the jurisdiction and granted a temporary
injunction enjoining demolition of the Improvements. The City filed an interlocutory appeal
challenging both rulings.
D. Stewart Title abandons the Bank,
27. Butler recognized, and informed the Bank, that setting aside one notice of
demolition would not prevent the City from issuing future notices and ultimately demolishing the
Improvements. Despite the City's appeal, and the likelihood that the City would continue its
enforcement efforts regardless of the outcome of that appeal, Stewart Title declared that it had
fulfilled its responsibility under the Policy.
28. Withers informed the Bank that Stewart Title's basis for withdrawing coverage
was that "any claim concerning this proposed demolition of the structures located on the
5730297.3 [P]roperty falls outside of the scope of coverage provided by the Policy" because "there was no
notice filed for record in the Official Public Records of Real Property of Bexar County Texas."
Thus, although it had actual knowledge of the February Notice, Stewart Title took the position
that it had no obligation to provide coverage because the January Notice was filed in official
records, but not the official real property records. As a result, the Bank was forced to retain
counsel on its own to defend the City's appeal.
29. Withers provided Butler with a copy of her letter to the Bank denying coverage.
Butler responded by pointing out the potential damage to the Bank resulting from the litigation
strategy directed by Stewart Title:
I am afraid the bank's attorneys are going to contend that by seeking relief from the City's demolition order on the basis that the 'Notice of Hearing' was not properly recorded, my defense cost them their coverage.
Withers replied:
That is the defense all the way around. If it had been there, we would have taken exception and they wouldn't have made the loan. If you did not raise the defense, they would lose and we would still deny.
30. But Withers' reply is disingenuous. She indicates that Stewart Title would have
excepted demolition of the Improvements from coverage if a notice of demolition hearing had
been filed in the real property records, presumably because Stewart Title would have been aware
of the notice. But a notice of demolition hearing was filed in the real property records—the
February Notice—and Stewart Title had both actual and constructive knowledge of that notice.
Even so, it did not except demolition of the Improvements from coverage.
31. Withers' reply also acknowledges the importance to the Bank of Stewart Title's
failure to take an exception by noting that the Bank would not have made the loan if an exception
had been taken,
5730297.3 32. Finally, Withers asserts that Stewart Title would have denied coverage if the Bank
had lost its suit against the City. In essence, Withers asserts that Stewart Title would have acted
in bad faith and breached its contract with the Bank regardless of the outcome of the lawsuit
against the City. If the City had prevailed, demolition of the Improvements would simply have
occurred earlier than it did. But coverage under the Policy had already been established by the
February Notice, which met all of the criteria of covered risks 5 and 6.
33. Stewart Title had no valid grounds for denying coverage even if the City
prevailed in the prior lawsuit. For that reason, pursuing a litigation strategy based on the January
Notice being insufficient to provide constructive notice because it was not filed in the real
property records jeopardized the Bank's coverage. It appears, though, that this was precisely
Stewart Title's intent. Having realized that it did not except demolition of the Improvements
from coverage, its only option to avoid paying the Bank's claim was to attempt to remove the
claim from the scope of covered risks 5 and 6. Pursuing the strategy of arguing that the January
Notice did not provide constructive notice was an integral part of that plan.
34. Despite Stewart Title's efforts to paint the Bank into a "no constructive notice"
corner, the holding of the court of appeals in the lawsuit against the City does not implicate
Stewart Title's obligations under the Policy. The court of appeals narrowly (and properly)
focused on the requirements for constructive notice as set out in section 214.001(e) of the Local
Government Code. It did not address the different, and independent, requirements for
constructive notice as set out in the Policy: a notice, describing any part of the land and setting
forth the violation or intention to enforce, filed in the Public Records. The court of appeals also
did not address (because it was not at issue) the constructive notice effect of the February Notice.
5730297.3 E. The Bank suffers loss as a result of Stewart Title's acts and omissions.
35. The court of appeals ultimately held that the Bank was not bound by the January
Notice. City of Sin Antonio v. D'Hanis State Bank, No. 04-10-00181-CV, 2010 WL 3249956
(Tex. App.—San Antonio Aug. 18, 2010, no pet). But during the pendency of the appeal, the
Improvements could not be renovated because the City would not issue building permits. The
Property therefore stood vacant. Eden Roc defaulted on the loan, forcing the Bank to foreclose
on, and take ownership of, the Property. This resulted in the Bank (through Banprop, an affiliate
of the Bank which held its real property, including troubled assets) incurring costs to fence off
and maintain the Property, and to pay taxes, insurance, and legal fees.
36. In addition, undaunted by its initial failed attempt to demolish the Improvements,
the City renewed its enforcement and demolition efforts. It issued a new demolition order and
required the Bank (through Banprop) to pay the cost of demolition, including the considerable
cost to remove asbestos from the Improvements before they could be demolished
37. The Bank has incurred significant losses resulting from the City's enforcement
actions, which culminated in the demolition of the Improvements. Stewart Title has failed and
refused to indemnify the Bank for those losses. Further, the legal course of action directed by
Withers and Stewart Title resulted in additional loss to the Bank.
V. CAUSES OF ACTION
A. Breach of contract.
38. As demonstrated above, the Policy requires Stewart Title to indemnify the Bank
against loss or damage sustained by reason of certain governmental enforcement actions if
notice, describing any part of the subject property and setting forth the violation or intention to
enforce, was filed in the Public Records.
5730297.3 39. The January Notice contains a legal description of the Property, sets forth the
alleged violation and the City's intention to enforce, and was filed in the Official Public Records
of Bexar County, Texas.
40. The February Notice contains a legal description of the Property, sets forth the
alleged violation and the City's intention to enforce, and was filed in the Official Public Records
of Real Property of Bexar County, Texas.
41. Plaintiffs sustained losses as a result of the City's enforcement actions including,
but not limited to, loss of the value of the Improvements, and costs incurred to maintain the
Property, remove asbestos and mold prior to demolition, demolish the Improvements, and obtain
legal representation after Stewart. Title's denial of coverage.
42. Plaintiffs' losses fall within covered risks 5 and 6 of the Policy. Stewart Title's
refusal to indemnify for those losses constitutes a breach of contract, for which Plaintiffs seek
recovery of their direct and indirect actual damages.
43. Also as a result of Stewart Title's breach of contract, Plaintiffs have been required
to incur attorney's fees to prosecute the present action. Plaintiffs therefore seek an award of
attorney's fees under section 38.001 of the Texas Civil Practice and Remedies Code.
B. Breach of the duty of good faith and fair dealing.
44. Issuing the Policy imposed on Stewart Title a common law duty of good faith and
fair dealing. Stewart Title breached this duty of good faith and fair dealing by denying payment
when its liability under the Policy was reasonably clear.
45. Stewart Title's breach of the duty of good faith and fair dealing proximately
caused injury to Plaintiffs, for which Plaintiffs seek recovery of direct and indirect actual
damages.
5730297.3 C. Violations of chapter 541 of the Texas Insurance Code.
46. Stewart Title's acts and omissions, as described above, constitute violations of
chapter 541 of the Texas Insurance Code. Specifically, Stewart Title violated sections 541.060
and 541.061 of the Texas Insurance Code by:
(1) misrepresenting a material fact or policy provision relating to coverage at issue;
(2) failing to attempt in good faith to effectuate a prompt, fair and equitable settlement of a claim with respect to which Stewart Title's liability has become reasonably clear; and
(3) misrepresenting the Policy by:
(a) making untrue statements of material fact;
(b) failing to state a material fact necessary to make other statements made not misleading, considering the circumstances under which the statements were made;
(c) making a statement in a manner that would mislead a reasonably prudent person to a false conclusion of a material fact;
(d) making a material misstatement of law; and
(e) failing to disclose a matter required by law to be disclosed, including a disclosure in accordance with another provision of the Texas Insurance Code.
47. Stewart Title's violations of chapter 541 of the Texas Insurance Code caused
Plaintiffs to suffer direct and indirect actual damages, for which Plaintiffs seek recovery.
48. Each of Stewart Title's acts and omissions, as described above, were committed
knowingly. Plaintiffs therefore seek an additional award of up to three times their actual
49. As a result of SteWart Title's violations of chapter 541 of the Texas Insurance
Code, Plaintiffs have been required to incur attorney's fees to prosecute the present action.
12 5730297.3 Plaintiffs therefore seek an award of attorney's fees under chapter 541 of the Texas Insurance
Code.
VI. DISCOVERY RULE
50. Plaintiffs did not discover and, through the exercise of reasonable diligence, could
not have discovered, the facts giving rise to its claims for breach of the duty of good faith and
fair dealing, violations of chapter 541 of the Texas Insurance Code, and fraud prior to receipt of
correspondence from Withers to Butler• on October 22, 2014. These claims, being filed within
the applicable limitations periods following the discovery date, are therefore timely.
PRAYER
WHEREFORE, PREMISES CONSIDERED, Plaintiffs Vantage Bank Texas, successor
by merger to D'Hanis State Bank, and Banprop, L.L.C., respectfully request that the Court enter
judgment in their• favor as follows:
(a) For Stewart Title Guaranty Company's breach of its contract of indemnity;
(b) For Stewart Title Guaranty Company's breach of the duty of good faith and fair dealing;
(c) For Stewart Title Guaranty Company's violations of the Texas Insurance Code;
(d) For actual damages of at least $959,571.39;
(e) For three times the amount of actual damages for Stewart Title's knowing conduct;
(I) For reasonable and necessary attorney's fees incurred in bringing this action and for any appeal by any party to the court of appeals, application for review by the Supreme Court of Texas, or proceedings before the Supreme Court of Texas;
(g) For pre judgment interest and post-judgment interest at the highest rate allowed by law; and
(h) For such other and further relief against the Defendants to which Plaintiffs may be justly entitled.
5730297.3 Respectfully submitted,
COX SMITH MATTHEWS INCORPORATED 112 East Pecan Street, Suite 1800 San Antonio, Texas 78205 (210) 554-5500 — Telephone (210) 226-8395 — Facsimile
By: /s/ David B. West David B. West State Bar No. 21196400 David A. Vanderhider State Bar No. 24070787 dbwest@coxsmith.com dvanderhider@coxsmith.com
Attorneys for Vantage Bank Texas, successor by merger to D'Hanis State Bank, and Banprop, L.L. C.
5730297.3 CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of Plaintiffs' Third Amended Original Petition
and Request for Disclosure has been served on counsel of record via facsimile on this 4th day of
February, 2015, as follows:
Scott Breitenwischer Andrew Nash Royston, Rayzor, Vickery & Williams, L.L.P. 1600 Smith Street, Suite 5000 Houston, Texas 77002-7380 (713) 224-8380 — Telephone (713) 225-9945 — Facsimile
Is! David B. West David B. West
5730297.3 Appendix K xi r (77 P. 0. BOX 839966 (4))
SAN ANTONIO TEXAS 78283-3966
DATE: October 13, 2011
D'HANIS STATE BANK 1401 19TH ST HONDO TEXAS 78861
RE: PROPERTY AT: 119 JACKSON KELLER
NOTICE OF HEARING You are hereby notified that the Dangerous Structure Determination Board has rescheduled the above property for another public hearing on October 24, 2011 at 8:30 a.m. in the City Council Chambers of the Municipal Plaza Building located at 114 W. Commerce Street. This date shall supersede any other conflicting hearing dates contained in prior notices or orders from the Board. The Board shall hear all issues and follow procedures noticed in its prior orders regarding the above property. All warnings, reports, or directions contained or incorporated in prior notices or orders remain valid and applicable.
For more information, please contact the Dangerous Premise Unit at (210) 207-3324.
Sincerely yours,
THE MUNICIPAL PLAZA BUILDING IS WHEELCHAIR ACCESSIBLE. ACCESSIBLE PARKING SPACES ARE MARC A. CASTRO AVAILABLE UPON REQUEST. INTERPRETERS FOR THE Assistant Director DEAF MUST BE REQUESTED AT LEAST 24 HOURS PRIOR Development Services Department TO THE MEETING BY CALLING 207-7245-TDD. Code Enforcement Services Division
Legal Review on W. 13'1( by Eric G. Burns Assistant City Attorney
XHIr1i I ? AAnal
DHSB-Banprop - 000782
Related
Cite This Page — Counsel Stack
Stewart Title Guaranty Company v. Vantage Bank Texas, Successor by Merger to D'Hanis State Bank, and Banprop, L.L.C., Counsel Stack Legal Research, https://law.counselstack.com/opinion/stewart-title-guaranty-company-v-vantage-bank-texas-successor-by-merger-texapp-2015.