Stewart Title Guaranty Company v. Vantage Bank Texas, Successor by Merger to D'Hanis State Bank, and Banprop, L.L.C. ( 2015 )

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.
STEWART TITLE GUARANTY COMPANY,
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
Judgment is GRANTED in its entirety.
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
File No.: 0903012 Policy No.: M-5952-000007292
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]
BLANK TITLE INSURANCE COMPANY
By
President
By
Secretary
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' 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.
SCHEDULE A
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.]
1. Name of Insured:
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:
3. Title is insured as vested in:
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
BACKGROUND
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
STEWART TITLE GUARANTY
COMPANY,
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
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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.
4
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
6
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
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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,
8
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.
9
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.
10
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.
11
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
damages.
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.
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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.
14
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
15
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