ORAL ARGUMENT REQUESTED

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)

_________________________________________

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

ACCEPTED

04-15-00228-CV

FOURTH COURT OF APPEALS

SAN ANTONIO, TEXAS

4/14/2015 3:19:56 PM

KEITH HOTTLE

CLERK

04-15-00228-CV

 FILED IN 4th COURT OF APPEALS SAN ANTONIO, TEXAS 4/14/2015 3:19:56 PM KEITH E. HOTTLE Clerk
ii

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
iii

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
iv

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
v

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
vi

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
vii

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
viii

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
ix

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.
x

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).
xi

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.
STATEMENT OF FACTS

Plaintiffs sued for breach of contract,2claiming 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.
-2-

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.
-3-

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.
-4-

“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 wellsettled 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 T2, the Texas Government Code and by the Texas Code of Ordinance. Further,
-5-

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
-6-

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
-7-

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
-8-

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
-9-

Records” that appears in the Policy. See Loan Policy of Title Insurance (Form T2) (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
-10-

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 prehearing 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
-11-

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.
-12-

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
-13-

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.
-14-

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
-15-

(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
-16-

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
-17-

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
-18-

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.
-19-

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 DefendantAppellant 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
-20-

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
-21-

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
-22-

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:
-23-

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
Appendix A
CAUSE NO. 2013-CI-14899 

VANTAGE BANK TEXAS, Successor by 5 

Merger to D'Hanis State Bank and 

BANPROP, L.L.C., 

Plaintiffs, 

v. 

STEWART TITLE GUARANTY 

COMPANY, 

Defendant, 

IN THE DISTRICT COURT OF 

BEXAR COUNTY, TEXAS 

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 On 2015 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. 

SIGNED THIS day of 

Iva* 3 1 2015 , 2015. Laura Salinas 

Presiding Judge 

186th 'District Court 

Bexar County, Texas 

THE HONORABLE LAURA SALINAS, 

JUDGE PRESIDING 

DB 1 / 82768 049. 1 3 
By: 

I. y Rogers 

State Bar No. 71721 

V 

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 

1 

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. 

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: 

1,911,1110111111111111111111 

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 

II 1_1111111f 1111111111111111 

2- 

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.;ti , REVES HERNANDEZ —1. NOTARY PUBLIC 

4

i e 7 My Comm. Exp.11-18-20(M 

STATE OF TEXAS rotary Pu State of Texas 

2 / 

AFTER RECORDING RETURN TO: 

HOUSING & NEIGHBORHOOD SERVICES DEPARTMENT 

AT7N: DAVID D. GARZA 

P. O. Box 839966 

San Antonio, Texas 78283-3966 

Doc# 8887 Fees: $0,00 

01/04/2008 3:05PM # Pages 1 

Filed 4 Recorded in the Offic141 Public 

iJCI 

Records of BEXAR COUNTY 

GERARD RICKHOFF COUNTY CLEF 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. IEach 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
NOTICE OF HEARING 

OWNER'S NAME: OLIVARES, PABLO GARZA 

CIO LUIS A GALVAN 

1831 TEXAS AVE 

SAN ANTONIO TEXAS 78228 

PROPERTY AT: 14420 HIGGINS RD 

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 

CI ANTONIO, Bexar County, Texas, a Municipal Corporation. 

200ff by DAVID D. GARZA, Director of Housing & Neighborhood Services, on behalf of the 

This instrument was acknowledged before me on the 30 day of vc.---4 ) 

.," 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 

San Antonio, Texas 78283-3966 

111111111111111 

SCANNED 

CITY OF SAN ANTONIO 

1.1111711111210.11111.11118131 

a 

DHSB-Banprop - 000064 
Appendix E
ery truly yours, 

285 District Court 

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 150thDistrict 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. 

RP/dg 
Appendix F
Cause No. 2013-CI-14899 

VANTAGE BANK TEXAS, SUCCESSOR 

BY MERGER TO D'HANIS STATE BANK, 

and BANPROP, L. L. C., 

Plaintiffs, 

v. 

STEWART TITLE GUARANTY COMPANY, 

Defendant. 

IN THE DISTRICT COURT 

150111JUDICIAL DISTRICT 

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 
SIGNED THIS *4) day of January, 2015. 

ONOR 

PRESI 

LE LA 

ING 

A SALINAS 

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. 

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
Authorized Signature 

City, State President 

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: 

Senior Chairman o the Boar 

4, r ) 0314:d 

WNW 

Service Title Company 

Company 

San Antonio, TX 

„,4, 

4n.`--$4.., SERVICE TITLE COMPANY 

Chairman ofthe 8 rd 

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, 

7-2 Loan Policy (5-. 

7334 Blanco Road 

San Antonio, Texas 78216 

rm (210) 344-8820 

Policy NI-5952.000007292 Serie! No_ 

11BIT 

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. 

(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 

end 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 tees and other similar fees or 

penalties allowed by law; 

(vi) expenses of foreclosure and any other costs of enforcement; 

(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. 

"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 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. 

(I) "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 it 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 

Page 3 

D-00158 
CONDITIONS Continued 

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 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 mortgagee 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 detect; (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. 

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. 

(c) If the Insured demands that the Company accept a settlement offer 

that is not greater than the Amount of Insurance or if the Insured expressly 

agrees that a settlement offer should be accepted, the Company has a 

right to be reimbursed if it has timely asserted its reservation of rights and 

notified the Insured that it intends to seek reimbursement if it pays to 

settle or defend a claim that is not covered by the policy. 

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' tees 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)(1) or (ii), all liability and obligations of the Company to the 

Insured under this policy, 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. 

5. DEFENSE AND PROSECUTION OF ACTIONS. 7. 

(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. When the Company has reasonable grounds to dispute 

coverage tinder this policy, the Company may reserve its rights to pay 

the claim and the costs of defense and seek reimbursement from the 

Insured for all amounts paid for which there was no coverage. 

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 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 

Page 4 

D-00159 
CONDITIONS Continued 

5. 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 

(e) 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. 

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 luny 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 

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. 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. 

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 

Loan No.: 

Amount of Insurance: $900,000.00 

Date of Policy: September 8, 2009 

Policy No.: M-5952-000007292 

Premium: $125.00 

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: 

Section 13 of the Conditions of this policy, which relates to Arbitration, is hereby 

deleted. 

SERVICE TITLE COMPANY 

4 

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 rightof-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 "PapeDawson", 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 "PapeDawson?', 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 

WWVI.PAPE-DAWS011.0t4 

555 East Ramsey San Antonio, Texas 78216 P 210.375.9000 F 210.375 9010 

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 "PapeDawson", the northwest corner of Lot 7, from which a found 'A" iron rod bears 

N 15°43'02" E, 0.92 feet; 

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. 

Pape-Dawson Engineers, Inc. 

9055-09 

March 17, 2009 

N:1Survey09\9-9100\9055-09\9055-09FN,doc 

THENCE: 

PREPARED BY: 

JOB No.: 

DOC. ID.: 

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: 

1. You may contact your title insurance agent at 

(telephone number) 

2. You may call Stewart Tide Guaranty Company's 

toll-free telephone number for information or to make a 

complaint at: 

(800) 729-1900 

3. You may also write to Stewart Title Guaranty 

Company at P. 0. Box 2029, Houston, TX 77252-2029 

4. You may contact the Texas Department of Insurance 

to obtain information on companies, rights or 

complaints at: 

1-800-252-3439 

5. You may write the Texas Department of Insurance: 

P.O. Box 149104 

Austin, TX 78714-9104 

Fax: (512) 475-1771 

Web: http://www.tdi.state.tx.us 

E-mail: ConsumerProtection@tdi.state.tx.us 

PREMIUM OR CLAIM DISPUTES: 

Should you have a dispute concerning your 

premium or about a claim you should contact the title 

insurance agent first. If the dispute is not resolved, you 

may contact the Texas Department of Insurance, 

ATTACH THIS NOTICE TO YOUR POLICY: 

Para obtener informacion o para someter una queja: 

1. Puede comunicarse con su agente de seguro de 

titulo al (telephone number). 

2. Usted puede Hamar al numero de telefono gratis de 

Stewart Title Guaranty Company para informacion o 

para someter una queja al: 

(800) 729-1900 

3. Usted tambien puede escribir a Stewart Title Guaranty 

Company, P 0. Box 2029, Houston, TX 77252-2029 

4. Puede comunicarse con el Departamento de Seguros 

de Texas para obtener inforrnacion acerca de 

companias, coberturas, derechos o quejas al: 

1-800-252-3439 

5. Puede escribir al Departamento de Seguros de Texas: 

P.O. Box 149104 

Austin, TX 78714-9104 

Fax: (512) 475-1771 

Web: http://www.tdi.state.tx.us 

E-mail: ConsumerProtection@tdi.state.tx.us 

DISPUTAS SOBRE PRIMAS 0 RECLAMOS: 

Si tiene una disputa concerniente a su prima o a un 

reclamo, debe comunicarse con el agente de seguro 

de titulo primero. Si no se resuelve la disputa, puede 

entonces comunicarse con el departamento (TDI). 

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
Form T-2 Sec. II Effective January 3, 2014

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)
Appendix I
Cause No. 2013-C1-14899 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

VANTAGE BANK TEXAS, SUCCESSOR 

BY MERGER TO D'HANIS STATE BANK, 

and BANPROP, L. L. C., 

Plaintiffs, 

v. 

STEWART TITLE GUARANTY COMPANY, 

Defendant. 

IN THE DISTRICT COURT 

150THJUDICIAL DISTRICT 

BEXAR COUNTY, TX 

PLAINTIFFS' RESPONSE TO DEFENDANT'S 

SECOND MOTION FOR SUMMARY JUDGMENT 

TO THE HONORABLE JUDGE OF THE COURT: 

Plaintiff Vantage Bank Texas, successor by merger to D'Hanis State Bank, individually 

and as agent for Banprop, L.L.C. ("Bank"), submits this response to the second motion for 

summary judgment filed by defendant Stewart Title Guaranty Company ("Stewart Title"). 

SUMMARY JUDGMENT EVIDENCE 

The Bank relies on the following evidence in support of its response to Stewart Title's 

second motion for summary judgment. 

Loan Policy of Title Insurance Tab A 

Notice of Hearing (January Notice) Tab B 

Notice of Hearing (February Notice) Tab C 

Business Records Affidavit and 

Dangerous Structure Determination Board Demolition Order Tab D 

Commercial Contract—Improved Property Tab E 

Promissory Note Tab F 

Affidavit of Geoff Hall Tab G 

Cause No. 2013-CI-14899 

VANTAGE BANK TEXAS, SUCCESSOR 

BY MERGER TO D'HANIS STATE BANK, 

and BANPROP, L. L. C., 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

IN THE DISTRICT COURT 

Plaintiffs, 

l50TH JUDICIAL DISTRICT 

v. 

STEWART TITLE GUARANTY COMPANY, 

Defendant. BEXAR COUNTY, TX 

PLAINTIFFS' RESPONSE TO DEFENDANT'S 

SECOND MOTION FOR SUMMARY JUDGMENT 

TO THE HONORABLE JUDGE OF THE COURT: 

Plaintiff Vantage Bank Texas, successor by merger to D'Hanis State Bank, individually 

and as agent for Banprop, L.L.C. ("Bank"), submits this response to the second motion for 

summary judgment filed by defendant Stewart Title Guaranty Company ("Stewart Title"). 

SUMMARY JUDGMENT EVIDENCE 

The Bank relies on the following evidence in suppOli of its response to Stewart Title's 

second motion for summary judgment. 

Loan Policy of Title Insurance .................................................................................... Tab A 

Notice of Hearing (Janumy Notice) ............................................................................. Tab B 

Notice of Hem'ing (Februmy Notice) ........................................................................... Tab C 

Business Records Affidavit and 

Dangerous Structure Determination Board Demolition Order ................................... Tab D 

Commercial Contract-Improved Property ................................................................. Tab E 

Promissory Note ........................................................................................................... Tab F 

Affidavit of Geoff Hall ............................................................................................... Tab G 
Affidavit of David B. West Tab H 

Exceipts of Deposition of Rainey Bingham Tab I 

BACKGROUND 

This case involves a dispute over coverage under a title insurance policy issued by 

Stewart Title Guaranty Company ("Stewart") to D'Hanis State Bank ("D'Hanis"). D'Hanis 

made a $900,000 loan in September 2009 to SA Eden Roc Apartments, L.L.C. ("Eden Roc") to 

enable Eden Roc to purchase and renovate certain property ("Property"), which included a 

number of apartment buildings ("Improvements"). Tab F at p. 1-2. 

In early 2008, the City of San Antonio issued notice of a January 2008 hearing 

concerning the proposed demolition of the Improvements on the Property ("January Notice"). 

Tab B. The January Notice was filed and recorded in the official public records of Bexar 

County, Texas. Id. A second notice ("February Notice") was filed in the Real Property Records 

of Bexar County with the correct legal description, but the wrong owner's name. Tab C. 

After the City found the property to be a public nuisance and issued a demolition order, 

but before judicial review of that order was completed,1the Property was sold to Eden Roc. 

Tabs D, E. On September 4, 2009, Eden Roc closed on the purchase of the Property and 

D'Hanis made its loan.2 Tabs F, G. Four days later, Stewart Title issued a $900,000 Loan 

Policy of Title Insurance ("Policy") to D'Hanis, covering the Property. Tab A. The Policy 

The judicial review proceeding was later dismissed because the Property was sold. See City of San Antonio p. 

D'Hanis State Bank, No. 04-10-00181-CV, 2010 WL 3249956, *1 (Tex. App.—San Antonio Aug. 18, 2010, no 

pet.). 

2Stewart Title disingenuously asserts that the Bank was aware, before it made the Loan, that the City was 

attempting to demolish the Improvements. See Stewart Second MSJ at 5-6. It bases this assertion on handwritten 

notations in contracts between the buyer and seller of the Property that "Buyer is aware of the issue with the city" 

and "Buyer has satisfied self that it can attain all necessary permits from City of San Antonio in order to rehab 

property." Id But Stewart Title is well aware that the notations concern the planned renovations to the Property, 

not any attempt to demolish the Improvements. Rainey Bingham, the loan officer for the Bank, testified that the 

"issue with the City" referred to whether or not the City would issue building permits to do the rehabilitation. Tab I 

at 32-34 

2 

Affidavit of David B. West.. ....................................................................................... Tab H 

Excerpts of Deposition of Rainey Bingham ................................................................. Tab I 

BACKGROUND 

Tllis case involves a dispute over coverage under a title insurance policy issued by 

Stewmi Title Guaranty Company ("Stewart") to D'Hanis State Bank ("D'Hanis"). D'Hanis 

made a $900,000 loan in September 2009 to SA Eden Roc Apmiments, L.L.c. ("Eden Roc") to 

enable Eden Roc to purchase and renovate celiain property ("Property"), which included a 

number of apmiment buildings ("Improvements"). Tab Fat p. 1-2. 

In early 2008, the City of San Antonio issued notice of a January 2008 hearing 

concerning the proposed demolition of the Improvements on the Propeliy ("January Notice"). 

Tab B. The January Notice was filed and recorded in the official public records of Bexar 

County, Texas. Id A second notice ("February Notice") was filed in the Real Property Records 

of Bexm' County with the correct legal description, but the wrong owner's nmne. Tab C. 

After the City found the propeliy to be a public nuisance and issued a demolition order, 

but before judicial review of that order was completed, 1 the Propeliy was sold to Eden Roc. 

Tabs D, E. On September 4, 2009, Eden Roc closed on the purchase of the Property and 

D'Hanis made its loan.2 Tabs F, G. Four days later, Stewati Title issued a $900,000 Loan 

Policy of Title Insurance ("Policy") to D'Hanis, covering the Property. Tab A. The Policy 

I The judicial review proceeding was later dismissed because the Property was sold. See City of San Antonio v. 

D'Hanis State Bank, No. 04-1O-00ISI-CV, 2010 WL 3249956, *1 (Tex. App.-San Antonio Aug. IS, 2010, no 

pet.). 

2 Stewart Title disingenuously asserts that the Bank was aware, before it made the Loan, that the City was 

attempting to demolish the Improvements. See Stewart Second MSJ at 5-6. It bases this assertion on handwritten 

notations in contracts between the buyer and seller of the Property that "Buyer is aware of the issue with the city" 

and "Buyer has satisfied self that it can attain all necessary pernlits from City of San Antonio in order to rehab 

property." Id But Stewart Title is well aware that the notations concern the planned renovations to the Property, 

not any attempt to demolish the Improvements. Rainey Bingham, the loan officer for the Bank, testified that the 

"issue with the City" referred to whether or not the City would issue building permits to do the rehabilitation. Tab I 

at 32-34 

2 
issued by Stewart Title did not include an exception to coverage for demolition of the 

Improvements. Id. 

While the City initially issued building permits for renovations to the Improvements, it 

later revoked those permits because another department of the City was still seeking to demolish 

the Improvements. Tab G. As a result of the City's efforts to enforce its nuisance ordinances 

and to demolish the Improvements, D'Hanis made a claim on the Policy. Id. Stewart Title 

denied coverage. Id. D'Hanis then filed suit against the City to prevent demolition of the 

Improvements (at least temporarily), and the court of appeals ultimately held that D'Hanis was 

not bound by the January Notice. City of San Antonio v. D'Hanis State Bank, No. 04-10-00181-

CV, 2010 WL 3249956, *3 (Tex. App.--San Antonio Aug. 18, 2010, no pet.). Undaunted, the 

City renewed its enforcement efforts and the Improvements were demolished in 2012. Tab G. 

The Bank filed suit against Stewart Title for breach of the Policy. The parties filed 

competing motions for summary judgment on the issue of coverage. Neither party alleged that 

any genuine issues of material fact exist on the issue of coverage. Even so, both motions were 

denied. But, as demonstrated in the Bank's second motion for summary judgment, there is no 

fact question relating to coverage for a jury to resolve. Coverage is established as a matter of 

law and Stewart Title's arguments attempting to negate coverage are negated as a matter of law. 

SUMMARY OF RESPONSE POINTS 

Response to the second motion for traditional summary judgment. 

Stewart Title has not conclusively established that coverage was not triggered under 

Covered Risks 5 and 6 for the following reasons: (1) the February Notice triggered coverage 

because it describes the property, the violation and the proposed enforcement, and was filed in 

the Official Public Records of Real Property of Bexar County, Texas; (2) the Policy does not 

require that notice be filed in the Official Public Records of Real Property. 

3 

issued by Stewart Title did not include an exception to coverage for demolition of the 

Improvements. Id 

While the City initially issued building permits for renovations to the Improvements, it 

later revoked those pelmits because another department of the City was still seeking to demolish 

the Improvements. Tab G. As a result of the City's effolls to enforce its nuisance ordinances 

and to demolish the Improvements, D'Hanis made a claim on the Policy. Id Stewart Title 

denied coverage. Id D'Hanis then filed suit against the City to prevent demolition of the 

Improvements (at least temporarily), and the COUll of appeals ultimately held that D'Hanis was 

not bound by the January Notice. City of San Antonio v. D'Hanis State Bank, No. 04-10-00181-

CV, 2010 WL 3249956, *3 (Tex. App.-San Antonio Aug. 18,2010, no pet.). Undaunted, the 

City renewed its enforcement eff01ls and the Improvements were demolished in 2012. Tab G. 

The Bank filed suit against Stewrul Title for breach of the Policy. The patlies filed 

competing motions for summary judgment on the issue of coverage. Neither party alleged that 

ally genuine issues of material fact exist on the issue of coverage. Even so, both motions were 

denied. But, as demonstrated in the Bank's second motion for summary judgment, there isno 

fact question relating to coverage for a jury to resolve. Coverage is established as a matter of 

lawalld Stewart Title's arguments attempting to negate coverage are negated as a matter of law. 

SUMMARY OF RESPONSE POINTS 

I. Response to the second motion for traditional summary judgment. 

Stewart Title has not conclusively established that coverage was not triggered under 

Covered Risks 5 and 6 for the following reasons: (1) the February Notice triggered coverage 

because it describes the propelly, the violation and the proposed enforcement, and was filed in 

the Official Public Records of Real Propelly of Bexar County, Texas; (2) the Policy does not 

require that notice be filed in the Official Public Records of Real Property. 

3 
Stewart Title has not conclusively established that the Bank's loss is excluded on the 

ground that the notice of hearing that finally resulted in demolition was not filed until after the 

Date of Policy. The Bank's loss resulted from defects or other matters that existed before the 

Date of Policy. Specifically, the loss resulted from the violation of a municipal nuisance 

ordinance occurring before the Date of Policy and enforcement of the ordinance began before 

that date. The fact that the actual demolition occurred after that date does not retroactively 

exclude the loss. 

Stewart Title has not conclusively established that the Bank's loss is not covered based 

on the assertion that it affected only the value of the property and not its title. The cases on 

which Stewart Title relies for this proposition are distinguishable because they do not apply the 

specific coverage provisions here at issue. The Bank's loss is covered under Covered Risks 5 

and 6, which were not at issue in the cases cited by Stewart Title. 

Finally, Stewart Title has not conclusively established that the Bank is judicially estopped 

from asserting that either the January Notice or the February Notice is sufficient to trigger 

coverage. Stewart Title seeks to estop the Bank based on its position in prior litigation with the 

City. But that litigation concerned a different issue—whether the City complied with statutory 

requirements necessary to bind a successor lienholder to a notice of hearing. The statute, which 

governs only the municipality's actions, does not aid in determining whether the January Notice 

was properly filed for purposes of triggering coverage under the Policy. In addition, the Bank's 

litigation with the City did not concern the February Notice at all. The Bank is therefore not 

taking inconsistent positions and judicial estoppel does not apply. 

IL Response to the second motion for no-evidence summary judgment. 

Stewart Title's motion for no-evidence summary judgment should be denied because it 

does not comply with Rule 166a(i). Particularly, it does not specify what element of the Bank's 

4 

Stewart Title has not conclusively established that the Bank's loss is excluded on the 

ground that the notice of hearing that fmally resulted in demolition was not filed until after the 

Date of Policy. The Bank's loss resulted ii-om defects or other matters that existed before the 

Date of Policy. Specifically, the loss resulted from the violation of a municipal nuisance 

ordinance occurring before the Date of Policy and enforcement of the ordinance began before 

that date. The fact that the actual demolition occurred after that date does not retroactively 

exclude the loss. 

Stewart Title has not conclusively established that the Bank's loss is not covered based 

on the assel1ion that it affected only the value of the property and not its title. The cases on 

which Stewart Title relies for tlIis proposition are distinguishable because they do not apply the 

specific coverage provisions here at issue. The Bank's loss is covered under Covered Risks 5 

and 6, which were not at issue in the cases cited by Stewart Title. 

Finally, Stewm1 Title has not conclusively established that the Bank is judicially estopped 

ii-om assel1ing that either the Janumy Notice or the February Notice is sufficient to trigger 

coverage. Stewm1 Title seeks to estop the Bank based on its position in prior litigation with the 

City. But that litigation concerned a different issue-whether the City complied with statutory 

requirements necessary to bind a successor lienholder to a notice of hearing. The statute, which 

governs only the municipality's actions, does not aid in detelmining whether the January Notice 

was properly filed for purposes of triggering coverage under the Policy. In addition, the Bank's 

litigation with the City did not concern the Februmy Notice at all. The Bank is therefore not 

taking inconsistent positions and judicial estoppel does not apply. 

II. Response to the second motion fol' no-evidence summary judgment. 

Stewart Title's motion for no-evidence summary judgment should be denied because it 

does not comply with Rule 166a(i). Pm1icularly, it does not specify what element of the Bank's 

4 
cause of action is not supported by evidence. 

In the alternative, the motion should be denied because the Bank has produced evidence 

raising a genuine issue of material fact concerning Stewart Title's breach of the Policy by 

denying the Bank's claim, which is covered under Covered Risks 5 and/or 6 and is not excluded. 

RESPONSE TO TRADITIONAL SUMMARY JUDGMENT MOTION 

STANDARD FOR TRADITIONAL SUMMARY JUDGMENT 

The party moving for a traditional summary judgment has the burden of showing that no 

genuine issue of material fact exists and that it is entitled to judgment as a matter of law. TEX. R. 

Civ. P. 166a(c); Nixon v. Mr. Property Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985); Swilley v. 

Hughes, 488 S.W.2d 64, 67 (Tex. 1972). The evidence favoring the non-movant is taken as true 

and every reasonable inference from the evidence will be indulged in his favor. Nixon, 690 

S.W.2d at 548-49; Montgomery v. Kennedy, 669 S.W.2d 309, 311 (Tex. 1984). Further, the nonmovant bears no burden unless and until the movant meets its initial burden. Rhone-Poulenc, 

Inc. v. Steel, 997 S.W.2d 217, 222-23 (Tex. 1999) (citing Oram v. Gen. Am. Oil Co., 513 S.W.2d 

533, 534 (Tex. 1974); Swilley, 488 S.W.2d at 67-68)). 

ARGUMENT AND AUTHORITIES 

I. The February Notice satisfied all of the filing requirements stated in Covered Risks 

5 and 6. 

A. The Policy does not require that the notice be sent to the property owner at 

the correct address. 

The Bank asserts that its loss is covered under Covered Risks 5 and 6: 

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: 

5 

cause of action is not supp011ed by evidence. 

In the alternative, the motion should be denied because the Bank has produced evidence 

raising a genuine issue of material fact concerning Stew811 Title's breach of the Policy by 

denying the Bank's claim, which is covered under Covered Risks 5 and/or 6 and is not excluded. 

RESPONSE TO TRADITIONAL SUMMARY JUDGMENT MOTION 

STANDARD FOR TRADITIONAL SUMMARY JUDGMENT 

The party moving for a traditional summ81Y judgment has the burden of showing that no 

genuine issue of material fact exists and that it is entitled to judgment as a matter of law. TEX. R. 

ClY. P. 166a(c); Nixon v. MI'. Property Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985); Swilley v. 

Hughes, 488 S.W.2d 64, 67 (Tex. 1972). The evidence favoring the non-movant is taken as tlUe 

and every reasonable inference fi'om the evidence will be indulged in his favor. Nixon, 690 

S.W.2d at 548-49; MontgOlnelY v. Kennedy, 669 S.W.2d 309, 311 (Tex. 1984). FUllher, the nonmovant bears no burden unless and until the movant meets its initial burden. Rhone-Pollienc, 

Inc. v. Steel, 997 S.W.2d 217, 222-23 (Tex. 1999) (citing Oram v. Gen. Am. Oil Co., 513 S.W.2d 

533,534 (Tex. 1974); Swilley, 488 S.W.2d at 67-68)). 

ARGUMENT AND AUTHORITIES 

I. The February Notice satisfied all of the filing requirements stated in Covered Risks 

5 and 6. 

A. The Policy does not require that the notice be sent to the propel'ty owner at 

the correct address. 

The Bank assells that its loss is covered under Covered Risks 5 and 6: 

5. The violation 01' enforcement of any law, ordinance, pelmit, 01' 

govelmnentalregulation (including those relating to building and zoning) 

restricting, regulating, prohibiting 01' relating to: 

5 
(a) the occupancy, use or enjoyment of the Land; 

(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. 

Tab A at 2, Iv (5), (6).3 

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; (2) be recorded in the Public Records; and (3) 

set forth the violation or intention to enforce, Tab A at 2, IN (5), (6). 

Stewart Title's second summary judgment motion acknowledges that the City filed a 

notice of hearing on the demolition of the property here at issue (the February Notice) in the 

Official Public Records of Real Property of Bexar County. Stewart Title Second MSJ at 4-5. A 

comparison of the January Notice and the February Notice reveals that both contain the exact 

same legal property description: NCB 10060 BLK 13 LOT 7. Compare Tab B with Tab C. 

Both Notices also refer to the same violation and proposed enforcement: 

The purpose of this hearing is to determine whether the above property constitutes 

a public nuisance in need of abatement. . . . 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. 

Id. 

3Stewart Title quotes Exclusions 1(a) and 3(a) and (b), apparently as somehow supporting an argument that notice 

must be filed in real property records. See Stewart Second iVISJ at 10-11. But neither Exclusion 1(a) nor Exclusion 

3(a) contains any notice filing requirement or mentions "Public Records." See Tab A, at 2 in (1)(a), 3(a). Exclusion 

3(b) excludes coverage for certain defects, liens, encumbrances, adverse claims or other matters "not recorded in the 

Public Records at Date of Policy," but does not specify that Public Records must be real property records. Id. at 2, 

3(a) 

6 

(a) the occupancy, use or enjoyment of the Land; 

(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 f011h the violation or intention to enforce, but only to the 

extent of the violation or enforcement refened 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 refelTed to in that notice. 

Tab A at 2, ~~ (5), (6).3 

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; (2) be recorded in the Public Records; and (3) 

set fOl1h the violation or intention to enforce. Tab A at 2, ~~ (5), (6). 

Stewart Title's second summary judgment motion acknowledges that the City filed a 

notice of hearing on the demolition of the propel1y here at issue (the February Notice) in the 

Official Public Records of Real Propet1y of Bexar County. Stewart Title Second MSJ at 4-5. A 

comparison of the January Notice and the February Notice reveals that both contain the exact 

same legal property description: NCB 10060 BLK 13 LOT 7. Compare Tab B with Tab C. 

Both Notices also refer to the same violation and proposed enforcement: 

The purpose of this hearing is to detelmine whether the above propet1y constitutes 

a public nuisance in need of abatement. . .. 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. 

3 Stewart Title quotes Exclusions I(a) and 3(a) and (b), apparently as somehow supporting an argument that notice 

must be filed in real property records. See Stewart Second MSJ at 10-11. But neither Exclusion I (a) nor Exclusion 

3(a) contains any notice filing requirement or mentions "Public Records." See Tab A, at 21i~ (I)(a), 3(a). Exclusion 

3(b) excludes coverage for certain defects, liens, encumbrances, adverse claims or other matters "not recorded in the 

Public Records at Date of Policy," but does not specity that Public Records must be real property records. !d. at 2, 11 

3(a) 

6 
The February Notice satisfies the filing requirements of Covered Risks 5 and 6. It 

undisputedly "describe[s] any part of the Land," describes the violation (public nuisance) and 

enforcement (demolition) that form the basis of the Bank's claim, and was recorded in the 

Official Public Records of Real Property of Bexar County. See Tab A at 2, TE (5), (6); Tab C. 

Stewart Title contends that the February Notice does not trigger coverage, however, 

because that notice was not sent to the property owner at the correct address. Stewart Title 

Second MSJ at 11. But there is no language in the Policy requiring that notice be sent "to the 

property owner at the correct address." On the contrary, as noted, the only Policy requirements 

for notice are that it (1) describe any part of the Land; (2) be recorded in the Public Records; and 

(3) set forth the violation or• intention to enforce.' Tab A at 2, IN (5), (6). The February Notice 

satisfies each of these requirements. 

Stewart Title's own motion conclusively defeats its contention that a notice of hearing 

triggering coverage was never filed in the Official Public Records of Real Property of Bexar 

County. Its request for summary judgment on this ground should be denied. 

B. The February Notice need only comply with the Policy, not with a statute 

regulating government action. 

Stewart Title's next attempt to avoid the effect of the February Notice is to ignore the 

Policy language and to turn instead to section 214.001 of the Texas Local Government Code. 

Stewart Title Second MSJ at 12. Stewart Title's reliance on section 214.001 fails because that 

statute does not apply in this case. This is not a dispute over whether a governmental entity 

complied with a statutory notice requirement. See TEx. Loc. Gov'T CODE § 214.001(e). This is 

purely a contract dispute between private parties and the only question presented is whether the 

4There is also no requirement in the Policy that the notice be filed under the grantor's or grantee's name. Thus, 

Stewart Title's assertion that expert Rhonda Jolley agrees that the February Notice could not be found in the 

grantor/grantee index for Bexar County Real Property Records is of no consequence. See Stewart Title Second M&I 

at 13. 

7 

The February Notice satisfies the filing requirements of Covered Risks 5 and 6. It 

undisputedly "describe[s] any part of the Land," describes the violation (public nuisance) and 

enforcement (demolition) that form the basis of the Bank's claim, and was recorded in the 

Official Public Records of Real Propelty of Bexar County. See Tab A at 2, ~~ (5), (6); Tab c.. 

Stewart Title contends that the February Notice does not trigger coverage, however, 

because that notice was not sent to the propelty owner at the conect address. Stewart Title 

Second MSJ at II. But there is no language in the Policy requiring that notice be sent "to the 

property owner at the conect address." On the contrary, as noted, the only Policy requirements 

for notice are that it (I) describe any part of the Land; (2) be recorded in the Public Records; and 

(3) set fOlih the violation or intention to enforce.4 Tab A at 2, ~~ (5), (6). The February Notice 

satisfies each of these requirements. 

Stewati Title's own motion conclusively defeats its contention that a notice of hearing 

triggering coverage was never filed in the Official Public Records of Real Propelty of Bexar 

County. Its request for summary judgment on tltis ground should be denied. 

B. The February Notice need only comply with the Policy, not with a statute 

regulating government action. 

Stewati Title's next attempt to avoid the effect of the Februat'Y Notice is to ignore the 

Policy language and to tum instead to section 214.001 of the Texas Local Govemment Code. 

Stewart Title Second MSJ at 12. Stewart Title's reliance on section 214.001 fails because that 

statute does not apply in this case. This is not a dispute over whether a govemmental entity 

complied with a statutOl'Y notice requirement. See TEX. Lac. 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 Policy that the notice be filed under the grantor's or grantee's name. TIlliS, 

Stewart Title's assertion that expert Rhonda Jolley agrees that the February Notice could not be found in the 

grantor/grantee index for Bexar County Real Property Records is of no consequence. See Stewart Title Second MSJ 

at 13. 

7 
February Notice complied with the Policy language. 

Stewart Title's reliance on section 214.001 evidences a misinterpretation of the Policy's 

definition of "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." Tab A at 3 ¶ (1)(k). A plain, grammatical reading of that 

definition reveals that "established under state statutes . . . for the purpose of imparting 

constructive notice" refers to the type of records, not the content .of any notice filed therein. 

Stewart Title has vigorously argued throughout this litigation that "Public Records," as 

defined, can only mean "Official Public Records of Real Property." But even accepting this 

contention for the sake of argument establishes only where the notice must be filed. What the 

notice must contain is prescribed, not by statute, but by Covered Risks 5 and 6. As established 

above, the February Notice complies with every Policy requirement, including both where the 

notice must be filed and its mandatory contents. 

In any event, section 214.001 actually disproves Stewart Title's contention that the 

February Notice did not impart constructive notice because it was not addressed to the correct 

property owner. Section 214.001(e) provides that filing a notice of hearing concerning a 

municipality's intent to have a substandard building demolished, as prescribed in that statute, 

provides constructive notice to subsequent interest holders: 

The filing of the notice is binding on subsequent grantees, lienholders, or other 

transferees of an interest in the property who acquire such interest after the filing 

of the notice, and constitutes notice of the hearing on any subsequent recipient of 

any interest in the property who acquires such interest after the filing of the 

notice. 

TEX. LOCAL GOV'T CODE § 214.001(e). 

The statute requires that the notice contain "a legal description of the affected property," 

but it does not require, in every instance, that it contain the property owner's name. Id. Rather, it 

8 

February Notice complied with the Policy language. 

Stewali Title's reliance on section 214.001 evidences a misinterpretation of the Policy's 

definition of "Public Records": "records established under state statutes at Date of Policy for the 

pUl]Jose of imparting constructive notice of matters relating to real propeliy to purchasers for 

value and without Knowledge." Tab A at 3 ~ (1 )(k). A plain, gralllmatical reading of that 

definition reveals that "established under state statutes . . . for the purpose of imparting 

constructive notice" refers to the type of records, not the content 'of any notice filed therein. 

Stewart Title has vigorously argued throughout this litigation that "Public Records," as 

defined, can only mean "Official Public Records of Real Propeliy." But even accepting this 

contention for the sake of argument establishes only where the notice must be filed. What the 

notice must contain is prescribed, not by statute, but by Covered Risks 5 and 6. As established 

above, the February Notice complies with every Policy requirement, including both where the 

notice must be filed and its mandatOlY contents. 

In any event, section 214.001 actually disproves Stewart Title's contention that the 

February Notice did not impart constructive notice because it was not addressed to the conect 

property owner. Section 214.001(e) provides that filing a notice of hearing conceming a 

municipality's intent to have a substandard building demolished, as prescribed in that statute, 

provides constructive notice to subsequent interest holders: 

The filing of the notice is binding on subsequent grantees, lienholders, or other 

transferees of an interest in the property who acquire such interest after the filing 

of the notice, and constitutes notice of the hearing on any subsequent recipient of 

any interest in the property who acquires such interest after the filing of the 

notice. 

TEX. LOCAL GOV'T CODE § 2l4.001(e). 

The statute requires that the notice contain "a legal description of the affected propeliy," 

but it does not require, in every instance, that it contain the propeliy owner's nallle. Id Rather, it 

8 
states that the notice must contain the owner's name "if that information can be 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 property records that 

contains a legal description of the affected property but does not contain the name of the property 

owner still imparts constructive notice. In this regard, the statute is completely compatible with 

the Policy language which, as just demonstrated, requires that notice describe some part of the 

land but does not require that it name the property owner. See Tab A at 2, im (5), (6). 

The February Notice was sufficient to impart constructive notice and to trigger coverage 

under the Policy. Stewart Title's request for summary judgment on the ground of lack of 

constructive notice should be denied. 

IL The January Notice satisfied all of the filing requirements stated in Covered Risks 5 

and 6. 

A. Section 214.001(e) of the Texas Local Government Code governs the legality 

of a municipality's action, not coverage under the Policy. 

As Stewart Title also acknowledges, the January Notice was filed in the Official Public 

Records of Bexar County. Stewart Title Second MSJ at 4. This notice, like the February Notice, 

describes part of the Land and sets forth the violation or intention to enforce. See Tab A at 2 ill 

(5), (6). Stewart Title's argument that the January Notice was insufficient to trigger coverage 

rests on its contention that "Public Records," as defined in the Policy, can only mean "Official 

Public Records of Real Property of Bexar County" rather than "Official Public Records of Bexar 

County." Stewart Title has not conclusively established any such narrow reading. 

Stewart Title again relies on section 214.001 of the Texas Local Government Code, 

which provides that a municipality seeking to demolish a substandard building "may file notice 

of the hearing in the Official Public Records of Real Property in the county in which the property 

9 

states that the notice must contain the owner's name "if that information can be 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 records that 

contains a legal description of the affected'propeliy but does not contain the name of the proPeJiy 

owner still impmis constructive notice. In this regard, the statute is completely compatible with 

the Policy language which, as just demonstrated, requires that notice describe some paJi of the 

land but does not require that it naJlle the property owner. See Tab A at 2, ~~ (5), (6). 

The February Notice was sufficient to impaJi constrnctive notice and to trigger coverage 

under the Policy. Stewmi Title's request for summary judgment on the ground of lack of 

constmctive notice should be denied. 

II. The January Notice satisfied all of the filing requirements stated in Covered Risks 5 

and 6. 

A. Section 214.001(e) of the Texas Local Government Code governs the legality 

of a municipality's action, not coverage under the Policy. 

As Stewart Title also acknowledges, the JanuaJY Notice was filed in the Official Public 

Records of Bexar County. Stewart Title Second MSJ at 4. This notice, like the February Notice, 

describes paJi of the Land and sets fOlih the violation or intention to enforce. See Tab A at 2 ~~ 

(5), (6). Stewmi Title's argument that the January Notice was insufficient to trigger coverage 

rests on its contention that "Public Records," as defined in the Policy, can only mean "Official 

Public Records of Real Properly of Bexar County" rather than "Official Public Records of Bexm 

County." Stewart Title has not conclusively established any such narrow reading. 

StewaJi Title again relies on section 214.001 of the Texas Local Govemment Code, 

which provides that a municipality seeking to demolish a substandard building "may file notice 

of the hearing in the Official Public Records of Real Propeliy in the county in which the property 

9 
is located." TEX. LOCAL GOV'T CODE § 214.001(e). But section 214.001(e) must be read in 

context. 

Section 214.001, as a whole, governs a municipality's authority concerning substandard 

buildings. Subsection (d) outlines a procedure whereby, after a public hearing and a finding that 

the subject building violated a pertinent ordinance, the municipality may order the owner to 

demolish the building within a reasonable time. Id. at § 214.001(d). If the owner fails to 

comply, the municipality then gives notice (by personal delivery or mail) to each identified 

mortgagee and lienholder identifying the property and violation and stating that the municipality 

will demolish the building if it is not done within a reasonable time. Id. In other words, 

subsection (d) gives the owner a chance to act, and then gives the mortgagees or lienholders a 

chance to act, before the municipality takes final action. 

Subsection (e), on which Stewart Title relies, is an alternative to the procedure outlined in 

subsection (d). It provides that the municipality may give mortgagees and lienholders notice 

before the public hearing so they have an opportunity to comment at the hearing. Id. at 

214.001(e). In this context, "the municipality may file notice of the hearing in the Official Public 

Records of Real Property in the county in which the property is located." Id. (emphasis added). 

Such a notice, if filed, "is binding on subsequent grantees, lienholders, or other transferees of an 

interest in the property who acquire such interest after the filing of notice, and constitutes notice 

of the hearing on any subsequent recipient of any interest in the property who acquires such 

interest after the filing of the notice." Id. If the municipality follows this alternative procedure, 

it need not give mortgagees or lienholders notice by personal delivery or mail if the owner fails 

to act. Id. 

10 

is located." TEX. LOCAL GOV'T CODE § 214.001(e). But section 214.001(e) must be read in 

context. 

Section 214.001, as a whole, governs a municipality's authority concerning substandard 

buildings. Subsection (d) outlines a procedure whereby, after a public hearing and a fInding that 

the subject building violated a pe11inent ordinance, the municipality may order the owner to 

demolish the building within a reasonable time. ld. at § 214.001(d). If the owner fails to 

comply, the municipality then gives notice (by personal delivery or mail) to each identifIed 

m0l1gagee and lienholder identifying the property and violation and stating that the municipality 

will demolish the building if it is not done within a reasonable time. ld. In other words, 

subsection (d) gives the owner a chance to act, and then gives the mortgagees or lienholders a 

chance to act, before the municipality takes fInal action. 

Subsection (e), on which Stewart Title relies, is an alternative to the procedure outlined in 

subsection (d). It provides that the municipality may give m0l1gagees and lienholders notice 

before the public hearing so they have an oppo11unity to comment at the hearing. ld. at 

214.001(e). In this context, "the municipality lIlay fIle notice of the hearing in the OffIcial Public 

Records of Real Propeliy in the county in which the propeliy is located." ld. (emphasis added). 

Such a notice, if fIled, "is binding on subsequent grantees, lienholders, or other transferees of an 

-' 

interest in the propeliy who acquire such interest after the fIling of notice, and constitutes notice 

of the hearing on any subsequent recipient of any interest in the property who acquires such 

interest after the fIling of the notice," kl If the municipality follows this alternative procedure, 

it need not give mortgagees or lienholders notice by personal delivery or mail if the owner fails 

to act. ld. 

10 
Subsections (d) and (e) set out procedures by which a municipality may require or effect 

the demolition of a substandard building. If a municipality chooses to proceed under subsection 

(e) and files a notice of hearing to bind subsequent interest owners, such notice must be filed "in 

the Official Public Records of Real Property in the county in which the property is located." See 

id. at § 214.001(e). But filing the notice in the appropriate records affects only whether the 

municipality's actions are legal and enforceable against subsequent interest owners. Complying 

or failing to comply with section 214.001(e) does not establish whether any particular notice 

complies with the Policy. Stewart Title is again reading into the Policy requirements that simply 

do not appear in its text. 

The Policy language is considerably broader than the statutory language. 

"Public Records," as used in the Policy, is considerably broader than "the Official Public 

Records of Real Property in the county in which the property is located," as used in section 

214.001(e). Indeed, the Policy definition encompasses the public notice records of Bexar 

County, where the notice of hearing in this case was filed. This is because the Policy does not 

require filing in the official real property records; it requires filing in records "relating to real 

property." Tab A at 3, If (1)(k) (emphasis added). A notice of hearing on the proposed 

demolition of improvements certainly "relat[es] to real property." And the court of appeals in 

the 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, at *3 n.2. Thus, the 

records where the January Notice was filed fall within the Policy definition of "Public Records." 

Section 214.001(e) is inapposite. 

C. Neither Sanchez nor Noble Mortgage adds to the analysis. 

Stewart Title next looks to the common law to support its argument that only documents 

filed in real property records impart constructive notice. It first relies on Sanchez v. Telles, 960 

11 

Subsections (d) and (e) set out procedures by which a municipality may require or effect 

the demolition of a substandard building. If a municipality chooses to proceed under subsection 

(e) and files a notice of hearing to bind subsequent interest owners, such notice must be filed "in 

the Official Public Records of Real Property in the county in which the propelty is located." See 

id. at § 214.001(e). But filing the notice in the appropriate records affects only whether the 

municipality's actions are legal and enforceable against subsequent interest owners. Complying 

or failing to comply with section 214.001(e) does not establish whether any particular notice 

complies with the Policy. Stewart Title is again reading into the Policy requirements that simply 

do not appear in its text. 

B. The Policy language is considerably broader than the statutory language. 

"Public Records," as used in the Policy, is considerably broader than "the Official Public 

Records of Real Propelty in the county in which the propelty is located," as used in section 

214.001(e). Indeed, the Policy definition encompasses the public notice records of Bexar 

County, where the notice of hearing in this case was filed. This is because the Policy does not 

require filing in the official real property records; it requires filing in records "relating to real 

property." Tab A at 3, ~ (l)(k) (emphasis added). A notice of hearing on the proposed 

demolition of improvements certainly "relat[es] to real propelty." And the court of appeals in 

the 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, at *3 n.2. Thus, the 

records where the Januaty Notice was filed fall within the Policy definition of "Public Records." 

Section 214.001(e) is inapposite. 

C. Neithet· Sal/chez nor Noble Mortgage adds to the analysis. 

Stewart Title next looks to the common law to SUppOit its argument that only documents 

filed in real property records impart constructive notice. It first relies on Sanchez v. Telles, 960 

II 
S.W.2d 762 (Tex. App.—El Paso 1997, pet. denied). But that case simply states that "an 

instrument relating to real property must be recorded in the public records in the county in which 

a part of the property is located." Id. at 767 (emphasis added); see TEX. PROP. CODE ANN. § 

11.001 (requiring instrument relating to real property to be recorded in county where property is 

without specifying "real property records"). Both the January Notice and the February Notice 

were filed in the public records of Bexar County, where the property is located; both comport 

with Sanchez. But Stewart Title then relies on Noble Mortg, & Investments, LLC v. D&M Vision 

Investments, LLC, 340 S.W.3d 65 (Tex. App.—Houston [1st Dist.] 2011, no pet.), to add 

language to (and to change the meaning of) the Sanchez court's statement. 

The issue in Noble Mortgage was "whether recording a sale on an execution docket in 

compliance with Rule 656 of the Texas Rules of Civil Procedure is a 'recording' for the purpose 

of putting subsequent creditors and purchasers on constructive notice under sections 13.001 and 

13.002 of the Texas Property Code." Id. at 77. Stewart Title states that the Noble Mortgage 

court "interpreted the reference in Sanchez to 'public records' as actually referring "to the county 

real property records rather than other public records." Stewart Title Second MSJ at 12 

(emphasis supplied by Stewart Title). Despite the bold and italics, however, this is not what the 

Noble Mortgage court said. Rather, it interpreted "public records" to mean real property records 

"rather than the execution docket of the county court." Noble Mortg., 340 S.W.3d at 80. This 

interpretation does not foreclose constructive notice being imparted by filing notice in some 

public record other than the execution docket. See TEx. PROP. CODE ANN. § 11.001 (specifying 

county but not type of record). Noble Mortgage, like section 214.001, simply does not apply to 

this case. 

Stewart Title has not conclusively established that the January Notice did not trigger 

12 

S.W.2d 762 (Tex. App.-El Paso 1997, pet. denied). But that case simply states that "an 

instmment relating to real propelty must be recorded in the public records in the county in which 

a part of the propelty is located." Id. at 767 (emphasis added); see TEX. PROP. CODE ANN. § 

11.001 (requiring instrument relating to real property to be recorded in county where propelty is 

without specifying "real property records"). Both the January Notice and the Febmary Notice 

were filed in the public records of Bexar County, where the property is located; both compott 

with Sanchez. But Stewmt Title then relies on Noble Mortg. & Investments, LLC v. D&M Vision 

Investments, LLC, 340 S.W.3d 65 (Tex. App.-Houston [1st Dist.] 2011, no pet.), to add 

language to (and to change the meaning of) the Sanchez comi's statement. 

The issue in Noble Mortgage was "whether recording a sale on an execution docket in 

compliance with Rule 656 of the Texas Rules of Civil Procedure is a 'recording' for the purpose 

of putting subsequent creditors and purchasers on constmctive notice under sections 13.001 and 

13.002 of the Texas Property Code." Id. at 77. Stewmi Title states that the Noble Mortgage 

court "interpreted the reference in Sanchez to 'public records' as actually referring "to tile cOllllty 

real property records ratller tllall otller public records," Stewart Title Second MSJ at 12 

(emphasis supplied by Stewart Title). Despite the bold and italics, however, this is not what the 

Noble Mortgage court said. Rather, it interpreted "public records" to mean real propelty records 

"rather than the execution docket of the county comi." Noble Mortg., 340 S.W.3d at 80. This 

interpretation does not foreclose constructive notice being imparted by filing notice in some 

public record other than the execution docket. See TEx. PROP. CODE ANN. § 11.001 (specifying 

county but not type of record). Noble Mortgage, like section 214.001, simply does not apply to 

tlllS case. 

Stewmi Title has not conclusively established that the January Notice did not trigger 

12 
coverage because the Policy requires that notice be filed in the Official Records of Real 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 asserting that the Bank's loss is not covered, Stewart Title also asserts that 

it is excluded under policy Exclusion 3(d). That exclusion excludes from coverage loss arising 

by reason of "[d]efects, liens, encumbrances, adverse claims or other matters: . . . attaching or 

created subsequent to Date of Policy . . ." Tab A at 2, ¶ 3(d). Stewart Title asserts that the 

Bank's loss is excluded because the notice and hearing that actually resulted in the demolition of 

the apartments occurred after the Date of Policy (September 8, 2009). This analysis 

misidentifies the cause of the Bank's loss. 

The defect, adverse claim, or other matter that resulted in the Bank's loss was not a 

particular notice or hearing. It was the violation and enforcement of municipal ordinances 

concerning substandard buildings. Despite Stewart Title's propensity to read portions 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 the violation or 

enforcement of laws, ordinances, or governmental regulations such as are at issue here the 

Bank's loss was sustained because the improvements on the property had constituted a public 

nuisance and the City exercised its enforcement powers to ensure that they were demolished. 

Both the violation and enforcement were matters that existed prior to the September 8, 2009 Date 

of Policy, as evidenced by the fact that the City issued a demolition order on January 14, 2008, 

finding that the apartments constituted a public nuisance and ordering their demolition. See 

D'Hanis, 2010 WL 3249956, at *1; see also Stewart Title Second MSJ at 2 ("The City of San 

Antonio had been trying to demolish the apartments on the Property as far back as 2002, due to 

its [sic] decrepit state"). 

13 

coverage because the Policy requires that notice be filed in the Official Records of Real Propelty. 

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 asselting that the Bank's loss is not covered, Stewart Title also asselis that 

it is excluded under policy Exclusion 3( d). That exclusion excludes from coverage loss arising 

by reason of "[ d]efects, liens, encumbrances, adverse claims or other matters: ... attaching or 

created subsequent to Date of Policy .... " Tab A at 2, ~ 3(d). Stewati Title asserts that the 

Bank's loss is excluded because the notice and heating that actually resulted in the demolition of 

the apartments occurred after the Date of Policy (September 8, 2009). This analysis 

misidentifies the cause of the Bank's loss. 

The defect, adverse claim, or other matter that resulted in the Bank's loss was not a 

patiiculat' notice or hearing. It was the violation and enforcement of municipal ordinances 

concerning substandard buildings. Despite Stewati Title's propensity 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 the violation or 

enforcement of laws, ordinances, or govemmental regulations such as are at issue here-the 

Bank's loss was sustained because the improvements on the propeliy had constituted a public 

nuisance and the City exercised its enforcement powers to ensure that they were demolished. 

Both the violation and enforcement were matters that existed prior to the September 8, 2009 Date 

of Policy, as evidenced by the fact that the City issued a demolition order on January 14, 2008, 

finding that the apatiments constituted a public nuisance and ordering their demolition. See 

D'Hanis, 2010 WL 3249956, at * 1; see also Stewart Title Second MSJ at 2 ("The City of San 

Antonio had been trying to demolish the apatiments on the Propeliy as far back as 2002, due to 

its [sic] decrepit state"). 

13 
The Bank obtained a temporary injunction setting aside the January Notice and 

temporarily halting the City's. enforcement efforts. That action, however, did not prevent the 

City from issuing additional notices and continuing the enforcement action that had already been 

taken. It also did not change the fact that, with the City's refusal to issue building permits, a 

violation of a municipal nuisance ordinance continued to exist. See San Antonio City Code 

Chapter 6, Art. VIII, §§ 6-156, 6-157. The fact that the City continued its enforcement efforts 

after the Date of Policy and that demolition was actually effected after that date does not alter 

when the substance of the covered risk began. In other words, the defect, adverse claim, or other 

matter resulting in the Bank's loss (i.e., matters falling within Covered Risks 5 and 6) was not 

something "attaching or created subsequent to the Date of Policy." See Tab A at 2, ¶ 3(d). 

Stewart Title has not conclusively established that the Bank's loss is excluded under 

Exclusion 3(d). Its request for summary judgment on this ground should be denied. 

TV. The Bank's loss is covered under Policy provisions other than Covered Risk 2, 

which is the only type of risk addressed in the cases on which Stewart Title relies. 

Stewart Title next argues that the Bank's loss is not covered under the Policy because 

demolition of the apartments affected only the value of the insured property, not title to that 

property. It relies for this argument on Hanson Business Park, L.P. v. First National Title 

Insurance Co., 209 S.W.3d 867 (Tex. App.—Dallas 2006, pet. denied), and McGonagle v. 

Stewart Title Insurance Co., 432 S.W.3d 535 (Tex. App.—Dallas 2014, pet, 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 on the property was subject to a dedication instrument. See 

Hanson, 209 S.W.3d at 868; McGonagle, 432 S.W.3d at 538-39. Neither case addresses the 

circumstances or covered risks here at issue; both cases are distinguishable from the present case. 

The Hanson and McGonagle courts both addressed whether the problem at issue was a 

14 

The Bank obtained a temporary i~unction setting aside the Januaty Notice and 

temporarily halting the City's enforcement efforts. That action, however, did not prevent the 

City from issuing additional notices and continuing the enforcement action that had already been 

taken. It also did not change the fact that, with the City's refhsal to issue building pennits, a 

violation of a municipal nuisance ordinance continued to exist. See San Antonio City Code 

Chapter 6, Art. VIII, §§ 6-156, 6-157. The fact that the City continued its enforcement efforts 

after the Date of Policy and that demolition was actually effected after that date does not alter 

when the substance of the covered risk began. In other words, the defect, adverse clainl, or other 

matter resulting in the Bank's loss (i.e., matters falling within Covered Risks 5 and 6) was not 

something "attaching or created subsequent to the Date of Policy." See Tab A at 2, ~ 3(d). 

Stewart Title has not conclusively established that the Bank's loss is excluded under 

Exclusion 3( d). Its request for sumlllaty judgment on this ground should be denied. 

IV. The Bank's loss is covered under Policy provisions other than Covered Risk 2, 

which is the only type of risk addressed in the cases on which Stewart Title relies. 

Stewart Title next argues that the Bank's loss is not covered under the Policy because 

demolition of the apartments affected only the value of the insured property, not title to that 

propeliy. It relies for this argument on Hanson Business Park, L.P. v. First National Title 

Insurance Co., 209 S.W.3d 867 (Tex. App.-Dallas 2006, pet. denied), and McGonagle v. 

Stewart Title insurance Co., 432 S. W.3d 535 (Tex. App.-Dallas 2014, pet. 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 stlUcture on the propeliy was subject to a dedication instrument. See 

Hanson, 209 S.W.3d at 868; McGonagle, 432 S.W.3d at 538-39. Neither case addresses the 

circumstatlces or covered risks here at issue; both cases are distinguishable from the present case. 

The Hanson and McGonagle cOUlis both addressed whether the problem at issue was a 

14 
"defect in or lien or encumbrance on the title" so as to be covered under the title insurance 

policy. See Hanson, 209 S.W.3d at 869; McGonagle, 432 S.W.3d at 539. This same language is 

found in the Policy here at issue, as Covered Risk 2: "Any defect in or encumbrance on the 

Title." Tab A at 1,11(2). 

The Hanson and McGonagle courts both held that the identified problems did not fall 

within this covered risk. See Hanson, 209 S.W.3d at 870; McGonagle, 432 S.W.3d at 540. 

More particularly, the Hanson court held that "a defect in, or encumbrance on, title (such as 

would trigger coverage under a title insurance policy) must involve a flaw in the ownership 

rights in the property." Hanson, 209 S.W.3d at 870. It "refuse[d] to equate a defect in the 

condition of the property with a defect in title to the property." Id The McGonagle court 

followed suit. See McGonagle, 432 S.W.3d at 539-40. 

But Hanson and McGonagle do not govern the analysis in this case. First, the Bank is 

not claiming loss from "a defect in the condition of the property." See Hanson, 209 S.W.3d at 

870. The Bank was aware that the property required renovation; that was one purpose of the 

loan. It is not the condition of the properly that caused the loss, it is the demolition order issued 

under• a municipal ordinance and the enforcement of that order by demolition that caused the 

loss. That is a risk that is expressly covered under the Policy as Covered Risks 5 and 6. No 

provision analogous to Covered Risks 5 and 6 were at issue, or even mentioned, in either Hanson 

or McGonagle. 

As noted, the Policy states that it covers "loss or damage „ . sustained or incurred by the 

Insured by reason of: . . [a]ny defect in or lien or encumbrance on the Title." Tab A at 1, ¶ 

2(a). But that is not the only covered risk. Rather, the Policy lists 13 other expressly covered 

risks. See id. at 1-2, IN 1, 3-14. And among those other risks are Covered Risks 5 and 6 which, 

15 

"defect in or lien or encumbrance on the title" so as to be covered under the title insurance 

policy. See Hanson, 209 S.W.3d at 869; McGonagle, 432 S.W.3d at 539. This same language is 

found in the Policy here at issue, as Covered Risk 2: "Any defect in or encumbrance on the 

Title." Tab A at 1, ~ (2). 

The Hanson and McGonagle comis both held that the identified problems did not fall 

within this covered risk. See Hanson, 209 S.W.3d at 870; McGonagle, 432 S.W.3d at 540. 

More p31iicularly, the Hanson court held that "a defect in, or encumbrance on, title (such as 

would trigger coverage under a title insurance policy) must involve a flaw in the ownership 

rights in the property." Hanson, 209 S.W.3d at 870. It "refuse[d] to equate a defect in the 

condition of the propelty with a defect in title to the property." ld The McGonagle comi 

followed suit. See McGonagle, 432 S.W.3d at 539-40. 

But Hanson and McGonagle do not govem the analysis in this case. First, the Bank is 

not claiming loss from "a defect in the condition of the property." See Hanson, 209 S.W.3d at 

870. The Bank was aware that the property required renovation; that was one pmpose of the 

loan. It is not the condition of the property that caused the loss, it is the demolition order issued 

under a municipal ordinance and the enforcement of that order by demolition that caused the 

loss. That is a risk that is expressly covered under the Policy as Covered Risks 5 and 6. No 

provision analogous to Covered Risks 5 and 6 were at issue, or even mentioned, in either Hanson 

or McGonagle. 

As noted, the Policy states that it covers "loss or damage ... sustained or incurred by the 

Insured by reason of: ... [a]ny defect in or lien or encumbrance on the Title." Tab A at 1, ~ 

2(a). But that is not the only covered risk. Rather, the Policy lists 13 other expressly covered 

risks. See id at 1-2, ~~ 1, 3-14. And 3l1long those other risks are Covered Risks 5 and 6 which, 

15 
as established above, apply to the circumstances of this case.5 

Hanson and McGonagle held only that the risks 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 Risk 2 in the Policy). The coverage provision at issue in 

those cases was not the same as the coverage provisions at issue in this case (Covered Risks 5 

and 6). Hanson and McGonagle do not support Stewart Title's claim to summary judgment. 

V. The Bank is not estopped by its position in prior litigation with the City. 

"Judicial estoppel precludes a party who successfully maintains a position in one 

proceeding from afterwards adopting a clearly inconsistent position in another proceeding to 

obtain an unfair advantage."6 Ferguson v. Bldg. Materials Corp., 295 S.W.3d 642, 643 (Tex. 

2009). 

Stewart Title asserts that the Bank is judicially estopped, but it is not clear from its 

motion just what it is supposedly estopped from asserting. The motion states that the Bank 

asserted in prior litigation against the City that the notice of hearing on the demolition order was 

never filed in the Official Public Records of Real Property of Bexar County. Stewart Title 

Second MSJ at 16. After reciting case law concerning judicial estoppel, Stewart Title concludes 

that "[t]he Bank cannot now take the position that notice of hearing on the demolition was never 

filed in the Official Records of Real Property For Bexar County." id. at 17. The two recited 

positions are not inconsistent; by definition, judicial estoppel cannot apply to them. See 

Ferguson, 295 S.W.3d at 643 (precluding clearly inconsistent positions). 

5Because the Bank does not seek coverage under Covered Risk 2 ("[a]ny defect in or lien or encumbrance on the 

Title"), Stewart Title's assertion that expert Rhonda Jolley agrees that the January Notice and February Notice do 

not create a cloud on title is of no consequence. See Stewart Title Second MSJ at 16. 

6 Stewart Title appears to also invoke something it calls "estoppel in law." _See Stewart Title MSJ at 14. The case it 

cites, Long v. Knox, 291 S.W.2d 292 (Tex. 1956), makes no mention of "estoppel in law" and the Bank has not 

found any Texas case employing that phrase. Because Long actually discusses judicial estoppel, the Bank concludes 

that Stewart Title's reference to "estoppel in law" is simply a reference to judicial estoppel under another name. 

16 

as established above, apply to the circumstances of this case. 5 

Hanson and McGonagle held only that the risks asselied 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 Risk 2 in the Policy). The coverage provision at issue in 

those cases was not the same as the coverage provisions at issue in this case (Covered Risks 5 

and 6). Hanson and McGonagle do not suppOli Stewart Title's claim to sunnnmy judgment. 

V. The Bank is not estopped by its position in prior litigation with the City. 

"Judicial estoppel precludes a pmiy who successfully maintains a position in one 

proceeding from aftelwards adopting a clearly inconsistent position in another proceeding to 

obtain an unfair advantage.,,6 Ferguson v. Bldg. Materials Corp., 295 S.W.3d 642, 643 (Tex. 

2009). 

Stewmi Title asserts that the Bank is judicially estopped, but it is not clear from its 

motion just what it is supposedly estopped from asserting. The motion states that the Bank 

asserted in prior litigation against the City that the notice of hearing on the demolition order was 

never filed in the Official Public Records of Real Propeliy of Bexm' County. Stewart Title 

Second MSJ at 16. After reciting case law concerning judicial estoppel, Stewmi Title concludes 

that "[t]he Bank cannot now take the position that notice of hem'ing on the demolition was never 

filed in the Official Records of Real Property For Bexar County." Jd at 17. The two recited 

positions are not inconsistent; by definition, judicial estoppel cannot apply to them. See 

Ferguson, 295 S.W.3d at 643 (precluding clearly inconsistent positions). 

5 Because the Bank does not seek coverage under Covered Risk 2 ("[alny defect in or lien or encumbrance on the 

Title"), Stewart Title's assel1ion that expert Rhonda Jolley agrees that the January Notice and February Notice do 

not create a cloud on title is of no consequence. See Stewart Title Second MSJ at 16. 

6 Stewart Title appears to also invoke something it calls "estoppel in law." ,See Stewart Title MSJ at 14. The case it 

cites, Long v. Knox, 291 S. W.2d 292 (Tex. 1956), makes no mention of "estoppel in law" and the Bank has not 

found any Texas case employing that phrase. Because Long actually discusses judicial estoppel, the Bank concludes 

that Stewart Title's reference to "estoppel in law" is simply a reference to judicial estoppel under another name. 

16 
Assuming Stewart Title means that the Bank cannot 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, its argument lacks merit. Once again, Stewart Title 

attempts to import section 214.001, a statute governing action by a municipality, into this 

contract dispute between private parties. Compliance with section 214.001 was properly at issue 

in the prior litigation against the City. There is no such issue in this litigation against Stewart 

Title, a nongovernmental entity. 

The issue in the prior litigation was whether the Bank properly obtained a temporary 

injunction enjoining the enforcement of the 2008 demolition order. See D'Hanis, 2010 WL 

3249956, at *1. The Bank argued that the demolition order was not enforceable against it 

because it had neither actual nor constructive notice of the hearing and was a bona fide lender. 

Id. at *2. The City argued that the Bank was not protected as a bona fide lender because notice 

of the hearing was filed with the Bexar• County Clerk. Id. at *3. The court of appeals held that 

notice of hearing on a demolition order is binding on subsequent lienholders "only if the 

municipality files the notice of hearing in the Official Public Records of Real Property." Id 

(citing TEX. LOCAL GOv'T CODE § 214.001(e)). 

The issue and holding in D'Hanis specifically concerned the City's failure to comply 

with statutory requirements for binding subsequent lienholders. See id. It was in that specific 

context that the Bank asserted that it did not have constructive notice because the notice was not 

filed in the real property records. Had the January Notice been filed in those records, 

constructive notice would have been imposed by statute. See TEX. LOCAL GOV'T CODE § 

214.001(e). But, for all the reasons discussed in section II(A) above, whether the January Notice 

does or does not fulfill the City's statutory obligations does not determine whether that same 

17 

Assuming Stewart Title means that the Bank cannot 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, its argument lacks merit. Once again, Stewart Title 

attempts to import section 214.001, a statute goveming action by a municipality, into this 

contract dispute between private parties. Compliance with section 214.001 was properly at issue 

in the prior litigation against the City. There is no such issue in this litigation against Stewmi 

Title, a nongovemmental entity. 

The issue in the prior litigation was whether the Bank properly obtained a temporary 

injunction enjoining the enforcement of the 2008 demolition order. See D'Hanis, 2010 WL 

3249956, at * I. The Bank argued that the demolition order was not enforceable against it 

because it had neither actual nor constructive notice of the hem'ing and was a bona fide lender. 

Id at *2. The City argued that the Bank was not protected as a bona fide lender because notice 

of the hearing was filed with the Bexar County Clerk. Id at *3. The couti of appeals held that 

notice of hearing on a demolition order is binding on subsequent lienholders "only if the 

municipality files the notice of hearing in the Official Public Records of Real Propeliy." Id 

(citing TEX. LOCAL GOy'TCODE § 214.001(e». 

The issue and holding in D'Hanis specifically concemed the City's failure to comply 

with statutory requirements for binding subsequent lienholders. See id It was in that specific 

context that the Bank asselied that it did not have constructive notice because the notice was not 

filed in the real property records. Had the Janumy Notice been filed in those records, 

constructive notice would have been imposed by statute. See TEX. LOCAL GOy'T CODE § 

214.001(e). But, for all the reasons discussed in section Il(A) above, whether the January Notice 

does or does not fulfill the City's statutory obligations does not detemline whether that same 

17 
notice complies with the Policy so as to trigger coverage. Thus, the fact that the January Notice 

did not provide constructive notice binding the Bank under section 214.001(e) does not preclude 

a finding that the same notice satisfied the notice filing requirement of Covered Risks 5 and 6. 

The Bank's position on the statutory issue is therefore not "clearly inconsistent" with its position 

on the Policy issue. 

In addition, the only notice at issue in the prior litigation was the January Notice. No 

mention was made of, and no position was asserted on, the February Notice. Stewart Title has 

therefore not established that the Bank is judicially estopped from asserting that coverage was 

triggered by the February Notice. 

Stewart Title has not conclusively established that the Bank is judicially estopped from 

asserting that the January Notice and the February Notice complied with the requirements of 

Covered Risks 5 and 6. Its request for summary judgment on that ground should be denied. 

RESPONSE TO NO-EVIDENCE SUMMARY JUDGMENT MOTION 

STANDARD FOR NO-EVIDENCE SUMMARY JUDGMENT. 

After an adequate time for discovery has passed, a party may move for summary 

judgment on the ground that there is no evidence of one or more essential elements of a claim or 

deknse on which the adverse party would have the burden of proof at trial. Tax. R. Ctv. P. 

166a(i). But summary judgment is not appropriate if the non-movant presents evidence showing 

that it is entitled to a trial. Southwestern Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 

2002); Llanes v. Corpus Christi Indep. Sch. Dist., 64 S.W.3d 638, 641 (Tex. App.—Corpus 

Christi 2001, pet. denied). In other words, if the evidence demonstrates a genuine issue of 

material fact, summary judgment should be denied. See TEX. R. CRT. P. 166a(1). 

18 

notice complies with the Policy so as to trigger coverage. Thus, the fact that the January Notice 

did not provide constructive notice binding the Bank under section 214.001(e) does not preclude 

a fmding that the same notice satisfied the notice filing requirement of Covered Risks 5 and 6. 

The Bank's position on the stahltOlY issue is therefore not "clearly inconsistent" with its position 

on the Policy issue. 

In addition, the only notice at issue in the prior litigation was the Janumy Notice. No 

mention was made of, and no position was asselted on, the February Notice. Stewmt Title has 

therefore not established that the Bank is judicially estopped from asserting that coverage was 

triggered by the February Notice. 

Stewmt Title has not conclusively established that the Bank is judicially estopped from 

asselting that the Janumy Notice and the Februaty Notice complied with the requirements of 

Covered Risks 5 and 6. Its request for summary judgment on that ground should be denied. 

RESPONSE TO NO-EVIDENCE SUMMARY JUDGMENT MOTION 

STANDARD FOR NO-EVIDENCE SUMMARY JUDGMENT. 

After an adequate tinte for discovery has passed, a pmty may move for summary 

judgment on the ground that there is no evidence of one or more essential elements of a claint or 

defense on which the adverse party would have the burden of proof at trial. TEX. R. CIY. P. 

I 66a(i). But summary judgment is not appropriate if the non-movant presents evidence showing 

that it is entitled to a trial. Southwestern Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 

2002); Llanes v. Corpus Christi Indep. Sch. Dist., 64 S.W.3d 638, 641 (Tex. App.-Corpus 

Christi 2001, pet. denied). In other words, if the evidence demonstrates a genuine issue of 

material fact, summary judgment should be denied. See TEX. R. CIY. P. 166a(i). 

18 
ARGUMENT AND AUTHORITIES 

I. Stewart Title's second motion for no-evidence summary judgment is fatally flawed. 

Rule 166a(i) of the Texas Rules of Civil Procedure authorizes a party to move for 

summary judgment on the ground that "there is no evidence of one or more essential elements of 

a claim or defense on which the adverse party would have the burden of proof at trial." TEX. R. 

P, 166a(i), It does not, however, authorize "conclusory motions and general no evidence 

challenges." Callaghan Ranch, Ltd. v. Killam, 53 S.W.3d 1, 3 (Tex. App.—San Antonio 2000, 

pet. denied) (citing TEX. R, CIV. P, 166a(i) & cmt,). Rather, the motion must state the specific 

elements as to which there is no evidence. Id. "If a no-evidence motion for summary judgment 

is not specific in challenging a particular element or is conclusory, the motion is legally 

insufficient as a matter of law . . . ." Callaghan Ranch, 53 S.W.3d at 3. 

The motion at issue in Callaghan Ranch stated: 

The Killams are entitled to summary judgment because the 

Plaintiffs cannot by pleading, deposition, answers to 

interrogatories or other admissible evidence demonstrate there is 

any evidence to support the declaratory judgment seeking to 

declare the road in question a public thoroughfare. 

Id. It then generally challenged Callaghan Ranch's factual allegations. Id. The court of appeals 

concluded, "The motion fails to state the elements of Callaghan Ranch's causes of action as to 

which there is no evidence; therefore, it is legally insufficient as a matter of law." Id. Stewart 

Title's motion suffers the same defect. 

Stewart Title's second purported no-evidence motion states that it is moving for summary 

judgment on "all Plaintiffs' claims," but does not identify what those claims are. Stewart Title 

MSJ at p. 15.. It broadly states that "Plaintiffs cannot . . , demonstrate that there is any genuine 

issue of material fact to support their claims," again without identifying those claims. Id. As an 

attempt at specificity, the motion states, "Plaintiffs can produce no evidence to support their 

19 

ARGUMENT AND AUTHORITIES 

I. Stewart Title's second motion for no-evidence summary judgment is fatally flawed. 

Rule 166a(i) of the Texas Rules of Civil Procedure authorizes a patty to move for 

summmy judgment on the ground that "there is no evidence of one or more essential elements of 

a claim or defense on which the adverse party would have the burden of proof at trial." TEX. R. 

CIV. P. I 66a(i). It does not, however, authorize "conclusory motions and general no evidence 

challenges." Callaghan Ranch, Ltd. v. Killam, 53 S.W.3d I, 3 (Tex. App.-San Antonio 2000, 

pet. denied) (citing TEX. R. CIV. P. 166a(i) & cmt.). Rather, the motion must state the specific 

elements as to which there is no evidence. Id. "If a no-evidence motion for summary judgment 

is not specific in challenging a pmiicular element or is conclusory, the motion is legally 

insufficient as a matter of law .... " Callaghan Ranch, 53 S.W.3d at 3. 

The motion at issue in Callaghan Ranch stated: 

The Killams are entitled to summary judgment because the 

Plaintiffs cannot by pleading, deposition, answers to 

intel1'ogatories or other admissible evidence demonstrate there is 

any evidence to suppOli the declaratory judgment seeking to 

declare the road in question a public thoroughfm·e. 

Id. It then generally challenged Callaghan Ranch's factual allegations. Id. The court of appeals 

concluded, "The motion fails to state the elements of Callaghan Ranch's causes of action as to 

which there is no evidence; therefore, it is legally insufficient as a matter of law." Id. Stewart 

Title's motion suffers the same defect. 

Stewati Title's second purported no-evidence motion states that it is moving for summary 

judgment on "all Plaintiffs' claims," but does not identify what those claims are. Stewart Title 

MSJ at p. IS. It broadly states that "Plaintiffs cannot ... demonstrate that there is any genuine 

issue of material fact to suppOli their claims," again without identifYing those claims. Id. As an 

attempt at specificity, the motion states, "Plaintiffs can produce no evidence to suppOli their 

19 
claim of breach of contract." It then briefly repeats arguments made in the traditional portion of 

the motion. See id But Stewart Title does not identify the essential elements of the Bank's 

breach of contract claim and does not state the specific element(s) for which there is no evidence, 

Its second no-evidence motion (like its identical first no-evidence motion) is therefore deficient. 

See id. 

Stewart Title's second purported no-evidence motion is again nothing more than an 

abbreviated version of its traditional motion. Because it is "not specific in challenging a 

particular element [and] is conclusory, the motion is legally 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 claim for breach of contract even arguably challenged in 

Stewart Title's second no-evidence motion is whether Stewart Title committed a breach of its 

obligations under the Policy. Stewart Title argues that there can be no breach because there is no 

coverage because no notice of hearing was filed in the real property records and such filing is a 

predicate to coverage. Stewart Title MSJ at 15. 

The Bank has produced evidence demonstrating that Stewart Title breached the Policy by 

refusing to pay a covered claim. The Policy covers losses resulting from the violation or 

enforcement of a municipal ordinance "if a notice, describing any part of the Land, is recorded in 

the Public Records setting forth the violation or intention to enforce . . ." Tab A at 2, 71(5), (6). 

The Bank's loss results from the violation of a municipal nuisance ordinance and the City's 

enforcement of that ordinance. Tab D. A notice describing the Land was recorded in the Public 

Records setting forth the violation or intention to enforce. Tabs B, C. A lawsuit over the 

demolition of the improvements to the property was pending at the time the policy was issued. 

Tab G. The Bank made a claim on the Policy, and Stewart Title denied the claim. Tab F. 

20 

claim of breach of contract." It then briefly repeats arguments made in the traditional pmiion of 

the motion. See id. But Stewart Title does not identify the essential elements of the Bank's 

breach of contract claim and does not state the specific element(s) for which there is no evidence. 

Its second no-evidence motion (like its identical first no-evidence motion) is therefore deficient. 

See id. 

Stewmi Title's second purported no-evidence motion is again nothing more than an 

abbreviated version of its traditional motion. Because it is "not specific in challenging a 

pmiicular element [and] is conclusmy, the motion is legally 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 claim for breach of contract even arguably challenged in 

Stewart Title's second no-evidence motion is whether Stewart Title committed a breach of its 

obligations under the Policy. Stewmi Title m'gues that there can be no breach because there is no 

coverage because no notice of hearing was filed in the real propeliy records and such filing is a 

predicate to coverage. Stewart Title MSJ at 15. 

The Bank has produced evidence demonstrating that Stewart Title breached the Policy by 

refusing to pay a covered claim. The Policy covers losses resulting from the violation or 

enforcement of a municipal ordinance "if a notice, describing any part of the Land, is recorded in 

the Public Records setting fmih the violation or intention to enforce .... " Tab A at 2, ~~ (5), (6). 

The Bank's loss results from the violation of a municipal nuisance ordinance and the City'S 

enforcement of that ordinance. Tab D. A notice describing the Land was recorded in the Public 

Records setting forth the violation or intention to enforce. Tabs B, C. A lawsuit over the 

demolition of the improvements to the property was pending at the time the policy was issued. 

Tab G. The Bank made a claim on the Policy, and Stewm'l Title denied the claim. Tab F. 

20 
OBJECTIONS TO STEWART TITLE'S 

PROFFERED SUMMARY JUDGMENT EVIDENCE 

The Bank has produced evidence raising a genuine issue of material fact and 

demonstrating its entitlement to trial on the issue of Stewart Title's breach of contract. Stewart 

Title's motion for no-evidence summary judgment should be denied. 

The Bank objects to Exhibit 2, which is purportedly an article from mysa.com, because it 

is irrelevant to any summary judgment grounds and is hearsay. See TEX. R. EV1D, 402, 802. 

The Bank objects to Exhibit 17, which is Stewart Title's Notice of Intent to Use 

Discovery Products Not on File with the Court for Summary Judgment Purposes (the "Notice"). 

The movant must file and serve all evidence at least twenty-one days before the hearing. TEX. R. 

Cw. P. 166a(d). The Notice references "deemed Responses to Requests for Admission, NonResponses to Requests for Production, Requests for Disclosure, Interrogatory answers, 

appendices, references and other discovery," but Stewart Title has failed to attached any such 

items to its summary judgment motion or otherwise file and serve any such items at least twentyone days before the hearing. Accordingly, the Notice provides insufficient notice of any intent to 

use the foregoing items. To the extent Stewart Title attempts to use any "evidence" that it failed 

to file and serve at least twenty-one days before the hearing, the Bank objects to such evidence 

on the grounds that it is offered in violation of TEX. R. Cw. P. 166a(d). 

Accordingly, Stewart's Exhibits 2 and 17 should be stricken from the summary judgment 

record. 

CONCLUSION AND PRAYER 

Stewart Title does not conclusively prove its entitlement to summary judgment on any of 

the grounds asserted in its motion for traditional summary judgment. Its motion for no-evidence 

21 

The Bank has produced evidence raising a genuine issue of material fact and 

demonstrating its entitlement to trial on the issue of Stewa11 Title's breach of contract. Stewart 

Title's motion for no-evidence summary judgment should be denied. 

OBJECTIONS TO STEWART TITLE'S 

PROFFERED SUMMARY JUDGMENT EVIDENCE 

The Bank objects to Exhibit 2, which is purportedly an at1icle from mysa.com, because it 

is irrelevant to any summary judgment grounds and is hearsay. See TEX. R. EVID. 402, 802. 

The Bank objects to Exhibit 17, which is Stewat1 Title's Notice of Intent to Use 

Discovery Products Not on File with the Court for Summary Judgment Purposes (the "Notice"). 

The movant must file and serve all evidence at least twenty-one days before the hearing. TEX. R. 

ClY. P. 1 66a(d). The Notice references "deemed Responses to Requests for Admission, NonResponses to Requests for Production, Requests for Disclosure, Interrogatory answers, 

appendices, references and otlier discovery," but Stewat1 Title has failed to attached any such 

items to its summary judgment motion or otherwise file and serve any such items at least twentyone days before the hearing. Accordingly, the Notice provides insufficient notice of any intent to 

use the foregoing items. To the extent Stewat1 Title attempts to use any "evidence" that it failed 

to file and serve at least twenty-one days before the hearing, the Bank objects to such evidence 

on the grounds that it is offered in violation of TEX. R. ClY. P. 166a(d). 

Accordingly, Stewat1's Exhibits 2 and 17 should be stricken fi·om the summary judgment 

record. 

CONCLUSION AND PRAYER 

Stewa11 Title does not conclusively prove its entitlement to summary judgment on atly of 

the grounds asserted in its motion for traditional summary judgment. Its motion for no-evidence 

21 
summary judgment is fatally defective. In addition, the no-evidence motion fails because the 

Bank has not only produced evidence supporting its claim of coverage, but has conclusively 

established coverage under the Policy. 

WHEREFORE, Vantage Bank Texas, successor by merger to D'Hanis State Bank, 

individually and as agent for Banprop, L.L.C., respectfully requests that the Court deny Stewart 

Title Guaranty Company's motion for summary judgment in its entirety. The Bank also requests 

such further relief to which it is entitled. 

Respectfully submitted, 

COX SMITH MATTHEWS 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 

112 East Pecan Street, Suite 1800 

San Antonio, Texas 78205 

Telephone: (210) 554-5500 

Facsimile: (210) 226-8395 

Is/ David B. West 

David B. West 

Attorneys for Vantage Bank Texas, successor by 

merger to D Wards State Bank, Individually and 

as Agent for Banprop, 

22 

summary judgment is fatally defective. In addition, the no-evidence motion fails because the 

Bank has not only produced evidence suppOliing its claim of coverage, but has conclusively 

established coverage under the Policy. 

WHEREFORE, Vantage Bank Texas, successor by merger to D'Hanis State Bank, 

individually and as agent for Banprop, L.L.C., respectfully requests that the COUli deny Stewart 

Title Guaranty Company's motion for summary judgment in its entirety. The Bank also requests 

such further relief to which it is entitled. 

Respectfully submitted, 

Cox SMITH MATTHEWS 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@coxsmith.com 

112 East Pecan Street, Suite 1800 

San Antonio, Texas 78205 

Telephone: (210) 554-5500 

Facsimile: (210) 226-8395 

lsi David B. West 

David B. West 

Attorneysfor Vantage Bank Texas, successor by 

merger to D'Hanis State Bank, Individually and 

as Agent for Banprop, L.L. C. 

22 
CERTIFICATE OF SERVICE 

I hereby certify that a true and correct copy of Plaintiffs' Response to Defendant's 

Second Motion for Summary Judgment has been served on counsel of record via e-mail and 

facsimile on this 30th day of December, 2014, as follows: 

Scott Breitenwischer 

Andrew Nash 

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 

/s/ David B. West 

David B. West 

5730513.2 23 

CERTIFICATE OF SERVICE 

I hereby celiify that a true and COlTect copy of Plaintiffs' Response to Defendant's 

Second Motion for Summary Judgment has been served on counsel of record via e-mail and 

facsimile on this 30th day of December, 2014, as follows: 

5730513.2 

Scott Breitenwischer 

Andrew Nash 

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 

/s/ David B. West 

David B. West 

23 
Appendix J
Cause No. 2013-CI-14899 

VANTAGE BANK TEXAS, SUCCESSOR 

BY MERGER TO D'HANIS STATE BANK, 

and BANPROP, L. L. C., 

Plaintiffs, 

v. 

STEWART TITLE GUARANTY 

COMPANY, 

Defendants. 

IN THE DISTRICT COURT 

150th JUDICIAL DISTRICT 

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 

FILED

2/4/2015 4:27:25 PM

Donna Kay McKinney

Bexar County District Clerk

Accepted By: Lisa Morales
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 

2 

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-CI09703, 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 

7 

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. 

13 

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
Sincerely yours, 

xi r (77 (4)) 

P. 0. BOX 839966 

SAN ANTONIO TEXAS 78283-3966 

DATE: October 13, 2011 

D'HANIS STATE BANK 

1401 19THST 

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. 

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 MEETING BY CALLING 207-7245-TDD. 

Legal Review on W. 13'1( by 

MARC A. CASTRO 

Assistant Director 

Development Services Department 

Code Enforcement Services Division 

Eric G. Burns 

Assistant City Attorney 

XHIr1i 

I ? 

AAnal 

DHSB-Banprop - 000782